Quality in government: an application of quality standards to the U.S. foreign military sales program. (Perspective).

To gain and sustain competitive advantage in a changing and increasingly demanding global economy, both business and government have introduced a wide variety of innovations to improve processes and practices. (1) Quality management is one principal innovation that business has used to continue improving, but according to quality expert Dr. H. James Harrington, "There has been some government quality improvement, but not nearly enough." In a December 2000 commentary published in Quality Digest, Harrington assigned U.S. government a grade of "D" "A" to "F" scale) pertaining to quality. (By contrast, he gave U.S. manufacturing an "A" and U.S. education an "F"). (2) The purpose of this article is to engender positive discussion regarding the need to improve quality in government. Recognizing that quality is not easily defined (Simon 53) and that government is a vast enterprise, this article offers practical illustrations to aid understanding and takes the following approach:

* First, it provides a brief description of the International Organization for Standardization (ISO) 9000 family of quality standards to establish a common basis for understanding. (Rationale for selection: ISO 9000 as an international quality standard has worldwide recognition. Also, federal procurement officials may use ISO 9000 as a higher-level quality standard when contracting with industry for "complex or critical item" (FAR 46.202-4)).

* Secondly it introduces a particular group of U.S. government organizations -- those engaged in the foreign military sales (EMS) Program that describes the principal information product that these organizations collectively produce -- the Letter of Offer and Acceptance (LOA); it reviews the quality measures the EMS Program currently employs to produce the LOA. (Rationale for selection: The EMS Program is "A Hotbed of Innovation and Change" (LeBoeuf, 15) within the U.S. government that remains open to further change and improvement.)

* Third, discusses the application of ISO 9000 to LOA production as well as the benefits that would accrue to FMS program organizations by adopting ISO 9000. (The author contends that adopting a systematic, process-based approach to quality management would enhance current practices in the FMS Program.)

What is ISO? What is the ISO 9000 family of quality standards? (3)

The International Organization for Standardization (ISO) was established in 1947 as an international body headquartered in Switzerland to define voluntary, worldwide standards for commerce. After eight years of international collaboration, ISO introduced its 9000 family of standards for quality management in 1987. These standards, used worldwide as a basis for establishing quality management, were updated in 1994 and revised in 2000. These standards provide a common language for managers and employees at all levels, as well as customers, to understand the meaning of quality.

The current ISO 9000 family includes three standards relating to establishment of a quality management system (QMS) (4): (1) 9000 provides an overview of the "Fundamentals and Vocabulary" of a QMS; (2) 9001 details the Requirements for a QMS; and (3) 9004 offers "Guidelines for Performance Improvements:" (Selection 2). ISO 9001 is the principal quality standard and consists of over twenty activities organized in five interrelated sections: Quality Management Systems, Management Responsibility, Resource Management, Product Realization, plus Measurement, Analysis, and Improvement.

The ISO 9000 family of quality standards provides managers a flexible framework by articulating what requirements should be met by an organization's quality system, but does not dictate how the organization must meet these requirements (ISO/TC 176). Another key aspect includes the incorporation of eight "Quality Management Principles to help managers lead the organization toward improved performance in a transparent and systematic manner." Figure 1 provides a listing and definition of each of these principles. Above all, ISO 9001 emphasizes documenting a "process approach," defining a "process" as an "activity using resources, and managed in order to enable transformation of outputs" (Sec. 0.2). This comprehensive family of quality standards provides a basis to further explore quality measures within government organizations.

What is the FMS Program? What is the LOA? What are current quality measures?

The FMS Program (5) is comprised of a number of different offices and organizations, principally within the Department of Defense (DoD), that are collectively referred to as the FMS Community. (6) The FMS Program involves the sale of U.S. defense articles or services to eligible countries and international organizations on a government-to-government basis. By law, the FMS program is entirely self-financed from revenues generated through sales. Although revenues were sustained throughout the Cold War and post-Gulf War, FMS program sales rapidly declined during the mid-1990s. (7) Also, the press criticized the FMS Program in 1998 as mired by "bureaucratic red tape, lax management and a reluctance to adapt to market demands" (Opall, 1). The FMS program was generating less revenue and appeared on the verge of losing relevance. FMS community leaders responded by aggressively pursuing a significant number of innovations (LeBoeuf, 14). The innovations led to a "remarkable turnaround" (Defense News, 20) with the FMS program regaining appeal (i.e., "relevance") among customer countries (Svitak), reaching sales levels of the early 1990s (Davison, Overview, 5). As important as these innovations were to the health of the FMS program, they lacked an explicit commitment to systematically pursue improving quality. (8) The next portion of this article explores the LOA in the primary output (9) ("product") of the FMS program, the LOA production process, and the current role of quality in producing the LOA.

