The Business of Defense Acquisition Reform: A Policy Proposal for Incentives that will Promote Acquisition Decisions Based on Good Business Models
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The United States continues to develop and deploy the best weapons systems in the world. However, these acquisition programs are often founded on poor business cases. Development of new acquisition programs based on poor business cases continue because there are strong incentives within the acquisition community to make promises regarding a weapon’s systems performance that cannot be kept while underestimating cost and schedule demands. This causes programs to take longer than originally planned, cost significantly more, and deliver fewer functional units and capabilities than originally planned. As a result, our soldiers use equipment with less capability than intended, weapons perform but perhaps not to the level planned, and support costs exceed acceptable levels over the life time of the system. This proposal outlines two policies designed to incentivize the defense acquisition workforce and upper echelons of Pentagon leadership to push programs based on good business models and reasonable cost estimates rather than the current status quo. The first proposal, an expansion of the Superior Supplier Incentive Program, would add better incentives to the existing program and create restrictions on which companies could bid on the largest contracts based on their ranking within the program. The second proposal, amendments to the Nunn-McCurdy Act, is designed to create better accountability for program decisions in the highest levels of Pentagon leadership and provide Congress with additional oversight opportunities on programs that incur a Nunn-McCurdy breach. This policy proposal set out to fix an enormously broad and complicated problem: eliminate systemic issues that incentivize overly optimistic cost estimates to be made on bad business models. While the proposal contains many strengths, such as a low cost iii incentive program that contractors are already on board with and forcing Congress to reconsider the largest cost overruns, these strengths appear to be overshadowed by weaknesses that have occurred as a result of an overly simplistic expansion of a program, and Congress’s own systemic issues. As a result, the policy proposal is not recommended.