This report summarizes the benefits of acquisition reform that are being realized on the JDAM program. A short program description and summary of the acquisition strategy are provided. JDAM results to date are also presented consistent with JDAM "Specific Metrics and Bridge Metrics".

1.1     PROGRAM DESCRIPTION

           The JDAM Program is a joint Air Force/Navy program that is developing an affordable, accurate, all weather guidance kit for inventory 1,000 and 2,000 pound bombs. The guidance kit includes an inertial navigation system augmented by Global Positioning System (GPS) updates. The guidance unit attaches to the bomb and, through controlled tail fin movements, directs the bomb to the target. The JDAM is to be integrated on the B-1B, B-2A, B-52H, F-15E, F-16C/D, FA-18C/D/E/F, F-22A, F-117A, and AV-8B aircraft.

           The JDAM guidance kit is a military-unique system without commercial counterpart; however, the major hardware elements in JDAM incorporate commercial parts. The inertial measurement unit, GPS receiver, computer and control actuators account for approximately 85 percent of the system hardware cost. These elements are currently produced by several commercial providers. Furthermore, each of the items either have been or could be sold to commercial buyers but with different specifications. Under the appropriate conditions, the commercial sector could produce these items using the same plant, work force and equipment for both JDAM and commercial applications. Most of the other components (wings, wiring harnesses and metal structures) use manufacturing processes that are generic to the commercial sector and the requirements for these components are not so stringent that they would exceed what commercial companies might produce for a commercial buyer. Thus, they are amenable to manufacture using commercial processes and dual-use processing equipment.

           Due to the nature of JDAM, the major savings from pilot initiatives accrue in production, rather than development. The realization of savings relies on the government's ability to acquire JDAM under commercial acquisition procedures, the prime contractor's ability to merge the JDAM development and production with ongoing commercial efforts, and the degree to which key vendors are able to take advantage of the statutory and regulatory relief.

           Given the above, the JDAM Defense Acquisition Pilot Program (DAPP) has demonstrated that the prime contractor and key subcontractors have been able to develop the JDAM using practices, processes, and procedures from their commercial sector business base. Government management and decision processes are as similar as possible to those of a smart, resource-limited commercial buyer, thereby reducing Government oversight, monitoring, and checking. The program has allowed subcontractors to participate that have previously refused to consider defense programs. Finally, the program is expected to meet the planned development and production schedules without the process delays that have been incurred on other major defense programs.

1.2     PROGRAM MANAGEMENT/ACQUISITION STRATEGY

           The JDAM is an Acquisition Category I-D program managed by an Air Force Program Director, who reports to the Air Force Program Executive Officer for Weapons. The program involves a two phased Engineering and Manufacturing Development (EMD) effort leading to initial production deliveries in FY98. The Phase 1 EMD effort began in April 1994 and involved two competing contractors, McDonnell Douglas Aerospace (St. Louis, Missouri) and Lockheed Martin (Orlando, Florida). The primary focus of Phase 1 EMD was to reduce both manufacturing risk and projected Average Unit Procurement Price (AUPP). The Phase 2 EMD effort was initiated in October 1995, with the downselect to one contractor, McDonnell Douglas. On 1 Aug 97, McDonnell Douglas and Boeing merged and began operations as the Boeing Company on 4 Aug 97. Thus, the prime contractor for JDAM is now Boeing. The Phase 2 EMD effort is directed towards completing development with emphasis on development and operational testing. The Phase 2 EMD contract is a cost plus award fee contract valued at approximately $93 million with a period of performance from October 1995 to February 1999. The Phase 2 EMD contract also includes minimum and economic order quantity options for production Lots 1 and 2. In addition, production price commitment curves for minimum and economic order quantities are included for Lots 3 through 5.

