The Process and Politics of Defense Acquisition: A Reference Handbook (Contemporary Military, Strategic, and Security Issues)

The Process and Politics of Defense Acquisition

Praeger Security International Advisory Board Board Cochairs Loch K. Johnson, Regents Professor of Public and International Affairs, School of Public and International Affairs, University of Georgia (U.S.A.) Paul Wilkinson, Professor of International Relations and Chairman of the Advisory Board, Centre for the Study of Terrorism and Political Violence, University of St. Andrews (U.K.)

Members Anthony H. Cordesman, Arleigh A. Burke Chair in Strategy, Center for Strategic and International Studies (U.S.A.) Th´er`ese Delpech, Director of Strategic Affairs, Atomic Energy Commission, and Senior Research Fellow, CERI (Foundation Nationale des Sciences Politiques), Paris (France) Sir Michael Howard, former Chichele Professor of the History of War and Regis Professor of Modern History, Oxford University, and Robert A. Lovett Professor of Military and Naval History, Yale University (U.K.) Lieutenant General Claudia J. Kennedy, USA (Ret.), former Deputy Chief of Staff for Intelligence, Department of the Army (U.S.A.) Paul M. Kennedy, J. Richardson Dilworth Professor of History and Director, International Security Studies, Yale University (U.S.A.) Robert J. O’Neill, former Chichele Professor of the History of War, All Souls College, Oxford University (Australia) Shibley Telhami, Anwar Sadat Chair for Peace and Development, Department of Government and Politics, University of Maryland (U.S.A.) Fareed Zakaria, Editor, Newsweek International (U.S.A.)

The Process and Politics of Defense Acquisition A Reference Handbook

David S. Sorenson

Contemporary Military, Strategic, and Security Issues

PRAEGER SECURITY INTERNATIONAL Westport, Connecticut r London

Library of Congress Cataloging-in-Publication Data Sorenson, David S., 1943– The process and politics of defense acquisition : a reference handbook / David S. Sorenson. p. cm.—(Contemporary military, strategic, and security issues, ISSN 1932–295X) Includes bibliographical references and index. ISBN: 978–0–313–34843–3 (alk. paper) 1. United States—Armed Forces—Procurement—Handbooks, manuals, etc. 2. United States. Dept. of Defense—Procurement—Handbooks, manuals, etc. 3. Government purchasing—Political aspects—United States—Handbooks, manuals, etc. 4. Defense contracts—United States—Handbooks, manuals, etc. 5. Defense industries—United States—Handbooks, manuals, etc. I. Title. UC263.S66 2009 355.6
212—dc22 2008033658 British Library Cataloguing in Publication Data is available. C 2009 by David S. Sorenson Copyright 

All rights reserved. No portion of this book may be reproduced, by any process or technique, without the express written consent of the publisher. Library of Congress Catalog Card Number: 2008033658 ISBN: 978–0–313–34843–3 ISSN: 1932–295X First published in 2009 Praeger Security International, 88 Post Road West, Westport, CT 06881 An imprint of Greenwood Publishing Group, Inc. www.praeger.com Printed in the United States of America

The paper used in this book complies with the Permanent Paper Standard issued by the National Information Standards Organization (Z39.48–1984). 10 9 8 7 6 5 4 3 2 1

Contents

Preface

vii

Abbreviations

ix

Introduction

1

Chapter 1

The Defense Acquisition Process Evolves

4

Chapter 2

The Current American Defense Acquisition Process

28

Chapter 3

The Defense Industrial Base

66

Chapter 4

The Politics of American Weapons Acquisition

87

Chapter 5

International Arms Sales and Defense Acquisition

126

Chapter 6

Reforming Defense Acquisition

142

Appendix I Company Profiles

171

Appendix II Primary Documents

199

Glossary

207

Index

211

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Preface

It is with some trepidation that I write this book, because there are few things that are as likely to confuse and confound readers as the American defense acquisition system, which supplies armaments and equipment for the U.S. armed forces, as well as foreign customers. It is extraordinarily complex, requiring many pages to describe a process that is in reality a small piece of a much larger process, the system that provides national defense for the United States. The acronyms alone can cause a reader to simply quit. A part of the acquisition system that has been in place for decades may suddenly be forced through change, rendering everything written about it to become obsolete. Unfortunately the defense acquisition process has also been marred by poor performance, including cost overruns, schedule delays, failure to meet performance specifications, and sometimes outright fraud committed by some participants in the process. It makes for difficult reading, particularly when it becomes clear that problems continue despite efforts to reform the system. It is particularly painful to read that sometimes the very reforms that were supposed to improve the defense acquisition system have actually made it worse. Yet there are many reasons to write this book. The U.S. Department of Defense is the most expensive organization in the entire world. There are few organizations that spend more money in a single year than does the Pentagon. Most American citizens read and understand only a small proportion of the system that the Defense Department uses to take ideas and form them into weapons and support systems. They may note that the price of a single B-2 bomber exceeded $1 billion a copy, for example, but they have no understanding of why. Yet it is their money that the government is spending, from their tax dollars, and from lost opportunities to spend federal revenues on something else. So in the name of good citizenship alone, it is highly useful to understand at least something about the defense acquisition system. Millions of Americans are more than bystanders in the defense acquisition system. They work in it, or they construct or consume its products. The defense industry alone in the United States creates and sustains hundreds of thousands

viii

Preface

of jobs, and these jobs in turn create “multiplier effects,” where the earnings of a welder in a shipyard move through the economic system to create even more employment and economic growth. For them, I hope that this book will place them and their interests within the context of a much larger system, and that they will understand better their place in it. The scholarship on defense acquisition once produced some of the richest literature in political science, applying theories of organizations and bureaucratic politics to studies of the defense budget process and numerous acquisition systems. Well-known political scientists like Samuel Huntington, Robert Art, Arnold Kanter, Desmond Ball, and numerous others generated works like The Common Defense, The TFX Controversy, Defense Politics, and Politics and Force Levels, published by leading university presses. However, scholarly work in the field of defense acquisition has largely dried up, and this book attempts to recapture the significance of earlier studies and carry them forward. In a system involving billions of dollars, there will always be problems, and problems abound in the defense acquisition system. Systems fail or reach performance standards months or years (if ever) after they were supposed to achieve what their defenders promised. Costs spiral out of control as problems and delays mandate additional time, research, or sometimes the abandonment of an entire defense program. The defense acquisition system hums along largely without notice by the press until a scandal or massive cost overruns or other problems suddenly draw headlines. The fix has been to reform the system, though one of the themes in this book is that well-meaning people often undertake reform, but its effects sometimes make the problems worse and rarely fix them. Like many scholars, I write this book as an observer rather than as a participant (almost all scholars who write on presidents, for example, have never been one). So I have drawn heavily upon those who have worked in the defense acquisition world, though, given the sensitivity of the material, most requested anonymity, and I have respected their wishes. Others have offered valuable criticisms of the work, including Colonel Mike O’Brien, Joe McCue, Jeffrey Record, and others. My editors Alicia Merritt, Adam Kane, and Shana Meyer have been very helpful, and Katherine Faydash’s copy editing was outstanding. She not only corrected my numerous writing errors, but did considerable fact checking, going so far as to note a story in the New York Times pertaining to something I had in text, and thus allowing me to update it. Any remaining errors are my own. This book represents the analysis and conclusions of the author and does not necessarily represent the views of any agency of the U.S. government.

Abbreviations

AFB AIA APB AT&L BCP BES CAIG CBO CCAT CDD CFIUS CJCS CMC CNO COD CPA DAAD DAB DAES DAPA DCAA DCMA DoD DPG EADS EMD FCS FMS FYDP

Air Force Base Aerospace Industries Association Acquisition Program Baseline Acquisition, Technology, and Logistics Budget Change Proposal Budget Estimate Submission Cost Analysis Improvement Group Congressional Budget Office Center for the Commercialization of Advanced Technology Capabilities Development Document Committee on Foreign Investment in the United States Chairman, Joint Chiefs of Staff Commandant of the Marine Corps Chief of Naval Operations Cooperative Opportunities Document Chairman’s Program Assessment Defense Auditing and Accounting Division Defense Acquisition Board Defense Acquisition Executive Summary Process Defense Acquisition Performance Assessment Defense Contract Audit Agency Defense Contract Management Agency Department of Defense Defense Planning Guidance European Air Defence and Space Company Engineering and Manufacturing Development Future Combat System Foreign Military Sales Five-Year Defense Plan (or Future Years Defense Plan)

x

Abbreviations

GAO ICD JCD JCDS JCIDS JCO JCS JPD JROC LCC MDAP MILSPEC MRAP NPFTF OMB OPM POM PPBE PPBS QDR RGS TPP TQM UAV UCAV USD (AT&L) WPB

Government Accountability Office (formerly General Accounting Office) Initial Capabilities Document Joint Capabilities Document Joint Capabilities Development System Joint Capabilities Integration and Development System Joint Concept of Operations Joint Chiefs of Staff Joint Planning Document Joint Requirements Oversight Council Life-Cycle Costs Major Defense Acquisition Program Military Specification Mine Resistant, Ambush Protected National Procurement Fraud Task Force Office of Management and Budget Office of Production Management Program Objective Memorandum Planning, Programming, and Budgeting Evaluation Planning, Programming, and Budgeting System Quadrennial Defense Review Requirements Generation System Total Package Procurement Total Quality Management Unmanned Aerial Vehicle Unmanned Combat Aerial Vehicle Undersecretary of Defense for Acquisition, Technology, and Logistics War Production Board

Introduction

The U.S. military receives billions of dollars of weapons and their supporting equipment each year. Those weapons and their supporting equipment flow out of what must be one of the most complicated decision-making systems in the world, which employs thousands of people across the United States who follow hundreds of thousands of pages of arcane documents containing millions of rules and regulations as they convert billions of dollars into military hardware. The term acquisition needs some definition. The Defense Acquisition Guidebook states that the defense acquisition system is “the management process by which the Department acquires weapon systems and automated information systems.”1 For Alic, defense acquisition encompasses both research and development (R&D) and procurement, the actual buying of the product.2 For the Defense Department, it also includes considerations of life-cycle costs, including research, development, production, maintenance, upgrades, and final disposal, either to storage and ultimate scrapping or to an international customer. This book, though, focuses on both the process and the politics involved in acquiring weapons, and not on the various processes that keep them operating and that finally retire them. The defense acquisition process involves local, state, and national politicians, military officers, defense contractors, defense intellectuals, and a host of others. They ultimately manage, fund, plan, budget, and produce fighter planes, aircraft carriers, and armored personnel carriers, along with wing nuts, nails, batteries, hypodermic needles, golf carts, and millions of other items used by the U.S. military every day. That use extends beyond the U.S. military, though, as numerous other militaries around the world also consume products from the American military procurement system. Some of these countries are now active participants in the process, going beyond consuming; they also supply the U.S. military with goods produced outside of the United States. The defense acquisition system is a huge enterprise that can be usefully broken down into manageable component parts. It is first a process, reflecting both the politicization and the bureaucratization of how the United States buys its

2

The Process and Politics of Defense Acquisition

weapons. The first chapter discusses how this process grew over time, and the fourth chapter discusses its current state. The international dimension of the defense acquisition process has grown to such importance and complexity that it deserves its own chapter. International arms sales once consisted mainly of surplus U.S. military equipment but gradually grew to include some of the most modern of U.S. weapons, both to support U.S. allies and friends and to lower the cost of weapons to the U.S. military. Now foreign military sales prospects are a part of the acquisition process for most modern American weapons and support systems. Thus, this book has a chapter on foreign military sales, detailing how the process has evolved and the political and policy considerations behind it. The defense acquisition process is also about politics, as billions of dollars change hands each year, affecting widely both the American economy and beyond. Given the vast sums of money, politics has shaped the system to make it more robust and accountable, according to its defenders, or to steer money to those with the most political influence, according to critics. The political environment has expanded beyond the military, once the exclusive executive weapons procurement agents, to a plethora of other actors. They include the Office of the Secretary of Defense, Congress, the defense business community, and foreign nations that purchase American-made military hardware. The second chapter details the political process, actors, and strategies that now characterize the defense acquisition process. Almost since Washington’s time, problems have rankled the defense acquisition system. Sometimes they involve misconduct, often by defense contractors but also by the government, including the uniformed services, civilian defense officials, and members of Congress. The U.S. federal prison system has seen more than its share of inmates who have defrauded the government by misusing the defense acquisition system for their own benefit. Wrongdoing gets the most media attention, but more often the problems of the defense acquisition system come from the inherent nature of the system itself. Too often the structure is too cumbersome and too politically shaped to produce weapons and systems efficiently or on time. Additional levels of decision making and oversight bog down the process that turns weapons from ideas into finished products, and in the current system, that can mean years if not decades before a concept becomes a fielded weapon. For reasons of both corruption and inefficiency, reformers have worked to restructure the system. Sometimes the purpose of reform is to actually improve the system by diagnosing the problems and proposing solutions. Sometimes, though, the purpose of reform is to provide the appearance of reform to give political cover to those who operate in the defense acquisition system or those who fund it or those who have oversight responsibilities for it. Such efforts are not necessarily done for nefarious purposes (though sometimes they are), but rather they reflect the reality that broken or problem-filled defense acquisition systems generate outrage from taxpayers and their elected representatives, as well as from the users of

Introduction

military systems who pay a price for acquisition failures or shortcomings. The defense acquisition system is highly complex and difficult to reform, with many vested interests in the process. Reforming the process itself is akin to turning a large oil tanker on a dime; it is cumbersome and slow because, like a huge ship, the defense acquisition system has considerable momentum. There are always systems proceeding through it, and to reform it would stop or delay them. There are integrated parts, and to change any one of them changes the whole system. In short, reform is a difficult process, but it continues to mark the defense acquisition process, as the chapter on defense acquisition reform indicates. Some of the key players in the defense acquisition process are defense contractors. Most grew from humble beginnings to huge corporations whose reach has extended beyond military production to include entries into the commercial markets. Their role in the defense acquisition process appears in chapter 6. This book closes with profiles of some of the more important defense firms in the United States, large and small, including the Electric Boat Division of General Dynamics, Boeing, Lockheed Martin, Northrop Grumman, Raytheon, Curtiss-Wright, and Pratt & Whitney.

Notes 1. Defense Acquisition University, Defense Acquisition Guidebook, https://akss.dau.mil/ dag/DoD5000.asp?view=document. 2. John A. Alic, Trillions for Military Innovation: How the Pentagon Innovates and Why It Costs So Much. New York: Palgrave, 2007, 1.

3

CHAPTER 1

The Defense Acquisition Process Evolves

Defense acquisition used to be simple, at least relative to what it has become today in the United States. In ancient times, soldiers often made their own hand weapons that they carried onto the field of battle. In early times, shipyards built the flimsy naval ships that ancient warriors sailed to fight their opponents, and ironsmiths tempered the steel weapons that both soldiers and sailors used to kill their enemies. These basic technologies usually came from small craft workers, who pounded out their weapons on anvils and primitive lathes, or bent wood planks to the curved shapes of warships. For many centuries, military technology proceeded slowly, with beaten metal piercing weapons, catapults, and rowed warships dominating warfare until the age of gunpowder. The mass production of weapons may have begun in Chinese shipyards centuries ago, as the Ming Dynasty explorer Zhang He prepared a large fleet of warships around 1405 for global exploration. The development of gunpowder, also pioneered in China, gave rise to artillery, the art of which advanced in Europe in the fifteenth century with inventions in metallurgy allowing for large cannon. Gunpowder replaced piercing weapons, and a whole new industry grew, beginning in Europe around 1840 and expanding into the vast military production facilities of today.1 The production of weapons grew more complex during the age of Napoleon, who modernized the process by opening state-run arsenals to massproduce weapons. Napoleon set a standard by which the modern state became the primary producer of weapons, though private producers continued to operate arms factories. Arms production was no longer the preserve of small private manufacturers, but a state-serving function that occupied a growing number of factory workers, engineers, and designers. Those state functions grew as warfare became more technical and more weapons intensive. Where one soldier could kill several in ancient hand-to-hand combat, gunpowder and its use in artillery and later in aircraft allowed a few soldiers to kill first hundreds and later thousands

The Defense Acquisition Process Evolves

of combatants, and as warfare evolved, to kill thousands and later millions of civilians. The support of warfare moved from craft to industry.

The American Experience The conduct of the American Revolutionary War and the initial period of independence that followed revealed much about how the United States would organize and manage its defense acquisition process. That practice reflected the deep suspicion that early Americans felt toward a professional military and its associated equipment. The militia tradition was strong, on the basis of the belief that a volunteer soldier force was less threatening to an emerging democracy than would be a standing professional army. The U.S. Congress initially wanted to depend on local arms production, but delays and a lack of coordination among states necessitated a national arsenal system, starting with the opening of an arsenal at Carlisle, Pennsylvania, in 1776 and the Springfield Arsenal in Massachusetts in 1777.2 There were no national naval shipyards, though, as U.S. shipbuilding remained in private hands. Change began when the U.S. Constitution superseded the Articles of Confederation, providing a stronger central government with the potential power to raise money for defense and to construct war-making material. In the post–Revolutionary War period, some leaders like Alexander Hamilton advocated a strong government role for the development and production of weapons, as America’s private arms producers were small in number and short on capacity. Still, the predominant attitude in the United States was that a new and weak nation should not engage in warfare, and thus Congress was very reluctant to provide a foundation for arming the nation. However, as the United States grew commercially as a trading nation, its merchant fleets were harassed both by national navies (France in particular) and by pirates in the Mediterranean. The new country could no longer rely on ships donated by cities or captured from enemies, and by the early 1800s, Congress authorized naval shipyards in Virginia and New Hampshire. The new republic still had to organize its military, which took its first organizational shape from the reforms of Secretary of War John C. Calhoun, who held that office between 1817 and 1825. Calhoun created the General Staff and the Quartermaster Department, along with the Subsistence Department to feed the troops (taking away that task from sometimes unscrupulous private contractors) and the Medical Department.3 Calhoun thus began the process of professionalization within the U.S. Army, accompanied by the development of the Army arsenal system to provide most Army weapons and equipment. The Navy, too, was becoming professionalized, though it took Navy Secretary Abel P. Upshur to develop the system of bureaus that would, among other things, supply the Navy and build its ships.4 In 1846, the United States declared war on Mexico, placing great strains on a military that had not fought an engagement outside of the United States, except

5

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The Process and Politics of Defense Acquisition

for a brief and unsuccessful venture into Canada. The United States had expanded its arsenal base, opening arsenals in places like Schuylkill, Pennsylvania; Albany, New York; and St. Louis, Missouri. Problems emerged, though, as equipment reached the front lines too late to be of use, and in one case, rubber pontoons ordered by General Winfield Scott arrived so late that he had to abandon a battle. Those problems, though, would pale in comparison to those the Union would face during the American Civil War.

The Civil War The Civil War became a war of industry, as the steel age produced weapons that contributed not only to the North’s victory but also to the more than 620,000 dead between 1861 and 1865, exceeding the totals for the United States in World Wars I and II. The North held a considerable advantage in industry, having more than 110,000 manufacturing establishments to the South’s 18,000, and while the states of the Confederacy produced 36,049 tons of pig iron in 1860, the state of Pennsylvania alone produced more than 580,049 tons.5 That capacity formed the defense industrial base for the North, which had to quickly adapt to new technologies (ironclad warships, rifled small arms and cannon, locomotives, and even balloons for battlefield reconnaissance). There was no chief acquisition officer in the War Department in 1861, and Congress had almost no military role other than to pass general war budget bills. Thus, the services did their own acquisition, and the results were decidedly mixed. On the one hand, Union officers did innovate, ordering locomotives and rails to connect troops in the field to their supply sources, and ordering rifles and rifled cannon to replace smoothbore guns. They hesitated, though, before ordering repeating rifles, partly because of concerns that the troops firing them would quickly exhaust ammunition stocks. While General Montgomery Meigs became the Army’s quartermaster, responsible for, among other things, acquisition, the participating states also had their own procurement processes to supply their own armies.6 However, these fledgling processes could not cope with a flood of corrupt actions, including overpricing, cheap goods, late deliveries, and bribery of officials responsible for acquisition, which became common, particularly in the first years of the war. Meigs single-handedly ran the acquisition process for the Union, spending almost half a billion dollars by war’s end, pushing for innovation in all areas, and ultimately consuming more than half of all Northern industry.7 Production came from both government factories (the Springfield Arsenal produced Springfield rifles) and private manufacturers (Colt, Remington, and Smith & Wesson all produced individual firearms), while both arsenals and private firms cast cannon, ammunition, and other weapons of the machine age. Private firms also made sleeping bags, uniforms, bandages, wagons, bridles, and thousands of other war-related items. The openness of Union officers to technological advances varied considerably. The Navy continued to use wooden ships for its blockade duty, but also accepted

The Defense Acquisition Process Evolves

the ironclad USS Monitor, which revolutionized naval shipbuilding (along with its Confederate counterpart, the CSS Virginia). Union quartermaster officers were reluctant to order repeating rifles, as noted earlier, even when the Spencer carbine proved to be an extraordinarily deadly weapon in its first battlefield tests. Some weapons appeared in only limited quantities (e.g., the Gatling gun, forerunner of the machine gun; reconnaissance balloons; body armor), while the Army rejected other weapons such as incendiary shells and poison gas as too immoral to be placed on the battlefield. As military contracting expanded greatly in the Union, graft and fraud expanded as well. As stories of misbehavior began to make the newspapers, the House established the Committee on Contracts, chaired by Representative Charles Van Wyke of New York. The committee discovered vastly inflated prices, partly fueled by the competition among state agents trying to equip state armies, which inspired the committee to recommend that only the War Department should be the contracting agent for federal forces.8 Pistols worth $14 sold for $25, horses worth $25 went for $120, and one of two ships purchased for $100,000 sank on her first voyage, all this the result of incompetent and sometimes dishonest government purchasing agents who actually worked for the sellers.9 Corruption also occurred under General John C. Fr´emont, the famous explorer and commander of the Army Department of the West, when, according to Koistinen, “Almost every aspect of supply and operations under Fr´emont . . . was subject to favoritism, bribery, kickbacks, profiteering, and misuse of government funds.”10 The American Civil War probably had the largest number of acquisition scandals of any American war, but they would not be the last. Military production took another significant step forward after the American Civil War as the military shipbuilding industry evolved from wood to iron. The naval duel between the Monitor and the Virginia ironclads off Hampton Roads, Virginia, in March 1862 hastened the demise of wooden warships, already on the horizon because wooden hulls could not withstand the weight and power of the new steam engines. The requirements for steel naval ships also introduced new complexities for integrated production, with the advantage going to the producer who could control most of the entire process, from iron mine to launch. In 1883, the Navy awarded a contract for four steel cruisers to John Roach, of Morgan Ironworks in New York, largely because Roach owned a steel mill, a rolling mill, and subcontracts to supply coal and iron. The resulting ships, built by Morgan because his company offered the lowest bid, were very disappointing, with poor performance, breakdowns during sea trials, and considerable political criticism.11 The Navy also struggled with steam propulsion, unable to duplicate the British Navy’s success with it. Dogged by inexperience (Navy secretaries appointed for political loyalty rather than expertise) and cautious senior naval officers, the first steam-powered naval ships broke up at sea only a few years after they were built.12 The new battleship class fared somewhat better. In 1890 Congress approved the construction of three battleships, two to be built in Philadelphia and one in San Francisco. In 1897 the USS Iowa, built at the Navy shipyard at Norfolk,

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The Process and Politics of Defense Acquisition

Virginia, joined the fleet, with Congress expanding production of cruisers (smaller than battleships) and submarines. This shipbuilding binge not only elevated the U.S. Navy to something close to modern European navies of the time but also generated controversy. Secretaries of the Navy during the late nineteenth century found themselves charged with corruption and favoritism, to the point that the famous fictional commentator Mr. Dooley claimed that the primary qualification for a Navy secretary was that the only salt he saw was at the bottom of a pork barrel. William Eaton Chandler, for example, found himself charged with favoritism when he awarded four battleship contracts to one firm, the aforementioned John Roach of Pennsylvania (Chandler escaped the charges and later served as a U.S. senator). William C. Whitney reversed the Chandler ties to Roach, deciding that U.S. Navy ships be built exclusively in Navy shipyards. Later modifying that proviso, Whitney got Congress to approve an 1885 measure to divide Navy work between private and Navy-owned shipyards, and his successor, Benjamin Franklin Tracy, moved more ship production toward private yards, which benefited from the Navy’s changing doctrine that favored larger, offense-oriented ships. The Spanish-American War of 1898 and the cruise of the “Great White Fleet” dispatched by President Theodore Roosevelt in 1907 gained more support for a large offensive-capable U.S. Navy. Naval procurement had succeeded because of activist secretaries of the Navy, an activist naval-oriented president (Theodore Roosevelt), and the influence of senators and representatives with both steel and shipbuilding constituencies. The Navy’s dependence on civilian steel companies for their ships’ material caused problems, though, as the steel industry delayed new technologies for armor-quality steel plate, and, in one case, the Carnegie, Phipps steel company sold inferior plate at highly inflated prices in 1893, causing considerable scandal and a Navy effort (later abandoned) to build its own steel plant.13 The Spanish-American War also revealed difficulties dealing with private contractors, whose inexperience resulted in inferior products that were often delivered late.14 Unlike the Navy, the Army foundered in the post–Civil War period. While the Navy fostered professionalism through its development of doctrine (e.g., the influence of Alfred Thayer Mahan) and its military education (the opening of the Naval War College in 1884), the Army languished in the post–Civil War period, engaged in a long campaign against Native American tribes and a brief conflict with Mexico in 1865. While the Navy pushed new technology, Army funds slipped dramatically from the Civil War days, and technical development for weapons declined considerably. Conservative acquisition strategies prevailed: the defeat of General George Custer at the hands of Sioux warriors at Little Big Horn in 1876 was partially due to the decision by the Army to equip its troops with single-shot rifles, while the Sioux were using repeating rifles. In 1888, Congress chartered the Army Board of Ordnance to foster weapons development, but American Army weapons lagged considerably behind their European counterparts. The Army did expand its arsenal system, opening a weapons plant at Rock Island, Illinois, in 1866, and a gunpowder plant at Picatinny Arsenal in New Jersey. However, more political

The Defense Acquisition Process Evolves

support went to the Navy, in part because it created more jobs in manufacturing and bought more steel to construct ships than did the Army, with its equipage of mostly small arms. The Spanish-American War of 1898 revealed numerous shortcomings in weapons (e.g., the Army had spent more money on coastal defense than on field weapons), and after the war, the deficiencies produced the usual commissions (e.g., the Dodge Commission, which found a general lack of administrative skill in the War Department), but even though the United States had the potential to become a global power after the Spanish defeat, few changes came to the War Department. Some American entrepreneurs tried to offer the Army modern weapons (e.g., the machine gun, which inventors like John Browning, Hiram Maxim, and Isaac Lewis offered to the Army, but their weapons were instead adopted by the British). Only after 1899, when Elihu Root became secretary of war did the Army begin to change, as Root tried to professionalize its ranks and increase its study of strategy (by, among other things, opening the Army War College). The reforms initiated by Root ultimately took power away from the conservative and cautious Army bureau system and placed much more acquisition authority in the office of the Army chief of staff. In the early days of the twentieth century, tank development likewise went very slowly, and the Army even adopted motor-driven trucks reluctantly.

World War I World War I began in 1914 without the participation of the United States, where neutrality was the official and popular policy (President Woodrow Wilson ran on the slogan, “He kept us out of the war” when he campaigned for reelection in 1916). But German submarine warfare sank American merchant vessels headed to Europe with war supplies, and ultimately the United States declared war on Germany in April 1917. The U.S. military was once again unprepared for war, and thus once again it had to build a vast acquisition organization to handle the demands of war in Europe. The effort never produced enough weapons, and thus the U.S. military relied primarily on European-made aircraft, and the few U.S.-produced artillery weapons were replaced with French models. The U.S. acquisition machinery itself was in disarray; thus, in May 1918, Congress passed the Overman Act, which gave President Wilson strong powers to reorganize the war effort, and also removed Army aviation from the Signal Corps and established the U.S. Army Air Service and the Army Bureau of Aircraft Production. The War Industries Board, formed in July 1917 and headed by financier Barnard Baruch, was to coordinate with defense industry to encourage mass production and to referee labor disputes.15 World War I was a turning point for the U.S. defense acquisition system. Industry in the United States was on the cusp of radical changes in productivity, with the automobile and aviation industries growing through technology and mass-production techniques. Yet the tradition of private ownership and

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The Process and Politics of Defense Acquisition

laissez-faire capitalism was strong, and war equipage efforts had to appeal to the patriotism of U.S. factory owners, along with somewhat veiled threats to nationalize the munitions industry should U.S. manufacturers not comply with war planners’ visions for wartime industrial mobilization.16 The result was a pattern of limited cooperation between U.S. private industry and the military that would later form the so-called military-industrial complex. Such cooperation served the military well, as steel production increased dramatically, along with coal mining and other ancillary industries, fueled by the belief that the industrialists could make a living and more by selling to the War and Navy departments. They would have to wait briefly to supply the next generation of American industry: aviation production. But that industry was growing as well. In 1905, the Wright brothers, barely two years after their first flight, offered their aircraft to the War Department, and other early aviation pioneers soon followed them. These pioneers began the aviation industry, before the War or Navy departments could start their own military factories, as was the case with other weapons and naval ships, and they were willing to take risks that an often conservative military was not. So the militaryindustrial complex, that balance between government purchasing and use, and commercial private manufacturing, began in earnest, as did the origins of the current defense acquisition system, which is largely a process between the defense consumer and private production, negotiated through an ever-increasingly complex process. The American military aviation industry grew slowly, often borrowing foreign airframe designs to couple to American-built engines. There were only a handful of companies and a shortage of raw materials for aircraft manufacture, so the Army, in an effort to generate aircraft materials, assigned more than 27,000 workers to the Spruce Division to harvest wood for the plane’s construction and pushed farmers to grow castor beans for aircraft lubricant. Defense planners enlisted the automobile industry to produce military aircraft (generating protests from the fledgling aircraft industry), and by the end of the war, the United States was producing more than 12,000 planes a year. However, the end of World War I brought a considerable drop in production, and early aviation firms turned to commercial applications. The Navy, trying to duplicate its shipyard production practices, established the Naval Aircraft Factory in Philadelphia to produce seaplanes. But most aviation remained in the hands of private firms, and the services had to negotiate their requirements with them. In 1917, the Navy and Army set up the Aircraft Production Board (APB) to coordinate production, but the services guarded their aircraft plans and largely ignored the APB. The infant U.S. aircraft industry drew the attention of the automobile industry, which gained licenses to produce aircraft engines and airframes (the Simplex Automobile Company merged briefly with Wright-Martin Aircraft Corporation, and the Fisher Body Company in Detroit got contracts to build the De Havilland DH-4). Edward Deeds, founder of the Dayton Electric Corporation (later to become Delco, a part of General Motors) sat on the APB and later was appointed chief of the Signal Corps Equipment Division, responsible for development and supply of all Army

The Defense Acquisition Process Evolves

aircraft. Deeds also had a commercial interest in aviation, supplying Dayton Electric ignitions for the DH-4s (reportedly causing many to crash). Other automobile executives (e.g., Howard Coffin, with ties to both Oldsmobile and Hudson, and president of the Society of Automobile Engineers) sat on the Naval Consulting Board, which advised on, among other things, the purchasing of naval aircraft. These and other connections between government advisory councils and the burgeoning aircraft industry raised issues of conflict of interest that continued long after the end of World War I. The experience of Deeds and his friends in trying to establish Wright Field in Dayton, Ohio, as an aircraft “arsenal” was tainted by the Air Corps’ leadership reaction to the role of the automobile manufacturers in aircraft production, and ultimately Wright (later Wright-Patterson Air Force Base [AFB]) failed as a depot,17 though the base continues on as a center for Air Force research and development and currently hosts the headquarters of the Air Force Materiel Command, the chief procurement agency for the Air Force.

The Interwar Period The end of World War I brought a rise in pacifism in the United States and elsewhere in the world. For many Americans, the war seemed bloody and pointless, hardly a campaign to “make the world safe for democracy,” as President Woodrow Wilson had justified it, but rather a war fought over European monarchal and colonial ambitions. There were also suspicions that the defense industry and its associated industries had benefited from the war, and the investigations of the munitions industry by the Nye Committee in Congress between 1934 and 1936 reinforced these beliefs. The Nye Report argued that American arms industry representatives influenced international arms sales, but, more significantly, operated in ways that made World War I more inevitable. The committee report stated: “The committee finds also that there is a very considerable threat to the peace and civic progress of other nations in the success of the munitions makers and of their agents in corrupting the officials of any one nation and thereby selling to that one nation an armament out of proportion to its previous armaments. Whether such extraordinary sales are procured through bribery or through other forms of salesmanship, the effect of such sales is to produce fear, hostility, and greater munitions orders on the part of neighboring countries, culminating in economic strain and collapse or war.”18 The inflammatory tone of the report gained considerable public attention, although it masked the more substantial causes of World War I. The sharp tone also masked some real findings about the weapons industry: that it had worked against disarmament and arms control, and it had illegally circumvented treaties to sell arms, though those practices were more episodic than common.19 The public reaction to the Nye Report caused some defense builders to leave the business altogether—Bethlehem Steel dismantled its gun-forging facilities, and DuPont Chemical almost stopped producing gunpowder. Moreover, international treaties spurred by the carnage of World War I limited military construction. The

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Washington Naval Conference of 1922, which attempted to limit capital warships, and the London Naval Conference of 1930, which sought further reductions, accomplished little except to reaffirm previous agreements that the Japanese found unacceptable.20 Other sweeping efforts to ban war included the KelloggBriand Pact of 1928, which grandly attempted to outlaw war as an instrument of national policy and fueled pacifistic public and political sentiment; and as a consequence, the American military shriveled considerably. Congress cut funding for aircraft and naval ships, and Army artillery and tank production waned to the point where the Army had to use trucks with the word tank painted on their sides to simulate the real thing in mock training exercises. Development of new weapons for the Army went slowly, and it entered World War II with mostly obsolete weapons. The Army Air Corps was an exception, as its leadership worked with private industry to develop the heavy bombers that would form the backbone of its developing strategy of area bombing against enemy means of production. The Navy developed the aircraft carrier, and its associated naval aircraft,21 along with submarines and, with the Marine Corps, amphibious assault capacity. Those forces would have to wait out the 1930s, though, because of the budgetary limitations imposed by the Great Depression and the political attitudes of the Republican presidents who ushered in the decade. President Herbert Hoover, for example, was ill disposed to increase the military much, inspired by the legacy left over from World War I. As Wilson commented, “The legacy that Hoover most warmly embraced was the Kellogg-Briand Pact. . . . It played a central role in the president’s attitude and policies.”22 Hoover tapped the inexperienced James Good, a fellow Iowan who knew almost nothing about military affairs, to serve as secretary of war, though after Good’s death, Hoover appointed Patrick J. Hurley as his successor. Hurley advanced plans for industrial mobilization that ultimately helped marshal civilian industry for World War II a few years later.23 When Hoover’s term ended in 1933, the United States was poorly prepared for a major war, and even the election of the more internationalist-inclined Franklin D. Roosevelt would not quickly advance U.S. military strength, given the persistence of pacifistic public opinion and the economic depression that saw almost one-fourth of the U.S. workforce unemployed at its peak. Initial experience with private aircraft manufacturers had its challenges, with early military aviators often negotiating contracts directly with a producer. Congress intervened in 1926 with the Air Corps Act, which, among other provisions, established the necessity of competition. The Air Corps initially resisted the competition elements in the act, continuing to favor certain manufacturers and, along with the Navy, continuing to produce its own aircraft, much to the chagrin of the early manufacturers, who complained bitterly to Congress about the continuing lack of Air Corps cooperation.24 Some military advances came from the Vinson-Trammel Act of 1934, implemented by newly elected President Franklin D. Roosevelt. Roosevelt, who had previously served as Navy secretary, understood the need to acquire more combat ships as he watched the growth of the Japanese, German, and British navies in

The Defense Acquisition Process Evolves

the middle and late 1930s. The Vinson-Walsh Act of 1940 authorized the expansion of the Navy by 70 percent, although the lean years of the 1920s and 1930s left the United States with shortages in shipyards, trained workers, and raw materials. However, naval planning, driven by the so-called rainbow war plans, drawn up at the Naval War College, drove shipbuilding onward to the point where the U.S. Navy had seven aircraft carriers and seventeen battleships on the eve of the Japanese attack at Pearl Harbor. Some of these were obsolete (the USS Arizona had been launched in 1915), and the United States had to mobilize its vast capacity to equip its forces for what would become the greatest conflict the country had ever fought.

World War II Following the attack on Pearl Harbor, President Roosevelt set highly ambitious goals for wartime production, calling for 60,000 aircraft, 45,000 tanks, and 8 million tons of ships to be delivered in 1942. As funds flowed freely for wartime weapons construction (roughly $177 billion), the United States saw vast expansion of its defense industrial base. Dusty lots quickly sprouted huge buildings, and marshes gave way to shipyards. Tons of asphalt were poured for runways and roads to deliver the new systems. Thousands of African Americans moved from the racially segregated South to the North and West to get jobs in the defense industry. Factories engaged in peacetime work quickly converted to wartime production, and automobile production ceased in 1942 to clear the way for tanks, trucks, transmissions, and helmets. The industry refined the mass production techniques first learned in the 1920s as aircraft and even ship production shifted to vast assembly lines. The production line built by the Ford Motor Company at Willow Run, near Ypsilanti, Michigan, turned out fourteen B-24 bombers each day during its peak production time in 1944, and American shipyards produced three Liberty transport ships each day. World War II ushered in a brace of new technologies that revolutionized warfare and challenged the defense acquisition process. Developments like radar, the jet-propelled warplane, and the atomic bomb had to be procured in secret, and thus dummy accounts and false names hid the actual project (e.g., “Manhattan Project” for the American atomic bomb development and production project, so named because much of the uranium ore was stored in Manhattan, New York, and some of the science for the bomb was done at New York’s Columbia University). Such projects thus received very little oversight as they went from the laboratory to the production line.25 The Manhattan Project would become the foundation for the secret “black projects” discussed later in this book. President Roosevelt brought in the experience of the New Deal to his preparations for World War II, which he believed was likely, given the international trends of 1940. The New Deal increased the growth in federal government power over the private sector, largely through the creation of the various New Deal federal agencies, which took on considerable political and economic power. The

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so-called alphabet agencies (so called because almost every letter of the alphabet appeared in their acronyms), included the National Recovery Administration, the Securities and Exchange Commission, the Works Progress Administration, and dozens of others. Roosevelt strongly believed in the viability of large planning agencies to guide the American economy, and he applied the same belief to wartime preparation and planning. In May 1940, Roosevelt created the Office of Emergency Management, which became home to a number of other agencies, including the National Labor Relations Board, the Office of Civilian Defense, the Office of Defense Transportation, the War Food Administration, the War Manpower Commission, the National Housing Agency, and the Office of Price Administration. Roosevelt chose prominent civilian industrialists to serve on these boards, including executives from American Telephone and Telegraph, Studebaker Motor Company, and, most prominently, William S. Knutsen, who had been president of General Motors.26 The very membership gave rise to problems, including a contest for authority between powerful individuals used to heading their own organizations, and suspicion that the industrialists on these boards would favor industry in general and their own industries in particular when it came to wartime production. There were no representatives from agriculture and only one representative of organized labor (Sidney Hillman, president of the Amalgamated Clothing Workers of America) involved in Roosevelt’s wartime agencies, despite the prominence of both farmers and labor in the Democratic Party New Deal coalition. The lineup suggests that Roosevelt saw wartime planning in a similar vein to Depression-era planning, a compact between business and the federal government that coordinated with both bodies instead of an effort to excessively regulate or restrict industry. To coordinate and centralize military production and contracts, President Roosevelt authorized the creation of the Office of Production Management (OPM) in January 1941. Headed by an Army general officer, its functions included the coordination of all major defense orders and contracts, and the review all major proposals for the purchase or construction by the War Department or the Navy Department of materials, articles, or equipment needed for defense.27 The OPM also had the Office of Scientific Research and Development (headed by Vannevar Bush), which linked science and industry in a single board headed by a military officer. However, the OPM did not have clear lines to industry or to the military procurement bureaus (which were the sources of considerable power); thus, the War Production Board (WPB) replaced the OPM in 1942. In addition to assuming most of the duties of the OPM, the WPB also took on the duties of rationing scarce commodities and supplies (food, tires, gasoline, and other goods) and ordering the cessation of civilian production. Wartime production quickly stretched the limits of the military arsenals and shipyards, and thus the War and Navy departments mobilized civilian industry. Converted automobile and truck factories ceased civilian production after WPB orders, and instead produced tanks and trucks for the military. The Aircraft

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Division of the OPM reached out to the automobile industry to assist in producing military aircraft, and numerous car companies found their factories producing aircraft parts, with General Motors, for example, producing the Allison aircraft engines that powered numerous warplanes. The Singer Sewing Machine Company converted from sewing machines to antiaircraft gun parts, aircraft engine rocker arms, gun turret castings, and dozens of other war-related items. Because there was such growth of private companies, the War and Navy departments revised their system of contracting, expanding the range of contracts offered to provide more flexibility in specifications, quality, and quantity, along with offering more security for the private firm. Thus, fixed-price contracts for risky programs offered the contractor a profit even if the system itself did not win acceptance by the military. An example is the system to prototype military aircraft, which often involved high-risk technologies. For example, the Air Corps contemplated a radical fighter design with a pusher (rear-driven) engine and forward-firing guns. Three companies offered prototypes but none was successful; nevertheless, the companies all received their contracted fixed price for their efforts. Other government commissions participated in the war effort as well. The U.S. Maritime Commission, created in 1936 to boost Depression-level shipbuilding, had already increased civilian shipbuilding before World War II and was thus poised for further expansion. It ultimately oversaw the production of 5,777 ships between 1939 and 1945. The industry modernized its production methods and employed both women and minorities, breaking a centuries-old tradition of employing only white male workers. World War II ushered in an era of huge military budgets, a vast defense industrial infrastructure, and an acquisition system run largely by commission. Each service retained its own acquisition corps, which operated sometimes in conjunction with and sometimes in opposition to the war acquisition boards, which were supposed to foster joint service efforts, among other things. The wartime economy boomed, and, by some estimates, it created more than 17 million jobs, helping to lift the United States out of the Depression of the 1930s but also creating a huge dependency on wartime industry for those jobs. Millions of women and African Americans, limited from employment by both law and tradition, found jobs in the defense industry as millions of white men entered the armed services. There was considerable labor migration to areas with defense industry, and many African Americans did not want to return to their rural Southern roots after enjoying wartime employment in the North and West. When the war ended in September 1945, it was clear that there would be considerable dislocation for both industry and workers. The United States exited World War II and quickly entered a new world in which it became thoroughly engaged in international affairs, based on the assumption that a more assertive America might have prevented World War II. American diplomacy engaged the other victorious powers of the past war to create the United Nations, the General Agreement on Trade and Tariffs, and on global economic cooperation through the creation of the International Monetary Fund

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and the World Bank. President Harry Truman had grown increasingly suspicious of the Soviet Union since the summer 1945 Potsdam Conference, where Western and Soviet differences on the division of Europe and a number of other issues appeared increasingly irresolvable. Soviet leaders appeared both eager and able to build up their military, even in the face of the devastating losses the Soviet Union took during what the Soviets called “the Great Patriotic War.” Key American analysts and leaders, including George Kennan, Dean Acheson, Clark Clifford, and George Marshall, increasingly warned of an expansionist Soviet Union, and, applying the perceived lessons of the pre–World War II period, determined to counter Soviet ambitions with military power. After World War II ended, the defense acquisition system faced new challenges as defense budgets shrank to a small fraction of their peak wartime levels. While national defense spending exceeded 40 percent of the total national economy in 1944, President Truman pared it back considerably in 1946, and it would never exceed 10 percent of the total U.S. gross domestic product during or after the Cold War. Truman also recast the methodology used to determine the percentage of total government spending that would go to the military, by emphasizing domestic programs first and then giving the leftovers to the Defense Department. World War II brought about not only many new military technologies, including radar, jet propulsion, and, perhaps most significantly, the nuclear weapon, but also synthetic materials, new manufacturing techniques, and a host of other innovations. The National Defense Act of 1947 reorganized the military, joining the three services (Navy–Marine Corps, Army, and the newly independent Air Force) under a single chief in the Joint Chiefs of Staff within a unified Department of Defense, which replaced the War and Navy departments.28 The reorganization did not paper over the traditional questions about service roles and missions, which new military aviation technology and doctrine had only exacerbated. Each branch of the military now had its own air arm, and, as defense budgets shrank after World War II, the competition for air roles and missions increased. The Navy advocated a new large flush-deck aircraft carrier capable of launching nuclear armed aircraft, while the Air Force wanted a new long-range strategic bomber, 70 combat groups, and exclusive ownership of atomic weapons. The ferocity of the competition suggested that the services framed the roles and missions debate around their own service interests more than the interests of national defense. Ultimately President Truman demanded that the service chiefs resolve their roles and missions differences at the Naval Station in Key West, Florida, in March 1948. The so-called Key West agreement limited the Army’s aviation role and restricted naval aviation to roles supporting naval campaigns, but Key West did not put an end to interservice rivalry. A subsequent meeting in September 1948 at the Naval War College resulted in further compromise, but interservice rivalry would remain a constant. The other development from World War II that would have a significant impact on defense acquisition processes was the use of operations research. First

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used during the war for the planning of antisubmarine operations and later for the development and use of the atomic bomb, operations research joined civilian scientists with military professionals to bring tools of analysis to bear on military problems. The new Air Force, in particular, sought to continue the role of operations research after the war, and Air Force collaboration with civilian scientists and the Douglas Aircraft Company led to the creation of the RAND Corporation in 1946 (actually a year before the Air Force gained its independence). The initial arrangement was problematic, given that RAND, with its connection to Douglas Aircraft, served as an adviser to the Air Force, raising the prospects of favoritism toward Douglas over its rivals.29 RAND (which came from an acronym meaning “research and development”) and Douglas later severed ties, but the creation of RAND led to the start-up of numerous other defense analysis companies that desired a role in the politics and process of defense acquisition (see chapter 4). RAND played an important role in linking strategic requirements to weapons development, but its most significant contribution to defense acquisition was the adaptation of both its studies and its personnel to the revised defense acquisition system of the Kennedy administration. The Eisenhower administration had reduced defense spending in almost all of its eight years in office, because Eisenhower, as a traditional Republican conservative, believed in a small federal government and a balanced federal budget. Eisenhower’s New Look policy placed emphasis on American strategic nuclear war-fighting capability over conventional forces, and Eisenhower, like Truman before him, set a defense budget ceiling (from $38 billion to $40 billion per year) to benchmark the process. Eisenhower hoped that such ceilings would provide stability and predictability over the long term, rather than subject defense budgeting and planning to a cycle of up-and-down swings. Said Eisenhower, “Now, you make out a plan and you follow that plan. You do not want . . . to be pushed off this plan time and again by something suddenly described as a crisis.”30 The services had to live within these ceilings; thus, each slice of the budget pie became more valuable as the pie shrunk, and interservice rivalry continued during the Eisenhower administration. The Air Force, which had the smallest personnel footprint, tended to win such battles because it could argue that its emphasis on strategic nuclear-capable long-range bombers was a cheaper alternative to large Army divisions and personnel-intense naval ships. Eisenhower also revised the World War II defense acquisition system in 1953, abolishing the old ammunition boards and transferring their authority to the assistant secretary of defense for supply and logistics, and integrating some of the service research and development programs under the assistant secretary of defense for research and development. In 1958, Eisenhower again reformed the Defense Department power structure, placing the secretary of defense directly in the military chain of command. The legislation removed the service chiefs from the chain of command, thus strengthening the civilian secretariat. Eisenhower did much to downgrade service authority in the name of jointness and civilian control over the Defense Department. In 1956, the Defense Department created the

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Defense Science Board to advise it on scientific and technological innovations that it might incorporate into military systems. In many ways, the reforms paved the way for the coming McNamara revolution of the Kennedy and Johnson years.

The Kennedy Years and the McNamara Revolution Senator John F. Kennedy came to the White House promising to change the way that previous administrations made weapons choices. He appointed Robert S. McNamara, the former president of Ford Motor Company, as his secretary of defense. McNamara had a background in business analysis, which he applied while at Ford using planning techniques that he had previously taught at Harvard Business School. McNamara had little experience in national security matters other than military service during World War II, but he quickly learned the arcane details from top to bottom, and, armed with his business experience, began to challenge the Pentagon’s ways of procuring weapons. The perennial question for any military establishment is, How much is enough?—and, more important, how to answer that question. McNamara believed that too much of the answer to the “how much is enough” question came from the priorities and mind-sets of the professional military, and he felt that the techniques he had used in the world of business management would produce better results than the methods used by senior officers. One of the most controversial set of methodologies adopted by McNamara was systems analysis, a method of breaking down a complex product into its component parts. As described by Alain Enthoven and K. Wayne Smith, “Systems analysis emphasizes the explicit consideration of all factors that bear on a particular decision in terms of the system these factors together constitute.”31 The notion of explicitness is critical for systems analysis. One of the virtues of systems analysis is that it requires that the objectives and alternatives to achieve those objectives be stated clearly to allow the ranking of alternative approaches. It is particularly important to treat uncertainty, one of the most complex challenges in defense analysis, as explicitly as possibly.32 Such explicitness allowed McNamara and his analysts to compare alternatives for the strategic nuclear weapons systems, benchmarking manned bombers against missiles, with clear calculations of their cost, reliability, and mission capability. Of course, uncertainty cannot simply be eliminated or, in some cases, reduced because of systems analysis, but systems analysis does require that uncertainty be treated as a factor, something that was sometimes absent in previous defense decision making. McNamara understood that weapons choice begins with strategy, and thus he began his changes at the Pentagon by altering massive retaliation, the prevailing U.S. nuclear strategy at the time to deter the Soviet Union and its perceived allies. Under massive retaliation, should the Soviet Union strike the United States or its allies with a nuclear attack, the United States would retaliate massively against Soviet cities and defense industries, wreaking utter and total destruction. Massive retaliation had allowed the Eisenhower administration to build up U.S. nuclear

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strike forces while reducing conventional weapons, on the basis of the premise that, since the United States could not match Soviet ground forces in particular, U.S. doctrine would emphasize the escalation of any significant conflict from conventional to nuclear weapons, thus hoping to deter even a conventional Soviet attack. The U.S. Air Force, in particular, had armed itself to carry out massive retaliation, operating more than 700 strategic nuclear bombers and a smaller number of missiles capable of carrying nuclear weapons. The Air Force leadership had, though, largely eschewed missiles, believing that they were unreliable, inaccurate, and would replace traditional aviators in bomber cockpits. Said General Thomas Power, commander of the Strategic Air Command, in 1958, “Operational limitations and problems affecting the employment of ballistic missiles . . . pertain primarily to accuracy, reliability, limited payload, maintainability, and lack of operational experience.”33 The Navy, to a lesser extent, had also placed some resources in strategic nuclear weapons, planning to deploy strategic ballistic missiles on submarines. McNamara began his reforms by questioning massive retaliation, which had already been challenged earlier in the Eisenhower administration as too limited and inflexible. McNamara worked to engage the Soviet Union in an unspoken bargain by replacing massive retaliation with what he called “damage limitation,” the more limited targeting of strategic nuclear weapons to military targets, and strategic nuclear weapons in the adversary’s homeland in particular. According to this new logic, a nuclear strike against one country would be met by a retaliatory strike against the attacker’s remaining nuclear weapons, thus reducing the originator’s ability to do further nuclear damage. The desired outcome was that both sides in a potential escalating conflict would recognize that a first nuclear strike would be self-defeating as it would disarm both sides. But, more significant for defense acquisition reform, McNamara hoped that damage limitation requirements would cause the Air Force to limit its purchase of strategic bombers and instead buy a more limited quantity of long-range ballistic missiles. McNamara did not completely eliminate the potential to destroy cities, and thus damage limitation also came to mean the ensured destruction of around one-quarter of Soviet cities.34 McNamara’s guidance along with existing military programs produced the strategic nuclear triad, which comprises long-range Air Force bombers, Air Force intercontinental ballistic missiles (ICBMs), and the Navy Fleet Ballistic Missile program for submarine-launched ballistic missiles. While these three programs have evolved over the years in both technology and force size, they are the backbone of today’s remaining U.S. strategic nuclear force. McNamara also tried to adopt a more realistic means of costing out competing defense systems, by turning from initial and development costs alone to life-cycle costs (LCC). Life-cycle costs are from cradle to grave, including developmental, production, modification, transportation during use, and ultimately retirement of a system. The purpose was to provide a more complete cost of weapons during

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their lifetimes, including modifications, to allow for better up-front estimates for competing systems. However, LCC has its limitations: it is much more difficult to estimate costs over what may be many decades of use and to predict which modifications may keep a system in operations over its years of service.35 McNamara also pioneered the concept of total package procurement (TPP), a system designed to replace the earlier practice of contracting initially just for the R&D phase of a program. Under TPP, the contract was for research, development, and production; thus, the contractor and the government had to agree on a total package cost and delivery schedule. The first trial of TPP was the Lockheed C-5A transport aircraft, and the problems encountered with that plane (see Appendix I) did not get TPP off to a promising start.

The PPBS Legacy As McNamara and his analysts reviewed the Eisenhower approach to defense structuring, they realized that there was no inherent relationship among planning (needs to fit strategic requirements), programming (fitting those needs to particular programs), and budgeting (funding programs). For example, budget levels appeared to be set from arbitrary ceilings rather than from decisions about how much money was really needed. The advocates of the planning, programming, and budgeting system (PPBS) argued that budgets should serve as management devices rather than as some mandatory upper limit on defense spending. For them, budget making would be integrated into planning and programming with the new tools of management that McNamara advocated. It would also firmly place the entire enterprise of PPBS in the hands of the administration. Policy disputes within the services would be referred prior to the coming year’s budget submission, and then worked into the five-year defense plan (FYDP).36 The significant achievement for PPBS was that the cycles of planning, programming, and budgeting would be linked to explicit defense criteria that would be evaluated as they passed through each of the three corridors of planning, programming, and budgeting. The benchmark, though, would be that dollar amounts would be used to compare alternatives as they advanced through planning and programming.37 McNamara and his associates used the concept and techniques of PPBS to manage a number of strategic programs that were making their way toward final production, including the B-70 bomber and the Skybolt air-to-ground missile that the Air Force wanted to maintain its strategic bomber program. As McNamara applied PPBS to those programs, he concluded that the task for both programs could be done with less expense by unmanned long-range ballistic missiles, and he thus canceled both the B-70 bomber and the Skybolt program, much to the chagrin of both the Air Force and its supporters in Congress.38 The Navy, though, found that if it did its own PPBS-like analysis it could reduce the span of civilian control in the McNamara years. Thus, as Sapolsky notes, the Navy had calculated the number of Fleet Ballistic Missile Submarines on the basis of Soviet target sets and the relative cost of striking those targets, and its homework was so thorough

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that when McNamara reviewed the program the only adjustment he made was to remove 5 extra submarines (set as a safety margin) from the needed 41 boats.39 The Kennedy administration ended the Truman and Eisenhower practice of managing defense programs through budget ceilings, arguing that such arbitrary limits posed risks to national security. Said McNamara, “A major instruction I received from President Kennedy was to develop a defense program . . . without regard to arbitrary budget ceilings.”40 However, as Betts argues, such ceilings required the services to make hard choices about defense programs (instigating interservice rivalry), but once the ceilings came off, the nature of the political battles changed. Since civilian defense overseers could not argue that no more money was available to the services, civilians now had to reject programs by saying that they were unnecessary, thus substituting their own judgments for those of the military professionals and inflaming civil-military relations.41 Subsequent administrations put their own mark on the defense acquisition system, but the basic reforms initiated by McNamara (and during the Eisenhower administration) remained in place. The reforms built around the PPBS did not solve many of the inherent problems in the defense acquisition system, and sometimes PPBS created its own problems. Sometimes it was difficult to reduce military requirements down to the kinds of metric measurements that PPBS required. Those best suited to operate the PPBS were often those with an operations research background rather than those steeped in war fighting. The system introduced new roadblocks to rapid delivery of weapons and systems because of its numerous process stages, and many innovations could not pass the rigorous testing and evaluation procedures mandated by PPBS. However, instead of trying to re-reform the defense acquisition system, successive secretaries of defense generally tried onetime fixes when significant issues arose. The result was an ever more complex system whose parts did not always fit together well. As problems persisted, a new stream of defense acquisition studies poured forth, often in response to well-publicized problems. The year 1970 saw the Fitzhugh Blue Ribbon Defense Panel, which recommended a complete restructuring of the Defense Department (“We are amazed it works at all, it’s so big and cumbersome under the present organizational structure,” said Fitzhugh42 ). The report also recommended integrating the regional combatant commanders into the acquisition system, something that finally happened decades later. A 1987 service secretary critique of the Defense Resources Board, the heart of the original PPBS, complained that its membership was too large, that big issues about acquisition and defense budgets were rarely answered, and that the “Defense Resources Board’s membership should be limited to the Deputy Secretary and Under Secretaries of Defense, the service secretaries and all of the Joint Chiefs of Staff. That would increase military representation as only the Chairman of the Joint Chiefs is now a member.”43 The sheer magnitude of the Reagan-era buildup allowed subsequent administrations to reduce military procurement budgets and use the stocks of weapons bought between 1981 and 1987. Procurement budgets under the Clinton years

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slipped to around $50 billion a year, though they rose to $60 billion in the last year of the Clinton administration. They did not increase to their roughly 25 percent of the total defense budget during the Bush years, though, as Campbell and O’Hanlon note. While the overall average of 25 percent of the defense budget should mean a procurement budget of around $100 billion per year, it reached only $85 billion in 2006.44 Instead, the other parts of the defense budget rose to compensate for maintaining an aging weapons stockpile, particularly in the face of the wear and tear of desert operations, as experienced in 1990–1991 and subsequent operations. The Reagan administration did focus on acquisition and military reform, particularly after the sharp increase in military buying power was accompanied by service duplication and large cost increases. In response to the initiatives by Senator Barry Goldwater and Representative William Nichols, Congress passed and the president signed the Goldwater-Nichols Department of Defense Reorganization Act of 1986.45 The act focused largely on jointness, the integration and coordination of unique service roles and missions, and, among other things, it allowed for much more jointness in defense acquisition (for further discussion, see Chapter 6).

George W. Bush and Beyond After the September 11, 2001, terrorist attacks, the Bush administration announced a shift from preparation for state-to-state warfare to the “global war on terror.” The message sent to those responsible for defense preparedness was decidedly mixed, though. The Bush announcement specified several kinds of terrorist threats, ranging from individual small groups of terrorists to, according to the Bush language, “state-sponsored” terrorism. For military planners, the options under the new mantra spanned from detecting small hidden groups of terrorists to launching a preemptive strike against states that allegedly sponsored terrorists. The former operations called for light and mobile forces, capable of fighting in a wide array of environments. As Betts observes, “With rare exceptions, the war against terrorists cannot be fought with army tank battalions, air force wings, or naval fleets . . . the capabilities most applicable to this task are intelligence and special operations forces.”46 However, invading a state called for a different approach, something closer to conventional warfare, with mobility and heavy weapons. The Bush II administration thus had two roads to military modernization and chose both. The first was unconventional warfare, focusing on counterinsurgency operations, while the second was preparation for hostilities with a major country like Russia or China. Thus, the administration opened the defense spending floodgates, ordering equipment across the spectrum of combat, with the Bush administration requesting $647.2 billion in new spending authority for fiscal year 2008. The “base defense budget,” that part of the budget that excludes the cost of combat activity, was $483.2 billion, which exceeded the fiscal 2007 base budget by $46.8 billion, which had increased real purchasing power by 8 percent.47 The

The Defense Acquisition Process Evolves

services got mostly what they requested for their traditional programs, as fighters, submarines, carriers, and the Army Future Combat System all received funds to build production systems. Existing programs also received increased funding. The Bush administration used creative defense bookkeeping to fund future projects. To replace equipment lost or worn out by combat, the Defense Department uses a budget category known as “reconstituting the force,” but the definition of what can fall into this category is very vague. Thus, in the 2007 “reconstituting the force” request, the Defense Department included requests for 2 F-35 joint strike fighters, which would not even be available until 2010, a spy plane also unavailable in 2007, 12 F/A-18 Navy/Marine Corps jets (though none were lost in combat), and dozens of other projects worth $51 billion. In 2005, the Congressional Budget Office estimated that war replacement costs should be no more than $8 billion each year.48 In August 2007, a memo from Deputy Secretary of Defense Gordon England specified the Defense Department’s “transformation priorities.” Under the heading “Transform Enterprise Management” was the following: “Establish a new strategic planning process to include an improved process for prioritizing and aligning resources to joint capability demands, implement a common transparent decision framework and supporting management information system and expand Capability Portfolio Management.”49 If ever there was a reaffirmation of the old saying “the more things change, the more they remain the same,” this was it. The current defense acquisition system came into place as a result of the following observations and criticisms of earlier processes: r The defense acquisition system lacked integration, emphasizing the development and production of defense systems while neglecting such things as maintenance requirements, future modifications, or even retirement of systems. Thus was born the concept of cradle-to-grave acquisition. r The defense acquisition system was still service driven, and thus lacked the ability to integrate weapons across service users. To address this shortcoming, the Defense Department (pushed by Congress in some cases) developed joint acquisition systems, and diverted acquisition authority from the services to both the Office of the Secretary of Defense and newly created joint organizations like the Joint Requirements Oversight Council ( JROC).

Conclusions While the course of warfare has changed considerably over American history, the defense acquisition system has evolved more slowly. The old system of arsenals and government shipyards remained until after World War II, and some elements continue on today. For most of American history, the military operated the system that supplied them with war material, but the high stakes and cost of the Cold War ultimately shifted that responsibility to civilians appointed by the president. Those civilians did not always bring military experience to their positions. Of the 21 secretaries of defense who have served since World War II

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(Donald Rumsfeld served twice), only 12 had any military experience at all, only 1 (General George C. Marshall) was a career officer, and the others served briefly (but not without distinction: some were decorated, and Elliot Richardson participated in the D-Day landings). More, however, held Ph.D.’s (often in mathematics or physics) and had backgrounds in science and engineering. They rarely served for the duration of the administration that appointed them, which often left the senior military officers, with their long careers, with considerable influence in defense acquisition decisions. The McNamara reforms (discussed in several succeeding chapters) paved the way for more civil-military tensions, which had always permeated the system, though PPBS only exacerbated these differences in acquisition approaches. The complexity of weapons also increased over the entire time span but most noticeably after World War II. The costs also increased, as did scheduled delivery dates and system problems and failures. Other actors joined the acquisition process, including Congress, which changed the methods of budgetary oversight to scrutinize weapons (see Chapter 4) in order to either improve the quality of the process (as their defenders argued) or ensure that some of the billions of dollars of acquisition money was spent in their states and congressional districts (according to their critics). With all of these actors and processes, current defense acquisition is quite difficult to understand, and even more difficult to work in. Gaining a thorough understanding of the system in its current form is easier if one understands where it came from.

