Defense Procurement Information Papers - Campaign '84

Introduction

Among the most pressing issues of the 1984 election campaign is the mounting budget deficit. The enormity of the preojected shortfall--$200 billion--will be at the heart of the national debate about the future course of this country's tax and spending policies. Along those lines, attention should be focused on the federal agency which, according to the Congressional Budget Office, will consume over one-quarter of the entire federal budget: The Department of Defense.

Across the country, Republicans and Democratic voters who support a strong national defense at a reasonable cost, are asking how the Reagan Administration's huge increases in defense spending (which began under President Carter) are justified in light of the stories they have heard and read about $1100 plastic stool caps, $400 hammers, and $9600 allen wrenches. Anyone who has shopped at a local hardware store knows there is something terribly wrong with a system which would pay such prices for simple items. What is more difficult to grasp, but just as true and just as alarming, is that the government is paying for the same degree of price inflation in our major weapon systems. After all, a weapon system such as the F-15 airplane is nothing more than "spare parts flying in tandem."

It is important to keep in mind that these "horror" stories are not new and are not the result of attitudes and policies specific to the Reagan administration. Problems in defense procurement transcend changes in administration and political ideology. They are entrenched and systemic.

Long-time Pentagon procurement reformers like A. Ernest Fitzgerald, now Management Systems Deputy in the Office of the Assistant Secretary of the Air Force for Financial Management, have pointed out the Pentagon's system of rewards and punishments is upside down. The Pentagon tolerates excessive mark-ups and cost overruns on weapon systems and penalizes the costcutters and whistleblowers who would control them. He is an expert on the subject. In 1969, he was fired for revealing to Congress $2 billion cost overruns on Lockheeds's C5 cargo plane. After fourteen years of legal battling, he was finally reinstated to his original position.

Fitzgerald's message and that of others familiar with the shortfalls of the defense procurement process, is that fat, waste and poor management is often overlooked because there is a definite payoff in "going along with the gag."^[1] The emphasis in the Pentagon is to spend, often regardless of what is being bought. The more money spent this year means even bigger budgets and more power for those controlling those budgets the following year.

Fitzgerald told a Congressional committee in 1984 that he has never seen a weapons program that could not initially be cut by 30%. His assessment has been reinforced by other Pentagon procurement critics. Former Defense Contract Audit Agency auditor George Spanton, whom the Office of Special Counsel found was the subject of illegal retaliation for publicly criticizing his agency, feels that 30% could be cut from the $100 billion a year procurement budget by exercising more effective cost controls and aggressively holding down contractors' costs. Air Force Industrial Engineer Ompal Chauhan was part of the Air Force team that evaluated the inefficiency of the Hughes missile plant in Tuscon, Arizona. (Missile production at that plant was suspended in August 1984 by the Air Force because of evidence of poor quality workmanship). Chauhan told a Senate subcommittee in June 1984, that $50 billion a year could be saved by introducing greater efficiency in defense plants and cutting waste and fat.

These information papers are an attempt to explain some of the reasons for the lack of meaningful incentives to control costs. Some of these include:

• The lack of competition. The General Accounting Office has found that true, competitive procurement with advertised solicitations and sealed bids comprises only 6% of Defense Department purchasing. A bill now pending in Congress would increase true competition by 5% per year until a goal of 70% is reached.
• The practice of estimating the cost of a new weapon system on how mcuh previous systems have cost. Those "historical" costs include the fat, inefficiency and poor management practices of the earlier production histories and use them as a base to perpetuate unnecessarily high prices. Instead, the industrial engineering technique called "should-cost" should be used. Should cost would determine what a weapon ought to cost if built according to efficient production standards.
• The "revolving-door" syndrome whereby government officials involved in contract and production decisions go to work for the contractors they were charged with monitoring. A contract or procurement official may not risk asking tough questions about a program as long as it sees it as a stepping stone in his career.

The result of these and other procurement ills are weapons that become so costly from year to year that fewer and fewer quantities can be bought because per unit costs are skyrocketing. Often those weapons are not adequately tested and are deployed before potentially serious flaws have been corrected. Inadequate weapon and spare parts supplies, fewer dollars spent efficiently on operations, maintenance and training of troops means a degraded readiness posture which according to internal Pentagon and Congressional studies leaves us unprepared to fight a conventional war for more than several weeks.

Solutions to the crisis in conventional weapons preocurement will not be easy or politically popular, but more and more elected officials are coming to realize that the will to reform wasteful spending practices, at whatever cost, is essential if we are to maintain a strong national defense. The Project on Military Procurement has prepared this working paper as an informational tool for all candidates for public office looking for legislative remedies to these problems on behalf of the soldier and their taxpaying consitutents.

The Project is non-partisan. We feel the goal of an efficient and cost effective military, getting the stonger military capability possible at the lowest cost to the taxpayer, transcends political ideology. We work with Democratic and Republican members of Congress equally. We are also happy to provide information to candidates of either party who are challenging incumbents.

Our paper is divided into two sections. More Bucks refers to those factors which relentlessly drive up the cost of our weapon systems, such as the lack of competition in defense procurement and the lack of incentives for controlling waste and saving money. The result is Less Bang: fewer, overly complex weapons, that do not work and cannot be supported in combat. It means fewer spare parts and a low level of combat readiness. It means less money to test weapons and train troops.

We have also included sections on Warranties and Operational Testing, two areas where Congress has voted into law meaningful reforms that are being stubbornly subverted by the Department of Defense. Unfortunately, DoD's actions only make it more imperative that Congress assert its constitutional authority and demand accountability from the Pentagon for how it is spending our tax dollars for national security.

Click here to read the full report.