1.3     RESULTS TO DATE

           The JDAM program is an example of employing commercial practices, regulatory/statutory relief and common sense practices to their fullest advantage in a weapon system acquisition. JDAM was initially granted 15 FAR and 11 Defense Federal Acquisition Regulation Supplement (DFARS) waivers; which were later augmented by granting an additional 10 FAR and 14 DFARS waivers. The most substantial relief was the allowance to use commercial practices, consistent with FASA '94. However, the greatest benefit of JDAM being named a pilot program was the willingness of management to allow us to try new things. While many of these things did not require waivers, they did not fit the template often applied for "business as usual." Thus, the cultural change provided by pilot program designation had the greatest impact on JDAM and resulted in the implementation of the following business practices:

• Use of a "Rolling Downselect" ¹ process that featured continuous information exchange between the government and its industry partners.
• Streamlined oversight of both the program and the contractors.
• Use of a "commercial-like" warranty which guarantees the contractor will repair or replace any defective item for a 20-year shelf life period or a 5 year service life (warranty costs included in AUPP).
• A long term government/contractor relationship built on trust, with aggressive use of Integrated Process Teams (IPTs), which include government personnel on contractor teams at the contractor site.
• Program/contractor management at the system specification level.
• Use of contractor formats for most data submittals, program reviews, design reviews and earned value reporting.
• Use of long-term prime/subcontractor relationships.

¹ "Rolling Downselect" refers to a series of interim performance evaluations conducted during the evaluation period based on the downselection criteria. The Government subsequently rendered interim evaluation to each contractor comparing their performance to the down-selection criteria. The intent of these evaluations was to provide the contractor's real time feedback on their performance that would enable them to correct deficiencies early in the program.

           1.3.1    JDAM Specific Metrics

           The JDAM program uses the development metrics that are directly traceable to program cost, schedule, and performance. JDAM program agreed upon "Specific Metrics" include:

• Program Cost to include Average Unit Procurement Price (AUPP)
• Program Office Staffing
• Operational Performance and Cost
• Program Funding Stability
• Regulatory and Statutory Relief.

The following paragraphs summarize JDAM reported results to date, against these metrics.

           Program Cost - This metric is intended to measure cost changes with a desired outcome of less program cost than the baseline estimate ("business as usual" - prior to acquisition reform). The measure includes total program cost which includes research and development cost, aircraft integration cost, production procurement cost, and operations and support cost. These data are provided in Table 1.3-1 together with Average Unit Procurement Price (AUPP) estimates. Two cost sources are shown. Program costs (actuals) are presented by President's Budget (PB) Years as directed by USD (A&T). The FY95 data measures pre-acquisition reform costs; the FY98 data measures current costs reflecting reform initiatives now implemented. For comparison purposes, Cost Analysis Improvement Group (CAIG) data are also provided, as these represent sanctioned, independently derived, confirmatory information developed at major milestones. As with the PB data, the two CAIG estimates reflect the before and after effects of reform initiatives. However, comparison of the PB and CAIG data requires understanding of their definitions, which are qualified below.

           Program cost estimates vary over time due to program maturation, (i.e. definitization of contracts) and due to specific changes in unit price estimates and total buy quantities in the outyears. Using President's Budgets for cost tracking also means that only approved budget line-items are reported. The major differences of these types are: Buy quantity differences between PB and CAIG and between PB 1995 and 1998 estimates; the time lag between the CAIG (Fall 1995) and PB data (Spring 1996); the lack of finalized and therefore reportable PB O&S data.

           Despite these caveats, the PB and CAIG data provide consistent evidence that JDAM cost savings have dramatically improved as a result of reform implementation. Furthermore, these cost savings will predictably continue throughout the acquisition cycle.

Table 1.3-1 JDAM Program Costs: President's Budget Actuals and CAIG Projections

* MSI includes 380 Kits; MSII includes 630 Kits            

As shown in Table 1.3-1, both the PB and CAIG program cost estimates were substantially reduced between the Milestone I estimates (pre-DAPP) and the Milestone II estimates (DAPP program). The CAIG estimate shows a 50 percent reduction in average unit procurement costs. The CAIG total program cost estimate for JDAM was reduced by approximately $2.0 billion (constant FY95 dollars) as of Milestone II. Similar percentage reductions are seen in the total actual President's Budgets. Additional President's Budget details are given in Table 1.3-2.

