The Section 809 Panel recently concluded its monumental analysis of defense acquisition law and regulations and released its third volume of recommended changes.  As we have written previously, the Panel’s work stands out from previous acquisition reform efforts with the appendices of detailed legislative and regulatory changes that accompany the commissioners’ analysis and recommendations.

Given the scope of the Panel’s work, few believe that Congress or the Department of Defense (“DoD”) will — or even could — simply adopt the recommendations in full.  Legislative bandwidth for additional acquisition reform is finite, and some of the Panel’s recommendations will prompt robust debate.  In this post, we analyze some of the recommendations that government contractors should follow most closely.  We highlight key issues and address the political dynamics involved in enacting them.

Background

The Section 809 Panel, established by Congress in Section 809 of the FY2017 National Defense Authorization Act (“NDAA”) to address issues with Defense acquisition policies, recently released the third and final volume of its report.[1]  Volume III contains 58 recommendations for how to reform the way DoD purchases commercial products, manages acquisition programs, trains its acquisition workforce, adjudicates contract disputes, and communicates with industry, among other issues.  On February 13, Covington and the National Defense Industrial Association convened and hosted an Industry Day, during which members of the Panel and leading acquisitions experts discussed the findings.

Commercial Buying Reform

A critical reform proposed by the Panel is the “Dynamic Marketplace Framework” (the “Framework”), a new method by which the Department of Defense can acquire products and services.  According to the panel, the Framework offers a “radically simplified way of interacting with the private sector” that will allow DoD to “adjust its acquisition processes to meet the demands of the dynamic marketplace in which it operates,” thereby accessing diverse markets and acquiring cutting-edge technologies more quickly.[2]  The Panel introduced the Framework in its earlier volumes, but provides more detail and draft implementing legislation in the final report.

The Framework would replace the current division between commercial and non-commercial purchases with a three-tier system: readily available goods and services; goods and services readily available with customization; and defense-unique procurements.

The “readily available” category “includes any product or service that requires no customization by the vendor and can be ordered directly by customers, to include products and services that only governments buy.”[3]  This would be similar to a commercial off-the-shelf item under the current system.  For these goods and services, acquisition officials would be able to buy items worth up to $15 million without the current public solicitation and bidding process—moving DoD, in some sense, into the place of a regular commercial buyer.  The Panel argues that this approach would reduce costs and bureaucracy, while providing new opportunities for smaller or less established vendors lacking the resources to navigate the present system.  DoD would retain the benefits of competition by conducting market research and comparing prices, much as a private-sector buyer would.

“Readily available with customization” refers to “products and services that are sold in the private sector for which customization, consistent with what is offered to existing private-sector customers, is necessary to meet DoD’s needs.”[4]  DoD’s approach to goods and services under this category would mirror that of the “readily available” tier, with relatively modest additional oversight and contract and regulatory compliance obligations.  The Panel argues broadly that “a product or service is readily available unless DoD is funding the development and the product or service is something that only defense entities would procure.”  While “readily available” would capture most products, “readily available with customization” would encompass the vast majority of services.[5]  As with “readily available” products, any goods or services worth more than $15 million would presumptively require public solicitation.

Finally, “defense-unique development” captures products and services that are purchased or developed based on specification for DoD.  Here, the new system would largely mirror and augment current acquisition policies, subject to the reforms, policies, and authorities that DoD and Congress have enacted in recent years, such as Other Transaction Agreements, Middle-Tier Acquisition, and the Commercial Solutions Operating pilot program.[6]  Generally, competition would remain limited or nonexistent, pricing would depend on development costs, and reforms would focus on reduced compliance burdens and process redundancies.[7]

According to the Panel, this three-tiered Framework represents a “revolutionary change to the way DoD conducts business.”[8]  It would shift the focus from an open bidding process to reducing bureaucracy, enhancing innovation, and enlarging the marketplace to entice new and non-traditional defense companies to compete for DoD business.

Portfolio Management

To streamline the purchasing review process, the Panel also recommends that Congress adopt a “portfolio management” system. The Panel contends that such a system would replace the current program-centric model with a “total lifecycle, multitiered capability” framework.[9] This would “[unify] responsibility and authority for acquisition elements such as requirements setting and program sustainment to facilitate technical and financial tradeoffs in capital investment management.”[10]

