Acquisition Considerations in a High Risk Environment

2. Acquisition Considerationsin a High Risk Environment Bill McNally Assistant Administrator for Procurement NASA Headquarters July 10, 2009

3. Overview • The President’s Memo • NASA’s Procurement Tenets • NASA’s Acquisition Strategy • Challenges

4. President’s Memo - Highlights • Focus of the Memo • Strive for an open and competitive process • Agencies must have the flexibility to tailor contracts to carry out their missions and achieve policy goals • Preference for fixed price type of contracts • Appropriate use and oversight of cost type contracts • Agencies must have sufficient capacity to manage and oversee the contracting process from start to finish • Inherently governmental functions must be performed by the Agency and not outsourced (use of support contractors) • Not a huge issue at NASA

5. President’s Memo - Requirements • OMB in collaboration with DoD, NASA, GSA, OPM and others that OMB deems appropriate shall • Due 7/1/2009: Develop and issue Government-wide guidance to assist Agencies in reviewing and creating processes for ongoing review of existing contracts • Due 9/30/2009: Develop and issue Government-wide guidance to: • Govern the use and oversight of sole-source contracts and to maximize full and open competition • Govern the use and oversight of all contract types considering Agency needs, minimizing risk, and maximizing value of contract effort • Assist Agencies in assessing the capacity and ability of the Federal acquisition workforce to develop, manage, and oversee acquisitions appropriately • Clarify when governmental outsourcing for services is and is not appropriate

6. President’s Memo - Future • Like the “Recovery Act” expect a very open environment where procurement information will be posted • Sole source and other limited competitive actions • Type of contract selection and strategy information • ID/IQs, GSA schedule, GWACs, and 8(a) sole source • Competition goals for Agencies • Insight into Agencies’ decisions on contracts that are behind schedule and have overruns (term “wasteful” from the memo) • Increased interest in the acquisition workforce in terms of resources and skills

7. Impact of the President’s Memo on NASA • No Change • NASA’s Challenges • NASA loves Award Fee contracts • Culture change can be a challenge • NASA has Procurement Tenets and processes in place to lead us in the right direction NASA’s Procurement Tenets are in line with the President’s Memo

8. Procurement Tenets - Purpose • August 1, 2008, the Procurement Tenets memo was signed by the Chief Acquisition Officer endorsing the Tenets and expecting the NASA Centers to start using them • 85% of NASA’s budget is obligated for procurements so NASA must maximize its buying power • The Procurement Tenets are a set of principles for a NASA way of doing business with the objective of increasing NASA’s Return on Investment • The Procurement Tenets are ancillary to the other Federal and Agency regulations, policies, and core values. Implement based on the circumstances for each acquisition • Each Tenet shall be addressed by Headquarters, project, program, and contract managers in their acquisition and procurement strategies, processes, and procedures

9. The Nine Procurement Tenets • Integrated Strategies: involve all functional authorities early and throughout the planning process • Turn Contract Upside-Down: in the planning process, determine the right number of prime contracts and understand the supply chain of a requirement • Maximize and Optimize Competition: establish and take advantage of a competitive environment to meet NASA requirements • Requirements: clearly specify what is to be acquired, zero-based approach in developing requirements • Streamline: remove non-value added steps and requirements that do not support the desired outcomes

10. The Nine Procurement Tenets • Performance Incentives: use to enhance desired outcomes • Merge NASA’s and Industry’s Core Expertise: define NASA and industry’s role with research, design, development, and integration for projects • Common NASA Contracts and Strategies:common face to industry; a NASA contract: not a Center or mission directorate contract • Contract Cost: reduce the cost and cost risk for procurements; move towards Firm Fixed Price contracts after development and on repetitive service contracts

11. Tenets – Contract Type • Reducing Cost and Cost Risk for Procurements • Cost risk for each requirement shall be properly allocated between NASA and industry • Competition and the cost of managing contracts are enhanced by the appropriate allocation of cost risk • Development Phase: NASA takes cost risk • Use appropriate tools to manage contracts • Production and Operations Phases: industry assumes risk • Firm Fixed Price • Industry earns appropriate profit for assuming cost risk

12. Tenets – Contract Type • NASA’s Culture of Award Fee • Because so much of what we do is development, Award Fee has become ingrained • In the past, some things with little or no cost risk were done Award Fee – comfort zone • Moving to Firm Fixed Price – where no high risk or uncertainty • Shift contract to Firm Fixed Price as soon as possible The President’s Memo and the Tenets are pointing us in the same direction. NASA also applies an Agency acquisition strategy framework to manage its high risk environment.

13. ICC Actions GAO High Risk List NASA Contract Management OMC Agency Acquisition Strategy Acquisition Policy* (1000.0, 7120.4, 7120.5, 7123.1, FAR, NASA FAR Sup.) Policy Implementation IEMP* Contract Management* Cost Estimating* Project Management* Other… • IEMP implements requirements • Training • Disciplined cost estimating processes • Cost Analysis Data Requirements (CADRe) (ICE) • Training • Planning, execution, and performance assessment (cost, schedule, technical) • Key decision points (entry and exit criteria and metrics) • CADRe (LCCE) • Training • Structure, award, monitor, and manage contracts • Collect data to assess contract performance • Training *Directly addressing GAO High Risk List

14. New Strategic Acquisition Process • Acquisition Strategy Planning Meeting (ASP) • Aligns decision with the budget cycle • Generates approval for a new or substantially changed program or major project, triggered by Agency requirements or legislative direction • Acquisition Strategy Meeting (ASM) • Validates that program level acquisition strategy can be supported by budget, schedule, and manpower • Ensures that first order program planning is in place (WBS, budget, risk assessment, schedule, etc.) • Validates make/buy rationale and any partnership decisions • Procurement Strategy Meeting (PSM) • Ensures that specific acquisitions are ready to proceed • Focus is on procurement process, not strategic planning

15. Challenges • Executing affordable, world-class missions - for NASA and for industry implementing high risk contracts • Developing thorough understanding of technical requirements • Establishing credible cost estimates and sufficient life-cycle budgets to meet mission objectives • Avoiding over-commitment to new initiatives • Controlling costs through committed, strong program management

16. Challenges • Reducing Procurement Cost and Risk • Improve the analysis behind our strategy and business decisions (e.g. contract type, conducting source selections) • Must get back into analysis of the cost, risk, marketplace in choosing contract type, conducting competitions, and other strategy decisions • Improving Cost/Price Analysis • Must ensure paying fair and reasonable price for services/supplies procured • Reduces risk for sustainable protest in competitions

17. Challenges • Recruiting, hiring, and retaining a highly capable acquisition workforce • Workforce balancing/uncovered capacity • Managing loss of senior managers and experienced personnel • Managing impact of Base Realignment and Closure (BRAC) on NASA installations