Background. The Department of Transportation 1996 Appropriations Act (PL 104-50) exempts the FAA from many existing Federal procurement laws and regulations, and it directs the agency to develop and implement a new acquisition management system by April 1, 1996. The FAA convened a Blue Ribbon Panel to provide outside expertise in reforming its acquisition management system. This report provides the panel's independent assessment of the FAA's acquisition reform efforts.

Reform Requirements. The Blue Ribbon Panel believes that reform is needed in four major areas to ensure that the FAA's acquisition management system adequately supports the FAA mission of providing a safe, effective, and efficient civil aviation system. In order of importance these four areas are: (1) creating a culture of excellence and transforming the Research and Acquisition (ARA) work force into a high performance organization; (2) reforming the acquisition management system; (3) reforming the budget process to ensure that the FAA is adequately funded and has the necessary budget flexibility; and (4) reforming and streamlining the FAA's procurement process.

Assessment of FAA's Acquisition Reform Effort.The panel believes that the new acquisition management system proposed by the FAA is an excellent start toward meeting the reform goals in acquisition management and procurement. The FAA's acquisition reform working group has been very successful in accomplishing its task. These reforms must be continued through an aggressive implementation program that will propel the FAA toward the continuous changes necessary for creating a system that fully emulates the best practices of world-class commercial organizations.

While the FAA has made significant improvements in the acquisition and procurement policy arenas, the panel has serious reservations concerning the personnel and budgetary reforms needed to support meaningful change in the acquisition management system. The Blue Ribbon Panel has developed specific recommendations for FAA and Congressional actions necessary for continued success of the acquisition reform effort.

Personnel Reform and Excellence in the Acquisition Workforce. While the personnel reform initiatives developed by the FAA will provide the ARA line of business with the flexibilities needed to transform its work force, the timetable for FAA-wide implementation of personnel reforms is unacceptable. The ARA line of business must be given permission to immediately pilot innovative personnel practices in hiring, performance management, compensation, incentive awards, etc., and invest adequate resources to jump-start transformation of the acquisition work force into a high performance organization.

Acquisition Management System Reform. The Blue Ribbon Panel believes that the increased flexibility, focus on lifecycle management, emphasis on external customer and supplier involvement, and empowerment of integrated product teams (IPTs) contained in the new acquisition management policy are steps in the right direction. The panel is concerned, however, that the priority selection process (i.e., requirements process) proposed by the FAA will not ensure the appropriate balance between meeting operational needs and taking advantage of technological opportunities (for cost reductions and safety and performance enhancements) within the resource constrained environment of the future. The panel believes that the FAA must establish an organization that functions as a high level advocate for non-traditional solutions and opportunities offered by advanced technology.

Budget Reform. The Blue Ribbon Panel was provided no tangible evidence of progress on the budgetary reforms needed to ensure successful implementation of the acquisition reform effort. The panel believes that budgetary reform is needed in two broad areas. First, the FAA must have a means to ensure adequate and stable multi-year funding for major acquisition programs, including the transition training and other support necessary to bring new systems into the FAA inventory. Second, the FAA must have the flexibility to manage its funds without constraints imposed by line item program allocations and barriers related to different appropriation sources. This funding flexibility must be matched with increased visibility and accountability in FAA's capital program to ensure that the FAA responsibly manages public resources to deliver results. The FAA must make internal changes to its budget process and aggressively work with Congress to obtain the necessary legislative reforms in the financial arena.

Procurement Process Reform. The FAA's new procurement policy represents a significant advancement over past practices. The FAA must now aggressively implement this policy and continue making changes needed to exceed the interim goal of a 50% reduction in the time required to award contracts. The FAA must continue to evolve its policy in the areas of price analysis, cost accounting standards, and performance-based contracting.

Implementation. The Blue Ribbon Panel believes that the FAA must establish an acquisition reform implementation group reporting directly to the FAA Administrator to continue the reform momentum and ensure that the necessary culture changes occur throughout the FAA.

Congressional Support. Congress must continue to play a critical role in supporting the FAA's acquisition reform effort by ensuring that the FAA has the flexibility to provide sufficient funding to transform the acquisition work force. In addition, Congress should pursue budgetary reforms that will provide stable, multi-year budgets for major system acquisitions and allow the FAA to more flexibly manage its own funds. Finally, Congress must resist imposing any new restrictive regulations on the FAA in response to mistakes that are likely to occur during transition to the new acquisition management system.

In recent years, the performance of the Federal Aviation Administration (FAA) has come under intense scrutiny and criticism by the aviation industry, independent evaluation panels, the General Accounting Office (GAO), the National Transportation Safety Board (NTSB), Congress, the news media, and most importantly the U.S. traveling public. In many instances, attention has been focused on the National Airspace System (NAS) infrastructure and the long time periods required for the FAA to field major systems needed to modernize the nation's air traffic control system. It is clear that the FAA's acquisition management system requires a major overhaul to support the FAA's mission of maintaining a safe, effective, and efficient civil aviation system and to support a competitive aviation industry.

