BEST PRACTICES FOR DEFENCE ACQUISITION REFORM IN SOUTH AFRICA AJ Swart and AJ ...

18 Pages·2009·10.56 MB·English

BEST PRACTICESFOR
DEFENCEACQUISITIONREFORMINSOUTH AFRICA
AJSwartand AJBuys
InstituteforTechnologicalInnovation
UniversityofPretoria
[email protected]
ABSTRACT
This paper investigates the best practices and acquisition reform initiatives'in the US
Department of Defencethat are relevant forthe defence acquisition reform process inSouth
.Africa.The first partofthepapergives ashort discussion onacquisitionmethods commonly
used by defence departments, briefly defines what acquisition reform is and states the
applicable principles that can be used for acquisition reform. The second part gives the
advantages anddisadvantages ofsome ofthe acquisitionreform initiatives andbestpractices
thatwere identified. Therelevanceofeach ofthese initiativesand best practices totheSouth
African acquisition reform effort is indicated. The last part describes an acquisition reform
modelthatcanbeusedasabasis tomake acquisitionbetter,faster andcheaper. Finally,some
recommendationsaremadeonthe way forward andactionstobetaken that willhelptospeed
uptheacquisition reformeffortinSouth Africa.
OPSOMMING
Inhierdie artikel worddiebeste praktyke en aanskaffinghervorming inisiatiewevandieVSA
Departement van Verdediging, wat relevant is vir die hervorming van
verdedingingaanskaffing in Suid-Afrika, ondersoek. Die eerste deel van die artikel bevat 'n
kort bespreking van aanskaffingmetodes wat algemeen deur verdedigingsdepartemente
gebruik word. Aanskaffinghervorming word kortliks gedefineer en die toepaslike beginsels
wat gebruik kan word vir aanskaffinghervorming word uiteengesit. Die tweede deelgee die
voor- en nadele van sommige aanskaffinghervonning inisiatiewe en beste praktyke wat
geidentifiseer is. Die relevansie van elk van hierdie inisiatiewe en beste praktyke vir
aanskaffingherfonning in Suid-Afrika word aangedui. Die laaste deel beskryf 'n
aanskaffinghervormingsrnodel wat gebruik kan word asbasis om aanskaffing beter,vinniger
engoedkopertemaak.Terslotte word 'n aantal aanbevelings gemaak oordiepadvorentoeen
.aksies watgeneemkanwordomaanskaffinghervorminginSuid-Afrikatebespoedig.
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ACRONYMSUSED INTHISARTICLE
AR AcquisitionReform
ASRP AcquisitionandSustainmentReinventionProcess
cxrv Cost asanIndependentVariable
CALS ContinuousAcquisitionandLife-CycleSupport
CDRL ContractDataRequirementsList
eOTS CommercialofftheShelf
DoD DepartmentofDefence
EA EvolutionaryAcquisition
EDI ElectronicData Interchange
ESS ElectronicSource Selection
EVMS EarnedValueManagementSystems
IDE IntegratedDataEnvironment
ILS IntegratedLogisticSupport
IPPD IntegratedProductandProcess Development
IPT IntegratedProductTeams
Lce
Life CycleCost
NDI Non-Developmental Items
O&S OperatingandSupport
OIPT OverarchingIntegratedProductTeams
OS Open System
PPI PastPerformanceInformation
RFP RequestforProposal
R-TOC ReductionofTotalOwnershipCost
SA South Africa
SANDF SouthAfrican National DefenceForce
SAP SimplifiedAcquisitionProcedures
SOW StatementofWork
SPI Single Process Initiative
TOC Total OwnershipCost
URS UserRequirementsSpecifications
US UnitedStates
WBS WorkBreakdownStructure
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1.BACKGROUND
The South African White Paper on Defence [1], as approved by Parliament in May 1996,
statesthatthe SouthAfrican NationalDefence Force (SANDF) shallbeabalanced, modern,
affordable and technologically advanced military force, capable of executing its tasks
effectively and efficiently..This requires the development, maintaining, upgrading and
replacementofweaponsandequipmentinthe SANDF inthemostcost-effectiveway.Forthe
SANDF to carry out its primary role, the availability of armaments is essential. Optimal
modernarmamentsforthe SANDFareobtained through aprocess ofarmam~ntacquisition.
