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Eleanor Spector Vice President, Contracts Lockheed Martin Corporation August 5, 2008 9:30-10:15AM

Industry Acquisition Issues. Eleanor Spector Vice President, Contracts Lockheed Martin Corporation August 5, 2008 9:30-10:15AM. Lockheed Martin 2007 Sales. Civil Government/ Homeland Security/ Intelligence and Other. Defense. 27%. 58%. 15%. International. Air Force 23%.

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Eleanor Spector Vice President, Contracts Lockheed Martin Corporation August 5, 2008 9:30-10:15AM

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  1. Industry Acquisition Issues Eleanor Spector Vice President, Contracts Lockheed Martin Corporation August 5, 2008 9:30-10:15AM

  2. Lockheed Martin 2007 Sales Civil Government/ Homeland Security/ Intelligence and Other Defense 27% 58% 15% International Air Force 23% Navy/USMC 23% Army 9% Other DoD 3% Total Sales - $41.9B

  3. LM Contracting Statistics • 46% of contracts fixed price • 31% cost reimbursable

  4. Hot issues • Award/incentive fees (not “bonuses”) • Ethics, OCI, PCI • Mandatory disclosures prior to company investigations • Data rights • Industrial base and protectionist legislation • Information assurance • Fixed price production contracts prior to demonstration of technology

  5. Congressional Perceptions • Impatience with cost estimating and control on development contracts • Incentive and award fee changes • Minimizing cost reimbursable contracts • Nunn-McCurdy Act Changes

  6. Congressional Perceptions • Perception executive branch losing ability to manage contracts • Redefining inherently governmental definition • Acquisition workforce enhancements • LSI restrictions

  7. Congressional Perceptions • Need more openness in acquisition process • Limitations on IDIQ services – competition over $100M • Expanded protest rights (while DoD concern with protests grows) • Public postings of past performance, contract information, justifications, executive compensation

  8. Congressional Perceptions • Frustration with stories of fraud, waste and abuse • Anti-profiteering bills • Mandating self-reporting of potential violations • Expansion of FCA’s reach/whistleblower rights • UCA definitization schedules and fee limitations • Demands for additional data rights

  9. Congressional Perceptions • DoD and industry not maintaining arm’s-length or preserving competition • Inherently Governmental functions redefined • OCI/PCI treatment and reporting • Increased access to protest system • More compliance and integrity reporting • Lead System Integrator prohibitions • Expanded protest authority

  10. FAR Cases of Interest • Reporting subcontract award data • Exemption of commercial services from SCA • Contractor compliance and integrity reporting • E-Verify (employment eligibility verification) • Conflicts of Interest

  11. DFARS Cases of Interest • Excessive pass through charges • Technical data rights • Open source software

  12. Industry Acquisition Agenda • Requirements generation and stabilization • Rational restrictions on changes in development • Greater stabilization of requirements before milestone B

  13. Industry Acquisition Agenda • Technology maturation • Quantum leap vs. evolutionary • Cost estimation and analysis • Award at Government estimate • Cost realism as major selection factor

  14. Industry Acquisition Agenda • Protect Company Intellectual Property • New rules designed to aid sustainment discourage private investment in technology innovation and the use of commercial technologies by requiring rights to privately developed technology as a condition of doing business. • E.g., Requirement for all technical data on a satellite contract. • Obtaining more rights in data will not solve most logistics support problems.

  15. Industry Acquisition Agenda • Multiyear contracting • Enhanced use creates economies of scale • Reasonable returns • Award fees are not bonuses • Development programs must be profitable • Workforce enhancement and training • Implementation of Gansler recommendations

  16. Industry Acquisition Agenda • Contract type determination • FAR Guidance is appropriate • Contract type determined by risk • Funding stability, reprogramming flexibility • Fund and fence program reserves • Allow greater flexibility in reprogramming

  17. Industry Acquisition Agenda • Draft standard, workable rules on protection of unclassified information on contractor networks. • Concerns: • No clear definition of information to be protected • Dissemination of network vulnerabilities • Costs to protect sensitive unclassified information

  18. Cost Growth • Acquisition community has failed to convince GAO and senior Government personnel the causes of cost growth on development contracts which include: • Optimism in competitions • Unpredictability of required technological innovations • Major changes in requirements after award • Funding instability • Defense contractors develop the best systems in the world, yet earn minimal returns on development contracts. • Contractors often supplement insufficient budgets on incrementally funded development contracts, or risk disruptive work stoppages, yet are given no credit in fee determinations.

  19. Summary • Considerable activity in acquisition policy areas. • Likely to be new focus with either new administration. • Acquisition is never dull!

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