Army: Push For Savings Must Also Consider Value

Program managers and acquisition executives in the Department of Defense are experiencing increasing pressure to find cost savings in their programs. It is generally a good thing for those with the responsibility of spending the public’s money to be careful to get the best price for the goods and services they procure. However, there is also a requirement for those same individuals to ensure that they are getting the best value for the customer, in this case the men and women of our armed forces.

Sometimes the desire to save money can conflict with the imperative that the military have the best equipment and material, in proper working order, when and where they need it and in sufficient quantities. This means that those writing the requests for proposals and judging the submissions need to consider carefully the potential costs associated with the decision to select a provider based largely on price. This is particularly the case when the decision is made to pick a new company to replace an incumbent. Unless the incumbent has failed to perform as required by contract, replacing it with a new one should take into consideration the impact of such a change on the quality of work that will result, the potential for disruptions to the production line or supply chain, and the consequences for warfighters.

One example of the potential problems that can arise was the decision by the Army to replace the existing producer of the Family of Medium Tactical Vehicles with another company. As my colleague, Loren Thompson, has written, the decision did not differentiate between the experience of the incumbent and that of the winner, weigh past performance or consider the different financial situations of the competitors.

The Army needs to avoid similar problems when it releases its RFP for management of the Radford Army Ammunition Plant (RFAAP) later this year. RFAAP is a unique facility upon which the military is dependent for critical components of most types of ammunition. The Army needs to ensure that it gets the best possible performance at the lowest credible price. But it also must ensure that it evaluates properly the capabilities of the bidders. Finally, the Army needs to have a plan in place to deal with any disruptions so that if it decides to make a change, the critical production performed at RFAAP is not interrupted.