TCS Daily

Trust And Competition Are Keys To Slashing Waste

By Ken Adelman - March 5, 2001 12:00 AM

Spending upwards of $300 billion yearly -- $60-plus billion for the procurement of new weapons and equipment - invariably brings waste, fraud, and abuse. Yet waste is far greater than fraud or abuse, and eminently more avoidable.

Acquisition has long been the most messed-up wing of the Pentagon. Few outsiders realize the hundreds of millions of dollars squandered annually because of shelves of regulations, scores of inspectors, and hordes of CYA ("cover your 'rear'") civilian buyers - all part of an Alice-in-Wonderland world of defense buying.

Insiders know this, and cringe.

Last month, though, the American Institute for Aeronautics and Astronautics (AIAA), the key Air Force acquisition officer Mrs. Darleen Druyun, and the "big five" aerospace firms (Lockheed Martin, Boeing, Northrop Grumman, BAE, Raytheon, and TRW) decided to stop cringing and start directing. Their report, A Blueprint for Action, released last week, lays out long-overdue ways to give our troops the best tools at the least cost - as quickly as possible. The measures include:
  • Streamlining time frames through "transformational pilot programs."
  • Introducing multi-year production and development contracts that cover full milestone periods.
  • Contracting out logistical and support services, especially depot maintenance;
  • Using award fees for a contractor's performance on R&D work.
  • Encouraging more efficiency from past rounds of defense consolidation by splitting subsequent savings with the companies.
  • Changing export controls to give State Department reviewers the incentives to approve hi-tech systems that strengthen our friends and allies as well as preclude those that would aid our adversaries.
  • Encourage off-the-shelf buying from commercial firms without the reams of paperwork or host of inspectors on factory floors overseeing their manufacturing process.
  • Close unneeded bases and defense facilities, a difficult task as members of Congress consider them the juiciest pork.
Before implementing these items, though, two fundamental changes are necessary.

First, the process needs to re-instill trust and respect in the system. Only in government procurement is a firewall of lawyers erected between customers and suppliers. In the outside world, companies build teams of suppliers with and for the customer - teams that work on tasks cooperatively and professionally. If suppliers don't furnish quality products on time at cost, they're replaced. The spirit of cooperation prevails.

Not so in government, where suspicion is the norm. The customer, here the Defense Department, cannot meet with a major supplier without lawyers madly scribbling notes for potential (or subsequent) legal actions. That's hardly an atmosphere conducive to the best results.

Secondly, the process needs an infusion of competition. Granted, that's hard since Pentagon procurement is a monopsony, with one buyer and many suppliers (the opposite of monopoly, with one supplier and many buyers). But more than a modicum of competition can come through decentralization.

The civilian Secretaries of the Army, Air Force, and Navy actually should have the legal responsibilities of procuring weapons and supplies for their respective soldiers, fliers, and sailors, traditional service rivalries. Doing so would yield real benefits.

General Motors pitted Cadillac, Buick, and Oldsmobile against each other for the sound capitalistic reason that competition brings out the best in any endeavor. Eventually, that competition led to Oldsmobile's demise for not meeting market demands. Devolving procurement from the undersecretary of Defense for Acquisition to the three service secretaries would instantly spark rivalry on which branch is most innovative and which the least wasteful. No one would want to end up like Oldsmobile.

These two fundamental reforms - infusing trust and adding competition into the Pentagon procurement system - are achievable. Secretary of Defense Donald Rumsfeld can deliver noticeable results now-- if he acts as boldly as he has spoken, especially when he said during his confirmation hearing that now is not the time for partial measures on defense reform.

Then the AIAA-government-industry reforms could complete the Rumsfeld Revolution in defense procurement and budgeting.

Being shown what's right to do - as the AIAA team has done, and so nicely - precludes any excuse for not doing it.

Those of us who want American strength restored while keeping government spending to a minimum are waiting for such action. And we're watching, carefully.


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