The Bucks Start at the Top
President Reagan’s appointment on Monday of David Packard, former deputy secretary of defense, to head a search for ways to clean up the scandal-ridden military-procurement system is a sign that he means business.
Packard knows the Pentagon. As co-founder and chairman of Hewlett-Packard Inc., one of California’s most successful companies, he knows industry. Those are important qualities, because the problem is far larger than $7,622 coffee pots, $640 toilet seats and attempts by contractors to nick the Pentagon for golf fees, parking tickets and haircuts.
The problem starts at the top. The Joint Chiefs of Staff are served by staff officers whose loyalties are frequently to the services from which they came--and to which they must look for future promotions. The result is more concern with protecting turf than with the broad questions of strategy that should guide weapons selection. That in turn leads to wasteful duplication of missions and effort by the services.
Costs are driven up by the tendency within the Pentagon as well as among defense contractors to goldplate weapons with technology that is desirable but not essential. Shoddy workmanship, plus inadequate testing programs, results in too many weapons that won’t perform as advertised in the field and that require a disproportionate amount of downtime for maintenance.
Although many items are purchased by the Pentagon under competitive bidding procedures, production contracts for such big-ticket weapons systems as nuclear submarines and bombers are commonly negotiated with single-source suppliers on a cost-plus basis.
In its losing race to protect the taxpayers’ interest, the Pentagon employs a vast army of military officers and civilians to negotiate, supervise and audit the production and acquisition of weapons and other items.
But critics allege that one-third of the $70 billion that is to be spent on weapons this year will be wasted. That figure, or even a substantial fraction of that figure, is unacceptable at a time when a massive federal budget deficit is causing grave problems for the U.S. economy and the free world generally.
The sheer size of the procurement operation encourages waste and fraud. According to Business Week, the Defense Department does business with 20,000 prime contractors and 150,000 subcontractors. On an average workday the Pentagon writes 50,000 contracts.
A certain amount of waste is inevitable in an operation of that magnitude. But outrageous cases of fraudulent billing also are involved. And taxpayers can hardly be well served when military officers serving relatively brief tours in procurement are pitted against practiced veterans on the contractor side.
Making things worse is the revolving door between these officers and the companies whose work they are supposed to supervise. As one expert notes, if a contract-supervision officer “stands up and makes a fuss about high cost and poor quality, no nice man will come to see him (about a job) when he retires.”
Congress is another part of the problem. Instead of forcing the Pentagon to eliminate some weapons systems when budgets are tight, House and Senate members tend to stretch out production on all systems, which only increases costs in the long run, and to reduce funds available for spare parts, ammunition and training.
It would be unfair to say that nothing is being done. Congress mandated the appointment of a civilian inspector general to search out fraud and waste in military buying. Pending legislation would impose financial penalties on companies found to have submitted improper overhead charges for reimbursement. Within the Pentagon itself the search for fraud and waste has been stepped up, and dual sources are being set up for some big-ticket items.
In truth, however, the system does not lend itself to simple or piecemeal reform.
It’s worth remembering that the existing system, with all its obvious faults, is itself the product of reforms initiated by Defense Secretary Robert S. McNamara in the 1960s. The gains in buying costs to be realized from competitive dual-sourcing must be balanced against the extra costs of maintaining dual supply lines.
An excess of oversight by auditors and congressional committees also becomes a source of waste when the result is to force interminable delays in decision-making. But, everything considered, we like the proposal by Rep. Timothy E. Wirth (D-Colo.) to create a special House investigating committee akin to the Truman Committee that successfully ferreted out waste, fraud and abuse during World War II.
But the new commission that Packard will head is a good place to start, including as it will lawmakers of both parties as well as outside experts and respected industry representatives. It can also help mobilize public pressures of the sort required to overcome the enormous bureaucratic and political obstacles to effective reform.
And Packard is not the sort of man to stay silent if he thinks that he is getting more lip service than cooperation from either the Administration or members of Congress.