Air Force Acquisition is There a Better Way? (A Streamlined Acquisition Management Approach) Gene S. Bartlow Colonel, USAF Recent media headlines portending serious economic difficulties in the near-term for individuals and the country as a whole include: "Runaway Spending," "Cost Overuns," and "Cutbacks." The situation has warranted congressional debate, and a degree of presidential support for constitutional amendments to require the government to work within an annually balanced budget coupled with presidential line-item veto authority. This budget situation can be understood by any citizen with a personal checking account. As individuals, we all have to live within our means; however, the federal government has not recently followed that dictum. The Air Force portion of the "money maze," simply stated, is that the Congress grants the Air Force authority to purchase resources through appropriations. Appropriations quthorize Air Force resource managers to incur obligations for general and specific purposes within certain time limits. This translates on down to budgets for acquisition systems divisions, air logistics centers, air divisions /centers, wings, bases, etc. Expenditures range from paper clips to fuel; spare parts to major aircraft and missile weapons systems. "Money often costs too much," as Ralph Waldo Emerson wrote. Saving $12 Billion The December 1983 Grace Commission report on cost control disclosed 2,478 ways to eliminate "waste," thereby saving in 3 years, with recommendations, more than $12 billion. About the same time, a controversy began on spare parts pricing. One item was a plastic end-cap on the leg of a lions authorize Air navigator's chair on the E-3A AWACS aircraft, in 1981; the Defense Logistics Agency bought three of them for the Air Force at $916.55 each. Subsequently, the E-3A contractor estimated the caps would cost $219.18 each and the Air Force accepted that price, which was reduced only after the Air Force zero overprice monitor complained. The price was still outrageous, of course, but there were considerable expenses in producing the tiny order. The Air Force, sensitise to the spareparts pricing issue, has instituted management systems and new procedures to preclude similar "horror stories." In spite of initiatives to correct the situation, editorials have continued the "drum beat" of expensive weapons systems and spare-parts pricing problems. This criticism, however, is unbalanced and provides an incomplete and often distorted perspective to the U.S. public. Caspar W. Weinberger, secretary of defense, worked hard to turn around the negative perceptions. In a recent letter to the Washington Post, he put some of the more notable "horror stories" in the proper context. While the Defense Department did buy a diode for $110, we also bought 122,429 for four cents each and received a refund for the overpriced diode. While we bought a claw hammer for $435, we also bought 87,244 hammers of various types for $6 to $8 each the same year and received a refund for the overpriced hammers. In addition, we actually bought the $9,600 allen wrench-the purchase was stopped as a result of our audit and we pay less than $10 apiece for toilet seats. A Paradox A wise observer comments that in the zeal to clamp down on excessive costs, the paradox is that costs are rising. A partial reason is the paperwork involved investigations, classification, inspection, and all constraints adding to the cost of doing business. A perfect cost system that scrutinizes the cost of every nut, bolt, and screwdriver is going to add greatly to the cost of those items. Weapons programs must now run a gauntlet of paperwork, which adds far more to cost than is saved by the safeguards. If the trend continues, we could expect that by the year 2000 not a single case of waste, fraud, or abuse in weapon system acquisitions will be reported in the Air Force and not a single weapon procured. Total control results in total immobility. This explains one aspect of a very complicated issue rules and regulations the Air Force lives by in contracting and acquisition. Rules are extensive, complicated, and exacting. It now takes a great deal of training and time to qualify a system program manager, a contracting officer, a deputy program manager for logistics, an item manager, a budgeting officer, etc. .Each rule when constituted was, in most cases, the result of an attempt by senior staff members to prevent inadvertent errors or mismanagement, or to comply with the provisions of public law. The Environment The litany goes on and the perception continues, increasing costs, longer acquisition times, poor quality, low reliability, and difficult maintainability. The public, the Congress, the media, and others decry inefficiencies and mismanagement of weapons system acquisition. For example, of the 47 major programs contained in the June 30, 1981, Selected Acquisition Reports, cost had more than doubled since Milestone II reviews of the Defense System Acquisition Review Council (DSARC) for these same programs. Although the current Selected Acquisition Reports would probably