Portfolio piece

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Executive Summary
This memo examines the nature of contracting in the DoD by using the March 2019 report from
the GAO, Defense Acquisitions: Information on Workforce, Organizational, Structure, and
Budgeting for Selected Programs. It provides solutions to address issues of best practices
concerning the long term cost and internal knowledge over time. It focuses on personnel and
organizational structure only and does not focus on contracting procurement for goods since this
memo is derived from the GAO document. Through this lens, it identifies issues with the budget
structure, the organizational needs, and responses along with misconceptions. The methods
discussed include traditional contracting, AGILE hiring/management and the use of FFDRCs.
Ultimately, it concludes that in the current climate, utilizing FFDRCs may be the most prudent
option.

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TO: Patrick M. Shanahan​, Acting Secretary of the DOD
FROM: Rose Anthony
DATE: April 29, 2019
RE: Addressing the DoD’s Defense Acquisitions Policy
Summary
As the largest department and a foundational one, it is unsurprising that the Department
of Defense (DoD) accounts for a substantial amount of the federal budget. The budget for the
current fiscal year is $686.1 billion and a significant amount of this budget is used to “develop,1
produce, and field” weapon systems through various defense acquisition programs. According to
internal department estimates, “82 major defense acquisition programs would cost over $1.69 to
develop and procure” . This acquisition process should be reviewed both as a matter of fiduciary2
responsibility for taxpayers as well as a national security issue. ​This memo provides best
practices for more efficient contracting for DoD’s defense acquisition programs by reviewing a
March 2019 report from the the Government Accountability Office (GAO).
Background
1
​Norquist, D. (2018). ​Defense Budget Overview: United States Department of Defense Fiscal Year
2019 Budget Request​ (p. 116). Retrieved April 29, 2019, from
https://dod.defense.gov/Portals/1/Documents/pubs/FY2019​-Budget-Request-Overview-Book.pdf
2
​DiNapoli, T. (2019). ​Defense Acquisitions: Information on Workforce, Organizational, Structure,
and Budgeting for Selected Programs​ (p. 1). The Government Accountability Office.

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Senator James Inhofe, chairman of the Committee on Armed Services, and Senator Jack
Reed, ranking member of the committee, request GAO to review “how military departments
meet program personnel needs and how DoD budgets for the costs associated with these
personnel” . GAO reviewed the organizational structure and personnel allocations for eleven3
programs focusing on the newest planned and allocated in the Air Force, the Army, and the
Navy. The three main categories they chose to focus on where the size of the staff, the
composition of talent and the mix of personnel. DoD personnel consists of military employees,
civilian/government employees, and contractors. ​The latter, contractors, are used frequently in
the Department, which was primarily due to the flexibility and expertise they provide​. The GAO
found that contractors were cheaper to use than military personnel for short term programs.
Civilian employees require the most investment since they require a longer on-boarding process
and are often a permanent fixture; ​in higher cost of living areas, it is especially hard for the DoD
to attract civilian workers​. The DoD frequently relies heavily on contractors to provide technical
knowledge when building weapon systems. GAO noted that in December of 2015, the ​DoD did
not have enough personnel to complete engineering tasks . This lack of adequate personnel for4
programs is not just limited to programs technical capacities but also seen in overall staffing.
GAO noted that “the B-2 Defensive Management System Modernization program estimated it
needs 82 personnel in FY2018 but was allocated just 13 people” . This allocation imbalance is5
partially due to the DoD operation process which allocates civilians by the risk factor in each
program but also due to the current budget structure. Although the ​DoD frequently knows the
contracting needs for programs beyond the fiscal year, this is not taken into account in the
3
​DiNapoli,1.
4
​DiNapoli,14.
5
​DiNapoli,14.

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program cost overview . Additionally, the type of personnel (military, civilian or contractor) is6
shown in different parts of the budget. The cost of military personnel is included in central
operating budgets for all branches, while the cost of contractors is included in program costs in
all branches. The cost of civilian employees is included in the operating cost in the Air Force but
in both the operating costs and personnel costs for the Army and Navy . Lastly, the report7
mentions the use of federally funded research and development centers (FFRDC) to staff Space
and Missile system programs for the Air Force; FFRDCs were not used in the other ten programs
examined.
Analysis
The use of contractors in the DoD reflects the current state of government reliance on the private
sector. Though this provides the DoD the ability to gain the technical know-how to build
weapons at a lower cost and the flexibility to change personnel according to national needs,
reliance on contractors is tricky given the mandate of the Department. As a matter of national
security, the Department must balance efficiency of spending allocated resources, speed of
building and updating new weapons systems and security of national manpower and systems by
all personnel. Although the GAO report focuses on only eleven programs, a relatively small
sample size to indicate endemic issues in the Department, the fact that these programs were
recently developed indicates possible issues in the structural process of developing and executing
these programs. For example, all programs indicated difficulty in tempting technically adept
civilians away from public sector counterparts who would often pay a salary that would match
6
​DiNapoli,14.
7
​DiNapoli,20.

