Ellen M. Lord, undersecretary of defense for acquisition and sustainment, speaks at the Professional Service Council’s virtual Defense Services Conference, August 13, 2020.
Transcript
Thank you, Jim, Like Jim mentioned, I’m curious Smith with Parsons Corporation. It’s my pleasure to introduce our first speaker today. The honorable Ellen M. Lord currently serves as undersecretary of defense for acquisition and sustainment. In this capacity, she’s responsible to the Secretary of defense for all matters pertaining to acquisition, development, testing, contract, administration, logistics, the material readiness, installations and environments, operational energy, chemical, biological and nuclear weapons, the acquisition workforce and the defense industrial base. Now, please join me and give him a warm welcome to Miss Ellen. Lord Lord over to you. Good morning and thank you. Carry for the introduction. The Professional Services Council is such a valued industry partner in addressing key issues, facing government and industry to deliver on the national defense strategy that guides all that we dio Defense services contractors are essential to supporting our troops around the world with commercial innovation. So I am really delighted to be able to address the Professional Services Council and the PSC Defense Conference audience here today and I’d like to take this opportunity to give you an overview and an update on some of the initiatives we have going on in an s right now, including where we are with the adaptive acquisition framework, particularly with the lens of our software policy. Section 889 Section 36 10 CMC and Small Business Group. A major accomplishment in 2019 was the rewrite of the 5000 Siri’s, which is the overarching policy guide on D. O D. Acquisition. This overhaul is the most transformational change toe acquisition policy in years and an effort that we expect toe have a long lasting positive effect. The 5000 rewrite was the decomposition of a large policy document into six clear, separate pathways known as the Adoptive Acquisition Framework, or A F because we always eat acronyms at D o D. So the six a F pathways include urgent capability, acquisition, middle tier of acquisition, major capability, acquisition, software acquisition, defense business systems and acquisition of services. These pathways simplify and Taylor in acquisition approaches and power program managers facilitate data driven analysis, actively managed risks and emphasized sustainment. This new approach will streamline traditional acquisition process, is providing our combatant commands and warfighters with greater lethality on the modern battlefield. Simply said. It allows program managers and contracting officers multiple ways to field capability much faster, which is where our job really is. So the acquisition policy rewrite includes D O D. Instructions for each acquisition pathway and functional area. The’s subordinate functional areas are engineering test and evaluation. Cybersecurity, which is new analysis of alternatives classed estimate intellectual property, which is new as well. Tech and program protection, human systems integration, Acquisition intelligence Again, another new area and information technology. I’d like to focus for a moment on the progress we’ve made with the adaptive acquisition framework through the lens of our software pathway in May 2019 and s formally delivered the Defense Innovation Boards, software acquisition practices or swap study to Congress. Following that report. The swap strategy is being implemented by D. O d software modernization working groups, and there’s significant forward progress with respect to policy processes, enterprise services and workforce, for example, an interim policy memo was issued in January to provide D. O. D. With a preferred pathway for acquiring software based capabilities. The pathway enables acquisition programs to transition, to use modern software methodologies and to deliver software capabilities at the speed of relevance. We’re on track to replace the interim policy with D o D. Instruction 5000 dot upu p is a placeholder until we actually issue it and get a number there. This is the operation of the software acquisition pathway. We’re gonna do this by the end of 2020. The draft D o d Instruction or Dodi is nearing the end of coordination with the components and OSD functional staff. Draft guidance. Supporting this pathway has been populated on the Adaptive Acquisition Framework website and my organization Acquisition Enablers is working with senior leaders and programs across the services to enable adoption. The policy will reflect a substantial departure from the usual way of doing business in D. O. D. The policy is rooted in lessons being learned from a set of agile software pilots, which are demonstrating that the department can be successful at delivering software capabilities to users and warfighters in a faster way with Sprint. Aside from implementing policy were establishing a plan for talent management of digital expertise and software professionals and a software talent management. Kadre, OSD Undersecretary offices and Defense Digital Services are working to stand up a leadership Kadre to establish and coordinate D. O D’s talent management strategy. Additionally, the team has developed an initial plan to address the recruitment, development and retention of a civilian and military workforce with digital and software development expertise. We also envision civilian and military career tracks related to digital expertise and related digital competencies. Concurrently, we’re focused on generating software development and training management