2.1 Problems with DoD's Acquisition Process

OVERVIEW

The Department of Defense (DoD) spends billions of dollars each year developing and procuring major weapons systems. These expenditures have produced many of the world's most technologically advanced and capable weapon systems--as demonstrated during Operation Desert Storm. Nevertheless, the process through which weapons requirements are determined and systems acquired has often proved costly and inefficient--if not wasteful. In addition, the "high stakes" weapons acquisition process has proven vulnerable to fraud, waste, and abuse. It was this high stakes process--and the absence of adequate internal controls--that provided the breeding ground for the investigation and charges of influence-peddling known as "ill wind."

DOD has made some improvements in the weapons acquisition process over the years. Major reforms recommended by the President's Blue Ribbon Commission on Defense Management--the Packard Commission--in 1986 have been or are currently being implemented. In addition, the diminished Soviet threat and corresponding budget reductions are also prompting major changes in the way DOD acquires weapons systems. Top management within the Office of the Secretary of Defense has taken steps in an attempt to make the acquisition process more disciplined and to redefine the basic strategy for acquiring weapons. Moreover, key Members of Congress are calling for the military services to reevaluate their roles and functions.

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THE PROBLEM

Despite many efforts to reform and improve DoD's weapons acquisition process over the years, a number of fundamental problems persist. For example, despite an increased emphasis on the sound development and testing of weapons, we still see major commitments to programs, such as the B-2 bomber and the Airborne Self-Protection Jammer, without first seeing proof that these systems will meet critical performance requirements. Despite improved cost-estimating policies and procedures, we still see the unit costs of weapon systems, such as the DDG-51 destroyer and the C-17 transport, double. Despite the increased emphasis on developing systems that can be efficiently produced and supported, we have weapons, such as the Advanced Cruise Missile and the Apache helicopter, that still encounter costly production and support problems. Clearly, problems are to be expected in major weapons acquisitions, given the technical risks and complexities involved, but too often we find
-- systems being acquired that may not be the most cost-effective solution to the mission need,
-- overly optimistic cost and schedule estimates leading to program instability and cost increases,
-- program acquisition strategies that are unreasonable or risky at best,
-- too much being spent before a program is shown to be suitable for production and fielding, and
-- individuals seeking to improperly influence the outcome of the contracting process.

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THE CAUSES

While there are many reasons for these types of problems, the underlying cause of persistent and fundamental problems in DoD's weapons acquisition process is a prevailing culture that is dependent on generating and supporting new weapons acquisitions. The culture is made up of powerful incentives and interests that influence and motivate the behaviors of participants in the process. Participants include the various components of the Department of Defense, the Congress, and industry. Sometimes, these interests transcend the need to satisfy the most critical weapons requirements at minimal cost. Such interests may include protecting (1) service roles and missions, (2) service budget levels and shares, (3) service reputations, (4) organizational influence, (5) the industrial base, (6) jobs, and (7) careers. Collectively, these interests create an environment that encourages "selling "programs--a process that may entail undue optimism, self-interest, and other compromises of good judgment. In this environment, it may not be reasonable to expect program sponsors to present objective risk assessments, report realistic cost estimates, or perform thorough tests of prototypes when such measures may expose programs to disruption, deferral, or even cancellation. The "culture" is not the cause of all the problems in weapons acquisitions. Some problems can be attributed to basic errors in judgment or other motivating forces. For example, the "high stakes"--that is, the big money involved--in defense acquisitions can lead to influence-peddling and contracting fraud and abuse--as found in the "ill wind" investigation.

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GAO'S SUGGESTIONS FOR IMPROVEMENT

If changes in the acquisition of weapons are to be of a lasting nature, they must be directed at the system of incentives that has become self-sustaining and very difficult to dislodge. Incentives and opportunities that produce undesirable behaviors must be eliminated or minimized through effective internal controls and/or offset by stronger--positive or negative--incentives. Moreover, officials in top DOD management positions, as well as the acquisition work force in general, must be held to the highest standards of integrity and conduct. Specific suggestions for addressing several prevalent undesirable behaviors or conditions are described below.
Controlling Inter-Service Competition
Several actions are needed to change incentives and conditions leading to inter-service competition, self-interest, and the acquisition of unnecessary, overlapping, or duplicative capabilities. These actions could also reduce incentives for overselling programs. First, a consensus must be reached between the Congress and the administration on military strategy, the services' roles and missions, and future funding levels. Uncertainty surrounding current roles and missions encourages the services to acquire weapons that will support and protect traditional or desired capabilities. The inability of DOD to accurately predict outyear funding levels has resulted in optimistic spending plans that cannot be executed under actual funding levels. Secondly, determining needed capabilities and the particular types of weapons to fill those needs should not be left with individual branches and warfare communities within the services. The duplicative outcomes of the acquisition process are an outgrowth of the fact that system requirements mirror the traditions and self-preservation instincts of their sponsoring organizations. Making these decisions at the Office of the Secretary of Defense level could enable competing demands, available resources, and the needs of theater commanders to be more fairly assessed before a specific program is given life.
Discouraging the Overselling of Programs
A combination of internal controls and other forms of incentives and disincentives is needed to reduce the tendency to sell weapons programs through optimistic cost and schedule estimates and accelerated--and therefore, high risk--acquisition strategies. Under the existing culture, the success of participants' careers is more dependent on getting programs through the process than on achieving better program outcomes. Accordingly, overselling "works" in the sense that programs get started, funded, and eventually fielded. The fact that a given program costs more than estimated, takes longer to field, and does not perform as promised is secondary to getting a "new and improved" system to the field.
Limiting Technology Risks
Research and technology efforts need to be freed from program association until they mature to a specified level, such as the demonstration and validation phase. This idea is already embodied in DoD's new acquisition strategy, which calls for advanced technologies to prove their feasibility and producibility before they are incorporated into new or ongoing acquisition programs.
Limiting Opportunities for Fraud and Abuse
DOD must continuously review and ensure compliance with controls designed to (1) ensure the free flow of current and accurate information from the contractors and program offices to top decision makers and those with oversight responsibility and (2) prevent improper influencing of contract awards. Today, the prospects for constructive change are quite encouraging. The demise of the Soviet threat and declines in defense budgets have created a unique opportunity to effect lasting changes in the weapons acquisition process. Both the Department of Defense and the Congress have acted upon this opportunity and have shown a willingness to support the types of changes needed to improve acquisition outcomes. DOD must ensure that effective internal controls are in place to minimize cultural influences, incentives, and behaviors that are not in the best interest of the taxpayers.