an annotated brief - center for strategic and international studies

An Annotated Brief

DEPARTMENT OF DEFENSE ACQUISITION

AND

PLANNING, PROGRAMMING, BUDGETING,

AND EXECUTION SYSTEM REFORM

A BEYOND GOLDWATER-NICHOLS PHASE III

ANNOTATED BRIEF

PRINCIPAL AUTHOR

DAVID SCRUGGS

CONTRIBUTING AUTHORS

CLARK MURDOCK

DAVID BERTEAU

AUGUST 2006

About CSIS

For four decades, the Center for Strategic and International Studies

(CSIS) has been dedicated to providing world leaders with strategic

insights on – and policy solutions to – current and emerging global issues.

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Cover Photographs: © United States Department of Defense

Cover Design by Jake Harrington, CSIS

Beyond Goldwater-Nichols:

DoD Acquisition and PPBES Reform

Phase 3 SummaryAugust 2006

David Scruggs, Principal AuthorClark Murdock & David Berteau, Contributing Authors

Purpose

The purpose of the Beyond Goldwater-Nichols Phase 3 Acquisition Reform effort is to:

• Compare and contrast recommendations of major recent acquisition and PPBES reform studies including – Beyond Goldwater-Nichols Phase 2 (BG-N)– Defense Science Board, Summer - 2005 Session - Transformation

Assessment (DSB)– Defense Acquisition Performance Assessment Project (DAPA)– 2006 Quadrennial Defense Review (QDR) Report

• Give status of current action, if any, on these issues• Prepare basis of Beyond Goldwater-Nichols Phase 4 work on

DoD Institutional Reform and Governance

INTRODUCTION

Defense acquisition reform has been on-going almost continuously since the original Goldwater-

Nichols legislation was passed in 1986. Unfortunately, too much attention has been paid to fine-

tuning the “small a” acquisition execution process and not enough attention has been paid to the

“Big A” overall acquisition system of requirements, budgeting and execution as we stated in our

Beyond Goldwater-Nichols Phase 2 report (BG-N) published in 2005. CSIS made a number of

recommendations for fundamental acquisition and logistics reform in BG-N Ph 2. This year, we are

updating progress on acquisition reforms begun over the past 12 months and tracking

recommendations of other influential panels on this topic. Specifically, this report reviews

recommendations of the Defense Science Board (DSB) Summer 2005 Study Session on

Transformation Assessment, the Defense Acquisition Performance Assessment Project (known

commonly as either the “DAPA Panel” or as the “Kadish Panel” after the project Chairman Ronald

Kadish, USAF LtGen Retired); and the 2006 Quadrennial Defense Review (QDR) Report. This

work can be considered as foundational for more substantive analysis and recommendations on

DoD Institutional Governance to follow in BG-N Phase 4.

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Key Problems Addressed

• Requirements process does not address COCOM needs adequately

• Execution of defense policies suffer from insufficient processes to implement senior management decisions

• Resource allocation process still inherently unstable – For major Service programs– For Joint programs

• Acquisition execution process lacks “strategic accountability”

• Implementation still a problem in overall governance of the acquisition system

• Logistics organizations and processes not aligned with DoD-wide supply-chain management needs

KEY PROBLEM AREAS ADDRESSED

In keeping with CSIS’ problem-centric approach, we have identified six key problem areas for

continued tracking and investigation. Requirements, resource allocation (budgeting) and

acquisition execution all have varying needs for policy-level reforms. These three major processes

form the “Big A” acquisition system within DoD. They determine what and how many new

capabilities DoD will acquire, as well as when and how these will be developed and procured. The

current requirements process remains Military Service-centric and does not easily accommodate

emerging COCOM needs in a timely manner. There remains a major disconnect, for only the

COCOMs, who are responsible for planning and conducting military operations, have operational

requirements. They are the ultimate “customers” for the capability provided by the Military

Services, defense agencies and SACOM, the “joint provider” of special operations capabilities.

Therefore, the COCOMs must be given mechanisms to shape requirements demand to fill current

and future needs.

The current Planning, Programming, Budgeting, and Execution System (PBBES) resource

allocation process is not integrated with the requirements process and does not provide sufficient

resources for joint programs, especially in critical early stages. Lack of coordination between and

perturbations in resource planning and requirements planning frequently result in program funding

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instability. Such instability increases program costs and triggers schedule slippages across DoD

acquisition programs. Chronic under-funding of joint programs is endemic to the current resource

allocation system. As Department operations are increasingly executed on a joint basis, more

efficient allocation of joint resources is becoming an imperative.

Strategic accountability in the acquisition execution process involves aligning appropriate

responsibilities and authorities within the Department’s acquisition organizations. Implementation

of the Goldwater-Nichols reforms in the 1980s and early 1990s resulted in the Services controlling

requirements and resources but OSD, through the Service Acquisition Executives, being responsible

for acquisition execution through a separate chain of command. This split in responsibilities has

resulted in a lack of institutional accountability for the timely delivery of new systems. Alignment

of execution accountability will incentivize improved decision making throughout the acquisition

reporting chain.