programs, specifically a D. O D working group, with representatives from across D o D functional and the services are developing modern competencies to support modern software. Occupational Siri’s training programs and career paths for D. O D. Leadership and software professionals in terms of our def. SEC Ops Enterprise Services, D. O. D released the def SEC Ops Reference design document outlining the preferred software practice for all D. O. D. Components and implementation and operational guidance for programs to create, deploy and operate software applications in a secure, flexible and interoperable banner. We’re looking at budget activity Stash A be a Dash eight pilots. The swap study recommended a new budget activity for appropriating money for defense software, which better aligns to the interest and fast paced technical work related to software engineering. D. O. D. Is acting on this by establishing pilot programs to gather lessons learned and best practices to support a new budget activity, which provides funding flexibility for modern software acquisition programs. N s will work with the programs to test whether the single appropriation supports programs in quickly adapting fielded capabilities to changing mission needs and our dynamic cyber threat environment. Be a Pilot funding Realignment under our G, T and E B. A. 08 has been supported in congressional mark ups so far. Finally, in terms of section 255 software S and T modernization, the swap study recommended that the department invest in the transition of emerging tools and methods for engineering mission quality software into practice and S is partnered with Arnie, the services and functional communities to develop the department strategy for bridging the Valley of Death as we all know it, that exists between promising ideas and practical application and to ensure greater success in rapidly transitioning innovative digital tech into our acquisition programs. We need software intensive programs or major software efforts within the other acquisition pathways to use the software pathway and provide feedback. While we’re proud of the new software pathway as an organization, we need to continue to learn feedback to the acquisition enablers team is critical. Our intent has always been to reshape the 5000 to better support acquisition programs. Additionally, the new documents, like a streamlined capability, needs statement and user agreement need to be exercise so that we can collect and share lessons learned. Looking forward. Some particular challenging areas will include cost estimates, metrics, plans and value assessments. We have provided accompanying guidebooks to help programs in these areas, but we must transform how we do these activities. When it comes to modern software development, modern software development and the software acquisition pathway are much more than just a new approach to writing code. They are also a new way to interact with users, continually deliver capability on short intervals, achieve test driven development leverage enterprise services, automate and innovate in what we are calling biz ops. Biz Ops is the contracting financial management and program management that supports modern software development. We need to build a workforce with the software engineering skills needed to take full advantage of new software pathway and ensure program success. Recent efforts include the Defense Acquisition Universities effort in the past two fiscal years to train approximately 1400 personnel and credential. 559 employees in software practices, turning now to the topic of Section 889 Today is a particularly important day as the interim Federal Acquisition regulation or far rule on Section 89 a one b goes into effect. Section 889 of the national defense offers it. The National Defense Authorization Act, or ND A for F. Y. 2019 establishes prohibitions related to certain telecommunications equipment and services from Wall Way Technologies Company and ZTE Corporation and their subsidiaries and affiliates. It also establishes prohibitions related Teoh certain video and telecommunications equipment or services produced or provided by High Terror Communications Corporation and many others, as well as their subsidiaries or affiliates. There are two specific prohibitions under section 889 Section 889 a one a. Prohibits the government from procuring any equipment, system or service that uses covered telecommunications equipment or services as a substantial or essential component of any system. This prohibition was implemented in the far VM via an interim rule in the Federal Register, which went into effect August 13 2019. Section 889 a one B prohibits contracting with an entity that uses any equipment, system or service that uses covered telecommunications equipment or services as a substantial or significant component of any system. Section 89 provides significant national security benefits to the general public by protecting against increasingly sophisticated threats in the supply chain. Threats to the United States posed by foreign intelligence entities are becoming more complex and may combine elements of traditional spying, economic espionage and supply chain and cyber operations to gain access to critical infrastructure and steal sensitive information and industrial secrets. The exploitation of key supply chains by foreign adversaries represents a complex and growing threat. The increasing reliance on foreign owned or controlled telecommunications equipment, such as hardware or software and services, as well as proliferation of networking technologies, may create vulnerabilities in our nation’s supply chains. D. O