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.

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

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