More Bucks, Less Bang (Part II): Can We Give Some Power Back to the DoD Oversight Personnel?

This column is a follow-up to my column last week about testing of our weapons and how the Department of Defense (DoD) system has put our weapons acquisition in a more-bucks-and-less-bang dilemma. On June 3, the DoD put out a memo from a special Pentagon group to study the problem showing that weapons' testing is not responsible for most of the delays in our overrun weapon systems that have been running years behind schedule. According to a story in Bloomberg News entitled “Weapons Testers Found Not to Blame for Procurement Delays,” the study of 40 weapons programs “investigated reports from program managers and program executive officers, or PEOs, that testers imposed requirements beyond the scope of weapons programs.”

Instead, the DoD memo “found no significant evidence that the testing community typically drives unplanned requirements, cost or schedule into programs,” but that the deep flaws and problems with the weapons that the testing found were the cause of most of the delays. In other words, the program managers et al., who called for the study because they were frustrated about weapons testing, had it thrown back into their face because it was their lack of quality in production and design that had to be fixed once the testing had found the problems. Bloomberg quotes Tom Christie, Pentagon's director of operational test and evaluation from 2001 to 2005, saying that the main problem “is that many programs move through milestone decisions with immature or unproven technologies. The program contractors either mislead the decision makers or the program managers don't understand how immature the technologies are. And the minute you start testing, low and behold, you've got problems.”

This is unhappy news for the program managers and the contractors because passing developmental and operational testing is the key to full-time development of the weapon, which makes it much harder to cancel and is the most lucrative time for the contractor. But despite this study, the program managers and the DoD contractors still may continue to come out ahead because failing tests is not the severe setback that it used to be for troubled weapons systems.

Even the industry-leaning Aviation Week wonders about the effect testers really have in the process. In their Ares defense technology blog, senior Pentagon editor Amy Butler wonders if testers have lost their teeth. She looked at the Global Hawk unmanned aircraft (one of the main subjects of last week's Solutions column) and mused, “Decades ago a rating of operationally 'not suitable' or 'suitable with significant limitations' would have been a show stopper, or at the very least prompted a potential pause in the program. But, more and more, these test findings are surfacing for weapon systems that are already operating abroad – often delivering commanders capability earlier than planned.” She also wondered if this could be a positive thing, in the case of drones, because their malfunction wasn't going to kill anyone (I guess she isn't talking about the unwitting civilians on the ground in war zones), but admitted one might have to be more careful in deploying a weapon like a bomber before testing because it might kill the pilot. She concluded that testing in the DoD has taken a hit because “a bad testing report that once could have brought a program to its knees is now becoming more of a data point in a program's progress.”

This has been a trend and a problem in the DoD bureaucracy for years. Testers, auditors and investigators of weapon programs have been losing their clout and their numbers for decades. Testers are going the way of auditors in the DoD, where their findings are delegated to only advice or “data points” to a system that is geared to pushing the weapon through to full production and “success” for the program manager and his DoD contractor.

Auditors who try to push for data or disallow exorbitant expenses have been pushed around or out of the system for years, and their example shows other auditors what happens if you try to force the contractor and his DoD program manager to relinquish documents needed to see where the money is going. A recent example is with the Defense Contract Audit Agency (DCAA) that found KBR (once a part of Halliburton) was grossly overcharging during the height of the Iraq war for housing and feeding the troops. The DCAA wanted to withhold payment on some of the billings when they could not find justification for a billion dollars in spending and until they could scrub the numbers and find out where the excessive costs lay.

The Army's civilian staffer who was overseeing the KBR contract backed them up. Charles Smith, the chief of the Field Support Contracting Division of the Army Field Support Command, told KBR that he would hold up some payments and especially bonuses because of the irregularities in the billings. The Army replaced him and brought in military and civilian personnel who went along with KBR. KBR got their inflated bills paid and received their bonuses. Even an expose by Smith in The New York Times did not dent the money flow to KBR – their contract in Iraq is now over the $40 billion mark.

This case is similar to what happened to DCAA auditor George Spanton, who, in the 1980s, was fired by the head of DCAA for holding up payments to Pratt and Whitney (which makes engines for military planes) because they would not give him backup documentation for their costs. Contrast these cases to any time you ever worked for a company and tried to get expense account costs reimbursed through the Mr. No auditor without a receipt. DCAA's audits have been relegated to “advice” to the program managers, who don't really want to hear their bad news.

There are also not enough testers, auditors and investigators to oversee the burgeoning DoD budget and that can't be blamed just on the Republican administrations. In the 1990s, Clinton's “streamlining” the government worked well in many agencies, but the Clinton administration allowed the generals to tell them how to streamline the DoD and they responded with a huge cut in the auditors and investigators. This “streamlined” the money flow and timelines of weapons because there were less pesky auditors and investigators to bring up unpleasant truths about the weapons programs. The auditors and investigators that were left saw what happened to anyone who was tough and bucked the program managers and the DoD contractors, so there is a culture to not rock the boat, but just “advise” when costs are overflowing and weapons are failing their tests.