Notes 1. See William H. McNeill, The Pursuit of Power: Technology, Armed Force, and Society since A.D. 1000. Chicago: University of Chicago Press, 1982; Bernard Brodie and Fawn M. Brodie, From Crossbow to H-Bomb: The Evolution of Weapons and Tactics of Warfare. Bloomington: Indiana University Press, 1973; Martin van Creveld, Technology and War: From 2000 B.C. to the Present. New York: Free Press, 1989. 2. Much of the material that follows draws on Wilbur D. Jones, Jr., Arming the Eagle: A History of U.S. Weapons Acquisition since 1775. Fort Belvoir, VA: Defense Systems Management College Press, 1999. 3. Paul A. C. Koistinen, Beating Plowshares into Swords: The Political Economy of American Warfare, 1606–1865. Lawrence: University Press of Kansas, 1996, 81–82. 4. Ibid., 86–87. 5. Allan R. Millett and Peter Maslowski, For the Common Defense: A Military History of the United States. New York: Free Press, 1984, 155–156. 6. Among the items procured by General Meigs was the property of Robert E. Lee’s wife, in Arlington, Virginia, for a national military cemetery in 1864. As Meigs was preparing the cemetery, the body of his son, killed in Virginia, arrived for burial. 7. Herman Hattaway and Archer Jones, How the North Won: A Military History of the Civil War. Urbana: University of Illinois Press, 1983, 139. 8. A. Howard Meneely, The War Department, 1861: A Study in Mobilization and Administration. New York: Columbia University Press, 1928, 258–260.

The Defense Acquisition Process Evolves 9. Ibid., 258–270. 10. Koistinen, Beating Plowshares into Swords, 135. 11. Benjamin Franklin Cooling, Gray Steel and Blue Water Navy: The Formative Years of America’s Military-Industrial Complex, 1881–1917. Hamden, CT: Archon Books, 1979, chap. 2. 12. Kurt Hackemer, The U.S. Navy and the Origins of the Military-Industrial Complex, 1847–1883. Annapolis, MD: Naval Institute Press, 2001, chap. 1. 13. Paul A. C. Koistinen, Mobilizing for Modern War: The Political Economy of American Warfare, 1865–1919. Lawrence: University Press of Kansas, 1997, 54–55. 14. Ibid., 78–79. 15. For a history of the War Industries Board, see Robert Cuff, The War Industries Board. Baltimore: Johns Hopkins University Press, 1973. 16. Ibid., 22–23. 17. Ann Markusen, Peter Hall, Scott Campbell, and Sabina Deitrick, Rise of the Gunbelt: The Military Remapping of Industrial America. New York: Oxford University Press, 1991, 57. 18. Senate, Report of the Special Committee on Investigation of the Munitions Industry (The Nye Report), 74th Cong., 2nd Sess., February 24, 1936, 3. 19. Paul A. C. Koistinen, Planning War, Pursuing Peace: The Political Economy of American Warfare, 1920–1939. Lawrence: University Press of Kansas, 1998, chap. 14. 20. While the Japanese did not accept the terms of treaty limitations, the other powers that did accept them found ways around the limits. The U.S. Navy converted several cruisers, limited by the Washington treaty, to aircraft carriers, which proved more efficient in World War II than the cruisers. 21. See Geoffrey Till, “Adopting the Aircraft Carrier,” in Military Innovation in the Interwar Period, eds. Williamson Murray and Allan R. Millett. Cambridge: Cambridge University Press, 1996, 191–226. 22. John R. M. Wilson, Herbert Hoover and the Armed Forces: A Study in Presidential Attitudes and Policy. New York: Garland, 1993, 19. 23. Ibid., 95–101. 24. Edwin H. Rutkowski, The Politics of Military Aviation Procurement, 1926–1934. Columbus: Ohio State University Press, 1966, chap. 4. 25. The secrecy surrounding the Bell P-59, America’s first jet-powered fighter, was so tight that when the plane emerged from its hanger, it was fitted with a dummy propeller. The hanger itself was marked with a sign reading, “Anyone approaching within 50 feet of this building will be shot!” 26. Institute for National Strategic Studies, McNair Paper Number 50, chap. 5, August 1996, http://www.ndu.edu/inss/mcnair/mcnair50/m50c5.html. 27. Office of Emergency Management, Office of Production Management Duties and Functions. Washington, DC: Office of Emergency Management, 1941, 1. 28. The reorganization is the focus of Demetrios Caraley, The Politics of Military Unification: A Study of Conflict and the Policy Process. New York: Columbia University Press, 1966. 29. The founding and evolution of RAND is told in Bruce L. R. Smith, The RAND Corporation: Case Study of a Nonprofit Advisory Corporation. Cambridge, MA: Harvard University Press, 1966. 30. News conference in March 1959, quoted in Richard A. Aliano, American Defense Policy from Eisenhower to Kennedy. Athens: Ohio University Press, 1975, 39.

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The Process and Politics of Defense Acquisition 31. Alain C. Enthoven and K. Wayne Smith, How Much Is Enough? Shaping the Defense Program, 1961–1969. New York: Harper & Row, 1971, 61. 32. Ralph Sanders, The Politics of Defense Analysis. New York: Dunellen, 1973, 17. 33. General Thomas S. Power, “SAC and the Ballistic Missile,” Air University Quarterly Review 9 (Winter 1957–1958), 11. Power also noted the inability to recall a ballistic missile once it had been launched. 34. There is a vast literature on the evolution of U.S. nuclear strategy, including Lawrence Freedman, The Evolution of Nuclear Strategy. New York: St. Martin’s Press, 1989; Lynn Eden and Steven Miller, eds., Nuclear Arguments: Understanding the Strategic Nuclear Arms and Arms Control Debates. Ithaca, NY: Cornell University Press, 1989; Robert Jervis, The Illogic of American Nuclear Strategy. Ithaca, NY: Cornell University Press, 1984; Michael Mandelbaum, The Nuclear Question: The United States and Nuclear Weapons, 1946–1976. Cambridge: Cambridge University Press, 1979; and Scott D. Sagan, Moving Targets: Nuclear Strategy and National Security. Princeton, NJ: Princeton University Press, 1989. 35. A good discussion of LCC may be found in M. Robert Seldon, Life Cycle Costing: A Better Method of Government Procurement. Boulder, CO: Westview Press, 1979. 36. Arnold Kanter, Defense Politics: A Budgetary Perspective. Chicago: University of Chicago Press, 1979, 59–61. 37. Enthoven and Smith, How Much Is Enough?, chap. 2. 38. Robert E. Hunter, “The Politics of U.S. Defense 1963: Manned Bombers versus Missiles,” in Readings in American Foreign Policy: A Bureaucratic Perspective, eds. Morton H. Halperin and Arnold Kanter. Boston: Little, Brown, 1973, 154–201. 39. Harvey Sapolsky, The Polaris System Development: Bureaucratic and Programmatic Success in Government. Cambridge, MA: Harvard University Press, 1972, 161. 40. Department of Defense Appropriations for 1962. Hearings before a Subcommittee of the Senate Committee on Appropriations, 87th Cong., 1st Sess. Washington, DC: Government Printing Office, 1961, 49. 41. Richard K. Betts, “A Disciplined Defense,” Foreign Affairs 86 (November/December 2007), 75–76. 42. News briefing by Gilbert W. Fitzhugh, Chairman, Blue Ribbon Panel, Pentagon, July 27, 1970, 4. 43. “Washington Talk: Department of Defense; From the Bureaucratic Buzzing, a Report with Sting,” New York Times, November 3, 1987. 44. Kurt M. Campbell and Michael E. O’Hanlon, Hard Power: The New Politics of National Security. New York: Basic Books, 2006, 93. 45. The failed Iranian-embassy hostage rescue effort under President Carter was also a reason for the Goldwater-Nichols Act. 46. Betts, “A Disciplined Defense,” 72. 47. Pat Towell, Stephen Daggett, and Amy Belasco, Defense: 2008 Authorizations and Appropriations. Washington, DC: Congressional Research Service, July 2007, 2. 48. “Weapons That Aren’t Ready Dot Bush’s War Budget,” Boston Globe, February 8, 2007. 49. Deputy Secretary of Defense, “DoD Transformation Priorities,” August 9, 2007. The document is no longer available on the DoD website. The text is in Jason Sherman, “DoD Sets 25 Goals, Many Launched by Rumsfeld, to end Bush Era.” Inside the Pentagon 23:1, 18–20, August 23, 2007.

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Further Reading Jones, Wilbur D., Jr. Arming the Eagle: A History of U.S. Weapons Acquisition since 1775. Fort Belvoir, VA: Defense Systems Management College Press, 1999. Koistinen, Paul A. C. Arsenal of World War II: The Political Economy of American Warfare: 1940–1945. Lawrence: University Press of Kansas, 2004. . Beating Plowshares into Swords: The Political Economy of American Warfare, 1606– 1865. Lawrence: University Press of Kansas, 1996. . Mobilizing for Modern War: The Political Economy of American Warfare: 1865–1919. Lawrence: University Press of Kansas, 1997. Millet, Allan R., and Peter Maslowski. The American War of War: A Military History of the United States of America. New York: Free Press, 1984.

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CHAPTER 2

The Current American Defense Acquisition Process

In the late 1940s, the newly independent Air Force was searching for a bomber to replace its World War II–era piston-engine aircraft. It turned to the Boeing Company to design an aircraft capable of carrying nuclear bombs over long ranges to potential targets thousands of miles away. When Boeing engineers presented a design for a bomber with straight wings and turboprops, Air Force officers demanded that they return to their Dayton, Ohio, motel room and start over, giving them the weekend to come up with something radically different. The result was the jet-powered, swept-wing B-52, one of the most successful planes ever bought by the U.S. military. The B-52 contract, signed at Wright-Patterson AFB, carried the names of Boeing representatives and Air Force officers, with the barely visible note in the margins “Symington says ok.” Stuart Symington was the secretary of the Air Force, and the cryptic note was the only indication of oversight beyond that of the military consumer. Those old days, though, hardly resemble the current defense acquisition system, the change reflecting the growing complexity of the weapons, the increasingly high political stakes involved in their purchases, and the layers of reform that have been applied to improve the process. It is probably fair to state that the current defense acquisition process is constructed on a foundation of distrust. How else to explain the extraordinary steps in the process, running from requirements specification to delivered product, or the large number of players in the process? Power is spread widely, across military services, their civilian overseers, Congress, other executive agencies (e.g., the Government Accountability Office, the Office of Management and Budget), defense contractors, and the political input of states and localities, which also benefit from influencing the choices about weapons. None of the parties fully trust the other parties. Congress, for example, distrusts the military to provide honest and reliable reports on its acquisition programs, while the military contends that Congress makes program-funding decisions with at least one eye aimed at electoral district and state jobs. The secretary of defense and the services often distrust

The Current American Defense Acquisition Process

one another, with the services viewing the secretary and the supporting secretariat bureaucracy as an impediment to service priorities, and the secretary sometimes believing that the services push acquisition programs as a means of furthering service, as opposed to national, goals and objectives. Secretary of Defense Robert Gates reflected that separation between secretary and service in 2008 when, in several public statements, he chastised the Air Force for pursuing its own priorities over delivering unmanned aerial vehicle support to the Army.1 This is not to suggest service selfishness, but rather a genuine disagreement on the best way to perform roles and missions in support of national objectives. American political tradition has long feared the concentration of power, and the power to make choices on weapons is considerable. With billions of dollars at stake and programs’ lives stretching into decades once they are approved, it is understandable that such authority is spread widely. Periodical efforts to centralize such influence under a so-called acquisition czar have met with raised eyebrows and efforts to water down the authority of such a position, because of fears that such a position could not only take power away from the far reaches of the acquisition galaxy but also make the holder subject to possible corruption and mismanagement. While there is now an undersecretary of defense for acquisition, technology, and logistics (USD [AT&L]), there are numerous other acquisition centers to dilute the power and authority of the USD (AT&L). In a way, the clash of perspectives between the need for centralized decision-making authority and the dispersion of acquisition influence across a wide political spectrum both inside and outside of the Pentagon is quite reflective of the larger American political paradox that both wants and fears political power in general. The following sections identify and analyze two parts of the defense acquisition system, the participants and the systems.

The Defense Acquisition System As noted in Chapter 1, the defense acquisition process failed Secretary Robert McNamara’s test of integration with the larger requirements and plans of the military, which resulted in McNamara’s imposition of PPBS—a process designed to integrate the three elements of planning, programming, and budgeting but without evaluating the results after systems passed through the process to final delivery. The consequences were that further modification, maintenance, and ultimately disposal were not initially included in the weapons procurement system. To remedy this, the Senior Executive Council (SEC) (consisting of the secretary of defense; the deputy secretary of defense; the undersecretary of defense for acquisition, technology, and logistics; and the secretaries of the Army, the Navy, and the Air Force) mandated an evaluation of the process in 2003, resulting in the issuance of the defense planning guidance (DPG), with directions for priorities from the secretary of defense, and a new title for the process: PPBE (planning, programming, budgeting, and execution). This system is the primary means of acquiring military weapons and equipment. It can be understood only

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by breaking it down into component parts, starting with the actors involved in the process.

Actors in the Current Process The list of players in the defense acquisition system reads like a who’s who of Washington and beyond. Some players are initiators, who draft military requirements and operate systems, specifically the armed services, or supply the military (defense contractors), but the majority are overseers who monitor the defense acquisition system for compliance with regulations or who grant or deny requests for funding (Congress).

The Military The term military includes the Office of the Secretary of Defense, the service secretariats, the Joint Staff, and the individual services. Title X of the U.S. Code specifically defines the Department of Defense (DoD) as consisting of the following: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Office of the Secretary of Defense Joint Chiefs of Staff Joint Staff Defense agencies Department of Defense field activities Department of the Army Department of the Navy Department of the Air Force Unified and specified combatant commands Such other offices, agencies, activities, and commands as may be established or designated by law or by the president 11. All offices, agencies, activities, and commands under the control or supervision of any element named in paragraphs 1–10.

The Office of the Secretary of Defense As noted in Chapter 1, Secretary of Defense McNamara strengthened the Office of the Secretary of Defense (OSD), believing that the services had too much power in shaping acquisition choices (see Chapter 4). The OSD staff expanded during and after the McNamara era, and its rise, built around systems analysis and other “objective” techniques to make procurement decisions, came at the expense of the military. A significant part of the OSD defense acquisition process is the Defense Acquisition Board (DAB) chaired by the USD (AT&L). The vice chairman of the Joint Chiefs of Staff also serves as the vice chair of the DAB, allowing for some coordination between the DAB and the Joint Requirements Oversight Council (see subsequent paragraphs). The DAB’s official function is to advise the USD (AT&L) on key acquisition decisions and to consult on general acquisition

The Current American Defense Acquisition Process

policy. Its membership consists of the undersecretary of defense, comptroller; undersecretary of defense for policy; undersecretary of defense for personnel and readiness; undersecretary of defense for intelligence; assistant secretary of defense for networks and information integration/DoD chief information officer; director, Operational Test and Evaluation; chairman, Program Analysis and Evaluation; the secretaries of the Army, the Navy, and the Air Force; and the director, Acquisition Resources and Analysis. In addition to its membership, the DAB has as official advisers the principal deputy USD (AT&L); the deputy undersecretary of defense for logistics and material readiness; director, Defense Research and Engineering; relevant OIPT (overarching procedures and assessment) leader(s); program executive officer; program manager; chair, Cost Analysis Improvement Group; director, Defense Procurement and Acquisition Policy; DoD general counsel; deputy undersecretary of defense for industrial policy; DoD component acquisition executives; commander, U.S. Joint Forces Command; and chair, Functional Capabilities Board(s). With such a varied membership and advisers, the DAB should never lack for input and advice, but the obvious problem is that, with so many members, decisions may be very difficult to reach, which increases the potential for compromised solutions. There are sub-bodies as well, including the Defense Science Board, which advises the principal deputy USD (AT&L) on the potential applications for science and technological developments for potential weapons use. The same is likely to be true for some of the boards below the DAB level. There is, for example, the Information Technology Acquisition Board, which decides on information technology acquisition issues that cannot be resolved by the appropriate integrated product team. The Information Technology Acquisition Board has for membership the deputy DoD chief information officer; the Information Technology Overarching Integrated Product Team leader; cognizant program executive officer(s) and program manager(s); cognizant OSD principal staff assistant(s); the undersecretary of defense, comptroller, the director of program budget, and deputy chief financial officer, the undersecretary of defense for personnel and readiness; the director, Operational Test and Evaluation; the director, Program Analysis and Evaluation; the director, Force Structure ( J-8); the component acquisition executives of the Army, Navy, and Air Force; DoD general counsel; the deputy director, Developmental Test and Evaluation; the director, Defense Procurement and Acquisition Policy; and DoD component user representatives. Information Technology Acquisition Board advisers include the undersecretary of defense for policy; the undersecretary of defense for intelligence; the domain owner; component chief information officers; the director of the Defense Intelligence Agency; the director of the Cost Analysis Improvement Group; the director of Defense Procurement and Acquisition Policy; representatives of the Joint Staff; the deputy undersecretary of defense for logistics and material readiness; the deputy undersecretary of defense for installations and environment; the deputy undersecretary of defense for industrial policy; the director of the International Cooperation; and the director of Acquisition Resources

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and Analysis. It is noteworthy that OSD membership is senior here, as it is with the DAB. The Defense Acquisition Executive Summary (DAES) process tracks cost, schedule, and problems in major defense acquisition programs. The DAES reviews a series of parameters for acquisition programs, including operational performance (how much variance from original goals), cost, funding status (deviation from original funding levels), testing results, systems engineering (to include integration of components, human engineering, safety issues, and such), and logistics, and supports after production. This latter step examines factors like declining manufacturing support as the system ages, spare parts availability, the nature of technical data (e.g., whether it is proprietary), and support equipment for continued maintenance. There is also the OSD’s Cost Analysis Improvement Group (CAIG), noted previously, which provides an independent cost estimate from the services on major programs. These cost estimates are a part of the data supporting each milestone decision, and the DAB often requests a CAIG analysis for its decisions. The CAIG also establishes guidelines for performing independent cost estimates, along with guidelines for the Contractor Cost Data Reporting System, which is a mandatory data system used by contractors that allows for uniformity across program cost analysis. The Joint Staff Jointness, as noted earlier, continues to be more important in the defense acquisition process. The Joint Chiefs of Staff emerged from the 1947 National Security Act, with the position of chairman created two years later. Further changes also came in 1949 as the service secretaries moved from the cabinet and under the secretary of defense, strengthening that office. In 1953 the chairman gained control over the Joint Staff, and more service secretaries (specifically functional service undersecretaries) were added to the secretariat, further reducing service influence. The 1958 defense reforms further increased the power of the secretary of defense, the Joint Staff was removed from the chain of command, and the services lost control over some functional responsibilities, like regional and functional commands (e.g., European Command, Strategic Air Command). The combined effect of these changes, coupled with the McNamara reforms, left the military, including the Joint Staff, with considerably reduced acquisition authority, and by the time of the Reagan administration, there were calls to restore some of the Joint Staff’s authority. The Joint Staff produces several significant documents, including the Joint Planning Document ( JPD), which advises the secretary of defense on programmatic and functional priorities in specific areas, and the Chairman’s Program Assessment (CPA), which evaluates service capabilities from the Program Objective Memorandum (POM) (see subsequent paragraphs) with national defense priorities. The Goldwater-Nichols legislation strengthened the Joint Staff’s role in defense acquisition, including adding the structure for the Joint Requirements Oversight Council ( JROC). This legislation, discussed in Chapter 6, represented one of the

The Current American Defense Acquisition Process

most significant reorganizations of the Defense Department since 1947. While its impact has been most pronounced at the military operations level, it has also had considerable impact on defense acquisition. The Joint Requirements Oversight Council The JROC oversees the defense acquisition process from start to finish, beginning with a review of service justifications and continuing with reviews of costs and scheduling. The JROC dates back to the Goldwater-Nichols Act and has evolved since its inception. During the Clinton administration, the JROC was linked more closely to the CPA, which the Joint Staff generates as an alternative to service-generated POMs. Specific functions of the JROC are to “determine and oversee the processes and methods to be used in identifying, developing, assessing, validating, and prioritizing joint requirements.”2 The vice chairman of the Joint Chiefs of Staff chairs the JROC, whose members consist of the vice service chiefs. In 2001, the Joint Chiefs of Staff designated the JROC as an advisory council to the CJCS (see subsequent paragraphs). The JROC reviews all ACAT (Acquisition Category) I defense programs, although, at its discretion, the JROC may also review ACAT II programs, an appropriate caveat since some ACAT II programs have a significant impact on ACAT I counterpart programs. This is true of munitions, for example, whose development must correlate closely with their appropriate weapons launching platform. It is also true for maintenance acquisition programs, which must link to the platform they will service. The JROC assessment allowed a single military input to the secretary of defense, but to produce the JROC-CPA, the JROC staff was reconfigured to allow for nine different assessment areas.3 The JROC reviews use the nine categories to consider major acquisition programs.4 The main organizing concept is clearly requirements, which come to the JROC from the services and the combatant commands.5 The JROC does have institutional problems, as cataloged by the then JROC chair Admiral E. P. Giambastiani: unrealistic requirements (reflecting assumptions that technology will grow to meet the desired requirement) and requirements creep, which occurs when the specified technology grows faster than the ability to produce it, which results in late and overpriced programs.6 To address the problem, the JROC is attempting to link requirements to the joint concept of operations ( JCO), which has four categories: major combat operations, stability operations, homeland defense, and strategic deterrence. Such categories may improve the requirements evaluation stage for a proposed program, but they can also add delay and cost to them. It is not surprising that sometimes program supporters try to push their program into the milestone step system before gaining JROC approval. For example, the DoD inspector general found that the Army officials requested $32 million for low-rate initial production of the objective individual combat weapon (OICW) before obtaining war-fighter requirements from the JROC, and Congress accordingly eliminated funds for the program.7

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The JROC also has jurisdiction over program service ownership, which makes it referee of the traditional roles and missions debates discussed in Chapters 1 and 4. In many cases ownership is clear by mission (e.g., the Navy and Marine Corps own carrier aviation), but the JROC does pass judgment on overlapping programs. Thus, when the Air Force wanted to be the executive agent for a substantial number of unmanned aerial vehicle (UAV) programs, the JROC refused its request in 2005, though the Air Force renewed its request two years later. The JROC also refused to approve the Joint Forces Command’s Experimental Joint Program because of “confusion among the Joint Staff and the Joint Forces Command about a proposed change in guidance that required additional data (on costs and timelines) be included when submitting these recommendations.”8 While JROC oversight is generally limited to reviews, with actual program control by the operating services, there is at least one case in which the JROC retained programmatic control over a significant program: mine-resistant, ambushprotected (MRAP) vehicles. The justification was that the JROC believed that the services might add new requirements to the system that might delay production.9 The Services The armed services were once organized around two pillars: the Department of War (Army) and the Department of the Navy. That all changed as a result of the 1947 National Security Act, and the system is vastly more complicated, including the following: r The U.S. Army, responsible generally for land combat acquisition, including heavy vehicles, and for the air systems to support land combat, including a large class of helicopters.

r The U.S. Navy, responsible for sea and sea-based combat, including major naval ships (combat and combat support), along with support of the U.S. Marine Corps, which is a part of the Navy Department. Thus, the Navy supplies the Marine Corps directly with weapons (e.g., armored vehicles, ammunition) and indirectly with assault ships to carry the Marines to the battlefield. r The U.S. Air Force, responsible for air combat and support, along with a major component of military space support, including combat and combat support systems. r The National Guard, responsible directly in peacetime to state governors, though the guard may be federalized upon presidential order. The National Guard is actually two components: the National Guard, affiliated and supplied by the Army, and the Air National Guard, affiliated and supplied by the Air Force (the Navy does not have an associated guard unit).

The services have their own acquisition branches, which process service requirements through service acquisition processes. Army acquisition is centralized in the office of the undersecretary of the Army for acquisition, logistics, and technology (UA [AL&T]). The Army also has its acquisition corps, managed by the U.S. Army Acquisition Support Center, which support program executives in their missions, along with the AL&T workforce of more than 55,000 military and civilians. The Air Force has the Office of the Assistant Secretary of the Air Force for Acquisition, along with acquisition “Centers of Excellence” located both

The Current American Defense Acquisition Process

in the secretariat of the Air Force and at field centers. The Air Force Materiel Command, headquartered at Wright-Patterson AFB, has direct responsibility for testing and acquiring Air Force weapons and equipment. In the Navy, acquisition is centered through the assistant secretary of the Navy for research, development, and acquisition, along with the naval systems commands, including Naval Air Systems Command, which manages air weapons; Naval Sea Systems Command, the manager for ship programs; and Space and Naval Warfare Command, which is responsible for space and information programs. A chief service responsibility is the development and issuance of POMs, which are compilations of overall service objectives and requirements to meet those objectives. The POMs include a time-phased allocation of resources (forces, funding, and manpower) by program, projected six years into the future, though in actuality the time span is considerably shorter. The POMs then represent service programmatic and budgetary requirements, which go to the joint process for adjudication.

Congress The U.S. Congress is empowered to authorize and appropriate all monies for national defense. Congress has significant roles to play in the defense acquisition process (the political role of Congress is covered in Chapter 4), including oversight of all defense programs, investigative powers, lawmaking (including laws affecting defense acquisition), and, most important, budgetary approval. Congress may investigate any of the Defense Department activities, including issues with acquisition. The problem for Congress, though, is that it has neither the mandate nor the will to shape national strategy, so instead its investigations and its budgetary oversight and approval process focus on details rather than overall strategic requirements. Congress also tends to be reactive rather than proactive; thus, congressional investigations tend to stem from media attention to a problem or the perennial “Washington insider” reports about problems, and so on. Congress is also hampered by lack of information, because its ability to gather and process information critical to military affairs pales in comparison to that of the Defense Department. Congress has tried to improve its lack of information by creating such support entities as the Congressional Budget Office (CBO, created in 1974), and enhancing the General Accounting Office (GAO, later renamed the Government Accountability Office) and the Congressional Research Service. Congress also created the Office of Technology Assessment in 1972, but the new Republican majority in Congress abolished the office in 1995. Still, despite the creation of information processing by Congress, its primary sources of information continue to be the Defense Department and the thousands of lobbyists who specialize in defense issues for their clients. The heart of congressional power and influence is in the committee system, which is organized by function. Military issues are channeled to the functional

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armed services committees in both the House and the Senate. While those committees can and do hold hearings on a number of military issues, their primary function is to approve the defense budget. Congressional budget authority begins with a congressional budget resolution, as required by the Congressional Budget and Impoundment Control Act of 1974, to cover the subsequent five fiscal years. The measure, in response to the president’s budget request submission in February, is supposed to be approved by April 15, but Congress rarely meets that deadline, and for fiscal years 1999, 2003, and 2005, Congress never did pass a budget resolution, largely because of interparty wrangling. Instead, Congress usually passes a continuing resolution, approved by both chambers, which allows the designated agency to continue to spend appropriated funds at current levels until Congress finally passes the appropriation. The consequence is that there are no guidelines on such things as budget ceilings, and the president’s budget request carries even more authority than it might otherwise. House Committee on Armed Services The House Committee on Armed Services, like other functional committees, is a legislative committee, responsible for matters particular to national defense. According to House rules, “The Committee retains jurisdiction of all subjects listed in clause 1(c) of rule X of the Rules of the House of Representatives and retains exclusive jurisdiction for: defense policy generally, ongoing military operations, the organization and reform of the Department of Defense and Department of Energy, counter-drug programs, acquisition and industrial base policy, technology transfer and export controls, joint interoperability, the Cooperative Threat Reduction program, Department of Energy nonproliferation programs, and detainee affairs and policy.”10 The House committee is divided into the following subcommittees: r r r r r r r

Air and Land Forces Readiness Terrorism, Unconventional Threats, and Capabilities Military Personnel Strategic Forces Seapower and Expeditionary Forces Oversight and Investigations

These subcommittees hold the original hearings for the specialized parts of the overall defense budget request, so the Subcommittee on Seapower and Expeditionary Forces examines the budget requests from the Navy and Marine Corps for their acquisition programs, and the Subcommittee on Air and Land Forces considers budget requests for military aircraft, land combat systems, and so on. The hearings begin with a presentation by the responsible service leaders that outlines their overall budget request, which is followed by questions from the committee members. Often the professional committee staff prepares the questions after a

The Current American Defense Acquisition Process

staff examination of the service budget requests, reflecting the power of the committee staffs. The House Committee on Armed Services also has mandated itself the power of oversight on budget and program management. It claims that it will pay particular attention to the mandates placed on executive departments and agencies by the Government Performance and Results Act of 1993 (Public Law No. 103-62), as well as consider how well the Defense Department uses performance-based budgeting techniques and five-year strategic-planning documents for its programs. This particular task falls initially to the Subcommittee on Oversight and Investigations. The House Armed Services Committee first approves budget amounts at the subcommittee level, then those decisions move to the full Armed Services Committee, which again votes on the Defense Department requests. Those figures then go to the full House of Representatives, where again the members vote on the committee decisions. The House Committee on Appropriations The House Committee on Appropriations is required to give final authority to spend federal dollars. It draws its authority from the U.S. Constitution, Article I, Section 9, which states, “No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” The executive branch, including the Defense Department, may not spend money until the congressional appropriations process has approved the specific funds to be paid from the Federal Treasury. As in the case of legislative committees, the House Committee on Appropriations has subcommittees to do its specialized work, including its Subcommittee on Defense. That subcommittee holds hearings on annual defense budget requests, which are often similar to those held in the House Committee on Armed Services subcommittees, almost always starting out with the same witnesses from the Defense Department to present justifications for their requested programs. As in the case of authorizations, the subcommittee renders its budgetary decisions, and then sends the requests to the full House Appropriations Committee, where members then have a chance to add amendments, vote on the bill, and then send it to the full House, where again votes are taken. The Senate Committee on Armed Services The Senate Committee on Armed Services plays a role similar to the House Committee on Armed Services as the entry point for defense measures into the Senate. It holds hearings and initiates legislation on a variety of defense issues, but one of its primary functions is to consider the Defense Department’s annual budget requests. The Senate Committee on Armed Services is also divided into functional subcommittees: r Airland r Emerging Threats and Capabilities r Personnel

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r Readiness and Management Support r Seapower r Strategic Forces The subcommittees take testimony from Defense Department witnesses, and then vote on the items in the department’s request, passing on their decisions for the full Senate Committee on Armed Services, which then votes again and passes its decisions on to the full Senate, where the committee decisions are subject to the final Senate vote. Normally the Senate passes a substitute amendment to each House spending bill, and differences between House and Senate figures must go through the conference committee process. The Conference Committee Process The conference committee process resolves differences between the House and Senate authorizations and appropriations processes. Each process has a conference committee composed of selected members of House and Senate committees. The guidelines specify that each chamber establishes the floors and ceilings, and that the compromise budget amounts should be between those figures and neither exceed nor drop below them, though the negotiators do not always follow those guidelines. Then both the House and Senate must again ratify the conference decisions, before they are sent back to the president for signature or veto. The House normally considers the conference reports first because it usually is the first chamber to consider budget requests. Once the president receives the bill, he or she has ten days to either sign or veto the total bill. All of these decisions are supposed to be completed before the start of each fiscal year in October. However, in the past 30 years, Congress and the president have not achieved a final measure, and thus federal activities (including defense activities) had to be funded by continuing resolutions passed by both chambers of Congress to allow funding at previous fiscal-year levels until agreement could be obtained on the fiscal year at issue. That causes consternation in the Department of Defense, but in actuality the acquisition process continues along even if no budget agreement continues (except for once, in 1995, was there no final appropriation because of a dispute between congressional Republicans and President Clinton that briefly shut down some federal functions). More significant, congressional actions allow but rarely challenge programs, in comparison to the actions in the OSD. While Congress can and does either increase or decrease funding levels, the secretary of defense not only has not initiated larger budget changes but also has killed off entire acquisition programs. In contrast, Congress has almost never completely eliminated a major acquisition program. One of the very few exceptions was the “dense pack” basing mode for the controversial MX intercontinental ballistic missile, which Congress voted down after the chairman of the Joint Chiefs of Staff acknowledged that he did not really understand how the program was to work.

The Current American Defense Acquisition Process

Defense Contractors As is discussed in Chapter 3, defense contractors have grown in both number and in political stature since World War II. At present there are thousands of defense contractors, ranging in size and income from some of the top companies in the United States to small operations barely out of the backyard garage. While there are fewer large defense companies than there were during World War II, the companies remain powerful actors in the defense acquisition system. They are so important that Chapter 3 is devoted to covering defense contractors and their place in the defense acquisition system.

Independent Oversight Agencies As the United States organized production for World War II, the War and Navy departments created a number of independent boards to facilitate war production (see Chapter 1), so the tradition of independent bodies overseeing defense procurement is not new. But the mission of World War II boards generally was to expedite wartime production, while the duty of independent monitoring agencies is to ensure veracity, efficient production, and compliance with federal and other laws regarding government contracting. There are a number of agencies or subagencies with defense acquisition oversight, including the following. Government Accountability Office Congress chartered the Government Accountability Office as the General Accounting Office in 1921 as an independent, nonpartisan branch of government to fill a need for better accounting of the large increases in the federal budget generated by World War I spending. Its primary mission up through World War II was to check government vouchers, but after the war, the GAO expanded into more comprehensive audits of federal expenditures and ultimately into program evaluation. It began its defense missions by auditing World War II contracts, finding, to the dismay of the comptroller general, considerable fraud, and expanded them in 1955 by creating a defense division within the GAO. Comptroller General Elmer Staats realigned the defense division into functional units, such as manpower, procurement, supply management, management control systems, and so forth, with the division becoming the Defense Auditing and Accounting Division (DAAD). In 1981–1982, the GAO expanded again to include the National Security and International Affairs Division, and its overall role increased to cover general budget issues and governmental shortcomings, with a special emphasis on defense system performance.11 In July 2004, the GAO changed its name to the Government Accountability Office. Its coverage of defense issue oversight is vast, issuing reports on personnel and pay systems, cost growth in weapons programs, military base closures, and hundreds of other areas. It briefs Congress on a regular basis, and it boasts that its recommendations bring a $105 return for each dollar spent on GAO operations.

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The GAO can also issue legal opinions. The GAO can rule on contract award decisions, as it did in early 2007 when two rival contractors, Lockheed Martin and Sikorsky, contested the Air Force’s award for a search-and-rescue helicopter to Boeing. The GAO upheld the protests, deciding that the Air Force failed to evaluate properly the life-cycle costs of the three helicopters and requiring that the service issue a new proposal request.12 In 2008, Boeing’s protest of the Air Force award to European Aeronautic Defence & Space (EADS)–Northrop Grumman for a replacement tanker aircraft also went to the GAO for adjudication. Department of Justice The Department of Justice has several areas of defense procurement oversight. It has the authority to investigate government fraud and to oversee policies on anticompetition, which often involves mergers of defense firms. The Department of Justice also enforces all federal laws and ensures that all federal agencies, including the Defense Department, are in compliance with those laws. The Justice Department created the National Procurement Fraud Task Force (NPFTF) in October 2006 to investigate and prosecute cases of government procurement wrongdoing, including defense areas through its National Security Division. The NPFTF is also responsible for making recommendations to change the federal acquisition regulations to build more safeguards against government fraud. Some of those recommendations result in congressional legislative changes to the Federal Acquisition Regulations (FAR), as happened in April 2008, when the House Oversight and Government Reform Committee passed the Close the Contractor Fraud Loophole Act, introduced by Representative Peter Welch (D-VT). The measure would require federal contractors to notify the contracting agency’s inspector general in writing if the company thinks that it may have violated federal criminal law or was overpaid erroneously. The NPFTF also investigated and prosecuted contracting fraud relative to the military actions in Iraq and Afghanistan, ranging from theft of government classified information to bribery and diverting government items for personal use.13 General Services Administration The General Services Administration (GSA) assists federal agencies in managing acquisition contracts and is the federal landlord over property and government vehicles. While the GSA has been working with the military since the 1940s, legislation signed in November 2007 increased GSA oversight of defense contractors. The legislation stated, “DoD has increasingly relied on private sector contractors, but it has not provided sufficient management oversight of its contractors . . . The conferees encourage the Department of Defense to increase its use of GSA Acquisition Services for its contracting in appropriate instances.”14 This effort will reinforce the collaboration that already exists between DoD and the GSA on contract administration. That cooperation has not always gone smoothly, though. While the new push for more DoD-GSA collaboration received support from some members of Congress (Representative Jim Moran [D-VA] said, “We want to free DOD contractors up to do more

The Current American Defense Acquisition Process

inherently defense-related work. . . . Clearly, there’s a need for [GSA’s] expertise in this area”), the DoD inspector general’s report was more critical, reporting that the Defense Department wasted $607,000 in enlisting assistance from the GSA’s Office of Assisted Acquisition Services in placing 91 orders on the Air Force’s so-called network-centric solutions. The Defense Department’s inspector general said officials should have used DoD’s resources to handle the work and put the money paid to GSA to better use supporting war fighters. “GSA was not a best business practice since options were available within DOD at a lower cost.”15 The GSA’s Jim Williams responded in a statement: “I don’t think they understood the facts. . . . For somebody to make that kind of statement is so dead wrong.”16

The Defense Acquisition System The actors noted previously have worked in a highly complex phased system, with many parts, and have made an effort to coordinate and control the elements through the PPBE system.

The Planning, Programming, Budget, and Execution System The PPBE system continues the effort started in the 1960s to integrate planning (for future needs), programming (allocating requirements for these needs to defense programs), budgets (the actual dollar figures requested and approved for programs), and execution (the introduction, maintenance, modification, and retirement or disposal of systems). The PBBE system is structured around a twoyear budget cycle, where DoD plans and programs for a two-year time frame and uses off years (odd-numbered years) as a benchmark to evaluate the execution of previous programs. The phasing of the process both initiates and is guided by several key documents. The Initial Documents Planning is designed to link American national security interests (relatively unchanging) and external threats to those interests, which may change, but gradually over time. Thus, the process starts with the issuance of the National Security Strategy (NSS) of the United States, which the president is required by law to issue in the first year of each term. The National Security Strategy. The first purpose of the NSS is to identify primary interests, which are long-standing foundations of the republic, including the protection of national sovereignty, access to international markets, protection of Americans at home and abroad, and the safeguarding of American “values.” American values can often be defined in ways that resemble the work of an advertising agency, as noted in the latest NSS from the George W. Bush administration: In the twenty-first century, only nations that share a commitment to protecting basic human rights and guaranteeing political and economic freedom will be able to unleash the potential of their people and assure their future

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The Process and Politics of Defense Acquisition prosperity. People everywhere want to be able to speak freely; choose who will govern them; worship as they please; educate their children—male and female; own property; and enjoy the benefits of their labor. These values of freedom are right and true for every person, in every society—and the duty of protecting these values against their enemies is the common calling of freedom-loving people across the globe and across the ages.17

Other administrations have crafted equally lofty language, though it rarely has a real bearing on the defense acquisition process or other elements of national security decision making. The NSS is a general statement, nuanced by the lack of certainty about pending threats (e.g., no NSS predicted the September 11, 2001, terrorist attacks) and massaged by the public affairs shops in the White House that try to make it more palatable than the classified drafts (in 1992 then defense secretary Cheney’s draft Defense Planning Guidance calling for the United States to prevent the rise of peer competitors was quickly withdrawn once it was leaked). Still, the defense acquisition process starts officially with the issuance of the NSS. The National Defense Strategy of the United States. This document originates in the Office of the Secretary of Defense, and the most recent as of this writing is dated March 2005 under the signature of the former defense secretary Donald Rumsfeld. It presents the basic principles of national defense (e.g., defense of the homeland first, secure global access, retain global freedom of action), along with guidance on force structure, including the following: Active, layered defense. We will focus our military planning, posture, operations, and capabilities on the active, forward, and layered defense of our nation, our interests, and our partners. “Continuous transformation.” We will continually adapt how we approach and confront challenges, conduct business, and work with others. Capabilities based approach. We will operationalize this strategy to address mature and emerging challenges by setting priorities among competing capabilities. Managing risks. We will consider the full range of risks associated with resources and operations and manage clear tradeoffs across the Department.18

The key notions in this document are the emphasis on continuous transformation and capabilities-based approach. Transformation, as noted in other chapters, became a Rumsfeld mantra, as it has under different names in previous administrations. The capabilities-based approach refers to goals based on military goals rather than on threat-based force structure. Such an emphasis gives more leeway to force planners to set goals based on known capabilities (e.g., air and sealift capabilities, aircraft carrier capabilities), rather than try to base force structure on potential enemy capability and intentions, as was so often done during the Cold War.

The Current American Defense Acquisition Process

The National Military Strategy. The chairman of the Joint Chiefs of Staff issues the National Military Strategy (NMS), which is designed to implement the principles of the “National Defense Strategy of the United States,” issued by the secretary of defense. According to the 2004 NMS, its objectives include protecting the United States against external attacks and aggression, preventing conflict and surprise attacks, and prevailing against adversaries. Such objectives are hardly surprising and would be the minimal expected in any defense guidance document. The NMS also defined the idea of joint operating concepts ( JOCs), which for 2004 included “force application, protection, focused logistics, battlespace awareness and command and control.” The NMS did not define how the JOC differed from other, more traditional and standard warfare techniques, however. Perhaps the more useful aspect of the NMS was its emphasis on nontraditional adversaries for the United States, which included not only the stateless terrorist threat (though the NMS is quick to point out that states sometimes sponsor terrorists) but also international criminals and “illegal armed groups,” though such groups were not identified. Partly because of such groups, and because of failed or opponent states, the NSS argued that “there exists an ‘arc of instability’ stretching from the Western Hemisphere, through Africa and the Middle East and extending to Asia.”19 Notably, the NSS did not include Russia and Southeast Europe in its “arc of instability.” Given the authorship of the NMS, it is hardly surprising that it would emphasize jointness. But the NMS does not clearly delineate what jointness really means, instead describing the joint force attributes as including “fully integrated, expeditionary, networked” and so on, but not really explaining how such things as networked apply to jointness. It does not specify what forces are needed to accomplish such attributes. It also does not fill out force structure for the force design requirements, specifically to “defend the homeland, deter forward in and from four regions, and conduct two, overlapping ‘swift defeat’ campaigns. Even when committed to a limited number of lesser contingencies, the force must be able to ‘win decisively’ in one of the two campaigns.” It only states that “this ‘1-4-2-1’ force-sizing construct places a premium on increasingly innovative and efficient methods to achieve objectives.”20 The Quadrennial Defense Review. The third document shaping the defense acquisition system is the Quadrennial Defense Review (QDR), required by Title X, section 118, of the U.S. Code, and drafted by the secretary of defense in consultation with the Joint Chiefs of Staff. Congress demanded that the Defense Department produce some type of defense review, a stipulation reflecting congressional frustration over the lack of managerial or budgetary oversight from the Pentagon. As its name indicates, the QDR is to be produced every four years by the Department of Defense, to be sent to Congress in the second year of the administration. The QDR process requires the Defense Department to consider its priorities and resources for meeting those priorities. Consider the language of the 2006 QDR issued by the Bush administration: “This QDR defines two fundamental

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imperatives for the Department of Defense: Continuing to reorient the Department’s capabilities and forces to be more agile in this time of war, to prepare for wider asymmetric challenges and to hedge against uncertainty over the next 20 years, [and I]mplementing enterprise-wide changes to ensure that organizational structures, processes and procedures effectively support its strategic direction.”21 The 2006 QDR also lays out specific objectives. For example, in the section marked “joint mobility,” the report notes, “[New joint mobility capabilities] will underpin the transition from a Cold War–era garrisoned force to a future force that is tailored for expeditionary operations.”22 That is a significant transition for a military that used large overseas bases during the Cold War to mount its operations. The military of the future, according to the QDR, will rely more on new transport aircraft and ships to move personnel and equipment from the United States proper to theaters of war, and the 2006 QDR noted both progress and future steps to meet this objective. Such official statements of both objectives and requirements are a step beyond the more informal defense planning and objectives process that often lacked precision. Still, in the words of one critic, “Overall, the 2006 QDR fell far short of its objectives. Rather than being a ‘fulcrum of transition to a post-September 11 world’ . . . the QDR made only a few significant adjustments to the U.S. defense program.”23

The PPBE Cycle The PPBE process is run on a biannual cycle, with even fiscal years considered “on years” and odd fiscal years considered “off years.” The real action occurs during the on years and is scripted by months. Both the OSD and JCS begin their cycle in January, running through May, while the services initiate their program and budget phases in March. The planning phase is to produce the “Joint Planning Guidance” by June, while the services put forward their POMs and Budget Estimate Submission (BES) by mid-August. At that point, the JCS and the services are supposed to resolve outstanding issues (often disagreements over how to split the budget or other areas of contention, and the consequence is a Program Decision Memorandum). The budget process is to conclude with a Program Budget Decision, also a product of intense compromise. The execution review begins in August and runs to the end of November. Off years are largely review years for on-year decisions, with Program Change Resolutions advancing by midyear and a budget submission to the Office of Management and Budget by the end of the calendar year. If the biennial process is not complex enough, there is also a four-year cycle corresponding to the presidential term, where Year 1 (review and refinement) involves the new NSS and budget and program refinement from past years, Year 2 is the QDR year along with the on-year defense cycle, Year 3 is the execution of guidance, and Year 4 has been called “insuring the legacy,” though exactly what the legacy is remains weakly defined at best. All of these combined processes are easy to diagram on a yearly calendar, but they rarely work this way in practice. In reality, all phases of the PPBE system

The Current American Defense Acquisition Process

are engaged all the time, often behind their deadlines as difficult issues elude resolution. The Planning Phase. The planning phase officially begins around 16 months before a designated fiscal year, though informally it may stretch much longer. It draws from the NSS, the NMS, and input from the top ranks of the defense department, including combatant commanders. The combatant commanders include the commands both regional (Central Command, European Command, Pacific Command, Southern Command, and Africa Command) and functional (Special Operations Command, Strategic Command, Joint Forces Command, and Transportation Command). The planning phase also brings in the Joint Capabilities Development System ( JCDS), which is designed to introduce jointness at the beginning of the PPBE process. The planning part of the PPBE produces three key documents: 1. Strategic Planning Guidance—which is issued early in the process to provide overall policy and strategy guidance. 2. Major Issue Analysis—a combined OSD and JCS examination of major issues and performance metrics to measure success in achieving the programmatic goals. 3. Joint Programming Guidance—the final document of the planning process, issued in even-numbered years by OSD and containing fiscally constrained programmatic guidance and performance measures. The JPG drives the development of the POMs and the BES.

The planning time horizons are complex at best. The services must forecast out several decades as they plan for new programs and requirements, knowing that such forecasts have been quite wrong in the past. The Air Force planned the F-22 fighter during the Cold War on the basis of Cold War requirements, but it did not go into production until many years after the Cold War ended. None of the services anticipated the protracted conflicts in Afghanistan and Iraq prior to September 11, 2001, and as of 2008 they continued to wrestle with adapting and planning on the run. Thus, a safer road to service planning is to plan for a continuation of the present, allowing for only incremental changes. In the early 2000s, the services could project their current projects into the future, but because those projects (the Army’s Future Combat System, the Navy’s heavy warships, and the Air Force’s F-22 and F-35 aircraft) were more appropriate for a conventional war with another great power (e.g., a combative China or Russia), they continued to plan for a conventional conflict in the future. That prompted Secretary of Defense Robert Gates to argue, “I have noticed too much of a tendency towards what might be called next-war-itis—the propensity of much of the defense establishment to be in favor of what might be needed in a future conflict. . . . [T]he kinds of capabilities we will most likely need in the years ahead will often resemble the kinds of capabilities we need today.”24 On the other hand, previous secretaries of defense have not always correctly forecasted the future (none of the Reagan-era secretaries of defense predicted the end of the Cold War), so their challenges to

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service planning documents are sometimes more a question of control than of correction. Thus, there is also pressure to plan for the worst set of unknowns because the worst outcome is to be caught unprepared. So planners must sometimes push unlikely scenarios to justify weapons, because even if an outcome is improbable, the consequences of its occurrence would be dire. Thus, for example, the F-35 joint strike fighter ( JSF), a very expensive $170 billion program, finds justification in its potential ability to deter China from attacking Taiwan, although such an attack would be very risky for China, which enjoys the flow of considerable investment into China.25 The Programming Phase. The programming phase takes the guidance from planning and attaches it to specific defense programs. It uses the POMs issued in the planning phase to develop and sustain programs, which are to provide for four years beyond the budget year for cost and manpower, and seven years beyond the budget year for forces. The programming phase also considers what are called Program Change Proposals (PCPs), which come in off years to change previous program baselines; for example, PCPs were issued to respond to the rash of improvised explosive devices in Iraq. Reviews of POMs occur at senior levels within the Defense Department, with final reviews at both OSD and JCS. The secretary of defense review completes the process, with issuance of the Program Decision Memorandum (PDM). The Budgeting Phase. The budgeting phase puts money in programs, but it is about more than just funding. Budgeting decisions reflect not only prices but also phasing of spending decisions and the impact on the overall budget for both the Defense Department and the larger federal budget. The primary document here is the BES. Budget estimates stem from fiscal guidance in the POMs and from the prior, current, and two subsequent fiscal years (so the fiscal 2003 estimate would come from fiscal 2001 and 2002, plus 2003 and projected 2004). The most solid data come from previous years, and, given the tendency to budget incrementally, the previous two years provide the most reliable guidance. Once departments complete their budget requests, they work through the chain of command to the undersecretary of defense, comptroller, for review. In odd-numbered off-budget years, Defense Department components submit Budget Change Proposals (BCPs) instead of a BES. The budget estimates and submissions are probably the most important and most contested parts of the PPBE. Unlike plans and programs, which remain relatively fixed over time, budgets may vary considerably, particularly in times of war or peacetime military buildup. They also represent something tangible that services and elements outside the Defense Department can fight over because they can clearly see the stakes. It is not only about actual money. A small cut in the budget can signal a losing of mission or of priority in the Defense Department hierarchy. Defense budgets can also generate intense debate outside of the Defense Department. For example, Congress rarely holds much debate over plans or programs, but every year it engages in intense deliberations over the size and divisions of the defense budget. It is hardly surprising, then, that the budget phase

The Current American Defense Acquisition Process

of the PPBE receives the most careful review. The primary review (known as the “Fall Review”) is done jointly by the Defense Department and the Office of Management and Budget and comprises the budget review, which addresses two years in the even-numbered on-budget year review and one year in the odd-numbered off-budget year review. The review is exhaustive and includes calculations and estimations of inflation, accuracy of estimates, and other factors that could affect the final numbers. The Execution Phase. When the president signs the defense appropriations bill, the execution phase begins, though it must be thought of as a continuing cycle. Appropriations are done by categories, so when the president signs off on appropriations, what is really approved is money in seven categories: r r r r r r r

Research, development, testing, and evaluation Procurement Shipbuilding and conversion Operation and maintenance Military personnel Military construction Defense working capital fund

The Office of Management and Budget authorizes funds to the Defense Department, and the keeper of the funds, the Defense Department comptroller, grants the services and defense department agencies the authority to obligate funds for purchases. Each new approval authority also initiates a program review to ensure that the contracts are executed legally and properly, and that the designated programs meet their performance objectives. Is the Complexity Necessary? The PPBE process moves billions of dollars into authorized funds to support the missions of the Defense Department, creating hardware, services, profits, and jobs for millions of people in and outside of the department. It is complicated for many reasons: it has to respond to wrongdoing within the system, and it has to manage the increased complexity of defense systems and the multitude of actors who build, operate, and maintain them. But has it become so cumbersome that its very inertia slows down the overall defense acquisition process? Has it limited the understanding of its processes to only a handful of experts who have a vested interest in it? Most significantly, has it resulted in more responsive programs, delivered on time and meeting specifications once they arrive? The language of these and thousands of other documents seems designed to ward off anyone but those read into the system, and sometimes meaning disappears in a long list of adjectives—for example: This instruction is based on the need for a joint concepts-centric capabilities identification process that will allow joint forces to meet the full range of military operations and challenges of the future. According to the

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The Process and Politics of Defense Acquisition CCJO, meeting these challenges involves a transformation to a knowledgeempowered, networked, interoperable, expeditionary, adaptable/tailorable, enduring/persistent, precise, fast, resilient, agile, and lethal joint force (reference g).26

It is difficult to argue that such language provides meaningful guidance or adds much to the process. Instead, the word choices seem to cover all contingencies, just in case some investigator were to ask whether forces were, for example, really “adaptable/tailorable.” Some cynics might argue that the PPBE documents are purposely vague and complex to keep out the outsiders and to keep the process confined to the inner circle of acquisition professionals. It is more likely, though, that the unwritten rules of the process reward inclusiveness over omission, even to the point of incomprehension. Linking the System Together There are three processes involved in supporting military requirements: the requirements generation process, the acquisition system, and the PPBE. While PPBE linked planning, programming, budgeting, and execution, it simply took service and joint requirements into its process. Linking these processes together to create a relatively seamless process from requirements to final purchase is the task of a relatively new element, the Joint Capabilities Integration and Development System ( JCIDS), created in 2003 and modified in 2007. JCIDS replaced an earlier decades-old system called the Requirements Generation System (RGS), which emphasized a threat-based set of requirements more appropriate to the Cold War. The JCIDS attempted to shift the requirements definition process from threat-based to capability-based requirements, predicated more on the National Military Strategy than the more vague threats of the post–Cold War period. Rather than a board with membership, JCIDS is a process that is intended to link together requirements, PPBE, and acquisition. The JCIDS starts with a capability-based assessment (CBA), which is based on an existing Joint Operating Concept ( JOC), Joint Integrating Concept ( JIC), or concept of operations (CONOPs). All of this is intended to identify weapons and systems capability, as well as shortfalls in that capability. This input into the JCIDS comes from the Joint Requirements Oversight Council ( JROC), chaired by the vice joint chief of staff (who also cochairs the Defense Acquisition Board), with the vice chiefs of staff for the services as members. The JROC approves (or, in rare cases, disapproves) the Joint Capabilities Document ( JCD) or an Initial Capabilities Document (ICD), which are the results of a CBA analysis. The task then shifts to the service responsible for providing a particular capability need identified by a JCD or ICD, which leads to a Capabilities Development Document (CDD) that specifies the technical performance requirements of a particular weapon that should meet the criteria identified by the JCD or ICD (e.g., speed of sound, range, rounds per minute). When the JROC approves a CDD, that document is critical in initiating a milestone program initiation (explained in subsequent paragraphs).

The Current American Defense Acquisition Process

Jointness Jointness as an idea has existed in the U.S. military since World War II, and the Goldwater-Nichols legislation finally signed in 1986 has induced change to the entire way that the Pentagon does business, or at least it would seem that way.27 Jointness starts at the top, with a significant emphasis on the services’ ability to integrate its efforts in joint planning and operations. This push, following Goldwater-Nichols, spawned a series of joint documents calling for joint doctrine, joint training, and, it would follow, joint acquisition. That effort started with the JROC, made up of the deputy service chiefs. The JCIDS, noted previously, supplemented the JROC. Critics argued that the JROC process started too late in a weapons development cycle, and that the services had learned how to play the JROC system so that almost all major programs received JROC approval. The JCIDS was supposed to provide strategic-level guidance through the development of joint war-fighting concepts, to be supported through what are called “functional capability boards,” including such force development areas as command and control, force application, joint training, net-centricity, and such. The boards are intended to identify capabilities that joint operations require and to oversee their development. The JCIDS is coordinated from the Senior Level Review Group (SLRG), chaired by the secretary of defense and including the deputy secretary, the five undersecretaries, the three service secretaries, and the six joint chiefs. The importance of the SLRG is that it forces interaction between the users of force (the services and the combatant commands) and the force providers (the OSD and its staff). In regular meetings of the SLRG, issues of jointness arise early and often, allowing for the opportunity for a new culture to develop at the top, driven by cooperation instead of service competition. There are legitimate questions about whether these processes work as intended. In 2006, the secretary of defense commissioned the Defense Acquisition Performance Assessment (DAPA), which concluded, in the words of a congressional summary: The Joint Capabilities Integration and Development System ( JCIDS) and Joint Requirements Oversight Council ( JROC) are not operating as envisioned. The Under Secretary of Defense for Acquisition, Technology & Logistics (USD(AT&L)) is failing to control spiraling costs of major defense acquisition programs. As a result, programs to replace key weapons systems are attempting to place all necessary and imagined capabilities onto developing platforms. . . . The DAPA report also found the JCIDS/JROC process does not adequately prioritize requirements provided by the combatant commanders, whom DAPA believes should have a greater say in determining requirements for future programs.28

The effort to increase jointness does not end with JCIDS. Joint Operations Concepts ( JOpsC), a new device currently under development by the Joint Staff

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and the U.S. Joint Forces Command, are intended to enhance the role of the combatant commander in force choice.29 Integral to JCIDS, JOpsC is designed to allow the combatant commands more input into both making service-specific systems more joint and ensuring that future systems respond more to their needs, even though primary weapons systems will probably still be acquired largely by the services. To help facilitate JOpsC, the Joint Forces Command has conducted exercises with the services, which enable them to anticipate shortcomings in their largely service-driven concepts of operations and sustainability. All of this raises the question of whether joint force development really adds value to the way the Defense Department does business or whether it simply adds more delay and complexity into an already convoluted process. The need for jointness was vividly demonstrated in the failed Desert One raid, launched into Iran in 1980 in an effort to free American hostages held in the U.S. Embassy in Tehran. The mission was multiservice, but since the different elements had not exercised together, an already complex and risky mission was further compromised, and it tragically failed. The Vietnam War also demonstrated the need for jointness, as the involved services appeared to pursue their own competencies without much coordination. Jointness, though, cannot reshape the fact that each service is a primary supplier of its particular force specialization. The military services still have control over the major traditional systems (ships for the Navy, fixed-wing aircraft for the Air Force, and land vehicles for the Army) and retain authority for other systems that they have traditionally maintained. Sometimes they hold onto those systems even when Congress tries to get the services to relinquish authority to a joint agency. The following exchange between Congressman Norm Dicks (D-WA) and then Army secretary Thomas White is indicative: Mr. Dicks: PAC-3’s [Patriot Advanced Capability-3], why did you still put them in the Army budget when Congress has directed you to put them in the Missile Defense Agency? Secretary White: The Missile Defense Agency is transferring control of PAC-3 and MEADS to the Army.30

The Army traditionally had operational capability for air defense and later for missile defense, which stemmed originally from the old coastal artillery responsibility. Thus, despite congressional interest in making missile defense more joint, the Army clung to it. A similar situation occurred with the Joint Unmanned Combat Air Systems Program ( J-UCAS), which resulted from the merger of two separate Air Force and Navy unmanned combat air vehicle (UCAV) systems that were initially taken from those services and placed under management of the Defense Advanced Research Projects Agency (DARPA). In March 2004 testimony, both the Air Force and Navy acquisition secretaries said that “they did not have substantial insight into or oversight over this important program since the change

The Current American Defense Acquisition Process

in management.”31 However, former Undersecretary of Defense Paul Wolfowitz removed the UCAV development responsibility from DARPA to the Air Force, “to the dismay of those who felt DARPA leadership shielded the program from budget raids and parochial priorities.”32 Another example of the limits of jointness between a service and a civilian agency is found in the problems encountered with Space Radar, a $20 billion system designed to provide all-weather surveillance of ground positions from space. However, the Air Force and the National Reconnaissance Office, the operator of the system, could not agree on how to share the costs of the system; consequently, the Air Force tried to slow the program down, resulting in congressional budget cuts and complaints that the intelligence community was not footing enough of the Space Radar bill.33 Still, jointness is the wave of the future, and as junior officers now exposed to jointness climb the ranks, they may embrace jointness in ways that will allow for joint acquisition of major weapons systems. A current example is the F-35 JSF developed by Lockheed Martin for not just the Marine Corps, Air Force, and Navy but for international partners as well. It has numerous features that allow it to carry a range of weapons for a variety of missions, and it has short takeoff and landing capability. It is also one of the most expensive single weapons programs managed by the DoD today, with the entire program valued at over $250 billion. That may be one price of jointness: the compromises required to get all users in support of the program add to its cost. Types of Acquisition Programs. Acquisition programs range from supercarriers to trash cans. Some cost multiple billions of dollars and require years to produce, while others involve little more than what a customer would do at Wal-Mart. So in order to decide on the proper process to acquire military goods, the Defense Department divides its programs by cost, as follows. ACAT I, also known as major defense acquisition programs (MDAPs), are programs that, as estimated by the undersecretary of defense for acquisition and technology, will cost more than $355 million in 1996 dollars for research and development or will have a procurement cost of more than $2.135 billion in 1996 constant dollars. ACAT II are those systems estimated by the DoD component head to cost more than $75 million in fiscal 1980 dollars for research and development or to have a procurement price of more than $300 million in fiscal 1980 dollars. ACAT III programs come below these two categories but include hundreds of thousands of items. There is no mandated cost threshold for ACAT III, but generally they involve program costs in excess of $15 million (fiscal 1996 constant dollars) or total program costs equal to or greater than $30 million (fiscal 1996 constant dollars). The commander of Marine Corps Systems Command (COMMARCORSYSCOM) designates ACAT III programs. ACAT IV is for everything else, which falls into two categories: ACAT IV(T) programs require operational testing and evaluation (OT&E), while ACAT IV(M)

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programs do not. A service component for research and development (e.g., the director of Marine Corps Operational Test and Evaluation Activity ACAT IV [M]) monitors ACAT IV programs. If this is not confusing enough, there are also ACAT IA programs, or major automated information systems (MAIS). An MAIS is estimated by the assistant secretary of defense for command, control, communications, and intelligence (ASDC3I) to require program costs for any single year in excess of $30 million (fiscal 1996 constant dollars), total programs in excess of $120 million (fiscal 1996 constant dollars), programs with total life-cycle costs in excess of $360 million (fiscal 1996 constant dollars), or those other programs designated by the ASD-C3I to be ACAT IA. Defense Contracts A defense contract, like any other business contract, is an agreement between buyer and seller on price, number of items, delivery date, quality, and thousands of other elements. The overall philosophy behind defense contracts is that they should motivate defense contractors to enhance quality and timeliness of delivery while reducing the cost of production. Contractors respond to both positive incentives (rewards for good performance) and, at the same time, try to avoid the pain of punishment (penalties for poor performance). Defense contracts also commit the buyer to certain conditions, including penalties for cancellation or changes in contract specifications. In the defense sector, there are two general classes of contracts, fixed-price contracts and cost-plus contracts. Fixed-price contracts include the following: r Firm fixed-price contracts: The government pays an agreed-on price whatever the costs of production are. This type of contract is best for containing production costs because additional costs cannot be added to the contract. r Fixed-price incentives: This type of contract requires the contractor and the government to agree on target costs, profit margins, and a ceiling price. One advantage is that the contractor must assume some of the risk and has an incentive to minimize production costs. r Fixed-price with economic price adjustment: These contracts allow both parties to renegotiate should there be considerable fluctuation in labor or material costs during the contract period. r Fixed-price redetermination: Such contracts allow for an initial adjustment for the final price.

Cost-plus contracts include the following: r Cost-plus fixed fee: Such contracts are commonly used in high-risk situations where the contractor is guaranteed to recover both costs and a guaranteed fee.

r Cost-plus incentive fee and redetermination: Similar to cost-plus fixed fee, but these contracts carry a provision for a profit should the contractor reduce original estimated costs. r Cost-plus award fee: Contractor can receive bonus payments above costs should it find ways to improve performance.

The Current American Defense Acquisition Process

r Cost sharing: The government pays only a negotiated portion of the cost, and these contracts are used when the contractor expects to place the resulting product on the commercial market and sell to the government.

