The Acquisition Research Program publishes a weekly email newsletter, Need to Know, in which we highlight key developments in acquisition, policy, government innovation, and research—as well as the latest news about ARP events and research. We hope you enjoy the newsletter, and let us know if you are doing work we can highlight in future issues. 

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April 16, 2021                                                                                                  Issue 51

This week, the Biden administration has finally provided more nominations for key leadership positions, including Christine Warmuth for Secretary of the Army, Susanna Blume to lead CAPE, and Gil Cisneros as undersecretary of defense for personnel and readiness. HASC chair Adam Smith described his desire for a leaner, more focused defense budget in a talk at the Reagan Institute, and shared concern that continued delay of a detailed budget request might lead to a continuing resolution for FY 2022. For those watching the Technology Modernization Fund, it’s up to $1.5 billion—meaning agencies may finally be able to tackle long-overdue overhauls of legacy systems and processes. Our top story showcases how DoD’s cloud computing and data processing needs are inspiring industry to innovate new solutions – and one of these days, DoD will be able to move out on a contract to procure those solutions. (We’re taking bets on whether the JEDI protest will be resolved before 2022.) Don’t miss the commentary piece describing how the author used AI to write a new national security strategy based on previous versions. It’s a fascinating combination of predictive analytics and rhetorical analysis.

This Week’s Top Story

How the DoD’s future war-fighting needs are shaping cloud vendors’ products
Andrew Eversden, C4ISRNET

The U.S. Defense Department’s expectation that future wars will be fought across dispersed, disconnected environments is driving changes to its cloud needs. Industry is preparing for that reality.

With the nascent concept of connecting the best sensor from any location with the best shooter in any service, known as Joint All-Domain Command and Control, the defense industrial base is seeing a shift in the Pentagon’s need for tools that people can access from any location.

In the future the military wants to process data, such as drone footage or vehicle-mounted sensor data, in the tactical environment, rather than transporting it back to data centers thousands of miles away, a process that sucks up precious bandwidth and takes too much time.

The need is driving investment by major cloud providers in smaller servers and processing devices for war fighters in remote environments. The need is evident, for example, with the Air Force’s Advanced Battle Management System, which uses cloud services from vendors Microsoft and AWS through indefinite delivery, indefinite quantity contracts.

Beyond that, the department needs to be able to easily and securely pass data between classified and unclassified environments — another requirement that has industry brainstorming new options.

Read more.

ARP and NPS News

Registration is open for the 18^th Annual Acquisition Research Symposium
This year’s event will be held May 11-13, 2021 as a live webinar presented through Zoom for Government. Keynote speakers are Ms. Stacy Cummings, Acting Undersecretary of Defense for Acquisition and Sustainment, Vice Admiral Jon A. Hill, USN, Director of Missile Defense Agency, and Mr. Frederick J. (Jay) Stefany, Acting Assistant Secretary of the Navy for Research, Development and Acquisition. Seats are limited. Register today!

Understanding the Incentives for Small Businesses to Participate in the Acquisition Process for R&D Intensive Products
Vivek Bhattacharya, Northwestern University

This ARP-supported, grant-funded report studies the incentives that small businesses face when they participate in the procurement process for R&D-intensive products through the DOD Small Business Innovation Research (SBIR) program. Using contract-level data, this report concludes that there are likely strong internal incentives within the SBIR program but finds less evidence for strong external incentives. DOD could incentivize more firms to enter the procurement process by changing the structure of the SBIR program itself rather than changing the broader defense procurement ecosystem.

Acquisition and Innovation

DoD’s New Pushback Against Chinese Money In US Defense Industry
Paul McLeary, Breaking Defense

Pencils up: Bids are due for Army’s Bradley replacement and it’s only the beginning
Jen Judson, Defense News

DOD’s innovation ecosystem is growing, but strict compliance is a barrier, DARPA director says
Jackson Barnett, Fedscoop

White House proposes even more for Technology Modernization Fund
Dave Nyczepir, Fedscoop

New Look for beta.SAM.gov - Before and After
fsd.gov

Events

C4ISRNET Conference
April 21, 2021

Measuring R&D Productivity, Perspectives on Trends and Policies
George Mason University Center for Government Contracting
April 22, 2021

Research

What Are the Priorities of Bureaucrats? Evidence from Conjoint Experiments with Procurement Officials
Janne Tukiainen et al., EconPol

Congress

HASC Chair Blasts White House For ‘Dragging Their Feet’ On Budget
Paul McLeary, Breaking Defense

GOP senators seek FBI investigation into Biden Pentagon nominee
Brett Samuels, The Hill

