Budget Cuts Put Acquisition Reform Back in the Spotlight

Lawmakers are once again officially pursuing the Holy Grail of reforming decades-old problems of waste and cost overruns in defense acquisitions. The House Armed Services Committee has tapped its vice chairman Rep. Mac Thornberry, R-Texas, to spearhead efforts to establish a new long-term reform strategy.

Though rank-and-file Pentagon employees may tire of such familiar promises, the fact that defense procurement accounts for 10 percent of federal spending could lend momentum to ideas that would better align the incentives of program managers and lighten the regulatory burden on contractors.

“We cannot afford a costly and ineffective acquisition system, particularly when faced with devastating impacts of repeated budget cuts and sequestration,” Chairman Rep. Howard “Buck” McKeon, R-Calif., said during a hearing Tuesday titled “Twenty Five Years of Acquisition Reform: Where Do We Go From Here?” McKeon said that “Congress, together with the Department of Defense and industry, must be willing to do the hard work to find root causes, look past Band-Aid fixes and parochial interests, and have the courage to implement meaningful, lasting reform.” Despite some progress in creating efficiencies, the Government Accountability Office says 39 percent of fiscal 2012 programs have had unit cost growth of 25 percent or more.

Thornberry, in an op-ed published the day of the hearing, called for simplifying decision making and eliminating excessive regulations. The hard-working “good people” in government “operate in a system that too often works against them,” he wrote.

“Heavy federal regulations drive up the cost of military hardware,” Thornberry said. “There are nearly 2,000 pages of acquisition regulations on the books, many of which have not been reviewed in years. Too often, Congress and the Pentagon respond to cost overruns by adding another law or an additional oversight office….To his credit, Secretary [Chuck] Hagel recently announced an effort to cut 20 percent of headquarters personnel over the next several years.”

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Dov Zakheim, the former Pentagon comptroller, testified that “the department needs to increase its focus on the career development of its acquisition personnel, beginning with its recognition that those in the acquisition corps are pursuing careers, and not merely holding down jobs. To the extent it does so, it tends to focus on personnel involved in weapons system-related activities. … Those officials who deal with services contracting, which…represent more than half of all DoD acquisitions, tend to have even less career support.” Zakheim called on the Office of Personnel Management to give the Defense Department greater flexibility in hiring and authorizing educational requirements -- even if that means new legislation.

Moshe Schwartz, a specialist in defense acquisition at the Congressional Research Service, said reform should mean creating “the right incentives,” such as curbing the tendency of managers to rush to spend excess money at the end of the fiscal year to avoid losing funds, as well as the common problem of contractors underestimating program costs in the early stages to win the award. Logistics contracts are the prime areas of waste, he said. Also needed are clear lines of authority, Schwartz added. “The inside joke among program managers is, ‘We’re not sure who runs the program.’”

Paul Francis, GAO’s managing director for acquisition and sourcing management, recommended principles such as identifying significant risks up-front and providing resources to address them; exploring ways to align budget decisions and program decisions more closely; and “attracting, training, and retaining acquisition staff and managers so that they are both empowered and accountable for program outcomes.”

The Thornberry-led initiative drew praise from the Professional Services Council, a contractor trade group. “Given constrained resources, massive demographic challenges, and the nature and pace of technology development, now is the time to act boldly, broadly and smartly,” President and CEO Stan Soloway said in a statement. He referred the committee to his association’s recent commission report “From Crisis to Opportunity,” which stresses rethinking human capital investments and training; fostering an “ecosystem” that rewards true innovation and breaks down barriers to entry; reinvigorating a collaborative relationship among defense program offices, contracting offices and industry; and “recognizing that the acquisition of professional services differs from the acquisition of weapons platforms and thus one size will not fit all defense acquisitions.”