Fixed-price contracts are designed to reward risk, because even if an innovative project fails, the contractor is paid the agreed-on price. Cost-plus contracts essentially require the buyer to cover the costs and are designed to induce contractors to invest in defense production and research facilities, which are inherently costly and often have little or no civilian use. Cost-plus contracts were used widely in the 1950s as the services pushed a number of innovative projects that private firms would have been very reluctant to fund. As Weber notes, “Perhaps more so than in any other industry, the technological and economic obsolescence of facilities is a constant and serious problem due to the rapid rate of technological change in products, plants, and equipment employed in defense production.”34 That means, among other things, that cost-plus contract estimates written by the contractor are likely to be quite high and not necessarily accurate (“the more cost, the more plus,” some commentators have noted). Defense Secretary McNamara tried to confront the cost-plus cost-escalation problem by modifying the types of contracts used for the F-111 combat aircraft, shifting from pure cost-plus to a contract with both target and ceiling price clauses. If the contractor’s costs fell below the ceiling costs, the company would receive a share of the difference, but if its costs exceeded the agreed-on ceiling, the company would have to pay the additional costs. The hope was that such incentives and penalties would reward more realistic cost estimates from contractors.35 Most contracts also specify a delivery date and quantity ordered, though some leave the terms unspecified. For example, “General Dynamics C4 Systems, Inc., Scottsdale, Ariz., was awarded an indefinite delivery/indefinite quantity contract, using Firm-Fixed Price (FFP) task orders, for Defense Information System Network Enhanced Mobile Satellite Services (EMSS) Equipment on November 21, 2007.”36 Contracts also often specify where the work will be done (helpful information for political figures); thus, a November 2007 contract with Lockheed Martin for work on the JSF specified, “Work will be performed in Fort Worth, Texas (68 percent), Orlando, Fla. (24 percent), and El Segundo, Calif. (8 percent), and is expected to be completed in October 2013.”37 There are other types of contracts, but cost-plus and fixed-price are the most common. Contractors usually prefer cost-plus types of contracts because they usually result in profits, but they do not usually result in savings. The government usually prefers some type of fixed-price contract, because they allow for more predictable future budgeting and hold incentives for the contractor to reduce costs and deliver goods on time. An example illustrating the choices are the Navy contracts for the Littoral Combat Ship, an innovative program for a multipurpose combat vessel. The first four ships were contracted for on a cost-plus contract, and the result was that the first ship came to the Navy 50 percent over its contracted price of $223 million and was delivered significantly late. The Navy, frustrated

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with the overruns and delays, renegotiated for fixed-price contracts for future purchases of Littoral Combat Ships.38 The Defense Contract Management Agency (DCMA) monitors contract performance for the U.S. military, as well as for civilian agencies and international buyers. The DCMA provides advice for government contract agents, and later monitors contracts to ensure that the parties meet performance and other agreedon standards. The DCMA maintains offices near the major military acquirers (both original and maintenance) that serve the Air Force—for example, at WrightPatterson AFB in Ohio, home of the Air Force Materiel Command—and at maintenance depots at Ogden, Utah; Oklahoma City, Oklahoma; and Warner Robins, Georgia. It has similar offices with the other services and with other nonmilitary agencies such as NASA. The DCMA also maintains numerous officers with defense contractors, thus enabling it to manage contracts at both ends. The Defense Contract Audit Agency (DCAA) performs all audit functions for defense contracts (along with audits for other agencies). Among other functions, the DCAA performs precontract audits and ensures compliance with various contract laws (including with the Truth in Negotiation Act). For fiscal year 2007, the DCAA audited more than $135 billion in contract value, and its audits revealed savings of $2.4 billion. Multiyear Contracts. The Defense Department has increasingly used multiyear defense contracts, favored both by contractors for their stability and by the department as a cost-saving device. Legally, multiyear contracts are limited to five years, allowing the initial contract to hold without renegotiation for a specified period of time. Long-term contracts may work in the interests of the services and contractors particularly when the system is complex and expensive, because multiyear contracts avoid the potentially disruptive changes in year-by-year contracting. Contractors can also charge a lower price because of long-term commitments. Some have objected to multiyear contracts because they do not allow for renegotiation or for contract performance review. Arizona Senator John McCain and then Senator John Warner of Virginia, both Republicans, criticized multiyear contracts because they did not allow for programmatic review. Said McCain, “If Congress bought these items under a series of annual contracts, there would be a meaningful opportunity for it to annually review the program’s progress. . . . For this reason, using multiyear contracts should be limited to only the best performing and most stable programs.”39 McCain wanted to limit multiyear contracts to only those programs that save at least 10 percent of the contract under multiyear terms, and cost savings of 8–10 percent would have to meet a further threshold of $500 million in total savings.40 There is a point here: multiyear contracts for deficient programs lock in those deficiencies only for the life of the contract, unless provisions are made to fix the problem during the production run. The C-130J, the latest in a long line of the Lockheed Martin air lifter, is illustrative. The Air Force ordered 60 new C-130J aircraft in a five-year $4 billion contract, believing that the basic C-130 airframe, first flown in 1955, would be a reliable platform and thus justifiable under a multiyear contract. However, a Defense Department

The Current American Defense Acquisition Process A

MS01

Concept refinement

B

Technology development

55

C

System development & demonstration

Production & deployment

Operations & support

Figure 2.1. The Milestone Development System.

study found that the planes were vulnerable to newer antiaircraft systems and could not drop paratroopers because the program that was supposed to keep the planes a safe distance apart failed.41 If a plane that has a long history of successful operations develops problems in its latest version, it again illustrates the difficulties inherent in multiyear contracting. The Milestone Management System Before the implementation of the acquisition milestone management system, defense managers found themselves frustrated by systems that came off the development and assembly lines with inherent problems (e.g., the F-111 fighter-bomber had poorly designed engine inlets, the B-1 bomber’s offensive and defense avionics jammed each other, the M-1 tank had a variety of teething problems). The milestone system was intended to help alleviate such problems, and it is based on the assumption that a stage-wise examination of each major program as it goes through development will help to prevent such problems. The milestone system starts at Milestone A, which enters the system as “concept refinement,” where new and innovative programs start. The program, if approved, passes Milestone A into technology development, and then through Milestone B, passing on to system development and demonstration. After passing a design readiness review, Milestone C, production and deployment, lies ahead. Once the system enters the Milestone C gate, there are no more gates left, though the operations and deployment phase follows, because the milestone system is supposed to be a thorough cradle-to-grave system that follows the program from first concept until retirement. The exit criteria for successful navigation of the milestone system are contained in the Defense Acquisition Executive Summary (DAES). Figure 2.1 diagrams the milestone system. The process starts with an acquisition program baseline (APB), prepared by the program manager, to specify the initial program goals, which the system organizes into performance, schedule, and cost. Such estimates may be treated as flexible early into the program’s developmental life, which allows for tradeoffs both within and across parameters. For example, if the cost of a particular program rises early in development, there may be “traded space” between the increased cost and reduced performance or schedule, though the user must approve all trade-offs. The APB is to be prepared either on entry to Milestone B or at

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program initiation, whichever comes later. It is to serve as the baseline throughout the program, and it can be revised only if there is a major program restructuring or a breach of the Nunn-McCurdy Act cost limits. Nunn-McCurdy, a 1982 measure, requires that “significant” breaches of baseline costs (15 percent of the current baseline or 30 percent of the original baseline) and “critical” breaches (25 percent of the current baseline or 50 percent of the original baseline) be reported to Congress. Early program decisions also involve the technology development phase (TDP), which must be completed for a program to enter the milestone phases. The TDP came into play because of concerns that the technologies associated with particular weapons systems were either too innovative to proceed without considerable problems throughout the life of the weapon or, conversely, that the technology was not advanced enough to provide an edge in performance (e.g., Boeing’s early design of a turboprop straight-winged bomber as its first version of the B-52). This part of the process is also a step backward from the earlier preference for concurrent development, which parsed out development of new technologies into the production and deployment phases, often delaying or crippling the program until the technological bugs could be resolved. The TDP statements include estimates of technological issues (evolutionary versus revolutionary technology), the number of prototypes required, and a test plan for each developmental phase. Not all programs enter at Milestone A: some come in at Milestone B and other more mature technologies (e.g., follow-on weapons improvements) can enter the process at Milestone C. Since the milestone process can take a considerable amount of time and impose more costs on candidate systems, it is reasonable to shorten the process in the cases of mature technologies or in cases that use relatively known technology. The danger is that even in cases of “mature” technology, problems may evolve that might not crop up in an abbreviated milestone review. Milestone A is probably the most important phase of the entire milestone system, and thus the list of requirements to gain access through the gate has grown, partly because it is difficult to add new requirements once the designated program is in the milestone system. For example, DoD acquisition regulations require that program managers consider the acquisition of foreign systems or cooperative development of their system prior to Milestone A. This means the completion and approval of the Cooperative Opportunities Document (COD), which documents that the requesting service considered the use of a foreign system or participation in the development program by other countries. Thus, the opportunities and costs of international weapons cooperation must be included through each milestone. How well does the milestone process work? Most would argue that it is better than the older, less rigorous systems that advanced undeveloped weapons and other products forward in time of war or national emergency, and resulted in tragic crashes (the Consolidated B-24 and the Boeing B-29 of World War II had serious development problems that were not remedied because of wartime

The Current American Defense Acquisition Process

urgency), and dud torpedoes and even dud nuclear warheads (for the Navy’s Polaris missile system). However, the milestone system has shown its vulnerabilities. One problem identified by the Defense Department’s inspector general in 2001 was that the exit criteria in the DAES were not always enforced by the responsible program managers. In one Army case, the program manager did not specify whether exit criteria were for low-rate initial production or for exiting the engineering and manufacturing phase of the acquisition process, a failure that also was discovered in wide-area munitions and in Virginia-class submarines.42 In other cases, particular systems policies do not specify program exit criteria, leaving them for the milestone decision authority. The GAO found this to be true in the acquisition of some space defense systems, which have particularly rigorous technological requirements given the harsh environment in which they operate—apparently the development of such specifications might delay critical programs.43 Participants have also argued that the urgent need for many programs helps them through the milestone system even if they do not meet the designated requirements. The program managers know that if the program fails a milestone review or lingers in the milestone system for too long it may lose its funding. Thus, there is pressure to push a program through and to redefine whatever problems may be holding it back. A system cannot pass a milestone review if it is designated with serious (level 1) or fairly serious (level 2) problems, but the program manager can negotiate to reduce high-level problems to medium-level problems, and hope that they will be resolved in later milestone stages.44 The GAO also found that different stages in the milestone process mean different things for certain programs. Noted a GAO report on shipbuilding: “The CVN 21 program held its Milestone B review shortly before a preliminary design review, and 3 years before the planned approval for the construction contract. The Milestone B review for DDG 1000—called DD(X) at the time—occurred over 1 year after the preliminary design review and shortly after the critical design review—it was used to authorize negotiation of a construction contract. The LCS program has received authorization for construction for six ships—it has yet to hold a Milestone B review.”45 Finally, the milestone development process takes a considerable amount of time to push a program through, and, generally, the more complicated the program, the more time it takes. The JSF program, for example, began in 1996 and will not become operational until at least 2008, and probably longer. The Navy/Marine Corps F/A-18/E/F combat aircraft spent three years in milestone development even though the plane is follow-on to previous operational F/A-18 versions. Given the numerous tests and documentation required, and the number of actors required to approve the test results, delays are hardly surprising, and most operators would prefer that the system is robust before deployments. However, often years of development of new systems means that existing systems must perform beyond their expected life spans, and what was radically new technology at the first milestone gate may be much less radical once it emerges into a produced system if subsequent developments have passed it by.

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Advanced concept technology demonstrations (ACTDs), developed by the Defense Department in 1994, are efforts to improve the assessment of mature technology as it entered or completed the acquisition process. The ACTDs pushed mature technologies over developing technologies to assess their value to the appropriate user communities, who could put the technologies in trial use on the basis of their requirements. The JROC makes a recommendation to the deputy undersecretary of defense for advanced systems and concepts (DUSD [AS&C]) regarding the lead service and user sponsor as part of the JROC review of candidate ACTDs. All user and development organizations are represented on an oversight group, chaired by the DUSD (AS&C). Congress requires congressional notification of JCTD new starts, with a 30-day review before the trial program can receive funding. The real purpose is to obtain the 70–80 percent solution immediately rather than delay until the program reaches the 100 percent solution. If ACTD programs do accelerate technology integration into defense acquisition programs, that will be a step forward in a process rife with delays. However, it may also represent a return to concurrent development, where 70 percent is good enough to get through review stages, but the arrival of 100 percent may be too late to assist the user if 70 percent is not enough. Working the Defense Acquisition System A system with as much built-in complexity and with such high stakes shapes the behavior of those who operate in it. The very processes that lead to decisions are often “gamed” by the participants to maximize the outcomes they value and to defeat rival outcomes. There are some constants that affect decision makers: 1. Competition for resources is keen; thus, a majority of proposals that enter the defense acquisition process do not survive it. 2. Losses carry huge consequences because they deprive the program owner of years of resources and a mission within the Defense Department. There are very few second chances to get a program through once it has been initially stopped or delayed. 3. Information is always power, but in the defense acquisition system that axiom is particularly true. As J. Ronald Fox noted years ago, “In any complex decision-making process the individuals who most significantly affect the process are those who control the sources of information. In the Pentagon, part or all, of the information on which a decision should be based may not be transmitted to a senior official until the time at which the decision must be made if it is transmitted at all.”46 Participants may hide or filter information, or they may present in selective ways that shape the decision. Again, as Fox notes, advocates find ways to present information favorable to their programs while providing information on alternatives in a way that makes them seen unattractive by comparison.47 4. Coalitions are often critical to programmatic success, or at least in helping to kill rival programs. For example, when the Air Force proposed the advanced air-to-surface missile (AASM) in 1959, the Army and the Navy formed a coalition against the program, arguing that the program would compete with other programs (including the Navy submarine-launched ballistic missile). The consequence was a split recommendation to

The Current American Defense Acquisition Process Defense Secretary Neil McElroy, who approved only development for the AASM, which effectively killed it.48 5. Often the players in the lower tiers of power are the most significant. John Kenneth Galbraith first noted the critical importance of those in the midlevels of organizations who have expertise, information, and thus power.49 In the Pentagon, the legendary “iron majors” often determine the fate of programs because they have the critical information that can either support or kill a project. They have often been in the position to supply a new and uninformed boss with select material to “help” him or her make a critical choice. 6. Civilian defense officials officially operate the defense acquisition process as appointees of the president. The military is officially subordinate to them. However, military officials are experienced professionals who possess expertise and experience in the systems that they operate. In contrast, Defense Department civilian appointees generally arrive with a new administration, and rarely last for the duration of the first term. They sometimes have defense experience (as a former member of Congress or as an executive in the defense industry), but others have little if any experience at all. Former Air Force Secretary Verne Orr ran a California automobile dealership before then governor Ronald Reagan appointed him as head of that state’s division of motor vehicles, then as director of state finance, and from there to secretary of the Air Force. His only military experience was a three-year stint in the naval reserve. Air Force officers with decades of experience in Air Force programs found it relatively easy to convince Secretary Orr of the need for their pet projects.50 President Eisenhower’s first secretary of defense was Charles Wilson, who had almost no military experience, having served as CEO of General Motors when Eisenhower selected him. Robert S. McNamara also came from the automobile industry, having almost no military experience except as an analyst with the Army Air Corps in World War II. Secretary Robert Gates spent a brief period of time in the U.S. Air Force, and George H. W. Bush’s defense secretary Richard Cheney used a college draft deferment to avoid military service. 7. The president is a significant actor if he (or she) wants to be, but there are limits. As Kanter noted, “The president cannot routinely command obedience from the members of the national security bureaucracy. Rather, he must bargain for it.” This is because the president cannot monitor every activity or make every decision.51 Instead, the president must delegate often unspecified authority to defense authorities. He may make decisions on the significant larger issues (e.g., to buy or not to buy a major type of warship). But often the roots of such a decision have already been made at lower levels by Pentagon officials (e.g., to develop a certain propulsion system or weapons system to be used by a certain warship), so that when the question reaches the Oval Office, it has already largely been answered.

Issues in the Defense Acquisition Process New Systems or Upgrades of Old Systems? New weapons programs go through an exhaustive scrutiny at many levels, as noted previously. However, the Defense Department also purchases thousands of upgraded versions of existing systems, since existing systems may require only modernization to keep them effective. This is a common approach that takes

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advantage of current technology and the learning and infrastructure associated with it. Many aircraft programs go through upgrades: for example, the Air Force’s F-16 fighter started with the basic airframe of the F-16A, delivered in 1979, and evolved into the F-16 Block 60 after 12 upgrades. The venerable Boeing B-52 evolved from the A to the H model, with continuous improvements made to many parts of the bomber. The Army’s Abrams main battle tank has also undergone transformation, with the M1A2 version having a more powerful gun than the initial M1A1 model. The upgrade process is treated differently than the first-time program at the DoD level. There is much less milestone development, and thus much less testing and evaluation of upgraded systems. This may contribute to problems, though. In the case of the Navy’s F/A-18 Super Hornet, an advanced version of the previous F/A-18 Hornet (in operations since the 1980s), the plane, 25 percent larger than its predecessor and much better equipped with avionics, developed flaws inside the wings that could halve the expected life of the plane. Some critics argued that the flaws survived the acquisition system because of the lack of oversight given to upgraded versions of existing weapons, noting that the upgraded F/A-18 process did not require the development of a prototype for testing, as new weapons acquisition does.52 Still, given the development problems with wholly new systems, like those encountered with the Marine Corps V-22 Osprey combat aircraft, the Air Force’s C-5 cargo airplane, the F-111 fighter-bomber, and many others, upgraded systems have an advantage in reducing development problems, although they do not give the sharp performance increase gained from new systems. This has also been the case with adapting new and questionable technology to conventional tasks. The case of directed energy weapons is instructive here. In the Reagan era, defense scientists and engineers explored the potential use of lasers and other high-energy technologies. But the services showed a reluctance to embrace such technologies when more understood methods remained available. Noted a 2007 Defense Science Board study, “There are competing and well understood conventional approaches to producing the desired effect. Given the history of high-energy laser programs, these conventional approaches are more credible to warfighters and force providers.”53

The Less-Visible Sector: Acquisition of Spare Parts Most studies and reports on the defense acquisition system focus on prime contracts for expensive and complex weapons. However, much of the energy in the defense acquisition system actually focuses on the purchase of spare parts to keep the entire military operating. Nuts, bolts, printer cartridges, engine components, anti-icing fluids, gaskets, and millions of other items must get to the military consumer through the defense acquisition process. That process received much less scrutiny than did large weapons systems until the 1980s, when the Defense Department’s own study revealed considerable problems with the spare parts acquisition system: “In 1983, an auditor with the Defense Contract Audit

The Current American Defense Acquisition Process

Agency called attention to 310 items of support equipment which were passed through the prime contractor to DOD from two tiers of subcontractors. The auditor estimated that, if the government had bought the equipment directly from the vendors, the price would have been $531,000. The same items cost $1,437,000 from the prime contractor.”54 Between 1995 and 2002 (during the Clinton administration), the Defense Department reduced lead times for spare parts by an average of 5.6 percent annually, but after the Bush administration took over, between 2002 and 2005, spare parts lead times dropped by only 0.9 percent. The consequences, according to a GAO report, were that “the effect of the lead time underestimates was almost $12 [billion] in spare parts arriving more than 90 days later than anticipated, which could negatively affect readiness rates because units may not have needed inventory. If orders had been placed earlier, readiness rates could potentially have been improved.” The reasons for the resurgent problems in the early 2000s included miscoded data and poor estimates of delivery times.55

Funding Acquisition Programs Since the 1950s, Congress has required funding of acquisition programs for the year in which the Defense Department procures the item or service. Congress made this requirement to ensure that it controlled the funds and that the Defense Department could not fund items incrementally, over time. The requirement is also reportedly to ensure that the buying service views the total costs up front rather than adding them up only after years of incremental funding. While there are some exceptions to this rule (e.g., systems with long lead times), the services have recently increased their use of incremental funding to include the purchase of sealift ships, the LHD-8 amphibious assault ship, the new Air Force aerial tanker, and the F-22 fighter. While Congress has approved some of these incremental funding efforts, it has disapproved others. Some would argue that incremental funding allows trade-offs down the procurement road and avoids the shock factor of the huge total cost of selected weapons, which might lead to their cancellation or delay.56

How Well Is the Current Defense Acquisition System Working? The previous chapter indicated that serious problems in delivery date, performance, and cost emerged throughout the history of the defense acquisition system. There have been countless reform efforts to reduce the kinds of problems that have been almost epidemic over the years. So how well is the defense acquisition system doing today, and have the reforms helped to reduce or eliminate problems? The GAO reviewed 27 major weapons programs in place in 2007 and found that their costs had increased by 34 percent, for a total increase of $35 billion over their original estimated cost.57 Part of the problem diagnosed by the GAO

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was that very few programs started with mature knowledge: in other words, these were revolutionary programs rather than evolutionary systems, and thus the initial knowledge deficit spiraled through the rest of the program once a program manager had initiated it.58 Concerned about this cost increase for major weapons, the GAO concluded, “The nation’s long-term fiscal imbalances will likely place pressure on the affordability of DoD’s planned investment in major weapon systems, reducing the ability of budgets to accommodate typical margins of error in terms of cost increases and schedule delays.”59 Chapter 6 covers cost overruns and other problems inherent in the defense acquisition system. Those issues are, perhaps unfortunately, the most visible part of the process, receiving much disparagement from the news media and political figures from across the spectrum. However, the other side of the story is that the system does deliver weapons, training, paper, windshield wipers, and hundreds of thousands of items to its consumers, the U.S. military and international purchasers. It will always carry the deficiencies of a state-planned system, irrespective of how much effort goes into transforming it into a market-based process. It often gets things done as it did in World War II, with a Herculean effort fueled by billions of dollars in resources and a dedicated workforce that often takes much criticism when things go wrong but rarely gets credit when things show up on time and under budget. The defense acquisition system is a highly complex process that starts with early planning and reaches a major step when the system goes to the defense industrial base for production, which is the focus of the next chapter.

Notes 1. “Defense Chief Advises Cadets on Disagreeing with Leaders,” New York Times, April 22, 2008; “Air Force under Fire from Defense Secretary Robert Gates,” Los Angeles Times, April 22, 2008. 2. CJCSI 5123-01A, March 8, 2001, A5, at www.dtic.mil/doctrine/jel/cjcsd/cjcsi/ 3137 01a.pdf. 3. William A. Owens, “JROC: Harnessing the Revolution in Military Affairs,” Joint Forces Quarterly (Summer 1994), 55–57. 4. The nine categories are: strike; ground maneuver; strategic mobility and its protection; air superiority; deter/counterproliferation of WMD; command and control and information warfare; intelligence, surveillance, and reconnaissance; overseas presence; and joint readiness. 5. There are two types of major commands (MAJCOMs), functional and regional. Functional commands include U.S. Space Command, U.S. Transportation Command, Joint Forces Command, and others, while the regional commands include U.S. Central Command, U.S. European Command, U.S. Southern Command, and others. 6. Major Defense Acquisition Initiatives. Statement of Admiral E. P. Giambastiani, vice chairman, Joint Chiefs of Staff, Committee on House Armed Services, April 2006, 1–2. 7. Program Management of the Objective Individual Combat Weapon. Office of the Inspector General, Report No. D-2006-123, September 29, 2006, 2.

The Current American Defense Acquisition Process 8. Military Transformation: Actions Needed to Better Manage DoD’s Joint Experimentation Program. Washington, DC: GAO, 2002, 3. 9. “JROC Retains MRAP Control to Stop Requirements Creep,” Aerospace Daily & Defense Report, May 15, 2007. 10. House of Representatives, Laws Relating to Federal Procurement. Prepared for the Use of the Committee on Armed Services, April 2003, 389. 11. For general histories on the GAO, see Roger R. Trask, Defender of the Public Interest: The General Accounting Office, 1921–1966. Washington, DC: Government Printing Office, 1966; Frederick C. Mosher, The GAO: The Quest for Accountability in American Government. Boulder, CO: Westview Press, 1979. 12. “Air Force Chief Frustrated by Helicopter Wrangling,” The Hill, April 25, 2007. 13. Statement of Barry M. Sabin, acting chief of staff and principal deputy assistant attorney general, Criminal Division, Department of Justice, before the Subcommittee on Government Management, Organization, and Procurement, Committee on Oversight and Government Reform, U.S. House of Representatives, April 15, 2008. 14. “FY 08 Defense Appropriations Encourages Increased Use of GSA Acquisition Services,” http://www.gsa.gov/graphics/admin/FY08 Defense Appropriations Encourages Use of GSA Acquisition.doc. 15. Matthew Weigelt, “Congress Endorses GSA’s Assisted Services,” Federal Computer Week, November 12, 2007. 16. Ibid. 17. The White House, “Introduction,” National Security Strategy of the United States, September 17, 2002, at http://www.whitehouse.gov/nsc/nssintro.html. 18. The National Defense Strategy of the United States of America, March 2005. Available at http://www.globalsecurity.org/military/library/policy/dod/nds-usa mar2005.htm.2. 19. The National Military Strategy of the United States, 2004. Joint Chiefs of Staff, http:// www.DefenseLink.mil/news/Mar2005/d20050318nmr.pdf; 5. 20. Ibid., 21. 21. Department of Defense, Quadrennial Defense Review Report, February 2006, http:// www.defenselink.mil/qdr/report/Report20060203.pdf. 22. Ibid., 53. 23. Mich`ele A. Flournoy, “Did the Pentagon Get the Quadrennial Defense Review Right?” Washington Quarterly 29 (Spring 2006), 81. 24. “Gates Says New Arms Must Play Role Now,” New York Times, May 14, 2008. 25. Steve Kosiak and Barry Watts, US Fighter Modernization Plans: Near-Term Choices. Washington, DC: Center for Strategic and Budgetary Assessments, 2007, 27–30. 26. Chairman, Joint Chiefs of Staff, Joint Capabilities Integration and Development System. CJCSI 3170.01F, May 1, 2007, B-1. 27. On Goldwater-Nichols, see James R. Locher III, Victory on the Potomac: The Goldwater-Nichols Act Unifies the Pentagon. College Station: Texas A&M University Press, 2002. 28. National Defense Authorization Act for Fiscal Year 2007. Report of the Committee on Armed Services House of Representatives on H.R. 5122 Together with Additional and Dissenting Views. Washington, DC: Government Printing Office, May 5, 2006, 350–351. 29. This unwieldy acronym is intended to distinguish Joint Operational Concepts ( JOpsC) from Joint Operating Concepts ( JOC). There really is a difference. JOCs “will further develop key areas of the JOpsC. Focusing at the operational-level, JOCs integrate functional and enabling concepts to describe how a JFC will plan, prepare, deploy, employ and sustain a joint force given a specific operation or combination of operations.

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The Process and Politics of Defense Acquisition The JOCs will also provide a detailed conceptual perspective for joint experimentation and assessment activities.” Department of Defense, Joint Operating Concepts, November 2003, 26. 30. Department of Defense Appropriations for 2004, Public Law 108-87, September 30, 2003, http://www.dsca.mil/programs/LPA/2004/mtml, 93. 31. Senate, National Defense Authorization Act for Fiscal Year 2005. Report to Accompany S.2400, Committee on Armed Services, May 11, 2004. Washington, DC: Government Printing Office, 2004, 132. 32. Amy Butler and David A. Fulghum, “New Frontiers,” Aviation Week & Space Technology, March 7, 2005, 23. 33. “Bush Budget Seeks Military-Agency Ties on Spy Satellites,” Asian Wall Street Journal, February 6, 2007. 34. Rachel Weber, Swords into Dow Shares: Governing the Decline of the Military Industrial Complex. Boulder, CO: Westview Press, 2001, 50–51. 35. Thomas L. McNaugher, Old Weapons, New Politics: America’s Military Procurement Muddle. Washington, DC: Brookings Institute, 1989, 60–61. 36. Department of Defense, http://www.defenselink.mil/contracts/contract.aspx? contractid=3654. 37. Department of Defense, http://www.defenselink.mil/contracts/contract.aspx? contractid=3648. 38. “Fixed-Price Contracts Slated for Navy Ship,” San Diego Union-Tribune, August 4, 2007. 39. “McCain Seeks Limits on Multiyear Procurement Contracts,” CongressDaily, May 23, 2007. 40. Ibid. 41. “C-130J’s ‘Not Effective,’ Pentagon Report Says,” Atlanta Journal-Constitution, January 19, 2007. 42. Office of the Inspector General, Use of Exit Criteria for Major Defense Systems, Report No. D-2001-032, Department of Defense, January 10, 2001. 43. Defense Acquisitions: Improvements Needed in Space Acquisition Management Policy, Report to the Chairman, Subcommittee on Defense, Committee on Appropriations, House of Representatives. GAO, September 2003, 26–27. 44. Interview, Maxwell AFB, AL, March 2008. 45. “Realistic Business Cases Needed to Execute Navy Shipbuilding Programs,” statement of Paul L. Francis, director of Acquisition and Sourcing Management Team, Testimony before the Subcommittee on Seapower and Expeditionary Forces, House Committee on Armed Services, July 24, 2007, 16. 46. J. Ronald Fox, Arming America: How the U.S. Buys Weapons. Boston: Graduate School of Business Administration, Harvard University, 1974, 88. 47. Ibid., 89. 48. Peter J. Roman, Eisenhower and the Missile Gap. Ithaca, NY: Cornell University Press, 1995, 160–161. 49. John Kenneth Galbraith, The New Industrial State, 4th ed. Boston: Houghton Mifflin, 1985. 50. A former defense official in the Reagan Pentagon went to Secretary Orr to stop a program favored by the Joint Chiefs, several weeks after both had arrived in the Pentagon. He walked into Orr’s office and found several Air Force generals there. They had presented Orr with a pilot’s helmet and flack jacket, and were telling him war stories. The official left

The Current American Defense Acquisition Process without speaking to Orr about canceling the program, realizing that the Air Force officers had already seduced him into supporting what they wanted. Interview with the author, September 1990. 51. Arnold Kanter, Defense Politics: A Budgetary Perspective. Chicago: University of Chicago Press, 1979, 81. 52. “Costly Flaws Found in Navy’s Top Jet,” Boston Globe, May 17, 2007. 53. Defense Science Board Task Force on Directed Energy Weapons. Washington, DC: Office of the USD (AT&L), December 2007, 11. 54. Review of the Spare Parts Procurement Practices of the Department of Defense. Report to Congress, Office of Federal Procurement Policy, June 1984, 6–7. 55. “GAO: DoD Could Improve Management of Military Spare Parts Lead Times,” IHS, http://parts.ihs.com/news/gao-lead-times.htm. 56. Ronald O’Rourke and Stephen Daggett, Defense Procurement: Full Funding Policy— Background, Issues, and Options for Congress. Washington, DC: Congressional Research Service, June 15, 2007. 57. Defense Acquisitions: Assessment of Selected Weapons Programs. GAO Report No. GAO-07-406SP, March 2007, 9. 58. The programs included the JSF, the Future Combat System, the V-22 aircraft, and the Expeditionary Fighting Vehicle. The JSF involved a combination of complex technologies, such as a vertical takeoff and landing system, and the V-22 combines fixed- and rotary-wing technologies. 59. Defense Acquisitions: Assessment of Selected Weapons Programs, 7.

Further Reading Davis, Paul K., ed. New Challenges for Defense Planning: Rethinking How Much Is Enough. Santa Monica, CA: RAND Corporation, 1994. Drezner, Jeffery A. Measuring the Statutory and Regulatory Constraints on Department of Defense Acquisition: An Empirical Analysis. Santa Monica, CA: RAND Corporation, 2007. Holland, Lauren. Weapons under Fire. New York: Garland Publishing, 1997. Jones, L. R., and Jerry L. McCaffery. Budgeting, Financial Management, and Acquisition Reform in the U.S. Department of Defense. Charlotte, NC: IAP–Information Age, 2008. Krishnan, Armin. War as Business: Technological Change and Military Service Contracting. Burlington, VT: Ashgate Publishers, 2008. Streeter, Sandy. The Congressional Appropriations Process: An Introduction. September 8, 2006, http://appropriations.house.gov/pdf/appfacts.pdf.

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CHAPTER 3

The Defense Industrial Base

In 1912, aircraft innovator Glenn L. Martin started a small aircraft company in rural Santa Ana, California, where his tiny workforce hand-assembled military aircraft for the fledgling air services. His first planes were trainers, but a bomber design emerged after World War I, designed by Martin’s chief aeronautical designer Donald Douglas. Douglas, in turn, left Martin to form his own company, Douglas Aircraft, where one of his leading designers was John Northrop, who also left his employer to form his own company. James McDonnell was a designer with Martin before leaving to form his own company, McDonnell Aircraft, which later merged with Douglas. Decades later, Douglas, Martin, and Northrop would become some of the largest companies in the country, and in their current versions—Boeing (which absorbed Douglas), Lockheed Martin, and Northrop Grumman—they generate billions of dollars in income each year. So began a portion of America’s military aviation industry, led by aviation pioneers whose passion for flying and designing was not often matched by their business acumen. Their passion, though, matched that of the early military aviators, who saw themselves as a breed apart from the traditional soldiers and sailors who, in the minds of aviators, were weighted down by centuries of hidebound tradition. So the early aviation companies and military aviators formed a loose partnership to exploit the promises of military aviation, hoping to render the battleships and tanks of the traditional services into the dustbins of history and beginning a significant period of military innovation that its advocates hoped would change the face of warfare forever. The rise of the private military aviation sector was an American anomaly. Before World War I, most American military production took place in governmentoperated arsenals and shipyards. Those enterprises usually did technological innovation at a leisurely pace, appropriate for a country that had almost never engaged in overseas combat. However, World War I revealed how far European military aviation had come compared to the state of affairs in the United States,

The Defense Industrial Base

and thus the military turned to civilian industry, and the fledgling American aviation industry in particular, to speed the pace of technology and the production of military aircraft. A further shift from government to private production occurred as the United States entered World War II and civilian industry converted to wartime production, producing ships, tanks, ammunition, and almost every other type of military equipment and thus creating what became known as the “militaryindustrial complex.” Before and during World War II, government arsenals and shipyards produced the bulk of military weapons, with the exception of military aircraft. However, as Friedberg notes, the reputation of the state had fallen while the status of business was rising, fueling a traditional American antistatist attitude. Reports claimed that while private factories met and exceeded wartime production requirements during World War II, government arsenals failed to keep pace with technology and requirements.1 The early aviation industry’s foray into the private sector contrasted with the U.S. Navy’s naval shipyard industry and the Army’s military arsenal system, both operated by their respective militaries as government facilities. The Brooklyn Naval Yard, for example, started in private hands, but the U.S. government purchased the yard in 1801 and the yard operated continuously under U.S. Navy control until Secretary of Defense McNamara closed it in 1966. The Brooklyn Naval Yard was one of six such facilities authorized in 1799 by Secretary of the Navy Benjamin Stoddert (the others were Philadelphia, Boston, Portsmouth, Norfolk, and Washington, DC). Not all naval shipyards serving the Navy were owned by the Navy: Newport News Shipbuilding started as the Chesapeake Dry Dock & Construction Company in 1886, founded by railroad magnate Collis P. Huntington as a terminal to bring coal for his trains, and by 1907 Newport News was building battleships for the Navy. However, the majority of the Navy’s ships did come from its own facilities, even though evidence suggested as early as the nineteenth century that private yards could build better ships than could the bureaucratic naval yards.2 Much of the U.S. Army’s equipment also came from government arsenals. As noted in Chapter 1, Army arsenals dated to 1794, when Congress chartered the Springfield (Massachusetts) Arsenal and, in the next year, an arsenal at Harper’s Ferry, Virginia. Other arsenals followed, including the Rock Island Army Arsenal, established in 1862 along the Mississippi River in Illinois to provide weapons to Union forces in the Civil War. It turned out howitzers, rifles, and small equipment like mess kits for decades, up through the twentieth century. In 1941, the Army broke ground for a site in northern Alabama that became Redstone Arsenal, today a hub of the Army’s missile programs. Other arsenals in Pennsylvania, Kansas, Iowa, and elsewhere produced cannonballs, uniforms, tents, and other Army material, employing thousands of workers in the process. The American defense industrial base grew from two branches, the private investors who built their companies to serve the military needs of the country (as well as international customers) and the government-owned facilities that were part of the structure of the services. The private companies, which initially focused on military aviation, grew in scope and gradually moved beyond aviation

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to land and sea weapons systems. For example, the Army opened the Lima Army Tank Plant in Lima, Ohio, in 1942 as a government-owned, contractor-operated plant, and in 1978, the Army selected the Chrysler Corporation to run the plant’s production of M-1 tanks. But in 1982 General Dynamics Land Systems bought the Chrysler Defense Corporation, bringing aerospace giant General Dynamics (which was once Convair Aircraft, among others) into the tank production process. Another aviation giant, Northrop Grumman (formed from the merger of the Northrop and Grumman Corporations), operates the Newport News shipyard in Virginia, the only shipyard capable of producing a nuclear-powered aircraft carrier in the United States, and one of only two shipyards able to construct nuclearpowered submarines. In 1985, the Packard commission noted that there were more than 20 large prime contractors prepared to produce items for the Defense Department, but by 2006, there were but six prime contractors remaining. Production had shrunk from 1985 Cold War production levels of 585 aircraft, 2,031 combat vehicles, 24 ships, and 32,714 missiles, to 2006 levels of 188 aircraft, 190 combat vehicles, 8 ships, and 5,072 missiles. The Army arsenals, often criticized for their conservative approach to weapons development and production (see Chapter 1), had their champions in Congress who valued the jobs they sustained. However, in one of his many reforms, Defense Secretary Robert McNamara found the Army arsenals plagued with overlapping functions (e.g., rifles and their ammunition were developed in two different arsenals under two different commands) and inefficiencies. McNamara not only centralized most of the arsenal function under the newly created Army Materiel Command but also closed a number of arsenals and moved their development work to private companies. His boldest stroke was to take the MBT-70 main battletank development project from the Army’s Tank-Automotive Command and give it to General Motors, though he also moved the development of the Cheyenne helicopter from the Army to Lockheed (the project ultimately was canceled).3

Characteristics of the American Defense Industry The American defense industry supplies the military with its equipment, its support, and even its ideas. While the largest defense contractors construct ships, vehicle, missiles, and aircraft, the defense industry also supplies maintenance for those and other systems, and provides ideas and advice. Many are large construction companies or include construction as a part of their business portfolio (Halliburton is a diversified corporation, but its Kellogg Brown & Root [now simply KBR] supplies both construction and support services, elevating Halliburton to the sixth-largest American defense contractor, with annual revenues of more than $7 billion). The Carlyle Group is primarily an investment firm, but its private equity defense holdings rank it as the twentieth-largest defense contractor. Other companies supply research and ideas: Johns Hopkins University ranks among the top 100 defense contractors, as do other research institutes. The defense industry is a vast undertaking that spans most American and international sectors.

The Defense Industrial Base

The traditional role for defense contractors has been to supply the materials for the professional military for use in military operations. That role is changing, though, as contractors increasingly not only supply missions but perform them as well. Contractors supply weapons, spare parts, advice, knowledge, operational support, and maintenance. Contractors chip paint and serve food on Navy ships, once a province of uniformed sailors. Contractors have moved into traditional military missions with air-to-air refueling, historically performed by the services, flying specially designed tanker aircraft to send fuel through hoses to other planes while in flight. Several private firms—Omega Air, Atlas Air, and Evergreen International Aviation—expressed an interest in providing commercial air refueling for what they argued would be a fraction of the cost of Air Force refueling. The Navy has tried a pilot program with Omega Air, and, according to a Defense Science Board report, the Air Force charged $17.50 per gallon to deliver fuel with its fleet of KC-135s and KC-10s, while Omega’s 707s have been able to operate at just under $7 per gallon for the Navy contract.4 While the private enterprise identity of the defense industry might indicate that it operates under the guidelines of free enterprise, it has unique characteristics that limit such assumptions. First, it is monopsonistic, meaning that it has only a single buyer, the U.S. military, for its primary products. Second, there are currently very few firms capable of delivering the large weapons systems that the military buys, which results in an oligopolistic (limited number of suppliers) situation. These realities restrict normal assumptions about a competitive market. Thus, market demands and many suppliers do not determine the price and quality, but instead the contractor and the service must negotiate it. Defense firms do not normally innovate on their own hoping to attract buyers, but instead must wait until the Defense Department approaches them with a request for proposal.5 Even then, there is no assurance that the Defense Department will follow through. For example, Northrop Grumman invested heavily in producing 30 Seawolf attack submarines, but later the Navy reduced the buy to just 3, none of which Northrop Grumman built.6 The producer assumes much risk: if the military does not buy its products, it must convert to commercial production or die. Because of the nature of the market, defense firms are quality maximizers rather than cost minimizers, as Weidenbaum notes.7 Demands for high-risk and advanced technology from the services also escalate prices and often delay delivery dates, sometimes resulting in lost income for the defense firm. The relationship between the military and the defense industry suggests that both sides are engaged in organizational preservation as the defense industry continues to shrink, even in the face of growing defense budgets. While there were at least 16 companies building large military aircraft during World War II, there are now just 2 active producers (Boeing and Lockheed Martin), with a third (Northrop Grumman) not currently producing aircraft. The number of military shipyards has declined from dozens to just six yards, owned or operated by either Northrop Grumman or General Dynamics. The Army faces a similar situation

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with the cancellation of legacy ground weapons systems.8 The number of trained workers in the U.S. aerospace industry is also shrinking, from 1.1 million in 1991 to 607,000 in 2005.9 Consequently, the remaining prime contractors sold themselves as vital national resources, dependent on defense contracts for their very existence. That means even less competition. Admiral Vern Clark, the chief of naval operations, has said, “I don’t think we really have competition today. I think we have apportionment. And I think all of the numbers are now clear that apportionment is costing us money.”10 As the number of contractors declines, concerns rise that the services will favor certain contractors to keep relations alive, possibly resorting to marginally legal or outright illegal methods to do so. Thus, Boeing and the Air Force suffered an embarrassing scandal when investigations revealed that Darleen Druyun, head of Air Force acquisitions, illegally gave Boeing details of a rival plan for an Air Force tanker aircraft for the Air Force. Boeing offered Druyun a job as a senior vice president, apparently as a reward for her provision of information while she was reviewing the tanker contract proposals from both Boeing and rival EADS. Druyun and Boeing vice president Michael Sears, who hired Druyun in 2003, lost their Boeing jobs and Druyun served prison time. While few contractors and services engage in such illegal conduct, there is also the more normal practice of funneling contracts to favored firms to maintain a positive relationship, to draw on established expertise, and sometimes to allow the service representatives to engage with former colleagues who have left the service for the corporate world.

The Structure of the American Defense Industry The defense industry is in reality a number of interconnected parts, which are discussed in the subsequent paragraphs.

Government-Operated Industrial Plants Government-operated industrial plants are the remainders of the old arsenal and shipyard system that predated World War II. Most have been shuttered and replaced by private contractors, but a few remain and even fewer engage in production. The Army’s Redstone Arsenal, near Huntsville, Alabama, engages largely in research on missile and aviation systems. Picatinny Arsenal in northwestern New Jersey develops and produces advanced ammunition for Army systems, while the Rock Island Arsenal near Moline, Illinois, is mostly involved in support activities for the Army but also produces howitzer maintenance equipment and associated artillery equipment. The Navy maintains four shipyards, at Pearl Harbor, Hawaii; Norfolk, Virginia; Portsmouth, New Hampshire; and Puget Sound, Washington. While naval shipyards used to manufacture entire ships, most of their work now involves repair and modernization.

The Defense Industrial Base

Government-Owned, Contractor-Operated Facilities Government-owned, contractor-operated facilities, known as GOCOs, operate out of government-owned buildings and generally sit on government-owned property, but private companies operate the facilities under contract. The GOCO model came about when the Army requested that the University of California manage the Manhattan Project, the atomic bomb development at what would become Los Alamos National Laboratory. There are some advantages that such arrangements bring: according to Sandia Laboratories’ Web site, “The GOCO allows proven private-sector processes to operate without bureaucratic restrictions. Scientists performing for a GOCO contractor are largely insulated from political pressures. Thus, they have the independence to speak out as honest brokers, acting truly in the national interest.”11 While this is technically correct, it also means that some of the bureaucratic restrictions designed to prevent problems may be absent. Many GOCOs are research laboratories, but some also manufacture, including the Lima Army Tank Plant in Ohio, which manufacturers and modernizes the M1A2 main battle tank, in facilities owned by the Army but operated by General Dynamics Land Systems. The Air Force also owns (or has owned in the past) numerous plants, including Air Force Plant 42 in Palmdale, California, which produced the SR-71 reconnaissance plane for Lockheed and the B-2 for Northrop; Air Force Plant 38 in Buffalo, New York, which constructed missiles by Bell Aircraft; and Air Force Plant 6 in Marietta, Georgia, which produces the C-130J cargo aircraft.

Private Defense Firms Private defense firms are owned generally by shareholders, and they own their own production facilities, though many also lease facilities from the Defense Department. These firms are for-profit: they sell shares, they borrow money from commercial (and sometimes government) sources, and they are structured similarly to firms doing business in the nondefense sector. They include large firms whose names are almost household words: Boeing, Lockheed Martin, Northrop Grumman, and dozens more. The largest firms are in the aviation business, but increasingly they are “integrated,” which means that they have multiple lines of work. However, there are hundreds of other firms engaged in the defense market as either their core business or as part of their overall activity. Defense firms can be broken down into three tiers. First-tier contractors are the largest prime contractors on the basis of sales, and in general they produce large and complete weapons systems rather than subcomponents, though larger firms also produce subcomponents. First-tier contractors are final system integrators that produce finished weapons from subcomponents. Lockheed Martin is typical, with contracts for the F-22 fighter, the C-130J cargo aircraft, the F-35 JSF, and dozens of other large contracts for facilities around

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the country. First-tier contractors also supply services and other support functions; for example, Northrop Grumman and Lockheed Martin both have support functions to service military computers, aircraft, engines, and thousands of other components, while DynCorp offers such services as military law enforcement, disaster assistance support, and aircraft maintenance and ship operations. Second-tier contractors are normally subcontractors to the first-tier contractors, though they may also produce finished goods. Engine manufacturers are typical second-tier vendors in that they produce final engine assemblies for installations into weapons, though the engines themselves originate from parts produced by third-tier contractors. Third-tier contractors are the smallest enterprises, building specialty items for first- and second-tier contractors. Examples include pumps for engines, fasteners for aircraft assembly, specialized wiring for defense electronics, and other small but vital components. Third-tier contractor status is usually the first step of new or start-up industries that emerge seeking a niche in the defense market. They are sometimes underfunded because their often-revolutionary ideas cause potential investors to shy away, and they are sometimes too small or lacking the business experience to attract Pentagon attention. However, such small firms are often an important source of innovation and the means to convert innovation into production. Recently, the Defense Department chartered the Center for the Commercialization of Advanced Technology (CCAT) to help small firms entering the defense market. Such assistance might include advice in seeking funding from the federal government for research and help in marketing ideas.12 Many third-tier contractors engaging in business with the Defense Department may win preferential no-bid contracts for military products because of their classification as “small businesses.”13 The hope is that such businesses, shorn of the necessity to compete and possibly engage in a contract they cannot actually afford to perform, will be helped to grow into reliable suppliers of military goods. Sometimes, though, no-bid contracts appear to be more of a deal between a small defense contractor and a political figure, as was the case with Digital Fusion, an Alabama-based defense company that received a $2.6 million no-bid contract for engineering in the district of Representative Silvestre Reyes after Digital Fusion contributed $24,000 to Reyes’s reelection campaign. According to a news report, “Both the congressman and company say there is no connection between the contract and the contribution, which was made at the Monocle, a restaurant near the Capitol. Both parties say their actions were legal and commonplace.”14 The reality is that the earmarks (see Chapter 4) that Reyes and other members of Congress use are often provisions for a no-bid contract. The largest prime defense contractors enjoy benefits accrued partly because of their sheer size and niches. Companies like General Dynamics, which operates one of only two submarine yards, or Lockheed Martin, which produces (or will produce) both of the Air Force’s twenty-first-century fighter-attack aircraft, are protected from the normal currents of business life because of their importance to national security and the impact of reductions in their workforces. In comparison,

The Defense Industrial Base

small third-tier contractors that employ a handful of workers to build specialty parts may not enjoy such protection because, in contrast to the larger contractors, they are small dots on the defense radar screen.

Stakeholders Private firms of all types, including defense, have a primary responsibility to their shareholders in the case of publicly held corporations. Defense firms also have a responsibility to their consumer, the Defense Department. Thus, firms face competing pressures from both constituents. The Defense Department values quality, performance, safety, and price, knowing that the products it buys may well make the difference between success and failure in wartime situations. However, as Weber notes, shareholders have a different set of values. Unlike the Defense Department, shareholders care less about performance of the products or the legality of the operations than they do about the value of share prices and dividends. They can be fickle, buying and selling in search of short-term gains over long-term stability.15 They may well punish firms for taking risks or investing too heavily in goods that have long-term production possibilities. But they may value lower-risk factors and stability over the often dramatic swings of highly innovative firms and the protection that defense firms receive from the federal government.

Defense Industry and the Boom-and-Bust Cycle The United States has a pronounced war-and-peace cycle, but little tradition supporting a large standing military. Thus, wars are initiated with a large-scale buildup from a small production base, which peaks usually at the end of a war. Following a peace treaty or truce ending the war, demobilization follows, as the military usually shrinks to a fraction of its wartime size. The end of World War II saw the scrapping of fleets of ships and fields of aircraft destined for the aluminum smelter. For example, the defense budget spiked to almost $380 billion (1996 constant dollars) in 1945, and then dropped to $100 billion over the next two years, only to jump back to more than $350 billion during the Korean War, below $300 billion until Vietnam, and then $350 billion during the Vietnam War. The post–Vietnam War era saw defense budgets drop to around $250 billion, only to see the Reagan-era budgets approach $400 billion, followed by yet another drop below $300 billion under the George H.W. Bush and Clinton administrations. The defense budget estimate for fiscal year 2008 exceeds $500 billion, but growing budget deficits may see it drop once again. The defense industrial base is quite vulnerable to swings from war to peace, as it expands in both number of competitors and in scope during the war years, only to contract and wither after the war ends. One result is that some companies cannot survive the troughs, and they either disappear altogether or merge with another firm. A long-term result is that, over time, the defense industrial base itself shrinks. In 1978, for example, the United States had 318 ammunition plants,

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but by 1995, there were fewer than 100 such plants. Those fewer plants have had to ramp up to fill military requirements following September 11, with the Alliantmanaged Lake City plant in Missouri expanding from 600 employees to 2,500 in 2007. However, the plant’s manager noted, “The demand is fast when it comes, and then it can drop off very quickly.”16 Even the plants that survive lay off experienced workers, remove excess equipment, and sometimes lose environmental permits that are required only for production above certain levels. One way around the boom-and-bust cycle is to expand defense contractors’ involvement in particular projects, even if that involvement takes a new business strategy. The Raytheon Company demonstrated such a path when it teamed with several subcontractors to advance its bid to win the Joint Cargo Aircraft contract. Raytheon is not an aircraft manufacturer; it supplies the military with electronics and Tomahawk cruise missiles. However, seeing an opportunity to expand its business, Raytheon teamed with EADS, the parent firm of Airbus SAS, to offer the C-295 aircraft. Raytheon reversed the old strategy of a prime contractor first getting a contract and then bringing on subcontractors: Raytheon first brought on board a subcontractor with aircraft experience to help it compete for a new business area. Paradoxically, Raytheon and its partner beat out Lockheed Martin’s proposal for a version of its C-130J and modeled its strategy on Lockheed’s successful bid for a new presidential helicopter by enlisting the partnership of an Italian helicopter manufacturer.17 There are other ways to mitigate the boom-and-bust phenomenon in the defense industry, which sometimes suffers from contract terminations in lean years. This has led to the follow-on contract system, designed to ensure a steady stream of contracts such that once a producer has finished a project, another one is waiting. Moreover, to reduce setup costs for a new system, the Defense Department may try to contract for a follow-on system that is considerably similar to the system just completed. James Kurth first described the “follow-on imperative” in 1973 in his examination of the military aircraft industry. He noted that a follow-on contract came to a contractor about three years before the old contract was to phase out—to name but a few examples, the Minuteman II followed the Minuteman I, the Trident submarine-launched ballistic missile followed the Polaris submarine-launched missile, the F-15 fighter followed the F-4 fighter, and the F-111 fighter-bomber followed the B-58 bomber.18 More recent cases involve Lockheed Martin winning the contract for the F-22 fighter to follow its F-16 fighter, and the Virginia-class submarines following the Los Angeles– class submarines at the Electric Boat yard in Connecticut. The Boeing Company was widely expected to receive a follow-on contract for a new aircraft tanker to replace the venerable KC-135 planes built in the 1950s and 1960, but in February 2008 the contract went instead to a partnership between Northrop Grumman and EADS. Boeing argued that, among other things, the contract award would result in the loss of Boeing’s long experience in building military aircraft. There is, of course, some economic and military logic behind follow-on contracting beyond trying to reduce corporate costs and help please shareholders— the services will be more familiar with a product similar to that which they

The Defense Industrial Base

operate, and the learning curve from one system to a newer one is less steep. However, the follow-on imperative may impede dramatic technological development. Another consequence of the boom-and-bust cycle is defense contractor mergers. As Weber notes, the 1990s saw defense budgets drop during the Clinton years, and Secretary of Defense William Perry warned defense contractors that his department could not support them all. Thus, company mergers, which had been a fact of life since World War II, picked up considerably, following the business strategy that a more diversified portfolio protects against cutbacks in a sector, such as shipbuilding.19 Another strategy for firms facing budget downturns is to exit the defense sector altogether for the commercial side, or at least to diversify defense dependency by investing at least some effort in nondefense markets. For firms with experience in the commercial sector (e.g., shipbuilders that build commercial cargo ships, or companies like Boeing that have both commercial and military sectors), the shift to a less military-dependent business may make sense. Boeing, which has a long history of commercial aviation, could ramp up production of its 700-series passenger planes should the defense budget cut aircraft procurement. But for most defense contractors, their experience was in the narrow confines of the military market, with its fixed-price contracts tied to a monopsonistic buyer, the U.S. Defense Department. When firms tried to move beyond this realm, they often found a world in which they lacked experience. The need to test commercial markets, for example, common in the commercial sector, was new to contractors that often just waited for the military’s next request for proposal. Others found that their brand name was not familiar to consumers who were used to buying recognized brands. So if a maker of military tracked vehicles tried to move into the construction or farm equipment, it would be competing with widely recognized brands like Caterpillar or John Deere. For example, when Grumman Aircraft Company tried to enter the civilian market after the defense downturn of the late 1980s, with everything from mail trucks to fire engines to canoes, it failed and reentered the military market by merging with Northrop in 1994.

The Power of the Defense Industry The defense industry employs hundreds of thousands of people, in all types of work. It obviously has a large impact on local communities, where defense companies are often the largest employer. Such companies are also considered a national security asset, valued for the experienced workforce and design teams that they retain. It thus is not surprising that the industry has considerable power to affect outcomes in its favor. The very locations of defense industry plants and offices are a consequence of political machinations as much as they are a function of efficiency. Local community elites and influential members of Congress steered federal money into states like California, where the buildup of military bases paralleled the growth of the military aircraft industry and shipbuilding.20 Southern and western states touted

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their good weather, which they argued was conducive to flying operations, as reason to locate defense plants in those areas, though the real reasons for the shifts from the Midwest and the East to the so-called gun belt had more to do with politics, including the power of senior members of Congress from the South.21 Many large defense corporations also moved extensive facilities to the Washington, DC, area so that they could be more effective in lobbying for their products.22 In theory, the defense industry receives proposals to bid on weapons systems and is supposed to respond to those government-directed programs. But as the defense industrial base shrinks, and as firms learn new political practices, it may be that contractors are enjoying a growing power to shape requirements to their liking. In a particularly candid presentation, Navy Secretary Donald Winter made his feelings about the shipbuilding business known: “Since becoming Navy secretary last year, Winter has been critical of industry, much to the chagrin of defense contractors enjoying large profits. Winter has said that instead of the Navy driving shipbuilding requirements, industry has established what it thinks the service needs, and that is not always for the better of the fleet.”23 Similar concerns arose over Boeing’s control over the Army’s Future Combat System, as critics have argued that the degree of Boeing’s control as lead systems integrator reduces oversight (though a Boeing spokesman claimed otherwise), and over Northrop Grumman’s lead systems integrator on the Coast Guard’s troubled Deepwater contract.24 The defense industry has considerable clout in Washington, with each of the large contractors having its own Washington office where it can exercise influence with both the congressional and executive branches. There are also powerful lobby groups representing the defense industry, including the following: r The Aerospace Industries of America (AIA) is based in Arlington, Virginia, and was founded in 1919. The AIA has more than 100 member firms, including the giants of the industry. The AIA lobbies on a variety of issues, including the encouragement of multiyear contracting, policies that sustain the aerospace workforce, and investments to preserve and expand the aviation industry. The AIA has a mix of constituencies, including both military and commercial aerospace. r The National Defense Industrial Association (NDIA) also has headquarters in Arlington, Virginia. The NDIA first emerged as the American Defense Preparedness Association in 1919 and resulted from subsequent mergers of different defense organizations. The association has around 1,375 corporate members and advocates a number of positions that stand to benefit its membership, including defense contract provisions: “Rather than mandating a preference for fixed-price development contracts, the Department of Defense (DoD) should develop a process to identify opportunities for fixed-price development within current regulations and ensure that any development using fixed-price contracts is fully funded.”25 The NDIA actively lobbies Congress on a variety of issues, including measures involving competition in the defense industry and efforts to reform the defense acquisition process. r The Satellite Industry Association, with headquarters in Washington, DC, is a relatively new organization, having started in 1993 with the transformation of the Satellite Super

The Defense Industrial Base Skyway Coalition into an industry organization. Its membership includes large aerospace firms and smaller technical firms that support the larger companies. It lobbies on behalf of its members on both commercial and military space issues, and its workshops attract a mix of military officials and industry representatives. r The Armed Forces Communications and Electronics Association (AFCEA International), founded in 1946, is a membership association serving the military, government, industry, and academia as an ethical forum for advancing professional knowledge and relationships in the fields of communications, information technology, intelligence, and global security. It hosts conferences around the country and publishes Signal magazine. r The American Shipbuilding Association supports both military and commercial shipbuilding. Its board of directors includes members from Northrop Grumman, Electric Boat, and General Dynamics. It actively lobbies Congress and the current administration for larger shipbuilding budgets and is particularly active with the Congressional Shipbuilding Caucus.