Defense and Federal Government

President Biden Announces His Intent to Nominate 11 Key Administration Leaders on National Security and Law Enforcement
The White House

7 allies sign onto polar research project
Andrew Eversden, C4ISRNET

US sanctions makers of supercomputers linked to Chinese military
Joe McDonald, C4ISRNET

US Should Push New Space Treaty: Atlantic Council
Theresa Hitchens, Breaking Defense

China aims to weaponize space, says intel community report
Joe Gould, Defense News

New ICBM Costs Can, Must Come Down, Hyten Says
Patrick Tucker, Defense One

Commentary: Strategy In The Artificial Age: Observations From Teaching An AI To Write A U.S. National Security Strategy
Elena Wicker, War on the Rocks

Acquisition Tips and Tools, with Larry Asch

Racing to the Bottom on Professional Information Technology Services

The mission stakes are high when it comes to buying the services of professionals with the best skills and greatest experience, especially in critical Information Technology and Cyber Services. Unfortunately, over the past few years and with restrictions on the misused Lowest Price Technically Acceptable (LPTA) for professional services, the Race to the Bottom has worsened.

One of my favorite movies, Remember the Titans, has a line similar to this:
‘We sure could use your help. Race to the Bottom is kicking our butts.’

For those who haven’t heard this phrase before, “race to the bottom” describes when industry bids responding to RFPs price services at unrealistically low levels, especially for Firm Fixed Price and Time & Materials contracts. Industry bidders do not trust the Government’s Best Value Tradeoff selection process and feel they must significantly reduce rates and prices to win a contract. The Project Managers (PMs) who must live with this contract in performance know that ‘the bitterness of poor quality remains long after the sweetness of low prices is forgotten.’ There are unnecessary contractual risks of poor performance, future change order price increases, delivery delays, and higher likelihood of mission failure.

Let’s say you put out a RFP that requires an ERP Architect, and now you’re evaluating bids. Here, you’ve got good news and bad news. The good news is that a contractor proposed $80 loaded for an ERP Architect. But the bad news is the contractor proposed $80 an hour, and now they must find people to fill those roles at that pay scale.

Some will argue that if you want to pay more money for quality services, you can just state it in the solicitation: “all evaluation factors other than cost or price, when combined, are significantly more important than cost or price.” This basis of award statement will not make a difference. Even on the acquisitions where the government team understands what this basis of award means (and they did not just copy it from the last acquisition), it will not prevent the industry culture of race to the bottom on best value tradeoff acquisitions.

Some recommendations to fix this area:

• Let’s start with better training of our people that includes, but is not limited to, making clear who is in charge, developing true discriminators and criteria, properly documenting findings (strengths and weaknesses), making proper tradeoff decisions, and documenting decisions.  How about updated Source Selection Guidance and one section on best practices for buying professional services—which is by far the hardest to come up with meaningful discriminators. Of course, we could continue to have the companies write how they will meet the PWS and Key Personnel resumes. This training and new Source Selection Guidance will help attack the problem and slowly build up confidence with industry that we are following the evaluation scheme, fairly and reasonably evaluating the competing proposals, and properly documenting decisions.
• Clarify proper use and guidance on how to evaluate professional compensation as required by FAR provision 52.222-46.
• Properly evaluate Staffing as a Quality discriminator versus Cost or Price.
• Update training on Cost Realism. In my career I have not met too many folks who understand Cost Realism. Now once they understand Cost Realism, you need to show them the differences between Cost Realism and Price Realism and the WARNINGS and pitfalls of using Price Realism. I have never been involved in an evaluation that included Price Realism.
• Use price ranges, as discussed in the INSA report, “Improving Acquisition of Services in the Intelligence Community”:

"The Government may also consider establishing a price range in appropriate situations. Acceptable price ranges may be established by the Government’s Independent Cost Estimate (ICE) and/or through market research; in particular, solutions that use commercially available technologies will have many data points available as input to the ICE. Acquisition organizations such as the General Service Administration’s (GSA’s) Federal Systems Integration and Management Center (FEDSIM) have had success with this method. Specifically, the acquisition may stipulate that, “Price/Costs that are excessively high or low (without sufficient justification) may be considered unrealistic and unreasonable and may receive no further consideration.” (For those of you who have worked with FEDSIM, they are top notch innovators.)

• Last recommendation and probably the most important: if we continue to put inexperienced people on Source Selections, we will continue to get more and more protests that lead to corrective actions, and sustained protests.

Source Selection process is both an art and science and requires that we facilitate the “seasoning” of the workforce through planned and strategically managed participation and growth in the entire source selection process.