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Are We Buying the Right Weapons in the Best Way?

April 3, 2001 


Dr. Jacques S. Gansler
Under Secretary for Acquisition and Technology 1997-2001

Mr. Philip E. Coyle, III
Assistant Secretary of Defense and Director, Operational Test and Evaluation 1994-2001

Dr. Kenneth Oscar
Acting Assistant Secretary for Acquisition, Logistics and Technology

Moderated by:
Mr. James Doyle
A founder of Defense News and former executive editor of Army, Navy, and Air Force Times

Follow this link to see bio's of the participants.

MS. DANIELLE BRIAN: I realize it must have been a real conflict for you to join us for this panel today given that the Napster hearings are happening at the same time in this building, but I'm glad you could make it to this important discussion. I wanted to point out that this is a panel celebrating the Project On Government Oversight's 20th anniversary. And in your folders is a report describing all the work that we've done over the past 20 years.

I am very excited to have Jim Doyle as our moderator, who will give the formal introductions of our guests. Mr. Doyle himself was one of the founders of Defense News and was executive editor of Army and Navy and Air Force Times and so obviously has got tremendous experience at looking at how we are buying our weapons and whether we buying them the right way.

While the formal introductions will be done by Mr. Doyle, I did want to make a few points. One is that last night our organization awarded Mr. Coyle our "Beyond the Headlines Award," which was designed to recognize someone who has worked behind the scenes to improve public policy. And we're very pleased to do that. And I also wanted to point out that I actually studied Dr. Gansler's work when I was in college in a course called The Economics of Defense, and he inspired me, but he inspired me to come here so I could disagree with him a lot. So I'm thrilled to have him here. And I am thrilled that we can have this panel discussion, which I hope might even become a lively debate.

So I will turn it over to you, Mr. Doyle.

MR. JAMES DOYLE: Thank you, Danielle. And I, too, welcome everyone. Thank you for coming.

We have three panelists here today who personify the best in public service, men who have devoted the better part of their lives to making government work better for the American people. I am going to ask each of them to begin in five minutes or less to start by answering the general question about defense acquisition, and then we will continue the colloquy with the help of all of you, I hope. If as we go along you have questions about the point under discussion, please raise your hand or do whatever to get my attention, and I will try to call on you fairly promptly. If you hear acronyms being used, please raise your hand fast, and I will ask people to explain the acronym. If you have a question on a brand new subject, pull back a bit and signal me as we go along and we will try to get to every subject.

I would like to introduce all three panelists first and then get to the subject at hand, which is how we can improve the ways that we buy national defense. On my far left is Dr. Jacques Gansler, who is Roger Lipitz Professor at the University of Maryland, the Center for Public Policy and Private Enterprise and professor at the School of Public Affairs at the University of Maryland. Dr. Gansler was Under Secretary of Defense for acquisition and technology in the last administration, responsible for all matters relating to acquisition research and development, logistics, acquisition reform, advanced technology, international programs, environmental security, nuclear, chemical and biological programs in the defense technology and industrial base. He has also served as deputy Assistant Secretary of Defense for material acquisition and has written extensively in articles and contributions to 12 books on defense conversion, on affording defense, on the defense industry, on national security, managing research and development, and public administration.

He has served as vice chairman of the Defense Science Board, chairman of the board of visitors at the Defense Acquisition University, director of the Procurement Roundtable, a senior consultant on acquisition reform to the Packard Commission, chairman of the board of the visitors at the University of Virginia and a similar board at the University of Maryland. He was a visiting scholar at the Kennedy School of Government at Harvard, a visiting professor at the University of Virginia, an honorary professor at the Industrial College of the Armed Forces. He has held executive positions with Raytheon, the Singer Corporation, and Task, Incorporated, an information technology company.

He graduated from Yale and has master's degrees from Northeastern and the New School and his doctorate from American University.

On my left is Philip E. Coyle, III. Phil Coyle just retired after six years as the longest serving director, Operational Test and Evaluation in the Department of Defense. In other words, he was the Pentagon guru for operational testing and principal advisor on the subject to the Secretary of Defense, and the Under Secretary for acquisition and technology. His job was mandated by Congress, and Mr. Coyle has enormous credibility here on Capitol Hill. He has 40 years experience in the field, much of it at the Lawrence Livermore National Laboratory in a number of high positions, including associate director and associate director for tests.