These lobbies make no secret of their membership and purpose, but there are other lobbies whose operations and missions are more shadowy. There is, for example, Citizens against Government Waste (CAGW), a nonprofit goodgovernment group that supported the process that awarded an Air Force tanker contract to Northrop Grumman and its partner EADS over rival Boeing. While CAGW claimed that it had no ties to Northrop Grumman, its “fact sheet” drew directly from Northrop Grumman public affairs releases, and the group would not indicate whether it had received financial contributions from Northrop Grumman. Boeing, the losing contractor, also found supporting lobbies: four conservative nonprofit groups held a news conference defending Boeing’s position and afterward acknowledged that two of the groups had received funds from Boeing.26 There are hundreds of other defense lobbies, both large and small, funded with whose sole purpose is to work on behalf of particular defense industries. Their power is always debatable, but in general, lobbies are very powerful in the realm of American politics where individual voter participation is quite low by the standards of industrial nations. That fact, coupled with low levels of political interest, has allowed political lobbies of all political stripes to become quite formidable in working toward the political outcomes that they favor. The defense industry also potentially benefits from having its former executives take senior positions in the Defense Department. For example, the George W. Bush administration’s Secretary of the Navy Donald Winter previously served as a senior executive at Northrop Grumman. Deputy Secretary of Defense Gordon England formerly served in high positions at General Dynamics and was president of its aircraft division (which later merged with Lockheed Martin). Undersecretary of Defense for Intelligence James R. Clapper Jr. was formerly the chief operating officer for Detica DFI, a specialist business and technology consultancy. Michael B. Donley, the director of administration and management, was formerly the senior vice president at Hicks and Associates, a subsidiary of major defense contractor Science Applications International Corporation (SAIC). James I. Finley,

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deputy undersecretary of defense for acquisition and technology, held numerous operational and management positions with General Electric, Singer, Lear Siegler, United Technologies, and General Dynamics, where he was a corporate officer, president of information systems, and chair of the Business Development Council. Jack David Patterson is principal deputy undersecretary of defense, comptroller. According to his official biography, From 1999 to 2001, he was the Vice President and Site Manager for Steven Myers and Associates’ support to Lockheed Martin Corporation’s winning joint strike fighter competitive proposal preparation. Between 1993 and 1999, Mr. Patterson held a variety of responsible, executive positions at McDonnell Douglas Corporation (later The Boeing Company) beginning as the Senior Manager for Market Research and Analysis on the C-17 military air cargo aircraft and later as Director, International Business Development. He was responsible for developing and executing the business capture strategy that won U. S. Government Defense Acquisition Board approval to procure 80 additional C-17s completing the first contract for 120 aircraft.27

When senior defense department officials have previous ties to the defense industry, the specter of favoritism appears. It is difficult, though, to connect a successful defense contract to such ties, since so many factors enter into the bargaining. It is also the case that there are positive aspects to having senior defense officials with defense industry experience, since such officials are much more likely to understand the nuances and complexity of the industry. Moreover, simply having former defense industry ties does not ensure that the Defense Department will support a person’s former industry. For example, several critics with alleged close ties to Air Force senior leadership accused Deputy Secretary of Defense Gordon England, who served in senior positions at both Lockheed Martin and General Dynamics, of curbing Air Force plans to buy an additional 200 F-22 fighter planes that his former companies produce.28 Former members of Congress can also help after retirement. The case of Vibration & Sound Solutions Ltd. (VSSL), of Alexandria, Virginia, is instructive. Its product is Project M, which involves magnetic levitation for a variety of purposes—to make submarines quieter, to protect Navy SEALs in their boats, and to shield Marines from roadside bombs. But none of the prospective service buyers wanted the technology. However, VSSL’s former Armed Services Committee aide Anthony R. Battista was an original incorporator of VSSL. Former representative William L. Dickinson (R-AL), once a senior member of the Armed Services Committee, was an investor, so some members of Congress continued to support VSSL with around $35 million dollars in earmarked funds.29 Members of Congress also hold investments in defense firms, which can create the potential for either real or perceived conflicts of interest. According to a 2008 watchdog group report, members of Congress have more than $196 million in personal investments in defense-related firms. According to the Center

The Defense Industrial Base

for Responsive Politics, more Republicans than Democrats hold stock in defense companies, but Democrats hold more value, at least $3.7 million in militaryrelated investments compared with Republican investments of $577,500.30 While the center does not report wrongdoing or favoritism associated with these investments, the appearance of potential special treatment is clear. How effective has defense industry power been? Profits are the results of many things, and there is no direct evidence that profitability comes from a close relationship between the defense industry and its political pillars. Still, 2007 was a good year for the industry. Lockheed Martin reported a 34 percent increase in quarterly earnings, to $778 million, or $1.82 a share, compared with $580 million, or $1.34 a share, a year earlier, from sales of fighter aircraft and lower pension costs. Northrop Grumman, the third-largest seller to the Pentagon, reported a 7 percent increase in earnings over a similar period in 2006, largely from the sale of warships and defense electronics.31 In April 2007, Boeing reported a 27 percent increase in profit over the first quarter of 2006, with revenues increasing 8 percent, from $14.26 billion to $15.37 billion.32 General Dynamics’ profit rose to $518 million, or $1.27 a share, from $420 million, or $1.03 a share, in the previous year’s quarter, and revenue increased by 11 percent to $6.59 billion in the quarter from $5.93 billion in the 2006 period.33 Such margins also lure other companies either to enter the defense market or to reestablish ties with it after initially diversifying away from defense. For example, heavy equipment maker Oshkosh moved away from defense into the civil market, but a flat profit curve helped to entice it to bid on a mine-resistant military vehicle. As one analysis noted, “Winning a healthy portion of the Pentagon contract could tide over investors unimpressed by its unchanged fiscal 2007 earnings-per-share outlook. Last week it (Oshkosh) reported a slight rise in fiscal-second-quarter profit, to $50.9 million. Though the acquisition of JLG is increasingly adding to results, it signaled some possible weakening in other businesses. Its U.S. garbage- and concrete-mixer-truck segment faces lower sales due to an emissions-regulation change, and some investors worry defense margins may erode.”34 Defense contractors appear to have also grown more powerful in their ability to challenge the Defense Department’s contract award system. For example, Lockheed Martin and Sikorsky Aircraft protested an Air Force decision to award a search-and-rescue helicopter to Boeing and won—one case of many where contractors successfully have the Pentagon review contract decisions. In 2006, defense contractors filed 1,327 protests with the GAO. That number increased by 10 percent over 2002—and the number of firms taking their cases to court has risen 50 percent. “The successful appeals have doubled, to nearly 30 percent, according to the GAO, the highest in two decades.”35

The Shrinking Defense Industrial Base In 1944, dozens of companies offered their services to build military aircraft, fed by the pace of World War II. Boeing, Douglas, Northrop, Chance-Vought,

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Consolidated, North American, Grumman, Bell, Fairchild, Martin, Brewster, Ryan, McDonnell, Curtiss, and Republic were just some of the manufacturers producing large military aircraft. In 2007, there are just two companies capable of producing military aircraft, Boeing and Lockheed Martin, with Northrop Grumman retaining some facilities but not producing planes. The other companies have left defense contracting, gone bankrupt, or merged with other companies to form the superdefense contractors that dominate the market today. Shipyards have also been in decline. The United States started its naval shipyard industry during the American Revolution, and American yards led the world in numerous technologies during the ensuing years. Shipyard capacity grew rapidly during World War II as new yards sprang up from marshes and swamps. During World War II, California yards alone employed more than 282,000 workers. The expansion fueled employment for minorities and women, who filled in for the ranks of white males sent off to military service. The yards’ production was staggering: the four shipyards in Richmond, California, operated by Henry J. Kaiser produced 747 ships alone, completing one in less than four days, a record that probably will never be broken. In 1943, the Portsmouth Naval Shipyard in New Hampshire launched four ships in a single day. In tiny Portland, Maine, more than 30,000 workers poured into town to work at the South Portland shipyards to build Liberty transport ships. The end of the war began a slow slide downward from the hundreds of shipyards opened or built up during World War II. In 1953 the United States had 30 major shipyards (14 on the East Coast, 5 on the Gulf Coast, 7 on the Pacific Coast, and 4 on the Great Lakes). By 2007 there were only nine yards left (four on the East Coast, three on the Gulf Coast, and one each on the Pacific Coast and the Great Lakes). The situation is viewed as so critical on Capitol Hill that the language for the briefing from the Committee on Appropriations stated that the $15.30 billion bill for shipbuilding ($1.65 billion over the administration’s request) was intended to “insure the stability of our country’s shipbuilding industry and maintain our superiority at sea.”36 The shipyard situation is so critical that the Navy is splitting some of its work between shipyards to ensure that they will survive. The DDG 1000 Zumwalt-class destroyers will be built at both the General Dynamics shipyard in Bath, Maine, and at the Northrop Grumman shipyard in Pascagoula, Mississippi, with both contractors sharing technology. Said the Navy’s DDG 1000 program manager, “Both shipyards realize that their viability in the future is at stake with this program. They know that if they don’t perform and this program is derailed in any way, in terms of either slowed down or cancelled, they have nothing.”37 The DDG 1000 class brought in another defense contractor, Raytheon, which won a contract to build the destroyer’s electronics and systems integration. Raytheon is using that project to improve its ability to integrate systems produced by both Raytheon and the other defense contractors, which could elevate Raytheon to the status of Lockheed Martin and Northrop Grumman as a major prime contractor.38

The Defense Industrial Base

The Defense Department and the Defense Industrial Base The Department of Defense clearly wants to maintain a responsive and robust industrial base to sustain its programs, but the dilemma lies in how to preserve and advance what is essentially a private industry (with the exception of the few remaining government arsenals). The very tradition of private enterprise dictates that the market, rather than the state, be the primary determiner of corporate activity. Yet the defense market is so different from the “normal” commercial market that government involvement is a necessity. As Weidenbaum has noted, “Because the market is so completely subject to the changing needs of this one customer (DoD), relationships between buyer and seller differ fundamentally from those in civilian sectors of the economy. By its selection of contractors, the government controls who enters into and who leave this market. It also determines the potential growth of these firms and is in a position to impose its ways of doing business with them.”39 Thus, the Defense Department has the power to do things normally done by the marketplace, to reward firms that perform well and to punish firms that fail their performance standards. The problem is that, in many ways, the defense market is creating artificial substitutions for market forces, which cannot often be sustained in an environment of political power and military needs. For example, in a normal market, the government could not offer subsidies to private firms, as such a reward would distort the normal market dictate that firms that fail should be allowed to leave the marketplace.40 But in the defense environment, firms that fail are also unique firms that are sometimes the sole provider of a system or service, and when they fail or perform poorly, they are bailed out with a new defense contract or renegotiation of an existing contract. Firms that lose a competitive bid in the private market must absorb that loss and presumably be encouraged to improve their practices so that they maximize their chances in the next bidding contest. But in the defense market, firms that lose a bid to a rival are often given a share of the winner’s prize. Thus, when Northrop Grumman’s F-23 prototype fighter lost the contract for the Advanced Tactical Fighter to Lockheed Martin’s F-22, Northrop Grumman joined with Lockheed Martin to produce parts for the F-22.

More Government Planning? The difficulties encountered by the public-private interface between industry and the Defense Department raise questions about exactly how much planning the government should do as it tries to both enjoy the benefits of free market assumptions (however imperfect) and accomplish government tasks. Republican administrations have been particularly loath to engage in too much government planning, but sometimes a combination of poor performance and poor publicity stemming from the defense industry’s bad news forces even conservative administrations to try central planning. So in 2002, George W. Bush’s Defense Department created the Task Force on Priority Allocation of Industrial Resources

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(PAIR) to help centralize and coordinate defense industrial policy. The duties of PAIR include the blending of acquisition plans with consumers (the combatant commanders, the alliance requirements [NATO in particular]), the JROC, and the Joint Material Priorities and Allocation Board (JMPAB).41 Whether this task force will actually accomplish its goals or whether it is a largely symbolic board to give the appearance of change remain to be seen, but the nexus between industry and the military is complex at best. Private industry must fund its own research and development, making careful decisions about how to spend scarce resources and thus avoiding R&D on risky low-payoff projects. However, in the defense market, the government often provides the R&D assets, including both funding and research work in government-owned research facilities, which then benefits private contractors at the government’s expense. The Defense Department may also intervene in the defense industrial base to prevent or limit contractors’ ability to leave the defense market or to shrink their share of defense work in favor of commercial contracting by structuring contracts with incentives for long-term production and follow-on contracts. The DoD may also set emergency priorities for national emergencies, because Title I of the Defense Production Act provides for presidential authority to require preferential performance on contracts and orders to meet national defense and emergency requirements. Given that labor disputes and other stoppages slowed defense production during World War II and the Korean War (when President Truman tried unsuccessfully to take over the steel mills in 1952 when the union went on strike), it is understandable that the president might want the power to manage contract delivery. However, presidential powers are limited, and it is unclear exactly how much intervention the chief executive might actually have over the defense industry. The secretary of defense can rank certain contracts for priority delivery—contracts designated “DX” have priority over contracts designated “DO”—and, in November 2007, the department designated mine-resistant vehicles (to combat improvised explosives in the wars in Iraq and Afghanistan), elements of the ballistic missile program, an upgrade of the Trident submarine-launched ballistic missile program, and presidential helicopter modernization as DX programs, though the national security urgency of a new presidential helicopter was not explained. Moreover, while the urgency of expediting the production and delivery of mine-resistant combat vehicles for troops in combat is obvious, the emphasis on missile defense may reflect more the particular priorities of the George W. Bush administration than it does national priorities.42 The Defense Department has a particular interest in defense corporation mergers, since such mergers may enhance productive capability by combining assets but may also reduce competition when rivals combine. Many of the large aircraft corporations, for example, have merged in the past decades, reducing the number of prime aircraft contractors from 16 in World War II to just 2 in 2008. But while the Defense Department takes a special interest in mergers, the antitrust aspect of such mergers remains the primary responsibility of the Department of Justice and the Federal Trade Commission. Should the Defense Department express a high interest in a pending merger, the deputy undersecretary of defense for industrial

The Defense Industrial Base

policy (DUSD[IP]) and the deputy general counsel for acquisition and logistics (DGC[A&L]) co-chair a joint consultative committee to assess the significance of the merger for departmental interests. The Defense Department does not have the authority to intervene directly should it oppose a particular merger; instead it forwards the views of the joint consultative committee to the Department of Justice. The Department of Justice has, among a multitude of responsibilities, the power to enforce federal laws regulating competition, which is the arena where most mergers fall. Thus, in 1998 the Justice Department opposed the merger of Lockheed Martin with Northrop Grumman, noting that both build aircraft and other related military systems. Said Joel I. Klein, assistant attorney general in charge of the department’s Antitrust Division, “This merger, in an industry that is already highly concentrated, would completely eliminate competition and reduce innovation in many areas that are vitally important to our national security, ultimately diminishing the quality of the products supplied to the U.S. military.”43 In a similar decision, the Clinton-era Justice Department required that Texas Instruments sell its military radar branch prior to a merger with Raytheon, which also produced military radar.44 International mergers are yet another matter, unlike domestic mergers, and are more tightly regulated by the Defense Department under the Exon-Florio Amendment to the Defense Production Act, which gives the president the direct authority to block the merger of an American defense firm with a non-U.S. firm, should the Defense Department (or another U.S. agency) determine that such an action would present a threat to national security. In these cases, the possible threats include the loss of classified or proprietary data to a non-U.S. entity, or a decision to suspend or reduce defense production of critical defense components. Such firms may also provide the products of their mergers to international buyers that the United States forbids sales to. The Defense Department role comes through its membership in the Committee on Foreign Investment in the United States (CFIUS), where it shares membership with the Departments of State, Commerce, Homeland Security, and Justice, along with other selected federal agencies. The defense industrial base is vast and complex, often subject to negative attacks for its alleged ties to warmongering and high profits. Like oil company executives, defense firm leaders often find themselves in front of hostile congressional committees. That is partly because, like other elements of the defense acquisition system, political considerations help to fuel the defense industrial base, which are the topic of the next chapter.

Notes 1. Aaron L. Friedberg, In the Shadow of the Garrison State: America’s Anti-Statism and Its Cold War Strategy. Princeton, NJ: Princeton University Press, 2000, chap. 7, and esp. 247–249. 2. Kurt Hackemer, The U.S. Navy and the Origins of the Military-Industrial Complex, 1847–1883. Annapolis, MD: Naval Institute Press, 2001, 55–56.

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The Process and Politics of Defense Acquisition 3. Thomas L. McNaugher, New Weapons: Old Politics: America’s Procurement Muddle. Washington, DC: Brookings Institution, 1989, 63. 4. “Air Force Is Pressed to Test Air Refueling—For Hire,” The Hill, June 6, 2007. 5. Northrop learned that lesson when it responded to encouragement from the Carter administration for an inexpensive fighter that would also be attractive to international buyers. It developed the F-20 Tigershark, but when the U.S. Air Force refused to buy the plane, no international customers stepped forward to replace the Air Force, particularly when they realized that without Air Force participation, they would have to assume both the risk and the cost of maintenance. 6. Mike Petters, “American Shipbuilding: An Industry in Crisis,” U.S. Naval Institute Proceedings, February 2006, 16. 7. Murray Weidenbaum, Small Wars, Big Defense: Paying for the Military after the Cold War. New York: Oxford University Press, 1992, 135. See also Jacques S. Gansler, The Defense Industry. Cambridge, MA: MIT Press, 1980. 8. National Defense Authorization Act for Fiscal Year 2004. Report to Accompany S.1050, Committee on Armed Services, U.S. Senate, May 13, 2003. Washington, DC: Government Printing Office, 2003, 122. 9. Robert F. Dorr, “Fighting for Survival,” Armed Forces Journal, June 2005, 27. 10. “Navy of Tomorrow, Mired in Yesterday’s Politics,” New York Times, April 19, 2005. 11. Sandia National Labs, “GOCO,” http://www.sandia.gov/about/history/goco/index. html. 12. “Getting a Fighting Chance for U.S. Grants,” Los Angeles Times, January 3, 2008. 13. In some cases there may not be much oversight on the nature of the company, which seems to have occurred with NewEra Manufacturing, a Nevada company that made wheel and brake components for military aircraft. NewEra was apparently a moneymaking firm for the Fundamentalist Church of Jesus Christ of Latter Day Saints (FLDS), and its president, John. C. Wayman, was an FLDS leader and a close associate of Warren Jeffs, the sect’s “prophet,” who was convicted of multiple accounts of rape in 2007. “Polygamist Sect Linked to U.S. Funds,” Atlanta Journal-Constitution, April 13, 2008. 14. “Defense Firm Forged Close Ties to Congress to Get No-Bid Contracts,” Wall Street Journal, April 14, 2008. 15. Rachel Weber, Swords into Dow Shares: Governing the Decline of the Military Industrial Complex. Boulder, CO: Westview Press, 2001, 55. 16. “Ammunition Industry Preparing for Ebb in Demand,” Tampa Tribune, July 24, 2007. 17. “With Cargo-Plane Bid, Raytheon Blazes a New Trail,” Arizona Daily Star, May 16, 2007. 18. James R. Kurth, “Why We Buy the Weapons We Do,” Foreign Policy 11 (Summer 1973), 40–41. 19. Weber, Swords into Dow Shares, 72–78. 20. Roger W. Lotchin, Fortress California, 1910–1961: From Warfare to Welfare. New York: Oxford University Press, 1992. 21. Ann Markusen, Scott Campbell, Peter Hall, and Sabina Deitrick, The Rise of the Gunbelt: The Military Remapping of Industrial America. New York: Oxford University Press, 1991. 22. Ibid., 9. 23. “Winter Seeks More Control over Industry,” Navy Times, June 9, 2007. 24. “Contractors in Lead Go on Defensive,” Wall Street Journal, July 24, 2007.

The Defense Industrial Base 25. “ISSUE 1: Maintaining Integrity and Responsiveness of the Acquisition Process,” NDIA’s Top Issues for 2007. 3, http://www.ndia.org/Content/NavigationMenu/Advocacy/ Policy/PDFs28/FINAL 2007 Top Issues.pdf. 26. “When Public Advocates Line Up for Corporations,” Washington Post, April 3, 2008. 27. Department of Defense, “Jack Dave Patterson,” http://www.defenselink.mil/bios/ biographydetail.aspx?biographyid=86. 28. “Sitting at Budget Controls, Official Throttles Program,” Fort Worth Star-Telegram, January 12, 2008. 29. “The Project That Wouldn’t Die,” Washington Post, June 19, 2006. 30. “Lawmakers Heavily Invested in Defense Companies,” San Diego Union-Tribune, April 4, 2008. 31. “2 Pentagon Suppliers Report Strong Sales and Profit,” New York Times, July 25, 2007. 32. “Boeing Profit Increases by 27 Percent,” Philadelphia Inquirer, April 26, 2007. The profit figures also include considerable commercial sales. 33. “General Dynamics Beats Estimates,” New York Times, July 26, 2007. 34. “Oshkosh’s Best Offense Is Defense,” Wall Street Journal, May 7, 2007. 35. “As Military Contracts Grow, so Do Protests,” Washington Post, February 27, 2007. 36. “Summary: 2008 Defense Appropriations, Full Committee Markup,” Committee on Appropriations, House of Representatives, July 25, 2007, 2. 37. “Maine’s Bath Iron Works Sails into an Uncertain Future,” Boston Globe, July 29, 2007. In July 2008, the Navy stunned both contractors by canceling the program after funding just 2 of the planned 32 ships, citing the program’s rapidly rising cost as one factor in the decision. 38. “Warship 2.0,” Boston Globe, July 29, 2007. 39. Weidenbaum, Small Wars, Big Defense, 132. 40. The defense market is hardly the only market to receive government subsidies, as the farm sector enjoys billions of annual subsidies, to list but one example. The effect of subsidies can also distort agricultural markets, though, as U.S. farm production has swung from surplus to shortage, as evidenced most recently by the food price escalations of 2008. 41. Undersecretary of Defense, “Priority Allocation of Industrial Resources,” February 4, 2004, http://www.acq.osd.mil/ip/docs/pair tf memo signed 04feb02.pdf. 42. The Bush administration has placed considerable emphasis on national missile defense, a program largely abandoned by the Clinton administration. The declared justification lies in the potential for North Korea or Iran to develop a ballistic missile capable of hitting the United States, but such programs are most likely decades away, if ever. However, the Bush administration, fearing that missile defense programs may be abandoned by a successor Democratic administration, may well try to make such progress on a nascent ballistic missile program that it will be difficult for a subsequent administration to cancel it. 43. “Justice Department Goes to Court to Block Lockheed Martin’s Purchase of Northrop Grumman,” press release, March 23, 1998. Washington, DC: Department of Justice, 98–131. 44. “Justice Department Requires Raytheon and Texas Instruments to Divest Key Unit before Approval of Their $2.9 Billion Merger,” press release, July 2, 1997. Washington, DC: Department of Justice, 97–277.

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Further Reading Defense Infrastructure: Actions Needed to Guide DOD’s Efforts to Identify, Prioritize, and Assess Its Critical Infrastructure: Report to Congressional Requesters. Washington, DC: GAO, 2007. Gansler, Jacques. The Defense Industry. Cambridge, MA: Cambridge University Press, 1980. Kambrod, Matthew R. Lobbying for Defense: An Insider’s View. Annapolis, MD: Naval Institute Press, 2007. Markusen, Ann, Scott Campbell, Peter Hall, and Sabina Deitrick. The Rise of the Gunbelt: The Military Remapping of Industrial America. New York: Oxford University Press, 1991. Weidenbaum, Murray. Small Wars, Big Defense: Paying for the Military after the Cold War. New York: Oxford University Press, 1992.

CHAPTER 4

The Politics of American Weapons Acquisition

For fiscal year 2007, the Defense Department budgeted more than $147 billion for weapons procurement, and the estimated life-cycle cost of the five largest Pentagon weapons projects is more than half a trillion dollars. However, despite such sums, little research exists to help explain the driving forces behind such numbers. This chapter considers and analyzes the political factors that shape decisions in the defense acquisition system. But what is meant by politics? Politics, basically understood, is about the actors and processes that influence the distribution of public resources, usually by governments. Political decision making involves making choices across public priorities, normally in a nonmarket environment. Political decision making is generally governed by rules, consisting of both formal laws approved in a legal process and informal rules achieved by informal consensus. Decisions in a political environment produce outcomes favored by particular recipients, who provide information and influence to attempt to direct more favorable outcomes toward them. In essence, the system involves exchanges of goods, as outcome recipients pass on influence and resources (often political donations of money, time, and other goods valued by those who allocate public resources), and expect to receive public goods (e.g., budget allocations, public contracts, access to the corridors of power). The process that regulates these exchanges is simply a particular system, in this case, the defense acquisition system. While the defense acquisition system is larger than its political component, it cannot be thoroughly understood without some understanding of that political component. The defense acquisition system is a part of a larger force-planning system, and in an ideal world, acquisition comes only after the planning and programming processes determine long-term global interests for the United States, potential threats to those interests, and the appropriate defense programs to defend against estimated threats. The world is not ideal, though, and multiple political actors and processes shape the defense acquisition system. This chapter examines the

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motives and actions of those actors and the processes they create and sustain to obtain their goals. It analyzes the system from two different approaches, one that emphasizes the link between weapons choices and national requirements set by interests and threats, and one that views weapons decisions as influenced more by domestic internal political preferences than by national requirements.

What Drives the Defense Acquisition System? Many actors and processes shape decisions on force structure, but a key question is how much impact each actor has in process outcomes. Several propositions may help answer such a question: 1. Vague abstractions about both future threats and values are less influential in shaping outcomes than are direct and clearly articulated interests. 2. The ability to generate tangible short-term benefits from defense acquisition decisions is more influential than the generation of relatively intangible long-term benefits. 3. Domestic politics is more influential than international politics in influencing outcomes, although international politics (particularly but not exclusively the politics of arms sales) remains important to the system.

Competing Assumptions about the Defense Acquisition System A common assumption about weapons choices is that they respond to a set of criteria responsive to national interests to defend against threats to such interests. As noted in Chapter 2, the process usually starts with threat-based planning that links military threats to the defense of national interests. Such planning assesses vulnerabilities to national interests from both state and nonstate actors, and develops plans and programs to respond to such dangers. Thus, during the Cold War era, much of the U.S. Department of Defense planning process began with threat assessments about the former Soviet Union, as illustrated by this 1961 exchange between Congressman Frank Becker (R-NY) and Chairman of the Joint Chiefs General Lyman Lemnitzer: Gen. Lemnitzer: Today we have great power. Our problem is to be sure that we maintain that position vis-`a-vis the Soviet Union in the future. Mr. Becker: And increase it constantly? And increase it better and constantly as we go along? Gen. Lemnitzer: That is right. Mr. Becker: And increase it faster? Gen. Lemnitzer: That is right, within reason.1

Defense Secretary Caspar Weinberger made a similar argument in 1982, opening his testimony on the proposed fiscal 1983 defense budget: “The Soviet Union has, in the extent of their growing threat, the power to inflict tens of millions of

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casualties on our population. . . . Only the Soviet Union has massive and modern conventional and nuclear forces deployed directly confronting our friends and allies in Europe and Asia. . . . Only the Soviet Union has the forces and the geographic proximity to threaten the free world source of oil. . . . Measured by that threat, Mr. Chairman, our proposed defense budget is fully justified.”2 After the Cold War, Defense Department planning took a new tack, shifting from threat-based to capabilities-based, as described in the 2001 Quadrennial Defense Review: A central objective of the review was to shift the basis of defense planning from a “threat-based” model that has dominated thinking in the past to a “capabilities-based” model for the future. This capabilities-based model focuses more on how an adversary might fight rather than specifically who the adversary might be or where a war might occur. It recognizes that it is not enough to plan for large conventional wars in distant theaters. Instead, the United States must identify the capabilities required to deter and defeat adversaries who will rely on surprise, deception, and asymmetric warfare to achieve their objectives.3

The shift was more semantic than real, though, because it still assumed a planning process driven by a threat, but it acknowledged that predicting future adversaries or their expected behavior would be more difficult than it was during the Cold War. In short, threat-based planning lived on even if the nature of the peril was more uncertain. The 2006 QDR reinforced that image: The Department of Defense conducted the 2006 [QDR] in the fourth year of a long war, a war that is irregular in its nature. The enemies in this war are not traditional conventional military forces but rather dispersed, global terrorist networks that exploit Islam to advance radical political aims. These enemies have the avowed aim of acquiring and using nuclear and biological weapons to murder hundreds of thousands of Americans and others around the world. They use terror, propaganda and indiscriminate violence in an attempt to subjugate the Muslim world under a radical theocratic tyranny while seeking to perpetuate conflict with the United States and its allies and partners.4

The QDR did not emphasize threats from traditional states, although a separate Defense Department report, Military Power of the People’s Republic of China, highlighted Chinese military modernization and noted: “At the end of the Cold War, China entered a period unique in its modern history in that it does not face a direct threat from another nation. Yet, it continues to invest heavily in its military, particularly in programs designed to improve power projection. The pace and scope of China’s military build-up already place regional military balances at risk. Current trends in China’s military modernization could provide China with a force capable of prosecuting a range of military operations in Asia—well

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beyond Taiwan—potentially posing a credible threat to modern militaries operating in the region.”5 The report also echoed earlier concerns about the former Soviet Union and its defense expenditures, claiming that China may spend between $50 billion and $100 billion on its military, though other analysts argued that the figure was closer to $50 billion.6 Some threat assessments are sweepingly broad in their span. Consider the language of the Air Force’s 2008 white paper that lays out Air Force perceptions of both threats and requirements for two decades: The following are salient features of this increasingly complex, dynamic, lethal, and uncertain environment: r Violent extremism and ethnic strife—a global, generational, ideological struggle r Proliferation of weapons of mass destruction and empowering technologies r Rising peer competitors with voracious appetites for resources and influence r Predatory and unpredictable regional actors r Increasing lethality and risk of intrusion by terrorist and criminal organizations r Systemic instability in key regions (political, economic, social, ideological) r Unprecedented velocity of technological change and military adaptation r Availability of advanced weapons in a burgeoning global marketplace r Exponential growth in volume, exchange and access to information r Surging globalization, interconnectivity and competition for scarce resources r Dislocating climate, environmental and demographic trends7

With such a threat range, the Air Force (like other services that have similar white papers) attempts to justify a plethora of new weapons programs, ranging from fighter-attack aircraft to tankers, bombers, airlift planes, reconnaissance systems, and cyber war systems. Theoretically, choices about military force levels and weapons types stem from strategic assessments guided by a combination of national interests and international threats to such interests. National leadership shapes these decisions by factoring in the effect of competing priorities and ultimately choosing how much can be invested in military priorities in competition with other priorities. This is termed the national interest paradigm, which Figure 4.1 illustrates. The conceptualization of the weapons acquisition process in Figure 4.1 is simplified and incomplete, though. Predicting the future and its possible threats is speculative, and the results cannot provide anything more than very general guidance in a process that requires high levels of precision. Weapons designers, producers, and operators require specific information to generate specific capabilities, and so other input factors into the acquisition process. That input includes the role and perspective of the operating military service, the interests and capabilities

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National interests

External threats to national interests

President/ secretary of defense

Force recommendations

Other national priorities

Congressional appropriations

Appropriated force decisions

Figure 4.1. National Interest Force Development System.

of the producers (and there may be hundreds), and the priorities and values of Congress along with those of the defense industry. Those factors become even more important since, even during the Cold War, threat assessments played only a partial role for weapons choices in both the United States and the Soviet Union. There is some evidence suggesting that each side based its armament decisions more on internal political factors than on strategic interaction.8 Moreover, a broader view of American history indicates that the United States rarely built up its military prior to a war, suggesting that even the presence of potential enemies did not stimulate an increase in American military capability (e.g., as before World War II), but the level of force after a war rarely returned to prewar levels.9 Therefore, other factors may be as significant as threat estimates in creating and sustaining major weapons programs, and consideration of how the defense acquisition system came about during and after the Cold War may provide evidence for such domestic forces. Systems evolve in part to allow significant participants in the process to engineer outcomes through political processes that favor their interests, and a consideration of how defense acquisition systems allow such access will help determine how those participants use it for their benefits.

Domestic Influences on the Defense Acquisition System The very term domestic influences sometimes smacks of selfish political interests trumping the national interest. However, domestic interests understood broadly are simply efforts by political actors to build and influence the defense acquisition

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system so that it becomes more responsive to their interests. Political actors may attempt to restructure the defense acquisition system to increase the efficiency of the system itself, or they may involve building access to the defense weapons process to allow domestic political actors to use it to further their own interests. National interests may still motivate them, but those interests become filtered through organizational prisms (e.g., the Cold War refrain, “The national interest is strategic deterrence, which the Air Force can do better than can the other services”). While threat assessment and other external conditions play an important role in arms acquisition decisions, internal factors also affect such choices. Given the complexity of the factors, analysts developed paradigms to categorize and examine them. Those paradigms include the bureaucratic politics factor, the civil-military relations factor, the congressional politics factor, and the militaryindustrial complex factor.

The Bureaucratic Politics Factor The bureaucratic politics explanation argues that bureaucracies foster types of behavior that reinforce the goals of their members, who hold a common interest in the sustainability and growth of their particular organization. Bureaucratic goals are easy to understand for their members, who believe that they are a part of the collective interest that bureaucracies both protect and advance, which include tangibles such as pay and job security, and intangibles such as organization pride.10 In contrast, vague concepts like the national interest are difficult to understand, and even more difficult to tie directly to resource decisions. How many dollars, for example, does the country need to protect freedom or democracy, in contrast to how many dollars a particular organization needs to outspend its rival organization or retain its organizational purpose in advancing the interests of its members? Of course, bureaucratic interests may not be inimical to national interests, and those holding bureaucratic perspectives may well also believe in supporting national interests. To sustain regularity and organizational equilibrium, bureaucracies develop predictable ways of doing things, sometimes identified as standard operating procedures, or SOPs.11 The SOPs tell an organization not only what it should be doing but also, perhaps just as important, what it should not be doing. Organizations protect what they see as core missions, and avoid taking noncore missions by establishing a set of perimeters around their missions so that no other organization can poach them and no noncore missions creep through to compete with established organizational responsibilities. This provides a large and complex organization with a relatively simple set of rules for all to follow, establishing the kind of regularity that is particularly essential to large organizations. Military services, as large organizations, develop service cultures based on shared lessons and experiences. Such lessons are captured in service doctrines— the basic ideas about what the service does and how it does it. For the Navy, for

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example, “Doctrine is the heart of naval warfare. It governs our actions beyond the ordered execution of military operations. . . . Doctrine provides the basis for mutual understanding and trust within our naval Services as well as with other Services and our national leaders. Composed of ‘shared convictions’ that guide naval forces as a whole, it fuses our Service-unique tactics, techniques, procedures, and warfighting philosophies.”12 This document is full of examples drawn from the best of naval warfare (usually from World War II), with examples from the Battle of the Atlantic on attrition warfare and the Battle of Midway for economy of force. Within this core, organizations tend to give some missions higher priority. Perhaps the organization came into prominence through particular missions that gained it fame and resources. Thus, a multimission organization will emphasize those “core” missions while minimizing mundane missions. For example, the Air Force favored strategic bombers over transport aircraft, the Navy preferred carriers to auxiliary ships, and both services were reluctant to embrace new missions that might draw resources from traditional high-value missions. Therefore, the Air Force eschewed space and the Navy riverine patrol and sealift, for example, and it required either outside intervention or the role of a particularly charismatic leader to get those services to embrace such missions.13 Likewise, the Army refused to embrace special operations after the Kennedy administration first proposed it. Krepinevich observed that “the notion that a group of novice civilians (Kennedy, McNamara, and the Whiz Kids) should require the Army to de-emphasize its strong suits (heavy units, massed firepower, high technology) in favor of stripped-down light infantry units was bound to encounter strong resistance from the Army leadership.”14 A corollary position in the bureaucratic politics literature suggests that when resources become scarcer, bureaucratic competition for weapons and their associated roles and missions intensifies. The competition for the strategic nuclear mission in the late 1940s and early 1950s is illustrative. The Air Force brought the proposed B-36 bomber to the funding table, while the Navy advanced its projected supercarrier, which would have been capable of launching nuclear-armed aircraft from sea.15 While the Soviet threat during these days was perceived as high, defense budgets were pared back in both the Truman and Eisenhower administrations, so service competition intensified. The nuclear missions were viewed by the services as more “cost-effective” because they required far fewer personnel than did conventional forces, and consequently competition over these missions was especially keen.16 Prior to 1947, the War and Navy departments were separate, and interservice coordination was unusual prior to World War II. Each service had its own force acquisition bureaucracy and its own functional committees in Congress that generally trusted the services to acquire weapons that the service senior leadership preferred. With the tight budgets of the 1930s, for example, there was keen competition for resources between the services. When the Army Air Corps came under criticism for its high cost, the chief of the service, General James Fechet,

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suggested that the Navy’s aircraft program should be cut instead, thus freeing up more money for Air Corps aircraft.17 However, World War II highlighted the need for better service cooperation on both planning and execution. After protracted and often bitter congressional hearings, Congress drafted and President Truman signed legislation creating the new unified Department of Defense in 1947.18 The resulting unification also required Congress to restructure its defense committee structure, with the Armed Services Committees in both chambers of Congress overseeing the functions of the services, but also granted it wide budgetary discretion until the 1960s. The services also kept their own acquisition and forceplanning capabilities. Unification did not remove service identity or shift primary missions, so the Army retained functional control over land operations, the Navy over sea power, and the new Air Force gained partial control over air combat capability. The Air Force did have to share that mission with the other services, as the Navy retained both carrier-based aviation and antisubmarine aircraft, and the Army kept both small fixed-wing aircraft and helicopters. The Air Force emphasized long-range strategic bombardment capability as a core mission while retaining both fighter and cargo capability. That core mission drew considerable support from both the president and Congress, since it had the dual advantages of being both effective and inexpensive. The Air Force and its defenders argued that strategic bombardment would spare the United States large conventional forces, since the threat of nuclear annihilation alone would deter the Soviet Union from engaging in global adventurism at the expense of the United States. Whether such a promise was credible was one matter, but for the bureaucratic interests of the other services, the Air Force efforts to gain a significant portion of the defense budget spelled potential doom. From the perspective of President Truman and Secretary of State George Marshall: The services appeared to be at war with each other and in mutiny against their Secretary. As one of them later put it, the Air Force (which was the only service that could deliver the A-bomb at that time) seemed intent on parlaying its monopoly on the nation’s new and obviously important weapon into an occasion for reducing the Army and the Navy to the status of police forces. On their part, the Army and the Navy seemed to be reacting to the advent of the A-bomb with all the attributes of labor unions intent on preserving their previously existing job, pay, and promotion opportunities in the face of a major technological change.19

To compete with the Air Force, the Army and Navy sought their own nuclear missions. The Army, traditionally the defender of the nation’s coast and airspace through its coastal and air defense artillery groups, tipped its air defense missiles with nuclear warheads. However, the Air Force also sought a similar mission with its Wizard project, and thus, as Schwartz explains, “The period between 1955 and 1958 saw an intense competition between the air force’s Wizard project and the

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army’s Nike-Zeus program. The battle was over which service would be granted the BMD (ballistic missile defense) mission—the air force, which had already established service dominance in the strategic nuclear mission . . . or the army which lacked a major strategic mission but which had been given the air defense mission of defending specific targets. . . . The interservice battle over BMD became part of a much broader competition for missions and defense resources.”20 Competition between the Army and Air Force also occurred at the intermediate ballistic missile (IRBM) level, as both services developed their own IRBM systems, which were almost identical, though it was difficult to cancel either one, since both systems had considerable industrial and congressional support.21 The Army and the Navy continued to favor their own respective production systems based on arsenals and shipyards. The Air Force, however, preferred to rely on private contractors to develop and produce its weapons. One officer argued that “a delicate but well-defined and effective relationship can be set up between industry and the military which will provide both the defense of the nation and continued industrial good health.”22 When the Army wanted to improve its armed helicopters, it turned to its own development centers at Alabama’s Fort Rucker and at Fort Benning in Georgia with little contractor support.23 Bureaucratic politics models also suggest that bureaucracies develop images of what their organization should (and thus should not do) and protect those images. Thus, when ballistic missiles became technically possible in the late 1940s and early 1950s, U.S. Air Force leadership resisted the idea in defense of manned bombers. Edmund Beard, in his study of the ICBM development, claimed that “the history of the ICBM program in the United States from 1947 until late 1953 indicates that cultural resistance within the Air Force and elsewhere to the idea of long-range ballistic rockets was at least as important as the state of the relevant technology in dictating the choices made. The early postwar decisions to subordinate missiles to manned aircraft (most importantly jets) and ballistic missiles to air-breathing versions were justified at the time.”24 Partially to fend off the threat of ballistic missiles to the manned bomber force, the Air Force had proposed the B-70 bomber as a replacement for the B-52 and defended it in the face of staunch opposition from the secretary of defense. Noted two analysts who worked for Defense Secretary Robert McNamara, “The Air Force studies sent to the Secretary of Defense in support of the B-70/RS-70 were filled with biased assumptions and exaggerated claims.”25 Sapolsky finds a similar attitude in the U.S. Navy toward the idea of a fleet ballistic missile submarine. Senior naval officers understood that the costs of such a program would be huge, and feared that they could come at the expense of programs that are more traditional: “There were other things to do militarily besides preparing for the war that seemed least likely to occur. Conventional warfare forces, for example, were being neglected, and the Navy could build its future by concentrating on these. Should a sea-based ballistic missile be needed, they preferred that its costs be charged against the Strategic Air Command appropriations.”26 The U.S. Army also maintained a rocket program at a high cost, which brought Neufeld to conclude that, “all too often, the entrenched

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interests of the services . . . seemed more important to their commanders than the national interest. The Army stubbornly held onto its prestigious ballistic missile and space assets even at the cost of its core mission.”27 The advent of the cruise missile also posed challenges for service preferences for traditional missions. As Art and Ockenden observed, “Without exception, the military services did not want cruise missiles if they threatened their respective dominant missions or ate into their scarce funds, both were in general the case. The long-range air-launched cruise missile (ALCM) was rammed down the throat of the Air Force. The Army refused to accept development for the ground-launched cruise missile (GLCM) . . . The Navy—specifically, the carrier admirals—did not want the Tomahawk antiship missile (TASM) because it represented a clear and present danger to the mission of the carrier-based aircraft.”28 Desmond Ball’s analysis of the strategic missile programs of the Kennedy administration provides yet another example of the power of bureaucratic politics. Ball found that, while the estimates and intentions of the Soviet Union were vague and divisive, service nuclear missile programs carried precise numbers (e.g., 1,000 recommended land-based long-range missiles), and after his study of the origins of these programs, Ball concluded, “It is clear that the strategic ballistic-missile levels of the 1960s were in excess of those required by the United States at that time, and that this misjudgment is not explicable in terms of inadequate intelligence or poor analytic techniques of force posture development. It was determined, rather, by other, more political factors.”29 Those factors included service-generated missile numbers competing with OSD missile numbers, with the final figure a compromise between these differences. For example, while a program analysis and evaluation (PA&E) civilian study recommended 32 missile tubes on fleet ballistic missile submarines, senior submarine officers concluded that the recommended number seemed to be just too much. The compromise between PA&E and the submariners resulted in Polaris-equipped missile submarines with 16 missile tubes, a number certainly not derived from careful threat response or systems analysis.30 Bureaucratic politics also defines what an organization seeks to control—the acquisition of its own equipment. That way it not only ensures the preservation of its image and identity but also allows organizations to advance systems that might trump rival organizations. Thus, when Robert McNamara tried to consolidate this authority within the civilian-dominated OSD, the services predictably resisted. McNamara was able to force some consolidation of aviation programs (demanding that the Air Force buy the Navy F-4 and later the A-7),31 but both the Navy and the Air Force resisted when McNamara tried to get both of them to buy the proposed TFX aircraft, later to become the Air Force F-111. In that case, the service selection board recommended the aircraft that was least compatible with joint service needs (Boeing and General Dynamics competed for the contract), and then the Navy engineered its version to the point where it became too heavy for carrier operations, finally forcing McNamara to cancel the joint effort.32 A similar effort in later years to get both the Navy and the Air Force to buy the

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F-22 in its early stages also failed, and the Navy opted instead to buy an advanced version of its F/A-18. The OSD did prevail over service preferences with the F-35 JSF, though. While all the fixed-wing service operators wanted replacement aircraft for existing models, the Clinton administration canceled some of their favored programs (the Navy AF/X fighter and the Air Force Multi-Role Fighter in September 1993), and then DARPA gained traction with its Common Affordable Lightweight Fighter, which grew into the F-35. It remains to be seen whether the F-35 will become a revolutionary joint and combined aircraft or an unloved TFX. While some argue that the F-35 has avoided the lack of service cooperation that marked TFX development, the services sometimes drop out of joint programs once started. The Navy abandoned an early interest in the F-22, and the Army stepped back from participation in the Marine Corps V-22 tilt-rotor program. Moreover, one report noted that, “while designing an aircraft that meets both the Air Force’s and the Navy’s needs is challenging, the Marine Corps short takeoff and vertical landing requirement may be what makes or breaks this joint program because it appears the most technologically challenging variant and is a leading cost driver.”33 The degree to which bureaucratic politics shapes weapons decisions probably depends on many factors, including the value of the stakes, the size of the overall resources to be expended on weapons systems, and the role of high-level leadership. Bureaucratic competition seemed to be especially keen during the early Cold War, when the emergence of an ambitious Air Force suddenly added to the mix of services searching for Cold War missions under budgetary constraints. The budget cuts of the Truman and Eisenhower administrations added to the intensity of bureaucratic rivalry, since as the overall defense resource pie shrunk, each slice became ever more valuable. Additionally, senior leadership during the Eisenhower years in particular seemed to foster heated competition through its own lax management style. During this period, competition for intermediate-range ballistic missiles (IRBMs) became intense between the Army with its Jupiter system and the Air Force with its Thor IRBM. Both programs moved forward through stiff service lobbying for their favorite rocket, and ultimately the Kennedy administration found that each had so much political momentum that it could not easily stop them without incurring political costs. Part of the reason, according to Michael Armacost, was that no one in the administration was willing to make a tough decision: “prolonged evasion of a decision on roles and missions was a consequence of disagreement among three Chiefs of Staff, the reluctance of the Chairman of the JCS to impose a decision, Secretary Wilson’s hesitancy in exerting his authority until forced by events and budgets, and the general aloofness of the President.”34 However, as Samuel Huntington indicated in his seminal study of early Cold War politics of defense, “Interservice competition tended to weaken the military as a whole but to strengthen the military services individually.”35 Bureaucratic politics remains as an explanation for current force-planning decisions. Services still compete with one another despite the progress of jointness, and the services still bring their own priorities to the table. So bureaucratic politics

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exist both within service bureaucracies and among services in the competition for defense dollars. The Navy provides an example of service priority. Its priority missions include large surface warfare ships, with carrier aviation leading the list. Submarines are probably a notch down on the list, but they are still a priority. By contrast, countermine warfare has not been a main concern, and the Navy has been reluctant to fund mine warfare ships. An exchange between Congressman Rodney P. Frelinghuysen (R-NJ) and Chief of Naval Operations Admiral Vernon Clark shows the point: Mr. Frelinghuysen: What are we doing in terms of technology to promote more antimine warfare? Admiral Clark: The biggest thing, Congressman is this. We made a commitment a few years ago to develop organic capability so that we would not have a one-of-akind ship doing mine warfare. And they were small and slow and hard to get to the point of action.36

Admiral Clark indicated that the future multirole Littoral Combat Ship would have an antimine capability, but he was clearly reluctant to support the construction and maintenance of ships specifically for countermine purpose, even though the United States had to rely on European minesweeping capability during the 1990–1991 Gulf conflict. The Navy also canceled two shallow-water minefield breaching systems and retired the mine command ship USS Inchon, decisions that particularly affected Marine Corps amphibious operations. The decisions led Senator Edward Kennedy (D-MA) to ask, “I mean, why should the subcommittee [on seapower] conclude the Department [of the Navy] is really serious about maintaining and improving the forcible entry capability in view of the various programmatic decisions that appear to be eroding that capability over time?”37 Possibly in response, the Navy’s incoming chief of naval operations (CNO), Admiral Michael Mullen, indicated that he was forming a “Navy Expeditionary Combat Command” to coordinate proposed inland operations but, at the same time, expressed support for the list of new ships and aircraft proposed by his predecessor, Admiral Clark.38 Another example was the fate of the 1990s proposed arsenal ship, which the Navy canceled as a result of inadequate funding. Noted a RAND study of the project, “The user-service mainstream never supported the Arsenal Ship concept, and therefore program. The most basic reasons were that they either did not believe it would be helpful (e.g., for Marines onshore calling for fire support), or they believed that it would replace traditional platforms (e.g., Navy carriers and strike aircraft, Air Force strike aircraft). These beliefs shaped the behavior of highlevel Navy officials and members of Congress, which in turn affected the behavior of Navy organizations, the [Arsenal Ship Joint Project Office], and the contractor teams.”39 The Air Force F-22, discussed earlier, provides another example of the power of bureaucratic politics. The Air Force highlights the plane’s advanced capabilities and potential future threats, as noted here:

The Politics of American Weapons Acquisition “They tout it as an insurance policy in any conflict against China or a resurgent Russia, and to counter increasingly sophisticated surface-to-air missiles with longer range and better targeting capabilities. We have made it look so easy for so long, people don’t realize how hard it is to establish air dominance,” Brig. Gen. S. Taco Gilbert III, the Air Force’s deputy director of strategic planning, said in an interview. “Iraq is not a good example of what we’ll see in the future.” The aging fleet of F-15 Eagles, which the Raptor will replace, is being bypassed technologically, Gen. John P. Jumper, the Air Force chief of staff, said in a recent interview in his Pentagon office. Citing the latest planes being developed in Europe and Russia, he said, “I do not relish the idea of some of the technology I saw in the Eurofighter . . . in the hands of certain nations. I think certain models of the [Russian built] Sukhoi are already superior to the F-15.”40

The problem is determining whether such statements of support constitute a valid statement of threat and corresponding need or are simply indicators of service interests. The F-22 does feature significant new technology, including supercruise stealth technology and advanced combat avionics, and it is the only designated successor to the F-15 fighter series.41 Moreover, Air Force leaders may well remember that the only frontline fighter in the Vietnam War was the multirole F-4, which the secretary of defense forced on them because the Air Force had not pushed its own advanced fighter. However, on the other hand, there is no aircraft like the F-22 planned for near-term production in any country, experimental Russian models aside, and the very few potential near-term enemies of the United States would be very hard-pressed to buy or, even more remotely, build their own version of an advanced fighter. Russia has been selling very small quantities of its advanced MiG-29 to countries like Somalia and Yemen, which lack the training and support infrastructure to make their planes threats to the United States. The F-22 does provide an increase in ground attack capability over the F-16 and F-15, though. Still, the Air Force came under unusual public criticism from Defense Secretary Robert Gates in an April 2008 speech to the Air University at Maxwell Air Force Base in Alabama, where Gates implied that the service was resisting deployment of drone reconnaissance aircraft because of its preference for aircraft like the F-22. Said Gates, “I’ve been wrestling for months to get more intelligence, surveillance and reconnaissance assets into the theater. Because people were stuck in old ways of doing business, it’s been like pulling teeth.”42 The U.S. Navy was particularly vulnerable to reshaping after the Cold War, as its structure revolved around large capital ships designed largely for combat with a Soviet naval fleet.43 While the potential for supporting land operations remained, the need for a large “blue-water” navy for combat at sea became less clear after the Cold War. The Navy continued to request even more carriers and support ships without a clear reason, and in the face of growing doubt about the need for new carrier capability, the Navy sought to justify its requirements by tying them to the so-called global war on terrorism. Said Admiral John B. Nathman, commander of the Atlantic Fleet, “Would you want to stop a container ship [with a weapon of mass destruction aboard] in Yemen, or would you rather stop a container ship at

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the entrance to the harbor at Long Beach?”44 The presumption was that stopping a container ship in Yemen required the large ships the Navy continued to operate, even though there was no evidence that weaponized container ships had been intercepted or that terrorists planned to use such a tactic. It is not surprising that bureaucratic politics appears to be a viable explanation for weapons choices after the Cold War. The paradigm worked during the Cold War when the threat was somewhat clear, so in the era of the indistinct threats that followed the Cold War, it should become even more prevalent. Early indications are that it has. Bureaucratic politics can often lead to interservice quarrels over which service wins responsibility for weapons, as noted earlier in the Thor-Jupiter controversy, and such squabbles continue in the present time. The Air Force, for example, wanted to wrest control of the Joint Cargo Aircraft, a program initially devised jointly with the Army. The Army and the National Guard, which wanted the plane delivered as soon as possible, worried that the Air Force would delay delivery until 2011.45 The Army and the Air Force also engaged in a battle over unmanned aerial vehicles (UAVs) in 2007, as the Air Force made a move to take control of all UAVs with operating altitudes over 5,000 feet, which would take the bulk of UAVs operated by the Army. The Army raised questions about whether the Air Force would be able to support Army troops as well as the Army UAVs reportedly do, but one defense analyst ( John Pike of GlobalSecurity) implied that Air Force interests better explained the attempted maneuver: I think this is a case of the Air Force having too much time on its hands. They seem to be striving for purpose as a military service and this is a way to go about that. There aren’t too many air forces left for them to fight in the air. They like shooting down other aircraft, and since that’s not much of a [twenty-first] century mission, then UAVs would be the next likely job. The Air Force has traditionally been concerned about air superiority over a battlefield. That’s how they make aces. You don’t become an ace by dropping bombs on tanks and troops.46

This may have been somewhat harsh and overstated (one does not become an ace [i.e., have five combat kills] by flying a UAV), but it does suggest that the competition over role and missions that Key West was supposed to solve in 1948 was still alive almost 60 years later. Efforts to resolve the UAV issue also fell short. Deputy Secretary of Defense Gordon England tried to merge the Army and Air Force UAV programs, but when Alabama Republican Senator Richard Shelby tried to give the Army control over the entire program (which would benefit Huntsville, Alabama), the Air Force reopened the fight, arguing that if it got program control, it would save $1.7 billion on it, prompting the other services to highlight Air Force cost overruns on its own Predator program.47 The Army and Air Force also disagreed over close air support for ground forces, which is somewhat surprising given the Air Force’s traditional preference for air superiority and bomber aircraft. However, as the Army developed the AH-64

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Apache helicopter for “deep support” missions, the Air Force took objection. Then Air Force chief of staff General Merrill McPeak argued that the AH-64 was too vulnerable for such missions, and that the Air Force’s A-10 close-air-support plane would be more effective for deep strike missions.48

The Civil-Military Relations Factor The proper relationship between the military and civilian political leadership is a vexing issue in the national security arena. A common assumption in American politics is that under democratic systems, elected officials make the key decisions about spending taxpayer dollars, and that while the unelected officials working in government organizations may influence those decisions, they cannot make them. This is clearly true for military officials in particular. The earliest writing on civilmilitary relations in the United States emphasized the separation of the military from political decision making.49 That line, however, can become quite blurred in reality. The professional military is responsible for national defense and, as such, is the consumer of weapons. Consequently, the military plays a key role in the threat estimates used to justify weapons choices. It can hardly be excluded from the process, so the key question becomes, How much involvement should civilian leaders grant uniformed service leaders? The nexus of civil-military relations in the defense acquisition area is access to and power over defense decisions. One way to shift power from the uniformed military to the civilian secretariat is to alter the structure of the system, inserting in it more decisional nodes to challenge the power of the professional military over weapons choices.

Civil-Military Relations and the Structuring of the Defense Acquisition System In 1948, the new U.S. Air Force signed a preliminary contract for a giant eightengine bomber design, the XB-52. The document, around 30 pages long, specified performance requirements, cost, delivery schedule, and many other critical factors. Air Force officers and representatives of Boeing Aircraft, the designer of the aircraft, signed the document on the last page. In faint pencil marks along one of the page margins is a cryptic anonymous phrase, “Symington says ok,” referring to the then secretary of the Air Force. That was the only civilian oversight for a decision to purchase this then-radical aircraft. The services ran a relatively simple system to produce their required weapons systems. Congress occasionally held hearings in an effort to shape defense priorities. However, the process was quite open to the particular influence of the service as the primary operator. The services, after all, were the main source of knowledge and experience on weapons systems—they flew, sailed, drove, or otherwise operated the systems of warfare and their associated support equipment. Both President Truman and President Eisenhower remained largely aloof from major weapons decisions, preferring to leave them to the services or, when

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conflicts over weapons became public, to their secretaries of defense.50 However, the Kennedy administration showed less confidence in the military and its power over force decisions. After Kennedy took office in 1961, his defense secretary, Robert S. McNamara, became convinced that the services (and the Air Force in particular) had too much influence in determining national defense programs, and he began to reshape the defense acquisition process. McNamara believed that the concepts of scientific management would shift power from the military (which, McNamara believed, bought weapons more to preserve bureaucratic power than for national security) to professional program managers and analysts. In developing the planning, programming, and budgeting system (PPBS), he incorporated mechanisms to link the defense budget process with defense planning. They included the five-year defense plan (FYDP), the Draft Presidential Memorandum, the creation of the Systems Analysis Office (later Program Analysis and Evaluation, or PA&E), and the Development Concept Paper. The FYDP required the Defense Department to engage in long-range forecasting of budget requirements, thus allowing comparison of programs over a longer run than the previous year-by-year planning cycle. The Draft Presidential Memorandum, an interagency think-piece paper spelling out essential assumptions behind a defense planning issue (e.g., nuclear strategy) dates from President Kennedy’s 1961 attempt to direct nuclear planning, and later the Office of Systems Analysis wrote the memoranda to include the entire defense program.51 The Office of Systems Analysis became the home of the civilian analysts who brought the skills of economics and management, if not military experience, to the defense budget and planning process. They introduced the concept of cost-effectiveness as a permanent part of defense planning and budgeting, allowing for the cost comparison of different systems on the basis of their ability to solve a particular military problem. This task ultimately reduced the role of the services in force planning and drew particular ire from the Air Force when McNamara ordered the cancellation of weapons like the B-58 Hustler bomber (after more than 100 were built) and the proposed B-70 strategic bombers based on their failure to pass the cost-effective test. In subsequent years, the Defense Department relaxed some of the McNamaraera reforms, rushing some systems into production without the full PPBS review, like the B-1 Lancer bomber and elements of President Reagan’s proposed 600-ship Navy. During the Reagan administration, the role of PA&E diminished considerably when its analysis opposed some of the proposed Reagan defense buildup, including the 600-ship Navy.52 However, Defense Secretary Richard Cheney resuscitated PA&E during the subsequent Bush administration when PA&E reversed position on some of the more expensive items desired by the services, including the Marine Corps V-22 Osprey, which PA&E director David S. C. Chu had opposed since his service in the Reagan era.53 Cheney canceled the Navy’s A-12 aircraft, and during the Clinton presidency, Defense Secretary Les Aspin scaled back the Reagan-era ballistic missile defense system substantially. The most recent case was Secretary of Defense Donald Rumsfeld’s cancellation of the Army’s Crusader artillery system in 2002.

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A consequence of defense reform (and shrinking defense budgets) was an increased interest in defense decisions beyond the Defense Department. Members of Congress focused more on national defense, partly because they feared that McNamara had excessively civilianized the defense decision-making process. Defense contractors, which had always been a source of influence, found that as both their own numbers and the defense budget shrank, they had to become even more involved politically in weapons choices. The services, too, were changing as jointness eroded (but did not eliminate) service identity, leaving the services to cooperate on operations while buying most of their primary combat systems separately. The entire climate gave even more impetus to the role of politics in force planning. It is thus important to understand the multiplicity of roles and actors in this process. It is also equally important to understand alternative viewpoints for explanations of weapons choices, since there is considerable evidence that the link between threats and weapons is tenuous at best, as noted earlier in this chapter. Military professionals are specialists in the application of armed force to political objectives, though shaping those objectives is theoretically the province of civilian political leadership. However, the military, which has the largest stake in maintaining and adding to the forces it operates, may seek to shape the strategic assessments that justify forces, as noted earlier. Additionally, the power of the professional military as official advisers to the president has grown considerably since the creation of the Joint Chiefs of Staff as a statutory body, along with the establishment of the Defense Intelligence Agency and the National Security Agency years later. The military now had access to raw intelligence about potential or real foes, and that intelligence in digested form bolsters the annual posture statements that go in front of Congress to support the president’s defense budget request. The professional military has a number of advantages over its civilian counterparts. For one thing, as Thomas McNaugher has noted, “Political appointees like the secretary of defense, his deputy, and service secretaries are rarely in their jobs long enough to sustain their own or their administration’s priorities. They take office to find weapons about to enter production that are for the most difficult if not impossible to stop, and they set in motion new projects that will be proved wrong only sometime after they leave office.”54 A senior Air Force general reported to Congress, “This week we expect Mr. Wynne to take the oath of office as the Secretary of the Air Force. He will be the sixth secretary, or Acting Secretary, of the Air Force in less than one year.”55 Military service chiefs also come and go, but they develop their commitment or opposition to certain weapons programs over their service careers, so that the programs advanced by one service chief are quite likely to be defended by successor chiefs. Thus, programs like the Air Force manned bomber series got support by the Air Force, which helped to persuade President Reagan to reopen the B-1 program after President Carter had terminated production. Air Force senior leaders also awaited Air Force Secretary Vern Orr’s departure, so that his demand that close air support receive priority over the advanced tactical fighter would be conveniently forgotten and Air Force military leaders could then get contracts for what would become the F-22 in late 1986,

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with no proposal for a close-air-support aircraft.56 The Navy, using a similar tactic, waited until the end of the Carter administration to cancel the fast transport ship that Carter wanted to transport troops to the Persian Gulf, but which also took money from more traditional Navy programs.57 The military also experiences turnover, though, and its dedicated acquisition corps is shrinking. Many uniformed personnel who used to specialize in acquisition have been deployed to combat assignments, and, because even a brief absence causes loss of knowledge in a rapidly evolving field, civilians in OSD have to make up for the deficiencies. Program turnover is a problem. As Alic notes, six Army generals headed the main battle-tank program during its 18-year gestation period, and the JSF, conceived in 1996, had its fifth manager by 2005.58 Civil-military struggles continued into the George W. Bush administration. In an effort to reshape the post–Operation Iraqi Freedom military, Secretary of Defense Donald Rumsfeld directed the services to redirect their threat assessment objectives to focus on what is known as the “10-30-30” scenario. According to a description, “U.S. forces should be able to ‘seize the initiative’ from an enemy, such as halting a North Korean assault on South Korea, in 10 days. In another 30 days, it should be able to ‘swiftly defeat’ the enemy, in this case, by driving North Korean forces back across the border. The U.S. military should be ready to swing to a conflict in another part of the world 30 days later, such as a Chinese assault on Taiwan.”59 The emphasis on speed allowed Rumsfeld to make weapons decisions, opting for lighter combat vehicles, fewer naval ships, and a spending emphasis on technology over personnel. Noted one report of the debate on current strategy and its possible effects, “Strategies that order the military to be prepared for two wars would argue for more high-technology weapons, in particular warplanes. An emphasis on one war and counterterrorism duties would require lighter, more agile forces—perhaps fewer troops, but more Special Operations units—and a range of other needs, such as intelligence, language and communications specialists.”60 Some critics argue that the emphasis is misplaced, suggesting that the speed of combat is not what ultimately was effective in Iraq, and mattered not at all during postcombat operations like urban reconstruction.61 Others argued that the program would result in shortfalls in such critical areas as language training, pointing out that a shortage of Arabic speakers halted or delayed critical military operations in Iraq.62 Additionally, the secretary’s efforts to shape future force programs eroded the traditional role of the uniformed military in such responsibilities, in ways reminiscent of the McNamara era reforms.63 In civil-military questions, the public status of the professional military bolsters its position politically, particularly when compared with other American political institutions. According to a June 2005 Gallup poll report, the military ranked at the top of a list of institutions rated by the public on the question of confidence. Some 74 percent of a public sample had “a great deal” or “quite a lot” of confidence in the military, with the police getting second billing at 63 percent. In contrast, “the presidency” received a 44 percent vote of confidence, with 22 percent for

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Congress. While the military has held top ranking in this Gallup survey for many years, both the presidency and Congress slid by 8 points from a similar survey the year before.64 This pattern has continued for decades, and the military suffered a drop in public respect only during and briefly after the Vietnam War, when all public institutions declined in the public mind. It is unclear at this point that the uniformed military will be helped in possible struggles with civilian overseers on weapons issues, partly because the services have rarely let their differences with the executive branch become public. In one recent case, though, even when Army differences with Secretary Rumsfeld over the canceled Crusader artillery system (noted previously) became public, there was little hue and cry, and the system died.

Where Does Military Influence Stop? By custom and by law, the role of the military in weapons acquisition is to serve as honest broker, a neutral referee whose recommendations for weapons move forward to civilian authority for decisions. But the line is sometimes unclear. For one thing, military contractors have ways to go through the backdoor of the acquisition system, such as by informally contacting military officers to promote their wares. Some contractor representatives are retired military officers who maintain contact with their former peers to advertise their products. Moreover, military officers usually attend symposiums where lavish contractor displays are on exhibit. At the Air Force Association annual conference, for example, hundreds of contractors maintain pavilions in the conference hotel, with cutaway displays of engines, full-scale demonstrator systems (Boeing had a search-and-rescue helicopter on display), and opportunities for contractors to lobby senior military officers directly to sell their goods. The other services have similar arrangements for face-to-face meetings with defense suppliers. Such activities are not against the law and have advantages for both parties. Retired officers who take positions with defense contractors bring their military expertise to the table, potentially facilitating better connectivity between parties. The services interface directly with suppliers to match up requirements with advertised capability, and the suppliers get a closer understanding of what the military needs. So while direct interface between military officer and contractor can bring benefits, it may also raise questions about the locus of acquisition decisions that are now the province of civilian officials in the Defense Department. Sometimes the process may exclude civilians from the decision-making process. That appears to have been the case in a 2005 contract issue involving a large-screen entertainment system to accompany the Air Force Thunderbirds’ air shows. The contract was awarded initially to a company known as SMS, headed by an individual who had close personal ties to a number of senior Air Force officers, including two chiefs of staff. The Defense Department inspector general investigated the contract after a rival complained, and, according to the report, “The investigation found that the December 2005 award to SMS was tainted with improper influence,

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irregular procurement practices, and preferential treatment. Lower-priced offers from qualified vendors and capabilities in-house were bypassed in an apparent effort to obtain services from [redacted], president of SMS, who had a longstanding relationship with senior Air Force officers and members of the Thunderbirds.”65 At the same time the Defense Criminal Investigative Service was investigating how the Virginia-based CRI paid $26,788 to a senior Air Force official who was awaiting confirmation to serve as principal deputy assistant secretary for acquisition. The questions came after CRI received a sole-source five-year contract worth up to $45 million and after the official, Charles D. Riechers, apparently committed suicide after Carl M. Levin (D-MI), chairman of the Senate Armed Services Committee, queried the Defense Department about the arrangement.66 The Air Force has apparently tried to resolve such issues, with a memo from Sue C. Payton, assistant secretary of the Air Force for acquisition, stating in part, “Situations may also arise with members of the industry that are ‘friends’ or recently separated members of the Air Force. There may be perceived pressures or they may seek preferential treatment when it comes to visitation, access to information, or contracting opportunities. The rules are very clear, we treat all potential competitors equally and no special privileges are granted.”67

The Congressional Politics Factor Congress plays a significant, if secondary, role in the defense acquisition process. Congress has the power to both authorize and appropriate funds for all defense items, including procurement, as noted in Chapter 2. Authorization is the power to commit federal funds to particular programs, initiated in the defense acquisition arena by the Armed Services committees in both the House and the Senate. Appropriation is official congressional permission to release funds from the overall budget to particular items, initiated by the Appropriations committees in both chambers. Such authority allows members of Congress to hold hearings on the overall defense budget, including procurement, for each fiscal year, and to add or subtract items from the presidential budget requests from the Pentagon. Congress also has investigative powers over all federal agencies, including the Defense Department, and Congress can compel members of all departments to testify on matters of interest to Congress. Congress can also order each department to produce documents that congressional members believe pertinent to their investigations, though the Defense Department, like some other agencies, is not always forthcoming with such information.68 These are weighty responsibilities for Congress, though the body is disadvantaged by numerous structural considerations. Congress is obviously much smaller than the Department of Defense and has a much smaller staff of experts to help it discern defense matters. It has constitutional powers such as the power to declare war, though it has not exercised that option since 1941. It has the potential authority of the War Powers Act, passed over President Nixon’s veto in 1973, but that has never been fully invoked, partly because it seems that neither the

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Congress nor the executive branch wants to test its constitutionality. Moreover, in public opinion, the military tends to rank as the most trusted of institutions, while Congress ranks as one of the least trusted bodies. Finally, while members of Congress do feel a sense of national responsibility to provide an adequate national defense, their own motivations are not far behind. Members of the House of Representatives are elected for two-year terms and members of the Senate for six-year terms, which means simply that House members are almost constantly running for reelection, and senators must never let reelection stray far from their agendas. Mostly both representatives and senators enjoy a high success rate when they run for reelection, often more than 90 percent for incumbents. Still, one can never take reelection for granted, and so it is not surprising that reelection strategy is a top priority of both senators and representatives. Successful reelection takes money, which representatives and senators raise from contributors, who expect a return for their investment. There is an understanding that political donors expect something for their campaign contributions, and if their benefactors do not deliver, the money will go elsewhere. So both senators and representatives can maximize their reelection chances by supporting programs that benefactors own. Reelection also requires that a congressperson convince voters that he or she is more worthy of support than opponents (if there is an opponent), and one way to accomplish this is to bring jobs to constituencies. This is often a difficult challenge because the private sector generates most of the jobs in the United States, and private-sector job creation often involves factors that are beyond the control of Congress members: foreign competition, cheaper labor in other states, changes in demographics, and so forth. But representatives can be much more successful in bringing in federal money to their constituencies to generate jobs, often in the form of construction projects like federal highways, dams, marinas, and other projects that may initially create new jobs. Once completed, though, such construction projects no longer generate employment at the rate construction did, and, moreover, construction work often draws transient workers who move from site to site, and often do not remain around to vote for the congressperson who voted for the original construction money. Thus, members often seek projects with more permanence to help their reelection efforts, and often the military budget provides such opportunities. Military-generated employment can come from numerous sources, but military bases and military industry are the most potent. Bases can generate hundreds and often thousands of civilian jobs that can remain for decades. Likewise, the defense industry creates numerous employment opportunities through both direct employment of industry workers and indirect opportunities in local communities where defense workers spend their wages. Thus, representatives are drawn to defense acquisition as a mechanism to direct dollars back home, for weapons, for bases to place such weapons, and for the defense industry that supplies weapons and their assorted support systems to the military.