Portfolio management remains an elusive goal for acquisition policy professionals, however.  The Section 809 Panel’s construct would allow DoD to address its product investments “at an enterprise level, rather than as independent and unrelated projects or activities”—which would empower a more holistic assessment of acquisitions, as opposed to managing them as isolated projects.[11]  The Panel envisions each portfolio being overseen by acquisition executives who would have independent authority over acquisitions beyond that currently given to Program Executive Officers.  These executives would “make acquisition, procurement, and sustainment decisions for agility and responsiveness in executing emerging needs in a timely and effective manner.”[12]  The Panel believes that the portfolio system, managed by acquisition executives, would provide a more agile approach “modeled on the commercial sector.”[13]

Simplifying Acquisitions and Adjudications

To restructure the defense acquisition process further, the Panel recommends a number of measures to simplify compliance and reduce the number of bid protests and adjudications.  The Panel noted in Volume III that the current system creates “a labyrinth of challenges to the acquisition workforce, in both the public and private sectors” that serve as “barriers to entry for prospective industry partners.”[14]

The Dynamic Marketplace Framework would eliminate pre- and post-award bid protests of “readily available” products and services valued at $15 million or less (aside from agency protests to DoD itself).  The Panel also recommends limiting the jurisdiction of the Government Accountability Office and the Court of Federal Claims to procurements with a value that exceeds (or is expected to exceed) $75,000.[15]  Additionally, the Panel proposes eliminating the “second bite at the apple,” by which contractors may currently file a protest at the GAO and, if unsuccessful, file again at the Court of Federal Claims (“COFC”).  This follows similar Department of Defense legislative requests that could be renewed as part of the FY2020 NDAA cycle with the support of the Panel’s recommendation.  This issue has also been an area of great interest to Congress.  Section 822 of the John S. McCain NDAA for FY2019 requires the Secretary of Defense to study “the frequency and effects of bid protests involving the same contract award of proposed award that have been filed at both the Government Accountability Office and the United States Court of Federal Claims.”[16]  In addition, both Heather Wilson, the Secretary of the Air Force, and Mark Esper, Secretary of the Army, have made similar proposals, and DoD itself proposed legislation along these lines last year for the annual NDAA.[17]

To preserve the value of speed that characterizes the GAO protest system, the Panel’s recommendation would eliminate the opportunity to file with COFC after filing at the GAO and require the COFC to issue a decision within 100 days of ordering that a procurement be delayed.[18] Finally, to enhance transparency and fairness, and to compensate for the reduction in visibility caused by eliminating a large number of bid protests, the Panel recommends providing for enhanced post-award documentation and debriefings.[19]  A similar provision on post-award debriefing rights was included as section 818 of the FY2018 NDAA.  DoD is still in the process of implementing this provision.

Communication with Industry

The Panel additionally urges Congress to expand DoD’s communication with industry.  It laments the “lore” (not law) that restricts candid dialogue between industry and the Defense acquisition workforce.  To stimulate helpful — and lawful — interchanges, the Panel recommends that Congress approve methods by which “the defense acquisition workforce and the private sector improve the way in which the exchange information and communicate needs.”[20]  Enhanced ties between DoD and the private sector would “allow the entire acquisition workforce to identify innovative capabilities, share best practices, learn from mistakes, and align missions among buyers and sellers in the marketplace,” as well as give DoD and its vendors a better understanding of each other’s needs and goals.[21]

Among other proposals, the Panel recommends that Congress direct DoD to communicate with the marketplace throughout the procurement process, from development through final payment.  It also recommends establishing a “Market Liaison” at each “acquisition activity” to facilitate communication with industry regarding particular projects.  Relatedly, the Panel suggests that Congress establish a market intelligence capability throughout DoD that would enhance the government’s overall awareness of industrial capabilities.

Improving the Acquisition Workforce

Finally, the Panel proposes reforms to improve workforce development.  It suggests a series of actions to update current hiring authorities, such as improving resourcing, allocation, and management of the Defense Acquisition Workforce Development Fund, which has helped DoD recruit and retain qualified personnel.  It also recommends changing DoD’s career development framework to include professional qualifications (demonstrated competencies and proficiencies) alongside certifications (education, training, and experiences), and establishing two-way public-private exchange programs.

Relatedly, to continue the work of acquisition reform after its expiration in July 2019, the Panel also recommends establishing a permanent Center for Acquisition Innovation at the National Defense University’s Eisenhower School for National Security and Resource Strategy.[22]

Conclusion

Over the course of its three volumes of recommendations, the Section 809 Panel presented sweeping and comprehensive recommendations for acquisition reform.  Congressional staffers, both past and present, do not expect Congress to enact acquisition legislation this year at the scale proposed by the Panel. It is most likely that Congress will first continue working the reforms from last year’s NDAA in the areas of commercial items reform and the reorganization of the provisions of law related to defense acquisition within Title 10 of the United States Code. Congress may then begin to consider broader reforms in the areas outlined above, while the Defense Department may begin some regulatory reforms, particularly in the area of the defense acquisition workforce.

