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Industry News

How Military Services are Contracting for Hardware Sustainment and Program Office Support to address Urgent War fighter Operational Needs

- Equipment Logistics Support
- Repair and Maintenance
- Installation and Hardware Upgrades
- Support Services Contracting

What should Microwave Companies do to participate and address these New Market Opportunities as the US Milita...

September 13, 2011
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We have to fix what is broken and worn out
It is clear that tightening Department of Defense (DoD) budgets are on track to become reality in the near term. And with the extended deployment of military hardware and weapons systems, our military faces a situation where “our stuff” has essentially been worn out through 10 years of prolonged military conflict. There is a critical need to maintain our military equipment and troops in multiple theaters of operation around the globe. All the military services are faced with increasing demands to sustain and support the troops in the field with not enough funds to do the job. Traditional time-consuming approaches to procuring and acquiring such material and support services “do not cut it” from a timing point of view when military “OPTEMPO” is at such a high rate. During deployments when time is of the essence, there is an imperative to keep our troops and their weapons systems functioning. And when the troops come home from deployment, they have a fixed amount of time “to reset” and get ready for the next deployment cycle. Each of the services have adapted their own acquisition procedures that they have in place and moved to put them into practice where expedited contractual mechanisms to efficiently and effectively get acquisition matters handled -- as quickly as possible. This includes addressing all aspects of warfighter support: Equipment Logistics Support; Repair and Maintenance; Installation and Hardware Upgrades; and Support Services Contracting. The US Army is using a program called Rapid Response Third Generation (R23G). The US Navy has adapted and evolved its program called SeaPort-E. And the US Air Force has a program called Fast Flexible Acquisition and Sustainment Tool (F2AST). If companies in the microwave industry are to participate in this growing market space, they must be aware of this activity and become more closely involved with any one of the contractors to expand their opportunity for future work. Let’s look into this matter in more detail.

We need an "inside playbook" on how things happen
The objective of this article is to document, identify and track the approach each of the military services is undertaking to the problem of sustainment: 1) Equipment Logistics Support, 2) Repair and Maintenance, 3) Installation and Hardware Upgrades, and 4) Support Services Contracting. I have included a lot of information here to help microwave companies understand what are the forces driving this market space. It is very detailed, contains a lot of facts, figures and specifics about each service -- and identifies a market area that could have significant revenue potential for microwave companies to market their products and technology. Each of the services has its own initiative and contractual approach to address its unique needs. And each service effort contains certain process and procedural matters that must be followed to obtain contract funding. But it is very clear, to participate and win business on these support contracts, one must be aligned with a prime contractor at each agency. Most of these requirements for hardware upgrades, installation and repair will never reach the open market for full and open competition in Fed Biz Ops. So, to play, companies must be aligned with someone who holds one of these prime contracts, so called “IDIQ” contractual efforts (Indefinite Delivery Indefinite Quantity). One needs to be a closely aligned teammate or work as “a selected supplier” on the team, both to the prime contractor and their other teammates. The article is sort of a detailed “playbook” to outline the business market landscape, identify all players and provide a starting point for our microwave companies to initiate market penetration and focus on this critical and emerging market opportunity.

DoD/OSD Policy Changes to Address Rapid Acquisition
The idea for rapidly acquiring goods and services is gaining momentum within the DoD. All three services have embarked on specific programs to streamline the acquisition of goods and services needed, including Equipment Logistics Support; Repair and Maintenance; Installation and Hardware Upgrades; and Support Services Contracting. However, the military seems to be “getting religion” at the DoD level for a more focused and unified/standardized approach. Defense Department’s top acquisition official Dr. Ashton Carter, Under Secretary of Defense for Acquisition, Technology and Logistics, said on July 15, 2011 at a Brookings Institution event that the entire Defense Department should institutionalize “an ad-hoc rapid acquisition program” used to provide weapons, equipment and support services. He also said this because US forces fighting in Southwest Asia cannot be victim to the delays of the traditional acquisition process which cannot adequately support the need of troops during wartime. The DOD has used its “fast lane” ad-hoc acquisition program in recent months to feed intelligence, surveillance and reconnaissance equipment to Iraq and Afghanistan. And institutionalizing such a program would also require establishing a “funding fast lane” to offset DoD’s general inability to be agile -- as a result of the elaborate requirements process used in formal acquisition programs. Ashton Carter said that the Pentagon has relied on an improvised "fast lane" program to quickly send more intelligence and surveillance equipment, including radars, sensors and military dogs, to Afghanistan. The effort has allowed a surge of equipment approved by former Defense Secretary Robert M. Gates earlier this year to be delivered now. The effort has been so successful that Carter argued the approach should be formally adopted. He called the current procurement system inadequate and criticized the Pentagon’s "general inability to be agile." "The [acquisition] system we have is designed to be deliberate and not to be quick," he said. “It’s a problem all by itself even in our normal programs; it’s completely unacceptable when you’re in the middle of a war."

