WASHINGTON — The Pentagon’s acquisition restructuring report, delivered to Congress Aug. 1 and released to the public the next day, shows a focus on innovation and a reliance on the military services to handle day-to-day sustainment, but the restructure needs to work through personnel issues to be successful, analysts say.

Under orders from Congress, the Pentagon must split the undersecretary of defense for acquisition, technology and logistics, or AT&L, into two smaller organizations — the undersecretary of defense for research and engineering, or USDR&E, and the undersecretary of defense for acquisition and sustainment, or USDA&S.

Those changes, along with the creation of a chief management officer, or CMO, position, are required to be implemented by Feb. 1, 2018.

The report shows an attention to congressional wishes that should earn department planners a gold star on Capitol Hill. But that doesn’t mean the plan is finished.

Now congressional staff will look at tinkering around the edges and adding their own input. And Patrick Shanahan, the newly installed deputy secretary of defense, told reporters in an Aug. 2 roundtable that the department intends to update the plan in 30 days.

There are a number of areas where offices may shift or have their mission altered, particularly with the CMO position. But aside from working out the final details, there appear to be two big challenges ahead, and both revolve around the messiest aspect of any organization: people.

The first is the question of hiring. Especially on the USDR&E side, the entire structure will only work if qualified, innovative people are hired to fill those spots. And while some of those jobs could be internally filled, there is a sense that both the Pentagon and the Hill want fresh voices in those jobs.

The second is the question of firing. The department is under orders to achieve a 25 percent reduction in headquarters staff, and Shanahan acknowledged that part of this reorganization involves making painful cuts.

“There are real people in those jobs, so what I don’t want to do is send the message out that I’m just going to drive to a number,” Shanahan told reporters. “We have to work with the team. There will be parts of this that people don’t like. That‘s just change.”

But overall, analysts seem to agree that if AT&L is to be torn down, this is a good way to go about it.

“The AT&L reorganization plan is a serious one,” said Michael Horowitz, a former Pentagon official now with the University of Pennsylvania. “While a lot depends on the details of implementation, this is a real swing at a hard organizational challenge.”

Added Andrew Hunter, a former acquisition official in the department now at the Center for Strategic and International Studies: “They were given the task to split the baby and they did it in a very thoughtful and efficient way. The two are internally coherent, and I think this [is] as good a first draft of this as anyone could have done.”

Undersecretary for research and engineering

There will be five direct reports to the USDR&E, a group specifically created to focus on new technologies and prototyping. Two of those, the Defense Science Board and the Missile Defense Agency, already exist, while three new offices — the Strategic Intelligence Analysis Cell, the assistant secretary of defense for research and technology, and the assistant secretary of defense for advanced capabilities — will be formed.

The Strategic Intelligence Analysis Cell will be the first office of the new organization stood up. The goal is to load it with analysts who will formalize the assessment of enemy capabilities, asses what technology is now available and provide guidance on where the department needs to spend resources to react accordingly. Essentially, the cell will provide guidance for what the rest of R&E does with its funding.

Because the cell appears to be the hub on which the rest of USDR&E pivots (Shanahan said it would be the first group stood up in R&E), a large chunk of that organization’s success “will depend on the details of implementation, especially the authority, scope, and vision of the Strategic Analysis Cell,” Horowitz said.

Hunter called out the ASD for advanced capabilities as a particularly “tricky” job, noting that it is a mix of policy, systems engineering, experimentation and prototyping. “It’s interesting, but would take an interesting mix of skills to do all of those things,” he noted.

Whoever takes that role will also have to internally navigate the jockeying from two built-in power bases it will be subsuming: the Strategic Capabilities Office and the Defense Innovation Unit Experimental. Both those offices currently report directly to the secretary of defense, a legacy of former Defense Secretary Ash Carter, and their leaders — Will Roper from SCO, and Raj Shah from DIUx — are known quantities in both the press and on the Hill, able to lobby for their individual units.

However, the report notes that the final decision on where those groups, along with the Defense Advanced Research Projects Agency, live is yet to be made; which is part of the reason Hunter expects them to end up, eventually, reporting back directly to the USDR&E, which “certainly would be my recommendation to anyone coming into this job.”

For his part, Shanahan downplayed any potential issues, saying both Roper and Shah are “just dynamite” and that the goal is not for those groups to be ”subsumed” in the new system, but rather to spread their capabilities and processes to the rest of the USDR&E team.

Undersecretary for A&S and the CMO

In contrast to its sister organization, USDA&S will largely be made up of existing offices that are shuffled around. There will be three direct reports to the USDA&S — the assistant secretary of defense for acquisition, the assistant secretary of defense for sustainment, and the assistant secretary of defense for nuclear, chemical and biological weapons.

However, this is where cuts appear most likely to existing staff. Hunter, for example, notes there does not appear to be any space for the integrated product teams that currently exist in AT&L — and he predicts those will be going away, in part because this entire reorganization is driven by the idea that the services can take on more of the day-to-day acquisition management.

“I think this structure is done very thoughtfully to ensure that there is much less staffing at the undersecretary level to get into milestone reviews and deal with programmatics in any meaningful way,” he said. “The culture of A&S is more of an oversight and checking mentality. I think that could be a concern over time because it may tend to regenerate itself to the volume that caused this issue to begin with.”

Which is where Ellen Lord, just confirmed as the last AT&L and expected to be reconfirmed as the first A&S, will have to maintain a steady hand. Shanahan called her “awesome” repeatedly during his talk with reporters and stressed that Lord will have the lead in guiding the AT&L devolution.

The biggest uncertainty is around the CMO spot, where details are still being worked out. For example, it’s unclear where the current Office of the Assistant Secretary of Defense for Energy, Installations, and Environment ends up. That could be placed in either the USDA&S bucket or in the CMO’s office. As that role would be in charge of any base closure and realignment, figuring out its home will be crucial going forward.

Other issues

At the end of the day, the biggest question for Hunter is how the two sides will communicate and work together.

“They will have to work hand-in-glove in order to be effective, especially when you consider the services will be more independent,” Hunter said. “So if there is any disconnect between the two undersecretaries, it will be very confusing for the services but also create the opportunity to ignore both if they want to.”

Which brings up the fundamental concern that opponents of the reorganization have had for the last year — that this weakens a central acquisition structure and creates opportunities for inefficacies and malfeasance.

When he was finishing his term as AT&L, Frank Kendall vocally opposed the split. Seeing this plan, his mind hasn’t changed.

“This is a step backward to a pre-1986 era that didn’t work,” Kendall told Defense News. “It’s painful to see the success of the previous administration at both sponsoring innovation and reining in cost growth followed by this fragmented and decentralized return to the failed past.”

“It’s an interesting experiment, but in five to 10 years I expect the idea of having someone in charge of defense acquisition instead of the fragmented mess this creates will look attractive again.”