Organizational capability

Earlier this week, the Government Accountability Office (GAO) ruled in the controversial Air Force tanker case. GAO's ruling sustained Boeing's protest over the decision awarding the contract to Northrop Grumman. (By the way, only the press release is available to the public. The full 69 page report contains confidential and proprietary information. A public version is expected to be released in the future.)

The case has been interesting to watch for a number of reasons, including the fight over what is an American company. But the GAO finding highlights the importance of a key intangible asset: organizational capability. The heart of the GAO report is that procurement procedures were not followed. The tanker case is not the only example of where the Department of Defense's organizational capabilities have been called into question. As the Washington Post points out:

The contract is an example of persistent overall problems with the way the Pentagon buys weapons, procurement specialists and government watchdogs say. As the government cedes more of its work to private companies and reduces the size of the workforce that oversees contracts, such problems are growing, according to a stream of government audits and reports.
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Federal auditors in recent years have documented that major weapons system programs are routinely delivered late and over budget. According to a congressional review, about half of all federal contracts in recent years have been awarded without full and open competition, about triple the proportion in 2000.

The federal government faces huge organizational issues. Maintaining a high level of internal organizational capability is one of them. As Robert Goldenkoff, Director of Strategic Issues at GAO, said in testimony before Congress just last month:

The importance of a top-notch federal workforce cannot be overstated. The nation is facing new and more complex challenges in the 21st century as various forces are reshaping the United States and its place in the world. These forces include a large and growing long-term fiscal imbalance, evolving national and homeland security threats, increasing global interdependence, and a changing economy. Further, as we have pointed out in our High-Risk Series and other reports for Congress, some federal agencies continue to face persistent performance and accountability problems at a time when taxpayers have come to expect—and need—higher levels of performance and greater responsiveness by public officials and programs.

It is estimated that one-third of the current federal workforce will be eligible for retirement by 2012. Finding ways to not only replace that workforce, but to capture that treasure trove of tacit knowledge locked inside that workforce, will be difficult. It appears that maintaining organizational capabilities in key areas, such as procurement, is also difficult.