Acquisition Planning and Management, and the Federal Budget Process

2. Acquisition Planning and Management, and the Federal Budget Process Breakout Session #601 Names: Ginny Wydler, Senior Associate, Booz Allen Hamilton Paul Tetrault, Senior Associate, Booz Allen Hamilton Date: July 20, 2010 Time: 4:00 – 5:15 pm 1

3. Agenda Acquisition Planning Developing agency needs Acquisition Strategies Programming, Planning, Budgeting & Execution Process PPBE Timeline and Lifecycle Map Alignment with the Acquisition Process Case Study – IT System Case Study – IT Service Summary

4. Three Major Management Systems Planning, Programming, Budgeting and Execution Effective Interaction is Essential for Success CapabilitiesDefinition and Requirements Development Systems Acquisition

5. System Enterprise View Strategic Requirements Planning Process (SRPP) Key component of Planning Phase Identifies strategic requirements and capabilities Links Strategic Plan and programs Output is the Integrated Planning Guidance (IPG) Programming and Budgeting Develop 5-year Future Year Plan (FYP) Ensures high priority programs are funded within guidance Programs prioritized and balanced Acquisition Management Process Key process in the Execution Phase of PPBE Goal is to effectively provide capabilities to users which meet the strategic requirements of the SRPP and the constraints of the P&B Process Provides a framework of efficient review and approval of acquisitions

6. What is Acquisition? The Federal Acquisition Regulation (FAR 2.101) defines acquisition as follows: “Acquisition means the acquiring by contract with appropriated funds of supplies or services (including construction) by and for the use of the Federal Governmentthrough purchase or lease, whether the supplies or services are already in existence or must be created, developed, demonstrated, and evaluated. Acquisition begins at the point when agency needs are established and includes the description of requirements to satisfy agency needs, solicitation and selection of sources, award of contracts, contract financing, contract performance, contract administration, and those technical and management functions directly related to the process of fulfilling agency needs by contract.”

7. Acquisition Process Governed by Laws, Regulations, Policies, Guidance Structured into discrete phases separated by major decision points (Acquisition Decision Events (ADE). Focuses on Key activities Process forms the basis for comprehensive management and informed decision-making Phases and decision points tailored to meet the phased budget plans for the work/program schedule

8. An integrated life cycle

9. Acquisition Process • PM initiates the process • Conducts acquisition planning • Describes agency needs in writing • Obtains program and budget approval • Submits procurement request to contracting officer • Contracting Officer awards and administers the contract • Develop and issue RFP/RFQ • Review/evaluate proposals – recommends selection • Awards contract/order • Appoints COTR

10. Developing Agency Needs • Acquisition Planning • Acquisition Plan – written plan reflecting the specific actions necessary to execute the approved strategy • Formal individual acquisition plan >$XXX • Describe/develop requirements • Statement of Work (SOW) – Details work to be performed • Statement of Objectives (SOO) – Performance-based broad objectives of the product or service • Performance Work Statement (PWS) – Specifies outcomes not how to do the work • Evaluation Factors for competitive actions (Section M) • Market Research – collecting and analyzing information about capabilities

11. Methods of Acquisitions Speed and Ease

12. Contract Types • Types of Contracts • Firm fixed price, Fixed quantity at a set unit price • Labor hour, Time and Material Provides for a mix of labor at set rates up to a maximum dollar amount • Cost Plus Contractor bills for all costs and receives a fee that is set at time of award; costs could be more or less

13. Solicitation Types Competitive – Full and Open Competition Competitive Government-wide (GWAC) Competitive GSA Schedule Sole Source/Limited Competition Federally Funded Research and Development Center

14. Contract Administration (Post Award) A Federal employee must monitor contractor performance May require a team of people, sub COTRs and agents Inspection and testing requirements Government Furnished Equipment Invoice review and approval Prompt pay act Closeout

15. Agenda Acquisition Planning Developing agency needs Acquisition Strategies Programming, Planning, Budgeting & Execution Process PPBE Timeline and Lifecycle Map Alignment with the Acquisition Process Case Study – IT System Case Study – IT Service Summary 14

