Section 809 Panel Releases First Volume of Recommendations for the Overhaul of DoD’s Acquisition Process

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In 2016, Congress instructed the Department of Defense (DoD) to review its procurement regulations by convening a panel of procurement professionals—from both the public and private sectors. This panel became known as the Section 809 Panel (809 Panel). Congress instructed the 809 Panel to recommend amendments or repeals of defense procurement regulations. The 809 Panel’s objective was to help streamline or improve the efficiency and effectiveness of the defense acquisition process while still maintaining an advantage in defense technology. While Congress and the DoD are not required to adopt these recommendations, the report shows an attempt to define the issues in modern federal procurement and improve upon the old system.

809 Panel’s First of Three Volumes Contains Major Reforms

On January 31, 2018, the 809 Panel issued its first volume of recommendations. Volume two is due in June while volume three is not set to arrive until January 2019. The first volume contains 24 recommendations to Congress for reform and spans over 600 pages. The volume covers a wide variety of topics—i.e. commercial buying, contract compliance and audit, and small business goals—and in places, appears to go beyond Congress’ direction to the panel to recommend amending or repealing current regulations. Instead, Volume 1 proposes major reforms that would require significant new law and rulemaking if the DoD wanted to implement them.

809 Panel Recommends Moving from a Process-Orientated System to an Outcome-Orientated System

As explained at the start of the report, one key theme for the 809 Panel is the conceptualizing of a “Dynamic Marketplace framework.” The 809 Panel’s research led it to believe that the current DoD acquisition process is an obstacle to the agency’s ability to gain access to the modern marketplace. The panel believes that by changing the framework of the process, it can develop a means for the DoD to harness benefits from the global marketplace of ideas, solutions, products and services—at a speed closer to real-time transactions.

The report bases its recommendations on this call to move away from the current “process-oriented” acquisition system and move toward a “mission-driven” and “results-oriented” system. The 809 Panel aims to develop an outcome-based acquisition system that emphasizes industry competing solutions to the DoD’s problems. The 809 Panel believes this approach favors a deeper market analysis and problem-driven competitions over the DoD’s current cost-centric emphasis on defining requirements.

Within its first report, the 809 Panel identified five essential attributes that the DoD’s outcome-based system should be:

  1. Competitive and collaborative
  2. Adaptive and responsive
  3. Transparent
  4. Time sensitive
  5. Allowing of trade-offs

Building off a concept originally developed by the Center for New American Security (CNAS), the report also defines four procurement “lanes” for a DoD procurement to choose from:

  1. Readily available products and services
  2. Products and services requiring minor customization
  3. Products and services requiring major customization
  4. Products and services specifically designed and developed for the DoD

General Areas Covered by Panel 809’s First Volume

Volume one is broken up into eight sections:

  1. Commercial buying
  2. Contract compliance and audit
  3. Defense business systems – acquisition of information technology systems
  4. Earned value management for software programs using Agile
  5. Services contracting
  6. Small business
  7. Statutory offices
  8. Statutory reporting

While the report lists 24 recommendations (see below for full list), some recommendations are broken down even further into sub-recommendations, so the report actually gives a total of 73 discrete recommendations.

The majority of the recommendations focus on the first three sections of the report: commercial purchases, contract compliance, and the DoD’s acquisition of IT. The remaining recommendations tend to either relate to giving the Secretary of Defense broad authority to structure the agency or relate to eliminating statutory reporting requirements. It is notable that the 809 Panel does not make any recommendations for changing the bid protest system. But, instead hints that the bid protest system will be critiqued in future volumes.

Full List of Panel 809’s Volume 1 Recommendations

Recommendation 1: Revise definitions related to commercial buying to simply their application and eliminate inconsistency.

Recommendation 2: Minimize government-unique terms applicable to commercial buying.

Recommendation 3: Align and clarify Federal Acquisition Regulation (FAR) commercial item termination language.

Recommendation 4: Revise Defense Federal Acquisition Regulation Supplement (DFARS) sections related to rights in technical data policy for commercial products.

Recommendation 5: Align Defense Contract Audit Agency’s (DCAA) mission statement to focus on its primary customer, the Contracting Officer.

Recommendation 6: Revise the elements of DCAA’s annual report to Congress to incorporate multiple key metrics.

Recommendation 7: Provide flexibility to Contracting Officers and auditors to use audit and advisory services when appropriate.

Recommendation 8: Establish statutory time limits for defense oversight activities.

Recommendation 9: Permit DCAA to use independent public accountants (IPAs) to manage resources to meet time limits.

Recommendation 10: Replace system criteria from DFARS 252.242-7006, Accounting System Administration, with an internal control audit to assess the adequacy of contractors’ accounting systems.

Recommendation 11: Develop a Professional Practice Guide for DoD’s oversight of contractor costs and business systems.

Recommendation 12: Require DCAA to obtain peer review from a qualified external organization.

Recommendation 13: Increase coverage of the effectiveness of contractor internal control audits by leveraging IPAs.

Recommendation 14: Incentivize contractor compliance and manage risk efficiently through robust risk assessment.

Recommendation 15: Clarify and streamline the definition of and requirements for an adequate incurred cost proposal to refocus the purpose of DoD’s oversight.

Recommendation 16: Combine authority for requirements, resources and acquisition in a single, empowered entity to govern defense business systems  (DBS) portfolios separate from the existing acquisition chain of command.

Recommendation 17: Eliminate separate requirement for annual Investment Review Board (IRB) certification of DBS investments.

Recommendation 18: Fund DBSs in a way that allows for commonly accepted software development approaches.

Recommendation 19: Eliminate the Earned Value Management mandate for software programs using Agile methods.

Recommendation 20: Clarify the definitions of personal and nonpersonal services and incorporate in the DFARS a description of supervisory responsibilities for services contracts.

Recommendation 21: Refocus DoD’s small business policies and programs to prioritize mission and advance warfighting capabilities and capacities.

Recommendation 22: Eliminate, or sunset within five years, the statutory requirement for certain acquisition-related offices and Secretary of Defense designated officials to increase flexibility and/or reduce redundancy.

Recommendation 23: Establish a permanent, automatic five-year sunset provision for DoD congressional reporting requirements.

Recommendation 24: Repeal, preserve or maintain various DoD congressional reporting requirements.

Look Ahead: Volume 2 Due June 2018 and Volume 3 Due January 2019

The 809 Panel’s report, Volume 1, makes at least one thing clear – there are a lot of areas of reform in DoD’s acquisition system.  Procurement experts hope that with the release of this report, Congress will begin to incorporate these proposed changes into future National Defense Authorization Acts and/or encourage DoD to utilize its regulatory power to make necessary reforms.  It will be interesting to see what Volumes 2 and 3 have in store!

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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