The Pentagon Procurement Debacle: "Disarming Ourselves as Defense Spending Grows" (Part 1)

We've all heard or read about some of the inconceivable war stories of astronomical sums spent on toilets, wrenches and other seemingly common place items within the Pentagon and other government agencies. What we rarely get is well informed analysis of the problems and more rare yet, concrete proposals to remedy the systems that produce such folly. John Lehman, who was Secretary of the Navy under Ronald Reagan, and later a member of the 9-11 Commission has done just that in an extraordinarily clear and concise critique and model to remedy the "catastrophic" failures within Pentagon Procurement in this past weekend's Wall Street Journal "Opinion" page. (Subscription is required to access the entire essay -- the preceding link is to a WSJ summary.)

Mr.Lehman cites riveting examples of cost over-runs such as when he "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." He adds that "at least they are safe from cyberattack since no one in China knows how to program the '83 vintage IBM software that runs them". Citing other examples, Mr Lehman concludes that they "all prove that we are currently unable to design, develop and deliver major weapons systems in anything approaching a cost effective and timely manner." But where he really takes off is in asking and answering "Why is this happening? Where did things go wrong?" and then proceeds to outline a broad 6 point plan of "What must be done to reform the current mess". Because the importance of what he has to say is so vital to our national defense and to understand how our tax dollars are being squandered, I will quote extensively from his critique of Pentagon Procurement this afternoon and follow-up tomorrow with his proposal to remedy this fiasco.

One of the most startling failures involves the "obliteration of clear lines of authority for managing procurement programs ... When it comes to the Pentagon, no one person is held accountable for good performance or punished for failure [resulting in] a loss of discipline and control over equipment requirements." Mr Lehman explains that "on the Navy's new small warship building program ... change-orders have at times averaged 75 per week [and that] Because of these constant changes, cost-plus contracts have become the norm far into production, instead of fixed-price contracting when development is complete." And that's exascerbated by the Pentagon surrendering "control of many programs to large contractors. During the 1980s, the Pentagon employed thousands of experienced project managers and engineering professionals. Today most of this talent has gone to work for the contractors, and their duties have been contracted out to those same contractors. It's a classic case of the fox running the chicken coop.”

This perfect (procurement) storm grows even worse on the supplier side: "After the Cold War, there was a 70% reduction in procurement funding. The pentagon encouraged consolidation and actually paid contractors to merge. That process went much too far with some fifty prime contractors merging into only six -- far too few to support a competitive base for our current and future requirements ... [resulting in] a serious decline in technological and engineering innovation ... [and a steady rise in cost for] mature production programs."

He goes on to explain an "unhealthy tolerance for conflict of interest" in the "revolving door problem" where "a number of experienced Pentagon procurement officials [work] for defense contractors and vice-versa ... All too frequently, procurement offices have become de facto out-placement offices for retiring officers seeking employment in the defense industry."

I have quoted extensively from Mr. Lehman's long essay because the outcome of the policy decisions he describes were so predictable that one cannot avoid believing that they were not inadvertent. Stay tuned for his equally candid proposal for reforming this “mess”.

William Busch

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