Category: Acquisition Reform

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Doggone Dogfight!

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So I have raised the hackles of my esteemed Warthog (A-10) brothers and sisters  and Army and Marine
ground pounders before in an article entitled “The A-10 and Reality.”  In that article I took the position that the A-10, even though it was a good airplane for its time (first flown in 1972), should be retired.  I still believe that its time has come.  You can read the details by going to the link, but my opinion is still that while it would be nice to have if the Air Force had unlimited amounts of money, it doesn’t.  The A-10 is expensive to fly and maintain, it takes lots of logistics and people support and I question its survivability at low altitudes, given the proliferation and availability of hand-held SAMs.  As I recall, there are usually altitude restrictions put into place in most combat situations to keep the aircraft out of  threat envelopes, and I would submit these restrictions negate many of the advantages of an A-10 in a close air support role (CAS).

So why am I messing with this still festering wound?  I just read about the impending (if you can define 3 years as impending)fly-off between the JSF and the A-10 to see which jet will win the CAS Crown.  It’s been amusing to sit on the sidelines and see how this fandango developed.  First, the Pentagon’s Test and Evaluation gurus, bowing to the extreme pressure from the Hill to keep the A-10, announced that sometime in 2017 or 2018 they would evaluate the JSF’s ability to be an effective CAS platform…Don’t you think it’s a little late to be thinking about that?   I am just stunned that we would get this far without already knowing the answer to that question.  Never mind that no matter what the outcome, we will still buy all the JSFs our increasingly limited defense dollars will buy (to the detriment of all other weapons systems, I might add).  And because of all the other pressures, we will most likely have to retire the A-10 anyway.  And this will be even more true three years from now when we finally get around to doing the tests.

Given all the problems we have in DoD acquisition, I think we could be putting our limited dollars and unlimited talents towards just getting the JSF delivered with some sort of combat capability, or figure out how to recapitalize the nuclear deterrence force, or figure out how to prevent some rag-tag bunch of cyber terrorists from obtaining every bit of personal/private information that I put on my security clearance application.  Or figuring out how to actually win the PR war against ISIS…After all, isn’t this the land of Mad Men, Cyber-superiority and endless imagination?  I just can’t figure out how those ISIS characters continue to scoop the US in the world of social media.  A cynic might think we should hire ISIS to do the recruiting ads for us…(that’s just a joke for you NSA guys monitoring my web site!!)

The point is it is stunning to me that we have only decided to look at JSF CAS capabilities decades into its development and well past the point of no return.  We will spend Tens of Millions of dollars to find out the answer to a question to which we already know the answer.  I guess that I’m not surprised since given the copious quality of cash flowing through the JSF coffers, a few Tens of Millions of dollars probably don’t even break the event horizon.

But I digress….To continue the JSF/A-10 CAS saga, after the OSD poobahs announced the “fly-off”, Air Force Chief of Staff, General Mark Welsh says, “I think is would be a silly exercise.”  YA THINK???? Of course, after he made those remarks, I’m sure he had a little one-on-one counseling over at the Pentagon.  Hence, a few days later it was announced that the Air Force leadership is “fully on-board with the planned test schedule.”  Sigh, you can’t make this stuff up!

I guess you are wondering which jet I think will win.  The Warthog, of course.  The A-10 was designed with a single purpose in mind…CAS.  You know what? my guess is that if they did a fly-off between the JSF and the A-6 Intruder for gunsight bombing, the A-6 would reign supreme!

This whole episode reminds me of a quote by Emerson,”A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines.” I’m all for protecting our brave troops on the ground,but I think that there will be plenty of 21st Century weapons system available to do that without the A-10.

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Premade Decisions: Why Bother?

I have written about the Navy’s Littoral Combat Ship kerfuffle before.  The recent “non-decision” by outgoing SECDEF Hagel concerning the fate of the LCS fleet has prompted me to write again on the subject.  For those you you who haven’t followed this “crisis of our own making,” my previous musing, Rethinking LCS, provides some background which I will not repeat here. But I know it’s a hassle to click on the link, so here’s the Cliff Notes version:

  • LCS concept was for affordable, brown water vessel with modular capabilities to fulfill the presence mission in key locations around the globe.
  • LCS modular concept meant that not all missions could be done at once, keeping costs lower and enhancing adaptability for new missions.
  • LCS was not designed as a front-line warship, bristling with armament, but was configured to protect itself in most likely operating areas.
  • Navy bought two designs, hoping to down-select, but alas, since the only decisions that are generally (or admirably, if you prefer in this case) made in the Pentagon are pre-decided, the decision was made to not decide and buy both forever.
  • Elements in DoD leadership decided LCS didn’t have enough firepower and was vulnerable and directed the Navy to explore alternatives.
  • Navy commissioned a big study to scratch the OSD itch.
  • All breathlessly awaited the Uber-SECRET study results, knowing the Unter-SECRET answer: Navy can’t afford anything else…….(shhhhhhhh don’t tell anyone!!!!!!)

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I found these slides in an article by the US Naval Institute and they are attributed to the US Navy, however I couldn’t find them on the Navy website.