TheArmscorandSouthAfricanDepartment ofDefence (DoD) acquisitionprocess issimilar
totheformerUnitedStates(US)DoDprocess ascontained inUSDoDSOOO-seriesdirectives
[2]. The US DoD 5000 series has, however, changed dramatically in the last few years.
Aggressive efforts from the USDoDaddressing specific areas of AcquisitionReform (AR)
havealreadysaved orresultedincostavoidance ofover $60billion inrecentyears.Changes
intheexternalenvironment oftheSANDFare similartotheUSsituationandprobably more
emphasised.Arrnscor investigationinto the cost/time associated with thecurrent acquisition
processindicatedthatthecurrentprocessistoocostly,toolongandtoorigid.
ThekeyplayersthatwillinteractindefenceARinSouthAfrica(SA)includetheSANDF,the
Defence Secretariat and Armscor. These three role players are considered to be in a
partnershipanddecisionmakingatalllevelsallows fortheviewpointsofthethreepartners.
2.INTRODUCTION
For years, the competition for scarce resources such as funding, personnel, and time,
inFfeased and it will continue to be intense in the years to come. There are more systems
desired than affordable, a premium on skilled personnel, an increasingly dynamic business
environment, and increased sensitivity to the efficiency and effectiveness,of our use of
resources. Not only were numerous acquisition problem areas identified, but also
'opportunitiesforimprovingthewaytomanage limitedresources.
.OneofthebiggestdilemmasthattheSANDF isfacingrightnowisaverytightbudget.There
are large demands for very limited resources. Everything that is required is simply not
affordable. Widespread implementation of AR is a necessary action in the SA Defence
environment, so that the required defence capabilities can be deliveredbetter, cheaper and
,faster.
:Using past successes as a foundation, the ways to accomplish acquisition and support of
systemsacross their entire lifecyclesmust be reshaped.Only by criticallyre-examining the
coreprocessesthat areused foracquisition and support activities -thatis,taking aprocess
orientedapproach-cannon-essential/non-value-addingactivitiesbeeliminated.According to
.theUS DeputyUnder SecretaryofDefense for Acquisition Reform [3]this AR culture will
' leaveonlyoneoption:"Tocontrolourdestiny andourspendingnow,orriskhavingsomeone
',elsedoitforus".
This report discusses certain US Defence AR initiatives and practices that may be relevant
andusefulforARinSA.ItishoweverimportanttokeepinmindthatitisnotpossibleforSA
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to implement alltheUS Defence ARinitiatives andpractices due tothemajordifferencesin
theacquisitionworkforcesandenvironments.
3. WHATISACQUISITIONREFORM?
According tothe USDeputy Under Secretary ofDefense for Acquisition Reform[3],ARisa
program to achieve the military acquisition objectives at a reduced cost and with increased
responsiveness to customers. AR istherefore not only to streamline acquisition processes or
to upgrade acquisition policies, but also to look at all the necessary resources, actions,
organisations and infrastructure needed to provide and support products andservices for the
customer. Theemphasis should beonbestvalueandaffordabilityas opposedtolowestprice.
The aimofARistohave successful acquisition programsthatplace capable andsupportable
systems in the hands of the user, when and where it is needed, and within the bounds of
affordability.
AR inSAshould start with a culture change within theacquisition workforce. The SANDF,
Armscor andtheDefence Secretariatshouldworktogether towards moreco-operativeandco
ordinated acquisition efforts.AR projects should beidentified and driven byARchampions.
This entailsthetotalspectrumofactivitiestobecarried outby theparticipating organisations
within the defence family to meet the armament requirements better, cheaper and faster to
ensure that the SANDF has the necessary user systems for maintaining a combat-ready
capability.
