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Panel – Budgeting for Defense Acquisition Requirements Wednesday, May 17, 2006 3:15 p.m. – 4:45 p.m. Chair: Budgeting for Defense Acquisition Requirements RADM James Greene, USN (ret.) – Naval Postgraduate School Discussant: VADM Tom Hughes, USN (ret.) – Naval Postgraduate School Papers: Reform of Budgeting for Acquisition: Lessons from Private Sector Capital Budgeting for the Department of Defense Jerry McCaffery, Naval Postgraduate School Larry Jones, Naval Postgraduate School Budgeting for Capabilities Based Planning Lt Col Steve Fraser, US Air Force Academy Kurt A. Heppard, Associate Professor of Management, United States Air Force Academy Steve G. Green, Professor of Management, United States Air Force Academy Brian C. Payne, Captain, Instructor of Management, United States Air Force Academy = ==================^Åèìáëáíáçå=oÉëÉ~êÅÜW=òb^qfkd=pvkbodv=clo=fkclojba=è^kdb====- 187 - = =
Reform of Budgeting for Acquisition: Lessons from Private Sector Capital Budgeting for the Department of Defense Presenter: Jerry McCaffery, PhD, serves as Admiral George F. A. Wagner Professor of Public Management in the Graduate School of Business and Public Policy, Naval Postgraduate School, Monterey, CA. Professor Jones teaches and conducts research on a variety of government financial and management reform issues. He has authored more than one hundred journal articles and book chapters on topics including national defense budgeting and policy, management and budget control, public financial management, and international government reform. Dr. Jones has published fifteen books including Mission Financing to Realign National Defense (1992), Reinventing the Pentagon (1994), Public Management: Institutional Renewal for the 21st Century (1999), Budgeting and Financial Management in the Federal Government (2001), Strategy for Public Management Reform (2004), and Budgeting and Financial Management for National Defense (2004). Larry Jones, is a Professor of Public Budgeting in the Graduate School of Business and Public Policy at the Naval Postgraduate School where he teaches courses focused on defense budgeting and financial management. He has taught at Indiana University and the University of Georgia. His current research interests include defense transformation and the PPBE system and their impact on DoD acquisition and resource allocation. He and Professor Jones are the authors of Budgeting and Financial Management for National Defense (2004). Lawrence R. Jones, Ph.D. Graduate School of Business and Public Policy Naval Postgraduate School Monterey, CA 93943-5000 (831) 646-0126 or 656-2482 (with voice mail) (831) 402-4785 (cell) Fax (831) 656-3407 e-mail: lrjones@nps.edu INTRODUCTION The ongoing replacement of Department of Defense (DoD) capital assets, as well as other much needed capital investments, will likely take place during a time of decreasing, or at least slowly growing financial resources over the long term. Some of this is due to the growth of entitlements, some to the size of the predicted deficit. Still another pressure is the long-term cost of military activity in Afghanistan and Iraq, predicted by CBO to be $450 billion over the next ten years. In addition, the Department of Defense is in the midst of an era of “transformation” under Secretary of Defense (SECDEF) Donald Rumsfeld that calls for the modernization of DoD warfighting doctrine, capital goods and business systems. The budgeting system has already been modified during Rumsfeld’s tenure (McCaffery & Jones, 2004, p. 403-435). Occasionally, it has been argued that the federal government and other public agencies should adopt “corporate” methods of budgeting to include the use of separate capital and operating budgets that are prevalent in the private sector. In the past, this argument has not made much progress, but the current trends enumerated above move us to consider that this argument should be revisited. It is clear that significant changes would have to occur in the present system if private budgeting methods were adopted by the DoD and other public organizations, but there are examples of public organizations that = ==================^Åèìáëáíáçå=oÉëÉ~êÅÜW=òb^qfkd=pvkbodv=clo=fkclojba=è^kdb====- 188 - = =
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Author(s) Title Publisher Issue Dat
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The research presented at the sympo
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Preface and Acknowledgements Those
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The NPS A Team Rear Admiral James B
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4 th Annual Acquisition Research Sy
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PANEL -- IMPLEMENTING AN OPEN SYSTE
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Plenary Panel - Acquisition Reform
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In May 1996, Rear Adm. Hamilton bec
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Panel - Enhancing Collaborative Cap
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Collaborative IT Tools Leveraging C
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Group’s Perceived Usefulness Grou
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diagnose collaborative capacity enc
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Organization A Problem Interagency
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Incentives - Collaboration as a pre
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Two other frequently cited barriers
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Panel - Analytic Approaches to Shap
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Discussant: Michael McGrath - Deput
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Panel - Strategic Sourcing Wednesda
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Abstract In this paper, we examine
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support from the taxpayer. A key co
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etc. (Figure 1) (Kraljik, 1983). Vi
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that companies adopted a strategic
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Benchmarking Industry According to
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80% 70% 60% 50% 40% 30% 20% 10% 0%
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initiatives. In efforts to reduce s
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eduction goals. Also, in the same m
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Conclusion The DoD is struggling to
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Gabbard, E. G. (2004, April). Strat
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Staff. (2005, December 8). Hacket r
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Panel - Implementing RFID in the De
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What Is the Right RFID for Your Pro
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Introduction The evolution and appl
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Literature Review RFID technology w
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The reader is a device used to coll
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Active tags sometimes have sensors
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An RFID network with open architect
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Passive tag application: Railcar ta
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This system has lowered the risk of
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Because of the temperature-induced
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Thereafter, through a process of tr
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to be read at a few inches by an op
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RFID technology has even enhanced s
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The Costs of RFID operation An RFID
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• Abandonment: The ability to aba
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Fleisch, E., & Tellkamp, C. (2005).
