Book Reviews

Defense Acquisition Management

by George Sammet, Jr. and David E. Green
Copyright 1990, the Board of Regents of the State of Florida

Reviewed by Sandy Friedman, CFPIM, CIRM

Today's headlines are filled with accounts about the high cost of modern, high-tech military equipment: the B-2 Stealth Bomber, Tacit Rainbow missile, C-17 cargo plane, and the recently canceled A-12, to name a few. Often the headlines place blame on the contractor citing mismanagement, cost overruns, or massive schedule slips. Sometimes specific individuals are singled out for blame. Rarely is the full story disclosed pertaining to the complex process of proposal, source selection, competition, research and development, full scale development, procurement and delivery, and logistics provision that both the Government and contractor (or contractors) must undertake to accomplish the task of providing advanced weapon systems for our defense forces. This book, which chronicles the development of the United States defense procurement system, describes in extensive detail the steps enabling the design, delivery, and support of such modern weapons. Defense Acquisition Management covers all facets of the defense industry, including the industrial base, defense marketing, program management, product assurance, manufacturing management, procurement, subcontracting, contract administration, and ethics. The book concludes with an appendix on "How to Prepare a Winning Proposal." The authors, Sammet and Green, both ex-military officers currently serving as Vice Presidents with Martin Marietta Aerospace, document accounts describing the development, expansion, as well as pitfalls of the modern defense acquisition management processes.

Sammet and Green assert that, "Buying for the Department of Defense (DoD) is the biggest business in the world, about $688 million a working day, or $178 billion a year... The buying process neither starts with the purchase nor ends with it. Buying is merely one step in a multiple step process, called acquisition management." Acquisition management consists of strategic procurement planning, offset management, socioeconomic management, marketing, source-selection procedures, inventory management, kitting, and ethics.

After World War II, general requirements for military weapons were generated by perceived needs. Sammet and Green claim that the leading edge of technology became the driver for the development of new weapon systems rather than the basic need itself, which had the effect of driving development and procurement costs upward. Other cost drivers were the inability (or unwillingness) to build to economic order quantities, or economies of scale, to reduce per-unit costs. "Building to economic order quantities could reduce the [unit] price of military hardware by as much as 20-50%... however production [at these quantities] would be cost-prohibitive."

In 1961, Secretary of State Robert McNamara proposed guidelines for improving program planning, source selection, contracting, and cost-plus incentive contracts. In 1970, The Logistics Management Institute found that the bargaining position was unbalanced; that there were no incentives for engineering and manufacturing operations process improvements; capital investment in modern plant, equipment, processes, and technologies; and that the contract failed as the "instrument of control." In 1981, Deputy Secretary of Defense Frank Carlucci provided 31 recommendations to streamline the acquisition process, which included such objectives as improving long-range planning, achieving economic rates of production, providing realistic cost and budget models, and establishing a strong industrial base necessary for a strong defense. Although these were admirable objectives at that time, Secretary of Defense Richard Cheney eight years later stated that even modest improvements in the defense acquisition process, including those for Full Scale Engineering Development (FSED) programs and detailed budget processes, would take years for full implementation.

Sammet and Green describe many problems of the modern procurement system, borrowing heavily from anecdotes experienced during their military careers. They characterize the defense industry as existing in an extremely unique market environment, whose features include: "... annual budget cycle, public accountability, little competition, rising prices, excess capacity, surge capability limiting factors, low pretax profit rates, low return on sales, heavy debt, and low productivity." Additional problems lie in the difficulty of invoking competition during follow-on procurements. These characteristics plus other factors prompted the advent of centralized life-cycle procurement for forward build, spares, manuals, and parts provisioning, which included new contractor cost-estimating techniques and cost/schedule performance controls. Undersecretary of Defense for Acquisition Robert Costello helped set the stage for the advent of Concurrent Engineering in aerospace and defense. His provisions included the requirement to reduce time to market for the development and delivery of weapon systems; reduction of costs by elimination of non-value added work; the implementation of international technology, acquisition, and logistics programs; the reduction of burdensome procurement regulations; the improvement of DoD-industry relations; and improved oversight over classified programs. One program not mentioned in the book that will have far-reaching effects on the way contractors define, deliver, and support their products is the Computer Aided Acquisition and Logistics Support Initiative (CALS), which attempts to define as designed, as built, and as delivered configuration information to the customer in a standardized, computerized format. Although CALS will impose greater up-front costs, the return on this investment will be realized in systems that can better manage logistics support, field returns, field retrofitting, and other multi-contractor information requirements towards the acquisition, procurement, and servicing of advanced weapons systems.

Sammet and Green describe the fundamental causes of the decline in world-wide competitiveness of America's manufacturing industries, and indicate what might be done to reverse this decline by itemizing the elements of a DoD strategy for maintaining a long-term manufacturing and technological capability. Thomas G. Pownall, then CEO of Martin Marietta, is quoted in a speech made in 1985: "What [the acquisition management process] suffers from is too much of all of the above. It has grown to the point of being so complex, so regulated, so overseen, so detailed, and so documented that it is difficult to do it right even when people try their very best... We must be constantly sensitive to the fact that it is the taxpayer's dollar that is being spent. Even more important, the nation's security is at stake. Our goal remains, as ever, to deliver the very best hardware in a timely manner and within contract terms of cost and price -- at the same time keeping in mind that profit is not a four-letter word."

Sammet and Green spend much of the book discussing problems in the manufacturing of weapon systems. Many of the classic DCAA/MMAS (Defense Contractor Audit Agency/Material Management and Accounting System) findings are cited, as well as solutions such as MRP II, JIT, education and training, and continuous process improvement strategies. The goals of the DCAA/MMAS Ten-Key Elements include the overall reduction in cost and lead time for the definition and delivery of military products by becoming more proactive, improving configuration management systems, reducing inventory investment and parts shortages, and improving bill of material and master production scheduling accuracy. Improved supplier relationships help lower procurement costs which can make up as much as 85% of the cost of a defense program. More effective procurement processes can improve quality at the source and time-phased purchasing and receiving, thus lowering overall costs.

Defense Acquisition Management is an outstanding compilation of the evolution of American military capability since World War II, and the developmental acquisition process that ensued. The acquisition process is contaminated with burdensome inefficiencies and other shortcomings, but is always undergoing constant review and improvement. Oliver Boileau, former President of General Dynamics [currently President and General Manager of Northrop B-2 Division] said in an address to the 1983 Defense Pricing Symposium, "Top management must change the traditional ways of doing things... Life-cycle costing [has become] a bastard child... the program manager who has to choose between reduction of acquisition costs and reduction of life-cycle costs becomes a hero by choosing the former. The politician's approach is 'early payoff,' not on decisions that will only be measured in the next 20 years... Five or ten years from now, I hope someone is not having to make the same speech."