DoD's Death Spiral or ... Why Did It Take
Five Years for the Light to Click On? 

September 3, 1998

Comment: #182

Discussion Thread:  #s 1-181 (sorry, but the kind of nonsense discussed in this message is the reason I started this list) plus three reports at hot link below signature block

References:

[1]"GANSLER: DoD IN A 'DEATH SPIRAL,' PROGRAM TERMINATIONS LIKELY," Defense Daily, 3 September 1998 Excerpts attached.

[2] Franklin Spinney, Memo William Lynn (Director of Program Analysis and Evaluation), "Presentation of Anatomy of Decline to the Manufacturing Strategy Task Force, Defense Science Board (1993 Summer Study), August 11, 1993," August 21, 1993. Attached.

Readers of this list may wonder why I keep harping of DoD's three problems: a high-cost modernization plan that cannot modernize the much smaller forces of the post cold war era, a rapidly deteriorating readiness posture that is the consequence of the rising cost of low readiness, and a corrupt accounting system that makes it impossible to understand the details of the first two problems, let alone design a comprehensive fix to them.

Well, the attached report in today's Defense Daily may give you a feel for why it is necessary to drill in the ABCs of the defense meltdown over and over and over.

It says Jacques Gansler, the Defense Department's Acquisition Czar (an apt title, because Czars had a habit of living luxuriously in the Kremlin oblivious to the world that was collapsing around them), has finally acknowledged the fact that the Pentagon is trapped in a "death spiral."

Duh!!!! Welcome aboard the ship of state.

Bear in mind, this acknowledgment must reflect a sudden awareness of the gravity of the problem, because the Office of the Secretary of Defense, of which Mr. Gansler is a senior member, just completed (in August) a review of the service plans that TOTALLY IGNORED THE CAUSES OF THE DEATH SPIRAL

Moreover, Mr. Gansler can not claim ignorance of these causes, particularly the close connection to the corrupted bookkeeping system, and the optimistic biases in the planning data caused by the interaction of the Front Loading with Political Engineering power games. I say this because he was present at two of my "Anatomy of Decline" briefings one at the JFK School (Harvard) in the early 90s (I forget the date) and the second time at a meeting of the Defense Science Board on August 11, 1993, where I explicitly made this connection. He remained silent on both occasions, raising no objections in forums designed for debate.

Reference 2 to this message is the memo documenting what transpired at the August 11, 1993 meeting. I sent it to William Lynn, then the Director of Program Analysis and Evaluation, now the Comptroller of the Pentagon (who, readers may recall, just testified to the FASAB that DoD can not meet existing accounting standards see #169, "The Constitution, Situational Ethics, & the Phony Debate Over More Defense Spending.")

Naturally, Mr. Lynn, true to his style, never even acknowledged that he received, let alone read, this memo. Read it for yourself, and judge whether it was worthy of attention.

Then ask yourself a question: Is the death spiral, which apparently surprised Mr. Gansler, an unpredictable event, like an earthquake, or is it a predictable consequence of business as usual?

The basic reason our Defense Department is in big trouble is because a broken accounting system is used to cover up the absurdity of the current situation. High officials, sitting in their pilothouse on the "E" Ring, may think happily they are steering the ship of state, but the gnomes in steerage have snipped the cables connecting the steering wheel to the rudder. Maybe that is why a real captain recently complained that his infantry company could expend a year's allowance of 60 mm mortar rounds in three days of normal training [#180].

It may not be the only solution, but at least it is designed to address the problems that have created Mr. Gansler's belatedly acknowledged "Death Spiral."

Chuck Spinney

[Disclaimer: In accordance with 17 U.S.C. 107, the following material is distributed without profit or payment to those who have expressed a prior interest in receiving this information for non-profit research and educational purposes only.]

Reference #1

Defense Daily
3 September 1998

GANSLER: DoD IN A 'DEATH SPIRAL,' PROGRAM TERMINATIONS LIKELY

Excerpts:

With limited defense dollars, the Pentagon has become trapped in a "death spiral" that can only be stopped by "unpopular" actions now--including the termination of existing acquisition programs, according to Pentagon acquisition chief Jacques Gansler.

