NCMA WORLD CONGRESS April 5-8, 2009 • L ong Beach, California

1. NCMA WORLD CONGRESSApril 5-8, 2009 • Long Beach, California S. 454 - Weapon SystemsAcquisition Reform Act of 2009 PRESENTATION Richard B. OliverPartnerMcKenna Long & Aldridge LLP

2. S. 454 - Weapon SystemsAcquisition Reform Act of 2009 • Introduced on February 23, 2009 • Sponsored by Senators Levin and McCain • Goals endorsed by President Obama • Purpose –DoD identify and address major problems much earlier in major weapon program development • After mark-up, S. 454 approved 26-0 by committee

3. GAO Report – April 29, 2008Annual Assessment ofDoD Weapons Programs • Exceed R&D budgets by 40% • Average Acquisition Cost Growth by 26% • Average Schedule Growth by 21 months 95 Major Defense Acquisition Programs

4. GAO Report - March 30, 2009Annual Assessment ofDoD Weapons Programs • 96 Major Defense Acquisition Programs • Exceed R&D budgets by 42% • Average Acquisition Cost Growth by 25% • Average Schedule Growth by 22 months • Newer programs not having same degree of cost and schedule growth • Notes revisions to DoD 5000.02 as positive

5. Acquisition Problems • Unreasonable performance requirements • Use of immature technologies • Unreasonable cost and schedule estimates • Cost/Schedule/Performance trade-offs • Costly changes in mid-program

6. UnreasonablePerformance Requirements • Identify performance problems early • Reverse “reforms” of last 20 years • Re-establish systems engineering organizations - § 101 • Perform systems engineering analyses, including reliability, availability and maintainability, for each program prior to Milestones A and B - § 101 • Re-establish DoD Director of Development Test and Evaluation - § 102 • Re-establish development testing and evaluation organizations and capabilities which will be integrated with systems engineering- § 102

7. Use of Immature Technologies • GAO - 64 of 72 programs lacked required level of product knowledge • GAO – 164 of 356 critical technologies did not meet minimum requirements for technological maturity • Annual assessment of technological maturities and integration risk of critical technologies by Director of Defense Research and Engineering - § 103

8. UnreasonableCost/Schedule Estimates • Major defense acquisition programs averaging 26 % increase in acquisition costs and 21 month schedule delay • Establish Director of Independent Cost Assessment - §104 • Principal DoD cost estimation official • Confirmed by the Senate • Conduct independent cost estimates for major defense acquisition programs for certifications and reports • Ensure cost estimates are fair and reliable

9. Cost/Schedule/Performance Trade-offs • Budget, acquisition and requirements processes not connected at lower DoD levels • Early trade-off decisions - § 201 • Involve Combatant Commanders - § 105 • Consideration of trade-offs by Joint Requirements Oversight Council - § 201

10. Costly Mid-Program Changes • Avoid cycle of program instability, budget and requirement changes, costly delays, and repeated baselining • Require Preliminary Design Review (“PDR”) and certification of “high likelihood of accomplishing intended mission” before Milestone B Approval –§ 202 • Tighten Nunn-McCurdy requirements - § 204

11. Current Nunn-McCurdy Requirements • Critical cost growth - 25 % of current baseline cost estimate or 50 % of original baseline estimate • Programs with critical cost growth overruns may not have additional funds obligated, unless Secretary of Defense certifies: • program essential to national security • suitable alternatives for lower cost are unavailable • causes for overruns have been addressed • current cost estimates are reasonable

12. Nunn-McCurdy Enhancements • TERMINATE major defense acquisition programs that experience critical cost growth, unless Secretary of Defense certifies that: • Continuing program is essential to national security • No alternative to meet military requirement at less cost • New costs estimates are reasonable per Director of Independent Cost Assessment • Management structure is adequate to manage and control costs • Rescind most recent Milestone Approval and obtain new Milestone Approval before next contracting action

13. Other Reforms • Life Cycle Competition - § 203 • At prime and subcontract level • Competitive prototyping unless waived • Dual sourcing • Funding of second source for next generation prototype systems • Use of modular and open architectures • Periodic competitions for subsystem upgrades • Government oversight of make or buy decisions

14. Other Reforms (cont’d) • Organizational Conflicts of Interest - § 205 • Generally prohibits system engineering firms from participating in development or construction of a major weapon system • Tighten oversight of make or buy decisions • Establish OCI Review Board • Acquisition Excellence - § 206 • Need positive motivation for acquisition work force • Annual awards program

15. S. 454 CONCERNS • Original reason for reversed “reforms” – acquisition process too bureaucratic and slow? • How create the needed systems engineering, developmental testing, and acquisition talent? • Overemphasis on cost containment versus breakthrough innovations and performance? • Little emphasis on funding innovation and emerging technologies • Not addressing maintenance of industrial base