In addition, policy implementation and management of DoD’s logistics organizations have also

emerged as important functional areas which are critical for DoD’s transition to a leaner, more

effective organization. Today, procedures for ensuring communication of and compliance with

OSD policies are highly fragmented. The organization and delivery of common business and

technical support functions within DoD are also fragmented as well as highly redundant. Logistics

functions work fairly well in DoD except in surge situations (where they are needed most) and

economic efficiencies (which will be increasingly important in the future as defense investment

funding is constrained).

Requirements Process (1)

The Problems:

• The center of capability “demand” (i.e. JROC) is run by heads of “supply” (i.e. Service Vice Chiefs)

• No institutional advocates for mid- and long-term joint capability requirements of regional commands

• Creeping requirements – both in the Key Performance Parameters (KPPs) and in the contractual standards to which systems are tested -- slowing system fielding and significantly increasing costs

• Significant time-horizon disconnects between Operators needing 1-2 year cycles and Acquisition & Test communities using 5-10 year schedules

THE REQUIREMENTS PROCESS

As DoD missions become more varied, adversaries more numerous and their capabilities more

diffused, U.S. capability needs to become much harder to predict. Rapidly changing environments

require much closer coordination between capability suppliers and forces in the field. The current

requirements system is overly Service-centric, process (vs outcome) focused, and out-of-synch with

some of the emerging threats.

The current center of demand for new defense capabilities is the Joint Requirements Oversight

Council (JROC), comprised of the Vice Chairman of the Joint Chiefs of Staff and the Vice Chiefs

of Staff of each of the Services. This group decides which types of systems and services DoD will

need in the future and authorizes capabilities development by the Services with the support of the

Joint Capabilities Integration and Development System (JCIDS) process. As holders of Title 10

authorities, the Services are responsible for supplying operationally capable armed forces for our

nation’s needs. However, since the 1958 Defense Department Reorganization Act, the Services and

the Service Chiefs no longer have warfighting responsibilities. The regional and functional

Combatant Commanders (COCOMs) now have that responsibility. As such, it is the COCOMs and

their staffs who are planning and executing field operations today and are most familiar with

operational requirements in their specific areas of responsibility (AoRs). It is also the COCOMs

who now have to respond to the fragmentation of threats around the globe: from GWOT to the rise 5

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of unfriendly regional powers (e.g. Iran, N. Korea), to the current operations in Iraq and

Afghanistan, to the hedging for future near-peer confrontations, to the providing of humanitarian,

peacekeeping and counter-narcotics assistance in weakly governed or un-governed parts of the

world. Since the COCOMs have become, in essence, the chief customers of operational

capabilities, it is they – not the Service Chiefs and Vice Chiefs – who constitute the center of

capabilities demand today.

The great majority of military operations are conducted by the regional COCOMs. They are

resourced for their operational missions, but not for robust roles in force development or resource

allocation. Moreover, the focus of the regional commands – as befits their responsibility to plan

and conduct military missions today – tends to be near-term. An increasingly robust Integrated

Priority List (IPL) process has increased the COCOMs’ ability to advocate near-term capability

needs. Yet, until recently, there has been inadequate advocacy of the mid- to long-term needs of the

regional commands in the current DoD system.

Requirements creep has always been a problem in defense acquisition. It has become a particularly

difficult problem over the past two decades as DoD builds fewer platforms and initiates fewer

overall new programs. As fewer programs are initiated and fewer numbers of units are procured

under each program, the temptation is to make each of the few units that do get built as capable and

multi-dimensional as possible. This has resulted in an explosion of Key Performance Parameters

(KPPs) and contractual standards to which systems are subjected prior to fielding. KPPs were

supposed to be the few key variables around which designers were to optimize system trade-offs in

order to meet the initial system requirements. Examples would be minimal radar signature, weight,

survivability, interoperability, etc. Unfortunately, new DoD systems are being required to meet not

a few but dozens of KPPs when supporting KPPs are included. Examples of this trend include

very general KPPs for new systems to be “Net-Ready” or “Highly Survivable”. While these are

straightforward requirements on their face, they have spawned multiple sub-KPPs on programs such

as FCS, DDG-1000 and JSF. The results of these expanded lists of KPPs and their attendant

contractual performance requirements is that the few platforms that are being built are taking ever

longer and costing more to validate and test than would otherwise be true. This slows the delivery

of capabilities to the field and places increased demands on the existing acquisition system. This

practice also exacerbates the perception of unchecked unit cost growth in defense systems, bringing

increased attention from Congress and others.

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Finally, there exists a disconnect between the needs of operators today and the acquisition and

testing paradigm currently used in DoD. The current system was developed during the Cold War.

Weapon system requirements were based on meeting a perceived Soviet capability at a projected

but undetermined time in the future. Performance was paramount and development time was

important but not critical as the US was in an arms race not a shooting war. Operators today,

typically via the COCOMs, see system and services needs develop quickly. In many cases, they

need solutions in timeframes of months or a year or two. The larger acquisition community and

particularly the test community still operate largely in the mode of an earlier era and are not

sufficiently responsive to many current needs.


