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How To Make Better Buying Power Better

Reforming the U.S. military’s acquisition system has been a hot issue since Congress replaced the Continental Army’s first Quartermaster General in 1777. Despite near-continuous efforts to reduce waste, accelerate schedules and control costs, these efforts have rarely achieved their intended results. According to a recent study by the Institute for Defense Analysis, growth in the cost of DoD’s Major Defense Acquisition Programs since 1970 ranged between 20 percent to more than 60 percent. By DoD’s own calculations, new weapon systems are fielded about 20 percent later than originally planned.

Many factors drive delays and expense into DoD’s acquisition programs. Weapons manufacturers are incentivized to submit optimistic cost and schedule estimates to win major contracts. Service officials agree with these projections to protect their acquisition budgets. And weapon system program managers, caught in the middle, want to avoid disruption stemming from reconciling optimistic cost estimates with unrealistic performance requirements after their programs have started.

A recent DoD report suggests that its Better Buying Power (BPP) initiative reduced cost growth of major new acquisition programs to less than 10 percent over the last decade as measured at their “Milestone B” points when capability requirements and cost baselines are set. While this may be true, this reduction can be attributed to the fact that more than a dozen programs reached Milestone B in 2005 compared to only five programs in 2014. It makes sense that with fewer programs it would be easier to better manage cost growth.

While there is no silver bullet that will fix problems plaguing DoD’s acquisition system, a few factors significantly impact acquisition program costs and schedules. Specifically, reforms should address how DoD defines requirements for new capabilities, conducts competitions for program awards to industry, and incentivizes its senior acquisition officials. While Better Buying Power include these factors in its focus areas, BBP needs to drive more fundamental changes in all three to deliver on its promise.

Balance Requirements With Budgets And Schedules

Establishing overly ambitious requirements for new capabilities is often the “original sin” of programs that became examples of acquisition malpractice. Since the Goldwater-Nichols reforms of the 1980s, the uniformed side of DoD, led by the Joint Requirements Oversight Council (JROC), has been responsible for validating requirements for new military systems. These requirements are passed to the civilian-led acquisition community, which works with industry to design and build new weapon systems.

Originally, requirements such as speed, range, and payload capacity for new capabilities were largely determined in isolation from resource constraints. Today, the BPP directs the services to establish targets for when a new system is needed and how much they can afford to spend before they settle on the system’s specific requirements. While this is laudable, military staffs responsible for defining a weapon system’s requirements often lack the ability to accurately estimate how changes to its payloads, data bandwidth needs, and other such variables would impact its development schedule and eventual cost. Those skills largely reside in the civilian-led acquisition community and defense industry.

Bringing these communities together would help ensure DoD decision-makers are fully informed on new program costs and schedules. One approach would be to create a single, unified chain of command within DoD that oversees its requirements definition and acquisition processes – similar to systems used by the Defense Ministries of the United Kingdom and Japan.

Shifting from today’s “one size fits all” requirements process to a two-tiered approach could also reduce the two years or more that are now needed to set requirements for some new weapon systems. DoD could continue to use a deliberate requirements process for major acquisitions such as aircraft, ships, and combat vehicles that will have long service lives and substantial sustainment needs. For smaller capabilities such as future munitions, sensors, radios, or electronic warfare systems, a requirements definition process based on experimentation and competitive prototyping may suffice. This could save considerable time and reduce acquisition program costs. Current laws would permit DoD to adopt such a two-tiered approach.

The Limitations Of Competition

DoD now relies heavily on competitions for new program awards to encourage prospective manufacturers to reduce their cost estimates. Unfortunately, decades of mergers and increased specialization has created a situation where few manufacturers are now able to develop and build major new capabilities such as aircraft carriers, combat aircraft and rocket engines. For example, while the Navy builds submarines at two shipyards, in reality each shipyard only builds half of each submarine. Increasingly, specialization is also having an impact on programs for smaller capabilities such as pumps, switches, and cables that use unique materials or have to meet military specifications that make them too expensive to have commercial applications. These realities can reduce incentives for defense industry to cut costs and gain efficiencies.

“Promoting effective competition” is one of Better Buying Power’s seven focus areas. Some of the more creative approaches prescribed by BBP, such as buying engines or radars through competitive bids and then supplying them to the single manufacturer able to build a platform, should help DoD to achieve this goal. However, competition won’t be possible when only one manufacturer can supply a particular system. For these cases, DoD will have to accept that it will not be able to rely on the crutch of competitive pressure to induce vendors invest their own resources in research and development, develop new proficiencies needed for future weapon systems, and reduce costs.

Stop The Churn; Create incentives

Reduced competition will increase the need to ensure that government acquisition program managers provide the oversight and leadership necessary to achieve desired cost, performance, and schedule goals. This will be hard to do given the churn in DoD’s acquisition workforce. On average, it takes 10 to 15 years to develop and field a major new weapon system. Military officers charged with managing these programs can expect to be in their jobs for about two or three years before receiving their next assignments, and civilian acquisition officials are changed out almost as frequently.

As a result, damage to a program caused by the bad choices or inattention of program managers will often not become evident until after they have transitioned to their next jobs. Increasing the tenure of acquisition program managers and executives to four to six years would help incentivize them to better manage their programs. Longer tour lengths would also give them sufficient time to pursue cost and schedule initiatives that take several years to implement and then see the results of their efforts.

Accept Reality

These changes will not be risk free. Eliminating the wall between requirements and acquisition would risk subordinating warfighter needs to budget constraints. Increasing DoD’s reliance on single sources for programs risks losing control over costs and schedules. And lengthening the term of acquisition officials risks damaging career paths and reducing the infusion of fresh ideas into the acquisition process.

Our proposed changes, however, reflect an acceptance of reality. Potential weapon system requirements must be weighed against available resources so America’s warfighters can get new capabilities on time and in acceptable quantities, rather than later or even never. Relying on competition when bidders aren’t on a level playing field will increase the likelihood that less capable vendors will underbid to win projects and then “get well” with cost overruns later in the program. And reassigning acquisition program managers after only a couple budget cycles prevents them from exerting ownership over their programs and being properly rewarded—or reprimanded—for their performance. Acquisition reforms that ignore these realities risk becoming just another waypoint in a long line of initiatives that have failed to live up to their promise.

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