A presidential commission has concluded that the Defense Department wastes billions of dollars yearly through an inefficient weapons-acquisition system that should be restructured along the lines of private industry, according to commission sources.
The recommendations by President Reagan's Blue Ribbon Commission on Defense Management, scheduled to go to the White House next Friday, would amount to radical retooling of the $100 billion-a-year procurement machine, sources said. The proposed changes would infuse the system with competition and force the Pentagon to buy ready-made spare parts instead of developing them from scratch.
Two new posts would be created to centralize the multilayered procurement bureaucracy: undersecretary of defense for acquisition and vice chairman of the Joint Chiefs of Staff.
Reagan appointed the 15-member panel in June as procurement scandals began to erode support for the president's military buildup. Reagan said last week that the commission's findings will answer the "propaganda" of critics charging Pentagon mismanagement. Sources said he plans to use the report to regain the initiative on reforming Pentagon problems.
The bipartisan commission, chaired by former deputy defense secretary David Packard, is expected to characterize the Pentagon procurement process as woefully inefficient while carefully avoiding criticism of Defense Secretary Caspar W. Weinberger.
The scope of the savings outlined through recommendations in the commission report was reported earlier this week in The Baltimore Sun.
A 100-page draft report comparing Pentagon management with the chaotic renderings of the mythical "Sorcerer's Apprentice" was shelved earlier this month after conservative Republican members termed it too negative.
Commission members sparred over the report's tone, participants said, but they have united behind a series of far-reaching reforms certain to inspire the opposition of defense contractors and entrenched Pentagon officials. Weinberger initially tried to stop creation of the panel on grounds that his department was running well.
"If the report is implemented in full measure," said a commission member, "there will be a dramatic change in the way the system is managed."
A special group headed by William J. Perry, undersecretary of defense for research and engineering in the Carter administration, focused on the acquisition process with an eye to some practices of private industry, a source said.
One of the corporate techniques recommended for the Pentagon is the practice of purchasing off-the-shelf items instead of pursuing the costly course of developing new spare parts. A defense board would be required to render a "make-or-buy" decision -- a term borrowed from the corporate world -- and all efforts would have to be exhausted to adapt existing products instead of developing new ones.
"There would be the presumption to buy rather than make," said a commission member. "The burden of argument would shift to the persons seeking to develop."
The purpose of this change, according to a source, is to avoid the Pentagon's expensive spare parts that have aroused controversy in recent months, such as the $640 toilet seats that the Navy purchased for some of its aircraft. Critics have charged that similar items could have been supplied by commercial vendors for much less.
For those weapons being considered for full development, the panel will recommend a two-tier contest, sources said, a departure from current Pentagon practices.
The commission's recommendation would require contractors first to explain how they would develop a weapon and to demonstrate a prototype.
Once a winning concept is selected, the contractors would enter a cost competition to determine who can develop the item most economically, according to a source.
Cost estimates should be more accurate because the contractor already has built a prototype, the source explained. This should help avoid the problem of cost overruns that has been embarrassing to the Pentagon, he said.
Industry is likely to oppose this two-tier process unless government pays for the costs of developing a prototype, sources said.