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National Defense > Blog > Posts > In Defense Industry, a Souring Mood on Acquisition Reform
In Defense Industry, a Souring Mood on Acquisition Reform
By Sandra I. Erwin



When Trey Obering was deputy director of the Defense Department’s missile defense agency in 2002, he was asked to fix one of the most troubled acquisition programs in recent history. The airborne laser — a modified Boeing 747 jet that carried a megawatt laser to shoot down ballistic missiles — was handed over by the Air Force to MDA after eight years of nonachievement.

What Obering discovered was an epitome of procurement dysfunction. The Air Force had assembled a “standing army” of managers and engineers who were spending hundreds of millions of dollars on studies and design reviews before anyone ever fired the laser for the first time, says Obering, a retired Air Force lieutenant general and now a senior vice president at the consulting firm Booz Allen Hamilton.

“We said, ‘Stop that.’ We are not going to pay for any more engineers. We want you to focus on firing the laser and taking the aircraft off to fly it,” Obering recalls during a recent interview. It took another two years to finally fire the laser, but technical accomplishments were not enough to save the program, which was terminated in 2010 after 14 years in development and projected cost estimates of about $1.5 billion per aircraft.

Although reams of new regulations have been laid on the military acquisition system to prevent these debacles, the underlying problems have not changed, Obering says. “Why is this so hard? It's because the process has evolved over time to be so complicated, and there are so many stakeholders, and so many process owners that it is very difficult to affect real change.”

Many executives in the defense industry are deeply discouraged by the inertia, according to a recent survey by Booz Allen Hamilton and the Government Business Council. They polled 340 business leaders on defense acquisition issues, with particular focus on C4ISR programs (command, control, communications, computers, intelligence, surveillance, reconnaissance).

The survey revealed a general sense of pessimism about the future of high-tech government procurements. More than half of the executives called attention to a growing disconnect between what buyers expect and what contractors promise to deliver.

A sticky wicket in military programs is understanding the “technical risks," says Obering. And there is rampant inefficiency. Defense programs get bloated and run up huge overhead costs before they produce anything, which often leads to budget overruns and, later, terminations, he says. “It’s not just design reviews and guys sitting around the table but doing something,” says Obering. “You demonstrate you have the technical risk in hand before you ramp up a standing army of engineers. That’s the risk reduction on the front end that the government should be demanding. That is what the contractor team should focus on before they start broad scale development.”

It might seem obvious to outsiders that government officials who manage procurement programs should deliver products, but the Pentagon’s arcane acquisition process does not necessarily encourage that, Obering says. “The fact is that program managers today spend more time managing up than they do managing down.” The Pentagon should streamline the oversight process, “empower those folks who are responsible for programs to be able to react and respond to technology and opportunities and threats.”

While industry executives frequently complain about Defense Department oversight and regulations, in this survey they actually suggest the government should take a more active role in programs. They would like to see procurement officials more engaged in the early phase of a program, to help prevent costly failures later. More than 60 percent of respondents said that greater government involvement in designing requirements could improve the overall acquisition process.

In complex programs, especially, government managers should be “lead integrators” who understand how to connect different systems and make them work together, says Obering. “This is demanded by the war fighter, and it's going to be demanded by the budget. We have to get more out of programs,” he says. “There is so much more you can do with information by integrating capabilities. … We can't afford things that don't integrate, things that take too long."

The Defense Department once had that integration expertise, but it rapidly degraded since the late 1990s when military budgets collapsed. “One of the unintended consequences was that the government lost the ability to manage and to own a technical baseline of a program, much less an integrated set of programs,” says Obering. “The survey says we have to get that back.”

At the start of a program, he says, the government must understand the technical risk and should make sure the contractor understands the technical risk. “That's a huge area that is a big problem,” says Obering. “Contractors have a ‘can-do’ spirit and often will not realize the severity of the technical challenge they have in front of them.”

