Government Contract Administration Continuous Improvement Projects: A Fresh Look At Government/Industry Teamwork

by Frank D. Colaw and Ronald L Smith, CPCM
THE ANTICIPATED REDUCTIONS IN FEDERAL SPENDING for space and defense will continue the trend of increased competitive pressure in these markets. This competition will occur not only among companies for particular programs, but also among programs themselves and the agencies that sponsor them. It is equally clear that the successful competitors will be those that improve the quality of their goods and services while reducing the cost of acquiring them. We must not ignore the critical importance of achieving such improvements to permit the development of technology and the production of products required for the defense of the nation as well as continuance of American superiority in space.

Recognizing this challenge, some federal procurement functions have initiated projects with industry participation designed to improve the systems/processes used to purchase goods and services and administer the resultant contracts. These projects use proven process improvement techniques that encourage open and constructive dialogue between the participants. This approach represents a sharp break with former ways of doing business and gives reason for great hope that we are beginning a new era in which an improved way of doing business will be the norm. This new era will benefit not only those of us involved in the administration of federal government contracts but, more important, could result in the American public's receiving increased value for the tax dollars associated with defense and space procurement.

Too often industry and government have viewed the systems and processes related to contracting exclusively from their respective sides of the fence. As a result "fixes" or "improvements" have often addressed only a portion of the overall flow, or were developed and implemented with little concern or understanding of the impact that the action might have on the remainder of the process.

A fundamental Rule of any process improvement activity is to identify first the customers of the product or service resulting from the process under review. Once these customers have been identified, their wishes concerning what

should be improved and what "improved" means is necessary before the improvement activity is initiated. Improvement of a process without this linkage to the customer and its wishes may yield a result that is meaningless.

All of the initiatives discussed in this article employ this customer orientation. Additionally, all represent a genuine effort by both government and industry to work together to develop improvements in the contracting process. This teamwork is not only critical to ensure the success of these specific efforts, it also constitutes the beginning of a new philosophy of how we view the procurement process generally and contract administration specifically.

In a recent speech to the National Secufity Industrial Association, Joint Chiefs of Staff Chairman Gen. Colin Powell emphasized the need for cooperation between government and industry in downsizing and restructuring defense:

"We must do our part to bring that kind of bonding back to American while we both (industry and the armed forces) get smaller and better. We must help our nation grow closer together. I encourage your efforts and ideas out in industry as to how we can do this more effectively, how we can solve the problems of our nation, because we're both concerned with the same end result, the same product: the sound, secure America."

Similarly, a Clinton/Gore position paper released during the campaign recognizes the value of industry/govemment partnerships. This paper cites a number of areas where closer working relationships between private enterprise and the federal government might provide a basis for improving America's technology base.


Frank D. Colaw is director, Contracts, Business Management-West, McDonnell Douglas AerosÞace, Huntington Beach, California. He IS a member of the Orange County Chapter.

Ronald L. Smith is director, Corporate Contracts and Business Policy, Grumman CorÞoration, Bethpage, New York. He is a CPCM, a NCMA Fellow, and a member of the Long Island Chapter.

The Air Force Space and Missiles Command (SMC) has an active program with its major contractors to streamline the sole-source change process. Under the leadership of Lt. Gen. Edward Barry, commander, and Col. Mike Collins, director of contracting, SMC Reg. 540 "Streamlining the Sole Source Contract Change Process" was issued in July 1992. The purpose of this regulation is to provide contractors, the SMC, administrative contracting officers (ACO), and the Defense Contract Audit Agency (DCAA) general guidelines to follow in developing programs to effect streamlining on SMC contracts. The terms agreed to are set forth in a memorandum of agreement.

The process of this procuring contracting office (PCO), ACO, DCAA, and the contractor, conducting a definition and analysis of the cycle time events in the sole-source change process, and the development of an improved process where activities are conducted jointly or in parallel rather than serially, hold great promise for improving cycle time and quality. Furthermore, the participants in this activity report that they begin to view the process more as one with a shared goal and less as one seeming to presume that an adversarial relationship will yield the best product.

Recently, the SMC hosted a contract directors conference attended by contracts representatives from the major SMC contractors and selected government representatives. During this conference representatives of each company, the SMC, and the DCAA, described their experiences in working on streamlining the change cycle on their respective contracts. One company has experienced an average cycle time reduction of 73 days, from 101 to 28, in definitizing changes on a SMC contract. This conference resulted in an open discussion concerning experiences that were of mutual interest. It was an excellent example of government and industry working together.

In the summer of 1991, the National Aeronautics and Space Administration (NASA) formed a process action team (PAT) consisting of NASA and industry participants. Initially this group assisted the National Space Club and NASA in planning the first "New Procurement Horizons" conference, attended by more than 200 representatives from government and industry in March 1992. During this conference working groups were established to "brainstorm" and list ways that the procurement process could be improved. Each group examined one of the following subject matter areas: (1) small business and small disadvantaged business issues, (2) proposal evaluation source selection and prerequest for proposal involvement by industry. (3) contract/subcontract management, (4) financial management practices and funding stability, (5) improved management of cost type contracts, and (6) award fee.

