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Appendix A Perry Memorandum THE SECRETARY OF DEFENSE WASHINGTON, DC 20301-1000 29 Jun 94 MEMORANDUM FOR SECRETARIES OF THE MILITARY DEPARTMENTS CHAIRMAN OF THE JOINT CHIEFS OF STAFF UNDER SECRETARIES OF DEFENSE COMPTROLLER ASSISTANT SECRETARY OF DEFENSE (COMMAND, CONTROL, COMMUNICATIONS, AND INTELLIGENCE) GENERAL COUNSEL INSPECTOR GENERAL DIRECTOR OF OPERATIONAL TEST AND EVALUATION DIRECTORS OF THE DEFENSE AGENCIES COMMANDER-IN-CHIEF, U.S. SPECIAL OPERATIONS COMMAND SUBJECT: Specifications & Standards - A New Way of Doing Business To meet future needs, the Department of Defense must increase access to commercial state-of-the-art technology and must facilitate the adoption by its suppliers of business processes characteristic of worId-ciass suppliers. In addition, integration of commercial and military development and manufacturing facilitates the development of dual-use processes and products and contributes to an expanded industrial base that is capable of meeting defense needs at Tower costs. I have repeatedly stated that moving to greater use of performance and commercial specifications and standards is one of the most important actions that DoD must take to ensure we are able to meet our military, economic, anal policy objectives in the future. Moreover, the Vice Presiclent's National Performance Review recommends that agencies avoid government-unique requirements and rely more on the commercial marketplace. To accomplish this objective, the Deputy Under Secretary of Defense (Acquisition Reform) chartered a Process Action Team to develop a strategy and a specific plan of action to decrease reliance, to the maximum extent practicable, on military specifications and standards. The Process Action Team report, "Blueprint for Change," identifies the tasks necessary to achieve this objective. I wholeheartedly accept the Team's report and approve the report's primary recommendation to use performance and commercial specifications and standards in lieu of military specifications and standards, unless no 37

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38 Impact of Acquisition Reform on DoD Materials and Processes Specifications and Standards prachcal alternative exists to meet the user's needs. I also accept the report of the Industry Review Pane] on Specifications and Standards and direct the Under Secretary of Defense (Acquisition and Technology) to appropriately implement the Panel's recommendations. I direct the addressees to take immediate action to implement the Team's recommendations and assign the Under Secretary of Defense (Acquisition and Technology) overall implementation responsibility. I direct the Under Secretary of Defense (Acquisition and Technology) to immediately arrange for reprogramming the funds needed in FY94 and FY95 to efficiently implement the recommendations. I direct the Secretaries of the Military Departments and the Directors of the Defense Agencies to program funding for FY96 and beyonc! in accordance with the Defense Planning Guidance. ~ 1 OF ~ Policy Chances Listed below are a number of the most critical changes to current policy that are neeclecl to implement the Process Action Team's recommendations. These changes are effective immediately. However, it is not my intent to disrupt on-going solicitations or contract negotiations. Therefore, the Component Acquisition Executive (as defined in Part 15 of DoD Instruction 5000.2), or a designee, may waive the implementation of these changes for on-going solicitations or contracts during the next 180 clays following the ciate of this memorandum. The Under Secretary of Defense (Acquisition and Technology) shall implement these policy changes in DoD Instruction 5000.2, the Defense Federal Acquisition Regulation Supplement (DEARS), and any other instructions, manuals, regulations, or policy documents, as appropriate. Military Specifications and Standards: Performance specifications shall be used when purchasing new systems, major modifications, upgrades to current systems, and non- developmental and commercial items, for programs in any acquisition category. If it is not practicable to use a performance specification, a non-government stanclard shall be used. Since there will be cases when military specifications are needed to define an exact design solution because there is no acceptable non-governmental standard or because the use of a performance specification or non-government standard is not cost effective, the use of military specifications and standards is authorized as a last resort, with an appropriate waiver. Waivers for the use of military specifications and stanciarcis must be approved by the Milestone Decision Authority (as clefinec3 in Part 2 of DoD Instruction 5000.2~. In the case of acquisition category ID programs, waivers may be granted by the Component Acquisition Executive, or a designee. The Director, Naval Nuclear Propulsion, shall determine the specifications and standards to be used for naval nuclear propulsion plants in accordance with Pub. L. 98-525 (42 U.S.C. 7158 note). Waivers for reprocurement of items already in the inventory are not required. Waivers may be made on a "class" or items basis for a period of time not to exceed two years.

