DTIC ADA487478: Acquisition Reform -- Inside the Silver Bullet. A Comparative Analysis -- JDAM versus F-22

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Acquisition Review Quarterly — Fall 2002
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Joint Direct Attack Munition
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Acquisition Reform - Inside the Silver Bullet. A Comparative Analysis -
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JDAM Versus F-22
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Aeronautical Systems Center,Wright Patterson AFB,OH,45433 REPORT NUMBER
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Acquisition Review Quarterly, Fall 2002
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Acquisition RLeEfSoSrmO N—S ILnEsiAdRe NthEeD Silver Bullet
ACQUISITION REFORM —
INSIDE THE SILVER BULLET
A COMPARATIVE ANALYSIS —
JDAM VERSUS F-22
Dominique Myers
Over the past quarter century, numerous acquisition reform initiatives have
been implemented in an effort to extract greater effectiveness and efficiency
from the federal acquisition system. Interestingly, while such initiatives have
made a positive difference, uniformly positive results have not been achieved
across the board. And in some cases, the relentless search for a “silver bullet”
has detracted from the real work that successful change entails. Acquisition
success stories abound, leading many to believe that acquisition reform is the
key to program success. This paper compares the acquisition reform
experiences of two Air Force programs to assess the validity of this assumption.
I
s it reasonable to expect acquisition policymakers, politicians, and industry
reform initiatives, proven successful interests. Yet, although it is recognized that
on one program, to be equally effec- the nature of a program and the environ-
tive on another? Or, are program outcomes ment within which it is executed contrib-
dependent not only on the methods em- utes to program outcomes, the emphasis
ployed but also on the nature of the pro- over the past quarter century has been to
gram and/or the environment within which search for a process-oriented silver bul-
it is executed? Historically, program out- let, i.e., acquisition reform initiatives that
comes, particularly in the systems acqui- could, in and of themselves, eliminate real
sition arena, have been heavily influenced or perceived inefficiencies in the federal
not only by the construct and management acquisition process.
of that particular program, but also by de- Recent U. S. Air Force (USAF) experi-
cisions arising from the confluence of ence indicates that while such initiatives
broader stakeholder, i.e., warfighters, make a positive difference, uniformly
313
Acquisition Review Quarterly — Fall 2002
positive results cannot be expected across not to exceed $40,000 (FY91$) (Ingols,
the board. To illustrate, this article com- 1998).
pares two very different, high profile, Air The program manager recognized that
Force programs: The Joint Direct Attack even though JDAM development was not
Munitions (JDAM) program, under cost, technologically challenging, keeping the
under schedule, wartime top performer, production kit price below $40,000 was
acquisition streamlined to the maximum unlikely to occur absent radical change.
extent; and the F-22 program, over cost, He, therefore, sought and obtained autho-
over schedule, performance still in some rization to conduct business in a more
doubt, acquisition streamlined to the commercial-like manner (Ingols, 1998).
extent feasible. The award of 18-month contracts for
Engineering and Manufacturing Develop-
ment (EMD) Phase 1 to Martin Marietta
JDAM
and McDonnell Douglas on April 11, 1994
was unaffected. Coincidentally, 11 days
JDAM provides the U.S. Air Force, later, the Office of the Secretary of
U.S. Navy (USN), and allied forces with Defense designated JDAM one of five
a precision aerial delivery capability for Congressionally-mandated Defense
existing warheads. This improved capa- Acquisition Pilot Programs (DAPP).
bility is provided through a strap-on JDAM’s acquisition strategy called for
inertial guidance kit, which receives guid- a two-phased EMD approach followed by
ance updates from the Global Positioning Low Rate Initial Production (LRIP) and
System (GPS). then Full Rate Production (FRP). EMD-
Following Desert Storm, the Air Force 1, focused on reducing manufacturing
and Navy each initiated programs to de- risks and affordability, was a traditional
velop this capability. These efforts were contract, competitively awarded but later
subsequently merged in restructured to take advantage of oppor-
1991 to form the JDAM tunities afforded under the Department of
“JDAM provides
System Program Office Defense’s (DoD) DAPP. EMD-2, an
the U.S. Air Force,
(SPO), with the Air option under the EMD-1 contract, focused
U.S. Navy (USN),
Force designated the on developmental testing, preparations for
and allied forces
with a precision lead agency. The JDAM production, and initial operational testing.
