Over the past several years, the relationship between the Department of Defense (DoD) and private industry has grown increasingly strained. In part, this is a consequence of efforts by the Pentagon to control the rising costs associated with the acquisition of new weapons systems and the sustainment of existing ones. DoD complains not merely that it pays too much for products and services but that its programs never seem to benefit from the kinds of improvements in productivity and, as a consequence, reductions in price that have become the norm in many parts of the private sector. The private sector is equally vociferous, albeit not always in public, in its expressions of unhappiness at the challenge of dealing with a single, somewhat quixotic, buyer and 535 backseat drivers on Capitol Hill.
Another factor that added to the widening breach was the Pentagon’s efforts to increase the arms length relationship between itself and industry. To some degree this effort reflected hoary notions of the existence of a so-called military-industrial complex, a beast with two bodies but one mind. But it also was a consequence of DoD leaders’ desire to create a more competitive environment among the array of potential suppliers of goods and services. A third influence on the decline in communications was the increasingly litigious atmosphere surrounding defense contracting. It is hard now to even remember a time when a losing bidder did not file a protest. If one was a DoD official, the safest policy was to keep industry at arms length or farther.
Certainly, government officials have to exercise care when they engage industry, particularly if there is an expectation that a competitive proposal will be released at some point. Nevertheless, dialogue between the government and the private sector is not merely valuable, it is crucial in an era of declining defense budgets. How else will DoD be able to understand how military requirements impact a program’s cost, schedule and even long-term sustainment? Only through open dialogue can industry come to appreciate how its customers think and where a program or solicitation fits into broader considerations of strategy, force planning and budgets.
An example of the importance of dialogue is the Joint Light Tactical Vehicle (JLTV) program. This was an attempt to replace the existing fleet of Humvees with a more survivable and capable family of tactical vehicles. Teams led by Lockheed Martin, General Dynamics/AM General and BAE Systems/Navistar were selected to compete in the program’s technology demonstration phase. When it came time to award contracts for the next or engineering and manufacturing development (EMD) phase, the two services changed the rules. The decision was taken to reduce significantly the requirements for the JLTV in order to bring down the price. DoD altered the potential value of an award by both reducing the number of vehicles it was planning to buy in the initial phase of production and proposing to significantly reduce the award period of future contracts. Given the reduced requirements, it seemed quite possible for new entrants who had not spent the time and money in the demonstration phase to now enter the JLTV competition with an extremely low bid. Finally, the draft request for proposal for the EMD phase proposed a very low dollar award to the winning teams. As a result, several potential bidders signaled the possibility that they might choose not to participate in the EMD competition.
In response to the warning signs from industry, the Army and Marine Corps did the right thing: they opened a dialogue with the private companies. As a result of the feedback received, the dollar value of the awards for the EMD phase was increased to reflect the costs associated with performing the specified work. In addition, parts of the draft request for proposal were recast to guarantee the winner of the initial production contracts a certain number of vehicles annually for a specified period of years.
The JLTV program still faces a number of hurdles, most notably the desire of some in Congress to kill the program outright. But at least the customer and industry are talking to one another and trying to figure out the best way to craft a proposal that meets the basic needs of both sides. This is a win for the Army/Marine Corps JLTV team and for the defense industry.
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