Charging that the armed forces have failed to clean up their act in weapons procurement, the Congressional Military Reform Caucus says the time has come to strip them of that function altogether and turn it over to an independent corps of experts. Legislation now pending would create a centralized procurement agency for the Pentagon. It would be headed by the Under Secretary of Defense for Acquisition, the official that Congress has long sought to establish as an “acquisition czar.”
The idea, says Sen. William Roth, Jr. (R-Del.), cochairman of the Reform Caucus, is to “take responsibility for weapons acquisition from the military and place it in the hands of professional men and women who spend their careers designing and buying arms.”
The reformers contend that the Department of Defense has made little progress since 1986, when the Packard Commission called for major action to rid the procurement process of waste and mismanagement. Senator Roth says that “while certain structural modifications have been made, there has been no real change in the way DoD does business. “
This accusation plays well with the public, which is inclined to think the worst about defense procurement, but many officials and analysts familiar with the process say the reformers are wrong. DoD response to the Packard report went far beyond minor “structural modifications.” The services have cut headquarters manning, streamlined paperwork and reporting channels for program directors, increased the use of competition in contracting, eliminated most of the internal tinkering with program baselines, and improved the qualifications of acquisition personnel.
In Air Force Systems Command, for example, program managers now bypass AFSC headquarters on matters pertaining to their systems and report directly to the USAF acquisition executive, Assistant Secretary of the Air Force John J. Welch, Jr. Sixty-seven percent of the Command’s contract dollars were awarded on the basis of competitive bid in 1988, compared to twenty-six percent in 1984.
For its part, Congress has not acted on the reform proposals directed its way by the Packard Commission. Budgets are less stable than ever, congressional micromanagement of programs has not decreased, and the lawsverning procurement remain as numerous and confusing as they were before.
The European Model
These considerations aside, might an independent acquisition agency do a better job of providing weapons for US armed forces? A surprising answer emerged from an AFA symposium on acquisition and logistics in late April. The “European model” of centralized procurement is cited often as an alternative to the US approach. Until recently, such comparisons were subjective. No quantitative data were available.
To fill that gap, a leading analyst of defense procurement, Dr. Jacques S. Gansler (author of “How the Pentagon Buys Fruitcake,” June ’89 issue of AIR FORCE Magazine), and Charles Paul Henning examined the acquisition of fighter and attack aircraft by centralized agencies in Great Britain, France, West Germany, and Sweden and compared them statistically with acquisitions in the United States.
The study, Dr. Gansler told the symposium audience, does not necessarily settle the question of which process is better. The answer varies, depending on whether the criterion is cost, performance, or time elapsed between a program start and the fielding of the new system.
When the yardstick is time or performance, the US approach wins. American systems reach production and initial operational capability about two years faster than European systems do. Performance scores (derived from range, speed, maneuverability, payload, basing mode, target acquisition, and fire control capability) show that US systems are, on the average, five years ahead of Soviet systems and ten years ahead of those developed by the Europeans.
The Footnote on Cost
As expected, raw measures of cost say that US systems are more expensive. That changes, however, when such considerations as relative performance and technology are factored in. It makes a big difference, Dr. Gansler said, if aircraft are based on existing technology rather than pushing the state of the art. American systems are more likely to use new technology. “If you think about the [multinational European] Tornado, it is basically [a US] F-111 ten years later,” Dr. Gansler said.
The bottom line, Dr. Gansler said, must be the amount of performance achieved per dollar spent. When the study plotted cost curves against performance curves, US and European acquisition approaches achieved almost identical results.
“The US was required to stress, we felt, technological superiority and getting [aircraft] into the field quickly, but our costs were dramatically higher,” Dr. Gansler said. The Europeans emphasized “longer, more stable schedules and significantly lower cost systems at the expense of lower performance. When they needed a higher performance system, they could get that by buying it from the US.”
Dr. Gansler noted that parliaments in European countries are not as intensely involved as the US Congress is with details of the acquisition process. Unlike Congress, the parliaments generally confine themselves to a few long-term decisions at major milestones of an acquisition program. Their actions seldom cause large annual perturbations. The Europeans, he said, “use multiyear fiscal plans. They have an annual debate on the budget, but it’s the sixth year of the plan they’re debating. We’re usually six months into the one-year [defense program] we’re debating.”
The bad news from both the US and European data, he added, is that “we’re getting less performance per unit of cost increase. Costs are going up faster than performance is going up.” He pronounced that trend “alarming” and a clear message that “we need to do something differently.”