Industry executives, regrettably, have turned more cynical about the acquisition system, he says. “There is a lack of trust in the system, and a loss of accountability.”

Successful acquisitions can be done, but that usually happens when the government works outside the system, he says. “When we have an urgent operational need or a classified program, we streamline and strip away a lot of the processes and we really focus on how to get the job done,” says Obering. “We can do that. It's going to take will and it's going to take support from all the stakeholders, including the Congress, to get real reform done.”

The survey’s message is that “we need new thinking,” says Greg Wenzel, senior vice president of Booz Allen Hamilton’s strategic innovation group. “Operators, acquisition managers, engineers all agree we need to a better way to buy in a more agile fashion,” he says. “It’s not about buying more, it’s about thinking like an enterprise.” Government buyers need to “understand the portfolio of the things that they are acquiring and where they fit in the larger enterprise,” says Wenzel. For new technology acquisitions, the Defense Department should “build-in” interoperability from the start.

Photo Credit: Defense Acquisition University

Comments

Re: In Defense Industry, a Souring Mood on Acquisition Reform

The Army is trying to improve with the Network Integration Evaluations, but the tyranny of requirements, and all the incentives for PMs on the side of spending more, not less, and sticking to the documented requirements no matter how nonsensical or impossible will not allow any room for improvement.  Test is another one.  The test community frequently fail systems which the troops tell us are 'good enough' again based on the requirements.  They don't want to accept any risk whatsoever.  Leaders need to step up and make the call to adjust sooner, especially in IT programs where the pace of commercial innovation outstrips our system which is geared to build tanks and bombers. 
Mrmccaffery at 3/23/2014 10:23 AM

Re: In Defense Industry, a Souring Mood on Acquisition Reform

We need a Commercial Based  Defense Dynamic Acquisition Reformation
Facts
-60+ years of non-reform
-Continued Program delays and Cost over runs
-System is beyond repair. Period. There are to many working parts with too many interests linked to these parts

The bureaucracy that created the system cannot be expected to fix the system. This is not a matter of opinion, but that of fact, as 65 plus years of reforms have done little or nothing but create the need for more reform

Need a new revolutionary business model with Industry LEADING the way
Industry would be Responsible for R&D, Production, requirements, sales, and service. (Automotive industry)
Sell complete products with services and upgrades and various models already complete

Instead of taking 20+ years to develop a fighter aircraft under our current way, the military says we need this kind of plane with x,y,z and Lockheed or Boeing already have it. If services don’t buy it they sell it elsewhere or design what they want. How many do you want? You want service with that? Upgrades?

With Industry responsible for market research, R&D, production, sales, service- Doubt we see delays and cost runs and even if we do its not tax payers paying for them.

The Services pay only for what they want for what they want offered form industry competitors, get the best possible product through competition enabling rapid agile acquisition

The Political benefits
Limited lobbying
No more MID
Increased tax revenue from  private industry sales
Jobs
Unions secure

DOD Benefits
DoD only pays for finished product and product support and upgrades ( No R&D etc.)
DoD does not pay for delays, but does pay for requirements on a finished product
Cost avoidance/ new capital is redirected into either increased quantities of platforms or redirected entirely into social programs
No jobs lost only redirected or under new ownership
Increased competition with better products


Recommendations should include the construction of an Aerospace and Defense Industry  Coalition

Aerospace and defense industry come together and propose a commercially-based approach to the development and production of major defense items

Provide in five years based on their own internal resources to meet recognized military requirements Companies would compete to win a contract at the five year mark.