           Program Office Staffing - The effect of acquisition reform on in-house efficiencies should be evident by changes in the total number of people (program office, contract administration, and audit) that are employed to manage the program. To compare program office staffing in the Navy with that of an Army or Air Force program office is not meaningful due to service acquisition strategy differences. Thus, a direct comparison of JDAM to JSOW as originally planned, was inappropriate. Figure 1.3-1 presents, the SAF/AQ "Lightning Bolt #3" baseline and the actual JDAM Program Office Staffing. The total quantities of people (military, civilian, and support contractors) are shown at the major milestones. MS III will be in FY99.

Figure 1.3-1 JDAM Program Office Staffing

           As shown in Figure 1.3-1, JDAM is realizing substantial reductions in program office staffing. With 39 authorizations (36 filled), JDAM is currently well under the baseline.

           Program Operational Performance and Cost - The focus of this metric is to measure tradeoffs of performance for cost, i.e., cost as an independent variable. Many trades were made during Phase 1 EMD during which the Manufacturing Development Initiatives (MDI) were employed in the current acquisition reform environment. In fact, large reductions in unit price were possible by trading other than "key performance" requirements. These trades were made with the full involvement and encouragement of the operational user who ultimately made the trade decisions.

           The effects of this on-going requirements trade process will be tracked through Phase 2 EMD. Two performance parameters, end game accuracy and reliability, will be correlated to AUPP. The JPO plots reliability and accuracy at each of the milestones with the Joint Operational Requirements Document (ORD) threshold values representing the baseline. This is shown in Figure 1.3-2. Note, Figure 1.3-2 includes the 30 meter Circular Error Probable (CEP) without GPS data available and 13 meter CEP with GPS. While it will be possible to show changes in AUPP and changes in performance, it may not always be possible to equate a specific unique change in performance to a specific change in price.

*No new estimate was made for LRIP.

Figure 1.3-2 JDAM Performance Metrics

           Program Funding Stability - This metric attempts to measure funding stability that may be provided to pilot programs. The results are intended to show the amount of "meddling" with program funding which correlates with any program instability. The baseline, per SAFAQ direction, is the FY95 budget allocation - prior to Pilot Program implementation. This information is presented in Table 1.3-2 together with the most recent President's Budget.

Table 1.3-2 JDAM RDT&E/Weapons Production President's Budget (FY95 vs FY98)

           Regulatory and Statutory Relief Benefits - The intent of this metric is to measure the benefit of each specific regulatory and statutory relief provided to the JPO. However, it has not been possible to separate and measure each specific relief or management initiative taken in JDAM. For example, distinguishing between the pilot program relief to use commercial practices and the management initiatives to eliminate encumbering military specifications and standards is difficult. To date the program has recognized a $3.0B (TY$) savings as a synergistic result of all of the acquisition reform initiatives combined.

           1.3.2    JDAM Bridge Metrics

           Table 1.3-3 presents the JDAM Bridge Metrics, with the JDAM Pre-DAPP effort as the baseline. As shown, the JDAM DAPP effort eliminated military unique specifications and reduced contract data requirements by an order of magnitude. The JDAM RFP was reduced by over 70 percent, while reported B&P costs were cut in half. Finally, SPO staffing has already been reduced by 54 percent.

Table 1.3-3 JDAM Bridge Metrics

                           * FTEs = Full Time Equivalent Positions
                           ** CEP = Circular Error Probable

           In addition, the JDAM SPO is reporting substantial reductions in projected production schedules, improved warranty provisions, and statement of work streamlining. These results are summarized in Table 1.3-4.

Table 1.3-4 Additional JDAM Results to Date

           The most dramatic results of the JDAM acquisition reform efforts are the reported reduction in total program costs of $3.0B (TY$), a 4 year reduction in production cycle, a 39 percent reduction in contract administration hours, and a 13 percent reduction in development time. Clearly, JDAM results to date, demonstrate the applicability of commercial practices and other innovative management practices to major defense acquisition programs (MDAPS) and the efficiency gains that can be achieved. As reported by the program office, acquisition reform, combined with common-sense management is enabling JDAM to realize substantial in-house efficiency gains, reduce contract costs, and improve cycle times.