Rome '08 Workshop
Rethinking our Acquisition Policies
Mr. David Patterson
University of Tennessee
THE RESOURCE CRUNCH
I offer several points for your consideration. First, despite whatever the European security community believes about the willingness and appetite of the United States to continue to fund at the level it has been funding, I would suggest to you that it is not true. Despite the fact that we have enjoyed a fairly robust budget from the beginning of the 21st century until now, I submit that those times are over. Though the US has a base budget of $512.5 billion and with an investment in procurement and research and development of over $180 billion, we have remained somewhat stagnant at between 3.7% and 3.9% of the gross domestic product, which is the lowest since World War II.
Let me also explain that the reason you will see a resource crunch is because the focus of future years’ budgets will not be on new starts but on reconstitution, repair, and replacement of existing equipment. Some dollars will be spent on recapitalization, but I leave it to your imagination to determine the definition of recapitalization. The word has a variety of definitions within the Pentagon, none of which are common, but I believe major program new starts will be few and far between.
So what is the challenge? The challenge is for industry to gather with government, which incidentally is the only major global enterprise relationship that has a monopoly selling to a monopsony. Unfortunately, what we have today with regard to that relationship—and this may sound unfair, but I am not so sure it is not true—is that government looks at industry and says, “I need it faster, cheaper, better.” Then industry says to government, “Outstanding! We can make it faster, cheaper, better, no matter how much it costs or how long it takes.” And government replies, “Hot dog (or bratwurst)! Where do we sign?” This approach to the acquisition relationship must stop.
DECLINING COMPETENCE
Another very difficult problem we have is that we have declining competence and a declining skill set within our acquisition workforce. This started during the 1990s, when we decided we were going to get rid of our “shoppers” and managed to get rid of our system engineers and cost estimators at the same time, which caused us untold problems. I do not think this is a problem that is unique to the United States or uncommon within the European community.
One of the consequences of not having a correctly sized, skilled workforce is that you cannot give them the flexibility to do contracting and source selection in the way we did in the past. I offer the fact that the Government Accountability Office (GAO) has sustained protests on programs that would not have been protested in the past and that, more tragically, we do not have the capability, not only in the Air Force but also in the Army to create a protest-proof solicitation. The Army lost the ACS because they cancelled it after about $900 million was spent. The contract for interpreters in Iraq continues to be in protest. Apparently, we do not have the competence to run a competition that is not protested and the protests sustained. What I submit to you is that it is fundamental to the experience levels of our people. In light of that, I submit that we need to replace the 54-page set of instructions with a rule set that establishes very clear and unambiguous direction, for example, when you enter systems development and demonstration, there are no more requirements allowed. The opportunity to provide the next greatest thing will not be allowed, unless those requesting the insertion of a new requirement can guarantee that there will be a four-to-one payback in savings and that the schedule will not be impacted.
BUILDING AND FUNDING NEEDS
Here is another rule for your consideration: The contractor will build what he bid and there will not be any more opportunities, while the ink is drying on the contract, for the folks from government to come in and say, “Oh, boy, I know what we asked for but what we really want is….” That should stop. Everything should be done within a time-defined period. I do not think that an airplane should take longer than five years—the F15 did not, the F16 did not, and the F15 came from a clean sheet of paper, not from a prototype competition.
We also need to insist on a stable budget, and we have recommended this as an initiative in what we refer to as capital funding. If you tell us how long it is going to take, we will guarantee that within that time frame we will fund you at the appropriate level. But do not fail! Your program will be reviewed by Congress twice a year, and, if three reviews in a row are red, your program is cancelled. Those kinds of rule sets, I believe, will be helpful in establishing programs that actually field weapons in a timely fashion.
COOPERATION, COLLABORATION, AND COMPETITION
Last, as a policy matter, I think that the United States government needs to understand the difference between cooperation, collaboration, and competition, and I offer some definitions. First of all, cooperation entails seeking to meet the government customer’s objectives in a relatively collegial manner while still striving to achieve company objectives and enhance shareholder value. Collaboration, on the other hand, is best characterized as teaming with other companies or the government customer, often suborning the company’s objectives to some commonly held goal. And competition is mobilizing all of the company’s resources to win a contract—it is clearly distinct from cooperation and collaboration. The government customer and the company do not sit down as partners.
I do not know how many times I have run up against folks in government who honestly believe that they are in a collaborative partnership, and how many times I’ve heard the word “partnership” while at the same time hearing, “Oh, by the way, we want the industry to suborn any profit motive in favor of the government’s objectives.” That is just plain silly. Industry is in business to make a profit. Industry does what government asks it to do contractually and to suggest anything else is naive.
RETHINKING OFFSETS
As a policy matter, and this is personal bias here, one of the things I have noted is that in the world of offsets and industrial participation often puts US industry at a competitive disadvantage. The United States Department of Defense has a Presidential executive order that proscribes it from encouraging our industries from seeking offsets as a condition of sale for other governments. Now, what is the consequence of that? Well, over the last 14 years, we have had a perpetual 71.2% disadvantage in offsets. In 2003, it was 124%. Over the last 14 years, we sold roughly $80 billion worth of goods and had to buy $60 billion dollars worth of goods in order to do that. I think we need to rethink that position. It may be appropriate in some cases, but it is not appropriate in every case. A system of reciprocity seems a better solution for the US aerospace and defense industry, if it is to compete successfully on a global scale. So I think that as a matter of policy we do need to rethink that position.
I offer these thoughts for your consideration, and I am grateful for this opportunity to be part of these discussions.