Better Buying Power

November 1, 2014 • Blogs, Online Content, The Globalist Notebook • Views: 923

By Christina Bartzokis

Courtesy of Flickr Commons

Courtesy of Flickr Commons

In 2011, Congress passed the Budget Control Act (BCA), which implemented $487 billion budget cuts in the Department of Defense (DOD) over a period of 10 years. The DoD budget will ultimately drop to the lowest level of funding since before World War II. DOD and Pentagon officials are struggling to absorb the impact of budget cuts, and many have expressed worry that the drastically decreased budget will prevent the US military from effectively projecting power and fighting wars abroad. However, because the DOD’s production processes are incredibly inefficient, the new budget constraints could force the department to adjust its production to maximize efficiency.

The military’s production procedures in recent years have been startlingly inefficient. The DOD does not negotiate fixed-price contracts with arms producers like Lockheed Martin, instead relying on “cost-plus” arrangements, in which a contractor is paid for all of its incurred expenses to a set limit, plus additional payment to create profit (2%-7%). This flexibility permits contracted producers to deliver aircraft or warships at a much higher price and after a much longer period of time than originally expected. Collectively, a 2009 Government Accountability Office estimate placed Pentagon weapons projects $296 billion over budget, with an average delay of 22 months per project. Additionally, the DoD prefers to develop technology independently of the commercial sector, forcing them to build all technology from scratch rather than drawing on preexisting tools. In order to both enable the development of better technology to effectively address threats at lower costs, the Pentagon must dismiss its oft-repeated maxim: “Better, cheaper, faster – pick two.” It should simultaneously reform the contract process to incentivize good performance by producers and open the doors to the implementation of commercially available technology in a military setting.

The Pentagon has begun to address contractual problems through the Better Buying Power initiative (BBPi), which began in 2010 and is now on its “3.0” iteration, developed in 2013. It seeks to improve initial estimates of costs, and increase governmental oversight of contracted production processes. It also takes the first steps towards revising the contract system, by using a formula that links the contractor’s gain to their performance.

However, BBPi 3.0 was the first iteration of the initiative to consider the benefits of commercial technology utilization, and even then, the subject was only briefly mentioned. The method of adapting existing commercial technology to serve military purposes has not yet been effectively incorporated into the conventional Defense Acquisition System. Nevertheless, one example of its success during the Iraq War has been used to spark a few growing initiatives within the DoD. In 2004, US forces in Iraq faced increased casualties from improvised explosive devices (IEDs) and were struggling to identify the supply networks that fed the manufacture of IEDs. Faced with such pressing need, the DoD recognized that developing technology internally would take years. Instead, it enlisted a small military intelligence organization, the US Army Technical Operations Support Activity (TOSA), to search commercial markets for technology that could be used against IEDs. The result was Constant Hawk, a program that used a wide-format camera system commonly used in Hollywood film production to provide overhead imagery in IED operations. Initiatives like TOSA have gradually multiplied, allowing Technology Domain Awareness and National Security Technology Accelerator initiatives to form within the DoD. By throwing more weight behind these programs, the DoD can cut costs in Research and Development and avoid developing technology from scratch, allowing production to be much faster.

By improving the production efficiency of weapons and technology through more responsible contracts, increased oversight, and the use of commercial technology, the Pentagon should be able to absorb a significant portion of budget cuts.

Christina Bartzokis ’18 is in Jonathan Edwards College. Contact her at christina.bartzokis@yale.edu. 

 

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