washingtonpost.com
New Pentagon Panel Reviews Acquisition
Study Ordered After Scandal, Overruns

By Renae Merle
Washington Post Staff Writer
Monday, July 18, 2005

A new Air Force missile-warning satellite system will cost $9.9 billion to produce, more than double the original $3.9 billion estimate. The Future Combat System, an Army modernization project, will top $108 billion, instead of $80 billion. The Navy plans to spend nearly $600 million to buy about 3,000 guided missiles. It originally expected to pay $390 million for more than 8,000 of the missiles.

Big numbers like those, budget constraints and the fallout from a recent Pentagon procurement scandal formed the backdrop for the first meeting Friday of a new Defense Acquisition Performance Assessment committee. Gordon R. England, the acting deputy defense secretary, ordered the review in response to criticism about cost overruns and delays.

Panel Chairman Ronald T. Kadish, a retired Air Force three-star general who once headed the Missile Defense Agency, noted that the Pentagon can afford only 60 of the more than 80 new major programs under development at a cost of $1.5 trillion. The cost of those programs has increased $300 billion, he said.

"There is a conspiracy of hope," fueled, in part, by the "must-win" attitude of defense contractors, Kadish said. The acquisition system also suffers from "program demagogy," which overvalues how much has already been spent on a program, he said.

The panel will submit its recommendations to England and Congress in November. The proposals could have "big implications" for the industry, including the way it is structured, said Kadish, who works for Booz Allen Hamilton Inc.

The report is also expected to influence the Quadrennial Defense Review, a reassessment of Defense Department missions, weapons and forces, he said.

Several other panels have studied the acquisition process in the past 20 years. "The perception is that no reforms have addressed systemic weaknesses in structure, process and governance of acquisitions," Kadish said.

"I think there are many large buildings filled with reports from commissions" about reforming the Pentagon's acquisition system, said Danielle Brian, executive director of the Project on Government Oversight, a watchdog group. "It's time for people to have to make the hard decisions rather than putting them off by just studying the issue to death."

The panel should consider how to add transparency to the procurement system and hold contractors accountable for cost overruns, Brian said. There is a lack of competition in the current system, with 40 percent of the contracts awarded without contests and the market dominated by a few large players, she said. If the Pentagon broke some of the largest programs into more modest contracts, mid-size contractors could compete, Brian said.

Some members of the six-member panel questioned how much reform the system really needs and suggested that cost is not always the most important factor in judging a successful program. Don Kozlowski, a consultant who is on the panel, said he was not sure the system is as bad as some people think. There are sometimes far worse problems with commercial programs, he said.

While acknowledging there may be problems with some large programs, such as aircraft and ships, John W. Douglass, president and chief executive of the Aerospace Industries Association, an industry lobbying group, said in an interview that the panel should also focus on how to streamline procurement.

"Generally speaking the procurement bureaucracy in the Pentagon is not equipped to make those quick decisions," Douglass said. If the panel recommends more government oversight of weapons programs, the Pentagon needs to hire more people, he said. The Pentagon's acquisition workforce fell to about 135,000 in 2004 from more than 450,000 in 1990, according to a Pentagon report.

Douglas said the industry has been assured that its opinions will be considered. "We have a lot of confidence that good things will come of this," Douglass said.

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