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Is Levin-McCain Bill the Right Path?

By Commentary Thursday, March 12th, 2009 5:04 pm
Posted in Commentary, Policy

Congress is awash in acquisition reform, as it was the last time a Democrat was elected president. The House Armed Services Committee created a seven-member acquisition reform panel on March 6. The week before that, Sens. Carl Levin and John McCain — the top two lawmakers on the Senate Armed Services Committee — unveiled a new bill intended to bolster the acquisition system. Robbin Laird, a defense consultant with a wide practice, wonders whether acquisition reform serves the country or may saddle it with aging and technically inferior weapons.

The Acquisition Reform Challenge
The Levin-McCain bill deals with an important problem, getting control over costs and reforming the acquisition process. But what must be remembered is simply that acquisition is about buying kit for the warrior and ensuring that the US has the best-equipped military in the world. Better processes by themselves to not yield better acquisition; focus on process by itself. We do not want to replicate in DoD what has happened to the nuclear power industry; we have process; we have no new physical plant.

And the US needs to foster innovation, which enables the warfighter to be ahead of the game. I do not see in the bill an approach which ensures that innovation is funded, and new programs prioritized for the reshaping of US forces. Cost containment is not difficult when making decisions about already developed and manufactured kit; what is significantly more difficult is funding new kit and ensuring that proper trade-offs are made between capabilities and costs for the inclusion of new kit into the force structure.

And the core problem raised by the bill is where will the acquisition and systems engineering talent come from which is to staff the government in monitoring contracts and managing programs. Program mangers need to be empowered to be able to make trade-offs between capabilities and costs. And the idea of a cost “tsar” in the Pentagon makes sense only if trade-offs between capabilities and costs can be considered.

I think there is a significant difference between developed and already manufactured kit and new programs when framing acquisition reform. For existing kit, cost containment is largely a function of a steady buying process by the government facilitated by long-term production contracts. In contrast, for new programs, there is a need to fund growth possibilities to determine the trade space among options for development, which provide more or less capability for the warfighter.

Perhaps for new programs, it would be sensible to put in place an initial cost package with realistic growth built in; at program launch, projected maturity points would be established at which time trade-offs between capabilities and costs would be determined. Put simply, development would funded through a date certain; at that point the Program Manager would frame trade-offs and identify off ramps whereby growth beyond acceptable cost would mandate making production choices.

If the first approach is the only real option, there will be no significant development and breakthrough opportunities for the US military. And the policy of change being advocated by the President surely should not exclude the breakthrough innovations, which have enabled American military superiority. We certainly do not want to buy weapons based on our understanding of technology circa 2009; if we do so we will fund a military mausoleum.

Cost containment is important; but fielding an effective force is at least as important. Determining the trade-offs between the two is really the challenge for acquisition reform.

And here a change in the focal point of the oversight czar suggested in the bill could make a very significant contribution to shaping a more effective acquisition and development process. The bill calls for the establishment of a “director of independent cost assessment” who would examine the cost of weapons. Rather than reproducing much of what already occurs in AT and L and with the Cost Analysis Group (CAG), it would be better to ask the new director and his staff, at least in part, to assess the capabilities trade-offs of new programs and to help shape a decision-making process where cost and capabilities trade-offs could be better understood.

In the current climate of “lynch mob” or “populist” procurement in which any program over cost is suspect, establishing an analytical center with professional competence able to be part of the public debate is crucial. Perhaps the new office could hire a professional staff, which could function along the lines of the very professional, and highly missed Office of Technology Assessment. This office for those not old enough to miss it provided high quality reports informing the public and policy debate about technology choices and options. An orgy of cost debates will miss the point.

DoD needs to sort through current and developmental options to ensure the mix of what is right for now and prepares the future. In today’s world the future is already part of the present. Favoring mature manufactured products which can be priced in today’s dollars with accuracy may seem a good bargain, but will prove to be a proof of the old adage “a penny wise and a pound foolish.”

Robbin Laird is an international defense consultant who served on the National Security Council staff of both the Reagan and Carter administrations.