So that brings us to the big pre-made decision by SECDEF, after consulting, conferring and otherwise hobnobbing with the Pentagon cognoscenti.  (Who are the cognoscenti you ask?  Read SECDEF’s statement and find out.)   And the decision was: Drum Roll Please

……stay with two LCS designs, bump them up a bit (maybe $53 or $61 Mil or so) and move on.  I think the only one surprised by the answer may have been SECDEF himself!  Otherwise, why bother?  I shudder to think about the amount of money and time spent on this study which had only one answer.  I haven’t seen the actual study, but from what I’ve read about it, no stone was left unturned (apparently 192 stones to be exact).  Option after option considered, analyzed, pondered, etc……..by those who already knew there was only one answer……we can’t afford anything else, nor can we afford the time required to start the acquisition process all over again.  The answer was pre-decided. My guess is most of the changes announced would have been made anyway.

These pre-decided decisions are common in the Pentagon, but all too often staffs are forced to do the kabuki dancekabukidance to give an air of legitimacy to them.  Those in disagreement get to say their peace and then dismissed as “having an input”, even though no one was really listening. I recall this vividly while working on budget end-game around the 2006 timeframe.  The Service programmers (three star resource folks) would be herded down to OSD about an hour before SECDEF was to receive a decision briefing on an issue, shown the slides prepared for him and then dismissed.  I barely had enough time to run back to the Vice Chief to brief him on what I had seen, let alone provide him with any analysis of what OSD had pre-decided.  Of course, if the Vice Chief were to raise an objection during the SECDEF briefing, the OSD Poobahs would announce,” Your folks have seen this and nothing was said.”

The point of this little tirade is that we waste money on these types of exercises all the time.  I think about all the good we could have done for our wounded warriors with the money we wasted on this study.  I think about all the time consumed by some very smart people who could have been working on something really important…how to deal with sequestration, how to keep the technological edge, how to fix our broken nuclear infrastructure…and any number of other problems.

Why does the Pentagon continue to do this?  I suggest it’s because they have an endless supply of people and money.  No one pays for people, they just have them.  No one has to justify the cost of doing such a study because cost is not an issue.  If I had done that in my civilian P&L life, I would have been shown the door.  I had to spend my money and time on things that mattered and contributed to the bottom line. Since there’s no bottom line at DoD, everything tends to become equally important.  Once on the Joint Staff I remember a staff briefing one day when the two topics discussed were the reduction of the nuclear arsenal by 50% and the Joint Staff savings bond campaign.  We spent the same amount of time on each…in the end it was decided we should brief the Deputy Director daily on the savings bond campaign and as needed for the nuclear issue.

I think we need a study on studies.

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One for the Price of Three!

Only in the DoD acquisition world would this sound like a good deal!  But before we cast too many arrows at the acquisition community, I must admit the idea is mine.  I developed this idea over the course of years of working in the Bizarro World of DoD ship financing.   You remember Bizarro? Bizarro It’s the world where everything is backwards….the name of the bizarro world planet is Htrae (so clever!) and the world is square.  As I recall, it was featured occasionally in Superman comics in the 1960’s. One of the mottos in Bizarro World was ” Us do opposite of all earthly things.”  Bizarro bonds were a hot item on Htrae because they were “guaranteed to lose money.”  So I don’t think it’s a huge stretch to make the analogy here.

As I learned during my time as Chief Resources and Requirements Officer for the Navy, the normal things you learned about economics don’t necessarily hold true when it comes to buying ships.  My initial experience was during my first year on the job.  We were working on balancing the budget and were about $400 Million off.  The staff proposed that we slide the purchase of a ship we were buying for the Army called the LMSR (contrary to popular belief, the Army moves primarily by sea, not air).  The price tag was about $400 Million and the staff had determined that we could stand to slide it a year.  “Sounds good to me!” I answered, happy at the prospect of putting a bow on the $130 Billion Navy budget and delivering it to OSD just in time for Thanksgiving.  By the way, that’s how you make sure that you don’t get rejected right away…..Submit something just prior to a big holiday so no one is around to grade your work.  This rule works in a variety of scenarios:

  • DoD generally drops significant RFPs just before holidays to force contractors to work feverishly at the expense of their families to get the proposal complete by some arbitrary deadline (which generally gets extended anyway).
  • The Congress always passes bills at the eleventh hour before big holidays, in hopes that the particulars will escape the media.  What’s more interesting? The details of the CR passed the day before Thanksgiving or the press conference where the President pardons the turkey?  Or maybe the 3 minute spot on the evening news which shows the neighbor’s Christmas lights display of 100,000 watts, synchronized to “All About That Bass.” I vote for the turkey pardon and the light show!!!!!(and sadly, so do most)
  • Controversial changes to Federal Register seem to always drop the day before a holiday in hopes that no one will notice.
  • My favorite, RFP’s released with 5 days to respond…(a favorite way to make sure the desired contractor wins)

Anyway, I’m sure you have your own sea story that would make mine look minor.  But back to the LMSR caper……

