Employing a Variable, Portfolio Contract Model to Accelerate Innovation Incorporation, Enhance Operational Sustainability, and Reduce Supply Risk in the Procurement Process

Abstract

This paper focuses on providing solutions to two problems plaguing federal acquisition processes: (1) limited ability to rapidly incorporate innovation into contracted procurement and (2) supply risk associated with high-volume quantity contracts that engage individual contractors. The author proposes solutions which are designed to resolve these problems, which include (a) capability requirement documents written to increase design flexibility and uniformity in operations and maintenance, and (b) a variable, portfolio contract model which simultaneously engages multiple contractors—to increase overall contract production capacity and reduce supply risk—and is able to change the quantity demanded from each contractor (“market share”), based on innovative improvements to cost, schedule, and/or performance. The contract model is applied to a high-end, near-peer, maritime competitive environment, requiring high-volume procurement. An evaluation of the contract model, consisting of 120 individual simulations, demonstrated (i) increased contract production capacity, (ii) consistent increase in procurement quantity demanded from innovative contractors, and (iii) increased product performance rating—which translates to a higher quality capability delivered to Warfighters. The paper concludes with a recommendation to implement a variable, portfolio contract to ensure timely, risk-mitigated delivery of high-volume, high attrition capability for the future, maritime fight.