• All four studies recommend building a more COCOM-centric requirements process based on validated operational capability needs

• Regarding JROC– Restructure it: BG-N, DAPA and DSB advise restructuring the JROC

• BG-N - replace Vice Chiefs with COCOM deputies and civilian representation (AT&L, PA&E, Policy and DDR&E)

• DAPA and DSB – add civilian representation (AT&L) to existing JROC– Refocus it: QDR - more collaborative investment decisions among

warfighter, acquisition and resource communities• Regarding JCIDS

– Replace it: DAPA - replacing JCIDS with simpler, COCOM-focused processes as superior arrangement to current system

– Restructure it: DSB – leave detailed program assessments to others, integrate joint capabilities across DOTMLPF spectrum

– Refocus it: QDR – need more collaborative investment decisions among warfighter, acquisition and resource communities

– BG-N: too early for final assessment, but early returns meager

Summary of Key Study Recommendations:

The COCOMs are the repositories of theater-level experience and operational planning expertise

and hence should be given a key role in setting joint capability requirements. The BG-N study

team, in both its Phase 1 an Phase 2 report called for an enhanced COCOM role in the requirements

determination process, an idea that was subsequently endorsed by the DSB, DAPA Panel and QDR

reports as well. The current JCIDS process for evaluating and setting joint requirements has

received multiple recommendations for replacement, restructuring or refocusing.

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• Regarding joint long-term requirements determination– BG-N – Create 3-star, Washington-based JFCOM office to determine and

advocate for future COCOM capability needs– DAPA – COCOMs to provide 15-year forecasts of capability gaps and

excesses biennially– QDR – Designate a single lead advocate for joint warfighter

• Independent analysis– BG-N – build stronger PA&E to provide independent analysis to SecDef on

broad range of strategic choices– QDR – Implement transparent agile decision process with authoritative cross-

department info sources and common analytical tools• Operational Test and Evaluation

– DAPA – establish “time-certain” and fiscal constraints for OT&E of major weapon systems

– DAPA - create a COCOM-defined “operationally useful” testing level

Summary of Key Study Recommendations (Cont’d):

In its Phase 2 deliberations, the BG-N study team considered a number of options for strengthening

the advocacy of mid- and longer-term needs of the regional COCOMs. These included the

possibility of separating Joint Forces Command (JFCOM) into two commands – the Joint Readiness

Command, focusing on readiness, training and force management, and a JFCOM, focusing on joint

force development, joint doctrine, and joint experimentation. The BG-N study team, however,

decided instead that a more robust JFCOM presence in Washington, with the expressed mission of

serving as a surrogate for the regional commands in the joint force development process, was a

more prudent recommendation. Although subsequent reports did not endorse this particular

proposal, most of the expert panels generally agreed that there should be a single, lead advocate for

joint warfighting capabilities.

OSD needs to be in a position to support this new joint requirements process by having a stronger

PA&E analysis capability, more authoritative cross-departmental information, and accepted

analytical processes. Operational testing should be coordinated to meet operational as well as

institutional (safety, reliability, etc…) requirements.

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• Execution Planning– DSB –

• Move from requirement-based to judgment-based execution planning by forcing capability trade-offs to maintain cost and schedule

• Limit technical reach• Limit Spiral Development to militarily useful increments with modest

cost/schedule/performance risks – DAPA – USD(AT&L) to delegate to SAE’s authority to reschedule non-

Key Performance Parameter requirements to future blocks


In the interests of making acquisition programs more manageable, DSB had several

recommendations clustered around the idea that less technical/cost/schedule reach up front gives the

Department more useable capability faster. Managing non-KPP requirements at the SAE vs at the

AT&L-level would also expedite program decisions without losing significant senior civilian

control according to the DAPA Panel. It might also provide an incentive for the Services to reduce

the number of KPPs, consistent with our earlier findings.

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Recent Developments:

• Group of 12 emerges as key decision-making body during 2005 QDR and evolves into Defense Advisory Working Group (DAWG)

• COCOMs taking more activist role in advocating joint capability needs– STRATCOM revives Senior Warfighting Forum (SWarF) – regular VTC

meetings of COCOM deputies to address joint capabilities across functions (e.g., intelligence, JC2, etc.) driving implementation through virtual task forces

• Vice Chairman JCS initiatives to strengthen JROC– JCIDS bypassed by “Most Pressing Military Issues” decision agenda– Adds civilian representation (including DNI) to JROC depending on issue– COCOMs invited to attend via VTC– JROC goes on road to seek COCOM feedback on JS-generated “Joint

Capability Gaps”

There are several important developments that should have a positive impact upon joint capabilities

determination and DoD resource allocation. A more effective senior-level decision making body,

the Defense Advisory Working Group (or DAWG), now takes a much more active role in DoD

planning processes. The Combatant Commands, particularly STRATCOM and JFCOM, are taking

major initiatives.Through the SWarF process, STRATCOM, on behalf of all the COCOMs,

facilitated a process that identified the top collective IPLs for the commands and used its IPL to

advocate those during the FY 2008 POM bill. According to a classified briefing given on 18 May

2006, JFCOM also sought and gained greater resourcing for common command needs through its

IPL process. The 2006 QDR report called for a “future joint warfighting advocate” and earlier

drafts, but not the final May 2006 version, of the 2006 UCP named JFCOM the “Joint Warfighting

Advocate.” JFCOM told the BG-N study team in mid-May 2006 that they interpreted this

responsibility as advocating the joint capability needs for current and future Joint Force

Commanders. Moreover, although JFCOM had not established a formal 3-star office in the

Washington area (as called for in BG-N Phase 3), the JFCOM J-8 maintained a continuous presence

in the Pentagon to ensure more effective advocacy for JFCOM positions.

