REQUEST FOR COMMENTS ON DRAFT OF MAJOR SYSTEM ACQUISITIONS CIRCULAR

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP77M00144R000600110013-3
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 12
• Document Creation Date: December 19, 2016
• Document Release Date: October 10, 2006
• Sequence Number: 13
• Publication Date: August 28, 1975
• Content Type: MEMO

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E CUTIiVE OFFICE OF THE PRESTISENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
August 28, 1975 Dcr-"t Jam"-'
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
Subject: Request for Comments on Draft of
Major System Acquisitions Circular
Attached is a copy of a draft circular on major system
acquisitions for your review and comments. This is ..
the result of informal comments on the previous drafts,
the recent hearings of Senator Chiles' Subcommittee on,
Federal Spending Practices, Efficiency and Open Govern-
ment, and deliberations within the office of Federal
Procurement Policy (OFPP). The circular is based on
findings and conclusions growing out of executive
branch consideration of the recommendations of the
Commission on Government Procurement.
We would appreciate a response Prior to close of business,
Friday, October 31, 1975, so that we may incorporate
appropriate revisions.
Hugh E. Witt
Administrator for
Federal Procurement Policy
Attachment
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EXECUTIVE OFFICE OF THERESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON. D.C. 20503
CIRCULAR NO. A-
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT: Major System Acquisitions
1. Purpose. This Circular establishes policy to be
followed in the acquisition of major systems from federally
appropriated funds.
2. Authority. The "Office of Federal Procurement Policy
t,' ? Public Law 93-400, 41 U.S.C. 401 et se , the Budget
and Accounting Act, 1921, the Budget and Accounting
Procedures Act of 1950, Reorganization Plan No. 2 of 1970,
and Executive Order 11541, July 1, 1970.
3. Background. The acquisition of major systems by the
Federal Government constitutes one of the most important,
vital, and expensive activities performed in the Nation.
Its impact on the accomplishment of Government agency
missions in such areas as defense, space, energy, and
transportation, and on technology and the Nation's economy
is critical. For a number of years, concern has been
expressed by private citizens, Members of Congress, and
representatives of industry regarding the effectiveness of
the management of major system acquisitions. The report of
the Commission on Government Procurement recommended
fundamental changes in the process of acquiring major
systems. This Circular is based on findings and conclusions
growing out of executive branch consideration of the
Commission's recommendations.
4. Responsibility. Each agency head shall insure that the
policy prov s.ions of this Circular are followed.
5.? Application. This Circular applies to the management of
the acquisition of major systems including: analysis of the
agency mission, determination of mission needs and the
setting of mission goals, system acquisition planning,
programming, budgeting, funding, research, engineering,
development, testing and evaluation, contracting,
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production, program control, and introduction of the system
into use. The Circular is applicable to such acquisition
programs even though some agencies may not have full
responsibility for each of these functions. For instance,
an agency may not procure systems for its own use but
instead may create optional demonstration hardware for
private sector choice, or may procure one-of-a-kind systems.
Such variations do not justify the exclusion of programs
from the management concepts of this Circular.
6. Definitions. As used in this Circular:
a. "Agency head" means the head or deputy head of an
executive agency.
b. "Executive aagency" means an executive department- or
an independent establish_ment within the meaning of sections
101 and 104(1), respectively, of Title 5, United States
Code.
c. "Agency component" means a major organizational
subdivision of an executive agency. For example, the Army,
Navy, Air Force, and Defense Supply Agency are agency
components of DOD; the Federal Aviation Administration,
`Urban Mass Transportation'Administration, and the Federal
Highway Administration are agency components of DOT.
d. "Mission need" means within an agency's overall
purpose a des recapability, including cost and schedule
considerations, expressed in mission terms, not equipment
terms. A mission need may be the result of an identified
deficiency or the result of a technologically feasible
,opportunity.
e. "Major system" means equipment, construction or
other improvements of real property, and related programs
involving the acquisition process which meet an agency
mission need of sufficient importance to warrant the
allocation of large dollar resources or special management
attention. Dollar thresholds and other criteria for the
determination of agency programs to be considered major
systems under the purview of this Circular shall be at the
discretion of the agency head.
f. "Acquisition process" means the sequence of
activities starting with reconciliation of mission needs and
goals with capabilities, priorities and resources, and
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extending through the introduction of a system into
operational use or the otherwise successful achievement of
program objectives.