16. The Budget Process Budgeting is about prioritizing and planning resources to meet the mission without redundancy and gaps. Influenced by Threats, Risks, National Strategy Federal Agencies use the Planning, Programming, Budgeting and Execution (PPBE) system to govern the allocation of resources. Considered an annual process; it’s really a long-term strategic process, with an outlook of several years Planning is a 5 to 10 year outlook; Programming is a 1 to 5 year outlook; Budgeting is a justification and request for annual resources (or multiple years in some cases); and Execution is the annual use of funds according to the budget plan

17. Programming, Planning, Budgeting & Execution Process • The PPBE process is part of an integrated suite of business processes designed to align resources to requirements in order to fulfill capability gaps and minimize duplication in fulfillment of Agency strategic goals • Planning establishes strategic priorities and capabilities required to achieve the strategy • Programming applies the resources to programs which provide the capabilities required to achieve the strategic priorities • Budgeting properly prices the programs, develops justification, and an execution plan • Execution performs and monitors the approved plan • Reporting includes annual reports (including performance and accomplishments) and agency level financial position reports

18. PPBE aligns investments to strategy and efficiently spending Overall process Executive branch (OMB) proposes a budget from the President to Congress Congress authorizes and appropriates funding through Acts of Congress Executive Agencies execute funds through individual budgets for programs and operations Activities are built around the Federal Fiscal Year, October - September Challenges to PPBE Process • Complexity of budget structure • Accuracy of cost & performance data • Complexity of operating structures • Conflicting stakeholder demands • Alignment of data between program & budget • Dependencies across the Enterprise Sustaining a multi-year PPBE process requires dedicated resources and managing key decisions PLANNING(FY +3)

19. Planning National Security Strategy (Approx. every 4 years) National Military Strategy National Defense Strategy (Approx. every 4 years) Guidance for the Development of the Force Joint Program/Planning Guidance POTUS SECDEF CJCS OSD Annual Program/Planning Guidance 18 5-10 year extended planning period the overarching direction and priorities: • strategic goals and objectives • projected operating environment • operational assessments • mission needs and priorities

20. Programming Adjudication of alternatives based on risk To OSD Most Dear FY10 New Funded Content Least Dear Funded AFCS Most Dear FY09 New Funded Content Least Dear Most Dear FY09 New Funded Content Least Dea Most Dear FY09 New Funded Content Least Dear Most Dear FY09 New Funded Content Least Dear Most Dear FY11-15 New Funded Content Least Dear Unfunded Offsets Next POM Baseline Areas where we have accepted risk New Requirements Linked to Planning Most Dear FY10-15 Existing Funded Content Least Dear Unresourced, prioritized requirements at the beginning of the exercise Most Dear FY06/07 Existing Funded Content Least Dear Unfundeds Prioritized baseline at the beginning of the exercise • Key to this phase is must allocate limited resources between competing requirements • Must align with strategic goals and Secretary's priorities • Requirements must be prioritized between base activities and new/unfunded initiatives • Final output: Secretary's Resource Allocation Decisions (RADs) 19

21. Jan/Feb 09 Program Build (POM) FY10 PBR Submit (POM/BES) FY10 PB Submit J Book + RMDs = PB Budget Build (Price POM) Budget Build (Price POM = BES) Budgeting Dept and Staff Build PBR Agency Review Aug Sep Oct Nov Dec Jan 08 Feb Mar Apr May Jun Jul RMD Submit Justification Documents & Electronic Data Pass to OSD’s databases Budget Review Program Review Submit Justification Documents To Congress Budget shows a financial plan for accomplishing goals and objectives Full costs of programs identified in compliance with Presidents Management Agenda Final output: Budget to Congress for approval and appropriation of funds

22. 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 Budget Execution and Reporting Strategy National Security Strategy National Security Strategy National Military Strategy National Defense Strategy Chairman’s Program Recommendation Strategic Planning (ongoing) Quadrennial Defense Review Integrated Priority List Planning Process (ongoing) ICRRA Annual Planning & Programming Guidance Strategic Planning/CRRA (ongoing) Planning Strat Planning Guidance Joint Programming Guidance Enhanced Planning Process (ongoing) Programming Division POM Developed & Delivered Dept POM Developed Budgeting Dept Budget Prepared & Submitted Program & Budget Reviews President’s Budget Submitted Enactment Congressional Review & Debate & Marks Budget Enacted Execution Budget Execution Planning O&M Execution Plans Investment Budget Review O&M Budget Review Budget Execution