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Appendix A. Perry Memorandum Innovative Contract Management: The Uncler Secretary of Defense (Acquisition and Technology) shall develop, within 60 days of the date of this memorandum, Defense Federal Acquisition Regulation Supplement (DEARS) language to encourage contractors to propose non-government standards and industry-wide practices that meet the intent of the military specifications and standards. The Under Secretary will make this language effective 180 days after the date of this memorandum. This language will be developed for inclusion in both requests for proposal and in on-going contracts. These standards ancl practices shall be considered as alternatives to those military specifications and standards cited in all new contracts expected to have a value of $100,000 or more, and in existing contracts of $500,000 or more having a substantial contract effort remaining to be performed. Pending completion of the language, I encourage the Secretaries of the Military Departments and the Directors of the Defense Agencies to exercise their existing authority to use solicitation and contract clause language such as the language proposed in the Process Action Team's report. Government contracting officers shall expedite the processing of proposer! alternatives to military specifications and standards ant! are encouraged to use the Value Engineering no-cost settlement method (permitted by FAR 48.104-3) in existing contracts. Program Use of Specifications and Standards: Use of specifications and stanclards listed in DoD Instruction 5000.2 is not mandatory for Program Managers. These specifications and standards are tools available to the Program Manager, who shall view them as guidance, as stated in Section 6-Q of DoD Instruction 5000.2. Tiering of Specifications and Standards: During production, those system specifications, subsystem specifications and equipment/product specifications (through and including the first-tier reference in the equipment/procluct specifications) cited in the contract shall be mandatory for use. Lower tier references will be for guidance only, and will not be contractually binding unless they are directly cited in the contract. Specifications and stanclards listed on engineering drawings are to be considered as first- tier references. Approval of exceptions to this policy may only be macle by the Head of the Departmental or Agency Standards Improvement Office and the Director, Naval Nuclear Propulsion, for specifications and drawings used in nuclear propulsion plants in accordance with Pub. L. 98-525 (42 U.S.C. 7158 Note). New Directions Management and Manufacturing Specifications and Standards: Program Managers shall use management and manufacturing specifications and standards for guidance only. The Under Secretary of Defense (Acquisition and Technology) shall develop a plan for canceling these specifications and standards, inactivating them for new designs, transferring the specifications and standards to non-government standards, converting them to performance-based specifications, or justifying their retention as military specifications and standards. The plan shall begin with the ten management and manufacturing standards identified in the Report of the Industry Review Panel on 39

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40 Impact of Acquisition Reform on DoD Materials and Processes Specifications and Standards Specifications and Standards and shall require completion of the appropriate action, to the maximum extent practicable, within two years. Configuration Control: To the extent practicable, the Government should maintain configuration control of the functional and performance requirements only, giving contractors responsibility for the detailed design. Obsolete Specifications: The "Department of Defense Index of Specifications and Standards" and the "Acquisition Management System and Data Requirements Control List" contain outdated military specifications and standards ant! data requirements that should not be used for new development efforts. The Under Secretary of Defense (Acquisition and Technology) shall develop a procedure for identifying and removing these obsolete requirements. Use of Non-Government Standards: I encourage the Under Secretary of Defense (Acquisition and Technology) to form partnerships with industry associations to develop non-government standards for replacement of military standards where practicable. The Under Secretary shall adopt and list in the "Department of Defense Index of Specifications and Standards" (DoDISS) non-government standards currently being used by DoD. The Uncler Secretary shall also establish teams to review the federal supply classes and standardization areas to identify candidates for conversion or replacement. Reducing Oversight: I direct the Secretaries of the Military Departments and the Directors of the Defense Agencies to reduce direct Government oversight by substituting process controls and non-government standards in place of development and/or production testing and inspection and military-unique quality assurance systems. Cultural Chances Challenge Acquisition Requirements: Program Managers and acquisition decision makers at all levels shall challenge requirements because the problem of unique military systems does not begin with the standards. The problem is rooted in the requirements determination phase of the acquisition cycle. Enhance Pollution Controls: The Secretaries of the Military Departments and the Directors of the Defense Agencies shall establish and execute an aggressive program to identify and reduce or eliminate toxic pollutants procured or generated through the use of specifications and standards. Education and Training: The Under Secretary of Defense (Acquisition and Technology) shall ensure that training and education programs throughout the Department are revised to incorporate specifications and standards reform. Program Reviews: Milestone Decision Authority (MDA) review of programs at all levels shall include consideration of the extent streamlining, both in the contract and in the oversight process, is being pursued. The MDA (i.e., the Component Acquisition

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Appendix A. Perry Memorandum Executive or his/her designee, for all but ACAT ID programs) will be responsible for ensuring that progress is being made with respect to programs under his/her cognizance. Standards Improvement Executives: The Under Secretary, the Secretaries of the Military Departments, and the Director of the Defense Logistics Agency shall appoint Standards Improvement Executives within 30 days. The Standards Improvement Executives shall assume the responsibilities of the current Standardization Executives, support those carrying out acquisition reform, direct implementation of the military specifications and standards reform program, and participate on the Defense Standards Improvement Council. The Defense Standards Improvement Council shall be the primary coordinating body for the specification and standards program within the Department of Defense and shall report directly to the Assistant Secretary of Defense (Economic Security). The Council shall coordinate with the Deputy Under Secretary of Defense (Acquisition Reform) regarding specification and standards reform matters, ant! shall provide periodic progress reports to the Acquisition Reform Senior Steering Group, who will monitor overall implementation progress. 41 Management Commitment This Process Action Team tackled one of the most difficult issues we will face in reforming the acquisition process. I would like to commend the team, composer! of representatives from all of the Military Departments and appropriate Defense Agencies, and its leader, Mr. Darold Griffin, for a job well done. In addition, I would like to thank the Army, and in particular, Army Materiel Command, for its administrative support of the team. The Process Action Team's report and the policies contained in this memorandum are not a total solution to the problems inherent in the use of military specifications and standards; however, they are a solid beginning that will increase the use of performance and commercial specifications and stanciarcis. Your leaclership and good judgment will be critical to successful implementation of this reform. I encourage you and your leadership teams to be active participants in establishing the environment essential for implementing this cultural change. This memorandum is intended only to improve the internal management of the Department of Defense and does not create any right or benefit, substantive or procedural, enforceable at law or equity by a party against the Department of Defense or its officers and employees. William J. Perry

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