Within the FMS Program, the principal, immediate output is the LOA "... a contractual sales agreement between the seller (the U.S. government) and the purchaser (a foreign government or international organization)." "The LOA is based on applicable regulations and the specifications the purchaser has set forth in its Letter of Request (LOR)" (Brandt, 185). The LOR is the initial input that begins the process, and the LOA is the product of the process. In this context, the LOA must enhance customer satisfaction and meet "customer as well as statutory and regulatory requirements" and, therefore, may be considered the product of the process.

The LOA production process uses a "value chain" (10) similar to that illustrated in Figure 2. The "Customer Country" sends the LOR (or initial order) to the "LOA Production Organization" (e.g., appropriate military department or DoD agency), which, in turn, forwards the LOR to the appropriate "Data Supplier" (e.g., Program Manager). This "Data Supplier" gathers requested components of information and returns these to the "LOA Production Organization" which assembles the LOA components and delivers the finished product to the "Customer Country."

The Defense Security Cooperation Agency (DSCA), the DoD-level agency that oversees the entire FMS Program, addresses quality and the LOA in one general and two specific instances in the Security Assistance Management Manual (SAMM) (11) as well as in a 1999 policy letter entitled Quality Review of Letter of Offer and Acceptance (LOA) Documents. In the general case, the SAMM contains a single sentence on "quality control" that charges the agency responsible for processing the LOA with ensuring "adequate controls exist to assure mathematical and factual integrity, and completeness, of the LOA package" (SAMM 70102.D). In the first specific case, the SAMM mandates "a standard quality technical review" by trained personnel to ensure the LOA complies with laws pertaining to the Missile Technology Control Regime (MTCR). (12) In the second specific case, the SAMM establishes criteria to improve the quality of payment schedules attached to LOA's (SAMM 130401.A).

In late 1999, DSCA published the "Quality Review" policy identifying the lack of LOA quality as a customer dissatisfier and called for quality improvement in the LOA proposing specific solutions (Davison Memo). This policy letter lists eleven areas of serious nonconformance that would result in DSCA rejecting and returning the LOA for re-work and another six areas of less serious non-conformance. Examples of serious problem areas include: failure to include or update a case closure date, inaccurate offer expiration dates, and inappropriate or duplicative notes, terms, or conditions. As an illustration of one measure of quality, DSCA monitors the number of LOAs and related documents submitted for approval versus those rejected. These documents showed a 10-11 percent rejection and rework rate during the first half of fiscal year 2002 (SCDF 12). However, these rates included legitimate and "false" rejections caused, for example, by faulty information technology systems (Baillie). (13) Therefore, DSCA continues to study this area further to develop a useful "quality component metric" (Millies, 2). Certainly, this policy letter, the SAMM, and efforts to develop quality metrics provide evidence of some commitment to quality.

As an example at the Military Department (MILDEP) level, the Navy International Programs Office (Navy LPO) (14) is an "LOA Production Organization" that has introduced initiatives to improve LOA quality (LeBoeuf). At the beginning of some new FMS programs, Navy IPO conducts a Case Initiation Meeting (CIM) with representatives from the Program Manager and customer country to ensure customer needs as expressed in the LOR are clearly understood and that Navy IPO is able to respond. The CIIM uses a checklist approach to ensure that all aspects of a potential sale are appropriately considered. In a similar fashion, Navy IPO convenes a Quality Review Board (QRB) with a similar group of stakeholders just prior to completing the LOA to ensure precedent setting and high dollar value cases comply with applicable statutes, regulations, and policies as well as meet customer requirements. Finally, in another effort to improve quality, Navy IPO conducts an LOA Conference on a periodic basis to conduct training and review current and new practices, procedures, and policies with "Data Supplier" representatives. (Baillie).

How would ISO 9000 apply to LOA production? How would the EMS Program benefit by adopting ISO 9000 for LOA production?