D fully supports the intent of Section 889 but recognizes the implementation challenges facing industry partners, defense pricing and contracting. DPC within a N S has responded to congressional requests for technical assistance with draft resist revisions to section 889 to facilitate effective implementation and to preclude unintended consequences. Section 36 10 of the Corona virus aid relief and Economic Security or Cares Act authorizes agencies to reimburse any paid leave, including sick leave their contractor provides to keep its employees or subcontractor employees in a ready state. This includes protecting the life and safety of government and contractor personnel. Drawing the ongoing public health emergency declared for Cove in 19 on January 31 2020 through September 30th. 2020. In other words, 36 10 Authorizes payment two companies to defense industrial based employees when they cannot work on government contracts. No appropriations accompanied the authorization to reimburse thes costs. D o d. Recognizes contractors All sizes are experiencing costs as a result of the coded 19 pandemic and are putting measures in place to maintain the health of employees. They’re coated 19 cost impacts to industry and on specific contracts in two broad categories. 1 36 10 Leave costs such as paid leave, including six leave sick leave. The contractor provides to keep its employees or subcontractors in a ready state and two other cove in 19 costs such as those incurred for personal protective equipment, additional deep cleaning, other protective measures and disruption cost throughout the supply chain. We’re in the process of developing guidance on submitting 36 10 reimbursement requests. Initially, we issued a draft document and offered industry the opportunity to review it. Industry provided over 300 comments comprised of 100 pages D. O. D is evaluating. Many were incorporated into the final guidance. We will be publishing shortly. We had a call with industry recently discussing how we have adjusted our prior draft to address industry concerns. Specifically, we have developed a streamlined path forward for low dollar value reimbursements under $2 million a path to settle globally at a company or division level that will eliminate the need to have proposals and negotiations on a contract by contract basis. D. O d anticipates that the cost for 36 10 as well as other Cove in 19 costs would impact the defense industrial base. We continue to work with Congress to discuss the importance of having an appropriation. To cover these costs, the military services, defense agencies and the Office of General Counsel, or OGC, completed a review of the 36 10 reimbursement guidance. It will now be sent to O. M. B for clearance under the Paperwork Reduction Act as soon as we secure o. M B clearance, we will issue the policy. The Health Economic Assistance, Liability Protection and Schools Act Heels is a $1 trillion economic stimulus bill introduced in 2020 by the United States. Senate joined the Cove in 19 Pandemic to supplement the earlier Cares Act. Within the Heels Act, $10.8 billion is apportioned to the services for section 36 10 costs. We had an opportunity to provide a view on the services finding section off the draft act. The Defense Pricing and Contracting Group provided a view that the appropriation in addition to Section 36 10 paid leave costs mentioned in the text should also be extended to the other category of costs. Other Cove It related costs via reimbursements for equitable adjustment. It’s no secret that the U A. That the US is it cyberwar Every day. Cybersecurity risks threaten the industrial base, national security as well as partners and allies at the end of January and s rolled out the cybersecurity maturity model certification or see MMC. The C M M. C is the D o d metric to measure a company’s ability to secure its supply chain. Throughout the CM’s EMC development process, the number one priority has been to communicate, communicate and communicate again. Industry associations, academia, the military services and Congress continue to collaborate in an effort to hear all concerns and suggestions now that the department has released the Sea MMC model, the focuses on the following implementation activities one. Supporting the Defense Federal Acquisition Regulation supplement or D Fars Rulemaking process to completing a no cost contract with the newly established see MMC accreditation body, known as the C M M C. Dash a B three Registering and training candidate. See MMC third party assessment organization assessors called C three p a hose four. Conducting additional risk reduction through see MMC Pathfinders and pilots and five developing the Sea MMC database infrastructure. The department is currently supporting the rulemaking process for the proposed de Fars rule on C MMC Implementation. The department and the C M M C A B also signed a memorandum of understanding, or MOU on March 23rd. The department issued a press release on June 1 regarding the signed Emma Mou with the C, M, M. C. A B and the anticipated definitive ization of a no cost contract in the near term. The C M M C A B started registering candidates. See MMC third party assessment organizations and assessors In late June, the C M M C A B conducted initial training off mock assessors for CMM sea levels one through three from June 27 through July 1. 