Driving Accountability in Space Acquisition

The U.S. Space Force was established as a separate service in order to respond to evolving threats from China and Russia. Having developed hypersonic and hypersonic glide threats, both those nations had also built and fielded counterspace capabilities to threaten U.S. satellites on orbit, rapidly evolving those capabilities every two to four years.

Accelerating U.S. space development is therefore among the most crucial requirements for the Space Force. In October 2022, Assistant Secretary of the Air Force for Space Acquisition and Integration Frank Calvelli laid out nine tenets for accelerating space acquisition, informative guideposts that have provided a crucial way forward for both the Space Force and industry alike.

Success is measured by executing on plan.

Assistant Secretary of the Air Force Frank Calvelli

“The traditional ways of doing space acquisition must be reformed in order to add speed to our acquisitions to meet our priorities,” Calvelli said in a memo to the force in October 2022. “Former approaches of developing a small number of large satellites, along with large monolithic ground systems taking many years to develop, can no longer be the norm.”

The nine tenets are now well known:

1. Build smaller satellites, smaller ground systems,

     and minimize nonrecurring engineering.

2. Get the acquisition strategy correct.

3. Enable teamwork between contracting officer

     and program manager.

4. Award executable contracts.

5. Maintain program stability.

6. Avoid special access program and overclassifying.

7. Deliver ground before launch.

8. Hold industry accountable for results.

9. Execute.

These tenets demand stable requirements, collaborative customer/developer interaction, executable programs, and most of all “accountability”—exactly what is needed in this world of rapidly changing threats and to assure access to critical space capabilities even when they come under attack.

Yet Calvelli’s tenets, or objectives, raise questions for industry, in particular these three: awarding executable contracts; holding industry accountable; and executing. 

As a group, the three focus on accountability, both for the government and its contractors. These three tenets are challenges to both the government and industry, and it will take collaboration and trust to succeed. Creating executable contracts with achievable goals and schedules and fairly rewarding good execution is the challenge for the former, as performance on executable contracts is the challenge for the contractor. Most importantly, this is about accountability on both sides.

Award Executable Contracts

Nonexecutable contracts can be defined as those with unrealistic combined technical, schedule, and cost objectives and create downstream cost overruns, missed schedules, and/or incomplete solutions.

While directing that contracts must be executable may be easily stated—it’s harder to achieve. Even when a program’s objectives seem impossible to execute, contractors may still be willing to try. If a contract is nonexecutable, contractors may still be incentivized to bid, because declining to compete, in effect, costs them future business.  Alternatively, bidding an executable program could cost them the contract if it doesn’t conform to the government estimate. So, while it is easy to say don’t bid nonexecutable contracts, that approach rarely works in practice.

The government, establishing clear expectations and using open communication, can shop around for the best capabilities and quickly identify what contractors are offering and assess whether these are things that they can actually deliver on the government’s required timelines. Reverse Industry Days is a good first step, but more detailed discussions on specific acquisitions could be beneficial. Without fully understanding the art of the possible in industry, the main risk to the USSF is that they will find contractors willing to take on the risks of potentially nonexecutable contracts, assuming “greenlight” schedules, then finding themselves persistently seeking engineering change proposals and managing cost overruns. However, properly implemented, a focus on executable programs and continued open communication with industry should alleviate these concerns. To do so requires honest assessments of risks and risk margins from the contractors to the government, allowing government leaders to make informed decisions on the risks and costs involved. Getting the government to work with the contracting community to generate more realism regarding cost and schedule will help avoid low bids and buy-in. Negotiations between government and industry should be a “win-win,” with the public sector quickly receiving a capability that works, and industry getting a fair profit.

Hold Industry Accountable For Result

Calvelli’s eighth tenet seeks to empower government buyers to hold their industry providers to higher standards by accepting only functioning capabilities, delivered on schedule, and within cost. He is exhorting his acquirers to be more proactive in managing their programs and to identify and resolve issues as early as possible. “With the urgent need to provide new space capabilities faster and for architecture resiliency, do not tolerate bad performance,” Calvelli advised. “Take corrective action and use all tools available for poor performers. A reminder to government buyers: ‘Industry works for you, so be a demanding customer.’”

No customer should tolerate poor performance. But the other side of this coin is that the government also needs to incentivize good performance. There needs to be both carrot and stick for this to work. Punishing bad performers is all well and good, but if we don’t reward the good performers—and the bad performers get the same opportunities for follow-on or related contracts as the good ones—there is insufficient motivation to perform well. The consequence for poor performance is simply too low.

What is needed is a well-balanced policy that includes both rewards for excellence and penalties for failures. By striking a balance between the two, organizations can create a culture of accountability, reinforcing the quality performance desired by the USSF. An unbalanced policy, however, is inefficient and ineffective, enabling poor performers to fail without cost. While too much emphasis on rewards could encourage companies to take unnecessary risk or to cut corners, an overemphasis on punishment and penalties could yield a culture of fear, stifling creative innovation.  More importantly, an unbalanced approach can undermine collaboration with the customer, causing disharmony.

While incentives for good performance is certainly a tool the government can use—the Space Development Agency is leading the way in rewarding good performance by offering $20 million bonuses to existing commercial production lines meeting scheduling, incentivizing performance—the thing contractors most want is the follow-on work.

