The more things change, acquisition reform remains the same

History offers little to suggest that today’s acquisition reform will succeed where its predecessor efforts failed… Behavioral change is needed to effect any transformation. Acquisition reforms can be coerced, but will not endure as true transformation unless cultural change occurs. Success requires commitment to change over simple compliance to superficial rewards and consequences. Overcoming 60 years of frustration will not be easy, but perhaps the solution lies in an observation made in the 1986 Packard Report back. It is time to undertake a long-term culturally-focused effort to transform DoD’s weapon systems acquisition process.

That was Colonel Peter K. Eide with the colorfully named report, “The More Things Change, Acquisition Reform Remains the Same.” Here is his rather excellent recommendation:

DoD should clarify, simplify, and standardize the metrics by which it measures success, then pay attention to those metrics and hold people accountable for them. I recommend outcome-based measures that focus exclusively on schedule and cost. This focus could form the basis for a simple, compelling, and unifying vision. I offer: DoD Procurement — On Time, On Budget. Performance measures retain importance, to be sure, but are secondary to schedule and cost. They form the trade space that accommodates fact-of-life adjustments in order to preserve on time and on budget outcomes.

To some, the recommendation sounds rather simplistic. Performance is secondary to schedule and cost? You’re saying, fixed cost and time targets with fluctuating outcomes on performance?

Yes, and a move in that direction is exactly what is required to harness uncertainty — limit your downside risks (cost/schedule) but take full advantage of the upside opportunities (performance). That is what Nassim Taleb and Benoit Mandelbrot recommend to us when faced with an uncertain R&D environment. Taleb says we underestimate the impact of low-probability events, like discovering a revolution in weapons technology. It is something the DOD intentionally neglects — the opportunities to choose a higher valued path with the discovery of new knowledge.

Though Colonel Eide didn’t spell it out, such a move to fixed cost and schedule targets first requires the reform of the PPBS and the funding appropriations, which are outcome oriented. They are primarily requirements-pull tools in a process that first defines what is needed, then analyzes the best way to do it, finally estimates to cost and time to accomplish it. Eide, it appears, would have it practically the other way around.

But certainly cost and schedule targets can’t be simply fixed for all projects, such as 3 years and $100 million. There has to be discretion there. And certainly if the manager’s time is up and the money is all gone, we can reevaluate whether there is more promise or spillovers which require another round of funding. And in some cases, where we have rather well defined technology and requirements, programming funds makes sense.

This is why in practice, I believe that Eide’s recommendation requires an organizationally oriented budget. Each primary appropriation, like a set of technology labs, a Combatant Command, or a Program Executive Office perhaps, receives relatively fixed funding and they can optimize withing that budget.

Where you have R&D projects and good management talent, then you can provide high discretion on technical aspects but just give fixed cost and time to show some test results. Where you have matters of major force structure procurement, you can seek stakeholder buy-in and program funds now that you know what it is you’re buying and how much it costs. A one-size-fits-all approach is never a good thing.