The Defense Department is setting “affordability caps” on programs as part of its Better Buying Power initiative to help strengthen the Pentagon’s acquisition force.
“What are we willing to pay for something and what will we stop funding to pay it,” Deputy Assistant Air Force Secretary for Acquisition Integration Richard Lombardi said yesterday at an Air Force Association (AFA) breakfast in Arlington, Va.
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| Deputy Assistant Air Force Secretary for Acquisition Integration Richard Lombardi. Photo: Air Force. |
The affordability cap conversation, Lombardi said, will also involve the requirements community, which might have to decide a program’s importance and whether to take money from other programs to pay for another system.
“Are we willing to trade something else out of our portfolio to make sure this stays on track,” Lombardi asked.
The affordability caps are born out of the Pentagon’s Better Buying Power 2.0 initiative to create greater efficiency and productivity in defense spending. Created by Under Secretary of Defense for Acquisition, Technology and Logistics (AT&L) Frank Kendall, Better Buying Power 2.0 is centered on achieving affordable programs, controlling costs throughout the product lifecycle, promoting effective competition and improving the professionalism of the Pentagon’s acquisition workforce.
Lombardi said the Air Force is having more frequent decisions that involve these difficult choices and they are happening at all types of reviews, including milestone reviews. They need to happen, he said, because the Pentagon and the Air Force can’t afford to not consider long-term affordability while assessing programs.
In a November 2012 memo, Kendall said affordability caps force a prioritization of requirements, which enables cost trades and ensures programs that are already deemed too expensive aren’t continued. The affordability caps initiative will also make long-term capital investment analysis covering product lifecycles of 30 or 40 years as a standard part of the acquisition process. Service and component resource managers and leadership will conduct portfolio analysis to limit future investment limitations on a capital investment portfolio of products, e.g. ground combat vehicles or surface combatants, the memo said.
Senior leadership, including defense acquisition executives (DAE), service acquisition executives (SAE) and component acquisition executives (CAE), is responsible for enforcing the affordability caps. They are required to work with the service and component leadership to halt programs that will not be within the established cap unless tradeoffs to reduce costs are implemented, according to Kendall’s memo.