Latest procurement reform may create a COTS renaissance

By John Keller
Editor in Chief

The year 2011 has to be better than 2010, doesn't it? Last year, Congress approved not even one spending bill-not one. Instead, it looks like the last Congress will leave it to the incoming group of lawmakers to fund fiscal years 2011 and 2012 in the same year. There's even a chance that the 2011 fiscal year, which began on the first of last October, might not even be officially funded until after the president's fiscal 2012 budget request comes out next month.

I have never seen anything like this-never-and I've been covering Washington politics now for nearly 30 years. Somehow it seems that members of Congress-Democrat or Republican-are genetically incapable of doing the right thing, which led us to 2010 when not one single appropriations bill was approved, and when lawmakers instead tried relying on earmark-riddled "continuing resolutions" to keep government running.

A continuing resolution, by the way, is congressional language for failing to get assigned work done on time. It's like begging a college professor for more time on a term paper assigned months before, or asking mom and dad for just one more chance to get overdue chores done to earn the week's allowance. In most places, this kind of tactic doesn't fly, but in Washington...

What we have in Washington is not only an inability to manage the taxpayers' money properly, but also tremendous pressure to cut federal expenditures of all sorts, and defense spending is not going to escape this time. It's a prudent question, then, to ask what's going to happen to companies serving the defense industry, such as the embedded computing business we all hold dear.

Well, it might not be all that bad, depending on whom you talk to. The need for technology insertion and systems upgrades are as pressing as ever, and embedded computing companies are well positioned to get a growing slice of a shrinking pie.

Prime defense contractors-well, that's a different story. The Boeings, Lockheed Martins, Raytheons, and Northrop Grummans of the world are looking at another round of re- inventing themselves, particularly in light of the latest round of military procurement reform: the fixed-price incentive firm target (FPIFT) contract.

These kinds of contracts provide incentives to prime systems integrators to keep costs as low as possible. Yeah, I know, it's been tried before-many times-but this time might be different; this approach invites prime contractors to share cost savings with the U.S. Department of Defense (DOD). If a contractor comes in under budget, the contractor splits that savings with the DOD.

This might be the ticket to real defense procurement reform that keeps military costs under control without compromising military readiness.

I know what you're thinking; I'm skeptical, too. No matter how often we come up with something new to bring defense costs down, it seems to come back to the old system where the defense primes lock the government into long-term procurement and sustainment contracts by packaging proprietary systems cloaked as open-standards technology. This system seeks to control costs by giving prime contractors incentives to beat-up their suppliers to within an inch of their profit margins. What's to keep that from happening again?

I wish I had a good answer. The least I can tell you, however, is this has as good a shot at succeeding as anything else we've seen since the COTS era began in the early 1990s.

I hear tell that these new kinds of contractors could trigger a renaissance in commercial off-the-shelf (COTS) procurement, which since the 1994 Perry Memo has devolved from true off-the-shelf procurement back to pseudo-open-standards procurement. Now there's a chance we can move back toward true off-the-shelf procurement.

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August 2015
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