Monday, May 4, 2009

Lasting Acquisition Reform and How to Get There

GAO-09-663T Defense Acquisitions: Charting a Course for Lasting Reform

The latest report from GAO on creating lasting reform is a good blueprint for ensuring positive acquisition outcomes at DoD on three fronts: setting requirements, funding, and managing acquisition programs. The current process creates pressures to deliver high performance; estimate budgets lower than reality, and proceed with calendar-driven versus knowledge-driven schedules.

To state the obvious, the report notes that DoD’s overall weapon system investment strategy does not work together to provide the best value to the warfighter and to the taxpayer. Instead, DoD largely continues to employ a service-by-service and individual platform basis to define warfighting needs and make investment decisions. So much for the Joint Capabilities Integration Development System, or JCIDS; created to supposedly address these very issues.

As a result of these incoherent and non-integrated systems for funding “priorities,” the Department routinely does not have enough funding for the number of commitments, creating and exacerbating the competition for program dollars by the services. Further problems identified include business cases established at the program level and service specific, with undefined and not fully understood requirements, with subsequent cost and schedule estimates based on overly optimistic assumptions rather than on sufficient knowledge and reality. Continuing the hit parade is the disorganization of portfolio management, as funding and acquisition processes are led by different organizations and making accountability difficult, further hampered by frequent turnover in leadership positions. Finally adding insult to injury is Congressional pressure for pet projects that provide jobs in their respective districts.

In regards to requirements, the bottom-line is that garbage in equates to garbage out when it comes to program requirements. The requirements definition phase performed during concept development is rarely performed with the disciplined and coordinated approach to tradeoffs among cost, schedule, and performance. For technology programs in the commercial sector, a strong consideration is given to changes in requirements when considered against cost, performance, or schedule. These requirements are analyzed for benefit and impact against cost, and are either modified or eliminated. This approach does not normally happen with the typical defense acquisition program, and the result is rebaselining and scope creep without the business case to support the change or a process in place to analyze the change. Requirements need to be defined upfront, baselined, and managed. However, any management being done is being done in a fragmented, service approach as the GAO reports. Institutionalizing warfighter needs from combatant commands, the principal joint warfighting customer, is the best way to turn the requirements around by ensuring warfighter needs are addressed and integrated into program planning. Further, Sec. Gates noted in the GAO report that the DoD must figure out how to institutionalize the acquisition of urgently-needed capabilities rather than having to do so on an ad hoc basis. Portfolio management is also a new discipline being employed at DoD, although the jury is still out on its effectiveness to alleviate these endemic problems of program accountability.

In regards to funding of proposed programs, budgeting takes place through yet another fragmented process, the Planning, Programming, Budgeting, and Execution system, which is also not synchronized with JCIDS. The current process is basically a sophisticated shell game between the services. Rather than limit the number and size of programs or adjust requirements, the funding process attempts to accommodate all programs. This process creates a competition for funds, with the result that sponsors of weapon system programs pursue overambitious capabilities and underestimate costs to make their programs most worthy to receive the funding – Future Combat System anyone? DoD then must make up for funding shortfalls by robbing Peter to pay Paul, and thus shift funds from one program to pay for another. This budget drill results in reduced system capabilities, cuts to procurement quantities, the stretching out of programs, and the termination of programs to save money. These actions ultimately hide the true future costs of current commitments, making it difficult to do any proper projections or planning. Off the cuff budgets are also not the answer, as DoD has used supplemental funding to go around the budgeting process to fund their programs off the books.

Much like Wall Street, programs that have pursued risky and unexecutable acquisition strategies have succeeded in winning approval and funding. If lasting reform is to succeed, then acquisition programs that present realistic strategies and resource estimates must be the norm. Of note, one of the recommendations made in the GAO report must be given very forceful attention as it is one of the most important and realistic ways to realize true, lasting reform:

…While actions taken and proposed by DOD and Congress are constructive and will serve to improve acquisition outcomes, one has to ask the question why extraordinary actions are needed to force practices that should occur normally. The answer to this question will shed light on the cultural or environmental forces that operate against sound management practices. For reforms to work, they will have to address these forces as well. For example, there are a number of proposals to make cost estimates more rigorous and realistic, but do these address all of the reasons why estimates are not already realistic? Clearly, more independence, methodological rigor, and better information about risk areas like technology will make estimates more realistic. On the other hand, realism is compromised as the competition for funding encourages programs to appear affordable. Also, when program sponsors present a program as more than a weapon system, but rather as essential to new fighting concepts, pressures exist to accept less than rigorous cost estimates. Reform must recognize and counteract these pressures as well…

It is this pressure that must be alleviated, and Congress holds the key.

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