Why things had to change - A view from the DoD Leadership
The standard system, which requires the Pentagon to go through an elaborate requirements-setting process long before it can buy equipment, cannot keep pace with the tempo of technological change and weapons systems support, according to DoD officials. He has been quoted that “everything is on the table” as the Pentagon looks to make significant cuts as part of a broader federal cost-cutting strategy. But Carter said the Defense Department should not just consider what he dubbed the “top of the iceberg,” or noticeable items like weapons programs. For instance, about 70 percent of the total cost of a weapon is maintaining it, while the other 30 percent goes to developing and buying it. In another example, Carter said that for every 45 cents spent on goods, the Pentagon spends 55 cents on services. “Our trade craft in the acquisition of services is even poorer than our trade craft in the acquisition of goods,” he said. The Office of Management and Budget too is targeting services. Officials said earlier this month that federal agencies must cut spending on management support services — generally considered consulting — 15 percent by the end of fiscal 2012. Carter also pointed to the high costs of personnel, bases and logistics. Inevitably, the Pentagon’s research and development and procurement budgets will be targeted as the government pursues savings, but he said it would be "unnecessarily imprudent" to make those categories the primary source of cuts. All spending areas need "to be scrutinized," Carter said. "They all need to go up on the table so everybody can see all the choices we have."

Service Needs and Requirements Define Program Approaches
Each of the three military servics has adapted and evolved unique contracting approaches to support its own programs and hardware sustainment needs. The US Army: R23G. The US Navy: SeaPort-E. The US Air Force: F2AST. We will explore each of their initiatives and develop an understanding of their processes, who are the key players, and how are requirements developed/addressed by industry through Statements of Work and IDIQ contracts. A lot of material will be covered here, "... so fasten your seatbelts and put your tray tables up"--were going to take off quickly.

US ARMY: Rapid Response Third Generation (R23G) R23G Overview
The R2-3G Contract vehicle from the US Army/CECOM is a multiple award task order contract that consists of eighteen separate Indefinite Delivery/Indefinite Quantity (IDIQ) contracts. Requirements for a broad range of services are competed as Task Orders against these eighteen contracts and awards are designed to be executed within 45 days from solicitation. The aggregate ceiling value of the 18 prime contracts over a five-year period of performance, which began in July 2010, is $16.4 B. The CECOM R2 Project Office is chartered by the Deputy to the Commanding General and the proponent and manager of the R2-3G Contract vehicle is Dwayne Terry. The R2-3G Contract can be used by any government agency that uses federal funds. Customers include Department of State, NASA, DoD and Commerce. The R2 program offers federal managers an efficient and effective means of acquiring critical, near obsolete items, thus sustaining crucial weapon systems, mitigating system downtime and serving the immediate needs of the warfighters and peacekeepers.

The R2 process consists of a self-contained contractual environment of IDIQ contracts, whereby service requirements can be competed and quickly placed via Task Orders through the use of the R2 Integrated Data Environment (IDE) and the unique, specialized support of the R2 Project Office. The R2 program has a broad Performance Work Statement (PWS) which establishes the requirements for contractor-provided services to include, technology insertion, system integration/installation, fabrication/prototyping, testing/certification, studies/analysis, logistics support, training and engineering support, including re-engineering and reverse engineering, for a range of equipment and anti-terrorism technology. These services support all new and existing platforms, systems, subsystems and items.

