Certified Defense Financial Manager (CDFM) Module 2.2 Defense Acquisition System

Strategic Alignment and JCIDS

The Defense Acquisition System (DAS) is aligned with high-level strategic documents including the National Security Strategy (NSS) produced by the National Security Council (NSC), the National Defense Strategy (NDS) produced by the Secretary of Defense (SECDEF), and the Planning, Programming, Budgeting, and Execution (PPBE) system led by the Director, Cost Assessment and Program Evaluation (DCAPE). The Joint Capabilities Integration and Development System (JCIDS), overseen by the Vice Chairman, Joint Chiefs of Staff (VCJCS), identifies capability gaps using Doctrine, Organization, Training, Materiel, Leadership and Education, Personnel, Facilities (DOTMLPF) analysis. If a materiel gap is identified, the Initial Capabilities Document (ICD) triggers the DAS; non-materiel gaps trigger the PPBE.

Defense Acquisition Policy and Roles

Department of Defense Directive (DoDD) 5000.01 establishes five overarching policies for the DAS: Flexibility, Responsiveness, Innovation, Discipline, and Streamlined and Effective Management. Department of Defense Instruction (DoDI) 5000.02 provides the framework for the Adaptive Acquisition Framework and empowers Milestone Decision Authorities (MDAs) to tailor regulatory, but not statutory, requirements. Specialized instructions include DoDI 5000.75 for Defense Business Systems. Key roles include the Under Secretary of Defense for Acquisition and Sustainment (USD(A&S)), who serves as the Defense Acquisition Executive (DAE), and the Under Secretary of Defense for Research and Engineering (USD(R&E)), who serves as the Chief Technology Officer (CTO). The Program Manager (PM) is responsible for creating the Acquisition Program Baseline (APB) and the Cost Analysis Requirements Description (CARD).

Acquisition Categories (ACAT) and Thresholds

Acquisition categories are determined by dollar value, review level, and decision-maker. Acquisition Category I (ACAT I) programs, or Major Defense Acquisition Programs (MDAPs), have thresholds of Research, Development, Test, and Evaluation (RDT&E) over $\$300\,million$ or Procurement over $\$1.8\,billion$. ACAT IA denotes Major Automated Information Systems (MAIS) with a total life cycle cost exceeding $\$520\,million$. The suffix "D" or "M" (e.g., ACAT ID) indicates a Defense-level MDA, while "C" (e.g., ACAT IC) indicates a Component-level MDA. A smaller ACAT number indicates a higher level of authority.

Acquisition Phases and Milestones

The DAS consists of five phases: Materiel Solution Analysis (MSA), Technology Maturation and Risk Reduction (TMRR), Engineering and Manufacturing Development (EMD), Production and Deployment (P&D), and Operations and Support (O&S). Milestone A (MS-A) authorizes entry into TMRR but does not constitute formal program initiation. Program initiation occurs at Milestone B (MS-B) with the approval of the APB. Milestone C (MS-C) authorizes entry into P&D. The Full-Rate Production Decision Review (FRPDR) is a required critical decision point during the P&D phase, though it is not a milestone. Initial Operational Capability (IOC) is reached during P&D, while Full Operational Capability (FOC) occurs during O&S.

Cost Estimating and Unit Costs

There are five primary cost estimating methods: Analogy (comparing to one similar system), Parametric (using statistical relationships from multiple systems), Engineering (bottom-up analysis), Actual Cost (using history from the same system), and Expert Opinion (often using the Delphi Technique). Average Procurement Unit Cost (APUC) is calculated as Total Procurement Cost divided by units; Program Acquisition Unit Cost (PAUC) is Development plus Procurement costs divided by units. Both calculations exclude Operations and Maintenance (O&M). Cost As An Independent Variable (CAIV) is a mandated policy that treats cost as a primary constraint, with the most significant cost reduction opportunities occurring early in the life cycle.

Economic Analysis and Project Management

Economic Analysis (EA) is a systematic approach to resource allocation expressed through Net Present Value (NPV). The discount rate for EA is set by the Office of Management and Budget (OMB) in Circular A-94. Quantifiable benefits include Cost Savings, Cost Avoidance, and Productivity Improvement (e.g., decreasing production time). For project management, the Program Evaluation and Review Technique (PERT) identifies the critical path (the longest path with zero slack). Gantt charts are preferred for displaying schedules and monitoring progress over time.

Contracts and Earned Value Management (EVM)

A legal contract requires an offer, acceptance, and consideration. Contracts are categorized into Fixed-Price, where the contractor bears the risk, and Cost-Reimbursement, where the government bears the risk. EVM is required for cost-type or incentive contracts valued at $\$20\,million$ or more, with full compliance with ANSI/EIA-748 required at $\$100\,million$. Key EVM metrics include Schedule Variance ($SV = BCWP - BCWS$) and Cost Variance ($CV = BCWP - ACWP$). A positive result in either formula indicates a favorable condition (ahead of schedule or under budget).