WASHINGTON — With conference finished on the National Defense Authorization Act (NDAA), it appears that sweeping acquisition reforms spearheaded by Sen. John McCain will become the law of the land.
The bill, reported out of a joint committee Sept. 29, gives service chiefs and secretaries overall responsibility for acquisition programs within the services — a shift away from the Office of the Undersecretary of Defense for Acquisition (AT&L), Technology and Logistics (AT&L), which has held milestone decision authority over programs for roughly the past 30 years.
"That's designed to establish clear lines of authority and clear accountability so the service chief and service secretary are given greater responsibility in this bill," a Senate Armed Services Committee staff member said during a briefing with reporters a day after the committee report was filed.
Months of negotiations between House and Senate committee conferees sorted through more than 120 acquisition policy provisions to yield a conference report with mostly Senate provisions. The measures are aimed at increasing accountability, streamlining existing rules, and gaining access to different and nontraditional parts of the industrial base.
That McCain's vision for reform won out is no small thing, particularly when it comes to the authorities that will devolve to the service chiefs — a key component of the senator's language.
That was in contrast to the version authored by Rep. Mac Thornberry, R-Texas, who heads the House Armed Services Committee. The HASC version of acquisition reform did not include as large a role for the service chiefs, leading to questions about how things would shake out in conference.
A House Armed Services Committee staff member, however, said the two bills were "incredibly complementary" and denied there were huge differences. "I think there was an over-irrationalization of the differences between what the two chairmen were trying to get to," he said.
The biggest change from the language means service secretaries and chiefs are expected to be engaged in the early stages of programs, deciding on performance, technical and cost issues before they allow programs to advance. They would also have to sign off on any new requirements, and to certify that a program's funding and requirements are stable.
Cost overruns of more than 15 percent — a Nunn-McCurdy breach — would mean a transfer of the program back to AT&L, and it would require the services to pay penalties at 3three percent of the overrun. These penalties would pay into a fund controlled by AT&L for prototyping throughout the Department of Defense.
The shift in authority will apply to new programs in 2017, and AT&L will retain authority over joint programs.
Supporters of the language have pitched it as a way to curb the requirements creep that bloats defense programs, but there are concerns both inside and outside the Pentagon that the language will effectively gut the power wielded by Pentagon acquisitions chief Frank Kendall Kendall.
Congressional staffers downplayed the shift in power, insisting the provisions will apply to relatively few programs at first, would not change the defense secretary's authority and actually provides the defense secretary with new tools to conduct business with commercial entities.
"Last time I checked, the services report to the secdef, and AT&L reports to secdef, and the undersecretary for policy reports to secdef," said the Senate Armed Services Committee staff member. "The secretary of defense retains ultimate authority here."
A spokeswoman for Kendall declined to comment, but in a July letter to Congress, Defense Secretary Ash Carter warned of "significant concerns" if power was shifted from AT&L to the service chiefs.
Doing so, Carter wrote, would prevent Pentagon leadership's ability to "guard against unwarranted optimism in program planning and budget formulation, and prevent excessive risk-taking during execution — all of which is essential to avoiding overruns and costly delays."
In order to provide new flexibility in acquisition, the language aims at having the Pentagon formalize rapid acquisition pathways typically reserved for crises, streamlining and creating waiver authority for two-to-five-year programs to allow foreign purchases. It also adds cyber to the urgent acquisitions process established in 2003.
Other such tools provide access to nontraditional parts of the industrial base, with expanded authorities to buy commercial products — outside federal acquisitions — for space systems, medical needs and other areas.
As the Pentagon makes overtures to Silicon Valley, the intent is to provide the military greater speed and flexibility to meet its urgent needs, congressional aides said.
"One of the things that's different between acquisition reform then and now is that it is really tied to national security" the HASC staffer said. "From a technological superiority standpoint, we had 20 years to overcome the gaps, and in today's day and age we just don't have that. We have to do things faster."
Dave McCurdy, the former congressman and co-creator of the Nunn-McCurdy rules, said the chairmen are trying to "put more teeth" in order to "actually impose some costs associated with nonperformance" in the acquisition system.
