The Pentagon needs a lighter touch with low-volume vendors.


Last week, in an essay on how software costs are eating the war effort, we wrote about a “bold industrial strategy” proposed by Atlantic Council advisor Harlan Ullman. As he wrote,
     one solution is to shift conceptually and practically from a defense industrial base to a defense intellectual property base in which producing military hardware and software is secondary to preserving IP, technology, and manufacturing assets for these extraordinary combat systems. This transition requires a complementary strategy of regeneration and reconstitution, meaning preserving and paying for certain manufacturing capabilities at minimal production rates, especially research and development, that can be expanded if or when legitimate threats emerge.
As might have been anticipated, we immediately received some expressions of concern. Some of the strongest objections concerned the fate of the munitions business. And in thinking about this particular line of business, we can generalize a remedy.

Bombs, like bullets, should be simple. Whether for political or administrative reasons, managing bombs and bullets is not so simple. For example, during last year’s sequestration of federal spending, the MacAlester Army Ammunition plant in Oklahoma temporarily laid off hundreds of workers. Many moved on to jobs in Texas’ booming energy industry. The lines, not actually running at full rate over the past few years, are still trying to recover, and they are having trouble finding sufficient skilled staff. Note that this happened at government-owned, government-operated plant, a so-called ‘GOGO’ in the US, and not to a contractor, which are widely presumed easier to slight.
Moreover, when workers walk out the door, they take much of an industrial enterprise’s know-how with them. In other industrial arenas, vendors doing the consolidating have recently bought whole technical data packages (TDPs) from vendors divesting. (Warhead fuzes are a notable example here.) Subsequently, the new owners have sometimes found that they could not produce effectively even with a fairly mature TDP, because no set of blueprints provides the whole of the story. Many details and and much of the art go missing with those skilled staff. Not all comptrollers, contracting officers, and cost analysts fully acknowledge that the production is then not entirely scalable: the learning curves often feature local step functions in output and cost.
We sympathize with Ullman’s overall sentiment, to preserve if not ‘innovate’ intellectual and industrial capacity rather than merely making widgets and their software. Sometimes, as former Pentagon procurement chief Jacques Gansler once told Vago Muradian of Defense News, innovative capacity is more found in the best 100 engineers than in 10,000 production workers (10 May 2004). Generally, though, designs must also be producible. Making stuff, knowing how to make stuff, and innovating the new stuff are thus entirely interrelated. Starving one can starve another, regardless of priority.
Then we have the bureaucracy. For every small quantity purchase, the government imposes all of its rules, and the bureaucratic burden for each truncated element in a procurement portfolio thus becomes an increasingly large fraction of the overall system cost. We know by observation that the acquisition system burden has rarely gotten smaller over the years. In instances when it may be abbreviated, as in battlefield emergencies, there is some latency to be sure, but the dead hand generally catches up with every program and project. Then, as Bob Komar wrote, bureaucracy does its thing.
We should thus recognize deep complications in the slow burn. If the Defense Department is to pursue this strategy of putting parts of its supply base on life support, then two strategies must go hand-in-hand with any decision to buy very few units of any widget. First, the Pentagon’s planners must carefully balance funding profiles amongst research & development, procurement, and sustainment accounts. Do they try to do this already? Certainly. But a broader policy demands more conscious attention. Defense needs to recognize its relationships with those vendors as potentially strategic.
Second, the procurement policy office needs to start writing simpler regulations for Minimum Sustainment Acquisition. Special treatment within the otherwise ponderous procurement system is not unknown: the Department’s ‘rapid acquisition’ projects are run by rules the rest of the bureaucracy isn’t allowed. The alternative is to continue to overburden vendors with high overheads on their small volume accounts. With the scar weight and drag of today’s procurement system, why would sensible enterprises stay in those lines of business? “Minimum Sustainment Acquisition” doesn’t roll of the tongue like Better Buying Power, but it’s an important part of the solution.
James Hasík is a senior fellow in the Brent Scowcroft Center on International Security. Dave Foster is a civilian analyst for the US Navy. The views expressed here do not represent those of the Department of Defense or the Department of the Navy.

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