When he retired from Livermore after 33 years, he was honored for outstanding service to the University of California and named associate director emeritus of the laboratory. In the past, he served as principal Deputy Assistant Secretary of Energy for defense programs where he had oversight responsibility for the nuclear weapons testing programs, as test director at the Nevada test site, test director of the full scale underground tests of the Spartan warhead on Amchitka Island in the Aleutians, scientific advisor to the Nevada Operations Office, and as a key deputy in Lawrence Livermore programs developing high-power lasers.

Besides the many awards he has received as a scientist, there are others for pioneering equal opportunity programs at Lawrence Livermore, which the laboratory has established an award in his name for excellence in diversity. The Department of Labor honored him for exemplary voluntary efforts to advance equal opportunity. He's been active in East Bay community affairs and is a member of the Alameda County Economic Development Advisory Board. He has also served on the boards of several educational organizations.

Mr. Coyle graduated from Dartmouth College with a BA in 1956 and an MS in mechanical engineering in 1957.

And on my right is Dr. Kenneth Oscar, Acting Assistant Secretary of Defense for Acquisition, Logistics, and Technology. Dr. Oscar has a long and distinguished career in this field. He served as the acting administrator for the Office of Federal Procurement Policy at OMB last year and took up his present responsibilities at the beginning of this administration. He has been Deputy Assistant Secretary of the Army for procurement, responsible for oversight and policy of all Army procurement, acquisition reform, industrial-base advocacy, and proponent for the contracting career field. He was acting assistant secretary of the Army for research, development, and acquisition; principal deputy for acquisition at the Army Material Command; deputy commander for research, development and engineering at TACOM, the Army Tank Automotive Command; and he is also adept at using cell phones.

During Operation Desert Storm, Dr. Oscar was appointed as TACOM's deputy commander for procurement and readiness and led a successful effort to provide billions of dollars of spare parts, vehicle spares, and maintenance resulting in extraordinary readiness rates for Army ground vehicles.

He was deeply involved in fielding the Army's first digital vehicle, the Abrams M1A2 Tank. He and his commands have won any number of quality improvement awards, and he has won a dozen or more personal awards for outstanding service, including two presidential WAC (ph) awards.

Dr. Oscar entered Pentagon service from United Aircraft. He holds a BS in physics from Clarkson University, a MS and a Ph.D. in physics from American University. And he has published more than 55 papers, many in international scientific journals.

Gentlemen, in the past several years, all of you have been through many battles in your efforts to improve our national defense, to develop new systems in the best ways. I'm sure that each of you could, if you chose, tell us some hair-raising tales about this. This country spends enormous amounts on defense, far more than our potential enemies, far more than our allies. In the best of worlds, the stewardship of these literally trillions of dollars would be difficult. In the real world of Washington, the problem has too often overwhelmed conscientious men and women, distorted the outcomes and sometimes led to discouraging failures, outrageous abuses, lost treasure and spilled blood.

The Project on Government Oversight has been among those who have raised questions about the military system for acquiring new weapons and the continuing doubts about the efficacy of that system and the resulting weapons. I will leave to the panelists and to you, but I would like to mention a few areas of concern. One is the V-22 Osprey tilt-rotor aircraft, its design, its testing, as well as 15 years of procurement decisions. Three more are the F-22, the FA-18-EF, and the Joint Strike Fighter Aircraft, questions as to how we can afford the $350 billion-plus to buy all three of these planes and the way we have gone about buying them. Another is national missile defense, how we designed it, how we have tested it or not tested it, and how we plan to buy it.

That's the top of the list. Eleven years after the end of the Cold War, we may finally get an honest review of what we have been buying -- or we may not. My question for the three of you is, and we will start with Dr. Gansler and then come across -- my question is when are we going to fix the acquisition system? What lessons have you learned from past battles and past mistakes? Why aren't we trying before we buy, that is making defense contractors assume more of the risk of testing their own products before handing them over? Why not insist the system work before giving a go-ahead? Why do we take shortcuts to the production stage when the threat is less than it was and different than it was during the Cold War when most of these systems were conceived? What's the hurry? Why are we adding to the procurement budget by cutting testing facilities and testing personnel?

