The US Senate version of the defense authorization bill proposes significant process changes to increase management accountability and focus on achieving planned program results. These changes are overdue given the status of more than $450 billion in cost overruns and average deployment times more than two years late and increasing annually.

While half of the major acquisition programs are performing as planned, the other half pushes the average overrun to more than 25 percent, a clearly unacceptable record given the funding limitations and new challenges DoD faces.

The fundamental change is to make the service acquisition executives the milestone decision authority and therefore clearly responsible for program outcome with the full participation of the service chief and in support of the service secretaries. This then allows the undersecretary of defense for acquisition, technology and logistics USD(AT&L) to focus on other emerging issues and retain the full authority to intervene when appropriate.

However, the authorization language has a few incomplete concepts relating to penalties, rewards, program status reporting and adequate leadership.

Penalties

The bill proposes penalties for poorly performing programs. This is a unique and welcome idea, but penalizes the wrong programs. As defined, 3 percent of program overruns reduced by underruns would be taken from the service RDT&E account and transferred to a rapid prototyping fund. In other words, the RDT&E account would have a sequester of almost 3 percent of major program overruns. Simply stated, the wrong programs pay.

The right way to use this innovative idea is to apply it to the malperforming individual programs by reducing the program content (usually production quantities) by the amount of the overrun. This sends a clear message to the contractors, program management officials and others that there is no bailout for poor performance.

This calculation would be made annually so improved performance could be reflected in quantity increases. Calculations should be done in base year dollars so inflation does not play a role. Of course, the secretary of defense could make program adjustments through the normal budgeting process.

Rewards

The language establishes many demands for performance, but includes no rewards for success. One approach would encourage inclusion of performance incentives in contracts and allow display of program excellence flags. Inadequate performance would eliminate the award.

Program managers accept the most professional risk and abuse, but the jobs require extraordinary skills in technology, business, military operations and leadership. Yet they must compete with others not burdened with similar demands for promotions and bonuses. Military major acquisition participants should be separated from the other military and be promoted from a separate pool not competing with other line and staff officers.

Technological and force advantage depends on the success of program management personnel and they should be recognized for this importance.

Reporting

The only program reporting now is the selected acquisition report issued annually and far too late to have any management significance. An accountability-based system must have adequate periodic reports from managers to judge performance. In the commercial sector, this is the quarterly performance report. This should be implemented for major acquisition programs based on a simplified selected acquisition report format.

Leadership

Centralized leadership implemented in the Goldwater-Nichols act was supposed to improve acquisition system performance. Based upon excellent studies conducted at the direction of USD(AT&L), this has not happened. In fact, centralization made possible the excesses of the transformation period and is shown as cost growth in programs ranging from aircraft carriers to land systems and aircraft. Absence of a strong director of defense research and engineering has contributed to the widely perceived reduction of technical dominance.

Emphasis on production cost and sustainment cost has been nearly eliminated as seen by the large backlog of repairs and declining materiel readiness in all services. Part of the reason is that the service assistant secretary responsible for these functions was eliminated and given inconsequential tasks. This should be reversed and that person be given clear responsibility for cost control and materiel readiness.

Approximately 10 percent of life-cycle cost is development (although production and sustainment costs are determined then), 20 percent is production cost and 70 percent sustainment cost.

This set of changes will complete the concepts defined in the authorization bill and make a complete major system acquisition philosophy.

Share:
More In Commentary