After decades of DoD acquisition reform, Congress has yet to tackle cultural issues

Listen to the panel of DoD acquisition experts

wfedstaff | April 17, 2015 8:31 pm

Twenty-two years ago, what was then called the General Accounting Office issued a report lamenting the Defense Department’s long history of cost and schedule overruns in its major weapons systems, but expressing optimism that the end of the Cold War made for a rare opportunity for culture change within DoD acquisition.

After two decades of overhauls to procurement laws, GAO’s diagnosis of DoD’s acquisition weaknesses might as well have been written today. Then, as now, big programs tend to overspend their budgets and blow past their schedules because of unrealistic requirements and rosy cost projections. Over the past decade, the median developmental acquisition program exceeded its initial cost estimates by 31 percent, according to Defense Department data.

The fact that so little has changed in spite of numerous congressional efforts to fix the system doesn’t mean reformers haven’t prescribed the right policies. It’s a reflection of the fact that no one’s quite cracked the code on how to change a culture that proven itself to be highly resistant to legislative reform for 40 years, said Paul Francis, the GAO staffer who led the drafting of that 1992 report.

“To look at this as a system that’s ‘broken’ underappreciates what’s going on. If something is broken, we would have fixed it,” Francis said in an interview at GAO headquarters, where he’s spent most of the past 36 years studying the defense acquisition process. “I think it’s more instructive to look at this as a system that’s in equilibrium and that produces the same results routinely. That’s a much harder problem to solve, but I think we need to go down that path.”

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As part of our special report, “The Missing Pieces of Procurement Reform,” several acquisition experts pointed out that DoD acquisition is one of the most studied problems in the history of government. The basic methodologies for bringing systems in on-time and on-budget are pretty well understood by now, and many of them have already been codified during past rounds of acquisition reform.

“I think they’re generally well known in terms of being able to list them. They’re not as well known as far as actually internalizing them in terms of day-to-day behavior,” said David Berteau, a senior vice president at the Center for Strategic and International Studies who previously served as a top staff member for the Packard Commission, a blue ribbon panel which began examining Defense acquisition issues in 1985. “I have sat on a lot of internal reviews of weapons systems, and all too often, the problem has been that the requirements at the beginning weren’t structured properly for the kind of funding and technology readiness that the program has available, and then the requirements change frequently. At least until the program runs out of money. Then you take what you can get.”

In interviews with Federal News Radio and in written comments to Capitol Hill, defense experts highlighted the existence of a deeply embedded system of incentives that seem to make DoD almost impervious to Congress’ attempts over multiple decades to achieve a cheaper, faster acquisition system.

One common theme: Program managers aren’t so much managers of their programs as they are advocates for keeping them funded.

“The challenge here is that program managers are evaluated on how quickly they can move their program to the next milestone before rotation to a new assignment,” wrote Dr. Christine Fox, who served as DoD’s director for cost assessment and program evaluation for four years beginning in 2009 and later served a short stint as acting deputy Defense secretary. “With this metric of achievement, these managers have a strong incentive to move the program forward, even if it should be slowed or reconsidered completely. There are no career incentives for acquisition managers to say that their program is not progressing well, it is not worth the money, and should be slowed or cancelled.”

GAO’s Paul Francis said the system of incentives that pushes to keep systems alive extends far beyond individual program managers. He said there are too few people in the acquisition system who have a rational reason to say ‘no’ when requirements spiral out of control or costs escalate.

So while the system has various checkpoints that acquisition programs are supposed to meet before they can move forward, in practice, big systems historically are only done away with or restructured when the secretary of Defense personally intervenes to say enough is enough.

“What are the incentives for stopping something that should be stopped? An acquisition executive — who might be spending all of two years in the Pentagon — they want to be the father of Program X. They don’t want to be known as the person who killed that program,” said Francis, who emphasized that his comments to Congress and to Federal News Radio represented his own views, not necessarily GAO’s. “What are the incentives to cancel or restrict or re-baseline a program? That really takes the will of an individual who has to put aside all of the incentives to say yes, and say ‘no’ instead. I think it’s unrealistic to expect the system to do that very often.”

Francis counts Congress as a part of that system-in-equilibrium, and thinks that lawmakers have a huge role to play in changing the incentive structure, not necessarily by enacting new laws, but by saying “no” to programs that don’t abide by the guidelines they’ve already enacted.

“Every year, new programs are presented to Congress for funding approval. They should hold those programs to the standards that are already in law and regulation: They should have high technical readiness, they should have realistic cost and schedule estimates, they should have an executable business case,” he said. “To the extent that Congress approves programs that break those rules and take shortcuts and overpromise, we’re filling the hopper up with programs just like the ones we’ve done before, and we’re also reinforcing the system. We’re telling other programs, ‘This is the way to get money. Don’t bother following the rules.'”

Notwithstanding the mismatch between Capitol Hill’s demands for better long-term acquisition results and its year-to-year funding decisions, there are reasons to hope that DoD can alter its persistent habits of cost and schedule overruns.