To promote and reward performance, the government could include unpriced options on short-duration, continuously competed contracts (those of two to four years in length).  Those options would enable the government to open an underperforming contract to recompete, taking into account the level of performance provided to date on the previous contract. If, however, the contractor performs well, the government could exercise the option to negotiate an extension without additional competition. This would give the contractors an incentive to not only perform, but also to invest independently to ensure they can retain the contract in subsequent phases. The result: Both customer and contractor benefit. External competitors would also have an incentive to invest their own research and development funds to create a differentiator, enhancing their ability to compete with and unseat a struggling incumbent.

Execute—Deliver On Schedule And On Cost

“Success is measured by executing on plan,” Calvelli wrote. In doing so, he challenges management on both the government and industry sides of the equation.

Management must focus on results, and therefore must be held to account to deliver on what’s promised. This is best done with tight collaboration between the contractor and the customer, or as  Chairman of the Joint Chiefs of Staff Gen. Charles Q. Brown Jr. says, “One Team—One Fight”. All companies have good engineers capable of performing well when given the proper resources, tools, and schedule. What separates success from failure then is not so much engineering talent as it is program planning, risk management, schedule and resource planning, active vendor and subcontract management, and, most importantly, executable contracts. Both the government and the contractor have an oar in this water, and Calvelli challenges both.

When a contract is signed, the contractor accepts that it will be judged on performance and contract outcomes, whether good or bad.  This means establishing a commitment with the USSF to measure and track progress to achieve success, and a clear understanding that success brings positive consequences while failure brings negative ones.

Yet penalties should fit the crimes. It is rarely in anyone’s interest to have a “one strike, and you’re out” system; rather, consequences should scale to the shortcoming and necessitate plans to correct the problems with measurable milestones. Utilizing such a constructive approach will encourage companies to take responsibility and quickly address and resolve issues, rather than casting about to place blame. But the better performers should certainly reap more rewards.

Policies must recognize the hard work of companies while still holding those who do not perform accountable. It is therefore encouraging to see the Space Development Agency adopting this approach in all of its programs (Missing Warning/Missile Training, the Transport layer, and the FOO Fighter program), while proving well-structured contracts, using proven technology, with emphasis on schedule and government PM’s that embrace these strategies of speed with low technology risk, can be successfully implemented on the short timelines necessary to respond to our adversaries’ aggressive timelines.

Two Parties To Every Deal 

To achieve success, the Space Force must clearly define its requirements:

Likewise, contractor responses must be consistent with the solicitations. But, the government must encourage that communication and not penalize the contractors raising these issues. If the objectives for cost and schedule cannot be achieved, contractors should not promise the impossible. Rather, they should help the customer by defining:

This is where negotiation comes into play, the last chance to define what is required of an executable contract. Time must be invested here to ensure this is done correctly. If the contracting officer tries to negotiate every penny out, the relationship will be strained from the start.  If the contractor is forced to bid too low, performance and transparency will suffer from Day One. Again, this should be fair and equitable for both sides, so the government gets a fair deal for its investment and the contractor is able to generate a fair profit for its stakeholders.

Program Execution

Increasingly short timelines demand tight and positive collaboration between the Space Force and its contractors. With every contract, establishing trust, collaboration, and fairness upfront is essential to avoid adversarial relations in the future. If it starts out badly, the deal will remain that way.

The benefit of ongoing open collaboration is that problems can be identified and fixed more quickly, with measurable get-well plans that can be put in place for the customer, who can then make informed decisions on schedule and risk. Moving forward, the program manager and the contractor must own those decisions together.

Accountability for success on any given program means being outcome driven. Contractors who are accountable don’t just do what they say they’re going to do; they get the results they promise, regardless of the challenges that must be overcome to deliver on that promise.

To build trust and enhance communications, both the contractor and the government customers should provide periodic “report cards” to each other, building on their collaborative relationship, trust, and mutually shared goals. Feedback should flow both ways, and be frequent, not left to the end of the program. If something is going wrong in the relationship, it’s best to know early, so it can be fixed.

The Space Force must decide early on how it intends to incentivize success. Award fees are part of the picture, but contractors value the promise of additional work even more. The best way to incentivize success is to enable success to beat a surer path to the next contract.

Follow-through on the part of program managers is the final and arguably most crucial step in the process. Success should be recognized and rewarded, while failure should likewise be recognized and addressed. The Space Force needs consistency to ensure it learns from mistakes and missteps and applies those lessons to future programs to increase the likelihood of success. Ultimately, USSF must reward its successful contractors to motivate everyone to be the good partners it needs for future success.

Conclusion

There are three big challenges for the U.S. Space Force in implementing Calvelli’s nine tenets of acquisition:

1. Assuring only executable contracts are awarded. This demands input from the contractors to ensure identified cost and schedule issues are discovered early. This must be a win-win for both the government and the contractor.

2. Incentivizing contractors. Determining how to incentivize contractors to be successful and accountable by rewarding good performance will be key to making this work.

3. Ensuring accountability. Determining how to hold poor performers accountable while assisting them to become quality performers in the future. But, rewarding good performers is an essential part of accountability, there has to be a benefit piece of accountability for it to be effective.

The key to all three is rewarding strong performers with an advantage when they reenter the competitive phase of future contracts. Finding ways to turn around poor performers—and not rewarding them for their poor performance—while making sure good performers are rewarded are, in fact, two edges of the same sword.

The success of the Space Force in today’s great new Space Race depends on leveraging Calvelli’s tenets to make programs work more effectively.

Thomas “Tav” Taverney is a retired Air Force major general and former vice commander of Air Force Space Command. His last article in Air & Space Forces Magazine was “Responding to Threats in Space,” in the December 2022 edition.