2020 O. C i S O A and the Missile Defense Agency are completing a C MMC Pathfinder on an existing contract. The Pathfinder encompasses acquisition tabletop exercises, training of mock assessors, conducting mock assessments that are non punitive non attribution off a prime contractor and three subcontractors on an existing contract. And the demonstration off CMM C A B processes O C I S O A an a D o d stock Stakeholder will initiate a second. See MMC Pathfinder on an existing contract in September 2020 that conducts additional non attribution non punitive moxie. MMC assessment for subset of the contractors. In addition, O. C. S O. A. Is working with the services and agencies toe identify new contracts for C MMC pilots. The’s pilots will be implemented on new D o D contracts to further reduce the risk of C M M C phase rollout by focusing on the flow down of controlled unclassified information called Kui for Short and see MMC requirements through the supply chain and conduct of mock mock see MMC assessments, the Pathfinder and pilot assessments will not result in a sea MMC certification. The office of the CIS o r O C I. S O. A is working with the Defense Information Systems Agency, DISA Enterprise, Mission Assurance Support Service UM, or E Mass Program Management Office to develop CMM C E Mass, which will serve as the D. O. D. Database or infrastructure for C MMC assessment reports, certificates and Data Analytics. The initial development for this is planned to start this month. The certification body will train and credential candidate assessors and a credit See MMC third party assessment organizations. In fact, the first see MMC training course for candidate assessors is also on track for this month. August. Finally, the Sea MMC team is currently working with global partners on C MMC efforts, including Canada, the UK, Denmark, Italy, Australia, Singapore, Sweden, Poland, Israel and the U cybersecurity body. There is potential for these countries to adopt US standards, which is really very exciting. Before closing, I would like to take a moment to mention a project regarding small business transformation toe other than small business classifications. As most of you know, many small businesses expend considerable management resource is tow. Avoid the burdens that they would face if they were to lose their qualification. As a small business, as the revenue or employees growth surpasses the limit for their particular naics code, these small businesses risk losing the majority of their work that stems from small business set asides drawing their transition of the 1013 North American Industry Classification System, or Next codes. 553 use an annual revenue standard, or threshold, making it challenging for small businesses to manage growth, especially for companies who conduct business that falls into more than one makes codes. Our industry Industrial Policy team participated in a trade industry call on August 5th, where small business growth management was raised. We are working with the trade associations as we move forward to collaborate with the interagency toe address. Small business concerns enclosing the D. O. D acquisition system provides over $320 billion annually. TOE are partners in national security. Many of those partners are service contractors. Service contractors play a key role in cyber resiliency assessments Across the department between the office of the undersecretary of defense for acquisition and sustainment and services, contractors have been key in integration of weapons system and critical infrastructure cyber assessments translating this risk to combat combatant commander missions. In doing so, service contractors also play a key role in the cyber resiliency of the defense. Industrial base service contractors have helped translate and integrate existing standards, such as the National Institute of Standards and Technology NIST number 171 into a viable certification program called the Cyber Maturity Model Certification that we’ve been talking about or see MMC. I’m incredibly proud of the efforts of D. O D service contractors and their contributions to help mitigate the impact of the ongoing cove. It 19 crisis implementation of a D. O. D Service Partner Tool prevented an estimated $500 million from going toe our adversaries to purchase counterfeit products, reduced fraudulent orders for product that never existed and eliminated price gouging from suppliers. The tool was instrumental in assisting the Federal Emergency Management Agencies or FEMA’s Cove in 19 task force to provide mission critical delivery of ventilators, testing kits and pharmaceuticals by vetting and consolidating sources of supply, predicting capacity requirements and thorning adversarial influence. Most importantly, our ability to use contractors to support an interagency coalition save lives and ensured our frontline workers have the protective gear they needed during the height of the crisis and well into the future. With that, I want to thank you for the opportunity to address you. Today. I’ll turn it over to you, Dave, for questions. Thank you, Madam Secretary, for sharing all those thoughts with very good survey of a wide array of efforts that you’ve had under way. And, of course, you’ve been most generous. Not only with your time here, it’s morning with us, but overall in terms of working with with PSC and and I remember companies as well as some other associations and making sure that that dialogue on all these issues have been very robust in ongoing There’ve been a number of questions come in. If you got a couple of minutes, I’d like Teoh bring a few of them up for your consideration on the adaptive acquisition framework we push out to our members as you issue these new policy memos and then ultimately, the D O D instructions. What are you doing internally? You mentioned Eau earlier on the software side. What are you doing internally to move these out there? As you well know, most people