The Pentagon’s “Superior Supplier” rankings need an overhaul

For Inside Defense, Jason Sherman wrote three articles at the beginning of the month about the “Superior Supplier” rankings at the Army, Navy, and Air Force Departments. The assessments are undertaken “on a contract-by-contract basis” by individuals acquiring the actual goods and services, and thus “reflect customer experience with a given contractor.” All such reports are aggregated into an overall assessment. What’s remarkable is the degree of churn in those rankings. To wit, the headlines:

Army drops more than half of 2015 contractors from new ‘superior supplier’ ranking
Eight Navy suppliers notch improved ‘superior’ ranking as overall list culled
Sixteen Air Force suppliers climb higher in 2016 ‘superior’ rankings

Some of this variance derives from what’s being delivered. This year, the Army and the Navy have been very happy with Boeing in general, each promoting at least one unit of the company from their second to first tiers of favorite suppliers. The Air Force, however, has been markedly displeased, dropping the Boeing Military Aircraft Company from its list entirely. That’s not surprising, after the bad year with the KC-46A Pegasus aerial tanker, which never should have been its most difficult program.

But note also how Oshkosh moved up the rankings for the Army Department, yet seemingly fell sharply in the Navy Department’s rankings. Last year, the company was in the Navy’s first tier; this year, it’s off the list entirely. The big product for both customers is trucks, but the Marine Corps just bought a lot fewer trucks from the company in 2015. By the Pentagon’s methodology, only the twenty-five largest accounts (by contract obligations) are rated. So if you’re not a big supplier, and a big supplier this year, you’re not on the list at all.

That method might not be the right approach, and for three reasons. First, restricting the list to big firms systematically overlooks the small ones. The Small Business Administration separately presents its annual Tibbets Awards in the Small Business Innovation Research program, but these are for innovative technical achievement more than, say, supply chain excellence or anything else. We all love innovation—particularly this year, yes?—it’s just not the whole ballgame. And if you’re not actually in the SBA’s SBIR program, you’re not even in the running.

Second, the SBA’s trophy is also restricted to small firms, but that approach can actually overlook the magnitude of the some achievements. Consider how Boeing’s 2015 Supplier of the Year in the “technology” category was General Nano, a firm with five full-time staff. Again, the company was the supplier of the year, not the small business supplier of the year. To consider the largest suppliers, but then select one of the smallest as the exemplar, is to send a strong message to the whole field—improve your game.

Finally, what about poor Oshkosh? Dropping off the rankings doesn’t just produce a marketing headache, though someone at its public relations firm in DC did need to field my call, and answer my question. Quite practically, dropping off the rankings cramps the feedback that big or just middle-sized suppliers can get from a numerical score. There’s no marker to which to rally the troops in Wisconsin (or anywhere else) to achieve what they can. If the Pentagon wants to use that better buying power to extract some better performance, it might tell more of the contractors how well they’re doing.

James Hasik is a senior fellow at the Scowcroft Center for Strategy and Security.