Current LOA production documentation and practices provide a firm basis on which to build a robust QMS that is systematic and process-oriented. This portion of the article examines examples of how the various elements LOA production process already discussed would "fit" into the ISO 9001 approach, and, conversely, discuss how ISO 9000 could be applied to the LOA production process. (For ease of reference, numbers in parentheses denote the applicable subsection in ISO 9001.)

* FMS Community leadership is seeking to develop a useful "quality component metric" for the LOA. Referencing "Management Responsibility, Section 5" and "Product Realization, Section 7," ISO 9001 articulates that the quality objectives should be both measurable and consistent (5.4, 7.1).

* The current DSCA policy letter delineates criteria for non-conformance, but does not assign specific responsibility for quality. ISO 9001 points to the need to identify those personnel responsible to ensure quality is built into specific elements of the LOA at each level of the value chain (5.5).

* Senior management conducts metrics reviews; however, a need exists to identify quality measures for use by the entire FMS Community when producing the LOA. DSCA, or respective MILDEP offices, could reaffirm management commitment (5.1) to producing a quality LOA as well as conducting periodic reviews to gauge LOA quality (5.6) in a comprehensive and relevant "Quality Policy" (5.3).

* In the "Resource Management, Section 6," ISO 9001 states that all personnel performing work affecting product quality would receive specific quality training (6.2). The SAMM states that trained personnel must provide "a standard quality technical review" of the LOA for Missile Technology Control Regime compliance. ISO 9001 would guide the FMS Community to extend this same standard to the entire LOA.

* Quality practices within Navy IPO already correlate, to a certain extent, to ISO 9001 subsections relating to customer focus (5.2) and customer-related processes (7.2) for determining and reviewing requirements as well as communicating with the customer. Adoption of ISO 9001 would fully incorporate these customer focus practices into the entire production process in a systematic, process-based manner.

Without a systematic, process-based approach, the FMS community risks omitting reviews or conducting redundant and possibly inconsistent quality reviews that add time (and therefore cost) to LOA production which are then passed on to the FMS customer. As reported by Defense News, one European representative identified "a lack of consistency" between military services in executing FMS Programs, and a Canadian representative wanted to see more done in order "to demonstrate the value added in FMS which would enhance defending a decision to go U.S. FMS" (Svitak). In summary, the systematic approach outlined in ISO 9001 would benefit the FMS community by ensuring that all elements of a sound QMS were considered to improve the process and LOA versus the "ad hoc" approach, which might omit critical elements that would lead to an improved product, process, or both.

An effective quality management system (QMS) would add value for customer countries and continue to strengthen stakeholder confidence in LOA production and the FMS program as a whole. Conformance with an internationally recognized standard would demonstrate to customer countries a commitment to apply quality in the FMS program and related processes. A QMS would provide a systematic approach and focus as well as offer guidelines (ISO 9004) for continual improvement. As an additional benefit, particularly relevant to programs in the federal sector, implementing a QMS would offer a mechanism to overcome growing concerns regarding the "graying of the workforce." Developing and documenting standardized processes would facilitate training new workers in the FMS community and help ensure continued production of a quality LOA.

In fairness, "quality" and "quality programs" should not be summoned as a magical incantation to solve organizational problems. As one example, quality expert Steve Levitt cautions against the possibility of losing focus, "Quality programs, without benefit of additional guiding purpose, run the risk of improving what was, instead of preparing for what should and must be" (xi, emphasis in the original). Also, earlier versions of ISO 9000 were criticized for too much emphasis on focusing on the quality of their Quality Manual and a "paperwork drill" that did not lead to positive changes like measuring defect levels and product conformity (McGovern, 67). The purpose for any quality program should not be, of course, to get an "A" grade from today's quality experts (e.g., Mr. Harrington) nor necessarily win the Baldrige Quality Award (or the government's equivalent: Presidential Quality Award (although both would be considered pleasant by-products)). A quality program must contribute to achieving competitive adva ntage.

By adhering to rigorous innovation, the FMS program has regained revenue, relevance and, in a sense, its "guiding purpose." With respect to this innovation, quality has played an important, but indirect role. In some cases, quality has been explicitly invoked, although in a limited fashion, to improve certain aspects of LOA production. While a commitment to quality is apparent, the FMS program has not explicitly implemented a systematic, process-based quality program. Adopting such a program is and ought to be a "strategic decision of the organization" (9001 0.1), and this article has sought stimulate such a positive decision to adopt such a program by describing a systematic, process-based approach to quality and outlining some of the benefits that would accrue if applied to the LOA production process.