aerial delivery SPO initially functioned A competitive down-selection was held
capability for in a traditional manner, and award made under the terms of
existing war- aligned within a func- McDonnell Douglas’ EMD-1 contract.
heads.” tional organizational Subsequent production contracts were
structure, utilizing stan- awarded on a single-source basis under the
dard acquisition procedures. Although auspices of JDAM’s DAPP authority (G.
initial unit cost estimates had been as high Williams, interview, March 2002).
as $68,000, by early 1993 it had been In 1994, there was little precedent for
determined that the average unit procure- doing business in a commercial-like man-
ment price for the first 40,000 units was ner. Therefore, to determine how best to
314
Acquisition Reform — Inside the Silver Bullet
acquire a military-unique system in a com- – Candid feedback provided to each
mercial-like manner, the JDAM SPO competitor after each of three
benchmarked and then implemented the evaluation periods.
best practices from industry (G. Williams,
interview, March 2002). – Emphasis on price versus cost;
award based, in large part, on
(cid:127) Performance-based requirements; no Average.
mandatory specifications and stan-
dards. – Unit Production Price.
(cid:127) Limited number of key performance (cid:127) Opportunity for a long-term commit-
parameters, one of which was low cost. ment.
(cid:127) Emphasis on price/performance trade- The SPO’s unrelenting focus on
offs (Cost as an Independent Variable) affordability coupled with the opportunity
to use commercial parts and processes
(cid:127) Streamlined oversight (contractor and enabled both competing contractors to
program office). “submit proposals that
were less than half the
“In 1994,
(cid:127) Open and trusting relationships be- original cost target of
there was little
tween the program office and industry $40,000” per kit (Ingols,
precedent for
counterparts; multiple integrated Gov- 1998). Affordability was
doing business in
ernment/contractor teams. addressed through the
a commercial-like
inclusion of an Average manner.”
(cid:127) Concise (two page) Statement of Unit Procurement Price
Objectives. (AUPP) for the first
40,000 production units and Production
(cid:127) Lean manufacturing. Price Commitment Curves (PPCC) for
future production lots. Although price
(cid:127) Configuration control maintained by commitments for production Lots 6 and
contractor. beyond were not contractually binding, the
contractor was motivated to honor them.
(cid:127) Extensive reliance on commercial By the end of EMD-1, each of the com-
products. peting contractors had conducted a Criti-
cal Design Review (CDR), an initial Pro-
(cid:127) Commercial-like lifetime warranty duction Readiness Review, and a techni-
(20-year shelf life, 5-year service life). cal demonstration to verify physical fit and
system functionality. Initial product design
(cid:127) Source selection award criteria based was essentially complete (90 percent of
on past performance and best value. the drawings were final, while the remain-
ing 10 percent were mature drafts). Source
– Competitive down selection from Selection criteria for EMD-2 addressed
EMD-1 to EMD-2 .
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Acquisition Review Quarterly — Fall 2002
affordability and contractor performance, authority to implement provisions of the
of equal importance, followed by system Federal Acquisition Streamlining Act
performance. The Air Force awarded (FASA) of 1994 and granted authority to
McDonnell Douglas the option for EMD- use commercial item exemptions for non-
2 plus options for production Lots 1 and 2 commercial items. The JDAM SPO also
on October 11, 1995. The PPCC success- benefited from expedited deviation author-
fully motivated the contractor to achieve ity from the Federal Acquisition Regula-
the Average Unit Procurement Price for tion (FAR)/Defense Federal Acquisition
Lots 1–5 and there is no evidence that this Regulation Supplement (DFARS) and
incentive will not continue to motivate de- DoD 5000-Series regulations. This relief
sired behaviors (G. Williams, personal allowed the JDAM team to renegotiate
communications, March 2002). EMD-1 to make it more “commercial-
However, transition from a competitive like” and to streamline the milestone
to non-competitive environment, while not review process and reporting procedures.
