Experts Set Off Alarms Over McCain's Defense Acquisition Overhaul

Senate-passed legislation intended to improve the Pentagon’s troubled acquisition system may end up having the opposite effect, according to a growing number of experts.

A House-Senate conference is now writing the final fiscal 2016 defense authorization bill. Both measures (HR 1735, S 1376) aim to streamline military procurements and get more bang for the buck. But one section of the Senate legislation is kicking up strong opposition from many who otherwise support the bills’ aims: a proposal to empower the military services, not the Defense secretary, to decide whether to commit to multi-billion-dollar weapons.

The champion of these changes is Senate Armed Services Chairman John McCain, R-Ariz. “Is anyone happy with the status quo? Yes, the Pentagon bureaucracy is happy with it,” says McCain. Referring to independent defense experts views of his legislation, McCain says, “They’re all for it.”

In reality, some of the most experienced former Pentagon officials and top congressional auditors think McCain’s proposal is ill-conceived. The critics include several experts whose advice on defense acquisition McCain sought last year for a Senate Homeland Security and Governmental Affairs panel report.

No one believes the current Pentagon procurement system is working well. But the worry is that letting the services drive major spending decisions, instead of the Office of the Secretary of Defense, could spawn programs with understated costs, overstated capabilities or just unsound concepts—shortcomings that could even end up killing U.S. military personnel. At a minimum, the critics fear that the services will approve more programs than can be afforded or that make sense from a broader war-fighting perspective, leading later to cutbacks and budgetary instability.

In other words, just because the current system is not working as well as people want doesn’t mean it can’t be made worse, they say.

Katherine Schinasi, who served for three decades at the Government Accountability Office, much of it as a top official overseeing  weapons acquisitions, says she is “happy to see efforts to bring more discipline to the process,” but adds that McCain’s provision “goes to undercutting the basis for how equipment should be acquired: with a joint perspective and civilian oversight.”

Upending the Process

The U.S. armed services help define the requirements that military equipment is supposed to satisfy. They execute the programs, choose the contractors, recommend how to divvy up their own budgets and more. Virtually no one is talking about changing any of that.

The fight is over McCain’s plan to cut the Defense secretary’s office out of the decision-making loop when it comes time to weighing the business case for permitting multi-billion-dollar programs to go forward.

McCain would empower the top acquisition officials in the Navy, Air Force and Army to make so-called milestone decisions for new, top-dollar weapons.

The Pentagon’s under secretary for acquisition, technology and logistics—the department’s No. 3 official—now makes those decisions on behalf of the Defense secretary.

Under McCain’s plan, the acquisition under secretary would only be the milestone decision authority for a relative handful of programs that involve multiple services, other countries or require special management.

What’s more, McCain’s measure would sharply limit information about programs that can be shared between the military services and the Defense secretary’s office.

And it would punish failures by subtracting a portion of Army, Navy or Air Force overruns from across that service's research initiatives and moving it to a prototyping program run by the Office of Secretary of Defense.

Support

The Pentagon acquisition under secretary position was created in 1986 in the wake of Reagan-era defense procurement scandals. The organizational change was recommended by a blue ribbon panel called the Packard Commission. The proposal became part of the so-called Goldwater-Nichols defense overhaul legislation, which was aimed at making the Pentagon work in a more unified way, rather than as a series of fiefdoms.

Many experts worry that McCain’s proposal on milestone decision authority will return the Pentagon to something approaching the very conditions the Packard Commission was meant to address.

It’s worth recalling what they were. “In the absence of a single, senior DoD official working full time to supervise the overall acquisition system, policy responsibility has become fragmented,” said the Packard Commission report. Authority and accountability have become “vastly diluted,” the panel said.

But Gary Roughead, a former chief of naval operations, says the military services are more interconnected, or joint, than they were back then. So, he says, fears that McCain’s provision would trigger a return to the bad old days are overblown.

Roughead agrees with McCain that it’s time to add accountability and subtract a layer of what he calls process .

“Requirements, budgets and acquisitions are best understood at the service level,” Roughead says.

The Army chief, Gen. Raymond T. Odierno, agrees, as does former Deputy Secretary of Defense John Hamre, who has said that the change would free up the Pentagon acquisition under secretary to focus more on developing cutting-edge technology and less on paperwork.

Administration Pushback

On the other side of the ledger stand President Barack Obama’s advisers. In a Statement of Administration Policy last month, they said they would recommend the president veto the authorization bill on a number of grounds. Third on their list was the milestone authority provision, which they said would “undermine” the Defense secretary and “significantly reduce” his ability to prevent the “unwarranted optimism” and “excessive risk taking” that drive up costs and delay schedules.

