Wasteful Defense Spending Is a Clear and Present Danger

[Valin]

WSJ
We could afford a stronger military if we implemented some contracting reforms.
JOHN LEHMAN

When John McCain was shot down over Hanoi in 1967, he was flying an A4 Skyhawk. That jet cost $860,000.

Inflation has risen by 700% since then. So Mr. McCain's A4 cost $6.1 million in 2008 dollars. Applying a generous factor of three for technological improvements, the price for a 2008 Navy F18 fighter should be about $18 million. Instead, we are paying about $90 million for each new fighter. As a result, the Navy cannot buy sufficient numbers. This is disarmament without a treaty.

The situation is worse in the Air Force. In 1983, I was in the Pentagon meeting that launched the F-22 Raptor. The plan was to buy 648 jets beginning in 1996 for $60 million each (in 1983 dollars). Now they cost $350 million apiece and the Obama budget caps the program at 187 jets. At least they are safe from cyberattack since no one in China knows how to program the '83 vintage IBM software that runs them.

[Schmedlap]

Inflation has risen by 700% since then. So Mr. McCain's A4 cost $6.1 million in 2008 dollars. Applying a generous factor of three for technological improvements, the price for a 2008 Navy F18 fighter should be about $18 million. Instead, we are paying about $90 million for each new fighter.

I wonder how good of a comparison that is. Was an A4 designed for the same mission as an F18? Is a "factor of three for technological improvements" really generous?

I love the concluding sentence.

At least they are safe from cyberattack since no one in China knows how to program the '83 vintage IBM software that runs them.

It reminds me of an anecdote that I shared with an Information Systems class in Business School, as I explained that - in the 21st century - we were using dot-matrix printers, floppy disks, and giant, low-resolution monitors to run the Army supply system. People thought that I was exaggerating. When the professor asked me for some plausible benefit of this, I pointed out, "well, I suppose you can't hack into an old 386 if it doesn't even have an ethernet port."

[Cliff]

I wonder how good of a comparison that is. Was an A4 designed for the same mission as an F18? Is a "factor of three for technological improvements" really generous?

First off, the F-22 doesn't cost $350 million... that's essentially including the development cost, most of which is sunk. Somewhere around $115-$130 million is probably more accurate. If the F-22 was built at the same rate (approx 2900?) the A-4 was, it would certainly be a lot cheaper. Or even the rate it was supposed to be built. Or even half the rate it was supposed to have been.

The A-4 is not really comparable to the F-22 either... roles and missions wise, we don't really have an equivalent... the ROKAF T-50, Hawk, or M-346 would probably be a more apt comparison. From the A-4's timeframe, the F-102 or F-4 are probably better comparisons.

If you compare the effectiveness increase of the F-22 (perhaps kill ratios?) over other fighters to the cost increase they are probably pretty close to proportional.

I've said it before, and I'll say it again... the US military needs to be able to fight at all levels of the spectrum of conflict. Without the high end forces (armor, artillery, carriers, fighters) needed to fight at the high end, wars may not stay small.

Personally I think we should be able to afford a force that allows a moderate level of risk across the spectrum.

[pjmunson]

Cliff, Lehman isn't saying that we shouldn't have the F-22. From the title, and the article itself, he's saying that the bloating of costs due to the screwed-up nature of our acquisitions bureaucracy, plus the fact that we've essentially let the contractors take over the job of telling us what we need, is killing us on defense spending. I'd argue that, while the F-22 makes an attractive example because of the sheer dollar amounts involved, you can see this contracting bloat everywhere. The answer to everything seems to be to hire contractors, who will then work into their study, their procedures, whatever, the trojan horse of how you are going to need them forever and how you need to increase the scope of their contract so you can pay them more money.

[J Wolfsberger]

Cliff, Lehman isn't saying that we shouldn't have the F-22. From the title, and the article itself, he's saying that the bloating of costs due to the screwed-up nature of our acquisitions bureaucracy, plus the fact that we've essentially let the contractors take over the job of telling us what we need, is killing us on defense spending. I'd argue that, while the F-22 makes an attractive example because of the sheer dollar amounts involved, you can see this contracting bloat everywhere. The answer to everything seems to be to hire contractors, who will then work into their study, their procedures, whatever, the trojan horse of how you are going to need them forever and how you need to increase the scope of their contract so you can pay them more money.

