3

ARL Enhanced Option

The ARL Enhanced option is the baseline for the committee's comparison of options. This option involves the implementation of several well attested measures that could be taken, within the limits of current administrative statutes and regulations, to give ARL more authority over its personnel and procurement decisions, and more effective relations with its research and development contractors. These measures have all been fully assessed by the military acquisition system over the past several years, but have not been thoroughly implemented. They would require only administrative directives by the Department of the Army, without congressional action, and could be implemented by fiscal year 1997, when ARL is scheduled to complete its process of formation. This option is therefore a reasonable baseline for the assessment. Two broad changes are assumed for this option:

  • implementation of the Defense Laboratory Demonstration program of personnel and purchasing reforms, mandated by the Deputy Secretary of Defense in 1989 (Atwood, 1989); and

  • implementation of the Department of Defense's Laboratory Quality Initiatives, proposed in 1993 as a contribution to the Defense Task Force of the Vice President's National Performance Review (Bachkosky, 1993). (One notable aspect of these initiatives is the use of cooperative agreements for procuring R&D, rather than the procurement contracts now used for this purpose by the Army.)

An independent external science and technology board of independent technical experts would replace ARL's current Board of Directors. This board, reporting to the ASA(RDA), would review ARL R&D programs for technical quality, orientation, and relevance, and advise on broad research directions.

Contracting activity would account for 20 percent of ARL's research and development (corresponding to the committee's evaluation of budget and personnel plans for ARL).



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THE ARMY RESEARCH LABORATORY: Alternative Organizational and Management Options 3 ARL Enhanced Option The ARL Enhanced option is the baseline for the committee's comparison of options. This option involves the implementation of several well attested measures that could be taken, within the limits of current administrative statutes and regulations, to give ARL more authority over its personnel and procurement decisions, and more effective relations with its research and development contractors. These measures have all been fully assessed by the military acquisition system over the past several years, but have not been thoroughly implemented. They would require only administrative directives by the Department of the Army, without congressional action, and could be implemented by fiscal year 1997, when ARL is scheduled to complete its process of formation. This option is therefore a reasonable baseline for the assessment. Two broad changes are assumed for this option: implementation of the Defense Laboratory Demonstration program of personnel and purchasing reforms, mandated by the Deputy Secretary of Defense in 1989 (Atwood, 1989); and implementation of the Department of Defense's Laboratory Quality Initiatives, proposed in 1993 as a contribution to the Defense Task Force of the Vice President's National Performance Review (Bachkosky, 1993). (One notable aspect of these initiatives is the use of cooperative agreements for procuring R&D, rather than the procurement contracts now used for this purpose by the Army.) An independent external science and technology board of independent technical experts would replace ARL's current Board of Directors. This board, reporting to the ASA(RDA), would review ARL R&D programs for technical quality, orientation, and relevance, and advise on broad research directions. Contracting activity would account for 20 percent of ARL's research and development (corresponding to the committee's evaluation of budget and personnel plans for ARL).

