Inside Military Procurement, Part 2: Traditional Procurement Vehicle Limitations

By March 21, 2018Uncategorized
DoD Military Procurement

An Air Force joint terminal attack controller prepares his gear before participating in raid scenario during Southern Strike 17 at Camp Shelby Joint Forces Training Center in Gulfport, Miss., Oct. 31, 2016. Air Force photo by Senior Airman Clayton Cupit.

PROCUREMENT CHALLENGES OF USING THE NATIONAL STOCK NUMBER SYSTEM AND AD HOC CONTRACTS

Military Supply Officers (SUPPOs) and enlisted logistics specialists have a challenging job. In addition to the complexity of navigating immense budgets and the Federal Acquisition Regulation (FAR), their mission to rapidly supply units can conflict with the need to control costs and combat waste.

In essence, a supply officer must become a problem solver when quickly obtaining equipment is at odds with the traditional supply chain. 

In the previous installment of this series, we looked at the basics of the military procurement system. This piece will examine some of the challenges of military supply in greater detail—specifically the limitations of using the National Stock Number (NSN) system and creating ad hoc contracts.

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NSN SYSTEM: BENEFITS AND DRAWBACKS

The National Stock Number system remains administratively, the easiest and professionally, the safest way for supply personnel to obtain equipment. This central repository contains hundreds of thousands of stock numbers for a wide variety of items.

It’s typically the first place a supply officer or logistics NCO looks when sourcing an item.

The NSN system may be simple, but it has limitations:
  • The time it takes to get something can be prohibitive. For example, if a unit requires a certain number and type of boot within two months but an item won’t be restocked for eight months, the supply officer must either find a substitute with a different NSN or obtain the item through other means. In essence, the NSN system doesn’t always work well with rapidly changing or unforeseen equipment demands and mission sets.
  • Not knowing the true availability of the item. “Sometimes, the stock numbers are out of date, which means there is no supply against that number, or they’re not even carrying that item anymore,” explained Brad Smith, the Army Vertical Manager for ADS and a former executive officer for a Special Warfare Training Group. “But the system still shows it and you don’t know it’s out of stock until after you submit your order – instead, you get a log report sometime down the road.”
  • Substituting items that are considered good enoughIf an exact item does not have an NSN or  is out of stock, supply officers may opt for an equivalent item that is in stock. Unfortunately, this can result in a unit refusing to accept a shipment because it does not meet requirements. Rejected material is then transferred to the Defense Reutilization and Marketing Office (DRMO), where it will be assigned to another unit that may need it, sold for pennies on the dollar at auction, or destroyed.

“Typically, [the success of using the NSN system] just depends on what you’re buying and what your timeframes are,” explained an active duty supply officer. “I may have a need for a widget and it’s got a stock number, but for whatever reason that warehousing organization is out. They may be buying 10,000 more to replenish their stock but it’s on a contract that could be six months out. Perhaps I can find a vendor across the street from where I work who actually has it on the shelf, but I may pay more for it because of markups and not buying in bulk. These challenges are where we wind up using a lot of [alternate vehicles].”

-Active Duty Supply Officer
AD HOC CONTRACTS LIMITS

If a supply officer fails to find equipment with an NSN, he or she can submit a request through a program office to initiate a new, ad hoc contract. These vehicles also have drawbacks, however.

The larger the contract, the longer it will take to create, approve, and execute.

  • A unit’s budgeting schedule is often at odds with the contracting schedule. The flow of money to a unit tends to build throughout the year. As the fiscal year progresses, resources intended for units that come in under budget for certain items are transferred to units that require more of these items. These new funds typically come online in the last few months of the year but, because of the time it takes to design and initiate a new contract, the contracting season usually shuts off around March.

“Anything over a million dollars, you’re probably not going to get it executed from March to October,” said an active duty supply officer.

  • Receiving the wrong equipment. Many contracting officers are administratively focused on achieving the lowest price technically available (LPTA), which may involve initiating a contract for a substitute item. Like many of the substitutions experienced when using the NSN system, this can result in rejected equipment.
Let’s say I’ve got a need for a holster and I know exactly what holster I want because I did my research. I write up a document that says Hey, contracting command, I want this holster; here are three quotes for it, along with a picture and a description,” explained Smith.

“The problem is that a contracting specialist is mandated to find that holster at the very lowest price and there are probably a thousand holsters that could meet that general description. In reality, it’s those small differences that make all the difference in the world, like the tensioning screws that keep the pistol from falling out of the holster.”

These details can result in purchasing equipment that simply does not meet requirements. In the example, the delivered holsters may be the wrong color or they might be completely incompatible with the pistols used by the unit. Again, rejected substitutions are sent to Defense Reutilization and Marketing Office, and, ironically, the quest for a lower price ends up costing the military more money when the equipment is rejected and sold for pennies on the dollar, mothballed, or destroyed.

Unfortunately, rejected equipment—due to an incorrect order, improperly updated records, or shifting unit requirements—is common. A 2014 study of DoD officials and uniformed military officers by the Government Business Council found that “67 percent [of respondents] say their unit has been forced to dispose of unnecessary equipment.”

Procurement challenges are common and significant, but military supply officers have adapted to the system to make sure units are supplied, and the Defense Logistics Agency (DLA) has tapped the private sector to deliver innovative solutions.

Procurement Plan Files: Part 2
If you have additional questions about military procurement, or simply need help finding an item or placing an order, contact your knowledgeable ADS Representative at 866.845.3012 or email customercare@adsinc.com.

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In the next Inside Military Procurement installment:

Our third and final installment of this series will discuss how supply officers power through the limitations of traditional procurement methods by operating in “the grey zone,” the professional pressures of doing so, and the alternate procurement vehicles that have been created to  solve many of these problems.

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SOURCES

  1. Interview with a US Navy Supply Officer.
  2. Interview with Warren Dykes, ADS.
  3. Interview with Brad Smith, ADS.
  4. Interview with Scott Bryant, ADS.
  5. Cornillie, Chris. DoD Officials Say the Pentagon's Logistics Challenges Are Threatening Military Readiness. Insights. http://www.govexec.com/insights/pentagons-logistics-challenges-threaten-military-readiness/104631/