The last frontier of acquisition reform

I think the Pentagon is going to look in the long term to the last frontier of acquisition reform, which is the budget process. One idea I heard was to consolidate these hundreds of budget lines into meaningful portfolios that are managed by empowered Program Executive Officers. For that to happen, Congress is going to have to relinquish some budget authority. So that’s where the Pentagon is really going to need Congress to help with acquisition reform.

That was Bryan Smith from our counterpart to the Center for Government Contracting at George Mason University, the National Security Institute, speaking on Government Matters “Putting a pause on new defense acquisition legislation.” HT: Matt M.

The main point was that Congress has been really active recently legislating acquisition reform, and should take a pause for the Pentagon and industry to digest it all. In the mean time, a serious conversation about budget reform should take center stage.

Here’s a slice from Bryan’s piece in Defense one, “A Call to Inaction on Defense Acquisition Law“:

Another way that we can unleash innovation is by letting the markets set more government pricing. No bureaucratic mechanism, statute, or reporting requirement can perform better than free markets. The government’s (especially Congress’s) obsession with cost in determining fair and reasonable price is misplaced. Cost is but one factor contributing to fair and reasonable pricing. The government’s approach fails to take into account prior investment, assumed risk, return on investment, and, yes, the elasticity of the buyer’s demand.

Three cheers! Of course, price signals only emerge in the tugs and pulls of competition, which requires lowering barriers to entry… which requires funding flexibility and empowerment of PEOs to manage themselves as a portfolio. I’ll conclude with wise words from Bryan:

The best thing that Congress can do right now to unleash and protect defense innovation is to do no harm. For now, the market is the best medicine. If we do this, then even China… cannot prevail against our comparative innovation advantage.