Why is it so unbelievably difficult to reform the Department of Defense’s (DoD) acquisition system? There have been perhaps a dozen major Pentagon reform initiatives over the past several decades. Only a few have demonstrated any staying power much less ability to improve the system’s performance and reduce costs. The most recent effort, Better Buying Power (BBP), is already in its third iteration. While the Government Accountability Office reported last year some $24 billion in “anticipated savings” due to the application of BBP’s should-cost methodology, there has been little evidence of progress in most other areas targeted. For example, the number of contracts awarded based on a full and open competition has actually declined over the past couple of years. The lack of progress is particularly troubling in view of the squeeze being put on defense spending by the 2011 Budget Control Act.
There has been a lot of hope and anticipation that the new Secretary of Defense, Dr. Ashton Carter, will be able to grab DoD’s dysfunctional acquisition system by the neck and shake it out. Carter was formerly both the Deputy Secretary of Defense and the Pentagon’s chief acquisition official. Some have characterized Secretary Carter along with current Deputy Secretary Robert Work and Under Secretary for AT&L Frank Kendall as the Pentagon’s acquisition “dream team.” This sense of optimism has been reinforced by the presence in Congress of reform-minded legislators, most notably, HASC Chairman, Mac Thornberry.
The problem with this scenario is that it is about making improvements to an acquisition system that is increasingly out of synch with the realities of a changing industrial and technological world. The current acquisition system is the product of the industrial mobilization that began in the run up to World War Two and was reinforced by the demands of the Cold War. Most acquisition reform proposals, including BBP, make no more sense than putting fuel injection on a 1940’s vintage car.
Here are four reasons why the usual approach to acquisition reform won’t work.
An oversized, inefficient and uncompetitive organic industrial base. The public or organic defense industrial base is an artifact of a bygone era. DoD has proposed shuttering a number of facilities. In a period of tightening defense budgets, laws that reserve 50 percent of depot maintenance dollars for the depots and logistics centers or that protect them from competition for work with each other or the private sector are counterproductive. Successful government facilities have been able to partner with the private sector and in a number of cases, rely on their counterparts to manage their supply chains.
A shrinking class of defense-oriented private companies. The consolidation among private sector defense companies that began after the last defense budget downturn in the 1990s resulted in an environment in which two or three firms dominate the development and production of virtually all major platforms and weapons systems. It makes no sense for Pentagon leaders to treat the defense and aerospace sector like a free market. We have today, or shortly will have, a de-facto arsenal system.
The growing importance of commercial goods and services to defense. Not that long ago, the U.S. defense industrial sector was the world’s leader in militarily-relevant technologies, with a long list of innovations, from nuclear power and lasers to the Internet and GPS, the result of defense R&D. That is no longer the case. DoD wants to pull advanced technologies out of the commercial world but wants to do so using outdated, cumbersome, cost-imposing rules and regulations. Try getting certified cost and pricing data from Microsoft or requiring access to Apple or Google’s intellectual property (IP). By the way, a number of these major defense companies such as Boeing, General Dynamics, United Technologies and Textron have significant commercial operations too and want to protect those franchises against unfair government demands for information, IP or concessionary pricing.
The globalization of the defense marketplace. Defense leaders have been sounding a warning that the United States is in danger of losing its technological superiority to prospective adversaries. More significant, the Pentagon faces competition from friends and allies with advanced technologies. There’s also the reality that even the U.S. defense market isn’t big enough to support all the players. Yet we still have export laws and Buy America provisions that hamper access to available markets and world class technologies.
Conventional approaches to acquisition reform are like driving a car while looking in the rearview mirror. It has little to do with navigating the road ahead or avoiding any obstacles to forward progress. The reality is that acquisition reform today is about trying to fix a system that isn’t just broken but increasingly irrelevant.
A modern defense acquisition system is one that gets over its fixations with an industrial mobilization model and government as the driving force in the marketplace. It would make more extensive use of proven commercial approaches such as performance-based logistics (PBL) in procurement and life cycle support. The British Ministry of Defence has a successful 25-year-long PBL-based contract with Boeing for the sustainment of that government’s Chinook helicopters. This is an example of breaking with outdated approaches to defense acquisition. A modern acquisition system would integrate the public, private, commercial and global defense industrial bases.
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