Hope and Despair in Government Procurement

A group of Pentagon and contractor executives gathered recently to tackle a perennial problem: the Defense Department’s procurement system.

It’s crunch time for acquisition reformers as they face a July deadline to submit recommendations to the House and Senate Armed Services Committees. Lawmakers decided they will take another shot at fixing the seemingly unfixable Pentagon procurement system, and have asked industry groups to submit suggestions. They will consider proposals for the fiscal year 2016 defense authorization bill.

Several executives stepped up to the microphone to share their views from the trenches.

Everyone in the so-called acquisition community appreciates the latest congressional effort, but wonders how a new round of reforms will be more productive than past attempts. They have seen piles of band-aids put on the system with negligible results.

“I’ve been a contractor for 30 years, and I’ve seen things get worse and worse,” said one participant.

The lengthy list of grievances is all too familiar to those in the business: Pentagon programs fail and nobody is held accountable, there are too many layers of supervisors that bog down the system, innovation is squelched rather than rewarded, and there is little to no incentive to cut costs.

Three decades of procurement reforms have had no noticeable effect on the performance of Pentagon weapon programs, but they surely have fueled industry cynicism.

“We are always on a 12-step program to reform. And we never reform,” said another participant.

Rep. Mac Thornberry, R-Texas, who is overseeing the HASC review of defense procurement, said he is acutely aware of the skepticism about acquisition reforms. The committees are not interested in piling on new rules, he said, and are investigating why current laws and regulations have not worked as intended.

This congressional probe comes at a time when lawmakers worry that the Pentagon is not getting a good return on its acquisition dollars.

When Congress last passed sweeping procurement reform legislation — the Weapon Systems Acquisition Reform Act of 2009 — the Pentagon’s budget had reached record levels and the mood at the time was to crack down on procurement fraud and abuse. Military spending has since plummeted, although the cost of major weapon systems has continued to rise.

The Government Accountability Office credited the Pentagon for slight improvements in the performance of major weapon systems, but cautioned that trouble still lies ahead. “While many of the recent efficiencies achieved by programs decreased their costs without reducing quantities, it is unclear how much more savings can be obtained in this manner,” said Gene L. Dodaro, comptroller general of the United States. The Defense Department and Congress have taken “meaningful steps to improve the acquisition of major weapon systems, yet many programs are still falling short of cost and schedule estimates,” GAO said.

The projected cost of 80 programs that GAO studied has increased by $14.1 billion, although 50 of the 80 have seen some cost reduction. The Pentagon will need about $682 billion to complete these programs, of which 45 percent have seen cost growth from initial estimates. GAO called this a “clear indicator” that the Defense Department needs to control cost in order to save these programs from the ax.

Industry insiders doubt that the Pentagon can turn this around until it can figure out how to estimate the “real” cost of a weapon system. Current models are based on the history of failed acquisition programs that were way over budget. “We don’t have a way to separate that bad history from what things will cost in the future,” said an industry official. The Pentagon’s new policy demands that program managers estimate what a system “should” cost, but that is hard to do, he said. “‘Should cost’ is the right approach. But it should be based on the new paradigm you’re trying to shift to.”

A former Pentagon official said it might be time to take a zero-based approach and start with a clean slate. The current system is grossly inefficient and wasteful, he said, because it is designed that way. “Too many cooks and too many layers” hold programs hostage, he said. “They prevent things from going forward by exercising a veto.” Managers are evaluated based on whether they “checked” all the boxes, rather than on the value they add to the program. “We need more doers, less checkers.”

An industry representative spoke about a “culture of fear and loathing” in the acquisition world. Many contractors, she said, resent that waste in government is conveniently blamed on the private sector. Although that is politically expedient, faulting contractors for all government waste has long-term detrimental effects, and drives “good” contractors out of the business, she said. “It creates a race to the bottom, you get the worst possible contractors, and it becomes a self-fulfilling prophesy.”

Besides the need to save money, another motivation to change the status quo is that U.S. adversaries are modernizing at a rapid rate. “It’s beyond me that we are nibbling around the edges,” another executive said. “We can spend a lifetime trying to fix what exists today: one regulation piled on top of another.” While the Defense Department’s acquisition system plods along, other nations are buying commercial technology from the open market. “Why are we emphasizing that we have to have a separate system that requires so many reviews, has to go through so many decision makers, that has grown into a behemoth of red tape?”

Alas, the Pentagon operating like a commercial enterprise is a utopia. As one defense official noted, “Attacking the bureaucracy is a bit naïve. The bureaucracy is not going away.” The problem is the individuals in charge who provide bad leadership, he said. “There are no rules that say, ‘Don’t be innovative.’ What this comes down to is leaders who are not innovative, not moving programs forward, relying on written policy as an excuse for not being innovative.”

Congress might have to accept the reality that, other than “blowing up” the current system — as some have suggested — there is not much it can do. “How do we change a system that doesn’t want to be changed?” asked one executive. “Every time we try to change the system, it reverts back to its natural equilibrium.”

Widespread disappointment about what goes on in the bowels of the bureaucracy leads to the conclusion that it will take much more than legislation to change the current dysfunction.

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