The Department of Transportation (DOT) 1996 Appropriations Act (signed into law by the President on November 15, 1995) provides the FAA with the opportunity for major reforms in both the acquisition and personnel management arenas. The legislation exempts the FAA from many of the existing Federal procurement laws and regulations including the Federal Acquisition Regulations (FAR). It also clearly indicates that Congress expects the FAA to reform its entire acquisition management system. The FAA's new acquisition management system is mandated to take effect on April 1, 1996.

The Appropriations Act also makes it clear that the FAA should take maximum advantage of outside expertise in reforming its acquisition management system. Accordingly, the FAA established a Blue Ribbon Panel, including 13 outside experts in acquisition reform drawn from industry, academia, and other government agencies. Appendix A provides a complete listing and brief biographical summaries of the external Blue Ribbon Panel members.

The Blue Ribbon Panel's role in FAA's acquisition reform effort was two-fold. First, the panel met regularly with the acquisition reform working group during the design of the new acquisition management system to provide input, assist the FAA in obtaining lessons learned and benchmarking data, and critique the concepts developed by the FAA. Second, the panel was asked to prepare a final, independent report assessing the new proposed acquisition management system.

This document represents the Blue Ribbon Panel's assessment report. The report begins with a brief overview of the Blue Ribbon Panel's perspective on the three goals and context against which the FAA acquisition reform effort must be viewed. The next section of the report describes five key elements that will determine the ultimate success or failure of acquisition reform at the FAA. The report concludes with the panel's overall assessment of the FAA acquisition reform effort and recommendations for actions that must be taken by the FAA and Congress to ensure continued success in the reform effort.

Ultimately, the FAA's acquisition management system must be judged in terms of its impact on the ability of FAA to successfully accomplish its mission. More specifically, the new FAA acquisition management system must be evaluated in terms of whether or not it accomplishes three goals that underlie the reform effort:

• Increasing the speed with which the FAA acquires new technology, systems, and services;
• Acquiring high quality products and services to support the FAA's safety mission and improvement in services provided to internal users and external customers; and
• Making major system acquisitions and operations more affordable for the government, suppliers, and ultimate users (e.g., airlines, flying public, etc.) of the civil aviation system managed by the FAA.

The changes required to accomplish the goals listed above involve much more than simply taking advantage of relief from external procurement regulations provided by the 1996 Appropriations Act. While procurement reform alone will have a positive impact, the full benefits of acquisition reform can only be achieved with corresponding reforms in the FAA's personnel and financial management systems. The productivity of the acquisition work force must be enhanced if the FAA is to meet the goal of increasing service while decreasing costs. The current acquisition management work force lacks the necessary competencies, organizational culture, and performance incentives needed to fully realize the potential gains to be reaped from an acquisition management system emulating the best commercial and government business practices. Likewise, the FAA will be unable to acquire new technology more rapidly or achieve significant cost savings if acquisition reform is not accompanied by financial reforms. These reforms must result in more stable multi-year funding and provide the FAA with greater budget flexibility to take advantage of technological opportunities and incentivize its work force. The agency must be able to allocate or reallocate funds according to priorities defined in its strategic planning process.

In evaluating the FAA's progress toward accomplishment of the three goals described above, the Blue Ribbon Panel identified five elements essential to successful acquisition reform. The following five key areas were used to organize the panel's recommendations and to guide its assessment of the FAA's acquisition reform effort:

• Overall acquisition management policy and process;
• Procurement policy and process;
• Personnel reform and the acquisition work force;
• Financial reform and budget issues; and
• Implementation and sustainment of acquisition reform in the FAA.

The next section presents the panel's view of what is required in each of the five key elements in order for acquisition reform to be successful at the FAA. The description of requirements for each element is followed by the panel's assessment of the progress the FAA has made in meeting these requirements in the new acquisition management system to be implemented beginning April 1, 1996.

Element 1: Overall Acquisition Management Policy and Process

Requirements for Success

The Blue Ribbon Panel believes that the FAA's new acquisition management policy must address the full range of acquisition-related decisions that occur throughout the life-cycle of major high technology systems. The new FAA acquisition cycle (as shown in Figure 1) must be a continuous one, wherein new mission needs are constantly being satisfied and new technological opportunities to improve services or reduce life-cycle costs are being inserted. Because major elements of the FAA infrastructure are information-intensive, and since the technology in this area is evolving very rapidly, it is no longer practical, or desirable, to think of systems that are developed and then put in place for decades. Rather, one must conceptualize a process in which new systems are developed and deployed in only a few years and then continuously upgraded, taking full advantage of the improvements offered as the technology rapidly evolves. The mind-set, then, is one of continuous mission improvement-albeit providing for the insertion of advanced technology only after it has been thoroughly proven.

The corresponding FAA acquisition approach for major systems should be modular in nature. The modules should be structured to allow early technology insertion and upgrades in system capability as the acquisition progresses from one module to the next. To the maximum extent possible, the approach should make use of commercial products and services. The outcome is an acquisition system that yields maximum fielded performance in the shortest possible time and at the lowest cost and risk.

