An Army Grey Eagle testing a NERO jammer.

Covering acquisition reform is one of this magazine’s strengths. It can be painful. The topic is abstruse, dense with details, subject to misunderstanding and incredibly important to taxpayers, Congress, the defense industry, allies and our adversaries. The Army has been a particularly ineffectual practitioner of acquisition reform, botching program after program for 20 years, so it’s particularly important when an Army colonel who works with the Army’s Office of Business Transformation offers an analysis of how to improve the system. His analysis and prescription follow. Read on! The Editor.

America’s defense industry is struggling to boost its innovative entrepreneurs, who need freedom and resources to come up with creative ideas.

Unlike other industries, defense innovators do not benefit from capital incentives to encourage research and development investment. Instead, innovative defense concepts have traditionally been nurtured in an environment combined of countercultural activity, legislative prompting, necessity (often fear), re-orientation and re-organization; which are rarely effective when implemented in isolation. Outlined below is a summary of the current state of the defense acquisitions system and how Congress must help us overcome the status quo.

Col. Richard Hough

During the interwar period, George Orwell noted “We have now sunk to a depth at which restatement of the obvious is the first duty of intelligent men.” In that vein, let’s look at defense acquisitions and congressional oversight. It is obvious that:

• Decades of tweaking the system based on the limited findings of panels and oversight committees has resulted in no perceptible cultural change.
• We do not use our broader cultural strengths and corporate traditions to inform acquisition policy.
• We have lost sight of long-term and emergent threats while becoming overly focused on current contingencies.
• Appropriations and regulatory requirements have created a consensus-based decision-making environment that is risk-averse.
• The acquisition workforce understands that excessive layers of bureaucratic review provides protection from direct accountability.
• And, it is painfully obvious that centralized management and overly prescriptive statutes undermines trust – trust being the central tenet of a positive command climate.

What is less obvious is whether or not Congress understands its contributions to defense acquisition shortcomings and the resulting dilution of authority and accountability.

No Perceptible Cultural Change 

The 2017 National Defense Authorization Act told the Pentagon to split the undersecretary of acquisition, technology and logistics into two separate jobs: undersecretary for acquisition and sustainment; and a new undersecretary for research and engineering (R&E). The new offices, particularly the R&E, are intended to increase innovation and “change the culture.”

James O’Bryon, former deputy director of Operational Test and Evaluation, questioned whether this was the best approach, essentially taking us back 40 years ago when the Pentagon had essentially the same setup: “I’m not sure, however, that returning to where we were in 1986 is the total answer.” O’Bryon ponders, “So what are we possibly missing in this process as it grinds away?” I would answer that what is missing is honest self-reflection within Congress on its contribution to sustained cultural influences within the acquisition system.

Our Broader Cultural Strengths 

Congressional testimony and defense reports have noted that government constraints on profit margins have compromised acquisitions because, “culturally, we have evolved to a point where the system would rather pay $1 billion and 5% profit for a defense good, than $500 million and 20% profit” from a more innovative supplier.

Overhauling the Code of Federal Acquisitions Regulations (FAR) is overdue. The FAR seeks to promote an accountable system that protects U.S. taxpayers, but it has become the epitome of a bureaucratic risk-averse culture that undermines innovation, partnerships, accountability, and fiscal responsibility.

Congress expects the services to improve relationships with existing and potential defense industry partners, but corporate and government regulators must translate “up to 186,000 pages with over 2,000 pages” added annually by various federal departments.

As a result, current defense firms have traditionally focused their innovation delivery models simply on meeting what the government wants. But what if what the government wants isn’t what it needs?

According to John Kenkel and Andrew Jesmain, of PA Consulting Group, this creates problems:

First, industry has not been incentivized to create new ideas and must deliver solutions defined by the customer, who often lacks awareness or understanding of the array of solutions industry is capable of providing. The result of this paradox is a laundry list of programs and solutions that have been over budget, delayed or canceled outright. Second, this reality creates a sharp contrast in approaches to research and development that differentiates defense firms from their commercial counterparts.

For the Army, these “failures” have cost tax payers billions and are the most obvious reason why oversight is overly centralized. Since 2011 alone, the Army has ended 20 programs, delayed 125 and restructured 124 others.

Figure 1: Major Army Defense Acquisition Programs Cancelled

While acquisition decision-making must improve, sequestration and the focus on present operational requirements hasn’t encouraged bold decision-making on new program initiation either. Plagued by bureaucracy, budget cuts, and canceled programs, mounting legacy equipment costs, and the lack of a major operational concept for over a decade, the Army just doesn’t know what to ask for.

Until the service explores the art of the possible with Congress, industry, and academia, requirements will “have — far too often — proven too ambitious, too expensive or too inimical to innovation.”

Meanwhile, the Pentagon has used various non-traditional acquisition approaches — Section 804 Middle Tier Programs — to avoid establishing new long-term acquisition programs. However, Congress is concerned with the near-term productivity and value of such programs. Unfortunately, where their scrutiny should lie is on the impacts on basic research and how such programs sustain long-term overmatch capabilities.

