A Defense Department systems analyst, reporting on his detailed...


WASHINGTON -- A Defense Department systems analyst, reporting on his detailed study of the department's last seven budgets, told Congress Friday the Pentagon has systematically underestimated the cost of weapons.

'You're dealing with the most complex bureaucracy in Washington,' Franklin 'Chuck' Spinney said.


When Sen. Charles Grassley, R-Iowa, asked if the Pentagon is in control of what is going on, Spinney agreed, saying: 'Yes, sir.'

Grassley and two other first-term Republican senators on the Senate Budget Committee worked all month, against Pentagon wishes, to set up the public hearing on Spinney's study.

In a 105-minute presentation, complete with graphs, on the cost of 111 weapons, Spinney told a joint hearing of the Senate Budget and Armed Services committees the costs increased in each new five-year projection since 1976.

Spinney gave as an example the B-1 bomber, whose procurement cost is estimated at $19.9 billion in 1983 dollars. The Pentagon estimates the per-unit cost would decline by 78 percent by 1987 from the initial heavy start-up costs, but Spinney said if the actual per-unit cost decrease turns out to be only 60 percent, the total procurement cost becomes $25.8 billion in 1983 dollars.


The point, he said, is that overestimating the unit-cost decline by 18 percent results in an increase of the total cost by 29 percent.

'More money spent in the same way would make matters worse,' said Spinney, who has been with the Defense Department since 1972.

But, he said, 'The problems are structural, not caused by political parties or policies.'

Fifteen members of the Senate Armed Services and Budget commitees were present in the Senate Caucus Room, which was crowded with Pentagon officials and defense industry representatives. They included Sens. Nancy Kassebaum, R-Kan., Slade Gorton, R-Wash., and Grassley, who overrode objections from Armed Services Chairman John Tower, R-Texas, to set up the hearing.

'There is a growing feeling, not only here but everywhere, there should be a greater accountability, a greater professionalism among the armed services in their requests,' Mrs. Kassebaum told a news conference before the hearing.

Grassley cited a lack of competition on defense contracts.

'Some of us would like to see come out of this a new creeping capitalism into the defense budget, where there's more competiton, maybe a savings of tax dollars and better quality as a result,' Grassley said.

'We want the Defense Department to set orders of priorities,' Gorton said. So far, Defense Secretary Caspar Weinberger has steadfastly refused to set such priorities in the defense budget.


Spinney particularly attacked the Pentagon's belief the per-unit costs of weapons tend to drop dramatically over a period of time. For this to happen, he said, there must be a fixed design, stable manpower, stable flow of material and parts and a stable budget. He said few of these circumstances occur.

Spinney cited five reasons for the underestimated costs:

-'Buy-in' problems, caused by purposely underbidding to get the contract.

-Frequent changes in design for the weapons.

-Weapon programs that are stretched out over a longer period or are decreased.

-Unplanned changes in the contractors' business.

-Defense industry labor cost growth.

David Chu, Defense Department programs analysis director and Spinney's boss, agreed the study is accurate as to what happened in the past but insistedchanges have been made to avoid such problems in the future.

'Charges have appeared in the press that the future cost record of the department will be as sad as that of the recent past. But those charges ignore the vigorous steps this administration has taken ... to deal with these problems on a systematic and decisive basis,' Chu said.

Chu said the Pentagon is using more accurate indicators to measure inflation, seeking independent cost estimates as well as those by Pentagon managers, making special reviews and encouraging multiyear procurement of major weapons systems.


When questioned about his superior's assessment, Spinney said: 'I don't think we've gotten to the structural problem ... the most I can say is the pattern appears the same.'

In closing the hearing, Tower said he was 'somewhat at a loss to understand why the Department of Defense was reluctant to have Mr. Spinney testify before Congress' because the conclusion he reached is that the Pentagon needs to spend more money.

'It seems to me Mr. Spinney's testimony illustrates how costly and inefficient further reductions would be,' he said.

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