To senior Air Force officials, the idea seemed simple enough: Conserve its funding by leasing new
engines for some B-52 bombers. If leasing a car is a good way to get transportation without laying out lots of up-front cash, they reasoned, so might leasing turbofans have the same advantage.
In practice, however, the lease has proved difficult to close. Under Pentagon accounting practices, the Air Force has to reserve enough money to cover the whole lease liability on the day the contract is signed. That means that the Air Force has to set aside some $2 billion—a hefty sum by today’s procurement standards. It defeats the whole purpose of leasing.
That is just the sort of government regulation that needs to be changed if the Air Force is to modernize its force within the constraints of today’s budgets, said Assistant Secretary of the Air Force for Acquisition Arthur L. Money, speaking last July at AFA’s Dayton national symposium, “Acquisition, R&D, and Logistics: Looking Forward to the Next 50 Years.”
“We’ve had this Revolution in Military Affairs,” said Money. “It is time we have a revolution in business practices.”
Much progress has been made in streamlining service acquisition and support efforts, said he and other officials at the Dayton meeting, but much more needs to be done if the Air Force hopes to adequately outfit and maintain the high-tech force of the early 21st century.
Sheila E. Widnall, the Secretary of the Air Force, offered a quick review of the service’s broad strategic priorities.
First, she said, is a move toward expeditionary capabilities. The reasons for this change are well-known: While the number of overseas bases shrinks, the demand for US air and space forces has never been greater. The Air Force has only two-thirds the personnel it did during the Cold War, yet its tempo of operations is now four times higher.
A second priority for the USAF of the future will be a greater reliance on space-based assets. Space is now a center of gravity in Air Force capabilities, said Widnall, as the number of service satellites on orbit has increased 250 percent since the fall of the Berlin Wall.
A final Air Force strategic goal is to continue to capitalize on past experience and reduce infrastructure and support costs. An aggressive move toward business efficiency is necessary, said the Secretary.
In general, the importance of information is expected to grow. In fact, Widnall said, the Air Force is looking toward a day when sensors, command centers, and aircraft will form a single web with data flowing instantly along its strands. “We’re aiming toward getting tailored, real-time image, weather, and targeting information to our aircraft and ground troops,” said Widnall.
Assistant Secretary Money
If there was a common reference point at the symposium, it was the importance of technology to the Air Force of 2010. The problem is that there is a gap between the kind of equipment that commanders believe they need and the amount of future funds available to pay for it.
“We are probably $3 billion to $5 billion per year short now on the modernization account budget vs.
the demand coming out of the warfighters,” Money said.
Thus, for next-generation systems, “affordability is a key performance parameter,” said Money. “We are willing to trade damn near everything based on cost.”
Knocking down the stovepipes of acquisition and sustainment and combining those two functions is one economy that is already being put in place. Another is the husbanding of R&D money. No longer will the Air Force pay to develop anything it thinks it can buy commercially.
There is also savings to be found in continued reduction of government owned and operated parts of the support structure. Over time the depots and the air logistics centers will likely just do services that are unique to the Air Force, said Money.
Overall, acquisition reform has already freed up lots of extra money, according to the Air Force acquisition czar. Savings totaled so far are $17 billion over the last two years. “About five and one-half [billion] of that is actual, honest-to-God savings that we’ve taken,” said Money. “The other 12 and one-half [billion] or so is future savings yet to be realized, but it is cost avoidance.”
Given that USAF’s procurement budget is around $20 billion, that means that the savings—if fully realized—will come close to providing an extra year’s worth of acquisition money.
Reduction of operations and maintenance costs remains a major issue, said Money. So does a reduction in parts inventory—a big part of so-called “lean logistics.”
Finally, Money said, DoD’s financial system “drives me nuts.” A long career in industry did not prepare him for such problems as the B-52 engine lease set-aside, Congressionally mandated budget changes, reprogramming issues, and expired funds.
According to Money, “We need to change the paradigm of managing the budget to managing the cost.”
Gen. George T. Babbitt Jr., commander of Air Force Materiel Command, made a similar point on the subject of changing the way acquisition officials think about their funds. His goal, Babbitt said, is to shift the focus of the command from budget, or “input management,” to cost, or “output management.”
There is a big difference in viewing oneself as a cost, not a budget, manager, said the AFMC chief. If 10 budget managers sat around a table, they would all say they needed more money, argued Babbitt, whereas 10 cost managers talking around a similar table would all say they needed to save more money.
“Their goal is not to deliver less; it is to continue to perform the mission well but at a reduced cost,” said Babbitt.
Cost reduction initiatives are already well under way at AFMC, said Babbitt. Research labs have already been consolidated under a single commander; test range and facilities are being studied for possible management streamlining.