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The process that representatives use to direct federal projects to their states and districts was commonly known as “pork barrel politics,” allegedly in reference to barrels of pork given to slaves in pre–Civil War America (although there are numerous stories of where the term actually came from; more recently, the term earmarks has been used to designate what was once pork-barrel spending). The earmark process allows individual representatives and senators to slip projects into their appropriations bills, which often pass without debate. Since the Supreme Court invalidated the presidential line-item veto during the Clinton presidency (which had allowed a president to veto a particular budget item without vetoing the entire appropriations bill), the president is also effectively prevented from canceling earmark projects. So, for example, Alabama Republican Senator Richard Shelby got more than $4 million for a poultry facility at Auburn University in Alabama. Democratic Senator Robert Byrd of West Virginia brought a $6 million National Center for Cool and Cold Water Aquaculture to his home state. These are but two of hundreds of examples of elected officials using their offices to direct money to their electorates. There are legitimate reasons for earmark spending by members of Congress, despite the negative image attached to the name. For one thing, such spending often creates jobs and opportunities, sometimes in distressed areas that otherwise have little outside income. Second, as Evans argues, earmarks to individual members can create winning coalitions that enable Congress to pass general-purpose legislation that might otherwise not attract a majority of members. Evans cites voting on the North American Free Trade Agreement (NAFTA) and federal highway programs as examples of controversial programs that individual members might have eschewed had they not received rewards of state and district earmarks.69 General-purpose legislation is not only often controversial but also often does not attract voter attention in ways that local spending bills do. Voters may simply expect their legislators to “do the right thing” and pass general-purpose bills: in the case of legislation like that proposed to eliminate the alternative minimum tax in 2007, voters might simply argue that since the congressional scoundrels initially passed the legislation, they have a duty to fix the problem that they caused and should not be rewarded with votes for it. On the other hand, local spending benefits are much easier for voters to see and appreciate.

Congress and National Defense Traditionally, Congress played an occasional but minor role in defense oversight, such as when it passed the Air Corps Act of 1926 requiring that the services purchase military aircraft competitively, or when Senator Harry Truman led an investigative committee on military contracting during World War II. For the most part, though, the legislative branch rarely got into the details of procurement until the early 1960s. The Appropriations committees retained budgetary power, but the functional authorizing committees (for defense budgets, the Armed Services committees) approved lump-sum budgets, thus allowing the services considerable

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spending discretion.70 That changed, though, as the congressional percentage of the defense budget requiring authorization increased from 2 percent (the military construction portion) in 1961 to 100 percent by 1983.71 The reasons for this growth of congressional oversight vary, however. Some argue that Congress has grown to distrust the wisdom of both the armed services and the civiliandominated OSD, a distrust that first grew under Kennedy and Johnson Secretary Robert S. McNamara and has continued on through George W. Bush’s administration. The second reason is that Congress wants more control over defense spending to further earmark projects that benefit states and congressional districts.72 There is evidence for both arguments. The B-1 bomber program illustrates congressional politics engaging in what some would call “pork-barrel politics.” President Jimmy Carter, concerned over escalating costs and program delays, canceled the B-1 program production, funding just research on the plane. However, members of Congress from both parties who had B-1 contracts in their states and districts worked hard to keep production alive. Said Nick Kotz, “Senators Alan Cranston and John Glenn brought onto the Senate floor yet another strategy to advance the B-1. Both Democrats were running for reelection, and their two states contained more B-1 jobs than any others in the country. Glenn and Cranston introduced a clever amendment that would salvage the B-1 while saving face for the president. . . . [I]t could either be a revised B-1 or an entirely new advanced technology bomber.”73 The Air Force’s advanced F-22 fighter, noted previously, provides yet another example of how weapons supporters in Congress can defeat determined efforts by senior members of Congress to limit programs. Both Defense Secretary Rumsfeld and senior members of the Senate Armed Services Committee like Republican senators John McCain (R-AZ) and John Warner (R-VA) tried to limit both the cost and production numbers of the increasingly expensive F-22 program, but, over their opposition, Congress approved a measure extending the life of the F-22 buy and reducing congressional oversight over it. Senator Saxby Chambliss (R-GA) and Representative Kay Granger (R-TX), both of whom have F-22 production facilities in their states and districts, were the primary engineers of the maneuver.74 Air Force efforts to secure a rescue helicopter also attracted congressional interest. The Air Force selected Boeing to build the Combat Search and Rescue (CSAR-X) helicopter, but two rivals, Lockheed Martin and Sikorsky, protested the award. Senator Charles Schumer (D-NY) supported the Lockheed Martin bid—”If the Air Force doesn’t change course right now, Lockheed Martin may be shut out for good by an unfair bidding process”—but should Lockheed have won the $15 billion contract, the project would add around 200 jobs to its Oswego, New York, facility.75 Naval acquisition provides yet another example of congressional provincialism. Shipyards generate considerable employment, and thus members of Congress continually work to keep them in production. For example, in the hearings for the 2006 defense budget, the Senate Armed Services Committee noted, “The Committee is particularly concerned about the state of the current shipbuilding

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program. The committee does not believe that the current or projected level of funding for shipbuilding is adequate to build the numbers of ships that will allow the Navy to perform its global missions or to sustain an increasingly fragile industrial base.”76 Members of the Virginia congressional delegation, including Senator John Warner and Representative Jo Ann Davis, injected $87 million in the 2006 defense bill to avoid delaying the construction of an aircraft carrier to be built in Virginia.77 Since there are very few shipyards capable of building carriers, the Virginia delegation was able to argue that it was preserving a vital national asset, although the thousands of shipbuilding jobs (and their presumably supportive votes) were also clearly a goal. The approach used by Maine’s two Republican senators, Susan Collins and Olympia Snowe, was more direct. When Navy Secretary Gordon England announced that the DDG 1000, the Navy’s next-generation destroyer, would be built in just one shipyard, either in Maine or in Mississippi, both Collins and Snowe, and Mississippi Senator Trent Lott, joined forces to get England to agree to build the ships in both states. Paradoxically, England estimated that the move to one shipyard would save the Navy more than $300 million in construction costs, but with the increased costs, the Navy reduced the overall DDX 1000 to just 7 instead of the original planned 32, and then to just 2 in the summer of 2008. While members of Congress may couch their naval interests in threat response—“Some experts have projected that China’s Navy will outnumber the U.S. fleet by 2015, less than one decade from now,” noted a Senate request to increase the shipbuilding budget from $8.9 billion to $14.1 billion—it is interesting that almost all of the 16 senators who signed it represented shipbuilding states.78 Shipyards are not the only item of congressional interest. The same committee report also criticized the Army for shortfalls in new munitions programs and the Marine Corps for not having small weapons modernization programs. The committee additionally prohibited the Air Force from carrying out a plan to retire some KC-135 and F-117 aircraft, which would keep employment at facilities basing and repairing these aircraft. The committee also stated its concern about the shrinking R&D budget, which had declined in real value over the previous fiscal year.79 Air Force Secretary Michael Wynne argued that the age of the KC-135 was such that should one crash because of an age-related problem, the remaining KC-135s would still have to fly, as the Air Force did not have an alternative fleet to replace them while grounded.80 Congressional Republicans inserted funding into the fiscal 2006 defense budget, adding more than $4 billion to the Navy’s shipbuilding budget, fending off a veto threat by President Bush. The measure funded seven new ships, three more than the Bush administration had requested, though the reasoning for the addition was not entirely clear.81 The leaders who pushed the proposal did not come from shipbuilding states, although some of their colleagues did. Congress members also steered money into the defense budget for continuing the troubled C-130J cargo plane and $900 million for the new DD(X) destroyer that the

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Navy did not request. Moreover, “There are 20 pages’ worth of smaller, sometimes vaguely-described projects that appear to have less to do with the war on terrorism: $5 million to study mood disorders; $2.7 million to research a cancer vaccine; $4 million to find new ways to diagnose heart attacks; $4 million for something called the ‘diabetes regeneration project.’ None of them were included in the Pentagon’s initial $363.7 billion spending request.”82 In 2007, the leading candidate for defense pork was Senator Ted Stevens (D-AK), remembered the year before for his “bridge to nowhere,” a long bridge across a strait connecting two fishing villages, canceled after it gained public notoriety. Among Stevens’s requests were $44.2 million for access to the Joint Tanana training complex in Alaska; $10 million for so-called utilidors—an aboveground, insulated network of pipes and cables—at Eielson Air Force Base in Fairbanks; and $2 million for “hibernation genomics.” The defense panel’s chairman, Democratic Senator Daniel Inouye, requested $183 million worth of earmark requests, along with Hawaii’s other senator, Democrat Daniel Akaka, including $6.5 million for a high-accuracy network determination system, $27.5 million for Hawaii’s federal health-care network, $24 million for the Maui space surveillance system, $16 million for Pacific airborne surveillance and testing, and $7.5 million for the Pacific-based joint information-technical center.83 Congressional politics also became involved in the Navy’s efforts to build a minisubmarine for special operations forces, with the contract going to an Annapolis-based company in 1994. The submarine has been plagued with considerable problems, bringing both criticism and defense. “Let’s stop here. Let’s rebid this thing,” said Representative Rob Simmons, a Republican from Connecticut whose district containing rival Electric Boat might get a rebid contract. Defending a Maryland-based company, Senator Barbara A. Mikulski (D-MD) steered additional funding ($50 million for fiscal 2005), as did Hawaii’s Senator Inouye, eyeing the Hawaii-based facilities for the minisub.84 The Marine Corps has found champions in Congress as well, particularly to support the revolutionary V-22 Osprey tilt-rotor aircraft. The plane is a combination helicopter and fixed-wing aircraft capable of landing like a rotary-wing aircraft but flying with its engines and propellers swiveled forward like a fixed wing plane. The plane, initially designed in the early 1980s, suffered from both cost overruns and fatal crashes that led then defense secretary Cheney to attempt cancellation. Cheney, though, was overruled by members of Congress (particularly former Marines like Senator John Glenn from Ohio), and the aircraft remained in development, surviving several crashes, killing 23 Marines, and scheduled for full production of more than 400 planes for both the Marines and the Air Force.85 Members of the Georgia congressional delegation found a way to block Defense Secretary Rumsfeld’s decision to cancel the Lockheed Martin C-130J, the latest iteration of its venerable turboprop air lifter. Senators Saxby Chambliss and Johnny Isakson (R-GA) introduced an amendment to an emergency defense-spending bill to block funds to terminate the C-130J program, estimated to be $1.6 billion, according to a Chambliss spokesperson.86 Shortly afterward, Rumsfeld announced

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that he was reversing the cancellation decision: Rumsfeld’s about-face, communicated in a letter to Capitol Hill, was as abrupt as the Pentagon’s proposal late in 2005 to cancel the program in the fiscal 2006 budget. That cut was designed to save $5 billion, but it quickly ignited political opposition led by lawmakers from Georgia, where Lockheed builds the transport plane.87 It must be noted that the Army had incorporated the C-130J into its Future Combat System program, so it was not clear whether Rumsfeld reversed his earlier cancellation decision because of opposition from the Army or from the Georgia congressional delegation. Congressional politics have also been active on the Air Force’s controversial program to replace its aging KC-135 tankers. The Air Force initially signed an agreement with Boeing to lease a military version of Boeing’s 767 commercial transport, but when the contract revealed illegal favoritism (discussed subsequently), the Air Force revisited the contract. In the running with Boeing was the European defense consortium EADS, which sought the American-based Northrop Grumman as a partner so it could compete using the Airbus A330 transport for the Air Force’s future tanker. However, since Airbus was locked in a bitter trade dispute with Boeing, several members of Congress inserted a provision into the defense budget language prohibiting a foreign company accused of accepting subsidies from bidding on an American defense contract, and giving Northrop pause in considering a potential partnership with EADS.88 That measure drew fire from Alabama’s Republican Senators Jeff Sessions and Richard Shelby, who favored the German- and French-owned EADS proposal. Here nationality mattered less than did the 1,000 jobs and $600 million investment in Mobile, Alabama, where EADS promised to build a plant if it won the tanker contract.89 In February 2008, the Air Force awarded EADS the contract, generating immediate protest from Boeing and representatives from Washington State. Senator Patty Murray stated on the Senate floor, “Airbus has said it will build an assembly plant in Alabama. The Air Force says the planes will be American. But the plant doesn’t exist. And the only thing we know about the jobs it will create is that most of the work will be done overseas . . . that’s like shipping a BMW over from Germany, putting new tires on it, and calling it America’s newest luxury car.”90 Congress also may authorize money for programs that the services do not want, like the DD(X), noted previously, or the three additional C-17 air lifters authorized at $785 million from the 2007 fiscal budget that the Air Force states it does not need. That measure, passed with strong support from members of the California congressional delegation, is intended to preserve Southern California’s last fixed-wing aircraft production line and its 5,500 workers.91 In addition to the C-17 effort, Congress also added more funds for an additional LPD-17 amphibious ship and $456 million for a T-AKE cargo ship. To sequester funding for these additions, congressional language also canceled or delayed future programs for the services, including a 25 percent cut on the Army’s Future Combat System (to be fully deployed in 2011), the Navy’s Littoral Combat Ship, the Airborne Laser, the Energy Department’s Reliable Replacement Warhead, and Global Positioning System priorities.92 Most of these programs would provide jobs only in

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future years; thus Congress swapped the possibility of future jobs for the greater certainty of current jobs. There is also evidence that direct campaign contributions influence congressional support for certain weapons. Federal ethics laws prohibit the sale of favors to campaign donors, but members can always argue that it was national interests that drove decisions that otherwise appear to be political rewards for political funds. The case of Representative Duncan Hunter, Republican from California, is instructive. Despite strong objections from the Navy, Hunter earmarked $27.7 million in funds for a ship developed by his biggest political donor, the Titan Corporation. The Navy, which preferred the Littoral Combat Ship, feared that Hunter’s earmark might jeopardize that program and raised concerns about the Titan-developed Affordable Weapon System, which Hunter included in his addition, though it had failed all four of its preliminary tests. Hunter also added $8 million to the 2007 bill for a vectored thrust aircraft made by DuPont Aerospace, another Southern California firm. From 1998 to 2003, Hunter received $47,200 in campaign donations from Titan, raising the impression that Hunter was simply repaying his benefactor rather than furthering the interests of the Navy or the country.93 When asked about his earmarks, Hunter stated, “There’s a little thing called the Constitution. It says Congress shall equip the military, not the Pentagon. The Pentagon proposal is just that.”94 Hunter was not the only member of Congress to support a defense project whose company contributed to campaign coffers. Representative James Moran, a Democrat from Virginia, pumped in $37 million in earmarked funds for Project M, a sound-deadening technology unwanted by the Navy. Even though the Navy rejected the concept several times, Moran kept inserting program money into the defense budget, after receiving around $17,000 in campaign contributions from the owner of the firm that marketed Project M.95 Congress has also prohibited the retirement of some weapons programs, allegedly because members feared that if the services withdrew older weapons from their stockpiles, they would then close the bases where those weapons were stationed or maintained. For example, Congress prohibited the Air Force from retiring the venerable C-5 airlift planes, even though those Vietnam-era aircraft were costing the Air Force scarce dollars to keep them flying.96 In an effort to break the stalemate, the Air Force proposed a one-for-one swap with a new C-17 for each retired C-5, which appeared to ease the concerns of some members of Congress: “That freaked out a lot of members, so they slapped on the restrictions,” the staffer said. “But I think AMC and the Air Force have basically told members in the districts that would be affected that even though you are losing your C-5A aircraft, we are going to backfill them with C-17s, so I think that kind of eased their concern.”97 It should not be assumed that Congress views the military and its resources primarily as a vehicle for political self-interest. Congress has had a long tradition of looking over the executive branch’s shoulder about military matters that go beyond parochialism. During the Eisenhower administration, the Senate held

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hearings to review the dominance of strategic nuclear weapons during the 1950s, chaired by both Senator Stuart Symington (D-MO) and Lyndon Johnson (D-TX). Later congressional activism over Reagan-era strategic acquisition programs caused a reassessment of several programs, including the MX missile. Senator Barry Goldwater (R-AZ) and Representative William Nichols (D-AL), both military veterans, introduced the Department of Defense Reorganization Act of 1986, which had a fundamental impact on many aspects of defense operations, including defense acquisitions.98 During the George W. Bush administration, Congress questioned the size of the active Army. Frustrated that Defense Secretary Rumsfeld ignored its calls to increase the size of active Army forces, Congress finally mandated a 20,000 increase for fiscal 2005, while Rumsfeld argued that force composition, not force size, was the real issue.99 According to Lebovic, though, Congress often took symbolic stands on issues without actually making any real changes to programs, partly because of the need to be seen doing something, and often because Congress focused on secondary issues (e.g., how to base the MX, later dubbed the Peacekeeper ICBM) instead of whether American strategic interests required the system itself.100 Congress still has limited investigative capability despite the Congressional Budget Office and other congressional research arms, and, more important, members of Congress understand that the appearance of action is often all that is necessary to please a usually ill-informed constituency on defense issues. This is not to suggest that Congress has failed in its oversight role, though there are limits on what it can do. It has probably done enough to prevent most outright fraud and to catch it when it occurs. As Alic notes, though, congressional rules “do nothing to address the technological reasons for poorly performing weapons systems.”101

The Military-Industrial Complex Factor The defense industry is a part of the defense acquisition system, as covered in Chapter 1. It is also a political actor, though. In the 1960s, attention began to focus on the military-industrial complex, drawing that wording from language in President Eisenhower’s farewell address, which warned of the growing dangers of collaboration between the military and the American defense industry. Concern grew that the American professional military had self-interest in inflating national security threats to obtain a larger piece of the U.S. national budget, and the defense industry, seeking ever-higher profits, was a willing partner in threat inflation schemes. The military-industrial complex category has several arguments, including the following: r The military and the defense industry have a mutual interest in increasing the share of resources allocated for defense purposes.

r The defense industry is a for-profit entity that will sometimes bend or break rules, or engage in unethical conduct to further corporate interests; thus, the Defense Department must regulate it and its relationship with the department.

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r The military and the defense industry have a shared interest in preserving a defense industrial base of a given size, and thus the awarding of defense contracts is partly shaped by decisions to direct contracts to industry that is threatened by either reduction below critical size or extinction. r The defense industry might constrict to a point where it cannot adequately serve wartime military requirements, since defense firms can either disappear altogether or convert to supply the civilian marketplace. r The defense industry creates jobs, and members of Congress often defend those industries located in their home states and districts.

The military and the military industry do have common interests: the military needs a reliable industrial base and the defense industry needs sales. That relationship has given rise to a host of critical literature arguing that both parties engaged in a nefarious policy of weapons buildup for the benefit of both.102 While neo-Marxist thinking grounded much of that literature, a more moderate argument stated that the military and the military industry needed each other, and that cooperation paid dividends for both. The relationship between the military and defense industry may be adversarial as well as cooperative, though. There is always the threat of disputes over price, delivery dates, and the quality of the item in particular between the contractor and the military. Defense firms may appeal for congressional support for weapons that the military does not want, as noted in the earlier section on Congress. Sometimes the conflict brings casualties—the Navy disqualified Brewster Company from producing Navy aircraft after demonstrated failures of production during World War II, and Brewster subsequently went bankrupt. Other companies, like Curtiss-Wright, saw their sales drop precipitously and left the aircraft manufacturing business. However, it is more common for the Defense Department to try for long-term contractual relations with a particular firm or firms. For example, the Navy bought most of its aircraft from the Grumman Corporation from before World War II until that company’s merger in 1994 with Northrop, and the Air Force bought a disproportionate number of tanker and bomber aircraft from Boeing. In other cases, the service may keep at least two potential producers in contracts, to ensure that there is competition and to avoid a single-supplier situation where the contractor can dictate terms that would be unacceptable under a competitive situation. Much of this is a function of the unique nature of the American defense industry.

Summarizing the Impact of Politics The impact of domestic factors on the defense acquisition system might result in a modification of the traditional understanding of force development (Figure 4.2).

Re-Rationalizing the Process: Jointness and More Reform? Members of both the Defense Department and the relevant committees in Congress are clearly aware of the problems ascribed to the internal pressures

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The Process and Politics of Defense Acquisition National interests and threats to those interests

Service values and interests Force development choices Congress

Defense industry

Figure 4.2. Impact of Internal Processes on Force-Planning System.

and decision styles, and they have taken steps to correct them. Particularly noteworthy are efforts to counter the pressures of bureaucratic politics by mandating jointness. In conclusion, none of this is to suggest that national interests and threats to those interests, perceived or real, do not matter in the politics of weapons acquisition. They are the basis for the existence of a military force and the overall parameters of changes to that force. However, neither threats nor interests are precise indicators of exactly what kind of force to build, when it should be delivered, and how much to spend on it. The gap between the abstract concepts of threats and interests on the one hand and the pulling and hauling of domestic politics must be factored together to fully understand how force decisions are made. Someone has to generate specific numbers and capabilities for planning purposes, and if those numbers and capabilities are a function of bureaucratic politics, incremental planning, and the intrusions of Congress and other domestic political actors, they occur because vague intelligence estimates of future threats and requirements are simply inadequate. This was true in the days when the United States and the Soviet Union eyed each other carefully, and threat estimates became better over time. In today’s imprecise international climate, it is hardly surprising that domestic politics will take a front seat in force planning. Efforts to re-rationalize the process are difficult at best. Consider the efforts to shape the QDR, now required by Congress. In the 2001 QDR, the document introduced the “1-4-2-1” paradigm, mandating “that the military prepare to defend the U.S. homeland”; “project forces to deter conflict in four regions around the globe”; “swiftly defeat aggression in [two] overlapping major conflicts”; and retain the ability for “decisive victory” in

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one of the major conflicts, which may include the possibility of “regime change or occupation.”103 The 2005 QDR drafters sought to add homeland defense to this list, but such efforts may only lead to complexity and confusion. It is not surprising that, according to defense scholars, “In practice, the military’s size and structure are heavily influenced by funding and policy constraints.”104

Notes 1. House of Representatives, Military Posture Briefings. Hearings before the Committee on Armed Services, 87th Cong., 1st Sess., Washington, DC: Government Printing Office, 1961, 651. 2. House of Representatives, Hearings on Military Posture and H.R. 5968. Department of Defense Authorization for Appropriations for Fiscal Year 1983. Committee on Armed Services, 97th Cong., 2nd Sess., Washington, DC: Government Printing Office, 1982. 3. Department of Defense, Quadrennial Defense Review Report. Washington, DC: Department of Defense, September 30, 2001, 4. 4. Department of Defense, Quadrennial Defense Review Report. Washington, DC: Department of Defense, February 6, 2006, 13. 5. Department of Defense, Military Power of the People’s Republic of China, annual report to Congress, June 4, 2006, http://www.lanuevacuba.com/archivo/china-military-powerus-dept-of-defense-anual-report-2006.htm. 6. “Chinese Threat Is Expanding, Pentagon Says,” Los Angeles Times, May 24, 2006. 7. General T. Michael Moseley, “The Nation’s Guardians: America’s 21st Century Air Force,” CSAF White Paper, December 29, 2007, 3. 8. William J. Bishop and David S. Sorenson, “Superpower Defense Expenditures and Foreign Policy,” in Foreign Policy: USA/USSR, eds. Charles W. Kegley Jr. and Pat McGowan. Beverly Hills, CA: Sage Publications, 1982, 163–182. 9. Bruce M. Russett, What Price Vigilance? The Burdens of National Defense. New Haven, CT: Yale University Press, 1970, 1–5. 10. The literature on bureaucratic politics is considerable, including Anthony Downs, Inside Bureaucracy. Boston: Little, Brown, 1967; I. M. Destler, Presidents, Bureaucrats, and Foreign Policy. Princeton, NJ: Princeton University Press, 1972; Morton H. Halperin, Bureaucratic Politics and Foreign Policy. Washington, DC: Brookings Institution, 1974; and Graham Allison, Essence of Decision. Boston: Little, Brown, 1971. The bureaucratic politics paradigm has its critics, including Stephen D. Krasner, “Are Bureaucracies Important? (or Allison Wonderland),” Foreign Policy 7 (1972), 159–179; David A. Welch, “The Organizational Process and Bureaucratic Paradigms: Retrospective and Prospective,” International Security 17 (October 1992), 112–146; and Edward Rhodes, “Do Bureaucratic Politics Matter? Some Disconfirming Findings from the Case of the U.S. Navy,” World Politics 47 (October 1994), 1–41. 11. The classic work remains Allison, Essence of Decision. 12. NPD 1: Naval Warfare, March 1994, http://www.nwdc.navy.mil/content/Library/ Documents/NDPs/ndp1/ndp10001.htm. 13. The late General Bernard Schreiver helped move the Air Force into the rocket age, while Admiral Elmo Zumwalt pushed for riverine forces when he was chief of naval

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The Process and Politics of Defense Acquisition operations. The Navy has never accepted sealift as a regular Navy mission and managed to push it off to the Military Sealift Command using noncommissioned ships and merchant sailors to operate military sealift. The Navy Department also demanded that it be run from a stock fund rather than appropriated funds so that it would not compete with funding for traditional Navy missions. Thus, the Military Sealift Command charges fees from the services to transport material. 14. Andrew F. Krepinevich Jr., The Army and Vietnam. Baltimore: Johns Hopkins University Press, 1986, 36. 15. The best discussion of this rivalry is Paul Y. Hammond, “Super Carriers and B-36 Bombers: Appropriations, Strategy, and Politics,” in American Civil-Military Decisions: A Book of Case Studies, ed. Harold Stein. Birmingham: University of Alabama Press, 1963, 465–568. 16. A discussion of the competition surrounding the development of the B-36 and B-52 bombers is in David S. Sorenson, The Politics of Strategic Aircraft Modernization. Westport, CT: Praeger Publishers, 1995, chaps. 3–4. 17. John R. M. Wilson, Herbert Hoover and the Armed Forces: A Study of Presidential Attitudes and Leadership. New York: Garland, 1993, 116. 18. One of the best studies of this process is Demetrios Caraley, The Politics of Military Unification: A Study of Conflict and the Policy Process. New York: Columbia University Press, 1966. 19. Warner R. Schilling, “The Politics of National Defense, Fiscal 1950,” in Strategy, Politics, and Defense Budgets, eds. Warner R. Schilling, Paul Y. Hammond, and Glenn H. Snyder. New York: Columbia University Press, 1962, 152–153. 20. David N. Schwartz, “Past and Present: The Historical Legacy,” chap. 9 in Ballistic Missile Defense, eds. Ashton B. Carter and David N. Schwartz. Washington, DC: Brookings Institute, 1984, 332. 21. Michael H. Armacost, The Politics of Weapons Innovation: The Thor-Jupiter Controversy. New York: Columbia University Press, 1969. 22. Edward N. Hall, “Industry and the Military in the United States,” Air University Quarterly Review 10 (Fall 1958), 42. 23. Frederic A. Bergerson, The Army Gets an Air Force: Tactics of Insurgent Bureaucratic Politics. Baltimore: Johns Hopkins University Press, 1980, 66–68. 24. Edmund Beard, Developing the ICBM: A Study in Bureaucratic Politics. New York: Columbia University Press, 1976, 219. 25. Alain C. Enthoven and K. Wayne Smith, How Much Is Enough? Shaping the Defense Program, 1961–1969. New York: Harper & Row, 1971, 251. 26. Harvey M. Sapolsky, The Polaris System Development: Bureaucratic and Programmatic Success in Government. Cambridge, MA: Harvard University Press, 1972, 17. 27. Michael J. Neufeld, “The End of the Army Space Program: Interservice Rivalry and the Transfer of the Von Braun Group to NASA, 1958–1959,” The Journal of Military History 69 ( July 2005): 756. It is interesting that the Army, in contrast to other services, compromised core missions for new technology instead of resisting new technology that would have challenged those core missions. 28. Robert J. Art and Stephen E. Ockenden, “The Domestic Politics of Cruise Missile Development, 1970–1980,” chap. 12 in Cruise Missiles: Technology, Strategy, Politics, ed. Richard K. Betts. Washington, DC: Brookings Institution, 1981, 360. 29. Desmond Ball, Politics and Force Levels: The Strategic Missile Program of the Kennedy Administration. Berkeley: University of California Press, 1980, 268.

The Politics of American Weapons Acquisition 30. The missile mission flew in the face of traditional submarine missions, so there was considerable opposition to the program in the Navy submarine community. Submariners also believed that the 32-tube requirement would make submarines too large to handle. The 16-tube requirement was copied by the British, the French, and the Soviets, who may have believed that it was derived scientifically. Sapolsky, Polaris System Development, 53–54. 31. Richard G. Head, “Doctrinal Innovation and the A-7 Attack Aircraft Decisions,” in American Defense Policy, 3rd eds., ed. Richard D. Head and Evrin J. Rokke, 435–441. Baltimore: Johns Hopkins University Press, 1973. 32. For details of the politics of the F-111, see Robert J. Art, The TFX Decision: McNamara and the Military. Boston: Little, Brown, 1968; Robert F. Coulam, Illusions of Choice: The F-111 and the Problem of Weapons Acquisition Reform. Princeton, NJ: Princeton University Press, 1977. 33. Christopher Bolkom, “F-35 joint strike fighter ( JSF) Program: Background, Status, and Issues.” CRS Report for Congress, RL30563, June 2, 2006, 15. 34. Armacost, The Politics of Weapons Innovation, 272. 35. Samuel P. Huntington, The Common Defense: Strategic Programs in National Politics. New York: Columbia University Press, 1961, 384. 36. House of Representatives, Department of Defense Appropriations for 2004. Hearings before a Subcommittee of the Committee on Appropriations, 108th Cong., 1st Sess., Part 1. Washington, DC: Government Printing Office, 2004, 291. 37. Senate, Department of Defense Authorizations for Appropriations for Fiscal Year 2003. Hearings before the Committee on Armed Services, 107th Cong., 2nd Sess., Part 2, Seapower. Washington, DC: Government Printing Office, 2002, 29. 38. “Navy’s New Leader Has Own Vision for Service,” San Diego Union-Tribune, October 14, 2005. 39. Robert Leonard, Jeffrey Drezner, and Geoffrey Sommer, The Arsenal Ship Acquisition Process Experience: Contrasting and Common Impressions from the Contractor Teams and Joint Program Office. Santa Monica, CA: RAND Corporation, 1999, 83. “ASJPO” stood for Arsenal Ship Joint Project Office.” 40. “Military Jet Faces a Fight to Fit In,” Washington Post, April 19, 2005. The Eurofighter, now called the Typhoon, features much more basic technology than does the F-22 and lacks stealth technology, supercruise, and the advanced avionics of the Raptor. See Pia Christina Wood, “The Never-Ending Story: Germany, Great Britain, and the Politics of the Eurofighter,” in International Military Aerospace Collaboration, eds. Pia Christina Wood and David S. Sorenson. Aldershot, VT: Ashgate, 2000, 53–71. 41. Supercruise refers to the ability of the aircraft to reach and sustain supersonic speeds without the use of its fuel-consuming afterburner. 42. “Defense Chief Advises Cadets on Disagreeing with Leaders,” New York Times, April 22, 2008; “Air Force under Fire from Defense Secretary Robert Gates,” Los Angeles Times, April 22, 2008. 43. Naval carrier task forces are also designed to support attacks against land targets, and they have carried out such operations during and since World War II. The planning factor that might have changed was the number of carrier task forces, which has remained at 12 for many decades even as the Cold War has faded into memory. 44. “Admiral Defends Role of Navy in Combating Terrorism,” Newport News Daily Press, October 7, 2005. On the same day, the chief of naval operations defended sea basing

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The Process and Politics of Defense Acquisition as a way to deliver relief supplies to disasters, noting the role of the carrier USS Abraham Lincoln in delivering emergency supplies to tsunami victims in Asia. “Relief Efforts in Gulf Demonstrate Sea Basing Capability: CNO Says,” Defense Daily, October 7, 2005. 45. “Gen. Moseley Pledges to Keep Air Cargo Program on Schedule,” The Hill, October 24, 2007. 46. “Army Hoping to Keep UAVs Away from Air Force,” Huntsville Times, August 13, 2007. 47. “Air Force, Army Clash Again on Unmanned Aerial Vehicles,” The Hill, October 30, 2007. 48. David E. Johnson, Learning Large Lessons: The Evolving Roles of Ground Power and Air Power in the Post-Cold War Era. Santa Monica, CA: RAND Corporation, 2007, 160–161. 49. The classics in this field include Samuel P. Huntington, The Soldier and the State: The Theory and Politics of Civil-Military Relations. Cambridge, MA: Belknap Press of Harvard University, 1957; Morris Janowitz, The Professional Soldier: A Social and Political Portrait. Glencoe, IL: Free Press, 1960; Peter Douglas Feaver, Guarding the Guardians: Civilian Control of Nuclear Weapons in the United States. Ithaca, NY: Cornell University Press, 1992; Peter Douglas Feaver, Armed Servants: Agency, Oversight, and Civil-Military Relations. Cambridge, MA: Harvard University Press, 2002; Lewis Smith, American Democracy and Military Power: A Study of Civil Control of the Military Power in the United States. Chicago: University of Chicago Press, 1951. 50. Such conflicts included the clash between the Navy and the Air Force over the role of carriers versus long-range bombers during the Truman administration and over the dominance of the Air Force during the Eisenhower administration. See Dale R. Herspring, The Pentagon and the Presidency: Civil-Military Relations from FDR to George W. Bush. Lawrence: University Press of Kansas, 2005, chaps. 3–4; Vincent Davis, The Admiral’s Lobby. Chapel Hill: University of North Carolina Press, 1967. 51. The origins of the process are described in Fen Osler Hampson, Unguided Missiles: How America Buys Its Weapons. W. W. Norton, 1989, chap. 3. 52. Later, during Reagan’s second term, Chu was able to force more budgetary discipline as the federal budget deficit grew significantly. 53. Christopher M. Jones, “Roles, Politics, and the Survival of the V-22 Osprey,” in The Domestic Sources of American Foreign Policy: Insights and Evidence, eds. Eugene R. Wittcopf and James M. McCormick. Lanham, MD: Rowman and Littlefield, 2004, 286–287. 54. Thomas L. McNaugher, New Weapons, Old Politics: America’s Military Procurement Muddle. Washington, DC: Brookings Institution, 1989, 145. 55. “Department of Defense Acquisition Reform,” Hearing before the Committee on Armed Services, 109th Cong., 1st Sess., November 2, 2005. Washington, DC: Government Printing Office, 2007, 9. 56. The Air Force, and the Army Air Corps before it, has long avoided close-air-support aircraft. The Air Corps briefly studied the concept of dive-bombing in 1942, and actually acquired three possible aircraft to test. But instead of ordering their own models, the Air Corps borrowed two Navy dive-bombers (the Douglas Dauntless, which became the A24, the Curtiss Helldiver, which became the A-25, and a dive-bomber that even the Navy did not want, the Vultee Vengeance, which the Air Corps designated the A-31. The Air Corps briefly tried the A-24 in combat, but in the absence of training or maintenance, the program failed, and the Air Corps abandoned dive-bombing. Much later senior members of the Senate and House Armed Services committees told a reluctant Air Force to buy a

The Politics of American Weapons Acquisition close-air-support aircraft if it wanted the F-15 fighter, thus forcing the Air Force to buy the A-10 Thunderbolt. 57. McNaugher, New Weapons, Old Politics, 147. 58. John A. Alic, Trillions for Military Innovation: How the Pentagon Innovates and Why It Costs So Much. New York: Palgrave, 2007, 92. 59. “Rumsfeld’s Push for Speed Fuels Pentagon Dissent,” Wall Street Journal, May 16, 2005. 60. “Pentagon Weighs Strategy Change to Deter Terror,” New York Times, July 5, 2005. 61. “Rumsfeld’s Push,” Wall Street Journal. 62. Ibid. That is not necessarily the case, as the preceding New York Times report suggests, but such areas as communications, special operations, and language training have been neglected in the past in favor of more conventional military capability, although they have gained much more momentum after the Cold War. Language training remains a critical shortfall. The Defense Language Institute Foreign Language Center administers courses to around 2,500 students a year, with the more difficult language courses lasting more than a year. The problem is that most students lack the basic language skills in the less-familiar languages (partly as a consequence of few language choices in secondary schools), and the services cannot spare too many officers enlisting in a yearlong course at the expense of duties and other educational requirements. 63. Rumsfeld challenged the Army in particular; see Herspring, The Pentagon and the Presidency, chap. 13. 64. Gallup Organization, “Military Again Tops ‘Confidence in Institutions’ List,” June 1, 2005. The poll question was, “Now I am going to read you a list of institutions in American society. Please tell me how much confidence you, yourself, have in each one—a great deal, quite a lot, some, or very little. The rank order of institutions was determined by the combined “a great deal” and “quite a lot” figures. Gallup conducted the poll between May 23 and May 26, 2005. Confidence in television news and newspapers were both at 28 percent. 65. “Report Finds Air Force Officers Steered Contract,” Washington Post, April 18, 2008. 66. “Pentagon, FBI Probing Air Force Contracts,” Washington Post, April 18, 2008. Riechers, a retired Air Force officer, drew attention earlier when an investigation revealed that the Air Force arranged a no-work contract with CRI when Riechers was actually working for Payton. “Air Force Arranged No-Work Contract,” Washington Post, October 1, 2007. 67. “Senators Ask for Pentagon Explanation on Contract Abuse,” Washington Post, April 19, 2008. 68. In 2007, congressional anger boiled over when David Chu, undersecretary of defense for personnel and readiness, failed to produce documents; as punishment, the House Appropriations Subcommittee on Defense cut the Defense Department’s Office of Legislative Affairs budget in half. “Cuts to OLA Punish Pentagon for Non-Responsiveness,” The Hill, July 26, 2006. 69. Diana Evans, Greasing the Wheels: Using Pork Barrel Projects to Build Majority Coalitions in Congress. Cambridge: Cambridge University Press, 2004. 70. As the name implies, a lump-sum budget has a single budget figure for a particular agency rather than specifying programs and tying a budget number to them, as line-item budgets do. 71. Barry M. Blechman, The Politics of National Security: Congress and U.S. Defense Policy. New York: Oxford University Press, 1990, 30–31.

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The Process and Politics of Defense Acquisition 72. One classic study is John Ferejohn, Pork Barrel Politics: Rivers and Harbors Legislation, 1947–1968. Stanford: Stanford University Press, 1974. See also Robert M. Stein and Kenneth M. Bickers, “Congressional Elections and the Pork Barrel,” Journal of Politics 56 (May 1994), 377–399; John A. Hird, “The Political Economy of Pork: Project Selection and the U.S. Army Corps of Engineers,” American Political Science Review 85 ( June 1991), 429–456; Blechman, The Politics of National Security (esp. 48, 56). Kenneth R. Meyer (The Political Economy of Defense Contracting. New Haven, CT: Yale University Press, 1991) finds little evidence of pork-barrel motives in prime defense contracts approved by Congress. 73. Nick Kotz, The Wild Blue Yonder: Money, Politics, and the B-1 Bomber. Princeton, NJ: Princeton University Press, 1988, 194. While Glenn (whose state of Ohio made many B-1 parts, including the engines) was a relative hawk in the defense aviary, Cranston of California (whose state was home to Rockwell, the prime B-1 contractor) was a relative dove. 74. “Air Force Jet Wins Battle in Congress,” Washington Post, September 28, 2006. 75. “Air Force Chief Frustrated over Helicopter Wrangling,” The Hill, April 25, 2007. 76. National Defense Authorization Act for Fiscal Year 2006. Report to Accompany S. 1042. Committee on Armed Services, U.S. Senate, 109th Cong., 1st Sess., 71. 77. “Panel Asks More for Carrier,” Newport News Daily Press, September 29, 2005. 78. The sixteen were Senators Susan Collins (R-ME), Jack Reed (D-RI), Trent Lott (R-MS), Jim Talent (R-MO), Olympia Snowe (R-ME), Chris Dodd (D-CT), Lincoln Chafee (R-RI), Mike DeWine (R-OH), Lindsey Graham (R-SC), Daniel Akaka (D-HI), David Vitter (R-LA), Frank Lautenberg (D-NJ), Bill Nelson (D-FL), Joe Lieberman (D-CT), Maria Cantwell (D-WA), and Mary Landrieu (D-LA). “16 Senators Request More Naval Funding,” The Hill, June 27, 2006. 79. National Defense Authorization Act for Fiscal Year 2006. Committee on Armed Services, U.S. Senate, 109th Cong., 1st Sess., 115. 80. “Wynne Says Aging Aircraft Could Threaten U.S. Superiority,” CongressDailyPM, September 19, 2007. 81. “House GOP Leaders Push Plan to Add Shipbuilding Funds,” Norfolk VirginianPilot, May 12, 2005. 82. “Congress Said to Steer Military Funds to Pet Projects,” Boston Globe, June 17, 2005. 83. “Stevens, Inouye Top Defense Earmarks List at over $180M Each; Byrd Next at $166M,” The Hill, September 18, 2007. Not all pork in the defense appropriations bills is military pork. Some members of Congress found ways to add nondefense items to the defense-spending measures. Representative David Obey (D-WI) inserted a provision for $750 million for the State Children’s Health Insurance Program, a joint federal and state program that provides health care for 6 million poor children, while members from Gulf states inserted money to pay for damage from Hurricane Katrina. “Some Lawmakers Want to Fund Civilian Projects through War Bill,” Washington Post, March 2, 2007. 84. “Trying to Sink the Mini-Sub,” CQ Quarterly, February 13, 2006. 85. “Pentagon Clears Full Production for Osprey Aircraft,” Wall Street Journal, September 29, 2005. “The bill was also good timing for Sen. Robert F. Bennett (R-UT), who secured $66 million in emergency watershed protection for the southern portion of his state, which was devastated by floods earlier this year.” As an effort to shore up the liberal base of his party, Senator Edward Kennedy (D-MA) “announced he will seek $12 million to provide protection for judges, responding to a request by the Judicial Conference,

The Politics of American Weapons Acquisition a group that represents the federal judiciary. Kennedy said his amendment is in part a response to comments by members of Congress, including House Majority Leader Tom DeLay (R-TX) that the senator said ‘have incited, or threatened to incite, violence against judges.’” 86. “Senators Aim to Derail Pentagon Plans to Scrap C-130J,” National Journal’s CongressDaily, April 18, 2005. 87. “Rumsfeld Restores Lockheed’s C-130J to Defense Budget,” Wall Street Journal, May 12, 2005. 88. “Politics Stalling Tanker Joint Bid,” Los Angeles Times, June 13, 2005. 89. “Shelby, Sessions Fight for Boeing Foe,” CQ Today, June 23, 2005. 90. U.S. Senator Patty Murray, “Senator Murray Debunks Airbus Claims in Speech on the Senate Floor,” http://murray.senate.gov/news.cfm?id=294227. 91. “Future of C-17 Line Still up in the Air,” Los Angeles Times, June 22, 2006. 92. “White House Threatens Veto over Policies, Not Weapons Cuts,” Aerospace Daily & Defense Report, May 17, 2007. 93. “Hunter Promotes Ship Navy Doesn’t Want,” National Journal’s CongressDailyAM, June 8, 2006. 94. “California Congressman Opens Up about Earmarks,” Washington Post, June 19, 2006. 95. “The Project That Wouldn’t Die,” Washington Post, June 19, 2006. 96. According to General Moseley, the daily cost of maintaining congressionally mandated aircraft is $6.4 million. “Air Force Leaders Eye Change to Personnel Reduction Plans,” Aerospace Daily & Defense Report, February 13, 2007. 97. “Air Force Floats Multiyear Globemaster Buy to Defense Lawmakers,” Inside the Air Force, April 20, 2007. 98. For an insightful history of Goldwater-Nichols, see James R. Locher III, Victory on the Potomac: The Goldwater-Nichols Act Unifies the Pentagon. College Station: Texas A&M University Press, 2002. 99. “Dueling Views on Army Size: Rumsfeld vs. Congress,” Christian Science Monitor, May 17, 2005. Congress did not go further and legislate that Rumsfeld spend the necessary funding for such an increase. Had it done so, or should it do so in the future, it would raise an unanswered constitutional question that first arose when Congress ordered the Jefferson administration to buy naval ships for the Barbary States Wars, and later when Congress ordered the Kennedy administration to buy the Air Force B-70 bomber. None of the cases reached the final arbiter of the Constitution, the U.S. Supreme Court, so the matter of congressional spending mandates to the president remains a question without an answer. 100. James H. Lebovic, Foregone Conclusions: U.S. Weapons Acquisition in the Post–Cold War Transition. Boulder, CO: Westview Press, 1996, 129–130. 101. Alic, Trillions for Military Technology, 67. 102. For example, Seymour Melman, Pentagon Capitalism: The Political Economy of War. New York: McGraw-Hill, 1970; Adam Yarmolinsky, The Military Establishment. New York: Harper & Row, 1973, chap. 63; and J. William Proxmire, Report from Wasteland: America’s Military-Industrial Complex. New York: Praeger Publishers, 1970. 103. “In Key Review, Pentagon Considers Altering Force-Planning Construct,” Inside the Pentagon, June 23, 2005. 104. Ibid.

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Further Reading Alic, John A. Trillions for Military Innovation: How the Pentagon Innovates and Why It Costs So Much. New York: Palgrave, 2007. Armacost, Michael H. The Politics of Weapons Innovation: The Thor-Jupiter Controversy. New York: Columbia University Press, 1969. Art, Robert J. The TFX Decision: McNamara and the Military. Boston: Little, Brown, 1968. Ball, Desmond. Politics and Force Levels: The Strategic Missile Program of the Kennedy Administration. Berkeley: University of California Press, 1980. Beard, Edmund. Developing the ICBM: A Study in Bureaucratic Politics. New York: Columbia University Press, 1976. Bergerson, Frederic A. The Army Gets an Air Force: Tactics of Insurgent Bureaucratic Politics. Baltimore: Johns Hopkins University Press, 1980. Blechman, Barry M. The Politics of National Security: Congress and U.S. Defense Policy. New York: Oxford University Press, 1990. Caraley, Demetrios. The Politics of Military Unification: A Study of Conflict and the Policy Process. New York: Columbia University Press, 1966. Coulam, Robert F. Illusions of Choice: The F-111 and the Problem of Weapons Acquisition Reform. Princeton, NJ: Princeton University Press, 1977. Enthoven, Alain C., and K. Wayne Smith. How Much Is Enough? Shaping the Defense Program, 1961–1969. New York: Harper & Row, 1971. Evans, Diana. Greasing the Wheels: Using Pork Barrel Projects to Build Majority Coalitions in Congress. Cambridge: Cambridge University Press, 2004. Feaver, Peter Douglas. Armed Servants: Agency, Oversight, and Civil-Military Relations. Cambridge, MA: Harvard University Press, 2002. . Guarding the Guardians: Civilian Control of Nuclear Weapons in the United States. Ithaca, NY: Cornell University Press, 1992. Hampson, Fen Osler. Unguided Missiles: How America Buys Its Weapons. W. W. Norton, 1989. Herspring, Dale R. The Pentagon and the Presidency: Civil-Military Relations from FDR to George W. Bush. Lawrence: University Press of Kansas, 2005. Huntington, Samuel P. The Common Defense: Strategic Programs in National Politics. New York: Columbia University Press, 1961. Kotz, Nick. The Wild Blue Yonder: Money, Politics, and the B-1 Bomber. Princeton, NJ: Princeton University Press, 1988. Lebovic, James H. Foregone Conclusions: U.S. Weapons Acquisition in the Post–Cold War Transition. Boulder, CO: Westview Press, 1996. Locher, James R., III. Victory on the Potomac: The Goldwater-Nichols Act Unifies the Pentagon. College Station: Texas A&M University Press, 2002. McNaugher, Thomas L. New Weapons, Old Politics: America’s Military Procurement Muddle. Washington, DC: Brookings Institution, 1989. Meyer, Kenneth R. The Political Economy of Defense Contracting, New Haven, CT: Yale University Press, 1991. Russett, Bruce M. What Price Vigilance? The Burdens of National Defense. New Haven, CT: Yale University Press, 1970. Sapolsky, Harvey M. The Polaris System Development: Bureaucratic and Programmatic Success in Government. Cambridge, MA: Harvard University Press, 1972.

The Politics of American Weapons Acquisition Schilling, Warner R., Paul Y. Hammond, and Glenn H. Snyder. Strategy, Politics, and Defense Budgets. New York: Columbia University Press, 1962. Sorenson, David S. The Politics of Strategic Aircraft Modernization. Westport, CT: Praeger Publishers, 1995. Stein, Harold, ed. American Civil-Military Decisions: A Book of Case Studies. Birmingham: University of Alabama Press, 1963.

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CHAPTER 5

International Arms Sales and Defense Acquisition

In the late 1930s, the Brewster Aeronautical Company received a contract from the U.S. Navy to develop a fighter plane, which resulted in the Brewster F2A Buffalo, a portly monoplane designed for carrier use. The plane had numerous problems (including a landing gear that sometimes collapsed) and laggard delivery from its Queens, New York, plant. The Navy ordered around 50 of the little planes but soon realized that the Grumman Wildcat fighter was superior and began to transfer the Buffalo to other countries anxious to bolster their air arms as World War II approached. The few Buffalo that Americans flew into combat at the Battle of Midway in 1942 found themselves quickly downed by more experienced Japanese pilots, and the Buffalo gained a reputation as one of the worst fighters the Navy ever bought. The U.S. Navy quickly got rid of its Buffalo, selling them to the British Commonwealth, the Netherlands, Belgium, and Finland. While the U.S. Navy had little success with the Buffalo, in the hands of Finnish pilots, the plane was a mortal foe against Soviet pilots in the 1941–1944 war between the two countries, where the Buffalo ran up a claimed superiority of 26 to 1 over Soviet fighters. Today, the only known remaining Buffalo, fished out of a Russian lake, is under restoration in Finland. The Brewster Buffalo is a fairly typical case of early American foreign military sales policy, which regarded obsolete or unwanted U.S. military weapons as prime candidates for foreign sales. Long after they had outlived their American usefulness, aircraft like the Boeing P-26 fighter, the Martin B-10 bomber, the F-104 fighter jet, the M-60 tank, and many Knox-class frigates found their ways to other countries, where they often served for many more years before winding up in a scrap yard (or museum). Such sales were hardly new: American arms sales to foreign customers spiked after the U.S. Civil War, with the Ottoman Empire becoming America’s largest purchaser of American weapons, and the United States competed with European suppliers during the rest of the nineteenth and early twentieth century for a plethora of weapons, including battleships for South

International Arms Sales and Defense Acquisition

America, which enabled Chile’s navy to become more powerful than the U.S. Navy.1 The old policy of international sales from surplus or undesired military hardware has evolved into a much different program, though. Now the U.S. military, in partnership with defense producers, operates a robust international sales program that markets modern military equipment to numerous overseas customers. This chapter provides an overview of international arms sales relative to their impact and role in the process and politics of defense acquisition. There are many additional explanations for international arms sales, which are briefly summarized in this chapter, but the real focus is on reasons that are directly related to defense acquisition.

The Current International Arms Sales Environment Global arms sales for 2006 totaled around $40.3 billion, a decline of 13 percent from the previous year.2 The United States ranked first in arms sales agreements in that year, at $16.9 billion, which was almost 42 percent of worldwide arms sales, with an increase of $13.5 billion in 2005. Russia was the second-largest supplier of arms, with $8.7 billion in agreements, or almost one-fifth of the total international sales. The United Kingdom ranked third in the world, with arms sales of $3.1 billion in 2006, an increase over its 2005 sales of $2.9 billion.3

Why International Arms Sales? Several justifications exist for international arms sales, including the following: r r r r r r

Support to allied or friendly countries against a common threat Disposal of equipment no longer needed by the U.S. military Increased profit for the military contractor Influence on recipient countries who buy U.S. weapons and systems Reduction of the cost of weapons paid by the U.S. military Offsetting an overall American negative balance of trade

There are additional reasons for international military sales, but the preceding are the primary ones.

Supporting Allied or Friendly Countries During the Cold War, the United States poured many thousands of weapons to allied and friendly countries, though such weapons usually came from excessive stocks. The supporting arguments for such sales (and grants, as some went free to recipient countries) was that the United States had an interest in building up other countries so that they could fight aggression with the same weapons that the United States fielded, and join with the United States should American

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forces have to join in their defense. Such weapons commonality made operations easier as it reduced supply and maintenance, and pilots and crews who flew the aircraft could train at U.S. bases, enabling more international cooperation. It was also easier to determine friend versus foe when recipient countries used the same weapons as the Americans; for example, in the 1990–1991 Gulf War against Iraqi forces, American-made aircraft made up most of the coalition, and thus American aircrews could identify aircraft of their country’s manufacturers as friends. This justification also appears in a notification to sell F-16 Block 50 fighters to Turkey in 2006: “This proposed sale will contribute to the foreign policy and national security objectives of the United States by improving the military capabilities of Turkey and advancing weapon system standardization and interoperability with U.S. forces.”4 The United States continues to use support to friendly countries as a justification for international arms sales. Senior members of the George W. Bush administration justified a recent sale to the Gulf Arab states (worth $20 billion) and ten-year agreements for $43 billion in arms sales to Egypt and Israel through language directed against Iran. Said Secretary of State Condoleezza Rice, “There isn’t a doubt that Iran constitutes the single most important single-country strategic challenge to the United States and to the kind of the Middle East that we want to see,” accusing Iran of “support for terrorism that is a threat to the democratic forces in Lebanon, support for the most radical forces in the Palestinian territories . . . or support for Shiite militias and the transfer of technologies that are endangering the lives of our soldiers and endangering a free Iraq.”5 When the United States has an opportunity to improve relations with a particular nation, arms sales often follow. They are justified on the basis of strengthening the bilateral relationship, but of course they also bring financial rewards to contractors exploring new markets. As U.S. relations improved with Pakistan after the September 11, 2001, terrorist attacks, American policy makers offered Pakistan sales of the F-16 fighter, once offered when the United States needed Pakistan’s assistance in resisting the Soviet Union in Afghanistan, and then withdrawn after the Soviets left Afghanistan and Pakistan tested missiles capable of carrying nuclear weapons. As American relations improved with India in the 1990s, American defense contractors rushed to enter a lucrative market, as Americans hoped to move India to American weapons and away from their traditional use of Sovietera arms. American arms representatives showed up at India’s Bangalore Air Show in February 2007 to display a host of products, including the F-16, heavylift helicopters, carrier jet trainers, and antiship missiles. Said Dennis D. Cavin, Lockheed Martin’s vice president for international air and missile defense strategic initiatives, “We are tickled pink to be here.”6

Disposal of Equipment No Longer Needed by the U.S. Military The second justification, disposal of equipment, was the most common in the earlier years of international sales. The United States disposed of obsolete weapons

International Arms Sales and Defense Acquisition

initially left over from World War I and, later, in the 1920s and 1930s. Thus, old aircraft, tanks, and naval ships went to Latin American countries for a fraction of the sums that the military paid for them, often to clear out U.S. military inventories so that the War and Navy departments could ask for more modern weapons. World War II created a bonanza for recipient countries, as weapons poured into the U.S. inventory at rates that even the intensity of the war could not match. While thousands of obsolete weapons went under the scrapper’s torch, thousands of others went to countries around the world. This enabled the United States to make back some of the money spent on the war while strengthening the new alliances of the Cold War. So the piston-engine P-51 Mustang fighters and Fletcher-class destroyers went to South Korea, Turkey, the Philippines, and dozens of other countries in need of cheap military equipment. Later, during the Cold War, the military put into surplus weapons that it did not want, like the Lockheed F-104, for foreign sales. The F-104, designed for the Air Force in the early 1950s, was a high-performance fighter that developed considerable problems, including engine reliability, lack of range, weapons capacity, and lack of all-weather combat capability. Consequently, the Air Force disposed of some of its F-104s to air forces in Turkey, the Federal Republic of Germany, Japan, Taiwan, Jordan, and other countries. Germany and Canada also built their own F-104s under license. Surplus disposal remains a motive for international arms sales. For example, in 2007, the United States negotiated the sale of surplus E2-C early-warning command and control aircraft to Egypt, along with spare engines and other support. The United States sold 60 M109 Paladin self-propelled howitzers to Morocco in 2007, which became surplus as the U.S. Army reduced its number of artillery units. Spain received American F/A-18 A and B models as the Navy and Marine Corps cleared out the early F/A-18s to make room for newer models. Surplus disposal of U.S. weapons to international markets brought few benefits to prime participants in the defense acquisition system. The weapons had already been bought, and the only prospect for the defense industry is that their sales cleared military inventories so that new systems might replenish them, which clearly brought benefits to defense contractors. However, the situation changed in the 1980s as cash sales to international customers for new weapons and systems began to grow.

Increased Contractor Revenues Military contractors are in business to make a profit, which normally comes from sales to the U.S. military. However, in times of U.S. military contraction, contractors can turn to foreign markets to continue their levels of production. For example, when defense production for the U.S. military contracted after the end of the major U.S. commitment to Vietnam, defense contractors avoided contraction by expanding foreign sales.7 Foreign sales can also reduce the cost of (or even save) American weapons. Klare observes that the Navy’s F-14 fighter aircraft was

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facing cancellation because of its high costs until Iran agreed to buy 80 of the planes in 1974.8 The large number of F-16 international customers allowed the contractor to reduce the price of the fighter for the U.S. Air Force. Sales of new equipment bring in not only an initial profit but also a stream of revenue from the follow-on support that most international sales contracts carry. For example, the United States sold Airborne Warning and Control (AWACS) aircraft to Saudi Arabia in the 1980s, which earned an initial profit for Boeing. Almost 25 years later, the same company applied to sell Saudi Arabia around $400 million in upgrade kits for the same AWACS planes.9 Sometimes American contractors seek out an international need for a weapons system that the U.S. military is disinterested in. In the late 1930s, the Vultee Aircraft Corporation built the Vengeance dive-bomber specifically for foreign markets, responding to French interest in a dive-bomber and paying for the aircraft out of company funds. Around the same time, the Glenn Martin Company developed its Maryland bomber initially for the Army Air Corps, but instead sold the aircraft that served British and French forces, as did its successor, the Baltimore, also rejected by the U.S. Army Air Corps. Later, Bell Aircraft would sell its relatively unsuccessful P-39 Airacobra fighter plane to the Soviet Union, which valued it for its ability to engage in ground attacks. The P-39, with its large cannon firing through the propeller hub, was ideal for the Soviet mission. In the 1980s, Northrop conceived the F-20 Tigershark for the export market after the Air Force rejected the aircraft, then designated the F-5G. Northrop hoped that international air forces that had bought and flown its earlier F-5 fighter aircraft would also buy the F-20, and it marketed it aggressively, even using American ace pilot Chuck Yeager to promote it. But the promise that it would be easy for underdeveloped air forces to operate the aircraft insulted some potential buyers, and when the U.S. Air Force again refused to buy the F-20 after extensive lobbying by Northrop, prospective buyers balked because they knew that they would have to pay the support costs normally borne by the U.S. operator. Finally, the Reagan administration relaxed previous limitations on F-16 fighter exports, and so several pending F-20 customers eagerly bought the F-16, realizing that it was a more capable, technologically advanced fighter. After six frustrating years, Northrop abandoned the F-20 project after spending more than $1.2 billion on the plane and suffering through a bribery scandal because of efforts to sell the F-20 to South Korea, which cost Northrop’s Chief Executive Officer Thomas V. Jones his position. Following that disappointment, few American defense contractors tried again to produce a weapon specifically for export. Currently there are a number of programs that provide healthy streams of revenue for American defense contractors, and the F-16 fighter is among the most lucrative. The Air Force first bought the plane as a lightweight fighter with a fairly low price tag, and that price today is an attractive feature for foreign customers, along with the relatively low cost of maintaining the aircraft (e.g., it has only one engine, which reduces engine repair costs). Twenty-four countries have purchased more than 4,300 F-16s, with more in the works. While some of these are

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refurbished former Air Force planes (e.g., those sold to Jordan), others are new versions, and in the cases of the wealthiest countries, they are the latest Block 60 versions. The sales package often comes with a maintenance agreement, which can increase the overall value of the purchase. Since the research, development, and upgrades for the F-16 have already been paid for, the cost to the contractor to produce foreign F-16s is relatively low, thus raising the profit margin.

Influence on Recipient Countries That Buy U.S. Weapons and Systems Arms sales are often justified on the basis of building better relations between buyer and seller. The argument is that both parties generally have similar interests that can be strengthened by arms sales. Kemp notes, for example, that President Kennedy approved the sale of Polaris submarine ballistic missiles to Britain to strengthen British-American ties, and that arms sales from the United States to places like Latin America, Iran, and Saudi Arabia were designed to influence pro-U.S. governments.10 Arms sales also can create long-term dependencies for the buyer toward the selling country, because arms require spare parts, maintenance, and upgrades, all of which the supplier country can provide. To break ties from the supplier nation, as Iran did after the 1979 revolution, is to render its American-produced weapons almost unusable because of the lack of spare parts and other things that are important to keep weapons operating (although Iran has scrapped together enough support to apparently keep some of its Americansupplied aircraft still flying). Venezuela under President Hugo Ch´avez may also find it a challenge to continue to fly its American-built F-16 fighter aircraft now that Venezuelan-American relations have soured considerably.

Reduction of the Cost of Weapons Paid by the U.S. Military Of the market assumptions that remain in the U.S. defense acquisition system, one primary supposition is that the larger is the sales volume, the lower is the sales price. This is also true for the defense market, and it is one reason why the U.S. military favors foreign sales: it pays lower prices for its own equipment when that equipment is also sold to international customers. The F-16 fighter is an illustrative case. Originally designed for the U.S. Air Force as a lightweight fighter aircraft, it is now in use in 23 countries outside the United States, and as of 2008, others like Morocco were engaged in talks to buy the F-16. While the cost savings to the U.S. Air Force is difficult to assess directly—some F-16s are coproduced in the buying country, where offset arrangements cloud the price, and some customers have bought F-16s that were actually more advanced than those of the U.S. Air Force (e.g., the United Arab Emirates)—the fact that more than 4,300 F-16s were sold has reduced the price for the Air Force. Moreover, as the F-16 goes through upgrades, international customers share the costs of those upgrades. Sometimes a related factor that keeps national production lines open can justify foreign military sales. The case of the C-17 transport aircraft is instructive here.

