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Background

Different weapons systems frequently include functional elements at the level of components, subsystems, equipment and parts (i.e., computers, radars, tracking devices), which serve the same purpose, but are specially developed and produced for each system. This lack of commonality among essential elements of weapons systems is addressed in Initiative 21 of the Defense Acquisition Improvement Program, which directs DOD to promote the development, specification, and interservice use of common hardware components, subsystems, equipment, and parts in military weapons systems. The objective is for the services to use, wherever possible, elements from other weapons systems that can be modified for a particular use in the new weapon systems at minimum cost.

It

The term common parts" has a broad meaning. includes commercially available aircraft purchased for training purposes as well as something as mundane as mercially distributed machine screws.

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Military specifications (MILSPECS) are developed for a wide range of end items being procured, including the various parts, components, and material included in the end items. MILSPECS define the technical characteristics required in the production of such items. Generally, it is more costly to produce an item to a MILSPEC than to a normal commercial standard.

Use of standard, off-the-shelf component equipment, subsystems, and field operational support systems can reduce weapons system development lead time, permitting earlier deployment of more sustainable weapons systems, and lower acquisition and life-cycle costs. Unfortunately, program managers are not generally motivated to focus on this form of cost-saving opportunity.

Methodology

Senior officials in DOD and industry were interviewed. Extensive articles and issue papers were reviewed, along with various conference reports.

Findings

The benefits of applying standardization of component parts are of two types: economies of scale obtained by larger volume purchases and economies of scale in maintenance and modification.

The high cost of applying unnecessary military standards and specifications also consists of two parts. One is the cost of verifying, usually in document form, that standards are being accurately applied. Another is the excessive acquisition cost occasioned when a standard specifies qualities not needed in the specific equipment being acquired.

MILSPECS have long been a target of misdirected criticism. The target should be procurement officials who are not sufficiently selective in citing military specifications requirements in contracts. Military specifications are developed for a very wide range of end items being procured. They are referred to as first tier requirements and lower tier requirements which are related to the components and material as well as processes (x-ray, stress tests, welding, tolerances) involved in the manufacture of items used, in end item components. It is necessary to develop such a vast array of military specifications because certain of the rigid specifications are in fact needed in acquiring certain end items. The problem has been that if a military specification exists, it will be cited as a requirement in any contract, even though the particular end item procured does not need to meet all such specifications. Procurement officials are not sufficiently selective in choosing only the particular military specifications that are truly needed in relation to the end item being procured.

In connection with the problem, a landmark militarycivilian study (1974-1976 Shea Task Force) concluded that the high cost of contractual military specification compliance resulted from failure to utilize the inherent flexibility of the documents in a reasonable and selective way rather than from a fundamental problem with the specifications themselves. William P. Clements, Deputy Secretary of Defense in 1975, observed, "The initial findings of the (Shea) Task Force have confirmed my concern regarding the need for a coordinated and well managed control over the application of specifications and standards in the end item equipment. This, therefore, is a fertile arena for effective cost reductions in the acquisition process."

Conclusions

The Office of the Secretary of Defense (OSD) Task Force believes that Government procurement personnel should be more selective and should invoke only those military specifications that relate specifically to the particular needs of the end item being procured. For example, military specification requirements on x-ray of material may be

important, in procuring certain items on a space vehicle, but not on ali items included in the vehicle, and not on other items being procured for less sensitive use.

In November 1981, OSD sponsored a three-day seminar, "Current Initiatives in the DOD Standardization and Specification Program to Improve the Acquisition Process. Addressing this seminar, Dr. Richard DeLauer, Under Secretary of Defense for Research and Engineering said, "The DOD must find ways to reduce the voluminous RFP (Request for Proposal) responses we require from contractors. We must be willing to take some risks which have a high payoff in terms of cost savings. The challenge is to motivate the acquiring services to specify only that which is essential ito a clear understanding of need, rather than dictate contractors' management systems, "how-to' procedures, or internal methods of accomplishment. DOD's policy statements to accomplish the above are well intentioned, along with organizational emphasis in OSD. However, implementation by the individual services has been slow, in part due to the laborious process of promulgating regulations through the Defense Acquisition Regulations (DAR) Council. In the Council, the individual services must for all practical purposes agree among themselves as to the implementing instructions before such regulations are issued.

