Putting the Defense Industry at the Defense Table

December 23, 2015
By M. Thomas Davis

Risk aversion is defeating attempts at effectiveness.

Senators John McCain (R-AZ) and Jack Reed (D-RI), the chairman and ranking member of the Senate Armed Services Committee (SASC), recently held a series of very important hearings regarding the need to make fundamental changes to the structure and substance of defense management. Among those who were called to testify were Arnold Punaro, an influential defense expert who once served as the SASC staff director; Norman Augustine, the widely respected former chairman and CEO of Lockheed Martin Corporation; Dr. Jacques Gansler, a former under secretary of defense for acquisition, technology and logistics; and Michele Flournoy, a former under secretary of defense for policy.

Punaro had numerous observations and suggestions about the need to reduce the Defense Department’s infrastructure and overall overhead, while Augustine and Gansler spoke eloquently about the enduring problems facing the defense industrial base—many the inevitable result of defense acquisition policies that discourage new companies from entering the defense marketplace while simultaneously encouraging many in it to exit, as recently seen in the decision of United Technologies to divest its Sikorsky Helicopter unit.

But, perhaps the most significant observation regarding acquisition came from Flournoy, the former Pentagon policy chief, who noted that it was important that “the federal acquisition regulation (FAR) is not used as a means to prevent industry from being at the table to suggest solutions and inform the debate about what is technologically possible.”

Flournoy’s observation was very important because there has been a definite trend during the past 20 years to deny the defense industry a seat at the table when initial requirements are being discussed. This practice has been driven by an acquisition process that has grown increasingly complex and, most significantly, risk averse. This tendency toward risk aversion has been driven, in no small way, by a defense legal community that itself has become so narrow in its interpretation of legal statutes that it opposes even the most common-sense presence of industry in important discussions out of fear of an eventual protest of an award.

In several recent presentations, Assistant Secretary of the Army for Acquisition, Logistics and Technology Heidi Shyu has highlighted this tendency toward risk aversion. Shyu commented that in the vital first step of a program, the development of requirements, they have too often “been derived or changed without full knowledge of costs, schedule or technical risks.” This has happened because the community that is most aware of the current state and costs of technology—the defense industry—routinely is excluded from these discussions. Or, as stated by Flournoy, they do not have a “seat at the table.”

Consider this one example. When the Army’s overly ambitious Future Combat System (FCS)—including its main component, the manned ground vehicle—was canceled in April 2009 by then-Defense Secretary Robert Gates, the Army quickly moved to salvage a new combat vehicle named the Ground Combat Vehicle (GCV). Under the direction of the vice chief of staff, a “Blue Ribbon Panel” was convened to review the Army’s latest combat history and develop a new set of requirements for the vehicle. As it was stated, the panel’s participants included “representatives from think tanks, academia, retired general officers, combat veterans and active-duty commissioned and non-commissioned officers who can provide insights into the creation of the GCV.” Although this list of participants seems comprehensive on first glance, it specifically excluded any industry participation. In other words, as noted by Shyu, those with the most knowledge of technology and risk were not present at the table.

What was the result? The GCV program was canceled in February 2014 as some in Congress were never certain they understood either the need for the vehicle or its specific role, and there was considerable disagreement within the Army over its maximum acceptable weight. To meet the required survivability needs within budget constraints, the primary contractors were developing vehicles weighing nearly 70 tons—the weight of an M1 Abrams tank—while some senior Army leaders were arguing that the vehicle, essentially a replacement for the Bradley Fighting Vehicle, could weigh no more than a Bradley’s 25 tons. Clearly, this was a significant disconnect.

Whether this program ever could have reached production under any circumstance is certainly a matter of debate. But the fact that it did not, and that its cancelation occurred under so much programmatic confusion over the basic requirement and a fundamental misunderstanding of what technology could provide at any given price point, can be traced directly to the original program decisions made without any substantial involvement by industry.

Senior Pentagon leaders routinely refer to the important role played by their “defense industry partners.” But a partnership, by definition, requires at least two parties; and the Defense Department recently has adopted positions making this particular partnership so distant that it often is too unworkable. Some of this is because the Pentagon legal community has become too strident in its interpretation of appropriate communications between the defense industrial base and the defense customer base. As Augustine has noted, the defense customer “makes the rules, interprets the rules and enforces the rules.”

Certainly, there should be agreement that the rules never were intended to create an acquisition partnership so distant, and so risk-averse, that the result would be frequent program failure—the very result a risk-averse regime seemingly would want to avoid. Flournoy is, therefore, quite correct: the FAR must be used to facilitate success, not to increase the possibilities of failure—an outcome serving no one’s best interests.

M. Thomas Davis, the Forrestal-Richardson Defense Industry Chair at the Defense Acquisition University, is a former corporate vice president with General Dynamics Corporation and a past assistant professor of economics at West Point, the U.S. Military Academy.

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