Acquisition Reform

The Pentagon considers acquisition reform (lowering the cost of acquiring weapon systems) to be one of its highest priorities. In an era of shrinking military budgets, the Defense Department (DOD) plans to use the savings from acquisition reform to pay for forces modernization. DOD established a reinvention laboratory in September 1994 to help reduce nonvalue added oversight requirements, thereby lowering contractors' compliance costs and the government's oversight costs. Overall, the reinvention laboratory has made only limited progress in reducing the cost of contractors' compliance with government regulations and oversight requirements. In particular, laboratory participants reported little success in addressing nine of the top 10 cost drivers. DOD officials said that the reinvention laboratory tended to receive little top-level support from elsewhere in DOD. Other factors that limited various projects included statutory and non-DOD regulatory requirements, disagreements between DOD and contractors over the value of some oversight requirements, and difficulties coordinating and obtaining approval for proposed changes that involved multiple customers. These results, however, should not deter DOD from continuing its efforts to reduce nonvalue added oversight requirements. Sustained support from DOD leadership is essential. From a budgetary perspective, the laboratory results underscore the need for caution in estimating cost savings from oversight reform.

GAO found that: (1) overall, the reinvention laboratory has made only limited progress in implementing changes to reduce contractors' costs of complying with government regulations and oversight requirements; (2) laboratory participants reported little success in addressing 9 of the top 10 cost drivers; (3) several factors, according to DOD and contractor officials, limited the ability of laboratory participants to make changes and achieve significant cost reductions; (4) DOD officials noted that on a more general level the reinvention laboratory tended not to get the highest level of support from other components within DOD and from service components; (5) other factors tended to affect specific projects, including statutory and non-DOD regulatory requirements, disagreements between DOD and contractor personnel on the value of certain oversight requirements, and difficulties in coordinating and obtaining approval for proposed changes where multiple customers were involved; (6) while the laboratory results highlight the challenges faced by DOD, the results should not deter DOD from continuing its efforts to reduce nonvalue added oversight requirements; (7) the lessons learned from the reinvention laboratory suggest that DOD leadership needs to continue support of oversight reform; (8) while DOD is in the process of closing the reinvention laboratory, DOD officials noted that many of the lessons learned have been reflected in structuring its Single Process Initiative; (9) DOD officials noted that the initiative is open to all defense contractors and believe that it will provide a more effective means for addressing many of the technically oriented issues such as manufacturing and quality assurance processes; (10) DOD officials cited the use of management councils as a key element in the initiative, as well as using a more structured approach to reviewing and approving projects and designating senior DOD and service officials to serve as facilitators; (11) DOD anticipates that proposals submitted under the Single Process Initiative will be reviewed and approved in a more timely fashion; (12) from a budgetary perspective, the laboratory results also suggest that caution must be used in estimating cost reductions from oversight reform; (13) only a small portion of the projected potential cost reductions from laboratory projects had been realized as of July 31, 1996; and (14) DOD officials noted that it may be some time before it is known whether the remaining projects will be approved and implemented, and many of the projects may incur implementation costs that would partially offset cost reductions in the near term.