4.ACQUISITIONREFORMPRINCIPLES
The following AR principles were identified and used as a basis during the research to
identifyapplicablebestpractices tobeusedinSAdefenceacquisition:
• Reducecostofownership.
• Useperformance-basedrequirements.
Use Integrated Product and Process Development (IPPD) and Integrated Product
Teams(IPT).
Managerisk.
• Encourageinnovation.
• Streamline.
• Usecommercial practices,productsandprocesses.
• Useon-lineelectronicmedia.
• Useunobtrusive testingtechniques.
• Usebestvaluetechniques.
5.ACQUISITIONMETHODS
Acquisition is a method of acquiring systems, which includes conceptualisation, design,
development, test, contracting, production, deployment, logistic support, modification and
disposal of systems, products, supplies or services. Traditional approaches include grand
design,incremental acquisition andphasedacquisition.
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Grand DesignAcquisition
The grand design approachrequiresall requirementsto be specified atthestart ofthe project
.aridassumes that the system,as specified,willbedelivered at the end oftheprocess.Thereis
a strong emphasis on planning the project (or phase) in advance. It is essentially a "once
through, do-each-step-once" strategy, i.e. determine user needs, define requirements, design
thesystem, andimplementthe system,test,fix,anddeliver.
IncrementalAcquisition
AccordingtotheUS Office ofthe SecretaryofDefense [4],incremental acquisition involves
buildingasystem inaseriesofincrements,eachadding to the capabilityofthe'previousone.
There is usually a single contract and all requirements are assumed to be known at the
beginningoftheproject.
.Phased Acquisition
In phased acquisition the acquisition is divided into phases, allowing decision points (and
often delays) betweenphases, when the direction of a projectmay be significantly changed.
The actual acquisitionmodel [or eachphase isnotspecified,and mightbe,forexample, grand
design orincremental acquisition. Phased acquisition is the official method used byArmscor
[5]. There are currently six different phases defined in the system hierarchy integration
processforSAdefence acquisition.
Although Armscor's general policy for the management ofthe acquisition process is only
used as a guideline for acquisition, it became more and more difficult to use one general
method or model for all types ofprojects, especially complex programs. To determine the
effectivenessofdifferentacquisitionmethods fordifferenttypesofacquisitionprojects is one
areaonwhichARcanfocus.
EvolutionaryAcquisition
Traditional acquisitionstrategies often fail(orareunable) to take rapid technological change
into account and advances in technology are not easily incorporated into systems when the
advances occur during the project development cycle. Consequently, many ofthe resultant
·systemsdonot meet theusers'expectations, cost too much and take toolongto develop (due
tothe strategy's weakness inaccommodatingchanges), and are expensivetomaintain.
·According to the US Under Secretary of Defense's "Defence Acquisition Deskbook" [6],
Evolutionary Acquisition (EA) is an alternative approach with the potential to produce
significantlybetter results. EA has, however,notbeen widelyusedduetotheconcern that EA
·isinherentlyrisky. However, forcertain typesofprojects,risks maybesignificantlygreaterin
traditional strategies,thanthose inEAstrategies.
The main thrust of EA is the specification, design, implementation, testing, delivery,
operation and maintenance of systems (not prototypes) incrementally. Delivery of each
incremental release increases the capability of the system until complete. Users have early
'access tosystem releases and are encouraged to provide feedback onperformance.This will
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then shapethesystemasitevolves intoitsfinalform.
ProjectsthataresuitedtoEAwillnonnaJlyhavesomeorallofthefollowingcharacteristics:
Softwareintensivesystems.
• Systemsusingrapidly changingtechnology.
• Systemswherehumans areanintegralpartofthesystem.
• Systemswithalargenumberofdiverseusers.
• Whenthesystemisunprecedented.
• Alimitcapabilityisneededquickly.
