Robert A. Sturgell’s Speech: Defense Acquisition Reform

This speech was given by Robert A. Sturgell at Lexington’s Defense Acquisition Forum on June 3, 2016.  Sturgell is Senior Vice President, Washington Operations at Rockwell Collins.

Let me begin by thanking the Lexington Institute for putting this forum together and for those in attendance today, I appreciate your contribution to our national defense.

Defense acquisition reform draws a lot of interest every year and rightly so, given its critically important role in the provision of our national defense.

In the past couple of years in particular, a lot has been said about the need to improve defense acquisitions in order to access the latest technology and innovation.  As the Department of Defense (DoD) Research and Development (R&D) budget tightens, more attention has naturally moved to the internal R&D investments of both the defense industry and the commercial sector.

In his desire to keep the U.S. ahead of our enemies from a technology standpoint, Secretary Carter has established the Defense Innovation Unit Experimental offices in Silicon Valley and Boston.

I was struck recently by the comments of the newly appointed managing director of the Silicon Valley office, Raj Shah, an entrepreneur and Air National Guard pilot, who began his remarks by reflecting that when he flew his F-16 along the border of Iraq and Iran, he did not have the capability to display a moving map so he could clearly see the border between those two countries.  He noted that general aviation pilots in the U.S. typically have this type of innovative display on their tablet in the cockpit of their small airplane.

As he was speaking, I immediately reflected that Rockwell Collins has that moving map product.  In fact, I would bet that most traditional, defense avionics suppliers have that particular product in their inventory as well.

I also thought maybe this quest for “innovation” isn’t really about getting access to new, commercial technologies.

Maybe it’s really about acquiring that technology.

As most of you know, there are only a handful of ways for a government agency like DoD to acquire technology…traditionally, for defense unique products, by using Federal Acquisition Regulations (FAR) Part 15.  For prototypes and experiments, there are options like Other Transactional Authorities  and Cooperative Research and Development Agreements.  But, if you really want to acquire innovative, commercial technologies for production, in quantity, you have to use FAR Part 12.

And remember, it’s not going to be off the shelf.  Any one and any country or military can get something off the shelf.  The military value – and the advantage – is really in modifying or tweaking the commercial technology for the military’s use…and that means it’s a commercial item “of a type”.   It’s not the same as the commercial version, but a little bit different.  And this is where the policies, practices and regulations around “acquiring” commercial items become important.

Federal Acquisition Regulation Part 12 provides DoD the path to access commercial “of a type” items and commercial items with “minor modifications.”  In fact, Congress intended FAR Part 12 to be sufficiently broad in nature in order to give DoD the ability and leeway to access the latest commercial technologies, even those that were not yet being sold in the marketplace.

Not too long ago, in the Fiscal Year 2013 National Defense Authorization Act (NDAA), DoD proposed to eliminate “of a type” from the definition of a commercial item.  The Congress rejected that proposal and expressly recognized the Federal Acquisition and Streamlining Act (FASA) of 1994 intentionally adopted a broad definition of a commercial item to ensure that federal agencies had ready access to products available in the commercial marketplace, including new and modified products that are just becoming available. That access is especially critical today and is the focus of the Secretary’s efforts.

Even Undersecretary of Acquisition, Technology, and Logistics Frank Kendall’s Better Buying Power 3.0 has an initiative to “break down barriers” to accessing commercial technologies.  The initiative purports to assess the need for both policy and regulatory changes, as well as training the workforce on how to access commercial technology and products with existing authorities.

I could not agree more that the existing authorities provide the access desired.  In fact, the August 2014 Defense Business Board (DBB) report on accessing “Innovation” expressly states DoD can act now — no new authorities are required.  The DBB recommended DoD expand, rather than restrict the definition of “of a type”.  The report also contained important recommendations on Intellectual Property protection and open systems architectures which would also be helpful.  I encourage all of you to review it.

All of this is to say that access is not the problem.  The problem lies with acquiring the items –with the policies, practices and interpretations around determining whether an item is commercial “of a type” or one with “minor modifications”.

We see recommendations of proposed policies that, for example, require at least 50% of sales to be commercial.  This would effectively eliminate commercial items “of a type” or items with minor modifications.  By definition, items “of a type” are not the exact same item as the one being sold commercially so they likely don’t have a lot of commercial sales.  They are similar, or “of a type”.

The same goes for proposals to eliminate “offered for sale” from the definition, as well as policies that require the same components or the same performance as the commercial product.  It’s not the same — it’s similar, of a type — and the law permits DoD to acquire these items commercially.

These types of policies and practices restrict, rather than enable, DoD’s access to innovative commercial technologies.  I think the recent Senate Armed Services Committee (SASC) report language for the Fiscal Year 2017 NDAA sums up this dilemma best:

“The committee is concerned about the Department of Defense’s increasingly narrow interpretation of the definition of commercial items…The current “of a type” and “minor modifications” language were intended by Congress to be broadly interpreted to expand access to items that were beyond commercial off the shelf items.  If there is a problem with the definition it appears to be the Department’s repeated attempts to narrow the definition to conform to an oversight strategy that will inadvertently lead to less competition [and] increased costs…”

In closing, at last year’s inaugural forum, our Chief Operating Officer highlighted the increase in restrictive regulations and interpretations around what products and services are determined to be commercial items.

He used an example of a cockpit display which we have been providing on a military helicopter program for over a decade as a commercial “of a type” item.  Two years ago, it took nine months to successfully resolve a challenge to the display’s commerciality.

In spite of the commercial item provisions in the FY16 NDAA, last year, it again took us six months to, again, successfully resolve a challenge to the display’s commerciality.

As in the previous challenge, well-meaning individuals focused on whether there were commercial sales of the same display, whether the displays had the same performance as the commercial counterpart and whether the display had the same components as the commercial counterpart.

But the display we provide the military and the display we provide our commercial customer are not the same.  They are, however, of a type.  Similar.  Slightly different.  Minor modifications.

Understanding and appreciating that distinction, which the law recognizes and provides, is important and simply a matter of effective training.  The Department must train the acquisition workforce and it must let them know that the leadership stands behind not just accessing, but also acquiring commercial items and services “of a type”.

For over two decades since the passage of the FASA in 1994, the Congress has been a strong advocate for providing DoD with access to cutting edge commercial technologies.  Secretary Carter has taken that ball and run with it by expanding the playing field and encouraging nontraditional commercial companies to work with the DoD.

Whether you are a traditional defense company, a nontraditional defense company, or a hybrid like Rockwell Collins who operates in both sectors, we all want to provide our warfighters with the best technology to dominate the battlespace.  Understanding the importance of three words – of a type – and encouraging the acquisition of commercial items of a type will help ensure that dominance.