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	John March 12th, 2009 at 5:36 pm We do not want to replicate in DoD what has happened to the nuclear power industry; we have process; we have no new physical plant. This is a poor analogy. The public doesn’t wan’t nuclear power in their back yards period. No process is going to change that. AA tzar is another stupid Congressional mandate by people whoaare part of the problem. Just restaff the government’s procurement oversite staff.
	p.w.prawl March 13th, 2009 at 9:07 am as a 20-year navy, SBA, and consulting contract trainer, the problem with govt contracting is congress and lawyers in congress writing business rules!! There are so many conflicts and contradictions written in Federal and Defense Acquisition regulations and loopholes big enough to drive a truck through and political interference, no wonder we have cost overruns!!!
	D Thomson March 13th, 2009 at 11:21 am Nothing is wrong with Nuclear. It’s only the fuel “Uranium” that people are afraid of. Replace Uranium with Thorium and the plant will be safe from melt down, explosion, and controllable radiactive contamination, plus it cannot be made into Weapons Grade material. Costs for Securety and handling would be minimized.
	DensityDuck March 16th, 2009 at 11:42 am D Thomson: But it is still NUCLEAR!!!! so it uses ATOMS!!!!! just like in ATOM BOMBS!!!!!! And atom bombs EXPLODE AND WILL DESTROY THE WORLD!!!!!!! (this being the state of the average American’s thinking about nuclear power.)
	DensityDuck March 16th, 2009 at 11:43 am As for the “oversight czar”: Hey, y’know, whatever. Is he going to be given authority over the services’ demands for new requirements? No? Well, then he’ll be as useful as tits on a boar hog.
	loggie20 March 16th, 2009 at 9:32 pm Levin McCain won’t fix it. Any more than Nunn McCurdy got any system overunning by 25% stopped. The whole system is broken. Congress, acquisition and requirements all inept all fictions. Designs are poorly engineered and the current skilled senior citizens, whose retirement is so daunting, do not baseline any solutions that match the over blown capability gaps, fictitious “solutions”. As if the inept can determine the future enemy will tilt as the wehrmacht or the Imperial navy. The purpose of the current system is maintaining an incompetent, protected industry and the huge bureaucarcy anticipating 20 more years work after they sell out the taxpayer. The question is not to find the next generation to manage the acquisition process. Rather it is to close down the useless and corrupt and find efficient design and manufacture. Levin McCain does point out that system engieering and managing by fact is needed, but some teeth for Nunn McCurdy would be a step.
	loggie20 March 16th, 2009 at 9:39 pm “at program launch, projected maturity points would be established at which time trade-offs between capabilities and costs would be determined.” Don’t bother with a performance baseline, already the rule. This is design to cost, been around for as long as I remember, better described as design to fail. More modern term is cost as an independent variable (CAIV) same o same o; designed to fail. At some point all the waivers and deviations mean the weapon is useless, unreliable and continously redesigned expensively in the field where it is no godd to anyone. But it is sustaining he revenues, which is the goal. On one ever asks “is the thing worht the money”? But then the insiders will answer: good at ten times the costs, 20 years late and with no performance.
	mike March 16th, 2009 at 11:00 pm First step in right approach. I watched the testimony that the the “old guard”(i.e., Gansler) gave before the hearings on the McCain Levin bill. First of all there is no need for more acquisition “oversight” personnel. Second, the military should be kept out of the program management and procurement business and instead keep the military employed in needed military jobs; Third, get rid of cost plus contracts and the useless Earned Value Management processes that has allowed a $400 billion dollar plus over run in the top major contracts and has allowed more games with program Estimate To Complete EAC numbers on countless other cost plus programs,. Forth, if a cost plus contract is needed, use a tailored contract that uses firm fixed price for LOE positions and isolating the fixed costs and cost plus portions of a new development program; Forth, go back to the American way of fixed price contracts and competition to get them. Congress made a big mistake in the 1940s in allowing cost plus contracts and now is the time to end them. The reasons leading up to allowing cost plus contracts is not applicable to today’s defense industry technology (see congressional hearings held back then). The billions now being spent on non producing military acquisition can be instead given to more producible consumers to help the world economy and society, not to retired military officers who now hold a major number of the defense agency and military contractor top management positions. Congress keeps listening to the “old guard” who are still focused on cold war systems and old ways of doing business. It is time to move the defense acquisition business from the 1950s to the new business strategies of the 21st century.
	loggie20 March 17th, 2009 at 6:07 am Cost plus works; when the EAC becomes fiction the PM terminates the contract. Cost plus the government has all the risk. Never happens, theory fine implementation flawed. Fixed price, contractor has the price risk, have these things called adjustments (equitable or economic), flawed as well. Oversight is flawed, usually goes to keep the cash out flowing. It is mostly execution. Theory is fine, execution is problem. The organization on the TO&E don’t run the place.