Defense industry groups issue 2005 recommendations.

Since 1993, the National Defense Industrial Association has co-chaired two defense industry coalitions known as the Acquisition Reform Working Group (ARWG) and the Industry Logistics Coalition (ILC).

The ARWG represents large and small business, manufacturers and service companies. The ILC represents the majority of the defense manufacturing and service companies involved with logistics, depot maintenance and life-cycle product support for the Department of Defense and the military services.

The purpose of these two coalitions is to identify issues affecting the defense industrial base, recommend solutions and make these concerns known to Congress and the administration.

The ARWG concentrates on issues related to the federal acquisition process. The changes made since enactment of the 1994 Federal Acquisition Streamlining Act and the 1996 Clinger-Cohen Act are important. Yet, these reforms represent only the proverbial tip of the iceberg of what is required to truly transform the procurement process.

The aim of the ARWG is to reduce costs, enhance efficiencies and promote quality management as the federal government expands the use of commercial practices and reaches out more to the private sector to acquire goods and services. Similarly, the ILG promotes policies that sustain and improve the ability to provide world-class repair and maintenance capabilities to the war-fighter. This year, the two groups' recommendations included:

Commercial acquisition practices. The government in recent years has attempted to realign its purchasing processes to lower costs and to gain access to new commercial technology. It does this by eliminating--or at least lowering--barriers that make doing business with the government overly cumbersome and unattractive to commercial firms, thus inhibiting greater integration of commercial and military production lines.

The Federal Acquisition Streamlining Act, the Clinger-Cohen Act and the 2003 Services Acquisition Reform Act enabled major changes in the way the federal government buys commercial items. However, ARWG has identified several areas in which the full potential of existing commercial practices has not been recognized and employed, either because of legislative or regulatory restrictions, or failure to use the flexibility provided. These require a number of additional steps, including:

* Curb proliferation of government-unique requirements applicable to commercial prime contracts.

* Make it clear that time and material commercial contracts do not apply to cost-accounting standards.

* Expand cooperative purchasing and schedules for homeland security.

* Improve protection of commercially developed intellectual property rights after submission to the government.

Business-process streamlining. The defense community has two key goals in acquisition reform. The first is to streamline the procurement process in order to reduce development and production-cycle times, as well as program costs. The second is to strengthen the technology and industrial base through increased government use of commercial items that incorporate advanced technologies.

The use of multi-year contracts also should be expanded as a means of providing defense companies with stable revenue and cash flow--particularly in the developmental phase. Multi-year contracts result in lower unit costs, since the contractor can build in more economical lot sizes with some assurance of recovering non-recurring costs over the life of the contract.

A reduction in the uncertainty of ongoing government business enables the contractor to build a more professional, stable workforce, thus potentially enhancing the quality of performance. ARWG has focused on several critical steps that should be taken to make federal purchasing more efficient. Among them:

* Encourage prudent use of exceptional waivers of certified cost and pricing data.

* Ensure compatibility of thresholds for Truth-in-Negotiation Act and cost-accounting standards.

* Improve the efficient-payment process.

* Extend Prompt-Pay Act interest payments beyond 12 months.

* Treat sales to foreign, state and local governments as commercial sales.

Limitations on Global Competition. The current export-control system and its processes do not support today's business demands. Unless the system is streamlined and aligned with today's objectives, the industries supporting U.S. security will suffer. ARWG recommends that Congress establish higher monetary thresholds for congressional notifications of defense exports, and create a more predictable and transparent process for notifications of export licenses.

At the urging of NDIA, the Defense Export Loan Guarantee Program was initiated by Congress in 1996, but it has limitations that reduce its usefulness. The DELG could become a more effective program by mirroring more closely the provisions that apply to the Export-Import Bank.

Streamlining Socio-Economic Requirements. A number of statutes focus on important socio-economic issues. Acquisition reform should bring structure and coherency to these initiatives in order to promote clear goals and objectives and streamline acquisition procedures. In particular, the following changes should be made:

* Enhance implementation of the small-business subcontracting goals.

* Simplify the small disadvantaged business-certification requirement.

Public-Private Partnerships in Military Depots. The public-sector depot workforce, like much of the civil-service workforce, is aging.

Increased use of public-private partnerships to do the work provides both an opportunity to attract younger, less-experienced government employees and to train them on the job. To view the entire ARWG and ILC briefing papers, please visit the Government Policy section on our website, ndia.org.

NDIA GOVERNMENT POLICY

Peter M. Steffes

Vice President, Government Policy

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Ruth W. Franklin

Director, Procurement

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Ann Stockwell

Director, International Trade Policy and Programs

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Chandra Hubbard

Analyst, Government Policy

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