During this age of austerity, the need for change to the status quo is clear. Dollars spent on burdensome compliance requirements that provide little value are funds not spent on sustaining America’s technological superiority, or preserving the readiness of our military.
Today’s acquisition system can be daunting. Its array of rules focuses on compliance and eradicating the risk of malfeasance in contracting. But it also discourages some companies from selling to the government, and it erects barriers to innovation and investment by the companies we rely on to innovate and deliver equipment needed by our armed forces. The costs of developing and enforcing a “zero-defect” acquisitions apparatus are steep: increased compliance expenses, diminished innovation, and delayed delivery of equipment needed by front-line troops.
Of course, we understand the importance of oversight. Our industry has a strong ethical commitment to working closely with our government customer to deliver the most effective and safest product at a fair price.
However, the mindset that “getting tough” on industry somehow looks out for the taxpayer negates the fact that it is actually the taxpayer – and ultimately the warfighter – who pay the price for a burdensome acquisition system. It creates significant barriers to participation in defense acquisitions, especially for mid and small-tier suppliers. It raises costs and does not add commensurate value.
The Department of Defense’s complex audit requirements are a case in point. They take much longer to complete than in the past, and lead to delays in contract awards and closeouts. While audits aren’t the only reason for the long time it takes to award contracts, they contribute to delays ultimately felt by the warfighter. And industry feels the effect too. Uncertainty makes financing more difficult for smaller firms who need predictable revenue projections to support operations. The backlog in incurred cost audits and contract closeout impacts payment – delaying critical revenue firms need to sustain their businesses.
We’re encouraged by the DOD’s Better Buying Power 2.0 initiative, which acknowledges audit requirements are a major factor driving lengthy procurement cycles, and with them, cost growth. And we are heartened by the willingness of the Defense Contract Audit Agency to listen to industry’s views and work to resolve issues. Clearing the audit backlog, reducing documentation reporting requirements, and focusing auditors’ efforts on problematic aspects of contracts will help remove barriers to participation.
The issue of protecting company intellectual property rights is another concern in defense contracting. Companies invest considerable capital – human and dollars – to develop intellectual property. They do so because the investment is intended to return value to their shareholders and owners. However, current DOD practices threaten to undermine these investments and are another negative influence on the defense industrial base. While DOD’s intention of reducing long-term costs and introducing as much competition as possible for contract awards is sound, current rules and policies could result in competitors reaping substantial rewards by having access to technical data they did not pay for or develop.
And these are only two examples. The fact is that defaulting to the most risk adverse regulatory environment creates a chilling effect on initiative and openness on both sides of the contractual relationship. And it drives some companies away.