The Howling Wilderness of Acquisition Deform (I) ... or
Why Illegal Contracts Speed Up & Simplify Decision Cycles

November 9, 1998

Comment: #213

Discussion Thread:  #s 151, 152, 169, 183


[1] John Donnelly, "Missile-Tracking Satellites' Costs Grow $1 Billion Plus," Defense Week November 9, 1998. Excerpts attached.

A cornerstone of the Acquisition Reform is to reduce cycle time. Defense contractors are particular fond of government reforms that simplify the choices, reduce decision points, and eliminate the onerous burden of government oversight. What is less well understood, however, is the central role of illegal contracts in the march toward reforming our inefficient decision-making practices. Let us bring in some sunshine to guide our the descent into darkness:

The U.S. has tried and failed to develop four different warning and tracking networks as part of the almost $50 billion it has spent on Ballistic Missile Defense since 1983, without the inconvenience of having to deploy and support one workable weapon system.

The attached horror story by John Donnelly describes how we are about to blow it for the fifth time.

The subject is the Space Based Infrared System or SBIRS program. Donnelly reports how the SBIRS is plagued by cost overruns and delays, which are, in part, the results of excessive complexity and optimism.

While there is nothing unusual about these kind of cost overruns and schedule slippages, Donnelly reports in the second paragraph that the Air Force is preparing a preemptive strike to deter cancellation by trying to get one of the contractors, Boeing, to share the program's cost increases with the government.

This struck me as an ILLEGAL cost-sharing arrangement.

To make matters worse, it occurred to me that an illegal cost-sharing agreement might set the stage for a bailout of the contractors responsible for producing this fiasco, if they could not fix the SBIRS problems.

What would happen, for example, if the government tried to cancel the program for default, or non-performance, or even fraud and corruption? Would it not be possible for the contractor to counter-sue the government for engaging in illegal behavior, arguing that the real issue is cancellation was for the convenience of the government? And if so, would it not be the only option for the government to terminate such a contract would be "for the convenience of the government," which means the United States taxpayer would be liable for the termination costs and any contract penalties?

After all, did not the government's follies in A-12 fiasco teach us this lesson?

To see if my fears had substance, I asked Hebert Fenster if the proposed arrangement was legal. Readers may recall from earlier messages that Fenster is the lawyer who won the A-12 case for General Dynamics, which, incidentally, was the largest settlement in the history of such lawsuits.

Attached is Mr. Fenster's Response --

"You are correct, as you probably know. I am in the middle of writing an article about this nefarious practice, but let me address your particular question.

The Air Force cannot 'cost share' such programs for at least two very simple reasons. First, doing so violates, not the anti-deficiency act, but a closely related statute, 31 USC 1342. This statute prohibits (and it too is a felony statute) the government from accepting so-called "voluntary services." Second, and much more fundamentally, this type of "procurement" results in the augmentation of appropriations a practice that is prohibited by the Constitution (of all things.)

The answer is "no, the proposal is NOT legal; it is illegal."

What seriously exacerbates even this terrible situation is the fact that the parties are well aware that the program will, in all events, be cancelled at some point in the not-to-distant future. This will mean that the contractor will have a permanent, uncompensated investment in this misguided (you'll pardon the pun) attempt to satisfy some terminally stupid congressmen that the space over our heads is as insular as the waters next to our land were in 1787."

There you have it, straight from someone who earns his living by knowing about these issues.
If Mr. Fenster is correct, one clear way to reduce cycle times and to ream out the money pipe is to use illegal contracts to eliminate the need for decisions. This has an added benefit of reducing the need for the onerous burden of excessive government oversight. In fact, with a little imagination, we could use this reform methodology to eliminate the need for all specifications and deliverables. The creative possibilities are endless!

Welcome, dear reader, to the howling wilderness of Acquisition Deform!!!!!!

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 Week
November 9, 1998

Missile-Tracking Satellites' Costs Grow $1 Billion Plus

By John Donnelly


The contracts to build demonstration versions of a new constellation of U.S. missile-tracking satellites are riddled with cost growth totaling about $300 million, the result of an "overly optimistic" acquisition plan, according to the Air Force official in charge of space acquisitions.

As a result, the Air Force is trying to get one of the contractors, Boeing, to split the program's costs with the U.S., an unusually draconian move for a "cost-plus" deal, the kind where the government is supposed to pay for development. Moreover, Brent Collins said in an interview last week, just in the last year, the estimated cost of the "objective" satellite system which is to follow the demonstration effort has itself ballooned $1 billion higher than anticipated.


All these woes have contributed to a possible decision this month by the Pentagon leadership to delay the first launch of one or both of these constellations by two years. The first SBIRS High satellite was to be launched in fiscal 2002, and now may be delayed to 2004. The first SBIRS Low satellite was to be sent aloft in 2004, and now it may go up in 2006. Delaying the schedule may help with the near-term budget crunch. But is likely to raise the ultimate price tag even further.


Since the 1980s, the U.S. has tried and failed to develop four different warning and tracking networks. The SBIRS program is the fifth.