1. Operationalize data
Data is currency in the modern global economy and the foundation for defense procurement. Improved data capture, management and evaluation will enable defense organizations to build more robust and accurate cost models for planning, and measure performance.
The central tactic is unlocking the power of structured and unstructured data to properly measure costs across the defense acquisition life cycle. Whether this is through cost profiles per assets or rigorous benchmarking costs in each gate of the acquisition process, the application of data to the procurement process is vital.
2. Adopt leading technologies
Blockchain technology and advanced analytics enable organizations to manage risk, and effectively assess, evaluate and manage assets through the supply chain. Blockchain technology will enable defense organizations to securely and transparently track all transactions through a decentralized, heavily encrypted ledger. Its application to the procurement life cycle is enormous.
When used on top of existing enterprise planning systems, these technologies allow for a fully transparent view of supply chain and performance costs.
3. Rationalize cost levers
Innovation cannot accelerate without examining the cost levers of the procurement life cycle. Across the value chain, four consistent levers — demand, source, fulfill and manage — apply to deliver a holistic, quantitative evaluation of the acquisition life cycle and, in turn, tie the appraisal to performance goals.
This means strategic, management and operational level metrics that tie together and are integrated into performance goals, such as costs, savings, efficiency, effectiveness, people or organization, and stakeholders.
4. Reinvigorate the procurement life cycle through total cost of ownership
Controlling the life cycle costs is a top priority for defense organizations, and staying on budget isn’t always enough. The acquisition process typically focuses on the most visible cost — the acquisition
price — while failing to recognize all of the underlying costs that have a significant impact on the overall cost.
Where “should cost analysis” and “performance based logistics” fall short, the total cost of ownership models add significant value. This will provide a holistic view into the costs throughout the acquisition life cycle.
Controlling costs in defense procurement does not imply that poor or arbitrary decisions to cut costs should be made that result in short-term savings at the expense of longer-term costs, and especially to the determent of the modernization agenda.
The four core principles can be applied to any acquisition program and any size of equipment, and can address the structural deficiencies in the acquisition process.