Weak processes stymie DOD cost-control efforts

I recently spent a weekend at a national defense conference featuring one of the most impressive casts of speakers and panelists imaginable. Gathered in one place were the Secretary of Defense and his two immediate predecessors, the Chairman of the Joint Chiefs of Staff, two service chiefs, a service secretary, three undersecretaries of defense, several four-star commanders, the chairmen and other members of both the House and Senate Armed Services Committees, and a plethora of widely admired, highly knowledgeable “formers” who remain among the real thought leaders in the national security field.

Yet, with all these luminaries, it was one young Air Force lieutenant who caught my attention. During a panel on the impacts of reduced research and development spending on the Defense Department’s access to new and critical technology, the lieutenant rose to express frustration at the lack of flexibility and the lack of tolerance for risk he believes dominates the environment.

He also expressed concern about the inadequate attention being paid to either the technology or to the human capital crises—among both the uniformed and civilian workforces—facing government.

All of the panelists, who hailed from both government and industry, agreed wholeheartedly with him and commiserated over the many impacts of the current budget debacle.

However, none of them spoke directly to steps the department could take, even as the budget battle continues on high, to address one or more of these challenges. Yet, such steps do exist.

Everyone is concerned about the impacts of the current budget instability and additional looming cuts to procurement and research and development. And everyone agrees there are meaningful and necessary savings to be had through reductions in the personnel and operations and maintenance accounts.

But there was surprisingly little discussion about solutions to the self-inflicted wounds alluded to by the lieutenant. Given that there are congressional leaders and others who, while strong supporters of the defense budget, remain unconvinced that DOD has done all it could to reduce unnecessary costs, that gap is one that must be addressed.

Of course, these are not simple questions and consensus on how to address them remains elusive. Nonetheless, it is worth considering some of what was not discussed at this wide-ranging forum.

For example, former undersecretaries of defense Michele Flournoy and Dov Zakheim challenged the department to more aggressively look at its overhead costs and stressed the critical importance of bringing departmental costs down to more sustainable levels. This would likely result in reductions in force structure, benefits and in federal civilian and contractor numbers.

But to make those cuts appropriately one needs analytically sound data. Yet, there was little mention of the analytically weak process the department has put into place to determine, where relevant, whether in-house or contractor costs are lower. In fact, there is resistance in the department to fully incorporating the non-partisan findings of the Center for Strategic and International Studies or the Government Accountability Office on this central question.

Today, the department’s cost comparisons are based on such factors as a company’s published GSA Schedule rates—with no consideration of the substantial discounting that almost always occurs as the result of competition. This makes no sense and is destined to result in flawed comparisons that risk incurring unnecessary costs to the taxpayer. It’s one of those core “specifics” that remains largely ignored.

Likewise, several speakers expressed deep concern over reduced R&D spending and what it could mean for the department’s future access to new and critical technology. Yet no one raised a question about the ways the department was making that access ever more difficult, such as continued efforts to dilute the application of commercial buying authorities contained in the federal acquisition regulation or expanding government audit access to company internal audit documents or imposing artificial caps on contractor employee compensation that bear no relationship to market realities.

Not only do these trends impose unnecessary and costly burdens on existing contractors, it makes access to commercial technology more difficult for DOD and for prime contractors seeking to incorporate cutting edge technology into their proposed solutions.

And we wonder why DOD sometimes seems behind the technology 8-ball?

There is little doubt that the budget challenges are having an enormous impact on government agencies, federal personnel, and contractors. How the fiscal impasse is settled is way above my pay grade.

But that doesn’t mean we can ignore those things over which we collectively do have control. In fact, doing so should be an imperative.