Todd Harrison joined me on the Acquisition Talk podcast to discuss a wide range of issues, including how the reorganization of defense space forces is shaping up, why real authority in Washington is budget authority, whether rapid acquisition authorities are here to stay, why the KC-46A tanker program should be considered a success, and much more.
The episode features a discussion of the on-going space re-organization. Todd explained how the DOD’s growing reliance on space capabilities is also creating risks. Many other nations are rapidly gaining capabilities to deploy effective countermeasures. The lack of effective responses in the Air Force has brought criticism from Washington. Proponents for a Space Force argue that space is a distinct profession, with its own mission, culture, and technologies.
We learn about the various players in defense space and prospects for the future. Todd believes that more of the responsibilities for space, currently spread among out among the services and OSD, should be consolidated into the Space Force. He makes an allusion to when the Air Force was separated from the Army, and that the separation of responsibilities perhaps didn’t go far enough. I push back, citing the benefits of diversity and competition. Todd responds that diversity should still exist in a consolidated Space Force, but we won’t have the unnecessary duplication of platforms when all that is needed is a new payload.
Podcast annotations
Be sure to listen to the podcast for a lot more on the space reorg. For the rest of this post, I want to focus on some other topics that we discussed.
One of the most important trends in defense acquisition is what has been loosely called the “cost disease” problem, when the prices of goods and services increases even after adjusting for quality changes. All adjustments for quality have a subjective component, so it is impossible to generate a precise and accurate figure. But we must still try.
RAND estimates between 7 and 11 percent annual price growth for ship and fighter aircraft procurement costs (that’s about 5 and 9 percent real price growth). Between 2 and 4 percent could possibly be accounted for by increased technical content (whose association with combat capability is not described). Using a different methodology, IDA has reached similar conclusions on procurement costs for aircraft and ground vehicles.
For operating and support costs, the CBO finds real growth for aircraft at between 3 and 7 percent. Here is Todd Harrison on the problem:
What we have seen over the past 30 years is a decoupling of our budget and the size of our force. So as the budget goes up and down, our force structure has been flat or going down. Especially since 9/11, when we’ve seen huge increases in the overall budget, adjusted for inflation, the size of the force structure basically stayed flat… So what that means is that the cost per unit of force structure has been going way up…
If you compare what we spend O&M, operating funds, on a Navy ship today, it’s double what we used to spend 20 years ago. And that’s adjusted for inflation. So we’re spending twice as much in real dollars per ship in operating them and we still have problems. We still have ships running into each other, not ready to deploy, and it makes you wonder how this ends. How can this trend continue? Because at some point we’ll be spending more and more money for a smaller and smaller force, and eventually, the force will be too small to do anything.
Doubling in real prices over twenty years annualizes to 3.5 percent real growth. The effects on inventory are pronounced, even if each unit is far more capable than previous generations.
For example, Army active helicopters reduced from nearly 9,000 at the end of the Cold War to 3,500 twenty years later. Air Force fighter aircraft inventory fell over 40 percent and bombers nearly 80 percent since the Cold War. Active Navy ships fell from 800 during Vietnam to over 500 during the Persian Gulf War to only 285 in 2019.
There are no silver bullets, as Todd explained. We discussed a wide-range of issues with the defense acquisition process that ultimately contribute to cost disease – though we don’t necessarily speak about it in those terms. For example, Todd points to the problem of narrowing down technical solutions too early and locking ourselves into a program and contractor:
Too often, we like to start these major acquisition programs and we narrow it down too soon. We’ll narrow it down to one contractor at Milestone B, and at Milestone B we don’t actually know what our requirements should be, what technology is going to pan out and work, and what this thing is ultimately going to look like and how it’s going to be used. Before we make that down select we got to have more information.
We should do a better job and there should be no shame in killing things early. We need to do more of that. I think that’s healthy. I think that’s a sign of a healthy acquisition system, when you start something and kill it in a year or two. It’s a sign that you’re preventing a bigger program failure in the future, and you’re preserving options for yourself [emphasis added].
I completely agree, and so did Armen Alchian back in 1954 when critiquing the Systems Analysis concept. We cannot know what will be successful before starting major development activities. The essence of a good strategy is to create options along the way. Options create opportunities, as well as providing insurance in case the single-best plan fails, or unexpected contingencies materialize. Here is Alchian:
Under uncertainty, the criterion of decisions is not simple maximizations; the essence of the decision process is to affect the scope of random factors so as to give a “good” probability distribution of outcomes. The insurance principle is to decisions what maximizations are to analytic implications.
