Defense Acquisition magazine The Business of Defense Bimonthly magazine of the Defense Acquisition University for senior military personnel, civilians, defense contractors, and defense industry professionals in program management and the acquisition, technology and logistics workforce. Defense Acquisition Magazine July-August 2025 Vol LIV | No. 4 | Issue 305
DEFENSE
A PUBLICATION OF DAU PRESS | dau.edu JULY–AUGUST 2025
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The Adaptive Acquisition Framework (AAF) is a powerful addition to your acquisition toolbox.
Based on six acquisition pathways, it equips DoD professionals with customized processes that can help deliver better solutions faster. DAU is here to help you master the AAF so you can accomplish the mission at speed and scale.
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06 Interview With Lt. Gen. William Mark Faulkner,
USMC (Ret.), President of the Institute for Defense and Business Benjamin Tyree Lt. Gen. Faulkner was interviewed on May 21, 2025, by Defense Acquisition maga- zine managing editor Benjamin Tyree.
12 Contracting Concepts: Prompt Payment Act Jennifer Jones
A reliable cash flow is a key industry mo- tivation.
18 Rise of the Coast
24 Lessons From Space on Digital Transformation Maj Caleb “CJ” Werner
Guard’s Foreign Military Sales Program Benjamin Posil, U.S. Coast Guard At nearly the $1 billion milestone in cur- rent projects, one of the U.S. Security Cooperation enterprise’s perennial over- achievers runs full speed ahead.
Hard-won lessons from the front lines of defense digital transformation provide strategies for building high-performing teams and a culture of innovation.
30 Still Better Program Management Through Digital Engineering
Updated Paul Solomon
Current DoD policies strengthen and ex- tend digitalization of key acquisition ac- tivities.
35 Systemic
Underestimation of Weapons Development Robert Larino The DoD can reduce the risks of under- estimating cost, time, and effort by embracing robust systems engineering practices and a culture of realistic ex- pectations.
40 Cost, Schedule, and Scope in Engineering Execution Dr. Adolfo Lozano III
Adhering to terms and constraints of de- fense contracts is more important than ever.
10 MDAP Program Manager Changes
DEFENSE ACQUISITION
VOL LIV
NO. 4, DAU 305
Published by DAU PRESS
Under Secretary of Defense for Acquisition and Sustainment
Michael Duffey DAU President
Bilyana Anderson DAU Chief of Staff Angela Carsten Director, DAU Communications & Public Affairs Christen Goulding Chief, DAU Visual Arts and Press Norene L. Johnson Defense Acquisition Editorial Staff
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To contact the Editorial Staff, email defacqmag@dau.edu or call 202-579-4628. Visit our website for additional articles and resources: www.dau.edu/library/damag For information on how to submit an article, please consult our Writer’s Guidelines, which are available at the back of each issue or on our website. To subscribe to our digital publication or update your current subscription information, click on the “sub- scribe” button on our homepage or email the editors at the address above. Defense Acquisition (ISSN 2637-5052 [print] and ISSN 2637-5060 [online]), formerly Defense AT&L and earlier Program Manager, is an official publica- tion of the Department of Defense. Defense Acquisition is published bimonthly by the DAU Press and is free to all U.S. and foreign national subscribers. Periodical postage is paid at the U.S. Postal Facility, Fort Belvoir, Va., and additional U.S. postal facilities. Postmaster, send address changes to: Editor, Defense Acquisi- tion, DAU Press, 9820 Belvoir Road, Fort Belvoir, Va. 22060-5565. Disclaimer Defense Acquisition magazine promotes the free ex- change of ideas. The views expressed are those of the authors and do not reflect the official policy or position of DAU, the Department of Defense, or the United States Government. Articles are in the public domain and may be reprinted or posted on the Internet. When reprinting or posting, please credit the authors and Defense Acquisition. Photos in this publication may have been sourced from the Department of Defense website (www.defense. gov/Multimedia/Photos/). The appearance of the U.S. Department of Defense (DoD) visual information does not imply or constitute DoD endorsement. Some im- ages may be digitally enhanced.
48 Conferences and Meetings
Current conferences and meetings of interest to Defense Acquisition readers.
51 Acquisition News and Highlights
Acquisition-related news, press releases, an- nouncements, and more on topics relevant to the acquisition professional.
52 What’s New at DAU
DAU news, deployment of new credentials, up- dated online training, available workshops, webi- nars, and other learning opportunities.
COVER IMAGE: U.S. Army Spc. Daveon Gilbert, assigned to 1463rd Transporta- tion Company, 109th Engineer Battalion, South Dakota National Guard, checks the ground during a foot patrol June 19, 2025. (U.S. Army photo by Cpl. Samarion Hicks) Courtesy photo illustration. This image was cropped to show detail. This im- age was edited using multiple filters, and dodging and burning techniques.