Figure 1

Mission Analyses. The first key element in an acquisition process is the decision as to which investments to make. This decision should be driven by four considerations:

• New mission needs that develop as a result of experience, input from external customers (e.g., airlines, general aviation, DOD, etc.), and/or anticipated changing environments (e.g., dramatically increased air traffic);
• New technological opportunities that are often based on non-traditional approaches that offer a significant improvement in system performance and/or in reduced system costs (e.g., the shift to a GPS-based air traffic control system);
• The desirability of incremental product improvements in current systems as technology evolves (such as the ability to greatly improve the reliability and/or maintainability of deployed systems); and
• The short- and long-term constraints on resources available to the FAA for acquiring, operating, and maintaining its systems.

As shown in Figure 1, the FAA must create an organization that includes participation by external customers/users, operators, maintainers, and developers. The organization must be staffed with analysts who are capable of performing detailed mission analyses and tradeoffs among the various alternative ways to satisfy new mission needs and/or to take advantage of new technological opportunities (which may enable development of entirely new operational concepts). These analyses must be conducted taking into consideration short- and long-term resource constraints. The analyses must consider a wide variety of alternative solutions ranging from those associated with different operating and maintenance approaches to those that arise from purely technological alternatives. Prioritization among the various needs and opportunities can only be done when first order estimates of cost, performance, and schedule are made for each of the solution alternatives. These first order estimates must address the total life-cycle costs of the alternatives, not just initial investment costs. There is a relative priority among the mission needs that must be established by the system's internal users and external customers, and this must be a key part of the overall mission analysis activity.

Additionally, because there is always a natural tendency on the part of current system users and operators to limit their considerations of new systems to only those with which they have had extensive experience, it is necessary for the FAA to establish (within the overall acquisition organization) both the investment resources and management organization needed to contract for the demonstration of non-traditional solution opportunities. This organization must function as a high level advocate for non-traditional solutions within the FAA (e.g. similar to the Advanced Research Projects Agency [ARPA]). The organization would take “demonstration systems,” developed with strong user involvement, up to the point at which they could be entered for consideration of significant corporate investments as part of the overall mission analyses.

Investment Decision. The “investment decision” is the single most critical milestone for many new FAA systems, and must be a “corporate decision” made by all key stakeholders (e.g., the internal and external users, operators, maintainers, and government acquirers). The "investment decision" is a commitment and prioritization of resources adequate to support the total lifecycle costs of the chosen system. From that point on, the implementation of the acquisition process begins. In some cases, this will simply be the purchase of commercial equipment; in other cases, it will require special-purpose development of a new system. These systems should be based primarily on commercially-available and reusable subsystems and software. Because systems will be frequently upgraded, FAA should maximize the use of commercially-accepted interface standards and open architecture design in its acquisitions to facilitate upgrades. The new acquisition management process should be aimed at rapid development and deployment. The individual acquisition cycles should be tailored to the specific system under development and/or procurement. Additionally, to create incentives for achieving high-performance at low cost, it is desirable to maintain competing options as long into the acquisition process as possible (based on well defined return-on-investment and cost/benefit analyses). Similarly, to assure that the total life-cycle cost of the systems is considered, greater emphasis must be placed throughout the acquisition process on the production and subsequent operating and support costs of the new system.

A key element of the management of the new acquisition process is the “partnering” relationship that must be developed among the government acquisition community, operators, maintainers, external customers/users, and industrial suppliers. This partnership may be developed through the use of Integrated Product Teams (IPTs) that include members from all of these communities. The partnership must be maintained throughout the entire acquisition cycle. As the new system evolves, there will be continuous need for trade-offs among performance, cost, and schedule based on the rigorous, predetermined baseline. Therefore, the major parties must all be intimately involved on an on-going basis.

Solution Implementation. The solution implementation phase that occurs after contract award is also a critical area that must be addressed in the acquisition management policy. A number of the FAA's most notable problems in major system acquisitions have occurred after contract award. While the changes in early phases of the acquisition cycle recommended above will reduce the risk of some of these problems, the acquisition and contract management policy of the FAA must strengthen the FAA's formal change control process to minimize requirements growth resulting in schedule delays and increased costs. Incentives must exist to encourage both contractors and the acquisition work force to deliver quality products within the performance, schedule, and cost baselines established at the time of the investment decision. The IPTs must be staffed with competent, well-trained individuals who are capable of accepting the empowerment offered by the new acquisition management policy. Finally, an appropriate level of awareness and oversight by senior FAA management must be retained in the system.

In-service Decision. The second key corporate decision point (as shown in Figure 1) is the decision to place the system in service. At this point, a reevaluation of the continuing, priority need for the system must be made, as well as its affordability and its effectiveness. Again, all stakeholders (internal and external customers and government acquirers) must take part in this “corporate decision.” It is particularly important to realize that once the in-service decision has been made, the management of the system does not stop; rather, at this point the IPT (in conjunction with the system sponsor and users) begins to evaluate the system’s performance in service, and to consider its evolution toward lower operating costs and performance enhancements.

Assessment of FAA Progress

The overall acquisition management policy and process proposed by the FAA is similar to that recommended by the Blue Ribbon Panel. The IPTs recently established by the FAA are also a step in the right direction. The primary concern of the panel members is the FAA's ability to strike the appropriate balance between assessment of operational needs and identification of technological opportunities within the context of the resource constrained environment they will experience over the next decade.

