Thompson Files: Defense industry realities

ARLINGTON, Va., April 15 (UPI) -- On July 9, 1861, as the Union mobilized to fight the Confederacy, The New York Times editorialized that the U.S. War Department was too corrupt to equip soldiers successfully: "It would seem as if some potent Spirit of Evil has cast its incurable curse upon the War Department of this country. ... In it financial frauds, wrongs, and robberies have been concocted on a scale so gigantic that all the frauds and defalcations of the past have been forgotten."

The Times called the War Department a "hotbed of wickedness and corruption." The paper returned to similar themes in later wars, noting after World War I that none of the thousands of tanks and planes ordered from U.S. industry made it to the front before the Armistice.

The excuse for such incompetence back then was that the United States didn't really have a defense industry. With military spending averaging only 1 percent of the economy between wars, every major conflict required a rapid mobilization of commercial enterprises for war production. So waste and fraud were common in the execution of weapons contracts.

But once the Cold War began, all that changed. Defense spending rose to more than 5 percent of gross domestic product and stayed at that level for 40 years. Sustained demand for weapons enabled the modern defense industry to come into being and fostered the professionalization of military acquisition. Controversy did not disappear -- witness the recurrent criticism of the "military-industrial complex" -- but competence increased and corruption receded.

Today, most of the debate about weapons purchases involves what is being bought, rather than how it is bought. But as even a cursory review of U.S. Government Accountability Office reports reveals, there is still plenty wrong with the way we buy weapons.

Some of these problems are not fixable, such as the fact that the two- and four-year cycles of the political calendar are out of sync with the more protracted cycles of the technology development process. But there are four basic principles in which a sound defense acquisition system must be grounded, and any serious effort to reform the system must begin by reinforcing those principles:

Cost realism. You can't develop a reliable program budget or schedule if you don't have realistic cost projections. However, program managers and contractors often seem to be in a competition to see who can come up with the most naive cost estimates. The next administration needs to create a structure of incentives that rewards rigor rather than optimism when predicting costs.

Requirements restraint. Programs that exceed five or six "key performance parameters" get into trouble because they are too hard to execute. But in our efforts to tap the full potential of new technology and promote jointness, we have burdened some programs with more than a dozen key performance requirements. The next administration needs to impose more discipline on the requirements process.

Funding stability. You can't expect predictable outputs from the acquisition process if the inputs vary wildly from year to year. The whole point of drafting realistic budgets and restrained requirements is to put programs on a stable path to success. The next administration needs to discourage the arbitrary shifting of funds from year to year that leads to inefficiency and waste.

Workforce competence. Successful execution of complex weapons programs requires government managers who are smart and professional. Despite efforts to promote professionalism, acquisition officials often lack the experience, skills, authority and incentives to do their job well. The next administration needs to foster a culture of accountability that rewards achievement.

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(Loren B. Thompson is chief executive officer of the Lexington Institute, an Arlington, Va.-based think tank that supports democracy and the free market.)