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THE ARMY RESEARCH LABORATORY: Alternative Organizational and Management Options ENHANCEMENTS Defense Laboratory Demonstration Initiatives The Lab Demo initiatives were directed by Donald Atwood, Deputy Secretary of Defense, in a memorandum in late 1989. These initiatives, to be taken at several military laboratories, including the U.S. Army Laboratory Command elements that have since become ARL, have several main points: Simplify contracting and procurement by removing service-imposed constraints that go beyond statutory requirements. In particular: (a) maintain laboratory bench stocks based on manager's assessments rather than demand data; (b) streamline procurement reviews by matching their complexity to that of the business situation, not simply the dollar amount; (c) make wider use of Broad Agency Announcements (in which the government solicits ideas in a broad area, rather than tightly specifying the contents of proposals); (d) make wider use of legitimate exception provisions of the Competition in Contracting Act (which requires full competitions based on cost, even for small procurements); (e) limit final negotiations to suppliers having a reasonable chance of award; and (f) issue commercial credit cards to labs for purchases of up to $25,000. Simplify personnel procedures by removing service-imposed constraints that go beyond the requirements of law. In particular: (a) let line managers classify positions (with automated position classification system); (b) install a dual career ladder, with science and technology supergrade staff positions (GS-16 through GS-18) equivalent to 3 percent of the scientist and engineer positions, to offer incentives for nonmanagerial advancement; (c) offer short-term appointments to attract distinguished senior retirees from industry or universities; and (d) appoint laboratory technical directors to four-year terms, with annual renewal thereafter. Increase local decision authority by (a) placing support functions (e.g., personnel, procurement, counsel, etc.) under the direct supervision of lab directors and (b) giving technical directors discretionary funds of 5 percent of their laboratories' gross project costs. Each of the Lab Demo initiatives has been presented often to high officials of DOD and the Department of the Army. Implementation has not been successful. Despite the energetic efforts of proponents, only a few initiatives have received enough support in the Army, DOD, or the Office of Management and Budget to be implemented (Heeb, 1993). The committee also discovered an excessive number of briefings were required for each initiative, increasing its chances for disapproval (Army Lab Demo Team,

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THE ARMY RESEARCH LABORATORY: Alternative Organizational and Management Options 1991). Figure 3-1 represents the committee's assessment of the progress made thus far in implementing each initiative at ARL, despite its best efforts. To implement just one of the many Lab Demo initiatives, a laboratory must receive changes or waivers in regulations at the local command, the Army Materiel Command, the Department of the Army, often the Department of Defense, and sometimes other agencies, such as the Office of Personnel Management; at each level, a pyramid of subsidiary approvals must be obtained, from all functionaries with interests in the change. The Tri-Service Lab Demo Executive Panel (1993) recognized 75 separate sub-initiatives required to implement the 15 primary initiatives (Army Lab Demo Team, 1991). One action officer on Lab Demo estimated that getting approval for one subinitiative required more than 100 briefings. Laboratory Quality Initiatives The Laboratory Quality Initiatives (Department of Defense, 1993) build on the Lab Demo program of reforms, and have been largely adopted as goals by the Vice President's National Performance Review (Leonard, 1993). They include the following changes: Manage workforce size according to budget (rather than by detailed instructions from the Army). Review the Defense Management Review Decisions for impacts on laboratory quality. Obtain authority for direct hiring of scientists and engineers, without prior approval. (Direct hiring authority is granted by the Office of Personnel Management in cases in which personnel are deemed not to be in sufficient supply. Some laboratories have direct hiring authority for clerical workers, but not for technical personnel.) Obtain DOD authorization for services to enter into cooperative agreements in procuring R&D. Only the Advanced Research Projects Agency, of all DOD organizations, has this authority today (see Cooperative Agreements below). Obtain approval under Defense Acquisition Regulations for a test of a streamlined R&D contract process. Establish a senior laboratory management champion at the Director of Defense Research and Engineering to review DOD and service actions for undue constraints on research and development. A memorandum on these initiatives, forwarded to the Director of the Defense Performance Review Task Force (Bachkosky, 1993; Lab Demo Executive Panel, 1993), reported that these initiatives would reduce

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THE ARMY RESEARCH LABORATORY: Alternative Organizational and Management Options FIGURE 3-1 Implementation of Lab Demo initiatives at ARL. Source: Committee on Alternative Futures for the Army Research Laboratory.