Read our Digital Publication Scan or Click
Defense Acquisition Research Journal Award-winning, peer-reviewed research journal now accepting articles for the 2026 print year. We welcome submissions from all acquisition career fields and phases of the acquisition life cycle—the conceptualization, innovation, initiation, design, testing, contracting, production, deployment, logistics support, modification, and disposal of weapons and other systems, supplies, or services (including construction) needed by the DoD or intended for use to support military missions. SUBMIT: • Original Research • Case Histories • Perspectives and Commentary NEW Call for Authors SCAN THE QR CODE FOR MORE INFORMATION
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INTERVIEW WITH LT. GEN. William Mark Faulkner USMC (RET.) President of the Institute for Defense and Business (IDB)
by BENJAMIN TYREE
Q On rebuilding the infrastructure, and given an all-out effort, what would be a realistic timetable for achiev- ing what we really need in order to maintain our position in the world? A. It’s a marathon, not a sprint. Doing it right and mak- ing it last will likely take a decade. Some gains might be made within five to seven years but achieving a resilient and adaptable industrial base takes longer. It also requires a long-term, bipartisan vision—something not tied to a single party or administration. Everyone must share a sense of urgency and commitment, regardless of politi- cal background. This kind of effort has to outlast election cycles and leadership changes. Q How about the workforce, though? There’s a people problem, the need to build up our cadre of engineer- ing and technical talent. What kind of approach or joint government-industry program would you like to see to ac- complish that? A. That’s a great point, and it should be a national security priority. Looking back, we probably would have approached
Lt. Gen. Faulkner was interviewed on May 21, 2025, by Defense Acquisition managing editor Benjamin Tyree. Q The Government Accountability Office recently pub- lished a report highlighting concerns with the Defense Industrial Base [DIB] , and President Trump has issued an executive order on modernizing defense acquisitions and spurring innovation in the DIB. What are your insights on actions that government and industry can take—for exam- ple, incentives and investment to expand and modernize infrastructure for manufacturing and repair? A. There’s no single fix—no one solution that has proven sustainable over time. Something may work in the short term, but long-term progress requires consistent invest- ment. It’s going to take both sustained funding and a more modern acquisition approach. I’d also say that collabora- tion between government and industry remains too incon- sistent. Organizations like NDIA [the National Defense Industrial Association] help bring those sides together, but we need deeper, more continuous engagement. Ultimately, it comes down to consistent investment and sustained col- laboration.
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things differently; but now we need to focus forward. That means investing in our people through technical education, mid-career reskilling, and creating clearer pathways that connect industry, government, and academia. At IDB, we partner with institutions like East Carolina University and DAU to help bridge these gaps. Workforce development must be shared across sectors and treated as foundational to our future readiness. Q We’ve read some research recently about the indus- trial base shrinking due to a large number of mostly smaller businesses that experience frustration working with the government. Are there ways that you know of to reduce the friction and frustration sometimes involved there? A. It’s not easy, but it starts with trust. Our system isn’t always built to foster it. Competition is healthy, but with- out transparency and constructive communication, it can also create barriers. From the DoD side, we need to make it easier for smaller companies to engage. Many of them bring tremendous value but face obstacles larger organizations don’t face. It’s about leveling the playing field and encour-
aging open com- munication. That’s something groups like IDB can support and help facilitate.
Q In terms of the Regional Sustainment Framework being built under the current administration, how important do you consider the future interchangeability among allied arms and equipment? I mean, if the allied nations begin making more of their own equipment, is that apt to hinder or create a lack of interoperability? A. It’s a critical issue. We often want to maintain domes- tic capability and self-reliance while also expecting full in- teroperability with our allies. But we don’t operate alone anymore. Whether it’s operations, logistics, or industrial support, interchangeability is becoming essential. There are things we must protect, of course, but platforms like the F-35 show the value of shared processes and capabilities. DoD already is doing more of this—particularly through our Five Eyes partnerships (Australia, Canada, New Zealand, the United Kingdom, and the United States)—and that kind of collaboration needs to expand.
