Washington is drowning in studies. The Federal Government annually producers a blizzard of studies touting its successes, assessing its situation and minimizing its failures. There are lots of additional studies done annually by avatar organizations such as the GAO, CBO, CRS and FFRDCs intended to support the policymaking process or informing Congressional decisionmaking. Then there are the array of products put out by think tanks, foundations, management consulting firms, professional and business associations, special interest groups, polling organizations and academic institutions. There are so many studies, with so many conflicting views, that it is hard even for interested individuals to pay them much attention.
But I recently came across one such study worthy of consideration. Why? It was commissioned by a government agency, conducted by an organization closely tied to that agency and government funding, and produced startling conclusions with respect to the utility of that very sponsoring agency.
Under withering criticism for its inability to reduce the cost growth of major weapons programs despite having levied new burdensome regulations and reporting requirements on defense companies and hired tens of thousands of new auditors, contract specialists and managers, the Office of the Under Secretary for Acquisition, Technology and Logistics (AT&L) commissioned a study by the Institute for Defense Analyses (an FFRDC). The study was directed to determine whether changes in Department of Defense acquisition policy and processes have had any discernible effect on the growth of Program Acquisition Unit Cost (PAUC) of major defense acquisition programs. The PAUC is the total acquisition costs, including research and development (R&D), procurement and military construction funds, divided by the total number of planned test and operational platforms. So PAUC is the cost per platform. The study examined PAUC cost growth over a 45-year period encompassing five distinct acquisition “regimes” and several up and down turns in defense spending. The study’s findings are remarkable:
- There is a statistically significant association between PAUC growth and funding climate. When defense budgets are flush, there are fewer cases of programs exceeding their PAUC target. Conversely, for programs initiated in tight budgetary environments, the variance between predicted and actual PAUC was higher.
- There is no evidence that efforts to strengthen the acquisition process through the years have resulted in lower or higher PAUC growth. The evidence, at a minimum, suggests that the effects of changes in the acquisition process since its inauguration in the 1970s has not had a dominant effect on PAUC growth.
- The acquisition culture appears to have no significant effect on PAUC growth.
The Under Secretary of Defense for AT&L, Mr. Frank Kendall thought enough of the report to cite its conclusions and mention the author by name in recent testimony before the House Armed Services Committee:
After over 40 years of various cycles of acquisition reform, I’ve concluded that there is no single reform or even package of reforms that will dramatically change our outcomes. A recent study led by Dr. David McNichol at IDA found that the single biggest statistical correlator to production cost increases in weapons systems was the budget climate (tight or loose money) at the time the program was first baselined. Program cost overruns are much more pronounced if the program was initiated during periods of “tight” money, such as we are currently experiencing. Everything else we’ve ever done as “acquisition reform” seems to have had almost no discernable statistical impact on production cost growth.
As the stepfather of one of the most far reaching efforts at reforming defense acquisition, the Better Buying Power initiative, Mr. Kendall’s statement is to say the least stunning. If everything done in acquisition reform for decades, including all the new hoops Kendall himself created, have had no impact on production cost growth, then what is the point to the so-called reform efforts of the past six and half years? The IDA study suggests that current efforts to define “should cost” and “must cost” for new programs, the incessant demands for exquisite, detailed cost and pricing data, the continuing pressure on acquisition officials to compete programs and recent efforts to acquire commercial data rights and impose controls on independent R&D are all rather pointless.
But over the last six-plus years, AT&L has hired tens of thousands of new acquisition personnel. Also it was spending billions on workforce training. The Services also have been participating in this orgy of hiring. Companies doing business with DoD have had to hire their own additional acquisition specialists, if only to produce the data that the new government employees received and analyzed. If the IDA study is right, these are largely a waste of personnel and dollars.
The IDA study raises a much more profound question: why do we have an AT&L at all? Yes, we need program managers, scientists and engineers as well as some purchasing agents, a few contracting officers and a handful of auditors. But if the IDA study is right, most of what AT&L does, does not move the needle one iota. We could cut the organization by 80-90 percent tomorrow, save tens of billions of dollars in personnel and infrastructure costs, billions more in reduced spending by the private sector, and not see a change in PAUC. Now that would be acquisition reform.
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