Graduate education and research: key to procurement transformation

Faced with the challenges of the global war on terrorism, and the fiscal battles of budget cuts and resource constraints, the Department of Defense (DoD) continues to rely on its procurement process to ensure a continuous flow of critical supplies and services. The DoD proposed Fiscal Year 2005 budget included $143.8 billion for RDT&E (research, development, test and evaluation), and procurement of defense-related supplies and services in support of the national military strategy (Cahlink, 2004). As the DoD continues to acquire increasingly critical and complex supplies and services in such a turbulent environment, the DoD's reliance on its acquisition process will continue to increase in importance. The DoD's procurement process is currently undergoing a transformation similar to the procurement transformation being experienced by the commercial sector. This transformation is changing the way organizations manage their procurement function--to include people, processes, practices, and policies. The procurement function is gaining enhanced status and importance as leading organizations, including the DoD, understand and realize procurement's importance in achieving organizational strategic objectives and procurement's impact on competitive advantage.

In addition to the transformation of its procurement process, the Department of Defense is also responding to this turbulent environment on another front--that of providing formal graduate-level education to its military and civilian acquisition professionals, as well as conducting extensive research in the area of acquisition and contracting for DoD customers. This article will discuss how the Department of Defense is leveraging its resources at the Naval Postgraduate School's Graduate School of Business and Public Policy, through scholarship-based education and research, to transform its military and civilian acquisition professionals. First, some background and overview of how today's leading organizations are partnering with academic institutions for acquisition related graduate-level education and research will be discussed. Next a brief discussion of the Naval Postgraduate School's acquisition-related education and research program will be presented. Finally, the experiences and reflections of a recent NPS graduate will be provided as a firsthand account of how this school is providing capable and competent intellectual warriors in the fight for procurement transformation.

Graduate Education: A Purchasing/ Supply Management Best Practice

The procurement transformation is drastically changing the DoD acquisition and contracting environment. Procurement initiatives such as strategic purchasing and supply management have introduced new processes such as strategic sourcing, commodity strategies, performance-based contracting, and evolutionary acquisition. With these new processes comes a need for a different focus on education and training. A recent RAND report identified relevant, timely, and comprehensive education and training as necessary for DoD contracting experts who will be using these new procurement processes and tools (Moore, Baldwin, Camm, & Cook, 2002). It's no surprise that the DoD relies on the Naval Postgraduate School for state-of-the-art graduate-level acquisition education and research. Many leading organizations rely on academic programs with major institutions of higher learning to provide a source of graduate education, certification, and research in the area of acquisition and procurement. In their book The Purchasing Machine: How the Top Ten Companies Use Best Practices to Manage Their Supply Chains, the authors identified the establishment of purchasing/ supply management academic outreach programs as a best practice among leading purchasing and supply management organizations (Nelson, Moody and Stegner, 2001). For example, Deere & Co., the world-famous equipment manufacturer, has established a partnership with Arizona State University, where ASU has set up an M.B.A. program at Deere. Deere's purchasing and supply managers attend courses in managerial economics, quantitative analysis, accounting finance, supply chain management, marketing, and cost management as well as an applied project, and graduate with a master's degree in supply management (Smock, 2001). In 2001, 35 new managers graduated from the customized M.B.A. program developed by Deere and ASU. The benefits were obvious to Deere, since ASU tailored the curriculum to the real issues being faced by the managers at the company (Biggs, 2001). It's no wonder Deere & Co. won the 2001 Purchasing Magazine's Medal of Excellence Award for excellence in purchasing and supply management.

Another example of a university partnering with industry in developing graduate supply management education is the Georgia Institute of Technology's Executive Master's of International Logistics (EMIL). In this program, Georgia Tech partnered with companies like Wal-Mart, Ford, The Home Depot, and Intel to develop a curriculum that met the needs of their growing supply-chain organization and groom their rising stars. Completion of the program results in a master of science in international logistics from Georgia Tech (Foster, 2004).

David Burt, Professor of Supply Chain Management and Director of the University of San Diego's undergraduate and graduate programs in supply chain management, also identifies training and education in supply management processes as one of his 12 Golden Rules of World Class Supply Management (Bug, 2003). Burt's Supply Chain Management Institute at the university is considered by many to be the preferred source for individuals and companies seeking executive level supply chain management education in World Class Supply Management. The institute focuses its effort on (1) applied research, identifying and proposing real-world strategies, techniques, and systems at the forefront of efforts to improve performance in supply chain management, (2) collaborative relationships with business partners through applied research, which simultaneously provides mechanisms to expose faculty and students to current issues through industry-based projects, and (3) world-class education targeted at all levels: undergraduate, graduate, and executive. The Institute focuses on the ultimate goal of helping industry realize the benefits attainable through world-class supply chain management. Some of the Supply Chain Management Institute's sponsoring companies include Raytheon, Flextronics, Hewlett-Packard, and IBM (University of San Diego, 2002).

