DoD Makes Overtures to Defense Industry to Help Fix Acquisitions

By Sandra I. Erwin

It is a rare and surprising occurrence when the Pentagon’s independent weapons cost estimator speaks at a defense industry forum. It is even more remarkable when he gives contractors specific advice on how to improve their working relationships with the Defense Department.  

An alliance between the Pentagon’s cost assessment and program evaluation, known as CAPE, and the defense industry may seem “unnatural,” although it might be necessary to fix a chronically broken procurement system, said CAPE Director Jamie Morin.

Morin suggested such a partnership has to work both ways. The Pentagon needs contractors to be more transparent and share more of their cost data, and industry executives need defense officials to be more receptive to their ideas for new products and technologies.

“Traditionally my team is viewed in an adversarial manner,” Morin said Sept. 17 at an industry event hosted by the Atlantic Council. “But we are in business to deliver actual capability as a team.”

Morin’s conciliatory tone marks a departure from the norm. His predecessor at CAPE, Christine Fox, publicly chided Pentagon leaders for being too cozy with weapons makers and deferring to industry judgment on too many occasions.

In his talk, Morin laid out a number of reasons why he would like to see an adversarial relationship turn more cooperative. First and foremost, CAPE analysts would like to have contractors merge their programs’ cost data with the government’s. That would go a long way to prevent procurement meltdowns as a result of unforeseen cost overruns, he suggested.

“We need good cost data,” Morin said. One reason so many programs have collapsed over the past decade is the absence of reliable cost estimates. The government caused its own problems when it decided in the 1990s to drop requirements on contractors to provide cost reports. That was then seen as a way to increase efficiency and ease red tape but it ultimately backfired. “We went from collecting about 1,200 cost reports a year in the late 1980s to under 200 by the early 2000s,” he said. In many critical programs, there was hardly any data at all. That data vacuum meant the

Defense Department lacked an “analytical foundation” to assess the cost of new programs. “I don’t think it’s a surprise that we ended up with program after program that flamed out, Morin said, citing the Marine Corps’ expeditionary fighting vehicle, the Army’s future combat systems and several satellite programs. “I don’t think that was an accident.”

CAPE has been rebuilding its cost reporting system. “But capturing cost data is always tenuous,” said Morin. “It is a long-term investment in a short-term world. It’s as much about helping the department understand what we’re getting into when we start the next program as it is about managing the current program.”

Having greater access to contractors’ data would help CAPE analysts make more accurate estimates, he said. “We have an enormous opportunity to make this effort more effective as a whole.”

Congress created CAPE in 2009 as part of a sweeping defense acquisition reform bill. Its job is to produce independent cost estimates of major weapons programs and recommend tradeoffs to decision makers.

Morin cited recent collaboration between his office and Lockheed Martin to help manage the cost of the Pentagon’s most expensive program, the F-35 joint strike fighter. “They are handing over a large data feed directly from their enterprise resource management system,” he said. “This is giving us dramatically more insight and reducing the administrative burden on them to compile and present the information in a traditional legacy way.”

The plan is to enlist more companies to do the same, Morin said. “We have been rolling that out on a pilot basis and we’re looking to move it forward and get it much more broad,” he added. “This is part of a five to six-year cost modernization effort.”

In military-speak, what CAPE is aiming for is a “common operating environment.” Having direct data feeds from contractors would help to create a “COE for government and business that builds a trust relationship,” Morin said.

As part of an improved DoD-industry rapport, the Pentagon could give contractors more opportunities to pitch ideas. CAPE typically is viewed by executives as the bad guy because it pokes holes in many industry proposals that “might end up costing a lot more than their estimates or glossy brochures suggest,” Morin said. “That is part of our role. But it turns out there’s a lot of good ideas out there [even] if we only have so much money to spend,” he continued. “We should weigh the good ideas one against each other. And make sure that we can deliver on the good ideas we settle on.”

People in the defense industry “are not in business to deliver failed programs,” Morin said. “Where we get into trouble is when the idea is not fully refined” and the Pentagon ends up wasting lots of money chasing pie-in-the-sky technologies.

More programs now are starting on the right foot, Morin said. The Pentagon reported 10 “Nunn-McCurdy” breaches in 2009, or programs that are grossly over budget. The number dropped to five in 2011 and two in 2014. “That benefits industry. Keeps us off that negative vicious cycle,” Morin said.

“There’s room for enhanced dialogue” with the defense industry, he said. “I recognize that part of what I’ll get is marketing. That’s fine, I expect that. It can be the start of a conversation that can be enormously valuable.”

Future conversations should also focus on the “strategic and operational concepts for the U.S. military to be pursuing to ensure enduring dominance,” he said. “I’m interested in a dialogue on what DoD can do to improve its management and internal efficiency.”

CAPE analysts are now involved in a “really deep dive” into the Pentagon’s budget priorities for next year. Deputy Defense Secretary Robert Work has overhauled the traditional “planning, programming, budgeting and execution process,” Morin said. The intent is to produce more rigorous analysis of what programs deserve more or less funding. “There is a concerted effort to construct piece by piece that analytical foundation.”

Morin described the current times as “extraordinary” for the Defense Department as it realigns its priorities. The Pentagon’s strategic push, however, has been hijacked by congressional politics. “I think the department is on the verge of making an important shift in where its priorities are, how it resources them and how it advances the war fighting capability of the United States,” he said. The budget impasse on Capitol Hill — that threatens to fund the federal government with temporary measures rather than full-year appropriations — would “make all of that moot,” Morin lamented. “It would give the department no ability to set into motion the changes that we’ve built an analytic foundation for,” he said. “We are in an environment where the national political environment is essentially saying to the department, ‘We don’t care about the strategic judgment of the civilian and military leaders of the Department of Defense.' That is a pretty extraordinary circumstance.”

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

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