Better Buying Power 2.0 Failing To Deliver On Increased Competition

For nearly five years, the Office of the Under Secretary of Defense for Acquisition, Technology and Logistics (AT&L) has been striving to make increased competition for defense contracts the centerpiece of an acquisition strategy that was supposed to simultaneously reduce costs, improve performance and increase participation in the acquisition process. The elements of the new approach were presented in a 2009 document titled Better Buying Power (BBP). In order to jump-start competition, the Department of Defense (DoD) restructured hundreds of contracts, shortening their periods of performance and limiting the number of option years in order to produce more opportunities for competition. Where no natural set of competitors existed, program managers scoured the underbrush of the defense industrial base trying to convince some minimally qualified companies to enter a low probability of win bid just so that there would be the appearance of a competition. Like Soviet central planners during the Cold War, DoD even established quantitative goals for competition, sort of like a quota system.

In November, 2012, AT&L doubled down on its theory of the virtues of centrally-managed competition with the publication of BBP 2.0. The new and improved guidance was supposed to reflect lessons the department had learned from its three year effort to implement BBP. In essence, BBP 2.0 was a rehash of the slogans and bromides published in the initial version. The message to the acquisition core was to double down on the policies established in BBP, whether they work or not.

Ironically, according to the Pentagon’s own data, the pursuit of BBP 2.0 has utterly failed to make good on at least one of its core elements, increased competition. According to data provided by Under Secretary Frank Kendall to Congress, the Pentagon has never been able to meet its goals for the percentage of contracts awarded competitively. Even more remarkable, the percentage of total contract dollars awarded by DoD based on competitive procurements has actually declined since the current crew took office from a high of 64 percent in 2008 to 57 percent in 2013.

There is little evidence that most of the prescriptions set out in BBP 2.0 have had an appreciable impact on cost, schedule or performance in defense contracts. In fact, to the extent that BBP 2.0 has added complexity and greater churn to the contracting system it is all but guaranteed to be a failure. Against any possible decrease in costs or improvement in performance on a given program created through greater competition must be juxtaposed the increase in costs for both the government and private companies associated with conducting more frequent competitions, the reduced incentive to invest corporate dollars in product and process improvements, and the inevitable risk to successful program outcome that can occur when contractors are changed out frequently. In fact, the most plausible reason why the majority of DoD contracts still are not awarded competitively five years after BBP was implemented is the program managers’ recognition that the most cost-effective approach is to award contracts to those companies best able to perform the work, without the charade of an ersatz competition.

The one element of BBP 2.0 that has a proven record of saving money and improving outcomes is Performance-Based Logistics (PBL). A PBL-based sustainment contract focuses on output metrics such as platform or system availability for a fixed price. Industry is incentivized to improve its performance and the reliability of its system or platform in order to increase its profits. Expanding the application of PBL-based sustainment contracts could save the Pentagon billions every year.