Study shows power of industry/fed union

The Defense Systems Management College at Fort Belvoir, Va., recently published a case study called "Implementing Acquisition Reform: A Case Study on Joint Direct Attack Munitions." Joint direct attack munitions (JDAM) is a kit consisting of global positioning satellite equipment and computers, which the military attaches to its existing arsenal of so-called "dumb" bombs. Once installed, the high-tech kits allow the bombs to navigate through environments such as storms, darkness or high winds to land within 40 feet of their targets. The military identified the need for the retrofit during the 1991 Persian Gulf War.

In midstream, JDAM was designated as an acquisition reform pilot program by the Federal Acquisition Streamlining Act (FASA). As such, it was converted from a conventional acquisition to one of the first procurements that embodied principles of acquisition reform. Program management responsibility for JDAM was given in 1993 to the Air Force, which was the lead service for the joint program. Air Force civilian Terry Little, a veteran of "black" programs that were less rule-bound than ordinary procurements of that era, took charge of the program. Little had a reputation, according to an official quoted in the case, "of being a 'throw it all out the window' kind of guy, of being arrogant and against the bureaucracy and the [Office of the Secretary of Defense] in general...[and of being] very defiant about complying with paperwork."

When Little took over, the internal estimate of the unit cost for JDAM was $68,000. The Defense Department planned to buy 40,000 kits, for a total cost of $2.7 billion. Little set a goal of $40,000 per unit. When briefing the Air Force chief of staff on the project, Little was surprised when the general pounded his fist and said, "If it's one cent over, I don't want it."

Little recalled the general "was holding me accountable for the number...I gave him. That had never happened before."

In April 1994, several months before FASA was passed, the Air Force chose McDonnell Douglas Corp. and Lockheed Martin Corp. as the contractors for an 18-month competition for development of a JDAM prototype. Meanwhile, Little had successfully lobbied DOD's acquisition reform office to include JDAM on the list of pilot programs in the Clinton administration's FASA proposal. Although Colleen Preston, then deputy undersecretary of Defense for acquisition reform, was inclined to limit pilots to commercial or "semi-commercial" products, she was persuaded that pilot programs had to include "a real military weapon" or else the military wouldn't take reform seriously.

On the government's end, the primary requirement change included reducing the number of unique military specifications in the request for proposals from 87 to zero during the head-to-head prototype competition. The 87 military specifications were replaced by five "live-or-die" performance requirements.

DOD also made two significant changes in its procurement strategy. It established integrated product teams with each of the two contractors. McDonnell Douglas worked with an Air Force team, which tried its best to help that company win, and a second team worked with Lockheed, trying to help that company win. Each government team came to root hard for "its" contractor.

DOD also made aggressive use of past-performance report cards.

Both contractors got the message that the government was serious about cost and performance. McDonnell Douglas "completely changed the design of the product" compared with what it had planned before the pilot program environment.

At the end of the 18 months, both prototypes exceeded the requirement for accuracy. McDonnell Douglas bid $14,000 per kit and won the job. The government saved more than $2 billion compared with the original cost estimate and more than $1 billion compared with Little's original aggressive cost target.

This case deserves a wide readership, especially among IT managers responsible for systems projects.

The lessons are a timely reminder of the potential benefits of acquisition reform and of strategies for producing such benefits: commitment to results, orientation to the commercial marketplace, aggressive use of past performance, industry/government cooperation and, let's not forget, government and industry folks willing to think differently.

-- Kelman was the administrator of the Office of Federal Procurement Policy from 1993 to 1997. He is now Weatherhead Professor of Public Management at Harvard's Kennedy School of Government.