Acquisition Reform Redux

Every year the NDAA contains acquisition system reforms, mostly adding complexity to an already inefficient system.  Good reforms occurred last year. Complementing reform proposals are included in this year’s House and Senate bills, and they are good.  The package includes so much good that the Administration has vowed to veto the bill if the changes prevail in conference.

Cost overruns in the current major acquisition programs have continued to grow over the past decade, totaling over $450 billion.  This is about 6 years of major acquisition funding.  Yet this is accepted as routine business.

Program milestones continue to slide at a pace of about two months every year delaying availability to operational forces.

Materiel readiness has continued to decay to low levels unheard of since the 1970s.  Maintainers have been reported searching museums for spare parts.

Acquisition production has been reduced to pay for personnel benefits , resulting in inadequate replacement production. Combined with inadequate cost control, less than half the aircraft needed to maintain forces are being procured. The result is an aging and declining force DoD wide.

Competition has been eliminated in many fields, the most worrisome being the planned shutdown of competitive fighter aircraft production. Others include reduction of the supplier base in shipbuilding.

The second carrier in the class will have to wait two years for a radar that has not started development.

Air Force incantations about the realism of  $550 million production cost ceiling for the B-21 defy a reality check when a tanker derived from a civilian airliner costs over $250 million.

Positive events have also happened:

Competition has been introduced into space launches

Competition resulted in a fixed price contract for the KC-46 tanker below expectations.  Subsequent overruns have been absorbed by the contractor belying the bid low and get-even on changes philosophy so prevalent in cost plus contracts.

A working anti-missile system has been deployed on ships.

The cost ceiling was set for the Ohio Replacement Program by the Defense Acquisition Executive.  It has a reasonable chance of being achieved if efficient production scheduling occurs.

Excessive cost for the Joint Light Tactical Vehicle resulted in reconsideration of requirements and subsequent competitive contract award well below expectations. 

The proposed legislation fails to remove all the legally required process steps.  Many of these have no value and are merely process obstacles. A good first step would be the elimination of the Joint Requirements Oversight Council (JROC) and leave this to the Service Chiefs. All others should be eliminated by Congress, then focusing on results, not process.  The Congress has little standing to tell others how to run efficiently and should concentrate on the excellent annual GAO reports regarding acquisition programs.  Hearings should focus on problem programs and successful programs.

A major issue is the division of the current USD(AT&L) responsibilities into two offices.  One would deal with technology development and maintaining technological superiority, the other with production and logistics.  This is a reversion to the last successful acquisition system that produced the Reagan force buildup. Each Service should have an Assistant Secretary for technology and one for production, logistics and force modernization.  No new positions are needed.  Each Service succeeded in producing new systems in quantity that are still in use. In the Navy case, these were produced on time and under budget. The Air Force was very successful in introducing competition into fighter engine production and the hi/lo fighter mix. The proposed changes should be supported despite the threat of a veto protecting bureaucratic turf.

The NDAA bills include mandatory personnel reductions without workload reductions. This will only lead to an inefficient system becoming more inefficient.  The changes must include reductions in layering, command elimination and process simplification. Navy started in this direction by eliminating the Navy Materiel Command in the 1980s.  Performance improved as the systems commanders realized they could not duck responsibility.  Other Services should do the same thing.  All processes should be reviewed for simplification or elimination.  It should also be recognized that new responsibilities have developed on health care, intelligence, missile defense and cyber warfare while logistics support activities have declined due to shrinking forces. 

Overall the proposed changes are in the right direction, provided all legally required process steps are removed.  Legislation should make clear what information and demonstration is expected and what should be evaluated at each milestone, but leave the details up to Acquisition Executives, not lawyers attempting to comply with a law that does not fit the project. 

Splitting the functions of the USD (AT&L) is a very sound concept proved in operation during the 1980s. Acquisition has not had an effective voice at the budget table resulting in force declines and significant readiness impairment.  New challenges exist around the world. The organization needs to be prepared to defeat these technology, force level, and readiness challenges.  After all, technology and forces are key elements in making strategy implementable.

Everett Pyatt was Assistant Secretary of Navy (Shipbuilding and Logistics) from 1984 to 1989.