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Commentary: Acquisition Mumbo Jumbo

Reform Programs Miss the Real Problem

Jan. 20, 2014 - 03:45AM   |  
By JOHN KING   |   Comments
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For the last two years Congress and the public repeatedly heard why the Pentagon’s latest effort at acquisition reform was going to work. Don’t bet on it. Wordsmithing the paperwork won’t fix the Pentagon acquisition process. The latest reforms will fail for the same reasons previous efforts failed. They don’t address the real problems.

As a senior budget analyst who performed due diligence on hundreds of Defense Department research and development, procurement and construction budgets worth $60 billion, I can say with some authority that senior managers at the top of the acquisition money machine don’t have a clue.

First, they are the problem. Not the solution.

Program managers don’t want to hear they need to get their act together when senior DoD executives are not doing their jobs. Look at the newly issued interim DoD Instruction 5000.02. It wordsmiths the old how-to instruction, adjusts some of the pretty color-coded acquisition development process graphics, and adds some fine words about better business practices and risk assessments earlier in the process. Better Buying Power 2.0? Give me a break.

The bosses consistently fail to recognize the requirements determination process, including analyses of alternatives, are not true validations of military threat, risk and response. These are in-house assessments from vested interests. Congress should require a truly independent team of experts with no prior Pentagon connections to evaluate all programs at key stages.

Second, the real cost drivers are never talked about. Acquisition reform always targets the margins, like “better management.” Issuing more specific guidance about affordability analysis and spending caps won’t help.

Designs are driven by technology, not operations and maintenance. If considered a critical factor in the decision process, the maintenance nightmare of the Navy’s trimaran-hulled version of the littoral combat ship might have kept it to an experiment. Now, it even costs more than a traditional frigate because, as the Navy finally admitted, it requires a real destroyer to defend it. Want to save money? Kill it off now.

Manufacturing and software development processes need to focus on production rework, which can account for 30 to 50 percent of procurement costs. Plus, with fewer major systems, component and supply chain manufacturing needs to be brought back in-house.

Third, DoD wants to set realistic program goals by aligning weapons requirements with long-term spending realities. This is where the quadrennial defense review consistently fails. Like insurance companies, the Pentagon needs a simple risk assessment strategy: If we have a real risk, defend against it. If we have a moderate risk, prepare for it. If we have a low risk, acknowledge it and have a plan. Don’t overinvest. Let our allies share the burden and costs.

Major acquisitions take so long and cost so much because of poor executive decisions. There are no “cost overruns,” as the Government Accountability Office continually highlights. There are only “underbudgeted” programs. If properly budgeted, the Pentagon could afford only half the expensive toys it wants.

Fourth, DoD needs to be less worried about what types of acquisition contracts it uses and more interested in achieving its goals. New technologies are costly and the government usually pays the bill anyway. But to effectively manage that risk, it should use annual fixed-price contracts. Open-ended cost-plus contracts merely encourage wastefulness and long lead times to fielding, and provide less transparency to Congress.

Fifth, separate development and production. One competition for design and prototype development; another for production. No concurrency with a single, winner-take-all developer/producer that creates a high-priced monopoly.

Whether government- or contractor-owned, we need to reduce waste by right-sizing our defense production facilities to support dual-sources. Larger savings are achieved with dual sources during production and annual head-to-head competitions than with multiyear contracts.

Sixth, stop all this silliness about better “long-term capital planning,” which is nothing more than a distraction. If DoD acquisition chief Frank Kendall wants to avoid costly cancel­lations, he needs to kill off high-cost, exotic solutions early as impractical and cost-ineffective.

Seventh, to effectively manage its acquisition outcomes, the Pentagon needs to stop being a bystander and re-establish its own in-house expertise in design, early development and production, and be able to conduct its own stress tests. Some things require government long-term scientific, engineering and manufacturing know-how. Winning a price competition shouldn’t be the primary criteria for providing for the nation’s defense.

Last, Kendall said program managers have a fundamental responsibility to understand their program costs and try to control them. But so did he, and he failed.

We need to stop wordsmithing the paperwork and start firing more of the senior executives, political appointees, and second-career general and admirals who are responsible for these acquisition fiascoes. How about a bottom-up solution for once instead of more top-down nonsense? ■

King is a retired Pentagon budget analyst and volunteer on the President’s National Commission on Fiscal Responsibility and Reform defense budget review team.

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