Defense Financial Highlights

Cost of U.S. military operations against ISIL is increasing

Tuesday, September 30th, 2014

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The cost of military operations in Iraq and Syria to combat the Islamic State of Iraq and the Levant (ISIL) is growing as Department of Defense (DoD) operations continue and expand.

The Pentagon announced a few weeks ago that the cost of the operations in Iraq were averaging $7.5 million dollars per day. Since then the air operations have been expanded to include strikes against ISIL forces in Syria and costs have increased. The U.S. and its partners have conducted 43 air strikes against ISIL forces in Syria, according to Hagel.

Last week, in a news conference Defense Secretary Hagel said the cost of DoD’s operations is now running between $7 and $10 million per day. A study prepared by the Center for Strategic and Budgetary Assessment (CSBA) estimated that DoD spent between $780 and $930 million through September 24.

Secretary Hagel stressed that the costs for these operations are being funded from the Overseas Contingency Operations (OCO) appropriations provided by Congress for FY2015.

Hagel also underscored that the U.S. is not acting alone in this effort. “A broad coalition has been and will continue to be a cornerstone of our strategy against ISI, he said.

But, he warned, the “diplomatic economic and military campaign will require a long-term commitment from the United States and all of our partners and allies.” “We are at the beginning, not the end of our effort to degrade and destroy ISIL” he cautioned. And, he said, the costs of ongoing operations will “require additional funding from Congress.” He said the administration is working with Congress to determine the source of this funding.

Some members of Congress have been calling for hearings to assess the cost as well as a debate on the goals and strategy underlying military operations against ISIL. However, the full Congress does not return until after the November elections so these hearings and congressional debate will probably not happen until mid-November.

DoD issues Better Buying Power 3.0 draft

Thursday, September 25th, 2014

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The Department of Defense (DoD) released a draft of Better Buying Power (BPP) 3.0, the latest step in DoD’s continuing effort to improve its acquisition process.

Frank Kendall, DoD’s Under Secretary of Defense for Acquisition, Technology, and Logistics, made the announcement at the Center for Strategic and International Studies (CSIS), a prominent think tank headed by John J. Hamre, former Deputy Secretary of Defense and DoD Comptroller.

Kendall warned that in the current security environment “our technical superiority is at risk, because we are not making the investment we should be making,” He implied the required cuts to DoD funding (sequestration) are a primary threat to continued technological dominance.

A DoD white paper on BBP 3.0 accompanying the announcement emphasized that the new version does not abandon earlier versions. BBP 1.0 stressed best practices and 2.0 emphasized critical thinking skills and better tools for the decisionmakers.

Many initiatives from 1.0 and 2.0 are “core” concepts of acquisition reform, the paper stressed. Affordability constraints, should-cost management, using data to inform policy development, and competition remain central to acquisition improvement. Along with a summary of BBP 3.0, the paper includes a status of the BBP 2.0 initiatives.

In describing BBP 3.0, Kendall said the new version “emphasizes innovation and technical excellence” and remains true to the concept of continual improvement in acquisition management.

BBP 3.0 is designed to strengthen the capabilities and “professionalism” of the acquisition workforce, Kendall said. It will stress better working relationships with industry by incentivizing innovation and removing barriers, but will still emphasize controlling total lifecycle costs, he added.

In his presentation, Kendal laid out eight focus areas for achieving dominant capabilities: Achieve affordable programs; Achieve dominant capabilities while controlling costs; Incentivize productivity in industry and government; Incentivize innovation in industry and government; Eliminate unproductive processes and bureaucracy; Promote effective competition; Improve tradecraft in acquisition of services; and Improve the professionalism of the acquisition workforce. Some of these areas are “core” initiatives from earlier versions, some are expanded, and some are new. These areas contains over 30 initiatives.