You should probably learn at least a little bit about how the defense industry operates before writing such slanderous nonsense.

[Ken White]

...that the bloating of costs due to the screwed-up nature of our acquisitions bureaucracy, plus the fact that we've essentially let the contractors take over the job of telling us what we need...

Seems to me the former leads to the latter. Both failures ably and forcibly supported by our superb Congress.

The emasculated the former to to stop backbiting and evading of Congressional preferences They assisted DoD in shutting down the P&C folks by passing some really dumb laws and requiring a 'compliance' bureaucracy that would be hilarious in its lack of value if it weren't sad.

They really like contractors -- contractors are BIG campaign contributors and many of them hire Union workers, a twofer for the Congroids.

There's plenty of blame in this for many -- including a number of folks in uniform and DoD civilians, appointed and career. The industry is reacting to the people it sells to. Contractors are subject to uniformed scrutiny...

[pjmunson]

instead of insulting me and calling what I say nonsense, or at least in addition to insulting me, then why don't you explain how ill-informed I am. Sensitive because contracting dollars are lining your pockets? I have seen it in action, and I also know contractors who admit as much. Contractors (the companies) are businesses and if they do not justify their continued utility to the DoD, and also the expansion of their scope of work, then they are not going to survive. It makes business sense for them to be selling themselves. It also leads to bloat when no one in the DoD bureaucracy cuts the fat, or at least weeds out what we need from what we don't.

Furthermore, some of the mechanisms through which the military is contracting out programs that are "urgent" leads to excesses, poorly written statements of work, and generally a lot of money wasted for not a lot of results.

I am not a defense industry or defense acquisitions expert, but don't hide behind your huffy insults. Explain how I am off base.

[Surferbeetle]

Privatization is a government strategy that can be attributed to Margaret Thatcher, Ronald Reagan, and Brian Mulroney. The objective is to allow the competitive powers and associated efficiencies of the free market to deliver government services at low cost. The theory is sound and simple to understand, however effective real world implementation depends upon a government's (and as we know they are not monolithic entities) ability to mobilize sufficient capability and capacity to properly oversee the process. The IMF & World Bank are famous/infamous for attempting to implement Privatization Strategies in 2nd and 3rd World countries.

The government side of the sausage making process as I understand it:

Hazy understanding:

• Agency develops a budget request which takes into account operations & maintenance, new projects, and force structure-somehow this is tied to a budgetary line item

• Line items get appropriations (money) from Congress

Better understanding:

• Five year plan projects or emergency projects are funded.

• Contracting Officer's Representative (COR) develops a Statement of Work (SOW) which incorporates project background, defines required work, references industry standards to measure the work against, defines a submittal schedule, incorporates a proposed project schedule, and defines the deliverables to be provided by the contractor.

• COR develops an independent government estimate of the projects anticipated cost.

• Contracting Officer (CO or KO) sends out a Request for Proposal and considers bids from qualified parties.

• COR reviews bids for technical considerations if requested and provides advice to CO

• CO applies Federal Acquisitions Regulation, determines winning bid, and negotiates price

• CO, COR, and Contracting Officer's Technical Representative (COTR) then oversee project to completion

Just like in military operations, weak links in government contracting operations often come down to capacity and capability.

[J Wolfsberger]

instead of insulting me and calling what I say nonsense, or at least in addition to insulting me, then why don't you explain how ill-informed I am. Sensitive because contracting dollars are lining your pockets? I have seen it in action, and I also know contractors who admit as much. Contractors (the companies) are businesses and if they do not justify their continued utility to the DoD, and also the expansion of their scope of work, then they are not going to survive. It makes business sense for them to be selling themselves. It also leads to bloat when no one in the DoD bureaucracy cuts the fat, or at least weeds out what we need from what we don't.

Furthermore, some of the mechanisms through which the military is contracting out programs that are "urgent" leads to excesses, poorly written statements of work, and generally a lot of money wasted for not a lot of results.