Obviously within the FMS Program this quality approach could be extended to execution of the LOA (providing the actual material and service at the agreed price and time) and performance of the system sold as part of the LOA, as well as applied to the full spectrum of "products" under the FMS umbrella such as leases, loans, grants, etc. This quality management approach could also provide benefit to other federal government organizations that produce information products, which move through a similar value chain and must meet customer requirements. For now, though, by incorporating a systematic, process-based QMS, the FMS program has the unique opportunity to demonstrate that "Quality in Government" extends beyond a fuzzy concept or mere contracting requirements for "higher-quality standards" (Federal Acquisition Regulation) to mean the application of specific and explicit higher standards of quality to government itself.

How to Implement a Quality Management System (1)

Steps                             Guidance

1. Identify the goals the         Typical goals may be the following:
   organization wants to achieve     * Be more efficient
                                     * Achieve customer satisfication
                                     * Improve communications and
                                       morale within the organization

2. Identify what others expect    The following are the expectations
   of the organization            of interested parties
                                  (stakeholders):
                                     * Customer and end users
                                     * Employees
                                     * Suppliers

3. Obtain information about          * Visit the ISO website:
   the ISO 9000 family                 http://www.iso.ch
                                     * See the standards: ISO 9000,
                                       ISO 9001 and ISO 9004
                                       (Standards are available to
                                       DoD Acquisition Reform.
                                       Detailed instructions are on
                                       the Defense Standardization
                                       Program website at
                                       http://dsp.dla.mil/ISO-docs.htm.
                                       DoD employees using a .mil
                                       address may download ISO
                                       standards directly from
                                       http://www.nssn.org.)

4. Establish current status,      May use one or more the following:
   determine the gaps between        * Self assessment
   current manageent system and      * Assessment by an external
   the requirements of ISO 9001        organization

5. Determine the processes        Review the requirements of the ISO
   that are needed to supply      9001 on Product Realization to
   products to customers          determine how these requirements
                                  do or do not apply.

6. Develop a plan to close the    Identify the actions needed to close
   gaps identified in Set 4       the gaps, allocate resources to
   and to develop the process     perfrom these actions. ISO 9001
   determined in Sept 5           sections 4.1 and 7.1 provide the
                                  information needed to consider
                                  developing the plan.

7. Carry out the plan             Proceed to implement the
                                  identified actions and track
                                  progress to schedule.

(1)Adapted from pages 6-8 of the brochure published by ISO in
Selection and Use of the ISO 9000:2000 Family of Standards. The Brochure
is available at
http://www.iso.org/iso/en/prods-services/otherpubs/pdf/selusee.pdf.

Figure 1 (Lucius 22-23)

Eight Quality Management Principles from ISO 9000

Customer Focus - Organizations depend on their customers and therefore should understand current and future needs, should meet customer requirements and strive to exceed customer expectations.

Leadership - Leaders establish unity of purpose and direction of the organization. They should create and maintain the internal environment in which people can become fully involved in achieving the organizationis objective.

Involvement of people - People at all levels are the essence of an organization and their full involvement enables their abilities to be used for the organizationis benefit.

Process approach - A desired result is achieved more efficiently when activities and related resources are managed as a process.

System approach to management - Identifying, understanding, and managing interrelated processes as a system contributes to the organization's effectiveness and efficiency in achieving its objectives.

Continual improvement - Continual improvement of the organization's overall performance should be a permanent objective of the organization.

Factual approach to decision making - Effective decisions are based on the analysis of data and information.

Mutually beneficial supplier relationships - An organization and its suppliers are interdependent and a mutually beneficial relationship enhances the ability of both to create value.

(1.) Simon analyzes and evaluates six frameworks to improve performance in government organizations: "total quality," excellence, reinvention (to include the National Performance Review), reengineering, Government Performance and Results (GPRA) Act of 1993, and the Baldrige Award. He concludes that Baldrige and "total quality" offer the greatest possibility for improvement. Though Simon did not discuss ISO 9000. his study did focus on quality as a "shift from an analytical dominant perspective to a system-thinking methodology" (51) which is the approach promoted by ISO 9000:2000 Quality Management System.

