Competition in Defense

Defense manufacturers, who complain frequently that they already face dog-eat-dog competition, will face sharply higher competition in future years, says the Air Force’s newly appointed “competition advocate,” Anthony J. Deluca.

The Air Force Systems Command, the largest procurement and research agency in the military, recently strengthened the position and has set ambitious goals to increase competition between defense contractors. The effect will be felt particularly in Southern California, which has the greatest number of defense contractors in the nation and which annually receives about 20% of total defense spending.

Deluca, a civilian, said he has been given the power to review every sole-source contract awarded by the Air Force and has the right to veto such contracts when it appears that competitive bidding could win the government a better deal. He will report directly to Gen. Lawrence Skantze, commander of the organization.

Historically, such advocates have had little authority to affect important decisions about contract awards. Also, they often are barred from involvement in the early planning of new programs or from highly classified ones.

But Deluca has set a goal of increasing the percentage of contract obligations awarded through competitive bidding from an estimated 28.5% in fiscal 1985 to about 45% by fiscal 1987. (In 1985, sole-source contract obligations are forecast at 6.9%, with the remaining 64.6% consisting of follow-on contract obligations.)

It is difficult to say exactly how the enhanced competition will affect Southern California, partly because these estimates probably apply to non-classified programs--a distinction Deluca cannot discuss. California has the largest portion of such secret defense work in the nation, with a handful of contractors working at capacity on secret spacecraft, space weapons and aircraft.

The competition program involves heavy reliance on planning and organization at lower levels of the Air Force’s vast procurement system, which could be apparent locally. “Anybody who says they can sit here in Washington and push down a policy of competition has their head in the sand. It is going to happen in the field,” Deluca says.

The Pentagon has been attacked bitterly by many congressional critics who say that too little of its spending is being awarded competitively and that recent efforts are simply window-dressing.

Deluca disputes the criticism. Of an available $9 billion not already committed to follow-on programs, about two-thirds is being awarded competitively, he said.

If the Air Force carries through on its plan, the effect will be much like deregulating what has been a highly regulated industry. Additional competition has spurred consolidations, shakeouts and losses in many other industries, and Deluca acknowledges that a restructuring of the defense industry is possible.

“Are my actions causing the marketplace to change? You bet. Is that better? The jury is still out on that,” he said. “The incumbent contractors are nervous. Everybody else is excited.”