Reforming the Acquisition Mindset

In what may be his last act to shape defense authorizations, the chairman of the Senate Armed Services Committee (SASC) is pulling out all the stops to remake the Pentagon. Senator John McCain (R-Ariz.) is advancing a National Defense Authorization Act for 2017 that would make changes to the Department of Defense more sweeping than any since the 1986 Goldwater-Nichols Act, which imposed “joint-ness” across the command structure of the US military and concentrated authority over major defense acquisition programs in the Office of the Secretary of Defense.

While I admire the seriousness of the legislation’s intent, I cannot commend it. Its provisions are rooted in an ideology about how to fix acquisition that attributes too much significance to organizational structure and processes. It also compounds the customary impulses of a system that instead requires a fresh mindset to address the challenge of defense innovation in the 21^st century.

The most far-reaching of the bill’s provisions would enact, in the words of the SASC’s report, “a comprehensive reform of the defense acquisition system designed to drive innovation and ensure accountability for delivering military capabilities to our warfighters on time, on budget, and as promised.” To achieve these aims, it proposes to disestablish the office of the Under Secretary for Acquisition, Technology, and Logistics (USD/AT&L); diffuse and devolve authority over acquisition programs while consolidating the functions of test and evaluation; and penalize the use of cost-type contracts, which the bill regards as a barrier to “non-traditional commercial and global innovation.”

The Obama Administration is threatening to veto the bill, indicating that it “strongly objects” to the disestablishment of the USD/AT&L and realignment of test and evaluation offices and finds “troubling” the bill’s direction on contracting practices. These objections perfectly reflect Secretary of Defense Ashton Carter’s own ideology of how to fix acquisition, which has focused on changing incentives and improving the quality of information acquisition officials use to make decisions, not on organizations and processes.

In fashioning his signature acquisition reform initiative, Better Buying Power, in 2010, then-USD/AT&L Carter expressed the view that no organizational superstructure can effect lasting change without an infrastructure of economics that gets the incentives right. BBP notably established no new organizations to cheerlead the campaign and advanced no new wiring diagrams of procedure, reforms of the sort Carter believed would animate only the form of change and distract from the substance of choice.

Moreover, Carter’s is an approach to reform that the Administration is crediting with improved acquisition outcomes. Its veto threat is contending that since 2010 the proportion of major development programs running under-budget has doubled and the proportion of procurement programs running over-budget has declined from more than half to just one in five.

My own reservation about the Senate’s approach to acquisition reform is that it reinforces a still different ideology of defense acquisition which I believe is antithetical to innovation. It is the ideology of the consumer applied to how we manage and regulate the acquisition of complex weapons systems. Like consumers, today’s acquisition workforce subscribes to a familiar code of imperatives—get what we paid for, get a good deal, and avoid surprises. It is the mindset of a buyer of assets who regards their value as fully determined at the point of sale, depreciating over time, at best; imposing long-run, “internalized” costs, at worst. Accordingly, consumer-minded acquisition places an abundance of importance on accounting, cost estimating, contracting, and test/evaluation, functions responsive to the time-honored precept of consumerism, caveat emptor—buyer beware. Indeed, these are the watchwords that would seem to have inspired the Senate’s reform proposals.

I wish instead that the next frontier of acquisition reform would gain inspiration from the ideology of the investor. The simple imperative of the investor is to acquire assets whose value can be made to grow over time. It’s a code reflecting the mindset of a buyer who regards the value of an asset as dynamic and susceptible to transformation by the application of knowledge, creativity, and sweat. An investor-minded acquisition system would place the abundance of its efforts, for example, on managing risk with portfolios, not controls; on motivating high performance with fabulous rewards, not sharp sticks; and on paying prices that reflect a deep understanding of an asset’s propensity to solve future warfighters’ problems and abate long-run costs, not simply a build-up of historical labor and material bills.

If Congress and the Pentagon are really are serious about driving a culture of innovation, abandoning acquisition-consumerism and embracing the mindset of the long investor is the key ideological divide that needs crossing. Rearranging the nameplates on the E-ring is not enough.