'Should Cost'

By John Liang / September 8, 2011 at 3:37 PM

The Pentagon has begun to assess whether its "should-cost" goals are being met. As Inside the Pentagon reports this morning:

It is too early to tell whether weapons programs working to implement the Pentagon's should-cost policy -- a key element of the Defense Department's better-buying-power initiative -- are successfully meeting challenging targets for affordability, according to a DOD official.

"What we're seeing with the should-cost policy is the ink is still a little wet," said the acquisition directorate's deputy director of program acquisition and strategic sourcing, Stuart Hazlett. "I think the should-cost is excellent, but as you get into it, the goal for your particular program . . . it's not just are those goals achievable but are they challenging you enough," Hazlett said in a brief interview. "They've got to be stretched goals."

Hazlett said that as DOD director of pricing Shay Assad and his team review data from program officers, they are seeing programs establishing "the right kind of goals." But "the proof is in the pudding," he added. "I've heard senior leaders say, 'We've already got it,' but, OK, then start today or the next."

Earlier this week, Inside the Navy reported that service officials have begun identifying and working toward "should-cost" goals for their programs under a new directive from Navy acquisition chief Sean Stackley as the service seeks to squeeze out savings wherever it can. Further:

Stackley, in a July 19 memo titled "Implementation of Should-Cost Management," states that all programs falling under acquisition category (ACAT) I through III should establish a "will-cost" and "should-cost" estimate. The former will be the baseline cost estimate for the program, whereas the latter "will identify specific, discrete and measurable actions or initiatives that achieve savings against the will-cost estimate," the memo states.

ITN interviewed BJ White-Olson, deputy assistant secretary of the Navy for management and budget, for that story:

The directive stems from Pentagon acquisition czar Ashton Carter's "better buying power" initiatives unveiled last summer, one of the pillars of which was a target affordability and controlled cost growth push toward will-cost and should-cost management, White-Olson said in an Aug. 31 interview. A subsequent memo late last year provided more specific guidance to the service acquisition executives on how to establish such goals beyond major ACAT I acquisition programs, leading to Stackley's memo.

Individual program managers will be tasked with coming up with should-cost goals based on their knowledge of their programs, and there is no penalty if they fail to meet them.

"There are no targets given to program managers," White-Olson said. "It's up to them to identify where they believe they can drive the savings out."

Asked what the program manager's incentive is to achieve savings, she said she believed program managers would want to exercise due diligence and seek to "get the most value for our dollar and . . . bring the savings back to the department so they can look at other programs."

For more on our past coverage of the "should-cost" issue, check out these stories:

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