Babbitt said that the Air Force had made big strides in pre–Request For Proposal release planning. For one thing, he noted, there is more emphasis in specifying desired performance than in specifying the particular processes for achieving it. Reliance on military specifications has been greatly reduced, for another.
Babbitt said that in the near future he will put more emphasis on production and support costs during the engineering and manufacturing development phase of acquisition, when careful engineering can best control them. He favors more innovative contractor support arrangements, such as co-use of production facilities for support.
“We can do little else when the cycle time of obsolescence is shorter than the time required to field an organic support facility,” Babbitt noted.
Norman R. Augustine
Norman R. Augustine, president and CEO of Lockheed Martin Corp., gave his view of the current state of what he called “America’s fifth armed force”—the defense industrial base.
Augustine noted that the past decade has been “Darwinian times” for industry. “Fortunately, we have been able to preserve a defense industrial base,” he noted. “The lesson to be learned comes from Charles Darwin, who said it is not the strongest of the species that survives, nor the most intelligent, but rather the one that is most adaptable to change. … The willingness to change has been absolutely essential—and to place so much greater focus on things such as cost than we are accustomed to doing in the past.”
What remains is remarkably efficient, capable, and competitive, said Augustine, but there’s not much industry left, and it “has very little ability to surge” its level of output.
In Augustine’s view, the future is clouded by many fundamental questions currently being raised about the industrial base. Among them:
If the industry is to globalize, who will decide what will be sold and to whom
Should the US permit foreign governments to indirectly own major elements of US defense R&D and production capability
Should the US let itself become technologically dependent on offshore software and electronics
How much internal capability does the US government maintain in terms of depots and arsenals
Who has responsibility for maintaining a strong domestic defense industrial base
Can the US make a fundamental shift to a service economy and still maintain military capabilities
How do you plan for a viable industry when decades pass between production of new aircraft, tanks, and warships
Getting the right answers is critical, Augustine noted, because “one can no more win in modern combat without a strong industrial base than one can win without a strong Air Force or Army or Navy or Marine Corps.”
At the AFA symposium, some negative reviews were voiced concerning USAF’s current acquisition structure, at the heart of which lay a fusion of traditionally separate development and logistics functions.
Retired Air Force Gen. Lawrence A. Skantze decried this step, suggesting that the Air Force would benefit from returning to a dual setup in which it had Air Force Systems Command to handle research, development, and acquisition of major systems and production of new weapons and Air Force Logistics Command to manage logistics and handle some near-term forms of acquisition.
Skantze, a former AFSC commander, told a panel on the Program Executive Officer system that he has “deep concerns” about what he views as a “steady and dangerous erosion of what was once a strong, focused Air Force research and development institution.”
Logistics and support, on the one hand, and research and development, on the other, are not compatible in philosophy or culture, Skantze argued. Logisticians’ concerns are day-to-day support of operational forces. They are risk averse—and their activities tend to be fully funded. Researchers focus on risk management. Their money comes in chunks.
“In the R&D world the future is tomorrow,” said Skantze. “In the logistic world the future is today.”
Keeping the functions separate thus makes sense for a high-tech Air Force, according to Skantze. When they are combined, as they are in today’s AFMC, something gets lost. Day-to-day battles consume the AFMC commander, and a focus on R&D gets lost.
“There is no real, discernable Air Force R&D institution in the field,” said Skantze.
Furthermore, said Skantze, the PEO system violates good management practice. A short chain of command, with the PEO reporting directly to the top of Materiel Command, sounds good in theory, but it cuts out the middle layers of management—product development chiefs and their staffs, among others—who are the teachers and librarians of Air Force acquisition. As a result, Skantze said, each new PEO sets out on developing his or her new system, unaware of the many pitfalls that lie ahead and without access to any real peer review process that can judge where they are heading before it is too late.
“In my judgement, we have seriously weakened the Air Force acquisition institution to where its strength, its substance, and its roots are eroding,” said Skantze.
The other two members of the panel, however, gave much higher marks to the AFMC and PEO structure.
Lt. Gen. Ronald T. Kadish, commander of Electronic Systems Center at Hanscom AFB, Mass., argued that the overall goal of the PEO system was to give the Air Force a very short chain of acquisition command and a sharper focus on the big acquisitions that are the crown jewels of the force.
“By and large it has worked very well,” said Kadish. “There is always a problem in dislocations and balance in every organization, but it has worked fairly well.”
Recent acquisition results speak for themselves, said Kadish. Two years ago the C-17 was near cancellation; now it has been put on a multiyear procurement contract. The shortened PEO system allowed the Air Force to sign off on the multiyear idea after only a few days of consideration, according to Kadish.
