Private Sector Offers Acquisition Alternatives

January 1, 2014
By Rita Boland

Officials with government and corporate experience lend their perspective 
for change.

Fiscal constraints and technology evolution are forcing the government to re-evaluate procurement efforts with a renewed vigor. Industry has suggestions for improving processes, but progress will require a different level of dialogue between companies and their public-sector clients. Company leaders believe they can help government overcome some of its issues because they understand both realistic technical solutions as well as the effect policies have on acquisition cycles. But they need the opportunity to show what is available. Government personnel increasingly are calling for that knowledge; however, legal and fair competition concerns often limit meaningful discussion, resulting in misunderstanding and frustration.

John Gilligan, the president and chief operating officer of Schafer Corporation, says if government would come to industry and clearly describe the problem to be solved rather than a solution, “It is amazing what industry could provide.” Gilligan previously served the U.S. Air Force as a civilian employee, including as one of the service’s program executive officers (PEO). He believes government underestimates the ability of companies to develop solutions that are “good enough” to meet mission needs at a very affordable cost. If the public sector stated requirements, and that it wants and would accept a “best fit” solution along with a warranty, Gilligan estimates that up to a 50 percent life cycle cost savings could be achieved, as well as a significant decrease in the length of the procurement cycle. “When you add these savings up across a number of systems and projects, that’s a huge savings,” he explains.

Having now served in both sectors, Gilligan says he realizes most people on the public side do not understand the value of time. “Simply put, shorter acquisition cycle time means less cost. They also don’t really understand what profit is or why it is a good thing for government as well as industry,” he states.

This confusion causes delays in contracts, which eventually end up costing the taxpayers. Misunderstandings aggravate situations, increase costs and often lead to protests. Gilligan says little or poor communication is the biggest cause of companies protesting contracts. He spent time in industry before working for the government, which he says was enormously beneficial. When he served as a PEO, he conducted a lot of outreach and solicited ideas to promote constant interaction. He suggests government collect information from industry that will enable it to put together good bids so industry can help save money and provide the best solutions. Year-long personnel exchanges in which government officials sit at a company and vice versa would help improve acquisitions all around, he adds. However, integrity rules make such a proposition difficult to execute.

An area of frustration across industry is the lowest price technically acceptable (LPTA) procurement cycle. “The government generally does a lousy job of defining what is technically acceptable,” Gilligan explains, and that leads to problems. Lt. Gen. Jeffrey A. Sorenson (Ret.), USA, president and partner, A.T. Kearney, and former G-6 of the U.S. Army, adds that he has talked to contemporaries across industry all identifying the same problems, most pressingly that LPTA contracts go to organizations without the capabilities or wherewithal to perform. Industry has a sense of angst especially in cases where LPTA replaces best value. One of the key solutions the private sector wants to offer the government is its passionate desire to give its best work all the time. Many companies believe that outside LPTA, they can deliver better results to the government.

Leaders at Cisco Systems agree. Tina Swallow, the firm’s manager of defense strategies and a retired U.S. Navy commander, says market research should be encouraged to help the government fully understand where commercial industry can be used to meet the government’s needs. Her colleague Cindy DeCarlo, a retired Air Force colonel and director of Cisco’s U.S. defense business development, says the implementation of LPTA is a problem. “You can’t beat how it sounds, conceptually,” she states. But what often happens is the solution that is procured meets the minimum requirements for today and is not able to support how the system inevitably will be used tomorrow. The quality of solution received is related to the quality of requirements specified, DeCarlo says. If government would allow industry to provide more input in areas for market research and solutions research, the private sector could offer more to the public one.

Darrel Beach, also formerly in the Air Force and now a consulting systems engineer with Cisco, presents a perspective from the technical level. He says reaching only the lowest acceptable level often results in technology that simply does not function as it should to meet evolving operational requirements or security requirements.

All the sources agree the government is facing increased costs and delays over time using LPTA. Industry can offer better solutions with some better standards. Gen. Sorenson says, “It seems that it is increasingly more difficult to work through contract administration and contracting folks.” Putting out requests for proposals (RFPs) is taking longer, making business more difficult for the government and industry. Companies can help government as partners, and partnership is one solution the private sector is trying to offer. Building on Gilligan’s earlier statements, Gen. Sorenson explains the public sector really does not understand having to make money. “If they knew how much the private sector has invested in responding to RFPs, I think in some cases they’d be astounded,” he says. If government had more dialogue with industry to learn more about these issues and better communicated when it had a valid reason for delaying RFPs, everyone would be better off.

A.T. Kearney focuses more on consulting with other private firms than with the government. Lessons learned in that type of business could serve as solutions for the public sector. Gen. Sorenson explains that when working on RFPs and establishing projects, an enormous amount of dialogue takes place between the parties so the firm understands what clients want and that they know what deliverables will look like. Collaboration often takes place at high levels of leadership, unlike in the government where working with officials at the top is difficult.

Even at industry days, the people who attend are often at middle and junior levels. Presentations are pro forma and dialogue is choreographed. The public sector has to be careful about fairness in the competitive environment while companies must protect their intellectual property. Sensitivity about open competition is part of all interfacing between the two sides, with government having to avoid certain answers or to give information to all companies.

Gen. Sorenson believes industry can help government more if talks were improved, especially at higher levels. “I think getting senior leaders involved in that process early on would be most beneficial,” he explains. The commercial sector has adopted more open information sharing and a different competition model yet seems to be doing fine. Government can apply some of the best practices to improve its functions. Gen. Sorenson adds that he has great admiration for the government’s acquisition work force but believes it is hindered by the bureaucratic process.

Certain private-sector entities also could help the public side more directly. These firms are set up to consult with managing budgets, obtaining better returns on investments and improving overall performance. Groups such as these carry out in-depth studies and analysis to come up with action plans and implementations. They can help government find value and bring it forward.

Beach explains that his interest in talking to agencies is not to gain a nefarious advantage. Companies want rules that allow them to compete while still providing the best technical solutions for the requirements in disciplines that evolve as rapidly as information technology and security. Beach wants to form engineering understandings to find out what organizations need in a solution set so he can better help clients. Another way industry can help is through its internal research and development (R&D) dollars. DeCarlo says government gains a lot of capability by buying what industry has to offer. The more the government specifies its needs, the better solutions companies can produce.

Lt. Gen. Dave Melcher (Ret.), USA, former G-8 of the U.S. Army and current chief executive officer and president, Exelis Incorporated, says government must be careful, however, not to assume that defense contractors will pick up any shortfalls in the government’s R&D investments. Corporations still are responsible to their shareholders and are obligated to be wise with their money.

“Some misunderstandings and mistakes can be made when you’re on the other side looking out,” Gen. Melcher says. “One is that defense companies are making unreasonable profits.” Now that he works in industry he does not believe this is true, explaining that profit margins are slimmer for this type of business than many other high-technology companies. Gen. Melcher continues the theme that if government personnel better understood how companies operated, the knowledge would result in better conversations and more affordability.

“I think industry can help because we’re actually pretty good at taking [commercial-off-the shelf products] and integrating them in new ways,” he continues. The private sector can bring integrated solutions forward if the government acquisition structure would become more amenable to accepting them. “Look, we all believe in this industry” and want it to be successful in providing necessary capabilities, Gen. Melcher states. Company personnel can help the government better craft requirements in meaningful ways so when RFPs release, they are highly refined. “What I’m saying is you can’t overlook the importance of the right conversation between the two parties,” he explains.


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