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THE ARMY RESEARCH LABORATORY: Alternative Organizational and Management Options procurement lead times by 50 to 70 percent; cut R&D contracting time by 30 to 50 percent; reduce overhead and administrative personnel (and overhead rates); improve the responsiveness of facility construction and maintenance; increase the number of personnel with advanced degrees; reduce attrition; cut recruiting time; increase numbers of patents, publications, and cooperative agreements with industry and academia; and increase technology transfer. The Laboratory Quality Initiatives are reflected in many of the initiatives of the National Performance Review (1993), as shown in Table 3-1 (Department of Defense, 1993). Cooperative Agreements Responsive contracting mechanisms are essential to ARL's effectiveness. DOD has had statutory authority for cooperative agreements—a form of agreement widely used by other federal agencies to support R&D partnerships with outside organizations—for some years; 10 U.S.C. 2358 was amended in 1981 to include grants, and 10 U.S.C. 2371 authorized cooperative agreements and other transactions in 1989. But it has not exploited that authority except in the Advanced Research Projects Agency. At the time of writing this report, the Director of Defense Research and Engineering was developing guidance for urging the services to start exercising cooperative agreement authority (Dunn, 1993). R&D often involves flexibility in research approaches, innovation, support, stimulation, and cooperation, which are unavailable in the standard federal procurement contract that has a rigidly defined product and discourages any deviations from prescribed deliverables by the customer. The ARL Enhanced option would involve the use of cooperative agreements to the maximum extent feasible.1 A cooperative agreement is much like a grant in its basic purpose, but allows for a more active role by the agency. Grants are normally used for transferring funds to a recipient to support or stimulate the performance of a public purpose, such as university research, without substantial involvement by the granting agency. A cooperative agreement is appropriate when the purpose is the same as for a grant, but substantial involvement is expected by the agency and any technical collaboration anticipated is defined and specified in advance. 1   Cooperative agreements under 10 U.S.C. 2371 should be distinguished from a Cooperative Research and Development Agreements (CRADAs) authorized under the Federal Technology Transfer Act of 1986 (Public Law 99-102) to foster technology transfer from federal laboratories to the commercial sector through cooperative work R&D. With CRADAs no transfer of funds is permitted to accompany the technology exchange.

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THE ARMY RESEARCH LABORATORY: Alternative Organizational and Management Options TABLE 3-1 Crosswalk Between Initiatives Lab Quality National Performance Review Manage to Budget BGT 03 Empower managers to perform BGT 04 Eliminate employment ceilings DOD 02 Establish a unified budget for DOD DOD 06 Establish and promote a productivity enhancing capital investment fund FM 07 Create innovation funds Resolve DMRD Conflict REG 03 Encourage consensus-based rule making Direct hire authority HRM 01 Create a flexible and responsive hiring system Cooperative agreements PROC 04 Establish new simplified acquisition threshold and procedures Expedite Streamlined R&D Contracts DOD 03 Purchase best value common supplies and services PROC 03 Encourage more procurement innovation Other pertinent reforms HRM 02 Reform the General Schedule Classification and Basic Pay System HRM 03 Authorize agencies to develop programs for improvement of individual and organizational performance HRM 04 Authorize agencies to develop incentive awards and bonus systems to improve individual and organizational performance HRM 05 Strengthen systems to support management in dealing with poor performance HRM 12 Eliminate excessive red tape and automate functions and information for classifying positions NOTE: BGT = Budgeting DMRD = Defense Management Review Decisions FM = Financial Management HRM = Human Resource Management PROC = Federal Procurement REG = Regulatory Systems

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THE ARMY RESEARCH LABORATORY: Alternative Organizational and Management Options Both grams and cooperative agreements must be supported by valid proposals. These proposals would normally come in response to Broad Agency Announcements, and must (a) demonstrate innovative and unique methods, approaches, or concepts and (b) not closely resemble any pending competitive acquisition requirements. Under 10 U.S.C. 2371, cost sharing in cooperative agreements is the norm, but not an absolute standard; contributions can include the fair market value of equipment, facilities, services, materials, and other assets. Intellectual property provisions are negotiable, giving the private sector party an additional incentive to enter into the cooperative agreement. COMPARATIVE ASSESSMENT The ARL Enhanced option is the baseline, to which the other options are compared. It offers the Army a quick improvement in ARL's effectiveness, without the need for radical change or upheaval, and without the need for congressional authorization. The following assessments, with respect to the committee's assessment criteria, highlight the effects of the changes assumed for this option, and compare the option with the others considered by the committee. Linkage to Army Strategy and Objectives Implementing this option, in itself, would have little effect on ARL's sensitivity and responsiveness to the Army's long-range strategy objectives. Some of the assumed personnel and purchasing reforms, as noted earlier in this chapter, would improve ARL's ability to respond to changes in Army needs in the shorter term. World-Class Land Warfare Research The initiatives assumed for this option would produce measurable improvements in ARL's R&D inputs. The committee believes that these improvements would soon lead to improved outputs. The personnel reforms would let ARL more quickly increase the proportion of its staff scientists and engineers who hold Ph.D.s, add needed expertise to its staff, and reward exceptional efforts. The procurement reforms would speed purchases of needed supplies and equipment and cut administrative overhead sharply. The use of cooperative agreements for research and development contracting would expose both ARL and its private sector partners to stimulating

