Jon Etherton’s Speech: Acquisition Transformation – Creating an Environment For More Effective Government and Industry Collaboration

The following remarks were delivered by defense acquisition expert Jonathan Etherton of Etherton and Associates, Inc. at a November 13 Lexington Institute event on Capitol Hill.

We strive for an acquisition system that produces value for all parties. In order for that to occur, government and industry must each understand and work with the knowledge of the other’s imperatives and the political and business environment in which they make decisions. Industry appears to have a much better sense of the government’s operations and objectives than the government has of the environment in which industry operates. Over the years of working on the industry side of this divide, I have been repeatedly impressed by the range of complex factors producing shareholder value when so much of our conversation remains fixed on single elements like contract profit. I believe a deeper appreciation by government of industry’s imperatives could lead to a Pentagon customer better able to use incentives rather than compliance measures to get its products and services in a cost-effective manner and while attracting a broader segment of the private sector to the national security marketplace.

In looking at study after acquisition study, I am repeatedly amazed at the degree of consensus among reasonable people about what a more effective acquisition process should look like. We point to clarity in requirements, timely decision making, predictability in funding, business terms and conditions (such as in the treatment of intellectual property), and consistent and transparent, yet flexible, methods for determining value. Yet these essential features of a well-functioning process seem to elude our grasp.

Given our long experience with the power of the intractable equilibrium, so well described by Paul Francis at Government Accountability Office, maintaining the current system, how do we start toward a different outcome? In the end, we need to get beyond clever problem statements, colorful band aids, and vigorous hand waving to identify and go after the root causes of the current dysfunction in the acquisition process. In my opinion there are several very difficult things that we need to look at:

• The budget process, involving the Office of Management and Budget, the Congressional Budget Office, the Authorizing and Appropriations Committees, and the Department of Defense (DoD) Comptroller, needs to be examined comprehensively for objective consideration of major changes that would upset a lot of very heavy rice bowls. In my opinion, the current budget and resource allocation process drives more stakeholder behavior in the current acquisition system than any other single factor.

• The oversight community is sometimes defining rules and standards, not merely enforcing approaches Congress has authorized. Many of these organizations, like the DoD Inspector General, are independent by statute and are not responsible in a larger enterprise sense for meeting individual program or procurement objectives. This situation has fostered a very strong compliance culture in the acquisition workforce and organizations, and the leadership everyone seems to crave does not naturally grow out of the current environment. We need to engage in candid and difficult discussions about balancing oversight and operational priorities, perhaps even considering changes to statute, to see if there are reasonable ways for oversight organizations to play more constructively in an enterprise-focused process.

• Our people are key. The Federal acquisition workforce needs to be transitioned from a compliance-based, transaction-by-transaction culture fostered by the current budget process and oversight processes to an enterprise-level orientation that can effectively apply value considerations on behalf of the taxpayer across entire acquisition lifecycles, or even multiple lifecycles. In doing so, we have to recognize that our acquisition people have only so much time and attention, and that today’s workforce will largely administer our acquisition system into the foreseeable future. Robust education and other support, as well as effective change management will be essential for transformation. If the provisions in the FY16 NDAA are any indication, Congress appears willing to provide any reasonable authorities and funding to help achieve a move in this direction if DoD will but request and use them.

• We also need better data capture and analytics, as these are the only ways for truly understanding the costs (including opportunity costs) we pay for the system we have now. Conclusive evidence demonstrating the magnitude of the costs of overhead and oversight, the costs of missed opportunities, and the cost of lost time could drive deep changes if all of the stakeholders were willing to weigh the evidence and follow where the analysis leads.

While I agree with Secretary Kendall on very many issues, I do not believe we will make progress by thinking of our mission as “continuous improvement.” The current system at its most improved would still be too slow, too cumbersome, and too costly to meet our emerging security challenges in cyber, autonomy, and other fast-paced areas of technological change. We need rather to be intent from the start on driving foundational transformation for at least the next five to six years in order to force the acquisition system into a new equilibrium state that embodies the features we all seek.