...

Following his remarks, Gansler declined to offer specifics about any weapons programs that may be cut. However, he did say in his address that in many cases funding would shift from the more traditional platforms--such as ships, tanks and planes--to weapons that could counter emerging asymmetrical threats.

Other necessary actions Gansler cited included: additional military base closures; drastic reductions in fielding times for weapon systems; a sharp reduction in logistics rates; increased outsourcing; significant investments in reliability enhancements and wide-spread implementation of acquisition reform.

...

said the Pentagon will "invest heavily" in upgrading current systems, including the Abrams tank and Bradley Infantry Fighting Vehicle, as they need to be "capable" on the modern battlefield. He said such investments are vital as the military will be relying primarily on existing warfighting platforms over the next decade.

Reference #2

21 August 1993

Memorandum for Mr. Lynn
Through Mr. Puscheck, Mr. Croteau

SUBJECT: Presentation of Anatomy of Decline to the Manufacturing Strategy Task Force, Defense Science Board (1993 Summer Study), August 11, 1993

On August 6, 1993 Gordon England, President of Lockheed Fort Worth Co., asked me to brief the Anatomy of Decline to the Defense Science Board (DSB) at the University of California, Irvine. Mr. England is the Chairman of the DSB's Manufacturing Strategy Task Force and is preparing a report on a strategy for reducing costs and improving efficiency in the acquisition process. As I understand it, the task force will forward its recommendations for reform to Mr. Deutch--the descriptors lean acquisition, lean production, and government-industry partnership were used repeatedly to characterize their goals. The task force is co-chaired by Edward Biggers, a vice president of Hughes. Although its membership includes retired and active general officers and DoD civilians, my impression is that the majority of participants are employed in the defense industry, either as consultants or in manufacturing enterprises.

My briefing is attached to this memorandum. The pages are numbered for easy reference. It is slightly different from the package handed to you by Bob Croteau during our meeting on June 11.

The members of the DSB graciously received me and gave me three hours to make the presentation. I sensed no hostility and was impressed by the civility of discourse. From my point of view, it was a productive exchange. This memorandum describes my interpretation of their reaction to the briefing. The first three sections describe the separate reactions to (1) the empirical contents (i.e., the data), (2) the synthesis of the behavior pattern shaping the empirical observations (and its match to those observations), and (3) the examination of the constitutional and ethical implications of the synthesis. The fourth section contains my assessment of their reaction. Bear in mind that what follows is, by necessity, a subjective interpretation made from one person's point of view. Others present may have differing interpretations of the points made below.

No member of the task force disputed or took exception to any of the data presented during the briefing. By this I mean the force structure, modernization rates, and costs described on pages 8-25; the pattern of mismatches described on pages 27-33; the example of front loading (i.e., F-18E) described on page 45; the example of political engineering (i.e., F-16) described on pages 49-52; and the 34 examples of "Mutually Destructive Adaptations" described on pages 55-90. In fact, several members, including the chairman, used very positive descriptors like "impressive," "comprehensive," or "overwhelming" to describe the character of the data. Unfortunately, my schedule forced me to leave for the airport immediately after the briefing, so it is possible that some members may disagree with some of the data, now that they have had time for reflection.

My impression is that most members of the task force had some difficulty grasping why I used the theory of evolution by natural selection as an intellectual framework for synthesizing the observations into an explanation of how and why the defense power games (i.e., front loading and political engineering) emerged and evolved into such pervasive influences shaping acquisition decisions and hence the evolution of our forces over time. While no one questioned this approach during the briefing, their facial expressions suggested to me that I was not communicating effectively. Nevertheless, once I transitioned into the explicit descriptions of front loading and political engineering, all confusion disappeared. Everyone, I believe, was familiar with and understood these topics.

No member of the task force denied the existence of the front-loading phenomenon. No one disputed the logic, the supporting data, or the conclusion of my argument--namely that front loading is a deliberate strategy of low balling estimates of future procurement costs in order to seduce the federal bureaucracy and Congress into approving a financial commitment to a new program (see pages 44, 45, 53, 54 and 56-71) [Footnote: At one point, a member of the task force did object to my choice of words, arguing I was inferring a cause and effect relation where none existed (and was not intended on my part), but said he agreed with the data I was presenting.]