July-August 2025 | DEFENSE ACQUISITION | 7
Q DoD recently issued a new strategy, an updated policy on the use of data to assess the health of weapon sys- tems and expand the capabilities of business intelligence systems such as Advana. What new skills or mindsets does the acquisition and sustainment workforce need to em- brace and leverage these capabilities? A. We’re seeing a shift across DoD from being data-com- pliant to data-fluent. It’s no longer optional; it’s now part of how decisions are made. At IDB, we’re embedding digital literacy and decision-making skills into every program— whether it’s focused on supply chain, logistics, or process improvement. More and more, leaders won’t take a brief, especially on something like the industrial base, unless it’s backed by solid data. And data doesn’t just strengthen deci- sions; it also makes them more efficient and cost-effective. Q Considering the rapid unfolding of actions across the federal government in response to executive orders and government efficiency, what are the potential ob- stacles to implementing the associated changes within the DoD? A. Cultural inertia is always a challenge in large organiza- tions like DoD. Outdated systems and fragmented authori- ties also slow things down. But we’re seeing progress, espe- cially through executive orders that aim to clear obstacles and modernize structures. Replacing legacy IT systems and streamlining authority are important steps. At the same
time, as the workforce shrinks, we need to invest in those who remain and give them the tools and education they need to make smart decisions quickly. That’s the only way to keep pace with demand. Q Given the Fiscal Year (FY) 2025 continuing resolution and the new administration’s incorporation of resourc- ing priorities within the FY 2026 budget, what advice would you have for the acquisition and sustainment workforce in this time of heightened uncertainty? A. Stay focused on the mission. In times of budget uncer- tainty, it’s easy to get distracted or start cutting professional development. But this is exactly when we need to invest in our people. Too often, education and training are the first things to go when budgets get tight. That’s a mistake. We should double down on developing talent during these peri- ods. It’s what enables us to adapt and lead through change. Q How do you currently see executive education pro- grams such as those offered by IDB, DAU, and others addressing this need that you’ve mentioned? A. There are many executive education programs out there, but not all are equally effective. Some have large overheads, aren’t very agile, and can’t adapt quickly enough to meet evolving needs. Programs today need to be responsive and aligned with the real-world demands leaders face. At IDB, for example, our LOGTECH program continues to evolve
Marine Lt. Gen. William M. Faulkner (Ret.) speaks at the 2024 Annual IDB Executive Fellows induction ceremony in Washington, D.C. Source: The Institute for Defense and Business
8 | DEFENSE ACQUISITION | July-August 2025
based on feedback and support from the Office of the Sec- retary of Defense, particularly through strong partnerships with leaders like Lisa P. Smith. That’s what ensures relevance and impact. Professional education is one of the most powerful le- vers we have, and we don’t use it nearly enough. At IDB, and at DAU, we go beyond policies and procedures. We focus on developing critical thinking, adaptability, and stra- tegic awareness. Executive education today needs to be hands-on, immersive, and cross-sector. It should expose leaders to real-world scenarios and different perspec- tives—from government, academia, and private industry. And it should help shift the mindset from compliance to innovation. Q What advice do you have for acquisition professionals who are hesitant about pursuing executive education during times, such as now, when there’s a lot of organi- zational change? A. Now is the time to double down on executive education. These programs don’t just help people survive organiza- tional change—they help them lead through it. For acquisi- tion professionals, that’s especially important. The return on investment is clear: better outcomes for the Warfighter, delivered faster and more efficiently. Q What in your experience are the most significant barri- ers to increasing participation in executive education among defense civilians and acquisition professionals? And how is IDB working to overcome them? A. Time, funding, and mindset are the big barriers. Lead- ers are often too busy, budgets are tight, and some view education as something that can be postponed. But that perception is risky—especially given the threats we face. At IDB, we’re working with partners across DoD and organiza- tions like DAU to reinforce that executive education isn’t a luxury. It’s a necessity. We can’t afford to delay investing in leadership. Q Can you share specific examples that demonstrate the impact of executive education on mission readiness or innovation within the DoD? A. We’ve seen many IDB graduates return to their organi- zations and apply what they learned—improving logistics, modernizing supply chains, and refining sustainment plan- ning. These are real, tangible outcomes. More and more, leaders want to see a return on investment from education, and rightfully so. Our programs are built to deliver practical tools and insights that can be put into action right away. Q With the DoD push for digital fluency and data analyt- ics, how are your programs adapting to ensure that leaders and workforce members are prepared for emerging technologies and operational challenges?
Too often, education and training are the first things to go when budgets get tight. That’s a mistake.
A. After every course, we update our curriculum to reflect new technologies and threats. We integrate topics like AI, data analytics, and digital sustainment into scenario-based learning. It’s not the traditional lecture format. It’s small, collaborative teams solving real-world problems using tools like AI. And we bring in industry partners—Northrup Grum- man, Viasat, Boeing, Lockheed—to share best practices. It’s about learning side by side, not across an RFP [request for proposal] table. That dynamic is a big part of what makes our programs so valuable. Q What new competencies or areas of expertise do you believe will be most critical for the next generation of defense leaders, and how is IDB positioning itself to meet those needs? A. Tomorrow’s leaders will need to be digitally fluent, strate- gically minded, and able to operate in fast-changing, multi- domain environments. At IDB, we’re focused on developing these skills now through close partnerships with DAU, East Carolina University, the University of North Carolina, and others. We’re preparing leaders not only for today’s chal- lenges but for whatever comes next. Q As president of the Institute for Defense and Business, where do you see the most promising opportunities for public-private collaboration to drive innovation and logis- tics, sustainment and acquisition? And what barriers still need to be addressed to unlock that potential? A. One of the most promising areas for collaboration is predictive logistics and sustainment—especially where AI, digital engineering, and data analytics are involved. Industry leads in many of these technologies, and DoD brings opera- tional expertise. At IDB, we create environments where both sides can come together to share ideas and develop solu- tions. Our programs are intentionally joint and whole-of- government, with growing participation from international partners as well. That level of integration didn’t exist 10 or 20 years ago, but it’s essential today.
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Q Sounds a lot like commercial off the shelf where we found ways to use marketplace privately developed technology in a military setting. It could be very efficient as we see with the drone usage in Ukraine, and you’re sort of experiencing the same thing with developing executive expertise by drawing from private sources to enhance decision-making. A. That’s exactly right. We are seeing more examples where commercial technology is adapted for military use, and the same applies to executive education. But challenges remain: cultural differences, mismatched timelines, and acquisition processes that don’t align with innovation cycles. Greater transparency and collaboration can help overcome these obstacles. Q Some of the more interesting examples of innovation we have learned about at DAU involve individuals who have faced a certain challenge, and they had to make in- novations on the ground, sometimes take liberties. Soldiers got a little permission or latitude from their commanding officer and innovated something that worked to reduce risk, such as a camera mounted on a military vehicle to spot anomalies on the terrain that allowed them to avoid moving on to an explosive device. A. We absolutely should encourage that kind of frontline innovation. Case studies like that are incredibly valuable not just because they offer solutions but because they foster a culture of experimentation. Our programs give leaders the chance to try out new tools in a professional setting, refine them, and then take them back and apply them in a way that fits their role and organization.