So, first, Dr. Gansler, then Mr. Coyle, and finally Dr. Oscar, tell us in five minutes or less how you think we're doing on acquisition reform, how we might learn from the past, and what you would do if you were Don Rumsfeld?

DR. JACQUES S. GANSLER: Let me start by saying I think -- I'm used to taking on the press, Jim. I think that the question of fixing the acquisition process is really the wrong question. It is not a zero-sum game, it is not one in which you can say, "It is broken and it needs to be fixed." I think what we need to do is to continuously improve the process in the presence of a dramatic set of changes going on around it in technology and geopolitics and industrial base and globalization, and so forth.

What I thought I would do in the five minutes you allocated to me was to look at some of the -- in fact, I identified 10 areas that I noted, in which there has been progress but in which there is an enormous opportunity to make much more progress and use those as sort of a stepping-off point for questions that we will address both in terms of what's been done and what the Rumsfeld group needs to look at.

I start off with the first item is creating new weapons for the 21st Century. Warfare is going to be different in the 21st Century, mobility, smart weapons, smart sensors. Those are the areas that need to be focused on. And if you look at our research allocation, it's very clear that the researchers are still focused on the old platforms and there needs to be a shift in resources. Some of that has taken place. A lot more needs to take place.

The second area I would argue is how to deal with the new threats that we didn't have, that we expect that I would guess are almost 100 percent likely in the 21st Century, early 21st Century. This deals, of course, with the asymmetric area, not just the obvious things of mines against ships and things, but much more the chemical, biological, nuclear, information warfare, homeland defense. These are the things that we haven't been spending money on in the past, that we started in the last few years to spend money on, and for which we have a lot more to go if we are going to be successful in defending against these, from a variety of threats, from terrorism or through -- I guess I can use this administration -- rogue nations.

The third area I think is the joint and coalition operations. In the beginning of the last administration, we had lots of speeches about jointness, but most of the equipment really wasn't being designed to take advantage of jointness, in fact wasn't even a requirement for jointness. We now have a firm requirement that all systems be designed for interoperability as a critical performance parameter, one that needs to be tested. And then I think we'll have a very significant impact on the systems. I think the coalition operations, however, still are yet to come. I think it is very important when you look at Joint Vision 20/10 that you saw, coalition operations weren't even described in there. If you look at Joint Vision 20/20, coalition operations are included in there. But planning for it and the use of it still needs to be done. I think there's a major initiative taken in terms of trying to worry about reviving expert controls that haven't been done for many years in order to be able to share technology with our allies while assuming they would control it. That's an effort that needs to be greatly strengthened. I personally was very encouraged by the fact that the UK had signed up to the Joint Strike Fighter. I think that will help a great deal in terms of interoperability.

The fourth area I'd mention is modernization. We need to reduce the O&M costs in order to be able to pay for modernization. It's very clear when you look at the cycles of weapon systems that we are at the point where we need to modernize, and the hope would be that we don't modernize with the old systems but, instead, we go to the next generation of systems and, in fact, focus on the things that I mentioned earlier -- smart sensors, smart weapons, CQ mobility, things of that sort. That does mean that we have to reduce our operating and support costs dramatically. Things like the smart ship are an example of that. Things like the DD-21 where you are focused on reducing fuel and reducing manpower is another example of it. We clearly need to -- and the Army has a major initiative Ken may talk about in terms of trying to invest in those areas that are low liability items in order to be able to reduce the operating support costs.

The fifth area is the high cost and the long cycles of our weapons, and I think this is where we get into a lot of discussion, Jim, on acquisition reform. Perhaps one of the most important things that's happened recently is the fact that cost is now a military requirement, so that when you design something, you not only have got to maximize the cost -- I mean maximize the performance, you actually result in maximizing the cost as well. Rather than do that, you want to be able to have an affordable system. Again, I think the Joint Strike Fighter is an excellent example of that where it is designed to be high performance, stealthy, and relatively lower cost. Changing the requirements process there so that also not only do you have a cost requirement, operability requirement, but you have evolutionary design as an important requirement so that you, in fact, put in systems technology that has been proven into the systems in an evolutionary fashion rather than try to develop the sub-systems and the technology at the same time as the weapons system. That has a very big impact on, for example, the test cycles. And I am sure Phil will cover that, but the integration of development tests and operational tests and the requirement to keep competition in these programs in order to keep introducing the new technology that has a cycle time of 18 months, and new weapon systems, as you know, that have cycle times more like 18 years.