USAF: Fast Flexible Agile Acquisition and Sustainment (F2AST) Overview
The 10-year, $6.9 B F2AST program is the follow-on USAF acquisition tool to the Fast Flexible Acquisition and Sustainment Tool (FAST) that began in 2001 and expired in 2008. Proponents say F2AST is an improvement over its predecessor, but some question whether it's faster than the original. To insiders, F2AST is a multiple-award contract tool for development, maintenance, modification, spares and repairs on dozens of Air Force aircraft, support systems and components. To the layperson, it is an efficient approach to awarding MRO contracts. The second-generation program combines the existing FAST program and the Integrated Weapons Systems Support Program into one indefinite delivery/indefinite quantity (IDIQ)-based contract. IDIQ-based contracts have been around for 10 years, but the F2AST approach adds a low-level research and development component to the acquisition toolbox. And the number of selected contractors able to compete under the F2AST has increased to 12, from the initial six chosen under FAST.

F2AST - The Suppliers Viewpoint
The vendors seem pleased with F2AST as the advantage of this (methodology) is you don't have to repeat significant amounts of the groundwork required under the original contract, as reported by Lockheed Martin in the trade press. It essentially makes the government's solicitation for a task order less complicated and time consuming than what would be required for a full acquisition. The time saved is noteworthy. Where the government used to spend weeks or months, it is down to days now as a result of F2AST and the teaming arrangements in place, as reported by Boeing Integrated Defense Systems in Fort Walton Beach, FL, in AW&ST. It used to take Boeing 50 days or longer to receive, respond and finalize a contract. With F2AST, Boeing is targeting 14 days. If one were to put a dollar amount to the savings, it would be quite large. Boeing recently received its first award under F2AST, a $19 M Air Force Special Operations Command contract for AC-130U gunship sustainment, maintenance, and flight and simulation software. Boeing has a 10-year track record sustaining the AC-130. This was a sole source contract not open to the other 11 contractors. Its work on the AC-130U gunships is expected to take place at several US facilities, much of it at Warner Robins. FAST is an acquisition tool, not a maintenance tool. Yet, the maintenance side benefits because it gets work faster. A number of the 12 companies chosen to compete for tasks either have MRO divisions or outside MRO partners. Of Boeing's 12 divisions, for example, five have MRO capabilities; of its 43 suppliers, 11 are MROs. And Boeing has access to 6.3 million square feet of hangar space in 20 states for MRO-related services.

F2AST Data
Examples of how long contract awards at Warner Robins took under FAST: Iraq Air Force C-130E sustainment contract, $20 M, 42 days; C-130 unscheduled depot level maintenance requirement, $43 M, 20 days; Huey II modification and refurbishment of AF UH-1H, $79 M, 19 days; MH-53 ballistic protection system, $2.1 M, 12 days; and the AC-130H laser target designator replacement program, $18 M, 62 days. As one might expect, FAST was created because "it took too long to get the job done" under the old full acquisition process. The Air Force needed a responsive contract to facilitate the maintenance or redesign of aircraft and systems. With wars in Iraq and Afghanistan, the need for FAST was obvious. But there were other reasons. Before FAST, much of the work at Warner Robins was sent to other DoD agencies. In some instances, the Air Force sent equipment and money to the Army, which placed that work against its multiple award contracts. To add insult to injury, the Army added a 1 to 3 percent surcharge. According to USAF officials, "Once we gave the money to another agency, the oversight the Air Force had was diminished." So the Air Force created FAST. Under the initial program, contracts were awarded between 2001 and 2008. By 2006, program officials determined that a second generation was needed, and planning for F2AST began. It excised elements deemed ineffective under the initial program, while adding other essentials to make F2AST better.