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The U.S. Air Force ordered the aircraft in the 1980s and first flew it in 1991. The Air Force’s initial plans called for a buy of 120 planes to end in 2004, but that plan grew to 180 with production through 2007, and then Congress added $2 billion in additional but unrequested funds for 10 additional planes through 2008.11 But with a threatened production line shutdown, the commander of the U.S. Transportation Command, General Norton Schwartz, called on manufacturer Boeing to aggressively promote the craft for foreign military sales to keep the production line open should the Air Force want to procure more C-17s itself.12

Arms Sales to Offset a Negative Balance of Trade The United States has increasingly run a negative trade balance, importing more than it exports. In September 2007, for example, the United States imported $196.6 billion and exported $140.1 billion of goods, leaving a negative balance of $56.5 billion, the lowest since May 2005.13 While economists debate the impact of negative trade balances (some correlate negative trade balances with positive economic growth, while others argue that long-term trade deficits benefit U.S. trade partners), they are controversial in Washington. Thus, foreign military sales are defended as a mechanism to decrease negative trade balances. The GAO provided data for 2000–2004 showing that exports of U.S. arms outweigh arms imports, though the value of arms coming into the United States grew at a faster rate than did exports, with imports as a percentage of exports rising from 14 to 18 percent. Still, the United States did export $11.9 billion in arms while importing only $2.1 billion in weapons for 2004.14 Still, $11.9 billion is a tiny fraction of the total trade balance, and it is hard to argue that economically it will make a macroeconomic difference.

The Management of Foreign Military Sales The United States currently leads the world in foreign military sales to developing countries, selling $16.9 billion worth of weapons in 2006, followed by Russia with $8.7 billion and Britain with $3.1 billion, out of total global weapons sales of $28.8 billion.15 Despite the size of the programs, however, official policy has been contradictory and sometimes incomplete. In official Defense Department lexicon, foreign military sales is known as “security cooperation,” which the Defense Security Cooperation Agency (DSCA) defines as “those activities conducted with allies and friendly nations to r Build relationships that promote specified U.S. interests r Build allied and friendly nation capabilities for self-defense and coalition operations r Provide U.S. forces with peacetime and contingency access”16 Security assistance is a subset of security cooperation but can also be thought of as a critical pillar of security cooperation, as it provides what most recipient

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countries do not have: funding for expensive weapons programs. There are a number of programs under security assistance, including the following: r Foreign military sales (FMS) r Direct commercial sales (DCS) r Foreign military sales credit (FMSCR), a direct loan program to recipient countries that cannot afford cash payments

r Long-term leases for military equipment r Drawdown, the transfer of U.S. military equipment or services, usually for emergency purposes

r Foreign military financing (FMF) grants or loans r International military education and training (IMET) The Arms Export Control Act and the Foreign Assistance Act of 1961 created the FMS program, which involves government-to-government weapons and systems sales. The Defense Department operates the program on a no-loss, no-profit basis (this means that sales are not conducted at below U.S. prices, and the Defense Department does not make a profit on them but instead charges a 3.8 percent fee). The program starts with an official request from the purchasing country, which the Defense Department coordinates through the Department of State’s Bureau of Political-Military Affairs. Once approved, the U.S. government actually contracts for the goods or services that the recipient country requested. Usually, to facilitate standardization with U.S. equipment (so that recipient countries can have interoperability with U.S. equipment in exercises or in allied combat), the FMS specifies that the particular foreign sales items are or will be in service with the U.S. military. Direct commercial sales, unlike FMS, are coordinated through the Office of Trade Controls at the State Department’s Bureau of Political-Military Affairs. In contrast to FMS, once the State Department has approved, DCS allows for direct negotiations between the international customer and the manufacturer, which allows both to avoid the surcharges involved with FMS and allows for specialized equipment that the international customer requires without the need for U.S.equivalent equipment. It is difficult to compare the value of arms transferred under each program because contractors participating in DCS are not required to reveal the value of those items. Arms transfers under FMS are coordinated between the contractor and the buyer by the Defense Security Cooperation Agency (DSCA). The DSCA operates on a no-profit, no-loss basis for the government, which charges a fee ($15,000 or 3.8 percent of item and service cost, whichever is greater) to cover administration costs. There is some advantage to selling items through FMS rather than DCS, as FMS transfers items already in use with the U.S. military, thus offering the potential for lower per-unit costs for the U.S. operating service, as well as standardization of weapons between the United States and an allied country. Unlike FMS, DCS is managed by the State Department. Direct commercial sales do not require the coordination of the Defense Department, as contract

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negotiations occur directly between the contractor and the recipient country, requiring nothing more than an export license, which is issued by the Office of Defense Trade Controls at the State Department’s Bureau of Political-Military Affairs. Thus, the costs of DCS are often lower than for FMS. Policy guidelines for U.S. foreign military sales include a number of documents, including Presidential Decision Directive 34, issued by the Clinton administration in 1995. The PDD 34 stated that “sales of conventional weapons are a legitimate instrument of U.S. foreign policy, enabling allies and friends to better defend themselves, as well as help support our defense industrial base.”17 However, the document also called for arms sales restraint in cases where arms transfers might cause or enable regional instability. A subsequent document from the Clinton administration proposed tying Latin American arms sales to more political guidelines: “In considering requests from appropriate civilian authorities for advanced conventional arms, we will take into account our guiding goals of strengthening democracy, including civilian control of the military; focusing resources on needed social and economic development; preventing an arms race; supporting transparency and confidence-building; and ensuring that defense modernization occurs responsibly and with restraint.”18

Potential Problems Posed by Foreign Military Sales While international military sales bring benefits to both the U.S. military and the U.S. defense industry, they also bring problems. Those problems include unauthorized technology transfer and unapproved use. Several U.S. arms customers have run into issues regarding either actual or potential technology transfer. While recipient countries must agree not to transfer sensitive technology contained in their American-supplied systems, there have been breaches of such agreements. Israel, for example, stood accused of transferring airborne early-warning and control technology imported from the United States to China, along with antiaircraft technology borrowed from the U.S.-made Sidewinder missile.19 Issues arise with other close allies or friends: the United States and United Kingdom were at odds over coproduction of the joint strike fighter, a program on which the United Kingdom was an original partner. The disagreement came when the United States initially refused to transfer classified computer codes, and the United Kingdom threatened to withdraw from the program altogether until a “painful” resolution was reached.20 The U.S. Congress and the commander of the Pacific Command recommended against the sale of the USAF F-22 fighter to Japan, following a disclosure that a Japanese officer married to a Chinese national had been found with classified information on the Aegis cruiser antiaircraft and antimissile system. Given this breach of security, the United States decided to not approve the F-22 sale.21 As a result of the various problems that can arise, U.S. export policy requires that the National Disclosure Policy Committee clear the transfer of any sensitive technology to foreign clients.

International Arms Sales and Defense Acquisition

Unauthorized Transfer or Use of Weapons While the actual use requirements for exported weapons systems are often vague, there are some guidelines. One is what is known as an “end-use” agreement, which tries to specify certain restrictions on the use of export weapons. One fairly clear provision is that the buyer may not sell the weapon or system to a third party without express permission of the United States. But the complexity of enforcing this provision is illustrated by the sale of American-designed F-86 fighters from Iran to Pakistan during its 1965 war with India. The planes were actually built in Canada under U.S. license, and then sold to Germany, which in turn sold them to Iran, and Iran apparently “lent” them to Pakistan to serve in the war.22 Unauthorized use includes violating specific prohibitions against the use of certain kinds of weapons against particular targets (often civilian targets). This was the case when the United States sold Israel cluster munitions, along with an agreed-on clause that prohibited their use in populated areas. However, during the 2006 Israeli-Hezbollah conflict, the United States accused Israel of using cluster munitions in Lebanese populated areas, reportedly causing around 30 civilian deaths in the aftermath. While the Bush administration could have imposed sanctions against Israel, divisions within the administration about the degree of the violation probably prevented any action beyond reporting it to Congress.23 This was not the first time the issue arose; the Reagan administration imposed a sixyear ban on Israel for using the same type of cluster munitions in Lebanon in 1982.

The Offsets Issue Buying weapons and other military systems from the United States poses problems for recipient countries. Formally defined, “an offset is a transfer of goods, services, or other commodities by a vendor and customer that are bundled with the sale of a good or service.”24 Foreign funds leave those countries for the United States, foreign militaries become dependent on U.S. weapons, and sometimes local industry loses out to American competitors. Offset agreements are one way to ameliorate these and other problems associated with buying weapons from the United States. Offset agreements provide a range of commercial and military benefits as incentives to purchase American-made defense goods, including coproduction agreements (e.g., the recipient country can produce some of the weapon), technology transfer from the United States to the purchasing country, financial assistance (e.g., preferential loans from U.S. financial institutions), and agreements to purchase commercial products from the buying country for sale in the United States. There are two kinds of offset agreements, direct and indirect. Direct offsets involve goods and services directly related to the purchased defense good (e.g., coproduction in the customer’s country, technology transfer), while indirect agreements involve exchanges not directly related to the military good (e.g., the United States agrees to purchase agricultural products from a country that has

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in turn agreed to buy U.S. weapons).25 Officially the Department of Defense regards offsets as a negative, calling them “market distorting and inefficient.”26 Yet other arms-selling countries provide offsets, and recipient countries have often come to expect them; thus, the United States must also offer offsets.

Congress and Arms Exports Some of Congress’s biggest successes in shaping American defense policy have come in the area of foreign military sales, though there have been decidedly mixed results. Congress has both official and unofficial roles in foreign military sales. According to section 36(c) of the Arms Export Control Act, Congress must be notified of a decision to issue an export license if the items to be sold are either defense articles or services valued at $50 million or more or major defense equipment valued at $14 million or more. Every February, the President must submit to Congress a report, known as the “Javits Report,” which includes the following: r An arms sales proposal listing all probable FMS or DCS exports for the current calendar year that exceed $7 million for major weapons or weapons-related defense equipment, or $25 million for other weapons or weapons-related defense equipment r An indication of which sales or licenses are most likely to be approved during the current year r An estimate of the total amount of FMS sales and DCS licenses expected to be made to each foreign country r Information about the status and rationale of FMS and DCS sales

Congress has a number of methods to either encourage or restrict foreign arms transfers. Before 1983, Congress could veto an arms transfer through a concurrent resolution, but a Supreme Court ruling in several unrelated cases found that such a veto was unconstitutional. Congress did pass the Arms Control Export Act (ACEA) in 1976, which requires notification of a potential arms sale that exceeds $14 million in value and allows for a vote of disapproval by a joint resolution of both chambers. The AECA also limits secondary transfers of sold items and denies future sales credits to countries that use weapons for “unauthorized purposes.” Congress has also passed a number of measures establishing arms transfer criteria. For example, in 1985 Congress passed section 620E(e) of the Foreign Assistance Act, known as the “Pressler amendment,” which requires the president to certify each fiscal year that Pakistan did not possess a nuclear device. Congress has also limited arms purchases by certain countries, most frequently Saudi Arabia. In the 1980s, Congress bucked President Reagan’s efforts to sell Saudi Arabia an airborne early-warning aircraft, which finally went to Saudi Arabia with limited capability (Israel feared Saudi Arabian espionage). Congress also challenged a proposed sale of F-15 fighters to Saudi Arabia, winning limitations on the export version of the plane that ultimately frustrated Saudi Arabia to the point that it bought the British-built Tornado instead.27 In 1990, members of Congress also protested a proposed $20 billion sale, and, in the face of this antagonism,

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President George H. W. Bush reduced the value to $7.3 billion for the sale to pass. Similar concerns arose in 2007–2008 as Congress reacted to President George W. Bush’s proposal to sell more than $20 billion in weapons to Saudi Arabia and other Gulf Arab countries, ostensibly to counter Iranian power. A coalition of 114 members of Congress signed a letter of disapproval, listing a host of grievances against Saudi Arabia, including the statement, “Despite assurances to the contrary, Saudi Arabia continues to bankroll terrorist organizations that have attacked both the United States and Israel. . . . [Seventy percent] of the most-wanted international terrorists are Saudi Arabians.”28 Israel, however, itself realized that congressional disapproval to Saudi Arabian arms sales might ultimate hurt Israeli security interests. After successfully lobbying to support F-16 sales to Jordan, a moderate Arab country, in the 1990s, Israel’s Prime Minister Ehud Olmert stated that, while he understood congressional reluctance to sell arms to Saudi Arabia, Saudi Arabia was a foe of Iran, and Israelis “understand the need of the United States to support the Arab moderate states, and there is a need for a united front between the U.S. and us regarding Iran.”29

Reverse Foreign Military Sales for the United States? While most of the attention focuses on foreign military sales by the United States to international buyers, some of those international buyers have now entered the U.S. defense market. While the United States has traditionally bought selected military equipment from foreign nations (e.g., SPAD aircraft from France, De Havilland planes from Britain during World War I, U.S.-produced designs for the British Lee-Enfield and French Berthier rifles), American arsenals and factories commonly supplied the bulk of U.S. military weapons and equipment. That was true particularly after World War II, when the so-called arsenal of democracy created an industrial base second to none in the world, with ample capacity to supply American armed forces during the Cold War. Conditions began to change as the Cold War wound down and U.S. defense production shrank. The U.S. defense manufacturers increased efforts to market their product abroad, but they discovered that potential international customer countries had developed their own defense industries, and should the United States want to sell weapons to those countries, those countries would in turn want access to the U.S. defense market. Allied nations who had traditionally bought arms from the United States began to complain about the closed nature of the American military market. Moreover, some international arms producers found niche markets for items that the United States did not produce (e.g., minesweeping craft). Consequently, the United States began to expand its purchase of arms from foreign suppliers. As of 2005 the percentage of defense imports was 18 percent of defense exports in value, but that had risen from 14 percent in 2000.30 Some of these sales came directly from international suppliers, but others evolved from partnerships between international and American companies. The

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case of the Air Force’s tanker replacement is illustrative. The Air Force currently flies the KC-135 Stratotanker, a military version of the venerable Boeing 707 commercial plane, along with a few KC-10s, which are modified Douglas DC-10s. The KC-135 first flew for the Air Force in 1956 and the last one left the Boeing factory in 1965. Despite continuous modernization and repair, the overall fleet of 481 tankers (187 active duty, 217 Air National Guard, and 77 Air Force Reserve) needs to be replaced. The Air Force originally tried to arrange a contract with Boeing to lease a military version of the Boeing 767 passenger plane, but ultimately the contract became enmeshed in fraud, and several Boeing and Air Force officials received prison time (see Chapter 4). The Air Force sent out requests for proposals, and in April 2007 Northrop Grumman joined Boeing with a proposal for the tanker, with as much as $100 billion in revenue for the winner. But what made Northrop Grumman’s proposal was the nature of its relationship with EADS, the parent company of Airbus Industries, Europe’s largest aviation producer. Northrop Grumman had actually left the aviation construction industry as a prime contractor and used EADS to regain a position as a prime aircraft manufacturer. EADS, though, had the largest portion of the contract, and thus a considerable portion of the tanker, built on a commercial A330 airframe, would be constructed in Europe, with final assembly in Mobile, Alabama. In February 2008, the Air Force announced that Northrop Grumman and EADS had won the contract, and Boeing announced that the company would protest the decision. Many factors were the basis for the protest, but the concern in Congress was that an aircraft largely designed and built in Europe would trump a plane designed and built mostly in the United States (although some of Boeing’s commercial 767, the airframe proposed for the KC-45, is built in international plants). Washington State Senator Patty Murray, a Democrat, issued a press release: “The Air Force’s short-sighted decision to place the future of America’s aerospace industry and national security in the hands of an illegally subsidized foreign competitor is simply wrong for America.”31 Murray and other Boeing supporters were referring to the fact that EADS receives subsidies from its parent European countries, though EADS counterclaimed that Boeing also receives subsidies from its military sales. The main point, though, is that the “buy America” preference was clearly under challenge. The contract protest (undecided at the time of this writing) did not foreclose other attempts by European companies to penetrate the U.S. defense market. Eurocopter, Europe’s largest helicopter manufacturer, won an Army bid to supply the UH-72A, and one Eurocopter official stated, “We will certainly be introducing other platforms in the future,” most likely with an American partner.32 The Army preferred the UH-72A Lakota to the American-built Blackhawk manufactured by Sikorsky, but Representative Duncan Hunter (R-CA), an opponent of international sourcing for the U.S. military, opposed the sale of the Lakota, claiming that it would be inadequate to fight forest fires (not a standard Army helicopter mission). The Army countered by noting that the Lakota was considerably cheaper than the Blackhawk, and Roger Wicker (R-MS), whose district included the

International Arms Sales and Defense Acquisition

offices of American Eurocopter Corporation, a North American division of EADS, claimed that the problems that Hunter noted (including an overheating cabin) were being fixed.33 Domestic politics came into play as international competitors found that jobs created were a potential formula for success, just as in the case of American-based competitors. The growth of international suppliers for the U.S. military has prompted some in Congress to call for investigations, citing such concerns as whether U.S. classified information involved in defense was getting into the hands of foreign nationals, and if the sales complied with the Buy America Act. The other related agenda seemed to be concerns that non-U.S. firms might be taking away American jobs and that the Defense Department was outsourcing national defense production. As more European companies sought partnership with U.S. firms (e.g., EADS, Rolls-Royce, BAE Systems, Thales, Finmeccanica), their North American partners found ways to “firewall” sensitive U.S.-only security information from the European partners and to abide by the Buy America Act, though Congress expressed concerns that the National Industrial Security Program (NISP) and the Defense Security Service (DSS), the primary agency for implementation of NISP, could keep tabs on the growing foreign suppliers of defense goods with an incomplete oversight process.34 Arms sales have been an important part of American defense policy since before World War II, but there is evidence that American sales may decline as more countries enter the arms business. A wide array of countries are seeing increases in aviation and space production in particular, and there is a distinct possibility that those firms will exploit the international arms trade even more than they do now, and seek more partnerships with U.S. defense firms.35 Thus, the U.S. international arms policy is quite likely to undergo some interesting changes in the near future.

Notes 1. Jonathan A. Grant, Rulers, Guns, and Money: The Global Arms Trade in the Age of Imperialism. Cambridge, MA: Harvard University Press, 2007, 15–16, 122–123, 164–166. 2. Richard F. Grimmett, Conventional Arms Sales to Developing Nations, 1997–2004. Washington, DC: Congressional Research Service, September 26, 2007, 4. 3. Ibid. 4. Defense Security Cooperation Agency, “Turkey: Advanced Block 50 F-16 Aircraft,” news release, Transmittal 06-71, September 28, 2006. 5. “Iran Is Critical as U.S. Unveils Arms Sales in the Middle East,” Washington Post, July 31, 2007. 6. “U.S. Military Contractors Seek Deals at Bangalore Air Show,” New York Times, February 7, 2007. 7. Michael T. Klare, American Arms Supermarket. Austin: University of Texas Press, 1984, 33–34. 8. Ibid., 34. As of 2008, Iran still was flying the F-14s.

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The Process and Politics of Defense Acquisition 9. Defense Security Cooperation Agency, “Saudi Arabia—Mission Equipment for AWACS Aircraft,” news release, Transmittal 08-28, December 7, 2007. 10. Geoffrey Kemp, with Steven Miller, “The Arms Transfer Phenomena,” in Arms Transfers and American Foreign Policy, ed. Andrew J. Pierre. New York: New York University Press, 1979, 46–48. The Polaris decision was in turn influenced by the United States denying Skybolt missiles to the United Kingdom. See Richard E. Neustadt, Alliance Politics. New York: Columbia University Press, 1970, chap. 3. 11. Christopher Bolkcom, Military Airlift: C-17 Aircraft Program. Washington, DC: Congressional Research Service, June 5, 2007. 12. “U.S. General Urges Boeing to Pitch C-17 Overseas,” Reuters.com, April 1, 2008, www.reuters.com/article/politicsNews/idUSN0132069120080402. 13. U.S. Census Bureau, “Monthly Trade Statistics, September 2007 Highlights,” http:// www.census.gov/foreign-trade/statistics/highlights/monthly.html. 14. “Defense Trade Data,” Briefing to Senate Committee on Armed Forces. Washington, DC: GAO, January 8, 2006. 15. “U.S. Is Top Arms Seller to Developing World,” New York Times, October 1, 2007. 16. Defense Security Cooperation Agency, “Frequently Asked Questions,” http://www. dsca.mil/PressReleases/faq.htm#What%20isSecurity%20Cooperation. 17. Defense Security Cooperation Agency, “Presidential Decision Directive 34,” February 1995, http://www.dsca.mil/PressReleases/ARMSTRAN95.htm. 18. Office of the Press Secretary, “U.S. Policy on Arms Transfers to Latin America,” August 1, 1997, http://www.dsca.mil/PressReleases/LATAMCAT.htm. 19. Shawn L. Twing, “U.S., Israel at Odds over Israeli Defense Sales and Technology Transfer to India, China,” Washington Report on Middle East Affairs, January/February 1999, 54. 20. Breane Wagner, “Arms Sales: U.S.-U.K Technology Defense Pact Likely to Draw Fire,” National Defense, September 1, 2007, http://www.allbusiness.com/government/ government-bodies-offices-legislative/5515055-1.html. 21. Kazuki Shiibashi and Bradley Perrett, “Stealth Play,” Aviation Week & Space Technology 167, no. 5 (2007), http://web.ebscohost.com/ehost/detail?vid=9&hid=13&sid= bde74a0b-319f-4e52-bae1-67f0a6c6b721%40sessionmgr3. 22. John Stanley and Maurice Pearton, The International Trade in Arms. New York: Praeger Publishers, 1972, 42–43. 23. “Israel May Have Violated Arms Pact, Officials Say,” New York Times, January 28, 2007. 24. Kenneth Flamm, “The Policy Context for Military Aerospace Offsets,” in Trends and Challenges in Aerospace Offsets, ed. Charles W. Wessner. Washington, DC: National Academy Press, 1999, 126. 25. “FMS Offsets and Other Issues Affecting FMS Procurements Frequently Asked Questions,” Defense Procurement, Acquisition Policy, and Strategic Sourcing, http://www. acq.osd.mil/dpap/cpic/ic/offsets of foreign military sales.html#q1. 26. Ibid. 27. A Saudi Arabian official argued that the loss of the F-15 sale opened the door for the British to additional military and commercial sales to Saudi Arabia, costing the United States more than $15 billion and 45,000 jobs. Interview with author, Dhahran, Saudi Arabia, January 1989. 28. U.S. Representative Anthony D. Weiner (9th congressional district, NY), “Broad Bipartisan Coalition of 114 Congressional Members Release Letter to President Bush

International Arms Sales and Defense Acquisition Opposing Arms Sale to Saudi Arabia, Say Will Vote to Stop Sale,” press release, New York, August 2, 2007. 29. “U.S. Arms Plan for Mideast Aims to Counter Iranian Power,” New York Times, July 31, 2007. 30. GAO, “Defense Trade Data,” Briefing to Senate Committee on Armed Services, FAO-06-319R, January 27, 2006. 31. Senator Patty Murray, “Murray Statement on Boeing Tanker Protest,” news release, March 10, 2008. 32. “Risky Business,” Aviation Week & Space Technology, March 17, 2008, 34. 33. “Army Defends Light Chopper amid Reports It Could Fail,” The Hill, November 20, 2007. 34. “Foreign DoD Contractors under Lens,” The Hill, April 17, 2008. 35. See Terrence R. Guay, Globalization and Its Implications for the Defense Industrial Base. Carlisle Barracks, PA: Strategic Studies Institute, 2008.

Further Reading Grant, Jonathan A. Rulers, Guns, and Money: The Global Trade in Arms in the Age of Imperialism. Cambridge, MA: Harvard University Press, 2007. Pierre, Andrew J., ed. Arms Transfers and American Foreign Policy. New York: New York University Press, 1979. . Cascade of Arms: Managing Conventional Weapons Proliferation. Washington, DC: Brookings Institution and World Peace Foundation, 1997. Stanley, John, and Maurice Pearton. The International Trade in Arms. New York: Praeger Publishers, 1972. Stoker, Donald. Military Advising and Assistance: From Mercenaries to Privatization, 1815– 2007. New York: Routledge, 2008.

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CHAPTER 6

Reforming Defense Acquisition

Almost since the time of George Washington, defense acquisition has been the target of efforts to construct a more accountable and responsive system. Long plagued by contractor fraud (sometimes abetted by military officers and members of Congress), defense acquisition also receives low marks for responsiveness to military requirements, timely delivery, and adherence to the negotiated price of goods. American military history is full of stories of overpriced weapons delivered late and systems whose performance falls below agreed-on standards. But the most frustrating part for potential reformers is that the problems continue on even after countless efforts to reform the defense acquisition system. There are reasons for such problems, some of which are obvious. Corruption has followed government contracting for most, if not all, of recorded history. Unscrupulous contractors bilked the government out of millions of dollars by offering up substandard products or by padding the cost they incur to produce the goods, or by a hundred other means that take armies of auditors and investigators to uncover. Members of Congress have also contributed to corruption, as evidenced by the case of former congressman Randy Cunningham (R-CA), sentenced to more than eight years in prison in 2006 for steering defense contracts to MZM Inc. in exchange for personal favors. Earlier, the House reprimanded Representative Robert L. F. Sikes (D-FL) in 1976 for failing to disclose ownership of stock shares in defense contractor Fairchild (though it did not reprimand him for voting for a defense appropriation favorable to Fairchild). In 1961, the Northrop Corporation sponsored hunting trips and gave rides in corporate aircraft to numerous members of Congress and their staffs. Most major contractors have at some point in their histories been accused of corruption, and often have paid millions of dollars in fines for their actions. However, as lurid as the stories of corruption may be, dishonesty is not the primary reason for problems in the defense acquisition process. There are more inherent issues in a system that is often irresponsive to military requirements,

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including measures of quality, cost, and on-time delivery. Defense suppliers often overestimate the problems they will encounter and underestimate the real expense of building an item. The very nature of low-bid contracting often encourages such underestimation, and sometimes subsequent amendments to original contracts allow sellers to recoup losses from the first contract. The military buyer frequently changes specifications or sometimes cancels projects outright after a contractor has invested in the system. A small defense industrial base in certain key product areas means that prices paid for certain goods may be much higher than those a real market with many buyers and sellers would establish. A desire on the part of the buyer to receive a product urgently (e.g., counterexplosive gear in the Iraq conflict) may produce a much higher cost because of the very urgency of the demand, or delays may emerge caused by production and supply bottlenecks that throttle construction. In short, most of the problems addressed by acquisition reform are aimed at the system itself rather than at remedying misdeeds of its participants.

Reforming Defense Acquisition: The Paradigms The range of problems and associated solutions depends on the definition of the problem itself. The approaches to defense reform and attendant remedies can be categorized as follows: r The problem is dishonesty; thus, reform must include stiff penalties for those who break the rules and more oversight over the whole process, particularly oversight from outside the direct acquisition system. r The problem is less dishonesty than insider influence, too much power in the hands of the services, the defense contractors, and members of Congress with defense interests. The solution, though, is similar to the first solution: more oversight of the acquisition system by those who do not have a vested interest in it. r The problem is the structure of the defense acquisition system; thus, solutions lie in restructuring the system, often to make it more like an idealized private market. r The problem is reform itself, and thus the answer is less reform.

These problem-solution sets are the focus of this chapter.

The Foundations of Acquisition Reform None of these definitions or answers covers the whole problem, as problems are often interrelated (dishonesty brings more oversight, which can lead to delays, and so on). But they represent the often piecemeal approaches to defense acquisition reform, usually done by well-meaning people in the Pentagon or Congress who understand the pressing need to make the system better but often realize that a wholesale restructuring of the process is both impossible and undesirable. Reformers usually find themselves under considerable pressure to apply fixes to procurement problems, and generally turn to single-set solutions

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(e.g., knowledge-based approaches, more congressional oversight), understanding that few things raise public ire more than reports of misspent taxpayer dollars. Acquisition reform started soon after the fledgling United States started to buy and produce military equipment. It continued after the Cold War in response largely to accusations of too much parochialism in the process, mostly from the armed services. Thus, acquisition reform in the McNamara years (discussed in Chapter 1) focused on removing the services’ control of the acquisition process and centralizing it in OSD, managed through PPBS (discussed in Chapters 1 and 2). McNamara believed that service rivalry and service preferences, coupled with little relationship between programs and budgets, were skewing defense acquisition away from national strategic objectives and toward service goals. Moreover, PPBS was supposed to allow for explicit criteria that each program had to meet, including cost effectiveness. Its staunchest defenders believed that PPBS-based reforms would solve a considerable number of acquisition problems. However, as PPBS and the associated acquisition reforms progressed, problems with the procurement system continued. Reviews in the late 1960s and early 1970s indicated how serious they were. Officials indicated that contract performance was substandard—the assistant secretary of the Air Force indicated that operational performance of operational equipment reached less than 86 percent of contracted performance, and a review of 35 major development programs indicated that only 2 were on or ahead of schedule. In another study of 61 weapons systems, cost estimates had increased by more than $33.4 billion over estimates.1

Paths to Acquisition Reform Acquisition reform has emphasized certain things in its checkered history. As Hanks and his colleagues indicate, the emphasis of acquisition reform in the 1980s (particularly that driven by congressional initiative) aimed to control and reduce “fraud, waste, and abuse,” as stories of alleged scandal appeared in the public media. However, acquisition reform in the 1990s (and beyond) has been directed at making the system more effective and efficient.2 The earlier period saw efforts to put quick fixes on the acquisition system in order to allay anger and suspicion of waste and fraud, and included such things as the creation of centralized policing authority and more transparency into the system, whereas later efforts tried to build more competition, reduce the complex military specifications (MILSPECs) that often dogged the system, and reduce some of the same oversight that had evolved in the earlier rounds of acquisition reform. The road to and through defense acquisition reform has been rough. Sometimes reform efforts appeared to be guided more by the urge to do something (and, more important, to be seen doing something) rather than engaging in a meaningful study and reforms based on identified problems and solutions. The easiest way to accomplish this is to establish more oversight. Thus, reformers pepper the process with demands for an acquisitions czar (after all, the United States has created the position of drug czar and an intelligence czar, so why not

Reforming Defense Acquisition

an acquisitions czar?). However, the problems inherent in the defense acquisition system are far too complex, too politicized, and too embedded to lend themselves to a czar-type solution. Often the costs of reform became excessive at best, and sometimes exceeded the cost of the problems the reform was supposed to fix at worst. In a 1987 study of defense reform, the Center for Strategic and International Studies estimated that the cost of defense oversight had about doubled since 1980. Part of these delays came from the Competition in Contracting Act and the Defense Procurement Reform Act, which CSIS noted, “Unfortunately, the practical impact of these measures has already begun to run counter to congressional intent. Acquisition laws and regulations have become more voluminous and complicated and have actually imposed additional delays and costs on the process.”3

Problems in the Defense Acquisition System Fraud Fraud in the defense acquisition system is purposeful behavior to manipulate the system for personal gain. Mostly such gain involves efforts to divert government funds for private use, but it can also involve manipulating the system either to avoid personal mistakes or to cook information to make the manipulator look more favorable. Fraud often takes the form of substandard goods, where the contractor cuts costs by cutting corners, as when a small company used substandard products in air filters for tank crew compartments and then lied about it.4 Sometimes contractors simply engage in false billing for goods, as in the case of a small defense contractor that bilked the Defense Department of more than $20 million over ten years by padding the cost of shipping small items like washers and lamps.5 The defense firm Science Applications International Corporation paid $2.5 million in fines to the Air Force for inflating the cost to clean up pollution at Kelly Air Force Base in Texas.6 A federal jury fined the firm Custer Battles more than $10 million for engaging in 37 cases of fraud for a scheme in which the company generated false invoices and even stole Iraqi forklifts, painted over them, and charged the U.S. government for them.7 Contractors have also padded cost estimates to raise the price of their goods or have engaged in complex bookkeeping that might fool all but the most diligent government accountant. Most significantly, contractors have hidden negative information on troubled programs, sometimes in league with the program’s service representatives. Secretary of Defense Richard Cheney axed the Navy/Marine Corps A-12 combat aircraft in January 1991 after learning that neither the Navy nor the contractor had fully reported to his office the significant cost overruns and technical problems encountered. A small Massachusetts company, Ace & Co., paid more than $500,000 in fines for falsifying test data on an optical fiber connector used in the Patriot antimissile system.8 In 2008, a federal grand jury indicted four individuals, including an Army civilian and employees of Global Engineering and Construction

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Inc., on charges of receiving payoffs and gifts in exchange for confidential information on construction contracts.9 In 1981, after repeated charges of defense wrongdoing, the Reagan administration launched an effort to identify and combat defense fraud by creating the position of assistant to the secretary of defense for review and oversight, which linked to the President’s Council on Integrity and Efficiency, also created in 1981. The Defense Department also maintains the Defense Contract Audit Agency (DCAA), created in 1965, to examine contracts for malfeasance as well as compliance with contracting rules and practices. Outside of the Defense Department, there is the Federal Bureau of Investigation, which monitors federal procurement laws; the GAO, which has reported on government waste; and the Securities and Exchange Commission, which overseas laws regarding public corporations, including defense contractors.

Poor or Incomplete Data Almost all the participants in the defense acquisition process complain about poor information, and understandably so. Misestimates of cost, delivery dates, requirements, and other information constantly cause the defense acquisition system to slow or stop, or worse, to deliver products late and above cost or products that miss the requirements target. There are abundant reasons for poor or incomplete data. Acquisition programs often start with revolutionary new technology that will not be tested outside of laboratory conditions until it goes into production and fielding, so there is virtually no information on how it will perform under service conditions. Programs often take years or decades to gestate, and unanticipated factors like economic recession or inflation may wreak havoc on cost estimates over long periods of time. Moreover, the buying services often change their requirements or Congress increases or cuts funds. Threat assessment data are particularly poor, largely because such assessments must project out for decades to serve as viable bases for defense planning. Most countries carefully hide their defense programs and international intentions, thus preventing reliable estimates of what their future capabilities and objectives might be.

Cost Overruns The problem of cost overruns dates back almost to the American Revolution. Weapons that were to cost a certain amount suddenly cost much more when they arrived off the production line. Cost overruns originate from many sources: poor original cost estimates (see earlier), purposefully understated estimates from contractors eager to win a bid, problems during program development, and buyerimposed changes during development. The problem has been serious for many decades, and despite acquisition reform, it continues to grow. In early 2008, the GAO found that 95 major weapons programs exceeded their original budget by

Reforming Defense Acquisition

a total of $295 billion, and the weapons examined in 2007 showed a developmental cost increase average of 40 percent, compared to a similar cost growth of 6 percent in 2000.10 The GAO singled out for particular criticism the Littoral Combat Ship, whose cost grew by more than 100 percent from first estimates, the Lockheed Martin joint strike fighter, and the Boeing Future Combat System. In 1999, the Air Force found that it had underestimated the costs of engineering and manufacturing development (EMD) between 1992 and 1998 by $4 billion. The reason was classic: problems emerged in some testing and development phases, a situation that occurs with almost every complex weapons system.11 The cost of the joint air-to-surface standoff missile (JASSM) increased by 25 percent since its contract signing, apparently because of “engineering increases,”12 which probably should have been expected given the nature of the experimental program but were not. The cost of the new presidential helicopter increased from $6.1 billion when the contract was signed in 2005 to $11.2 billion in 2008.13 Part of the problem was that the Marine One helicopter was supposed to be a follow-on version of the aircraft in the existing fleet, but its requirements changed as concern over terrorist attacks against the helicopter’s passengers grew, a concern that accelerated changes. The original estimates did not obviously reflect those changes. Lockheed Martin’s price for a new presidential helicopter rose from $1.79 billion to at least $2.4 billion in two years.14 The initial response from Lockheed Martin and Boeing seemed tailored to deny any problems. Said a Lockheed Martin spokesperson, the JSF “is performing solidly, making outstanding technical progress in the context of the most complex aircraft ever built . . . the bedrock and the cornerstone [of the F-35 program have been] affordability and cost containment.” Boeing stated, “Boeing’s commitment is to deliver on our promises to our military customers and meeting their requirements in the most cost-effective way possible.”15 In 2007, cost overruns continued to bedevil the services. A GAO audit found that programs to construct or modernize Air Force transport aircraft were over budget by almost $1 billion, even though the programs were in their early stages and costs could continue to grow. The C-5A and C-130J programs were both cases of relatively unsophisticated technology (both plane designs are decades old), so the overruns were even more troubling. Again, the contractors, Boeing and Lockheed Martin, tried to put the best face on the problems: the C-130J “has exceeded 340,000 flight hours worldwide performing airdrop, air-to-air refueling, ground refueling and humanitarian relief,” said a Lockheed Martin spokesperson. A Boeing spokesperson said of the same plane, “We were able to overcome earlier challenges, and the program is now performing extremely well.”16 Neither spokesperson responded to the charges, though. Cost overruns for the Expeditionary Fighting Vehicle, a Marine Corps amphibious assault vehicle, encountered development problems that pushed the per-vehicle cost up by 168 percent and pushed the development deadline back by eight years.17 Cost growth also plagued the Air Force’s F-22 tactical aircraft. Congress capped the cost of the aircraft program in the Authorization Act for fiscal 1998

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at $37.5 billion, but in August 2001 the Defense Department estimated that the program costs had risen to $43 billion. A GAO report indicated that while the Air Force had built in cost reduction plans to the F-22 program, it had not fully funded them. Moreover, the GAO identified future elements that would cause the F-22 program cost to rise even further, such as testing delays that in turn could delay the awarding of a cost-saving multiyear contract.18 The original F-22 contract called for 750 aircraft, but as the Cold War unexpectedly ended, the Air Force began to reduce the buy, to 648 in 1990 and then to 442 in 1994, dropping to 339 in 1997, and ultimately to 183 planes by 2006. On the one hand, the Air Force, Congress, and the Defense Department failed to anticipate the end of the Cold War when they planned their next fighter project in the 1980s, but, then again, so did most analysts who studied the Cold War. Cost growth on some programs is so high that it threatens other programs as services scramble to budget for unexpected overruns. The U.S. Navy’s carrier modernization programs are a case in point. The price of the USS George H. W. Bush has grown by $847 million, or 17 percent over its original budgeted cost, and the USS Gerald R. Ford may climb to $1 billion over its first estimate. These overruns, coupled with other cost growth in the Littoral Combat Ship, the LPD-17 amphibious warship, the DDG 1000 destroyer and the Virginia-class attack submarine. One consequence may be to cut back on the Navy’s planned expansion to 313 ships from the current 279.19 The reasons for cost overruns are complicated. Defense contractors often point to the military as a source, arguing that military requirements often change when an item is in development, or even in production, thus causing delays and unforeseen cost increases. For example, the first versions of the Air Force F-22 fighter did not have a gun, relying instead on antiaircraft missiles. However, after Lockheed Martin completed the first two prototypes, the Air Force changed its mind and insisted that the plane carry a gun, resulting in considerable redesign and an accompanying cost increase. Additionally, the Defense Department manages too many programs with two few dollars, and immature technologies are sent into production without adequate testing.20 The other reason for cost overruns is a systemic problem: under competitive bidding, contractors have the obvious incentive to bid low to win the contract, hoping that, should the cost of the product exceed what they initially bid, the buyer might revise the contract to help recoup potential losses. Cost overruns are often more likely in the cases of highly innovative weapons or weapons production processes. Since cost estimates usually derive from previous experience in weapons and production, processes that depart considerably from the past are much more likely to be off estimates. In the case of Northrop Grumman’s LPH-17 San Antonio–class amphibious assault ship, the price increased from $850 million to $1.85 billion because of complicated production processes (e.g., welding titanium pipes) and the use of new computer design tools that proved faulty. The consequences of the cost overruns included reducing the overall number of LPH-17s from 12 to 9.21

Reforming Defense Acquisition

Remedies for cost overruns are illusive. In 1983, Congress, tiring of the chorus of complaints over cost overruns, passed the Nunn-McCurdy Act (noted in Chapter 2), which requires the Defense Department to report any cost overruns of 15 percent or above and to terminate programs where cost growth exceeds 25 percent, unless the secretary of defense submits a statement to the effect that the program is vital to national security and that no alternative program exists that could replace the inflated one. The secretary must also certify that the cost increases are “reasonable,” which presumably can cover a variety of unanticipated problems that increased the price. It is also the case that very few programs have been canceled because they exceeded the provisions of Nunn-McCurdy. The case of the Space-Based Infrared System Program (SBIRS) is illustrative. In 2001 SBIRS had a Nunn-McCurdy breach; the program was restructured in 2002, and the GAO passed the critical design review even though only 50 percent of its design drawings were complete.22 The Multiple Launch Rocket System Upgrade Program also incurred a Nunn-McCurdy breach, but the Army and the contractor restructured the program, which was permitted to proceed.

Delivery Delays During World War II, defense delivery times set records in many categories as the energized defense industry worked diligently to get products out on or before schedule. The Kaiser Shipyard in California completed ships in a matter of days (one, the Robert E. Perry, was built in just five days), and the North American P-51 Mustang fighter went from drawing board to flying prototype in a record 117 days. Of course, engineers’ and defense plant workers’ wartime fervor, and almost unlimited budgets, helped to speed the processes along, but the reality is that now, more often than not, delivery of defense goods is often months and, more commonly, years behind schedule. There are numerous reasons for delivery delays. Often they are a consequence of the requirement that any new technology must be thoroughly tested before it can go into the field. That means that new innovations must be worked free of the numerous development problems that ultimately plague new systems. The step from the laboratory to the production process can be a humiliating experience for developers, because what appear to be workable ideas on paper often break or fail operational testing when they go into production. Years often pass before all the layers of approving officials have finally signed off on a product that has not initially met specifications. However, there may be an urgent need for the particular good or service that creates a tension between those who need it now and the approval process that is often required by regulation to not release the item until it meets its specifications. That is one reason for the paradox that cost overruns are often a consequence of the fielding of immature technology, yet technological development has stretched into years and often produces delivery delays. Defense reform has tried to resolve such conflicts in a number of ways. Sometimes the approval process can be circumvented when overseers are convinced

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that a genuine need for quick delivery outweighs the requirement that the product meets all specifications. It is more common, though, to devise a compromise solution in which the good starts initial development and then goes into service, in operation while continuing development. This is known as “concurrent development” or “production concurrency.” The roots of this practice go back to World War I, when rapidly developing needs drove research items to production quickly, sometimes with unfortunate consequences (e.g., aircraft engines often failed and resulted in fatal crashes). It continued during World War II and after. During the latter phases of the Korean War, the Air Force rushed the F-100 fighter into production, with the first production F-100A flying just two weeks after the second prototype flew. The consequences were sometimes tragic, with the F-100 aircraft suffering a spate of accidents because of design flaws.23 The B-1 bomber also went into concurrent production with troublesome results. The crew escape module did not work reliably in tests, the engine inlet design was switched during production, and the variable-sweep wing mechanisms had problems, forcing the contractor, Rockwell International, to shift workers from production to fixing problems. The bomber’s weight increased during production as processes changed, limiting its range, the avionics designed to defend the bomber failed completely, and the plane was delivered to its operators with the problems unresolved.24 The F-111A had serious design flaws in the engine air inlets, which restricted supersonic flight operations.25 As Thomas McNaugher noted in congressional testimony, I would call it the ABC model. The A model of a lot of airplanes, and other things, too, often had serious design anomalies in it; the B model got it roughly right, and the C model is where you really wanted to be all along, but it took maybe even 100 to 200 production models to get there. So it was expensive. And when you did that, the average effectiveness of our overall force actually was lower than it would have been had you waited and gotten all the production run, or most of it, to the C level.26

While concurrency and other ways to accelerate delivery have produced problems, they still have advantages, and there are some success stories. The Air Corps rushed the P-51 Mustang fighter into production during World War II as both Japan and Germany improved their own fighters, and the Mustang became one of the best Army Air Corps fighters used in the war. During the Vietnam War, the Navy rushed the Mark II Patrol Boat, River (PBR) into service after a short development of commercial fiberglass fishing boats into fighting craft. More recently, BBN Company delivered the Boomerang shooter-detection program in 66 days to beleaguered troops in Iraq.27 Sometimes the military and defense firms adopt civilian technology to military systems to save both money and development issues. An Army regulation of 2004 specifies, “It is [Department of the Army] policy to use domestic [civilian] technology transfer as an integral part of the research and development (R&D)

Reforming Defense Acquisition

effort through a variety of technology transfer mechanisms and to encourage technology transfer from all appropriate R&D activities, consistent with the military mission.”28 Civilian technology is often cheaper than military technology because it is designed for profit-making mass production rather than highly specialized “cost-is-not-an-issue” military production. However, adoption of civilian technology can cause its own problems. For example, when Bell Helicopters was developing the ARH-70 combat helicopter for the Army, it tried to develop its civilian model 407 helicopter into the ARH-70 and ran into problems because the combat model required a more powerful engine and advanced communications systems. The result was that the company could not keep its scheduled 2008 delivery schedule, and the Army (with some help from Texas Senator Kay Bailey Hutchinson, as much of the ARH-70 was to be built in Texas) won a reprieve from the Army.29

Lack of Competition According to basic market theory, competition among suppliers enhances quality and choice and lowers costs because producers must supply a variety of goods at competitive quality and price. Monopoly is a barrier to both quality and price. Yet monopolies have existed in the defense production system, though it is more common to find oligopolies: markets dominated by only a few major producers. Examples abound: there are only two suppliers of major military aircraft, Lockheed Martin and Boeing. There are only two shipyards qualified to produce submarines: General Dynamics in Connecticut and Northrop Grumman in Norfolk, Virginia. There is only one company capable of producing main battle tanks, the Lima Army Tank Plant (operated by General Dynamics) in Lima, Ohio. Monopolies and oligopolies exist in the defense sector for a number of reasons. First, there are considerable barriers to entry, including the high cost of setting up production, the high security requirements, and the dominance of established companies. Risks also include dealing with a single, potentially capricious customer, and the often ponderous bureaucracy that that customer uses to purchase goods and services. The Defense Department (and before it, the War and Navy departments) has attempted to entice more contractors to enter into and remain in the defense market. The military can provide free or low-cost production facilities (the Air Corps and later the Air Force provided government-owned plants like the one Northrop used to build the B-2 bomber in Palmdale, California), which substantially reduces operating costs. The military also can test the company’s products at its many test ranges, reducing development costs. Government research laboratories can provide information on materials, construction techniques, aerodynamics, ship hull design, and other pieces of information that the company would have to research itself in the private sector. The military has other means of instilling competition, sometimes requiring that a company share its production. In the mid-1920s, the Army Air Corps chief

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required Consolidated Aircraft to share the design of its PT-1 training aircraft with rival designers so that they might compete to produce it, despite strident protests from Consolidated’s founder, Reuben Fleet.30 More frequently, the losing bidder gets a share of the prize, if only to help keep the company in the market. In some cases rivals share in a prime contract, as is the case with the DDG 1000 Navy ship, which is being built at both Bath Iron Works, a subsidiary of General Dynamics, and Ingalls, a part of Northrop Grumman. Competition does help reduce prices. An electric-fuel-pump supplier reduced the projected price of an electric fuel pump for the F-22 Raptor by $25 million when the Air Force raised the possibility of using a second supplier for the item.31 Earlier, in 1979, Pratt & Whitney was the sole supplier of jet engines for the Air Force F-15 and F-16 fighters, but Congress funded a second supplier, General Electric, and that competition induced both improved engine reliability and lower cost. The problem is that often there are few competitors to induce bids from, particularly for the complex major acquisition programs, which consume the largest share of the overall acquisition budget.

Overly Stringent Requirements Because there is often a lack of competition that might positively influence quality, the military has issued specifications for its products. These specifications, known collectively as “military specifications” (or MILSPECS), have sometimes become a problem for defense production. They mandate strength of materials, reliability rates, type of construction materials, survivability rates in combat, and thousands of other items that ultimately led to such things as a 25-page set of MILSPECS for a military chocolate chip cookie. The MILSPECS requirements are understandable as a broad principle. Without competition, a sole-source contractor has incentives to cut costs and minimize performance. Low-bid winners sometimes reduced the costs of production to try and meet the agreed-on purchase price, which sometimes resulted in subpar performance. Moreover, the military requirements for certain items must exceed commercial standards for a similar product. For example, commercial jet engines are built to certain reliability standards, but when the military uses them in corrosive environments (e.g., salt air, desert sand), they must be enhanced through MILSPECS to meet those particular conditions. The MILSPECS are also a consequence of shoddy goods or fraudulent contractors. The MILSPECS for a chocolate chip cookie may well have come in response to a baker’s effort to fill such cookies with too much lard or not enough chocolate chips. Failures of aircraft engines, ammunition that would not fire, or parachutes that did not open spawned more than 30,000 MILSPECs by 1990. The advantages came with costs, however. The military could not purchase numerous items on the civilian market because they did not meet MILSPECs. Thus, they spent more than $30 on a bolt to secure a missile guidance system, although a commercial version of the same size bolt cost $0.30. In some cases, circumstances justified

Reforming Defense Acquisition

the MILSPECs: bolts on a missile-guidance system reentering the earth’s atmosphere at more than 15,000 miles per hour must be stronger than commercial bolts used to secure a bedpost, for example. Moreover, meeting MILSPECS can dramatically increase the cost of a system, given the requirements for expensive materials, additional testing requirements, legal scrutiny, and other costs. In 1994, Defense Secretary William Perry mandated a shift away from MILSPECs, deciding instead to apply commercial standards to many items acquired by the Defense Department. The MILSPECs had become too controversial, with reports of cookies and other ordinary commodities making the program look superfluous. But MILSPECs remain (there is a 14-page list of MILSPECs just for pressure-sensitive tapes and allied products). Stringent requirements remain for defense items that must perform in both desert and arctic climates, work to save lives in dire combat or emergency medical situations, survive massive gravitational loads in air and space, or explode with certainty when directed at an enemy target. However, the elimination of MILSPECs for noncritical items also raised problems. The Army took the position after the Perry reforms that it could cancel most MILSPECS, but some commercial alternatives were not useable because, in some cases, there were inadequate data to assess their quality, particularly for integrated circuits. Moreover, there were widespread cancellations of the military documents that specified MILSPECs for a variety of military aircraft, with no replacement documents available.32

Types of Reform Reform proposals come in several different flavors: r Reform the acquisition process by adding more government oversight. r Reform the process by converting much of it from government-regulated to marketoriented (the business model or the commercial practices approach).

r Reform the process through new managerial innovations, such as knowledge-based approaches.

r Simplify the process by using alternative approaches, such as those used in the so-called black world program acquisition.

These are the most common forms of reform, though there are others.

More Oversight Since the defense acquisition system is a cumbersome mix of private and government participants, reform efforts have usually taken several paths: more regulation over the process and more market incentives to make the defense market more efficient and effective. The problem is that often the process starts with more regulations either to catch what appears to be wrongdoing by the participants or to fix what appears to be a lack of responsible oversight. That usually results in a more complex system where delays grow and performance drops. As

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the number of actors drawn into the process through reform grows, the number of reviews grows also, stretching out delivery times. Moreover, as the number of actors grows, the more independent decisions clutter the system, and thus the number of compromises to unclog the process also grows. This often results in a less-than-satisfactory outcome, but the ultimate need to produce something usually outweighs the need for an optimum good or service. Much of the oversight regulatory change came under Defense Secretary McNamara, as discussed in earlier chapters. McNamara’s distrust of the uniformed services was one of the primary drivers of his efforts to both civilianize and systematize the defense acquisition process. While his reforms were roundly criticized, much of his system remains an entrenched part of defense acquisition, including the role of PA&E (the old systems analysis shop) and PPBS, now PPBE (but still the same logic). One of the key recommendations of the Packard commission involved streamlining the regulations governing the acquisition process, along with increasing testing and competition, and changing what the commission called the “organizational culture” of defense acquisition. But did such recommendations have the desired impact? After examining the impact of Packard reforms on the particular issue of cost overruns, Christiansen, Searle, and Vickery concluded that not only did the Packard recommendations not improve the situation but also cost overruns actually became more frequent after the Packard reforms, at least for the Air Force. Prior to Packard, the average Air Force cost overrun was 5.6 percent, but that jumped to 9.5 percent after efforts to implement Packard. The costs overruns of Army and Navy contracts did not significantly change, though the authors could not explain why the reforms appeared to fail.33 One key part of the Packard recommendations, increased testing, did receive attention, with the Predator UAV as a model. As noted earlier in this chapter, much of the testing for new programs occurs under idealized conditions, which rarely hold in the operational environment. The Predator, though, a fairly complex integrated program of both aircraft and communications, underwent operational testing. After first trials in Arizona, the Predator system was used in several operations in Bosnia, in actual combat conditions, before reaching final program approval, and areas for improvement discovered in those realistic tests were worked into the final program.34

Fixing the Problem by Turning to Commercial Market Solutions As Chapter 1 notes, most of the defense acquisition system lies in government hands, from the services that buy and operate equipment to the layers of government oversight and regulation, to the Congress that funds the process. Just the defense industry lies outside of government, and some argue that the relationship has grown so cozy between private contractors and the military that they are part of the same cabal. That is an overstatement, but the very nature of the defense market prevents contractors from operating as they would in the private market.

Reforming Defense Acquisition

Many defense reformers are enamored of the behavior and operation of the private sector, arguing that efficiencies stem from the reward and punishment structure of market forces rather than from negotiated contracts that often disobey market principles. Such reformers cite the success of Fortune 500 companies like Microsoft and Dell, where innovators took ideas and turned them into billiondollar enterprises. They also cite cases of business failures (e.g., Montgomery Ward, TWA, and Ford Motor Company’s Edsel) as examples of how the market punishes those who do not abide by its rules. Such beliefs have inspired marketoriented defense acquisition reformers to consider applying commercial practices to the defense realm. Some government agencies that have examined commercial practices argue that they hold advantages that render them applicable to government procurement: the GAO found in a 1999 report that, “(1) on the basis of the work GAO has done over the past 3 years, GAO believes the best practices of leading commercial firms can be used to improve the development of technology and weapon systems in DOD; [and] (2) knowledge standards that are rigorously applied, coupled with the practice of keeping technology development separate from product development, stand out as key factors in the most successful commercial examples.”35 Other studies found that the very nature of government and the government market in particular might serve as barriers to full implementation of commercial acquisition practices but that semicommercialization might be an option. For example, in private acquisition, the suppliers record is a key indicator, and those who perform poorly do not win subsequent contracts.36 These applications have had a mixed record. According to Department of Defense reports, the Joint Direct Attack Munition (JDAM) achieved a 50 percent cost reduction by employing commercial practices, and the C-17 cargo aircraft experienced 4 percent savings by using a commercial-specification engine type.37 Problems with commercial deals that have gone badly, like the previously noted Boeing–Air Force tanker lease and other questionable situations, like problems with the Lockheed Martin C-130J transport plane, have soured some on both sides of the contracting world on commercial business practices. Noted one report: “A chorus of observers, including military officials and a U.S. attorney, agreed at a hearing of McCain’s airland subcommittee last week that it was time to reassess the Pentagon’s overall procurement process. Michael Dominguez, the acting Air Force secretary, last week told a Senate panel it was clear the 1990s reforms, meant to streamline acquisitions, attract non-defense firms and adopt more commercial practices, had gone too far.”38 The Navy’s efforts to apply commercial practices to the Littoral Combat Ship (LCS) also produced disappointing results. In the post–Cold War era, some Navy leaders realized the need for smaller, lighter warships that could perform multiple missions. Their vision was to turn to modularity, an approach that would allow several different capabilities to be “plugged and played” to facilitate different missions—submarine detection, surface warfare, or land-support operations— thus allowing for a true multipurpose warship.39 Additionally, some defense reformers hoped that the new smaller ship design would empower more second-tier

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shipyards to bring their talents from the commercial market to bear on the project, perhaps forcing the older traditional military-oriented yards to reform their business practices. But problems bedeviled the program. The lead integrator for the LCS program, Lockheed Martin reported considerable cost growth on the LCS— in 2007 from $350 million to $375 million, up from about $270 million, because, the contractor claimed, of numerous Navy changes to the program after its inception.40 A more significant share of the problems, though, came from efforts to design and construct the ship from lessons learned in the high-speed commercial ferry business. The Navy learned, though, that the commercially oriented second-tier yards were hardly in better shape than were the large yards,41 nor was it helpful that Lockheed Martin, the systems integrator for one of the two competing projects, had no previous shipyard experience. The commercial ferry idea as a model was challenged after construction started, as project managers realized that the ship had to be able to take and survive battle damage that a ferry would not encounter.42 Consequently the designs changed, costs mushroomed (with an additional $100 million in overruns expected), and the whole situation led Mississippi Democratic Representative Gene Taylor, who leads the House Armed Services Subcommittee on Seapower and Expeditionary Forces, to argue, “Thinking these ships could be built to commercial specs was a dumb move.”43

A Commercial Market Subset: Reforming through Best Practices A spate of recent acquisition reform efforts has focused on managerial innovations centered around the theme of “best practices.” It is perhaps indicative of the scope of the reform dilemmas that reformers have turned to best practices as a remedy (is it possible to imagine that a multimillion dollar aircraft or a billion-dollar Navy ship would be acquired and constructed using less than best practices?). While best practices has become something of a buzzword in the management world, and has spawned numerous contractors who offer advice on how to accomplish best practices, there is only a loose definition of what the term means. One firm defines best practices as follows: “A best practice is a technique or methodology that, through experience and research, has proven to reliably lead to a desired result. A commitment to using the best practices in any field is a commitment to using all the knowledge and technology at one’s disposal to ensure success.”44 The then General Accounting Office was more specific: best practices incorporated a knowledge-based approach to acquisition, which proceeds in stages: Knowledge point 1 is a match is made between the customer’s requirements and the available technology (before development). Knowledge point 2 is when the product’s design is determined to be capable of meeting performance requirements (midway through product development). Knowledge point 3 is when the product is determined to be producible within cost, schedule, and quality targets, before entering production.45

Reforming Defense Acquisition

The point is that technology development should be kept separate from production, and that production should not start until knowledge about the technology at each step has matured. Notes the official GAO text reported to the congressional committee, “Leading commercial firms begin product development only when a solid business case can be made. The business case centers on the ability to produce a product that the customer will buy and that will provide an acceptable return on investment. . . . Commercial practices for gaining knowledge and assessing risks can help produce better outcomes on weapons systems.”46 These recommendations appeared in 2000, but eight years later the GAO issued yet another acquisition report to benchmark acquisition reform progress. The report concluded balefully, “Since fiscal year 2000, DOD has significantly increased the number of major defense acquisition programs and its overall investment in them. Unfortunately, during this same time period, acquisition outcomes did not improve. Based on our analysis, total acquisition costs for the fiscal year 2007 portfolio of major defense acquisition programs increased 26 percent from first estimates, whereas the 2000 portfolio increased by 6 percent. Likewise, development costs for fiscal year 2007 programs increased by 40 percent from first estimates, compared to 27 percent for fiscal year 2000 programs. In most cases, programs also failed to deliver capabilities when promised.”47 The report continued by lamenting that “the continuing absence of knowledge-based acquisition processes steeped in disciplined systems engineering practices— aimed at analyzing requirements to determine their reasonableness before a program starts—contributed significantly to this.”48 It would appear that the question about knowledge-based approaches as a cure for at least some of the chronic acquisition problems remains unanswered because of the Defense Department’s reluctance to adopt the methodologies used in best practices management. In the 1990s some defense components (the U.S. Air Force in particular) turned to the total quality management (TQM) movement to find solutions from the private sector, which had embraced TQM. The Air Force even started its own Quality Institute to equip all in the service with the tools and techniques to engage in “continuous product improvement.” The TQM world was shaped heavily by defense contractors who pushed particular methodologies and the tools and workshops necessary to accomplish them. The TQM framework became a part of the core curriculum in many military education venues, and TQM language permeated the narrative for most military organizations. It was particularly noteworthy in defense acquisition, where its promise of continuous improvement, constant measurement, and mapping diagrams was intended to make the acquisition system operate more efficiently, with more on-time deliveries and less waste and cost overrun. However, the language and philosophy did not gain ready acceptance in the professional military world. The “empowerment” by TQM of even the most junior worker in a process to make decisions ran against the ingrained chain of command. Its use of “gurus,” who were often consultants or statisticians (Edward Demming, allegedly the founder of TQM, was a particularly venerated individual)

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raised the eyebrows of senior military officers who sometimes asked whether these gurus knew anything about combat or weapons. Thus, TQM began to fade from use after its champions left—after General Merrill McPeak retired as Air Force chief of staff, the Air Force closed the Air Force Quality Institute and the language and the contractors involved in TQM quickly disappeared. However, it appears that the methodology and the language of TQM are returning in the guise of acquisition reform. The office of the undersecretary of defense for acquisition and logistics issued its Strategic Goals and Implementation Plan for 2008, which contained a considerable number of lofty objectives, including full implementation of continuous process improvement (CPI) and lean six sigma. Moreover, the objectives adopted the language of those contractors offering lean six sigma training by setting the bar at 4 percent AT&L workforce being certified as “black belt” and 25 percent of that force receiving “green belt” certification by July 2008.49 According to one source, more than two-thirds of all Defense Department organizations have adopted some form of lean six sigma.50 Lean six sigma is actually a combination of two managerial tools: lean refers to the elimination of unnecessary steps that do not add value to a manufacturing process (e.g., storing parts for long periods of time, as opposed to on-time delivery of those parts to the assembly line), while six sigma refers to an error reduction goal. In statistical language, the normal distribution (i.e., the bell-shaped curve) is a continuous probability distribution containing a mean of zero, with .6826 of scores occurring within one standard deviation plus or minus from the mean (one sigma), and .9546 percent of scores within two sigmas, and on out to six sigmas, or around 0.999999998027. If errors substitute for sigma, then the purpose of six sigma methodology is to reduce error probability to six sigmas: 3.4 defects per 1 million items. A person with a “green belt” in six sigma is at the entering level of education, while a “black belt” certifies high expertise (there are also intermediate “yellow belts”). Whether such practices can improve the defense acquisition process is questionable. Defenders of the process argue that there are success stories. The Naval Air Systems Command used lean six sigma to develop a new approach to the Joint Standoff Weapon Block II program, generating savings of more than $133 million in fiscal 2006 and more than $420 million for the life of the program.51 But like many management techniques (often pushed by consulting firms eager to sell their wares), lean six sigma can be oversold. Some of it is simply common sense cleverly packaged, like stepwise planning for complex projects or careful estimates of future costs, performance, and problems. It is not just about colored belts (available for a price from numerous consulting firms) but also about prudent planning and programming. Moreover, while adopting lean six sigma may indeed improve processes, it may not be able to tackle the problems posed by highly complex technologies pushed through the defense acquisition system by eager service users, members of Congress, and defense contractors, whose political clout often outweighs even the most robust reform methodology. Finally, the reduction of errors to six sigma may make sense in systems where reliability is

Reforming Defense Acquisition

critical (e.g., aircraft ejection seats, reconnaissance satellites), but not for the bolts that hold a military desk together, or military shoe polish, or hundreds of thousands of common items purchased by the military every day. The design for the coffeemaker in the C-5 aircraft that required it to survive a crash that would have assuredly killed the crew was a case of requirements overkill. Another subset of efforts to adopt commercial practices was price-based acquisition, an alternative to the prevalent cost-based acquisition models currently in use. The argument supporting price-based acquisition is that in the commercial sector, buyers make choices largely on price, not costs, and the Defense Department (and other government agencies) should consider adapting the same logic. Moreover, advocates of price-based acquisition argued that it would ultimately save money by reducing the numerous requirements by contractors and program managers to provide initial cost estimates and oversight over cost growth. However, a RAND Corporation study of price-based acquisition argued that the methodology was inappropriate for Defense Department acquisition because of the lack of a real market structure (e.g., enough competitors) to provide realistic pricing information and the difficulty of monitoring price gouging, among other problems.52

Transformation? The George W. Bush administration inherited some of the very same defense acquisition problems that faced previous administrations. A January 2006 defense study put the problem starkly: “Both Congress and the Department of Defense senior leadership have lost confidence in the capability of the Acquisition System to determine what needs to be procured or to predict with any degree of accuracy what things will cost, when they will be delivered, or how they will perform.”53 The keyword from the Bush administration and its first defense secretary, Donald Rumsfeld, was transformation, and the Bush Defense Department was eager to use the term to demonstrate its commitment to acquisition reform. According to its “Defense Acquisition Transformation Report to Congress,” the Department planned reforms around the following: r r r r

Streamlined and simplified acquisition Affordable and predictable outcomes Improved centers of excellence Responsibility and accountability alignment

A closer examination of these themes suggests that there is not much new. Streamlined and simplified acquisition involved the use of best business practices, which is just an old method for ranking types of business practices until the best one emerges. It also relies on continuous process improvement, an idea central to the quality management fad of the 1990s, which the then chief of staff General Merrill McPeak imposed on the Air Force, which quickly abandoned it after

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McPeak’s retirement. The affordable and predictable outcomes were to be ensured through the use of concept decision reviews, which are “to ensure, as early as possible, that DOD is making the right corporate investment choices, balancing operational and programmatic risks, to ensure that those choices are affordable, and that any resulting non-materiel solutions and/or materiel acquisitions are designed for lifecycle success.”54 However, this is also the task of the Defense Acquisition Board, and, to a lesser extent, the JROC and numerous other councils created by previous administrations. The Defense Transformation Report did not make it clear as to why the creation of yet another layer of oversight would improve the defense acquisition process when previous oversight boards had apparently failed. Affordable and predictable outcomes would be assessed by the enterprise risk assessment model (ERAM), which “utilizes industry best practices to identify and mitigate business system risks in order to enable more rapid delivery of business capabilities. ERAM is an integral part of the Business Capability Lifecycle (BCL) process which is a new DOD framework that is being implemented in October 2007 to develop, approve and execute business capabilities in the Business Mission Area.”55 And ERAM becomes the foundation for an assessment team comprising senior executive service personnel, GS-15, and “highly qualified experts” (is there another kind of expert?) in addition to other support staff, to produce a “detailed findings document and an “executive briefing” within six weeks of the team’s formation to assess risk factors and other business elements for a particular acquisition program. But, again, there is nothing new here; service acquisition staffs, members of the Defense Acquisition Board, and other long-standing bodies in the defense acquisition system have had similar if not identical tasks for decades.