Other world-class organizations such as Harley-Davidson and United Technologies Corporation have also included professional certifications in purchasing and procurement as part of their procurement workforce education and training. These organizations see these professional certifications as key components of their education programs because they represent the industry standard in the field of purchasing, and they also help to keep the skills current and valuable (Ausink, Baldwin, & Paul, 2004).

Defense-Focused Education and Research

Just as other leading organizations have partnered with institutions of higher learning for purchasing and supply management education and research, the Department of Defense relies on the Naval Postgraduate School (NPS) for graduate-level education and research in acquisition, contract management, and strategic purchasing. As the nation's premiere school for defense-focused business management and public policy, the NPS is on the pointed end of the spear in providing graduate-level education and research in acquisition and contract management. The NPS Graduate School of Business and Public Policy is accredited by the Association to Advance Collegiate Schools of Business (AACSB) and the M.B.A. and master of science programs are accredited by the National Association of Schools of Public Affairs and Administration (NASPAA). The NPS offers both a defense-focused resident Master of Business Administration (M.B.A.) degree with a concentration in acquisition and contract management, as well as a distance-learning Master of Science in Contract Management degree for the DoD civilian and military workforce. The NPS selected the M.B.A. degree program to provide a broader graduate education in business subjects as they apply to the DoD's defense mission--thus recognizing the business management aspects of working in the DoD. The defense-focused M.B.A. program reflects the thinking within the DoD that the military is entering a new phase that requires a different, more businesslike approach to its operations. Like many other large organizations, the DoD is shifting its attention to areas that are critical for success and survival, such as integrating advanced technology, improving supply chain management, and responding to changing competition (Bisoux, 2004).

The defense-focused M.B.A. program, which consists of 19 M.B.A. core courses and up to 11 concentration courses in contracting and acquisition, provides officers and DoD civilians an advanced education with an interdisciplinary approach to problem solving and policy analysis through the application of advanced quantitative, financial, economics, information technology, and other state-of-the-art management techniques. Typical M.B.A. core courses include:

* Problem Analysis and Ethical Dilemmas

* Fundamentals of Information Technology

* Research Methods and Data Analysis

* Economics for Defense Managers

* Analytical Tools for Managerial Decision-makers

* Cost Management

* Corporate Finance

* e-Business for Defense

* Strategic Management

The acquisition and contracting concentration courses include such courses as:

* Principles of Contract and Acquisition Management

* Contract Pricing and Negotiations

* Contract Law

* Acquisition and Contract Administration

* Acquisition and Contracting Policy

The students are also required to complete an M.B.A. capstone project or thesis prior to graduation. When the students graduate from the M.B.A. program with a concentration in Acquisition and Contract Management, they also meet the educational requirements for the Defense Acquisition Workforce Improvement Act (DAWIA) Level III certification in the contracting career field (Yoder, 2004).

The NPS has also established an active acquisition research program, providing applied research for Department of the Navy and other DoD sponsors. The NPS Acquisition Research Program has been providing leadership in innovation, creative problem-solving and an ongoing dialogue, contributing to the evolution of Department of Defense acquisition strategies. The objectives of the NPS Acquisition Research Program include establishing NPS acquisition research as an integral part of policy-making for Departments of Defense and Navy officials, creating a stream of relevant information concerning the performance of DoD acquisition policies with viable recommendations for continuous process improvement, preparing the workforce to participate in the continued evolution of the defense acquisition process, and collaborating with other universities, think tanks, industry and government in acquisition research.

In addition, the NPS annual Acquisition Research Symposium serves as a forum for the presentation of acquisition research and the exchange of ideas among scholars and practitioners of public sector acquisition. The symposium is attended by a diverse audience of influential acquisition professionals from academe, government, and industry who are well placed to shape and promote future research in acquisition (http://www.nps.navy.mil//GSBPP/research.htm). The completed projects of the NPS Acquisition Research Program are published in any of the following products: The Acquisition Research Sponsored Report Series, The Acquisition Research Working Paper Series, or The Acquisition Research Case Series.

Experiences and Reflections of a Recent NPS Graduate

The education received while at NPS has enlightened students' thinking on DoD's procurement processes. Indeed, students have been taught the state-of-the-art by a cadre of talented and well-respected educators, oftentimes teaching from self-authored books or case studies. Among the faculty at NPS are an army of Ph.D.s, lecturers, former military officers and distinguished leaders from both the private and public sectors, each committed to imparting their particular area of expertise upon the students. The course of instruction utilized the case study method, whereby students were exposed to over 75 case studies involving business situations requiring analysis and methodological thinking. Periodic seminars gave students the opportunity to interact with contemporary business leaders and active duty military program managers.