23. One-year Appropriations O&M Personnel Two-year Appropriations Research and Development Three-year Appropriations System Procurement Hardware Procurement Other Procurement Five-year Appropriations Construction Appropriations by Funding Type can influence Execution Operations R&D Procurement Construction

24. Alignment with the Acquisition process The Budget Process supports contract awards in each phase of a program B C A ProgramInitiation IOC FOC MaterielSolutionAnalysis Technology Development Engineering and Manufacturing Development Production & Deployment Operations & Support Technology Contract Maintenance Contracts Design Contract Production Contract Development Contract

25. Agenda Acquisition Planning Developing agency needs Acquisition Strategies Programming, Planning, Budgeting & Execution Process PPBE Timeline and Lifecycle Map Alignment with the Acquisition Process Case Study – IT System Case Study – IT Service Summary 24

26. Case Study – IT System DHS Program to Update Nation’s Alert and Warning capabilities

27. Originally called the “Key Station System,” the CONtrol of Electro-magnetic RADiation (CONELRAD) was established in August 1951. Participating stations tuned to 640 & 1240 kHz AM to initiate the following sequence: Shut down – 5 sec Return to air – 5 sec Shut down – 5 sec Transmit tone – 15 sec Several shortcomings and vulnerabilities The Evolution of Emergency Broadcasting 1951 - 1963 1963 - 1997 1997 - 2006 2006 CONELRAD EBS EAS Upgrade Initiative EBS was initiated to address the nation through audible alerts. It did not allow for targeted messaging. System upgraded in 1976 to provide for better and more accurate handling of alert receptions. Originally designed to provide the President with an expeditious method of communicating with the American Public, it was expanded for use during peacetime at state and local levels. EAS jointly coordinated by the FCC, FEMA and NWS. Designed for President to speak to American people within 10 minutes. EAS messages composed of 4 parts: • Digitally encoded header • Attention Signal • Audio Announcement • Digitally encoded end-of-message marker Modernize and integrate the nation’s alert and warning infrastructure. Integrates new and existing public alert and warning systems and technologies Provides authorities a broader range of message options and multiple communications pathways Increases capability to alert and warn communities of all hazards impacting public safety. Source: The Broadcast Archive Maintained by: Barry Mishkind The Eclectic Engineer

28. Program Vision Television Provide Timely Alert And Warning To American People To Preserve Life And Property Radio Cell Phone Alerting Authorities; Federal, State, territorial, tribal, and local Computer Home Phone Program Aggregator Public Signage

29. Program Background PMO stood up in April 2007 Budget projected at $25M per year thru 2014 with initial $70M in Hurricane Katrina Funds Initial focus on Presidential Alerts Governance process similar to DoD Milestone as adapted by DHS (ORD, MSN, AoA, AS, ILSP, FRD etc) Program redirections/budget impacts/ GAO have all impacted progress

30. FROM: MD 1400 Investment Management Multiple versions in various states of of release and usage Focused on Investments - Limited to capital assets Separate Processes for Resourcing, Acquisition, and Requirements - Non-functional Department requirements process - Devolving acquisition processes TO: 102-01 Acquisition Directive Compliments new acquisition line of Business Directive (MD 252-07) Accompanied by robust “how-to” Instruction document Focus on Delivery of Capability through Programs and Projects Includes all efforts related to delivery of capabilities, e.g., services, interagency agreements) Interoperable Decision Support Systems Interfaces between requirements, PPBE, and acquisition are defined 3 processes are mutually aware DHS Acquisition Directive 102-01 made budget process changes PPBE: Planning, Programming, Budgeting & Execution

31. Speed Bumps Mission changes – wider focus on usage by State and Local communities GAO reports and help from the Hill Budget reductions and earmarks Staffing turnover Governance process growing pains

32. Lessons Learned Document your way ahead and solicit buy in from stakeholders Expect your funding will change Prioritize project components Remain flexible

