An initiative inspired by Better Buying Power, where the services tell industry how much they are willing to pay for better performance, is paying dividends, according to DoD’s acquisition czar.
Under Secretary of Defense for Acquisition, Technology and Logistics (AT&L) Frank Kendall said Tuesday the military services are now providing a monetary definition of best value and performance and giving credit for it in the source selection process. Kendall said, as an example, if industry can provide twice as much range or payload, the services would be willing to pay 20 percent more for that capability.
Kendall said this new initiative all stemmed from asking the requirements and operational community a simple question: how much more are you willing to pay for better performance? He said this equation is used by consumers in everyday life.
“No one had ever asked them that question before,” Kendall said at a Washington Space Business Roundtable (WSBR) luncheon in Washington.
Kendall said the Pentagon previously used this approach in a couple of high-priority programs like the Army’s Joint Light Tactical Vehicle (JLTV) and the Marine Corps’ Amphibious Combat Vehicle (ACV). Ironically, these two programs were protested, with one, JLTV, facing a lawsuit that was later withdrawn. General Dynamics [GD] is protesting ACV awards made in November to BAE Systems and SAIC [SAIC]. Lockheed Martin [LMT] protested and later filed a lawsuit over the JLTV award to Oshkosh [OSK], but later withdrew both its lawsuit and bid protest (Defense Daily, February 19).
DoD, Kendall said, had a historical approach to contracting that revolved around defaulting to the lowest cost, due to its ease. Requirements were usually written with a threshold requirement and an objective requirement. The threshold was what a service would accept and the lowest it would be willing to take while the objective would be what the service would really like to have.
“Obviously, if the objective were free, you’d prefer to have that, relative to the threshold,” Kendall said. “But it never is.”
This new approach, Kendall said, helps get industry the information it needs to make an informed decision about what to bid. He said contractors won’t offer higher performance unless it believes it improves its chance at winning a competition. DoD will continue to use this new approach in future acquisition efforts, he said.
The approach of valuing capability, Kendall said, also forces the services to confront the relative value of their requirements, which ones they really care about that they’re willing to put their money on the table to acquire. Kendall said DoD is trying to move away from lowest price, technically acceptable (LPTA) contracting where appropriate, but he said resource constraints are a factor.
DoD was unable to respond to requests for comment by press time Wednesday.