M.B.A. Core Courses

Early course work (i.e., core courses) focused on traditional business administration material designed to develop students' quantitative and qualitative skill set. Courses were about evenly divided between quantitative and qualitative subject matter, and in each case, included an aspect of DoD relevance. During the first several quarters of the program, the students' focus was directed toward learning the business environment and the proven analytical techniques and frameworks used by business managers, and less on their individual concentration areas.

Quantitative course work established the foundation upon which future classes would be built. Classes in financial accounting, for example, gave students the necessary background for performing calculations related to net present value and cash flow determinations, both fundamental tools used in business decision-making. Other tools such as cost-benefit analysis and utility functions provided students the analytical fluency necessary to discern among competing alternatives and were later useful in tackling many acquisition-related case studies.

Qualitative course work focused on effective management and strategy. The shared experiences of instructors and students, acquired while serving in various Fleet operational billets, enriched classroom discussions and effectively bridged the gap between academic theory and practical application. Students learned the Organizational Systems Framework, for example, a useful model for determining overall strategic direction. Another management class taught the Leadership Pipeline, a diagnostic tool used to identify appropriate priorities at each level within an organization. Tenets of the Leadership Pipeline were later applied within the context of DoD and included personal interviews of senior military leaders.

The best way to illustrate the sum total of early course work at NPS is to consider it analogous to the formulation of an effectual business case. Here, assorted techniques are used to organize disparate data in order to tell a convincing story. In more complex cases, business leaders must draw upon both quantitative and qualitative techniques, and must oftentimes base their decisions on sketchy or nonexistent information. Either way, practitioners must have intimate knowledge of the tools of the trade. Beyond that, it is up to the individual to pick and choose techniques best supporting his or her business case. The early course work completed at the NPS equipped students with these necessary tools and provided them with the ability to discern their proper use.

Acquisition and Contract Management Courses

About halfway through the six quarters of study, students transitioned into specific areas of concentration. Among all concentration areas, acquisition and contract management is perhaps best suited for application of business principles since it primarily involves DoD's procurement activities. Rarely does a day go by where mention is not made in the media of some aspect of federal government spending. The news, while not always pleasant, is everywhere. Generally speaking, students were proud to be a part of the acquisition community, and to be engaged in the trenches of procurement transformation.

Concentration courses broadened and deepened students' understanding of the Federal Acquisition Regulation (FAR). Students found especially interesting the FAR proviso enabling DoD business leaders to use innovative acquisition techniques in the absence of prohibitive language. For students, this meant a certain degree of creativity was permissible in formulating acquisition strategy and provided an opportunity to experiment with business-related tools and techniques previously learned. Refreshingly, this proviso discredited the notion that DoD business leaders are bound by a set of inflexible rules and opened the door for some real creative thinking and problem solving.

Current Issues

Students spent a great deal of time examining current issues in procurement transformation, including the Federal Acquisition Streamlining Act, the Services Acquisition Reform Act (SARA), and commercial outsourcing. Where appropriate, commercial "best practice" was also examined to determine where process improvements could be made. One "best practice" the government is committed to adopting is that of performance-based service contracting, as described in SARA. In one class, the instructor devised a project whereby student teams drafted performance-based statements of work for an actual contract undergoing conversion to a performance-based service contract.

Another project involved interviewing an industry executive working for a leading service provider to get his perspective on recent changes to the Office of Management and Budget's Circular A-76 governing commercial outsourcing (a copy of this report is published at www.nps.navy.mil/gsbpp/acqn/publications).

Other issues examined included recent procurement ethics violations. Students analyzed varied points of view and were forced to consider each case through the lenses of both government acquisition professionals and private industry. Students in the Acquisition and Contracting Policy Course, for example, developed a case study using a compilation of articles pertaining to Iraqi reconstruction contracts. The case study highlighted numerous "gray areas" and was useful for providing instruction and spurring classroom discussion.

Procurement Transformation

Innovative acquisition concepts, such as share-in-savings initiatives, award-term contracts, and government lease arrangements also received much attention.

Students pored over dozens of Government Accountability Office (GAO) reports and scores of lessons learned in order to grasp the full implication of these innovative concepts and to formulate their own opinions on the efficaciousness of their use. One student exercise involved drafting FAR language concerning use of award-term contracts. A challenging assignment no doubt, as students were forced to consider every consequence, intended and unintended, of the proposed policy.