The Blue Ribbon Panel has great concerns about mission needs coming solely from the operating organization where incremental improvements are the only changes that may be envisioned. While incremental changes through pre-planned product improvements are often desirable, the FAA must ensure that it is open to technological opportunities leading to major paradigm shifts in its operations.

The FAA has suggested that there will be a reduction in the number of new program starts in the future, and the FAA's research and development (R&D) budget is already declining sharply. Both of these trends will drive the FAA toward a focus on meeting operational needs at the expense of exploring technological opportunities. A narrowed operational focus must be balanced by some mechanism that enables the FAA to identify future technological opportunities that could significantly improve service or decrease costs.

Adequate R&D funding and the appropriate organizational structure are needed to ensure that the FAA takes advantage of future technological opportunities. They are essential in view of the rapid changes in information technology and the potential for dramatic performance enhancements and/or cost reductions that will be offered by such potential, non-traditional solutions to FAA needs. The new R&D alliance with NASA Ames represents one creative example of how the FAA might leverage R&D resources.

It must also be emphasized that the appropriate organization and skill mix required for performing the on-going, complex mission analyses and resource tradeoffs described above does not exist within the FAA today. The creation of this organization (with a mix of in-house and contractor support) must be a high-priority initiative if future investment decisions are to be made effectively.

Finally, the FAA's new acquisition management policy must clearly define the roles and responsibilities of FAA organizations involved in key decision points throughout the acquisition process. The lines of authority in early drafts of the new process are often not clear. For example, the current policy does not clearly indicate who has responsibility for the in-service decision.

Element 2: Procurement Policy and Process

Requirements for Success

The FAA's new procurement process must be judged against the best practices currently used by large private sector enterprises in the business of developing or operating large, complex, high technology systems and government agencies that have undergone significant acquisition reform, such as the Air Force. These best practices include:

• A highly trained and motivated acquisition management team;
• Flexibility to tailor procurements to the unique needs of each acquisition;
• Competition that attracts the most highly qualified and efficient suppliers;
• Frequent and on-going communication and constructive engagement with potential suppliers;
• Innovative techniques that minimize proposal development and evaluation costs for both buyers and sellers; and
• Contract management practices that incentivize suppliers to save costs and deliver high quality products and services as well as rewarding competent contractors by establishing long-term, mutually beneficial relationships.

Assessment of FAA Progress

The FAA has structured the new procurement process to give the IPTs that manage major FAA acquisitions considerable flexibility in the way specific procurements are conducted. This should allow the IPTs to be highly innovative if they are well-staffed and operate as a team. The procurement policy could promote this by more clearly stating that the responsibility for critical procurement decisions reside within the IPT. The policy should make it clear that the IPTs are self-contained organizations, empowered to make these decisions with a minimum of external review processes. For example, if IPTs are to be held accountable for meeting aggressive schedules, their progress should not be hampered by lengthy legal review processes.

The accountability for making decisions must also be reinforced in the policy. This must be done in two ways. First, the policy must clearly indicate which individuals have the responsibility for procurement-related decisions. It is not sufficient to attribute decisionmaking responsibility to "the team." The IPT leader, the contracting officer, or another responsible individual must be identified as the decision maker with accountability. Second, the policy must stress the need to define critical success factors for each major acquisition and note that performance rewards and penalties will be specified for both the team and the individuals with decisionmaking authority.

One of the major elements of the new source selection process is increased communication between the parties during the procurement. This increased communication is a result of removing the artificial barriers created by constrained discussions. This is a significant improvement which should lead to better understanding of the agency's requirements and to better contracts.

Another major element of the new source selection process is the use of streamlined competitive approaches modeled on commercial practices including pre-qualified supplier lists, down-select procedures, and a simplified approach for buying commercial items. These are useful tools which can be highly effective. The procurement policy must make it clear that these special techniques are only tools, not mandatory requirements, and that each IPT is expected to exercise sound business judgment in selecting the most effective process and selection criteria for its procurement. The Blue Ribbon Panel strongly believes that competition is the most effective way to acquire new technology at the best value, and that sole source contracting is to be used only when absolutely necessary. The more effective and efficient competitive process embodied in the new policy should eliminate the need for most sole source procurements.

The FAA has a laudable goal of reducing its acquisition lifecycle time by 50 percent. However, to achieve this goal and go beyond, the FAA must continually streamline its procurement processes and train its acquisition personnel. The FAA should also build a highly competent pricing staff that will determine price reasonableness through price and market analysis and move away from the use of cost analysis.

The FAA's new acquisition policy should more strongly encourage contract management practices that incentivize suppliers to reduce cost and deliver high quality products and services. Chief among these practices is the use of performance-based contracting techniques and the inclusion of past performance as a major evaluation criteria in contract award. In addition, the policy should encourage the use of value engineering as a technique to achieve or exceed acquisition goals.