33. Case Study – IT Services Naval Marine Corps Intranet Outsourced IT services

34. Budgeting for Services Major Programs are procured with formal Budgets General services are procured in two ways Line in the Organizational budget Embedded (hidden) within a Program or Operation Examples include Training, 1% of budget, upwards of 3-5% hidden costs Information technology, both line item and embedded Facilities, centralized or special interests Little way to trace or account for hidden spending

35. Outsourcing IT Services Navy Marine Corps Intranet (NMCI) largest outsourcing effort within the Federal Government $9B, 10 years Awarded October 2009, ends October 2010 Initiative based on cost drivers for infrastructure upgrade $3.9B investment and maintenance, cheaper alternatives • Rules for NMCI funding – General IT Budget • Naval CIO had budget authority and controlled IT funds investments, NMCI priority • Naval FM had spend rules froze dollars within accounts, withholds for NMCI • Navy and Marine Corps Organizations owned budget dollars; Discretion on who and when to deploy NMCI under fixed costs for desktop and network services, “seat management”

36. What Issues to Consider Reasons to consider seat management? Free staff to focus on core missions (41%) Improve service delivery (41%) Eliminate daily management headaches of managing the desktop (39%) Reduce costs (32%) Easier implementation of new software (32%) • Eliminate all decentralized purchases of IT • Eliminate use of “sweep-up” IT spending • Eliminate “shadow armies” of IT support • Eliminate desktop changes by users • Eliminate user downloads from Internet

37. NMCI Philosophy Buying commercial services using commercial practices Outsourcing for cost reduction, obsolescence, and inventory management Buying a capability with “seat management” All costs for desktop, network services, timed refreshment of hardware and software, standardized software loads for all users, 24-hour help desk, information assurance Reduce costs of IT infrastructure and investment Navy would have spent $3.9B up front Outsourcing moves investment to industry, with Navy costs stretched over the 10 years No need for program structure, merely buy COTS • Actual “per seat” costs • $6,039 (INPO) • $6,200 (GSA sampling) • $8,000 (Gartner) • $12,331 (SAM) • Navy goal of <$4,500 per seat (actual FY98 costs)

38. Program and Contract Approach Program approach – no PMO, users determine needs No Program of Record designation, commercially available IT Departments responsible for capital investment analysis Oversight approach – no need for oversight Not a Major Acquisition, no program staff needed Buying commercial, no systems development under COTS Budget approach – no Program Element General IT Budget line from each user organization Annual appropriations for IT Services Contracting approach – Mandatory Requirements contract Annual guaranteed payment to Vendor SOO with SLAs, incentives and penalties Funding approach – Draw from annual budget Mix of funding types (Working Capital Fund, Operation and Maintenance, annual procurement, R&D

39. Lessons Learned Big ticket items draw attention Congress, GAO, OMB, User interest caused adjustments to the deployment plan There is a need to budget for a major investment effort Current NMCI has a Program Element number in budget PM NMCI is a functioning program office Navy and Defense now provide oversight The Planning portion of PPBE has critical decision points This can trigger programmatic and contracting approaches Buying seat services roles up all the segments of IT, which brings into play the allocation of funding types and auditable spend

40. Changes to Major IT buying The FY2010 National Defense Authorization Act (NDAA) codified into law new processes for IT Programs, and directed a new acquisition process for IT Systems IT programs will execute multiple, rapidly executed releases of capability that allow requirements to be prioritized based on need and technical readiness, allow early operational release of capability, and adapt to changes driven by field experience A portfolio of IT systems, with staggered deployment and refresh, with be the approach to acquiring the capability Stepping away from rigorous IT Oversight and Approvals Recognizing the budgeting process will be based on diverse user needs, deployments and refreshment cycles Maybe NMCI wasn’t so far off….

41. Summary The budget and acquisition processes and organizations are tightly linked Needs/Gaps are addressed through Strategic Requirements Planning process (Office of Policy/Joint Requirements Council) Resources are identified, obtained, and allocated through the Programming and Budgeting cycle (CFO/Program Review Board) Acquisitions are managed through the CPO/Acquisition Review Board) Conducting an acquisition to meet approved requirements demands an integrated process that involves close cooperation between the PM, the CFO and PCO

42. Pointsof Contact Ginny Wydler 703 377-5577 Wydler_Virginia@bah.com Paul Tetrault 703 917-2737 Tetrault_Paul@bah.com

43. QUESTIONS?