Reforming the Defense Industry As observed earlier, structural reform became a management tool in the Defense Department (sometimes driven from inside, sometimes by Congress), and the relationship between the military and the defense industry is no exception. Both the nature of the defense market itself and reports of illegal activity generated calls for reform dating back to the days of John Paul Jones. It continues today as the defense market changes from a Cold War structure to an uncertain future. Today’s defense structural reforms date back largely to the Reagan buildup, which spawned its own defense reforms as reports about defense contractor abuse grew. Reports that the Defense Department paid $400 for a hammer, or $35 for a bolt, or $500 for an aircraft toilet-seat cover suggested that the acquisition process had spun out of control, even though a more careful examination suggested that there were reasonable explanations for some of these things.56 There were also reports of contractor favoritism. For example, during the Reagan administration, the Army awarded Ford Motor Company a contract for an air-defense system known as the Division Air Defense (DIVAD) system. The company had no experience in constructing such a system but was in a financial crisis after poor

Reforming Defense Acquisition

automotive sales. According to Richard Stubbing, Ford had lost a record $1.5 billion in 1981, and the Reagan administration saw an opportunity to reward a political contributor. The Army selected DIVAD even after a competing system from General Dynamics scored better in competitive testing, but ultimately the secretary of defense canceled it in 1985 after it failed all of its trials.57 The B-1 bomber was defended partly to boost the fortunes of Rockwell International (once North American Aircraft Company), and after President Reagan revived the aircraft in 1981, Rockwell’s stock price doubled.58 As a result of these and other problems, hundreds of new rules and regulations came into effect, perhaps making the process less controversial but also producing considerable delays and often increasing the costs of production. Those reforms led to a growth in oversight that became so cumbersome that, in later years, reformers tried to de-bureaucratize the process by simplifying it, while also pushing for more commercial buying practices, as noted earlier.59 Pressure also led to demands for competitively bid contracts rather than sole-source buying practices. However, as the effects of reform began to ripple through the defense system, some painful realities emerged. Reform oversight that required competitively bid defense contracts instead of sole-source contracts was difficult to fulfill in an era of a shrinking defense industrial base.60 Lead times for weapons stretched into years as all systems had to meet rigorous requirements on performance and price. Given the problems, the Defense Department reduced some of the reforms spurred by the Reagan problems and shifted to a simplified system (e.g., fewer requirements, less formal systems specifications), though some reforms remained. Those changes did reduce some of the long lead times for weapons development, but they also challenged the quality that sometimes only long testing could ensure. More important, they did not change some of the most basic issues in the defense acquisition system. Said Congressman Norm Dicks (D-WA), a long-serving veteran of the House Armed Services Committee, “I’ve been here for 37 years and we’ve been doing acquisition reform for the last 37 years. You’d think we would finally get it right. The problem is they bid low and the cost goes up.”61 In some cases, the reforms did not prevent problems. The Air Force, for example, ran into difficulties in several acquisition areas, like rocket purchases and tanker replacements. Boeing and Lockheed Martin were prime contractors for rockets, but in 1998, the government accused Boeing of illegally acquiring proprietary data from rival Lockheed Martin and barred it from competition for rocket contracts. However, according to a report in the Wall Street Journal, the Air Force lifted the ban to preserve both prime contractors as rocket suppliers, with $6 billion in contracts that skirted a number of provisions designed to save money and encourage cooperation between suppliers.62 The most notable recent case of defense contractor problems is that of the Boeing tanker lease. Boeing needed a military contract for its 767 commercial airliner as airline sales slowed. The Air Force sought replacements for its existing KC-135 tanker fleet that dated back to the first days of the Boeing 707 in the early

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1960s. Boeing was the sole supplier of large commercial and military aircraft in the United States, but the Air Force still could have considered a bid from the European consortium Airbus Industries. However, in September 2001, then Air Force principal deputy assistant secretary Darleen A. Druyun reportedly offered the Air Force a lease arrangement on behalf of the company that would become her employer, Boeing. The deal would have allowed the Air Force and Boeing to circumvent the protracted period required for a standard acquisition contract, but later legal procedures revealed that both Druyun and Boeing Vice President Michael Sears used improper influence in the deal, worth $23.5 billion; they both served prison sentences for their misconduct. The point, though, was that Boeing and the Air Force engaged in conduct that was clearly driven more by contractor self-interest than by national interest, as the following implies: “‘We all know that this is a bailout for Boeing,’ Ronald G. Garant, an official of the Pentagon comptroller’s office, said in [an e-mail] message to two others in his office and then-Deputy Undersecretary of Defense Wayne A. Schroeder. ‘ Why don’t we just bite the bullet,’ he asked, ‘and handle the acquisition like the procurement of a 1970s-era aircraft—by squeezing the manufacturer to provide a better tanker at a decent cost?’”63 There were also questions about the Army’s dealings with Boeing in its development of the Future Combat System. After repeated problems with the $100 billion program, the Army decided to rein in Boeing’s control of it.64 The Army’s decision appears to have been prompted by criticism of the program from both the GAO and members of Congress, particularly Senator John McCain (R-AZ). The GAO noted that after two years, the program goals were still not established, and that only 1 of 50 new technologies was ready for use.65 Still, there was great reluctance to punish Boeing for the problems or to try to qualify a new contractor.66

Learning from the Black World Programs The process discussed in Chapter 2 covers regular military acquisition, but, to a degree, it excludes classified programs known as “black programs.” While almost all defense acquisition programs have elements of security attached to them, black world programs are usually related to intelligence gathering or highly sophisticated technologies that would cause serious damage to the United States if revealed. The most common examples are reconnaissance satellites and aircraft, although stealth aircraft such as the F-117 Nighthawk and the B-2 Spirit bomber are also examples. Black world programs go through an abbreviated acquisition program because the levels of security clearance they carry are so high that few outside of the direct program have the proper security credentials. Space programs are a classic example of black world classification, with highly classified programs that often worked their way through abbreviated acquisition approval systems in separate packages so that very few officials not cleared for their programs would see the

Reforming Defense Acquisition

completed project.67 Many classified projects were no-bid contracts given to a sole-source producer because of the particular clearances and technological experience of that contractor. Lockheed (and, later, Lockheed Martin) was a favored contractor for aircraft, as its U-2 and later SR-71 reconnaissance aircraft went through an approval process that involved only the contractor and the operating service. Northrop also worked in this area, competing and beating Lockheed for the B-2 bomber contract in a decision made only by the Air Force because of the security concerns involved.68 Some programs do come out of the black world for program decisions, but their road through the milestone system is generally avoided. Thus, Congress, which has budgetary authority over large programs, may object and try to cancel the project (as a number of representative have tried to do), but at that point it is an operating system with a sunk development cost, which makes it more difficult to kill. Some black world programs have been highly successful. The F-117 light bomber led the attacks on Baghdad in initial operations in the 1990–1991 Gulf War, and the B-2, though not without problems, has accomplished its performance parameters. Space reconnaissance systems have also reportedly worked well, though their operations remain so classified that there are still few details available. The U-2 reconnaissance plane, developed with great secrecy in the 1950s, still flies today. Numerous military satellite programs have provided considerable information and navigation capability for the military. Of course the black world programs that fail, reach only part of their capability, or spiral out of cost control are rarely reported because of security, so it is difficult to provide an overall assessment of the viability of the black world as an alternative to the normal acquisition road.

Reforming Reform? There is tremendous pressure to reform the defense acquisition process, and, more important, to announce success. Thus, in 1988, Robert B. Costello, undersecretary of defense for acquisition, was proud to inform the House Armed Services Committee, “We have substantially improved the acquisition system. . . . As a result of our acquisition reforms, defense programs are generally on-time and within budget.”69 Given the situations described previously, one may appreciate the sincerity of Undersecretary Costello and at the same time ask whether he was exaggerating or whether a temporary acquisition system set of fixes has gone terribly awry nearly twenty years later. It is probably time for participants and overseers to sort through the various acquisition reform efforts to determine what works, what does not work, and where to go next. The system is at a crossroad, where previous reform efforts have perhaps avoided more serious problems but have not provided relief from embedded difficulties that continue to draw attention and sap the system of necessary resources. Acquisition reform has clearly not reduced cost growth beyond estimates. A 2006 GAO report indicated that not a single defense acquisition reform

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trimmed cost overruns. In the 1970s, despite the Fitzhugh commission and the Commission on Government Procurement, cost overruns averaged 30 percent, totaling $13 billion. In the decade of the 1980s, the Carlucci initiatives, the Grace commission, and the Packard commission efforts did not prevent overruns of 39 percent ($12 billion total), and the 1990s saw overruns of 40 percent ($15 billion total) even after the Federal Acquisition Streamlining Act and the ClingerCohen Act.70 Part of the reason for this continuing poor performance was that more than 80 percent of the programs examined by the GAO did not pass through the initial reviews required by most of the reform efforts, and reduced buys of major systems led to cost overruns of 27 percent in the joint strike fighter and 54 percent overruns in the Future Combat System.71 The cost of the military’s top five weapons programs was $231 billion in 2000, but that swelled to $521 billion in 2005 for the same programs.72 If reforms were ever designed to curb excessive cost growth of prime contracts, they were clearly not working. Pentagon officials acknowledge that oversight is dwindling. While the dollar value of weapons contracts has doubled over the past decade, the Pentagon halved the size of the workforce that polices their costs. The government work of managing the design, development, and production of weapons has been largely outsourced to the weapons contractors themselves.73 The size of service acquisition forces has dropped significantly, and more oversight on complex systems like the Army’s Future Combat System is now done by the contractors who have a vested interest in pushing the program forward but will not have to use it in combat.74 The Navy’s acquisition force is also becoming smaller, along with the Air Force’ military acquisition professionals, as more uniformed personnel deploy to war zones. One consequence of reform has been the diffusion of acquisition power, which has also grown because of the inherent distrust built into the system. That may mean that the role of a strong central program manager who has genuine program and budget authority might be restored. In previous years, a strong figure who understood the differences between tough management and the adoption of management tools could have a significant impact on solving acquisition problems. Congressman Duncan Hunter waxed nostalgically about one such individual: “Many years ago, when Dr. Johnny Foster was head of Director of Defense Research and Engineering (DDR&E), for the U.S. Government, he told the Air Force when costs started to go . . . off the page, that they had to build a tactical fighter aircraft for five million bucks. . . . [T]he Air Force told him that was absolutely impossible. And his answer was, then you are not going to have an aircraft. They did build one for five million bucks. It is called the F-16.”75 In the diffused world of current defense acquisition, though, it is difficult to imaging someone with the kind of clout (and political courage) that Foster demonstrated.

Fixing the Problems: Appearances versus Reality? There are few things that evoke the ire of taxpayers as much as finding out that their tax dollars are being poorly spent. Stories of waste, fraud, and abuse quickly

Reforming Defense Acquisition

generate frantic efforts by political figures to fix the problems that arouse public anger. The obvious problem is that most cases of revenue abuse or misuse are difficult to fix. They are often embedded in the complex systems that emerge from years of previous reforms, the peculiar nature of the defense industry–military relationship, congressional persuasion, and a host of other items that make for a less-than-efficient system. So sometimes pressure to reform the system results in the appearance of change rather than real change in an effort to appease critics. Thus, new management routines come into practice (the quality movement is a case in point) that appear to remedy or at least lessen the problems of defense acquisition. For example, in 1996 the Defense Department built on the interest generated by the Revolution in Military Affairs (hardly a revolution, as is the case with most things called “revolutions”) to craft a “revolution in military acquisition affairs,” or RMAA. As an example of its success, Paul Kaminski, undersecretary of defense for acquisition and technology, cited changes in prototyping improvements tested on the USS Yorktown. According to Kaminski, one of these systems, the integrated bridge and voyage management system, cut down the number of sailors on the ship’s bridge from 13 to 5.76 The fact that Kaminski used such a trivial example of the effects of reform to support RMAA strongly suggests that (1) RMAA was hardly revolutionary, and (2) an application of common sense could probably have accomplished the same results.77 However, where the pressures to fix a system that elude simple solutions, the temptation to apply symbolic solutions becomes greater.

Conclusions Reforming the defense acquisition system has become almost a pastime in Washington, with repeated efforts to make the system more honest, more accountable, less costly, and better managed. Most of these reforms have been well intentioned, but most have fallen short of their marks. More important, some reforms have actually contributed to the very problems they were intended to resolve. With increased gates of oversight through which major programs must pass, the system is now slower and provides more opportunity for changes and delays. Additionally, the operating services have found ways to work the system to assist favored programs through a system that was intended to reduce service influence. However, the principle problem with the acquisition system is the nature of the system itself and the military requirements that it supports. There is still one customer, a small handful of suppliers, uncertain threats for the military to respond to, and highly technical systems that are produced in inefficient numbers. Those who describe the Pentagon acquisition as one of the last bastions of socialism are perhaps not far from the truth. However, no one has derived a clear alternative, so the system will likely continue, along with the reforms that may improve it at the margins but are also designed to respond to the public outrages that boil up every time the defense acquisition system produces a $400 hammer or a $1,000 toilet-seat cover.

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Notes 1. J. Ronald Fox, Arming America: How the U.S. Buys Weapons. Boston: Graduate School of Business Administration, Harvard University, 1974, 3–4. 2. Christopher H. Hanks, Elliot O. Axelband, Shuna Lindsay, Mohammed Rehan Makik, and Brett D. Steele, Reexamining Acquisition Reform: Are We There Yet? Santa Monica, CA: RAND Corporation, 2005, 1. 3. Center for Strategic and International Studies, U.S. Defense Acquisition: A Process in Trouble. Washington, DC: Georgetown University, Center for Strategic and International Studies, March 29, 1987. 4. “Defense Contractor Pleads Guilty to Fraud in Manufacture and Sale of Chemical, Nuclear, Biological Filters,” Department of Justice News, September 7, 2007. 5. “Defense Contractor Was Paid $1 Million to Ship 2 Washers,” Washington Post, August 17, 2007. 6. “Defense Contractor SAIC to Pay $2.5 Million to Settle Fraud Charges,” San Antonio Business Journal, April 27, 2005. 7. “Jury Fines Defense Contractor in Iraq $10M,” USA Today, March 10, 2006. 8. “Defense Contractor Pleads Guilty to Fraud,” Boston Globe, August 2, 2006. 9. “4 Indicted for Fraud, Conspiracy in Army Contracts Scheme,” Atlanta JournalConstitution, April 24, 2008. 10. “GAO Blasts Weapons Budget,” Washington Post, April 1, 2008. 11. House of Representatives, F-22 Cost Controls. Hearing before the Subcommittee on National Security, Veterans Affairs and International Relations of the Committee on Government Reform, 106th Cong., 1st Sess., December 7, 1999, 14–50. 12. “Four JASSM Failures Cast Doubt on Program’s Future,” Aerospace Daily & Defense Report, May 10, 2007. 13. “Cost Nearly Doubles for Marine One Fleet,” Washington Post, March 17, 2008. 14. “Large Cost Overruns Likely in Lockheed Helicopter Contract,” Washington Post, May 17, 2007. 15. Ibid. 16. “Air Force Programs Late, over Budget, Audit Finds,” Washington Post, March 8, 2007. 17. “Congress Criticizes Tank Overruns,” Washington Post, April 30, 2008. 18. GAO, Tactical Aircraft: DOD Needs to Better Inform Congress about Implications of Continuing F/A-22 Cost Growth. Report to the Honorable John F. Tierney, House of Representatives, GAO-03-280, February 2003. 19. “Price Tag for Navy’s New Aircraft Carrier on the Rise, GAO Says,” Norfolk Virginian-Pilot, September 22, 2007. 20. “GAO Blasts Weapons Budget,” Washington Post, April 1, 2008. 21. “Assault Ship Never Had Smooth Sailing,” San Antonio Express-News, July 31, 2005. 22. Brian Shimel, “Looking at the Root Causes of Problems: Preventing Repeat Mistakes,” Defense AT&L (May–June 2008), 12. 23. Thomas L. McNaugher, New Weapons, Old Politics: America’s Military Procurement Muddle. Washington, DC: Brookings Institution, 1989, 34–35. 24. Michael E. Brown, Flying Blind: The Politics of the U.S. Strategic Bomber Program. Ithaca, NY: Cornell University Press, 1992, chap. 7.

Reforming Defense Acquisition 25. Robert F. Coulam, Illusions of Choice: The F-111 and the Problem of Weapons Acquisition Reform. Princeton, NJ: Princeton University Press, 1977, 167–235. 26. “Joint Strike Fighter Acquisition Reform: Will It Fly?” Hearing on National Security, Veteran’s Affairs, and International Relations of the Committee on Government Reform, House of Representatives, 106th Cong., 2nd Sess., May 10, 2000. Washington, DC: Government Printing Office, 2001, 101. 27. “When the Military Needed It Yesterday,” New York Times, October 21, 2007. 28. “Military-Civilian Technology Transfer,” Army Regulation 70-57. Washington, DC: Headquarters, Department of the Army, February 26, 2004, 1. 29. “Army Keeps New Helicopter Alive at Bell,” Fort Worth Star-Telegram, May 19, 2007. 30. Fleet was able to foil the Army’s plans by dramatically increasing production of the PT-1, but in the process the company earned so much money that the Air Corps made it return some of it. See Jacob Goodwin, Brotherhood of Arms: General Dynamics and the Business of Defending America. New York: Times Books, 1985, 58–59. 31. “F-22 Cost Controls,” 52. 32. William P. McNally, “Will Commercial Specifications Meet Our Future Air Power Needs?” Acquisition Review Quarterly (Summer 1998), 297–316. 33. David S. Christiansen, David A. Searle, and Caisse Vickery, “The Impact of the Packard Commission’s Recommendations on Reducing Cost Overruns on Defense Acquisition Contracts,” Acquisition Review Quarterly (Summer 1999), http://findarticles.com/p/ articles/mi m0JZX/is 3 6/ai 78177456/pg 1. 34. Michael R. Thirtle, Robert V. Johnson, and John L. Birker, The Predator ACTD: A Case Study for Transition Planning to the Formal Acquisition Process. Santa Monica, CA: RAND Corporation, 1997. 35. Defense Acquisition: Best Commercial Practices Can Improve Program Outcomes, Statement/Record, 03/17/99, GAO/T-NSIAD-99-116. 36. The Lean Aircraft Initiative Policy Focus Group, “Adopting Commercial Practices in the Department of Defense: Barriers and Benefits,” September 16, 1996, at https://www. dodmantech.com/pubs/leanwp20.pdf. 37. Defense Department, “Memorandum for Correspondents,” Memorandum 025M, February 26, 1997, http://www.defenselink.mil/Utility/printitem.aspx?print=http://www. defenselink.mil/news/Feb1997/m022697 m025-97.html. 38. “Defense Contract Reforms Probed,” New York Times, April 8, 2005. 39. Peter Dombrowski and Eugene Gholz, Buying Military Tran$formation: Technological Innovation and the Defense Industry. New York: Columbia University Press, 2006, 49–50. 40. “Cost of Lockheed Ship Rises,” Washington Post, February 9, 2007. 41. Dombrowski and Gholz, Buying Military Tran$formation, 39. 42. “Costly Lesson on How Not to Build a Navy Ship,” New York Times, April 25, 2008. 43. Ibid. 44. TechTarget, http://searchsoftwarequality.techtarget.com/sDefinition/0,,sid92 gci 498678,00.html. 45. House of Representatives, Joint Strike Fighter Acquisition Reform: Will It Fly? Hearing before the Subcommittee on National Security, Veterans Affairs, and International Relations of the Committee on Government Reform, 106th Cong., 2nd Sess., May 10, 2000. Washington, DC: Government Printing Office, 2001, 6–7. 46. Ibid., 20–21.

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The Process and Politics of Defense Acquisition 47. GAO, “Defense Acquisitions: Assessment of Selected Programs.” Washington, DC: GAO, March 4, 2008. 48. Ibid., 5. 49. AT&L Goals, 2008, http://www.acq.osd.mil/goals/20080207 SGIP.pdf. 50. Brian Robinson, “DoD Rallies around Lean Six Sigma,” FWT.com, March 2008, http://www.fcw.com/print/22 5/features/151766-1.html. 51. Ibid. 52. Mark A. Lorell, John C. Grasner, and Cynthia R. Cook, Price-Based Acquisition: Issues and Challenges for Defense Department Procurement of Weapons Systems. Santa Monica, CA: RAND Corporation, 2005. 53. Defense Acquisition Performance Assessment. A Report of the Assessment Panel Assessment Project for the Deputy Secretary of Defense, January 1, 2006. The report grimly noted that over a number of years, 128 studies had focused on problems in the defense acquisition system, and problems identified by the Packard commission more than 20 years earlier were still present. 54. “Defense Acquisition Transformation,” John Warner National Defense Authorization Act, Fiscal Year 2007, section 804, February 3, 2007. 55. Defense Department, “FAQs—Enterprise Risk Assessment Methodology (ERAM),” http://www.defenselink.mil/dbt/faq eram.html. 56. For example, the $35 bolt was designed to secure the guidance system to a Minuteman II missile, and was ordered in very small quantities and constructed out of hightension alloy metals. Author’s interview, Newark Air Force Base, 1984. 57. Richard Stubbing, The Defense Game. New York: Harper & Row, 1986, 182–184. 58. Kotz, The Wild Blue Yonder, 223. 59. The climate that spawned these reforms is discussed in Daniel Wirls, Buildup: The Politics of Defense in the Reagan Era. Ithaca, NY: Cornell University Press, 1992, chap. 4. 60. David S. Sorenson, “Fewer Dollars and More Reform? Defense Acquisition in the United States after the Cold War,” Security Studies 2 (Winter 1992), 310–329. 61. William Matthews, “U.S. Congress May Be in a Reform Mood,” Defense News, May 2, 2005. 62. “Air Force Intends to Lift Rocket Spending,” Wall Street Journal, April 19, 2005. 63. “E-mails Detail Air Force Push for Boeing Deal,” Washington Post, June 7, 2005. The Air Force justified the urgency of the tanker deal by citing corrosion problems in the KC135 fleet, requiring urgent replacement of those planes. However, a study by the Defense Science Board published in 2004 revealed that the KC-135 airframes were useful through the year 2040. Ibid. 64. “About Face: Army’s Decision on Boeing Changes Philosophy,” Wall Street Journal, April 6, 2005. 65. “Future Combat System Faces Familiar Foe in Armed Services Subcommittee,” CQ Today, May 12, 2005. 66. “Boeing Lags in Bid to Revamp Army Radios,” Chicago Tribune, May 26, 2005. 67. See, e.g., Paul B. Stares, The Militarization of Space: U.S. Policy, 1945–1984. Ithaca, NY: Cornell University Press, 1985; Paul B. Stares, Space and National Security. Washington, DC: Brookings Institution, 1987; William E. Burrows, Deep Black: Space Espionage and National Security. New York: Random House, 1986. 68. Part of the story is in Ben R. Rich and Leo Janos, Skunk Works: A Personal Memoir of My Years at Lockheed. Boston: Little, Brown, 1994, chap. 15.

Reforming Defense Acquisition 69. “Integrity of Department of Defense Acquisition System and Its Impact on U.S. National Security,” Hearings before the Full Committee and the Acquisition Policy Panel, Committee on Armed Services, House of Representatives, 100th Cong., 2nd Sess., October 13, 1988. Washington, DC: Government Printing Office, 1989, 13. 70. Defense Acquisitions: Major Weapon Systems Continue to Experience Cost and Schedule Problems under DOD’s Revised Policy. Report to Congressional Committees, GAO, GAO-06368, April 2006, 5. 71. Ibid., 3, 10–11. 72. “U.S. Reviews Weapons Buying, Seeking to Control Costs,” Bloomberg.com, June 13, 2005. 73. “Arms Fiascos Lead to Alarm Inside Pentagon,” New York Times, June 8, 2005. 74. Interview by author, Maxwell AFB, AL, April 2008. 75. House of Representatives, “Department of Defense Acquisition Reform,” Hearing before the Committee on Armed Services, 109th Cong., 1st Sess., November 2, 2005. Washington, DC: Government Printing Office, 2007, 15. 76. House of Representatives, Defense Reform Act of 1997. Hearings before the Committee on National Security, 105th Cong., 1st Sess., Washington, DC: Government Printing Office, 1998, 9–10. 77. Other examples cited were helping Raytheon reduce the number of independent soldering processes and replacing a military navigation system on the F-14 aircraft with a commercial GPS version, again hardly revolutions. Ibid., 10–14.

Further Reading Defense Acquisitions: Major Weapon Systems Continue to Experience Cost and Schedule Problems under DOD’s Revised Policy. Report to Congressional Committees, U.S. Government Accountability Office, GAO-06-368, April 2006. Hanks, Christopher, Elliot I. Axelband, Shuna Lindsay, Mohammed Rehan Malik, and Brett D. Steele, Reexamining Military Acquisition Reform: Are We There Yet? Santa Monica, CA: RAND Corporation, 2005.

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APPENDIX I

Company Profiles

Boeing Company Integrated Defense Systems Headquarters: Chicago and St. Louis U.S. Manufacturing Locations: Decatur and Huntsville, AL; Mesa, Anaheim, El Segundo, Palmdale, Long Beach, Seal Beach, and Huntington Beach, CA; Macon, GA; Kennedy Space Center, FL; St. Louis and St. Charles, MO; Wichita, KS; Philadelphia; El Paso, Houston, and San Antonio, TX; and Puget Sound, WA Workforce: 72,000 worldwide Revenue (2006): $61 billion Employees: 160,000 in the United States and overseas

History In 1908 William Boeing went to his first air show in Los Angeles, and thrilled by the aircraft he saw there, he took flying lessons from Glenn Martin, another pioneer aviator and company founder. With his friend William Westervelt, Boeing designed and built a wooden seaplane, which Boeing flew without so much as a warm-up in 1916. A year later his Boeing Airplane Company became a reality, and Boeing began hiring the engineers, woodworkers, and sewers needed to fabricate the crude aircraft of the time. Initially building planes designed by other companies under license, the Boeing company began to design its own planes, capitalizing on the interest spurred by Charles Lindbergh’s flight over the Atlantic in 1927. Boeing demonstrated his understanding of how to build a large aviation company by building relations with other companies both to supply and buy his aircraft and to get widespread publicity. In the 1920s and 1930s, Boeing pioneered numerous aircraft designs, building the first monoplane fighter for the U.S. Army Air Corps, the P-26, and the B-9

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low-wing monoplane bomber. Boeing also started an airline, United Aircraft and Transport, providing a ready-made customer for Boeing passenger liners. However, antitrust legislation in 1934 required Boeing to spin off its passenger line, which became United Airlines, and its engine facilities, which later became United Technologies. Although William Boeing quit the company, Boeing continued to grow, moving into the production of large aircraft for both civilian and military use, including the massive Boeing 314 flying boats, the commercial Stratoliner, and the prototype B-17 bomber for the Air Corps. That latter aircraft provided the foundation for Boeing’s entry into the military bomber world, with the company producing 12,731 B-17’s during the war (only half in Boeing plants; the others built elsewhere under license), followed by the more advanced B-29, of which 3,970 emerged from numerous factories through 1946. The end of World War II production spelled trouble for Boeing and the other large aircraft manufacturers, and more than 700,000 Boeing workers received furlough slips. However, within a few years Boeing adapted German-developed swept-wing technology to move quickly into the jet age, developing the B-47 medium bomber and the 707 commercial transport, which quickly found military use. The B-52 bomber first flew in 1952 and went into production several years later. Boeing also moved into the military missile business, starting with the Bomarc antiaircraft missile in the 1950s and moving into production of the solid-fuel Minuteman in 1958. Boeing’s commercial jet lines increased with the introduction of the 727, 737, and the 747 jumbo jet, at its time the largest passenger plane in the world. Boeing sales to the military continued with the 707 passenger liner converted to tanker, cargo, and reconnaissance versions, while Boeing also reached into space by producing many elements of the Apollo program and stages of the Saturn rockets that carried Americans to the moon. Boeing also entered the helicopter area when it bought Vertol Corporation in 1960. Like most defense companies, Boeing began to grow through mergers. In 1996 Boeing merged with Rockwell International Corporation, which had started life as North American Aviation before itself merging with Rockwell Tool. In 1997 Boeing merged with McDonnell Douglas, itself a combination of the Douglas and McDonnell Aircraft companies. In merging with McDonnell Douglas, Boeing eliminated one of its chief rivals for American commercial aviation, as McDonnell Douglas (and Douglas before the merger) built a series of DC jetliners that were similar to Boeing commercial planes—Douglas’s DC-8 competed with Boeing’s 707 and the Douglas DC-9 in its several versions competed with the Boeing 727s and 737s, and the DC-10 rivaled the Boeing 747. By merging with McDonnell Douglas, Boeing also acquired Hughes Helicopters, which Douglas had obtained in 1984, and gradually acquired more of Hughes through 2000, absorbing almost all of the old companies owned or founded by aviation pioneer Howard Hughes. In March 2001, Boeing announced that it wanted to move its headquarters from Seattle, where it had been almost since its founding. Several cities competed for the prize, and ultimately Chicago won. In 2002 Boeing opened a second

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headquarters in St. Louis for its combined space, defense, government, intelligence, and communications capabilities.

Boeing Today Boeing is divided into corporation sectors, the commercial aircraft division, and Boeing’s Integrated Defense Systems. Together they make Boeing the world’s largest aircraft manufacturer, though Boeing, like most large defense contractors, has diversified outside the primary aerospace arena. Boeing’s primary defense systems are the following: r EA-18G Growler—designed for airborne electronic attack missions; initial operation capacity expected in 2009.

r F/A-18E/F Super Hornet Block II—multirole strike fighter. r F-15E Strike Eagle—multirole fighter currently in production for the Republic of Korea Air Force and contracted for Singapore.

r Harpoon Block III—an antiship weapon system. r Joint Direct Attack Munition ( JDAM)—guidance kit consisting of a tail section with INS/GPS (inertial guidance system with global positioning system) that converts existing unguided free-fall bombs into near-precision-guided weapons. r Small Diameter Bomb (SDB)—a 250-pound class near-precision-guided weapon launched from a fighter, bomber, or unmanned aircraft that will destroy targets from a range of greater than 40 miles. r Standoff Land Attack Missile-Expanded Response (SLAM-ER)—a day/night, adverse weather, over-the-horizon, precision strike missile. r T-45 Training System—a fully integrated jet pilot training system.

Global Mobility Systems: r C-17 Globemaster III—heavy airlift aircraft r KC-767 Advanced Tanker—proposed aerial-refueling platform Airborne Anti-Submarine Warfare (ASW) and Intelligence, Surveillance and Reconnaissance (ISR) Systems: r 737 Airborne Early Warning & Control (AEW&C)—Proposed airborne surveillance, communications, and battle management

r Airborne Warning and Control System (AWACS)—airborne early-warning systems, operated by the United States, NATO, the United Kingdom, France and Saudi Arabia; Japan operates a fleet of 767 AWACS r P-8A Poseidon—long-range antisubmarine warfare, antisurface warfare, intelligence, surveillance, and reconnaissance aircraft

Rotorcraft Systems: r AH-64D Apache Longbow—multirole combat helicopter in service with the U.S. Army and ten international defense forces worldwide

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r Chinook—heavy-lift helicopter for intratheater troop and cargo movement r V-22 Osprey—a tilt-rotor aircraft capable of taking off and landing like a helicopter, but once airborne, its engine nacelles can be rotated to convert the aircraft to a turboprop airplane capable of high-speed, high-altitude flight

Boeing is also a prime contractor for the Army’s Future Combat System (FCS), a multipart integrated weapons program. It contains traditional equipment (e.g., tracked vehicles, information systems), but its revolutionary feature is that each part is designed to function in integration with the rest of the system, including the training and soldier integration. Boeing’s role in the FCS is lead systems integrator, which gives Boeing a greater share of control than partner Science Applications International and $14.8 billion control over the entire system. Boeing also maintains Phantom Works (a term probably drawn from Lockheed’s Skunk Works), which performs R&D work, much of it highly classified.

Problems at Boeing Like many other major defense contractors, Boeing has found controversy in the defense business. Its most notable crisis came in 2003 when the company fired Chief Financial Officer Michael Sears and Vice President Darleen Druyun after Sears was charged with improperly offering Druyun a job after she served as the Air Force’s top acquisition officer. Druyun had been reviewing proposals for the Air Force’s follow-on tanker aircraft and stood accused of secretly providing Boeing with information about rival Airbus Industries’ proposal for the plane. Both Sears and Druyun went to prison for their activities, and President Phil Condit resigned in December 2003. His replacement, Harry Stonecipher, lasted fewer than two years before the Boeing board also fired him after he admitted to an “improper relationship” with a female Boeing executive. Boeing also found itself in trouble after submitting an artificially low bid for the Future Imagery Architecture reconnaissance satellite system, spending more than $4 billion on the highly complex system before the National Reconnaissance Office pulled the plug, creating, in the words of one analyst, “perhaps the most spectacular and expensive failure in the 50-year history of American spy satellite projects.”1 Despite such problems, Boeing continued to surge as a defense and commercial contractor. Its revenues for the fourth quarter of 2006 jumped by 26 percent, to $17.5 billion, and although much of the jump came from commercial aircraft sales, its defense arm also grew, with fourth-quarter revenue climbing 18 percent, a $9.7 billion increase.2

Public Service at Boeing Boeing engages in considerable public service, including the encouragement of employee diversity (Boeing Women in Leadership in St. Louis sponsors a popular monthly “Breakfast of Champions” that attracts many employees, especially new

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hires), and conducts a public campaign to encourage more Americans to enter the engineering profession. There is also a corporate code of conduct, emphasizing employee safety, honest management, and stewardship to shareholders. Boeing contributed more than $48 million in 2007 to various charitable causes, including the arts, education, and the environment.3

Notes 1. “In Death of Spy Satellite Program, Lofty Plans and Unrealistic Bids,” New York Times, November 11, 2007. 2. “Boeing Doubles Profit in Quarter,” Los Angeles Times, February 1, 2007. 3. Boeing 2007 Corporate Philanthropy Report, http://www.boeing.com/ companyoffices/aboutus/community/assets 07/Philanthropy Report 07.pdf.

General Dynamics Electric Boat Division Headquarters: Groton, CT, and Falls Church, VA U.S. Manufacturing Locations: Groton, CT, and Quonset Point, RI Workforce: 10,500 Revenue (2006): $24.06 billion

History During the American Revolution, an American inventor named David Bushnell invented the world’s first workable submarine, the Turtle. The tiny craft, resembling a large water barrel, was propelled by a single sailor turning two screws, one for horizontal and one for vertical propulsion, and was armed with a small bomb that the operator was to screw into the wooden bottom of his targeted ship. The first and only mission in July 1776 resulted in failure, and the Turtle never attempted another foray into the midst of the British fleet moored in New York harbor. While Bushnell was a visionary designer, it is doubtful that he could have known that one of the world’s largest submarine producers would locate in his native state of Connecticut. John Philip Holland continued Bushnell’s pioneering work in submarines. Holland dreamed of a submarine that could attack British warships supporting British control of Holland’s native Ireland. Holland migrated to the United States in 1873 and continued his work on submarines. He was the first to combine electric propulsion for submerged cruising and diesel power for surface operations, and in 1888, the U.S. Navy accepted his design but did not award him a contract to produce such a vessel. Holland found a lawyer, Elihu Frost, to help him form the Holland Torpedo Boat Company, but when funds ran short, Isaac Rice, a German-born inventor who had formed a company to build electric batteries,

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and later electric taxi cabs, absorbed the Holland Torpedo Boat Company to form the Electric Boat Company in 1899, with Rice as president and Holland as general manager. Electric Boat would quickly grow, absorbing the New London Ship and Engine Company in Groton, Connecticut, to supply it with diesel engines for its submarines. Business grew in 1914 as the U.S. Navy prepared for the possibility of a world war, and by 1918 the Navy had contracted for 85 submarines with Electric Boat. In 1924 the new yard at Groton produced a submarine for the Peruvian navy, the first of hundreds to follow. This contract and others like it brought the censure of the Nye committee (see Chapter 1), which cited the Peruvian sale in its 1936 report: “Following the peaceful settlement of the TacnaArica dispute between Peru and Chile, L. Y. Spear, vice president of Electric Boat Co. (which supplied submarines to Peru) wrote to Commander C. W. Craven, of Vickers-Armstrong (which supplied material to Chile): ‘It is too bad that the pernicious activities of our State Department have put the brake on armament orders from Peru by forcing resumption of formal diplomatic relations with Chile.’”1 In 1924, Electric Boat’s only competition for submarine construction, the Lake Torpedo Boat Company, left the business, and by default Electric Boat became a monopoly supplier. The Navy, concerned about the power of such a monopoly, and perhaps still skeptical that private yards could build quality ships, quickly made the Portsmouth Naval Shipyard into a submarine design and construction center.2 World War II brought considerable expansion, with the Groton yard constructing 74 submarines and almost 400 patrol torpedo boats. These were boom years for Electric Boat, and it expanded its facilities and hired thousands of local citizens to work in the yards. Submarines were powered by a combination of diesel and electric motors, but in 1951 Electric Boat received a contract to produce the world’s first nuclearpowered submarine. The idea for this revolutionary propulsion came from research at the Oak Ridge National Laboratory in 1946, and was pushed by an energetic naval officer, Captain (later Admiral) Hyman Rickover. Rickover, known as the father of the nuclear submarine, would later clash with Electric Boat. In 1951, Electric Boat received a contract to construct the USS Nautilus, which ushered in maritime nuclear propulsion when Electric Boat launched it in 1954. The next innovation from Electric Boat was a missile-carrying nuclear submarine, the USS George Washington, launched in 1959. That boat, carrying 16 Polaris nuclear-tipped missiles, would be followed by the Ohio-class missile submarines, which held 24 Trident missiles, each with 10 nuclear warheads, making the Ohioclass submarines some of the deadliest warships in history. The first of 18 boats, the USS Ohio slipped into the water for the first time in 1979. Ten years later work began on the Los Angeles–class attack submarines at Groton, which would be followed by the launching of the first Seawolf submarine in 1996. A year later the last Ohio-class submarine left the yards at Groton, and a year after that Electric Boat received a joint contract (with Northrop Grumman at Newport News) to start

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the Virginia-class attack-submarine program. In 2004 Electric Boat delivered both the last Seawolf and the first Virginia-class submarine. Like most large defense contractors, Electric Boat grew from a specialty submarine construction firm to a multinational giant. In 1945, company president John Jay Hopkins realized that the end of World War II might mean a drop in submarine orders for the U.S. Navy, and he began to expand the company beyond its one-item production. In 1947, Hopkins bought Canadair Limited, a Canadian aircraft manufacturer, and moved into the atomic energy field by founding the General Atomic Division in 1955, three years after he renamed his company General Dynamics (GD). Hopkins further expanded his aviation assets in 1954 by purchasing the giant Convair aircraft company. Convair, itself a merger between Consolidated and Vultee Aircraft companies, built both fighter and bomber aircraft (including the giant ten-engine B-36 aircraft). In 1951, the Air Force, inspired by German missile developments in World War II, awarded Convair a contract for missile development, which ultimately led to the Atlas intercontinental ballistic missile, and to other missile projects, giving General Dynamics an edge in rocketry for the military. General Dynamics also developed fighters (including the revolutionary delta-winged F-102 and F-106) and the B-58 Hustler bomber, which was the first plane of its class to exceed the sound barrier in level flight. Convair continued to produce aircraft until 1965, when it shifted to missile production alone. However, GD sold off its primary aircraft business, including its profitable F-16 fighter line, to Lockheed in 1993, after selling its missile line to Hughes Aircraft the year before, and shutting down the remaining aircraft capability in 1996.3 In addition to selling Convair and some other defense-related parts of the company, GD acquired civilian firms with expertise and experience in information technology as well as commercial aviation, like the Gulfstream Aerospace Corporation, a business jet firm, purchased by GD in 1999. Currently GD has four business groups, Aerospace, Combat Systems, Marine Systems, and Information Systems and Technology. Breaking from its military origins, though, GD now produces and services commercial aircraft, except where the military buys business jets for passenger transports. Combat Systems represents a new venture for the former submarine company, and GD ventured into land weapons after decades of specialization in air and sea systems. Combat Systems includes Land Systems, which is the world’s largest supplier of tracked military vehicles, to include the M1A2 Abrams Main Battle Tank, the Marine Corps Advanced Amphibious Assault Vehicle, and the Army Stryker wheeled combat vehicle. The M1A2 (and its predecessor, the M1A1) is produced in a plant in Lima, Ohio, which GD acquired from Chrysler Defense in 1982, and is the only regular tank now in service with the U.S. Army. The Marine Corps Advanced Amphibious Assault Vehicle is a tracked amphibious weapon that launches from a ship and carries Marines and their weapons ashore, and the Army Stryker system is a wheeled combat vehicle similar to the previous armored personnel carriers except that it moves on wheels instead of tracks. General Dynamics also bought the Bath Iron Works shipyard facilities in Maine in 1995.

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Electric Boat Today Electric Boat is a part of the GD family of defense firms, which ranks sixth on the Defense News list of top 100 global defense contractors. The company manages two facilities, one at the old Naval Air Station site in Quonset Point, Rhode Island, where submarines hulls are started, and one in Groton, Connecticut, where the hulls are barged in from Quonset Point and completed. Electric Boat’s core business continues to be the construction of submarines, and it is currently building the Virginia-class attack submarines in a contract-sharing agreement with Northrop Grumman’s Newport News yard. Electric Boat has completed the USS Virginia, while Northrop Grumman finished construction on the USS Texas. The USS Hawaii and USS New Hampshire are to be constructed at Electric Boat, while the Newport News yard is constructing the USS North Carolina and USS New Mexico. The two yards will share production of the remaining 24 boats. The specifications for the Virginia class submarines are as follows: r r r r r

Displacement: 7,700 tons (submerged) Length: 377 feet Hull Diameter: 34 feet Speed: 25+ knots Diving Depth: 800+ feet Weapons: Mark 48 advanced capability torpedoes, Tomahawk land-attack missiles, Mark 60 CAPTOR mines, advanced mobile mines, and unmanned underwater vehicles

Electric Boat is also modifying some of the three Seawolf-class submarines and reconfiguring the SSGN Ohio-class ballistic missile submarines.4 These boats, designed and built during the Cold War to carry 24 Trident missiles, are now being redesigned to perform special operations missions. The huge boats will carry up to 154 cruise missiles, 66 special operations forces, and something called the Advanced SEAL Delivery System, a small minisubmarine fitted to the top of the SSGN. Electric Boat is also working on some advanced concepts for submarines of the future, including innovations in propulsion, weapons, and control devices. Electric Boat entered into a fairly unique partnership with rival Northrop Grumman’s Newport News shipyard to build the Virginia-class submarines. Electric Boat kept afloat as it could both build Virginia-class boats and do maintenance work, along with building the USS Jimmy Carter submarines (technically called “Multi-Mission Platforms”). However, when the latter contracts ended, Electric Boat was left with just the Virginia contract, building just one submarine per year. Both Northrop Grumman and Electric Boat wanted the Navy to up its Virginia submarine orders to two per yard per year, but the Navy insisted that the cost of $2.4 billion per boat had to come down to $2 billion before it could up its order pace.5 The Navy is also considering plans to reduce its overall submarine force to 48 boats in the late 2020s,6 though the rise of a traditional navy like that of China or Russia could quickly change such plans.

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Problems at Electric Boat Like most prime contractors, Electric Boat struggled to avoid problems on large contracts. Its problems in building the first Ohio-class ballistic missile submarines came from innovative technological construction methods that sometimes produced poor welds, poorly fitting pipes, and a variety of other problems that resulted in cost overruns and delays.7 More recently, Electric Boat’s reliance on a single commodity, submarines for the Navy, makes the company particularly vulnerable to swings in the defense budget cycle. In 2005, Electric Boat announced that it would cut 2,400 jobs for 2006, and possibly cut its workforce by half in 2008. Electric Boat employed around 23,000 workers in the 1960s and 1970s, but as Cold War spending declined, the company reduced its workers to 7,000 in the 1990s, rebounding to 11,500 in 2006.8 In an unusual move, the state of Connecticut funded upgrades to the yards at Electric Boat to the tune of $20 million, not a large amount in defense terms, but a symbolic gesture of the importance of the contractor to the economy of the state, which had lost jobs in other industries and now faced even more unemployment as Electric Boat threatened to lay off more workers.9 Electric Boat did escape a potentially damaging problem when the Defense Department reversed a decision by the 2005 Base Realignment and Closure (BRAC) Commission to close the Naval Submarine Base at Groton, which would have deprived Electric Boat of the ease of parallel training for submarine crews. With Groton co-located with the Electric Boat yards, the future submarine crew could train on the boat as it neared completion.10

Notes 1. Report of the Special Committee on Investigation of the Munitions Industry (The Nye Report), U.S. Congress, Senate, 74th Cong., 2nd Sess., February 24, 1936, 3. 2. Paul A. C. Koistinen, Mobilizing for Modern War: The Political Economy of American Warfare: 1865–1919. Lawrence: University Press of Kansas, 1997, 49. 3. Convair suffered a series of aircraft failures, including the Convair 880, built to compete with the Boeing 707 and Douglas DC-8, but it consumed more fuel per mile than its competitors, and the company lost millions in the gamble. Its loss exceeded that of Ford Motor Company’s loss in its venture in the 1950s, the Edsel. 4. SSGN stands for submarine, guided missile equipped, nuclear powered. The double letter used to designate U.S. Navy ships is used to differentiate them from the designation used by most European navies, which use one letter, thus the U.S. Navy uses DD to designate a destroyer. 5. “Industry Confident It Can Build Two Subs a Year, but Concerns Remain,” Defense Daily, March 21, 2007. 6. Ibid. 7. See D. Douglas Dalgleish and Larry Schweikart, Trident. Carbondale: Southern Illinois University Press, 1984, chap. 5.

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Appendix I 8. “In a Hurry to Diversify Beyond Submarines and Luck,” New York Times, December 18, 2005. 9. “GD Gaining $20 Million from Connecticut for Electric Boat Upgrade,” Defense Daily, July 10, 2006. 10. David S. Sorenson, Military Base Closure: A Reference Handbook. Westport, CT: Praeger Publishers, 2007, 145.

Lockheed Martin Headquarters: Bethesda, MD U.S. Manufacturing Locations: 1,000 facilities, including Huntsville and Troy, AL; Goodyear, AZ; Camden, AR; Sunnyvale, Edwards AFB, San Diego, Vandenberg AFB, Santa Maria, San Jose, Palo Alto, and Los Angeles, CA; Denver, CO; Marietta, Atlanta, and Kings Bay, GA; Baltimore, Greenbelt, and Hanover, MD; Eagan, MN; Cherry Hill, Atlantic City, and Moorestown, NJ; Albuquerque, NM; Oswego, Mitchell Field, and Schenectady, NY; Akron and Cleveland, OH; Norristown, Newton, and King of Prussia, PA; Fort Worth, Grand Prairie, and Houston, TX; Greenville, SC; Springfield, VA; and Silverdale and Richland, WA Workforce: 140,000 Revenue (2006): $39.6 billion

History In 1909, Glenn L. Martin, an aviation pioneer who used his wire, wood, and canvas airplanes to land a role in a movie next to actress Mary Pickford, started a an airplane company, one of the earliest in the United States. Several years later, two brothers, Allan and Malcolm Loughhead, flew a primitive aircraft over San Francisco and shortly went into the aircraft business, after changing the spelling of their name as it was correctly pronounced: Lockheed. Dozens of other aircraft companies opened in this era to capitalize on the success of the Wright brothers, and most did not survive. Early aviation innovators usually understood more about aircraft than they did about running a business, but both Martin and the Lockheed brothers were exceptions. They understood the value of mergers, and Lockheed temporarily joined Detroit Aircraft, while Martin joined the Wright brothers. Neither joint venture lasted, though, and Lockheed set up shop in Hollywood, California, like many other aircraft makers, partly to take advantage of California’s good flying weather. Martin moved to Maryland and opened a small factory in Middle River, which still operates today. Both factory aircraft companies realized that the depression of the 1930s spelled potential doom for the fledgling aviation industry, and thus capitalized on headline-capturing operations to further their companies. Lockheed signed up aviation celebrities like Charles and Anne Morrow Lindbergh to fly navigation routes in a Lockheed aircraft, while Amelia Earhart flew to numerous aviation

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records with Lockheed airplanes, as did Wiley Post, who punctuated his flights with humorist Will Rogers (both would die in a Lockheed plane). Martin built some of the first heavy bombers for the fledgling Army Air Corps, and Colonel William “Billy” Mitchell and his pilots used them to sink several tethered battleships in the early 1920s, operations that gained considerable headlines throughout the world. Airline orders kept Lockheed alive during the 1930s, while military orders helped Martin. Both anticipated World War II, and both developed innovative aircraft for the military market: Lockheed with the radical P-38 Lightning twin-engine fighter, and Martin with the high-performance B-26 medium bomber. Lockheed also built transports, while Martin turned out several seaplane designs during the war. After World War II, Lockheed was one of the first aircraft manufacturers to enter the jet age with its P-80 jet-propelled fighter, though Lockheed stayed in the commercial aircraft market with its four-engine Constellation airliners. Martin ceased production of most military aircraft and entered the commercial sector for the first time with its Martin 404 airliner. Martin built slightly more than 100 models before discontinuing his venture into passenger aviation and concentrating his company on the missile field. Lockheed built its Electra turboprop passenger planes, but also focused on innovative military technology, using the talents of master aviation designer Clarence “Kelley” Johnson to design the radical U-2 reconnaissance plane (later made famous in 1960 when the Soviet Union shot a U-2 down while it was spying on Soviet missile developments). Lockheed, like Martin, moved into the missile and space arena with its Agena rocket launching the first U.S. Earth-orbiting satellite. Lockheed also built submarine-launched missiles and pioneered the SR-71 spy plane, which still holds world records for speed and altitude. Martin delivered the Titan II rocket for the manned Gemini space effort, while Lockheed reentered the world of fighter aviation with the single-engine F-16, which first flew in 1974. In 1995, Lockheed and Martin combined to become Lockheed Martin, bringing into the new company dozens of other companies that each had bought over their years of operation. Those companies included RCA (originally Radio Corporation of America), Goodyear Aerospace, parts of General Dynamics, General Electric Aerospace, IBM Federal Systems, and Ford Aerospace, among many others.

Lockheed Martin Today Lockheed Martin ranks first in the Defense News list of the top 100 defense contractors worldwide on the basis of revenues. Because of its many acquisitions over the years, and its ability to penetrate diverse markets, Lockheed Martin fields thousands of programs. Its signature programs remain its core business: aircraft. It is building both of the next-generation fighter-attack aircraft, the USAF F-22 Raptor and the F-35 Lightning II, for American customers, including the Air Force, Navy, and Marine Corps, as well as the United Kingdom. Lockheed continues to

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produce the F-16, a single-engine fighter first designed in the 1970s, and now built largely for international markets. The F-16 continues to earn a profit for Lockheed Martin, and the company expects more orders, possibly from India, which would allow the company to continue the production line. Its problem is that the production line will compete for space with the new F-35 joint strike fighter, thus possibly limiting completion of the backlog of 116 F-16 orders on the books.1 However, a company spokesperson claimed that the F-35 would account for almost 10 percent of the company’s revenue in 2008, a number that would only climb as production increased.2

Major Programs Lockheed Martin’s major programs include the F-16 Fighting Falcon, the F-22 Raptor, the F-35 Lightning II, the C-130J Hercules, missiles, space systems, and military and civilian information systems.

Problems at Lockheed Martin Lockheed has become one of the more successful defense and commercial contractors in the aviation sector, but its rise to prominence has not been without problems and issues. In the 1970s, Lockheed encountered problems with its L-1011 passenger liner, the first Lockheed passenger plane since problems in the 1950s with the Lockheed Electra. The plane encountered stiff competition from Boeing’s 747 and Douglas’s DC-10, and to further sales, Lockheed bribed the Japanese government to subsidize sales to a Japanese carrier. Lockheed acknowledged bribe payments of more than $22 million, and the resulting crisis brought down the government of Japanese Prime Minister Kakuei Tanaka. Lockheed may have provided bribes to a number of other countries, including Canada, the Arabian Gulf countries, Hong Kong, and numerous others.3 The bribery scandal came on the heels of Lockheed’s lunge toward bankruptcy and its need to get a government-guaranteed loan for $245 million as the L-1011 disappointments depleted corporate coffers. Lockheed also encountered problems with its massive C-5A cargo jet, which it had started to build in 1965. The C-5A quickly became overweight, and, as the contractor tried to fix the problem, overpriced because of the attempted fixes. Between the Air Force and Lockheed, the existence and size of the cost overruns became masked, and when Defense Department worker Ernest Fitzgerald revealed them to a congressional committee, he was replaced after an Air Force effort to smear him.4 Lockheed also ran into problems when the Army canceled its contract for the experimental AH-56 Cheyenne attack helicopter, and it encountered yet another cost overrun on its contracted engine for the short-range attack missile. Lockheed Martin found itself under scrutiny more recently when its Deepwater program for the Coast Guard became the target of an investigation by the

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Justice Department. Lockheed Martin (and its partner in the venture, Northrop Grumman) were accused of placing unapproved electronics devices in the hull of some Coast Guard cutters.5 Despite its issues, Lockheed Martin carries considerable political clout. For example, the most recent version of its venerable C-130 plane, the C-130J, has come under fire, and the Air Force at one point tried to terminate the program. However, congressional pressure from West Virginia and Georgia, homes of the plane’s manufacturer, kept the assembly line alive. In a bid to sell even more C-130J’s to the Air Force, Lockheed offered an unsolicited proposal for an additional 120 planes, even though the Air Force had no need for them. Still, according to Air Force Chief of Staff General T. Michael Moseley, “that is a very attractive opportunity.”6 Such clout cannot always protect companies like Lockheed Martin from cutbacks, particularly when budget pressures drive such reductions. For example, in November 2007 Lockheed Martin received two pieces of bad news: first, the Navy reduced its planned buy of 32 Littoral Combat Ships to 21, arguing that postponing the 11 ships until after 2013 would save $5 billion.7 Lockheed’s Atlanta production facilities received similar news on the same day, when the Defense Department announced that it might delay the improved presidential helicopter for as long as five years, from 2009 until at least 2011, again because of budget pressures.8

Public Service at Lockheed Martin Lockheed Martin donated more than $20 million to community projects in 2004. Half of those funds went to education, with emphasis on science and engineering. The company also supports such endeavors as homeless shelters, children’s health, literacy programs, and particular support for the USO, which benefits military service personnel. Lockheed Martin employees also donate their time to charitable causes, including food drives, educational support, and other community activities.

Notes 1. “Downside of Dominance?,” Washington Post, December 17, 2007. 2. “Lockheed’s Profit Climbs 5.8% on Defense Spending,” Wall Street Journal, April 23, 2008. 3. Senate, Lockheed Bribery. Hearings before the Committee on Banking, Housing, and Urban Affairs, 94th Cong., 1st Sess., Washington, DC: Government Printing Office, 1975, esp. 42–43. 4. See Berkeley Rice, The C-5A Scandal: An Inside Story of the Military-Industrial Complex. Boston: Houghton Mifflin, 1971; Daniel Terris, Ethics at Work: Creating Virtue at an American Corporation. Waltham, MA: Brandeis University Press, 2005, esp. chap. 2.

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Appendix I 5. 6. 7. 8. 2007.

“Setbacks for Lockheed Martin,” Baltimore Sun, April 19, 2007. “Lockheed Pitches $6 Billion C-130J Buy,” The Hill, October 25, 2007. “Pentagon Delays Warship Purchases,” Washington Post, November 29, 2007. “Lockheed Copter May Be Delayed,” Atlanta Journal-Constitution, November 29,

Curtiss-Wright Headquarters: Roseland, NJ U.S. Manufacturing Locations: Phoenix, AZ; Vernon, Lynwood, and Livermore, CA; Windsor, Bloomfield, and New Britain, CT; Miami, FL; Peachtree, GA; Addison, IL; Ft Wayne, IN; Wichita, KS; Lafayette, LA; Boston, MA; Romulus, MI; New Brighton, MN; Charlotte, Gastonia, and Shelby, NC; Farmingdale, NY; Twinsburg and Columbus, OH; Emigsville, PA; Grand Prairie, TX; and Milwaukee, WI Workforce: 7,600 Revenue (2007): $66 million

History Two of the most famous names in pioneer aviation are Glenn Curtiss and the Wright brothers. They became bitter rivals in the days of wood-and-canvas airplanes, with the Wrights successfully suing Curtiss for patent infringement in 1913. Both formed their own companies, and both companies sold early aircraft to the military, with the Wrights’ company selling planes to the Army Signal Corps and Curtiss marketing floatplanes to the Navy. Wilbur Wright died in 1912 and Orville Wright’s company built the last of its own airplanes in 1916. Wright & Company became Wright Aeronautical in 1919, and shifted its emphasis to aircraft engines, and, long after the Wright brothers’ involvement in their namesake company, it merged with Curtiss to form Curtiss-Wright, in 1929. Curtiss, which started its existence as the Curtiss Aeroplane and Motor Company, had become the world’s largest aviation company by 1916, employing 18,000 workers at its Buffalo, New York, plant, and 3,000 at its Hammondsport, New York, factory, producing more than 10,000 aircraft during World War I. The engine portion of Curtiss-Wright involved the air-cooled radial engine (a design with cylinders fitted in a circle around the engine crankshaft, so that all cylinders faced forward and could be cooled by the air rushing around them rather than by liquid, which was more complex and prone to failure). The company continued to produce aircraft for both the commercial and the military markets, equipping the Army Air Corps with the P-40 fighter and the C-46 transport, and the Navy with the SB2C dive-bomber, along with a number of unsuccessful planes (the dangerous Curtiss P-54 fighter, with two out of the three prototypes crashing), and the Seamew floatplane for the Navy (whose failure was traced largely to its Ranger engine, used instead of a Curtiss-Wright engine).

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Unlike some of its competitors, Curtiss-Wright seemed to lose its technological prowess (it was on the decline during World War II), and the company’s efforts to transition from the propeller period to the jet age failed. Curtiss-Wright had no commercial plane design to transition to the postwar civilian transport market (its C-46 was initially designed as a civilian passenger plane, but few went to the airlines). It attempted to continue its fighter line with the XP-87 twin-jet-engine fighter, but when it lost to Northrop’s F-89, Curtiss-Wright left the airplane manufacturing business and sold that part of the company to North American Aviation. The company survived, though, by moving into both defense subcontracting and commercial business. For both markets it produces pumps, valves, and instrumentation for nuclear reactors and aircraft applications. Its specialized aircraft market involves such items as landing gear doors, fire detection systems, control activators, and hundreds of other products. Curtiss-Wright has insulated itself partly from the variable swings in the defense market, while its product market is so diverse in the civilian market, that it has maximized its chances to continue positive growth.

Curtiss-Wright Today Curtiss-Wright is a diversified company with business in both the military and commercial sectors. Its military diversity allows it to partner with larger defense contractors for a share of their prime contracts without having to bear the costs and risks of those contracts. Curtiss-Wright’s military lines are limited to subcomponents, including the following: r Actuation systems for the weapons bay doors and flap and dive systems for the F-22 r r r r

fighter and for the Ordnance Hoist System and Ordnance Quick Latch System for the F-35 joint strike fighter Integrated Main Mission Management Computers for the Global Hawk reconnaissance unmanned aircraft Aiming, stabilization and suspension systems to current forces, such as the Bradley Fighting Vehicle, the Abrams Tank, and the Stryker Mobile Gun System Advanced Arresting Gear technology to replace earlier arresting gear systems that trap aircraft landing on aircraft carriers, scheduled to go into production in 2009 JP-5 Smart, Leakless Valve, designed retrofit all of the pumping station valves on the U.S. Navy’s aircraft carrier fleet

This is but a short list of the hundreds of products Curtiss-Wright produces for military consumption. Contracts keep arriving: in March 2008, Curtiss-Wright received a subcontract from Northrop Grumman to provide the radar for the U.S. Marine Corps’ Ground/Air Task Oriented Radar (G/ATOR) program. In May 2008, Curtiss-Wright received a contract to supply processor modules for the

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Army’s Future Combat System, and in the previous month, the Navy awarded Curtiss-Wright a contract to supply pumps and valves for its Virginia-class submarines. In March 2007, Forbes magazine placed Curtiss-Wright on its list of 100 “Most Trusted Companies” relative to accounting transparency and fair dealings to shareholders. While the list featured a number of commercial Fortune 500 companies (Mattel, H. J. Heinz Company, Goodrich), there were no other major defense contractors on the list.1

Problems at Curtiss-Wright Almost all first-year law students learn about the famous 1936 U.S. v. CurtissWright Supreme Court case, where Curtiss-Wright’s export subdivision was found guilty of violating arms export provisions (the case was significant because of its role in determining executive power over foreign affairs). Curtiss-Wright also found itself under fire from then senator Harry Truman, who accused the company of selling defective engines to the Army. However, Curtiss-Wright has avoided legal or political problems, and some analysts consider the company solid because of its portfolio of mixed defense and civilian production, and its ability to gain new contracts. The Web site Investopedia touted in April 2008 that “the biggest winner of late has been Curtiss-Wright” because of its nuclear power plant and Japanese Ministry of Defense contracts.2 But Curtiss-Wright has avoided the headline-attracting problems that have plagued some other defense contractors.