Thesesystemsusuallyhaverequirementsthataredifficulttocaptureanddefineandwhichare
likely tochangeduringthelifeoftheproject. EAprojects arealsolikely toutilisecommercial
technology that is emergent or quickly changing, making it particularly suitable for
informationtechnologyprojects.
When used correctly for appropriate projects, EA can provide significant benefits over
traditionalacquisitionmodels.The benefits include:
• Betterrequirementsearlierintheacquisitionprocess.
• Morefeasiblerequirements.
• Fielding anearlyoperationalcapability.
• Incorporation ofnewtechnology.
• Morecontrolandvisibilityofprojectprogress.
• Bettersystemsthatmore closely meettheirusers'needswhendelivered.
• Lowersupportcostsbecausetheneedforearlymodificationsisreduced.
Some of the penalties, which will normally be incurred in using EA, as compared with a
grand designapproach,are:
• Additional andduplicatedactivities andinteractionrequired.
• Frequent changes in direction, which may result in nugatory work being done and
delaystotheschedule.
• Greaterprojectedcost andschedule.
• Betterandmoremanagementneeded.
• Impact ofconcurrentactivities.
• Betterconfigurationmanagementneeded.
• Technical supportfortheacquirer.
• Userresourcesandco-ordination.
• Supportforfieldedreleases.
EAisahighlydynamicandflexible approachtotheacquisitionofcomplex systems.Assuch,
itinvolves higher levelsofrisks inanumber ofareasthatneedto becontrolled iftheproject
istobesuccessful.
Itis clear that EA istherefore not aneasy orsimplified optionfor acquisition. It ishowever
believedthatthattherearereal benefitstobegainedfromtheEAapproach andthatforsome
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projectsEAisessential.
....Inchoosingan acquisitionmodel,itmay be useful to consider combinations ofthedifferent
models that are available. For example, grand design projects often include some early
delivery of system components. Similarly, in a large grand design project, EA may be
considered fortheacquisition ofcomplexsubsystems.
6.BESTPRACTICESANDACQUISITIONREFORMINITIATIVES
Although many other US DoD AR initiatives and best practices exist, only a few practices
were identified that showed significant benefits for ARinSA.Itis importantthatARshould
also take advantage ofbusiness process improvements being pioneered in the,private sector.
Thecommercialsector hasreorganised, restructured,andadopted revolutionarynewbusiness
and management practices in order to ensure its competitive edge in the rapidly changing
globalmarketplace.TheSADoDmustadoptandadaptthelessons oftheprivate sector,ifthe
SANDFistomaintain itscompetitiveedgeintherapidlychanging defenceenvironment.
CostAsAnIndependentVariable.
According to the U.S.Navy Acquisition Reform Office [7],Cost as an IndependentVariable
(CAIV) isan acquisition strategy focusingon cost-performancetrade-offs insetting program
goals. It entails setting aggressive but realistic cost objectives when defining operational
requirements and acquiring defence systems, and managing achievementofthese objectives.
This strategy ensures thatcost objectivesbalancemission needs with available andprojected
resources,taking intoaccountthestateofrequisite technologies.CArydoes notmeantrading
cost, performance, and schedule equally. CAIV means picking the right affordable cost
. Objective, and sticking to it. Key CAIV principles and practices to use for SA defence
acquisitionare:
• Requirements should be stated in terms of capabilities and may be exchanged,
substituted,oradjusted forthesakeofanother.
Requiredcapabilities shouldbeestablishedatthesystemlevel andnotatlowerlevels.
• Realistic cost objectives, that are consistent with requirements and projected fiscal
resources,shouldbeclearlydefinedasearly aspossible.
• Thecost objectivesmustbeupdatedforeachphaseoftheacquisitionprogram.
• Key trade-off areas should be identified in the Statement of Work (SOW) and
specifications.
• Early and continuous customer/user participation insetting program goals throughout
theprogram.
• Provisions forcontractor participation in Integrated Product Teams (IPT) tofacilitate
tradeoffs duringallprogramphases.
• Robust contractor incentivesforachieving costobjectivesduring allprogram phases.
