The silver lining to defense budget cuts
Maybe the Pentagon will have to clean up its weapons procurement mess

Sgt. Dayan Neely/U.S. Air Force

Article Highlights

  • Defense cuts could finally force the Pentagon to stop buying weapons and equipment in the wasteful way it has since the 1960s

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  • Now is the perfect opportunity to create a new military-industrial complex more suited to the era of cyberspace, and advanced technology

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  • The Pentagon's procurement labyrinth have bred mutual distrust in the defense-contracting world

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There's a lot to deplore about President Obama's proposed military drawdown, but here's a possible silver lining: It may finally force the Pentagon to stop buying weapons and equipment in the wasteful way it has since the 1960s. Changes in military acquisition could not only save hundreds of billions of dollars but could also allow our defense industry to relearn how to build the best possible weapons at the lowest possible cost.

There are familiar horror stories of $5,000 coffee pots and $600 dollar ashtrays, not to mention the multibillion-dollar cost overruns that hamper the deployment of weapons like the Littoral Combat Ship and the F-35 fighter—and even kept the Navy's A-12 ground-attack fighter from being deployed at all.

But anyone wondering why an F-18 fighter that should cost $18 million costs $90 million, or why operating a future fleet of F-35s is slated to cost more than $1 trillion, needs to realize that these problems arise out of a procurement system that dates back to the age of vacuum tubes and hi-fi sets.

Created in the 1960s by then-Secretary of Defense Robert McNamara and his vaunted team of "systems analysts," the five-stage Planning, Programming, Budgeting and Execution System is a one-size-fits-all process for buying weapons and equipment for all the military's services. By insisting on a rigorous review at every stage, the system was supposed to bring business-style accountability and cost control to the Pentagon.

Instead the system has become a bureaucratic nightmare. Pentagon acquisition employs more than 30,000 people—the equivalent of two full Army divisions. Its barrage of review committees and cost accountants drag out the average schedule for major weapons programs to a decade or more (it was two to three years during World War II) and add 25%-50% to the cost of every weapon produced.

And no wonder. Complying with the system's regulations costs every defense contractor extra time, labor and mountains of paperwork—all of which gets passed onto the taxpayer thanks to the standard cost-plus contract that the Pentagon issues, which reimburses contractors for allowed expenses with an add-on fee as profit.

Those costs include the additional regulations imposed by other federal agencies that insist on getting into the act, such as the Government Accountability Office, the Equal Employment Opportunity Commission, the Environmental Protection Agency, and the Occupational Safety and Health Administration. When Lockheed was building its first stealth fighter, OSHA required engineers and workers to use 65 different kinds of protective masks—all at taxpayers' expense.

The Pentagon's five-stage system also requires constant reviews and audits as weapons move from one stage of development to the next. These trigger delays—so managers, engineers and employees on union wage scales collect paychecks while nothing happens, sometimes for months.

Those delays, in turn, create time for new requirements and add-ons to be dreamed up by everyone from the separate services to the various congressional and executive committees that oversee the procurement process, to the 20-odd deputies working for the undersecretary of Defense for acquisition, technology and logistics—not to mention all the other federal inspectors. All this made the golf cart-sized guard robot of the Army and Navy (the Mobile Detection Assessment and Response System) cost 50 times its original projection. It's also why the Air Force's latest unmanned bomber design cost three times more than the manned B-2 that it's supposed to replace.

It certainly doesn't say much for Pentagon procurement when its biggest successes come when a Defense secretary overrides the entire system, as Secretary Robert Gates had to do to get the Mine Resistance Armored Reconnaissance vehicles (MRAPs) that our troops needed in Iraq—and as McNamara himself did with laser-guided munitions during the Vietnam War.

This cumbersome system has been sustained by big defense budgets, so now is the perfect opportunity to create a new military-industrial complex more suited to the era of cyberspace, robotics, unmanned systems, and even more exotic high-tech areas like nanotechnology, where America's military future will be forged.

The first step should be a rational rollback of the rules and supervisory authorities that make the current system dysfunctional. As in any industry, overregulation rewards the tried but not always true, discourages innovation and improvement, and limits competition by driving away anyone not inured to the rules of the game.

The second step is to return to the robust commercial practices that built our leading defense companies in the first place. Instead of demanding theoretical perfection in every weapons system regardless of cost, Pentagon officials need to be willing to accept a product that gets the job done, with quick response to implement improvements. And instead of relying on cost-plus contracts that provide no incentive for saving money, defense firms should be encouraged to see keeping costs down as part of their own bottom line, as any other company would.

Finally, decades spent in the Pentagon's procurement labyrinth have bred an atmosphere of mutual distrust in the defense-contracting world. (Litigation over the A-12 is still going on, more than two decades after it was canceled.) The spirit that animated the officials and private companies who built the B-29 and the atomic bomb in World War II was one of camaraderie and cooperation. That was something the systems-analysis obsession with numbers never grasped—the sense of dedication, not to mention inspiration, needed from those who build what this country needs to defend itself.

That spirit is still alive in today's defense firms, waiting to let loose again. Smaller defense budgets must offer the opportunity to do it.

Mr. Herman is a visiting scholar at the American Enterprise Institute. His latest book, "Freedom's Forge: How American Business Built the Arsenal of Democracy That Won World War II," will be released by Random House in May.

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