Document created: 31 December 03
Air University Review, May-June
1972
One does not have to be an expert on government contracts these days to realize that the Defense Department’s procurement process is undergoing substantial change. Since the advent of the new policies of Deputy Secretary of Defense David C. Packard, a definite framework for future procurement has emerged. Many techniques have been eliminated or de-emphasized; among the casualties and targets are such terms or systems as total package procurement, concurrency, fixed-price contracting for development, centralization of authority and responsibility, reliance on paper studies, elaborate management systems, and cumbersome and redundant procurement regulations. Some of the new or impending systems that will receive added emphasis are milestones, increased dependency on prototypes, rules on fixed-price contracts, and simplified program management.
Secretary Packard stated at the opening of the Defense Systems Management School that it was almost impossible to find a major program that was not in trouble. All were behind schedule, although in most cases this was because impossible schedules had been set at the beginning. He indicated that putting better managers in charge would do more to bring about improvement than anything else. He also stated that we must develop ways to improve the management of our development and procurement programs.
Program management is by no means a simple subject. There are, however, a few simple fundamentals. The three essential elements of program management—performance, schedule, cost—are like the three sides of a triangle that can take on an infinite number of shapes: they must be delicately balanced and controlled in each program if the triangle is to be the right shape. Maintaining contract delivery, cost controls, and performance goals with inherent reliability is a tremendous management challenge. It is a subject of great concern at all levels of government. How to accomplish this challenging objective is not well understood by many people actually engaged in the work.
I suppose the main problem is that, in acquiring a major weapon system—or any system, for that matter—there must be a management system. And, as with any system, the system itself tends to harden and solidify with age. Then we, for whom the system is supposed to work, too often find that we are working for it. We become too much the captive and the victim of the system; it leads an existence of its own, and one not always related to the purpose for which it was created.
As one who has been associated with government procurement for several years, I am amazed at how much the system had paralyzed us—at how we couldn’t get things done—at how we were being consumed by our own processes in trying to reach our goals.
It was clearly the intent of Mr. Packard’s philosophy and instructions to get the military services unshackled from what had become almost an unworkable system. This transformation will not happen overnight, but we are well down the road. However, it takes a long time for the word to spread everywhere and be translated into the desired actions. So the prime need, as I see it, is for wider and more expeditious dissemination and enforcement of policies and for wholesale revision of formal directives, so that our genuine achievements can be a result of the system rather than a deliberate bypassing of it.
During the past decade, the Department of Defense has employed the principles of concurrency (combination of development and production) to manage many “major” acquisitions. More recently, a serial development approach (fly-before-buy) has been adopted as being more conservative of national resources, particularly where operational urgency is not overriding. Concurrency and fly-before-buy are similar in that a conceptual design is specified in advance. Subsequent efforts are then directed toward achieving the specified design so that hardware can be produced in the quantity desired. However, with this approach, the specified design normally has resulted from a collection of paper studies rather than from the results of actual hardware demonstration. Since concurrent development/production programs have normally been conceived and approved in totality (i.e., both development and production), the commitment of national resources has been high and sometimes of severe consequences to a limited military budget. As a result, decisions to conduct advanced development have been based too much on the requirement for approval to procure the complete system and not enough on information provided by the development and testing of prototypes both for the actual product and for the more important components and subsystems.
Recently, Secretary of the Air Force Robert C. Seamans, Jr., indicated that scientific and technological programs will continue to be essential if we are to maintain an effective Air Force. We must have a strong technological base that will permit us to select the best possible approaches to develop and acquire our new weapon systems. To provide such a base, we must move technological innovations ahead in a way that will achieve step-by-step incremental gains in areas likely to be critical to future Air Force needs. Secretary Packard indicated to the Senate Armed Services Committee that one way to control soaring weapon costs was through emphasizing “prototyping”—the requirement that firms build working models of a proposed weapon system before the nation commits billions of dollars to a questionable product. With such prototypes, a new weapon can be evaluated in terms of what it will in fact do, not what the specifications or the contractors’ proposals say it is supposed to do. With this approach, competition that is based on brochuremanship will not be a part of the prototype effort. Instead, the prototype program will provide for competition in real performance of actual hardware, and it will require that competing teams demonstrate the superiority of their product, rather than the superiority of their salesmanship.
The Air Force is currently developing a selective development prototype strategy to bridge the development gap so necessary to acquiring many of our future systems. The purpose of this strategy is to explore fully the advantages of emerging technology, to reduce the risks and uncertainties associated with development, and to provide a variety of hardware options that are readily available for application to military requirements.
One of the major objectives of this concept is to provide hardware for Air Force test and evaluation of preliminary designs and military usefulness to support projected or anticipated military needs. The prototype program will not replace the current development cycle but will assist in reducing the cost and technical risks during this vital and necessary phase. It will complement current exploratory and advanced development efforts that are more directly associated with technical solutions for ongoing and proposed programs. It will also assure an adequate base of demonstrated hardware for alternate choices that will be based upon actual experience with hardware, rather than on paper studies and analyses. A prototype could encompass advanced development and in some instances would contribute to preproduction engineering.
