With McCain’s Acquisition Reform Proposal, the Pendulum Swings Again

Congress nearly three decades ago passed sweeping legislation to reorganize the Defense Department in part to impose stricter controls over the military services. Lawmakers at the time were frustrated by the services’ insularity and by their inefficient, unmanageable processes for acquiring weapon systems.

But like other attempts to fix perceived problems in the military procurement system, the 1986 Goldwater-Nichols Act has had unintended consequences that now warrant another reorganization to give the military services back some of their lost power, the Senate Armed Services Committee concluded in its version of the National Defense Authorization Act for Fiscal Year 2016.

The committee’s bill includes an extensive list of proposals to streamline military acquisitions. The most dramatic provision is one that shifts key authorities over military programs away from the Defense Department’s acquisition executive and returns it to the individual services.

“Milestone decision authority for major defense acquisition programs shall be the service acquisition executive of the military service that is managing the program,” the bill states.
SASC Chairman Sen. John McCain, R-Ariz., believes the shakeup is long overdue because the current process clearly is not working. “An acquisition system that takes too long and costs too much is leading to the erosion of America’s defense technological advantage, which the United States will lose altogether if the department continues with business as usual,” said a committee statement. “In short, our broken defense acquisition system is a clear and present danger to the national security of the United States.”

Milestone decision authority now is in the hands of the Undersecretary of Defense for Acquisition, Technology and Logistics. According to the SASC bill, AT&L would only have “advisory authority over service acquisition programs for which the service acquisition executive is the milestone decision authority.”

In a separate provision, SASC calls for the military chiefs of the services to have a larger statutory role in acquisition programs. The rationale for this is that the services are the “customers” of the acquisition system and should have a greater say. By the same token, the service chiefs would be held more accountable for missteps.  The bill would financially penalize the services for cost overruns.

McCain’s move to decentralize procurement authority is likely to become the most contentious item in the SASC bill that relates to weapons acquisition reform. It has yet to get through the full Senate and then has to be reconciled with the House version of the NDAA, which includes procurement reforms that are far less controversial. After both chambers agree on a final bill, it has to be signed by the president for it to become law.

Defense procurement watchers have seen the proposed realignment a long time coming. Within the military services, discontent has been festering about the expanding powers of AT&L and the administrative logjam that keeps programs bogged down in bureaucracy for years.

A study by the Rand Corp. in 2010 warned about the unintended consequences of Goldwater-Nichols, such as a “growing divide between a military-run requirements process and a civilian-run acquisition process — a divide they [the services] regard as inimical to the efficient and effective support of military forces.”

Goldwater-Nichols, the study said, also prevented the Defense Department from building a “blended acquisition workforce composed of line officers with extensive operational experience who provided valuable perspective that those who spent most of their careers in acquisition assignments lacked. It created a generation of line officers who had little or no understanding of or appreciation for the acquisition process.”

In recent years, service officials have grumbled to lawmakers and congressional staffers that programs are unnecessarily slowed down by AT&L mid-level officials who second-guess requirements that already have been approved by four-star officers. Under the SASC proposal, Undersecretary for AT&L Frank Kendall would still be the Pentagon’s top procurement official and would have the authority to challenge a service decision, but his subordinates would have less power to review and challenge decisions already signed off by the individual services’ chain of command.

It is not yet clear how the Defense Department will respond to the SASC recommendations. Pentagon spokeswoman Maureen Schumann said Kendall could not yet comment on specific provisions because he had not had a chance to read through the legislation, which was released May 21. She said Kendall has long been supportive of the service chiefs having a central role in defense acquisitions. “They are responsible for approving requirements through the Joint Requirements Oversight Council, they oversee their respective service's defense budget and set spending priorities and most importantly, they are responsible for managing and developing the more than 150,000 men and women in the defense acquisition workforce that deliver enormous capability to our war fighters,” Schumann said in a statement. “The secretary of defense testified that further empowering the service chiefs in the acquisition process in a balanced, appropriate manner would be a welcome reform.” Kendall believes that there are “numerous ways to do this without statutory changes.”

The Senate Armed Services Committee has been studying this issue for some time. It solicited written opinions from a wide range of procurement experts, and their papers were published last fall.

Some of the essays bring up the idea that it might be time to reverse Goldwater-Nichols reforms.

Irv Blickstein, senior engineer at the Rand Corp., wrote in one of the essays that soon after the law was passed, then SASC Chairman Sen. Sam Nunn “continued to voice concern about the balance between uniformed and civilian command and control.” Nunn’s concerns have been proved prescient, Blickstein added. “When communications at the top are poor, the rest of the bureaucracy follows suit. The result is a lack of communication and near gridlock.”

Blickstein cautioned that changing Goldwater-Nichols legislation would be “fraught with difficulty in this divided Congress” but the Pentagon could implement a simpler fix like making the vice chairman of the joint chiefs of staff co-chair of the Defense Acquisition Board that approves all acquisitions.

“Looking back, Sen. Nunn’s concern that the implementation of the law would create an impenetrable wall between the staffs of the service secretary and the service chief has been validated,” observed Blickstein. “To hear a chief of service state that he cannot talk to a PEO because he is outside my chain of command should put us on notice that there is a systemic problem with the implementation of Goldwater-Nichols.”

Another critic of that law is David Oliver, retired Navy vice admiral and a former Pentagon procurement official during the Clinton administration. He noted that Goldwater-Nichols was seeking to restore public confidence in the Pentagon acquisition system and adopted many of the proposals of the Packard Commission that sought to solve the “$800 toilet seat problem.” But it is clear that the Pentagon still struggles to find the right balance, he added. “Without acquisition responsibility, the service chiefs, who are responsible to maintain, train and equip combat-ready forces capable of winning wars, naturally tended to lose focus on acquisition. Thirty years and two wars later, guess where chiefs have funneled officer talent?”

If the SASC measures were adopted, in theory they could help to streamline the administration of programs, but that would depend on the services taking the appropriate actions to improve their processes, analysts said.  

Another SASC provision requires a review of the requirements process and budgeting for acquisition programs. This is important, said analysts, because of the enormous impact that poorly constructed requirements have on program performance. SASC also directs the Defense Department to conduct more market research on commercially available items, with the goal to accelerate efforts to identify and capitalize on commercial innovations. The bill would required the Defense Department to protect the intellectual property of commercial contractors that develop technology for the military at their own expense.

The legislation would require the Pentagon to increase use of fixed-price contracts and incentive-fee contracts for development programs. Kendall has said the Pentagon prefers to give contracting officers the flexibility to choose contract types based on the particulars of the product they are buying, such as whether the technology is already mature and costs are more predictable.

Industry analyst Byron Callan, of Capital Alpha Partners, informed investors in a research note that some of the SASC provisions could have positive implications for Pentagon contractors. The bill seeks to build a “tighter alignment between defense requirements and acquisition,” which many industry CEOs have called for. Also of note to contractors, the committee requests new guidelines to shorten the development cycle of "middle tier" acquisition programs, calls for the establishment of a “rapid prototyping” fund, and directs the Pentagon to come up with a process to work with non-traditional contractors.

Also likely to be welcomed by industry is a provision — similar in spirit to those adopted by the House version of the NDAA — that the defense secretary create an advisory panel on “streamlining acquisition regulations” with the goal to improved the “efficiency and effectiveness of the defense acquisition process and maintaining defense technology advantage.”

Topics: Procurement, Acquisition Reform, Defense Department