In the inevitable situations where varying degrees of management and technical contractor labor will be required to support major FAA programs but cannot be defined with any reasonable precision, task order contracts may provide a responsive vehicle. The FAA should develop guidelines to help instruct its personnel as to when these vehicles are appropriate, and how to design a task order contract to permit access to the appropriate skill levels, disciplinary expertise, and working conditions which can be foreseen before the fact.

The new procurement policy presents the FAA's planned approach for a new small business utilization program to replace the requirements existing in the Small Business Act. The Blue Ribbon Panel strongly encourages the FAA to continue its excellent record in contracting with small businesses and small businesses owned and controlled by socially and economically disadvantaged individuals. The panel is encouraged by the FAA's emphasis on competitive contracting for procurements set-aside for both of these business communities. However, the panel raised some concerns about the the clarity of the guidance provided for determining when procurements should be set-aside, the appropriateness of the high threshold values set forth in the policy, and the definitions used for the new classification of "very small business." It is clear that the FAA must continue to evolve this section of the policy and develop more detailed guidance on how the policy will be implemented.

In view of the short time available, the FAA has made an excellent start in developing its new procurement policies. However, the procurement policies proposed for April 1, 1996, should be viewed as an interim step. Continuing work over the next few years can lead to a thoroughly modern procurement policy that gives the FAA access to the best firms in a timely manner.

The Blue Ribbon Panel's conclusions and recommendations are not based on a review of the entire system proposed by the FAA, since several major sections of the new procurement policy were still under development at the time this report was prepared.

Element 3: Personnel Reform and the Acquisition Work Force

Requirements for Success

The FAA's mission demands the highest level of excellence in organizational performance in the acquisition, development, and management of complex, high technology systems. This extraordinary performance imperative is on par with such government missions as manned space exploration, nuclear weapons, and cancer research in terms of the requirement for an acquisition work force comprised of highly qualified, high performance individuals with the infrastructure, organizational culture, and tools to assure success.

Successful transformation of the FAA's acquisition work force into such a high performance organization will require considerable changes in the existing culture and the personnel management system. The personnel management system must support the infusion of new talent at all levels within the organization. The system must stress a new approach to hiring, promoting, compensating, and rewarding the acquisition work force. This system should be built on the recognition that there need not be a life-time guarantee for employment and, in fact, should stress that employees could move in and out of the FAA system during their careers. However, the FAA must attract and retain a cadre of employees with critical acquisition management competencies, and for a mission-critical system acquisition, the employees should agree to remain on the team for a major portion of the life of the project.

For example, when a new program is initiated, the FAA might enter into personnel contracts (based on expected performance objectives linked specifically to the program success) with a limited number of key acquisition personnel. Their compensation would be based on that contract and their rewards or penalties would be contingent on achieving or exceeding the agreed-to goals (incentivized as the FAA tries to incentivize contractors). At the end of a successful deployment of the program their contracts would be fulfilled and they would leave or have to renegotiate new contracts for new programs. This would allow FAA to attract well-qualified, leadership-oriented, risk takers who have a track record of delivering-and to compensate and reward them based on their successes.

At the same time the system is infusing new talent into the acquisition work force, it must also support the transition of the current work force into this higher performance environment. This work force contains a significant number of capable employees with the potential to become high performers once they are provided with the opportunities and incentives of the new system. These employees will likely welcome the characteristics of the new personnel system described above.

Other segments of the work force who are not entrepreneurial or who choose to remain as functional experts at a fixed level of responsibility must also undergo development in order to contribute to a more professional acquisition corps characterized by individual and organizational excellence. For these employees, the system would stress development and learning-essentially opportunities which allow the current employee to achieve a defined set of capabilities needed in the new acquisition management system. These individuals must also be recognized as valuable members of the work force whose skills must also be continually refreshed and broadened through opportunities for continued education and developmental job rotations. There will be instances, however, when employees are not continuing to perform or develop and must leave rather than reduce the effectiveness of the team.

Personal development is a shared responsibility: the agency must provide opportunities (such as tuition reimbursement), but ultimately individuals must be responsible for their own development. All development cannot be done during working hours and at agency expense. The FAA should also support and reward those employees who choose to temporarily leave the FAA and gain knowledge and experience elsewhere and then apply it to key FAA programs.

The transformation of the FAA's acquisition work force into a high performance organization can draw upon the lessons learned in other model government organizations that have been created through innovative approaches to human capital, public-private partnerships, and liberation from bureaucratic constraints. Some of the more salient sample programs and strategies used to create organizations characterized by exceptional high performance include:

• DOD PL 313 Program - A strategy to attract and motivate high level scientific talent through special compensation and job definition flexibility;
• Rickover Program - A strategy to recruit the brightest and the best in the field of nuclear propulsion R&D through imposition of extremely rigorous employee screening and intelligence and accomplishment standards; all employees were given difficult assignments and held accountable for exceeding their goals;
• Air Force Acquisition "Corps" - A strategy to achieve excellence in weapons systems acquisition through rigorous entry standards, structured career paths and professional development, and a distinctive culture and traditions; and
• NASA Manned Space Program (Mercury and Apollo) - A strategy to create technical and management excellence through targeted recruiting of intermediate and upper level professionals from the private sector.