Nevertheless, notwithstanding several attempts on my part to stimulate a constructive discussion, the members of the task force would not discuss the ethical implications of the buy in. (These implications are precisely formulated and explicitly analyzed in the third part of my briefing, see #3 below.) [Footnote: Regarding the ethics of front loading, an example may help to illustrate what, I think, was a psychology of denial exhibited during this part of the discussion. A member of the task force (a senior corporate official with over 20 years of experience) said he had never been lied to. I countered that I had been lied to on many occasions and used the example of the deception surrounding the existence of the F-18E's new wing, including the imbroglio over the false statements made to Congress in June 1992 (which is well documented), to illustrate my point. Without denying the problem of front loading, he responded that I was moralizing and indicated it was time to move on to another subject. So the ethical debate terminated without an affirmation, rebuttal, or resolution.]

Likewise, no member of the task force denied the existence of the political-engineering phenomenon or disputed the reasoning of my argument that its aim is to neutralize opposition in Congress by spreading dollars, jobs, and profits around the nation (see pages 47-54). Nevertheless, when I stated my conclusion--namely, that the pervasive application of political engineering unleashes a " ... hydra of special interests, which overwhelm Congress and subvert the needs of DoD and the nation ... " (page 54), it was disputed by the following counter-argument: Political engineering is not bad; it is good, because it reflects the inherent strength of a representative democracy. Perhaps the best way to explain this position is to reconstruct it by paraphrasing the reaction of one senior member of the task force to the information contained on pages 49-52:

'This is democracy. Where else in the world can the individual citizen influence the activities of his government. I can call up my congressman, and he will return my call almost immediately.' [Footnote: A senior representative of a defense contractor made this statement. While it is not an exact quotation, this paraphrasing captures the essence of the tenor and content of his statement.]

Although the reaction that political engineering is good set the stage for the final part of the briefing, I could not complete the briefing in an orderly manner. Notwithstanding my attempts to move the briefing forward, this reaction, and my opposition to it, stimulated a chaotic discussion that consumed the remaining time. [Footnote: Although I said several times that we were about to address the constitutional implications of this issue, if only we could move forward, I could not move the briefing beyond this point. Prior to this distraction, the briefing was on schedule and could have been completed expeditiously.]

Consequently, it was not possible to analyze the ethical implications of front loading and political engineering (pages 92-101), which I consider to be the most important part of the entire briefing.

Pages 92 to 101 can be read and understood from the text contained in the briefing slides. From my point of view, the fact that the intellectual and moral implications of front loading and political engineering were not discussed is not a serious omission, assuming the one takes the initiative to read the text.

As mentioned earlier, my sense of the meeting is that it was a productive exchange. The members' reactions revealed a crucial difference in viewing the problem I was trying to describe--a difference that must be understood and explicitly addressed if we are to neutralize the pathologies described in the Anatomy of Decline. Part of communication difficulty stemmed, I think, from the fact that the data and argumentation of my briefing examined the world through the lens of government, while the audience's reaction to it was interpreted through the lens of industry. These lenses are very different, and they result in a different perception of reality, a different world view, even a different zeitgeist. The inability to have a constructive discussion of the ethical or constitutional implications of a politically-motivated, deceptive acquisition strategy (i.e., front loading) coupled with the idea that political engineering is good are evidence of this difference, I believe.

Any proposal to reform the acquisition system should deal constructively with unavoidable conflicts of interest arising out of these different world views. From the point of view of the government, it is clearly in our nation's interest to have a decision-making process that strives (1) to provide a quality defense at a reasonable price, but also strives to (2) protect the financial interests of all the people while (3) preserving the government's fitness to adapt effectively to unpredictable changes in future threats, opportunities, and constraints. Front loading and political engineering are bad from this point of view precisely because they insinuate political constraints into the government's decision process. As these constraints insensibly accumulate, they progressively diminish the government's capacity to take the initiative, making it more difficult, if not impossible, to achieve these three aims. Viewed through this lens, for example, a decision to defer the refueling of a reactor in a front-line SSN-688 class submarine while buying a more expensive SSN-21 submarine appears incomprehensible.

