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Defense Industrial Policy

In reference to the Defense Watch editorial, “Managing the Defense Industry: Stalinism or Smart Business” (Nov. 2011, p.9), Ms. Erwin started with a reasonably interesting article that appeared to present the various sides of the issue. But the conclusion, especially the suggestion attributed to Marty Bollinger (director of Booz & Company’s aerospace and defense practice) to proceed with a “defense industrial policy” but obfuscate it by changing names, is not only disingenuous but outright dishonest.

To support his position, Bollinger suggests, “Toyota, Ford or any major corporation does industrial planning on a routine basis. They scrutinize the supply base, identify areas where they want competition, and select suppliers with which they want long-term relationships.”

That is a nonsensical comparison. Of course corporations plan. That is how they stay ahead of the competition and appeal to the customer. That is how capital markets work. But the point of the article is for the Department of Defense to do the planning; to scrutinize its supply base, identify areas where it wants competition and select suppliers with which it wants long-term relationships. See the difference?

Want an example of stupid government central planning? Consider the discussion about “cheap liquid fuel” in the Nov. 2011 cover story, “10 Technologies the U.S. Military Will Need For the Next War.”

The services want “green energy” fuels to power their fleets even though none are commercially available at a reasonable price. Air Force Gen. Ray Johns Jr., the commander of Air Force Mobility Command, is quoted: “I can’t go to the new market until the market exists.” The presumption is that biofuels are currently more expensive to produce than JP-8 because there are not enough customers buying in bulk to reach the economy of scale that would lower the price. Johns, again: “I don’t know that we can drive the commercial enterprise.”

I have news: Economy of scale is not the problem. An unimaginably huge demand already exists. The entire modern world is waiting for a suitable low-cost alternative to petroleum. The automobile industry, the transportation industry (truck, rail, ship), aviation industry, heating industry, electric power-and-light industry, road construction industry, petrochemical industry, manufacturing industry, mining industry, on and on, all are anxiously awaiting its availability. And countless entrepreneurs are working on it. And when they begin to deliver, the market will rush to purchase all that it can.

Only government bureaucracy thinks that the path to success is to pick and choose the winners ahead of time and throw money at the problems. After all, it’s not their money; they’ll just tax more. Ignored is how that will undermine the market competition and shatter any chances of real progress.
Chester A. Kojro
Rolla, MO

In the article “Army Acquisition: Not Broken and Not Fixed,” (Dec. 2011, p.18) as always, Professor Sapolsky makes a number of good points. Unfortunately, he also falls victim to his own criticisms.

He says that it is not clear that Army acquisition is any worse off than the Navy or Air Force, but then goes on to cite the F/A 18 E/F, the Littoral Combat Ship, the F-22, the F-35, and the KC-46A tanker. Whatever problems these may have had, at least they are in service. Name a major Army system development program that has succeeded in fielding anything in the last 20 years. And not for want of trying; the list includes vehicles, helicopters, missiles, whatever. This is clearly worse.

Professor Sapolsky then goes on to say that Army acquisition is not fixed, but offers no suggestions as to how this might be accomplished; and he says that the Army is floundering because it has no clear vision for its future. While this is true, it is unlikely to change, so fixing Army acquisition requires this reality be dealt with.

So how do systems that anticipate rapid but unpredictable change deal with that? One way is through modular construction. The computer industry is a good example of that: advances in displays, CPUs, hard drives, and power supplies all have to be dealt with or the system will rapidly become obsolete. This is done through modularity and open interfaces: each
module interacts with other modules according to a prescribed set of rules that are
publicly available. This means that if I have a better idea how to build a hard drive, all I have to do is comply with the interface specifications and it will work in any computer.

The Army could do this in many areas, including non-traditional ones such as armored vehicles. Rather than designing a specific “point design” vehicle that may be obsolete or irrelevant before it is fielded, the design could focus on modules such as an automotive module and a mission module that could be changed out or upgraded as threats and technology evolve. For example, technology today may not support an effective hybrid-electric automotive module, but in 10 years it might be a clear winner. Modular design would allow all the mission modules (and the training that goes with them) to be retained while achieving the benefits of the new hybrid technology. Similarly, if a contractor came up with a new design for a mission module, it would not require an expensive and time-consuming integration by a vehicle prime contractor.

Point designs worked reasonably well for much of the 20th century, but are doomed to failure for systems that will likely be in the field for 50 years. Flexible approaches are required if we hope to defeat the enemies of 2061.
Thomas F. Hafer
Arlington, VA

Topics: Defense Department, DOD Policy, Procurement, Acquisition Reform

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