In addition to these promising developments, the VCJCS has taken several steps to increase the

participation of the Combatant Commands in the JROCs. Although these fall well short of the BG-

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N Phase 2 recommendation to replace the Service Vice Chiefs with the COCOM deputies, they

should lead to increasing levels of attendance and participation of the COCOMs in the validation of

joint capability requirements. It also appears that the Joint Staff may be short-circuiting some of the

lengthy Joint Capabilities Integration and Development System (JCIDS) processes. The numerous

oversight and functional capabilities boards and lengthy document review have yielded a pretty

unwieldy process that was harshly criticized by most of the expert panels. It now appears that

Pentagon staffers are finding workarounds and alternative methods to JCIDS in order to meet

systems development and operational needs and schedules.


Recent Developments (Cont’d):

• QDR Execution Roadmap for DoD Institutional Reforms experiments with new approaches– Joint capability portfolios & portfolio management – Joint funding and execution mechanisms– Experimenting with JC2, NCOE, BA and Logistics

BG-N Study Team View:• Promising developments that move in right direction• Need to institutionalize current reforms which are working based on

personal relations today• Will address in Phase 4 work on DoD Institutional Reform and

Governance

From the CSIS Study Team’s perspective, recent developments within the Department regarding

requirements are generally positive. These changes will need time to be accepted and pushed

throughout the organization. Shifting funding mechanisms and authorities to better align with joint

needs will be the next major challenge for the Department. Most importantly, these requirements

reforms must be institutionalized to have any lasting effects. This is an area we will focus on more

when we review DoD Institutional Governance as part of our Phase 4 effort.

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DoD Management and Resource Allocation (1)

The Problems:

• Resource allocation perturbations cause program instability– Procurement cuts to pay for O&M– Lack of financial discipline – too many programs chasing too few

dollars – exacerbates situation• Few systems “born joint” in Service-centric POM process

– Despite over 20 years of trying to build interoperable C2 systems, the lack thereof is still viewed as one of DoD’s most pressing capability shortfalls.

• Little meaningful planning and even less attention to policy implementation in PPBES

DEPARTMENT MANAGEMENT and RESOURCE ALLOCATION

Experience has shown that funding stability and the locus of funding control have huge impacts on

program outcomes. Stretch-outs, unplanned funding level changes and inconsistent budgeting

priorities across the Department wreak havoc on program managers’ schedules and abilities to meet

cost targets. The high costs for repair and maintenance of equipment being used in Iraq and

Afghanistan are straining on the Department’s procurement, and to a lesser extent, RDT&E

budgets. Under the current budgeting system, there are no “shock-absorbers” to allow for the

orderly accommodation of unanticipated changes in funding requirements. Currently, costly and

inefficient supplemental appropriations are used for this purpose. Common commercial practices

such as management reserves and contingency funding are virtually non-existent. Exacerbating this

problem is the endemic Department practice of programming too many projects for the funding

available.

Under the current Program Objective Memorandum (POM) process, Service priorities routinely

take precedence over joint priorities. Near-term shortfalls drive out long-term procurement funding.

Not only are joint programs consistently under-funded – witness the high number of LD/HD (low

demand/high density) assets in the C4ISR area – but critical service-acquired capabilities,

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particularly in the command and control (C2) area are not interoperable. As recently as Operation

Iraqi Freedom (2003) it was evident that joint command and control among US ground forces and

among coalition allies remains a pressing issue despite 20 years of attempting to build interoperable

C2 “from the outside in.”

The term “Execution” was officially added to the description of the Department’s Planning,

Programming, Budgeting and Execution (PPBE) resource allocation process in 2003. The apparent

intent was an increased focus on tracking and implementation of senior OSD management’s

decisions throughout DoD. There have been scant visible results of this new focus on policy

execution to date. In an effort to improve governance, OSD appears to be migrating to a

management-by-exception method of operations. If OSD intends to manage by exception,

processes for identifying, prioritizing and raising policy exceptions to appropriate senior leadership

levels needs to be put in place. Only through the creation of these processes can senior OSD

leadership know its policies are being implemented. More importantly, only through demonstrated,

consistent execution of senior OSD leadership decisions can OSD effectively guide Service and

Agency managers in the execution of their respective missions and responsibilities.

