Almost 30 years after Norm Augustine's warning, the U.S. still is buying less for more
When it comes to defense acquisition reform in the U.S., a famous paraphrase of President Ronald Reagan holds true: Government isn't the solution, government is the problem.
That is the irony facing officials and lawmakers—including those with experience in the private sector—as they launch the latest in Washington's quixotic efforts to change and improve the way the Pentagon spends hundreds of billions of dollars each year on weapons, goods and services.
“It's decades since Norm Augustine [one-time CEO of] said that the way costs were rising, we'd wind up with one plane, one ship and one tank; and nothing has happened since he said that to change the analysis,” says Dov Zakheim, chief financial officer at the in the George W. Bush administration.
But the absence of major change has not come from lack of trying. As a new analysis by congressional auditors of major defense acquisition programs shows (see chart), despite the 2009 Weapons Systems Acquisition Reform Act and the Pentagon's two-plus versions of Better Buying Power policy mandates, the results of recent reforms have been paltry. While thehas noted that newer programs show progress, auditors there say it is still early days for them—and the rest of the acquisition portfolio is haunted by a backlog of legacy programs where problems are “baked in.”
To be sure, acquisition reform remains a widely held goal, no matter its success rate. Last month, House Armed Services Committee (HASC) Vice Chairman Mac Thornberry (R-Texas) was put in charge of a new study effort there, while Defense Department officials from acquisition czar Frank Kendall on down have made comments this year about boosting their efforts in light of long-term budget cuts.
Analysts and officials say the work must continue, because any progress is worthwhile. Yet, the Sisyphean task remains unlikely to provide enough proceeds to ward off the effects of the 2011 Budget Control Act and its annual sequestrations. Moreover, as lawmakers and officials are slowly acknowledging, it takes a change in culture in both government and industry to truly alter a course. The answer is not simply a new law that adds, cuts or changes regulations or program requirements.
“It really comes down to people, you know. We can pass all the legislation we want,” says Rep. Adam Smith (Wash.), the ranking HASC Democrat. “One of the greatest challenges . . . is getting the incentives right so that the men and women who work on this have the proper incentives to be innovative, to find the way to do the thing that's most cost-effective.”
Of course, new incentives must be aimed at the right goals. According to several testimonies at a HASC hearing in November, part of today's problem is that there is a raft of individual, competing incentives that lead to poor outcomes for taxpayers and combatants. “Many of the problems of the acquisition system are really the result of unintended consequences of a very Byzantine and, at times, outright contradictory set of laws and regulations rather than outright malice or malfeasance on the part of the people,” says Pierre Chao, a defense acquisition expert and senior associate at the Center for International and Strategic Studies. Nevertheless, each was passed or implemented for good reasons at the time.
“There's no point in blaming anyone; we are where we are,” agrees Zakheim.
For instance, contracting officers lately have come to favor lowest-priced, technically acceptable awards because they best guard against seemingly omnipresent bid-protest threats, which can mar their federal careers and inhibit raises and promotions. In industry, meanwhile, companies often overpromise on cost, schedule and new-technology capability to beat the competition to program awards; and then they and their lobbyists rush to push the program into production to cement it as a revenue stream and to begin finally making a profit from it.
Besides, cross-currents exist elsewhere, in structural ways that cannot easily be fixed legislatively. “I'm trying to do a decade-long program with program managers that rotate over a couple of years, with oversight by a Congress that has two- and six-year cycles, being executed by companies that have quarterly performance metrics that they're trying to match,” Chao observes. “The system is set up . . . to lie to itself.”
Taxpayers can expect proposals to start appearing as early as next year. Thornberry's study effort could result in HASC provisions being passed as part of the House's fiscal 2015 defense authorization bill, which is likely to be marked up in the spring.