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Pentagon procurement reform effort pays off

Pentagon procurement reform effort pays off

It was not the perfect start to a new job. Stan Soloway had just been named deputy undersecretary of Defense for acquisition reform, and was still waiting for his formal security clearance, when the story broke on March 18 that the Pentagon's inspector general had found the department overpaying for certain spare parts--in one case, nearly $76 for a single screw.

The media accounts downplayed key details, such as the fact that $76 was the price commercial customers paid as well. And it also missed the big picture, outside observers say: The $76 screw aside, the Defense acquisitions system--once the archetype of inefficiency--has made real strides toward reform since the 1993 establishment of the acquisition reform office, a small policy workshop, and especially since the Federal Acquisition Streamlining Act of 1994 and the Federal Acquisition Reform Act of 1996.

In the words of Steven Kelman, formerly the head of the Office of Management and Budget's Office of Federal Procurement Policy and now an acquisitions expert at Harvard University's John F. Kennedy School of Government: "DoD, through acquisition reform, has been saving billions and billions of dollars."

Examples abound. The acquisitions workforce, as estimated by the General Accounting Office (GAO), is a third smaller than in 1994. The largest acquisitions agency and once the most notorious, the Air Force Materiel Command (AFMC), boasts that since 1995 the Air Force has cut the number of pages in its acquisitions instructions by about 64 per cent, the number of requests to contractors for specific technical data by 77 per cent and the number of specifications and standards by 84 per cent. The Army Materiel Command (AMC) once had 12,000 specifications and standards; it has kept only 2,000.

Supporting documents for contracts once totaled thousands of pages--Bert Concklin, the president of the Professional Services Council, recalls working on a 500,000-page proposal--but have been trimmed to a few hundred. The Pentagon's private-sector suppliers are breathing sighs of relief. "The advent of oral proposals [especially]," said John Delane, president of base maintenance contractor Del-Jen Inc., "is really a godsend."

After decades of piling on the paperwork to keep contractors like Delane honest, the Defense Department has adopted a new philosophy: Trust. Said Concklin, "The government, to the surprise of many or most in the private sector, has really, to a remarkable degree, been willing to get into an interactive, healthy, positive partnership with us." All of the services now use "integrated product teams," on which industry representatives sit side by side with government officials to shepherd projects through. The Marine Corps's Advanced Amphibious Assault Vehicle project is actually co-located with its prime contractor's factory, and one Navy missile range now rents itself out to private companies under the name "Space Port Florida." Soloway himself embodies the new spirit: He comes to the Pentagon from the private sector, after 10 years as a consultant to the Contract Services Association of America, a leading industry group.

Such close collaboration carries risks, but experts say that the elaborate oversight system had come to cost more than the problems it was intended to prevent. The new philosophy, explained Maj. Gen. Roy Beauchamp, head of the Army's Tank-Automotive and Armaments Command, is that "we don't think every contractor that we do business with is a crook." A new emphasis on past performance gives acquisitions officials the authority to evaluate bids based on a company's record as well as its proffered price.

The hoped-for benefits are not only financial. The Information Age military that won the Persian Gulf war feeds on rapidly changing technology. Products become obsolete in only 18 months, Soloway explained. So, rather than laboriously design every item to rigid military specifications, the Pentagon has moved to a "plug-and-play" approach that quickly slots new civilian technology into old weapons. Beauchamp boasts that, though it looks identical from the outside, "the M1A2 SEP tank today . . . is as different from the basic M1 tank that was produced in 1983 as the M1 tank was . . . from the [1960-vintage] M60 tank it replaced."

Loren Thompson, of the libertarian-leaning Alexis de Tocqueville Institution, summed up the progress this way: "Pentagon acquisition reform initiatives have come a great distance conceptually, a significant distance culturally and"--with a laugh--"let's say, a moderate distance in terms of actual implementation. . . .We have 40 years of Cold War practices that have to be deconstructed, and that takes time."