.Dueto budget constraints, cost isalready treated as an independent variable in SA defence
···cicquisition. Budget uncertainties, however, makes it difficult to define cost objectives that
.balanceoperationalrequirements withavailableresources andtechnologies.
CAIVcould be averyuseful technique forprogrammanagement at all levels inSA defence
.'3cquisition. It is a very valuable tool for the analysis of alternatives. High-level cost
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objectives should be communicated continuously to the Annscor project managers and
SANDFproject officers. CAIV should be tailoredto thespecific circumstances ofindividual
programs
ContinuousAcquisitionandLife-cycleSupport.
AccordingtotheU.S.NavyAcquisition Reform Office [7],ContinuousAcquisition andLife
Cycle Support (CALS) is astrategy toaccelerate the pace at which high quality information
flows within the DoD and between the DoD and its business partners, simultaneously
reducing informationmanagement overhead costs.The USDoD's overarching goal inCALS
is to develop a seamless defence enterprise in which the knowledge products of the
acquisitionprocess areimmediatelyandrapidlyaccessibletoalluserswhilemaintainingnear
immediate currency and quality of information. Application of the best technologies,
processes, and standards for the development, management, exchange, and usc ofbusiness
and technical information among and within governmental and industrial enterprises will
generate anIntegratedDataEnvironment (IDE).
An IDE and the implementing processes should be provided for the people who design,
acquire, use and support weapon systems. This gives them the technical and management
informationneeded tofield, operateandsustain affordable, effective weapon systems. Ready
access to accurate acquisition and logistics information improves weapon systems life cycle
managementenabling mission performance atlower cost.
Numerous efforts were made in the past by the SA defence family to establish a life-cycle
support environment. The lackofclearlydefinedteams, processes,standards and information
management systems made these efforts unsuccessful and costly. Electronic information
flows withinand between the SA000, Armscor and contractors needs tobe improved with
easy access.The US Defence Acquisition Deskbook [6]is a good example of a method for
communicatingprocesses and changes within the DoD.An IDE ishoweveressential forAR
inSAandneedsserious consideration.
IntegratedProductandProcessDevelopment,
According tothe US Secretary ofDefence [8], Integrated Product and Process Development
(IPPD) is a management process that integrates all activities from product concept through
production to field support, using a multi-functional team, to simultaneously optimise the
product and itsmanufacturingandsupportprocessestomeetcostandperformanceobjectives.
Thekeyelements ofIPPDare:
• Customerfocus.
• Concurrentdevelopmentofproducts and processes.
• Early andcontinuouslifecycleplanning.
• Flexibilityforoptimisation.
• Uniqueapproaches.
• Encouragerobustdesignandimproved processcapability.
• Event-drivenscheduling.
• Multidisciplinaryteamwork.
• Empowerment.
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Seamless managementtools.
'. Proactive identificationandmanagement ofrisk.
' This isakey managementprocess foreffective defence acquisition inSA.IPPD depends on
theproduct and process, and there istherefore nosingle solutionor implementationstrategy.
TheTPPD process in SA should however start with changes to the decision-making process,
incorporating more on the functional expertise ofintegrated product teams. Open channels
should existtobring downstreamissuestobearearlier.
IntegratedProductTeams.
According to the US Secretary of Defence [8], Integrated Product Teams (IPT) is a
multidisciplinary teamwork approach to implement 1PPD and enable making the right
decisions at the right time. IPT's are composed of representatives from all appropriate
functional disciplines working together with a team leader to build successful and balanced
programs,identify and resolve issues, andmake sound and timelydecisions.The purposeof
IPT's is to make team decisions based on timely input from the entire team including
customersandsuppliers.
..TheUSDoDhas three differentlevelsofIPT's.TheOverarchingIPT (OIPT)isat thehighest
level while the Program1PT operates at theprogram level. The Workinglevel IPT includes
officers from the Program Office and staff represented at the OIPT level. The focus and
responsibilities ofthe threetypes differ.