7. General policy. The guidelines of this Circular are
designed to work as an integrated whole toward the
improvement of the effectiveness and efficiency of the major
system acquisitions process. They are based on the general
policy that Federal agencies when acquiring major systems
shall:
a. Establish needs and goals based on broad agency
mission definition.
b. Perform planning, programming, and budgeting built
on analysis of needs, goals and missions which implies:
better resource allocation resulting both from improved
agency,articulation of missions and goals, and from improved ``
cbmmunication with Congress in accord with the Congressional It
Budget Act of 1974, Public Law 93-344 (31 U.S.C. 1301).
c. Create and explore alternative system solutions
within the broad agency "mission" context -- with emphasis
upon generating increased innovation, participation, and
conceptual competition from industry as opposed to undue
reliance upon agency internally developed concepts and/or
preliminary designs.
d. Increase levels of agency early R&D funding for
exploration of alternatives as relatively inexpensive
insurance against t pass --ility that a premature or
preordained choice may later prove to be either a less
effective or a more costly means of fulfilling a mission
need.
e. Focus competition re meaningfully on alternative
design concepts as opposed to con ining competition o price
or performance differentiation within a single design
concept.
f. Choose a final system from among alternative systems
that are honed by a competitive development environment.'
g. Manage systematically the entire requirements
determination/development/production process.
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h. Provide appropriate managerial level for decision-
making and an improved management hierarchy of authority,
responsibility and accountability..
i. Provide strong checks and balances for systems
destined for production through a test and evaluation
organization independent of developer and user.
8. Management objectives.
a. A major system acquired by the Government must
fulfill a mission need, be affordable, operate effectively
in its intended environment, and demonstrate a performance
level and reliability that justify the allocation of
resources tp its acquisition, ownership, and support.
Efforts shah. be made to minimize life cycle cpsts by
inc1i.ing the appropriate use of technology, means to
promote competition, and incentives to achieve reliability
of the system in its operating environment.
b. An "acquisition strategy" must be tailored for each
individual system program as soon as a determination is made
to solicit design concepts which could lead to the
acquisition of a new major sstem. Such strategy should
include test and evaluation criteria and business managem
cons'iderations'such as. the timing of essential elements of
the acquisition process, the content of proposal
solicitations, whom to solicit, methods. for obtaining and
sustaining competition, data rights, use of warranties, need
for developing contractor incentives, and selection of
contract types. The cpntracting process should be
recognized As an important tool in system acquisitions.
9. Management structure..
a. Each agency that acquires major systems, or is
responsible for the activities leading to the acquisition of
major systems, shall have an, acquisition executive,
designated by the head of the agency, -who s a e
responsible for the agency's integrated acquisition
management process and for monitoring policy implementation
and practice under this Circular. There shall be clear
channels of delegation of responsibility and authority
within the agency's acquisition management process.
Technical and program decisions normally should be made at
the operating activity or component level with clear
channels of accountability within the agency. However, the
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following key approval decisions should be retained by the
agency head:
(1) Mission need and the goals that an acquisition
program is to achieve.
(2) Selection of competitive candidate systems for
demonstration, or noncompetitive (single concept) system
development.
(3) Full-scale system development and limited
production.
(4) Full production release.
b. Major system acquisition programs shall be managed
Py a. program manager, who should be designated when a
decision is made to fulfill a mission objective by pursuing
design concept alternatives and who, with satisfactory
performance, should be retained for a sufficient period to
provide reasonable continuity and personal accountability.