Rebecca L. Grant
Another panel participant, Dr. Rebecca L. Grant, the president of IRIS Corp., a research group, in Arlington, Va., said that PEOs were established for a number of purposes.
One was to get clear command channels that make it easier for weapon systems to gain support of top Pentagon officials. Another was to limit reporting requirements. Still another was to put good managers in place with small staffs and free them of the need to constantly defend their systems on Capitol Hill.
“With all the turbulence and chaos that went on with the creation of the Air Force we have today, there was an overriding theme to all that reorganization,” said Grant. “I would characterize it as a focus on the operator and on the operator’s requirements.”
Furthermore, she said, the Air Force’s warfighting commands and their staffs are much more technologically sophisticated than ever before. The number of big programs has shrunk drastically from that of 15 or even 10 years ago.
“I would submit … that the stand up of AFMC was … not a moment too soon,” said Grant. “Many of the benefits that we have begun to see, both on the acquisition side and particularly in logistics—in the two-level maintenance initiatives, in lean logistics—have been greatly enhanced by the existence of a single and unified command. It is not a perfect command but … an integrated command that pulls these issues together.”
When it came to logistics, speakers at the AFA symposium spent much time discussing Joint Vision 2010 and “agile combat support,” the picture it presented of the support system of the future.
Maj. Gen. Dennis G. Haines, AFMC director of logistics, said that the Air Force will need to be competent in a number of core areas to successfully implement the new Joint support concept.
One is long-range communications—an ability to reach any source of supply in the world, be it an Air Force depot, a Navy yard, or contractor, and find a needed component. Another is air mobility express, which will use a blend of military and commercial flights to move parts anywhere in the world in a maximum of three days. Finally, agile support will likely depend on a lean, responsive depot structure which uses performance-based business processes.
Jeffrey A. Jones
The idea is to move just what you need, said Jeffrey A. Jones, executive director of logistics management, Defense Logistics Agency. The idea is also to avoid what happened during Operations Desert Shield and Desert Storm. In Jones’ view, USAF simply emptied the entire inventory of consumables onto the back of US Transportation Command to get it moved into the theater, after which it sat idly until 40 percent was moved back to the United States.
The problem lay at the boundaries between echelons and functions, said Jones. Within a depot, or a fighter wing, there are wonderful management systems that handle parts movement. The second these management systems start talking to other systems outside their narrow world, the result is friction that slows down response. Inventory is the primary symptom of this friction, said Jones. It’s a stockpile of components judged necessary to deal with the whole support system’s inefficiencies.
Cutting inventory will be crucial if agile combat support is to really save money. That is because much inventory represents waste. Between 30 and 40 percent of what is inventory ultimately never gets used because of obsolescence of one kind or another, said Jones.
Retired Army Gen. William G.T. Tuttle Jr., president of the Logistics Management Institute, said that 21st–century logistics will rest on three principles.
The first is Joint common supply and services support of dispersed elements. In other words, Joint logistics for things everybody uses and service logistics for their own unique weapons. Development of Joint service logistics processes will be key if this first principle is to be fulfilled.
The second principle is the need for a minimum logistics footprint. That keeps targets for tactical ballistic missiles to a minimum. “You tailor your loads,” Tuttle said. “Air mobility express delivers direct to the Air Force dispersed operating bases.”
Third—and most controversial: The services and the Defense Logistics Agency need to contract out many, if not most, support functions. “I am saying we need to get the services out of the business of operating logistics infrastructure,” said Tuttle.
One Man’s Vision
In sum, speakers at the AFA meeting agreed that more needs to be done, whatever the progress that has been made in recent years. Otherwise, a vision outlined by Augustine, CEO of Lockheed Martin, might become reality.
In 2020, according to Augustine’s fanciful remarks, the Pentagon has been downsized to “the Square,” the nation’s entire defense industry can sit at two tables, the Secretary of Defense is Mike Wallace, and Augustine himself is head of Lockheed Martin Northrop Grumman Loral Disney. The Air Force wants to replace its entire inventory of aircraft, which consists of one F-16—but a Congressional staffer points out that all active-duty forces were phased out years earlier in favor of simply telling enemies we have lots of airplanes that are designed with stealth technology, so no one can see them.
“That’s the way it could sound if we don’t do things that really do fix the acquisition process, given the amount of money we are likely to be able to spend in the years ahead,” he said.
Peter Grier, the Washington bureau chief of the Christian Science Monitor, is a longtime defense correspondent and regular contributor to Air Force Magazine. His most recent article, “Stressed Systems,” appeared in the July 1997 issue.