Frank Kendall is the US defense undersecretary for acquisition, technology and logistics. (Defense News files)
Frank Kendall, US undersecretary of defense for acquisition, technology and logistics, oversees hundreds of billions of dollars in procurement programs. But that has not stopped him from taking on some side projects. He recently rewrote the Pentagonís acquisition bible, known as Defense Department Instruction 5000.02. The new guidance implements Better Buying Power initiatives developed by Kendall and his predecessor, Ashton Carter.
Q. Can you talk about the update to DoD 5000.02?
A. I found a couple of gaps that I thought we needed to close that were fairly significant. Also, there were a number of laws that had been passed that needed to be implemented into the [Department of Defense Instruction] somehow. And we had done some things under Better Buying Power that I thought needed to be reinforced through 5000.02.
The gaps have to do largely with the need for a requirements decision point during what is the risk-reduction phase, the technology demonstration phase. Essentially, what we were doing is writing a draft requirements document when we first came through before Milestone A. That Milestone A kicks off a number of risk-reduction activities with industry, usually competitively. Then we were setting up Milestone B, the entry into full-scale development, after the preliminary design review. But nowhere in between was there a place to finalize the requirements. So we added a new decision point, which Iíll participate in for major programs, but itís largely a Joint Requirements Oversight Council, Joint Staff, service, requirements community decision.
Q. Can you talk about affordability?
A. I mentioned Better Buying Power; weíre implementing the affordability analysis and affordability caps now in 5000.02. Affordability was discussed, but this really is much more specific guidance. Basically it tells the services, and ... the operational communities and the programming communities that they need to do long-term capital planning before they start down a program; that cost is a requirement. We canít afford to pay whatever people want in terms of capabilities. We have to limit our reach to stay within our grasp. The affordability analysis piece of this gets the programming community and the requirements community to sit down and figure out what kind of cost constraint theyíre going to have to live in.
Q. So they have to justify their budget?
A. We do a 30-year shipbuilding, we do a 30-year [tactical aviation] plan. This makes all the communities look out [to] that kind of a time frame, the life-cycle of a product. If Iím going to have roughly this amount of money in my service to spend and I have to replace everything in my current equipment inventory over 30 years, how much can I afford to spend on a given item?
Q. What else?
A. I tried to implement cost control, cost management as a higher priority. ďShould costĒ is an important part of that. Program managers have a fundamental responsibility to understand their cost and to act to try to control their costs to drive them down. Thatís a cultural change thatís going to take a little time.
Another thing thatís important in the new 5000.02 is the emphasis on tailoring and alternative models for how to structure programs. Iím trying to make a very big point that thereís not just one size or one way to set up a program. There are some basic things that you have to do in almost every program, but beyond that you have to look at the nature of the product and factors like the operational urgency ... then lay out a program that makes sense for that product.
Q. Have any of these new items have been implemented on programs?
A. A lot of stuff thatís in there, weíre already doing. A lot of it is the Better Buying Power initiatives that weíre doing. Iíve been emphasizing tailoring, but this makes it clearer to the workforce.
I think of 5000.02 as a vehicle to do a couple of things. One is implement the law, [such as the Weapon System Acquisition Reform Act]. Also, Iím using it to educate the workforce about some things, the Better Buying Power initiatives, some fundamental philosophies I have about program management and how to structure a program.
Itís a document that can be used by somebody who is new to this business to try to understand it more thoroughly. Itís also a document that somebody who is a serious, experienced professional can go back to as a reference to understand what the rules are, and some of the fundamentals that heís going to have to apply.
Q. What are some of your biggest concerns in 2014?
A. My biggest concern, obviously, is execution of a budget and preserving the long-term health of the department as we go through what is inevitably going to be an incredibly difficult period. The [budget] act [passed by] Congress right now resolves í14. It does not resolve the out-years. We are still going to be in an environment with an enormous amount of uncertainty about what [DoD] is going to look like long term. Without that, itís very hard for us to get on the path to a future posture for the department that we understand and weíre sure we can get to and execute.
We still like that strategy [that DoD developed two years ago], but it looks like the resources are going away. In that environment, thereís a tendency to hang on to force structure, but at the same time ... youíre taking big cuts. The money has to come from somewhere. It tends to come partly from readiness and partly investment accounts, modernization and R&D [research and development] and procurement. Even with the numbers that are currently in the law, weíre still going to have a big problem in the next few years.
Q. What worries you?
A. Iím particularly worried about [R&D]. Iím particularly worried about sustaining technological superiority over time, and what deep cuts to R&D are going to do to that. Iím particularly worried about the industrial base and what deep cuts in production and R&D are going to do.
As I look around the world and I see what other countries are doing who may or may not be future adversaries, but who certainly would be willing to sell to people who might be future adversaries, Iím disturbed by it. Iím very concerned about eroding technological superiority and where weíre headed. Weíre cutting our budget substantially while some of the people we worry about are going in the opposite direction. Weíve had 20 years since the end of the Cold War of a presumption in the United States that we are technologically superior, militarily. I donít think thatís a safe assumption. In fact, weíve gotten complacent about that and weíve been distracted for the last 10 years fighting counterinsurgencies. I think weíre cutting budgets in the face of growing threats, and thatís something we need to recognize.
Q. How big of a cut do you see to the R&D accounts?
A. Weíve looked at the sequestration numbers, and if you cut roughly 10 percent out of the budget, and you protect military personnel and you start to gradually draw down the force, then you have to take the cuts all out of readiness and investment accounts. The numbers for readiness have been in the 15 percent-ish range, maybe a little less than that. The numbers for R&D and procurement are more in the 20 percent range.
As force structure comes down, that frees up some resources to go back into the investment accounts and back into readiness. But if we donít know where weíre going to end up with force structure, weíre going to be reluctant to take it down and to take it down as fast as we should in order to provide adequate resources for the forces that are going to remain long term.
Q. Weíve talked in the past about your desire to have companies invest more on research projects.
A. Iím encouraging companies to continue to invest in R&D. Weíre in a cyclical downturn right now. It will end, and then there will be an upturn. The people who are prepared with products that we need or who have done the technology [development] to build the products that we will need will be much better positioned when that upturn occurs.
Q. What has been the reaction from industry to this?
A. Itís very much a function of whether the leadership of the corporation involved is thinking long term or short term. If youíre only thinking about your quarterly report, which unfortunately our system tends to encourage people to do, youíre not going to think about this.
I was at a company [in the 1990s] that understood the importance of R&D for its long-term health and despite the drawdown ó and we did take some cuts ó there will still be an emphasis on internal research and development and preparing for the next generation. I would hope that thereíll be a number of CEOs who feel that way.
Q. What is your view on the state of the F-35 program?
A. Iím cautiously optimistic. I put out a decision memorandum recently outlining some of the things that need to be emphasized. The airframe itself is making reasonable progress through its test program. Iím concerned about the operational software. Iím concerned about reliability, which is going to be an important driver for future cost and sustainment. And Iím concerned about the logistics support system.
Q. Are you confident the F-35 production numbers could start increasing?
A. Consistent with what budgets are going to be, weíre going to try to ramp up production. Iíve got a budget, I think, to ramp up production. Our allies help us a lot there. There are a lot of foreign sales coming in the next round.