Defense Acquisition Reform Could Include Pay Hikes for Program Managers

The Pentagon official charged with curbing waste in weapons acquisition said Thursday that he would “like to keep my best people longer, reward them with added compensation and bonuses like in industry. But such recognition is difficult in the civil service.”

Frank Kendall III, Defense undersecretary for acquisition, technology, and logistics, made the statement during a Senate Armed Services Committee hearing that produced both signs of progress and lingering problems in the Defense Department’s near-decade-old effort to avoid cost overruns in programs producing hardware as well as information technology.

“I’ve seen too many management fads and slogan-based programs that failed to address the fundamentals of what it takes to develop and field a new product,” Kendall said in prepared testimony. “Improving defense acquisition is a long, hard, tedious job that requires attention to the hundreds of factors that affect acquisition results,” he added, but “it will be an incremental evolutionary adjustment to the current set of initiatives…The hard part of bringing change to the Pentagon is not announcing new policies; it is following up to ensure that those policies are actually implemented.”

One obstacle to progress, according to Kendall, the Government Accountability Office and several senators, is a discontinuity of personnel and short tenure of program managers. The multi-service F-35 joint strike fighter, noted GAO acquisition specialist Michael Sullivan, has seen six different program managers over 11 years, “which means not much accountability” To increase contractor competition, “it would be great to see longer tenure—the continuity of the undersecretary for acquisition is only 22 months,” he added.

“We should pay the program managers more if they’re good at what they do,” said Sen. Claire McCaskill, D-Mo., suggesting that legislation might be in order. “Talk about value.” McCaskill also asked Kendall, “How seriously have we thought about the changing turnover of too many program managers? We don’t need a new guy or woman every 18 months, and the goal of continuity requires longer stays.”

Kendall agreed, but said “the problem is we’ve had 10 years of war. The policy is to keep them in place for four years, but they should stay longer.” Too many program managers, Kendall said, focus on the lead-up to big go-no go decision, but “the real job is to stay and execute the program. We have a steep personnel pyramid at the colonel level,” he added, noting that many managers are forced out, retire, or go to work for industry. “We’re trying to keep them around and use more career civilians. But the problem there is that they need more career development and don’t like to move around.” The point, he stressed, is that “people matter.”

Chairman Carl Levin, D-Mich., convened the hearing to assess progress on reducing wasteful procurement since enactment of the 2009 Weapon Systems Acquisition Reform Act, which, at the time was aimed at fixing a system in which “programs had exceeded their research and development budgets by an average of 40 percent, seen their acquisition costs grow by almost 30 percent, and experienced an average schedule delay of almost two years.”

The problem too often was late realization of cost hikes due to added requirements, and, as GAO put it, “it can cost 10 times more to fix a problem after you have built a weapon system than it does to get it right the first time.”

Yet in the past two years, Levin noted, GAO has found improvements. In the previous year, 50 of the 80 programs reduced their overall costs, and 64 percent of the programs increased their buying power, resulting in $23 billion of savings. “But DoD’s track record in the acquisition of new IT systems remains abysmal,” Levin said, “with repeated examples of systems that take years longer than expected to field, run hundreds of millions of dollars over budget, and end up being cancelled without any benefit at all to the government.”

GAO’s Sullivan pointed to promising best practices in the Pentagon’s Better Buying Power program run by Kendall working to better align incentives among the acquisition players.

But the larger problem, Sullivan testified, is that the department’s “three key decision making processes for acquiring weapon systems -- requirements determination, resource allocation, and the acquisition management system -- are fragmented, making it difficult for the department to achieve a balanced mix of weapon systems that are achievable and affordable and provide the best military value to the warfighter when the warfighter needs them. In addition, these processes are led by different organizations, making it difficult to hold any one person or organization accountable for saying ‘no’ to an unrealistic requirement or for tempering optimistic cost and schedule estimates.”

Sen. John McCain, R-Ariz., blasted the Pentagon for spending $3.2 billion on a presidential helicopter without competition and that has yet to be delivered, and decried “cronyism” in the Air Force’s space-based Evolved Expendable Launch Vehicle, noting that the number of competitive test launches planned has been cut in half. “It makes no fiscal sense,” McCain said.

Kendall replied that his department has brought the launch vehicle program “under direct control” of his office to work with the Air Force to try and assure as much competition as possible. He said the moves have saved $3 billion, in part by allowing outside bidders who are not yet certified to bid.

On why IT procurement continues to plague Pentagon buyers, Kendall -- preferring the term “business systems” to IT -- said he had brought the logistical management of commercial programs “back under our control to better understand the problems and the complexity of procurement,” such as burdensome micromanagement of suppliers. Business systems are not like weapons—they have to be modified, Kendall said, and the transition to a new system requires running a parallel system during the transition.

But Kendall acknowledged that “finding the expertise and skill sets required to develop and acquire capabilities for IT, particularly business systems, is a challenge to which departmentwide managers are responding.

“If there is one legacy I would like to leave behind it is a stronger and more professional defense acquisition workforce than the one I inherited from my predecessors,” Kendall said in written testimony. “The tide would seem to be against me because of events like pay freezes, sequestration, furloughs, shutdowns and workforce reductions.”