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Weapons Procurement
Can the Pentagon Build ‘Affordable’ Weapon Systems?
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By Sandra I. Erwin
The average U.S. consumer can expect to buy a better computer or smart phone every year, for less than what he paid before. The Pentagon, alas, only gets raw deals.
“More has been costing more,” said the Defense Department’s top buyer Ashton Carter. “We need to reverse that trend and restore affordability to our programs.”
Carter’s comments last month came shortly after he unveiled yet another Defense Department “efficiency” campaign that seeks to trim 2 to 3 percent off the cost of military programs so that the savings can be applied to more pressing needs.
The specifics of how defense programs will be made less costly are still being parsed. At the nation’s largest defense companies, meanwhile, executives have seen the writing on the wall for some time, and already have launched austerity programs.
“We are going to challenge every expense,” said Lockheed Martin’s Chief Executive Officer Robert Stevens, at a news conference in June. In anticipation of tighter spending at the Defense Department, Lockheed’s management will be “steering the company in a different direction,” Stevens said. “We are not going to look at the world the same way going forward as we looked at the world in the past.”
Just weeks before that speech, Lockheed executives had met with senior Defense Department and Air Force acquisition officials to announce the company would be overhauling the way it designs and builds military systems in order to give the government better value for its dollar. The initiative is called “engineering for affordability,” said Ray O. Johnson, Lockheed’s senior vice president and chief technology officer.
In an industry accustomed to unrestrained spending, frugality can be a culture shock.
After a decade of growing defense budgets, engineers at Lockheed and many other defense suppliers have not had to be concerned about the cost implications of the systems they designed.
Now, they will have to channel Dr. Ernest Rutherford, the father of nuclear physics, who more than century ago gathered his aides as his lab was running low on funds and told them, “We’ve got no money, so we’ve got to think.”
American engineers also will have to begin to think more like their Indian counterparts, who have thrived in many industries because of their ability to bring business savvy into the products they design.
For the past three years, Lockheed has been working with India’s science and technology government agencies to help train U.S. engineers on how to develop “innovative and affordable solutions,” said Lockheed spokesman Dean Acosta. “They work with scarce resources, combine it with a business model to deliver high value at low cost.”
Cost-consciousness has not been a guiding principle for Lockheed’s 70,000 engineers, so the company will have to retrain them, said Jeff Wilcox, vice president of corporate engineering.
One immediate change will be the increased use of modeling and simulation so that engineers can easily calculate “performance tradeoffs,” such as how much money can be saved by altering the technical specs of a system, Wilcox said in an interview.
For this effort to yield results, contractor engineers will have to work more closely with government customers in the early phases of a program, Wilcox said. “Eighty-five percent of the cost of a system is architected early on” so it’s important for the engineers to get involved in that initial discussion. “We’re training them to work closely with manufacturing,” so they can develop weapon systems that can ultimately be produced without having to undergo costly redesigns.
Wilcox said it is still too early to forecast how much money these reforms will save the Defense Department. Company officials said they need new “metrics” to gauge progress. “At the end of the day, we need to put numbers on this,” he said.
In the broader context of how the Defense Department does business, however, it may not be fair to blame engineers for overpriced weapon systems.
There is nothing wrong with the way we engineer, said Ephrahim Garcia, associate professor of mechanical and aerospace engineering at Cornell University’s Sibley School of Mechanical and Aerospace Engineering.
The reason why military hardware costs are out of control is that the Pentagon’s procurement and contracting system rewards inefficiency, not just in the engineering process, but throughout all phases of a program, said Garcia, who previously managed military projects at the Defense Advanced Research Projects Agency.
When the Pentagon seeks a new weapon system, it typically pays a contractor based on the “time and materials” employed. “That is expensive,” Garcia said. “You’re rewarding delays, you’re rewarding added expense.”
In projects he participated in while at DARPA, Garcia said, companies would run up the tab by taking “risk-reduction paths,” which involved time-consuming redesigns. “I found we would burn a lot of money in these risk-reduction paths,” he said. “We didn’t pay for success. We didn’t pay for the product. We were willing to pay for just time and materials.”
The culture of cost-is-no-object has been fueled by the simple reality that the government has been willing to pay for the highest performance systems, Garcia said. “In the aerospace community in the U.S., cost is not really put into our thoughts, even at the education level,” he said. “Can we engineer for lower cost? Certainly. Is there something fundamentally wrong in the way we engineer? I don’t think there is.” Sometimes, the extra performance is worth the price, he said, especially when it’s about equipping troops who are in harm’s way.
The engineering world for decades has been using cost-saving techniques such as modeling and simulation and rapid prototyping, Garcia said. “Things are getting cheaper. We don’t have to run to a machine shop and build everything.”
If the Defense Department wants affordable systems, it should not worry so much about the engineering but rather about how it procures technology and how long it takes to acquire it.
Major weapon systems take years to develop. “There’s something wrong with that,” Garcia said. The inability to rapidly field weapons is a consequence of a procurement system that financially rewards delays, he added.
The Pentagon ought to consider shaking things up and awarding major contracts to small businesses that are more agile and charge less overhead costs, he said.
“We have this fear of working with small- or mid-size companies for major procurements,” Garcia said. “We seem to have this comfort level” with the big aerospace firms, but that may be the reason why it’s difficult to get innovative products at affordable prices. “What we need to do is grow smaller companies, reward the mid-size companies and see if they can deliver the larger systems,” Garcia said. “This has to be done with prudence but it has to be done,” he said. Smaller firms cannot handle many of the large programs, but they would be capable of taking on many projects where currently they don’t have opportunities to participate. “The path to lower cost is to get away from companies that are charging 300 to 400 percent overhead rates on the time of their employees,” Garcia said. “That model is not sustainable. It’s pure Cold War.
“We almost need a rebirth of the aerospace industry,” Garcia said. “We’ve seen some of this in the unmanned air vehicles sector.” The problem is that once a small firm is successful, it gets gobbled up by a large company, and loses what first made it attractive to the government — being nimble and efficient.
If the Pentagon’s budget problems could be fixed through engineering, they would have been solved by now, said Garcia.
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