(2.) In a 12 August 2002 exchange with the author, Dr. Harrington stated that he believed improvement in some government departments had occurred, but not enough. He stated that in his opinion government would get a "D+."

(3.) ISO 9000:2000 standards are available to DoD at no charge as part of a DoD Acquisition Reform. Detailed instructions are on the Defense Standardization Program (DSP) website at http://dsp.dla.mil/ISO-docs.htm. DoD employees using a .mil address may download ISO standards directly from http://www.nssn.org (Delorie).

(4.) To distinguish between 1987, 1994, and 2000 versions of these quality standards, ISO refers to the current family of standards as ISO 9000:2000. The individual standards are ISO 9000:2000 (family and this initial standard have same designation), ISO 9001:2000, and ISO 9004:2000, respectively. ISO 9002 and 9003 existed in earlier versions, but were subsumed in ISO 9001:2000. For the sake of the reader and since only the 2000 version is further discussed in this article, the author has omitted the 2000 suffix.

(5.) The FMS Program is a principal element of Security Assistance. Considered a tangible instrument of foreign policy to realize National Security objectives, FMS is controlled by the State Department, but administered by the Defense Security Cooperation Agency (DSCA). EMS has existed in one form or another for more than fifty years, but was codified as currently structured in 1976 as part of the Arms Export Control Act (AECA).

(6.) The FMS Community is made up of different organizations within various governmental agencies at different levels and include State Department and DoD level agencies, Military Departments, U.S. Coast Guard, Navy Inventory Control Points, Program Manager, etc. Two of these organizations are discussed in this article: The Defense Security Cooperation Agency (DSCA) and the Navy International Programs Office (Navy IPO).

(7.) DSCA reported FMS levels for 1991-1998 were: 1991: $17.3B, 1992: $13.9B, 1993: $31.1B, 1994: $13.3B, 1995: $8.6B, 1996: $10.3B, 1997: $8.8B, and 1998: $8.6B (Davison, Overview 5).

(8.) The author agrees that the pursuit of "quality" was an implicit part of these FMS program innovations.

(9.) "Outcomes" from the FMS Program include enhanced foreign policy and national security objectives. However, this article limits discussion to one significant, immediate "output" of the FMS program, and the LOA. Further differentiation between "outcome" and "output" is considered beyond the scope of this article.

(10.) "Value Chain" is a concept that consists of partnered organizations using a managed process to produce a custom tailored product that matches customer needs in a manner that is integrated to add value (Chase, 328). This concept is contrasted with a "Supply Chain" which provides an illustration of how organizations are linked together from a particular company's viewpoint (Chase, 332). The author of this article contends that the FMS Process is more appropriately represented by the Value Chain paradigm.

(11.) The SAMM is the primary document for the FMS Program and assists, "... in complying with... statutes and directives; complying with policies, procedures, and reporting requirements; and facilitating changes to SA policies and procedures." (SAMM, 10001). In other sections, the SAMM does emphasize the importance of the U.S. government employing "the same quality and audit inspection procedures as would be used in procuring for itself" when procuring items for customer countries.

(12.) The MTCR "is an informal international political arrangement designed to control the proliferation of rocket and unmanned air vehicle systems (and their associated equipment and technology) capable of delivering weapons of mass destruction" (SAMM Section 50004.D.1). Further discussion is considered beyond the scope of this article.

(13.) Though beyond the scope of this article, an interesting area for further study would include a detailed analysis of the cost of LOA rework (i.e., the cost of "not getting it right the first time") which would provide further insight to the cost of not having an explicit, systematic approach to quality.

(14.) Navy IPO leads all International Programs efforts for the Department of Navy (DoN) including the EMS Program.

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Chase, Richard B., Nicholas I. Aquilano, and F. Robert Jacobs, Operations Management for Competitive Advantage, 9th ed., New York: McGraw Hill/Irwin, 2001.

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About the Author

Joseph Milligan is the Deputy Director for Security Assistance at the Navy International Programs Office in Washington, D.C. where he oversees the entire security assistance program for the Department of the Navy. He is currently working to implement systematic, processed-based aproaches within the Department of Navy Security Assistance Program. Also, as a Naval Reservist, he serves on the staff of the Naval Inspector General working to improve efficiency, cost management, and financial integrity. He welcomes comments or opinions on this article and may be contacted at the following e-mail address: [e-mail].