Q Where do we draw the distinction between the train- ing of the individual on the job who’s doing the actual acquisition, and the executive who is in charge of making overall policy and has to take a broader view of things? A. Policies and procedures are important, and we must fol- low them, but leaders also need to help shape them. They have a responsibility to create an operational environment that supports innovation. That means being open to new approaches, understanding risk, and encouraging measured experimentation. Without that, we risk stagnation. With it, we enable progress. Q Do you have some parting thoughts you would like to share with us to kind of round out the interview? A. First, I appreciate the opportunity. Our partnership with DAU is something we truly value. As we look ahead, it’s never been more important to focus on strengthening our industrial base, and that means investing in people. We talk about our people being our most important asset, but we need to back that up with action. Developing leaders who can make timely, effective decisions is more important now than ever. Editor’s note of appreciation: Shawn Harrison, the DAU learning director for Product Support Integration and a pro- fessor of Life Cycle Logistics, helped shape this interview.
The views expressed in this article are those of the participants alone and not the Department of Defense. Reproduction or reposting of articles from Defense Acqui- sition magazine should credit the authors and the magazine.
MDAP PROGRAM MANAGER CHANGES With the assistance of the Office of the Secretary of Defense, Defense Acquisition magazine publishes the names of incoming and outgoing program managers for major defense acquisition programs (MDAPs). This announcement lists such changes of leadership for both civilian and military program managers for April and May 2025. ARMY
NAVY/MARINE CORPS Capt. Jay A. Young relieved Capt. Seth A. Miller as Program Manager for the Arleigh Burke Class Guided Missile De- stroyer Program Office (PMS 400D) on May 12, 2025. Mr. Christopher G. Melkonian relieved Col. Timothy F. Hough as Program Manager for Advanced Amphibious Assault Pro- gram Office (PMA AAA) on May 18, 2025. FOURTH ESTATE None
Mr. Michael Dunne relieved Mr. Steven Herrick as Product Manager for Robotic Combat Vehicle effective May 2025. Lt. Col. Samuel Singleton relieved Mr. Richard Licata as Prod- uct Manager for Intelligence Systems effective May 2025. Mrs. Faith Duncan assumed position as Product Manager for PATRIOT Ground Support Equipment (GSE) New Start effec-
tive May 2025. AIR FORCE None
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WINNERS 2025
Gold Awards for Print Media | Design | Publication Overall and Print Media | Publications | Magazine
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EMILY ASHCOM, BENJAMIN TYREE, NICOLE BRATE, SUSAN MUTH, COLLIE JOHNSON, and DAU VISUAL ARTS AND PRESS STAFF DAU PRESS
CONTRACTING CONCEPTS: Prompt Payment Act by JENNIFER JONES
Eighth in a series of introductory articles on contracting. When attending contracting certification courses, students often are asked to perform exercises that relate to contracting issues they may not understand. They can do the exercises following the processes we teach them, but the best students want to know what it all means. Their inquiries inspired me to write this series of articles.
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July-August 2025 | DEFENSE ACQUISITION | 13
O ne of the DoD’s top priorities is expanding the industrial base and improving the health of its commercial partners. This improves our defense posture and enhances our ability to attain our sustainment and systems goals. One way we do this is by being a reliable, responsive contracting partner, un- derstanding and harnessing industry’s motivations, one of which is having a reliable cash flow. In the 1970s, there was significant
payment, to impose interest penalties on the government for late payments, and to ensure that the government took discounts for prompt payment only when payment is made within the discount period. (For example, if a contract had a 2 percent discount for payment within 15 days, the govern- ment should not take the discount if it did not pay within 15 days.) The Act was passed in 1982 and took effect in 1983. It became part of the Federal Acquisition Regulation (FAR) subpart 32.9. The PPA has since been modi- fied, in part to tighten government responsibilities and compliance. This article will review some of the his- tory of the Act and its impact on DoD contracting. Payment Due Date One of the key goals of the PPA was to establish clear payment due dates, so vendors would be better able to manage their cash flow, know when to expect payment, and budget accordingly. So, under the PPA, when are payments due? And if not made on time, when would interest begin to accrue? The clause Prompt Payment at FAR 52.232-25 states that payment is due 30 days from the latter of the following events: • Receipt of proper invoice at the designated office. • Acceptance of supplies/services. While 30 days is the normal win- dow from invoice/acceptance until payment is due, there are numerous exceptions to the 30-day rule. One in- volves perishable items such as sub- sistence, dairy, or meat, for which we reduce the 30 days and other periods discussed herein to accommodate
discontent in the commercial world with the government’s failure to pay invoices in a timely manner. Industry made this known to Congress, which instructed what was then the General Accounting Office (GAO) to inspect the timeliness of the payment process in government contracts. The GAO is- sued a report to Congress on Feb. 24, 1978, noting that approximately 30 percent of federal payments were late due to government fault—i.e., paid after the due date. As a result of this report, the Prompt Payment Act (PPA), Public Law 97-177, was born. The goals of the PPA were to es- tablish clear due dates for invoice pay- ments, to require timely government
quicker product turnover and the need for greater cash flow. Also, we should make payments for commercial items as similar as possible to prevailing in- dustry practice. We are required by the Act to specify the payment due date in the contract—the 30 days is a default if we do not. And there are special provisions for construction contracts. Please be aware of these exceptions in FAR 32.904. But for clarity’s sake, this article will not ad- dress these special circumstances further. In 1983, how did the paying office (a group separate from the contract- ing office) know what these dates were to enable timely payments? When the PPA was first implemented, most payments were made by local paying offices or those assigned to individual services. The Defense Fi- nance and Accounting Service (DFAS) did not yet exist; it was created in 1991. So, for almost a decade after the Act came into effect, these payments were made more organically. And the dates were usually captured using a
One of the key goals of the PPA was to establish clear payment due dates, so vendors would be better able to manage their cash flow, know when to expect payment,
and budget accordingly.
