Lowest Bidder Defense Service Contracts Create A Race To The Bottom

Everyone likes to save money if they can. That is why many people go to warehouse stores, comparison shop, search on EBay for bargains, visit thrift stores, take advantage of two-for-one sales and get multiple bids from contractors. When it comes to buying commodity items or hiring someone to do simple tasks it makes sense to go with the lowest price, so long as the quality of the goods are about the same or the capabilities of the contractors are adequate. However, as I have experienced with my cable provider, the skill level of the service personnel they send out can vary greatly and mean the difference between a quick resolution of the problem or endless headaches.

This kind of problem might be acceptable for routine services or activities. But would you really go with the lowest cost product or service provider if your safety or even your life was on the line? If you needed major surgery would you go with the lowest cost provider so long as he or she had an MD? Experience and skill can count for a lot and most people are willing to pay extra for those qualities when the stakes are high enough.

The stakes are usually high when it comes to national security. You would think that if any organization would be interested in buying the services of professionals with the best skills and greatest experience it would be the Pentagon. Unfortunately, over the past few years, in its zeal to reform the acquisition process and reduce costs, the Department of Defense (DoD) has instituted contracting policies that virtually guarantee that national security will suffer. More and more contracts, particularly for IT and cyber services but in other areas as well, are being written so that the winner is the lowest cost bidder who meets minimum technical qualifications. In addition, under the banner of acquisition reform, DoD is pushing for increased competitions based on shorter contract periods. As a result, winning contractors have little or no time in which to recoup their costs and generate a profit, take advantage of the learning curve or grow a cadre of more experienced personnel.

The consequences of this approach to acquisition reform are simple and stark. Defense contractors can no longer compete by offering the best product and most capable people if it means bidding a higher price. They cannot afford to grow and retain the best personnel if they become expensive. So defense companies are forced to recruit younger, less skilled but cheaper people with the minimum qualifications. The result is a “brain drain.” This phenomenon is most severe in the IT and cyber sectors where there is growing commercial demand, particularly for highly skilled and experienced workers.

The Pentagon tells anyone who will listen that the future of warfare is all about IT and cyber. There has been repeated warning from senior government officials about the danger to the United States of a cyber “Pearl Harbor,” an attack that takes down major national infrastructure or networks such as the electric power grid. Shouldn’t the government, in general, and DoD, in particular, want to create, maintain and support the world’s best IT and cyber workforce in the defense companies? Yet, the perverse incentive structure in DoD contracts is doing exactly the opposite.

DoD’s acquisition reform policies are encouraging a race to the bottom when it comes to defense IT and cyber. It is a form of self-imposed disarmament. As a result, the United States is more likely to suffer a cyber “Pearl Harbor” and less likely to win future conflicts.