substantively altering the Integrated Prod- In all, the program received 28 waivers to
uct Team (IPT) structure, did necessarily FAR, 27 waivers to DFARS, and almost a
engender a more traditional relationship blanket waiver to the DoD 5000-series
between the Government and its industry regulations (G. Williams, personal com-
partner as each sought to effectively man- munications, March 2002).
age the JDAM program The buy-to-budget policy, approved in
(Ingols, 1998). The de- the Milestone II Acquisition Decision
“Rigid strategic
cision to maintain the Memorandum, effectively fenced JDAM
planning methods
IPT structure proved for- procurement budgets, allowing the pro-
have proven
tuitous when in late gram manager to funnel acquisition re-
inadequate for
1997, the developmental form savings into increased annual pro-
the high complex-
and operational test pro- curements. While procurement budgets
ity and dynamics
of large public grams and the produc- have not remained fixed, the program has
acquisition tion program all had to enjoyed significant support and stability
projects.” be restructured. Flight in the DoD, USAF, and USN budget pro-
instability problems cess. As a result of not only the buy-to-
with the Mk-83 and BLU-109 JDAM kits budget policy but also the tremendous
delayed production of BLU-109 by almost success of JDAM in combat, program
a year. Also part of the production restruc- stability has been maintained and pro-
turing was a decision to continue the de- duction quantities have been substantially
velopment of the fin-locking mechanism increased (G. Williams, personal commu-
needed to qualify the Mk-84 for the F/A- nications, March 2002).
18 inboard pylons (G. Williams, personal Innovative, commercial-like manage-
communications, March 2002). Issues ment at a critical stage coupled with the
such as these, however, are to be expected non-developmental nature of JDAM en-
as JDAM continues to be adapted for use abled a 33 percent reduction of the esti-
with other munitions and platforms. mated development cycle, a 42 percent re-
As a Defense Acquisition Pilot Pro- duction in the estimated development cost,
gram, JDAM was provided legislative and more than a 50 percent reduction in
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Acquisition Reform — Inside the Silver Bullet
the average unit production price (Ingols, attributable to these changes as well as
1998). More important, the JDAM pro- those resulting from developmental de-
gram produced an end product that met lays, the F-22 team implemented a num-
warfighter needs, on time, at an afford- ber of cost reduction initiatives. Report-
able cost. During Operation Allied Force, ing and oversight requirements were also
March 29 through June 9, 1999, B-2s substantively increased (Druyun, 2001).
launched 651 JDAMs with 96 percent re- Yet, acquisition reform was embedded
liability and hit 87 percent of intended tar- in this program almost from the outset.
gets, at a cost far below that of any other At about the same time that the Air Force
precision-guided munitions in the U.S. was selecting two contractors to build
inventory (Ingols, 1998). competing prototypes, the Packard Com-
mission was making its recommendations.
Among these were that major weapons
F-22
system acquisitions should utilize perfor-
mance-based specifications and competi-
The F-22, originally identified as the tive prototype development and that Gov-
Advanced Tactical Fighter (ATF), is the ernment and industry partners should
Air Force’s next generation air superior- share research and development costs.
ity fighter. The F-22’s design blends low The ATF program director, charged
observability with advanced avionics, a with implementing these
highly maneuverable airframe, and a new recommendations, reor-
“In marshalling
engine capable of sustained supersonic ganized the F-22 SPO
resources, risk
flight without afterburners. Other key el- into government/con-
management
ements include reliability, maintainability, tractor IPTs in order to
aggregates risks
and supportability requirements that re- enhance communication
to assess their
duce life cycle cost, enhance sustainment, and cooperation and re-
impacts and
and assure operational capability. duce program risk. The thereby estimate
The F-22 program is managed within program office then slack resource
the traditional framework of DoD’s acqui- worked with the two requirements.”
sition management system and has en- competing contractors to
joyed neither program stability nor lim- integrate the Packard Commission’s rec-
ited oversight. In 1985, the Air Force ommendations as well as a few innova-
planned to procure 750 aircraft at a rate tive ideas of their own, e.g., allowing com-
of 72 aircraft per year between 1992 and petitors to design their own prototype test
2005. By 1991, changes in the post-Cold programs into the ATF Demonstration/
War National Security environment Validation (Dem/Val) Program.
