Cover Story

Thinking outside the 5-sided box

"Thinking outside the 5-sided box" Continued...

Issue: "Mounting a defense," May 25, 2002

It was Sept. 11 that triggered the first serious sea change in U.S. military policy. President Bush "shook the defense department loose from the psychosis that America is incapable of asserting our own interests as we see fit, without getting permission from the UN and other countries," said J. Michael Waller, vice president of the Center for Security Policy in Washington, D.C.

Yet, despite 9/11-inspired urgency, the Pentagon "still is not on a war footing," Mr. Waller notes. "It's still taking an obscenely long time for procurement. There are emergency exceptions, but overall, you have this sense of business as usual, of military bureaucracy."

Mr. Rumsfeld agrees. "Almost every day in meetings, I am confronted by people who come to me with approaches and recommendations and suggestions and requests that reflect a mindset that is exactly the same as before Sept. 11th."

It's not that DOD's people aren't bright and hardworking-most are. But, as U.S. Comptroller General David Walker told Congress in March, there is little incentive to upset the status quo. DOD's half-million civilian employees are not rewarded so much for great performance as they are for just sticking around. Meanwhile, decades of policymaking-sometimes concurrent and conflicting-have produced layer upon layer of paperwork, and more hoops to jump through than the Cirque du Soleil.

To understand the difficulty of change, it helps to look beyond weapons and recruiting counts at the vastness of the agency that protects American freedom. Over 1.4 million active-duty service members operate in more than 140 countries. DOD maintains the equivalent of small cities in most of those lands-more than 80 such mini-cities in Europe alone-along with 50 Army forts, 66 Air Force bases, and 81 Navy and Marine Corps bases stateside.

From these installations, and from 318 Navy ships, U.S. forces fight terror, project power, hunt drug traffickers, monitor despots, police borders, rescue disaster survivors, deploy spies, train foreign troops, patrol seven seas, even search for comrades lost in wars past. Then there are the American peacekeepers who blanket the planet, deterring aggression.

Maintenance and logistics groups repair, process, and transport everything from infrared goggles to toothpaste. Meanwhile, military schools staffed with hundreds teach troops about weapons, nuclear power, electronics, computers, intelligence, medicine, transportation, supplies, food service, administration, and special warfare. Add to that the vast network of human resource and "quality of life" operations that attempt to keep America's all-volunteer force paid, fed, and happy.

The management and procurement structure powering this behemoth consumes more than double the dollars spent annually by the militaries of all other NATO nations combined. Yet, according to the September 2001 Quadrennial Defense Review (QDR), DOD's financial systems "would struggle to meet the standards of generally accepted accounting principles."

In March, for example, the General Accounting Office (GAO) reported that the DOD last year couldn't exactly tell whether $1.1 billion earmarked for spare parts was actually spent on spare parts. Also in fiscal year 2001, the defense department made $146 million in "illegal" financial adjustments, while the Navy blew $64 million on fraudulent government purchase card expenditures.

Some current acquisition programs already are treading the path of cost overrun and delay. For example, R&D costs for the new F-22 fighter, in development since 1995, are expected to exceed by $557 million the contract price of $18 billion, according to the Office of the Secretary of Defense. Production costs are expected to shoot through the $37.6 billion contract cost cap to $43 billion. Meanwhile, F-22 flight testing is behind schedule, so the Air Force extended the schedule and reduced the test requirements by almost a third, the GAO reported.

The 2003 defense bill lists more than 50 acquisition and modernization programs-from buffing up the radar-jamming, Vietnam-era EA-6B Prowler to developing the new DD-X family of stealth-capable ships. GAO defense analyst Allen Li says he hasn't seen much to convince him that those programs will fare better than the F-22. DOD program managers, he said, often commit financially to a project before they know how well an article will work. "They're now recognizing that that's not a good thing to do and are looking at how private industry does it. But I haven't seen any success stories so far that show their words are turning into action."

Past attempts to bring DOD in line with the best practices of private enterprise have been costly disasters. Take Corporate Information Management (CIM), for example, a 1989 reform initiative expected to save billions by reforming DOD procurement, finance, and other key management areas. By 1997, after spending eight years and $20 billion on CIM, the savings had yet to materialize. DOD eventually abandoned the initiative.

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