not support the same conclusion, the perceptions remain. In addition to the effects of weapon system costs, a more subtle burden pervades the acquisition process in the form of management and administrative systems. The net result is a massive amount of regulations, procedures, directives, documentation, and review requirements that are imposed on each layer of acquisition management from the Congress to the Office of the Secretary of Defense, through the secretary of the Air Force and program managers and, ultimately, on to industry. "At each level of this chain, a bureaucracy has been created to fulfill and perpetuate these requirements, resulting in increased costs at all levels and built-in administrative delays throughout the process." President Reagan's first deputy secretary of defense, Frank Carlucci, in testimony before the Congress stated: "Program Managers and industry initiatives are often stilted by overregulation." He noted there were then 114 directives related to acquisition, compared to 15 in 1961 and 25 in 1977, and that studies indicated it costs 8 cents out of every contract dollar to satisfy congressionally and DOD imposed management systems and data requirements. Defense Is No Cottage Industry The Congress participates in the analysis of defense requirements of the United States to a greater extent than do parliaments of other western democracies. The growth of congressional committees and staffs associated with defense has been escalating in recent years. Ten years ago, four congressional committees wrote legislation on defense; today DOD is shepherded by 24 committees and 40 subcommittees. Defense is no longer a cottage industry on Capitol Hill; the House Armed Services Committee alone fields a professional staff of 54, reflecting the eleven-fold growth in House staff members since 1946. There has been a significant increase in congressional staffers. For example, in 1970 the House and Senate staffs comprised 11,061 people, and in 1982 they comprised 18,761 (a 59 percent increase in just 12 years), and the growth continues. During 1983, DOD witnesses spent 1,453 hours testifying before 91 committees and subcommittees. The DOD responded to 84,148 written inquiries and 592,150 telephone calls from Capitol Hill; moreover, in the 1970s, the Congress intervened on such vital issues as whether officers' clubs should serve margarine, butter, or both. In 1984, DOD as a whole responded to 7,346 questions for the record subsequent to congressional hearings; there were instances when DOD replies resulted in entirely new questions. Then, too, identical or similar questions were submitted to different witnesses throughout DOD, thereby creating duplication and wasted motion. Current congressional oversight and information requests represent an unprecedented level of micromanagement. The contract or budget data on congressional "what if" drills are not routinely available in the requested format and it is not always in a form used for Air Force management or review. The Air Force should be required to provide only DOD standard information. The statutory workload which has been growing could be reduced. The cost associated with these and other similar activities is hidden, pervasive and often subtle. Many critics, including more than a few on Capitol Hill, believe that micromanagement of the military has cost millions of dollars and led the Congress to scrutinize "trees rather than forests." From Concept To Combat The present acquisition administrative process has contributed to an increase in the acquisition time allocated for new weapons systems. Representative Richard H. Ichord (D. Mo.), past chairman of the R&D Subcommittee of the House Armed Services Committee, the 96th Congress, in an article in Military Science and Technology stated: "Of all the serious problems besetting the military, none is more profound or far -reaching than the dangerous amount of time it takes the United States to move a new weapon from concept to combat readiness." Representative Ichord observed that "overmanagement is probably the leading secondary cause of defense acquisition delays." Increasing acquisition costs and increasing acquisition times are related; cause for one is usually cause for the other. Perhaps the most visible difficulty is the impact of funding instability on weapons system acquisition. Often, instability reflects concern over a weapon's performance but too often this finds its origins in the Congress. Erratic swings in research and development money, reflecting congressional direction, is a chief cause of later cost growth and other problems in weapons system acquisition. The Congress has been known to withhold funds on one weapons system until the military initiated a new direction in another related program; or, pushed the military into buying weapon systems the military saw no need for or considered too expensive for the mission involved. This viewpoint is disturbing, but not surprising. As the Congress and the public have demanded more say about, and more visibility into, costs of the defense establishment, the services reacted