Pentagon Pushing Back Forcefully Against McCain’s Procurement Reforms

Defense procurement legislation has gone from low profile to high drama.

A Senate-backed policy bill that shifts key powers of the defense secretary over major procurement programs to the individual military services is generating a crescendo of opposition from the Pentagon. The proposal, spearheaded by Armed Services Committee Chairman Sen. John McCain, is one of a long list of procurement reforms that both the House and Senate have put forth in the National Defense Authorization Act for fiscal year 2016. Defense officials and industry executives have praised many of the NDAA measures. But Section 843 of the Senate bill has hogged the spotlight and become the focus of intense blowback from the Pentagon.

The battle escalated last week when McCain called out Undersecretary of Defense for Acquisition, Technology and Logistics Frank Kendall for openly criticizing reforms that, according to McCain, are badly needed and long overdue.

Kendall’s former deputy Andrew Philip Hunter, now director of industrial initiatives at the Center for Strategic and International Studies, has taken a lead role in the push to beat back the proposed legislation. During a panel Hunter hosted July 17 at CSIS, current and former defense officials forcefully argued that gutting Kendall’s office would do nothing to correct current flaws in the system and, further, could create a whole new set of problems.

The language in question transfers approval authority over major defense acquisition programs — known as milestone decision authority — back to the military services except when the program is joint, international or requires special management.

Kendall, who is the Pentagon’s third highest ranking official, would per the Senate bill have “advisory authority over service acquisition programs for which the service acquisition executive is the milestone decision authority.” In a separate provision, the legislation calls for the military chiefs of the services to have a larger statutory role in acquisition programs.

The Senate bill attempts to deal with long festering issues that military officials have complained about for years, such as a proliferation of Defense Department acquisition staffs over the past two decades that created a massive web of red tape that stifles program managers and slows projects to a crawl.

Hunter lauded the Senate proposal for seeking to lean the bureaucracy and hold the military services accountable for their acquisition performance but believes it goes too far. “Unfortunately, in pursuit of these goals it sacrifices far too much of the secretary of defense’s fundamental power to shape the military.”

Kendall oversees 78 major defense acquisition programs that are worth about $1.4 trillion. “Clearly, control of this huge investment is fundamental to shaping the military," said Hunter.

A House-Senate conference has been working to reconcile both bills and its final report is expected to be completed this month. Hunter suggested lawmakers need to “better understand what the secretary of defense’s role in acquisition truly is, and is not” and craft an alternative to the Senate proposal.

“The role of the milestone decision authority is to make critical decisions on committing to major investments,” he added. “We’re talking about many billions of dollars over decades. As it stands today, the services and the secretary of defense are jointly making these investment decisions.”

Service-specific program managers look upon AT&L for long-term guidance, he said. “It’s about laying out the acquisition strategy for a program. It’s not a one-year plan. In many cases it’s a multi-decade plan on how the system is going to proceed. That is a distinct activity from the day to day management of a program.” Milestone decisions that don’t include the secretary, said Hunter, “set the services up for glaring disconnects with the rest of the department.”

Defense officials also strongly object to language that restricts Kendall’s office’s access to information about programs. “Section 843 puts a whole bunch of restrictions on data flow up through the secretary’s staff,” said Alan Estevez principal deputy undersecretary of defense for acquisition, technology and logistics. Impeding data access is a “bad thing in any kind of organization,” he said. “It takes away his staff’s ability to get information in order to have an intelligent discussion.” Section 843 “impedes the secretary’s ability to manage the department.”

Estevez was especially critical of McCain’s frequent assertion that the reorganization is necessary in order to be able to hold officials accountable for cost overruns and other missteps. “We also believe in accountability,” he said. Kendall has “absolutely removed program managers and program executive officers who are not up to the task.”

Under McCain’s rationale, service leaders would be taken to task when programs go awry, and therefore would be motivated to improve performance. The flaw in that argument, said Estevez, is that major acquisition programs progress for years before problems arise and, by then, managers who may have made bad decisions are long gone. “Then you face the question: Are you going to fire the service chief or the secretary because there is a cost overrun?” Estevez asked. That seems questionable, he said, as service leaders have a much broader set of responsibilities than just acquisition programs.

Estevez also challenged the idea that this or any legislation can magically turn the Pentagon into a well-oiled machine that produces weapons on a predetermined schedule. “It’s hard to field big complex systems,” he said. “We are pushing the technology edge. It’s not just a slam dunk that you can legislate that you can do something in five years.”

The Pentagon supports the NDAA acquisition reforms, he said, despite major concerns about section 843. “There is a lot of goodness in the bills.”

One of McCain’s lines of attack has been the notion that defense programs have performed poorly under Kendall’s watch, and that continuing business is unacceptable.

Kendall will be rebutting that claim soon when he releases a new report on the performance of Defense Department program, Estevez said. “We are getting better results. Programs are showing negative cost growth.” He offered some teasers from the upcoming report. Since 2009, cost overruns have come down in 57 percent of major defense programs during the research, development, testing and engineering phase, compared to 17 percent in the 2000-2008 timeframe and 9 percent between 1982 and 2000. On the procurement side, 79 percent of programs are experiencing less cost overruns, compared to 44 percent from 2000 to 2008 and 33 percent in the period before that.

“Those are significant numbers,” said Estevez. “We are going to continue pressing with the things that we are doing under ‘better buying power.’”

The Pentagon does support McCain’s language that elevates the role of the service chiefs. “It’s critical,” said Estevez. “They need to drive the requirements, they certainly drive the budget, they need to pick the right people inside their service that are driving the programs. That’s an important part.”

For milestone decisions, the services should not have the final word, he said. That could set up the Pentagon for more procurement headaches. “In times of tight money, the services try to cram more into their program. It’s a natural tendency to try to buy more than the program may allow. Getting a corporate view helps through that.”

Former Air Force chief of staff now retired Gen. John P. Jumper said there should be a middle ground so that service chiefs are more involved and the secretary of defense can exercise adequate oversight.

“I disagree with anything that says you’re going to automatically exclude. Inclusion is essential to the success of programs,” he said. “Nobody gets this any better than Frank Kendall in my opinion. His efforts to bring senior people together have been exemplary.”

The Obama administration informed the Senate last month that it would consider vetoing the NDAA over the acquisition provisions. “The administration strongly objects to section 843 and related provisions, which are inconsistent with the secretary of defense’s exercise of authority, direction, and control over all of the DoD programs and activities,” said a White House statement. The defense secretary should have the power to “guard against unwarranted optimism in program planning and budget formulation, and prevent excessive risk taking during execution, all of which is essential to avoiding overruns and costly delays.”

Topics: Defense Department, DOD Budget, DOD Leadership, Procurement, Acquisition Reform, Defense Department