USNS Bob HopeA few days after the decision was made, the staff came back and noted that since we slid the ship a year, it’s going to cost more…..I don’t remember how much, but it was around $100 Million or so.  “Really?” I commented.  ‘Oh, yes,” came the reply, ” money will cost more the next year, we have shipyard loading issues that we will have to pay for, the cost of steel is going up, blah, blah blah.”  So I began to understand that the economics of shipbuilding were different.  I formulated The Shipbuilding Entropy Rule: “Nothing ever costs less.  NO matter what you do, it will always cost more.”  You buy less, they cost more.  You cancel the buy, you still have to pay the overhead.  You remove capability, it costs more to redo drawings.  Its all very counter-intuitive.  This became very clear to me during the following year’s budget build when the staff came back and said “We made a mistake.  We have to move the LMSR back to the original purchase year.”  “Fine,” I replied, “No harm, no foul.”  Sensing it wasn’t “Fine“, based on the furtive glances between the staffers (an admiral sees a lot of those looks in the Pentagon) I asked “What’s wrong?”  Turns out, if we moved the ship back into the original purchase year, it added another $100 Million to the cost!  Whadakknow?  We essentially did nothing and paid $200 Million not to do it!  That, my friends, is Bizarro accounting!

Anyway I could go on and on about this, but I want to get to the reason I chose the title of this article, One for the Price of Three.

The DDG-1000 (AKA CG(X), Arsenal Ship, Zumwalt Destroyer, DD21, DD(X), etc) was originally intended to have a buy of around 32 ships or so.  USS ZumwaltThey became so expensive and the requirements bounced around so much, we began advertising it as a fire support ship vital to the survival of the Marines during amphibious assaults.  As such, we only needed about 10-12, just enough to support the number of amphibious ready groups (ARGS) we had at the time.  The Marines were happy about that, even though they preferred to have 2 per ARG.  I even went over to the Hill with my Marine counterpart extolling the virtues of the DDG-21 as the perfect fire support ship for the Marines.  But once the Marines realized that the cost of the ship was so high that it would probably limit the amount of other stuff they could buy, they dropped it like a hot potato…..they would much rather have the 360 V-22’s than 24 DD(X)’s.  So in the space of about a month we changed our tune from”vital” to “not so vital.”  Now that they are $3 Billion a copy, we are only building 3 of them and I’m not sure there’s a real requirement out there.  As my Grandmother said when she got her first taste of champagne in one of those dinky champagne flutes at my son’s baptism, “That’s not enough to wet my whistle.”  So it is with DDG-1000 IMHO.  The real requirement as far as I can tell is to have something for Bath Iron Works to build ( they will build all three) so they can stay in business in order to address industrial base concerns.  Hence the title of the article.

I propose instead of spending $9 Billion for 3 ships we don’t need, why not pay the shipyard to build it, take it apart and then build it again?  It keeps them busy. The Navy doesn’t have to shoulder the Operations and Maintenance costs necessary to support a ship class of 3 ships, and we don’t have rustle up the personnel and training facilities which must be specially developed on this one-of-a-kind weapons systems.  Heck, we will save money by doing that!  Of course, this idea only works on Bizarro World.

That, by the way, is how Bizarro JosBanks works too.  You pick out one suit and pay for three!

What a world, what a world!

 

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Reforming Acquisition Reform

There has been a lot of static on the net lately concerning acquisition reform.  Two notable recent arrivals on the scene have been all the buzz around the Beltway:  First, the release of Better Buying Power (BBP) 3.0, Under Secretary of Defense (AT&L) Frank Kendall’s reincarnation of BBP 1.0 (originally issued by Ash Carter when AT&L, and later BBP 2.0 by Mr.Kendall). DoD CartSecond was the publishing of a report by the Senate Permanent Subcommittee on Investigations, Chaired by Senator Levin, with Senator McCain as the Ranking Member.  The report, entitled “Defense Acquisition Reform: Where Do We Go From Here?, is a collection of essays by 30 experts in the Defense acquisition world about how to improve or reform defense acquisition of things (and to a small degree, services).

Better Buying Power 3.0

One of the things I like most about the concept of the Better Buying Series is the iterative process in improving its focus.  After letting BBP 1.0 run for a while, corrections were needed as the result of some unintended consequences (like an irrational focus on lowest price, technically acceptable contracts) and need for clarification of some of the elements.  BBP 2.0 did just that, directing that more care must be given in defining what is “technically acceptable” for example.  Now, BBP 3.0 has come out to further tweak the elements of BBP.  A couple of previous elements were eliminated because they were considered complete:

  • Institute a system to measure the cost performance of programs and institutions and to assess the effectiveness of acquisition policies
  • Assign senior managers for acquisition of services

There were some carry overs as well, mostly with refined language.  I won’t list them all here, but the ones that I think represent the most significant change are:

  • A recognition that capability must be considered in evaluating cost by changing the focus from “Control Costs Throughout the Product Lifecycle” to “Achieve Dominant Capabilities while Controlling Lifecycle Costs”
  • Expanding focus on incentivizing productivity and innovation by breaking out into separate areas with following additions:
    • Increase prototyping and experimentation
    • Emphasize tech insertion and refresh in program planning
    • Use of modular, open architecture systems
    • Provide tech requirements to industry early
  • Increasing ability of acquisition leaders to understand and mitigate technical risk.
  • Increased support for Science, Technology, Engineering and Mathematics (STEM) education

Here’s a link to the BBP 3.0 overview.  All in all I think it represents a good step forward in the BBP series and will certainly help in trying to understand all the things going on in the world of acquisition reform……..BUT,

Many of the themes that emerged in the second recent arrival, the Senate study (Complete study can be found here) were not really addressed in the BBP 3.0 document.  To be fair, the report had yet to be released prior to putting BBP 3.0 on the street, but I would have hoped for more overlap.

The Senate report pulled out four overarching themes from the musings of the 30 experts contributing to the report:

  • A cultural change is needed in the acquisition workforce, including more effective incentives
  • Training and recruiting of the acquisition workforce must be improved
  • Realistic requirements definition are critical
  • Accountability and leadership throughout product life-cycle needs improvement

The report also makes two observations which I will quote here:

“First, among all those factors that have been identified as contributing to dysfunction in the defense acquisition system, cultural change is among both the most important and the least amenable to legislation and policy changes. It is, rather, a function of leadership throughout the chain-of-command and an incentive structure that threads through both the government contracting and acquisition workforce and industry that assigns a premium to cost-control and the timely delivery of needed capability.

Second, continued “sequestration” of the DOD’s budgets will undermine any savings that could be achieved through even the most successful acquisition reform.”

Well, to me that says, 1.  It’s more of a DoD problem than a legislative problem and 2. sequestration will nullify ( or at least severely impact) all acquisition reform efforts.   The last thing we need is even more regulation in the acquisition process.  I would offer that in my opinion sequestration is not necessarily the enemy here.  I still think we have too much waste in DoD, too many pork barrel projects, too many pet projects and too many cooks in the kitchen.  What is the enemy is the uncertainty in the budget process over the last several years….Continuing Resolutions, multiple budgets, Overseas Contingency Funds abuse and a foolish focus on equity in Service budgets have all undermined our ability to reform how we buy things.  In the end, it is a indeed a legislative problem….The failure to pass budgets on time, regardless of  the funding levels.  Life would be so much easier and efficient in DoD acquisition with regular and predictable budgets, passed in a timely fashion and accurately executed.

One final observation:  I would like to see the Senate produce a similar document on acquisition reform, but using 30 PRACTITIONERS of acquisition at the grass roots level: Project Managers, PEOs, and Contracting Officers.  A view from the top is always useful, but without a view from the bottom we will never really fix what is wrong with acquisition culture. They are the ones that make up the culture, not the poobahs at the top.  A little more focus on them would be helpful…I’m not sure that after a contacting officer reads BBP 3.0 they will do anything different.

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Sewing Machines and DoD Acquisition

I saw an interesting article this morning on the NDIA Blog site which said Secretary Frank Kendall, the Under Secretary of Defense for Acquisition, Technology and Logistics  USD(AT&L), was unhappy that DoD did not meet the goal for having more competition for defense-related contracts.  Singer328 height= I’m not surprised at that because given the irrational focus of DoD on vendor profits, they have managed to make bidding on defense contracts so unattractive that fewer and fewer companies are making the effort to bid.  In my view, it’s not just one reason:

  • There are less contractors out there to bid
  • DoD rules and regulations limit profitability on contracts (only the big guys can survive at the margins expeced by DoD)
  • FAR requirements are so onerous (and increasing) that it’s too expensive to bid on many contracts
  • FAR requirement are so onerous that it’s too risky to bid on many contracts
  • The specter of having DCAA establish a parasitic site in your corporate HQ to monitor your finances is too distasteful
  • Uncertainty of funding streams, including the ability of DoD to cancel any contract for any (or no) reason
  • Too many ID/IQ contracts in order to avoid protests.  They are just beauty contests.

I think I will stop at those seven for now, but there are more.  What’s fascinating to me is that these reasons are ignored as DoD attempts to develop a fix for limited competition.  The DoD solution is to increase regulation, increase reporting frequency (so the bad news comes more quickly I suppose), and continue to monkey around with contractor profits, even on fixed-price contracts.  The best way, is to reduce the number of requirements, like those cited above, and let natural instincts and market forces drive competition.

 In order to have more bidders, it must become more attractive to bid!

Hello?  Did i just say that?  Why isn’t the leadership focused on how to make bidding and working on government contracts more attractive?  Can it be that simple?  I think the answer is yes.

