Boat Buying Business

John Young spent more than a decade as a staff member on a Senate Appropriations Subcommittee on Defense, adding and cutting money from the Defense Department's multibillion-dollar annual weapons budget. Now he serves as the Navy's acquisition chief and worries that the annual congressional give-and-take is hurting the service over the long run.

"Congress works intently on the budget one year at a time. It will be hard, but I think they can probably help us and themselves by starting to look more into the future. The chance to build a long-term budget and build it credibly is just really important," says Young, the assistant secretary of the Navy for research, development and acquisition.

Young says the Pentagon itself is partly to blame for the situation. The Navy, he acknowledges, sometimes lowballs estimates for weapons systems in order to receive initial funding. As such systems enter the development phase, money must be siphoned from other programs to cover soaring costs. In some cases, delivery dates are delayed, or fewer weapons are fielded due to a lack of money.

"We've got to change the mind-set and have everybody invested in the outcome. I want to manage our way out of problems, not buy our way out of them," Young says.

His comments carry particular weight because Young is respected on Capitol Hill and President Bush has nominated him for deputy undersecretary of Defense for acquisition, technology and logistics. Young's nomination, however, along with several other Pentagon appointments, has been held up due to controversy over an Air Force proposal to lease tanker aircraft.

The Navy has a unique opportunity to change its weapons buying practices because it is in the process of awarding some of its biggest contracts ever. Robert Work, a senior analyst for the nonpartisan Center for Strategic and Budgetary Assessments in Washington, says the service is in a "period of transformation" in which it is rethinking almost all the hardware it buys.

The Navy has increased spending on developing and buying weapons from $30.3 billion in fiscal 2000 to a proposed $45.3 billion in fiscal 2005. During the past five years, the Navy has doubled the number of ship programs in the works from six to 12. This year alone, the Navy awarded contracts for a new Littoral Combat Ship that might be worth as much as $12 billion and for a new Multimission Maritime Aircraft that eventually could be worth $68 billion.

Young says under such programs, the Navy will make better upfront assessments of costs and goals and tie contractor payments to meeting them. "We are very prepared for companies to be profitable if they deliver on cost and on schedule," he says.

If problems do arise during an acquisition, Young wants managers to solve them rather than simply seek more funding. For example, the Navy avoided large cost overruns on a program to purchase a dozen LPD-17 amphibious ships by consolidating the work under one contractor in 2002 rather than using two shipbuilders.

In another case, the Navy recently faced cost overruns and delays in overhauling the aircraft carrier Dwight D. Eisenhower. The Navy renegotiated the contract with Newport News Shipbuilding, but the contractor will earn additional money only if the overhaul stays on schedule and within budget.

Such negotiations and work on new programs have created a spike in work for the Navy acquisition workforce at a time when its size has reached a post-Cold War low. Since 1989, total acquisition employment has fallen from 250,000 military and civilian workers to about 100,000.

Young says contract oversight will suffer if the workforce is cut any further. "We are on the edge of going too far," he says. "We might be a little lean and might need to adjust upwards in some areas."

John Douglass, a former Navy acquisition chief who now heads the Aerospace Industries Association, agrees accountability would suffer if more acquisition jobs were cut. Acquisition managers, he notes, are in an unenviable position between Navy budgeters who push for cuts and warfighters who want more advanced and expensive weapons.