Considering the current fiscal climate and pressure to reduce defense spending, policy makers and military leaders are looking for innovative ways to reduce operating costs. The Pentagon is not alone in this endeavor and the entire federal government is undergoing similar belt-tightening efforts.

One approach directed by the President’s Office of Management and Budget in its Fiscal Year 2015 Budget Guidance is the increased use of evidence based decision making as a way to reduce costs and improve program effectiveness. This aligns well to the old management axiom “you can’t manage what you don’t measure” and should be applied to the ongoing effort to Reduce Administrative Distractions.

When one compares defense acquisitions to product development in the private sector, the amount of oversight and administration in defense programs are significant factors in the cost-per-unit disparity. Every private American automobile, aircraft and ship manufacturer would certainly be bankrupt if they had to contend with the excessive oversight each defense program must endure.

A 2011 US Army study identified it takes a minimum of 16.5 years to navigate through the oversight and administrative processes for each defense acquisition program. For comparison, in the 1940s through the 1960s, it was not uncommon for a new weapons system to reach full scale production in three to five years. A recent study from DARPA makes an interesting comparison of defense aviation programs to private sector programs over time.

DARPA SLIDE

Although both studies focus on the length of time for acquisition programs, in practice, time translates to cost. Using a rough estimate based on the 16.5 year baseline figure, the minimum cost of oversight and administration for an acquisition program could easily reach tens to hundreds of millions of dollars per program depending on the program’s size and technical complexity. Extrapolate that figure across all DoD programs and the amount is significant, even by Pentagon standards.

Currently the cost associated with the onerous oversight of defense acquisition programs is included in the program itself and therefore does not provide the clarity necessary to make evidence-based decisions on which steps in the process add value and which do not.

In the future, the cost of acquisition administration and oversight must be the responsibility of the mandating agency and must be separated from the cost of the actual programs. Doing so would force the two different communities of “checkers and builders” to become more efficient.

On one hand, if each executive-level review, administrative requirement, and report were funded separately by the OSD, Joint Staff, or military departments, each organization would eventually evaluate the effectiveness of each step rather than accepting the bureaucratic accretion currently in place. Once implemented, the defense wide-cost of oversight would be identified and Congress and defense officials could make better informed decisions on what processes and reviews actually add value and which could be eliminated.

This is not a new approach. In 2010, then Secretary of Defense Robert Gates implemented a policy to identify the cost of producing reports and studies to satisfy the demand of both internal and external agencies. This approach did not go far enough, however. While identifying cost is an important first step, imposing that cost onto the requester would certainly make that agency think twice about making requests of tenuous value.

For the builders, the actual cost of each weapon system would be transparent. This would force Program Managers to act more like private industry and attempt to control the costs associated with design and manufacturing better. In other words, program managers could spend more time managing the program, rather than diverting resources to satisfy the administrative burden.

To determine what components of defense oversight add actual value, the Secretary’s three criteria must be used: Does this help protect national security? Is this in America’s strategic interests? Is this worthy of the service and sacrifice of our men and women in uniform? Considering the constrained defense budget and trade-offs currently underway, any decision that diverts resource away from operational capabilities in favor of unnecessary administrative overhead clearly fails these tests. There is no evidence that proves increased oversight over the past several decades has resulted in a more effective acquisition process.

It is unlikely that anyone in the Pentagon actually knows the total cost of oversight and administrative reviews associated with defense acquisition programs. Until the cost of building acquisition programs and cost of oversight are identified separately, it is difficult to determine the latter’s value. Mandating this separation would be an important step in using evidence based decision making to lower the operating cost of the Department of Defense and preserve actual capabilities for the warfighter.




Posted by Robert Kozloski in Uncategorized
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  • RightCowLeftCoast

    A great article showing the onorous costs associated with regulatory/administrative overhead! It is said that there are so many laws and regulations governing everything we do, that it is impossible for an individual to not unknowingly violate one of those thousands of laws and regulations, and thus we may all be called criminals.
    If these regulations and laws serve more to hinder our armed forces from defending this nation, or reduce our citizen’s liberties, then something should be done to reduce or remove them.

  • XBradTC

    What happened in 1975?

    • Robert Kozloski

      By 1975 you start to see the results of McNamara’s effort to centralize DoD’s management to mirror the practices of private industry. He was also concerned about surprising the Soviets and deliberately put a system in place to slow the acquisition system -stability was more important than efficiency. In mid 1971 the first DODD 5001.1 was issued and the results after that point speak for themselves.

      Given the fact that the Navy successfully managed its acquisition programs from 1775 to 1960, it is difficult to find any value added from having OSD involved in service acquisitions. This fundamental issue should be addressed before more tradeoffs occur between unnecessary overhead and operational capability.

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