More OT Misinformation

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     Misinformation about other transactions is legion. Much of the misinformation stems from ignorance or a misinterpretation of OTs grounded in previous experience with traditional procurement contracting. Sometimes misinformation is conveyed by sources that many would assume speak knowledgeably and from experience. Such is the case in a recent article in Forbes by former Under Secretary of Defense (AT&L) Frank Kendall. Not only are many of his opinions wrong, but he misstates facts which he should know! Other publications have cited this article apparently assuming he knows what he is talking about.

While paying some homage to the new OT Guide (Helpful; But Not Enough) and saying a few nice things about OTs, the bulk of Mr. Kendall’s article is basically an unfair critique of OTs with partial truths interlaced with outright false statements. Ignorance is displayed when he says most OTs are fixed price or cost plus. He apparently cannot fathom that many OTs are structured in ways that are not described in Part 16 of the Federal Acquisition Regulation (FAR), namely with a series of specified payments based on observable achievements (milestones), neither firm fixed price nor cost-reimbursement.

An example suggesting that Kendall has not closely read the new Guide or cannot understand doing business in a different way is his reference to “contracting officers”. Even folks with cursory experience know OTs are executed by agreements officers and need not be warranted FAR contracting officers, as stated in the Guide. The first duty of a contracting officer as specified in FAR is to assure compliance with the myriad rules of traditional procurement contracting. Few of these apply to OTs. A different skill-set is needed.

Kendall points out major OT programs that he describes as “notable failures”: Arsenal Ship, Future Combat Systems (FCS) and Global Hawk. The article is illustrated with an image of Arsenal Ship. Arsenal Ship was, according to maritime expert Norman Polmar, the first truly new concept in warship design since the ballistic missile submarine. Simply stated while Arsenal Ship was cancelled, it was not cancelled because it was a failure. In an overly generous statement, the director of DARPA stated that Arsenal Ship was cancelled because of Navy mismanagement of the budget process. The more cynically minded will say the carrier and submarine admirals did not like the idea of competing against a surface ship for current or future missions. The passing of Chief of Naval Operations ADM. Jeremy Boorda, Arsenal Ship’s key proponent within the Navy, provided the opportunity to nix a highly capable and affordable competitor. An Arsenal Ship Lessons Learned Report is available on-line for any interested in understanding the program and how being conducted as an OT positively impacted the program.

FCS was a failed program. However, the fact that it was conducted using an OT agreement was not a contributing factor to its failure. The Institute for Defense Analyses (IDA) did an extensive study of FCS management. IDA concluded that FCS benefited from being conducted as an OT. See The Future Combat Systems (FCS) Myth on this website.

Kendall makes the remarkable assertion that Global Hawk “was terminated several years ago in favor of the venerable U-2 spy plane because of its astronomical sustainment costs.” Global Hawk originated as DARPA Advanced Concept Technology Demonstration (ACTD) and the first major OT prototype project. Global Hawk rolled out just 21 months after program initiation, flying operational missions over Afghanistan while still in its ACTD phase.

Global Hawk was transitioned to the Air Force to become a traditional acquisition program before the full compliment of ACTD aircraft had been produced. Any failings with the program happened after the transition to the traditional system! Although production has ended, the Air Force would be surprised to discover Global Hawk was terminated several years ago since it is still being flown (like the B-52, B-1 and B-2 etc.). NASA also continues to operate the aircraft despite the assertion of astronomical operating costs. Moreover, the Navy is developing its maritime version of Global Hawk, Triton. The Japanese have recently signed up to purchase block 30 Global Hawks and Germany is in the market for the Triton. Apparently, just saying words doesn’t make something true.

Kendall did not mention his failure to reinstate an OT program to substitute qualified commercial parts or components for obsolete parts on DOD legacy systems. According to Dr. Jacques Gansler, one of Kendall’s predecessors as USD (AT&L), $100 million in OT research and development funding resulted in saving $3 billion in O&M and procurement funds. This was probably due to his lack of awareness. He may also be unaware that a DARPA dual-use program involving cost-shared multi-party OT agreements obligated $762 million of DOD R&D and leveraged over $1 billion in private resources. Kendall’s article is not only full of misinformation but avoids important data on OTs. Kendall’s legacy is that nothing like these highly successful OT programs are taking place today!

 “You cannot escape the responsibility of tomorrow by evading it today.” – Abraham Lincoln

It is interesting that Kendall writes an article on OTs after leaving office. His article points out complexities and difficulties in OT contracting (contracting in general as well). Many contracting challenges can be addressed by educating the workforce. While in office Kendall took no effective action to implement the Congressional mandate to “ensure that management, technical and contracting personnel…involved in transactions under this section…are afforded adequate education and training (10 U.S.C. 2371(g)).” If the DOD workforce is not well equipped to effectively execute OT contracting Kendall bears much of the responsibility.

Why would Kendall write an article filled with such misinformation? Congress directed DOD to issue revised guidance on OTs within 180 days of enactment of the National Defense Authorization Act of 2016. He was clearly responsible for this action. Despite numerous important legislative changes, no revisions had been issued for fifteen years. Kendall did not meet the 180-day deadline and in fact no new guidance was issued while he was still in office over a year later. One can surmise that he was either apathetic toward OTs or prepared to give them lip service rather than providing leadership in their use. Now, as a consultant, he seems to want to appear to be knowledgeable about OTs.

 “We can’t solve problems by using the same kind of thinking we used when we created them.” – Albert Einstein

Another recent example of OT misinformation is contained in an article in Contract Management magazine purporting to debunk the hype involving OTs. Like Kendall, the authors start with faint praise of OTs and then go on to debunk what they call hype through an accumulation of ignorance concerning OTs. They fail to distinguish between research and prototype OTs. In addition to citing Kendall, the authors rely on other dubious sources for their information. The article’s deficiencies would require a lengthy discourse. One example is the authors’ list of statutes likely applicable, written in apparent ignorance of DOD’s official list of such statutes. The article may faithfully record the opinions of the authors; however, their opinions are uninformed by solid research and their analysis is handicapped by a lack of in-depth knowledge of OTs.

The power of OTs cannot be unleashed without a knowledgeable workforce. Shame on Forbes and Contract Management for articles that do a disservice to those in government and industry who want to overcome “takes too long, costs too much” and provide capabilities at the speed of relevance to support the national security establishment and other important government missions. OTs can form the basis of an alternative to the traditional acquisition system, but only if they are used by a well informed and experienced workforce. The opinions of ill-informed self-styled experts published in reputable journals (as well as lesser print and broadcast media) undermine the already inadequate education available to those willing to challenge the “business as usual” status quo.

“It must be remembered that there is nothing more difficult to plan, more doubtful of success, nor more dangerous to manage, than creation of a new system.  For the initiator has the enmity of all who would profit by the preservation of the old institutions and merely lukewarm defenders in those who would gain by the new ones.”  – Niccolo Machiavelli 
written by Richard L. Dunn

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