I am not a defense industry or defense acquisitions expert, but don't hide behind your huffy insults. Explain how I am off base.

1. “… the bloating of costs due to the screwed-up nature of our acquisitions bureaucracy…” Agreed. And one of the few accurate observations.

2. “… plus the fact that we've essentially let the contractors take over the job of telling us what we need…” Completely false. This is not how the acquisition process works. For the Army, TRADOC (Training and Doctrine Command) determines doctrine and needs. These are given over to the AMC (Army Material Command) activity, which interfaces with the contractors. It is generally in this area that the requirements process breaks down, for the service, the civil service and contractors.

3. “ … contracting bloat everywhere.” Yes. Due to the fact that for the last 10 or so years the entire engineering process has been FUBARed. Specifically, our systems analysis and engineering sucks, across the board. My observation, the GAO’s judgment, and the principal thrust of the latest acquisition reform bill.

4. “The answer to everything seems to be to hire contractors…” Yes. Because of:

a. Congressionally determined authorized end strength.
b. Retention problems for highly skilled technical fields.
c. Inflexible Civil Service rules regarding hiring and firing.

5. “… who will then work into their study, their procedures, whatever, the trojan horse of how you are going to need them forever and how you need to increase the scope of their contract so you can pay them more money.” No. And in addition to being false, it is also extremely insulting.

There are amateurish, unethical officers, civil servants and contractors. There are far more ethical, professional, competent officers, civil servants and contractors. If you’ve had a run in with some unethical types, that’s unfortunate. It doesn’t justify your remarks, in either post.

And I stand by my observation: You need to learn how the acquisition process works.

[pjmunson]

Up front, I'm not pointing the finger solely at contractors. As Ken White put it, there is plenty of blame to go around and I recognize it. Contractors (speaking of the companies more than the individuals) are there to make money and, as such, they have a responsibility to their shareholders, employees, themselves, to figure out how best to turn a profit. In that, they are going to do everything they can to sell themselves. That includes justifying their continued utility, lobbying Congress, etc.

"“… plus the fact that we've essentially let the contractors take over the job of telling us what we need…” Completely false. This is not how the acquisition process works. For the Army, TRADOC (Training and Doctrine Command) determines doctrine and needs. These are given over to the AMC (Army Material Command) activity, which interfaces with the contractors. It is generally in this area that the requirements process breaks down, for the service, the civil service and contractors."
-It is not completely false. You are correct, I do need to learn more about the acquisitions process, but at the same time, I can still have a valid observation without be an acquisitions expert. I know that TRADOC, MCCDC, and others are supposed to be determining doctrine and needs and in many cases that is happening. However, the contractors can still inject themselves into the process (as they rationally should be doing to make a profit) and tell the military what it needs and how that contractor can supply it. Because the bureaucracy is short staffed, etc, it often takes these "great ideas" and presentations and runs with them, finding out way to late just how little work had been done beyond the powerpoint. This falls on the shoulders of both the contractors who are selling subpar ideas/products, as well as the civilians and officers staffing the DoD side. A quote from an officer who was part of one of these deals, discussing how we would actually employ a program that was sold to DoD essentially through his office, "It looks great on powerpoint, but you (the operating forces) will have to figure out how to make it work" because the powerpoint briefing at least in parts was completely out of touch with reality. That office was fed crap by the contractor, then put the stamp of their office on the slideshow. Again, both are culpable.

-"“The answer to everything seems to be to hire contractors…” Yes. Because of:

a. Congressionally determined authorized end strength.
b. Retention problems for highly skilled technical fields.
c. Inflexible Civil Service rules regarding hiring and firing."

-Agreed. I understand why contractors are being relied on and how the DoD has forced that situation, but the bottom line is that the contractors have their hooks in the DoD, and Congress, and the DoD is increasingly being steered by them due to its own shortcomings. Completely rational behavior on the part of the commercial contractor, but this is a very unequal relationship. You have a crippled bureaucracy, subject to Congressional and Executive directives, that is not governed by dictates of profitability or business competitiveness permeated by commercial entities, that ARE governed by the need to make a profit, that have powerful access to Congress and the Executive. This is not a healthy relationship.