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rubber stamp. Truly! The stamp had blocks to record the date the invoice was received, the date of acceptance, and often the date the invoice was for- warded for payment. While this payment due date pro- cess sounds very straightforward, if awkward, originally there were some loopholes that allowed the govern- ment to delay payments without seeming to be late. One such loophole
was delayed acceptance. As an exam- ple, perhaps supplies were received on May 1, but the government did not officially accept them until July 1. That meant that the 30-day clock for the payment due date did not start until July 2 rather than May 2. And some- times we even started using the sup- plies well before July 1, essentially a ruse to avoid interest. This was clearly contrary to the intent of the Act.
After enough uproar, Congress passed Public Law 100-496 , Prompt Pay- ment Act Amendments of 1988 to create something called “construc- tive acceptance.” That means, only for purposes of the PPA, acceptance will be deemed to have occurred on the sev- enth day after delivery/performance. This does not limit our rights to fur- ther inspect, reject, or avail ourselves of other rights under the contract. But it does start the clock ticking to establish the payment due date and potential liability to pay interest. Our contract may specify a different pe- riod depending on what is being pur- chased, but the default is seven days. If actual acceptance occurred before the seventh day, that earlier date would start the clock. Another loophole was the govern- ment’s failure to properly document the receipt date of invoices. Again, harking back to earlier times, most of- fices had a date/time stamp machine to document receipt of invoices. The receiving unit occasionally did not process or immediately stamp the
Exclusionary Note Per Federal Acquisition Regulation (FAR) 32.901, the Prompt Pay- ment Act only applies to invoice payments, not contract financing payments as defined in FAR 32.001. Invoice payments are made for supplies or services accepted by the government. On the other hand, contract financing payments are those that provide for the govern- ment to make payments before acceptance of supplies or services. They include advance payments, performance-based payments, and most progress payments.
July-August 2025 | DEFENSE ACQUISITION | 15
(x) Any other information or documenta- tion required by the contract (e.g., evi- dence of shipment). If an invoice lacked any of this in- formation, we could deem it improper and would not be able to make pay- ment against it. So, an office could hold a defective invoice and not act, delaying payment. The 1988 amend- ment to the Act specified that it was the government’s responsibility to return any defective invoices to the vendor within seven days after their receipt, explaining any deficiency. If it were not returned within that time, that additional time would be included in calculating interest due. (For example, if we took 15 days to return a deficient invoice, we would only have 22 days to pay the proper invoice once received, having used eight of the 30 days due to our delay in returning the invoice.) Payment Once we have received a proper invoice and/or accepted the supplies or services, we must make payment within 30 days as discussed above. Per the PPA, within the 30-day win- dow, a check must be issued or an electronic funds transfer made by the payment due date. The date the payment is issued is considered the payment date, not the contractor’s actual receipt of payment. It is also interesting that govern- ment cash management and the PPA discourage early payment. In fact, the goal is to pay no earlier than seven days before payment is due, but no later than the payment due date, or
invoice upon receipt. And in those cases, the clock did not start when it should have. In 1988, Congress closed this loophole as well. This change stated that if we did not properly an- notate the date of receipt of the in- voice, the 30-day period would begin on the actual date of the invoice itself. This essentially cost the government up to a week of time to make pay- ments (postal mail days). Another potential problem was “improper invoices.” The PPA clause includes a list of the following items that must be included in a proper in- voice: (i) Name and address of the Contractor. (ii) Invoice date and invoice number. (The Contractor should date invoices as close as possible to the date of the mail- ing or transmission.) (iii) Contract number or other authori- zation for supplies delivered or services performed (including order number and line-item number). (iv) Description, quantity, unit of mea- sure, unit price, and extended price of supplies delivered or services performed. (v) Shipping and payment terms (e.g., shipment number and date of shipment, discount for prompt payment terms). (vi) Name and address of Contractor official to whom payment is to be sent (must be the same as that in the contract or in a proper notice of assignment). (vii) Name (where practicable), title, phone number, and mailing address of person to notify in the event of a defective invoice. (viii) Taxpayer Identification Number (TIN) … if required elsewhere in this contract. (ix) Electronic funds transfer (EFT) banking information.