The sixth area is the modernization of our logistics system. Here we spend $80 billion a year and don't have world-class performance on either responsiveness, dependability, or cost. We have an opportunity here to have an enormous improvement in our logistics system with modern information technology, rapid transportation, and shift literally billions of dollars, probably at least $10 billion or more a year from logistics into modernization.

The seventh area that I felt was very, very important, and I am really concerned about in terms of the new administration, whether they'll recognize the importance of long-term investments in science and technology. We just can't afford to keep eating the seed corn. And with the shortage of resources to pay for all the things that I just went through, there's a tendency to forsake science and technology. During the last administration, the Congress was very helpful, the White House was very helpful, and I think that has to continue in order to maintain that long-term investment. But it has to shift into the new areas, in other words, the new technologies, and give up some of the older areas in order to be able to fund, for example, high-energy lasers and NOW (ph) technology, things of that sort.

The eighth area I would mention is the importance of the defense industrial base and its new structure. In the old days, the government could sit back and put out RFPs and we would get six or eight people bidding on them. Today there're only two or three firms in any given sector. The government now has the responsibility to assure you can maintain competition in that sector, and yet you want to make sure you have a healthy industrial base. And so, as you know, one of the things we have to do was stop some of the mergers in other areas to make sure that they can be achieved in an efficient fashion rather than simply at an accounting level.

Two areas that I tried to focus on that I think are important in the industrial base are civil-military integration and globalization of the industrial base. And we can talk about those during the Q&A.

The ninth area is attacking excess infrastructure. Here Congress has been totally remiss in not going on to additional base closures. Every analysis that anybody has ever done shows we have 25 percent or more excess capacity. In the absence of Congress facing up to that, then I think the alternative is simply to try to shift more and more into a competitive environment where you compete public and private. But all the empirical data there shows that the competition tends to improve the performance at an average cost reduction of around 30 percent, sometimes up to 50 percent. And through things such as housing privatization where we have something like $20 to $30 billion of unfunded housing just to get up to minimum acceptable standards, not budgeted, privatization will allow you to get that. And I think those are the shifts that we have to encourage the administration and the Congress to push.

And my last area of note would be to focus on the acquisition work force. Here we have a dramatic shift taking place in the types of things that the government does. The government is shifting from the doer to the manager of the doer. The government is required to oversee very high technology activities, modern information technology. We need a work force that's compatible with that. What we have is over the next four years now about 50 percent of the people eligible for retirement. That does give us an opportunity but we do need to restructure the acquisition work force, both in government and in industry.

Now, each of those 10 areas, I think things have happened, and that's why I emphasized in my first comment that the issue isn't fixing it; it's continuing to improve it. But there is a long way to go in each of those areas, and that is the challenge for the incoming administration, I think. If they continue to focus in these areas, I think we can continue to make progress. I suspect we will always be able to do better. At least the part I was responsible for was about $180 billion. If you can make some improvements in the effectiveness and the efficiency of those, you can make an enormous impact in our national security.


MR. DOYLE: Phil?

MR. PHILIP E. COYLE, III: Thank you, Jim. I want to note from the outset that many military acquisition programs work out very well. You never read about them in the newspapers, and they provide the user, the war-fighters, with all the intended capabilities. However, there have been some disturbing trends. In some recent years, 80 percent of Army systems did not achieve 50 percent of their required reliability in operational testing. In recent years, two-thirds of Air Force systems had to halt operational testing because they weren't ready. The Navy has had to deal with such difficulties also. In 1992, only 58 percent of Navy systems undergoing operational testing to support a milestone trade decision were successful. The Navy instituted several changes to their acquisition process, including not going into operational testing before they were ready. And a few years later, their success rate was up to 92 percent.

