Stop Outsourcing Know-How

Since World War II, the nature of the private sector and its relationship to government has been changing. During the Cold War, the United States developed a permanent military industrial base with the federal government as the predominant customer. With the end of the Cold War and the demise of the Soviet Union, U.S. military spending declined. As a result, private-sector defense companies combined and consolidated to gain and hold a significant share of the market. This consolidation reduced competition.

The decline in spending also resulted in a drawdown of the Defense Department's technical infrastructure. With the goal of saving even more money, Defense began to contract out more work and do less internally. As a result, the private sector began to provide capability, not just capacity, and to perform what were inherently governmental functions.

The implications of this shift are twofold. First, the government loses capability to perform its basic functions of deciding what the problem is, selecting the approach to solve the problem and validating the solution. The second effect is that certain critical industries, such as shipbuilding, become indispensable, and the government begins to budget on the basis of keeping those businesses alive rather than meeting mission needs.

The reduction of in-house technical functions has eroded government's "decision competence." Thus, government's historical role of "deciding" and industry's of "providing" what's needed have become distorted. This trend is most pronounced in the engineering arena. Engineering competence must be developed through "doing," not "watching." Agencies such as Defense and NASA, which depend on engineering products, lose their ability to effectively oversee contractors' technical performance and take on the functions of prime contractor and systems engineer. The government has paid a heavy price in oversight disasters such as the Challenger accident and the collapse of the Navy's multibillion-dollar A-12 aircraft contract.

Over the past 50 years, this pervasive trend has left critical government agencies ill-prepared to use the capacity of industry effectively. To reverse this trend, agencies must focus on performing sufficient technical work in-house to prepare the decision-makers who interact with industry to make the right choices.

Defense and NASA have been going in the opposite direction, focusing on the administrative side of contracting rather than technical decisions. No system has ever failed because of an administrative breakdown, but many have failed because of bad decisions and incompetent technical oversight. A properly administered contract that results in a technically deficient product is still a disaster.