| Defense Economics and Acquisition Reform |
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Traditional economics envisions a marketplace of many buyers and sellers. The discipline of the marketplace selects out vendors who cannot offer the prices or quality or features of their competitors. The defense "marketplace," however, usually consists of one buyer and a small number of sellers. Market influences are even more restricted for big ticket items. Once such a major program enters EMD (engineering and manufacturing development, several years before a procurement go-ahead) the selected contractor has a monopoly. At this point, market forces cease entirely and "power games" become decisive. In such an environment, are there ways we can assure ourselves that we are buying the weapons the warfighter needs at prices that are reasonable?
"Informed Budgeteer," produced by the Congressional staff, October 1, 2001. As we rapidly add money to the DoD budget, how do we know it will be spent wisely? During WW II (see p. 2), the answer was a "Special Committee to Investigate the National Defense," chaired by "an obscure junior senator from Missouri, Harry S. Truman." (22K PDF file)
"Major Management Challenges and Program Risks: Department of Defense" (GAO-01-244, January 2001) In this important and well researched report, the General Accounting Office (GAO) found that DoD's business practices fail to approach the standards of excellence demanded of troops in the field. In particular, "power games" such as front loading (basing program decisions on unrealistic assumptions) waste money that could be used to improve readiness and support modernization. The report reiterates the importance of fixing DoD's unauditable financial systems as the basis for reasonable decisions.
The latest DoD IG report on the unauditable state of the Pentagon's financial management system (on the Financial Systems page).
"More Spending is not a Reform Strategy," the Werther SITREP (Commentary 419). July 2001. Why chaos in the Pentagon's review processes ensures that most of the 2001 and 2002 spending add-ons will be wasted.
Congressional Add-ons to the FY 2001 DoD Budget. From the Center for Defense Information. Documents $3.6 Billion in procurement items not requested by the Pentagon but added by Congress. This figure, by way of comparison, would equal 42% of the entire procurement budget of the United Kingdom.
The Plans/Reality Mismatch into the New Millennium. The upcoming train wreck between social spending (general health care, Social Security, Medicare) and defense can be avoided, but not ignored.
"Defense Time Bomb," Chuck Spinney's 1996 study of how rising procurement budgets--as Cold War era weapons programs enter production--will devour money needed for pay, readiness, social security, and other priorities. To make matters worse, the enormous spending required for the F-22, JSF, V-22, F-18E/F, etc., will not even modernize the force (as GAO report in the next item confirms). Originally a staff study, then published in its current form in Challenge: The Magazine of Economic Affairs, July-August 1996, pp. 23-33. (70KB .pdf file)
"Tactical Aircraft: Modernization Plans Will Not Reduce Average Age of Aircraft," GAO Report GAO-01-163, February 2001. The 30-year service spending plans, even if perfectly executed (no slips, no overruns), will not modernize the force. Despite spending between $258 billion $338 billion on new aircraft, the average age of tactical aircraft in 2026 will be higher than it is today (currently, 13 years for the USAF, 10 for the Navy -- both numbers higher than service goals). These plans do not include the $1,344 billion needed for structural mods to current aircraft. (808 KB .pdf file)
"As Readiness Debate Rages, Pentagon Implement Budget Boost," Adam Herbert, Inside the Air Force, September 1, 2000. More on the debate over the "Four Percent Solution."