within a window of 23 to 30 days after acceptance/receipt of invoice. This was included in the 1998 amendment. This is similar to how individuals manage their own money. They usu- ally do not pay their bills early (to earn interest on the money or manage pri- vate cash flow). There are exceptions to this cash management policy, es- pecially for small businesses as pro- vided in the Defense Federal Acquisi- tion Regulation Supplement (DFARS) 232.903, where we are given a man- date to pay them as quickly as pos- sible, with a goal of 15 days. And DoD policy encourages prime contractors to make accelerated payment to small business subcontractors within 15 days from government payment to the prime. Sometimes vendors offer prompt payment discounts (e.g., 2 percent, 20 days). These may be offered on the contract or on individual invoices. The paying office must calculate whether it is in the government’s in- terest to pay within 20 days to save 2 percent. If so, we will pay within 20 days, counting from the date of the invoice. But if we improperly take the discount but do not pay on time per the discount terms, then we may owe interest. Late Payments When we do not make payments by the due date, the Act provides that interest is automatically owed. We must pay the company monthly com- pounded interest at a rate established by the Treasury Department every six months, which was 4.625 percent as of January 2025. The interest rate used is based on the date when interest begins to accrue, i.e., when payment is due. If we do not pay interest due, we must also pay an additional penalty if the interest penalty is more than $1, if it is not paid within 10 days after pay- ment of the invoice, and if payment of the penalty interest is requested in writing by the vendor with the request postmarked within 40 days after the invoice is paid. The Treasury
Other Resources • Contracting eBusiness, Office of the Assistant Secretary of Defense • “Handshake” Procedures on Procure to Pay • Bureau of the Fiscal Service, Prompt Payment
16 | DEFENSE ACQUISITION | July-August 2025
The PPA and the mandate for seamless electronic processing of payment requests and payments seem to have paid off. In 2000, DoD paid approximately $27 million in in- terest due to late invoices (approxi- mately .0093 percent of total DoD budget request of $718.3 billion). In 2024, it was down to $19 million (ap- proximately 0.0023 percent of the total budget request of $842.0 bil- lion). JONES is an intermittent professor of contract management in the DAU South Region. She has worked in the defense contracting field for 46 years and holds a B.S. from the College of William and Mary. The author can be contacted at jennifer.jones@dau.edu . The views expressed in this article are those of the author alone and not the Department of Defense. Reproduction or reposting of articles from Defense Acquisition magazine should credit the authors and the magazine.
When we do not make payments by the due date, the Act provides that interest is automatically owed. We must pay the company monthly compounded interest at a rate established by the Treasury Department every six months, ...
Department has a calculator for ven- dors’ use to determine how much
fense Logistics Agency in 2004. In 2008, it became mandatory for all of DoD as the only acceptable elec- tronic system for submitting invoices and receiving reports and, with limited exceptions, is mandated in DFARS 232.7002(b)(1). It has since been in- corporated into the Procurement In- tegrated Enterprise Environment, fur- thering consolidation of government information management systems. One of the beauties of WAWF is that it provides all the information needed to implement the PPA in one seamless system. No more rubber stamps or mailing things back and forth. The system captures invoice submission, receipt, acceptance of supplies/services, and payment. All parties have visibility of the entire process. And calculating payment due dates and the necessity for interest payments have become automatic.
interest they are due. DFAS and Wide Area Workflow
While an improvement, this pro- cess was cumbersome in the days of rubber stamps and mailing invoices back and forth. Technology has ad- vanced well beyond the tools of yes- terday. Since the advent of e-mail, in- ternet, electronic funds transfer, etc., government and industry are able to communicate more efficiently and effectively. Congress agreed and in October 2000 passed 10 U.S.C. 4601, which became effective for contracts awarded against solicitations issued after June 30, 2001. It required that invoices be submitted to and pro- cessed within DoD electronically, with limited exceptions per DFARS subpart 232.70. On a related note, in the late 1990s, DoD began the push for paperless contracting. Its goals included reduc- ing errors caused by repetitive data entry and use of multiple systems and reducing the use of paper. Na- tional Defense magazine published an interesting article on the history of this initiative: “Pentagon to Field Paper- less Procurement System in ‘04.” One goal of this initiative was to consolidate and link the numerous systems used by the various Services. One of these systems was Wide Area Workflow (WAWF), initially created by the De-
DAU Resources • Contracting • Defense Contract Management Agency Development (Web Event) • Accelerated Payments to Small Businesses
July-August 2025 | DEFENSE ACQUISITION | 17
RISE OF THE COAST GUARD’S Foreign Military Sales Program by BENJAMIN POSIL
18 | DEFENSE ACQUISITION | July-August 2025
T his year, the U.S. Coast Guard’s Foreign Military Sales (FMS) program is pro- jected to reach a major milestone: execution of more than $1 billion in ag- gregated total case value in support of national security objectives. While the U.S. Government’s FMS
program is massive, with annual sales averaging $30 billion and deliveries that include the latest cutting-edge military hardware, the Coast Guard’s contribution is often overshadowed. The Coast Guard’s location within the Department of Homeland Secu- rity (DHS), the small size of the of- fice that manages the program, and the off-the-shelf nature of its pro- curements are a few reasons why the Coast Guard’s FMS efforts rarely generate the same attention as those within the DoD. That said, nearing the $1 billion milestone proves that the Coast Guard is moving past its historic supporting role in the FMS enterprise toward global prominence. The Coast Guard’s presence is ubiquitous throughout offshore, coastal, and inland waterways. The Service’s iconic blue and orange rac- ing stripe and logo are recognized around the globe. The Service now is the first point of contact and often the first responder for maritime emer- gencies across the entire country, an impressive achievement given its rela- tively small size. With an authorized strength of just over 44,500 active- duty personnel, the Coast Guard has fewer active-duty members than the number of employees in the New York City Police Department. The organization’s mission in- cludes both local law enforcement and traditional military missions with a much smaller budget than those of DoD Services. The Coast Guard’s ability to maintain its op- erational relevance alongside the larger military services is an apt re- flection of the Coast Guard FMS’ role in the U.S. Government’s Security Cooperation enterprise. Every acquisition professional is intimately familiar with the Federal Acquisition Regulation, the formal rules that establish processes for all