• Joint capability funding and authorities– Move responsibility out of Services: BG-N, DSB and QDR

• Form JTF with budget and acquisition authority over C3, give to STRATCOM or JFCOM but not both

• Assign clear responsibility to DoD CIO for NCOE, to STRATCOM for global C2 and to JFCOM for theater-level C2

• Reorient policies around joint capability portfolios starting with Joint C2, NCOE and Space

• Stabilize acquisition funding– Establish stabilization and/or capital accounts: DAPA and QDR

• Create stabilization account under USD(AT&L) control for all MDAPs as they pass Milestone A; establish management reserve contingencies by holding termination liabilities at Service level

• Explore establishing capital accounts for MDAPs– DSB – Intensify efforts to maintain stable funding



Most studies recommended moving the greater responsibility for Joint C2 (JC2) and Net-Centric

Operations (NCO) into JFCOM or STRATCOM or both. These recommendations differed on

much acquisition authority the joint commands should have. As will be discussed shortly, there

continue to be promising developments in this area. A significant amount of emphasis was also

placed on creating stabilization or capital accounts to dampen annual funding instability

[particularly on major acquisition programs (MDAPs)] as part of a broader focus on program

stability.

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• Ensuring joint task execution– BG-N – Create Office of Implementation & Execution Review and put

under new USD(Management)– QDR – Establish Joint Task assignment Process which will assign and

oversee joint missions and verify that joint tasks have all sufficient resources and authorities to execute in timely manner

• Rationalize administrative functions– BG-N

• Establish new USD(Management) that would be responsible for all commercial-like defense agencies and any programs managed by OSD

• Consolidate much of Service Secretariat staffs into Service Staffs• Disband J-7 and transfer responsibilities to JFCOM J-3, J-5, J-8

– QDR • Migrate toward shared services model for support functions including

administration, management and computer support• Create new horizontal organizations to better integrate key DoD

activities such as communications and human capital strategies• Break out budgets by joint capability areas (QDR)



In addition to funding issues, the allocation of administrative effort to track and ensure

implementation of cross-departmental tasks was examined by the review panels. Both the BG-N

study team and the 2006 QDR recommended more centralized management, although BG-N sought

an organizational solution (e.g., an Under Secretary for Management) and the QDR emphasized

process solutions (e.g., a new Joint Task Assignment Process). The BG-N study team, however,

continues to believe that organizations have to be created or empowered to carry out new

responsibilities. Simply mandating that current organizations do business differently is unlikely to

work. In some cases more effective, centralized management will require the consolidation of

existing administrative offices. In other cases, per the QDR, this may require the creation of new

horizontal organizations for provision of shared services and functions.

Further recommendations included partial OSD and Joint Staff combinations, restrictions on

reallocations of program funding and new budgeting guidelines. The QDR took a bold step by

calling for Department budget breakouts by capability areas managed through a portfolio approach.

The QDR Execution Road Map task force for DoD Institutional Reform and Governance is

experimenting in this effort, and the BG-N study group will return to this issue in its Phase 4 work.

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• Joint capability funding and authorities– Roadmap being created for Joint Capability Portfolio Management– Comptroller/PA&E/AT&L tasked to combine financial databases to lay

groundwork for capabilities-based budgeting– Dir Admin & Mgmt (DA&M) assigned to develop a Joint Task Assignment

Process for assigning and resourcing joint missions and tasks• Stabilize acquisition funding

– IPT no. 5 assigned to develop realistic guidelines for use of capital accounts at capability portfolio and program levels

– Comptroller/AT&L tasked with establishing capital account management processes for all MDAPs

BG-N Study Team View:• Magnitude of the problems seem to outstrip options being looked at• Need to move beyond organization & process changes to funding

mechanism. – Give joint entities OPCON for program execution in key areas (e.g. JC2)

• Phase 4 to re-visit fragmentation of DoD corporate planning process



Several initiatives for joint program funding and MDAP stability have been undertaken recently –

most within calendar 2006. For example, in the area of Joint C2, STRATCOM and JFCOM

decided through the SWARF process that they were both stakeholders in JC2 – STRATCOM at the

global level and JFCOM at the theater/operational level – but that Defense Information Systems

Agency (DISA) would be the “chief architect and engineer” for JC2. And, as reported in BG-N Ph

2, STRATCOM’s 3-star Joint Functional Commander for Global Network Operations is dual-hatted

as the Director of DISA. In early spring 2006, DISA released new Network Enabled Command

Capability (NECC) concept which established JFCOM as the lead for determining JC2

requirements. It now appears that greater coherency is emerging in the critical area of Joint

Command and Control.

While it is too early to tell which of these recent initiative will be effective and which will not, the

BG-N study team still believes that planning processes, particularly as it relates to programming and

budgeting, is still too Balkanized to yield significant positive results. This will be a key focus area

in BG-N Phase 4.

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Acquisition Management (1)

The Problems:

• Same litany of complaints about the acquisition system that preceded Packard Commission – not responsive, cost overruns, schedule delays, etc

• Strategic accountability lacking in terms of – Service Chiefs control requirements and funding but not acquisition

• G-N took Service Chiefs out of PM-PEO-SAE-DAE structure– No single source to integrate requirements, acquisition and resource

allocation processes• DoD lacks strong advocate for next round of breakthrough

technologies – Little coherence or jointness in DoD S&T

ACQUISITION MANAGEMENT

Goldwater-Nichols reforms attempted, but ultimately failed, to get at the root of DoD’s acquisition

execution problems. Recent Defense Selected Acquisition Reports (SARs) to Congress provide

one example of the magnitude of the problem. Quarterly SAR reports are required for major

programs that have experienced over 15% in unit cost growth over their base years and/or have

incurred over six months schedule slippage. As of December 31, 1999, there were 73 programs on

the SAR list with aggregate cost estimates totaling $742 Billion. By December 2005 there were 85

programs on the SAR list with estimated total costs of $1.58 Trillion indicating a 213% aggregate

cost growth in just six years. Clearly, problems remain. Aligning resources with responsibilities

and empowering an advocate(s) for critical new technologies development are also key issues of

acquisition management. When Under Secretary of Defense Research & Engineering Bill Perry

