Can Anyone Fix the Defense Budget?
In the face of exploding costs, it seems like everyone has a plan to wrangle the Pentagon's spending. But the problem isn't the system — it's who's in charge.
Here we go again.
Every time the U.S. Defense Department has problems developing, building, or maintaining weapon systems within acceptable cost limits, there are calls to reform the acquisitions system. The 85 major weapon systems being developed and procured by the Pentagon, with over $400 billion in cost increases, have raised eyebrows as budgets have tightened — especially as projects like the troubled F-35 jet have run fantastically over its estimated price tag. Both the House and the Senate have introduced defense bills to “fix” the problems behind these cost overruns. Proposed changes range from minor — reviewing old regulations that have been built up over the years or better holding of program managers to task — to major overhauls. Among the most ambitious is Sen. John McCain’s (R-Ariz.). His proposal would transfer responsibility and oversight for major defense acquisitions programs from the secretary of defense back to the chiefs of the individual services and, he argues, create accountability and cap costs.
It’s a nice idea. But it won’t fix what’s behind the heaping cost overruns.
The problem, as history shows, does not lie in the defense acquisitions process itself. If anything, the issue has gotten worse since the most recent attempt to fix the system — the Weapons Systems Acquisition Reform Act of 2009. Rather, the biggest hurdles to purchasing the weapons and capabilities we need at a price we can afford are the politics involved and the people managing the process.
The F-35 joint strike fighter, the A-12 combat aircraft, the V-22 Osprey, and the M247 Sgt. York air defense system have all been famously troubled programs, suffering from interrelated problems of huge cost increases, overambitious technical aspirations, inter-service rivalry, and pressures to push the programs beyond their readiness. While the specific issues have varied, the common thread is the lack of strong leadership at the very top of the Pentagon to set realistic goals for the services, prioritize efforts across the Department of Defense, and hold people accountable for problems in bringing the programs to maturity.
The F-35 — perhaps the best-known offender in recent memory — became the first trillion-dollar weapons system, coming in at almost 100 percent over its projected budget. It not only aimed to meet the needs of the Air Force, the Navy, and the Marine Corps with a common aircraft, but former Secretary of Defense Robert Gates and then-Acquisitions Undersecretary Ashton Carter also moved the plane into production before testing was complete, even though it wasn’t urgently needed in combat in Iraq or Afghanistan. Moving it ahead before all of the technical problems were worked out, however, meant that the planes already bought and paid for had to be modified, further raising the cost of each aircraft.
Two other aircraft programs, the Navy’s A-12 Avenger and the Marine’s V-22 tilt-rotor Osprey, offer different lessons. Just as the Navy developed its high-end F-14 when the Air Force built the F-15 in the 1970s, it proposed building the A-12 after the Air Force began developing the F-22 in the mid-1980s — the military version of sibling rivalry in action. But by the time the contract for the A-12 was awarded in 1988, the defense budget had tightened as a result of the Gramm-Rudman-Hollings Balanced Budget Act of 1985 (the first sequester). The Navy, trying to hang onto the plane despite tightening budgets, claimed that a fixed-price contract would let it buy the A-12 for less than the Air Force’s F-22 — a claim that was patently ridiculous. Unfortunately, the Office of the Secretary of Defense allowed this fiction to persist for three years. But when former President George H.W. Bush’s Secretary of Defense Dick Cheney and his deputy, Don Atwood (former vice chairman of General Motors), discovered how absurd this was, they canceled the program for breach of contract in 1991 and instructed the Navy to continue buying the F/A-18. Cheney and Atwood also demanded that the contractor repay most of the $2 billion that had already been spent on the failed plane.
The V-22 tilt-rotor Osprey was conceived in the early 1980s as an answer to the shortcomings of existing helicopters, laid bare after the failed attempt to rescue American hostages during the Iranian hostage crisis. It was originally destined for the Army, the Marines, and the Special Forces. But the Osprey was hobbled with problems right from the beginning. The cost ballooned from an estimated $2.5 billion to $30 billion over two years. Moreover, the aircraft faced severe technical problems including multiple crashes by prototypes during testing, stemming from the immature tilt-rotor technology that enabled it to take off and land in a helicopter mode and then transition to an airplane mode during flight. In the face of these issues, the Army dropped out of the program. In the early 1990s, Cheney and Atwood attempted to cancel the Marine version, citing numerous problems with cost overruns.
