The Fiscal Year 1987 budget was developed in an environment in which a broad range of new acquisition management policies and practices had been established. The success of the Air Force research, development and acquisition program depends on a strong, efficient management system. Within the past year the basic process through which we acquire and support complex weapon systems has been subjected to meticulous evaluation and numerous management techniques have been refined to ensure better control of our resources. conjunction with this budget submission, a broad range of improvements will be pursued in basic acquisition policy, spare parts acquisition systems, people programs, and NATO Cooperation. B. Acquisition Policy and Procedures In 1. Acquisition Cost Reduction: The management initiatives discussed in the following paragraphs of this section are being instituted to reduce the costs of weapon systems. At the top of our list is increasing competition across the board in Air Force contracting. 2. Competition Advocate: The Air Force believes that increasing competition is the most important initiative we can pursue to reduce the cost of all acquisitions, from major weapon systems to spare parts. In January 1982, we established the Competition Advocate Program. In addition, the commanders of 15 major commands and operating agencies have established three-year competition plans designed to reach the goals established. We have sent to the field more than 300 Competition Advocates to serve in more than 160 contracting locations throughout the Air Force. Our advocacy efforts have been made institutional through published directives that map out program infrastructure. In response to Congressional direction the Air Force Competition Advocate General office was established three years ago to further increase our emphasis on competition. The advocate, a general officer, is on the staff of and reports to the Assistant Secretary of the Air Force for Research, Development and Logistics. This office is reviewing all justifications for proposed noncompetitive awards exceeding $10 million and recommends disposition to the Assistant Secretary. In light of these efforts, our Fiscal Year 1985 accomplishment was 39.2% of our procurement obligations. An additional 48% was awarded as follow-on to procurements that were originally competed. Non-competitive acquisitions were only 12.8%, the lowest in over ten years. We have established an Air Force competition goal for Fiscal Year 1986 of 42% of our procurement obligations. (The Fiscal Year 1987 goal will be developed during 1986). This is a 9% increase over our Fiscal Year 1985 goal of 33%. We have given emphasis to proven techniques such as second sourcing, component breakout, and subcontract competition. These techniques serve to mandate the use of competition throughout the acquisition cycle. FORCE a. Second Sourcing: Second sources are being used in a number of major programs at the prime contract level. These include production contracts involving the Alternate Fighter Engine; the AIM-7M and AIM-9M air-to-air missiles; the imaging infrared Maverick air-to-ground missile; the Ground Launched Cruise Missiles and the combined effect munition. We are introducing a second source for the Advanced Medium Range Air-to-Air Missile. We are also initiating a competition between the F-16, F-20, and other appropriate aircraft for the Air Defense mission. ACQUISITION MANAGEMENT ENHANCEMENTS b. Component Breakout: Below the prime contractor level, the Air Force is actively working to save contract dollars. By breaking out components from prime contractors for competition, we save overhead and handling costs. A variety of subsystems and components now are being pursued. These include canopy transparencies, wheels and brakes for the F-16 and B-1B, B-1B InertialNavigation System, radomes, and vertical situation display/gyro stabilizer; F15 countermeasures dispenser, and the F-16 radar. C. Subcontract Competition: Competition by our prime contractors with their vendors and suppliers also is being actively encouraged. Subcontract competition plans are required for major programs to ensure that the prime contractors consider competition in their buy decisions. While subtier competition is not recognized in Air Force competition statistics, it produces all the benefits of competition for our weapon system programs. The Air Force has proposed a change to the Federal Acquisition Regulation for subcontract competition reporting to help improve subcontract competition. 3. Acquisition Streamlining: The Air Force believes overspecification can be gnificant cost driver on our weapons acquisition programs. To improve this and other aspects of the acquisition process, the Air Force is an active participant in OSD's Acquisition Streamlining Initiative. For example, in January 1985 we appointed a Streamline Advocate. This position was established to focus overspecification policy development, systematically review the acquisition process, and to institute methods and initiatives which will reduce the time and cost of weapon systems acquisition while maintaining or improving product quality. With the initial focus on overspecification, the Air Force, in September 1985, published a change to our overall acquisition policy regulation. In addition, the Streamline Advocate has been included in the initial review of operational requirements to ensure these are not overstated. Further, overspecification of replenishment items is a basic consideration of our Zero Overpricing Program. Finally, we have actively supported internal and OSD initiatives and policy development to prevent overspecification, reduce contract requirements and improve the acquisition process. 