US NAVY: SeaPort-E
The Naval Sea Systems Command (NAVSEA) procures over a half billion dollars of Professional Support Services (PSS) each year for its headquarters' Directorates, Program Executive Offices (PEOs), and field activities. In order to meet the Navy strategic sourcing wedge, NAVSEA committed to $250 M in savings by procuring PSS more efficiently. Coupled with this need, the Office of the Secretary of Defense (OSD) directed that 50 percent of all support services be procured using performance-based contracting by the year 2005. Furthermore, NAVSEA had more than 450 separate PSS contracts supporting its requirements. Most of these efforts were not integrated from a Command perspective, utilized a multitude of different processes in which to procure the services, and did not leverage corporate buying habits or e-business to facilitate the processes. In addition, the services were predominantly procured via level of effort vice performance-based terms.

Why the need for Seaport-E
NAVSEA established the SeaPort Office to meet the NAVSEA strategic sourcing wedge and the OSD performance-based contracting directive while bringing order to NAVSEA PSS acquisitions. The vision was to provide a faster, better, and cheaper means in which to procure PSS. The strategy developed in October 2000 involved a product line solution containing three components:
(1) Develop and award Multiple Award IDIQ contracts (MACs) using innovative acquisition techniques to achieve the NAVSEA strategic wedge, to conform to the OSD performance-based contracting directive, and to bring order to PSS acquisitions.
(2) Exploit existing e-business opportunities and create an automated, intuitive, web-based, e-procurement portal to provide services quickly and easily in an "amazon.com" environment.
(3) Create a website continually refreshing customers and suppliers with new information, opportunities, training, metrics and useful links to associate sites.

An important tactic used to implement this vision and obtain "buy-in" was to involve senior leadership and working level representatives in the design and implementation of the MACs and the portal through multiple "Integrated Product Teams (IPTs)". These IPTs continuously and aggressively communicated the vision, strategy and status to leadership at all working levels.

On April 2, 2001, in an unprecedented period of less than six months, SeaPort became a reality when all three of these initiatives converged. The MACs were awarded to 21 exceptionally well qualified industry partners, the e-business portal became operational, and its front door website, www.seaport.navy.mil, was launched. These components combined to provide a faster, better and cheaper process to acquire PSS within the Command. Today, there are thousands of SeaPort-E contractors.

Using Seaport-E
SeaPort-E is the Navy's electronic platform for acquiring support services in 22 functional areas, including Engineering, Financial Management, and Program Management. Seaport-E represents more than $41.3 B for IDIQ contracts. Contracts The Navy Systems Commands (NAVSEA, NAVAIR, SPAWAR, NAVFAC, and NAVSUP), the Office of Naval Research, the US Marine Corps, and the Defense Threat Reduction Agency (DTRA) compete their service requirements among 1800+ SeaPort-E IDIQ multiple award contract holders. The SeaPort-E portal provides a standardized, efficient means of soliciting offers from among the diverse population of large and small businesses and their approved team members. All task orders are competitively solicited, awarded and managed using the SeaPort-E platform. The SeaPort-E approach to acquiring services provides opportunity that fuels the nation’s engine of job growth because nearly 85 percent of its contract–holders are small businesses. Simply stated, SeaPort-E provides an efficient and effective means of contracting for professional support services and enhancing small business participation. The Navy conducts rolling admissions to allow new industry partners the opportunity to participate.

The Potential Business Opportunity for Microwave Companies
It is clear that microwave companies need to take note of this activity and plan to engage and become a player in this market space for contracted support and sustainment services. One should try to become a partner and technology/product supplier to support some of these programs. It is, however, a different channel and approach to market needs than what most microwave companies are used to -- selling technology/product solution into a customer's problem set. Most of these requirements for hardware upgrades, installation and repair will never reach the open market for full and open competition in Fed Biz Ops. We have seen that these program SOWS tend to be broadly based for IDIQ type contacts. And typically hardware needs are usually defined “post IDIQ award” as part of the analysis and support activities desired by a Service PM Office. So it will take a realignment of our thinking -- our company’s sales process -- to adapt to this new channel to market. However, the rewards of participating can be high, as one can be a significant supplier to these OEMs in a broad range of areas. In addition, if companies do not play and stay on the sidelines, they stand the risk of being left behind to their competition who will likely focus on this market space.

Recent Articles by Jim Fallon President and CEO, Fallon & Associates LLC

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