R-TOC Best Practices: Acquisition Practices
Area: Acquisition Practices
Area: Acquisition Practices
Best Practice: Multi-year procurement
Pilot Program: C-17
Initiative: The C-17 multi-year procurement strategy incorporates a number of innovative features including performance based financing and a team approach with the Government, the contractor, and key suppliers working to develop a joint cost model and to identify cost reduction opportunities.
Benefits: Overall, the stability and economic advantages of this multi-year approach reduced the C-17 program's contract cost by 5.5% over an annual buy contract strategy (based on a $14.2B 7-year multi-year contract for 80 aircraft). In addition, the production stability afforded by multiyear contracting has allowed the prime contractor to deliver new aircraft consistently more than four months ahead of schedule.
Area: Acquisition Practices
Best Practice: Commercial Acquisition Practices
Pilot Programs: various
Initiative: A variety of Pilot Programs are experimenting with commercial acquisition practices.
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Precision Fires is evaluating price-based acquisition for the High Mobility Artillery Rocket System (HIMARS)
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SLAM-ER has instituted a lean enterprise strategy to reduce lead time and improve affordability and delivery
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AWACS is considering commercial supply chain management strategies to reduce inventory costs and lead times
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F-117 is examining web-enabled purchasing and commercial contracting to reduce lead time and stabilize parts supply.
While the use of commercial processes and technologies has undoubtedly been accelerated by the R-TOC program, several of the systems designated as R-TOC Pilots have been engaged in adapting COTS/NDI capabilities for many years. At least six of the Pilot Programs (HEMTT, MTVR, SLAM-ER, AWACS, C/KC-135, and JSTARS) were originally adapted from COTS or NDI systems and components.
Benefits: When applied correctly, these can reduce the time required for contracting, design, and production; reduce costs; and expand the pool of companies willing to bid on the project.
Area: Acquisition Practices
Best Practice: Must-Cost
Pilot Program: C-17
Initiative: The C-17 Must Cost program is a collection of contractor-funded cost reduction initiatives. The contractor is authorized to invest money for these initiatives over four years with no increase in the multi-year production targets. Under this arrangement, the Air Force agreed to pay back the investment over four years, with payback delayed by one year from investment. Must cost initiatives address design and process changes, technology insertion, reductions to overhead, and optimized multi-year contracts with suppliers.
Benefits: Through June 2001, a total of 126 approved must cost initiatives have resulted in $418M in savings/cost avoidance, for a 2.7 to 1 return on investment for the C-17 program.
Area: Acquisition Practices
Best Practice: Economic Order Quantity (EOQ)
Pilot Program: Standoff Land Attack Missile - Expanded Response (SLAM-ER)
Initiative: SLAM-ER was planned from inception to reduce development, production, and O&S costs. Steps taken during development included maximize non-development items (NDI) and COTS; documentation streamlining; reduced parts count; 53% reduction in government maintained drawings; and an incentive fee contract. Production savings were achieved through: performance specifications; contractor configuration control; twelve-month procurement leadtime; and use of LRIP to sustain production line.
The TOC profile for the SLAM-ER system is atypical for weapon systems, with 47 percent of life cycle costs accounted for by procurement and only 28 percent resulting from O&S. Consequently, TOC reductions are heavily dependent on acquisition cost savings. The PM has suggested increasing the procurement rate to an economic quantity since the program's inception as a Pilot Program.
Initially, the annual procurement rate was reduced to 20% of the plan, which increased procurement costs by 83%. Eventually, the plan was revised to buy out the requirement from FY03-05, with major unit cost reductions resulting from this decussion.
Benefits: Shortening the production run resulted in total FY06-12 savings of $75.5M.
Area: Acquisition Practices
Best Practice: Evolutionary Test and Evaluation
Pilot Program: SLAM-ER
Initiative: SLAM-ER capabilities will be improved periodically, primarily via software rapid acquisition with demonstrated technology. The program office recognizes that commercial-specification partsinternal to SLAM-ER (e.g., electronics components) will become obsolete and therefore change over time.
SLAM-ER will continue to be procured to a performance specification. The traditional testing approach has a number of disadvantages: it requires "batches" of missiles to evaluate changes or improvements to a weapon system, it requires a cost prohibitive quantity of assets to create a statistically significant sample size it provides no path for demonstration and accelerated IOC of innovative design and employment concepts, and it treats "evolutionary" approaches as "non traditional." SLAM-ER's initiative will perform collaborative follow on test and evaluation (FOT&E) in conjunction with development testing (DT) of future improvements (seamless use of DT/OT data). This approach maximizes the data set for system evaluation, allowing the program to "gather date once, use many times."
Benefits: The principal benefit of this approach is that it will reduce T&E costs and schedule.
