DEPARTMENT OF DEFENSE PROCUREMENT SYSTEM

Government Procurement: Department of Defense Procurement System and Price Inefficiencies

Government Procurement: Department of Defense Procurement System and Price Inefficiencies

Introduction

With the end of the Cold War and collapse of the Warsaw Pact and Soviet Union, the monolithic threat to Western Europe disappeared and many governments took the opportunity to obtain a 'peace dividend'. This has meant the reduction of defence spending and the reallocation of those funds to other areas of public spending.

However, the 'New World Order' has taken a direction, which is rather different from that forecast. Instead of the one major threat, there is now a multitude of smaller ones, which cannot be met with large conventional forces stationed in the Central Europe, but will have to be countered by smaller intervention forces capable of rapid deployment.

This reorientation, so far as the United Kingdom's Armed Forces were concerned, was announced in the Strategic Defence Review, in July 1998. It also recognised the need to do more with a smaller budget, given the rate of defence inflation (which is generally above normal economic inflation). Faced with criticism stretching back many years which accused the Ministry of Defence of having an over bureaucratic approach to procurement (Kincaid (1997a); Kincaid (1997b) and Kincaid (1998)), failing to prevent high defence inflation and in-service date slippage, the Smart Procurement Initiative was announced as part of the Strategic Defence Review. It is hoped that these “radical changes … will deliver a forward looking organisation using up to date acquisition processes and procedures. The emphasis will be on flexibility … and continuous evaluation to avoid any danger of stagnation” (Ministry of Defence, 1998, Supporting Essay 10, Paragraph 6). 'Faster, better, cheaper' ( Ministry of Defence, 1998, Chapter 8, Paragraph 161) has become the new catch phrase for the supporters of change but for others, the change in mindset is a difficult proposition.

Explanation

Smart Procurement involves a change from the previous Downey procurement cycle and a move to a more streamlined acquisition cycle. The structure of this cycle aims to reduce risk by carrying out a more comprehensive assessment of projects at an earlier stage, while streamlining the approval process (Jdir, 1998, p. 7). Formal approval has been reduced from three to two occasions, the first time is during the concept phase (Initial Gate) and between the assessment and demonstration phases (Main Gate). Central to the implementation of Smart Procurement is the introduction of Integrated Project Teams, which are part of the drive to move from a functionally based management and reporting structure to a project-based organisation. They will drive the management of major defence equipment procurement, balance the trade-offs between performance, cost and time, within boundaries set by the approving authority. These Teams will bring together all defence stakeholders and industry under a single-team leader. They will be responsible for overseeing the complete life cycle of the piece of equipment, and once in service, will move from what was the Procurement Executive, now the Defence Procurement Agency, to the Defence ...