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the cost of living. Additionally, the programs were restricted by sluggishness in the hiring
process due to a rigid on-boarding process that leads them to favor contractors and military
personnel . ​However, although contractors are an adept solution for the short term, it is found8
that over the long term, civilian employees are often more cost-effective for programs.​ This is
because of contractor fees, which are higher than the cost of civilians, are included in the
program costs while the use of military personnel can be a resource drain if the program is not
sensitive or urgent.​ Long term programs may need more oversight of contractors especially since
the likelihood of these contractors handling sensitive data increases​. The expertise generated by
contractors remains untapped by the Department unless the contractors are from an FFRDC. This
due to the fact that even though FFRDCs are operated largely through contractors, the main
focus of these centers is to provide objective research on “technology, system acquisition, and
policy guidance” on the center’s expertise. They are independent of both the Department,
thereby free from politics, and the public sector since they have a strict non-compete act that
prevents them from creating marketable products . ​This separation allows the public sector more9
access to technology without the risk to national security. ​ Currently, the budget system and the
operating system favors general contractors as both a short term and long term solution, a
decision that would not be in the nation’s fiscal interest for the long term.
Options
1. Traditional Contract System: ​ This system allows the Department to hire contractors
when needed to fill personnel positions quickly and to provide technological expertise.
With the current system, DoD heads do not have to calculate the overall cost of
8
​DiNapoli,15.
9
​(2015). ​FFRDCs—A Primer​ (p. 56). Mitre Organization. Retrieved April 29, 2019, from
https://www.mitre.org/publications/all/ffrdcs-​a-primer

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contractors for the entire span of the program, which they often have to do for civilian
personnel making contractors seem more appeals. As a private sector entity, contractors
can be fire more easily since they do not have the same protections as federal employees.
Additionally, they do not have to be provided with federal pensions. These characteristics
make ​hiring contractors seem less risky than civilian employees since they often do not
need to spend resources upfront.​ They also allow contractors to quickly flow through
stages of defense acquisition and be applied when needed. However, c​ontractors cost
more overtime and often require more oversight​ to ensure proper measures are being
taken to complete tasks efficiently and effectively. Furthermore, ​contractors are hired on
project bases, so expertise may not be passed along to newer employees and more
effective processes would not be formalized​. Moreover, even though programs may share
similar resources unless contractors for these programs are assigned to the same portfolio,
there is ​no guarantee that practice like sharing resources to limit waste would be
implemented.
2. AGILE Management/Hiring System​: AGILE is a process that arose through software
development. Instead of allocating time to find issues in products, developers would
focus on providing quick solutions to issues that users found. By allowing the majority of
product testing to be done by users, it created a collaboration between creators and users
that, in the end, created a better-developed product . The ​AGILE method is used ​for10
10
​Franco, E. (2017, August 19). Agile Procurement For The Public Sector. ​Public Spend Forum​.
Retrieved April 29, 2019, from
https://www.publicspendforum.net/blogs/emilio-franco/2017/08/19/agile-procurement-public-sec
tor/

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procurement in the private and public sector ​because of its flexibility. It focuses on
collaboration, individuals/interactions, and real-time responses​. Using the proponents of
the AGILE method, the Department can create a more fluid hiring structure that allows
programs to use contractors but transition over to more cost-effective full-time workers.
For example, a short term program of two years might favor using contractors but if that
program was to be expanded to ten years, then an ​AGILE hiring system would allow
management to locate the best civilian candidates and transition the program over to them
in the mid stages of the program, five years and onwards.​ This system would require a
large amount of energy from management to facilitate the new hires into both the
Department and the ongoing process. However, i​n the long term, it would allow the
Department to keep necessary technical skills that they anticipate needed in the long
term. It would also require project managers to be incentivized to check the progress and
efficiency of programs under their scope.
3. Increase FFRDCs: ​Nine of the eleven programs examined were managed through a
portfolio structure due to a combination of three reasons. Programs had “related
acquisition structures”, “interrelated technologies” and were “part of the same weapons
systems platform” . The traditional defense acquisition process is a multiphased process11
that includes: “technology maturation & risk reduction, engineering & manufacturing
development and production & deployment” . In the traditional process, the need for12
personnel in these areas fluctuates depending on the program timeline, which makes
11
​DiNapoli,17.
12
​DiNapoli,5.

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hiring traditional contractors more effective. However, if the DoD increased the number
of FFRDCs this would not necessarily be the case since these center could systematically
and constantly examine risk reduction, technology maturation or any other developmental
analysis. Establishing these FFDRCs would be more pricey than hiring more civilian
employees since but it is more politically feasible since it would not cut out the public
sector entirely causing massive increases to personnel spending for the Department.
Additionally, FFDRCs tend to have higher salaries with constant funding for research
which would attract the brightest minds. As a public-private partnership, these centers
would allow the Department to have access to technical expertise over a larger period of
time, which in turn would increase the Department’s knowledge of newer technology in
order to make better decisions as well as have employees who are familiar with newer
and older systems. Additionally, the objective and isolated nature of FFDRCs would
ensure the security of defense systems and limit the need for as much oversight as
traditional methods of contracting.
Recommendation
The reliance on traditional contractors for the Department limits future growth and technological
development since this personnel type was originally created as a temporary mechanism for the
Department to gain expertise and manpower quickly but for short periods of time. To
immediately address the issue of limiting the DoD’s reliance on traditional contractors, I would

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recommend applying option 2. This is primarily because this system utilizes some current
systems like using private resources but through a more sustainable period of time.
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