(later Secretary of Defense Perry) successfully advocated for a DoD-wide R&D emphasis on

stealth, precision and speed of operations in the late 1970’s, he laid the foundations for the current

U.S. lead in military technologies. To ensure operational advantage for the U.S. military over the

next 30 years, the Department will need a technical champion with an enterprise-wide view of the

R&D vectors to be exploited.

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• Restore Service Chiefs acquisition role– Realign acquisition execution responsibility under Service Chiefs: BG-N,

DSB and DAPA• BG-N – Restore authority of Service Chiefs over execution of

acquisition programs; get AT&L out of micromanaging (via proliferating IPTs) acquisition programs

• DSB – Restructure acquisition processes to give Services clear responsibility and accountability through the Service chain of authority

• DAPA – Establish 4-star System Acquisition Commands (SAC); PEO’sreport to 4-star SACs on programs up to Milestone B, to SAEs after

• Extend technical leadership – Increase DDR&E stature and scope: BG-N and DAPA

• BG-N – Reorganize USD(AT&L) to USD(TA&L); make DDR&E Principal Deputy; DDR&E appointed to JROC

• DAPA – DDR&E coordinates all Service S&T transition plans with JCIDS replacement organization (JCAD); DDR&E appointed to JCAD


Three of the four major study panels determined that realigning acquisition execution under the

authority of the Service Chiefs was a key step towards improving acquisition performance. In the

pre-Goldwater-Nichols era, the Service Chiefs had acquisition execution authority and were

dominant in a Service-centric requirements determination process. A key difference in the current

situation is that the expert study groups also recommend that DoD adopt a more COCOM-centric

process for determining joint capability requirements. The underlying assumption of these recent

recommendations is that the Military Services are the “suppliers’ of capabilities to the COCOMs.

The COCOMs should have the dominant voice in the “demand” side of the equation, namely in

determining which capabilities are needed to meet their operational requirements.

Raising the stature and span of control for the DDR&E was seen as an important step in addressing

the issues of DoD’s continued technological leadership. Twenty-five years ago DoD made major

investments in stealth, speed and precision strike technologies which we are benefiting from today.

To restart the next defense technology evolution, it is necessary for DoD to empower technological

leadership and organize to fund it accordingly.

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• Enabling rapid acquisition– BG-N – Expand and rationalize the rapid acquisition process– DSB – Provide a mechanism for rapid insertion of new capabilities for

forces engaged in operations• Adopting time-certain development requirements

– DAPA – Establish non-adjustable time-certain development requirements for MDAPs; 6 yr max timeline from Milestone A to IOC

– QDR – Shift to time-certain program development approach trading performance and cost goals to meet schedule

• Establish risk-based source selection – QDR – Replace cost-based source selection process with selection based on

technical and management risk of bids• DAPA – Realign Milestone B decision to occur at Preliminary Design Review• DSB – Create net-enabled DoD-wide business management information system;

USD(AT&L) is lead for all business process support


Additional recommendations for improved acquisition management were made by all of the studies.

Each study emphasizes different aspects of acquisition. BG-N and DSB tended to focus on

enabling factors including processes for rapid acquisition, business management systems and

streamlining oversight (next slide). DAPA and QDR made operational level suggestions of

mandating time-certain development requirements and risk-based (vs cost-based) source selection

criteria. These recommendations merit further consideration in BG-N Phase 4.

21


• Streamline the oversight process – BG-N – Use BRAC-like process to consolidate congressional committee

oversight of DoD– DAPA – Streamline oversight process

• Stabilize acquisition leadership– DSB – Seek legislation to make it easier to attract senior and mid-career

professionals; need uniform financial disclosure and recusal standards– DAPA

• Establish via White House a pool of cleared, non-career senior executives which may be appointed to fill acquisition executive leadership

• Seek legislation to establish SAEs as 5-yr fixed Presidential appointments• Elevate SAE’s and Service Under Secretaries to Executive level 3

positions• Seek legislation to retain performance military acquisition personnel

beyond Defense Officer Personnel Management Act (DOPMA) limits• Immediately increase number of federal acquisition employees offset by

reductions in contractor support funding


Streamlining Congressional oversight was recommended by both BG-N and DAPA. These

recommendations were based on the notion that excessive review by multiple Congressional

committees, members and staffers consumed an enormous amount of senior DoD leadership time

that could be more effectively spent running the Department. To the extent a politically feasible

process to consolidate oversight can be adopted, possibly based on the BRAC model, it would save

tens of thousands of man-hours of effort and cost while enabling Congress to better focus its scarce

resources.

The stabilization of acquisition leadership also received attention from DSB and especially DAPA.

