Abercrombie: Cost Overrun Reduction Needed
“A vital element in keeping the peace is our military establishment. Our arms must be mighty, ready for instant action, so that no potential aggressor may be tempted to risk his own destruction. We have been compelled to create a permanent armaments industry of vast proportions. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex.—
These cautionary comments made as Dwight Eisenhower departed the presidency more than 48 years ago were eerily prescient. Today, the Department of Defense has 96 major acquisition programs under way amounting to $1.6 trillion. That’s
about half the size of the federal government’s annual budget.
However, what’s even more eye-opening is that more than 25 percent of that figure — $296 billion — is cost overruns, increases in acquisition costs above initial estimates. In fact, the Government Accountability Office reports that more than 4 out of every 10 Pentagon acquisition programs are over budget. That $296 billion in cost overruns would cover the annual budgets for the Departments of Agriculture, Interior, Labor, Health and Human Services, State, Transportation, and Housing and Urban Development.
And to compound the problem, the GAO also found that Department of Defense procurement programs are an average of nearly two years behind schedule. Those delays run up the costs even more, so the American taxpayers are a long way from getting their money’s worth. But there’s another group who loses out from delays: soldiers and Marines on the ground, pilots and flight crews, sailors.
One glaring example is the Marine Corps’ Expeditionary Fighting Vehicle. The Marines need a newer amphibious assault vehicle to replace their aging equipment. The problems began, as they often do, with unrealistic and overambitious project estimates. The research and development costs alone for the EFV have increased 126 percent over the initial estimate. And now, the price tag for each new Expeditionary Fighting Vehicle is 167 percent of the original contract amount.
Yet with all this additional spending, there have been major reliability issues. Translation: We’re paying a lot more, but it still doesn’t work like it’s supposed to.
A review of defense procurement programs highlights the same issues over and over again — unrealistic cost estimates, unrealistic timelines, and plans built on technologies that aren’t quite ready for mass production. That was recently the case with the Army’s Future Combat Systems, in which a GAO investigation found the technology that was the foundation for the entire program still in design and development.
Yet even when a program’s budget keeps increasing until Congress finally says, “Enough!— and turns off or slows the money supply, a program rarely ends. More often, the Pentagon usually winds up just buying fewer of whatever it is — at the higher price.
Much of this chronic problem stems from a lack of real oversight in the Department of Defense, both civilian and military. Defense has an acquisition work force stretched far too thin to effectively manage a vast and growing portfolio. The lack of enough trained professional government employees to manage all these contracts led to the novel concept of outsourcing oversight, the establishment of “Lead System Integrators.— This means that one of the contractors —usually the prime or major contractor — is paid to manage the contract. Talk about a recipe for disaster.
Today, with all the other fiscal demands on Congress and the administration, the defense budget is no longer infinite. The next generation of aircraft, ships, vehicles and weapons will have to compete for dollars with military operations. The Department of Defense and their contractors will have to demonstrate a more efficient and effective use of public dollars.
I have long supported attempts to address these issues, from creation of special inspectors general for Iraq and Afghanistan to requiring market research for any contract worth more than $1 million. And today, I support the proposed Skelton-McHugh defense acquisition reform bill, a leap forward for Department of Defense acquisition reform.
This legislation seeks to establish three independent functions: cost estimation, systems engineering and performance assessment. Right now, these functions are carried out by different departments. They need to be consolidated for better oversight. By having better analysis upfront, we can prevent some of the exorbitant price escalation in contracts that occurs later when reality sets in. Better systems engineering will improve reliability. And better performance assessment would require continued evaluation of the program baseline.
Careful attention to these elements of contract administration will move the Department of Defense a long way toward a process for procuring new weapons and other defense systems in which contract delivery that’s on-budget and on-schedule is the norm rather than the exception.
Rep. Neil Abercrombie (D-Hawaii) is chairman of the House Armed Services Subcommittee on Air and Land Forces.