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STATEMENT
OF THE

AEROSPACE INDUSTRIES ASSOCIATION OF AMERICA, INC.

CONCERNING THE CURRENT

STATE OF THE FEDERAL PROCUREMENT SYSTEM

SUBMITTED TO

SUBCOMMITTEE ON FEDERAL EXPENDITURES, RESEARCH AND RULES
COMMITTEE ON GOVERNMENTAL AFFAIRS
UNITED STATES SENATE

June 5, 1981

The Aerospace Industries Association, which represents the nation's major manufacturers of aircraft, spacecraft and related components, equipment and systems, appreciates this opportunity to address the state of the Federal Procurement System and to indicate problems currently of concern to our industry. This discussion is most timely, coming at a moment when the Office of Federal Procurement Policy is reviewing the federal procurement system in order to provide Congress a proposed comprehensive procurement system for use by all Federal agencies. There is an urgent need to achieve greater efficiency in procurement to make the government dollar go further. This is particularly true in defense procurement, an area in which our industry has broad and indepth experience.

It should be noted that the current leadership in the Department of Defense has recognized many of the problems indicated below, and within its charter has initiated actions aimed at correcting or alleviating them. Such problems are nevertheless indicated here to advise the Congress of their existence pending their resolution by appropriate DOD action. Further, many of them have proven remarkably resistent to correction over time, often due to inadequate

implementation of policy direction. This is a significant problem in itself,

we believe, and will require determined and continuing DOD management attention if the major acquisition system is to truly achieve the improvements we all seek.

CONTRACTING v. IN-HOUSE

A principal problem of the present Federal procurement system is the absence of a statute setting forth a national policy that the needs of the government for goods and services be satisfied by the private sector. This policy is enunciated in OMB Circular A-76, but its implementation is such that there is a tendency to increase government in-house activities. The decision of whether a government need will be met by in-house effort or contracted out to private industry is based not on the concept of reliance upon the private sector, but upon cost comparison. Moreover, the cost comparison guidelines are inequitable, are generally unreliable, and fail to recognize, on the government side, incentives to take risks, innovate and cut costs. Also, private firms pay various local, State and Federal taxes; government entities do not. Thus, government in-house activities shrink the tax base and shift the tax load to others. The cost comparisons ignore accountability and the effort to prepare them drains the resources of the agencies. Finally, can a Federal agency fairly judge whether to keep the work in-house or contract it out?

WEAPONS ACQUISITION POLICIES

Since Vietnam, U. S. defense funding has represented a dwindling portion of the nation's Gross National Product and contributed to declining military capability. The Soviet Union, on the other hand, has been committing massive resources to production and deployment of weapon systems, and to research and

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development of more advanced weaponry. As a result, the U. S. and its allies are now heavily outnumbered in most weapons categories. Of equal or greater importance, the long-held belief that superior U. S. weapons quality can offset inferiority in numbers has become suspect. The disparity in numbers has become too large and, in some instances, Soviet weapon quality equals or surpasses that of the U. S.

The U. S. must increase its weapons inventory as quickly as possible while maintaining the quality level to the extent practicable.

This demands significant increase in defense spending at a time when the nation's economic health is less than robust. But more dollar input is not the sole answer; there must be a concomitant enhancement in the amount of defense improvement the dollar will buy.

Some erosion of the defense industrial base has occurred, in part, because the defense acquisition system is not working as well as it should and must. The U. S. has saddled itself with a procurement bureaucracy, including layers of Congressional overseers, that has made weapons acquisition an increasingly unwieldy and inefficient process. As a result, the nation is getting less than it could for its defense outlays and taking longer than necessary in the development-to-delivery cycle. It is imperative that the U. S. sharpen the procedures through which its defense establishment determines requirements, develops and acquires major weapon systems.

In the interest of cost-effective development and timely delivery of weapon systems, it is essential to reverse the trend toward increased layering of controls in the defense procurement process.

Excessive control has

diluted responsibility for programs, impeded decision-making, and induced developmental stretchouts with attendant increase in system costs. That, in turn, has forced reductions in the numbers of weapons eventually delivered

and deployed.

OMB Circular A-109 and DOD Directives 5000.1 and 5000.2 were designed to effect reforms in the weapons acquisition system. They were intended to limit Congressional involvement to approval of needs and appropriate funding, to preclude management layering, to eliminate non-essential management procedures and paperwork, and to encourage alternatives that would foster technological innovation. But that has not happened. As Congressional staffs have grown, there has been an increasing trend toward Congressional micromanagement and unnecessary participation in the procurement process by a growing array of overseers..

We recommend, therefore, that consideration be given to:

0 Reasonably limiting Congressional involvement to program and budget approval and eliminating undue detailed program management by Congress and its staffs;

o Strengthening the authority of the pertinent agency head in deter

mining requirements and that of the government program manager in
contract management;

o Stressing consistent implementation of policy at lower Service

management levels and providing for implementation oversight
including an avenue for contractor feedback;

o Recognizing the authorized responsibilities of contracting officers; o Improving procedures and eliminating requirements which result in

unnecessarily long RFP's and costly contract requirements, specifically

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Stating agency needs in a manner that gives prospective suppliers maximum latitude for independent business and technical judgments in responding;

Specifying what is needed, not how to do it;

Eliminating requirements that trigger excessive effort and

documentation and complicate evaluation;

Involving contractors, through contractual agreements, in tailoring
specifications, standards, management systems and data requirements;
Requiring contractor review of draft RFP's, and contractor
recommendations on final data requirements, in order to improve
RFP content and to reduce RFP, source selection and program costs;
Emphasizing technical capability and innovation as primary factors
in source selection.

0 Establishing short clear lines of authority, responsibility and

accountability;

o Establishing a methodical program to eliminate unnecessary, conflicting, redundant, outdated regulations, management systems, specifications, and similar documentation that overburden the procurement process. Many of these regulations intrude on the way a contractor conducts his business, and are costly to implement and counter-productive.

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