don’t get up in the morning and say, Is there another memo from your undersecretary, right? Yeah. How do you push this out? So it’s in the program of the tens of thousands of program officers and contracting officers out. We communicate, communicate, communicate. And I do that a variety of ways. Um, I talk about this at the Secretary of Defense’s staff meeting where we are. So the senior leadership team knows what we’re doing. Obviously, my entire team. Kevin Fahey, Stacy Cummings. Ah, whole number of people are constantly reaching out and meeting with the service action officers to make sure that what we’re doing is meeting the mark, so to speak, that it’s usable that it’s clear we put together all kinds of easy reference materials. For instance, one of my favorite trifles, which we hand out all the time show hasn’t quick reference here as to what the pathways are We are training in de au, both through real time processes, getting out, talking about the different pathways as well as having workshops. I also meet bi weekly with the service acquisition executives, and we brief them on an ongoing basis. And this is a two way conversation we wanna learn as we go. Most importantly, we have Pathfinder projects to continue toe work with it. We also under our acquisition enablers team in, um ASD acquisition. We have Dave Cadman and the team holding regular meetings with all the functional groups, all the agencies, all the services where we talk about where we are and what needs to be done. This is, ah, highly coordinated process that, frankly goes through are formidable, very formal coordination process in the building. So everything is actually signed off. But we need to tell our stories about how it is speeding up acquisition. I think each of the services are doing that. In fact, just one final comment on that I had the opportunity earlier this week to sit down with General Siku Brown, who I think is everybody knows is taking over as chief of staff of the Air Force. I’m sick use an operator, and in my discussions with him I said, Listen, I just really would like to talk about the adaptive acquisition Workforce he said. Oh, I went to D A. You for a four hour primer just so I would know what was going on. And I was so excited that he made the connection between getting capability down range to the warfighter more quickly and what we were doing with middle tier acquisition and a variety of other things. So that’s what we need. We need the users to understand the tools we have and our acquisition professionals, whether they be program managers or contracting officers to be creatively compliant, not be scared to get out there and try something new, Thank you very much. And we appreciate those efforts. And, of course, you mentioned Stacy Cummings, Dave Cabin. We’ve hosted them before and actually would probably like to have him back for another round, on particular on the software update before it before it’s finalized and promulgated. I think there’s a lot of progress we can make in that regard. Yeah, In fact, Tori Cough, who works as one of our key members of the team has really been focusing on how you do the contracting for that as well. Eso we should have her as part of that as well. Absolutely as you well know. You know, most of industry doesn’t buy software through labour hours and labour categories. They buy it by results, but all too often, D o. D is still in fact procuring input rather than results. And so I think those changes would be very welcome for us. Great. Let me talk a little bit about section 89 b, and you mentioned the interim rule. Andi initial efforts. It is two part question here. One is what are you doing to make sure contracts were still awarded on O D o. D has put out guidance. But again, not everybody wakes up in the morning and says, What’s the latest memo? Ham. In addition, not you, noted the comment period, you know, ah, comments for the interim rule, even though it’s in in rule and takes effect today. The comment period is still open for another month, and one of things we do at PSC is we watch the results of the initial implementation. We incorporate those into our comments We had some success back on Section A last year in terms of getting the final rule be improved from the interim rule. How can we work with D o. D on your initial results? First of all, how you make ensure contract still get awarded. And how can we work with whatever initial results pop up from this implementation to make sure we can reflect those in our comments a month from now? So we have a dynamic tension here. Obviously, it’s challenging, changing. A lot of contracts were trying to be able to do class changes. I’m still working on that. We also have Kim Harrington and the team spending ah, lot of time with contracting officers trying to get them to incorporate changes into contracts before, um, you know, everything goes live here August 13th. But most importantly, we need feedback, and that’s where the industry associations are absolutely invaluable to us. What we want is we need to hear we want to listen to what’s going well and what’s not. What you could personally do is make sure that you have the infrastructure, if you will, to gather that information above and beyond what we get from individual contracting officers. With industry coming back on individual contracts and tell us what the biggest challenges are, what’s working, what’s not working. I know we’re all aligned in that we do not want adversaries in our supply chain. We don’t want further theft of intellectual property. We don’t want these nefarious actions going on. But how do we get the language into the contracts? How do we practice