2 2 eleanor spector vice president, contracts lockheed martin corporation august 5, 2008...
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Eleanor Spector
Vice President, Contracts
Lockheed Martin Corporation
August 5, 2008
9:30-10:15AM
Industry Acquisition Issues
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InternationalInternational
DefenseDefense
58%58%27%27%
15%15%
Civil Government/ Civil Government/ Homeland Security/Homeland Security/
Intelligence and Intelligence and OtherOther
Lockheed Martin 2007 Sales
Total Sales - $41.9BTotal Sales - $41.9BTotal Sales - $41.9BTotal Sales - $41.9B
Air ForceAir Force23%23%
Navy/USMCNavy/USMC23%23%
ArmyArmy9%9%
Other DoDOther DoD3%3%
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LM Contracting Statistics
• 46% of contracts fixed price
• 31% cost reimbursable
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Hot issues
• Award/incentive fees (not “bonuses”)
• Ethics, OCI, PCI
• Mandatory disclosures prior to company investigations
• Data rights
• Industrial base and protectionist legislation
• Information assurance
• Fixed price production contracts prior to demonstration of technology
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Congressional Perceptions
• Impatience with cost estimating and control on development contracts
– Incentive and award fee changes
– Minimizing cost reimbursable contracts
– Nunn-McCurdy Act Changes
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Congressional Perceptions
• Perception executive branch losing ability to manage contracts
– Redefining inherently governmental definition
– Acquisition workforce enhancements
– LSI restrictions
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Congressional Perceptions
• Need more openness in acquisition process
– Limitations on IDIQ services – competition over $100M
– Expanded protest rights (while DoD concern with protests grows)
– Public postings of past performance, contract information, justifications, executive compensation
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Congressional Perceptions
• Frustration with stories of fraud, waste and abuse – Anti-profiteering bills– Mandating self-reporting of potential
violations– Expansion of FCA’s
reach/whistleblower rights– UCA definitization schedules and fee
limitations– Demands for additional data rights
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Congressional Perceptions
• DoD and industry not maintaining arm’s-length or preserving competition– Inherently Governmental functions
redefined– OCI/PCI treatment and reporting– Increased access to protest system– More compliance and integrity reporting– Lead System Integrator prohibitions– Expanded protest authority
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FAR Cases of Interest
• Reporting subcontract award data• Exemption of commercial services from
SCA• Contractor compliance and integrity
reporting• E-Verify (employment eligibility
verification)• Conflicts of Interest
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DFARS Cases of Interest
• Excessive pass through charges
• Technical data rights
• Open source software
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Industry Acquisition Agenda
• Requirements generation and stabilization–Rational restrictions on changes in
development–Greater stabilization of
requirements before milestone B
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Industry Acquisition Agenda
• Technology maturation–Quantum leap vs. evolutionary
• Cost estimation and analysis–Award at Government estimate–Cost realism as major selection factor
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Industry Acquisition Agenda
• Protect Company Intellectual Property – New rules designed to aid sustainment
discourage private investment in technology innovation and the use of commercial technologies by requiring rights to privately developed technology as a condition of doing business.
– E.g., Requirement for all technical data on a satellite contract.
– Obtaining more rights in data will not solve most logistics support problems.
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Industry Acquisition Agenda• Multiyear contracting
–Enhanced use creates economies of scale
• Reasonable returns–Award fees are not bonuses–Development programs must be
profitable• Workforce enhancement and training
–Implementation of Gansler recommendations
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Industry Acquisition Agenda
• Contract type determination–FAR Guidance is appropriate–Contract type determined by risk
• Funding stability, reprogramming flexibility–Fund and fence program reserves–Allow greater flexibility in
reprogramming
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Industry Acquisition Agenda
• Draft standard, workable rules on protection of unclassified information on contractor networks.
• Concerns:– No clear definition of information to be
protected– Dissemination of network vulnerabilities– Costs to protect sensitive unclassified
information
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Cost Growth• Acquisition community has failed to convince GAO and
senior Government personnel the causes of cost growth on development contracts which include:– Optimism in competitions– Unpredictability of required technological innovations– Major changes in requirements after award– Funding instability
• Defense contractors develop the best systems in the world, yet earn minimal returns on development contracts.
• Contractors often supplement insufficient budgets on incrementally funded development contracts, or risk disruptive work stoppages, yet are given no credit in fee determinations.
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Summary
• Considerable activity in acquisition policy areas.
• Likely to be new focus with either new administration.
• Acquisition is never dull!