It seems like a lot of the advice for improving spending at the Department of Defense (DOD) comes down to pretty common sense concepts: don't accept shoddy ships, don't give the Department of Defense things they didn't ask for. Maybe even choose programs based on strategic needs. And a report released Friday by the Government Accountability Office (GAO) points out another problem that seems to be able to be solved by the common sense solution of making procurement decisions based on, oh, realistic cost estimates.
Yet again, the Air Force is being criticized for low-balling cost estimates. This time, the GAO is concerned about the Air Force's numbers for their Future Strategic Airlift. From the report:
The Air Force currently estimates it will spend $9.1 billion on upgrading the C-5s. However, this estimate may be understated because DOD did not apply risk or uncertainty analyses...At the same time, the Air Force has not priced or budgeted for a new upgrade program it plans to begin in fiscal year 2010 to address certain modernization deficiencies and to add new capabilities.
And possibly even worse, it sounds like the manufacturer is even telling the Air Force that they're severely underestimating costs:
At some point, the C-17 production line will shut down, and DOD will have to pay substantial costs that have not yet been budgeted. The manufacturer and Air Force shutdown estimates differ significantly--about $1 billion and $465 million, respectively--in large part because the manufacturer’s estimate included assumptions about demolishing facilities and environmental remediation, while the Air Force's did not.
The GAO recommended that DOD prepare updated C-5 modernization cost estimates, but DOD disagreed, saying that recent estimates are sufficient, and that mitigating factors have already been identified.
DOD claims to be--and I think many officials genuinely are--concerned about improving their business practices, as can be seen in the somewhat recent establishment of the Business Transformation Agency (BTA). When I talked to BTA Director David Fisher last week, he told me that one of his goals is to help decisionmakers to have the context and information necessary to make smart business decisions, though he also admitted that BTA is struggling to come up with their own performance measures to determine how to measure their success. Still, accurate and realistic cost estimates are one of the most basic pieces of information decisionmakers need, and the GAO report reveals that the Air Force doesn't even have that.
-- Mandy Smithberger
Look, this is how it works. Let's say you're a government employee and you see a need for a new weapon. In this case you see that we haven't had a new airlifter since the early '90s and you want to remedy that situation. Not only is it well past time for a new airplane, but you've also just seen an airlift guy promoted to be head of the USAF. So acting in what you see as the best interests of the nation you lobby for a new airplane program within the government. Once you get your start and get some seed money, you enlist your potential suppliers to help you build program momentum.
The contractors come up with all kinds of whacky ideas, everything from full stealth, piloted/unpiloted with composite structure and vertical take off and land (VTOL) to an updated C-141 with a glass cockpit and high bypass engines. Understand, everyone involved knows the continued existence of this program depends on their being able to show a big bang for the USAF buck. Because they know this, some will produce numbers for their airplane that are, to put it frankly, lies. But they are lies that have the name and backing of a major US defense contractor standing behind them, so who's to question them? The system depends on these lies. If everyone told the truth, there would be no new airplane program. Ironically, typically the biggest lies are told about the most conservative designs, because anything you claim about a wild new design will be treated with considerable skepticism. Thus our current procurement system is biased against new technology (despite what the GAO might tell you).
Once the contractors get to the competition phase the whole point of the competition is to see who can sell the biggest lie. There is no down side to lying. The worst thing that can happen is you can work on the design for years and years until it finally comes to the point of producing hardware and then you have to admit your design won't work. That will either cause the program to be cancelled, in which case you count all the profit you've earned and get a bonus for cancellation, or it will be rebaselined. This means you get to throw out everything you did up to that point and design a whole new airplane that may or may not work. This causes the program to drag out longer and means profits go up, and still you don't have to produce anything.
You think I'm kidding? Look at the Airborne Common Sensor program. One company sold the government on an airplane that was half big enough, but it looked pretty good compared to the other that was one third big enough. Look at the Joint Strike Fighter VTOL airplane that wouldn't get off the ground. It's funny how little press that one got. They built an airplane that wouldn't get off the ground and everyone said, "ho hum". No one lost their job. No one even cared. And why should they? The company that built the prototype made a profit on every day they worked on that turkey. The only loser was the US taxpayer, so big deal. Next.
As long as companies have nothing invested and nothing to lose, why tell the truth? Telling the truth means you won't get selected. It means your program won't get funded. Were you hoping the defense contractors just wouldn't notice? It pays better to lie and you wonder why you buy lies. It pays better to fail, and you wonder why you buy failure.
Posted by: Dfens | Nov 25, 2008 at 01:58 PM