Defense Acquisition Needs to Change Course

Program Manager, March, 2001 by Phil W. Bolin, James S. O'Brasky

Why? Because The Landscape Has Changed -- Dramatically!

The defense acquisition landscape has changed more than most people think. The Department of Defense (DoD) needs to take additional steps to improve the process of acquiring U.S. defense products. The landscape we refer to includes five interacting components that support U.S. defense forces: funding and leadership; the Defense Industrial Base; the Revolution in Military Affairs; the Revolution in Business Affairs; and people. For this article, we focus on the following five issues:

* Funding decisions over the past decade have put DoD in a "Catch-22" situation. DoD has foregone modernization to fund operational readiness; aging equipment together with other requirements now place an ever-increasing burden on available funding

* The diffusion of military and economic power creates a difficult environment for U.S. leaders to define a clear strategy and gain sufficient funding to support the military.

* The Defense Industrial Base has changed; consolidation, high company debt, and unstable military purchase plans require that the Defense Industrial Base shift its focus to other business areas and seek stronger influence with Congress. DoD needs to reconsider its approach to this new entity

* DoD's approach to the new environment -- a combination of the Revolution in Business Affairs and the Revolution in Military Affairs --is only the start of what needs to be done. A near-term shortage of senior science and engineering technical personnel should be cause for alarm as the Department continues its efforts to reform the acquisition process.

The Current Situation

After four thousand studies, a dozen major commissions, and hundreds of laws and regulations, efforts are still on-going to improve the DoD acquisition process. In view of recent changes in the Defense Industrial Base and the current environment, we sought to determine if the current Department of Defense/Department of Navy (DoD/DoN) acquisition policies were really effective in supporting the warfighter. We concluded that, while some success is evident, more could be done.

To reiterate a tired but true refrain heard repeatedly in recent years, funding has decreased dramatically throughout DoD. A review of two major military funding categories highlights the real implications for defense: Operations and Support (O&S) and Modernization. O&S includes funding to support the operating forces and pay for military personnel; modernization funds include procurement and research and development.

In DoN, O&S funding fell 27 percent from $75.7 billion in 1990 to $55.3 billion in 1999 (constant 2001 dollars). Investment funding fell 42 percent in the same period, from $52.7 billion to $30.5 billion. Not surprisingly, force structure also fell during this period, with the number of battle force ships reduced by 44 percent.

A reduction in forces and funding could be expected after the United States won the Cold War. However, two factors argue that the reduction in O&S funding is even more severe than shown by the raw numbers.

Less O&S Dollars to Operating Forces

First, in a study on O&S funding, the Institute for Defense Analyses (IDA) found that O&S funds spent on items "less-related" to combat forces increased from twenty cents on the dollar to thirty cents on the dollar. [1] For purposes of the study, IDA grouped O&S funding into three categories: those funds applied directly to forces; those funds less related to forces such as environmental compliance, health, and administration; and funds to support other nations. It comes as no surprise that environmental compliance and health costs have increased, as those items are of national interest. Worthy of note, however, is the fact that less of each O&S dollar is actually allocated to operating forces.

Aging Military Force

Second, complicating the funding reductions is an aging military force. One of many examples of this fact is that the average age of U.S. Air Force planes is 20 years, even though they were designed for 15 years of service life. Even with planned procurements, former Under Secretary of Defense (Acquisition, Technology and Logistics) Jacques S. Gansler predicted that the average age would grow to 30 years before modernization could be achieved.

Noting that a lower percentage of O&S funding is reaching an aging operating force, Army Gen. Henry Shelton, Chairman of the Joint Chiefs of Staff, told the Senate Armed Services Committee Sept. 27, 2000, that, "We are collectively robbing Peter to pay Paul, or robbing modernization ... to pay for current readiness.

How "robbing Peter to pay Paul" affects modernization is highlighted by several facts. In 1997, the Quadrennial Defense Review stated that 1996 procurement was $18 billion less than called for in the Bottom-Up Review plan. To compensate, the Office of the Secretary of Defense (OSD) developed a goal to provide $60 billion per year for military procurement. As time passed and procurement continued to be pushed into the out years, this procurement goal became a target to achieve in the fiscal 2001 budget.