The OSD Task Force believes DOD has not adequately addressed the lack of common parts in weapons systems and the excessive use of military specification requirements (rather than normal commercial standards) in contracts. The enormous costs involved require that both OSD and the services change substantially their methods of approaching the problem. OSD must provide incentives for the services to promote commonality and better utilize its existing authority to require standardization. The services must cooperate among themselves toward a common objective of total life-cycle cost reduction among all services. The services must relate to industry in a more cooperative, less adversarial role in order to decrease weapons systems

costs.

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The long-standing nature of the problems makes them particularly difficult to remedy, since cultural as well technical issues are involved.

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Recommendations

OSD 20-1: DOD should link military or commercial hardware standard utilization planning directly to the weapons system cost, performance, reliability and field maintain

ability objectives for each program. Life-cycle support cost is a particularly important decision variable in acquisition of repairable hardware for combat service.

OSD 20-2: DOD should provide seed money (appropriated funds) as front-end funding to carry out cross-service military hardware design standardization studies as an integral part of the individual weapons systems acquisition process. The objective is to identify the unique system components, subsystems, or equipment that could be adapted to multiple weapons system use without extensive modification.

OSD 20-3: DOD should provide seed money to initiate joint-service development of military hardware (e.g., subsystems, major components, and support systems), or software having multiple weapons system applications potential. Participation of services on equal terms would permit competitive design approaches and second-sourcing of end items.

OSD 20-4: DOD should indemnify the weapons systems contractor when DOD standard equipment used does not measure up to the contractor's overall system requirements.

OSD 20-5: As normal acquisition practice, DOD should consider only MILSPECS related to the item being procured Tfirst tier standards) as required. All other lower tier MILSPECS for material, parts, and components included in the end item should be simply reference documents, and not mandatory, unless individually justified and separately listed in the purchase contract. This is the inverse of present procedure which considers all layers or tiers of cross-referenced documents to be contractual requirements unless formal exception is taken.

OSD 20-6: DOD should authorize the use of financial incentives to encourage contractors to challenge unimportant or irrelevant "standard" requirements when responding to an RFP.

These incentives might consist of cash payments or allocating a given number of source selection evaluation points based on the potential cost savings of the proposer's alternative recommendations. (At present, there still is a generally perceived disqualification for "nonresponsiveness" when changes are suggested.)

OSD 20-7: At the Request for Proposal (RFP) stage, DOD should invite all contractors to challenge burdensome data requirements. It should not gather detailed contractor documentation and data merely for proof of performance or "just in case" archives. It should take advantage of contractors' computerized data storage and retrieval systems. OSD 20-8: After contract award to the lowest qualified competitive bidder, DOD should offer contractual financial incentives for cost savings derived from selective applicaEion ("tailoring") of standards. For example, in flexibly priced contracts, such proposals could be incorporated as an instantaneous value engineering proposal without requiring extensive audit or negotiation. (Advanced "tailoring" input for each successive phase of the acquisition process is now DOD policy per Directive 4120.21, November 3, 1980.)

OSD 20-9:

At the service level, individuals in charge of standardization efforts should report to the program manager (rather than someone in Logistics Management). The standardization function should be linked to the service laboratory center of technological expertise, so that laboratory consultants can advise when it is timely to identify technology for standardization and also when standardization might impede technology development.

OSD 20-10: DOD should mandate service implementation of OSD standardization policies in DAR without prior approvar by the DAR Council. The services should be required to request OSD policy deviations on an exception basis. ( This is the inverse of the present system under which individual service administrative and legal representation on the DAR Council can essentially "pocket veto" OSD policy.)

Savings and Impact Analysis

We have estimated the potential cost avoidance from applying these suggestions against the $70.1 billion fiscal. year 1983 total obligational authority for weapons acquisition as follows:

I.

Increased use of common subsystems among services

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Improved design alternatives for multiple-
use and life-cycle cost-effectiveness.
Estimated 2 percent saving, based on a
1982 Boeing Study.

($ billions)

$1.4020

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Joint service development of multiple use
components and subsystems. Estimated 1 per-
cent saving, based on Air Force estimate

0.7010

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Broader application of existing DOD equip-
ment inventories. Estimated .3 percent
saving, based on an OSD Task Force estimate.

0.2103

TOTAL

$2.3133

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