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THE ARMY RESEARCH LABORATORY: Alternative Organizational and Management Options exchanges of ideas and techniques that will enrich the intellectual climate and broaden the scientific and technological options available to the Army. The result would be a laboratory with performance superior to that of ARL without these enhancements. Fully and properly implemented and supported, with the recommended new reporting channel and more focused mission (see Chapter 2), this option could give the Army a world-class source of science and technology. Diversity and Quality of Research Sources The ARL Enhanced option, by virtue of its improved internal quality and its use of cooperative agreements, would better exploit outside sources of research and technology. The range of sources available would increase, and ARL's activities with its partners would be richer, more flexible, and more interactive. However, the option—like ARL may be in 1997—is restricted to contracting no more than 20 percent of its R&D (and that 20 percent is limited to work in funding category 6.2). (This percentage corresponds to ARL's available funding and personnel plans for fiscal year 1997.) An organization weighted heavily toward internal research and development, with severe budget constraints and the current overmanning (may be corrected through force reduction), cannot compete with the other options considered in optimizing diversity. The Army would have to increase ARL's research and development budget as well as be more flexible in ARL's percentage of contracted research and development. Technology Transfer to the Army The ARL Enhanced option would not have a substantial effect on ARL 's success in transferring technology to users through the RDECs, the field assistance programs, and other means discussed in Chapter 2. One might argue that the general improvement of ARL's R&D would enhance its technology transfer, but such an effect would be marginal. ARL could be improved in this area by the focusing of its mission and the formation of the technology transfer partnerships, both recommended in Chapter 2 (and both assumed for all of the committee's options). If ARL were not competing with its own customers (the RDECs) and were doing research and development its customers considered critical, technology would flow more easily. All other things being equal, one would expect an internal operation to have better transfer to other parts of the Army, as there are fewer barriers.

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THE ARMY RESEARCH LABORATORY: Alternative Organizational and Management Options Ability to Leverage Funds and Programs Military plans rely increasingly on exploiting technologies developed outside the Army, in areas where outside work is more advanced or more cost-effective. New links are needed with commercial and academic laboratories, and the laboratories of other government agencies. A wide variety of mechanisms are available, including the use of off-the-shelf commercial products, collaborative working arrangements in which costs and results are shared, and “spin-on” and “spin-off” programs that aim at exploiting “dual-use” technologies. This option would better prepare ARL to achieve this goal, by virtue of its more flexible management practices, and in particular its use of cooperative agreements, which would free ARL to do truly cooperative R&D with its contractors. The ARL Enhanced option, because of its limited contracting, would not have the rich networks of interactions with outside organizations that are built into options using contractors. Recurring Costs and Productivity The ARL Enhanced option involves substantial increases in ARL's ability to improve its cost-effectiveness and productivity. The Lab Demo program and Laboratory Quality Initiatives alone would reduce ARL's administrative overhead dramatically (Department of Defense, 1993). Contracting would take less effort and get research underway with less delay, making it possible for ARL to look for the best research sources rather than seeking ways of piggybacking on present sources. Highly qualified personnel would be easier to hire. In addition, the overall quality of ARL's work would increase because of the improved administrative procedures and the more effective cooperation with R&D contractors. On the cost side, the ARL Enhanced option has the advantage of relying on government-employed scientists and engineers, who are paid less on average than contractors ($52,700 per year, in 1993 dollars, compared with $70,000). Under the constant operating budget assumed for all options in the committee's comparison, ARL would be able to afford a larger technical staff through this options. Other options would rely more on contractors and, in the case of the NIST option, pay their government employees on average more than ARL does today. ( Chapter 7 reviews the cost comparisons of the options; Appendix D contains details of the committee's cost study.)