Transformational issues aside, students also learned some very practical components of the profession. A class on the recently revised DoD resource allocation process--Planning, Programming, Budgeting and Execution System (PPBES), for example, provided students with the background necessary for deeper understanding of DoD's procurement system. Another class taught the essentials of contract pricing and negotiations, and culminated with student teams conducting a mock negotiation with a representative from The Boeing Company. This unique opportunity was an invaluable part of the students' education, as it built confidence and equipped students with the ability to see the entire negotiations process through to completion.

Students are required to complete either an individual thesis or an M.B.A. project consisting of teams of up to three persons. These capstone research projects are intended to demonstrate the culmination of material learned while at the NPS and are ideally suited to address contemporary acquisition issues. The M.B.A. project completed by this coauthor was entitled, "A Cost-Effectiveness Analysis Comparing the Small Diameter Bomb with the Joint Standoff Weapon (A+ Variant)" and was performed at the request of a major systems command. Fundamentally, it was a business case built upon cost-effectiveness analysis, the purpose of which was to provide an academic approach supporting the acquisition of a major weapons system.

Professional Certification

The acquisition and contract management curriculum at the NPS is superb preparation for successfully completing both exams required for designation as a Certified Federal Contracts Manager (CFCM). Although optional, and separate from the M.B.A. degree, the core business classes sufficiently prepare students for the general knowledge exam by exposing them to each major topic area covered by the exam. Preparation for the exam can be accomplished through review of class notes and business class textbooks. Additionally, students have access to a multitude of resources, including faculty members and other students interested in forming study groups. Likewise, preparation for the Federal Knowledge exam mirrored the content of contracts and acquisition classes; and therefore, exam preparation can be accomplished concurrently with class preparation time.

Conclusion

In the final analysis, the educational experience as a student enrolled in the nation's only defense-focused M.B.A. program was certainly positive. The combination of M.B.A. core courses, contracting specialization courses, capstone project, discussions of current procurement transformation issues, and the pursuit of NCMA's professional certification provided an extensive, rigorous, and invigorating program of study covering the contracting body of knowledge and provided the best academic preparation for a future naval contracting officer. The dedication and encouragement of the faculty were evident at every turn, and it is clear that the graduate education and research taking place at the NPS Graduate School of Business and Public Policy is eminently supportive of DoD's objective of procurement transformation.

The views expressed in this article are those of the authors and do not necessarily represent the views of the Department of Defense or its components. Dr. Rene G. Rendon, CPCM, CFCM, PMP, C.P.M., Fellow, is on the faculty of the Graduate School of Business and Public" Policy at the U.S. Naval Postgraduate School (NPS) in Monterey, Calif, where he teaches graduate courses in acquisition and contract management. LCDR Brett Stevens, CFCM, MBA, is a recent NPS graduate in acquisition and contract management. He was the December 2004 recipient of the Naval Supply Systems Command Award for Academic Excellence in Management.

Reprinted with permission from the National Contract Management Association, Contract Management, June 2005

References

Ausink, J., Baldwin, L.H., Paul, C. (2004). Air Force Procurement Workforce Transformation: Lessons from the Commercial Sector. RAND, Santa Monica, Calif.

Biggs, M. (2001). Learn anytime, anywhere. Computeruser.com (URL: http://www.computeruser.com/articles/2010,1,2,1001,01.html)

Bisoux, T. (2004). Armed and Educated.

BizEd, March/April, 2004. AACSB International.

Burt, D., N., Dobler, D. W., Starling, S. L. (2003). World class supply management: The key to supply chain management. New York: McGraw-Hill Irwin.

Cahlink, G (2004). Seeking Services. Government Executive, August 15, 46.

Foster, T. (2004). Fortune 500 Send Employees Back to School for SCM Training. Global Logistics & Supply Chain Strategies. December, 2004.

Moore, N.Y., Baldwin, L.H., Camm, F., and Cook, C.R. (2002). Implementing Best Purcahsing and Supply Management Practices: Lessons From Innovative Commercial Firms. Documented Briefing, RAND, Santa Monica, Calif.

Nelson, D., Moody, P.E., and Stegner, J. (2001). The Purchasing Machine: How the top ten companies use best practices to manage their supply chains. New York: The Free Press. Smock, D. (2001) Deere takes a giant leap. Purchasing magazine on line. September 6, 2001.

University of San Diego, Supply Chain Management Institute web site (Retrieved from http://www.scmi.sandiego.edu/index.html)

Yoder, C. (2004). The Naval Postgraduate School's Defense-Focused Master's Programs in Acquisition and Contracting. The Navy Supply Newsletter. (Retrieved from http://www.navsup.navy.mil/npi/lintest/ma04/dfmaster.htm)

Dr. Rene G. Rendon, Faculty, Graduate School of Business and Public Policy, U.S. Naval Postgraduate School, and LCDR Brett Stevens, SC, USN, Assistant Supply Officer, USS Frank Cable (AS 40)

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