4. Program Stability: To be efficient, the acquisition process must operate in an environment that has stable requirements, financial resources, and managerial support. Unless stability exists, the acquisition process will be continually faced with uneconomical program stretchouts, cost overruns, technology updates, and management inefficiencies. The Fiscal Year 1987 program includes employment of proven management techniques that encourage this vital stability in programs. a. Program Baselines: After careful review, we select those major acquisition programs for HQ/AF approval which will benefit the most from enhanced program stability. This baseline is an agreement between the developer, usually Air Force Systems Command, the users, TAC, MAC, SAC, etc., and the supporter, usually Air Force Logistics Command, that the requirement, direction, funding, and schedule will allow us to field a system when it is needed, at a realistic cost, with proper logistics support and, and most important, with the capability required. Signed by senior Air Force leaders, the baseline document highlights those programs which are felt to be most important to fulfill our national objectives. Baseline agreements are maintained throughout the acquisition program and have proven to be a valuable aid in controlling cost growth on systems ACQUISITION MANAGEMENT ENHANCEMENTS such as the B-1B, KC-10, F-15, F-16, Ground Launched Cruise Missile, and Defense Meterlogical Satelite Program. The Ground Wave Emergency Network program will be baselined in Fiscal Year 1987. b. Multiyear Procurement: Since the multiyear law was expanded in 1982, the Air Force has initiated thirteen major efforts involving multiyear contracting techniques. The savings from these contracts exceed $3.2 billion. In addition, the agreements have resulted in programs that have been free from major quantity changes that might have otherwise occurred during the multiyear contract term. This stability might not have been possible without the detailed process used to select our existing and proposed multiyear contracts. They include B-1B aircraft production and spare parts, the Navstar Global Positioning system satellites the KC10 tanker cargo aircraft and the Defense Satellite Communication System III satellite. The F-16 aircraft began its second multiyear procurement contract in Fiscal Year 1986. 5. Should Cost: Should Cost reviews are being conducted of our major contractors to ensure that engineering labor, manufacturing effort, and overhead resources are being used as efficiently as possible. The Government evaluation team, consisting of engineers, auditors, and pricing specialists, reviews all areas of cost and prepares an overall evaluation. The recommendations will be used in the formulation of price objectives and during negotiations. Should Cost team members will participate in negotiations and assist the contracting officer in realizing the recommended savings. Should Cost analyses have yielded significant cost savings in the past. To aid in evaluating other programs, documentation will become part of a history that will be available for use by other Should Cost teams faced with similar program efforts. 6. Work Measurement: Program managers have incorporated the requirements of MIL-STD-1567A, "Work Measurement," into their contracts to obtain direct labor productivity information for use as a baseline in estimating manufacturing costs. Programs for which it is proposed that Work Measurement not be used must first obtain a waiver approved by the Secretariat. Air Force Systems Command (AFSC) reviews contractors' systems for establishing engineering work standards in compliance with MIL-STD-1567A, and reports to the Secretariat on all instances where tailoring of the MIL-STD-1567A has been approved. The use of MIL-STD-1567A is a key to determining contractors' productivity. Productivity indicators are now included in all program assessments. AFSC has issued policy that requires the use of engineering work standards in estimating and negotiating contract costs. The Fiscal Year 1986 Department of Defense Authorization Act specifies Work Measurement as the preferred method for establishing the direct labor hour standards and tracking system associated with the contractor Bills of Labor. C. Spare Parts and Support Equipment Acquisition 1. Spare Parts Management in Perspective: Our spare parts acquisition and logistics system, while not perfect, is a very effective and efficient system. We support 122 active bases and 150 Guard and Reserve installations as well.as radar sites, ballistic missile locations, electronic combat operations sites and other auxiliary airfields. In all we support some 2,835 installations around the world. In the area of spare parts alone, the Air Force manages some 890,000 different types with an active inventory worth more than $38 billion. We process more than 4 million procurement actions each year. The system is large, complex, dynamic, and |