Last week, House Armed Service Committee Chairman Mac Thornberry submitted draft legislation offering proposals to reform weapons acquisition at the Department of Defense. Hoping to include them in the upcoming National Defense Authorization Act for 2016, Thornberry introduced his plans last Monday at the Center for Strategic and International Studies (CSIS).
At CSIS, Thornberry offered four categories of reform. The first category deals with people. It seeks to make acquisition a more attractive career for uniformed military personnel and that civilian acquisition personnel have private sector experience. The second category deals with acquisition strategy. It calls for a plan to be completed up front, in writing, identification of the appropriate type of contract for the project, a risk mitigation plan included, and a consideration of incentives. The third category calls for a simplified chain of command, with a single program manager in charge of decisions. Finally, the fourth category deals with paperwork and regulation—eliminating dozens of requirements built up over decades that impede the process.
In his introductory remarks for Thornberry, CSIS President John Hamre explained that the reason acquisition is such a high priority is that increased defense spending is vital and the American people need to be assured the Pentagon is getting the most out of their tax dollars. The HASC chairman later reiterated that point. The problem with that argument is that, at least with these initial steps, Thornberry’s proposals do not address structural issues with defense acquisition that increases in the defense budget will likely exacerbate.
The defense marketplace is monopsonistic, meaning there is only a single buyer and multiple sellers competing for its business. This creates a great deal of risk for companies in the defense industry. Thornberry mentioned the need to change the incentives in the acquisition process multiple times in his remarks on Monday. But the most important incentive is the risk that monopsony creates. Because of that risk, contractors are more likely to lowball initial estimates to secure approval of a program, creating “buy-in” among the interested parties, and recouping costs on the back end through cost overruns. While Thornberry hopes that removing the “stigma” on close relationships between industry and the Pentagon will help each side better understand a program’s needs from the beginning, it also increases the chances the two sides will collude to achieve buy-in on coveted programs.
The risk inherent in the defense monopsony also makes it less likely that industry will provide the military with realistic assessments of a program’s cost and requirements. Thornberry’s idea that acquisition officers might earn joint service, necessary for promotion to flag office, could exacerbate this problem if it encourages more joint weapons development. When multiservice platforms are developed jointly, there is increased risk because, should the military sour on the project, the contractor has nowhere else to sell its product. Therefore, it is unlikely the contractor will be willing to challenge military preferences, even when they are untenable for technological or managerial reasons. As the military adds more requirements, the cost of the program spirals higher.
At least a few of Thornberry’s proposals, such as eliminating competitive prototyping for weapons and simplifying program management, have earned some praise. And the draft legislation offered last week is certainly worthy of further study. But by his own admission, Thornberry’s initial offering does not attempt to solve the Pentagon’s acquisition problems all at once. Instead, it will be an incremental process. Unless that process takes into account the fundamental structure of the defense monopsony, any difference it makes will be marginal at best.