Commandant Wants To Be More Involved in Acquisition
President Eisenhower warned about the "military-industrial
complex" four decades ago. Today, however, the United States
should worry about not having one, said Gen. James L. Jones, commandant
of the Marine Corps.
"One thing I worry about is the lack of a military-industrial
complex that is diverse and robust enough," Jones told a recent
gathering of defense industry executives.
Another source of concern for Jones is the current Pentagon acquisition
process for new weapon systems, which he criticized for not allowing
more participation by the service military chiefs. That is particularly
a sore subject for Jones, who has had to testify to Congress about
the safety problems plaguing the V-22 Osprey aircraft.
The service chiefs typically are involved in setting the requirements
for weapon systems, but often stay out of the acquisition process,
which is overseen by civilian leaders and military program managers.
In the case of the V-22, Jones said he would have preferred to
have been more involved. Early participation in the acquisition
process would make sense, he said, "if I am going to be held
accountable when it [the program] goes bad." In retrospect,
Jones also said he wished he could have worked closer with the V-22
contractors, Bell Helicopter and Boeing. "I am critiquing myself
for not having reached out proactively to industry before it was
too late," said Jones.
Jones’ counterpart in the Army, Gen. Eric K. Shinseki, appears
to share the commandant’s views on expanding the role of the
chiefs in the acquisition process. A senior Army acquisition official
said that Shinseki is "actively" involved in acquisition
Key to Procurement Reform: Demand Reasonable Prices
Cost should be, in most cases, the "most important" standard
used to evaluate a defense program, said David Oliver, acting defense
undersecretary for acquisition and technology.
In a speech to the Precision Strike Association, Oliver told industry
executives that they need to realize that cost should be, more often
than not, the number-one "key performance parameter."
Companies typically make products for a price that they think the
Defense Department will pay, "without any relation to the real
cost," Oliver said. That is bad news, he said, because oftentimes,
programs are not funded properly if the costs were not assessed
correctly. Making cost a "key performance parameter" in
most defense programs will do more for acquisition reform that any
other regulatory action, he said.
Speculation About JSF Future Boosts European Industry
Never-ending speculation about the long-term prospects of the U.S.
Joint Strike Fighter program has not helped efforts to try to sell
the aircraft to allied nations, said Tom Burbage, executive vice
president and general manager of Lockheed Martin’s Joint Strike
The timing of the Pentagon’s strategic program review has
not helped the Lockheed Martin marketing effort. "Yes, it does
hurt," Burbage told reporters in Washington, D.C. last month.
For nearly a decade, there have been extensive political and diplomatic
discussions about international participation in JSF. Now, "when
we get right to the point when the participation is about to happen,
we have a change in administration, a change in power and a big
review," he said. "It’s a difficult time. I think
the United Kingdom’s vote was very critical to the program.
Other countries probably are going to wait and see what kind of
an endorsement comes out of the new administration before they commit
any kind of significant funding to the program."
The bad news for Lockheed and the other JSF competitor, Boeing,
is that the uncertainty surrounding the U.S. government’s
commitment to JSF provides fresh ammunition to European competitors,
such as the Eurofighter and France’s Rafale, both of which
aggressively are courting international customers.
U.S. Shipbuilders Struggling in Global Market
The level of frustration is rising among U.S. shipbuilders. The
reason is twofold: the U.S. Navy shipbuilding budgets are declining,
and foreign shipyards are offering "much better deals,"
said Michael J. Brown, executive vice president of AMI International,
a naval analysis firm in Bremerton, Wash.
During a meeting of U.S. naval attachés and industrialists
in Washington, D.C. last month, one of the "hot issues"
was the lack of funding and personnel to support Navy international
programs, said Brown, who was in D.C. for the annual Navy League
Competing in the global market has become quite tough for U.S.
yards, because they don’t have the kind of government support
seen in Europe and Asia–where governments and shipyards work
in close partnerships to win contracts, said Brown. The U.S. government,
for example, would not broker a loan to sell a military vessel.
France, however, was able to close a deal with Chile for a ship
sale, where the French government guaranteed a loan for 100 percent
of the purchase, over 25 years, at a 2.5 percent interest rate.
"How can U.S. shipyards compete with that?" Brown asked.
"Europeans use whatever tactics they need to survive,"
he said. In Asia, China currently is the most formidable competitor
in the naval ship market.
Large-Deck Carriers Here to Stay
The ongoing Pentagon review of major defense programs will not,
in the near term, drastically affect the business of building aircraft
carriers for the U.S. Navy, said William P. Fricks, chairman and
chief executive officer of Newport News Shipbuilding.
The program review, which was directed by Defense Secretary Donald
Rumsfeld, is expected to recommend changes in the U.S. military
force structure and may cut some large programs, according to analysts.
Some speculated that aircraft carriers may be targeted for cutbacks.
"In the end, reason will prevail," Fricks told reporters
in Washington, D.C. Carrier-based naval aviation is not likely to
undergo a major revolution for at least a decade or two, he noted.
The review probably will recommend an "evolutionary" approach
to change. "I don’t see us making huge left and right
turns," said Fricks.
A shift toward smaller carriers is unlikely in the foreseeable
future, he said. The Navy already has studied the issue and determined
that it needs large-deck carriers to be able to run a military airport
at sea, given the size of today’s airplanes. These planes
can’t take off from small decks.
Ironic Twist in Bidding War for Newport News
How quickly can the U.S. shipbuilding industry realign itself? The
answer is about four weeks.
During a breakfast with reporters in Washington, D.C., on April
12, William P. Fricks, chairman and chief executive officer of Newport
News Shipbuilding, said he was "somewhat neutral" about
the acquisition of Litton Ingalls Shipbuilding by Northrop Grumman
Corporation. Ingalls makes surface combatants for the U.S. Navy.
Newport News makes nuclear-powered aircraft carriers and submarines.
"I don’t see the Litton/Northrop Grumman merger having
an impact" on Newport News Shipbuilding, Fricks said. "They
are not going to build nuclear subs. We are not going to build cruise
Fricks also hinted that Newport News could be competing in the
systems-integration role against large electronics houses, such
as Northrop Grumman. Newport News is seeking to establish itself
as a ship systems-integrator, with the introduction of a "carrier
About two weeks after Fricks made those remarks, General Dynamics
Corp., which owns the Electric Boat shipyard in Groton, Conn., announced
plans to take over Newport News Shipbuilding for $2.6 billion. Less
than two weeks after Newport News had agreed to be acquired by General
Dynamics, Northrop Grumman made a hostile matching offer, citing
concerns that a merger between Newport News and General Dynamics
would create an unhealthy monopoly.