WASHINGTON — As with the past two years' of acquisition reform bills, House Armed Services Committee Chairman Mac Thornberry, R-Texas, is expected to announce a draft bill — on May 18, 2017 — for a month of feedback before it's added to the House version of the annual defense policy bill for 2018.
"As you know, I'm trying to eat this elephant a piece at a time, but to take discreet segments and try to do it well — not try to have one bill that fixes everything," Thornberry told reporters Wednesday, following testimony from experts on acquisition reform. "I think what you'll see tomorrow is very consistent with the problems they described, but it obviously doesn't fix all of the problems they describe."
Moving beyond the previous years' focus on major weapons system acquisition, the 80-page bill takes aim at acquisition of all goods and services, according to committee aides who highlighted several main provisions for reporters on Wednesday.
Here are some of the key focus areas.
Building an online marketplace for commercial items. The Department of Defense lacks a quick, easy way to buy commercial products, apart from the General Services Administration and cumbersome DoD-driven processes, committee aides said. So the bill would allow the DoD to use an existing e-commerce portal like Amazon or W.W. Grainger and buy from a variety of suppliers as if the DoD were any other business.
The idea is that such a portal would allow the DoD cheaper and easier comparison shopping for certain purchases, access to more suppliers, and the ability to internally chart buying patterns.
Streamlining contract auditing.
The bill takes aim at incurred-cost, which aides say are slow, time-consuming and do not deliver substantial enough returns for the taxpayer. In 2016, it took 885 days for the Defense Contract Audit Agency to complete these audits, which accounted for "a pretty small percentage of the net savings the DCAA brings to the government," an aide said.
The bill's three-tiered answer would be to:
- Let contract officers choose either DCAA or outsource to a qualified private sector auditor.
- Raise the contract-value threshold that requires such audits.
- Require the audits to be done within a year, so to encourage contractors to focus on high-risk audits.
Creating transparency for services acquisitions. In 2015, roughly half of the $274 billion the DoD spent on contracts was on service contracts. Yet aides said the DoD lacks visibility on a number of these contracts and returns on investment — and the Pentagon is too often leaning on bridge contracts. The bulk of these are in the DoD’s operations and maintenance account and offer potential savings to be reinvested elsewhere, aides said.
The proposed solution is to mandate that the DoD analyze spending plans, include more detail about service contracts in its annual budget request and have it better evaluate requirements. The Pentagon would have to identify enduring service contracts, a move expected to debunk the thinking that contracted services cannot be budgeted more because they are emerging, changing and unpredictable.
"We think this will result in the acquisition for fewer services, which we think will save the department resources," an aide said.
Finding balance in intellectual property acquisitions. The bill would require the DoD create a centralized intellectual property office — with experts in IP law and systems engineering — to help contract officers develop IP strategies and write contracts before negotiating with industry. It would also require IP negotiations early on in an acquisition.
With IP a big tension point between the DoD and industry, the bill, aides said, seeks to help the DoD find "a sweet spot" between passivity and over-aggression. The idea is to encourage the DoD to tailor IP acquisitions to individual programs and ultimately acquire technical data early enough to cut sustainment costs for weapons systems.
"If you attempt to acquire too much, it's cost-prohibitive, and you're going to drive away bidders," an aide said. "On the other hand, if you don't acquire anything, you don't set yourself up for success during the sustainment phase of the weapons system."
Democratic opposition. Overall, Democrats do not agree with all of the proposals, and they are expected to push back on several, arguing Thornberry's bill saddles the Pentagon with new processes, bureaucracy and unfunded mandates.
The House Armed Services Committee's top Democrat, Rep. Adam Smith, of Washington, has argued the Pentagon needs a chance to breathe as it undertakes structural changes mandated in the 2017 defense policy bill. The bill created an undersecretary for acquisition and sustainment as well as a new undersecretary for research and engineering, which is essentially a chief technology officer.
Specifically, Democrats argue the marketplace would leave out small businesses and require strong oversight to police vendors and screen out counterfeit goods.
On the auditing language, Democrats fear qualified private auditors would be too few in number, too expensive and prone to conflicts of interest. Democrats would rather DCAA not be penalized for its backlog, but instead be given resources to remedy it.
Democrats also argue that mandating IP negotiations early in acquisitions would not only inflame opposition from the defense industry, but seriously impede weapons programs. They believe an IP office is just more acquisitions bureaucracy in the middle of an ongoing reorganization.
Correction: An earlier version of this story mischaracterized the audits targeted for change in the defense acquisition reform bill.
Joe Gould was the senior Pentagon reporter for Defense News, covering the intersection of national security policy, politics and the defense industry. He had previously served as Congress reporter.