ACQUISITION PROGRAMS

Viewpoint: Defense Acquisition in an Unaccountable World

5/1/2011
By Nathaniel H. Sledge Jr.
In the 1960 screwball romantic comedy, Tall Story, the college coach, frustrated that his star player was ineligible to play the big game, said in anguish, “I’d love to work at a college that had no faculty. We’re wasting too much time on academics!”

With all due respect to academics and the advancement of knowledge, those were better days. No star college players are sitting out big games today because they are failing courses.

Basketball works as metaphor for many of today’s ills, particularly in the world of weapon system acquisitions, namely because there is no accountability.

Current and former government officials testified in March before the subcommittee for financial management of the Senate Homeland Security and Governmental Affairs Committee, which is looking into cost overruns on weapons development programs. The panelists made promising statements, indicating progressive thinking on the part of senior executives, particularly in competition, accounting tools, requirements scrubbing and incentives to improve efficiency. The candor on display was impressive and unusual. Still, given the recurring patterns in the history of defense acquisition and the increasingly regressive trends in politics and public management, it is not clear that those in high positions will or can make the changes to leadership, management and culture that are critical for improving the cost performance of major defense acquisition programs.

For years, acquisition professionals have known that competition and disciplined administrative accounting can improve management performance. Yet competition is insufficient and there is poor adherence to tracking tools. And these are tools for achieving accountability. Increasingly more time and money are being thrown at failing programs. Officials seem to lack the will and cooperation to enforce discipline.

The fundamental reason for past, present and, sadly, prospective failure is lack of accountability.

Systems of accountability should follow first principles. Performance against mandates must be traceable. This implies transparency and data collection. Officials must also be answerable to someone outside and above their organization. This reduces conflicts of interest and provides a clearly defined chain of authority for apportionment of blame and praise. And programs must be controllable through a regimen of consistently and fairly applied sanctions and rewards.

In government, there has rarely been effective accountability. For example, our defense budget cannot be balanced (traceability). Millions of items of information are, but should not be, classified “top secret” each year (transparency). We have so-called independent agencies such as Cost Accounting and Program Evaluation (CAPE) that provide back-scratching cost estimates (answerability). Operating under such conflicts of interests, these offices are responsible for the establishment of unrealistic program baselines, making them poor checks against excesses in acquisition. And the Nunn-McCurdy law shows that we do not follow the many rules the government makes. It has become little more than a reminder that acquisition programs should be held to account (controllability). Lamentably, this law has proved to lack teeth, pointing up the fact that ideals, theories, and policies alone are insufficient. We need leaders with skill, discipline, and moral courage to give policies life.

Being the government is like hanging out and gambling in a casino with unlimited chips and a free presidential suite. You have privileges and freedom of action and there are no consequences for losing. It follows that the primary reason government is expensive and inefficient is lack of accountability. And this begins with government secrecy. Anyone who submits a Freedom of Information Act request finds out first-hand the meager level of government accountability.

Impunity has become endemic. Internationally, we coddle nations that don’t even pretend to be accountable, and tyrannical dictators end up in retirement dachas instead of prison. In global finance, American stock exchanges are listing foreign stocks without due diligence. At the national level, lack of accountability has resulted in a ruinous misalignment between revenues and expenditures.

At the state and local levels, communities bear unsustainable pension obligations, making it difficult to protect, educate and provide healthcare. Lack of planning and ineffective responses to Hurricane Katrina in 2005 and the 2010 Gulf of Mexico oil spill were directly enabled by poor accountability within both federal and state government agencies that had the responsibility to act.

Lack of accountability also was a key contributor to the worldwide real estate and credit crises. Credit ratings agencies went astray, rating junk bonds as safe investments, partially because of the incentives, but also because they would suffer little consequence if the bonds failed. In the wake of historic losses in personal and national wealth, only isolated and unsympathetic scammers have been prosecuted for fraud or malfeasance. Moral hazards abound.

Our defense acquisition system has assimilated the virtual impunity that exists at home and around the world. The defense acquisition system has mostly dedicated public employees who are rarely disciplined or fired. Contractors are rewarded for failure through generous cost-plus contracts and softball award fee structures in which the government shoulders most of the risk. The defense acquisition system employs untrained executives and keeps many in jobs too long. It also empowers independent cost estimators who validate overly optimistic cost and schedule targets. The system also incentivizes year-end obligation abuses and pursues dubious capabilities that taxpayers cannot afford (unfettered requirements). And we have witnessed multiple Nunn-McCurdy baseline breaches since the law’s inception, yet only a handful of programs have been terminated. Restructuring, or lowering the bar, is the response of choice.