with layer upon layer of management structure to gather the information end gain more control. We have become "so superbly conscious of avoiding errors that we added a heavy overburden to our process." What is the recipe for acquisition success? The simpler the recipe (or solution), the more likely the success. The Response The Air Force has instituted many structural, procedural, and management actions specifically designed to improve the cost of weapons systems. One ongoing new initiative, "Acquisition Streamlining," opens the door to diverse opportunities for cost and time reduction. First, acquisition streamlining is any action that can be taken to improve the weapon system process by either reducing costs or eliminating the time required to field a weapon system. The Air Force approach to acquisition streamlining is outlined in the following objectives: · Reduce cost and time of weapon system acquisition. · Establish realistic requirements at program outset. · Maintain requirements flexibility throughout the life cycle. · Improve quality. Colonel James J. Lindenfelser, Air Force streamline advocate, pointed out it is "important to recognize that streamlining is a philosophy" and that the Air Force intends to "encourage innovation and allow flexibility in the [acquisition] process." The DOD is working on a new draft directive regarding acquisition streamlining. From the Air Force perspective, excessive use of specifications and standards, management control systems, and complicated procedures add to the cost of a weapon system. The Air Force's new acquisition streamlining initiative provides a broad umbrella under which many opportunities for innovation can be pursued. The new streamlining initiative may require institutional, cultural, and attitudinal adjustments, as well as in the way some people think. It is under the auspices of the Air Force acquisition streamlining initiative that the new proposal outlined herein is offered for consideration. The Proposal A central theme of a viable improvement in acquisition management systems is in "tailoring the acquisition process to yield the optimum acquisition strategy." One initiative, if applied, could have the potential for significant improvements Air Force wide. The proposal may appear radical at first blush, but elements of this proposal have been instituted in selected classified "specialized management" acquisition programs with surprisingly positive results. The proposal is: Apply specialized acquisition management procedures to a broader spectrum of Air Force weapons system acquisition programs. The Initiative The Air Force uses specialized management procedures for selected acquisition programs under Air Force Regulation 800-29, "Application of Specialized Management." Specialized management is a term applied to tailored procedures used by the Air Force to ensure exceptional responsiveness and flexibility in acquisition programs specifically designated by the secretary of the Air Force, the chief of staff of the Air Force, or higher authority. "Specialized Management" is a system designed to cut through red tape and enable selected people to bypass routine management requirements, some staff, and get on with the task at hand; however, public law remains sacrosanct. As AFR 800-29 states, 'The deviations from normal management practices must be consistent with statutory authority and executive orders." Specialized management allows program managers wide latitude to ignore paperwork and tasks including justification of their respective individual decisions, usually taking time and presenting road blocks, which also are often unwarranted (and ultimately unnecessary), yet mandatory in the acquisition system. An example might be going through the various levels of administrative approval to get a decision on a realignment of management priorities or a weapons system design change, which could take 6 months or more. Even getting obligation authority can take a month if handled through the routine system. The specialized management system allows a program manager to get on with the heart of a job. Specialized management often requires a greater degree of senior leadership involvement. This allows the system to assign accountability readily. Normally, weapon systems changes are related to changes in missions, threat, or technology. Fewer people within the requirements identification community can further reduce the resulting changes in weapon system requirements. This could result in fewer changes to mission requirements which can equate to lower costs and faster acquisition, the crux of the Air Force streamlined acquisition management initiative. Perhaps a few pilot conventional weapons programs in the early conceptual or developmental stages could be selected for specialized management systems. The DOD and the Congress might exempt these programs from the many acquisition management requirements; these programs could be test cases for DOD and the Congress to evaluate how much management systems cost and time could be saved. There is now a degree of congressional support for this