So what does the sewing machine have to do will all of this?  This past weekend, the lovely Mrs. Crenshaw volunteered to do a little sewing to get one of our granddaughter’s uniforms ready for school.  In order to do this, she needed her sewing machine liberated from the darkest recesses of the attic.  I felt like I was in the basement of the Smithsonian as I rummaged throughout the boxes of brass plaques accumulated over the 32 years of my naval career (I’m not allowed to display them).  I found a medal I received from the Russians, a box of challenge coins, some old text books from the Naval Academy (why I still have a book on differential equations is beyond me), and various other flotsam and jetsam accumulated over 40+ year of marriage. I finally found the sewing machine, Singer Syle-o-Matic Model 328 (now listed on E Bay as “vintage”).  Setting it up after many years of disuse was challenging.  It’s a mystery to me why sewing machines work anyway, much like the DoD acquisition process.  I started fiddling around with the upper thread tension, adjusting the needle alignment, resetting the timing, changing the motor belt, tweaking the bobbin tension, etc.  Before you know it, I had adjusted just about everything on that machine and I had no idea of  what the original settings (which worked fine the last time we used it) were.  I should have left it alone, done some basic maintenance (a drop of oil perhaps) and let it do its thing.  But NOOOOOOOoo!  I had to fiddle around with every possible adjustable part and got it so far out of whack that the only option was to go back to basics and take it to a professional.  Now it works just fine.  I think the same is true in the world of DoD acquisition  We have monkeyed around with so many parts that we have lost sight of the original settings—-namely good, old-fashioned competition, unhindered by excessive regulation or government meddling in corporate finances. Why not turn over the management of corporate finances to the professionals (that would be corporate leadership) and let them do what they do best, COMPETE!

DoD ACquisiton

So my suggestion on how to increase comptetion is simple: make it more attractive to bid.  One does this by eliminating the barriers to bidding, not by adding more..  Take a look at my seven reasons above.  If we focused on fixing those, I guarantee you there would be more competition.  In the end, the government would get better value for the dollars it spends, not just cheap, mediocre work for which the government is becoming increasingly famous (or infamous, I suppose).

 

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The Devil is in the DoD-tails

A few weeks ago, Secretary of Defense Hagel published his list of six focus areas for the coming year. Here’s his list:focus

  1. Focus on institutional reform.
  2. Re-evaluate our military’s force planning construct.
  3. Prepare for a prolonged military readiness challenge.
  4. Protecting investments in emerging military capabilities
  5. Achieve balance
  6. Personnel and compensation policy

Really?  That’s what he’s focusing on?  You probably haven’t heard much about this list because it is sooooo uninspiring.  If this isn’t bureaucratic gobbledygook, I don’t know what is. Do you think these are his real priorities, or just the same type of feel-good rhetoric that his staff regularly generates. Ask yourself what the really big issues facing the DoD today are and see if this list scratches the itch. Let’s look at the priorities:

Focus on institutional reform.  The subheadings under this priority are reform and reshape our entire defense enterprise, direct more resources to military readiness and capabilities, and make organizations flatter and more responsive.  So what are the metrics to use to determine is progress is bring made?  As far as I can tell, this focus area should be part of the regular drumbeat of DoD, not some special focus area, implying that we will look at it, fix it and move on.  Does he serious think that he is going to reshape the entire defense enterprise?  Into what?  And does he really mean to direct  more resources into readiness, or just cut spending in other areas, only so they can become focus area next year?  This one just leaves me uninspired and wondering exactly what we are reforming?

Re-evaluate our military’s force planning construct. This one includes the classic example of Pentagon-speak, namely force planning construct.  In the interest of clarity, I believe he means develop a different way to decide how big the Army, Navy, Air Force and Marine Corps needs to be.  “Challenge assumptions” is a key part of this focus area.  When have you not been to some type of business course where they didn’t say “Challenge the Assumptions?”  Exactly what assumptions will we be challenging, who will challenge them and by what process will we evaluate the accuracy and efficacy of the assumptions? In my experience, DoD did a pretty good job translating the National Security Strategy into what wars and other missions we were supposed to be prepared for, turning that into war plans and then figuring out how many forces we needed to execute the plans.  The problem was always with the front end in defining what the military would be expected to do.  It always turned out to be too expensive.  When I first started paying attention to the war fighting expectations I was a policy wonk on the Joint Staff.  Back then we were supposed to fight and win two wars simultaneously.  That proved so expensive that we had to change it to win one war, while holding our own in another, swinging forces to the the second war once we triumphed in the first.  That, too, became too expensive, so we changed to win two wars, but one of them would be the war on terror.  Frankly, I’m just not sure what the overarching strategy is these days, but I think it can be found in the 2014 QDR (see QDArghhhhhh).  This is what it says:  “U.S. forces could defeat a regional adversary in a large-scale multi-phased campaign, and deny the objectives of – or impose unacceptable costs on – another aggressor in another region,” whatever that means.

Prepare for a prolonged military readiness challenge. This is Pentagon-speak for figure out how to do more with less.

Protecting investments in emerging military capabilities. Not sure why this requires the continued focus of SECDEF. Can’t he just say make sure we have enough money in R&D accounts?  By the way, here is where the grand plan is not to spend more DoD dollars in R&D, but push off the expense of R&D to industry.  That’s not going to work as long as DoD keeps putting pressure on industry to lower profit margins…..Let’s see.  I’m a Captain of industry; What’s my priority for where to put the profits I make? 1) Shareholders, 2) capital improvements, 3)cash reserves, 4) corporate jet 5)R&D.  Hmmmmm what am I going to cut first when my profits drop????

