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Innovation and Commercial Items: A National Security Imperative.

As students return to school and Congress returns to Capitol Hill, there is a feeling of anticipation in the air. Some might attribute this feeling to the autumnal equinox arriving in less than two weeks, and others might associate it with the expected flurry of legislative activity surrounding the end of the government fiscal year. To observers of the acquisition landscape, however, this feeling of anticipation signals something different, specifically, the potential for wholesale change in how the government conducts business.

Earlier this year, Senate Armed Services Committee Chairman, John McCain, introduced S. 1376, the National Defense Authorization Act (NDAA) for Fiscal Year 2016. That bill, along with H.R. 1375, introduced by House Armed Services Committee Chairman, Mac Thornberry, attempts to tackle the challenges raised by what has become a slow, bureaucratic, and costly Defense acquisition system. The House and Senate are in conference on the two bills; but one thing is clear: unlike in the past, these bills move beyond simply improving processes for the sake of efficiency.

Among other things, the bills seek to reduce paperwork and reporting requirements, streamline the acquisition process, increase accountability, and promote the professional development and growth of the Department of Defense (DOD) acquisition workforce. All are potentially positive steps for a beleaguered, inefficient defense acquisition system that is sinking under the weight of overregulation, burdensome reporting requirements, and an archaic cost-based oversight regime.

Of particular note is the Senate bill’s provisions enhancing commercial item contracting and reducing barriers to entry for nontraditional commercial technology firms seeking to do business with the Department. These provisions reflect the high priority the Senate has placed on gaining access to innovative technologies and cutting-edge commercial firms. This priority appears to be shared by Secretary of Defense Ashton Carter who has voiced the Department’s strategic imperative of embracing the commercial marketplace and cutting edge innovators.   This position manifests a conviction that improving access to commercial innovation from the commercial market is vital to ensuring American military dominance over the long term. Thus, procurement reform is not only a priority for management improvement; it is a national security imperative.

That is why, as discussed in the August 13th FAR & Beyond blog, the Department proposed rule addressing access to cost and/or price data for commercial items is a curious step. The rule is a step back from commercial item contracting that is counter to the goal of gaining greater access to commercial innovation by reducing barriers to market entry.

In response to the proposed rule, Senator McCain sent a letter to Secretary Carter raising concerns regarding its negative impact on access to innovation and cutting-edge commercial firms. In part, that letter states,

This new regulation would likely deter privately held start-up companies from offering their products and services to DOD, because it would impose cumbersome and excessive bureaucratic requirements on these firms to provide detailed cost data for precisely the types of solutions that DOD needs. …

A copy of the letter can be found here.

The Armed Services Committee Chairman urged the Secretary to rescind the proposed rule “immediately.” The Coalition will continue to monitor the status of the proposed rule, and if necessary submit comments on behalf of our members. We also will continue to monitor and update you on the status of acquisition reform on the Hill.

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