Figure 2: A History Of Rapid Fielding In Support Of Near-term Requirements

Losing sight of long-term threats

The good news is Army executives are embracing change. Thomas Russell, deputy assistant secretary for research and technology, says he’s seeking “innovations from industry and other partners wherever possible” to guarantee success of the “most important” acquisition programs. Acting Army Secretary of the Army Ryan McCarthy says that, “the Army must also focus efforts on modernizing today to be ready to fight tomorrow, against increasingly capable adversaries and near-peer competitors”. But any attempt to channel near-term innovation delivery into a disciplined long-term strategy is shortsighted.

Why?

At this juncture, when 25 percent of Army acquisition spending is invested in pre-1991 programs and 55 percent in 1991-2001 programs, near-term program changes cannot overcome the lack of a long-term strategy. The “most important” thing the Army can do is to work with Congress to fund a long-term strategy.

Over the last 15 years, the Army has prioritized near-term readiness and equipment needs to combat non-state actors. This has limited its ability to modernize so it can engage in high-end  combat against near-peer challenges.

Meanwhile, the Army is facing increased sustainment costs and reduced funding for concept development and new programs. In turn, major program failures have undermined the Army’s ability to: encourage innovation by major defense partners; solidify a strategic concept; and, formulate consensus on a long-term procurement strategy. If the Army maintains this “demand pull” approach, over an extended period of time, the “likelihood of generating disruptive capabilities” will decline and lend itself to fear-based decision-making in the future.

A Risk-Averse System

In the 2016 NDAA, Congress established the Section 809 Panel whose initial findings include identified influences that Congress must reflect on if real progress is to be achieved.

As an independent panel with credible qualifications, Section 809 Panel has described in their initial report that those operating within the system respond to Congress in ways that Congress fails to recognize or appreciate. Overly complex laws and regulations result in suboptimal risk-averse decision-making. Excessive hearings on non-traditional acquisition pathways have undermined prototyping of new systems; buying commercial off-the-shelf items; and created cultural barriers that undermine technology companies from working with the DoD. And, the “acquisition workforce understands congressional intent thru bureaucratic reviews, budget cuts, hiring freezes, salary freezes, furloughs, continuing resolutions, sequestration, hearings, and statements that it must change.”

While Section 809 Panel has found several other shortcomings and conclusions unrelated to Congress, its final report, due early next year, can highlight that cultural change must start at the top.

Bureaucratic Review Shields Failures From Direct Accountability

Within the acquisition enterprise decision-makers have multiple layers of bureaucracy and accountability. A single Army decision may cross four multi-star organizational boundaries and be subject to 10 flag officer reviews. The requirement is generated by one TRADOC organization, ranked by another, and then transmitted by a third, before senior Army officials review it during three committees.

Why? The obvious answer is a lack of trust and misplaced values imposed at the top of the acquisitions enterprise – authorizations and appropriations.

Overly Prescriptive Laws Undermine Trust

In an effort to highlight how present legal constraints undermine the miltiary’s ability to leverage corporate advantages or to seek disruptive technologies, let us review Section 219 of the 2017 NDAA.

DoD lab directors are permitted to use not less than 2 percent but not more than 4 percent of all funding available to the lab for “off-roadmap”, or disruptive, technologies, according to Section 219, . While the authorities may be helpful, those funds are rarely used because they are only a fraction of those required for bold initiatives without having to seek outside funding — often from PMs — where other priorities and funded near-term concepts trump untested concepts.

Various studies have recommended increasing lab directors’ flexibility and Congress improved a previous 3 percent cap to 4 percent. But we will fall further behind civilian researchers and potential competitors unless we think more creatively.

CONCLUSION

Congress must clarify the long-term concepts and acquisitions strategies governing DoD weapons buying. Once they are better defined, congressional oversight can then lend itself to overcoming sustainment engineering of existing legacy systems and the risk-averse culture that maintains it.

Additionally, Congress should implement “succeed-fast” and “fail-fast” policies regardless of a system or subsystems Technology Readiness Levels (TRLs). A principle reason why Section 804 innovation initiatives remain relevant is that they are one of the few means available for maturing technologies along such lines. If “fast-fail” policies had been applied to long-term programs the Army might have avoided the numerous failures of major acquisition programs over the last two decades.

Also, Congress should

• Identify and eliminate internal influences affecting DoD’s risk-aversion culture.
• Eliminate line item acquisition funding. Retract or cut FAR, eliminate statutes, and reform NDAA development processes.
• Incentivize corporate and defense decision-making to drive modernization concepts and capabilities development.
• Increasing lab director authorities to fund disruptive programs.
• Return acquisition funding to historical norms, and, program for multiple years. Expand limits imposed on acquisition funding authorities across the board.

As we move forward into the twenty-first century, we must put twentieth century bureaucratic practices behind us. In a more complex world trust is the only means of establishing an acquisition and defense strategy capable of avoiding the “we aren’t fearful enough” drumbeat for defense innovation. Like other industries, defense acquisition innovation must recognize that “inspiration flows best when individuals ‘can breathe free,’ thinking creatively without limits of fear.”

Army Col. Richard Hough is a senior strategic study fellow in the Army Future Studies Group. The opinions, conclusions and recommendations are those of the author and do not reflect the views of any entity of the U.S. government.