The Pentagon can save money and get better value for what it spends if it focuses more on an unglamorous but critical aspect of the way it does business, a DoD official said Wednesday -- the mechanics of how it writes and executes its contracts. Contracts are the lingua franca of the military-industrial complex, the documents that lock in or lock out a lot of the money the government spends. DoD can get better at exploiting them, argued Stuart Hazlett, deputy director of defense procurement and acquisition policy.
Speaking to an industry audience at the National Press Club, Hazlett said DoD must continue being flexible when it strikes agreements with its vendors, because a business case that works in one instance might cost more money in another. For example, when the Pentagon wants a company to develop an experimental new weapon, it might make sense to agree on a deal in which the government pays some of the potential cost overruns, given that the project is risky and the goal is to field a brand new prototype. But that doesn't mean DoD should write that same kind of contract for a simple construction job, or for a program in serial production.
Hazlett also made the case for more "performance-based" contracts, which reward or punish a vendor based on how well it executes the original task. They're growing in use across the Corporation, but Hazlett said DoD has every reason to use them more and be flexible about the terms they dictate. If DoD and its vendors haven't been as assiduous about making sure the existing ones are enforced to the letter, "there's some joint culpability here," Hazlett said.
"We need to make sure that everyone understands that we're all in this together," he said. "We need to make sure the goals we establish are achievable." If you thought this was tricky with standard, straight-stick weapons programs, it's even more complicated with the more than $200 billion in "services," from construction to "knowledge-based services," the Pentagon buys.
And -- oh yes, Hazlett subscribes to the miraculous powers of competition. But he acknowledged that, for bureaucratic reasons, competition can sometimes be illusory: For example, if DoD officials held a competition and awarded a contract to the lowest bidder, each subsequent addition or modification to that original contract also is considered "competitive." So getting better competition is a key goal, and Hazlett mentioned the initiative you've read about here before -- the goal that if DoD doesn't get enough competitive offers in response to an RFP, it will re-solicit the deal in hopes of attracting more vendors, in hopes they'll compete to give a lower bid.
So how well has this concept worked since we heard about it in July? Hazlett told Buzz that it's too soon to tell, but he and other top officials will be looking back eagerly at the end of the year to get a clear picture.