Pentagon officials agree that cultural change is critical. "When I first began in this business 25 years ago," recalled Beauchamp, "it was a very rigid process, it had to be approved every step of the way with very rigidly defined specifications. . . . [a] very risk-averse environment."

"I was trained to be a risk avoider," echoed Glenn Miller, a 29-year veteran of Air Force acquisitions who now heads the AFMC's requirements initiative. "Today we're telling people, manage your risk."

That shift requires training. LeRoy Haugh, a vice president of the Aerospace Industries Association of America and a 40-year acquisitions veteran himself, frets that Defense is not doing enough to reach "the people down in the trenches." Soloway's goal is 40 hours of mandatory continuing education per person per year. Already his office orchestrates a Pentagon-wide "Acquisition Reform Week"--this year's, the third annual, begins on May 4--to showcase reform and provide intensive training. Using techniques first developed by the Army, each service conducts "road shows" year-round in which acquisition reform experts visit each major local office for several days of exercises with test-case acquisitions. A complementary system of "just-in-time training" responds to local offices' requests for help by sending out experts to walk them through their immediate problems.

Is all of this sinking in? Both the Army and the Air Force Materiel Commands say exhaustive internal surveys show that it is. Kelman, who has embarked on his own government-wide survey, agrees: Most acquisitions workers, he said, are telling him that "we did so much crap before, we did so much that didn't make sense . . . [now] finally I feel like a real human being, rather than a paper pusher."

But that is not the only reaction. One recently retired Navy acquisitions officer, referring to the troubled C-17 cargo plane program, warned that "when you see people getting fired for making a mistake . . . the willingness of the system to take chances the next time is not apparent." Soloway admitted that "if we get to a point where the workforce is saying to us . . . `Yeah, I think that's a good idea, but I'm afraid if I don't do it just right, the hammer's gonna come down on my head'--we're dead in the water." Amid the uproar over the $76 screw, Soloway said, "the message to them has to be: `OK, you made a mistake. . . . Fine. Now you learn from it, we move on and you keep trying.' "

Equally novel and equally important is the restrained reaction of Congress to the recent blow-up. For four decades, acquisitions experts say, each acquisitions blunder led to public outcry and new legislation--layer on well-intentioned layer of protection until the system could hardly move. Compare the comment of Sen. Rick Santorum, R-Pa., chairman of the Armed Services Acquisition and Technology Subcommittee, on the $76 screw: "When this latest thing came out . . . people were saying, 'Here it is, the Pentagon doing this all over again'; and my comment was: `These are isolated instances. . . . It's hard to change an organization of several hundred thousand people overnight.' "

Some in the House are not so sanguine. "We've been undertaking procurement reform initiatives for 18 years," complained Rep. Duncan L. Hunter, R-Calif., a Vietnam combat veteran, "and it's still a very inefficient system." Pointedly comparing the acquisitions workforce--roughly 300,000 strong--to the Marine Corps--170,000--Hunter said, "The Department of Defense should be able to operate effectively with as many shoppers as there are U.S. Marines."

Hunter and House National Security Committee chairman Floyd Spence, R-S.C., introduced a plan to cut the acquisitions workforce to the size of the Marine Corps over four years. Passed by the House, the measure was watered down in conference.

A crucial problem was agreeing on how many acquisitions workers there are now. Hunter cites a Congressional Budget Office estimate of roughly 300,000; after a half-hour of caveats, a senior GAO evaluator allowed that there might be 320,000. In the face of this uncertainty, the House's cut--of well over 100,000 positions--was bargained down to 25,000, with a waiver that would allow Defense to cut just 10,000. Soloway said the Pentagon is still studying the matter and will report in June on whether it will invoke the waiver.

So Soloway has his work cut out for him. In an interview, he vibrated with enthusiasm: "One of the reasons I was eager to come over here when I was offered the opportunity was, if you look back over the last five years, you had probably one of the most successful stories in the history of government."

But the end of that story is not yet written. With the eyes of Congress upon them, and with the world's largest, most complicated buying system in their care, Soloway and his colleagues will certainly need such enthusiasm if they are to press ahead.