Canceling A-12 Was Bold but Insufficient : Defense: The Pentagon is overdue for a thorough overhaul of the way it acquires weapons.

Defense Secretary Dick Cheney stunned the defense industry last week when he terminated the Navy’s A-12 aircraft program. But no one should think it marks a fundamental shift in the way the Pentagon acquires its weapons systems.

The A-12 was just the latest in a long list of failures and disappointments in the Pentagon’s acquisition process. The weapon types, service branches and contractors vary, but the common results--dramatic performance shortfalls, cost growth and schedule slippage--all stem from a flawed process that has defied reform for decades, despite numerous blue-ribbon panels and Pentagon reorganizations.

During the 1980s the Pentagon concentrated on hardening its business relationship with the defense industry. It mandated unprecedented competitions, forced companies to team up and to license their designs to competitors, invoked new kinds of cost-sharing commitments, slowed its payment schedule, and--worst of all--imposed fixed-price contracts for even the most risky developments where contractor costs are highly uncertain. These policies weakened the industry and failed to reduce the incidence and severity of the problems afflicting major defense acquisitions.

Now, with procurement funds and public confidence dwindling, the Pentagon must finally come to grips with the fundamental defects in its development and production process and, at the same time, bolster the health of the troubled industry.

Thirty-five years of RAND research on both successful and unsuccessful programs show what the defense secretary and his acquisition executives should do to prevent future debacles:

--Streamline the early phases of acquisition by scrapping the practice of initiating programs with detailed “requirements” statements. Using more general statements of goals and constraints would promote design creativity and reduce both government and industry costs. More austere start-ups would permit more new program starts and more competing concepts within each new program.

--Invest more attention, dollars and time in developing new subsystems that can improve a weapon platform’s combat effectiveness, if brought to full maturity. Effective electronics and advanced munitions are often more difficult and time-consuming to field than the vehicles that carry them, yet they are generally allotted less time for development, testing and correction of deficiencies.

--Build prototypes of new weapon systems before undertaking full-scale development. Well-executed prototyping detects operational problems early, makes it possible to accelerate the achievement of full system capability, and contributes to more informed source-selection decisions. Even if a prototype is not chosen for further development, many of its features may find their way into future designs.

--Delay full production until most testing is accomplished. Military testing of advanced weapons during development is usually quite thorough; most problems are identified during the test phase. Unfortunately, premature production usually means that enormous sums are expended on fielding large numbers of units before design flaws are identified and corrected.

--Devise a way to maintain incentives for innovation even as procurement funding declines. Currently, support for innovative research and development is tied directly to the level of procurement spending. Firms that win design competitions often recoup unreimbursed development expenses during production. Firms with production contracts can also recover most of the cost of self-initiated R&D.; Thus, a reduction in procurement funding directly threatens the defense industry’s pace of innovation, thereby imperiling the technological edge on which our defense strategy relies.

--Stimulate industry investment in new computer-based manufacturing equipment. Far too many of our defense plants lack modern production equipment with the built-in flexibility to efficiently accommodate inevitable changes in design and production rate.

--Reduce to the bare minimum the differences between the Pentagon’s business practices, including its crushing paperwork requirements, and those of the commercial sector. To satisfy future needs, the Pentagon will probably have to turn to many companies outside the so-called defense sector. Therefore, the barriers to doing business with the department should be greatly reduced.

Even the celebrated Packard Commission sidestepped most of the deficiencies identified here. Although that presidential advisory group did endorse prototyping, it was silent on the danger of premature commitments to production and the importance of upgrading existing equipment with new subsystems. It offered no solution to the problem of high program start-up costs and paid scant attention to the subject of manufacturing efficiency and flexibility.

The decision to terminate the A-12 was an unmistakably bold stroke. It should be just the first cut in a major campaign to correct the real flaws in the defense acquisition process.