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THE ARMY RESEARCH LABORATORY: Alternative Organizational and Management Options IMPLEMENTATION ISSUES It is assumed that ARL (like all other options considered by the committee) could be reorganized with the features of the ARL Enhanced by fiscal year 1997. One might expect some turbulence and morale problems at first, thus the full benefits would appear over a period of years. The cost of conversion would be small, about $11 million, in severance pay and other personnel costs, to account for the personnel displaced by the recommended narrowing of ARL's program (see Chapter 2 and Chapter 7). As noted earlier, implementation of the administrative reforms of this option will require serious attention at the highest possible levels. Despite ARL's best efforts to fully implement the Lab Demo initiatives, implementation of reforms were retarded by the lack of such support and the need to obtain a pyramid of separate approvals for each initiative. This option may not be bold enough to gain full support within DOD. Needless to say, without the administrative reforms, this option is meaningless. Some caution is warranted in changing the status quo at ARL. Any impact on the decisions of the Base Closure and Realignment Commission would require notification of the commission. The latest (1991) commission has dissolved and the next (1993) commission will not present its findings until 1995. The commission would have to review decisions which substantially affect facilities, base closures, or other commission issues. OVERALL EVALUATION If done properly, with the full implementation of the Laboratory Demonstration Program initiatives and the Laboratory Quality Initiatives, this option could provide the conditions for an better laboratory. It would not be as likely to achieve world-class status or as high a reputation as the other options, which go further in taking advantage of the private sector and modern techniques of laboratory management. The real challenge, as suggested above, would be implementing these rather modest reforms in the face of the vacillation and friction of the DOD decision-making system, which requires approval from the bottom up of even minor changes. The failed implementation of the Defense Lab Demo program, described earlier in this chapter, shows that modest reform may not be worth the effort of attaining it. More radical change, with support from high officials such as the Chief of Staff of the Army and the Secretary of the Army, could stand a better chance of taking place.

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THE ARMY RESEARCH LABORATORY: Alternative Organizational and Management Options REFERENCES Army Lab Demo Team. 1991. DMR Lab Demonstration Program Summary. June 24. Atwood, D.J. 1989. Laboratory demonstration program: Actions for improvement of the quality, productivity, and efficiency of DOD laboratories. November 20. Memorandum. Bachkosky, J. 1993. Reinvention laboratories. July 30. Memorandum from the Deputy Director, Defense Research and Engineering, to the Director, Defense Performance Review Task Force . Department of Defense. 1993. Laboratory Quality Initiatives. Dunn, R.L. 1993. Personal communication from Richard L. Dunn, General Counsel, Advanced Research Projects Agency, Arlington, Virginia, to Albert A. Sciarretta, Study Director. December 7, 1993. Heeb, M. 1993. Personal communication from Michael Heeb, U.S. Department of Energy, Washington, D.C. Leonard, W. 1993. Crosswalk between NPR and LQI. Briefing charts presented by W. Leonard, U.S. Army Missile Command Lab Demo Office. October. National Performance Review. 1993. Creating a Government that Works Better and Costs Less. Washington, D.C.: U.S. Government Printing Office. September 7. Tri-Service Lab Demo Executive Panel. 1993. DoD Laboratory Quality Initiatives. Draft memorandum for the Secretaries of the Military Departments; Comptroller; Director, Defense Research and Engineering; Assistant Secretary of Defense (Force Management and Personnel); Deputy Undersecretary of Defense (Acquisition Reform); Director of Defense Procurement .