Assessment of FAA Progress

The FAA's acquisition reform working group has identified a number of personnel management system changes required for successful implementation of the new acquisition management system. The Blue Ribbon Panel believes that transformation of the acquisition work force into a high performance work force characterized by elevated standards of excellence is the most important factor in the long-term success of FAA acquisition reform.

While the FAA has provided information on a new learning system that will meet many of the training or development requirements identified by the Blue Ribbon Panel, additional personnel management system changes in the areas of hiring, performance management, and incentive-based compensation will be required. The information provided to the Blue Ribbon Panel indicates that the FAA's personnel reform effort will provide ARA with the necessary personnel management system flexibility to support acquisition reform. However, the timetable for FAA-wide implementation of personnel reform is unacceptable. The ARA line of business must be given permission to immediately pilot innovative personnel practices in hiring, performance management, compensation, incentive awards, etc. In addition, artificial constraints such as FTE ceilings must be eliminated to allow ARA to manage its personnel based on workload and available funding.

Assuming that ARA is given the authority to pilot the necessary personnel reform initiatives, the Blue Ribbon Panel has two primary concerns related to the FAA's ability to create a culture of excellence in the acquisition work force. The first concern relates to the availability of resources needed to establish the learning system infrastructure and jump start the recruitment, hiring, and training needed to rapidly infuse the necessary capabilities into the acquisition work force. The Blue Ribbon Panel believes that funds must be specifically earmarked and dedicated to transforming the acquisition work force into a high performance organization. To support this effort, the FAA should also consider a near term alliance with NASA and/or the DOD as a potential source for providing this type of trained, effective talent.

The second Blue Ribbon Panel concern is the lack of a well-defined model or strategy for achieving the infusion of new talent into the organization. The absence of this conceptual approach for transformation of the acquisition work force represents an impediment to successful realization of the objectives of the acquisition reform effort.

Element 4: Financial Reform and Budget Issues

An overriding theme that emerged in the Blue Ribbon Panel's participation in the FAA acquisition reform effort is the need for budgetary reform. This reform includes changes to the FAA's internal budget planning and allocation process as well as financial reform provisions requiring Congressional approval. The investment decisions made during the acquisition planning process must influence and be reflected in the agency's "topline" budget. This reformed budget process must be perceived as credible, analytic, tough, wellinformed, etc., so that the outcomes have credibility with other elements of the Administration and Congress. Factors important to successful achievement of this end are described below.

A credible process must simultaneously address topline cost and affordability issues as well as the capabilities "required" of the FAA over time. Acquisition programs designed to meet estimated required capabilities must compete with all other options (including nonmaterial) that could meet the capability on the basis of effectiveness and cost (affordability). This competition must take place at every stage in the planning, programming, and budgeting process, from the construction of the FAA's strategic vision down to the final budget revision before the President's Budget is submitted.

Pure efficiency (costsaving) program options must also be allowed to compete for resources in the resource allocation process. Upfront investments can often yield substantial downstream savings but are seldom made because costsaving programs do not always receive the same attention in the budget process. However, these efficiencyoriented programs must compete in a very integrated fashion. For example, if outsourcing of functions can yield major cost savings, the implementation of outsourcing may have fundamental implications for other FAA operations, and these must be considered with the outsourcing decision.

Details of budgets should be put together on a multiyear basis and should be programmatically structured. Program planning should cover at least 10 years, with less granularity required in the out-years. Artificial constraints on budget flexibility should be removed so that substitution among resources to achieve the most efficient program outcomes can be accomplished. This funding flexibility must be matched with increased visibility and accountability in FAA's capital program to ensure that the FAA responsibly manages public resources to deliver results. Other items that naturally fall into this kind of programmatic thinking include all the elements of human capital development such as training, use of interns, etc. Programs that provide for the infrastructure of trained and experienced personnel need to be integrated with technical programs so that provisions are made for interns, explicit on-the-job training, etc. The FAA should use its available budget flexibility to provide needed funding for transformation of the acquisition work force.

Likewise, the distinction between Facilities and Equipment (F&E) and Research, Engineering and Development (R,E&D) appropriations should be eliminated to provide the FAA with greater flexibility to invest in up-front analysis of applied technologies and related non-traditional solutions. Thus, considerations of program content and execution will require serious consideration of both physical and human capital and budgets.

Assessment of FAA Progress

The acquisition working group has provided substantial evidence of the need for financial and budgetary reform to support successful implementation of the new acquisition management system. While evidence of need has been clearly demonstrated, this is the area in which the Blue Ribbon Panel has been provided with the least evidence of progress by the FAA. It is clear that some of the budget planning and resource allocation issues may be addressed through internal FAA actions; however, other aspects of the necessary financial reform will require action by the Administration and Congress.

The Blue Ribbon Panel believes there are two major areas of financial/budgetary reform needed to support the FAA's acquisition reform effort. The FAA must have an adequate and stable funding stream to support major system acquisition programs that span multiple years. It is imperative that the agency, the Administration, and Congress achieve a mutually agreeable compact based on multi-year commitments to dramatically improve the long-term safety and reliability of the air traffic control system. Constantly changing plans and resource levels every fiscal year must become a thing of the past.