Lee Fleming, a contractor with the U.S. Coast Guard Office of International Acquisition, works on one of four 110- foot Island class patrol boats that were transferred to the Hellenic Navy as Excess Defense Articles. Work on the boats was done at a shipyard in Greece. Source: U.S. Coast Guard photo
government procurements. Similarly, the Security Assistance Management Manual provides formal direction for the Coast Guard’s Security Coopera- tion programs. These two sets provide legally binding guidance for every of- fice conducting FMS procurement. Each DoD Service has numerous program offices that operate within this structure in supporting FMS ef- forts across the globe. Within the Coast Guard, however, the mission of only one office is at the nexus of these two parallel sets of guidance: CG-922. CG-922, formally the Office of In- ternational Acquisition, manages the Coast Guard’s FMS program. CG-922 was established during an organiza- tional overhaul in the late 1990s. As part of that reorganization, the Coast Guard’s FMS program was separated from the office tasked with shap- ing the Service’s global engagement strategy on behalf of the commandant and incorporated into CG-9, the Coast Guard’s Acquisition Directorate. This
realignment more accurately reflected the reality that the FMS program is, at its core, an acquisition office tasked with furthering U.S. Security Coopera- tion goals by equipping operational maritime forces, even if the forces in question necessarily belong to foreign partners. While CG-922’s placement in the Acquisition Directorate reflects the fact that the FMS program’s funda- mental mission is procurement of goods and services, it obscures the re- ality that the International Acquisition team’s mission is unique within CG-9. The rest of the directorate is tasked with equipping the Coast Guard’s organic operational forces, but CG- 922 is externally focused, providing equipment, services, and resources exclusively to foreign partners. From an FMS perspective, while the Coast Guard is organizationally part of DHS, CG-922 actually func- tions as an extension of the U.S. Navy. The Navy International Program
July-August 2025 | DEFENSE ACQUISITION | 19
Office serves as CG-922’s implement- ing agency (i.e., de facto higher head- quarters) and provides the authority and oversight that enables CG-922 operation within the larger FMS en- terprise. For nearly two decades, the Coast Guard’s FMS program had fewer than a dozen civilian employees, supported by about as many contractor staff. A recent expansion has pushed CG- 922’s civilian and contractor team members to 30, but the office still operates with a lean force structure that relies heavily on a few uniquely qualified managers and support staff to oversee the myriad geographically dispersed projects that are underway at any point. CG-922 historically has focused on two primary lines of effort: new procurement and the transfer of ex- cess defense articles (EDAs). As its name implies, new procurement in- volves purchasing newly manufac- tured boats, planes, etc., along with spare parts, ancillary support, and the training and technical assistance needed to keep those resources in operational condition. Generally, the “menu” of assets available to foreign partners reflects the capabilities organic to the Coast Guard’s own operational forces. That said, for reasons related to both the idiosyncrasies of the FMS process along with the need to cater to a multitude of different FMS customers, CG-922 cannot leverage the existing contracts used to equip organic Coast Guard units. This means that, while the assets provided to partners may look very similar to those employed by the Coast Guard, they actually
Above: In May 2024, the U.S. Coast Guard Office of International Acquisition on behalf of Paraguay awarded a contract to procure nine 25-foot interdiction boats with trailers and equipment to SAFE Boats International of Bremerton, Wash. Pictured is one of the boats awaiting inspection and acceptance by the U.S. Coast Guard at SAFE Boat’s Tacoma Production Facility before being shipped to Paraguay. Source: Lt. Cmdr. Kevin Yen, U.S. Coast Guard
Right: Source: U.S. Coast Guard, CG-922
are procured through singular stand- alone contracts that must be man- aged cradle-to-grave by the CG-922. The second line of effort is the EDA transfer. Despite constituting roughly 40 percent of CG-922’s total workload, EDA garners significant at- tention both within the Coast Guard and throughout external Security Co- operation stakeholders. EDA involves transferring decommissioned assets to foreign partners and refurbishing to afford the generation of their max- imum utility. The assets themselves are technically free to the partner, or more specifically, transferred as $0 grants. However, the entire effort to return the assets to an operational status and incorporate any enhance- ments requested by the partner can become quite costly, with that cost borne by the partner (though, in some cases, subsidized by a variety of U.S. Government funding sources). Characterizing EDA as an acqui- sition project understates the actual
scope and scale of the effort. The transfer of a decommissioned ves- sel generally includes hundreds of separate procurements executed using various types of purchasing methods, often over a year or more. Major contracting efforts such as those needed to award and manage dry dock evolutions for ships, pro- cure communication and navigation suites, and even conduct engineering studies associated with weaponizing vessels, often overlap with more mun- dane requirements such as procuring tug services and oily waste offloads. Because the foreign crews are usually present for the refurbishing and often live onboard their “new” vessels, all procurements associated with their daily “care and feeding” provide yet more recurring requirements that further complicate the Coast Guard’s management of EDA transfers. A standard FMS case that involves the procurement of newly produced boats, spares, and training generally
The Coast Guard’s presence is ubiquitous throughout offshore, coastal, and inland waterways. The Service’s iconic blue and orange racing stripe and logo are recognized around the globe.