Kendall stressed that BBP 3.0 wants to stimulate research through programs to incentivize innovation. As described in the white paper, DoD is striving to increase the use of prototyping and experimentation to allow the exploration of innovative operational concepts, emphasize technology insertion to keep up with the pace of technology in certain areas, such as digital processing, and use modular open systems to stimulate innovation. DoD also wants to increase the return on Small Business Innovation Research (SBIR) and provide clear definitions of “best value” to allow industry to make better bids and enable DoD to make wiser decisions.

In the next three months, DoD will consult with industry, academia, Congress, customers, and other stakeholders on the BBP 3.0 draft. The final version should be released in January 2015, Kendall said.

More detailed information is available on the Better Buying Power program website.

President signs FY2015 Continuing Resolution funding government through Dec 11

Tuesday, September 23rd, 2014

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The president signed a FY2015 Continuing Resolution (CR)—H.J. Res 124—that will fund the government through December 11, 2014. The House passed the CR (319-108) last Wednesday and the Senate approved it (78-22) on Thursday, 78-22.

After the Senate passed CR, Senate Appropriations Committee (SAC) chair Sen. Barbara Mikulski (D-MD) said the goal of the CR “is to lay the groundwork for an omnibus funding bill in December that will include all 12 appropriations bills.” Mikulski said she supported the bill because it avoided a government shutdown, does not harm existing important programs, provides funding for the nation’s security, and will allow Congress time to negotiate an omnibus appropriations bill.

The bill sets the discretionary funding level for the federal government during CR period at an annual rate of $1.012 trillion.

Final action on the CR came after agreement was reached on a proposal to authorize the training and arming of Syrian rebels fighting Islamic State of Iraq and the Levant (ISIL) forces. The bill allows the Department of Defense (DoD) to reprogram funds provided to DoD in the CR to support this action.

The bill also extends expiring Department of Defense (DoD) activities, such as counterdrug activities and support of the Office of Security Cooperation in Iraq, and provides State Department funding to counter regional aggression toward Ukraine. Additional Veterans Affairs funding is included to process disability claims and to investigate improper conduct, and the Customs and Border Protection receives funding flexibility to address urgent problems. The bill also includes $88 million requested by the administration to address the Ebola crisis, extends the operating authority of the Export-Import Bank through June 30, 2015 and extends the Internet Tax Freedom Act through Dec 11, 2014.

After passing the CR, the House and Senate adjourned for the November mid-term elections. The Senate may convene in October to conduct some business, but the full Congress will not return until after Veterans Day (Nov. 11). At that time Congress will begin a lame duck session to address unfinished business, including the passage of FY2015 appropriations.

To date the House has only passed seven FY2015 appropriations bills while the Senate has passed none. Congress will have less than one month to reach agreement on the details of all 12 appropriations bills, put them together in an omnibus bill, and get it to the president by December 11th. If Congress does not meet this deadline it will have to pass another CR to avert a government shutdown.

House passes Continuing Resolution to keep government running until December 11

Wednesday, September 17th, 2014

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Today, the House passed (319-108) a FY2015 Continuing Resolution (CR), H.J. Res 124, which would fund the federal government until December 11. The bill sets the discretionary funding level for the federal government during CR period at an annual rate of $1.012 trillion.

The House passed the CR after debating and approving (273-156) an amendment that would authorize support (training and arming) for Syrian rebels fighting Islamic State of Iraq and the Levant (ISIL) forces. “This amendment is of great importance to our national security, and attaching it to this Continuing Resolution will allow its enactment within a swift timeframe,” said House Appropriations Committee chair Rep. Hal Rogers (R-KY).

A CR is necessary because less than two weeks remain until the beginning of FY2015 and Congress has not passed any of the 12 appropriations bills. The House has passed seven appropriations bills (including DoD and Military Construction/VA) and approved another four through the full House Appropriations Committee (the HAC has not approved the Labor, HHS bill). The full Senate has not considered a single appropriations bill and the Senate Appropriations Committee (SAC) has approved only eight bills (including DoD and Military Construction/VA).