When such problems arise, it's usually because of a general lack of realism, a lack of realism which manifests itself in, I think, four basic ways. Incidentally, none of these observations are original with me. Many others have noted these same issues, and these topics were the subject of a conference put on by the National Defense Industrial Association out in Long Beach just last week.

The first area is unrealistic requirements. Naturally, we want our soldiers, sailors, airmen and Marines to have the very best new equipment, and they want that too. The users, the war-fighters, want fewer more capable systems. Or to put it somewhat different, they want multi-mission systems. This leads to more complicated, multi-functional systems, often with computers and sensors working together for decision-making and information fusion. These days practically everything has a computer in it. For example, the Crusader Howitzer has roughly a million lines of code in its computer, about the same as the F-22 fighter aircraft.

The second area is unrealistic costs and schedules. It's not uncommon for the Department to have unrealistic expectations for cost and schedule as well as performance. This leads the contractors to buy in in order to be competitive. Also, with the intent of saving time and money, sometimes the military departments turn to so-called "commercial off-the shelf" or non-developmental items. Usually, these items are not on anyone's shelf, commercial or otherwise, and often the designers never contemplated that the commercial product would be put to military use in a military environment.

The third area is unrealistic contractual environment. Too often the Department goes into highly complex, high-technology programs expecting the contractor to deliver a firm, fixed-price contracts. Even when the contracts are not at firm fixed price, many contracts are structured with no incentive to continue to develop to improve the system and every incentive to get into production as soon as possible. You heard the phrase, "You can make it up in production." Later, if production quantities are cut, which they often are, that further reduces the prospects for profit. Also, the contractual environment for these contracts requires defense companies to make unrealistic bids simply to stay in the defense business. Jacques talked about consolidation, and that has increased the pressures there. If you have tracked the stock prices of defense industry stocks, you can see that Wall Street has figured this out also.

And a fourth area is preparing for realistic operational environments. Sometimes defense acquisition programs underestimate the operational environment. This can be an operational environment such as simply bad weather. The B-2 is an example there. But it also can be the stresses of battle or operational loading. For example, computer systems may be loaded much more heavily in battle than in the laboratory, something the Army has been dealing with with its digitization programs. Sometimes acquisition programs do not prepare adequately for operational tests, which, by definition, will be operationally realistic. Complex systems that have done well in the controlled environmental laboratory sometimes do not perform well in realistic operational tests.

Well, talk is cheap. What would you do about that? Here are eight things the Department could do that I think would help. The first is make requirement changes, go back to the JROC, the Joint Requirements Oversight Council, for approval. While the JROC is doing a lot, too often user requirements are changed without JROC involvement.

Second, in case the first doesn't happen, I would have development costs be reimbursable so that when the services do change requirements, they have to pay for requirements creep.

Third, allow defense companies to make a reasonable profit for doing development before production. Until the fall of the Berlin Wall a dozen years ago, development was allowed to be up to 90 percent cost reimbursable. Today, development is discouraged, leading defense companies to want to get into production as soon as possible, whether they're ready or not.

Fourth, structure procurement outcomes that encourage sustained competition that are not winner-take-all outcomes. For example, you could have contracts with a 60 percent leader, 40 percent follower arrangement or say 40 percent for two successful bidders with 20 percent more for the more competitive contractor later.

Fifth, get realistic in defense contracting. By this I mean avoid firm fixed price contracts for high-risk programs and avoid putting defense contractors in cut-throat unconditional surrender competitions where they have to buy in or low-ball to stay in the defense business at all.

Sixth, don't consider a product commercial, off-the-shelf unless you truly can buy it off the shelf, it comes with a user's manual, and has been tested in the same environments in which it is to be used by the military.

Seventh, get the testers involved early. Among other things, this means funding the service operational test agencies so that they have the people, equipment, and money to participate in acquisition programs from the very outset, something they don't have now.

And, eight, deal with the death spiral, as Dr. Gansler put it so well. He correctly explained how the sustainment costs for military systems far exceed their first costs. We often concede that these systems will be expensive to maintain early in operational testing. Sustainment ought to become a regular part of every operational test so as to identify sustainment issues earlier and correct them before they become a burden to our operational forces in the field.

Thank you.