The Department of Defense could say yea or nay at the outset, but if it likes what it sees, then the government has to commit to buy a minimum number from whoever wins the competition
If DoD doesn’t want to buy the item or platform then it must allow the company to sell it internationally

Yes its dream world, but so is the one we live in now that thinks we can fix the existing cluster.
Bradd Buckingham at 3/23/2014 7:42 PM

Re: In Defense Industry, a Souring Mood on Acquisition Reform

Trey Obering, contact me, I was the Deputy Director of BMDO/MDA when the ABL was transfered to the Air Force.  I served in BMDO for 6 yrs in the '90s.
Dick West at 3/24/2014 9:59 AM

Re: In Defense Industry, a Souring Mood on Acquisition Reform

Military-specific IT systems acquisition (not to be confused with email platforms and other commodity IT platforms) needs to be a completely different approach than hardware platform acquisition.  The development of process over the last 15 years has crippled innovation in the IT space because it is treated like hardware or platforms (in DOD 5000.2). 

The flexibility of software creates a requirements black hole, where non-technical people can "dream up" anything they like, and contractors are motivated to pursue programs based on their complexity, as those programs create a longer support tail, and a better bottom line for traditional defense contractors. 

An increased focus on systems engineering and assembly of COTS-based capabilities (vice development of custom code applications), tailored to meet discrete military missions, prior to acquiring these systems, would virtually eliminate the long-tail strategy to maximize revenue over time, and encourage innovation and reuse over lock-in with traditional defense contractors, whose business model is based around technical labor support, vice IT product development and the mitigation of revenue risk normally done in the commercial IT development sector. 

As it stands today with Cost-Plus contracts, and multi-year IDIQs with little onboarding opportunity for new, innovative businesses, the large contractors actually benefit from failure over the long term, as the complexity of contracting actually mirrors the complexity of the technical work (creating small monopolies). 

This all contributes to the non-sensical ever-increasing market capitalization of defense contractors even in times of contraction in budgets.  The market sees that, regardless of year over year contraction, the long game of build-fix-bulid, with little traditional competition from emerging technology companies due to IDIQs/MAC/BPA contracts will continue to be a winner over time for large defense contractors until product quality takes precedence over tradition in contracting.
David Ahearn at 3/24/2014 11:33 AM

Re: In Defense Industry, a Souring Mood on Acquisition Reform

LGEN Trey's insights would be more constructive it he told us what he tried to do to straighten out the ABL once he inherited it and how the dumb DoD Acquisition Process stymied his efforts.  As far as I've heard, no one has ever built a more successful ABL that we could study as a role model. Too many of our bosses serve their time without introducing new ideas to fix the "process" and then whine about it once they've got their sinecure in the private parts.  ABL may have been a dubious choice for the MDA mission because of the numbers of aircraft need to provide 24/7 360 degree defense but we need to be shown how it could have been done better – or killed sooner.
DRBOB at 3/24/2014 12:30 PM

Re: In Defense Industry, a Souring Mood on Acquisition Reform

The problem is too many high ranking military members becoming VP of these contractors calling in favors and running the cost up.  The Government requirent is, 'I want a plane that can do this", the contractor takes that and says well we could also add this great capabilty we have been working on, although we don't know exactly how to do it for this plane but it will be great.  The retired General talks to his buddies still in uniform and sell them on the new capabilities.  The program office tries to figure out exactly what they are trying to add and the contractor's proposal for this new capability requires 20-25% profit due to the risk. 

If we actually bought the original requirement, the overruns wouldn't be so drastic.  Go look at the changes that occurred for the F-22 while it was undergoing the initial build and continued to go through, spiral development (what a joke)!  Taxpayer money is wasted by former military people selling their souls for a title.
DSmith at 3/24/2014 1:26 PM

Re: In Defense Industry, a Souring Mood on Acquisition Reform

There are many good ideas and philosophical words out there, but none of it will address the underlying problem - government bureaucracy. Until this is fixed, all of these arguments are just spinning wheels much like acquisition reform. The Defense Dept oversight offices and the acquisition commands exist to make themselves bigger, an eternal jobs program. They don't exist to produce anything and until that problem is admitted to (...the first step to recovery...), then  nothing will change. If you want to know where the DoD budget can be slashed, look no further. Yes, there are many good people in the system, but there just as many who don't add any value. After eliminating the overhead, then you can move onto other driving issues:

- LSI: govt or industry. Govt lost this ability in the early 80s and would be folly to attempt given the current culture in the bureaucracy. Industry can do it, but incentives both positive and punitive must be in place to do it right.
- Risks: Govt PMs have one goal - survive the job for the next promotion. There is no incentive to be efficient, to change, to improve. There is disincentive to make waves, to identify problems, to demand excellence. Until PM's are directed and the system changes to promote aggressiveness, risk taking and efficiency, then programs will continue to underperform.
- Test: this is the one group that actually pays off. As a program PM, I negotiated with both DT and OT to make sure all understood was built and delivered for test. And yes it was contentious sometimes. Once done though, test usually boiled it down to "does it work or not". Unfortunately, this is what the focus needed to be on the first day of the contract, not in the 5th year. The acquisition system needs to get back to basics and look at it from this perspective from day one of requirements generation.

This could go on and on. That damn chart needs to be erased and different people (ie not those currently in govt) need to be brought in to start over.
Scott Orren at 3/24/2014 2:15 PM

Re: In Defense Industry, a Souring Mood on Acquisition Reform

Trey provides a very accurate and honest depiction of the broken DOD acquisition process that sometimes works for weapon systems, and never for IT intensive systems like NECC, DCGS, DHMRS, to name a few.   The pentagon's acquisition bureaucracy has had numerous chances to embrace Agile Acquisition Processes and commercial best practices, but refused to consider anything other than the status quo.  Congress has already directed OSD to establish a separate, Agile Acquisition Framework for the fast paced IT market, which could have been an "easy button" as several already exist.   Its time we start listening to the sage advise of Einstein who observed "you can't solve today's problems with the same thinking that got you there".  DOD is fast approaching a tipping point it may not recover from, and hope that Secretary Hagel takes action.  
John Weiler, IT-Acquisition Advisory Council at 3/24/2014 2:30 PM

Re: In Defense Industry, a Souring Mood on Acquisition Reform

Take a look at changing the design paradigm, breaking the build, test, re-design model by using advanced computer tools to virtually build and test using complex multi-physics codes.

CREATE tools are being used by more than 70 different programs helping design Air Vehicles, Ships, and Electromagnetics (Antennas etc.) to determine performance envelopes and reduce risk in new designs before the first piece of metal is cut. 

CREATE tools bring government engineers and industry together to reduce acquisition risk and time with the end purpose of sustaining a strategic advantage for the US acquisition community.
Andy Weedon, HPCMP-CREATE Program at 3/25/2014 3:36 PM

Re: In Defense Industry, a Souring Mood on Acquisition Reform

Before complaining about the DOD acquisition system it created; Industry needs to look hard in the mirror as Industry itself is the problem; you got the acquisition system you paid for.

DOD needs vastly less influence from Industry marketing (especially less directive language from Congress penned by marketing departments) and a much stronger analytic capability to look at forces / equipment and structures necessary to prevail in violent confrontations. Asking DOD to have business-like efficiencies is profoundly unwise; redundancies are necessary to prevail after losses in combat. Commercial provision of some systems makes sense where the systems will never face conflict but we ought to consider re-capture of manufacture/design functions where no commercial analogs exist. As defense articles are a ‘Command economy’, restoring the ‘Arsenal System’ where the DOD maintains specialist expertise in natural and combat environments and maintains/enhances indigenous manufacture and support for unique military articles should be considered. DOD led R&D followed by limited manufacture is indicated since industry shed S&T expertise needed for a number of items during the “total systems performance responsibility” contracts debacles in the 1990s.
 