The CR “is merely a temporary, Band-Aid funding measure,” Rogers said. But, he stressed, now it is “the most clear path forward—allowing time to draft bicameral pieces of legislation that reflect our real and budgetary requirements.” Final action on FY2015 appropriations bills will have to occur in a lame duck session of Congress after the November mid-term elections. That session is expected to begin right after Veterans Day.

Other than the amendment to authorize support for the Syrian rebels, the House CR is relatively clean of controversial extraneous matters. But, it does include a number of provisions that the Appropriations Committee described as necessary” to prevent catastrophic, irreversible, or detrimental changes to government programs, to address current national or global crises, or to ensure good government.”

The bill would extend expiring Department of Defense (DoD) activities, such as counterdrug activities and support of the Office of Security Cooperation in Iraq, and provide State Department funding to counter regional aggression toward Ukraine. Additional Veterans Affairs funding is included to process disability claims and to investigate improper conduct and the Customs and Border Protection would receive funding flexibility to address urgent problems. The bill also includes funding $88 million) requested by the administration to address the Ebola crisis.

Addressing two issues that Congress is currently debating, the House CR includes funds to extend the operating authority of the Export Import Bank through June 30, 2015 and to extend the Internet Tax Freedom Act through Dec 11, 2014.

Under the CR, agencies cannot start any new programs or increase production rates and could not initiate any multiyear procurements during the CR period.

The Senate is expected to consider the CR over the next week.  

DoD issues guidance to improve acquisition competition

Thursday, September 11th, 2014

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Moving to reverse what he calls a “declining competition rate,” the Department of Defense (DoD) acquisition chief issued strong guidance last month to the Military Services and DoD components to improve the defense acquisition competitive environment.

In a memo to the DoD acquisition community, Under Secretary of Defense (Acq) Frank Kendall said that DoD has not met its competition goals in the last four years. Calling competition “the most valuable means we have to motivate industry to deliver effective and efficient solutions for the Department of Defense,” Kendal stressed that a competitive environment spurs innovation, improves quality and performance, and lowers costs.

He emphasized that with the limitation on resources, DoD has to maximize the use of competition. “Every dollar saved through competition benefits the Warfighter and the taxpayers,” he said. Kendall’s memo described actions DoD must take to provide a more competitive environment.

The Business Senior Integration Group (chaired by Kendall to oversee the Better Buying Power Initiative) will assess the progress on efforts to expand and improve competition at its quarterly meetings. The group will determine what actions have been successful and will also deploy “business intelligence tools” to identify competition opportunities.

Contracting officers will ask for feedback from companies that expressed interest in a competitive solicitation, but did not submit an offer. This will provide acquisition leaders with important information to enable them to identify possible barriers to competition.

Contracting officers will also be required to expand the use of Requests for Information (RFI) or Sources Sought (SS) notices before issuing non-competitive acquisition solicitations. This will assist managers to better maximize the use of competitive procedures.

Kendall announced the issuing of “Guidelines for Creating and Maintaining a Competitive Environment for Supplies and Services in the Department of Defense.” These guideline will complement the principles of the Better Buying Power Initiative: 1) think rather than default to the “school solution,” 2) attract and train acquisition professionals; stress acquisition fundamentals; and streamline decisionmaking. Kendal said the techniques and examples in the guidelines should be considered in designing acquisition strategies that create and maintain a competitive environment throughout the product or service lifecycle.

DoD will also publish a “DoD Competition Handbook, A Practical Guide for Program Managers” that updates the Defense Systems Management College handbook (Establishing Competitive Production Sources), which is 30 years old. This updated handbook will include new chapters on technology maturation and risk reduction, engineering, manufacturing, and development, and operations and support.

In addition to these actions, Kendall said DoD will also amend procedures for preparing non-competitive Justification and Approval (J&A) documents. Current policy does not effectively track the use of possible plans to remove or overcome barriers to competition in follow-on acquisitions of a product or service, according to Kendall’s memo. To capture these missed competition opportunities, the previous J&A document for a product or service will be required to be part of the approval package for any subsequent acquisition.  

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