AFSC’s “Cultural Change”
AFSC’s Commander, Gen. Bernard P. Randolph, had already reached a similar conclusion and served notice that a “cultural change” was in order. Preaching a philosophy he calls “Total Quality Management,” he hammers the message constantly to contractors and program managers alike that they must do better on cost, schedule, and performance.
In recent months, General Randolph has concentrated his ire on electronic countermeasures (“a disaster”) and software schedules (“We’ve never made one on time”), but these are not his only areas of concern. An AFSC study on aircraft engine bearings, for example, found that the cost of scrap, rework, and repair in US firms was about fifteen percent of sales, compared to less than three percent of sales for foreign producers.
“There is only one thing that’s going to solve the acquisition problem, and that is getting discipline into the system,” General Randolph told the symposium audience.
General Randolph has told program managers in no uncertain terms that their job is to manage acquisitions, not to carry the flag for the systems being acquired. Advocacy, he says, is up to the using commands and the Pentagon.
Systems Command will concentrate its energies on such problems as the development and maintenance of software, which General Randolph identifies as “one of the greatest challenges the Air Force faces for the 1990s.” Advancements in computer processing speed have increased the demand for software, but productivity in software development has not kept pace.
The requirements are astounding. Counting support software, the Advanced Tactical Fighter will need between 4,000,000 and 6,000,000 lines of code—more than forty times the software in the F-16A when it went operational in 1981. “The B-2 has 200 computers on board, more lines of code than the space shuttle, and it’s the most complex airborne local area network in the world,” General Randolph said at the symposium.
By 1990, he said, the Air Force will be spending nearly $30 billion a year for embedded software—a tenfold jump since 1980. Quality and defining the job correctly the first time will be critical. “Software support costs over a fifteen-year cycle can be as high as eighty percent of the original full-scale software development,” General Randolph said. “It costs thirty-six times more money to rid software of errors during operation than during design, and eighty percent of errors are due to misunderstanding and miscommunicating of users’ requirements.”
Sharing the Blame
“Our number-one problem today is poor contractor performance,” Lt. Gen. Mike Loh, Commander of the Aeronautical Systems Division, told the symposium. “There’s hardly a program out there where we’re delivering on schedule, at cost, and meeting our performance specifications.”
This, he said, is not the fault of the contractors alone. “We all share the blame. We are the ones who put industry on contract.” Consequently, ASD is trying to instill Total Quality Management internally to ensure that specifications, requests for proposals, contracts, and change orders are properly executed the first time.
Systems Command has consistently refused to give industry a precise definition of what it means by Total Quality Management, preferring that each company decide for itself how to improve productivity and quality. It has, however, established a procedure to score contractors’ results. Systems Command has compiled Contractor Performance Assessment Reports (CPARs) on fifty firms so far.
In six recent source selections at ASD, General Loh said, “contractor past performance was a significant factor in all but two, and they were early on, when we didn’t have enough CPARs written.”
Profit on the Table
Mr. Welch, who sees all of the Air Force’s major procurement action in his role as acquisition executive, chose “radical” as the best term to describe the scope of changes that have taken place since the Packard Commission report.
Acquisition responsibility has been consolidated at the headquarters level, with direct lines of authority and communication between program managers—more than 300 of them—said Mr. Welch. Operating and using commands now develop requirements for weaponry and are the advocates for the systems they say they need. Competition in contracting has increased sharply, and, according to Mr. Welch, past performance has be come “critical and primary” in deciding which contractor is chosen.
“[For] as long as I can remember, the Air Force has had the best qualified acquisition personnel and the best acquisition system in the Department of Defense,” Mr. Welch said at the symposium.
Systems Command has established four levels of certification for its military and civilian acquisition force. Level Four certification means that an individual is eligible to manage a major program if selected to do so by a board consisting of AFSC’s product division commanders. Certification at that level generally means the person has a master’s degree, operational experience, headquarters experience, and program experience at a lower level.
The capstone of professional development is study at the Defense Systems Management College.
Improved management is essential to make systems less expensive, Mr. Welch said, because “if you divide unit prices into available dollars, we don’t get what we need.” Better management is also in the interests of contractors that often fail to qualify for incentive awards they could earn on Air Force contracts. “A lot of people are leaving a lot of profit on the table because they aren’t performing,” he said.
On the proposal for a centralized acquisition corps, Mr. Welch said flatly, ”I’m against it. I haven’t found a single thing to support it, whether I’ve looked domestically or internationally.”