The USIPT'sare verysimilartotheprojectteams being used inSAdefenceacquisition. The
SA project teams function only on the program level and often experience difficulties in
decision-making,guidance,program statusandbudgets. Theseprojectteamsshouldhowever
be restructured and redefined in terms of authority, focus, responsibilities, members and
interfaces.
Some misconceptions do exist on IPT's and the new draft policies in Annscor calls it
'Integrated Project Teams". It is however important to have IPT's with qualified and
empowered team members thatwill focusonacertain field ofexpertise fordecision-making.
These IPT's can be used for drawingup Requests for Proposals (RFP's)or to solve specific
technicalproblems andshouldexistatalllevcls.
"TheIPTconcept isimportantforotherARinitiatives such asIPPD,butshouldbestreamlined
.for the SA acquisition processdue tothe limited acquisition workforce.Program managers
J>shouldindicatethedifferentIPT'sthatareneededandchairallthefirstlevel1PT's.
TotalOwnershipCost, CAIVand TargetCost.
., Accordingtothe USOffice oftheSecretaryofDefense [4],Total OwnershipCost (TOC) for
, defence systems is often confused with Life Cycle Cost (LCC) and Operating and Support
i(' (O&S) cost. TOC is a broader concept than LCe and O&S cost and includes not only
acquisition program direct costs, but also indirect and hidden costs attributable to the
';,'acquisitionprogram(i.e.,costs thatwouldnotoccur iftheprogram didnotexist).Indirectcost
would include, for example, the infrastructure that plans, manages andexecutes a program
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f
overitsfulllifeand commonsupport itemsandsystems. ~
~
.
CAIV is a process to reduce costs while TOC is a domain - a set ofcosts to be reduced. ~
Reduct~on of TOC (R-TOC) is a program that consists ofa set ofprocesses that seeks t6'i
change. _ I
f
• Whatisacquired(usually addressed byCAIV).
'~
• How to acquire or operate a system (addressed in a number of ways), in order to ~
reducecost.
The threemainobjectiveswith theR-TOCprogramsare:
:1
• Tocontrolcost (Capture andarrestcostgrowth).
I
• Toreducecost (Reduce costandcapturesavings).
• Investtomodernise. .,
I
Although thesame objectives exist inthe SADoD, no R-TOC programs have beeninitiated
to date. This is an area where formal AR programs can show tremendous results. The I
challenges that are faced are the lack ofTOC databases, the difficulty of capturing allTOC·"1
and thefactthatTOC isconfusedwithLCCcostand O&S cost. BenefitsofARinthetarget..••
costdomaincouldbeto: :
• Increaseoverall profitability.
:1
• Reducemanufacturingcosts. I
• Reducethecosts ofnewproducts beforemanufacturing.
• Meetorexceed customerexpectations. I
• Reducethecostofpurchasedmaterial.
• Resultincustomervaluedproductfeaturesandfunctions. I
• Developamoreprofitableproductmix.
./
• Decreasethenumberofdesignchanges.
• Reduce timerequiredfornewproductintroduction. ·1
I
i
Single Process Initiative
~
J
:1
According to the U.S. Navy Acquisition Reform Office [7], Single Process Initiative (SPI) :;!
(also referred to as "commonprocess initiative"or "block change process')isaninitiative to '
consolidate or eliminate multiple management and manufacturing requirements acrossj
defence contracts onafacility-wide basis.Manymethods ofperformingthesameprocessare:'
often employed to satisfy different contracts/customers. Given the fact that defence
contractors may on average employ 250 or more discrete processes, any multiplication of '
alternatemethodsrapidly introduces technicalandcost inefficiencies.
SPI addresses this problem by allowing contractors to propose use of their most efficient
business and manufacturing practices in lieu of Government imposed standards. SPI is a·.·,
streamlininginitiative that can be used in SAto accomplish AR goals ofcost, scheduleand·
performance improvement by eliminating unnecessary overheads and reducing inefficiency.
TheSPIproposal and approval process,.however,relies upon integrated product teamingandi
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