Achieve balance I guess this is the old “tooth-to-tail” argument that Secretary Rumsfeld was fond of.  How much redundancy do we need?  How much forcible entry capability do we need? HOw many forces do we station overseas?  How many fighters do we need and who gets them? and on and on.   We’ve tried this before and the Services resisted any balancing initiatives that left them with less.

Personnel and compensation policy The crux of this priority is to figure out how to have a world-class military force while implementing the lowest price, technically acceptable personnel and compensation schemes. That hasn’t worked so well in the acquisition world and I doubt it will work any better as a personnel policy. This is one I agree that’s needed, but not in its current fashion.

None of these priorities are necessarily bad or wrong, but they are lacking the detail necessary to figure out if they will really make a difference.  Is there someone tracking these priorities and providing monthly updates on progress.  None of these items are terribly original either.  We have all heard these things time and time again.  I can remember tackling the issue of balance way back in 1990 with the AC/RC study done by the Joint Staff.  I would rather see a list of 5 really vexing issues facing the department and put a concentrated effort into fixing them.  The current list has no sense of urgency and just seems like business as usual to me. They are so big, just about everything winds up in a focus area.  Why not focus on specific issues?

“OK, Smart guy.  What would your priorities be?” you are asking.  Here is my list:

  1. Make JSF affordable (It’s costing us big time and we will never cut it!)
  2. Rightsize the force, paying attention to Army and Marine Corps (Admit that they are both too big and fix it and stop worrying about hurting feelings)
  3. Develop a sustainable personnel compensation and benefits system by 2017(put together a comprehensive package and stop focusing on the margins)
  4. Accelerate and complete Service transition to ERPs, institute direct treasury disbursement and eliminate DFAS (It’s the 21st Century! Why doesn’t DoD join it with the rest of us?)
  5. Eliminate Department dependence on OCO by 2017. (said another way, produce one budget……..incorporate sequestration and stop pounding people into the dirt developing budgets which are dead on arrival)
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A-10 and Reality

I just reread the summary of the 2015 National Defense Authorization Act (NDAA) passed by the House on a vote of 385-98.  At the end of the day, it appears that the House was not interested in agreeing with many of the cost cutting proposals that DoD had hoped for.  Base Realignment and Closure (BRAC) is not an option (see Bric-a-BRAC) , and it looks like the Air Force can keep it’s A-10’s for now.  When all is totaled up, the bill accounts for just a shade over $600 Billion in spending.  That number is a far cry from what the sequestration number would have been, thanks to the BiPartisan Budget Agreement, but 2016 will be another story.  A-10s The Senate also affirmed its desire to keep the A-10s in the inventory in its version of the NDAA.

I happen to agree with the Air Force that it is time for the A-10 to go.  It’s expensive to maintain and operate and doesn’t really have a place in the 21st Century battlefield.  It pains me to say that, because it was a good airplane for the mission, tank killing and Close Air Support. Intruder in the Spagetti My airplane was also the victim of affordability cuts and the entire fleet was scrapped right after it had undergone an expensive and extensive rehabilitation effort.  I’m talking about the A-6 Intruder, retired in 1997.  No one came to its rescue unlike the A-10.  I’m not quite sure why the A-6 retirement didn’t kick up more dust back then except to say that times were tough, money was tight, and everyone recognized the an airplane like the A-6 was vulnerable at low levels against the threat and that with weapons improvements we just didn’t need an airplane that could carry twenty-two 500 pound Mk-82 bombs.  What’s the point?  With Tomahawks and Joint Stand Off Weapons there was just no need for the A-6.  The same is true for the A-10, in my opinion. With today’s technology, the threat environment where the A-10 would be operating would not be survivable.  The assumption is that in order to use the A-10, we would have to have Air Supremacy (meaning no enemy airplane flying) and completely neutralized the hand-held SAM threat on the ground.  That’s a tall order!

In today’s world with armed drones…..oooopppps….i meant to say Remotely Piloted Aircraft, there’s just no need to put aircrew at risk.  Add to that the expense in maintaining the A-10 and it’s just not worth it……at least not to the Air Force.  It IS apparently worth it to members on the Hill who have A-10’s flying in their districts, and the hundreds of airmen required to be in each squadron to maintain the A-10. Sometimes it’s hard to admit you are flying a dinosaur that just doesn’t have a home in the 21st Century.

 

 

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Motivate me!

