Pentagon's New Contractor Policy Doesn't Scare Defense Industry At All

The Pentagon's new contract acquisition policy -- heralded for getting tough on military contractors -- is actually a feeble, token attempt to change a system that has spiraled out of control to the enormous benefit of the defense industry.

Defense Secretary Robert Gates and his acquisition chief, Ashton Carter, announced a series of steps on Monday they said were intended to cut overhead costs and improve the Pentagon's "buying power."

The savings, they explained, could then go toward continued growth in "warfighting capabilities" -- as a way of mitigating what is expected to be an end to a decade of double-digit growth in the overall Pentagon budget.

Their goals, however, are small change compared to the enormous sums the Pentagon lavishes on its contractors.

The acquisition changes are, in fact, only one part of a $102 billion five-year reduction Gates put forward three weeks ago. As Winslow Wheeler, an expert on military reform at the Center for Defense Information, blogged for the Huffington Post at the time:

Gates' $102 billion reduction in overhead is a cumulative goal for five years, not one, and the bigger savings don't arrive until the elusive (may-never-happen) out-years. This will be after Gates, maybe even Obama, is long gone. The first year savings ($7 billion) is a puny 1.2 percent of the 2012 Pentagon spending plan. The public schedule includes no savings in the next fiscal year, the one for 2011 that doesn't even start until next October.

It's a testament to how corrupt the now $400 billion a year contracting process has become that the changes outlined Monday seem in any way dramatic; they are, mostly, simple assertions of common sense. Among the new policies, as summarized by me:

  • Cut down on awarding contracts without genuine competition.

  • Cut down on contracts in which government pays for all or part of cost overruns.

  • Reward higher productivity, innovation and excellence, rather than other things.

  • Get credit for government's generous cash-flow policies.

  • Eliminate valueless overhead and administrative fees; for instance, don't pay contractors' bidding and proposal expenses when there was no bidding.

  • Add more and better government acquisition workers.

  • Improve audits.

  • Let cost considerations shape requirements and design for new programs such as the presidential helicopter, the ground combat vehicle and the new nuclear submarine fleet.

  • Don't allow contractors to reduce production rates without approval.

The Atlantic's Marc Ambinder may see this as evidence that "the pendulum has swung in the direction of reform," away from the Bush-era corporatization of the Pentagon. But the titans of the defense industry actually seem quite delighted.

As Bob Cox reports for the Fort Worth (Tx.) Star-Telegram:

Defense industry officials said they welcomed Carter's invitation to discuss changes to contracting policies and government requirements that would help lower costs.
In a statement issued after the Pentagon meetings, Lockheed Martin Corp. Chief Executive Robert Stevens praised Carter's initiative and promised cooperation.

"We see the world through exactly the same lens as Secretary Gates and Dr. Carter, and we intend to be relentless in focusing on program execution, on continuously improving our quality, and on driving affordability into every process and every program," Stevens' statement said."

And the defense giants' trade group, the Aerospace Industries Association, issued a positively cocky response, even going so far as blaming government regulations for costing them money:

"We are pleased that the department is taking a comprehensive look at what drives up costs in government procurements," it said. "One of the most significant challenges faced in reducing costs is that the government continues to impose new government-unique contracting regulations that as early as 1994 were estimated by Coopers and Lybrand to increase the cost of products that (the Defense Department) buys by 18 percent."

Defense analyst Wheeler tells HuffPost in an e-mail:

Is converting fat into tooth good? Yes. Is the $102 billion enough of a cut? Not even close. After it is effected out there in 2015, there will be layers upon layers of fat and useless overhead to remove, but the even sadder truth is that the excess headquarters and bloated DOD management and corporate types will fight this tooth and nail. All the Ashton Carter memoranda the printing presses can squeeze out will not do much of anything unless and until the DOD budget starts to shrink, rather than grow by 1% real growth per year. We added $1 trillion to the base DOD budget from 2001 to 2011, not counting war money. For the bureaucracy and corporate types to take the actions seriously, we have to go on a path where we start to get all, repeat all, that $1 trillion back. It will mean a DOD world very different from the one we have now. Precisely that is needed.

There are, in fact, some flanking moves afoot in Congress that bear watching.

As Sam Stein wrote for the Huffington Post in May:

A leading Republican on the president's deficit commission has called, informally, for an audit of the Department of Defense, arguing that without a true sense of what is being spent and where, it will be impossible to achieve significant budget savings.

In a detailed, wonkish and occasionally fascinating 10-page letter sent to commission Chairmen Alan Simpson and Erskine Bowles on Wednesday, Sen. Tom Coburn (R-Okl.) laid out a host of areas where the Pentagon's fat could be trimmed.

Here's that letter.

And as I wrote a few weeks ago, a task force formed by a bipartisan group of iconoclasts in Congress led by Rep. Barney Frank (D-Mass.) identified nearly $1 trillion in defense budget cuts over the next 10 years.

That would be real change. This -- is not so much.