Incidentally regarding ABL; bad science fiction repackaged by marketing doesn’t make a weapon and strong government oversight should have cancelled the concept before wasting a decade of SPO costs.
J_kies, Technical guy at 4/7/2014 12:41 PM

Re: In Defense Industry, a Souring Mood on Acquisition Reform

The P-51 went from cocktail napkin drawing to flying prototype in 150 days.  There was no "acquisition reform" then to stymie the program, just a small group of experts who knew what was needed to be done.
    
The F-15A, AH-64A, M1 were all designed and fielded BEFORE "acquisition reform".  Those programs were so good that now we have F-15Es, AH-64D and Es, and M-1A2s, still in many cases the best weapons of their type in the world.  But under "acquisition reform"  we could not execute new tanker aircraft, new combat vehicles for the Army or Marines, new recon/attack helicopters, and we cancelled F-22 after only 183 units and F-35 has had a lot of cost growth and problems meeting requirements.

The Army boasted about getting the Stryker vehicle fielded in 4 years, but it was simply a modified Mowag Piranna - an existing vehicle.  The universal acquisition system (from requirements generation, PPBES, and the actual acquisition system) is broken when it takes 4 years to modify an existing vehicle.
  
Today's program managers are not all be dumb and incompetent.  The problem is with the disfunctional acquisition system and government bureaucracy in general.
  
What did we do differently back BEFORE acquisition reform when we developed an attack helicopter that was good enough that it could be modified into the AH-64E, the best attack helicopter in the world?  A tank that could be modified to remain the best in the world?
  
In today's acquisition world, contracting officers and the FAR and DFARs simple get in the way of program management decisions.  The program manager has to "kiss the ring" of 50 layers of bureaucrats and politicians, none of whom have any skin in the game of whether the program actually succeeds, they just want to ensure that they can "rent seek".  Additinally, the folks writing requirements are often not experts in the field they are writing requirements for. Government employees vary in quality, but not a single personnel system really does a good job of permitting management to eliminate marginal employees and reward excellent employees.  A marginal government employee is almost impossible to fire, unless they make a mistake that clearly steps accross the line of bad conduct.  But they will make almost as much money as an excellent Government employee.
   
My recommendations are this: make program managers responsible for the success or failure of the program.  Keep them in place long enough for the success or failure to become apparent - this would require tenure far longer than the 3-4 years they normally serve now - like 10 years.  No more ticket punching of 3 year Lieutenant Colonel PMs and 3-4 year Colonel PMs - let them get promoted in their PM job if it is doing well, and suffer the consequences if the program is not doing well, because they will be around long enough for the facts to reveal themselves.  Completely eliminate the separation between contracts and program management - contracting officers should report to the PMs; contracting should not have the power to derail programs that they have now.  Subtantially reduce the legislative and regulatory burden.  Keep only limited regulations that directly pertain to getting the best value (for example, eliminate the "Small Business Advocate", and let the PM decide which type of contracts best supports program objectives)  The test of program success should be reduced to two simple factors: does the program pass OT, and does it meet it's cost requirements..
Aaron at 5/8/2014 3:42 PM

Re: In Defense Industry, a Souring Mood on Acquisition Reform

IT-Acquisition Advisory Council (IT-AAC) published its Roadmap for Sustainable IT Acquisition Reform with the support of the most respected Defense Leaders ever to serve;
- Honorable Bill Lynn, former DEPSEC
- Dr. Jack Gansler, former DUSD ATL
- Honorable Dov Zakheim, former Comptroller
- Honorable John Grimes, former DOD CIO
- Honorable Duane Andrews, former ASD C3I
- GEN Paul Kern, former AMC Commander
- LTG Ted Bowlds, former AF ESC Commander
- LTG Trey Obering, former MDA Director
- LTG Mike Peterson, former AF CIO
- LTG Dave Deptula, former AF A2 Deputy Chief
- Dr. Marv Langston, former Navy CIO & DOD DCIO
- Kevin Carroll, former Army PEO EIS Director

This report is not available at http://www.it-aac.org/itreformroadmap.html 
John Weiler at 10/4/2014 10:47 AM

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