20 | DEFENSE ACQUISITION | July-August 2025
Coast Guard Office of International Acquisition Delivers Capability Globally
Estonia
Latvia Lithuania
Canada
Ukraine
Kazakhstan
France
Georgia
Albania
Washington D.C.
Uzbekistan
Georgia
Turkmenistan
Azerbaijan
Tunisia
Malta
Jordan
Iraq
Pakistan
Bahrain
Taiwan
Mexico
Saudi Arabia
Oman
Bahamas
Bangladesh
Taiwan
Oman Yemen
Dominican Republic
Niger
St. Kitts & Nevis
Jamaica
Antigua & Barbuda
Belize
Chad
Cape Verde
Haiti
Dominica
Guatemala
Honduras
Barbados Grenada Trinidad & Tobago St. Lucia
Senegal
St. Vincent
Vietnam
Philippines
Nigeria
El Salvador
Togo
Djibouti
Ghana
Guinea
Benin
Sri Lanka
Venezuela
Costa Rica
Panama
Ivory Coast
Malaysia
Cameroon
Liberia
Guyana
Colombia
Sao Tome & Principe
Kenya
Ecuador
Gabon
Seychelles
Tanzania
Comoros
Mauritius
Madagascar
Paraguay
Uruguay
Australia
Chile
Argentina
$1+ Billion Total Case Value
82 Countries Impacted
700 + Asset Deliveries
July-August 2025 | DEFENSE ACQUISITION | 21
includes support surges during the standard milestone events (e.g., source selection, final acceptance, etc.). While these can be resource- intensive, the events that require maximum involvement tend to be episodic and usually buffered by ex- tended periods of waiting. EDA transfers, on the other hand, require disproportionate and con- stant support. The volume of daily acquisition requirements over an extended period, often for a project with a relatively modest overall bud- get, is a unique defining feature that sets EDA transfers apart from more conventional projects. A noteworthy EDA feature is that each transfer has quantifiable, in- trinsic value for the Coast Guard. For every decommissioned vessel that CG-922 can transfer to a foreign part-
ner, the Coast Guard avoids paying for the extended storage, risk mitigation, and potential scrapping of that vessel. The fact that these costs would be associated without operational value to the Service adds further mo- tivation for the Coast Guard to avoid incurring those expenses. In the case of the larger 378-foot-high endurance cutters, this could easily constitute a seven-figure savings for one ship alone. While the cost avoidance totals are less for smaller vessels, the aggre- gated savings garnered by the Coast Guard through CG-922’s ongoing EDA transfers equate to approximately $9 million every year. These ancillary cost savings, when combined with the ex- panded capability of our foreign part- ners, mean that EDA activities remain a key focus within CG-922’s portfolio of work.
Within the last two years, CG- 922 added follow-on support as a third line of effort. A standard FMS case incorporates what is referred to as a total package approach. This is mandated by the Security Assistance Management Manual and constitutes provision of the primary capability (e.g., boat, aircraft, etc.) along with spare parts, training, and support needed not just to complete delivery but to establish an actual operational capability. While this is intended to enhance a partner’s ability to realize sustained benefit from its new acqui- sition, it does not address the longer term requirements to keep that capa- bility operational. Follow-on support is specifically intended to provide any spare parts, equipment, techni- cal assistance, and training needed to sustain assets for an extended period.
Vietnam Coast Guard 8022 is moored at the pier at U.S. Coast Guard Base Seattle in Seattle, Wash., in February 2025, following completion of work at Lake Union Drydock Co. in Seattle. Formerly Coast Guard Cutter Mellon, the 378-foot-high endurance cutter will depart for Vietnam following completion of final training for its new crewmembers. Source: U.S. Coast Guard photo
22 | DEFENSE ACQUISITION | July-August 2025
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