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Section 809 Panel Urges Congress to Bring DoD Spending into the 21st Century

The Section 809 Panel recently released an interim report and supplement (the “Interim Report”) advocating in broad strokes for a host of improvements to the Department of Defense’s (“DoD”) acquisition system to better streamline the process and increase industry offerings to the government.  The NDAA for FY 2016 established the Section 809 Panel to address “fundamental problem[s]” in the means by which the DoD acquires goods and services to support its warfighters.  Indeed, in meeting with over 200 government and industry representatives, the Interim Report found that the DoD’s acquisition system creates obstacles that make it unattractive for small and large businesses alike to offer their goods and services to the government.  The Interim Report explains that “the United States’ ability to maintain technological, military, and economic superiority is being challenged,” as our adversaries are recognizing vulnerabilities in our forces and modernizing their militaries in response.  Thus, according to the Interim Report, DoD’s acquisition procedures must be improved to achieve “a degree of agility that DoD is not currently able to deliver.”

To achieve this agility, the Interim Report recommends improvements in five areas:

  • Improve the Adaptability of the Acquisition System — The Interim Report observed that the fluid and interconnected nature of world markets requires an acquisition system that can adjust quickly to evolving threats. This agility requires the ability to procure “fundamentally different capabilities on different timelines.” For instance, the acquisition system must allow for rapid procurement of existing technologies to support the warfighter in theater, while also allowing for acquisition of R&D services to ensure DoD has access to the latest technology. These different types of acquisitions require greater nimbleness in DoD procurements.

  • Improve DoD-Commercial Customer Relationships — The Interim Report observed that unlike in the past, DoD is increasingly dependent on “boutique” defense companies and nondefense companies. Because DoD no longer dominates in many sectors, doing business with smaller defense and commercial companies requires that DoD become a “more sophisticated buyer” by understanding market dynamics and the interests of these companies.

  • Improve Allocation of Resources — The Interim Report points out that although the United States has the largest military budget in the world and is the largest funder of R&D efforts, other countries (including China and Russia) are growing closer to the United States’ budget. Because the United States’ budget is not slated to grow at rates comparable to other countries, the Interim Report stressed the importance of the DoD allocating resources effectively, especially by better aligning requirements with budgeting and acquisition policy.

  • Simplify the Acquisition Procedure — The Interim Report recognized the need to improve the attractiveness of doing business with DoD when conducting relatively small-value transactions. To that end, the Interim Report recommended simplifying the acquisition process in several ways. First, the thresholds for the Simplified Acquisition Procedures (“SAP”) should be raised. Second, the FAR clauses applicable to SAPs should be reevaluated and reduced. The Interim Report pointed out that today more FAR clauses must be considered, and potentially applied, in SAP contracting as compared to time and materials (“T&M”) contracting, despite the fact that T&M contracting typically poses a greater risk to the government.

  • Empower the DoD’s Workforce — The Interim Report recognized that the DoD’s hard working acquisition officials must be empowered and incentivized to improve the acquisition system. This empowerment would include creating an acquisition system that is more simple, understandable, and executable. Additionally, acquisition officials should be permitted to develop requirements and allocate funds based on sound business rationales, rather than arbitrary deadlines and outside pressures.

Overall, the Interim Report proposes a platform for reforms that could have a significant positive impact on the DoD’s acquisition system and result in an increased desirability to conduct business with the DoD. That said, although the areas identified for improvement show promise, the Section 809 Panel does not plan to provide actionable recommendations to improve these areas until it releases its final report in August 2018.  In the meantime, contractors may consider offering such recommendations to the Section 809 Panel.

© 2017 Covington & Burling LLP

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About this Author

E. Sanderson Hoe, Covington Burling, Contracts Lawyer, Negotiations Attorney
Senior Of Counsel

Sandy Hoe has practiced government contracts law for more than 40 years.  His expertise includes issues of contract formation, negotiation of subcontracts, bid protests, the structuring of complex private financing of government contracts, preparation of complex claims, and the resolution of post-award contract disputes through litigation or alternative dispute resolution.  His clients include major companies in the defense, telecommunications, information technology, financial, construction, and health care industries.

202-662-5394
Alexander Hastings, Covington, Contract Litigation, E-Discovery
Associate

Alex Hastings is an associate in the Washington, DC office and a member of the firm’s Government Contracts Practice Group.  Mr. Hastings advises clients in securing and performing government contracts and responding to government investigations. Mr. Hastings is also a member of the E-Discovery Practice Group where he routinely advises clients concerning best practices in e-discovery.  He assists in investigations and litigation that involve complex e-discovery issues and has represented clients in investigations brought by the U.S. Department of Justice and Securities and Exchange Commission.

202-662-5026