As Congress begins to consider the Panel’s proposals, industry should follow several potential areas of reform closely.  Bid protest reform will be of particular interest, especially to contractors that use the “second bite” option sparingly and carefully to challenge perceived errors in GAO decisions.

Should Congress take a tactical pause in major acquisition reform legislation, industry will have time to digest the Panel’s findings and engage with congressional staff to explain concerns and develop any alternative approaches.  By offering Congress counterproposals that grapple with statutory and regulatory detail, contractors can respond to the Panel’s extensive draft legislation with useful suggestions of their own, enhancing the likelihood of successful advocacy. In addition, while Congress studies the Panel’s recommendations for closer collaborations between DoD and industry, DoD can take some steps on its own.  As the Panel noted, candid, thoughtful discussions with DoD can be a helpful and informative practice.

(This article originally appeared on Covington’s Global Policy Watch blog.)


[1] Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations, Volume 3 (Jan. 2019) (hereinafter “Report”).

[2] Advisory Panel on Streamlining and Codifying Acquisition Regulations, A Roadmap to the Section 809 Panel Reports (Feb. 2019), at 5 (hereinafter “Roadmap”).

[3] Advisory Panel on Streamlining and Codifying Acquisition Regulations, Summary of Recommendations, Volume 3 of 3 (Jan. 2019), at 3 (hereinafter “Summary”).

[4] Id.

[5] Report, at 37.

[6] Report, at 10.

[7] Summary, at 3.

[8] Roadmap, at 5.

[9] Roadmap, at 11.

[10] Roadmap, at 11.

[11] Summary, at 4.

[12] Report, at 60.

[13] Report, at 62.

[14] Summary, at 6.

[15] Roadmap, at 21.

[16] The John S. McCain National Defense Authorization Act for Fiscal Year 2019, H.R. 5515, 115th Congress, 2nd Sess. (2018).

[17] Department of Defense Acquisition Reform Efforts, Hearing Before the S. Comm. on Armed Services, 115 Cong. 20, 80 (2017) (Statements of Heather Wilson and Mark Esper); John S. McCain National Defense Authorization Act, supra note 16, at § 822.  Other bid protest reforms have been enacted in NDAAs over the last several years.  See David H. Carpenter and Moshe Schwartz, Cong. Research. Serv. R45080, Government Contract Bid Protests: Analysis of Legal Processes and Recent Developments 12-13 (2018).

[18] Id.

[19] Id.

[20] Summary, at 7.

[21] Id.

[22] Summary, at 8.

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Photo of Samantha Clark Samantha Clark

Samantha Clark practices in the firm’s Public Policy Practice Group as well as the CFIUS and Government Contracts groups. Ms. Clark provides advisory and advocacy support to clients facing policy, political, and regulatory challenges in the aerospace, defense, and national security sector.

Before…

Samantha Clark practices in the firm’s Public Policy Practice Group as well as the CFIUS and Government Contracts groups. Ms. Clark provides advisory and advocacy support to clients facing policy, political, and regulatory challenges in the aerospace, defense, and national security sector.

Before joining the firm, Ms. Clark served in a number of senior staff positions on the U.S. Senate Armed Services Committee, most recently as Deputy Staff Director and General Counsel. In this role, she managed the passage of the National Defense Authorization Act (NDAA), the annual defense policy bill that authorizes the Defense Department’s budget. Ms. Clark worked on Chairman McCain’s legislative priorities to modernize the military retirement system and reform the defense acquisition system and served as an investigative counsel for the committee’s inquiry into cyber intrusions affecting U.S. Transportation Command contractors. During her time on the committee, she managed a multi-billion dollar policy portfolio that covered acquisition law and policy, national security law and policy, military, civilian, and acquisition workforce policy, congressional investigations, military end strength authorizations, military pay and compensation, law of war and detainee issues, and women in combat.

The Secretary of the Navy awarded Ms. Clark the Department of the Navy Distinguished Public Service Award for her “exceptional service to the Department of the Navy as Deputy Staff Director of the Senate Armed Services Committee,” and the Department of the Air Force awarded Ms. Clark her second Distinguished Public Service Award for her work leading specific legislative initiatives to modernize acquisition authorities and reform the military and civilian personnel systems in support of the Air Force during her tenure on the Senate Armed Services Committee.

Photo of Jeff Bozman Jeff Bozman

Jeff Bozman practices with the Public Policy & Government Affairs and Government Contracts practice groups in Washington, DC.  He focuses on the defense and aerospace industry, and on the labor and employment laws that apply to government contractors.