The Department of Defense can make smarter and faster acquisition decisions if it uses people more thoughtfully.
Instead of involving top-level leaders at every decision point in the acquisition process, senior leaders should determine the organization’s enterprise-level goals, then communicate them to empowered and capable leaders who can decide how best to meet those goals. The Section 809 Panel’s portfolio management framework shows how this can be done.
The 2015 GAO Report on Portfolio Management notes that portfolio management has long been used by leading commercial companies to ensure their investments are optimized to meet customer needs within available resources. This version of portfolio management “focuses on products collectively at an enterprise level and involves evaluating, selecting, prioritizing, and allocating limited resources to projects that best accomplish strategic or organization goals.” The GAO expressed concerns that DoD’s approach to portfolio management “could reinforce the stove-piped governance structure that we found to be an impediment to integrated portfolio management.”
The Section 809 Panel recommendations go further than the GAO’s, adding better alignment between the requirements, programming and budgeting, and its acquisition systems. In the panel’s framework, portfolios employ modeling and data analysis, along with critical questions about portfolio value, to develop strategic plans and roadmaps. Portfolio success also depends on an empowered portfolio management team with representatives from requirements, programming/budgeting, and acquisition.
In the current environment, a Major Defense Acquisition Program (MDAP) navigates three insufficiently (or poorly) coordinated systems to develop requirements, secure funding, and plan acquisition. Each of these three major DoD decision systems have processes with separate decision makers and timelines, that make it difficult to deliver the right capabilities in time to meet needs and within budget constraints.
In this system, program executive officers (PEOs) and program managers (PMs) have little ability to make changes that would cut costs or improve interoperability across programs, even though they are the most knowledgeable about these programs. At the same time, enterprise-level leaders often lack adequate information to optimize strategic decisions because the operational situation is constantly changing.
This stove-piped process, designed around MDAPs and applied in modified format to smaller programs and many other acquisitions, cannot keep pace with the rate of technology change. Acquisition of defense IT systems, for instance, frequently follows the same structure of generating requirements years before capabilities are ever delivered to end users, with predictably poor results. In the private sector, by contrast, users, acquirers, developers, and other stakeholders work together iteratively to define and modify what they need.
Shifting the acquisition system from managing programs to managing portfolios of systems aligned with enterprise-level capabilities is necessary in the current landscape of quickly changing threats and rapidly evolving technologies. It provides a better view of the department’s capabilities. In 2019, only 40 percent of procurement funds were allocated to major programs, defined by dollar thresholds for development or production. The other 60 percent of procurement funds are allocated to smaller programs and systems whose status has shifted. The F-16, for instance, is not classified as an MDAP, so it is not tracked in the centralized system of reporting and program oversight as a major capability. Some traditional defense contractors, in fact, take pride in providing DoD with capabilities that can be integrated into existing or future platforms, rather than supplying the major platforms themselves.
To move DoD into the future, the panel recommends creating two levels of coordinated portfolios: an Enterprise Capability Portfolio (ECP) that maintains a strategic view of capabilities across DoD, and an execution-level portfolio that applies detailed defense system knowledge of requirements, technology, development, production, and sustainment to manage a portfolio of assets that support capability needs within allocated funding. Requirements and budgeting would be coordinated across both levels of portfolios, reducing problems such as inadequate/misaligned funding or redundant capabilities.
Altering focus from MDAPs to logical portfolios of systems would enable coordinated assessments, trade-offs, and total lifecycle management to make the best use of DoD’s money and combat capability. The capability of tactical aircraft, for instance, could be managed as a portfolio of systems: the F-16, F-15, F-22 and F-35. Other capability examples could include nuclear command and control, undersea warfare, and armored ground combat.
At the execution level, PEOs would be empowered to become portfolio acquisition executives (PAEs) and given expanded authorities to make decisions about acquisition, budget, and requirements, while working in a more decentralized manner with the aligned decision makers for requirements and budget. PAEs would manage their portfolio of related systems with a long-term view from initiation through sustainment to disposal. Families of capabilities would fall under fewer budget line items or program elements, allowing PAEs with their aligned requirements and budget team to adjust requirements or move funding where it’s needed to best support the enterprise mission.
At the enterprise level, the ECP would align strategic concepts and articulate truly joint capabilities. These needs would be allocated resources and then assigned to military services or defense agencies. A PAE would then manage the systems that produce the capabilities. The effectiveness of these systems will be measured and shared with the ECP, providing a holistic view of the entire department’s capabilities that can adapt at the speed of relevance to threats and technology opportunities.
Requirements would be developed at both the enterprise and execution level. At the enterprise level, the Joint Chiefs of Staff and the military service chiefs would develop integrated capstone requirements and threat assessments. They would assign those enterprise level requirements to execution level PAEs who would determine how best to meet them. In making these determinations and managing both portfolio and program-level requirements, the PAE would work closely with warfighters to add real-time knowledge of current operations and threats.
This insight from the PAE and their operational representatives will be conveyed back up to the enterprise level in an ongoing feedback loop. Existing programs would be balanced against enterprise capability needs and inform future decisions about requirements, resources, and acquisition. For instance, if a PAE chose to invest in modernizing an existing IT system instead of developing a new one, did that decision meet enterprise-level requirements and satisfy end users?
The defense acquisition system must move away from a business model defined by centralized decision making and overly prescriptive management of major program to one that continuously delivers timely, innovative and supportable weapons, IT, and business systems to the warfighter. The 809 Panel’s portfolio management framework gives leaders at all levels the flexibility and authority to make that happen. The objective of defense acquisition, and all its participants, should be to “Deliver Better Capability, Faster.”
Ross Thompson, formerly principal military deputy to the assistant secretary of the Army for acquisition, logistics and technology, is a commissioner on the Section 809 Panel.
Michelle V. J. Johnson is a senior research analyst and communications manager at the Section 809 Panel.