Internally, the department has begun imposing spending caps on each of its major programs so that they do not enter the acquisition lifecycle with designs on spending more money than they’re likely to get, said Frank Kendall, the undersecretary of Defense for acquisition, technology and logistics. The affordability caps, which Kendall said have been applied to nearly all of the Pentagon’s major systems, are part of DoD’s Better Buying Power program.

Kendall routinely refers to that program as “acquisition improvement” and strenuously avoids the term “acquisition reform.” And during the current runup to potential legislative action, he’s made clear that he doesn’t believe many of the previous reform laws have had much of an impact on cost or schedule.

“I object to the idea that there’s some magic thing we can do, some silver bullet we haven’t found yet that’s going to dramatically improve the results. I don’t think it’s that simple, and I think we’ve tried most of those,” Kendall told reporters recently.

But he is a big believer in data. So last year, DoD, for the first time, began a broad, self-critical exercise in data analytics. Among the questions: Which acquisition policies are working, and which contract structures tend to lead to the best outcomes? One initial finding is that incentive-type contracts tend to lead to much better performance.

Kendall said the data is still extremely “noisy” and requires a lot more analysis.

Jonathan Etherton, a former Senate staffer who shepherded many of the 1990s-era acquisition reforms through Congress says it’s nonetheless a major step forward in terms of informing any changes Congress might make the next time.

“We have better access to data about performance of the acquisition process and we also have better analytic tools to assess the data, put it in context and use it to make decisions rather than leaning on anecdotes and people’s hunches about what to do next,” said Etherton, who now leads acquisition reform studies for the National Defense Industrial Association. “Of all the things I see out there that could really characterize what could be a different approach this time to acquisition reform, I think evidence-based decision making is probably the major thing.”

In comments to Congress and Federal News Radio, acquisition experts overwhelmingly agreed that improvements to the acquisition workforce — whether in quantity, quality, or both — are essential.

Dozens of reviews over multiple decades have also emphasized that point, but it’s often been undercut by budget realities, as it was during the 1990s when Congress and DoD cut the acquisition workforce in half without much regard for the expertise it needed or the tasks it would have to perform in an increasingly outsourced defense environment.

“We dramatically increased spending on contracts — more than doubling procurement spending between 2000 and 2008 — with a corresponding burden on the understaffed, under-trained contracting offices,” said Dan Gordon, a former White House procurement chief who now teaches at George Washington University. “As the Gansler Commission reported in 2007, that meant that the Army’s contracting personnel faced a 600 percent increase in workload since 1992.”

Several others pointed to structural challenges within the workforce. For example, there are significant disincentives for uniformed members to enter into an acquisition career since those positions are not highly valued within the military’s personnel system, and as a result, don’t offer many opportunities for promotion.

“In that kind of a system, you have two choices,” Berteau said. “You can bring in officers from the field and put them in charge of acquisition programs, and we’ve seen that happen under the thinking that if you’re a great leader, you must be a good acquisition program manager. We’ve also done the opposite: we’ve had program managers who are extremely good, but since they’re not competitive for promotion, we have to get rid of them. There are ways to fix that, and Congress has considered them, but it has never made it out of committee.”

Capitol Hill is still in an exploratory phase as to how big it will go on its next round of acquisition reform. But observers generally agree that the slow, deliberate process lawmakers are following right now is probably not going to lead to a major change in direction for acquisition policy.

From DoD’s perspective, the ideal outcome would be that Congress resists the urge to add more rules, and instead uses the opportunity to untangle some of the existing ones it’s imposed during past reforms.

“Oversight and governance requirements have added multiple layers of prescriptive processes, authoritative organizations and extensive reporting and documentation requirements. In short, the sheer size and overlapping nature of the bureaucracy is not implementable,” wrote Sean Stackley, the assistant secretary of the Navy for research, development and acquisition.

Kendall said DoD is in the process of assembling a legislative package that would attempt to streamline the layers of laws and regulations that now comprise the reams of compliance checklists that various reforms have imposed on program managers since the Goldwater-Nichols Act, while still maintaining the basic intent behind those reforms.

“They’re all well-motivated. But the total body of law is very large and complex. The same is true of the [Defense Federal Acquisition Regulation Supplement] and the [Federal Acquisition Regulation],” Kendall said.

GAO’s Francis says it’s a worthwhile effort, as long as it’s undertaken carefully and doesn’t attempt to jettison safeguards that were put in place for good reasons.

“I can agree with people who say that the system is byzantine and that no one can possibly follow all of the regulations,” he said. “But I think if you went through and pulled all of them out, they were put there for some reason. Until you know that the reason is gone, you don’t want to take all the rules off and trust everyone that everything’s going to be fine. But I think you could look at the key principles we hold ourselves to, look at the outcomes we want, what incentives we want to create, and see how much deadwood is in all of those rules and regulations.”

More from the special report, Missing Pieces of Procurement Reform:

Treasury Acquisition Institute adjusts to reach more students

10 ways to improve program management

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