The rapid prototyping fund is dead before it even got started

Do you remember Section 828 of the FY 2016 NDAA? It’s OK, most people don’t. Here’s a refresher:

For each fiscal year beginning with fiscal year 2015, the Secretary of each military department shall pay a penalty for cost overruns on the covered major defense acquisition programs of the military department.

How was that to be done? Every year, the DOD puts out a Selected Acquisition Report for major defense programs. It contains the statutory measures of performance and cost growth.

Each year, the current Program Acquisition Unit Cost (PAUC) would be compared to the original baseline figure. That includes all acquisition costs, even RDT&E. The PAUC growth would then be multiplied by the total quantities currently in the program. That figure represents the cumulative cost growth on the program.

If we sum the cumulative cost growth over all programs, and compare it to the previous year, we have the balance. This is done for each military department. Then, 3 percent of this figure — if it is greater than zero — will be taken out of that department’s RDT&E budget and transferred into a Rapid Prototyping Fund.

That Rapid Prototyping Fund was supposed to be used to quickly route money to new efforts that would use Section 804 authorities, also established in the same legislation.

Unfortunately, the House version of the FY 2020 NDAA has a Section 814, which repeals the previous rule. There is no more funding for the Rapid Prototyping Fund. Rapid prototypes that make use of Section 804 authorities will then have to use the traditional budget process, which takes 2 or 3 years — one year if you’re lucky. So-called “rapid acquisition” does not seem so rapid anymore.

Another major point about Section 804 that is often lost is that it only exempts programs from the DODD 5000.01 process, not DODI 5000.02 which includes a whole slew of processes and required reports.

I remember when I heard about the 3 percent rule for funding the Rapid Prototype Fund. I thought it was infeasible then. There would be too much administration and questions over definitions. For example, each program is baselined according to a constant Base Year figure, which is when the program got its acquisition baseline (usually at Milestone B). They would all have to be normalized to the same dollars using the correct weighted index.

That doesn’t sound too hard, (though, watch out for Navy shipbuilding). Then consider programs get broken out into subprograms, such as CVN-78 later breaking out EMALS. These programs get a “pass” by having a new, original, baseline. Or F-35 acquisition costs that are in the AF aircraft procurement mods account, which are not included in the official SAR figures. And then these edge cases go on and on.

I doubt the Pentagon even implemented the legislation. I haven’t heard anything about it. Perhaps this is inevitable when Congress provides over a thousand pages of requirements each year, not to mention the DOD IG’s over 1,558 open recommendations, and so forth. [Update: I asked Todd Harrison about this on the Acquisition Talk podcast, and he said the Air Force had been administering the transfers.]

Plus, one might expect a program office to inflate its budget requirements by 3 percent or more in order to remain whole. If all program offices do this, then the policy was self-defeating.

All the impracticality aside, how will rapid prototypes get funded? Where is the pre-funded account which can be routed to priorities as they emerge? How can the budget be as agile as leadership is asking the workforce to be?