Chairman Jack Reed: We were chatting before and reminiscing about days gone by. One of the relics of those days gone by is the defense budget process, the PPBE — Planning, Programming, Budgeting, Execution — it was the product of McNamara and the ‘whiz kids’ and I can assure you those whiz kids are not kids anymore. It’s 70 years. I’ll just ask Mr. Schmidt, do we need to modify this process to provide the kind of organizational responsiveness? And are there any other specific recommendations in terms of the current programs and doctrines that you would suggest.
Eric Schmidt: There are a lot of problems with the current procurement process, Mr. Chairman. As a result, every few years there’s a re-do of them, which makes it more complicated. There was a joke that the only way to understand the procurement process is to have an AI system explain it to everyone.
One problem is the design cycle. There’s something called a POM [Program Objective Memorandum] or Program of Record. There is a two year planning cycle ahead of doing anything. So if you want to do something new, you have to plan it, and it starts two years from that time because that’s when you get the money for it.
Because of the way the appropriators work, money that is not used in a particular time are taken away unless its on a POM-based program. This structure means people who should be making the decisions — in my minds the COCOMs and people at the Secretary of Army, Navy, and so forth — find they don’t have control over what’s going on. They’re responsible, but they don’t have the ability to effect these things. The result is that procurement systems are increasing every generation by two years — the design cycle — and the costs of course go up.
There’s a number of mechanisms you all have given the DoD over the course of years. Special authorities of one kind or another. One of the things I don’t understand is why, if you give them the authority, they don’t take it. So what I suggest is you give them more authorities and figure out why they’re not taking advantage, because we’re all in this together to get faster design cycles.
To give you an idea of how strange the current design cycle is, in a normal business you’d have the engineers and the product people, you’d have a chat and figure out what it costs, and the CEO says ‘let’s do it!’ That’s precisely not what happens in the military. There’s a requirements document that is not allowed to be communicated to the people who are going to build it. There is no feedback between the people building it and the requirement document. As a result, the requirement document gets longer and longer causing the tradeoffs to get more and more complicated, and you end up with a camel rather than a horse.
That was from an interesting testimony from Eric Schmidt at a Senate Armed Services hearing on Feb 23, 2021, “Emerging Technologies and Their Impact on National Security.” Make 2021 the year of PPBE reform!
Lots of goodness there, but I want to highlight that one sentence: “money that is not used in a particular time are taken away unless its on a POM-based program.” Arbitrary execution rates — if the program doesn’t obligate the funds quickly enough they might be taken away — is an especially worrisome problem for smaller or experimental programs. It’s easier for everyone involved to create a single big Program of Record that is defensible and less likely to have funding removed rather than try to coordinate less defensible efforts that are modular or incremental. After all, size contributes greatly to organizational status.
I wonder if Congress realized that Schmidt was explicitly putting the blame on them — that the problem is driven by Congress’s need to micromanage where the money goes, which in turn drives the 2-year planning cycle and inability to adapt to changing needs or new information.
Right on the money. Ultimately this problem comes back to the methods of oversight, and there’s no point to start unless they’re willing to rethink their metrics. It can’t be based on multi-year lifecycle planning as the basis for APBs ahead of development.
I’d put it slightly differently — Congress can EITHER exercise fine-grained oversight of what DoD is buying, or they can get things faster. They can’t have both — not unless they can come up with a working mechanism to hold people accountable for their decisions after the fact. The commercial world can move quickly because there is a mechanism for evaluating management performance and ways to reward and punish the people responsible for success and failure. In defense acquisition, there’s no way to evaluate performance or assign blame sensibly, and if you could it wouldn’t matter because those people would be long gone. (We also choose not to punish prime contractors for failure, even in the most egregious cases — probably because there’s nobody to turn to if we’re not willing to work with Boeing or LM.)
If you get things done quickly then you can assign blame for failure, no? I don’t think there’s any technology reason programs have to take more than 4 or 5 years.
It’s a bit of a nit, but Mr. Schmidt’s statement that the requirements document can’t be communicated with the people who are going to build it. I presume he’s referring to the company that would get the contract to build the system. Isn’t it the case that industry days, draft RFPs, and the like are all available to an acquisition team to do just that…get feedback from industry on the requirements, which also provides industry insights?
Well, maybe I’d argue industry days are just briefing days, only incumbents scour for RFIs, and draft RFPs might pigeonhole without proper market research. By the time requirements process is done and the acquisition community starts doing their thing, even pre MS-A, 80-90% of the cost is already preset (that was the agreed view in the 70s at least…)