-"5. “… who will then work into their study, their procedures, whatever, the trojan horse of how you are going to need them forever and how you need to increase the scope of their contract so you can pay them more money.” No. And in addition to being false, it is also extremely insulting. "
-Not false, and shouldn't be insulting unless you are feeling extremely defensive or guilty. My wording of "trojan horse" perhaps is pejorative, but I think that it is apt in that, once contractors are in the door, they are going to try to stay there and increase their profits. What company in their right mind would not attempt to demonstrate their utility and, more importantly, once given insight into the DoD's needs by working on a given contract, what company would not try to expand their "market share" by proposing other services they can offer? DoD is culpable in that it needs an appetite suppressant, as is Congress in that they can sometimes force DoD to buy what it acknowledges it does not need.

Furthermore, the nature of the contracting industry, with its networked set of companies that (a) are often huge with many different branches with very different functions (b) often own subsidiaries or have mutually beneficial relationships with other companies and (c) are frequently shifting, renaming, and reorganizing, presents problems and conflicts of interest. Example: Massive defense corporation A has an analytical branch. It is contracted to do a study of issue X for a TRADOC-like entity. It also has branches that can provide manpower and systems that will carry out the recommendations of such a study. The TRADOC-like entity is under no obligation to implement the findings of the study, but the contractor in this case is telling the TRADOC-like entity what it needs. It the TRADOC-like entity decides to implement the findings of the study, won't corporation A be likely to have a huge advantage in the bidding? Not to mention that the surveys that the high-paid PhD and his crew came up with would fail any graduate level research design class as completely flawed.

You'll probably tell me again that I am slanderous and ill-informed, but I'll leave it to others to judge. You don't have to be an acquisitions expert to have valid criticisms of all aspects of the situation, although many would like to say so, in order to ensure that only the insiders are allowed to criticize themselves.

[Ken White]

talking past each other but you are focusing, it seems to me, on different aspects and perhaps, as they say the truth is somewhere in between. The process is flawed, we all acknowledge, contributors to problems exist in all categories of persons involved, I think we all said one way or another -- so the problem is that we -- Whoa! I'm retarded, -- YOU are both victims of that flawed process and you're hacked off by it.

I'm not even a victim -- now -- and I'm hacked off. The problem existed back in my day but it has gotten significantly worse in the last few years. It is borderline criminal and it sure needs to be fixed -- for the sake of the contractors, the services and the nation.

Never vote for an incumbent!!!

[J Wolfsberger]

Example: Massive defense corporation A has an analytical branch. It is contracted to do a study of issue X for a TRADOC-like entity. It also has branches that can provide manpower and systems that will carry out the recommendations of such a study. The TRADOC-like entity is under no obligation to implement the findings of the study, but the contractor in this case is telling the TRADOC-like entity what it needs. It the TRADOC-like entity decides to implement the findings of the study, won't corporation A be likely to have a huge advantage in the bidding? Not to mention that the surveys that the high-paid PhD and his crew came up with would fail any graduate level research design class as completely flawed.

Companies that perform studies and analysis for organizations like TRADOC are usually small and specialized, and generally aren't involved on the acquisition side.

One of the major problems, highlighted by the GAO, is that massive XYZ corporation isn't doing the necessary up front system analysis and engineering. Usually, because it's written out of the contract, inevitably resulting in program failure.

I wind up doing what I think is necessary to get the right tools to the soldier, but my magic phrase is "I'm always happy to work on a best effort basis at the direction of the customer." As a result, I have data in hand when I have to explain why F still equals Ma, why survivability does indeed trump ease of maintenance, etc. I will also walk away from a contract where the customer demands I do something stupid.

Unfortunately, too many contractors think about having to go home and explain how they got laid off or fired for not doing something stupid. ( And before you judge them harshly, take a look at your own family and think real hard.) They cave, and a lot of them especially cave when confronted with someone from the government side who walked into the contract having predetermined that all contractors are lying thieves out to cheat the government. I don't, but I've paid a price and do not begrudge anyone who made a different decision.

