The big question in my mind is not whether we are going to increase the authorities at the lower levels — we have to do that, I don’t think that’s a question — in fact, at my level we already have done that, and I’ll explain that in a second. The biggest question for me is whether our young people ready for the responsibility that comes with that authority. It’s not just about going fast. Yes, going fast is a by-product of that. But we really need to still make high quality business decisions at every level of the Air Force. So I wonder sometimes when I get asked these kinds of questions, do people really understand, not just the authority I’m giving them, but the full weight of the responsibility that carries. For them to go be an expert, and actually if they have a question in their mind about the decision they’re going to make, go get help. As a business leader, go find advisers of your own.
[Second,] I have already delegated by authority down. I’ve increased each of the senior contracting officials’ authority level to $1 billion, in both competitive and non-competitive. I’ve asked them to act as entrepreneurs in their own right. I’ve flattened the contractual flow of authority and taken two layers out… What you’ll see is that all that Part 1, what I call gobbledygook, which includes all that about HCA [Head of Contracting Activities] and the SCO [Senior Contracting Official] and then SICO [??] and SICO-like authority and then directors of contracting authority that are not-SICO like. I can’t explain it to anybody who asks me. You need a PhD just to know what authority you have.
We’re taking that out. And we are reducing it. So now what you have is me as the single HCA, with most of my HCA functions delegated — almost all of them — and then at the Senior Contracting Official’s portfolio, I think there’s 27 of them with $1 billion of authority each, and then there’s COCOs [Chief of the Contracting Office] under that.
That was from the excellent Contracting Experience podcast with Air Force Maj. Gen. Cameron Holt, head of contracting from February 2019. He said in effect he was cutting out two layers of approval. That requires individuals to be ready to take on the responsibility of handling authority. I think a major part of that responsibility is reading widely including the history of your particular technology and business subfield, which provides officials the ability to learn “reflection in action.”
It’s cliche to call it a cultural matter, but so it is. I like what Ben Horowitz says about cultural statements, for them to be effective they also have to be shocking or confusing, like Tom Coughlin’s “if you’re on-time you’re late” or Mark Zuckerberg’s “move fast and break things.” I wonder what would be appropriate for the Air Force, or any major government agency, to apply. I presume they would be different according to service, or even more locally than a command.
One that comes to mind that would make most every contracting officer ask, “how could that be so?”, might be the following: “Forget about the profit.” The shock of such a statement would then require explaining about how the market economy works, which the DOD finds itself embedded in and reliant upon. In markets, profit signals signal one of two things:
(1) anti-competitive behavior which leads to restricted supply/increased prices, often from capture of government regulatory process but perhaps also by — through sheer size — threatening 3rd party vendors not to deal with up-starts.
(2) returns to innovation. If other firms have free entry to compete, the only way a firm should receive high profits is due to innovation that other firms cannot match. Otherwise, they would surely estimate that they could enter the DOD market and steal away profits until they equilibrated with the opportunity cost in the broader market. And that is exactly what happens over time as a business becomes sclerotic and start-ups are incentivized to be disruptive. Overall prices fall and quantities increase in the competition over profits, which tend to get driven downward but are always shifting with the growth of technology.
Certainly contracting officers should not take a “bad deal,” the price of which sounding unreasonable and without alternatives. After all, such agreements officers were put in place to provide a check against fraud and abuse by managers. But we must ask, “why are there no alternatives?”
Ultimately, officials will not learn from acquisition literature what a “fair and reasonable” price is in an innovative ecosystem of products, but only through immersion and observing many related deals being made. The more contract tasks are broken down into smaller chunks, both over time and across technical attributes, the more “bites at the apple” each official will have to gauge what if “fair and reasonable.” Feedback effects. Symmetrically, task partitioning increases the likelihood of competitive business behavior by reducing barriers to entry.
And so profits should be correlated with innovation only so long as government officials have the quality of experience in deal making that can only come through partitioned tasks. And so we have a shocking statement, “forget about the profits,” which makes sense so long as officials take on the responsibility to really understand their technology subfield and be able to get merited firms on contract quickly, iterating successes while cutting failures.
Back to Maj. Gen. Holt, here’s a good part on the increased use of Government Purchase Card [GCP], which really would allow COs and PMs to open up competition by making the Air Force an attractive customer for firms:
That process right now is connected to SBIR [Small Business Innovation Research] and the pitch-day. But you can now disconnect that process from a SBIRs [Phase] 1 and reconnect it to commercial solutions openings, for example, and use that 3400 money [Operations & Maintenance] against it.
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