Pentagon cost overruns defy easy solutions

A top Pentagon acquisition official, a Government Accountability Office analyst, two outside experts and the leaders of a Senate panel all agreed Thursday that major defense procurement programs cost much more than expected and take far longer than promised to become operational. And while everyone had recommendations on how to improve the process, no one suggested it would be quick or easy.

Senate Homeland Security and Governmental Affairs Federal Financial Management Subcommittee Chairman Thomas Carper, D-Del., cited the GAO's latest report that cost overruns in the military's top 95 procurement programs had increased $295 billion since 2000 and now total $1.6 trillion over the original price estimate.

At a hearing on spiraling defense procurement costs, Carper noted the escalating national financial crisis and the threat to individual Americans. "Every dollar our government spends inefficiently is a dollar that is not spent to help the American taxpayers deal with these financial strains in their lives," he said.

Homeland Security and Governmental Affairs Federal Financial Management Subcommittee ranking member Tom Coburn, R-Okla., who has focused many of his legislative efforts on trying to curb government spending, warned that the cost escalation was more troubling because the proposed bailout of the nation's financial industry would force reductions in defense spending next year.

Michael Sullivan, GAO director of acquisition and sourcing management, said the Pentagon processes for identifying needs, allocating resources and managing acquisition "are fragmented and broken."

Sullivan and two academic witnesses agreed that major programs start with ill-defined performance goals and unrealistic cost estimates and are pushed ahead before the necessary technology has been proven. He said some programs are initiated when they are little more than "PowerPoint presentations" and the true costs are not known until four or five years later.

Steven Schooner, a professor of procurement law at George Washington University, and Clark Murdock, a defense expert at the Center for Strategic and International Studies, echoed many of GAO's criticism of the defense acquisition process.

James Finley, deputy undersecretary of Defense for acquisition and technology, did not dispute most of the complaints. But he pointed to a series of changes executed since he filled the long-vacant office which he said had cut the cost growth.

Finley attributed many of the procurement problems on the sharp reduction in the acquisition workforce, which Congress mandated about five years ago. He said it would cost $1.3 billion over the next five years to rebuild that workforce.

But Coburn complained that the military had the same kind of cost overruns during the Cold War, when it had a full acquisition force.

The witnesses agreed on the need for more realistic requirements and accurate price estimates at the start of a program and greater accountability for failure. They noted that contractors can offer bids they know are too low because major weapons programs are seldom allowed to fail.

Although Coburn advocated fixed-price contracts instead of the current cost-plus deals, Schooner said "some of the biggest acquisition catastrophes" were in fixed-price contracts.

Some of the recommended changes in procurement policy included shifting the authority to set requirements from the service chiefs to the combatant commanders, who must use the weapons; giving the service leaders more authority over the acquisition process, rather than the civilian officials, and creating an independent cost analysis organization in the Pentagon.