Program managers should have an understanding of user needs
and constraints, familiarity with development principles,
and program management skills and experience in the
following functional areas where applicable: research and
development, operations, engineering, construction, testing,
contracting, prototyping and fabrication of complex systems,
production, finance, and business. A program manager shall
have a written charter which provides authority to
accomplish r ecogn ze program objectives.
c. Each agency shall rely, to the greatest extent
possible, on competitively derived concepts and designs, and
shall insure that management layering, staff reviews,
reporting procedures and paperwork requirements placed on
program managers and contractors are minimized.
d. Each agency shall develop the capability to predict,
review and control costs for system development,
engineering, design, test, production, and operation and
support (i.e., life cycle costs). Costs, schedules and
performance shall be tracked against predictions and
examined by the agency head at key decision points, and new
cost/schedule/benefit analyses shall be performed where
significant cost, schedule or performance variances occur.
Life cycle cost techniques shall be employed during concept
evaluation and selection, full-scale development, facility
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`r'
conversion, and production, to insure identification and
achievement of the lowest lifetime costs in consonance with
the capability being acquired.
e. Joint interagency working groups should be
established where appropriate as a means to advance
technology and. reduce system costs, promote standardization
and enhance the development of a competitive acquisition
environment.
10. Mission needs and o als?
Initiation of all major system acquisition programs
a.
should be based on an analysis of an agency's mission and a
determination of needs and goals reconciled with overall
capabilities, priorities and resources. If analysis of an
agency's mission shows that a need for a major system
exists, such a need should be defined in terms of f the
mission objective, agency components involved, capability,
schedule and cost goals, and operating constraints.
etitive
Benefits to be derived should be optimized by compity
exploration of alternativsshoand uld betrade-offs
exercisedfduringilthe
goals, time, and cost. Care
initial steps of the acquisition. process not to distort
needs and goals by forcing their conformance to anyfonownloor
offered systems or products
consideration of alternative design concepts or alternative
approaches under a single design concept.
b. Agencies having more than one component may compete
the concepts and developments traditionally assignedlect ach
in order to consider innovative approaches approach
most technically suitable and most cost effective app
to fulfilling a mission deficiency.
c. Each agency shall maintain a strong technology base
by conducting, supporting, or sponsoring basic research,
applied research, system concept studies, proof of concept
work, exploratory subsystem development, and tests and
evaluations in both the private sector and Government in-
house technical centers relevant to the agency's assigned-
responsibilities.
11. Alternative systems.
a. System concept design alterl:.atives shall be
solicited from all competent qualified sources in order to
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achieve the optimum system through encouraging innovation
and competition. Conceptual designs are to be primarily
solicited from private industry, including smaller
businesses. Federal laboratories, federally funded research
and development centers, educational institutions, and other
.not-for-profit organizations may also be considered as"
sources for conceptual system designs.
b. Ideas, concepts, or technology, developed by
Government laboratories or at Government expense for which
Government rights have been established, may be made
available to private industry through the procurement
process. Industry proposals to the agency may be made on
the basis of these ideas, concepts, or technology or on the
basis of alternatives which industry considers superior.
Requests for system concept design proposals shall contain
explanations of the mission need, time, cost, and capability
goals, and operating constraints. Each offerer shall be
free to propose his own technical approach, main design
features, subsystems, and alternatives to time, cost, and
capability goals. In the conceptual and less than full-
scale development stages, the contractors should not be
restricted by a wide spectrum of detailed Government
specifications and standards. Selections from competing
proposals shall be based on a review by a team of experts
from inside and outside the agency component development
organization. Such a review shall consider proposed system
functional and performance capabilities to meet mission
needs, resources required, and benefits to be derived by
trade-offs of technical performance, acquisition costs,
ownership costs, time to develop and procure and the
accomplishment record of competitors.