In addition, the Administration and Congress should provide the agency with the flexibility to manage its funds without the constraints imposed by line item program allocations and barriers related to different appropriation codes. In turn, there must be increased visibility and accountability in FAA's capital program to ensure that the FAA responsibly manages public resources to deliver results. The FAA must aggressively work with the Administration and Congress to enact the necessary legislative reforms in this area.

Element 5: Implementing and Sustaining Acquisition Reform in FAA

Requirements for Success

Implementation will be the greatest challenge facing the FAA in its acquisition reform effort. To ensure that acquisition reform becomes a permanent part of the FAA culture, the Blue Ribbon Panel believes that fundamental changes must be made in the agency to ensure the momentum is sustained. Currently the agency has approximately 600 personnel in the procurement specialist job series out of a total population of almost 50,000 in the agency. Several hundred more employees support acquisition programs through participation or support of the integrated product teams. The bulk of the agency's work force is focused on its operational mission and few individuals have had extensive training in all aspects of acquisition management.

The panel believes that two organizational enhancements are required to sustain acquisition reform and give it the focus and impetus it needs to take root within the agency. In formulating these organizational suggestions, the panel reviewed other Executive Branch agencies engaged in acquisition reform to determine the root causes of their successes or failures and to assess how they could be incorporated into the agency's proposed new system. Set forth below are additions to the FAA's proposed system that the panel believes are needed to sustain acquisition reform.

An ARPA-like organization should be established within the Research and Acquisition organization to examine leap frog technologies that could be folded into future solutions as a part of the mission analysis tradeoff process. Currently, the agency is so focused on the immediate needs of its customers, it has not been able to focus on how its mission could be fulfilled by either development or application of a variety of solutions considered "non-traditional" for the agency. A good example is the DOD's Global Positioning System that is now widely used in the civil and defense world. The FAA was approached in the 1970's and given an opportunity to participate in the development of this technology, but declined to do so because the agency could see no need for the system. It is essential that this new organization be given funding to invest in analysis of advanced technologies and nontraditional solutions, and that it focus on the agency's future needs and potential requirements. The organization must identify technologies that will ensure the agency remains the leader in civil aviation. In addition, this group should participate in the FAA's mission analysis process, offering up both needs as well as potential applications of technologies to solutions being examined in these analyses.

The Associate Administrator for Research and Acquisition must focus all of the organization's talent and efforts on implementing basic agency reform over the next three year period. The most significant challenge the agency will face internally is whether or not acquisition reform is a passing whim or a permanent way of doing business. A similar situation existed within the DOD in the late 1980's and into 1993. Acquisition reform was something that was not taken very seriously until a new office was created in 1993. The total focus and purpose of this small office was to turn acquisition reform into a reality and to make it a permanent part of the defense culture. This new defense office, titled the Deputy Under Secretary of Defense for Acquisition Reform, reports directly to the Secretary of Defense and the Under Secretary of Defense (Acquisition and Technology) and is organizationally independent from the established acquisition bureaucracy. The focus of this DOD office is to develop and implement the statutory changes needed to turn acquisition reform into reality, to develop and oversee acquisition reform in "pilot programs," and to oversee training in the agency. The purpose of pilot programs is to test new acquisition concepts and processes to determine if they should become a permanent part of the new processes being developed.

The panel firmly believes that a similar small FAA organization reporting directly to the FAA Administrator must be established to serve as a catalyst for continuous acquisition reform. The office should focus specifically on reform issues and should not become involved in acquisition program decisions. A major focus of this new office should be changing the culture and defining the next steps required in the reform effort. This organization can baseline the agency's acquisition documents and develop on-line tools to facilitate reform. The organization should also oversee the acquisition pilot programs and monitor the on-going assessment of the acquisition reform effort using metrics that provide objective evidence of progress being made. It is important that this office constantly benchmark best practices to ensure continual reform, and that it work with users and customers of the acquisition process as it conducts its evaluation.

The creation of such an FAA organization ensures that acquisition reform is not personality-dependent and that it can be directly tied to the mandate from Congress and the FAA Administrator. The panel believes that this organization should include fresh talent from outside the FAA and should be established soon after April 1, 1996. The charter for the group should have a sunset provision so that it can be disbanded once reform is a permanent part of the FAA culture.

The FAA's assessment of the impact of acquisition reform must include metrics designed to measure long-term changes in mission performance. These metrics must have relevance to the services provided to internal users and external customers, include cost savings for external customers and suppliers working with the FAA, and provide information on FAA field operations. The metrics must allow comparison of results achieved on dimensions such as safety, cycle time, development costs, procurement costs, operating and support costs, system performance, etc. The measurement of continuous improvement in mission performance is the ultimate test of the acquisition management system's effectiveness. The Blue Ribbon Panel recommends that FAA establish initial baseline data on key metrics at the start of implementation in April 1996.

Finally, the Blue Ribbon Panel believes that a subset of the existing panel should continue beyond April 1, 1996, to provide input and advice to the FAA and to provide an objective assessment of implementation progress. This panel should meet with the FAA quarterly during the first year of implementation and less frequently thereafter.

