Lead System Integrators

EXECUTIVE SUMMARY: In the wake of recent cost overruns, schedule slips, and performance shortfalls, there is a growing concern about using private-sector lead system integrators (LSIs) for the execution of large, complex, defense-related acquisition programs. Abandoning the LSI approach will challenge the Services, because in most cases they lack the ability to manage complex programs on their own.

DISCUSSION:
In recent years, DOD acquisitions have turned to the LSI concept in large part because they have determined that they lack the in-house, technical, and project-management expertise needed to execute large, complex acquisition programs. Because private-sector firms often have better knowledge and expertise of rapidly developing commercial technologies, LSI arrangements can promote better technical innovation and overall system optimization.
LSI proponents argue the only way a complex program with numerous component contracts can be delivered, is by contracting for a seamless single integrated program led by the LSI which effectively streamlines the downselect and procurement process. In an LSI arrangement, the federal government has a contractual relationship with the LSI prime contractor, not with any subcontractors that report to the prime contractor. This lack of transparency makes government management and oversight of an acquisition program more difficult and increases the risk of cost overruns, schedule slippage, poor product quality (e.g. lack of interoperability), and inadequate system performance.
Of course, cost overruns, schedule slips, and performance shortfalls have plagued large weapon system acquisition programs since World War II, so LSI’s maybe a scapegoat for more fundamental contributing factors to these problems including requirements creep, funding instability and immature technologies.
“We’ve relied too much on contractors to do the work of government as a result of tightening budgets, a dearth of contracting expertise in the federal government, and a loss of focus on critical governmental roles and responsibilities in the management and oversight of acquisition programs,” Coast Guard Commandant Adm. Thad Allen said last April.1 In recent years, House Armed Services Committee members have been concerned about ceding too much program management to contractors, allowing cost overruns, schedule delays and other problems to go undetected until too late. HASC Chairman Gene Taylor (D-Miss.) said last month he wants to abandon the use of a lead system integrator. 2
In a Capitol Hill hearing March 26 on the nomination of Ashton Carter to be the next Pentagon acquisition chief, SASC Chairman Sen. Carl Levin (D-Mich.), took DOD to task for failing to be able report on its services outsourcing until 2011. “That’s a real problem,” Levin said. “We have contracted out so much of the services needed that we can’t even inventory the services for years.” 3
All evidence suggests it could take up to a decade to rebuild the Navy’s roster of competent engineers and acquisition managers to a level capable of managing a program like LCS. Because DOD does not have the requisite work force, the likely outcome is some revamping of the LSI construct. 4

Notes and Links:
1 Bennett, John T. U.S. reasserts control over contractors, Despite Deepwater Takeover, Many Say Gov’t Lacks Skills To Run Programs, Defense News, April 23, 2007 http://integrator.hanscom.af.mil/2007/April/04262007/04262007-21.htm
2 Kivlan, Terry. Lawmaker lays down markers on fiscal 2010 shipbuilding budget, Congress Daily , February 5, 2009
http://www.govexec.com/dailyfed/0209/020509cdpm1.htm
3 Chavanne, Bettina,H. DoD Acquisition Work Force Insufficient, Aviation Week's , March 27, 2009 http://www.military.com/features/0,15240,187701,00.html?wh=news
4 Grasso, Valerie B. Defense Acquisition: Use of Lead System Integrators (LSIs) - Background, Oversight, Issues, and Options for Congress Congressional Research Services (RS 22631), Jan 10, 2009 http://digital.library.unt.edu/govdocs/crs/data/2008/meta-crs-10699.tkl