Improving Defense Efficiency Means Changing DoD’s Culture

The Pentagon’s drive to improve acquisition efficiency is in full swing. Senior defense officials from the Secretary on down have adopted the mantra of efficiency as wholeheartedly as their predecessors did the slogan of transformation. Unfortunately, this attempt at reform is as likely to fail as all those that have come before.

Without a major change in the Department of Defense’s own culture, the effort to make the acquisition system more efficient is more likely than not to enhance inefficiency. In particular, it will almost certainly engender a more combative relationship between DoD and the private sector. The defense industry has repeatedly shown itself willing to morph itself to meet changes in the way that the Pentagon decides to conduct itself. Whether it is fixed price versus cost plus, the use of commercial items, basic ordering agreements, small business and minority set aside, performance-based logistics, contractor logistics support arrangements or SETA support, the private sector has responded to every invention and notion the bureaucrats have devised and continued to support the warfighters. Just look at what has been accomplished by the Rapid Equipping Force in concert with the private sector to supply the troops in Afghanistan and Iraq with the personal items, basic equipment and weapons to fight a new type of conflict.

The private defense industrial base has always been very good at responding to changes in demand signals from its one and only customer. The Navy wanted to expand access to non-traditional shipyards in the development and production of what was supposed to be a less expensive class of small vessels, the Littoral Combat Ship (LCS). So the two competing prime contractors, Lockheed Martin and General Dynamics, went out and found two commercial yards, Marinette Marine and Austel, respectively, and worked with them to produce the new ships. Then, when the Navy changed its mind about the requirements for the LCS — thereby raising the vessels’ costs astronomically — the two primes helped their new partners learn the ropes of building warships “by the book.”

The private sector is already changing in response to the signals from the Office of the Secretary of Defense. In response to government concerns that defense companies were both helping to develop and evaluate proposals for new weapons systems and also bidding on the proposals, Northrop Grumman went out and sold the unit that had been providing such analytic support (its TASC subsidiary). Other companies have done the same.

The major stumbling blocks facing DoD are not the attitudes or behavior of the private sector but those historically exhibited by the government. DoD has shown no willingness to reduce its need for control not only over all aspects of the acquisition process but also over requirements generation, budgeting, testing and evaluation. Secretary Gates talked about the 80 percent solution and what did the Army do but develop a set of requirements for its new Ground Combat Vehicle that asked for a 110 percent response. Yes, the Army leadership pulled back the RFP supposedly when its internal evaluation raised questions about the service’s requirements but in truth it was because the size, weight and cost of the vehicles proposed surprised them. One is reminded of the old saw that an elephant is nothing more than a mouse built to government specifications.

Look at the problem with performance-based logistics (PBL). Despite the demonstrated fact that PBL-based arrangements save the government money and increase the availability of equipment to the warfighter, a number of DoD components, but particularly the Air Force, have been engaged in a war to bring back work inside the public industrial base. One major reason is that PBL-arrangements like multi-year contracts, lock the government into a must pay bill. Long-term PBL contracts allow the private companies to assume much of the upfront risk with the promise of greater returns later. But multi-year contracts also limit the government’s ability to move money around freely. That is why program managers dislike them.

Unfortunately, there is no evidence from the Pentagon’s efficiency initiatives or statements by senior officials that DoD is willing to reduce its desire for absolute control over the acquisition process or contracting activities. It still seems to want the degree of freedom it has always had to add requirements, move money around, change production rates, etc. But, at the same time, it now wants increases in efficiency, reduced costs, high productivity and adherence to schedules. Look at what Secretary Gates and Under Secretary Dr. Ashton Carter have been saying. They do not understand why the defense industry does not have productivity of the consumer electronics sector. Really? Perhaps it is because the consumer does not get a chance to determine the technologies involved, the production volumes, the reliability rates or any of the other myriad of factors that DoD (and Congress when it comes to authorizing and appropriating funds) gets to define when they let a contract. Nevertheless, without oversight and control, the consumer electronics industry has always been several generations ahead of the products available to the Pentagon. The truth is that our soldiers in the field today could have low-cost, highly reliable, web-capable, cell phone-based communications systems but for the restrictions placed on such systems for security reasons by the NSA. Try doing that in the private sector.

The inevitable result will be an assault on prices and profits. This is already the case with programs such as the KC-X tanker in which the contractors must bid a firm, fixed-price for a decade long development effort. Since the government has not promised they will not change requirements, alter projected funding profiles or jigger production rates, all the risk is on the contractor’s side.

The current effort at reforming the way DoD buys equipment and services and maintains stuff is likely to fail. The DoD acquisition system will not be more efficient until the chief culprit, the government bureaucracy, is reigned in. What is needed here is reform of the crazy acquisition culture in DoD. But Under Secretary Carter said recently that he does not want to change the culture. So, in Dr. Carter’s case the solution to the problem is simple: “physician” heal thyself.