Bill Clinton, however, stood behind the project during the 1992 presidential campaign in order to prove his defense bona fides and to appeal to voters in Texas and Pennsylvania, where the Osprey would have been built. During the election year, against the recommendations of the Pentagon, the Democratic Congress restored and continued to fund the program after Clinton took office. After reports of significant cost overruns, many deaths, and innumerable technical problems, the V-22 finally became operational some 25 years later, demonstrating that even when you have strong management, politics can force bad acquisitions decisions.
These problems are not restricted to aircraft. In 1982, the Army claimed that the Sgt. York air defense system was passing all its tests and should be moved into production. Unfortunately for the Army, but fortunately for the taxpayer, Rep. Dennis Smith (R-Ore.) tipped off the media that in the “successful” tests, the Sgt. York had not downed an enemy helicopter, but actually hit an outhouse fan in the area of the test. The public outcry resulted in then-Secretary of Defense Caspar Weinberger personally reviewing the program and finally cancelling it in 1985. Even after the cancelling of the Sgt. York program, it ended up costing taxpayers $1.45 billion, demonstrating that ill-conceived programs don’t even have to be on life support to waste money.
With such a dismal record of acquisitions blunders, it’s easy to understand the perennial calls to reform the defense acquisitions system. But there have been acquisition successes, too, even under the exact same defense acquisitions system.
The F-16, for example, was and is probably the most successful cost-effective aviation program in the history of the Defense Department. Since production was approved in 1975 by the secretary of defense, more than 4,500 have been built. However, the F-16 doesn’t have a smooth origin story — the Air Force originally didn’t want it. In the 1970s, the Air Force pushed for the two-seat F-15 fighter equipped with more advanced (and much costlier) avionics to expand its fleet. But two business-minded deputy secretaries of defense — David Packard, of Hewlett-Packard, and William Clements, the founder of SEDCO, the world’s largest offshore drilling company, who went on to serve two terms as governor of Texas — restructured the Air Force acquisitions process, given that in the post-Vietnam War decline of the defense budget, there was not enough money to build all the planes that the Air Force needed if they went only with the high-end system. They would be buying the F-16 instead, like it or not.
On the technical side, the Office of the Secretary of Defense insisted that production not be started until development was completed — in essence, what Packard called a strict “fly before you buy” policy. Finally, both deputies resisted calls from some to make the F-16 the low-cost option for the Navy’s high-end F-14. In this, the two deputies remembered the lessons of the Tactical Fighter Experimental program, the F-111, a sophisticated do-it-all fighter developed during the 1960’s to be used by both the Air Force and the Navy. But by trying to build one plane for both services and multiple mission sets, the Pentagon created so many technical and cost problems that it had to cancel the Navy version and build only a small number of planes for the Air Force.
Instead of making the Navy buy F-16s, Packard and Clements allowed the Navy to build its own low-cost F/A-18 jets instead. Without the repeated forceful intervention of these two industry titans, the F-16 would have been either never built or tugged in competing directions between the requirements of the Air Force and the Navy’s requirements. Trying to make the plane both meet Air Force’s need for a low-cost fighter and producing a two seat, low-cost Navy version capable of operating from a carrier would have created technical and cost problems for the F-16 that are all too familiar from the F-35 program today.
These two aircraft programs — which produced vastly different results — were developed through the same acquisitions system. So what happened? Most critically, the quality of the leadership in the Office of the Secretary of Defense plays an enormous role in the success or failure of defense acquisitions. Related to this, the preposterous cost overruns of the F-35 appeared less consequential as a part of post-9/11 defense budgets that had escalated to heights not seen since World War II. Without the budget pressures of earlier years, there was less incentive to keep cost overruns and costly programs in check.
What these and many other examples of acquisitions failures tell us is that the Office of the Secretary of Defense must take charge of every major defense acquisitions program. There must be a deputy secretary with a strong management background, like Packard, Clements, or Atwood, who is not afraid of making tough decisions and holding people and programs accountable for mismanagement. With the secretary taken up by other pressing issues at home and abroad, this is something that only the deputy can do. Therefore, Congress should not embrace McCain’s proposal to transfer responsibility back to the services; it will only exacerbate the problem. Christine Fox, a longtime Pentagon official who served as acting deputy secretary of defense for Chuck Hagel, explained in a June speech why this is a problem: “The services are incentivized to be optimistic. [They] want capability and, of course, they face incredible operational challenges. They are able to convince themselves they can have their program for less than anybody would have ever predicted, and sooner than anybody would have ever thought, so … they think, ‘Let’s just put that program in the budget, and it will all turn out fine.'” What can fix it, however, is good management, and the politics to back it up.
Photo credit: Kelly M. Agee/U.S. Navy via Getty Images