The White House also slammed the proposed limit on sharing of information between the services and the Defense secretary’s office. That “abrogates the ability of the Secretary and Under Secretary to conduct routine execution monitoring of programs, thus handcuffing their ability to intercede unless and only until notified programs are at risk of failure,” the administration said.

Frank Kendall, who is now the Pentagon’s acquisition under secretary, was even more direct in a published interview in June, saying the proposed change would enable the military services “to ignore me and it will send a very, very strong message to the departments that I am not in charge anymore.”

Critiques Abound

Critics share some of these worries. The services have always tended to overstate what their systems can do and understate the time and money required to buy them.  On many occasions, this excessive optimism has not been checked by the Pentagon’s acquisition under secretary. But on other occasions it has.

John Young was the Navy’s acquisition chief from 2001 to 2005 and later the Pentagon’s buying chief. So he has seen the issue from both sides. He recounts how, when he held the Navy job, the Defense secretary’s acquisition chief forced him back to the drawing board on a major missile program. He didn’t’ like it, but the final result was a more capable weapon, he said.

Then, when Young himself became the acquisition boss for the Office of Secretary of Defense in 2007, the Army wanted approval for the Joint Light Tactical Vehicle, a Humvee replacement, even though Young believed the Army’s projected cost and schedule were wildly unrealistic. If he had not forced the service to recalculate, he says, the generals’ excessive optimism would not have been revealed until later, when it almost certainly would have led to costly redesigns and delays.

“The entire system—through the Army chain of command, up through and including the Army acquisition executive—presented this to OSD as a plan to rubber stamp this and go forward,” Young recalls. “So you need the check and balance of having an appropriate and timely amount of OSD oversight.”

Lee Buchanan, who served as the Navy’s top acquisition official from 1998 to 2001, speaks of being pushed by Marine Corps leaders to advance the V-22 tilt rotor aircraft toward production, even though he knew it required further development before it would be safe to fly and effective in battle. Three dozen people were killed in V-22 crashes, mostly during testing, though the aircraft is now operational.

 “Milestone decisions which must consider technological maturity, performance thresholds, and financial management need to be made by someone not directly affiliated with any service and according to a consistent standard among all programs in order to eliminate inevitable conflicts of interest,” Buchanan says. “I saw this in my own experience in the both the V-22 Osprey program and the LPD-17 [amphibious ship] program, where there was great pressure to minimize large shortfalls in technology and financial management out of fear that heightened scrutiny could jeopardize both programs.”

Michael Sullivan, the director of weapons systems acquisitions at the Government Accountability Office, says it’s particularly important for the Pentagon acquisition chief to have sole authority to sign off on early decisions in the life of a weapon—whether and how to begin demonstrating systems or to enter full-scale development.  It’s at those junctures that billions of dollars are won or lost. If McCain’s provision were altered to keep the Defense secretary’s office in charge of those particular milestones, it would be more defensible, Sullivan says.

“I’d have more confidence if the under secretary retained the decision-making role until a solid business case was established,” Sullivan says. The reason for keeping the top acquisition official in command, Sullivan says, is “you get more oversight at a corporate level.”

Tom Christie helped set up the acquisition under secretary office in the 1980s and retired as the Pentagon’s top weapons tester in 2005 after being involved in many of the major weapons investment decisions of recent decades. Christie does not support taking the milestone decision authority away from the acquisition chief. But he says that person has to have “spine.”

“When you look at the parade of acquisition executives over the years, for the most part, they’ve been patsies,” he says.

Andrew Hunter was a senior official in the OSD acquisition office from 2011 to 2014 and a senior congressional aide before that. He says McCain’s provision would result in approval of more programs than the Pentagon can afford or than make sense—leading ultimately to budget cutbacks that upend economies of scale and harm strategic planning.

“I don’t think taking OSD out of the chain is the best way to solve the problem,” Hunter says.

McCain frequently tells the story of how he was outraged when he recently asked Chief of Naval Operations Jonathan W. Greenert who is responsible for a $2.4 billion overrun on the latest aircraft carrier, and Greenert said he didn’t know.

Hunter predicts that in the future, if McCain’s provision is enacted as is, it could be the defense secretary who is shrugging his shoulders about why overruns are happening.

McCain recoils at that suggestion.

 “The secretary of defense is their superior--hello?” he says. “That’s the most ludicrous charge I’ve ever heard of.”

To that, Hunter replies: “If the Defense secretary is not consulted when the critical decision is made and his staff cannot get critical data, then maybe he is still the boss, but he doesn’t have the tools to do his job.”

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