The last time U.S. defense spending faced deep cuts, the Clinton administration made regulatory changes to encourage commercial contractors to more economically — and innovatively — satisfy military needs.
Reformers knew commercial technologies, especially telecommunications and computing, were advancing more rapidly than military ones, but government regulations dissuaded tech firms from doing business with the Pentagon.
Recognizing that commercial hardware would rarely be embraced without some degree of modification, Clinton officials introduced the concept of commercial “of a type,” purchases of commercial items needing reasonable and modest modification before induction to military service. In its simplest form, this meant a T-shirt from a commercial vendor could be delivered in green instead of white, or a civilian helicopter could be fitted with wheels rather than landing skids.
Over the years, this technique has dramatically expanded the Pentagon’s ability to quickly acquire civilian technologies, and it’s been used for everything from utility helicopters to computers to smartphones.
In a few cases, however, it has been abused.
The effort to adapt AgustaWestland’s existing AW101 helicopter for the U.S. presidential transport is a case in point: Billed as an economical way to replace the aging presidential helicopter fleet, costs skyrocketed as the government piled on more than a thousand specification changes, including requiring that the aircraft be built of an entirely different kind of aluminum. When estimates suggested that each aircraft would end up costing nearly half a billion dollars, the program was canceled.
The same thing happened with other programs, prompting some in the Pentagon to conclude that a clause intended to save money was actually costing billions of dollars. So now, even though there is little evidence to suggest that commercial designation was the primary or only cause of cost overruns, DoD is proposing to Congress that “of a type” be dropped from commercial solicitations, with waivers to be granted on a case-by-case basis.
Contractors oppose the change, arguing it will dissuade commercial firms from working with DoD while hurting contractors who rely on modified commercial parts to cut program costs.
The problem isn’t with the regulation, which, when applied correctly, can and has saved the government money. Rather, it’s that the rule has been misapplied to fill needs that should have been satisfied through more traditional ground-up approaches. There’s no point in adopting a commercial product if it needs extensive modification to meet a given requirement. At that point, it’s better to ask industry to develop a product that meets unique needs.
The solution here is in improving how DoD defines what it really needs and how best to acquire it.
To do that, the acquisition corps must improve its skills in program management, cost estimation and cost comparison to allow it to better manage dissimilar competitions among commercial, modified commercial and traditional acquisition approaches.
The Pentagon also must develop military requirements in close coordination with acquisition professionals and commercial and military industry to prevent costly technological overreach or wasteful duplication of effort.
Many factors drive cost overruns. Thoughtful reform shouldn’t limit DoD’s ability to get the best that commercial industry has to offer.