Through employment of the prototype development strategy, the Air Force will be able to identify previously unrecognized problems and resolve recognized uncertainties that may, if undetected, precipitate major changes in the performance, cost, or schedule of a weapon system. The function of a competitive prototype strategy is to increase confidence in operational performance, cost realism, and attainable production schedules. These more accurate and realistic estimates are intended to establish a basis for determining whether or not a system should proceed into full-scale development and eventually production.
Prototyping can be used as a valuable tool for identifying technology that is too new for direct application to a system. Through the use of advanced prototypes, we can develop technical confidence before committing a system to full-scale development. Flyable protetypes should be considered for advancing the technology leading to short takeoff and landing (STOL) transports, lightweight fighter and remotely piloted vehicles. If the initial prototypes prove successful, the concept can be expanded to other development area. Thus, hardware will improve our ability to correlate expectation through predicted outcome by reducing the major uncertainty associated with the technical, cost, and schedule aspects of a weapon system. Prototype validation provides a means by which technical risk can be identified, trade-off analysis made, and the recommended solutions tested. The experience gained by the competing contractors during the prototype phase can improve their ability to estimate more accurately the actual development/production costs and propose more realistically a low-risk production schedule.
The prototype concept can restore an element of competition by having rival companies build competing prototypes. The competing prototypes would be compared before the winner was awarded a development/production contract. Such a “fly-off” will be held next fall between rival models of the A-X close-air-support aircraft being built for the Air Force by Northrop Corporation and Fairchild Industries. Thus, competition will serve as a motivation to the competing contractors to keep their prototype cost as low as possible. This is based on the assumption that the prototype selected will, for the most part, closely resemble the actual production model. Although a prototype is built with the expectation of change and to discover what changes are necessary, changes should usually be limited to achieving the objectives of the original design
Among the key features or characteristics of the competitive prototype program will be new or renewed emphasis on (1) simplified and streamlined management and procurement approaches, (2) minimal documentation and reporting, and (3) performance measurement and evaluation.
In a competitive prototype strategy, the Air Force contemplates the award of two development contracts to competing contractors. The competing contractors would be informed that only one would be selected to accomplish full-scale engineering development and production. Also, the final selection would be based, primarily, upon the success of the demonstration of the engineering test vehicles that were developed by each competing contractor.
Competitive prototyping can be conducted at the system or critical subsystem level. A “prototype,” by definition, may be contracted for at various points within the development spectrum. Whether or not a prototype should be employed to validate a concept would depend on the risk assigned to the proposed system. However, the request for proposal and model contract should only require performance ranges and goals to be achieved by the competing contractors. This would provide contractors with sufficient latitude to explore alternative technical solutions relatively free of close government supervision and of early configuration management baseline. The requirement for government documentation should be limited to that which is essential to the prototype manager for initial source selection and for evaluation of the prototype demonstration.
For prototype development, the procurement approach should be structured around the concept of flexible and supportable procedures. A basic premise is that prototype candidates will enter the procurement process at different thresholds in the development spectrum, thus requiring varying procurement and contractual approaches to satisfy each individual prototype need. Prototype managers should not be constrained or limited to a single procurement approach but, rather, should be provided with maximum flexibility to acquire prototype within the legal limits established by statute or directives. Since a prototype may be contracted for at various points within the development spectrum, the statement of work may be either broad or quite specific. Award may be based on competitive proposals for a specific design, on “design goals,” or on a contractor’s “best effort.”
Many contracts presently specified in the Armed Services Procurement Regulation (ASPR) or various combinations thereof are appropriate for a selected prototype procurement, i.e., firm-fixed price, cost sharing, cost-plus-award-fee, and cost-plus-fixed-fee. In developing or selecting the contract type, one must proceed on the premise that a limited or fixed amount of funds will be available. Since firm-fixed-price (FFP) contracts will not be appropriate in all instances, a combination of cost and fixed-price features can be used. However, if the combination contract is used, it should incorporate the cost contract concept. The only exception to this approach would be that the government’s cost share should be fixed. This type of contract incorporates the concept of “best effort,” broad specification “design goals.” It would recognize that the contractor may not achieve the design goals in the contract, but it would require the delivery of completed hardware. An appropriate label for this kind of contract would be “Cost/Government Share Fixed” (C/GSF).
As indicated, the type of contract selected will depend on a combination of the risk involved and the government’s objectives. For example, the FFP contract should be used only where there is a reasonable basis for firm pricing and where technical risks are minimal. An FFP may be particularly appropriate for parallel prototype contracts where follow-on development/production is contemplated.
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Where a single source is involved, an award fee provision could be used with any of the recommended types of contracts. The purpose for using this provision is to provide additional positive motivation to entice the contractor to do a better job for the level of dollars expended. Thus, the condition present in each procurement must be carefully examined to determine the most appropriate type of contract to use.
The management system selected for prototyping must not impose constraints that are applicable to systems under full-scale development. The management system must be structured so that contractors know the government is ready to accept and evaluate new ideas. Also, the system must be flexible, to enable responsibility and authority between government and industry, on any given program, to vary from total government engagement to disengagement.