About the Comments (Full text of the references are available on Infowar)
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Comments:
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Is War a Business? or Why it is Necessary to Teach
the Pentagon to Think Before it Spends. August 7, 2001
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Down the Tubes: The Family Farm's Dangerous Romance with Technology. August 5, 2001
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Dumbing Down the Indefensible Defense Debate, July 29, 2001
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The Werther SITREP: Is the Pentagon Hostage to a Frankenstein Monster? July 15, 2001
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Richards Report: A Swift Elusive Sword ... or ... An Alternative to
"Transformation Pentagon Style" July 12, 2001
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A Critique of Pure Superstition: The Question of What Revolution in Military Affairs, April 6, 2001
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Sneak Attack Reveals Why Bureaucrats Love Anonymity, March 5, 2001
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Strategy Quo Vadis: The Cycle of Adaptation Through Rationalization & the Case for a New SSC, November 17, 2000
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John T. Correl & the Question of Integrity? October 11, 2000
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The Kind of Questions No One Wants To Hear, September 21, 2000
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The Real Cost Of Spending 1% More Of GDP On Defense, September 20, 2000
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Madness of Versailles: The Pentagon's Presidential Auction, August 30, 2000
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The JSF: One More Card In The House, August 16, 2000
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JO's Lament Illustrates Hollow Defense Debate, August 16, 2000
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The Howling Wilderness of Acquisition Reform … or … Why the Super Hornet is a Super Failure (II), January 17, 2000
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The Howling Wilderness of Acquisition Reform … or … Why the Super Hornet is a Super Failure, December 16, 1999
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Virtual Decision Making in the Hall of Mirrors, November 10, 1999
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Theory of Self-Liking Ice Cream Cone to Replace Value
Theory of Stock Pricing on Wall Street, November 6, 1999
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Flash - Plummeting Defense Stocks Poised to
Accelerate Defense Death Spiral, November 4, 1999
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The Howling Wilderness of Acquisition Reform: F-22 — a Case Study of How Business-as-Usual Shapes the Anatomy of Decline, July 20, 1999
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The Howling Wilderness of Acquisition Reform: A Discourse on Inside the Beltway Magic, July 9, 1999
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Why Did Slobo Cave? (IV), July 6, 1999
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A 'Walk-About' Through the Howling Wilderness of Acquisition Reform, June 25, 1999
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The Dark & Satanic Forces Proliferating Gobbledygook in Versailles on the Potomac, June 22, 1999
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The Lose-Lose Dilemma: Why Task Force Hawk is a Paradigm for Fiascos Waiting to Happen, June 22, 1999
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Correction of Error #289, June 22, 1999
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Task Force Hawk -- Lessons Learned in Albania, June 21, 1999
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F/A-18E/F Reveals the Exit Strategy From the Howling Wilderness of Acquisition Reform, February 11, 1999
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The Howling Wilderness of Acquisition Reform: Why Endless Lawsuits are at the Center of Its Vortex, February 10, 1999
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Fortress America: Why America Lost Its Peace Dividend After the Cold War Ended, November 29, 1998
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The Howling Wilderness of Acquisition Deform (I) ... or Why Illegal Contracts Speed Up & Simplify Decision Cycles, November 9, 1998
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Notes from the Sausage Factory: AF May Accelerate C-130J Procurement to Control F-22 Costs!!!! October 27, 1998
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Notes from the Sausage Factory: C-130J -- Healthy or Rancid Pork? October 27, 1998
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Toys vs. Boys (II) Crony Capitalism American Style, October 24, 1998
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Toys vs. Boys (I): The Emerging Defense Policy Debate It's Either the Contractors or the Troops, October 23, 1998
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Readiness Trap Sprung--The Real Game Begins, October 10, 1998
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Hollow Defense Debate …. Why Hope IS the Method, October 1, 1998
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Readiness Trap Sprung - More Money Spent the Same Way is Not the Answer, September 30, 1998
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Hollow Defense Debate Heats Up as Congress Moves to "Save"
Readiness by Adding Unneeded Weapons Systems, September 25, 1998
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More on the Phony Debate to Increase the Defense Budget, September 11, 1998
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DoD's Death Spiral (II) … Why the End Game is Either Program Death or a Complete Overhaul, Not Higher Budgets,
September 3, 1998
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DoD's Death Spiral … or ... Why Did It Take Five Years for the Light to Click On? September 3, 1998
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Today's Contribution to the Hollow Defense Debate ... The Washington Post Weighs in Against Tax Cut to Protect Defense Budget, August 16, 1998
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Notes From the Sausage Factory (III) - The Banality of Defense Spending, August 15, 1998
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READINESS TRAP SPRUNG (III) - Crony Capitalists in Washington Funhouse Set Stage for Phony Debate Over Defense Spending, August 13, 1998
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READINESS TRAP SPRUNG (II)? - Defense Intelligentsia Leads Stampede into Howling Wilderness of the Post-Information Era, August 10, 1998
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READINESS TRAP SPRUNG? - Senate Passes Amendment as Part of a Plan to Increase Defense Budget by $60 Billion over Next Three Years, August 1, 1998
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Congressional Scam to Increase Defense Spending ... or ... Why "It's going to cost a lot to adjourn this year," the Hill Staffer said with a laugh. July 28, 1998
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