Thursday, March 24, 2011

Are low-profile, quick-turnaround military contracts replacing the traditional procurement process?

Posted by John Keller.

Defense industry suppliers tell me that military solicitations and contract awards moving through traditional procurement channels have slowed to a trickle, as military program managers safeguard their budgets by delaying or cancelling procurements that had been in the pipeline. That's the bad news.

The good news is that RFPs and contracts moving through non-traditional procurement channels appear to be picking up. These kinds of procurements typically involve small-scale, quick-turnaround contracts for urgently needed component replacements and upgrades that often take place right in the field.

The military seems to be moving in the direction of these quick procurements because they can be kept at a low profile, often involve limited numbers of platforms, and are kept spread out and reasonably priced. Translated, that means the military services can keep their weapons systems functioning and up to date with reduced threat from the bean-counting budget cutters in the Pentagon.

This seems to be a win-win situation for the military services that need new technology, as well as for defense suppliers providing subsystems like embedded computing, rugged displays, and high-reliability data storage. Those in the defense industry can maintain their cash flow while they wait for traditional procurement channels to open up once more -- if they ever really do.

There's a dark side to this approach, however: those in the defense industry are losing trust in the traditional procurement system. It's possible they are becoming less inclined to respond promptly to traditional procurement programs, and sometimes are reluctant to submit bids at all, where in the recent past they would have been jumping on these programs with enthusiasm.

"We have to be extremely sharp in choosing the horse we want to ride, so we can be reasonably sure the horse will finish the race, and not go lame in the process," one supplier told me recently.

Perhaps there's a silver lining to all this. This could be the beginning of the kind of organic defense procurement reform that ultimately could speed all kinds of military technology procurement, and lessen the instances of these monolithic procurements that take forever, cost billions, and succeed only in fielding obsolete technology.

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