Christine Fox’s Speech: Defense Acquisition Reform

This speech was given by Christine Fox at the Lexington Institute’s Capitol Hill Defense Acquisition Reform event on June 24, 2015.

Thank you so much for the invitation to join you today and to share my thoughts on this critically important issue.  It is imperative that we continue to advance our nation’s technological capabilities quickly, our potential adversaries are moving very fast.

While I know the subject of today’s event is the important work of Acquisition Reform, I must say that the biggest challenge facing our nation and the Defense Department today is the budget, both in terms of the level and the uncertainty that the Department is living under.  The Department needs predictability to plan an adequate budget to develop new capabilities.  If you have not read it, I commend to you Dave McNicol’s work on the effects of the funding climate on major defense acquisition programs.  In it he looked for correlations between acquisition policies and program performance. He found very little correlation. But, he looked harder and found a very significant correlation between cost and schedule growth and budget decreases. The Department’s tendency to “slip and slide” programs during budget crunches causes significant cost overruns and schedule delays.

But as we also know, and as we have been discussing for a very long time, we need a change to the process by which we acquire new technologies.  The proposed legislation has some very big ideas for acquisition.  These ideas both give me hope and give me pause.

On the hope side, I am hopeful and enthusiastic about all of the goals of the legislation.

A larger role for the uniform services has been discussed for a long time and is included in the proposed legislation. Better partnering between the uniform and civilian sides of DoD can only help improve acquisition.  We need more discussion of the interrelationship between requirements, cost, and schedule throughout the process.

I’m also supportive of the goal of more accountability and different incentives and tour lengths for program managers.  Right now the incentive for a program manager is to meet the next milestone, but we need to push incentives beyond just reaching the next milestone. We need incentives that would support program managers who stand up and say “it’s not ready to go to the next milestone,” or maybe “it’s never going to be ready,” or even “we don’t need it anymore.”  PMs should be recognized for acting in the best interests of the public.

The proposed legislation also calls for a much-needed review of the statutory and regulatory certifications that have built up over last 6-8 years.  The Department is bogged down is these certifications, many of which do not add value. Congress must be an active partner in this review.

Staying the course and rebuilding acquisition expertise in the Department is another critically important goal.  We need people with the experience and confidence to stand up to industry when necessary and also stand up internally to the people who want more than they can reasonably achieve.  Such expertise should include a depth of experience, knowledge of best practices, and relationships throughout the DoD, industry, and on the Hill. DoD has begun the process of rebuilding this expertise but much more is needed.

And finally, the legislation is right, in my view, to support the Department in gaining better access to non-traditional and commercial contractors.  The Secretary and this bill rightly push the Department to lower the barriers to these new partnerships and increase the Department’s access to innovative solutions.

So there are many good goals with this legislation, but as I said in my introduction, I also have some worries.  First, and most significantly, I believe it is important for the Secretary of Defense to have responsibility and oversight for the major defense acquisition programs.  This is in part because the Services are incentivized to be optimistic. I have seen it over and over.  People in the Services want capability and, of course, they face incredible operational challenges.  They are able to convince themselves they can have their program for less than anybody would have ever predicted, and sooner than anybody would have ever thought, so…they think “let’s just put that program in the budget and it will all turn out fine.”  But it doesn’t.

OSD can and should push back.  The Weapon Systems Acquisition Reform Act of 2009, requiring independent cost estimates from CAPE, has made a real difference in this respect. That difference was enabled by the Undersecretary of Defense (AT&L) and the Secretary himself. Taking the Secretary and the Undersecretary out of the loop has the risk of rolling back some of the recent progress we have seen.  There have been no recent Nunn-McCurdy’s and the GAO has reported that we are making good progress – but it has taken years to get there.  These things do not move quickly.

Another item that gives me some pause are the fines associated with cost overruns.  At first blush, I admit that I thought the idea of fines was wonderful—I see why it was included in the legislation.  But there are worries.  When you first put a program in the budget, you don’t get the fine.  There is nothing immediate because there is no immediate cost overrun.  And people will always believe that their program will be different.

In addition, the fines themselves are not all that significant.  The fine is only 3% of the overrun – an overrun the PM won’t believe will happen.  And what is even more difficult is that the Department would be taking the fines from the Services as punishment when they still need the capability.

Finally, we need a process that recognizes and encourages jointness.  The legislation keeps joint programs at the OSD-level, but not service specific programs.  With this structure, who will ensure interoperability among the programs?  Also, the Services are not known for identifying commonalities and pursuing cost savings between them. These opportunities are often not apparent until the Services come together and are in the room with OSD. The Services also gain from partnership in sharing best practices in contracting and in planning for better operating and support costs.

So now there will be a debate, which is great.  That serious acquisition reform has the attention of Congress is exciting.  I believe that we have made a lot of progress with acquisition reform over the past few years and I would not want to risk throwing out the good things that we have done, but more progress is certainly needed.  The goals of this bill are exciting and that gives us reason for hope, but there are some specifics that worry me – a lot, frankly – and the conversations over the next couple of months are critically important.

The Honorable Christine Fox recently served as Acting Deputy Secretary of Defense.