Budget Pressures Beg for a Serious Look at Overhauling Acquisition System

By Lawrence P. Farrell Jr.
The defense budget will be declining by an average of $52 billion per year between fiscal years 2013 and 2017. Even though Congress has not acted on the president’s budget request, let’s assume lawmakers agree to most of the elements — although the consensus is that changes to military retiree medical benefits don’t stand a remote chance of being enacted as proposed. But if the budget is passed as is, and if sequester is enacted in January, another $500 billion to $600 billion will be deducted from the 10-year budget.

It would be welcome news if Congress and the White House struck a grand deal to make sequester go away. But where will the money be found to “buy down” sequester? And which accounts are likely to become the bill payers?

Recent studies by the Center for Strategic and International Studies offer some clues. The data shows that spending continues to climb even as active duty strength declines. Also, that the base budget is projected to be flat from 2012 out to 2017 in constant dollars with OCO (overseas contingency operations) funding being undefined for every year except 2013, which is $89 billion. The services, especially the Army, need the OCO funding to repair and replace equipment for about three years beyond the end of combat operations, so this uncertainty is troubling.

Interestingly, procurement from 2012 to 2017 grows by 16 percent. All other accounts are flat except research and development, which declines by 11 percent.

There are many variables in the budget equation: Expiring tax cuts, the debt ceiling increase, sequestration, the Pentagon’s opposition to further cuts, the president’s refusal to repeal of sequestration without offsetting with tax increases, and the large national concern with the debt and large deficits.

Finally the CSIS numbers show that the procurement share of 2013 budget is 18 percent but shouldered 38 percent of cuts, while personnel accounts make up 24 percent of the 2013 budget, but suffered only 12 percent of the reductions. Operations and maintenance are 44 percent of the budget and contributed just 35 percent of cuts. If another deal is advanced, one might conclude that personnel and O&M might be the next targets. Or even procurement, which grew by 16 percent from 2012 to 2017.

By service, the Army loses the most (53 percent) while the Navy gives the least (7 percent). This is in line with the new strategy that “pivots to the Pacific” but is not supported by the shipbuilding program. Capital ship numbers and carrier battle groups are endangered by this thin shipbuilding program.

Recently the Government Accountability Office released its “Assessment of Selected Weapons Programs.” GAO looked at 96 major defense acquisitions that are valued at $1.58 trillion. It documents a 2011 program growth of $74.4 billion as a result of inefficient production, quantity changes and R&D growth. The F-35 Joint Strike Fighter has the most growth by far of any program. The problems are attributed to production inefficiencies, quantity changes and soaring R&D cost.

Most programs carry technology design and production risks. Although there are some improvements in competitive prototyping, competition, systems engineering and systems reviews, buying power continues to decline as costs climb and quantities decline. Just 10 programs contribute 55 percent of the cost increases and one, F-35, contains 21 percent of the growth. The programs analyzed are the smallest number since 2004. The obvious conclusion is that the number of programs is down and their cost is up.

How did we get away from an acquisition system where the Air Force’s F-15 and F-16 fighters flew only four years after program start? And where the F-16 price per unit came down in real terms in successive years. There was a time when programs were delivered on schedule and on or below cost. Those two aircraft, to be sure, were delivered before the Goldwater-Nichols Act of 1986. The programs in the GAO assessment are post Goldwater-Nichols.  

Goldwater-Nichols was spot-on with respect to the need for joint-service integration at the combatant commands. But its impact on the acquisition system has been mostly unsatisfactory.
The acquisition reforms of Goldwater-Nichols took the service chiefs and senior military officers out of the acquisition process. The chief, who oversees budgets and requirements, is not responsible for program performance.  

The three elements of program success are budget, requirements and actual performance. They need to be traded off carefully. There needs to be a balance among budget, requirements and program performance. There needs to be a healthy tension between the acquirers and the requirement community, the war fighters. Only one person with cognizance over all three can effectively balance all three. The person to oversee and enforce that balance and that healthy tension is the chief of the service. Only the chief is uniquely positioned to referee between the acquisition community and the customers in the field. And only the chief is uniquely positioned to judge the tradeoffs between budget, requirements and program performance.  

Perhaps it is time to go back to the future by doing things the way we did them in the past, when the chiefs and the military leadership were deeply involved in all aspects of equipping the service — in requirements, in budgeting for equipping and training, and in supervising and balancing he acquisition process.  

We need a more efficient and responsive system. Let’s get back to a process that judiciously balances requirement demands and realistic program performance. Let’s go back to the military being deeply involved in acquisition, with the service leader being the “balancer-in-chief” between budget, requirements and program delivery. Let’s get back to the future.

Topics: Defense Department, DOD Budget, DOD Leadership

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