At recent hearings, Sen. Scott Brown, R-Mass., had the hardest-hitting comments and questions. He observed that 80 percent of major defense acquisition programs fail to meet cost and schedule goals, and 47 have experienced Nunn-McCurdy breaches, some multiple times. Yet anecdotally, based on testimony, the project managers who are in charge are relieved at a rate of less than 2 percent. He asked why few managers had been reassigned for cause and he appeared frustrated, since no one really answered the question. This exchange suggests that senators understand two things: First, program managers are not fully responsible for the health of their programs. Second, lax accountability is endemic in the environment and culture in which defense acquisition takes place.

There are several reasons for the absence of consequences for failure. First, there is no effective oversight of Defense Department activities. It is Congress’ job, but it only feigns oversight, and is infested with cronyism and conflicts of interest. Oversight is either selective or capricious. Congress also lacks resources and organization. With so many congressional committees looking into how more than 20 percent of the federal budget is spent, no consistent oversight regime exists. And to whom does the Congress answer? Because of incumbency, gerrymandering, unlimited corporate spending on issue ads, and an uninformed and disinterested electorate, the answer is effectively, no one.

Second, the Defense Department is a complex and diffuse bureaucracy for which no one can be easily be held accountable. Real change usually comes from outside an institution. But since change threatens external and internal stakeholders’ interests, improvements in accountability aren’t forthcoming. There are so many agencies and headquarters staff that influence what program managers are trying to accomplish that it would be ridiculous to hold them solely responsible for the prevalence of cost overruns. Failures of project management are sometimes the problem, but it is congressional political calculation, Pentagon requirements and program machinations, and prime contractor performance failures that drive program breaches. Leadership is the best remedy for this situation, but our institutions must get better at selecting leaders and they must truly empower them with proportionate authority and resources.

This sets up the third reason for lax accountability. Program manager responsibility and authority are tenuous. They lack the authority and resources to make and implement critical program decisions. It is not surprising that program managers spend most of their time trying to “ride the tiger,” satisfying the disparate external stakeholders and responding to exogenous events. Ask them what they control and one will discover that it is very little. They can’t make a move without extraordinary coordination. Checks and balances are a feature of accountability, but in the extreme, they not only impede innovation and decisiveness, but they ultimately reduce participant accountability as well, because key actors don’t own their decisions.

Balancing transparency, answerability, and controllability with autonomy and innovation offer a better way. It has always been a challenge for the government to achieve this sweet spot, so the future is not promising.

Finally, and most sadly, government watchdogs have failed to hold public officials accountable through in-depth investigations and objective reporting. Despite their efforts, nongovernmental organizations have not proved to be effective communicators that are in touch with ordinary Americans. Chief among those failing to meet their fiduciary responsibilities to our society is the press. Journalists, in particular war correspondents and those on the Pentagon beat, seem to care more about access than truth. They have, like millions of others on the treadmill, mortgages and college tuition obligations; but these are not good excuses for their indolence. Journalists need to be concerned about both access and truth. There are lines of bias and coziness that should not be crossed. We’ve witnessed the disastrous effects of this coziness. The U.S. Minerals Management Service became captured by big oil; the SEC was captured by the big banks and major financial institutions. Similarly, journalists are captured by the public officials they cover around the Pentagon’s E-Ring, and by industry executives.

Investigative journalism seems to be a fading art. Any journalist dealing with the military should be skeptical of pronouncements about the success of operations or the health of acquisition programs, because the nature of the military and government is to provide only disinformation to protect the government and its executives from embarrassment.

The public doesn’t know what is going on with major defense acquisition programs because the topic is rarely, or poorly, covered in the mainstream press. Few know the ins and outs of the F-35 fighter or how the MEADS air defense program survived and wasted so much treasure for over 20 years without success. Supine reportage is part of the answer. Without an objective press corps, who will be the watchdogs to protect us from unaccountable government, immoderate interest groups, unscrupulous individuals, and esurient corporations?

Unfortunately, the reasonable and forward-looking words of the panelists testifying recently before Congress will join the millions of words their forbearers uttered before similar committees in the past few decades.

There are no serious catalysts for improvements in efficiency and accountability except a smaller budget and diminished total obligation authority.

If the Defense Department chooses to attack this issue, it must get the accountability principles right. Oversight and discipline are essential, but those providing it must be accountable themselves, and their policies and practices must be consistent with some approved canon of rules and procedures. Bringing these principles to life would reduce the many moral hazards government policies and practices produce.

As the last line of defense, only skilled and strong leaders can keep us on track. But the accountability that is required will not emerge until there is real accountability within and outside acquisition shops.

Nathaniel H. Sledge Jr., PhD, is a retired U.S. Army colonel.

Topics: Defense Contracting, Defense Department, Civilian Workforce, DOD Budget

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