This document contains the final report of the DSB study on Defense Acquisition Reform (Phase II). The Phase I report firmly acknowledged the need to adopt commercial practices as a way of doing business, and developed a set of reform initiatives designed to accelerate the required changes. The thrust of the Phase II effort was to further define these areas by examining specific industry segments, identifying specific combatant commands for increase responsibility in the requirements process, and further identification of the barriers to the adoption of commercial practices. The Task Force concludes that: mature jet engines, microelectronics, software, and space systems can and should be procured and supported in a fully commercial environment; USACOM and CENTCOM should be given increased technical cadres to further their capability to participate in the requirements process; and it is feasible to eliminate may of the barriers to adoption of commercial practices without sacrificing the public trust in spending public funds.

This report provides the Research and Development Subpanel's assessment of Acquisition Reform Initiatives, Advanced Concept Technology Demonstration Programs, a number of acquisition process models, specific Research and Development (R & D) programs, and the acquisition education and training programs. The subpanel's recommendations stress the importance of implementing Price Based Acquisition as a major reform initiative for the Department. It also offers specific recommendations for the Joint Strike Fighter, shipbuilding, space, Joint Tactical Radio System, and education and training programs of the Department.

Over the past decade, dozens of studies, reports, directives, and commissions have recommended specific changes in the approach the Department of Defense (DoD) uses to acquire products (primarily major weapon systems). This Defense Science Board (DSB) Summer Study Task Force reviewed these prior studies and concluded that, by and large, the recommendations have ben implemented. Rather than adding to the list of 'what to do' recommendations, this Task Force concentrated on recommending 'how-to-implement' change. This is a departure from the typical technical recommendations, but the Task Force believes this 'how to' focus is urgently needed at this juncture.

The current defense environment is such that acquisition budgets are low and likely to remain so, weapons system costs are high and rising, the traditional defense industrial base is steadily shrinking in both size and number of participants and military threats around the world are unpredictable and varied. Nevertheless, there are still compelling reasons to invest in force modernization and in affordable defense systems featuring technological superiority. In order to make this possible, more efficient use must be made of acquisition resources. A new weapons research and development process is required, able to supply effective hardware in small quantities, producible and supportable at affordable cost, with reduced cycle times. As an integral feature of the new process use must be made of world-class commercial suppliers. The advanced technology and efficiencies typical of commercial operations must be incorporated into the development process. In changing to and implementing the new system, the public trust must be retained throughout. Figures 1 and 2 illustrate this background to the DoD acquisition reform effort.