I just finished plowing through the 2014 Performance of the Defense Acquisition report published by Office of the Under Secretary of Defense, Acquisition, Technology, and Logistics (AT&L).  ATL Report width= I was prompted to look at it when I saw this article in the Washington Post on what motivated contractors, according to the report.  Pardon my suspicion at a report bragging about how well the current crowd at AT&L is doing, but I’m suspicious.  First….there’s a lot of statistics included and my experience is that statisticians can twist the numbers to say anything.  As evidence, I note there wasn’t much bad about the JSF (perhaps the worst performing program of all time) in the report.  Oh sure, it appears, but if one were to just glance at the charts and graphs where JSF is mentioned, you get the impression that it’s just a middle-of-the pack program…..lots of programs perform worse, a few perform better.  EXCUSE ME?  This baby is already $160 Billion behind schedule and 10 years late in delivery (and still counting by the way, especially given the disastrous fire at Eglin Air Force Base last week). How DoD can publish a report on performance of the Acquisition system without including a chapter on why the JSF program is so gooned up is beyond me.  It’s like the YouTube video when the gorilla walks through the basketball game.  Am I the only one who noticed?

Another item I thought was interesting was the conclusion that although Firm Fixed Price (FFP) contracts do perform better and generally exhibit less cost growth, the report concludes it’s because most of those contracts are lower risk anyway.  Oh by the way, the evil part of FFP contracts is that the vendors who do a good job of managing cost and performance of their programs are probably making more profit and therefore gouging the Government.  I can hear the conversation in the Pentagon now, “That darn contractor actually delivered on-cost and on-time, so we must have given him too much money!”  That substantiates my belief that the Pentagon has the uncanny ability to take from good performing programs to pay for the sins of poor performing programs, thereby dooming all programs to some level of common mediocrity.

One other point I thought was interesting….there’s no mention of contracts that were awarded on a lowest price, technically acceptable (LPTA) basis.  Some in industry contend that DoD is so bent on doing things on the cheap, that quality has suffered when contracts are awarded on an LPTA basis. I don’t know if that is just sour grapes from the expensive losers or truth.  No one seems to care…….about the quality any way.

Back to the title…..What were the conclusions?

  • Not all incentives work. In order to work they have to be used, be “significant, stable and predictable,” and they must be tied to DoD objectives.
  • Cost-Plus vs Fixed Price contract debate is a “red herring.” It’s incentive-based contracts that matter.
  • Incentive Fee contracts work best.  The big plus here is that using them allows the Government to limit contractor profits. (My personal opinion is that DoD should spend less time wringing their hands over profits and more time on getting the requirements right to begin with.)
  • FFP contracting requires knowledge of costs.  (Once again, this one refers to limiting contractor profits)
  • Programs which realize better profits in production incentivize vendors to move quickly through the development phase (Of course, this implies that the Government does not change requirements in the development phase….Good luck with that!) and saves money in the end.

So there you have it.  My little list of what incentivizes contractor to perform better goes like this:

  • Well written Requests for Proposals which are clear on requirements.
  • No requirements creep during the process.
  • Regular and reliable funding streams…none of this Continuing Resolution, furlough, of OCO stuff (Oh, how I’m tempted to use a different word here).
  • Full and Open competitions
  • Procurement professionals who spend a lot of time on improving government processes and less on monkeying around with industry processes.
  • A Government that honors multi-year procurement deals.  No canceling in mid-stream.

To be fair, I think that there have been improvements in the acquisition process and those in the driver’s seat deserve a pat on the back.  But in the end,  the fundamental problem is that the requirements process never gets it right and we spend lots of time and money recovering.  Congress doesn’t help things with its inability to pass a budget either.

 

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Acquisition: Practitioners vs. Pontificators

DoD Acquisition Process

The DoD Process Simplified

I ran across an article from the National Defense Industrial Association (NDIA) the other day by Sandra Erwin on Congressional frustration on how the Pentagon buys things.  Not being satisfied with the progress being made by the DoD Acquisition guru’s, Congress has decided that more legislation is needed to fix things (Really? Congress is going to fix something?).  The Congress has asked nine of the industry associations around the Beltway to provide comments on how to make it better, with inputs due in July.  I belong to several of those and I’m glad the Congress is asking for industry input, although I hope they remember that asking the people who make money as a result of inefficiencies is just one side of the argument. I think significant progress has been made since then Under Secretary of Defense for Acquisition, Technology and Acquisition (USD(AT&L)) Ash Carter launched his “Better Buying Power Initiative” in September of 2010. In his memo to acquisition professionals he provided a roadmap to improving acquisition within DoD.  He focused on five areas of interest:

  1. Target Affordability and Control Cost Growth
  2. Incentivize Productivity and Innovation in Industry
  3. Promote Real Competition
  4. Improve Tradecraft in Services Acquisition
  5. Reduce Non-Productive Processes and Bureaucracy

Details of this can be found at this link if you are interested.  All these are worthy goals, and they have made a difference.  A recent GAO report found that some progress was being made, but that cost and schedule growth remain significant; 39 percent of fiscal 2012 programs have had unit cost growth of 25 percent or more. The amount of money in the DoD acquisition pipeline is staggering;  86 major defense acquisition programs  estimated to cost a total of $1.6 trillion according to GAO. If you have any questions about a specific program click here.

Besides the modest, if not marginal, improvements in acquisitions, some not so nice things happened as well.  As is often the case in large bureaucracies, what the big guys at the top are saying and what the little guys in the field are hearing frequently don’t jive.  That was the case with the Better Buying Power Initiative.

