Journalists, lawmakers and others tend to focus on the Pentagon's expensive hardware, in part because it's expensive, but in part because it's conceptually easy to grasp -- there's a pointy, silver airplane out there somewhere that goes whoosh and costs much more than it was supposed to. But as one of DoD's top acquisitions officials said this week, most of what the department spends on acquisitions isn't on goods or hardware. The real money -- and potentially, the real waste -- is in "services."
Shay Assad, director of defense pricing under the Building's top buying baron, Ashton Carter, told reporters that DoD needs to get better at acquiring "services," a term of art that apparently can encompass everything from logistics support; to paper-hatted, bow-tied Bangladeshi guys serving food in the chow hall in Iraq; to Beltway Bandit contractors tasked with evaluating the wisdom of retaining Beltway Bandit contractors to study the wisdom of things. DoD spent about $160 billion on supplies and weapons in fiscal 2010, Assad said. It spent about $200 billion on these "services."
One major strategy will be to change the way the department contracts for this sort of work. Assad said that when DoD solicits contracts for a job, even if it includes opportunities for different vendors to compete, the Pentagon often ends up getting only one bid. Going forward, DoD must try to get better deals from vendors by forcing more of them to compete to drive down the price, he argued -- yes, you have heard this before. This new policy means that DoD could re-solicit contracts if officials only get one bid but they believe they can get others to force a lower cost, Assad said. Not only that, he said this has already happened, although we're still waiting on DoD to provide examples of when it has done this and how much it believes it has saved.
If the Pentagon can actually get some major savings in this broad area that does not include specific weapons and equipment, it may be able to free up cash to take the pressure off its higher profile weapons programs. But for many reasons, reforming this lesser-known side of what DoD does could be just as difficult, or more, as cutting or paring back more familiar weapons. Contractors work hand-in-glove with the military at almost every level, often in the same offices, and if DoD begins getting rid of them, there's no telling what it could do to its unglamorous but critical ability to do management and oversight.
In the late 1990s and early 2000s, nothing bad happened overnight, but the Navy's Fleet Review Panel, the Army Acquisitions Report and other studies have described the delayed consequences that come from eliminating positions that appeared to just be bureaucratic overhead. With less experience in the back office and fewer inspectors at the yards, Navy shipbuilding became dysfunctional and produced a generation of ships with lingering quality problems. And with fewer Army acquisitions professionals, the service lost its ability to keep control of its major programs, wasting time and billions of dollars on programs that yielded nothing.
DoD officials would probably say they've learned those lessons, and they'll take care to repeat those mistakes as they try to reform services contracting. The challenge is, it could be years before it becomes clear whether they succeeded.