c. During the uncertain period of identifying and
exploring alternative system concepts, contracts covering
relatively short time periods at planned dollar levels shall
be used. A timely technical review of alternative concepts
will be made to effect the orderly elimination of those
least attractive.
d. Programs shall be structured and resources allocated
to insure demonstration and evaluation of competing
alternative concepts to mission accomplishments wherever
economically feasible, including competition between similar
or differing concepts throughout the entire acquisition
process. Contractors shall be provided with operational
test conditions, mission performance criteria, and lifetime
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ownership cost factors that will be used by the agency in
the evaluation and selection of the system(s) for full-scale
development and production..
e. Appropriate interaction between agency
representatives with relevant operational experience and
participating contractors should be encouraged as necessary
in developing performance and other requirements for each
system alternative as tests and trade-offs'are made.
f. Development of subsystems which are intended to be
included in a` major system acquisition program shall be
restricted'to less than fully designed'hardware (full-scale
development) until the subsystem is identified as a part of
a system candidate for full-scale development. Exceptions
may be; authorized by the agency he'ad'if the subsystems are
long .lead time items fulfilling a recognized generic need or
if tey'havea high'potentialfor common use among several
existing or future systems..
g. Approval for development of a noncompetitively
selected major system design concept should be considered
only if justified by factors `'typified by either extreme
urgency of 'need with only one viable approach, or physical
and financial 'impracticality'Of demonstrating alternatives.
12. Full-scale development and production.
a.. Full-scale development, including limited
production,'shallnot be approved'until'agency mission needs
and' 'goals are reaffirmed and competitive demonstration
results prove that'the chosen technical approach is sound.
b. Full production shall not be approved until agency
mission 'needs and 'goals are' reaffirmed. In addition full
production shall not be approved until system performance
has been satisfactorily 'tested independent of'the agency
development and user organizations,' and evaluated in an
environment that assures demonstration in expected
operational conditions. Exceptions to the independent
testing portions of this policy may be authorized by-the
agency head if a cost benefit analysis shows that release of
a system to production is'clearly justified.
c. Selection of a system and system contractors for
full-scale development and'production should be made on the
basis of: (1) system performance measured against current
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mission needs; (2) an evaluation of estimated costs of
system development, production, operation, and support; (3)
program schedule; and (4) the contractor's proven
management, financial, and technical capabilities as related
to the requirements of the contract.
d. System tests and contractor performance relative to
meeting system performance, cost, and schedule commitments
shall be monitored by the program manager. Significant
actual or forecast variances shall be brought to the
attention of the appropriate management authority for
corrective action. The acquisition executive shall be
informed of such variances and corrective actions.
13. Budgeting and financing. The agency's research and
development budget should reflect an appropriate balance
between the general technology base in support of the
agency's overall mission and the technology in support of
specific mission areas. Agencies shall insure that the
research and development budget is developed and allocated
in consonance with mission area needs and goals. Each
agency should insure that research and development is not
undesirably du
li
t
d
p
ca
e
across its mission areas.
14. Information to Congress.
a. Agencies shall develop procedures, in conjunction
with the Office of Management and Budget and the various
committees of Congress having oversight responsibility for
agency functional responsibilities, to inform Congress in,
the normal budget process about agency missions,
capabirities, deficiencies and needs and goals related to
new acquisition programs in consonance with Section 601(i)
of the Congressional Budget Act of 1974, Public Law No.
93-344.
b. Disclosure of the basis for noncompetitive`.a d '
undemonstrated system concept selections shall also be made
to the appropriate congressional committees in the normal
budget process. _
15. Implementation. Agency guidelines or policy directives
implementing this Circular shall be furnished the
Administrator for Federal Procurement Policy (OMB) for
review. Within six months after the date of release of the
Circular, each agency shall develop and submit to the
Administrator for Federal Procurement Policy (OMB) a time-
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phased plan for meeting the requirements of this Circular.
During this period, the agencies shall work with the
Administrator to resolve implementation problems.
JAMES T. LYNN
DIRECTOR
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