The Pentagon's "rigid and convoluted" acquisition system is wasting billions in taxpayer dollars, according to a new report.
At a House Armed Services Committee hearing on Wednesday, a congressionally-mandated advisory panel looking into Pentagon acquisition reform presented an interim report calling for a shake-up in the Department of Defense's outmoded acquisition system. It said the reforms would save money and help the military stay on the cutting edge of technology.
"Some of the regulations and statutes governing defense acquisitions are outdated or no longer applicable and should be amended or repealed to make the system more effective and efficient, and expand the number of companies willing to do business with DoD," said the report.
House Armed Services Committee Chairman Mac Thornberry (R-Texas) on Thursday is expected to introduce a DoD military procurement reform measure focusing on weapons systems. The lawmaker referred to the announcement at Wednesday's hearing but provided no specifics on the bill.
"We made some significant changes," said Thornberry. "But I don't think any of us believe that we have done enough or fixed the problem. And that is part of the reason this panel was created."
The independent advisory panel's report said the number of defense firms exclusively manufacturing products for the U.S. is declining and that these companies are increasingly relying on subcontractors, including sometimes foreign-based suppliers.
The report said these changes in the defense industrial base also require new thinking by Pentagon leaders because military technology solutions don't always come from the nation's five major defense prime contractors. It said sometimes the most innovative tech can be found from smaller firms.
At the same time, the report said the military needs to consider new approaches, including using off-the-shelf hardware or through modifying existing technologies.
"Instead of being so rigid and convoluted, the acquisition system should be shaped to fit the required capabilities," the report stated.
Also, the advisory report urged that the Pentagon move faster to cancel programs when necessary rather than allowing costs to be ignored.
The report also identified examples of DoD waste and areas where savings could be achieved in the tens of billions of dollars.
In particular, it singled out the Air Force's Expeditionary Combat Support System information technology system, a computer replacement program which it said ended up costing "a billion dollars … with no useful results." Also, it said the Army could save about $11 billion during the life of its purchase of armored vehicles through simple "production efficiencies."
"Poor programs may need to be cancelled, but in such cases, the decision should happen earlier and before spending so much money. Requirements, budgeting, and acquisition strategies that are not aligned and coordinated can cost billions of dollars."
The advisory panel also found non-defense U.S. companies with emerging technologies are sometimes staying away from the defense sector.
Advisory panel member Joseph Dyer, a former commander of the Naval Air Systems Command and former COO and chief strategy officer of Boston-based iRobot (NASDAQ: IRBT), spoke at the hearing about how cutting-edge firms are sometimes discouraged from bidding for defense work.
Dyer recalled a meeting with a Wall Street analyst who was critical of iRobot getting into defense and offered up some advice: "You have to get iRobot out of the defense business. It's killing your stock price. His point was … profits are limited by weighted guidelines [from the Pentagon's acquisition policies]."
Yet Dyer said iRobot is just the kind of company the Pentagon should be looking to attract given its focus on cutting-edge technologies such as autonomy and artificial intelligence, among other things.
According to the report, "DoD has benefited from disruptive technologies and been able to incorporate these innovations, from net-centric warfare to unmanned vehicles. To fully incorporate existing and future technologies requires organizational shifts that will allow DoD to access and incorporate them faster than potential competitors."
"Today the United States' ability to maintain technological, military, and economic superiority is being challenged because its adversaries are rapidly modernizing their militaries with an eye toward exploiting U.S. vulnerabilities and negating traditional U.S. advantages," said the report.
Added the report, "DoD has not fully adjusted to the pace of this environment, nor has it adjusted to a marketplace that bears no resemblance to that of just a few decades ago."
Another advisory panel member suggested Alphabet's (NASDAQ: GOOGL) Google, Facebook (NASDAQ: FB) and other tech firms have speed in the overall development process when it comes to software but that the Pentagon still is operating under an outdated model with software development.
"You have to be able to go fast, go in short sprints – and if you make a mistake you get back on track," said advisory panel member William LaPlante, a former assistant secretary of the Air Force for acquisition.
One of the Democratic members of the House Armed Services Committee expressed skepticism about the chances of any major acquisition reforms.
"Every administration in virtually every Secretary of Defense since World War II has embarked on an acquisition reform effort," said Rep. Salud Carbajal (D-California). "Yet we still face significant challenges."
Carbajal asked the advisory panel to identify specific recommendations and he urged them to take "a different approach."
Deidre Lee, chair of the defense streamlining advisory panel, conceded there might be resistance to some of the changes the panel eventually proposes.
Even so, Lee said "the environment is right. You in the Congress are interested."
"We also have some very bold recommendations that will come out later that will impact some particular constituencies," said Lee, a former director of defense procurement and acquisition policy and also a former administrator for the Office of Federal Procurement Policy.
She added, "There will be some hard decisions to make significant changes for us to move on and modernize this acquisition system."
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