prompted a reduction in quantity to 648, The results of these efforts were out-
a reduction in the production rate from 72 standing. Lockheed’s YF-22 and
to 48 per year, and a four-year delay in Northrop’s YF-23 were flight tested in late
production. Following the award of EMD, 1990, within four years of the award of
these trends have continued, prompting their Dem/Val contracts, as compared to
five program restructures. To address bur- the Air Force’s last stealthy aircraft pro-
geoning costs and affordability concerns gram, the B-2, which took eight years
317
Acquisition Review Quarterly — Fall 2002
from design to flight. The taxpayer cost desired F-22 AUPP and an Affordability
for the ATF program was $3.9 billion ver- Improvement Program (AIP) for follow-
sus $33.2 billion for the B-2. Granted, on production contracts. Other Production
these are not absolute comparisons. The Cost Reduction Plans (PCRPs) included:
ATF benefited not only from taxpayer
funding but also from industry invest- (cid:127) Producibility improvement projects.
ments totaling approximately $2 billion,
it also profited from (cid:127) Lean manufacturing.
what the Air Force had
“Although cost
learned during earlier (cid:127) Leveraged buying strategies to lower
and affordability
stealth programs, and cost of raw materials and purchased
were important
the ATF cost cited above parts.
from the outset,
does not include produc-
they became
tion equipment that is (cid:127) Production support tailoring.
critical priorities
following the embedded in the B-2
award of the cost. Even so, it is clear (cid:127) Performance based contracting.
EMD contract.” that the ATF program
achieved at least an or- (cid:127) Multi-year procurement.
der of magnitude im-
provement over the experience of the B-2 (cid:127) Rate savings due to award of the Joint
(Easterbrook, 1991). Strike Fighter contract.
However, this success was short-lived.
Following the August 1991 award of the Although significant challenges re-
EMD contract to Lockheed Martin, fund- main, progress is being made as evidenced
ing shortfalls, technical difficulties, and by the passage of yet another major mile-
threat changes necessitated five EMD stone in August 2001, when the Defense
program restructures, substantively in- Acquisition Board unanimously approved
creasing estimated acquisition costs, de- the F-22’s entry into LRIP.
laying Initial Operating Capability (IOC),
and further reducing the number of
production aircraft. COMPARATIVE RESULTS
Although cost and affordability were
important from the outset, they became JDAM is clearly a success story. The
critical priorities following the award of question is, to what degree are its results
the EMD contract. In June 1996, a Joint replicable. No doubt, the program ben-
Estimating Team (JET) developed the efited from visionary leadership, effective
most probable F-22 production cost and management, sustained commitment to
identified initiatives to reduce that cost. affordability, a competitive environment,
Leveraging JET recommendations, the Air regulatory relief, limited oversight, and a
Force and contractor teams initiated a relatively stable budget environment. But
comprehensive cost reduction program in it also benefited from other opportunities.
February 1997. It included a Target Price While JDAM is a military-unique sys-
Curve (TPC) for LRIP that achieves the tem, the technologies required to build it
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Acquisition Reform — Inside the Silver Bullet
were, to a large extent, both mature and goal, competition beyond Dem/Val is gen-
commercially available. These include the erally not feasible for major weapons sys-
inertial measurement unit, GPS receiver, tems. Even on JDAM, it was recognized
mission computer, and control actuators, that it was too costly a process to main-
which together account for approximately tain beyond EMD-1 (Lovell, 2001).
85 percent of the system hardware cost Program stability and management
(Joint Direct Attack Munitions [JDAM], oversight also played significant roles in
1997). the effective and efficient execution of
Additionally, many of the other com- these programs. JDAM benefited from
ponents (wings, wiring harnesses, and fairly stable budget authority and mini-
metal structures) rely on manufacturing mal program oversight. F-22 execution,
processes that are amenable to manufac- on the other hand, was and continues to
ture using commercial processes and dual- be greatly hampered by budget instability
use processing equipment (JDAM, 1997). exacerbated by requirements changes and
While a number of efficiencies were real- developmental delays, prompting even
ized, the most significant was the price greater levels of pro-
decrease resulting from the reduction in gram scrutiny. It should
“JDAM benefited
size and cost of the GPS receiver. be noted, however, that
from fairly stable
McDonnell Douglas was also motivated. as the USAF’s largest
budget authority
Having recently lost a major competition acquisition program, the
and minimal
for sole production of the Tomahawk mis- F-22 program, under the program
sile, they realized that if they wanted to best of circumstances, oversight.”