concept. Senator Sam Nunn (D-Ga.), Senate Armed Services Committee, has expressed interest in the further application of specialized management procedures. In an interview with Aviation Week and Space Technology, Senator Nunn said if a few candidate programs could be identified for specialized management, he would give them "one paragraph treatment" in law. That paragraph would say, basically; 'We want this to be done with an effective and efficient procurement method with the maximum of competition to the extent feasible and practical, period, end of sentence - 'Now go do it.' Senator Nunn in further justifying the idea said: "I really have the view that we've so encumbered the system with rules and regulations and red tape, all with noble purposes, that the cumulative effect of it is just devastating." He added: 'The way we're doing business now, if you came down from on high and you said your job was to devise the worst possible combination between the Congress, the Pentagon, and all the elements, I think we've got it." Specialized management programs, particularly those under the purview of the classified special-access required procedures, often are required to be processed only through selected congressional members and staff. This procedure is not intended to limit congressional oversight, but to reduce proliferation of the unique highly classified advanced technology information. The corollary effect is to smooth the approval process in the Congress and reduce routine inquiries. There is an obvious lesson here for wider use of this system. The Air Force, as a further example, previously used similar streamlined specialized management in its dealings with Lockheed California Company, Advanced Development Projects (ADP), for acquisition of the U-2 and SR-71 aircraft. The Lockheed "Skunk Works" under Clarence "Kelly" Johnson has become synonymous with rapid development times from concept to flight hardware. Specialized management procedures routinely have been used when security was paramount and the need-to-know was to be limited under special-access-required classification procedures. The approach is designed to cut through the high cost and time constraints of the normal procurement and acquisition system, to limit access to the program to people with an absolute need to know, and to protect potentially perishable advanced technology. Streamlined specialized management is when a small and dedicated team is tasked to provide direction and control of a program, as well as to provide a buffer between the program and the bureaucracy. When matched with a similar structure by the contractor, the savings in management systems and data will pay off richly in time and dollars. Johnson observed that, even in his "Skunk Works," only three percent of the total time actually was spent addressing problems of how to make hardware. Normally, within specialized management procedures under AFR 800-29, the Air Staff program element monitor, Major Air Command (MAJCOM) staffs, systems program offices (SPOs), and contractor teams are austere as compared to the normal acquisition environment. Management reviews are informal, infrequent, and are usually focused on problems, not status. Some special-access-required classified programs work with less than one-third of the people used in a normal acquisition program. While a skeletal system may not be appropriate for many programs, it sets a standard against which to compare the size of the normal offices of today that are doing essentially the same acquisition job. Frequently, people in various levels of program management find themselves in the midst of bureaucrats who review, coordinate, and generally interfere with the activities of the programs. Under the guise of "continuity" and "lessons learned," these people invade a contractor's facilities to review design and program plans. The contractor, in turn, must increase the number and size of his middle-management teams. Reviews and data requirements consume time and dollars that should be directed toward designing, testing, and fabricating the new weapons systems. Not only must the contractor increase management personnel to address these issues but the Air Force is faced with a similar problem in responding to congressionally mandated rules. Specialized management is notable for other beneficial attributes. For example, on-site visits by the SPO are relatively frequent (usually the SPO only) and on-site timely decisions are made verbally and followed-up later in writing. Informal problem-solving working groups are routine. Every engineer is a "system engineer" in thought process and is able to act as a SPO technical spokesperson. Contractor data is held to an absolute minimum (deliverable and non-deliverable); whereas most data are maintained in the contractor-selected format (most useful for design purposes) and accessed through the contractor-maintained data accession listings and computer terminals. One critical element of a specialized management program is the great reliance on the integrity of handpicked individuals within these small select program offices