VIEWPOINTS : Private Industry’s Lesson for the Pentagon : Officers Often Lack Experience, Authority to Be Good Managers

At first glance, the current defense procurement scandal may appear to be no more than the actions of greedy consultants--a few “bad apples.” A closer look reveals that the scandal is only the latest in a series of problems stemming from the federal government’s longstanding shortcomings in industrial management.

Today it takes the form of consultants leaking proprietary government information; last month it was contractors making false charges to government contracts; last year it was technical failures in defense programs; the year before that it was unanticipated cost growth, and the year before that it was high-priced spare parts.

Every few years, government commissions are appointed to study these problems. Each time, the commissions recommend the same cures. Most people agree with the recommendations, but, within a year or two, key defense managers change, the recommendations fade away, and a new set of problems emerges.

Unfortunately, past efforts, though well intentioned, all have violated the same fundamental principle of business: When an organization undertakes a major program, it must assign people experienced in industrial management, give them the authority needed to accomplish their jobs, compensate them well and hold them accountable. The Defense Department falls short on all counts.

Defense Department officials oversee some of the largest industrial firms in the country, managed by well-trained, well-compensated, highly motivated managers who are very familiar with their companies’ procedures for overhead allocations, profit calculations, cost estimating, performance measurement and return on investment.

Government program managers often have little knowledge of these key industrial management tools and the impact they have on contractor operations. Yet they have responsibility for directing frequent program changes, and evaluating contractors’ schedules, costs and technical performance.

Recently I talked with a group of industry managers new to the defense business and unaccustomed to Defense Department methods. It was interesting to hear what surprised them about defense procurement.

As expected, they were appalled at overly detailed government specifications, endless reporting forms, changes in funding and the many audits. None of this is new. But the managers were stunned by the Defense Department’s attempt to manage complex industrial programs with military officers who had little or no experience in industrial management. Indeed, at two major defense procurement offices with thousands of personnel, about half the military officers are lieutenants.

Some typical comments from the industry managers: “If we did this in the commercial world, we would be out of business in six months.” . . . “These government managers have little idea how our organizations work and what incentives apply to our managers.” . . . “The government invites contractors to play games by assigning inexperienced government managers to key positions, and then changing them every two or three years.”

Although most military personnel assigned to defense procurement want to do a good job, the Army, Navy and, to a lesser extent, the Air Force, treat them as second-class citizens compared to military operations officers. For the past 25 years, the Defense Department has attempted to manage multibillion-dollar programs by placing military officers and civil servants in impossible situations, asking them to control work performed by giant industrial firms, but failing to provide them with the tough negotiating skills, street smarts and stable assignments required to deal with contractors on an equal footing.

Today, government procurement managers are often placed in a position akin to giving a new officer a few weeks of classroom instruction on flying, putting him in the cockpit of a jet fighter and sending him on a combat mission.

As ridiculous as this seems, it is equally ridiculous that most defense procurement officers are given 90 days or less of classroom instruction, and then assigned to oversee defense procurement activities involving giant industrial contractors, complex technical specifications, contractor accounting systems and millions of dollars.

Given little authority and few tools to manage their programs, the outgunned officers often function as little more than briefing specialists and marketing managers, spending much of their time seeking additional funds and continued support for their programs. That is hardly the prescription for high-quality management, no matter how dedicated the personnel.

As a crowning blow, military personnel are forced out of the service at age 45-50 when most still have heavy financial commitments, including mortgages and children in school. Where can they find a good-paying job? Usually with the defense industry. And imagine the potential for conflicts of interest that arise when a program officer sits across the negotiating table from a potential future employer.

The increasing complexity of defense procurement leads government and industry managers to hire thousands of consultants to assist in getting through the most complex maze in the field of industrial management. The consultants compete, each trying to outdo the other in gathering and distributing information. The process is now so complex that many consultants and contractors seek inside information as a near necessity, never viewing their actions as illegal--but as a legitimate way of conducting business.

Consolidate Laws

After working with government and industry for nearly 30 years, I believe that we must:

- Provide carefully defined government careers to create experienced, knowledgeable military program managers, with attractive compensation and promotion opportunities to retain outstanding managers beyond the age of 50.

- Create a substantial (i.e., 12- to 24-month) full-time training program in industrial mangement, designed to acquaint government personnel with how the procurement process actually works, the problems that occur and practical alternatives for dealing with these problems.

- Consolidate the myriad defense procurement laws, regulations and oversight agencies, making obligations and responsibilities more explicit and comprehensible.

- Demand increased accountability from defense officials.

Managing the development and production of large industrial programs requires capabilities that are likely to emerge only from a military/civilian branch of the Defense Department separate from combat operations, along the lines of the French defense procurement system. An independent branch could offer attractive career paths and the prestige associated with expanded opportunities for training, experience and promotions. Assignments and promotions could be controlled by the senior officers of the branch, thereby easing pressures that now compel U.S. program managers to devote much of their time to promoting their own programs and obtaining the favor of senior military combat arms officers who control their future assignments and promotions.

Separating procurement from combat operations also would slow the revolving door between the military and its contractors, a phenomenon set in motion largely by the combat-oriented policy of enforced early retirement. If outstanding procurement officers were encouraged to work for another five to 10 years, it would reduce the need for consultants and reduce the incentive--sometimes the near necessity--to join the more lucrative defense industry.

In short, the Defense Department needs to manage major programs the way they are managed in private industry. It needs well-trained, full-time industrial managers, whose career development is treated at least as seriously as the career development of pilots or ship captains. Failure to act now guarantees a continuation of the problems of cost growth, reduced defense capability and increased risks of a major financial crisis for the nation.