It's your adversarial attitude I'm responding to. Here's some free advice: Stay out of acquisition. If you ever go into the acquisition side with the attitude you've shown here, you will enjoy a self fulfilling prophecy. The only contractors who will want to work with you will be the ones who live down to your expectations.

[pjmunson]

You are being far to defensive, taking this far too personally, and not reading my posts carefully. Calm yourself down. And, by the way, I don't need your free advice to know to stay out of the world of acquisitions. This is not an acquisitions discussion board, and many of the people here have seen the ugly end results of poor acquisitions management on the DoD side and unscrupulous contractors on the commercial side. You need to understand that in order to realize that I don't have to have a Masters or PhD in acqusitions or contract management to have a voice. If you had opened your input in this discussion with something other than, "You should probably learn at least a little bit about how the defense industry operates before writing such slanderous nonsense," then maybe we'd be having a less adversarial conversation and I'd have more respect for you point of view. As it is, I still have responded to your posts with logical explanations of my position, rather than insults.

First off, look back at my last post. When I said "contractors" up front, I specified "speaking of the companies more than the individuals." In a number of places, I spoke to the profit motive and stated that it was rational (actually I should have said necessary) behavior in the business world. A company that doesn't want to make a profit is like an animal that won't eat. Its not long for this world. Now, with regard to the individuals, I know that they are under intense pressures from the companies to make this profit. I understand that not caving in to such pressures can mean not putting food on the table of your family. I also understand that poorly written, sourced, and executed contracts, for all the reasons I've laid out above, can lead to human wreckage. I've also said that there is plenty of blame to go around, some of it individual, much more of it institutional.

It all comes down to the fact that a profit-motivated world is dealing with a world that does not live and die by profits, and therefore, the relationship is unequal and leads to, let's say, inefficiencies in sterile terms.

[pjmunson]

"Companies that perform studies and analysis for organizations like TRADOC are usually small and specialized, and generally aren't involved on the acquisition side."

Details aside because my example in the post you were responding to is real, the company doing the study is not small, and while it has a specialized analytical branch, evidently, it is heavily involved on the acquisitions side. Again, rational business behavior. Major defense contractors have the influence and economies of scale to operate more efficiently in all modes of defense contracting, plus when they branch out into analysis, they're helping their own cause out. While it may not be direct influence, as I do not know the ethical and legal obligations of fencing off such a study from the other branches of the company, they are at a minimum gaining insight into where DoD is looking for change and can clue their other branches to look for marketable activities there.

[Ron Humphrey]

I do think J Wolfsbergers last

It's your adversarial attitude I'm responding to. Here's some free advice: Stay out of acquisition. If you ever go into the acquisition side with the attitude you've shown here, you will enjoy a self fulfilling prophecy. The only contractors who will want to work with you will be the ones who live down to your expectations.

Is fairly accurate both on the attitude perception side and especially the part about self-fulfilling prophecy.

As a contractor myself I have seen and experienced much of what each of you has mentioned but have to say that in general most of those who work for DOD do not approach everything from a "get everything you can" perspective. This from Ken

Well, I think both of you are correct. You are not
talking past each other but you are focusing, it seems to me, on different aspects and perhaps, as they say the truth is somewhere in between. The process is flawed, we all acknowledge, contributors to problems exist in all categories of persons involved, I think we all said one way or another -- so the problem is that we -- Whoa! I'm retarded, -- YOU are both victims of that flawed process and you're hacked off by it.

I'm not even a victim -- now -- and I'm hacked off. The problem existed back in my day but it has gotten significantly worse in the last few years. It is borderline criminal and it sure needs to be fixed -- for the sake of the contractors, the services and the nation.

absolutely hits the nail on the head.

The larger problem however is that there are problems on the military/ Civilian sides as well which more often than not create that survival of the fittest/ CYA requirement since either of the above on a whim can bring a whole lot of pain for very little purpose other than that they are not happy with some aspect of a given mission requirement or position.

Want to really see what kind of impact this can have look at the current Civilian hire move as defined by those who decided on it and taker a deeper look at how it is being implemented at the lower echelon's.