No single management procedure should be prescribed for prototyping. The management system selected should recognize the degree of risk associated with each specific technological challenge, and the contractor should share the penalties that might be incurred in accepting the challenge. Thus, the government’s management approach must be able to adjust to the particular circumstances of the program. It must impart the government’s confidence in the contractor, recognize the degree of risk involved, and utilize the contractor’s existing internal management control system. Also, the government’s internal decision-making process must be attuned to the contractor’s to assure that new ideas have not grown old by the time they are identified and pursued.
Contractors should be encouraged to use simple, straightforward management techniques to control their efforts. Elaborate and formal documentation should not act as a constraint on the program. Maximum use of the contractor’s formulated data should be used by the government to satisfy management and reporting requirements. Significant information must be easily retrievable by the contractor. Since the objective of prototype to acquire maximum technical knowledge and data at minimum cost, it is essential to limit the number of government and industry personnel involved in a prototype project. Therefore, the management system should be less formal and more personal, to foster mutual trust, expedite decision-making, and eliminate elaborate management information and control systems.
The government’s prototype manager must be delegated the authority and responsibility to manage his program. Minimum documentation and reporting should be the hallmark of the selected management system. However, management and program information must be readily available to facilitate the concept advocated when required by the government. The major benefits from the application the proposed adaptive management approach will be derived through the adjusted role that is assured by the government in its relations with industry. This will be accomplished by providing an interface at the prototype program manager level.
To insure that this restructured management system will be effective, no one standard organizational structure or level for all prototype programs is recommended. The potential number, scope, and type of prototype efforts vary so much that organizational flexibility as important as management adaptability. To facilitate this relationship, the government should consider placement of the program management function at the prototype contractor’s facility. This will maintain the organizational balance between the government and the contractor and at the same time accommodate the concept of less documentation enhance decision-making, and thus should reduce overall prototype cost.
In keeping with the adaptive management philosophy, source selection for prototype procurements should be conducted in a simple straightforward manner and administrative time reduced to a minimum. To accomplish this objective, a modified evaluation technique should be employed. The evaluation team should consist of five to ten people who are recognized authorities in the areas of technology to be exploited by the prototype effort. Consideration should be given to the use of recognized experts within industry to participate during source selection. The evaluation should be subjective in nature, with emphasis on broadening the technological base and exploiting new ideas rather than on low-risk approaches to satisfy a specific operational requirement. Thus, elaborate scoring techniques will be unnecessary, and the process should be completed in five to ten days. The final evaluation report, in narrative form, should set forth the evaluation results of the proposals and will be the only formal documentation required to support the selection of the source or sources.
Test plans should be developed that are suitable for evaluation of the prototype fabricated. For example, preliminary design reviews and critical design reviews should be eliminated and personal surveillance substituted to accomplish this objective. This approach will insure that the concept of allowing the contractor design freedom is achieved. Through frequent contact (SPO collocated at contractor’s facility), Air Force personnel will be able to check progress and provide the necessary on-the-spot assistance when appropriate.
The rigid test and evaluation procedures that the Air Force currently exercises over contractor testing must be significantly modified. Stringent controls must be eliminated in order to achieve the objective of maximum contractor flexibility. The Air Force must participate with the contractor in developing the test plan, but daily tests and test procedures should be scheduled and controlled by the contractor. Thus, the contractor would be free to institute further investigation of test results which he considers necessary. Based upon his own technical judgment, he could eliminate certain tests he determines are not required.
Government control over the contractor’s selection of test facilities should be eliminated. To conserve resources, the contractor should maximize the use of his own facilities to accomplish the required tests. If additional test facilities are required, the most economical method should be used to select and accomplish this objective.
Since the objective of the prototype is to establish and evaluate the actual performance capabilities of the system, test and evaluation are of paramount importance. However, where goals have been substituted for requirements and the contractor has been given design freedom to achieve the goals, the classical test approach is inappropriate. Nevertheless, the Air Force and the contractor must agree on a test plan that will satisfy the individual needs for information that can only be obtained by testing. Thus, maximum reliance will be placed on contractor-generated test data to evaluate a system undergoing test. This concept is compatible with the prototype management concept of allowing the contractor to manage his own resources and keep the cost of the individual program to a minimum.
In summary, through the application of this recommended prototype development strategy, the Air Force can move ahead to select areas of technology that offer potential to improve significantly the current method used to develop and acquire our weapon systems. This will result, in part, from providing a variety of hardware options that, if exercised, could achieve a more realistic basis for the timing, selection, management, and acquisition of new systems needed continually to modernize the Air Force.
Hq
United States Air Force
Colonel Delbert H. Strube is Chief, Systems
Procurement Branch, Directorate of Procurement Policy, Hq USAF. Previous assignments have been as a
procurement officer in Europe, Africa, and Asia; as Director of Procurement for
the KC-135 System Program Office (1963-65); as chief of the procurement
inspection team for the Air Force Systems Command Inspector General (1965-68);
and as the procurement member of the DOD-directed Prototype Study. Colonel Strube is a graduate of Air Command and
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