MR. DOYLE: Dr. Oscar?

DR. KENNETH OSCAR: Thank you. You first asked, "What is the rush? Why are we doing all this?" Over the last 10 or 12 years, both Democrat and Republican Presidents have deployed forces in anger over 35 times. In the 30 years prior to that, we deployed forces less than 10 times. So there has been a nine-fold increase in deployment of forces. Those forces are our sons and daughters and the goal is to have them win quickly and come back alive. And with the rapid proliferation of technology around the world, we need to constantly improve the weapons, the defenses, the survivability, the equipment we give them.

Now, you also asked, "How is it going?" I think it is going wonderful. When you think at any given point in time the Defense Department has approximately a thousand items that is in development or procurement, everything from night vision goggles to a GPS, Global Position System, to tell you where you are anywhere on earth, to a Patriot missile, which this weekend, by the way, was unbelievably stressed. We shot a long-range, high-altitude rocket at it that used rapid defensive maneuvers. We simultaneously shot a lower-altitude, shorter range rocket at it. It detected both in the air and simultaneously knocked them both down. There's just millions of successes, many of which spill over into the civil world, like night vision or Global Position Systems or computers or many of these weapons become commonplace.

And so, you have do -- and I agree with Jacques, there have been many, many successes. What you hear about is once in a while the testing doesn't turn out the way we thought it would. But that's the purpose of the test. It's impossible to develop anything the first time. You develop it, you test it, you find its weaknesses, you re-develop it, you test it again, you find its weaknesses. And that's the normal process of developing anything, whether it's an automobile, which every once in a while we have recalls on, or whether it's even a Boeing 777, which is the most phenomenal, quickest aviation airplane that was ever developed. But it took over five years. We tend to forget that.

This is a normal process.

So the rush is that those are our sons and daughters, and we're trying to give them the best equipment possible. And since we're pushing the state of the art, we don't want to give them an off-the-shelf rifle. We want to give them a better rifle so we can defeat the enemy. We don't want to give them Russian night vision goggles. We want to give them the best, that he can see farther than the enemy.

And so we're pushing is the state-of-the-art. And when you do that, you're going to design it, you're going to test it to see if it works, you're going to re-test it and re-test it again. And it's not unusual to find problems in those items. That's the purpose of those tests.

The equipment that they have out there is phenomenal. It's very good. It's been very successful. We can continue to improve the system. We always work on improving the system. It's a continuous improvement operation.

Some of the things we're working on now -- I think modernization is a misnomer. You know, if you have a taxi cab fleet and you have 100 taxi cabs, and each taxi cab were to last ten years, you should buy ten taxi cabs a year. If you don't buy ten taxi cabs this year, you should buy 20 next year. And if you don't buy any taxi cabs for ten years, at the end of ten years you have 100 beat-up, old taxi cabs and it's going to cost you a lot to replace them.

Modernization is different. Modernization is when I buy my taxi cab, maybe they ought to put a GPS in it, or maybe a fancy radio, or maybe I ought to get a Cadillac instead of a Ford. That Delta is modernization. So when you look in the military budgets and say, hey, we're arguing this weapon against that weapon, it's really not true.

What you've got to look at is we have trucks out there, we have helicopters out there, we have ships out there, we have tanks out there, we have rifles out there, and just like that taxi cab fleet they're all aging. And you should buy so many a year. Now when you buy a new machine gun, the question is do you buy a little better one or do you buy the same old one? Sometimes we buy the same old one. Sometimes we buy a little better one. That is how the Defense Department makes up its budget.

And so the real argument is that little Delta of modernization, because the fact is right now, today, we are not keeping up. Our equipment is aging and that's why our maintenance costs are going up. It's just like your automobile. The longer you keep your car the more your maintenance costs are. And so there's some optimum time to buy a car. There's an optimum time to replace these weapons. We're not doing that right now, and so they're aging. And so we need to catch up with that phenomena.

I'll stop there and throw it open for questions.

Founded in 1981, the Project On Government Oversight (POGO) is a nonpartisan independent watchdog that champions good government reforms. POGO's investigations into corruption, misconduct, and conflicts of interest achieve a more effective, accountable, open, and ethical federal government.

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