3.7 RISK MANAGEMENT AND THE ACQUISITION STRATEGY
In addition to providing the framework for program planning and execution,
the acquisition strategy serves several purposes that are important to risk
- Provides a master schedule for research, development, test, production,
deployment, and critical events in the acquisition cycle.
- Gives a master checklist of the important issues and alternatives that
must be addressed.
- Assists in prioritizing and integrating functional requirements,
evaluating alternatives, and providing a coordinated approach to integrate
diverse functional issues, leading to the accomplishment of program
- Documents the assumptions and guidelines that led to the initiation and
direction of the program.
- Provides the basis for the development and execution of the various
subordinate functional strategies and plans.
The strategy structure should ensure a sound program through the management
of cost, schedule, and performance risk. A good acquisition strategy
acknowledges and identifies program risks and forms the basis for implementing
a forward-looking, rather than reactive, effective risk management effort.
Acquisition strategy should describe how risk is to be handled and identify
which risks are to be shared with the contractor and which are to be retained
by Government. The key concept here is that the Government shares the risk
with the contractor, but does not transfer risk to the contractor. The PMO
always has a responsibility to the system user to develop a capable system and
can never absolve itself of that responsibility. Therefore, all program risks,
whether primarily managed by the PMO or by the contractor, must be assessed
and managed by the PMO.
Once the program office has determined how much of each risk is to be
shared with the contractor, it should assess the total risk assumed by the
developing contractor (including subcontractors). The Government should not
require contractors to accept financial risks that are inconsistent with their
ability to handle them. Financial risks are driven, in large measure, by the
underlying technical and programmatic risks inherent in a program. The
Government contracting officer should, therefore, select the proper type of
contract based on an appropriate risk assessment, to ensure a clear
relationship between the selected contract type and program risk. An example
would be the use of cost-reimbursable-type contracts for development