DepSecDef Carter’s Defense Of Better Buying Power Misses The Mark

Every senior defense official, in or out of uniform, is opposed to the way sequestration is forcing the Pentagon to take mandatory spending reductions. In fiscal year (FY) 2013 the Department of Defense used unobligated balances and a variety of accounting “gimmicks” to reduce the real budget cuts to $37 billion. If sequestration holds for FY 2014, the Pentagon will have to absorb a $52 billion budget hit. This means that the Navy will be forced to delay or cancel as many as half its planned maintenance availabilities for surface combatants. The Air Force could be required to ground up to a third of its combat-coded tactical fighter wings for lack of flying hours, maintenance dollars and range time. The Acting Secretary of the Air Force, Eric Fanning reported that even this early in the ten year process, sequestration is already affecting pilot retention. Despite offers of hefty bonuses that could reach $250,000 for a ten year reenlistment, trained Air Force pilots are leaving the service. The reason is a lack of opportunity to fly as budget cuts force the Air Force to reduce flying hours and even ground entire squadrons for months at a time.

In response to this situation, the outgoing Deputy Secretary of Defense, Dr. Ashton Carter, published an editorial in DefenseOne, under the heading “Manage Defense Spending Through ‘Better Buying Power,’ Not Sequestration.” According to Carter, Better Buying Power (BBP), a reform initiative he began as the Under Secretary of Defense for Acquisition, Logistics and Technology (AT&L), was intended to make the Pentagon more efficient in the ways it annually spent some $400 billion on goods and services. BPP focused on five major reforms. First, make affordability a primary requirement for acquisition programs. Second, encourage industry to be more productive and innovative by tying their profits to performance. Third, promote real competition: head-to-head competition where there was more than one supplier, and competition for profit via contract structure where there was a sole supplier. Fourth, improve the training and professionalism of DoD’s acquisition corps, particularly in the acquisition of services. Finally, reduce nonproductive processes and bureaucracy in the government as well as in industry.

A second version of BBP, dubbed 2.0, made a few changes to the basic program but generally reaffirmed its basic tenets. In some ways BBP 2.0 actually takes a step backwards. BBP 2.0 fails to do anything substantive about the burdens the acquisition system puts on private industry. For example, the new memo deleted the directive in BBP 1.0 to eliminate requirements imposed on industry where costs outweigh benefits. Nor does it restrain the drive by acquisition officials to impose additional burdens on those private companies seeking to sell critical commercial items to DoD. Dr. Carter’s claims of an improved industry-government relationship notwithstanding, most knowledgeable observers believe that this relationship has never been worse.

Dr. Carter stressed the value of increased competition among private companies for contracts as a means of reducing costs in defense programs. His article claims a number of successes for BBP: a $2 billion reduction in the projected cost of the Navy’s SSBN-X fleet, $300 million from the cost of the Arleigh Burke DDG program, unspecified savings on a $2.7 billion Army ammunition purchase and cost reductions for the Air Force’s new long-range bomber, a system just beginning development. However, when you consider the net annual savings from these efforts against the $52 billion bill for sequestration in FY 2014 alone, they do not amount to much.

What Dr. Carter and his successor at AT&L, Frank Kendall, fail to appreciate is that the only way to achieve real and substantial near-term savings in acquisition with which to offset sequestration’s impact is by reducing the burden on the system of unnecessary, outmoded and excessively costly regulations, policies and procedures. On November 8, the Lexington Institute sponsored a non-partisan forum on Capitol Hill to address ways of reducing the Pentagon’s overhead costs. There was general agreement by nearly a dozen speakers that cutting reporting requirements, audits, contracting paperwork, data calls, and some testing requirements could save tens of billions of dollars annually. Add to these steps taking measures such as reopening the so called A-76 competitions between public sector facilities and private companies for maintenance and support work and expanding performance-based logistics contracts, and the savings could go a long way towards addressing the problem of sequestration. Moreover, it would do so without requiring the reduction of a single warplane, ship or tank.

It is understandable that Dr. Carter wishes to protect his signature achievement as Under Secretary. Unquestionably, there is value over the long-term in a number of the tenets of BBP. However, for the near-term the only way to extract significant savings from Pentagon operations is by reducing the enormous overhead burden that increases the costs of all defense goods and services by as much as 20 percent.