A private-sector, defense contractor, on the other hand, might want to provide the best defense and protect all the taxpayers, but to survive, he must do whatever is necessary to ensure that the government's money continues flowing to his factory. Naturally, the contractor strives to survive on his own terms, so from the point of view of his coalition, front loading is a necessary competitive strategy (because everyone else does it). It is simply not reasonable to expect a contractor (or a member of the coalition supporting him), to put the general interest of all the taxpayers ahead of the peculiar interests of the members of his faction--that is, the corporate officers, shareholders, employees, subcontractors, the economic and political interests of the local communities where they live, and those members of the federal government that benefit from the execution of his program.

Political engineering is clearly good for the contractor and his faction, because a decrease in the government's decision making flexibility reduces his business risk and protects the coalition of interests supporting him. Viewed through the lens of the contractor's faction, tying up an SSN-688 while buying an SSN-21 is a sensible and desirable outcome.

In other words, what has survival value for the part can damage the whole, and vice versa. (See pages 36-40 and 54). This problem of faction is actually much more complex than implied by the simple dichotomy described above. Each faction, for example, usually includes some members of the government, who observe, orient, decide, and act within the constraints of the zeitgeist of the faction as opposed to that of the government. Moreover, not all interests have the same stake in a program's success and the mix of these interests changes over time as coalitions form and reform. [Footnote: An acquisition program, like the M-1 or F-18, can be thought of as a bundle of special interests. Different binding forces hold the various constituents of the bundle together. Strong binding forces tie some constituents (e.g., prime contractors, politicians from the district in which the assembly factory is located, the government program manager whose career is tied to the program's success, etc.) to the bundle, because their survival is dependent on the program's continuation. Other constituents may have influential but weaker binding forces (e.g., a subcontractor, the politician from the subcontractor's district, a member of the service staff charged with overseeing the program's budget). Viewed through the lens of the government, the diagrams illustrating the mutually destructive adaptations (pages 55-90) can be thought of as fleeting traces of the pressures exerted by the power games of the ever-changing bundles of binding forces. While each deviation may be perfectly explainable from the point of view of the faction, or the individual binding force, their collective effect is unpredictable, arbitrary, and corrosive to the efficient working of government.]

The sweeping generalization that political engineering is good, because it reflects one's ability to influence his government, is equivalent to saying what is good for the contractor is good for DoD, or what is good for the faction is good for the nation. [Footnote: Faction and the ethical implications of its abuse of power are discussed in pages 93 to 101 of the briefing.]

Federalist #10 explains why this position is antithetical to the principles underpinning the design of our republic. It ignores the unavoidable conflict between the general interest of the government and unique interests of the factions making up the defense industry. This conflict ought not, in my opinion, be swept under the rug with soothing assertions that the key to acquisition reform is a government-industry partnership.

Good business practice is based on arms-length relationships, a code of conduct premised on honesty, adherence to the specifications of contracts, and the rule of law, not a cozy partnership between a buyer and a seller. An arms-length relationship is crucially important when the buyer is spending other people's money. Likewise, the idea that we can reduce government oversight and produce a lean or more efficient acquisition system, without attacking the waste and inefficiency produced by the coupled effects of front loading and political engineering, is patently absurd. The data are overwhelmingly clear on this point. Without changing the behavior that created the programmatic chaos and economic craziness depicted by the hydra of mismatches shown on pages (deficit & bud mismatches + spaghetti), proposals for "lean" anything will merely have a cosmetic effect and will direct our attention away from more important work.

The top priority in acquisition reform should be to detox the FYDP. After all, how can one determine what route to follow without first knowing the starting point of the journey?

/s/ Franklin C. Spinney Tac Air Analyst

Copies to: Gordan England, Chairman DSB Task Force on Manufacturing Strategy, Edward Biggers, Co-Chairman Staff Office, DSB (cys for distribution to all members of task force)