Pressures in the Tunnel

May 1, 1985

Earlier this year, a blue-ribbon panel convened by the Georgetown Center for strategic and International Studies examined the defense system acquisition process and found it wanting. This panel, like many another panel that went before it, said that major weapon systems often cost too much, take too long to produce, and frequently fail to perform as intended.

The specific faults identified in the Georgetown study are likewise familiar. There has been a lack of discipline in establishing requirements. Once set, requirements may be abandoned or changed suddenly in the annual budget shuffle. There has been too much fiddling with system designs while acquisitions were under way. This, along with fluctuations in funding, led to wasteful in stability. There is too much high-level micromanagement. There is not enough competition for defense contracts, depriving the Pentagon of its best opportunity to keep system costs down.

The relevant question is whether the experience of decades and the findings of all the studies, panels, and commissions have had or will have a beneficial effect. Is there anything at the end of the tunnel except more tunnel

Some indicators are encouraging. The rate of real cost growth on major defense systems has declined steadily and significantly for the past four years. More work is being awarded after competition by contending bidders, and more of the contracts are of the preferred fixed-price variety. A stiff new law curtails sole source procurements. Cost estimates used in budgeting are more realistic than in the recent past. Most of the Air Force’s major programs are formally baselined, which reduces the temptation to redesign a system after acquisition has begun. Contract incentives for reliability and system quality loom much larger than before.

These measures, however, do not remove all of the tunnel at the end of the tunnel.

Official Washington revolves around the scramble for shares of the federal budget. Since this is an annual affair, the emphasis tends to be on outlays and potential savings this year and maybe next year. Programs are often stretched out overtime, both to keep options open and to save money in the short term. The F-15 fighter acquisition is an example. Procurement of the original increment of F-15s was stretched out from six years to nine. Money was saved in the short term, but the additional cost in the long term was $2 billion. This sorry bit of history continues to repeat itself. Planned F-15 production has been stretched out again in each of the past two programming and budgeting cycles.

Despite the clear results of multiyear procurement — program stability, efficient production rates, and appreciable cost savings — this approach is underused. The F-15 is still funded on a year-by-year basis. The Air Force has a total of seven programs on multiyear procurement.

Micromanagement is another problem. Reasonable oversight is to be expected — indeed, is prudent — on major acquisitions, but congressional and Pentagon staffers overdo it. Excessive demands — sometimes approaching the ridiculous — for detailed data disrupt management schedules. The combined pressures for a little change here and a small adjustment there create turmoil.

Even at best, the acquisition process is subject to harshly conflicting influences. New systems are designed at or beyond the leading edge of technology. This generates risk in the venture. High-risk designs usually mean higher costs and extra difficulty in development. They are not easy to forecast or control. But conservative designs are vulnerable to technological bypass. The system may be obsolescent or non-responsive to the evolving enemy threat by the time it’s fielded. If development risk is high, however, contractors will be reluctant to bid a firm fixed price for producing it, wanting the protection of a cost-plus-fee arrangement. That leaves the door wide open for cost overruns.

Te Georgetown study observes, correctly, that the very nature of the process encourages low cost estimating. The point could be taken further. No new system is ever approved without strong advocacy. Advocates tend to be enthusiastic and optimistic about what they’re advocating. On top of this, the more certain and more reasonable priced a new concept sounds, the easier it is to sell. Adversaries of a system too often demand unrealistic assurances, and advocates are often all too ready to give them. Funding favors the bold.

For these reasons and others, the weapon system acquisition process will never be as simple or as efficient as buying potatoes at the supermarket. It is too complex and involves too much uncertainty. This is why the acquisition problems of the past twenty years defy simple solutions. New management initiatives, some of which are cited above, promise considerable improvement through. These actions are already helping and will help more if given a fair chance to jell. Still greater improvement is possible if system acquisition, inherently a long-range proposition, can be addressed with long-range thinking and an understanding of the strange pressures in the tunnel.