the behaviors of ensuring we understand what we have in our supply chains for telecommunications equipment on and so forth? What we need to do is continue to hear from you to the degree which you can organize that information coming back give it to us in a format where it’s aggregated under major themes than with specific proof points to support each of those themes. That’s what would work really, really well. And I know Kim Harrington would be incredibly appreciative. We will certainly undertake to do that. You mentioned earlier the comments that you receive from industry on the initial 30 16 reimbursement guidance right. We have three days to turn those comments. Around 12 of those 100 pages that you mentioned came from PSE and we’re organized with our members to make sure we do that on 89 b s. Well, so thank you very much for that. Yeah, and I’ll tell you is just briefly what we do with that. That’s not only for our own information and interest, but that allows us to take it to Congress and give them proof points on things we’ve been saying, but perhaps sound a little anecdotal coming from those of us within D o d. But when we have those real life examples, it’s very, very helpful. Thank you. We know you’re using them. It makes it a lot easier for us to collect them and aggregate them. And of course, we anonymous him so that no individual company is putting themselves at risk by may be making a negative comment about something that might be happening inside the department Exactly, and that’s a huge, huge benefit that the industry association served. So one final question you mentioned, of course, 30 16 and we already talked about that. There’s also a couple of questions on you did issue a memorandum on progress payments, increasing progress payments both for small businesses and for larger businesses, and I know that that memorandum extends the change indefinitely, right? There’s no in date to it. But, as you well know increasingly are. Companies depend upon the financial sector for everything we do day to day, right? And everything the financial sector does is they want certainty. They want something that they can build into their models. Right and indefinite doesn’t fit the definition of certainty. What would you need tohave to consider making that guidance on progress payments not be indefinite anymore, but being the permanent, that is, until it changes again. You know, we do change progress payments. What would it take for you to consider doing that data data data with the only criticism we get in terms of changing the progress payments is a perception that it primarily benefits large primes. And it doesn’t benefit small companies. We can have the large primes talk about flowing down progress payments. How much cash is moving that half of the equation? What we need is the feedback from the smalls, especially as well as mid tier companies saying this was flowed down, tow us. We received it. It made a difference. It saved jobs. It kept us are small company being part of the defense industrial base. If you could gather that, that would be immensely helpful. We’ll undertake that as well. I’m taking a lot of homework assignments away from this conversation, So thank you. It’s a piker ship. In one final point, you mentioned the small business on and you know it is. It is Teoh us. Ah ah, riel. Sad thing that the only place in America where our public policy punishes economic growth is in the small business set aside world where if you grow, you lose, right? PSC undertook some work on this Ah, a couple of years back and were provided that information to your staff already on this where we showed that basically, if you graduate from the a day set aside program a decade later, 60% of the companies that were under a day are no longer getting government prime contracts and the 40% that are on average or getting smaller contracts and they were getting when they were in the set of Piper. We need a policy that promotes growth that rewards growth rather than punishes growth and makes it impossible for companies to succeed. So we really applaud you doing that and we’ll work with you going forward. Excellent. Amy Murray’s the point of contact under industrial policy, So I fully well realized that this is an interagency problem. But defense, I think, can be a huge advocate and perhaps try to drive some changes. One of the things that we know in the acquisition world is that if we can get it d o. D. To make the change, we can move it to the rest of the federal government as well. And so, having us the bellwether and the leader on this, it will make a great deal of difference. And we’ll work carefully with you. Miss Lord, I want to thank you for spending the time with this today. You’ve been very, very insightful and very generous with both your time today, but also with that partnership in collaboration with PSE and the other association to represent our industry is you see, as you know, our folks are just is committed to mission success, justice commissioned, committed to readiness and sustainability around the world. Justice committed to defending the freedom of America as the men and women in uniform and the federal civilians Did you have working there. In fact, many of us came from there, right? And so all that commitment is there. You keep building on it, were at your side and working with you all the way. So thank you so much. We’re gonna take a 10 minute break now and we’ll see you. The audience back here for the first panel, which actually picks up nicely from the comments. One accelerating D o d. Modernization through digital transformation. Thank you very much. Thank you, Miss Lord. Thank you.