Long and short, Yes some things gotta change; point is make sure your looking at the entire cycle and all players involved before devolving into the easier bash the contractor only to find in the end that rather then getting things right for the future you instead ended up knocking them back to 6 years ago and have essentially ensured things will stay there for the next ten.

As to this last-

Perhaps it's just my youth and relative inexperience but are you saying that it's a bad thing for organizations which perform services for a customer to actually work hard to know what the client may require for the future and do their best to provide options when and if the time arrives that they are asked for it.

(PS IMHO any good general analyst can have at least a fair idea of what those requirements might be w/o necessarily having the "inside scoop" )

"Companies that perform studies and analysis for organizations like TRADOC are usually small and specialized, and generally aren't involved on the acquisition side."

Details aside because my example in the post you were responding to is real, the company doing the study is not small, and while it has a specialized analytical branch, evidently, it is heavily involved on the acquisitions side. Again, rational business behavior. Major defense contractors have the influence and economies of scale to operate more efficiently in all modes of defense contracting, plus when they branch out into analysis, they're helping their own cause out. While it may not be direct influence, as I do not know the ethical and legal obligations of fencing off such a study from the other branches of the company, they are at a minimum gaining insight into where DoD is looking for change and can clue their other branches to look for marketable activities there.

IF on the other hand your simply saying there are those who stack the deck then OK;Exactly how do you differentiate between the former (mentioned above) and the latter. (your apparent concern)

[Ken White]

I'd hate to shut a good thread down because civility got lost. But I will.

ADDED: Ron's post snuck in while I was typing mine; he seems to be relatively chilled and I think I am...

We all need to remember that this is not a good communication medium, nuances and smiles get missed so one has to be pretty careful how one words things, else something not meant to give offense may not be taken as innocently as it was meant.

[Entropy]

...which feels a lot better than being spun-up!

This thread reminds me of a contracting story told by RJ Hillhouse over at her neglected blog. It contains many elements of dysfunction that we probably all see in the current system. The one that strikes me is the experience mismatch between uniformed, government and civilian acquisitions/contractor personnel. In the Air Force, for example, many of the best acquisitions personnel, particularly the technical and science ones with advanced degrees, leave the service because the Air Force is stupid and doesn't mentor, nurture and promote them as it should. The result is that our supposed technology-focused service drives out the technical experts it needs to understand the technology and explain it to the service leadership who must make procurement decisions. I get the sense that the services often don't have the technical expertise to provide proper oversight and management.

Oh, and the process is probably just a bit overcomplicated. Click on the flowchart on that site - yes, it's one powerpoint slide! Need we say anything else?

[Ken White]

Thanks for the link. I think.

The thing that really irks me is that those yo-yos in Congress, the institution who is responsible for much of this -- acknowledging that services do tend to drive out the really sharp techies who can translate things for those senior but unversed (and that I certainly wouldn't want to be an acquisition guy...) -- will get on their high horse in a fraction of a second over any kerfluffle in the process they created...

The terrible thing is that it's likely to get worse before it gets better.

[J Wolfsberger]

If you want to know why we're having such problems, notice that the final Capabilities Description Document (CDD) appears at the top just before Milestone B, and never feeds back into product development. Add in the "Fundamentals of System Engineering Management" ca. 2000, where System Analysis is redefined as a "management and control activity," and I think we can completely explain why 70 out of 74 major acquisition programs out of the last 10 years have been in trouble (GAO report to Congress).

If we really want to improve the process, we scrap the "V" diagram and "Fundamentals," return to the 1990s version with a traditional waterfall approach to development.

[Entropy]

Thanks for the link. I think.

Did you happen to read the fine print on that flow chart? If not, here it is (emphasis added):

This chart is a classroom aid for Defense Acquisition University students. It provides a notional illustration of interfaces among three major decision support systems used to develop, produce and field a weapon system for national defense. Defense acquisition is a complex process with many more activities than shown here and many concurrent activities that cannot be displayed on a two-dimensional chart. Supporting information is on back of this chart. For more information, see the Acquisition, Technology, and Logistics Knowledge Sharing System (http://akss.dau.mil).

So that's the "simple" version!