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Williams, D. (2005, August 4). Pres
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logistics systems from the military
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Panel - Transforming the DoD Acquis
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upon the best knowledge and practic
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cost, this form appears to be the m
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access to, and conducted his analys
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organizational problems surface thr
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Change in analytic framework. Burea
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As we look at the effort to change
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interpretation or narrative. What
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common construction. Rather, sense-
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There will be a temptation for acto
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modeling suite. The key comparison
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This model provides us also with th
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here, particularly if the organizat
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organization identified through pri
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Levitt, R.E., Thomsen, J., Christia
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BACKGROUND To an extent, we are add
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Concept Refinement Concept Decision
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some subset of commercial “best p
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transforms the value of a public-se
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We also assume that since the gover
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Of course, we know in reality that
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CONCLUSIONS The acquisition of publ
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Panel - Issues in Acquisition and P
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To What Extent are DoD Activities C
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NAVSUP Data Call (2003 and 2004) FI
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exemption from a particular regulat
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Page 151 and 152: should be fully supported by applic
Page 153 and 154: example, federal government, state
Page 155 and 156: ADR Techniques Traditional litigati
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Page 159 and 160: It is a consensus building, public
Page 161 and 162: Investigative Question 1—Conclusi
Page 163 and 164: Question 3b: Did the ADR process us
Page 165 and 166: suited than another to resolution.
Page 167 and 168: Investigative Question 7: Barriers
Page 169 and 170: customer, and each of these service
Page 171 and 172: Panel -- Implementing an Open Syste
Page 173 and 174: Open Systems and Modular Open Syste
Page 175 and 176: procurement planning phase include
Page 177 and 178: procurement documents and specific
Page 179 and 180: system technical architecture requi
Page 181 and 182: These evaluation factors are tradit
Page 183 and 184: In the Cost Reimbursement contract
Page 185 and 186: technical, schedule, and past perfo
Page 187 and 188: Developing Performance Based Requir
Page 189 and 190: The DoD Performance Specification d
Page 191 and 192: due to many of the reasons presente
Page 193 and 194: even if there were ten other upgrad
Page 195 and 196: software developers can employ when
Page 197 and 198: Conducting this analysis will be as
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Page 205 and 206: In fact, the disagreement between t
Page 207 and 208: Functional Area Analysis D O T M L
Page 209 and 210: Though many in Washington blame the
Page 211 and 212: In response to an open-ended questi
Page 213 and 214: CAPITAL BUDGETING IN THE DoD AND TH
Page 215 and 216: investment. Full funding also helps
Page 217 and 218: c. Functional Requirements If it is
Page 219 and 220: 4. Budgeting Phase of Capital Progr
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Page 223 and 224: 4. Acceptance of a project using th
Page 225 and 226: Another disadvantage of the payback
Page 227 and 228: Another guideline is that firms mus
Page 229 and 230: This concept has remained consisten
Page 231 and 232: purchases. Also, the Office of Mana
Page 233 and 234: CONCLUSIONS The current practices o
Page 235 and 236: REFERENCES Bierman Jr., H., & Smidt
Page 237 and 238: Ratnam, G. (2005, December 12). Big
Page 239 and 240: Brian C. Payne, Captain Instructor
Page 241 and 242: A Transactions Cost Economics (TCE)
Page 243 and 244: SECTION 1: INTRODUCTION This report
Page 245 and 246: SECTION 2: REVIEW OF TRANSACTION CO
Page 247 and 248: cooperative agreements, but since t
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The added risk faced by military co
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J) Some Empirical Evidence On the w
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unproductive bargaining and influen
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also include the costs of internal
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N) Results from a Bargaining-game M
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efforts to screen for reliability a
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Program Managers lead Program (Proj
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Table 2. Research, Development, Tes
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To minimize transaction costs for t
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A recent initiative to accommodate
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Technical complexity within a syste
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As briefly introduced above in Sect
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Table 5. Typical Contract Type by P
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multiyear procurements and other ty
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Alpha Contracting reduces procureme
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SECTION 4: SYNTHESIS AND CONCLUSION
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Finally, DoD contracting practice w
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Productive Effort Parameters Unprod
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f. Operational Significance. (added
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enchmarks, and the like. Elements T
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Cooter, R., Marks, S., & Mnookin, R
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Nissen, M. E. (1997). JSOW alpha co
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Development of Measures of Success
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of acquisition practitioners to all
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Attributes of Good Metrics. Certain
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Center ACEs were from separate loca
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unique. Every interview transcript
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appropriate. However, when asked if
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they are receiving in their attempt
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forcing each activity and report to
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Force Space Command System Program
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corporate Air Force acquisition ini