at all levels. When a professional knows there will be minimum oversight, integrity becomes an important factor. The opportunity to take advantage of this system is evident. However, with specially selected key individuals who are recognized as able to handle that kind of pressure and who are entrusted with million dollar expenditures based solely on the word of a small cadre of individuals, the system can work efficiently. Rewards could be provided through increased responsibilities and promotions for people handling these activities well. Heavy reliance is put on the program managers and on contractor integrity with an open door policy for all information with full governmental visibility. Media headlines describe contractors who intentionally overcharge the government. With the spotlight on a specialized management program, there would be an incentive to avoid negative management and accounting practices. Senior management should be prepared for resistance from the military and from contractors when streamlined specialized management is proposed for implementation in a program. Some engineers in the contractor community who have used military specifications for years as a buffer from contractor' management might be uncomfortable when military specifications are tailored or untiered. Some engineers may resist the change from standard methods of operation. However, this initiative would provide the opportunity for contractors to demonstrate their management integrity. Selection of unclassified programs for a test of the proposal outlined herein would even gain an element of streamlining that the special access required classified programs are unable to share; that is, the unclassified program would not require the expense facilities, time, and manpower needed to place a cloak of secrecy over the project. The unclassified program would not need secure vaults, safes, fences, or communications; or, security clearances, background checks, badges, and special security procedures (other than those required for a normal program). The bottom line is the ability of all program managers to commit expeditiously to procurement and contract decisions with full authority to act. Thus, individual integrity and trust are vital to the success of specialized management. Conversely, immediate action is required without regard to "personnel management niceties" when an individual is deemed no longer productive or has violated the trust; hiring and firing freedom is essential. Some generalized benefits of streamlined specialized management include: (1) the ability to field a weapon system faster; (2) significantly less bureaucratic activity without the real loss of senior-level management supervision and oversight; (3) minimum administrative workload with greater emphasis on programmatics; (4) expeditious procurement authorizations; (5) extensive on-site activity and use of informal cross-functional working group involvement to enhance communications and (6) heavy reliance on Air Force and contractor personnel integrity, which provides greater incentive to keep the program honest and on track. The Cautions Four cautions are important to implement streamlined specialized management procedures beyond the individual integrity imperative discussed above. First, the time-press may increase costs and schedule risks. This requires program managers to maintain a higher than normal management reserve to cover the continuous risk assessment and for planning alternatives. Parallel solutions to problems and high concurrency activities will result in greater risk; but, risk often provides significant cost and schedule benefits and new improvements, provided early decisions were essentially correct. Second, the time-press increases performance risk including deviations from some standards and an early design freeze could be overturned by the user; but, early and direct user (MAJCOM) involvement in the development effort, and clearly established and defined responsibilities will overcome this potential deficiency. The individual integrity issue again becomes a factor in this arena, but less so when the involved people are the most qualified and are specially selected. Third, less corporate review raises the potential for integration disconnects with other systems and initiatives; but, with hard work and key people alert to this potential problem, it can be overcome. Fourth, if too many programs were authorized to participate in specialized management procedures the ability to field a system expeditiously may be adversely impacted and, potentially, a new bureaucracy would surface to serve this new management component. Specialized management procedures are primarily limited to very unique, classified efforts; expanding this concept into too many other areas could jeopardize the ability to use this technique for special advanced technology programs. This specialized management streamlined system should be restricted to a few select high priority programs and expanded into other areas only as new procedures warrant. As before, however, risk can generate great benefits; clearly, less