February 1, 2012  

The price of isolated thinking

Why Congress, DoD and industry must share plans openly

“You should be giving us a single, coordinated input.” The senior staffer on the Senate Commerce, Science and Transportation Committee showed his frustration when he reviewed the Defense Department’s and the Transportation Department’s separate proposals for the Maritime Security Program.

Come to think of it, he was right.

Without realizing it, the staffer hit on a seminal issue that has plagued the defense community, and the entire executive branch: Government agencies do not coordinate enough with each other, or with Congress and industry, as they develop their policy and budget inputs for each year’s legislative cycle.

Instead, all parties work largely in isolation. Defense agencies do not share detailed information with each other, lest a rival pluck the “low-hanging fruit” of a lower-priority program’s funding. DoD planners do not share programming information with industry out of concern that lobbyists will march to Congress to defend their programs. Industry partners do not share ground-truth cost data with DoD, so they can protect their edge in competitive bids. Congress is kept out of the loop until the White House sends its budget submission in early February, lest the early involvement by 535 often-parochial-minded lawmakers grind the process to a halt.

Even the information that is shared is often discounted. Congress inherently distrusts budget information it receives from the Pentagon, which likewise distrusts cost information it receives from industry. Given the history of cost increases in major acquisition programs, these sentiments are perfectly understandable.

Yet the cost of restricting information has become unbearable. Of the 74 Nunn-McCurdy breaches since 1997, engineering design, schedule, quantity and requirements changes have been cited as significant factors 169 times, according to March 2011 testimony by Michael J. Sullivan, director of acquisition and sourcing management for the Government Accountability Office (GAO). These factors are controllable through better collaboration and, more importantly, better information.

Without accurate and reliable information, DoD often underfunds new programs, which ultimately wastes billions of dollars in attempts to make it up later. The Joint Strike Fighter’s initial development costs, for instance, were underestimated by nearly 20 percent, or $7.1 billion, according to GAO estimates in 2008. Covering those extra costs disrupted other programs, which raised their own costs, and so on. In fact, the GAO found 75 percent of programs were not fully funded in the Future Years Defense Plan. To make up the funding shortfalls, DoD moves money between programs, and defers work and funding far into the future or adjusts program quantities, all of which contribute to unstable funding and cost inefficiencies throughout the defense budget.

The result is a massive, complex, loosely integrated budget request that lacks full consensus except for one aspect: All agree that program costs will increase far more than anyone planned. In a fiscal environment that demands not just cost-cutting but true reform, it is essential to ensure that disproportional and unnecessary cost increases for military procurement programs never occur again.

Better information would help DoD planners better predict and program for technology maturation, design and manufacturing limits, and the ability of industry to meet defense requirements. In turn, Congress will have more confidence in defense budget requests because the information used to build them is much higher fidelity and will prove over time to be more accurate. But how can this be made to work?

Fixing the Problem

The White House recently took a step in the right direction. A memo by Jacob Lew, then-director of the Office and Management and Budget (OMB) and now the White House chief of staff, directed executive branch agencies to build their fiscal 2013 programs with consideration for reducing duplication and increasing program integration within and between agencies.

Lew’s memo encourages an open discussion between agencies. In past budget cycles, interagency discussions have been muted, if they existed at all, with OMB playing the honest broker only after each agency or department had produced its budget proposal. The effect of isolated agencies producing narrowly focused budgets only leads to a fragmented decision process requiring integration at some point in the future. Often, that point never arrives.

But there is much more to be done.

First, all parties must agree that the problem is a lack of information during the Defense Department’s annual programming cycle and that at least a partial solution would be to increase collaboration among DoD, Congress and industry. GAO clearly agrees and has restated the problem and solution in numerous reports. DoD, in a responsible way, must remove prohibitions from disclosing internal, pre-decisional information and create a process in which lawmakers and industry can disclose information without fear it would be used to gain an advantage in Congress, the marketplace or the DoD budget.

Change must start with the DoD in reaching out to its interagency partners, industry and Congress early in the annual programming cycle. The DoD leaders best suited to execute this direction would likely be the deputy undersecretary of defense for acquisition, technology and logistics, or DUSD(AT&L), and the assistant secretary of defense for legislative Affairs, or ASD(LA). The director of the White House’s Office of Management and Budget could continue to oversee the final integration of the president’s spending request.

building trust

Engagement with industry and Congress during the programming portion of the planning, programming, budgeting and execution cycle requires changing the programming process and the mindset behind it. But the changes necessary — sharing program priorities for DoD, proprietary information for industry and spending priorities for Congress — require, above all, trust among all the participants. That trust must be developed over time through a repeatable process that all players understand and accept.

To build that trust, DoD should begin the annual programming cycle with a 30-day review of program status with each prime contractor for each major defense program. This review, led by DUSD(AT&L), would consider technology maturation, current and future capability requirements and expected budget top line with available resources by program. The goal of this review with industry would be to determine “the art of the possible” within available resources. Example: Barring unforeseen fiscal, technological or political roadblocks, can industry produce a joint tactical radio meeting defense requirements within five years and within projected Future Years Defense Program (FYDP) funding? This would not take the form of a formal request for proposal, yet would allow industry representatives to go on record with DoD, Congress and the nation about their ability to produce the capability needed. Competition for contracts or advocacy for funding improvements in existing programs would begin after Congress appropriates the defense budget.

Lawmakers and their staffs, likewise, must share their knowledge about defense priorities and capabilities. ASD(LA) could lead a 30-day review, which would follow the industry review, with professional staffs from the Authorization and Appropriations committees in the House and Senate. The goal of this review, which should be kept as privileged information in order not to diminish Congress’ constitutional authority and avoid separation-of-powers issues, will be to determine within broad categories, what capabilities Congress will accept and which they will reject or defer funding.

During these two reviews, DoD should invite, or the president can direct, participation of interagency partners with a stake in relevant programs. To give one example, DoD currently provides resources and services such as transportation and logistical support to agencies that do not have adequate resources to meet their mission needs. Through the use of “Section 1206 funds” — established by the 2006 National Defense Authorization Act — for training and equipping foreign military forces, and the planned, joint DoD-State Department Global Security Contingency Fund, DoD could support mutual efforts from pooled resources and enable a more efficient use of existing funding to support whole-of-government needs. Pooled resource funding could be an item for discussion during the 30-day review periods.

Although DoD, as the largest stakeholder in the interagency process, would lead the effort to collaborate on budget building, OMB would perform final integration before the White House sends the spending request to Capitol Hill.

DUSD(AT&L) and ASD(LA) could begin their work as early as the fiscal 2014 budget, the next on-year FYDP, soon to begin. In the intervening time, DoD and congressional leadership can begin preparing their staffs for a new process for collaboration and the work tempo required to execute it.

There will be difficulties in the early years, particularly with establishing boundaries for the level of detail for shared information, but the result will be a long-awaited and necessary change in stewardship of taxpayer dollars. AFJ