Acquisition in a large IT Organization

By Agata Szydelko, Deputy Director, Acquisition 2/26/2018
This article explores the background, challenges and paradoxes of the NATO IT acquisitions, highlights the drivers of change in NATO procurement processes and procedures, and explains the underlying evolutionary nature of this change.

The IT acquisitions performed on behalf of the 29 NATO nations are key elements of NATO's defence and deterrence posture. Transparent and unbiased procurements, underpinning delivery of NATO capabilities and services, require a set of proper frameworks, policies, procedures, processes and people to turn the requirements into deliverables. The world is evolving – and so should NATO IT acquisitions; but do they really evolve in an adequate manner? This article provides an overview of past and current challenges and solutions and outlines expected developments in NATO acquisition of IT technologies and systems.

Evolution of NATO IT acquisition

In 1996, NATO revised its procedures for acquisition of commonly funded infra­structure under the NATO Security Investment Programme (NSIP). The procedures promoted full and open competition—International Competitive Bidding (ICB)—as the default procurement method, with the lowest compliant bid as the evaluation methodology, and were geared primarily to the acquisition of static IT infrastructure.

Not surprisingly, this construct did not survive contact with real-time NATO opera­tions triggered by the crisis in the Balkans in the late 1990's. To improve NATO's ability to better respond to crisis situations, in 2002 the NATO nations approved a set of procedures aimed to significantly shorten procurement timelines and, at the same time, promote the broader participation of the small and medium enterprises in NATO procurements through the so called Basic Ordering Agreement (BOA) Pro­gramme.

The unfolding NATO operations in Afghanistan led to a further consolidation of the regulations for the NATO Security Investment Programme (NSIP) in 2011, provid­ing a set of procedures covering non-article 5 NATO-led operations, i.e. the Alliance Operations and Missions (AOM) NSIP Procurement Regulations.

In parallel, in 2009 the NATO nations also approved a policy for conducting interna­tional competitive bidding using a Best Value evaluation methodology.

So it looks like all regulations and other prerequisites are available – small and big scale procurements, lowest compliant and best value evaluation, peacetime and oper­ations-geared procedures. Is there anything that we are missing? In fact, one can ar­gue that there are remaining challenges, as well as opportunities to improve NATO's acquisition of IT systems.

Paradoxes of NATO IT procurement regulations

There are a couple of paradoxes that mark the landscape of the NATO IT acquisitions when it comes to the NATO procurement regulations.

The most fascinating paradox, which is so much embedded within the NATO system that is hardly regarded as being anything out of ordinary, is that the fundamental cri­teria determining the applicable procurement procedures is … the source of funding. At the very top of all of the NATO procurement regulations are the NATO Financial Regulations – the NFRs, but right below there are three separate sets of procurement procedures – one for the NSIP, one for the Military Budget (MB), and one for the Civil Budget (CB). As the NSIP funds NATO investment in new infrastructures and systems, the MB pays for their follow-on operations and maintenance, and CB covers operation and maintenance of the NATO Headquarters. This ultimately implies that different sets of procedures apply to the different stages of a system's lifecycle.

Another interesting aspect is that all NSIP contracts are, by rule, Firm Fixed Price (FFP) contracts. More flexible and innovative approaches to contract pricing, widely known and used in national systems, like incentive or performance based contracts do not exist in the NSIP regulations. Therefore, the only way to try to get NATO a better deal than a lowest compliant FFP contract is to opt for a best value FFP. But here comes another paradox – in the best value competitions the default weighting be­tween the top level criteria, price and technology, is … 50-50. Changing the weighting to account for greater share of the technology aspect must be properly jus­tified and agreed by the Investment Committee (IC). Ultimately, due to the default 50-50 rule, even in the best value competition it is still the lowest priced bid that stands the greatest chance of winning.

It can be expected that, over the coming years, there will be efforts aimed at closing the gaps created by these paradoxes – continuation of bottom-up enhancements, leading at some point to an adjustment of the overarching policies and procedures.

 

Full article available in Information & Security: An International Journal, Volume 38, p.71-76 (2017).

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