risk costs more. Conclusion The present acquisition process has become bogged down by review and inertia, while the need for action has become more urgent. The layman, quite rightly, is baffled by the massive bureaucracy needed to buy weapons systems. It is often true that people internal to the program acquisition process don't fully understand how it works, which is inherently wrong. Common sense cries out for a vastly simplified process. Proposals outlined herein would require congressional and DOD support, a few test-pilot programs, and further refinement of AFR 800-29, the specialized management directive. If the current acquisition system is not progressing toward inherent improvements, perhaps the current system is part of the problem. Many will say this departure from the norm is too radical and would never work. Well, it can work. Elements of this proposal work now in the special-access-required classified programs with numerous important benefits not the least of which is reduced time and fewer dollars to bring a system on-line and operational. Some benefits have not and may not ever surface publicly due to the classified nature of the advanced technology involved. Thus, it is impractical to publish in an open forum the true benefits of specialized management because the real success stories are often highly classified. Suffice it to say, benefits are known to key senior leadership. Corporately, the government is always looking for ways to cut costs, especially in this current budget deficit environment. This proposal, workable and costing virtually nothing to implement, may have concomitant risks, but it would have the potential for great savings in time and dollars to the Air Force. "In 1951, the military ordered 6,300 fighter planes at a cost of $7 billion in 1983 dollars. In 1984, the United States (spent) $11 billion to build only 322 planes 95 percent fewer." 2Z Of course, weapons systems are vastly more complex and more advanced technologically with improved mission capabilities. However, granting this greater degree of capability and complexity, trends and future negative prospects for cost and numbers of aircraft produced are alarming. The problem is readily recognizable and something must be done about it now. In conclusion, the proposal is viable and has great potential. Specialized streamlined acquisition management procedures could be authorized for a few test programs with the potential for important benefits. Given flexibility to use ingenuity, the Air Force and contractors can go far in reducing the trend of spiraling weapon systems costs. Risks are there but experience shows that benefits far outweigh the risks incurred. Can we do the same or more with less and sooner? Usually, yes; particularly if we simplify the system and trust hand-picked people to do the job right the first time. References 1. Correll, John T., Senior Editor, "Beyond the $916 Stool Cap," Air Force Magazine, September 1983. 2. Weinberger, Caspar W., Secretary of Defense, "How the Pentagon Bought 3,500 Pliers at $3.10 Each," The Washington Post, April 13, 1985, Washington, D.C. 3. Buckley, William, F., Jr., "The Defense Bilkers," The Washington Post, Aug. 20, 1985, Washington, D.C. 4. Brabson, G. Dana, Colonel, USAF, "Department of Defense Acquisition Improvement Program," Concepts, Vol. 4, No. 4 (Autumn 1981) pp. 54-75. 5. Bongiovi, Robert P., Major, USAF, "Weapons Systems - Acquisition - The Keys to Improvement Are Already in the Hands of the Program Manager," staff report, Armed Forces Staff College, Nov. 15, 1982, 14 pps. 6. Hearings, Defense Procurement Policy and Management, U.S. Congress, Senate Committee on Armed Services, July 18, 1981, 97th Congress, 1st Session, Washington, D.C., GPO 1982, 76 pps. 7. Hiatt, Fred and Atkinson, Rick, "To Pentagon, Oversight Has Become Overkill," The Washington Post, July 4, 1985, Washington, D.C. 8. Congressional Quarterly, August 1985, Washington, D.C. 9. Fossedal, Gregory A., The Wall Street Journal, Aug. 8, 1985, New York, N. Y., p. 22. 10. Ichord, Richard H., AF/RDPJ, Feb. 11, 1982, The Pentagon, Washington, D.C. 11. Bongiovi. 12. Lindenfelser, James J., Colonel, USAF, "Acquisition Streamlining: The Air Force's Advocate and the War on Overspecification," Government Executive, June 1985, Washington, D.C. 13. Ray, Alan C., Major, USAF, "The Revolutionary Application of Old Ideas,". Program Manager, July-August 1985, Defense Systems Management College, Fort Belvoir, Va. 14. Brabson. 15. AFR 800-29, Acquisition Management, "Application of Specialized Management, AF/RDPJ," Feb. 11, 1982, The Pentagon, Washington, D.C. 16. Ibid. 17. Mann, Paul, "Key Senator Seeks Arms Project Curb," Aviation Week and Space Technology, Vol. 122, No. 9, March 4, 1985, p. 16. 18. Ibid. 19. Bongiovi. 20. Dr. Robert J. Massey, Gordan A. Smith, and Jack F. Witten, "Improving the Acquisition System," Concepts, Vol. 4, No. 1 (Winter 1981), pp. 13-27. 21. Ibid. 22. Fox, J. Ronald, "Revamping the Business of National Defense," The Harvard Business Review, September-October 1984, pp. 63-70, Harvard University Press, Cambridge, Mass.