Background: The U.S. Air Force has sponsored a number of SEI Independent Technical Assessments (ITAs) on acquisition programs that operated between 2006 and 2009. The programs focused on the development of IT systems, communications, command and control, avionics, and electronic warfare systems. This blog post is the second in a series that identifies four themes across acquisition programs that the SEI identified as a result of our ITA work. Other themes explored in the series include misaligned incentives, the evolution of science projects, and common infrastructure and joint programs. This post explores a related second theme, the need to sell the program, which describes a situation in which people involved with acquisition programs have strong incentives to "sell" those programs to their management, sponsors, and other stakeholders so that they can obtain funding, get them off the ground, and keep them sold.

The Second Theme: The Need to Sell the Program

Many studies have noted that defense suppliers are consolidating (becoming larger and fewer), and that future DoD budgets will likely shrink. To use scarce resources more effectively, DoD acquisition programs are increasingly combining multiple capabilities into single systems, meaning that there are fewer programs for which the smaller number of defense suppliers must compete. The consequence is that acquisition program awards become "must-win" competitions for those suppliers. In such an environment, it becomes critically important for acquisition program participants to "sell the program" to their management, sponsors, and other stakeholders so that they can obtain and keep their funding.

A recent study on reforming defense acquisition found that in many situations "the acquisition culture has become an environment that promotes 'selling' programs and includes behavior fraught with unfounded optimism and parochialism." Such an environment creates incentives for acquisition program management and staff to sell the program and keep it sold by

• exaggerating the value of the system to the user or warfighter to raise its perceived importance
• underestimating the system's cost to make the price tag more palatable
• defining ambitious requirements that promise substantial jumps in capability, to increase the system's attractiveness to stakeholders
• impact its viability
• downplaying adverse information about the program or system
• delaying risky or complex tasks that could cause poor results or failure
• deferring longer-term investments (such as sustainment planning) that are critical, but provide no visible near-term "selling point" for the system
• minimizing real-world test and demonstration activities (such as comprehensive operational tests) that might reveal issues and
• using more advanced, and (unfortunately) sometimes less mature, technology to promise superior system capability.

So why is the SEI looking at these issues? Because the role of software in defense programs has increased dramatically and continues to rise, and thus complicates these issues. For example, the complexity of software estimation actually promotes underestimation, since it increases the inherent uncertainty of the cost. Also, the ease of deploying upgraded software to already fielded systems to improve capability is very attractive--but requires even more up-front sustainment planning, rather than less.

Contractors also often have a vested interest in "selling the program" through underbidding and other activities. If the program is either not awarded, or cancelled, there is no income. As the GAO noted last year, there are "...prevailing pressures to force programs to compete for funds by exaggerating achievable capabilities, underestimating costs, and assuming optimistic delivery dates."

Our concern is that in situations when all these incentives come together, the annual funding process creates a competition in which "success" is measured more in terms of the ability to obtain the full amount of the next year's funding, rather than delivering promised capabilities on time to the warfighter. In short, the goal becomes maintaining the perception of high value and good progress for as long as possible.

The resulting push to "sell" programs is a root cause for many of the recurring acquisition problems that we see in our work, including acquisition programs that run over schedule and budget. We can see how certain actions, such as underestimating costs and overpromising results, directly lead to schedule pressure due to the cost of development staff. Likewise, the use of less mature technology raises risk, which frequently leads to schedule and cost overruns. When taken together, these incentives all push programs in the same direction: running over cost and schedule, underperforming, reducing functionality, and diminishing quality.

The existence of an incentive to follow a particular course of action does not necessarily mean that the incentive will be successful in producing that behavior. Our goal at the SEI is to gain a better understanding of this problem so that incentives in acquisition can be aligned in such a way that they benefit the individual and the group, as well as the government and country. Acquisition program management and staff should not be forced to choose between what's best for them and their program versus what may be best for their service or country. When faced with these kinds of misaligned incentives, most people believe they have the integrity to "do the right thing." When implicit incentives are built into the acquisition system, however, they encourage the acquisition community to overstate value, understate costs, use immature technology, and minimize risks and problems. When these incentives exist, there is often pressure to act accordingly, despite the best of intentions by participants in the process.

As we look toward addressing this particular aspect of misaligned incentives, we face the same challenges that we laid out in the blog entry on the first overarching theme in acquisition. We need to start addressing each of these implicit incentives in the acquisition system. We begin by shining a light on them and recognizing them as counter-productive influences that often weaken--not strengthen--DoD readiness and effectiveness. The next step is to help inform the acquisition community about these issues, show them how they occur, and equip them with a toolkit of methods to counteract them to better serve warfighters and taxpayers.

New research at the SEI is applying analysis and modeling tools to characterize acquisition behaviors and assess the effectiveness of different techniques for aligning incentives. We are developing interactive exercises that can be used in both classroom and eLearning contexts to help the acquisition community find ways of better managing the development of our essential defense systems.

This is the second in an ongoing series examining themes in software-reliant acquisition. New installments in the series will be published over the next several months on the SEI blog, where a new post is published every Monday morning.

Additional Resources:
Check back for a forthcoming SEI Special Report An Analysis of Recurring Issues Found Across 12 U.S. Air Force Software-Reliant Acquisition Programs.