Assessment of FAA Progress

The FAA's policy represents an excellent first step. However, successful acquisition reform will require an aggressive implementation program that will propel the FAA toward even greater changes in the future. While the agency is proposing to begin implementation of these initial acquisition reforms with three to five pilot programs, the panel believes that the FAA should supplement these efforts with several pilot programs using full commercial style contracting procedures as tests with appropriate metrics to determine the potential overall benefits to the agency in terms of cost, schedule, and technical solutions. The National Aeronautics and Space Administration and the ARPA organization are already authorized to experiment with such commercial style contracts. The Unmanned Aerial Vehicle contracts recently awarded by ARPA are excellent examples of commercial contracts that facilitated the simultaneous development and deployment of critical assets needed by DOD. These commercial contracts saved time and valuable resources, and allowed contractors to propose innovative solutions. Clearly the creation of an acquisition reform organization as discussed in this paper will support the development and testing of new innovative processes and additional reform initiatives.

The FAA has included a three-year, on-going assessment of the new acquisition management system as part of its implementation plan. The FAA's evaluation plan includes an independent evaluation by an external group as well as continuous improvement feedback during the implementation. The ongoing evaluation effort must provide the data needed to modify pilot programs over the three year period. While the metrics to be used in this assessment will provide some indication of the improvement in the functioning of the acquisition and procurement processes themselves, it is not clear that the FAA's assessment places adequate focus on more long-term, outcome-oriented measurement that would capture changes in overall mission performance.

BLUE RIBBON PANEL CONCLUSIONS AND RECOMMENDATIONS

The new acquisition management system proposed by the FAA represents an excellent start toward the needed reforms. The new acquisition management system should assist the FAA in meeting the goals of the reform effort. The increased flexibility and streamlining in both the overall acquisition policy and the new procurement process should assist the FAA in acquiring quality systems in a more timely manner. The focus on life-cycle management, continued development of integrated product teams, and increased emphasis on customer and supplier input throughout the entire acquisition phase should contribute to the acquisition and development of higher quality products and services. Finally, the reduction in documentation and curtailment of requirements for cost data and detailed cost analyses should reduce the costs of acquisitions to both the government and industry.

However, the acquisition management and procurement policies and processes that go into effect on April 1, 1996, must be viewed as only an initial version of a system that must continue to evolve over a period of several years. The agency must "think out of the box" if they are to develop and implement an acquisition management system that fully emulates world-class, commercial acquisition/procurement practices. More importantly, the agency's leadership must embrace this goal and strive toward its achievement as aggressively as possible.

All members of the Blue Ribbon Panel concur that the acquisition reform effort at the FAA must be continuous if the FAA is to achieve its goals of faster acquisition of technology and equipment needed to maintain safety, improve services, and decrease costs. In order to continue this reform effort, the FAA and Congress must take the actions delineated in the paragraphs below.

To continue the acquisition reform effort beyond April 1, 1996, the FAA must:

• Aggressively implement and continue evolving the new acquisition management system over the next three years. This implementation should include the establishment of an office focused exclusively on the implementation of acquisition reform and three to five pilot programs that are provided with increasing latitude to move toward emulation of commercial acquisition practices;
• Jump start its efforts to increase the skills and professionalism of its acquisition work force by investing in the infrastructure needed to establish the new learning system. This will likely include contracting for development of cases studies, simulations, and other learning system components;
• Establish ARA as a pilot for innovative personnel practices. This will enable infusion of new personnel with extremely high levels of the most needed competencies at all levels throughout the acquisition work force while assisting the existing work force to increase its level of competence and ability to operate in a flexible work environment;
• Invest in long-term R&D and establish an ARPA-like organization to ensure a focus on identification of long-term technological opportunities as a balance to its current focus on immediate operational needs;
• Resolve quickly any remaining organizational issues related to authority and responsibility for key decisions at various points in the life-cycle acquisition management process;
• Pursue internal and external budgetary reform and legislative action as needed to capitalize on the potential gains offered by its new acquisition management system; and
• Appoint a subset of the Blue Ribbon Panel to provide input and advice to the FAA as the acquisition management system matures.

In order to support the FAA's continued success in reforming its acquisition management system, the Congress must:

• Continue legislative support of the FAA acquisition reform effort;
• Ensure that the FAA sufficiently funds the infrastructure investments needed to jump start the transformation of the acquisition work force;
• Enact necessary financial/budgetary reforms to increase the FAA's flexibility in use of all of its funds and its ability to establish stable, multi-year budgets for major system acquisition programs. This funding flexibility must be matched with increased visibility and accountability in FAA's capital program to ensure that the FAA responsibly manages public resources to deliver results;
• Support the establishment of an ARPA-like organization and increased investment in up-front analysis of non-traditional solutions within the FAA; and
• Resist enacting future constraints if mistakes occur during the FAA's transition to the new acquisition management system. While the FAA and its personnel must be held accountable for ensuring the integrity, fairness, and protection of public trust in its new system, implementation of new restrictive regulations will kill the chance for the acquisition reform effort to ultimately succeed.