The Howling Wilderness of Acquisition Reform:
July 9, 1999
Discussion Thread: #s 16, 49, 61, 81, 169, 288, 289, 292
 Defense System Affordability Council, Email from XXX [a civilian logistician with 26 years experience working for the Air Force], July 8, 1999. Attached
Before the Serbo-NATO war grabbed our attention, the primary focus of this stream of comments was the three problems tearing the military to pieces: a modernization program that cannot modernize the force because the new weapons are too expensive, the rising cost of low readiness that leads to perpetual pressure to reduce readiness while transferring money from the modernization to the operating budgets, and a corrupt accounting system that makes it impossible to identify the detailed information needed to track and fix the first two problems. The referenced discussion thread lists only a few of the earlier messages describing these problems.
At the heart of the Defense Death Spiral is a political economy aimed a shoveling money to defense contractors by increasing costs faster than budgets (even when budgets increase sharply as they did in the 1980s). This is reflected in the most enduring phenomenon of the post-Cold War era: the continuing obsession with fielding ever more technically complex and costly technologies while threats are evaporating. A far-ranging discussion of these issues can be found in the reports and messages at the website beneath my signature block.
In this environment, promises that the 'future will be different from the past' take root and grow very easily. Not surprisingly such Panglossian nonsense permeates the policy statements of those individuals struggling to protect the comfortable lifestyle evolved by the military - industrial - congressional complex during the Cold War. The pronouncements of the Defense Affordability Council about lower operating costs IN THE FUTURE can be used to illustrate the Panglossian mindset of the courtiers inhabiting Versailles on the Potomac.
One of the members of this list, a civilian expert who has been on the receiving end of these policies for 26 years as an AF logistician, has been kind enough to provide his analysis of Dr. Pangloss in action. Reference #1 below is his interpretation of the Defense Affordability Council Report Issued last January. He has entitled his analysis "A Discourse on Inside the Beltway Magic."
Those interested in reading the full report can find it following website
According to our expert logistician, future affordability will be enhanced as follows: We will cut acquisition costs, cut support costs, and buy more weapons. At the same time, we will be able to transfer money out of the support accounts and into the modernization accounts. Of course, none of it HAS work over the long term, because it is based on the theory that we can use Cost as an Independent Variable (CAIV) in the short term.
Understanding his reasoning requires us to penetrate into the darkest recesses of the Howling Wilderness of Acquisition Reform: CAIV is a short term policy initiative that will allow us to make all kinds of budget cuts in long term budget projections, while we test 'things' to see if they work. Once we meet the unit cost goal, we will buy what we get, and the schedule will be met The fiction is that you can estimate what it will cost to support the new weapon without contract specifications and long before it is designed and used by the troops see it in the field. [e.g., the AF claims today that the F-22 will cost less to operate that F-15 even though it will cost several times more to buy than the F-15 and its integrated avionics are not fully designed.] Thus CAIV permits the defense intellaaaaaactuals to say future will be different from the past without having to explain it, thereby generating a imaginary future saving in operating costs that will justify the higher procurement costs today -- or put another way, CAIV is a reform initiative that will enable us to adapt to change by CONTINUING BUSINESS AS USUAL. QED.
Our expert's bottom line -- In the real world, you will continue to have ever growing readiness problems, because the promises of these policies lead to cuts in logistics infrastructure today, while the actions of the policies increase the requirements for more infrastructure and higher support costs tomorrow. But this is ok, indeed, it is good for business: the infrastructure cuts mean we will have to hire the contractor to fix the unreliable equipment, which will permit him a decent profit over and over again on a declining production base.
Perhaps our friend is a bit cynical -- So it might be best to read Reference #1 carefully, and then compare it to the report hot linked above, and judge for yourself what it is like to walk through the inner recesses of the Howling Wilderness of Acquisition Reform.
[Disclaimer: In accordance with 17 U.S.C. 107, this 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.]
[ Attachment #1]------------------
In Apr 99 the Defense Systems Affordability Council did its thing and issued goals for freeing funds for modernization while reducing support costs and overhead. It is more Beltway magic.
Under Secretary of Defense Gansler endorsed this as well. Very interesting, I wonder where the emperor left his clothes this time.
The Defense Systems Affordability Council (DSAC) was established by USD (A&T) to establish goals and monitor progress toward the goal of freeing money for investment in procuring systems that don't work as predicted, can't be maintained, and luckily aren't needed, so they don't have to work. It is a good thing the service acquisition executives ignore these USD initiatives. This one will lead to faster procurement of worse systems, and never realize any of the predicted good things like reduced cost and more readiness.
The new paradigm is "SCHEDULE IN SPITE OF PERFORMANCE AND COST." Use new techniques like evolutionary engineering, partnering, and cost as an independent variable to deliver systems that are not founded in satisfying a military need. The whole process obscures the track from what the combat user may face in war and what the system produces.