Dr. Carter said “Increase the use of Fixed Price Incentive Fee contract type where appropriate…”, but the dudes in the field heard “More Fixed Price contracts, less Cost Plus Fixed Fee and Time and Materials contracts.”  Contracting officers were suddenly burdened with having to provide extensive justification for any non-Fixed Price contract.  Since they were busy enough, the Contracting Officers would rather just go with the flow and issue fixed price contracts, even though the work was not appropriate for them.  The words “where appropriate” were overlooked.  In the end, it wound up costing more money.  Here’s why.  When a contractor agrees to a fixed price contract, the contractor is assuming all of the risk.  Suppose the job was improperly scoped by the Government, or suppose a software glitch pops up that takes time (and money) to fix.  All those unexpected expenses are absorbed by the contractor.  Consequently, Fixed Price contracts tend to be more expensive in order to cover the risk.  This was certainly the case in my former life when a long-time client came to me and said, “The Boss says we have to do a Fixed Price contract” this year and it can only be for one year at a time.  This was not what the customer wanted, but the customer was at the mercy of the acquisition folks.  The work we were doing at the time was rather unpredictable and my team was never quite sure from day-to-day what they may be tasked with next.  In order to be responsive, it was a Time and Materials (T&M) contract, which allowed us to flex to the client’s requirements.  But with a fixed price contract, I was not able to flex without a contract modification (and that takes time and money).  I told the client that if we were going to do a fixed price contract, I would have to increase the price and that I would not be as flexible in doing new work.  That fell on deaf ears because it was going to be such a hassle to justify anything other than a fixed price contract.

Here’s another example.  Dr. Carter says “Promote Real Competition”, but the  folks in the field heard, “Use Lowest Price, Technically Acceptable (LPTA)” evaluation criteria for source selection.”  This caused all kinds of price wars in the community and the Government was feeling smug about how much money they were saving, but…………Turns out many Requests for Proposals were poorly written with vague and overly broad technical requirements, so that just about any old company with the resources to put together a proposal could win the contract.  And they bid ridiculously low rates, so in the end they were unable to deliver and customers began to fall back to other contact vehicles to get the work done, or just didn’t do the work.  I think it’s a little too early to actually get to the real statistics about how many customers are really satisfied with the results of LPTA winning vendors but the Congress should find out before attempting to come up with more legislation.

The current USD(AT&L), Frank Kendall,  issued an update to the original Better Buying Power, known around town as Better Buying Power 2.0.  In it Mr. Kendall says:

  1. Achieve Affordable Programs
  2. Control Costs Throughout the Product Lifecycle
  3. Incentivize Productivity & Innovation in Industry and Government
  4. Eliminate Unproductive Processes and Bureaucracy
  5. Promote Effective Competition
  6. Improve Tradecraft in Acquisition of Services
  7. Improve the Professionalism of the Total Acquisition Workforce

The result has been a much greater focus on costs of acquiring the systems and a recognition that perhaps the LPTA pendulum was swinging just a little too far over.  As in the original BBP, those in the field had some different interpretations about expectations from the top.  One of the initiatives within the Incentivize Productivity goals was to “Align profitability more tightly with Department goals.”  This translated into government auditors deciding they need to closely scrutinize contractors books to ensure vendor were not making “excessive profits,” even on fixed price work.  I just don’t think that’s in the government’s lane. If they are so concerned about profit margins, then why not issue Cost Plus Fixed Fee contracts where the Government essentially controls corporate profits?   Thus,  despite all their good, it seems to me a few fundamental flaws in the acquisition system have not been addressed in BBP or BBP 2.0:

  • There is still a lack of coordination and cooperation between those who generate requirements, those who pay to satisfy the requirements and those who buy the stuff with the money they are given.
  • There is still a disconnect between contracting officers and the customers for whom they buy products and services.
  • There is still a disconnect between what the leadership in the Pentagon says and what the people in the field do.
  • The uncertainties of funding from year to year drive programs to their most expensive procurement options.
  • Certain key programs get a “pass” from all the rhetoric about performance, affordability and life-cycle costs, overshadowing all of the progress made to reform acquisition. The top 10 acquisition programs still account for 65% of all the acquisitions according to the GAO.  The Joint Strike Fighter is 25% of all DoD acquisition alone!

So in the end, I doubt very much if legislation will fix the problem.  Four feet of  stacked up Federal Acquisition Regulations and Defense Federal Acquisition Regulations are not going to be much affected by another thousand pages or so of legislation.  Check out the recent testimony of Dr. Paul Francis, the Managing Director of Acquisitions and Sourcing Management at GAO.  He has some very practical steps on how to improve the process. In addition to those steps, I would like to see DoD actually evaluate each program on its own merit, not on investment levels or political support or not simply press on with a poor program because they managed (mismanaged is probably the better word here) to get into a position where there is no alternative.  It would also be nice if the people who are actually charged with executing the acquisition system at lower levels could have a say in how to make things better.  There’s too much Top Down and not enough Bottom Up built into the process in my humble opinion.  What if we asked the practitioners to come up with a series of reforms instead of the pontificators?