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To understand the mindset in the DoD bureaucracy, you have to look at the incentives in the system. A program manager of a weapons system is supposed to keep things moving with as little drama as possible. They also know that if they are too tough on the contractor, they will be hung out to dry when there is a failure or overrun without the help of the contractor's lobby in Congress and the DoD to soothe any concerns. Most program managers only stay for a few years, so their success is tied to keeping the weapon's milestones on track by hiding or ignoring any problems of quality control, bad design or overruns.

The goal for the new guy is to keep the illusion of progress and hand off festering problems to the next program manager. If it starts to leak out that there is a problem, the new program manager can say that it didn't happen on his watch and he is working the problem on a “time multiplex basis.” His predecessor usually has retired to a contractor job and is out of reach for oversight or blame or has been promoted above the current program manager, so he has no interest in blaming his boss. The current program manager just needs to keep his fingers in the dike long enough until his next assignment and then pass the bad news on to the next new guy. The weapon system keeps perking along with multiple problems. Each program manager hopes that if the bad news cascades out, the weapon will be so far down the road that the DoD and the Congress would not want to cancel it and lose the billions of dollars it sunk into it. This system works under what famous DoD whistleblower Ernest Fitzgerald called Fitzgerald's first rule of military procurement: First, it's too early to tell; second, it's too late to do anything about it.

So, the program manager sees the auditors, investigators and testers as a threat and drama to his milestone goals. The program manager is like the traffic cop whose job is to keep the traffic moving at all costs. He looks down the road and sees other cops whose job it is to give out tickets for moving violations and has pulled over cars to give tickets. This wrecks his smooth flow of traffic and he works hard to make sure these cops handing out citations are few in number, inexperienced and hesitant to give out violations for even the most egregious driving behavior. That helps the traffic flowing for him during his shift, but in the long run, traffic is held up more in the future because the bad drivers know that they can speed and change lanes and run red lights without fear of citation. The resulting increase in accidents ends up interrupting the smooth flow of traffic much more than cops pulling over cars to give tickets.

There is, and should be, a natural tension between the program manager who wants to get the weapon through the system and the auditors, investigators and testers who tell him that his baby isn't pretty. But because of past precedent and lack of resources, the oversight group lacks personnel and, more importantly, power and backup to point out problems and have them fixed. That is why the DoD testing study shows that the delays are not from oversight and testing, but because of the flaws and bad management by the program manager and the DoD contractor. The balance has been broken for decades and the oversight people now in place have accepted their role as merely advisory to the program manager.

Solutions to this problem? The more permanent solution is very tough and I have been hammering away at it in past columns; you have to get the self-dealing out of the system with very tough and strict revolving-door restrictions. However, there are some stopgaps that can help the situation now.

First, you need to greatly increase the amount of oversight people, auditors, investigators and testers on these major weapon systems and other large DoD contracts (like KBR). There has been a push to do this and the Congress has appropriated money to beef up all the acquisition personnel, but the DoD has been slow to implement it.

From a recent House DoD Appropriations Committee report:

The acquisition workforce development fund was established to increase the end strength and quality of the Department's acquisition workforce. The effort is financed with a myriad of funding to include direct appropriated funding and a taxing of other appropriated funds. Since its inception, the fund has executed only a portion of the total funding available in any given fiscal year. The forecast for fiscal year 2011 is no exception. The Department plans to carry over approximately $346,000,000 of funding available in fiscal year 2011 to fiscal year 2012.

So, the Republican House has decided to take back some of the funding and slashed $200 million from this budget. This is especially penny-wise and pound foolish when it comes to the oversight personnel, who traditionally have recovered money in amounts many times over what they cost. Hopefully, the Senate and the administration will realize that one needs to invest more to save more in this area.

Second, the auditors, investigators and testers need to be elevated in the procurement process, so that they are not just pesky bumps in the road to full production. Auditors need to be able to hold up payments when they cannot get the documentation they need to seriously audit the programs. Investigators need to have the respect and backing by the program managers to push the contractors into more transparency with their documentation, especially if their investigations point toward civil or criminal fraud going on in the contract.

Testing reports need to be more blunt and direct and need the DoD institution to give them enough weight to be able to stop the full production of a weapon until it is proven that problems are solved and its design actually works in combat scenarios. If the weapon has fatal flaws in design, throwing billions of dollars at it is a waste and a danger to the troops, and it needs to be canceled.

There needs to be a willingness to cancel projects that fail, no matter how much the contractor will scream and run to Congress for relief; and program managers, including generals, need to be fired or relieved of command if they play the procurement game according to Fitzgerald's law.

Some of these fixes could be legislated, but it would be much more powerful and long lasting if the administration, through the new secretary of defense, would make the cultural changes within the DoD and hold fast against all the institutional forces that would try to convince him of impending disaster for these types of reforms. We haven't had a secretary of defense that has been willing to reassert civilian control over the building; most just nibble around the edges and withdraw when their head bangs up against the current system.

Is secretary of defense designate Leon Panetta up to the task?