To assist the Department in attracting senior executive talent, DSB and DAPA argued that Congress

must allow a more transparent process of disclosure and recusal and allow the Administration to

pre-approve and pre-clear high value candidates. Due to their sensitive acquisition roles, DAPA felt

the SAE positions should be given 5-yr terms and elevated. DAPA also felt the DoD acquisition

corps should be rebuilt by retaining selected uniformed personnel and rebuilding the civilian

professional ranks with cuts in contractor funding.

22


• Options of reinstating acquisition authority to the Service Chiefs and elevating the strategic direction of DoD S&T (by elevating the DDR&E role) seem to be receiving little attention– New Under Secretary of Defense (AT&L), however, seems intent on shifting

focus of AT&L to strategic level and away from program management• Some minor initiatives to improve performance

– Technology Maturation Assessments– “Back to Basics” movement in space acquisition– AT&L/PA&E/JtStaff assigned to give schedule increased emphasis in

program decision processes• Creating Risk-based source selection process

– AT&L tasked to define appropriate weighting criteria for capability, cost and past performance in source selection process

• New priority of creating trade-offs among risk, capabilities and funding


There have been several recent but fairly modest initiatives to address the key acquisition

management issues. This may be the first wave of more substantive changes to come based on a

subtle shift in AT&L leadership focus from operational program management oversight to a

strategic governance approach. Current initiatives such as more aggressively managing risk at the

early stages of the development process in terms of assessing technology maturity more accurately

and giving increased weigh to getting capabilities into the field faster may prove fruitful in the next

few years, but it may be too early to assess their ultimate impact. The ground-work for creating a

risk-based, source-selection process is being laid. If adopted, this change would significantly shift

the defense contracting paradigm away from the cost-as-independent-variable focus the Department

has used since the mid 1990’s. Finally, the willingness to trade system capabilities for less

development risk and more timely initial operating capability (IOC) within constrained funding is a

significant change from past DoD acquisition approaches, possibly more appropriate for the security

environment today.

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BG-N Study Team View:

• Promising developments may be moving the Department in the rightdirection

• Phase 4 Goal – Build an integrated package of simple, but significant actions that Congress and the Pentagon can embrace and implement.

It is our view that the current reforms put in place by incoming DoD senior leadership need time to

percolate throughout the DoD acquisition system. Incorporating early results, CSIS will assemble

an integrated package of actionable initiatives over the next six - nine months and vet these with

senior Congressional and DoD leadership before finalizing them.

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Logistics (1)

The Problems:

• US has world’s best military logistics system – but at huge cost• Logistics now a $100B + activity • Visibility into the supply-chain is significant problem as

– Each Service has multiple inventory, transport and order tracking systems with limited DoD-wide interoperability

– Multiple seams among global – regional and strategic – tactical hand-offs of goods and information

• Current processes include multiple conflicting incentives– Warfighters always want extra margin of supply – but don’t pay for it– DLA has increased control over how much and where commodity

stocks are positioned – but Service Materiel Commands determine where parts inventories are held

– TRANSCOM has CONUS and global air, sea, land distribution mission – but Service Materiel Commands also move significant loads (esp. in CONUS) without TRANSCOM coordination

LOGISTICS

The US has been able to get its logistic needs met to date by brute force. Huge amounts of people,

assets and funds are now devoted to supplying, repairing and maintaining our armed forces and

their equipment. In a period of continued high OPTEMPO, flattening budgets and rising pressures

from other DoD accounts, the recent increases in logistics expenditure are not sustainable. Key

impediments to enabling our military logistics system to behave in a more efficient manner are the

lack of visibility in the supply-chain (e.g. the Wal-Mart model) and the inefficiencies inherent in our

current logistics organizational structures.

25

Logistics (2)

• Creating a Joint Logistics Command– BG-N – Fuse logistics and transportation functions into an integrated US

Logistics Command– DSB – Create a Joint Logistics Command Responsible for end-to-end

supply-chain including DLA, TRANSCOM, Service logistics and transportation commands

• Regional COCOMs retain in-theater logistics• PMs retain lifecycle logistics support

• Improving visibility– DSB – Create integrated logistics information system and appoint external

advisory board, incl industry, to assist this effort– QDR – Improve supply-chain asset visibility; understand DoD costs and

performance relative to commercial supply practices • BGN – Merge much of J-4 with OSD DUSD(LM&R) and have this office report

to both USD(AT&L) and CJCS• QDR – Improve and accelerate DPO initiative• QDR – Develop defendable strategic targets to guide focused logistics resource

planning


Most of the expert studies focused on the two areas of realigning command structures and

improving supply-chain visibility. BG-N and DSB both advocated creating a Joint Logistics

Command but with differing scopes of authority. BG-N recommended making a US Logistics

Command with end-to-end authority over the defense supply-chain. DSB was more willing to

accommodate the current structures, letting the Regional COCOMs handle their own theater-level

logistics and keeping the focus of systems life-cycle support with the Service program managers

and systems commands.

Supply-chain visibility received a significant amount of attention from DSB and the 2006 QDR.

The need to understand what supplies, equipment and parts are on-order, in stock, in transit and at

what rate they will be reordered in the future is identified as one of the most pressing challenges for

the DoD logistics system today.