That seems roughly in-line with what Todd was saying:
I think that the way you balance the two is to have a dynamic strategic plan for your acquisition program. You just create options early in the program, and you don’t lock yourself in prematurely into anything, you don’t lock you into production, you don’t lock yourself into a contractor.
When you’re still exploring what the requirements should be, you want to keep yourself open, create options, and basically plant seeds, see what sprouts, and then make your decision about what you’re going to back.
But the problem is that it takes time. And a lot of times, the services they say “here’s the capability we want,” and they just plunge right in and want to get it into production… If it’s something urgent like the MRAP in the mid-2000s, then sure, you do that and pay whatever it’s going to cost… But if it’s for a longer term acquisition program, you got to take your time. You got to do the development and testing before you decide.
One of the things Alchian argued was that systems analysis, because it puts confidence in prediction up-front, pushes toward concurrency of R&D and production. The advocates said it allows us to get the greatest advance for the least cost and shortest time. Systems analysis was supposed to accelerate technology development.
Alchian, however, argued the opposite. Proceeding incrementally allows programs to arrive at technological states earlier because they are not committed to strategies potentially riddled with errors.
I think Alchian would agree with Todd that decision-makers should take their time when considering major platforms and inventorying systems. Those considerations are not done through a drawn out requirements process, where all major questions are solved before-the-fact. Rather, important decisions brew over long periods of time; they logically follow from a broader strategy of continuous conjecture, experimentation, and refutation, where consensus emerges from empirical evidence.
Another problem, intimately related with the above, is how the acquisition process starts with military requirements from many contributing offices. The requirements may be piled on without reference to cost or technical maturity. This introduces the “opportunity cost” concept, which is the idea that when you decide to pursue one requirement you must give something else up. This is inherently a value-based judgment. So what is actually being required? Todd asks the right questions:
You always got to go back and ask yourself – first of all why do we use the word “requirement”? It’s really not a requirement. Nothing is actually required. It’s all tradeable. What we have to ask ourselves, what’s it worth? Would the warfighter have more of something else than to have that particular requirement right here?
Another aspect of military requirements is that the requirements generators are organizationally separate from those responsible for funding and executing. Here’s Todd:
That’s where I think we got to bring our acquisition system into alignment, where people shouldn’t be allowed to touch the requirements unless they have the money. I like to tell people that real power — real authority — in Washington is budget authority. If you got the ability to write something on paper, that’s great, but if you can’t fund it it’s not going to happen.
And that’s where I think our acquisition system will often run off the tracks, because there’s too many cooks in the kitchen, they’re getting in there and throwing things in and they don’t have to eat it. Ultimately, it’s the services that have to fund this stuff, and so they need to be in control of those requirements.
Due to the time and inter-organizational energy necessary to get these programs authorized, requirements inevitably get more complicated. It doesn’t seem as feasible to go through the process for new components or subsystems, providing us more information and options. Instead, the DOD takes a full-up systems approach. Institutional factors push new project starts to becoming major new platforms when perhaps the DOD could have achieved the capabilities with a new component on an existing platform. As Todd advised:
I think we need to get out of the mindset that every new capability needs a new platform. We got to be thinking about how we can put new payloads, new sensors, new munitions, on existing platforms to give us new capabilities.
Here is another good part. We discussed the Section 804 authorities which provide “rapid acquisition” pathways, but note how there is no funding pipeline that is equally as rapid. Here’s Todd:
You can speed up all this acquisition stuff as much as you want, but we still have a budget process where you’ve got to prepare your budget request about two years in advance of when you’re going to use it. So if you’ve got a really cool idea of something we should do today, then we can put together a budget proposal and in about two years you might have funding appropriated to start; just to start. What that does is drive us into systems acquisition, platform acquisition, when acquiring a platform is not always the right solution.
I’d like to thank Todd Harrison for joining me on Acquisition Talk. Here is Todd’s article, “Why we need a Space Force”. Here are a number of articles from Todd at CSIS and Defense 360. Here is Todd on the GovLoop podcast, talking to Vago Muradian on Military Space, and on a panel discussing the FY2020 budget. You can follow him on Twitter @ToddHarrisonDC.
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