Opinion / Acquisition, Reform

Bad Idea: Scrapping the Federal Acquisition Regulation

Bad Ideas in National Security Series

Accelerating the pace of defense acquisition is popular right now. Speed became a significant part of the Pentagon’s acquisition tool kit as a necessity during the wars in Iraq and Afghanistan. However, it has truly taken off as a priority in recent years as a tool for responding to the threats presented by strategic competitors. As Russia and China make progress modernizing their systems, the urgency in the U.S. acquisition system has increased even as deployments have fallen.

The keys to rapid acquisition in the peak war years was flexible funding, provided in substantial quantity by Congress, strong leadership from the Secretary of Defense and his staff, and the ability to quickly leverage and integrate relatively mature technologies. The situation today is different. The flexible funding of years past is largely gone due to reductions in Overseas Contingency Operations (OCO) funding and the Budget Control Act. And many of the systems that DoD is now seeking to acquire rapidly are technologically sophisticated, requiring substantial development and integration. Thanks to the emphasis on speed in the National Defense Strategy, one thing that hasn’t changed is the urgency expressed by senior leaders.

As the department tackles this complex challenge, many pillars of the acquisition process which did not impede rapid acquisition for contingency operations have been criticized as barriers to innovation. New tools like rapid prototyping and other transaction authority (OTA) agreements have created alternative pathways that are growing fast and hold out hope for quicker fielding of new technology. These alternative pathways side step parts of the traditional acquisition process to enable faster, more flexible processes and acquisition strategies. But in promoting these alternative pathways, there is a temptation to toss out some pillars of the defense acquisition system that serve important purposes. Chief among these is the Federal Acquisition Regulation (FAR). There have been calls to abolish the FAR, create a permanent FAR exemption for DoD, or to simply to use OTAs for all contracts. This temptation to shift completely away from the FAR is shortsighted. Tossing out the FAR and starting over will slow, not accelerate, acquisition in the near term. Worse, it will ultimately undermine the usefulness of the alternative pathways that we are currently developing. In short, it is a bad idea.

To assess the damage that would occur from eliminating the FAR, it is important to understand what the FAR is and what it does. The FAR is an all-purpose playbook for carrying out basic acquisition tasks, such as performing market research, carrying out competitions among contractors, negotiating contracts, and following a range of acquisition statutes including small business legislation, contracting law, and the Buy American Act (among other domestic sourcing requirements). In addition, the FAR provides a menu of ready-made contract clauses for enforcing standard government contract requirements. These contract clauses provide tightly crafted legalese that has stood the test of time through use in millions of contracts. While it is fair game to criticize the laws which require these clauses, there is little doubt that it is helpful to have clear mechanisms for enforcing the government’s and contractors’ rights when the law requires it. And since DoD contracting offices engage in millions of transactions in locations all around the globe, there is merit in ensuring some degree of consistency across such a gargantuan enterprise. In general, the FAR allows substantial flexibility for unnecessary contract clauses to be excluded. Much of the critique of the FAR then is really a critique of contracting laws and frustration with statutes like the Competition in Contracting Act, the Truth in Negotiations Act, domestic sourcing restrictions, and intellectual property law.

Another source of opposition to the FAR comes from conflating the FAR with DoD Instruction 5000.02, a separate policy document which governs the operation of the defense acquisition system. The primary purpose of DODI 5000.02 is to define the steps and approvals needed to execute complex acquisition programs. Unlike the primarily legal considerations that drive the FAR, the 5000.02 is meant to enforce requirements for sound engineering, sound analysis, sound resourcing, and sound decision-making.  Critiques focused on the many decision-making layers in the Pentagon, excessive fear of failure in the acquisition process, and an outdated “waterfall” approach to technology development are fundamentally about DODI 5000.02, but too often these critiques are lobbed at the FAR.

The FAR is certainly not beyond criticism, but getting rid of it completely is not the answer. It would result in total paralysis in the acquisition system. Millions of contract actions are routinely carried out under the FAR that touch in almost no way on the development-focused requirements of DODI 5000.02.  Throwing out the FAR means asking the acquisition workforce to suddenly come up with a new way of doing business with contractors, with little to no guidance on successful mechanisms that have been used for this purpose in the past. This is a recipe for paralysis across large swaths of the acquisition system until new mechanisms can be sorted out, because the current acquisition workforce would take substantial time to come up with a new procedure on its own, which defeats the objective of accelerating acquisition.

Furthermore, the elimination of the FAR would put unprecedented burdens on new tools, such as other transaction authority agreements, to tailor themselves for the kinds of routine contract actions the FAR specializes in. Increasingly over time, these mechanisms would take on larger and larger shares of FAR-like requirements in order to accomplish this broader set of tasks that might eventually kill their utility for the innovative partnerships for which they were developed. Rather than being a threat to OTAs and the alternative acquisition pathways they support, the FAR is an enabler for alternative approaches by taking on the routine tasks for which more generic approaches are appropriate. Elimination of the FAR, perversely, would only increase the challenge of innovation.

The FAR can and should be improved. Additional doses of flexibility would be helpful as well as fewer contract clauses mandated by statute. FAR definitions and processes can be updated, as recommended by the congressionally-mandated acquisition streamlining panel (known as the Section 809 Panel), particularly for the acquisition of commercial technology. However, elimination of the FAR would set back the cause of innovation in both the near and longer term. Let’s put this argument to bed and focus instead on improving the FAR and continuing to develop alternative pathways to deliver good outcomes in areas such as software and adaptable systems where the traditional acquisition system is most lacking.

(U.S. Navy photo by Mass Communication Specialist 3rd Class Grant G. Grady)