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Article Highlights

  • Acquisition reform must address the reality of DoD’s diminished purchasing power

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  • DoD must consider how to best use the private sector to meet national security needs within constrained resources.

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  • The Pentagon must learn from the acquisition reform efforts of the 1990s

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In November 2013, the House Armed Services Committee (HASC) embarked on an effort to reform what is universally recognized as a broken acquisition system within the Department of Defense. Representative Mac Thornberry (R-Tex), the HASC Vice Chairman, and Ranking Member Adam Smith (D-WA) were tasked with leading the charge on what will likely be a multi-year reform effort. 

The task is daunting and has skewered many previous efforts at improvement. To understand the magnitude of the challenge, it may be helpful to view DOD as first and foremost a people-centric enterprise supporting an economy the size of a small nation. Together, military service members, civilians, and contractors (oftentimes performing interchangeable functions) use an installed capital base of machines, equipment and land to meet the national security missions of the United States. To operate this economy, DOD bought $308 billion in goods and services in 2013. How contractors are used is critical to the productivity and readiness of the Armed Services that translates into the ability to fight and deter potential enemies abroad. 

DOD is the only buyer of many defense unique products like jet fighters and aircraft carriers and, because of this monopsony, is forced into the role of a centralized industrial planner for these markets. Acquisition policy is the predominant tool that determines the rules of the game of how the defense market works. For decades, the acquisition system was successful, if judged by the degree of innovation and the quality of weapons produced compared to our rivals. But like many centrally planned economies, the system was never a paragon of efficiency. What efficiencies that do reside in the system are oftentimes determined by the quality and extent of the use of commercial market-based incentives and practices. 

In the current defense spending downturn, the underlying historical factors that enabled past defense innovation are at risk and call into question many past policies. Acquisition reform must address the reality of DOD’s diminished purchasing power and its declining ability to influence commercial technology trends that are now critical to DOD’s needs. Potential adversaries may understand the implications of these trends better than DOD does, so the risks are great if we don’t get reform right.

The nature of the defense acquisition challenge is how to best use the private sector to meet national security needs within constrained resources. Defense acquisition reform is not just about contracting procedures; it is about strategy, vision, and the efficient and effective allocation of taxpayer dollars. Acquisition starts with a requirements process informed by a budget process. It encompasses personnel and financial management reforms. It addresses how this country innovates and what kind of industrial base (defense-unique, commercial, integrated or globalized) supports the military. 

Acquisition is not just about developing new weapon systems, but also about maintaining, operating and eventually disposing of the old. In addition to feeding, clothing, housing and training the troops, it is more and more about advanced engineering services, cyber-security, and telecommunications. Acquisition is about protecting technologies and knowledge from getting in the wrong hands while making it easier to share technologies and operate alongside our allies. If the acquisition system is optimized, it can do all of these things at the least possible cost to the taxpayer. If it is not, it leaves us less secure. 

The emphasis of current congressional acquisition reform efforts is yet to be determined. Will it be broad-based or narrowly focused on a few politically doable contracting reforms? Comprehensive reform based on a clear industrial strategy is needed because innovation is being stifled, competition is declining, and costs are rising due to other factors that have crept into the acquisition system over the years. 

The roadblocks to reform are many. The acquisition system is incredibly complicated, making overarching reform difficult to achieve. Each bureaucratic stovepipe believes that its function is more important than all others leading to massive sub-optimization. For arguably noble purposes, a multitude of oversight and social requirements have been placed on the system (each with its own political constituency) that collectively increase costs and are not affordable in today’s budget environment. These unique requirements divide the industrial base into a system of haves and have-nots -- between those who understand the system and take advantage of barriers to entry into the market and those who do not and are precluded from participation. A collusion of interests between those in the bureaucracy who want to keep the system the way it is and those who currently benefit from acquisition rules is just one of the barriers to overcome.

There are lessons to be learned from the last major acquisition reform effort conducted in the early 1990s. These include a need for outside views and assistance and a considerable amount of time allocated for debate and staff work. Members and staff from multiple committees in both the House and Senate devoted several years of effort to prepare the Federal Acquisition Streamlining Act of 1994 and the Clinger-Cohen Act of 1996. They relied on the work of an independent panel (the section 800 panel) that identified many of the issues and provided proposed specific legislative fixes to begin congressional discussions. While this may not be the same roadmap that is required this time, it is one that worked in the past. 

These past efforts required senior level leadership to set the parameters of the debate and to guide bipartisan reform legislation through the process. The commitment of leaders like Representatives Thornberry and Smith will be critical to successful reform this time around. The questions that remain to be answered will be how long this focus can be sustained and what will be the scope of the acquisition problems they intend to address.

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William C.

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