EFFECTIVE ACQUISITION STRATEGIES FOR SYSTEMS …

1 SC H O O L O F PU B L I C PO L I C Y SCHOOL OF PUBLIC POLICYJu l y 2 0 1 2 July 2012T h i s re s e a rc h wa s p a r t i a l l y s p o n s o re d b y t h e This research was partially sponsored by the N ava l Po s t g ra d u a t e S c h o o lNaval Postgraduate SchoolEFFECTIVE ACQUISITION STRATEGIES FOR SYSTEMS engineering AND technical assistance (SETA)By:Jacques S. Gansler, William Lucyshyn, and John Rigilano1856 UNIVERSITY OFMARYLANDFORM_Online Report 17/23/2012 11:35:21 AMUMD-AM-12-174 Report Documentation PageForm ApprovedOMB No.

2 0704-0188 Public reporting burden for the collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering andmaintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information,including suggestions for reducing this burden, to Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, ArlingtonVA 22202-4302.

3 Respondents should be aware that notwithstanding any other provision of law, no person shall be subject to a penalty for failing to comply with a collection of information if itdoes not display a currently valid OMB control number. 1. REPORT DATE JUL 2012 2. REPORT TYPE 3. DATES COVERED 00-00-2012 to 00-00-2012 4. TITLE AND SUBTITLE EFFECTIVE ACQUISITION STRATEGIES for SYSTEMS engineering and TechnicalAssistance (SETA) 5a. CONTRACT NUMBER 5b. GRANT NUMBER 5c. PROGRAM ELEMENT NUMBER 6. AUTHOR(S) 5d. PROJECT NUMBER 5e.

4 TASK NUMBER 5f. WORK UNIT NUMBER 7. PERFORMING ORGANIZATION NAME(S) AND ADDRESS(ES) University of Maryland,Center for Public Policy and Private Enterprise -School of Public Policy ,2101 Van Munching Hall ,College Park,MD,20742 8. PERFORMING ORGANIZATIONREPORT NUMBER 9. SPONSORING/MONITORING AGENCY NAME(S) AND ADDRESS(ES) 10. SPONSOR/MONITOR S ACRONYM(S) 11. SPONSOR/MONITOR S REPORT NUMBER(S) 12. DISTRIBUTION/AVAILABILITY STATEMENT Approved for public release; distribution unlimited 13. SUPPLEMENTARY NOTES 14. ABSTRACT 15.

5 SUBJECT TERMS 16. SECURITY CLASSIFICATION OF: 17. LIMITATION OF ABSTRACT Same asReport (SAR) 18. NUMBEROF PAGES 81 19a. NAME OFRESPONSIBLE PERSON a. REPORT unclassified b. ABSTRACT unclassified c. THIS PAGE unclassified Standard Form 298 (Rev. 8-98) Prescribed by ANSI Std Z39-18 iii Table of Contents Executive Summary .. iv I. Introduction ..1 Report Roadmap ..2 II. Background ..4 Growing Complexity of SYSTEMS ..7 Inadequate Workforce ..9 Industry Consolidation ..12 III. Challenges ..16 Organizational Conflicts of Interest.

6 16 Legislating Against OCIs ..20 Insourcing ..25 Inherently Governmental Functions ..27 IV. Possible STRATEGIES ..31 Option 1: Augment the DoD s Organic Capability ..31 Option 2: Encourage the Development of Independent SETA firms ..42 Option 3: Transition SETA Functions to Federally Funded Research and Development Centers ..45 V. Recommendations and Conclusion ..52 Appendix ..56 Reference List ..59 Acknowledgements ..65 About the Authors ..66 iv Executive Summary This report addresses the policy changes that are necessary if the Department of Defense (DoD) is to reconcile its growing need for SYSTEMS engineering and technical assistance (SETA) with the realities of today s defense industry.

7 The DoD relies heavily upon SETA contractors to facilitate the ACQUISITION of complex SYSTEMS . SETA contractors are civilian experts who provide analysis and engineering services to the government and often work hand in hand with government engineering staff. This arrangement provides numerous benefits to the DoD. For instance, SETA contractors are able to provide the flexibility and quick availability of expertise to DoD programs without the commitment or expense of sustaining a large, long-term government staff.

8 It must be emphasized that decisions on many aspects of SYSTEMS engineering concerning the organization of goods and services by the DoD ( , SYSTEMS architecture optimization, cost performance options, tolerable technology risks, realism of schedule feasibility, etc.) are judgments that are inherently governmental and must be made by government officials with a background and understanding of SYSTEMS engineering . However, the generation of the analyses and simulation, for example, that inform these judgments can be perhaps best done by private-sector SETA contractors, provided that they are, in fact, independent and, thus, objective.

9 However, as reliance on contractors has increased, so has vertical and horizontal consolidation within the defense industry, which has led to the significant reduction in the number of independent firms capable of providing the DoD with objective SETA services. Indeed, firms selected to design and construct military SYSTEMS have, on occasion, also provided advisory services via one or multiple SETA contracts. This trend has led to the growing concern that firms may be considering their own, and possibly long-term, interests (or the interests of their affiliates) in designing a system , which disadvantages both the government and other firms.

10 Organizational conflicts of interest (OCIs) of this sort present a serious impediment to the successful execution of DoD programs. v Beginning in 2009, as part of its wider efforts to reform government contracting and correct perceived abuses, the Obama administration began an initiative to insource ( , convert to civil service positions) some functions that had been provided through SETA contracting with private firms. The objective was to reduce reliance on contractors and, some believed, improve cost efficiency.