Public Service at Curtiss-Wright In fiscal year 2007, Curtiss-Wright donated more than $500,000 dollars to “goodwill,” though the corporate report did not specify exactly what “goodwill” meant.

Notes 1. “America’s Most Trustworthy Companies,” Forbes, http://www.forbes.com/ leadership/2007/03/26/companies-accounting-governance-lead-cx pm 0327trusty.html. 2. “The Best (Portfolio) Defense Is Good Defense,” Investopedia, http://community. investopedia.com/news/IA/2008/The Best Portfolio Defense Is Good Defense.aspx? partner=YahooSA.

Raytheon Headquarters: Waltham, MA U.S. Manufacturing Locations: Tewksbury, MA; Garland and McKinney, TX; El Segundo, CA; and Reston, VA Workforce: 72,000 Revenue (2007): $21.3 billion

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History Vannevar Bush was one of the leading scientists in the United States, a brilliant inventor and manager of science, professor at MIT, and president of the Carnegie Institution. His stature was such that fellow scientist Alfred Loomis once said, “Of the men whose death in the summer of 1940 would have been the greatest calamity for America, the President is first, and Dr. Bush would be second or third.” Bush’s role as a science adviser and confidant to Presidents Roosevelt and Truman overshadowed his founding, along with a college roommate, in 1922 of the American Appliance Company to produce a radio tube that would allow a radio to be powered directly from an electric socket rather than from the shortlived batteries of the time. The tube, marketed under the name Raytheon had earned more than $1 million by 1926, and when another company claimed to own the name American Appliance Company, Bush’s business changed its name to that of its tube (derived from the French rai for “beam of light” and theon from the Greek “from the gods.” World War II propelled Raytheon to new frontiers when Britain awarded it a contract to develop the magnetron tube, which was the heart of the radar technology Britain was working on. The successful magnetron tube got Raytheon into the radar business, and unintentionally led to the microwave oven when the magnetron inventor found that the candy bar in his pocket melted when he stood in front of a powered magnetron tube. That started Raytheon in the commercial business when its first microwave appliance, appropriately the Radar Range, went on the market in 1947. Raytheon also pioneered missile guidance, which won it contracts for the Sparrow and Hawk antiaircraft missiles. Raytheon also produced the first transistor in 1948, following its invention by Bell Laboratory scientists. Raytheon retained its core business of electronics, but it did expand more into the commercial sector by buying the Amana Corporation to expand its microwave ovens, as well as the D. C. Heath publishing company. In 1980, Raytheon bought Beech Aircraft and formed Raytheon Aircraft Company by merging its new acquisition, Corporate Jets, with Beech. However, Raytheon sold the Raytheon Aircraft Company in 2007, even though it had been a moneymaker for the company, earning a $73 million dollar profit in the last quarter of 2006.1 The sale of the aviation portion, which had been on the market since 1999, actually earned Raytheon around $3.3 billion, surprising observers who thought that Raytheon would not be able to sell the enterprise.2 In 1996, Raytheon purchased the Chrysler Corporation’s defense electronics business and the missile portion of Hughes Electronic Corporation, moves that seemed to strengthen Raytheon’s defense electronic sector even as it shed aircraft production. Raytheon also shed Amana in the 1990s.

Raytheon Today Raytheon is one of the largest defense contractors in the world, despite its reputation as the little company that could, ranking fifth among Defense News’s top 100 defense contractors. Raytheon’s history mirrors the defense industry’s acquisition

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patterns, moving into commercial business areas when defense spending declined and disposing of those same commercial sectors as defense budgets moved upward. That core business, for Raytheon, includes radar sets for the Air Force’s F-15 and F-22 fighters, the Navy’s F/A-18 fighter attack aircraft, and the Air Force’s B-2 bomber. Raytheon also produces land-based radar sensors, as well as shipboard radars and missile detection radars, including the X-band radars to be employed in the National Missile Defense System. Raytheon also continues to produce missiles, including the Maverick and HARM antiaircraft missiles, along with the venerable Sidewinder. In 2007, Raytheon expanded its business when it received an award from the Army for combat training, beating out larger contractors like General Dynamics (who led a team with participation from Lockheed Martin and Northrop Grumman) for $11.2 billion over ten years. Raytheon’s major programs include the following: r r r r r r r r r

Patriot PAC-3 Antimissile System AEGIS MK 99 Fire Control Adaptive Land Enhanced Raytheon Radar Technology (ALERRT) Dual Band Radar (DBR) Global Public Health Surveillance System (GPHSS) HAWK-AMRAAM Air Defense System MK 29 SEASPARROW Guided Missile Launching System (GMLS) Relocatable Over-the-Horizon Radar (ROTHR) Sea-Based X-Band (SBX) Radar

Raytheon has benefited from its Patriot missile in particular, as the use of mediumrange ballistic missiles in the world rises. The Patriot, an antiaircraft missile upgraded to an antimissile system in the 1980s, received credit for downing Iraqi Scud missiles during the 1990–1991 Gulf War, though skeptics challenged those claims.3 Patriot has been upgraded several times since the Gulf War, and has been sold to Germany, Greece, the Netherlands, Spain, Saudi Arabia, Kuwait, Israel, Japan, and Taiwan, among others. In 2006, Raytheon reportedly earned $283.9 million on global Patriot sales.4 Raytheon was also involved in sales of the most advanced Patriot version to Israel, partly in response to increased fears in Israel of Iranian nuclear weapons capability in the coming years.5 The Iranian threat also stimulated potential Patriot sales to other Gulf countries in addition to Saudi Arabia, and Raytheon had its missile on display for interested customers at the 2007 Dubai Air Show.6 It sold to another country faced with ballistic missile threats, South Korea, which signed a contract to purchase $241 million worth of Patriots and their support equipment in April 2008.7 Recently Raytheon, seeing an expansion opportunity, teamed with EADS to build the C-295 aircraft. In this arrangement, Raytheon and its partner beat out Lockheed Martin’s proposal for a version of its C-130J, while modeling its strategy on Lockheed’s successful bid for a new presidential helicopter by enlisting the partnership of an Italian helicopter manufacturer.8 Raytheon is also partnering

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with Boeing to field the Joint Air to Ground Missile ( JAGM), to enter service in 2016 and be used on helicopters, including the Apache Longbow and Super Cobra, and the Navy and Marine Corps F/A-18, with a total contract value of $7 billion.9 In October 2007, Raytheon acquired Oakley Systems, a data-leakprevention toolmaker whose assets Raytheon planned to use in tapping into an estimated $8 billion market protecting both government and private-sector computer systems.10

Problems at Raytheon Like numerous other defense contractors, Raytheon has had its share of controversy and legal issues. In 1993, Raytheon paid $3.7 million in penalties, standing accused of inflating labor costs for its Patriot antimissile system. In the following year, Raytheon paid $4 million as a part of a settlement in response to charges that the company inflated the cost of antimissile radar. In 2002, Raytheon’s chief executive officer resigned after the Securities and Exchange Commission (SEC) sanctioned the company for violations of financial data-release rules. In 2005, Raytheon placed its chief financial officer on administrative leave after the SEC brought action against the company for illegal accounting practices relating to Raytheon’s commercial aircraft business, actions that cost the company $12 million in fines.11 The largest penalty, though, came in 2003, when Raytheon was assessed $25 million in civil fines, among the largest penalties assessed a U.S. corporation, for illegally selling radio technology to Pakistan from 1990 to 1997. When U.S. rules changed to block the sale of “troposcatter” radio technology, Raytheon used a Canadian subsidiary to sell the radios to Pakistan under the fiction that they were civil disaster relief. Raytheon admitted wrongdoing but claimed that the violations were intentional.12

Public Service at Raytheon Raytheon has supported educational scholarships, with a particular focus on science and mathematics, awarding more than $350,000 in scholarships in 2007. Raytheon also maintains support programs for military personnel and other community involvement programs.

Notes 1. “Raytheon Earnings up 32%,” Arizona Daily Star, February 2, 2007. 2. “Raytheon’s Aircraft Unit, Once Thought to Be Unsellable, Commands $3.3 Billion from Private Equity Investors,” World News & Analysis, January 1, 2007. 3. Theodore A. Postol, “Lessons of the Gulf War Experience with Patriot,” International Security 16 (Winter 1990–1991), 119–171. Postol’s criticism was countered by Robert Stein of Raytheon. Robert Stein and Theodore Postol, “Correspondence: Patriot Experience in the Gulf War,” International Security 19 (Summer 1992), 199–240.

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Appendix I 4. “Raytheon Expects Jump in Patriot Sales,” Boston Globe, January 18, 2007. 5. “Raytheon’s Most Advanced Patriot Missile Is Offered to Israel,” Bloomberg News, October 31, 2007. 6. “At Weapons Bazaar, Gulf Leaders Are Planning to Be Big Spenders,” Miami Herald, February 17, 2007. 7. “Raytheon Gets Patriot Missile Pact from South Korea,” Boston Globe, April 23, 2008. 8. “With Cargo-Plane Bid, Raytheon Blazes a New Trail,” Arizona Daily Star, May 16, 2007. 9. “Raytheon and Boeing Partner Up,” Arizona Daily Star, April 15, 2008. 10. “Raytheon Zeros In on Defending Cyberspace,” Boston Globe, April 9, 2008. 11. “Raytheon CFO Faces SEC Action,” Boston Globe, April 16, 2005. 12. “Raytheon to Pay $25M in Civil Fines, Settles US Charges in Attempted Export Sale,” Boston Globe, February 28, 2003.

Northrop Grumman Headquarters: Los Angeles U.S. Manufacturing Locations: McLean, Reston, Newport News, and Herndon, VA; Linthicum, MD; El Segundo and Redondo Beach, CA; and Pascagoula, MS Revenue (2006): $30.19 billion Employees: 122,200

History In 1939 John K. Northrop formed an aviation company in the Los Angeles suburb of Hawthorne, after doing stints as an aircraft designer at a number of other pioneer companies. Nine years earlier, a group of innovative aircraft designers, among them Leroy Grumman, formed the Grumman Aeronautical Engineering Company in New York. Northrop, who had never actually learned to fly, was enamored of the idea of a tailless airplane, or “flying wing,” and his early experiments attempted to prove the viability of the unorthodox concept. Grumman was also pioneering aircraft ideas, developing the first retractable-landing-gear fighter plane for the U.S. Navy a year after its founding. Grumman would continue to build aircraft primary for the Navy during the 1930s and would establish its reputation with the sea service by providing numerous combat planes during World War II, including the Wildcat, Hellcat, and Avenger, along with a number of amphibious planes. Northrop continued to demonstrate the feasibility of flyingwing aircraft, though most of his designs had inherent stability problems and he had to briefly abandon the idea in conceiving the Air Corps P-61 Black Widow, a large fighter specifically designed for night action. However, while Grumman found its niche in Navy fighters, following its World War II fighters with the jetpowered Panther of Korean War fame, Northrop continued to experiment with flying-wing design, attempting to sell the Air Force on its propeller-driven B-35 strategic bomber, and later on its jet-powered B-49. But neither version was stable

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enough to meet Air Force standards, and a prototype B-49 crash in the California desert in June 1948 dampened enthusiasm for the flying-wing design, though the Air Force ordered 30 just weeks after the accident. Ultimately, the Air Force chose the Consolidated B-36 bomber over the B-49, provoking charges that Northrop’s refusal to merge with Consolidated finalized the deal.1 The Air Force did buy the Northrop F-89 fighter-interceptor and the T-38 trainer, which also produced a fighter version, the F-5, which became a large seller on the international market. Grumman produced the A-6 Intruder attack aircraft for the Navy around the same time, but Northrop initially struggled with its effort to compete with General Dynamics for the Air Force’s lightweight fighter. The General Dynamics F-16 won the competition over Northrop’s F-17, although Northrop ultimately sold the F-17 idea to the Navy as the F/A-18, joined by McDonnell Douglas as an partner and, ultimately, the prime contractor. Northrop then tried to replicate its F-5 export success with a follow-on version, dubbed the F-20, which made its first flight in 1982. But potential foreign buyers wanted the Air Force to buy the plane first, as that would set up a support network of training and spare parts, but the Air Force refused in the end, and Northrop scrapped the $1.2 billion project. Northrop entered competition for a new close-air-support plane with its A-9 but lost to Republic’s A-10. Northrop also completed for the Air Force’s Advanced Tactical Fighter program. However Northrop and its partner McDonnell Douglas lost the competition to the F-22 partnership of Lockheed Martin, Boeing, and General Dynamics (later to become the Lockheed Martin F-22 when that company bought General Dynamics). Northrop did win a successful bomber contract with its B-2 stealth bomber, designated the Spirit by the Air Force. The B-2 incorporated the original Northrop theories of a flying wing, which finally became successful with the addition of digital flight controls. It is said that John Northrop, still bitter about the cancellation of his original flying-wing bombers, wept when presented with a scale model of the B-2 decades after the Air Force reduced his company’s B-49 bombers to scrap. Grumman was having its own difficulties in competition, trying but failing to land the contract for the F-111 fighter-bomber, which was then called the TFX.2 However, studies of U.S. combat aircraft during the Vietnam War convinced Grumman that they could use some of the lessons learned from the TFX project, which would produce a much more maneuverable fighter. The result was the Navy F-14 Tomcat, which remained in Navy service for decades. Still, Grumman, noting the drop in defense spending after the buildup in Reagan’s first term, tried to diversify, moving into such civilian enterprises as mail delivery trucks and even canoes, without much success. Northrop, seeking to expand and viewing its B-2 bomber as possibly its last military aircraft, acquired Grumman in 1994. Then, taking cues from other integrated defense firms, Northrop, now Northrop Grumman, acquired Westinghouse Electronic Corporation, part of the larger Westinghouse Corporation, in 1996, giving Northrop expertise and experience in defense radars. Expansion continued with the acquisition of Logicon in 1997, another integrated electronics and information firm, which further

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expanded Northrop Grumman’s defense portfolio. Two years later Northrop Grumman added Teledyne-Ryan to its portfolio, which included drone aircraft among its products. But Northrop Grumman was not finished: some of its largest acquisitions took place as it entered into a field in which it had no previous experience, military shipbuilding. In 2001 Northrop Grumman acquired both Litton Industries and Newport News Shipbuilding. Litton, which bought the Ingalls Shipbuilding Corporation in 1961, was also an integrated defense contractor, while the Newport News shipyard dates back to 1886 and has a long history of constructing large naval ships, including nuclear-powered aircraft carriers and submarines. In 2002, Northrop Grumman acquired the space and mission systems businesses of TRW, a leading developer of military and civil space systems and military satellites that left the defense business and returned to its automotive roots.

Northrop Grumman Today Northrop Grumman is divided into four business areas: Information and Services, Electronics, Aerospace, and Ships. Information and Services provides a range of information services for the Defense Department, while Electronics includes aircraft and shipborne radar, missile detection devices, and infrared vision equipment for soldiers. Northrop Grumman Aerospace includes production and upgrades for the B-2 bomber (no longer in production), the E-2 Hawkeye Navy surveillance plane (continuing Grumman’s naval heritage), the Global Hawk unmanned surveillance aircraft, and, in partnership with EADS, proposed a conversion of the Airbus A330 commercial airliner as a tanker to replace the Air Force’s aging KC-135 aircraft, as discussed in Chapter 4. In February 2008, Northrop Grumman won the KC-45 tanker aircraft contract, beating out rival Boeing. The arrangement was unusual, as Northrop Grumman partnered with European EADS, which would build subassemblies in Europe and ship them for final assembly to a plant in Mobile, Alabama. In April 2008, Northrop won a contract from the Navy for an unmanned surveillance aircraft, beating out Boeing and Lockheed Martin. Northrop Grumman also builds the center section and other parts of the F/A-18 attack aircraft in its El Segundo plant, and then ships the sections to Boeing’s St. Louis plant for final assembly. The Aerospace division also produces and sustains a range of satellite programs for the military. Northrop Grumman is also exploring a new generation of small flexible intelligence satellites in partnership with Israeli Aircraft Industries.3 The Ship Division builds the Virginia-class submarines in partnership with the General Dynamics Electric Boat division, the Wasp-class amphibious ships, the LPD-17 amphibious assault ships, and the Arleigh Burke–class guided missile destroyers, and it is the sole builder of nuclear-powered aircraft carriers. Parts of Northrop Grumman’s shipbuilding business have cost the company money, bringing a 32 percent drop in profit in the first quarter of 2008 as shipbuilding delays plagued its Gulf Coast shipyards.4 Northrop Grumman also

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produces ballistic missile defense sensors and other support components, DDG 1000 Zumwalt class destroyers, the CVN-21 Gerald R. Ford–class aircraft carrier program, RQ-4 Block 10 Global Hawk unmanned reconnaissance vehicles, and numerous other smaller programs. Northrop Grumman also partnered with Lockheed Martin for the F-35 joint strike fighter, among other programs.

Problems at Northrop Grumman Like other defense contractors, Northrop Grumman has had its brushes with the legal system, though some occurred in companies that Northrop Grumman acquired after the alleged wrongdoing. In 2003 Northrop Grumman paid more than $111 million to resolve claims that its TRW firm padded defense bills in the 1990s.5 Northrop Grumman’s Logicon division stood accused along with its partner, Oracle, of exchanging a contract with the state of California for campaign contributions to then Democratic governor Gray Davis.6 Northrop Grumman and its partner Lockheed Martin received criticism from members of Congress for stalling on a refund for faulty Coast Guard boats that the two companies produced. The boats were so bad that the Coast Guard had to decommission them, prompting Representative Elijah Cummings of Maryland to claim, “We deserve to have every dime of our money back.”7

Public Service at Northrop Grumman Like other large defense firms, Northrop Grumman maintains a community relations program, which focuses on educational support through its Defining the Future program, which supports science and mathematics programs. Northrop Grumman also supports Employees Charity Organization (ECHO), allowing its employees to support local charities through payroll deductions, and it provides grants to fund arts, cultural, educational, environmental, and health programs.

Notes 1. The charge and evidence for and against it is discussed in David S. Sorenson, The Politics of Strategic Bomber Modernization. Westport, CT: Praeger Publishers, 1995, 86–87. 2. See Robert Art, The TFX Decision: McNamara and the Military. Boston: Little, Brown, 1968; Robert R. Coulam, Illusions of Choice: The F-111 and the Problem of Weapons Acquisition Reform. Princeton, NJ: Princeton University Press, 1977. 3. “Northrop Embraces Small Satellite Plan,” Wall Street Journal, April 11, 2007. 4. “Northrop Net Slumps on Ship Unit,” Wall Street Journal, April 25, 2008. 5. “US: For Whistle-Blowers, Virtue May Be the Only Reward,” Los Angeles Times, June 16, 2003. 6. “US: Senator to Testify in Oracle/Logicon Inquiry,” Los Angeles Times, January 15, 2003. 7. “Northrop, Lockheed Criticized,” Atlanta Journal-Constitution, July 10, 2007.

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Pratt & Whitney Division of United Technologies Headquarters: East Hartford, CT U.S. Manufacturing Locations: Huntsville, AL; Springdale, AR; Canoga Park and San Diego, CA; Middletown, East Hartford, Cheshire, and Windsor, CT; West Palm Beach and Kennedy Space Center, FL; Columbus, GA; Indianapolis, IN; North Berwick, ME; Lansing, MI; Stennis, MS; Clayville, NY; Tinker Air Force Base, OK; Harrisburg, PA; Grand Prairie, Carrolton, San Antonio, and Arlington, TX; and Bellevue, WA Revenue (2006): $11.1 billion Employees: 238,442

History Some of the first aircraft were powered by air-cooled rotary engines, where the cylinders were mounted in a circular design around the crankshaft, but early American experience favored the in-line liquid-cooled engines, which were familiar to the automobile engine designers who flocked to the pioneer aviation industry in the years after World War I. But Frederick Brant Rentschler, assigned to supervise engine production for the U.S. Army, believed that the rotary engines were superior to in-line engines, and in 1925, he joined the Pratt & Whitney Company to prove his design. Pratt & Whitney, an old company whose roots went back to the U.S. Civil War, had its primary business in the tool industry, which produced guns for the Union Army in the Civil War. Rentschler initially became president of the Wright Aeronautical Corporation (after Wilbur Wright departed his namesake company), but when the board of directors did not buy into his idea for the radial engine, he approached Pratt & Whitney, whose board created the Pratt & Whitney Aircraft Company and authorized the development of Rentschler’s engine with the support of Admiral William Moffett, a U.S. naval aviation pioneer. Pratt & Whitney’s first Wasp engine soon followed and was quickly adapted by the Navy. In 1929 Rentschler broke off from the main Pratt & Whitney Company, but kept the name Pratt & Whitney Aircraft Company and continued pioneering engines. Like many other aviation pioneers, Rentschler expanded his holdings, creating United Aircraft and Transportation company the year before he left the main Pratt & Whitney Company, creating a holding company that included the Boeing Airplane Company, the Hamilton-Standard Propeller Company, the ChanceVought Aircraft Company (which produced the famous Corsair fighter for the Navy and Marine Corps), and a group of small airlines that Rentschler merged into United Airlines. When antitrust legal action broke up the holding company, Pratt & Whitney was left with Sikorsky, Vought, and Hamilton Standard Propeller Company. Its main product was aircraft engines, and the company was proud to note that the 600 million horsepower produced by its aircraft engines was half the horsepower used by the U.S. military during World War II. With the dawning of the jet age, Pratt & Whitney developed its J-57 jet engine used in the

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B-52 bomber (still in service today) and the Saber jet series of Air Force fighters. The company also pioneered gas-turbine and turbo-propeller engines, along with rocket engines that powered the first U.S. space flights.

Pratt & Whitney Today Pratt & Whitney, a subdivision of United Technologies, is primarily an aircraft engine maker, with its engines powering almost half of the world’s commercial aircraft. Their engines also propel the F-16 and F-15 fighters, along with the F-22 and F-35 of the future. This latter plane, built for both a multiservice and multinational role, is powered by the Pratt & Whitney F-135 Integrated Liftfan Propulsion System, which won the 2001 Robert J. Collier trophy as “the greatest achievement in aerospace in America.” Pratt & Whitney also produces rocket motors, expanding its offerings in 2005 through a purchase from Boeing of another rocket motor producer, Rocketdyne Propulsion & Power, making it one of the largest rocket motor producers in the world. Pratt & Whitney is also a subcontractor for a number of military systems. It produces a component of the Terminal High Altitude Area Defense antimissile system known as the Divert and Attitude Control System, which actually directs the missile defense system to its target. Raytheon’s work on missile defense systems allowed it, as a major project participant, to work with the Navy in the intercept and destruct a military satellite that threatened to crash to Earth with a tank of toxic hydrazine in April 2008.1 Raytheon is also developing the Russiandesigned RD-0146, a cryogenic upper-stage engine designed and developed by the leading Russian cryogenic rocket engine developer, Chemiautomatics Design Bureau. The company also supports a variety of experimental engine programs, including the HySET (Hydrocarbon Scramjet Engine Technology, a three-phase program sponsored by the U.S. Air Force to develop and demonstrate a Mach 4–8 hydrocarbon-fueled scramjet propulsion system, and the SED-WR (Scramjet Engine Demonstrator-WaveRider) in a partnership with Pratt & Whitney, the U.S. Air Force Research Laboratory, and Boeing. Pratt & Whitney has enjoyed a sole-source contracting status with the Defense Department as a supplier of F-35 joint strike fighter engines. However, its dominance was challenged by General Electric and its British partner Rolls-Royce, which wanted to qualify a second jet engine for the aircraft. Congress appeared to favor the GE–Rolls Royce package when it approved $340 million for GE engine development, but the Air Force argued that it would save more than $1.8 billion if Pratt & Whitney continued as the sole-source supplier of F-35 engines. Unsurprisingly, GE and Pratt & Whitney were waging a fierce lobbying battle over the issue, with GE’s possible future as a supplier of military jet engines on the line.2

Problems at Pratt & Whitney Pratt & Whitney has had encounters with federal law, paying $6 million after bidding on a contract based on inside information. In 1997, Pratt & Whitney

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paid $14.8 million as a settlement to allegations that it diverted $10 million in U.S. military aid to a slush fund controlled by an Israeli Air Force officer.3

Public Service at Pratt & Whitney Like other defense contractors, Pratt & Whitney community service public affairs endeavors, like its Golden Eagle scholarship award, which is the largest endowment of the Tuskegee Airman Incorporated, an organization that recognizes the achievements of the famed African American World War II combat pilots known as the Tuskegee Airmen. Pratt & Whitney is also a major contributor to nonprofit educational institutions, participates in Habitat for Humanity, which focuses on building houses for low-income families, and provides grants to Pratt & Whitney employees who wish to engage in charitable work.

Notes 1. “How Satellite Shot Went Down,” Arizona Daily Star, April 13, 2008. 2. “GE’s Jet Engine Dogfight,” Wall Street Journal, August 8, 2007. 3. CorpWatch, http://www.corpwatch.org/article.php?list=type&type=14.

The VSE Corporation Headquarters: Alexandria, VA U.S. Office Locations: Huntsville, AL; Anchorage, AK; Chula Vista, Riverside, Los Alamedas, Barstow, Fort Hunter Liggett, Sacramento, Mare Island, Fresno, and Moffitt Field, CA; Jacksonville and Miami, FL; Warner Robins and College Park, GA; Barrigada, Guam; Columbia, Lexington Park, and Indian Head, MD; Sterling Heights, MI; St. Charles, MO; Bridgeport, Dayton, and Shrewsbury, NJ; North Charleston, SC; San Antonio, TX; Alexandria, Ladysmith, Hampton, Ashland, and Chesapeake, VA; Washington, DC; and Morgantown, WV Revenue (2007): $653 million Employees: 1,200

History Unlike the other defense contractors profiled in these sections, VSE is a smaller defense contractor (ranked number 94 of the top 100 defense contractors in 2007 based on sales). The company started in Virginia in 1959 with three employees as Value Engineering Company, to provide engineering, management, training, and logistics services to the military. It received its first contract a year later, for engineering on rocket motors. In 1965 the company opened its first field office, and two years later launched its initial fabrication shop. In the 1970s VSE entered

Appendix I

the marine business, supporting ship overhauls, and it expanded that business area throughout the decade. By 1984, the renamed VSE Corporation employed more than 1,500 people in 22 facilities nationwide. In the 1990s, VSE acquired Schmoldt Engineering Services Company, which specialized in corrosion control and protection systems, and also founded Human Resource Systems. The company continued to expand both by acquisitions and by new operations, acquiring Energetics Inc. in the 1990s and founding Management Sciences Division in 2001. In 2007 VSE acquired Integrated Concepts and Research Corporation (ICRC), a technical and management services company.

VSE Today VSE is in an enviable business position of offering a wide array of services rather than a few large programs that either succeed very well or suffer problems or failures that can drag a defense contractor down. As a consequence, VSE had a banner year in 2007, earning revenues of $653 million, up more than 80 percent from the previous year.1 It offered more managerial services than tangible systems, a trend that allowed the company to market its wares to both defense and commercial clients. Those services included Design for Lean Six Sigma (DFLSS), a statistical quality-control methodology that reportedly allows its users to be “focused on the bottom line of the organization through increasingly effective product and service delivery.”2 VSE also supports logistics programs by developing supporting architecture, including management and cost evaluation tools, along with supply chain management. Despite the emphasis on engineering and logistics support, VSE also does limited fabrication, though much of that work is design work, including reverse engineering and prototyping of subsystems. VSE lists as its major programs life-cycle support to military aircraft (manned and unmanned), engineering and fabrication of the U.S. Army Tactical Message System (TMS), AN-TYC-24(V) 1, support of military fuel handling and distribution systems, systems technical support for the M992 Field Artillery Ammunition Support Vehicle (FAASV), the USMC’s Light Armored Vehicles (LAVs), and other wheeled and tracked military vehicles, support for AIM-9 Sidewinder air-to-air missiles and other missile systems, and support for a variety of military munitions and subsystems. The U.S. Navy is VSE’s largest customer, with the company listed as among the Navy’s top 30 contractors. VSE also maintains contracts with the Army, its oldest client, and the Air Force, providing logistics, supply chain, and base support operations for all three services. VSE also supports the Defense Logistics Agency (DLA) and the Defense Threat Reduction Agency (DTRA). VSE also plays a role in foreign military sales, including restoring to operating condition previously retired U.S. systems, spare parts support, maintenance, and management. The support functions include life-cycle contract maintenance that the U.S. military does not always provide for international customers, including installation support, upgrading, and training.

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Like other consulting contractors in the defense world, VSE has adopted management practices that generally fall under best practices (see Chapter 6 for a discussion of these practices). Under the rubric of “Enterprise Excellence,” VSE states, “Enterprise Excellence optimizes the critical success factors of quality, cost, schedule, and risk through a focused, collaborative implementation of a Quality Management System, Voice of the Customer System, Six Sigma, and Lean Enterprise.” Whether such techniques actually improve performance is one question, but almost all firms in VSE’s category seem to have adopted them.

Notes 1. “VSE 2007 Annual Report,” http://www.vsecorp.com/investor/VSE AR 2007.pdf. 2. “Lean Six Sigma,” http://www.vsecorp.com/services/management/leansixsigma.htm.

APPENDIX II

Primary Documents

The Goldwater-Nichols Act of 1986 U.S. Code, Title 10, Subtitle A, Part I, Chapter 5 151. Joint Chiefs of Staff: Composition; Functions. 152. Chairman: Appointment; Grade and Rank. 153. Chairman: Functions. 154. Vice Chairman. 155. Joint Staff. 151. Joint Chiefs of Staff: Composition; Functions (a) Composition. The Joint Chiefs of Staff consist of the following: (1) The Chairman. (2) The Vice Chairman. (3) The Chief of Staff of the Army. (4) The Chief of Naval Operations. (5) The Chief of Staff of the Air Force. (6) The Commandant of the Marine Corps. (b) Function as Military Advisers. (1) The Chairman of the Joint Chiefs of Staff is the principal military adviser to the President, the National Security Council, and the Secretary of Defense. (2) The other members of the Joint Chiefs of Staff are military advisers to the President, the National Security Council, and the Secretary of Defense as specified in subsections (d) and (e). (c) Consultation by Chairman. (1) In carrying out his functions, duties, and responsibilities, the Chairman shall, as he considers appropriate, consult with and seek the advice of (A) the other members of the Joint Chiefs of Staff; and (B) the commanders of the unified and specified combatant commands.

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Appendix II

(d)

(e)

(f)

(g)

(2) Subject to subsection (d), in presenting advice with respect to any matter to the President, the National Security Council, or the Secretary of Defense, the Chairman shall, as he considers appropriate, inform the President, the National Security Council, or the Secretary of Defense, as the case may be, of the range of military advice and opinion with respect to that matter. Advice and Opinions of Members Other Than Chairman. (1) A member of the Joint Chiefs of Staff (other than the Chairman) may submit to the Chairman advice or an opinion in disagreement with, or advice or an opinion in addition to, the advice presented by the Chairman to the President, the National Security Council, or the Secretary of Defense. If a member submits such advice or opinion, the Chairman shall present the advice or opinion of such member at the same time he presents his own advice to the President, the National Security Council, or the Secretary of Defense, as the case may be. (2) The Chairman shall establish procedures to ensure that the presentation of his own advice to the President, the National Security Council, or the Secretary of Defense is not unduly delayed by reason of the submission of the individual advice or opinion of another member of the Joint Chiefs of Staff. Advice on Request. The members of the Joint Chiefs of Staff, individually or collectively, in their capacity as military advisers, shall provide advice to the President, the National Security Council, or the Secretary of Defense on a particular matter when the President, the National Security Council, or the Secretary requests such advice. Recommendations to Congress. After first informing the Secretary of Defense, a member of the Joint Chiefs of Staff may make such recommendations to Congress relating to the Department of Defense as he considers appropriate. Meetings of JCS. (1) The Chairman shall convene regular meetings of the Joint Chiefs of Staff. (2) Subject to the authority, direction, and control of the President and the Secretary of Defense, the Chairman shall (A) preside over the Joint Chiefs of Staff; (B) provide agenda for the meetings of the Joint Chiefs of Staff (including, as the Chairman considers appropriate, any subject for the agenda recommended by any other member of the Joint Chiefs of Staff ); (C) assist the Joint Chiefs of Staff in carrying on their business as promptly as practicable; and (D) determine when issues under consideration by the Joint Chiefs of Staff shall be decided.

152. Chairman: Appointment; Grade and Rank (a) Appointment; Term of Office. (1) There is a Chairman of the Joint Chiefs of Staff, appointed by the President, by and with the advice and consent of the Senate, from the officers of the regular components of the armed forces. The Chairman serves at the pleasure of the President for a term of two years, beginning on October 1 of odd-numbered years. Subject to paragraph (3), an officer serving as Chairman may be reappointed in the same manner for two additional terms. However, in time of war there is no limit on the number of reappointments.

Appendix II (2) In the event of the death, retirement, resignation, or reassignment of the officer serving as Chairman before the end of the term for which the officer was appointed, an officer appointed to fill the vacancy shall serve as Chairman only for the remainder of the original term, but may be reappointed as provided in paragraph (1). (3) An officer may not serve as Chairman or Vice Chairman of the Joint Chiefs of Staff if the combined period of service of such officer in such positions exceeds six years. However, the President may extend to eight years the combined period of service an officer may serve in such positions if he determines such action is in the national interest. The limitations of this paragraph do not apply in time of war. (b) Requirement for Appointment. (1) The President may appoint an officer as Chairman of the Joint Chiefs of Staff only if the officer has served as (A) the Vice Chairman of the Joint Chiefs of Staff; (B) the Chief of Staff of the Army, the Chief of Naval Operations, the Chief of Staff of the Air Force, or the Commandant of the Marine Corps; or (C) the commander of a unified or specified combatant command. (2) The President may waive paragraph (1) in the case of an officer if the President determines such action is necessary in the national interest. (c) Grade and Rank. The Chairman, while so serving, holds the grade of general or, in the case of an officer of the Navy, admiral and outranks all other officers of the armed forces. However, he may not exercise military command over the Joint Chiefs of Staff or any of the armed forces.

153. Chairman: Functions (a) Planning; Advice; Policy Formulation. Subject to the authority, direction, and control of the President and the Secretary of Defense, the Chairman of the Joint Chiefs of Staff shall be responsible for the following: (1) Strategic Direction. Assisting the President and the Secretary of Defense in providing for the strategic direction of the armed forces. (2) Strategic Planning. (A) Preparing strategic plans, including plans which conform with resource levels projected by the Secretary of Defense to be available for the period of time for which the plans are to be effective. (B) Preparing joint logistic and mobility plans to support those strategic plans and recommending the assignment of logistic and mobility responsibilities to the armed forces in accordance with those logistic and mobility plans. (C) Performing net assessments to determine the capabilities of the armed forces of the United States and its allies as compared with those of their potential adversaries. (3) Contingency Planning; Preparedness. (A) Providing for the preparation and review of contingency plans which conform to policy guidance from the President and the Secretary of Defense. (B) Preparing joint logistic and mobility plans to support those contingency plans and recommending the assignment of logistic and mobility responsibilities to the armed forces in accordance with those logistic and mobility plans.

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Appendix II (C) Advising the Secretary on critical deficiencies and strengths in force capabilities (including manpower, logistic, and mobility support) identified during the preparation and review of contingency plans and assessing the effect of such deficiencies and strengths on meeting national security objectives and policy and on strategic plans. (D) Establishing and maintaining, after consultation with the commanders of the unified and specified combatant commands, a uniform system of evaluating the preparedness of each such command to carry out missions assigned to the command. (4) Advice on Requirements, Programs, and Budget. (A) Advising the Secretary, under section 163(b)(2) of this title, on the priorities of the requirements identified by the commanders of the unified and specified combatant commands. (B) Advising the Secretary on the extent to which the program recommendations and budget proposals of the military departments and other components of the Department of Defense for a fiscal year conform with the priorities established in strategic plans and with the priorities established for the requirements of the unified and specified combatant commands. (C) Submitting to the Secretary alternative program recommendations and budget proposals, within projected resource levels and guidance provided by the Secretary, in order to achieve greater conformance with the priorities referred to in clause (B). (D) Recommending to the Secretary, in accordance with section 166 of this title, a budget proposal for activities of each unified and specified combatant command. (E) Advising the Secretary on the extent to which the major programs and policies of the armed forces in the area of manpower conform with strategic plans. (F) Assessing military requirements for defense acquisition programs. (5) Doctrine, Training, and Education. (A) Developing doctrine for the joint employment of the armed forces. (B) Formulating policies for the joint training of the armed forces. (C) Formulating policies for coordinating the military education and training of members of the armed forces. (6) Other Matters. (A) Providing for representation of the United States on the Military Staff Committee of the United Nations in accordance with the Charter of the United Nations. (B) Performing such other duties as may be prescribed by law or by the President or the Secretary of Defense. (b) Report on Assignment of Roles and Missions. (1) Not less than once every three years, or upon the request of the President or the Secretary of Defense, the Chairman shall submit to the Secretary of Defense a report containing such recommendations for changes in the assignment of functions (or roles and missions) to the armed forces as the Chairman considers necessary to achieve maximum effectiveness of the armed forces. In preparing each such report, the Chairman shall consider (among other matters) the following: (A) Changes in the nature of the threats faced by the United States.

Appendix II (B) Unnecessary duplication of effort among the armed forces. (C) Changes in technology that can be applied effectively to warfare. (2) The Chairman shall include in each such report recommendations for such changes in policies, directives, regulations, and legislation as may be necessary to achieve the changes in the assignment of functions recommended by the Chairman.

154. Vice Chairman (a) Appointment. (1) There is a Vice Chairman of the Joint Chiefs of Staff, appointed by the President, by and with the advice and consent of the Senate, from the officers of the regular components of the armed forces. (2) The Chairman and Vice Chairman may not be members of the same armed force. However, the President may waive the restriction in the preceding sentence for a limited period of time in order to provide for the orderly transition of officers appointed to serve in the positions of Chairman and Vice Chairman. (3) The Vice Chairman serves at the pleasure of the President for a term of two years and may be reappointed in the same manner for two additional terms. However, in time of war there is no limit on the number of reappointments. (b) Requirement for Appointment. (1) The President may appoint an officer as Vice Chairman of the Joint Chiefs of Staff only if the officer (A) has the joint specialty under section 661 of this title; and (B) has completed a full tour of duty in a joint duty assignment (as defined in section 664(f ) of this title) as a general or flag officer. (2) The President may waive paragraph (1) in the case of an officer if the President determines such action is necessary in the national interest. (c) Duties. The Vice Chairman performs the duties prescribed for him as a member of the Joint Chiefs of Staff and such other duties as may be prescribed by the Chairman with the approval of the Secretary of Defense. (d) Function as Acting Chairman. When there is a vacancy in the office of Chairman or in the absence or disability of the Chairman, the Vice Chairman acts as Chairman and performs the duties of the Chairman until a successor is appointed or the absence or disability ceases. (e) Succession after Chairman and Vice Chairman. When there is a vacancy in the offices of both Chairman and Vice Chairman or in the absence or disability of both the Chairman and the Vice Chairman, or when there is a vacancy in one such office and in the absence or disability of the officer holding the other, the President shall designate a member of the Joint Chiefs of Staff to act as and perform the duties of the Chairman until a successor to the Chairman or Vice Chairman is appointed or the absence or disability of the Chairman or Vice Chairman ceases. (f) Grade and Rank. The Vice Chairman, while so serving, holds the grade of general or, in the case of an officer of the Navy, admiral and outranks all other officers of the armed forces except the Chairman. The Vice Chairman may not exercise military command over the Joint Chiefs of Staff or any of the armed forces.

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155. Joint Staff (a) Appointment of Officers to Joint Staff. (1) There is a Joint Staff under the Chairman of the Joint Chiefs of Staff. The Joint Staff assists the Chairman and, subject to the authority, direction, and control of the Chairman, the other members of the Joint Chiefs of Staff in carrying out their responsibilities. (2) Officers of the armed forces (other than the Coast Guard) assigned to serve on the Joint Staff shall be selected by the Chairman in approximately equal numbers from (A) the Army; (B) the Navy and the Marine Corps; and (C) the Air Force. (3) Selection of officers of an armed force to serve on the Joint Staff shall be made by the Chairman from a list of officers submitted by the Secretary of the military department having jurisdiction over that armed force. Each officer whose name is submitted shall be among those officers considered to be the most outstanding officers of that armed force. The Chairman may specify the number of officers to be included on any such list. (b) Director. The Chairman of the Joint Chiefs of Staff, after consultation with the other members of the Joint Chiefs of Staff and with the approval of the Secretary of Defense, may select an officer to serve as Director of the Joint Staff. (c) Management of Joint Staff. The Chairman of the Joint Chiefs of Staff manages the Joint Staff and the Director of the Joint Staff. The Joint Staff shall perform such duties as the Chairman prescribes and shall perform such duties under such procedures as the Chairman prescribes. (d) Operation of Joint Staff. The Secretary of Defense shall ensure that the Joint Staff is independently organized and operated so that the Joint Staff supports the Chairman of the Joint Chiefs of Staff in meeting the congressional purpose set forth in the last clause of section 2 of the National Security Act of 1947 (50 U.S.C. 401) to provide: (1) for the unified strategic direction of the combatant forces; (2) for their operation under unified command; and (3) for their integration into an efficient team of land, naval, and air forces. (e) Prohibition of Function as Armed Forces General Staff. The Joint Staff shall not operate or be organized as an overall Armed Forces General Staff and shall have no executive authority. The Joint Staff may be organized and may operate along conventional staff lines. (f) Tour of Duty of Joint Staff Officers. (1) An officer who is assigned or detailed to permanent duty on the Joint Staff may not serve for a tour of duty of more than four years. However, such a tour of duty may be extended with the approval of the Secretary of Defense. (2) In accordance with procedures established by the Secretary of Defense, the Chairman of the Joint Chiefs of Staff may suspend from duty and recommend the reassignment of any officer assigned to the Joint Staff. Upon receipt of such a recommendation, the Secretary concerned shall promptly reassign the officer.

Appendix II (3) An officer completing a tour of duty with the Joint Staff may not be assigned or detailed to permanent duty on the Joint Staff within two years after relief from that duty except with the approval of the Secretary. (4) Paragraphs (1) and (3) do not apply (A) in time of war; or (B) during a national emergency declared by the President or Congress. (g) Composition of Joint Staff. (1) The Joint Staff is composed of all members of the armed forces and civilian employees assigned or detailed to permanent duty in the executive part of the Department of Defense to perform the functions and duties prescribed under subsections (a) and (c). (2) The Joint Staff does not include members of the armed forces or civilian employees assigned or detailed to permanent duty in a military department.

The Executive-Legislative Budget Process Spring OMB issues guidance to executive agencies for planning the next fiscal-year budget. July The OMB provides agencies with detailed instructions for fiscal-year budget requests. Spring/Summer Agencies begin developing new fiscal-year budget requests on the basis of OMB guidance. September Agencies submit initial new fiscal-year requests to the OMB. October–December The OMB evaluates and determines fiscal-year agency budgets. The OMB “pass back” informs the agencies of budgetary decisions. December Agencies have the opportunity to appeal the president’s new fiscal-year budget before it is publicly announced in February. March–April 15 Congress completes the fiscal-year budget resolution. May 15–June 30 House completes its ten fiscal-year appropriations bills and sends them to the Senate. July 1–September 30 Senate completes its 12 fiscal-year appropriations bills.

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Appendix II

August–September 30 Conference committees reconcile differences between the House and Senate versions of the appropriations bills. After final approval by both chambers, the president vetoes or signs. Adapted from Public Policy Office Federal Budget Resource, American Institute of Biological Sciences.

Glossary

Acquisition

Acquisition life cycle

Appropriation

Armed Services Committee

Authorization

Black world programs Budget estimate submission Chairman’s Program Concurrency

Defense Acquisition Board

The initiation, development, testing, procurement, and production of weapons and other military systems. Phases of acquisition, including concept refinement, technology development, system development and demonstration, production and deployment, and operations and support. Congressional legislation approving the expenditure of funds for particular purposes, initiated by appropriations committees. Committee in both the House of Representatives and the Senate with the authority to authorize and oversee defense programs. Congressional legislation approving the expenditure of funds for particular purposes, subject to appropriations. Highly classified programs that often have their own acquisition system. The budget submission from the DoD component to the secretary of defense, used in PPBE. Appraisal from the chairman of the Joint Chiefs of Staff on Assessment programs and budgets. Combining or overlapping phases of development, such as operational and developmental testing. Committee of service acquisition chiefs; operates the milestone management system.

208

Glossary

Defense acquisition executive

Person responsible for supervising the defense acquisition system. Defense Planning Guidance Primary document for the defense planning process. Direct commercial sales Arms sales contracted between a military manufacturer and an international customer. Evolutionary acquisition Strategy for acquisition of mature technology, including (1) spiral development, which defines requirements through demonstration and user feedback, and (2) incremental development, by which capacity is identified and developed incrementally. Excess defense articles Surplus or obsolete military equipment sold or given free to an international customer. Foreign military financing Grants provided to international customers to purchase U.S. military equipment. Foreign military sales Government-to-government sales negotiated by the Defense Department. Future Years Defense Program Database that summarizes forces and programs within the Defense Department. Goldwater-Nichols Defense reform act of 1986 that restructured the top tier of the Defense Department. Government Accountability Federal office that oversees performance of govOffice ernment agencies and their contractors. Government owned–contractor Facility owned by the federal government but operated operated by a for-profit contractor. Initial operating capability The phase when a system actually begins production. Joint Chiefs of Staff The senior military portion of the Defense Department, consisting of the chairman, vice chairman, and service chiefs. Joint Capabilities Board Assists the Joint Requirements Oversight Council. Joint Capabilities Integration Supports JCS and JROC in assessing and develand Development System oping military needs. Joint Programming Guidance Final planning document. Joint Requirements Oversight Reviews all top acquisition programs for their Council impact on joint warfighting. Life-cycle cost Total cost of system over its operational life.

Glossary

Line-item budget Low-rate initial production Milestone Management System Military specifications Multiyear procurement National Defense Strategy National Military Strategy

National Procurement Fraud Task Force National Security Strategy

Packard Commission

Planning, programming, and budgeting system Planning, programming, and execution system Quadrennial Defense Review

Senior Executive Council Senior Leadership Review Group Systems analysis

209

Budget that specifies items by budget line. First part of the production and deployment phase. System of checkpoints that every major acquisition program must pass through. Performance and quality specifications. Ability to procure up to five years of requirements in a single contract. Issued by the secretary of defense in response to National Military Strategy. Document issued by the Joint Chiefs of Staff outlining the military response to the National Security Strategy. Arm of the Justice Department designated to find and eliminate fraud in government procurement. Document issued by each presidential administration outlining the national interests and threats and responses to those interests. 1986 commission that made recommendations for reorganization of the Defense Department structure. System initiated by Secretary Robert McNamara to manage defense programs. Replaced planning, programming, and budgeting system. designed to provide decisions linking strategic requirements to capability. Document issued every four years by the secretary of defense outlining the state of the Department of Defense. Senior leaders of the defense acquisition community, created in 2003. Senior advisory body to the secretary of defense for acquisition issues. The dissection of a complex system into its component parts, emphasizing the interaction of those parts.

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Index

1-4-2-1 paradigm, 43, 116 600-ship Navy, 102 A-12 aircraft, 145 ACAT I, 33, 51 ACAT II, 33, 51 ACAT III, 51 ACAT IV, 51–52 Acheson, Dean, 16 Acquisition, definition of, 1 Acquisition czar, 144–45 Acquisition Program Baseline, 55 Advanced Concept Technology Demonstrations, 58 Aerospace Industries of America, 76 AH-64, 100–1 Air Corps Act of 1926, 12, 108 Air Force Materiel Command, 35 Air Force Plant 42, 71 Airborne Laser, 112 Airborne Warning and Control: Sales to Saudi Arabia, 130 Aircraft Production Board, 20 Air-launched cruise missile, 96 Akaka, Daniel, 111 American Shipbuilding Association, 77 Armed Forces Communications and Electronics Association, (AFCEA International), 77 Arms Control Export Act, 136

Arms Export Control Act and the Foreign Assistance Act of 1961, 133 Army Acquisition Support Center, 34 Army Board of Ordnance, 8 Army Bureau of Aircraft Production, 9 Arsenal ship, 98 Aspin, Les, 102 Assistant Secretary of Defense for Networks and Information Integration, 31 Assistant Secretary of Defense for Research and Development, 17 Atlas Air, 69 BAE Systems, 139 Baruch, Bernard, 9 Bath Iron Works shipyard, 152 Battista, Anthony, 78 Bell Aircraft, 151 Best practices, 156–57, 198 Black world programs, 162–63 Boeing Company, 79, 80, 112, 138, 161, 171–75 Boeing, William, 171 Brewster Aeronautical Company, 115, 126 Brooklyn Naval Yard, 67 Budget ceiling management, 21 Budget Change Proposal, 46 Budget Estimate Submission, 44, 46 Bureau of Political-Military Affairs, 133 Bureaucratic Politics Factor, 92–101 Bush, George W., 22 Bush, Vannevar, 14, 187

212

Index Business Capability Lifecycle, 160 Buy America Act, 139 Byrd, Robert, 108 C-130J transport, 54–55, 110, 111, 147, 155, 183 C-17 transport, 112, 132–33, 155 C-5 transport, 60 Calhoun, John C., 5 Capabilities Development Document, 48 Capability-based assessment, 48 Carlucci Initiatives, 155 Carlyle Group, 68 Carnegie Phipps Steel Company, 8 Carter, Jimmy, 109 Center for Responsive Politics, 78–79 Center for the Commercialization of Advanced Technology, 72 Centers of Excellence, 34 Chairman’s Program Assessment, 32 Chambliss, Saxby, 109, 111 Chandler, William Eaton, 8 Cheney, Richard, 42, 102, 145 Chu, David S. C., 102 Citizens Against Government Waste, 77 Civil-Military Relations Factor, 101–6 Clark, Vern, 70, 98 Clifford, Clark, 16 Clinger-Cohen Act, 164 Clinton, Bill, 22 Close the Contractor Fraud Loophole Act, 40 Collins, Susan, 110 Combat Search and Rescue (CSAR-X) helicopter, 109 Committee on Foreign Investment in the United States, 83 Competition in Contracting Act, 145 Competition in defense contracting, 151–52 Concept Decision Reviews, 160 Concept Refinement, 55 Conference Committee Process, 38 Congressional Budget and Impoundment Control Act of 1974, 36

Congressional Budget Office, 35, 114 Congressional Politics Factor, 106–14 Congressional Research Service, 35 Continuous process improvement, 158 Contractor Cost Data Reporting System, 32 Cooperative Opportunities Document, 56 Cooperative Threat Reduction, 36 Cost Analysis Improvement Group, 32 Cost overruns, 61–62, 146–49 Costello, Robert B., 163 Cranston, Alan, 109 CRI, 106 Crusader, 102, 105 Cunningham, Randy, 142 Curtiss-Wright, 184–86 Custer Battles, 145 CVN 21, 57 Davis, Jo Ann, 110 DDG 1000, 80, 110, 148 Deeds, Edward, 9–10 Defense Acquisition Board, 30–31, 160 Defense Acquisition Executive Summary, 32 Defense Acquisition Performance Assessment, 49 Defense Acquisition Transformation Report to Congress, 159 Defense Advanced Research Projects Agency, 50 Defense Auditing and Accounting Division, 39 Defense Contract Audit Agency, 46 Defense Contract Management Agency, 54 Defense contracts, types of, 52–53 Defense Criminal Investigative Service, 106 Defense Industry, boom-and-bust cycle, 73–75 Defense Intelligence Agency, 103 Defense Planning Guidance, 29 Defense Procurement Reform Act, 145 Defense Production Act, 82 Defense Resources Board, 21 Defense Science Board, 18, 31 Defense Security Cooperation Agency, 132 Defense Security Service, 139

Index Defense Transformation Board, 160 Delivery delays, 149–51 Department of Defense, creation of, 16 Department of Justice, 40, 82, 83 Department of State Bureau of Politico-Military Affairs, role in arms sales, 133 Deputy General Counsel for Acquisition and Logistics, 83 Deputy Under Secretary of Defense (Industrial Policy), 31 Deputy Under Secretary of Defense (Logistics & Material Readiness), 31 Deputy Under Secretary of Defense for Industrial Policy, 83 Development Concept Paper, 102 Dickinson, William L., 78 Dicks, Norm, 50, 161 Direct Commercial Sales, 133–34 Director, Defense Procurement and Acquisition Policy, 31 Director, Operational Test & Evaluation, 31 Division Air Defense, 160 Dodge Commission, 9 Dominguez, Michael, 155 Donley, Michael, 77 Douglas, Donald, 66 Draft Presidential Memorandum, 102 Druyun, Darleen, 70, 162, 174 DynCorp, 74 EADS-Northrop Grumman, 74, 77, 112, 138 Earmarks, 108 Eisenhower, Dwight D., 17 Electric Boat, 175–79 England, Gordon, 23, 74, 77, 100, 110 Enterprise Risk Model, 160 European Aeronautic Defence & Space Company (EADS), 40, 70, 74, 112, 138, 139, 192 Evergreen International Aviation, 69 Exon-Florio Amendment to the Defense Production Act, 83 Expeditionary Fighting Vehicle, 147

213 Explicitness, 18 F/A-18 aircraft, 23, 57, 60 F-104 fighter, 129 F-111 fighter, 55, 96, 150, 191 F-117, 162, 163 F-16, fighter, 60, 131; Sales to foreign buyers, 128 F-20 fighter, 130 F-22 fighter, 45, 61, 97, 98–99, 103, 134, 147–48 F-35 fighter, 23, 45, 46, 97 Fechet, James, 93 Federal Acquisition Regulations, 40 Federal Acquisition Streamlining Act, 164 Federal Trade Commission, 82 Finley, James I., 77–78 First-tier contractors, 71–72 Fitzgerald, A. Ernest, 182 Fitzhugh Blue Ribbon Defense Panel, 21, 164 Five-Year Defense Program, 20 Fleet Ballistic Missile Submarine, 20 Follow-on imperative, 74–75 Foreign Military Financing, 133 Foreign Military Sales Credit, 133 Frelinghuysen, Rodney P., 98 Fr´emont, John C., 7 Functional Capabilities Board, 31 Future Combat System, 45, 112 Gates, Robert, 29, 45 General Dynamics, 72, 80 General Services Administration, 40–41 Giambastiani, E. P., 33 Glenn, John, 109, 111 Goldwater-Nichols Department of Defense Reorganization Act of 1986, 22, 49, 114 Government Accountability Office, 35, 39–40; weapons review by, 57 Government operated industrial plants, 70–71 Government owned-contractor operated facilities, 71 Government Performance and Results Act of 1993, 37 Grace Commission, 164

214

Index Granger, Kay, 109 Ground-launched cruise missile, 112 Grumman, Leroy, 190 Grumman Corporation, 190 Hillman, Sidney, 14 Hoover, Herbert, 12 House Committee on Armed Services, 36–37 House Committee on Appropriations, 37 Hunter, Duncan, 113, 138 Hurley, Patrick J., 12 Hutchinson, Kay Bailey, 151 ICBM, 19, 95 Information Technology Acquisition Board, 31 Initial Capabilities Document, 48 Inouye, Daniel, 111 Intercontinental ballistic missile, 95 IRBM, 95, 97 Isakson, Johnny, 111 Javits report, 136 Joint Air-to-Surface Standoff Missile, 147 Joint Capabilities Development System, 45 Joint Capabilities Document, 48 Joint Capabilities Integration and Development System, 48 Joint Cargo Aircraft, 74, 100 Joint Chiefs of Staff, 32 Joint Concept of Operations, 33 Joint Consultative Committee, 83 Joint Direct Attack Munition, 155 Joint Forces Command, 31, 34 Joint Integrating Concept, 48 Joint Material Priorities and Allocation Board, 82 Joint Operating Concepts, 43, 49 Joint Operations Concepts, 23 Joint Planning Document, 32 Joint Planning Guidance, 44 Joint Programming Guidance, 45 Joint Requirements Oversight Council, 30, 33–34, 48–49, 58, 82 Joint Staff, 32–33 Joint Standoff Weapon Block II, 158

Joint Unmanned Combat Air Systems Program, 50–51 Jointness, 49–50 Jones, Thomas V., 130 Jumper, John P., 99 Kaminski, Paul, 165 KBR, 68 Kellogg-Briand Pact, 12 Kennan, George, 16 Kennedy, Edward, 98 Kennedy, John F., 18 Key West Agreement, 16 Lean Six Sigma, 158 Levin, Carl, 106 LPD-8, 61, 148 Life-cycle costing, 19 Lima Army Tank Plant, 68, 71, 151, 183 Littoral Combat Ship, 53, 98; cost overruns, 147, 151 Lockheed Martin, 72, 79, 80, 109, 148, 161, 180–84 London Naval Conference, 12 Los Alamos Nuclear Laboratory, 71 Lott, Trent, 110 Loughhead, Allan and Malcolm, 180 LPH-17, 112 M1A2 Abrams Main Battle Tank, 55, 60 Major Issue Analysis, 45 Manhattan Project, 13 Maritime Commission, 15 Marshall, George C., 16 Martin, Glenn L., 66, 171 McCain, John, 55, 109, 162 McConnell, James, 66 McDonnell Douglas, 172 McElroy, Neil, 59 McNamara, Robert S., 18, 53, 67, 96, 102, 154; questions services, 19; develops PPBS, 20 McPeak, Merrill, 101, 159–60 Meigs, Montgomery, 6 Mikulski, Barbara A., 111 Milestone phases, 55–57

Index Military Industrial Complex Factor, 114–15 MILSPECS, 144, 152–53 Mine-Resistant, Ambush Protected, 34 Moran, Jim, 40 Morgan Ironworks, 7 Moseley, T. Michael, 183 Mullen, Michael, 98 Murray, Patty, 112, 138 Nathman, John P., 99 National Defense Act of 1947, 16, 32, 34 National Defense Industrial Association, 76 National Defense Strategy of the United States, 42 National Disclosure Policy Committee, 134 National Guard, 34 National Industrial Security Program, 139 National Military Strategy, 43, 48 National Procurement Fraud Task Force, 40 National Security Agency, 103 National Security Strategy of the United States, 41–42 Naval Air Systems Command, 35 Naval Sea Services Command, 35 Newport News Shipbuilding, 68, 192 Northrop, John, 190 Northrop Grumman, 79, 190–93 Nunn-McCurdy Act, 56, 149 Nye Committee, 11, 176 Objective Individual Combat Weapon, 33 Office of Emergency Management, 14 Office of Management and Budget, 44, 47 Office of Production Management, 14 Office of Scientific Research and Development, 14 Office of Secretary of Defense, 30–32 Office of Systems Analysis, 102 Office of Technology Assistance, 35 Offset agreements, 135–36 Olmert, Ehud, 137 Omega Air, 69 Operations and Deployment, 55 Orr, Verne, 59, 103

215 Overman Act, 9 Packard Commission, 68, 154, 164 Patterson, Jack, 78 Patton, Jack, 78 Payton, Sue C., 106 Perry, William, 153 Picatinny Arsenal, 8 Planning, Programming, and Budgeting System, 20, 102, 144 Planning, Programming, Budgeting, and Execution, 29, 41–49 Portsmouth Naval Shipyard, 80, 176 Power, Thomas, 19 Pratt & Whitney, 194–96 President’s Council on Integrity and Efficiency, 146 Presidential Decision Directive, 34 Pressler Amendment, 136 Production and Deployment, 55 Program Analysis and Evaluation, 31 Program Budget Decision, 44 Program Change Proposals, 45 Program Decision Memorandum, 44, 46 Program Executive Officer, 31 Program Manager, 31 Programs Objectives Memoranda (POM), 88 Quadrennial Defense Review (QDR), 43–44, 89, 116 RAND Corporation, 17 Raytheon, 74, 80, 186–90 Reagan, Ronald, 21, 22 Redstone Arsenal, 70 Reichers, Charles, 106 Reliable Replacement Warhead, 112 Requirements Generation System, 48 Revolution in Military Affairs, 165 Reyes, Silvestre, 72 Rice, Condoleezza, 128 Roach, John, 7 Rock Island Army Arsenal, 8, 67 Rockwell International, 150, 161, 172 Roosevelt, Franklin D., 12, 13

216

Index Roosevelt, Theodore, 8 Root, Elihu, 9 Rumsfeld, Donald, 23, 102, 104, 105, 111–12 Satellite Industry Association, 76–77 Schumer, Charles, 109 Schwartz, Norton, 132 Science Applications International Corporation, 145 Sears, Michael, 70, 162, 174 Seawolf submarine, 69 Secretary of Defense, strengthening of, 30 Second-tier contractors, 72 Securities and Exchange Commission, 146 Senate Committee on Armed Services, 37–38 Senior Level Review Group, 49 Sessions, Jeff, 112 Shelby, Richard, 106, 108 Sikes, Robert, 142 Sikorsky, 79, 109 Simmons, Rob, 111 SMS Company, 105–6 Snowe, Olympia, 110 Space Based Infrared System Program, 149 Springfield Arsenal, 5, 6, 67 SR-71, 163 Staats, Elmer, 39 State Department; role in arms sales, 133 Stevens, Ted, 111 Stoddert, Benjamin, 67 Stonecipher, Harry, 174 Strategic Air Command, 95 Strategic Planning Guidance, 45 Symington, Stuart, 28 Systems Analysis Office, 102 Task Force on Priority Allocation of Industrial Resources, 81–82 Taylor, Gene, 156 Technology Development Phase, 56 The National Defense Industrial Association, 76

Third-tier contractors, 72 Title X of the U.S. Code, 30 Tomahawk antiship missile, 96 Total Package Procurement, 20 Total Quality Management, 157–58 Transform Enterprise Management, 23 Truman, Harry, 16, 94, 108 UAV, 100 Uncertainty, treatment of, 18 Under Secretary of Defense (Comptroller), 31 Under Secretary of Defense (Personnel & Readiness), 31 Under Secretary of Defense (Policy), 31 Under Secretary of Defense for Acquisition, Technology & Logistics, 49 Unmanned aerial vehicle (UAV), 34 Upshur, Abel P., 5 U.S. Army Air Service, 9 V-22, 60, 111 Vibration & Sound Solutions Ltd., 78 Vice Chairman of the Joint Chiefs of Staff, 30 Vinson-Trammel Act, 12 Vinson-Walsh Act, 13 Virginia-class attack submarine, 57 VSE Corporation, 196–98 War Department, 14 War Industries Board, 9 War Production Board, 14 Warner, John, 54, 109–10 Washington Naval Conference, 12 Welch, Peter, 40 White, Thomas, 50 Whitney, William C., 8 Wicker, Roger, 138–39 Wide-Area Munitions, 57 Wilson, Charles, 59 Winter, Donald, 76, 77 Wolfowitz, Paul, 51 Wright Brothers, 10 Wynne, Michael, 110

About the Author DAVID S. SORENSON is Professor of International Security Studies at the U.S. Air War College. He has authored and coedited numerous books and articles on Middle East politics and national security affairs, including Military Base Closure (PSI, 2006).

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