In the wake of the terrorist attacks of September 11, the urgency
of transforming U.S. forces to prepare for 21st century warfare
became palpable. Indeed, the assaults on the World Trade Center
and the Pentagon, in many ways, changed the rules of war, and the
president responded with a focused, resolute call-to-arms to the
American people, informing them that fighting terrorism will not
be a short-term struggle.
For today’s generation of young adults, the war on terrorists
is likely to be the rough equivalent of what the Cold War was for
“baby-boomers.” But it will be characterized by a country
united in outrage and buttressed with worldwide support that has
only strengthened as a result of these attacks.
At press time, much was unknown. How would retaliation take place?
How would the Quadrennial Defense Review (QDR) and the budgets for
2002 and 2003 be affected? How would the new Office of Homeland
Security work with the Defense Department? And how would all of
this affect the defense industry?
Will the administration continue to support another round of base
closures? Will the new focus on homeland defense undercut the two-war
strategy? Should we lift the historic ban on the use of military
forces for domestic law enforcement? Are we prepared to surge the
production capacities of parts of the defense industrial base?
Before September 11, there was some doubt that Congress would approve
the additional $18.4 billion that President Bush requested for national
defense. But now it is certain that this amount and more will be
In fact, $20 billion of the $40 billion emergency supplemental
funding provided in the wake of the attacks will be allocated in
the 2002 appropriations bills. The $343.5 billion defense budget
requested before September 11 will serve as a floor—not a
ceiling—as Congress rushes to provide the men and women in
uniform with tools to confront the nation’s enemies during
the long struggle ahead.
Earlier, Defense Secretary Donald H. Rumsfeld was criticized roundly
by some elements within his own department, as well as by members
of Congress, for his handling of the military services and Capitol
Hill. Now, however, he looks almost prescient, because of a number
of studies that he chartered before beginning the QDR.
One of these studies, on crisis management, positioned him well
to confront the unexpected when it became reality. And, though he
may not have addressed dealing with the loosely affiliated terrorist
organizations known as al-Qaeda head-on, it is clear that by allocating
the department’s initial supplemental appropriation to intelligence
operations, he took precisely the correct first step toward engaging
an amorphous enemy.
Rumsfeld reviewed one topic that quickly will guide his dealings
with industry, and that is acquisition reform. Though there have
been more than 100 such studies since the department’s creation,
this secretary especially is committed to improving efficiencies.
He testified on Capitol Hill that the department should be able
to achieve a 5-percent savings, across the board, through management
improvements. Furthermore, he recommended that the president veto
the 2002 Defense Authorization Act if it contained provisions in
the House version of the bill, severely restricting competitive
sourcing of defense services.
Moreover, as a businessman who has surrounded himself with service
secretaries selected as much for their business acumen in the defense
industry as for their leadership skills, Rumsfeld clearly recognizes
that the future of national security requires not only an efficient
and properly funded infrastructure, but a capable and competitive
industrial base as well. He understands that if the war fighter
is to receive equipment and services at affordable prices, business
policies must be a priority. Burdensome regulations and laws that
either delay efficient procurement of equipment and services or
impose significant costs on the private sector, thus, are likely
to be changed.
As mentioned above, the administration sided with NDIA and other
industry groups in strongly opposing certain sections in the House’s
2002 Defense Authorization bill. For example, a provision of the
bill would have arbitrarily limited the number of full-time equivalent
positions that could be studied for potential conversion to private
sector performance. The department opposed such a provision, arguing
that limiting the number of positions eligible for study would undercut
its ability to take advantage of savings and efficiencies prevalent
in the private sector.
The Pentagon also objected to a provision mandating public-private
competition for all service contracts, including both new ones and
work currently being performed by the private sector. The department
said these provisions would have delayed the implementation of new
services and resulted in increased management costs upwards of $2
The Pentagon, in addition, fought a provision to remove the $10
million threshold for demonstrated savings in public-private competitions,
asserting that the proposal would not allow the department to take
advantage of savings greater than $10 million but less than 10 percent
of the value of the contract. Currently, the department may outsource
work if it demonstrates cost savings of 10 percent or $10 million.
The department further objected to a provision that it said would
impose increased and unnecessary requirements that federal contractors
report indirect costs and proprietary information. The department
said that these requirements would provide little or no value in
ensuring contract performance, noting that the language was not
clear as to who would pay the increased costs of these requirements.
Although the way ahead is far from clear, one thing that is sure
is that this administration is going to focus more sharply on the
industrial base. As has been noted in these pages previously, Rumsfeld
acknowledges that the decline in the defense industrial base is
a serious problem. This concern certainly was valid before September
11, but the events of that date have served only to heighten it.