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Hayes, B. Measuring Customer Satisf
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Pope, K. Measuring the Effect of th
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Using KVA and Real Options Analysis
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Estimating Return on Investment and
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This research project gathered info
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“I have determined that the curre
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On Budget Allocation to Increase Op
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Panel - Perspectives in Program Man
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Best Practices: Better Support of W
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When Should You Terminate Your Own
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- Management activities, expenditur
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RF COMMUNICATIONS DIVISION ROCHESTE
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REQUIREMENT HF MANPACK TACSAT VHF/F
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Figure 4. System Components INTEGRA
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My best technical experts would spe
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“JULIE-GATE” The program was st
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All agreed it was finally over, and
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A short time later, the world waite
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some of NASA’s Mars probes) or if
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managing systems with tipping point
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The second example of tipping point
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Although the plant did not begin co
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snt - add-new-tasks strength {work
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einforcing loop. We show how, throu
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there is no more project backlog. F
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Frac requiring rework (Frw ) 1.0 0.
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Total Backlog as a Fraction of Inti
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provide opportunities for improveme
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divided into avoiding tipping point
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The horizontal axis of Figure 14 re
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Total Backlog Total Backlog/Initial
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deadline and ensuring that it is re
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unrealistic due to drastic changes
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Kharbanda, O., & Pinto, J. (1996).
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Panel - Service Contracting Thursda
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Managing the Services Supply Chain
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include professional, administrativ
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Service Characteristics and their I
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given stage is made dependent on th
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contracted effort. The procurement
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Construction, Repair and Maintenanc
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The second phase of the procurement
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human capital. This is partially du
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for the contracting of services wil
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Yet a RAND study of the Army showed
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services, the Army appears to have
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(janitorial) services, food service
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Each requirement organization provi
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Brown, S. W., Gummesson, E. Edvards
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Gronroos, C. (1982). Strategic mana
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What Works Best when Contracting fo
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Panel - Earned Value Management Thu
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Measuring Uncertainty in Earned Val
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level of rate-of-change and the abs
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But, if the widget is only half com
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so more rapidly in environments cha
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Impending Task Delays (ITD) can be
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with: v: In the Fisher model, it re
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In discrete time form, the estimati
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Thus, various types of delay such a
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Entropy The uncertainty (non-specif
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Panel - Contractors in Support of M
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Contractors Supporting Military Ope
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drivers and other historical refere
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Another factor driving toward incre
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number of highly experienced Blackw
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Unity of command is one of the prin
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was reimbursed for expenses actuall
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principles, such as unity of comman
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aircraft involved in re-supply miss
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President Cheney) has apparently ma
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modest proposals for incremental ch
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In July 1937, the “China Incident
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President Roosevelt’s assistant,
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Pilots of the Flying Tigers receive
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was larger than the marine aid stat
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Merchant vessels kept Britain in th
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The final vignette involves Charles
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contract (Wake Island pre-war). In
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purposes continues to be the “leg
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Going to War with Defense Contracto
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Abstract This paper reports on an e
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Table 1: Factor loadings and alpha
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depict causal relationships tested
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work-related experience than younge
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Discussion and conclusion On averag
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2003 - 2006 Sponsored Acquisition R
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NPS-PM-04-017 Matthews, David. The
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Technical Reports NPS-GSBPP-03-003
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