remain in the precision-guided munitions could not have avoided
business, they had to win JDAM (Ingols, much of the intense scrutiny under which
1998). it has operated since its inception. And as
As with the JDAM program, acquisi- threats began to change, developmental
tion reform initiatives implemented by the challenges arose, and total ownership
F-22 program during the competitive costs continued to mount, it was unlikely
phase garnered extraordinary results while to be overlooked as a prime source of
those applied in a noncompetitive envi- funding for other “must-pay” bills.
ronment proved to be less effective. This While JDAM was well positioned to
result should not be surprising, given that take advantage of the opportunity to do
competition has long been recognized as business in a commercial-like manner, the
one of the market’s most effective cost F-22 was only marginally afforded this
containment strategies. The fact that com- opportunity. Although these programs
petition could be sustained through EMD- span the spectrum of typical military
1 for JDAM proved fortuitous in reining development efforts, neither would have
in cost through the commitment to Aver- met the criteria for a typical commercial
age Unit Procurement Prices and Produc- development program. Commercial prod-
tion Price Commitment Curves under uct launches generally require a match
competitive conditions. The F-22 was not between customer requirements and avail-
afforded this opportunity — for while sus- able technology; evidence that the design
tainment of competition is a worthwhile is mature prior to commitment; and proof
319
Acquisition Review Quarterly — Fall 2002
that the product is producible within cost, CONCLUSIONS
schedule, and quality targets prior to pro-
duction. This increased knowledge, avail- While both the JDAM SPO and the F-
able to industry decision makers at criti- 22 SPO sought to do business in a more
cal junctures, mitigates the potential for commercial-like manner, it is not clear that
cost escalation, requirements changes, and the results of such efforts can or should
schedule delays (Schinasi, 2000). be expected to be equally effective from
Militarily unique development pro- one program to another. Although acqui-
grams are also riskier than commercial sition reform initiatives enhanced program
programs because, in addition to pushing outcomes in both cases, they were not the
the state of technology, they require tight principal determinant of program out-
cost and schedule estimates up front. This comes nor did the application of specific
was certainly true for the acquisition initiatives necessarily produce
F-22 program, depen- like outcomes. JDAM’s success is largely
“Militarily unique dent on a number of sig- attributed to the program’s effective imple-
development nificant technological mentation of acquisition reform initiatives,
programs are advances in integrated yet the facts indicate that while these
also riskier than avionics, sustained su- initiatives enhanced program outcomes,
commercial pro-
personic flight, and low there were many other contributing fac-
grams because,
observability. But it was tors, not the least of which was the pro-
in addition to
less so for the JDAM gram’s ability to sustain competition
pushing the state
of technology, program due to its de- through EMD-1.
they require tight pendence upon a combi- Nor did application of like initiatives
cost and schedule nation of commercial necessarily yield similar results, e.g.,
estimates up and non-developmental JDAM’s inclusion of an AUPP under com-
front.” rather than emerging petitive conditions proved much more ef-
technologies. fective than did the F-22’s inclusion of a
Perhaps too, we ex- similar provision under noncompetitive
pect too much of complex military devel- conditions. Rather, program outcomes
opment programs. For it is instructive to were dependent upon not only the con-
note that while the F-22, the USAF’s next struct and management of the program,
generation air superiority fighter, took 14 but also the confluence of broader stake-
years to move from concept development holder, i.e., warfighters, policymakers,
to first flight, commercial development of politicians, and industry interests.
the Boeing 767, an aircraft built upon Acquisition reform initiatives, in and of
proven rather than emerging technologies, themselves, however well conceived and
consumed, not four as originally pro- intentioned, cannot be expected to rem-
jected, but 12 years (from concept devel- edy real and perceived inefficiencies in the
opment to first flight) (The Boeing 767, federal acquisition process, in part because
1991). it is but a subset of a much larger, highly
320