"It is certainly different from what we originally proposed, but I think they are becoming more frustrated with some of the breaches," McCurdy said.
At a Sept. 30 event hosted by the Center for Strategic and International Studies, a panel of experts were largely optimistic about the changes.
Moshe Schwartz, a specialist in defense acquisition policy for the Congressional Research Service, praised the focus on "issues of human beings being part of that acquisition process."
He notes that reform efforts talk about accountability, program manager authority and training, areas that often have been overlooked in the past.
Andrew Hunter, director of the Defense-Industrial Initiatives Group at CSIS and a former director for DoD's Joint Rapid Acquisition Cell, said the reform language is largely positive. But he raised concerns about changes to Milestone B authority, where the service chiefs will have greater authority.
"My concern is that I think it treats every milestone as if they are all the same," Hunter said. "In my view, Milestone B, you're making a huge decision about strategy and an investment for the department that the process simply will demand the secretary of defense's view play a heavy role, because it is a departmental decision.
"And I think that will have to happen, to some extent, through the backdoor as a result of the way the language is written, rather than it being out in the open for everyone to see and participate in," Hunter said. "I think that ultimately is not a great thing."
Steve Grundman, a former Pentagon industrial policy chief and now the principal of Grundman Advisorys, called that a fair concern, but believes the service chiefs are uniquely positioned to weigh in on requirements, budgets and force decisions for a program.
"That's their job," he said. "So I would like to think their authority and stature will help good decisions get made."
Of course, the looming caveat of any acquisition reform language is when, or if, it goes into effect.
President Obama is expected to veto the NDAA over $38 billion in additional funding included in the overseas contingency operations (OCO) wartime account. Obama and leading Democrats have derided OCO, which is exempt from congressionally mandated budget caps, as a "gimmick" that allows GOP leaders to inflate defense funding without increasing domestic spending.
Grundman does expect some "short-term turmoil" as the rules are figured out and the service chiefs adjust to their new responsibilities.
And the chiefs have largely appeared eager to adjust to the new rules. A sense of welcome for additional authority has permeated Discussions over the last several months have with a general sense that the services welcome more authority having permeated discussions over the last several months.
Both Gen. Ray Odierno, the recently retired chief of staff for the Army, and Adm. Jon Greenert, who has also since retired as chief of naval operations, have praised the idea of taking a larger role in acquisition.
But with new powers come new responsibilities, and at least one of the Joint Chiefs is concerned that the new language may prove to be a double-edged sword.
"I think you have to be a little careful what you ask for," Gen. Mark Welsh, Air Force chief of staff, said in a September exclusive interview with Defense News.
While agreeing with his fellow chiefs that being involved in the process is important, he said that the services already have major input about how programs are acquired: "I have never felt disconnected from acquisition since I've been in this job."
Assigning extra responsibilities to the service chiefs, he said, requires a deep understanding of acquisition policy and technology — adding another proverbial spinning plate to the ones the chiefs are already monitoring.
"I spent a few years working in the acquisition business in the Air Force, and I know how much work goes into it," Welsh said. "I know how much energy is spent trying to get these programs right. I know the level of expertise of our acquisition professionals that do the job.
"Putting acquisition authorities into the service chief's box may create a problem because it would completely change the job, and we'd have to think through that because you'd have to spend an awful lot of time getting smart about the acquisition business." he added.
Both Hunter and Grundman were optimistic about the increased role for the chiefs. But Grundman also pointed out brought up the point that OSD is not being entirely cut out of the process.
"It's not like OSD will have no authority over the choices the services make. There is the program and budget review. And ultimately if the thing doesn't make it into the budget, it won't matter what authorities the services have over the programs."
McCurdy also worries that removing AT&L from the mix might lead to more stovepiped acquisition — one of the primary targets of Goldwater-Nichols so many years ago.
"You have to be a little careful that you don't undermine AT&L and its role as well," he said, "because ultimately, in my opinion, ultimately it's about making strategic choices."