Darleen Druyun, chief of staff. NASA, conference chairperson, stated in the conference report: "Most of the NASA budget is spent through the thousands of contracts. both large and small. It is important that, in examining improvements to the acquisition process, we open and continue a dialogue among those involved in this process. The NASA/Industry Conference, and its supporting process action team, is an excellent forum for this dialogue.The 1992 conference is the first step in this process, and I believe that our combined deliberations will result in significant considerations for acquisition improvements which are critical to the success of the Space Program. The new Assistant Administrator for Procurement, Don Bush, and I look forward to a continued close working relationship between NASA and our contractor community in discussing and resolving matters of mutual interest."

The results of the Houston conference have been prioritized and are being addressed by NASA procurement personnel and the PAT. Examples of improvements resulting from this conference include clarification of NASA's small business goals and wider distribution of NASA acquisition forecasts. Other conference considerations are under agency review. Another conference is scheduled for spring 1994.

The PAT has also served as a forum for discussion of new improvement ideas. The discussions during these sessions have been positive, with the individual members contributing based on their varied backgrounds in government procurement. Both sides have found this to be a beneficial dialogue. The PAT efforts are initial steps in pursuit of NASA's acquisition system vision. At NCMAs 1992 West Coast National Educational Conference, NASA Administrator Daniel S. Goldin described this vision:


"A system in which teamwork, with fellow employees and contractors, is an ingrained part of the system. Our procurement system has facilitated an increasingly adversarial relationship with our contractors, who complain bitterly in private, but grin and bear it in hopes of pleasing the customer. That's not teamwork, that's the Bad News Bears! At NASA we are working to reverse the tide and achieve our vision of an 'enlightened procurement system.' One example is our process action team with industry. This team is a group of professionals representing large and small businesses, the U.S. Chamber of Commerce, NASA field centers and Headquarters. The fundamental objective of the team is to provide input to NASA on various aspects of the acquisition process, including the impact of pending policy or regulations. To date, the team has focused on award fee contracting, financial management practices, proposal evaluation and contract management. This team gives us the opportunity for continuous open dialogue, before lines are drawn in the sand, or draft Rules are published."

This open dialogue has been maintained consistently for more than a year, even though the issues being discussed are often controversial and government/industry viewpoints are sometimes sharply divergent. This open communication is possible because the members are determined to make the process work and maintain a high standard of professionalism.

The Defense Contract Management Command (DCMC) recently initiated a program called "PROCAS" described in a draft regulation, Defense Logistics Acquisition Management 8000.5 "Performance Based Management A Process Oriented Approach to Contract Administration Services." Generally, this approach has local contract administration offices and contractor representatives working together on projects to improve the quality of systems that involve interaction between the two. A statement of the DCMC vision is included in the draft regulation. In part, it states:

"We are committed to supplying our customers with the best possible products and services through our dedication to continuous improvement. Focusing on the customer's requirements and expectations we must work together as full partners with the buying offices, Defense Contract Audit Agency (DCAA) and other government agencies. In addition, teaming with our contractor associates, our objective is to provide the best for our common customers the users of our products, services, and knowledge."


In addition to these formal agencywide initiatives, there are areas where government and industry, on a program level, are working together where previously their respective efforts were conducted separately. For example, recently the McDonnell Aircraft Company (McAir) and the Naval Air Systems Command jointly conducted cost analysis of a major subcontractor on the fiscal year 1993 F/A18 E/F contract. Also, the DCAA attended joint fact finding sessions. The parties worked together beginning with the initial fact finding instead of independently conducting cost analysis activities.

The results were impressive. Both McAir and the Navy concluded that the flow of information improved significantly, resulting in (1) enhanced cycle time, (2) greater trust between the participants that the others could add value without compromising privity between the prime contractor and the subcontractor, and (3) a more efficient use of the paticipants' time. Efforts are underway to extend this approach to other subcontracts.

All of these activities represent a shift in the way the federal government and its contractors view their respective roles. These efforts depart from the traditional adversarial roles, changing into one that promotes a team approach to problem solving. Some critics or defenders of the status quo might argue that this is not an improvement, that the arms-length nature of the relationship becomes blurred, and therefore the integrity of the system is threatened by this new approach. The success of these cooperative projects, however, demonstrates that the interests of the primary constituents, company shareholders, and the public, are best served when industry and government engage in active, meaningful dialogue focused on improvements.

Sound management practices based on open communication between customers and suppliers should yield positive results in every market. The application of these techniques to federal government contract administration has equal potential for both government and industry. This open dialogue can be maintained in full compliance with procurement integrity and other ethics statutes when all parties are committed to open commu

nication and high standards of professionalism. The examples cited in this article demonstrate that the professionalism of the government/industry work force is equal to this challenge. We believe all contract professionals should recognize the benefits of these activities and should actively participate in them whenever possible.