Here is a recap:
Goal 1: Rapidly field high quality weapons systems and support them responsively.
Objective 1-1 Reduce acquisition cycle time by 50%
Objective 1-2 Reduce logistics response time from 36 to 18 to 5 days in the FYDP
Objective 1-3 Reduce repair times by 25%
Evolutionary acquisition: Never meet the requirements, but never stop developing and producing. Good way to avoid the question: Is the system worth the taxpayers' money. Good thing we don't really need the systems! No quality products here.
Partnering: Getting everyone on the same team, all pulling together,. This way you get the testers to buy in. They can't be partners then say the system is not effective nor suitable. All the partners are pulling together to get the system into profitable production on time. No quality products here, either.
Maintain Schedule in spite of lack of performance and cost overruns. The old paradigm of design to cost is now replaced with design to the scheduled increase of budgeted production funding, in spite of how much more evolutionary development is required later to get the system to work in a manner that may succeed in battle.
With all this bad performance you will need good logistics and the ideas for that are sensible, but involve new organizations, which will be hard to do politically.
Goal 2: Reduce Total Ownership Costs to make money available for needed modernization, because the force is getting old, and the potential adversaries have access to good commercial technology. Ironic!
Objective 2-1 Achieve 20 to 50% reductions in life cycle and unit costs using "cost as an independent variable (CAIV). CAIV is a cousin of evolutionary acquisition, if it costs too much to get the performance, it must not be that necessary, so we ignore the equipment and move on. Performance is sacrificed.
Objective 2-2 Reduce logistics costs for weapon systems by 7% in 2000, 10% in 2001 and 20% by 2005.
How: Do this by integrating the industrial base: commercial practices, lean aircraft initiative, move from cost (input) based negotiation to price (outcomes) based negotiations, eliminate specifications so more businesses will do business with the military (but specifications gave reliability), negotiate total system performance responsibility (TSPR) with the businesses. Blind faith that commercial things will work in harsh combat environment.
Somehow the industry can repair items using outcome-based pricing cheaper than the depots. Outcome-based pricing will consider bad outcomes of poor reliability and bad maintenance design, and we will then pay to cover those things we allowed CAIV policies give away in development.
New authority for the program manager. Let the program manager control tradeoffs for life cycle, include doing CAIV tradeoffs that lower performance. Don't question the manager, even though he is a military fellow who is going to leave soon with his career intact if he follows the incentives of CAIV: stay on schedule without any slow down (like making the system work) and continuously refresh technology to try to get some reliability and maintainability (this is first cousin to evolutionary acquisition).
If I needed any of the reliability at all I should have got it up front!
What is missing is any concern for reliability -- how often the things break, or maintainability -- how efficiently we repair that which breaks. Without investing in these two areas, there can be no reduced support cost unless we sacrifice readiness. There are laws of physics that require you have quality to get good performance and that is not addressed in how to get to the goals incentivized by CAIV.
Goal 3 Reduce Overhead of Acquisition and Logistics Infrastructure. To make money available for modernization and high profits for the defense industry.
Objective 3-1 Reduce percent of logistics costs in total obligation authority (TOA) from 64% to 53% by 2005
Objective 3-2 Use the money to spend $60 billion on profitable production in 2001.
Use people and resources efficiently. More with less!
Privatize in spite of the 10 USC 2466 requirement for 50% of depot repair to be done organically to preserve a surge capability congress did not see available in private industry. Industry is magic -- they can take bad systems and make them well for almost no cost!
Activity based costing. Try to understand now what we don't know after 50 years trying.
Reduce DoD infrastructure, get rid of excess bases to keep incompetent inefficient defense contractors in the money.
These goals and objectives lead to two observations:
First, goal one and two effectively separate the operational utility or value of the weapon system in combat from both cost and schedule in an effort to create a steady stream of new production to allow modernization. The result will be a new "bow wave" of less useful and more expensive to operate weapons, like the B-2 and Apache. Such concepts as evolutionary acquisition, partnering and CAIV make it nearly impossible to stop a system that has little utility from being produced. The Air Force and the Navy need no help in getting systems through the milestones that don't work, but this will help the Army. We could see the Sgt. York built under this regime.
Observation two: There is little to recommend the success of goals two and three to reduce acquisition and support costs to free money for modernization. Performance and readiness will slip to free the money. Privatization will gobble up the costs saved by reducing infrastructure. We have little idea what it costs for the depots to do business but we will see the hidden depot costs in the contractors fixed price proposals to maintain the systems.
I am sure all the savings are already taken in the 2002 FYDP therefore we will have a lot of new stuff and in 2007 we will see it gobbling up the readiness budget as the B-2 is doing today.
Evolutionary acquisition, partnering, and continuous technology refreshing are new versions of front loading and political engineering.
F-22 and JSF are already paradigms of the new Defense System Affordability process -- both are under intense cost pressure!!!!!!.