The BG-N study team is continuing to monitor developments closely in the logistics area and will

re-visit its Phase 2 recommendations in the light of future developments. As a result of recent

discussions, particularly with the J-4 directorate, the previous recommendation that TRANSCOM

and the Defense Logistics Agency (DLA) be “fused” – the term was intentionally vague – into a

new Logistics Command has been reassessed as probably not the appropriate solution. A new 4-

star Logistics Command is probably needed to ensure the most effective and efficient flow of

26

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material to Joint Task Forces around the globe. This function is too critical to military success to

leave to the discretion of the individual regional COCOM commander. However, DLA should not

be incorporated into it. As a senior DoD official commented privately, “Wal-Mart doesn’t own its

suppliers; it disciplines them.” DLA, as the supplier of material, needs end-use visibility so it can

plan for how to support the more than 30 Joint Task Forces around the globe. But a new Logistic

Command – or a Transportation Command with beefed-up authorities from its Distribution Process

Ownership of the entire supply chain management – needs to manage the supply chain and have the

authority to allocate scarcity between the competing needs of the regional commands and their

many task forces.

Logistics (3)

• Joint Logistics Board and Defense Logistics Board assigned to institutionalize Distribution Process Ownership process and improve asset visibility

• AT&L in process of establishing a DLA Board of Directors, appointing members and creating business rules for deliberations

• TRANSCOM attempting to institutionalize DPO authorities• Regional COCOMs are taking different approaches to theater logistics

– CENTCOM uses a DDOC approach– PACOM in S.Korea uses a Joint Logistics model

BG-N Study Team View:

• Prior BG-N logistics recommendations merit review based on recent developments

• DoD must significantly accelerate the transition of its logistics functions from a supply-push to a demand-pull orientation


Institutionalizing TRANSCOM as the Distribution Process Owner has been a Department priority

for the past year. RFID initiatives are meeting with initial successes. IT integration progress to date

has been Balkanized and limited. While some efficiencies are being realized (notably in CONUS

transportation) there are still numerous areas which have yet to show results. An additional

problem with harmonizing Department-wide information and distribution processes is that regional

COCOMs are taking differing paths to fulfilling logistics needs. This practice respects local

COCOM prerogatives but severely limits the Department’s logistical efficiencies. To achieve

meaningful savings, information systems and delivery processes must be standardized to the

greatest extent possible. Otherwise, suboptimization results, and little improvement on the overall

system can be achieved. In the immediate term one fact remains clear: The costs of not converting

from a supply-push to a demand-pull logistics system across the entire supply-chain will cripple the

Department’s ability to achieve its other goals in the near and mid-term given the amount of DoD

resources now being consumed – and likely to be consumed – by DoD’s logistics functions. Due to

the variety and intensity of recent improvement efforts in logistics functions it is premature to judge

current DoD policies as successes or failures. After the recent initiatives have evolved somewhat,

the entire DoD logistics system merits a comprehensive review.

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Appendix

Acquisition Study MatrixDoD Logistics Spending

29

Acquisition Study Matrix

30

DoD Logistics Spending

1CSIS Draft Working Papers-Not for Attribution 4/19/06

Functionally, Maintenance consumes more resources and hasgrown faster than Supply or Transportation

Logistics Spend Analysis

$0$20$40$60$80

$100$120$140$160

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Transportation Supply MaintenanceSource: Logistics Management Institute, CSIS Analysis

In C

urre

nt $

Bill

ions

Actual FDYP

DoD Logistics Total Obligation Authority FY1998-2010 (incl Supplementals)Cost

GrowthRates

(’98-’05)

10.0%

9.8%

4.9%



$0$20$40$60$80

$100$120$140$160

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Other DoD Marine Corps Air Force Navy Army

In C

urre

nt $

Bill

ions

Actual FDYP

DoD Logistics Total User Demand FY1998-2010 (incl Supplementals) CostGrowthRates

(’98-’05)

14.3%

6.6%

9.8%

9.5%12.1%

Army has put the biggest demands on the logistics system in recentyears with significant growth from Air Force and Other DoD

Source: Logistics Management Institute, CSIS Analysis

35



Source: Logistics Management Institute, DIOR, CSIS Analysis

DoD Manpower(Mil/Civ)

38%

Alternative Views of DoD Logistics Outlays - 2005 (incl Supplementals)

Contract Services

36%

Service MaterielCommands

51%

Total = $136B

By Expense Type By Provider

Defense LogisticsAgency

30%

TRANSCOM6%

Purchased Goods $35B 26%

COCOM In-Theater 2%

Other 6%

Contract services now over one-third of logistics spend; Materiel Commands are still key logistics providers (esp. for maintenance)


Iron mountains of Desert Storm were not repeated in OIF

Logistics slowed advance on Baghdad only 2 days of 3 weeks

Episodic (Up-armored vehicles and vests) problems solved

The next frontier is getting visibility into the supply chain

DLA, Army and Navy all installing SAP systems

Marine Corps installing Oracle fulfillment system

OSD AT&L(LM&R) leading RFID efforts

Final frontier will be getting real-time health and usage data from field to headquarters to industry to start planning fulfillment automatically (commercial model)

DoD continues to work the problem

DoD Logistics Efforts

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an annotated brief - center for strategic and international studies

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