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Friday, February 6, 2015

A Proposal To Reduce The Defense Budget (Opinion)

Disclaimer: This post represents my opinion only and is no reflection on the views of my employer.

There is no question that the Department of Defense is a huge part of the National Budget.  I think that it is possible to make significant cuts in that budget without impairing our national capabilities.  There are many issues in the Defense budget to include Healthcare, size of the force, entitlements, compensation etc. that are important, but I am not going to discuss those issues.  Rather, my interest is in how the Department of Defense buys stuff.

A lot has been written about Acquisition Reform, and I am not going to write much about that topic except to say that every few years there is another reform effort that never seems to reach the vision of those who initiate it.  A lot of very smart people work on this issue and fail, and I am not convinced that I am any smarter or more earnest than they are.  Rather, I intend to propose fixing the system from the bottom up with a few radical policy changes that would greatly empower end users to get the goods that they need at effective prices.

Let End Users Get the Best Value for The Dollar

Eliminate the Federal Acquisition Regulation(FAR) and the Competition in Contracting Act (CICA), or at least set a very high dollar threshold before they apply.  Allow end-users to but good and services that they believe will meet their organization's needs.  The end-users know better than contracting bureaucrats what it is they need, and they are capable of judging best value versus lowest price better than contracting bureaucrats.

This idea is radical.  It requires the DoD to trust its employees to act in the best interests of the American People.  The truth is that it will result in some corruption.  People will funnel money to the businesses of their friends and family.  People might take bribes.  The solution to such problems is not to spend a dollar to ensure that we do not waste a penny.  In cases of corruption and violation of ethics, it should still be possible to prosecute the bad actors.  Yes, the system is not perfect and there will be some who get away with it.  So be it, we will still save money overall.

An additional issue is that the American People have decided to use federal contracting law to advance social objectives.  Giving preference to 8 (a) contractors advances the social goal of having an economy that is more diverse and offers some correction to the historically disadvantaged.  I do not dispute these social goals, but perhaps they could be accomplished better through the tax code or even through direct subsidies. Currently, too many 8 (a) contractors are just fronts that subcontract to major defense contractors, with a pass-through fee.  I do not doubt that many 8 (a) contractors are conscientious and effective businesses, but putting more hoops in the way of end-users trying to do their best to do their jobs is not the answer.

I should say that I am not proposing trashing the DoD 5000 series.  Major Acquisition Programs need to be properly engineered to get the American people the best value for their dollars, but the threshold for that type of acquisition is much higher than what I am discussing.  In fact it gets back to Acquisition Reform.

Eliminate the Expiration of Funds

Currently, appropriations to Government agencies expire, i.e., they need to be spent by a certain date or they disappear.  It may sound like a good idea; afterall, if you cannot figure out how to spend your money, maybe you did not need it in the first place.  The problem is that expiration of funds forces management of projects to follow the timeframe of the funding cycle.  

When dollars are about to expire, there is a rush to spend them, however unwisely.  Oftentimes, when executing a project, there are "come-to-find-outs," that is there are unexpected circumstances that make the project more complicated than it originally seemed on someone's Microsoft Project plan.  

If a project takes more time to execute than originally expected, why not allow the project to use the money already allocated to spend in the smartest way rather than the quickest way.

Congress may not like this proposal because it may seem to curtail their power of the purse.  I think they could rectify this issue by reducing the next year's budget by an amount that is correlated with the amount of money an agency is carrying over.  Such an approach would stop agencies from simply banking funds, but would still given them the flexibility to spend it smartly.

Allow More Fexibility with the Color of Money

Currently, appropriations are made into different types of funding, colloquially referred to as the color of money.  The different types of money have different expiration time frames and cannot be converted from one to the other under normal circumstances.

What if you run out of Research, Development, test and Evaluation (RDTE) money, but you still need to do more research or testing before you move to procurement?  You can either spend your Procurement money prematurely, or wait until the next appropriation for more RDTE dollars, while the clock is ticking on your procurement funds.

A better solution would be do put reprogramming authority at the lowest possible level so that some procurement dollars could be spent on RDTE.  Yes, I am verging into Acquisition Reform, but this change would not completely rewrite the 5000 series.

Acquisition Reform

Finally, the fact that nobody seems to be able to succeed at Acquisition Reform does not mean we should abandon all hope.  The essence of reform in my opinion would be to spend more money upfront in RDTE to avoid huge expenditures down the line in operations and maintenance.  It is easy to say, but it is a tough nut to crack.  We ought to get our best and brightest to focus on this issue in a non-partisan way in the best interests of the American People.  In this case, good ideas are not enough.  Cracking this nut would require critical thinking and decision making that is evidence-based, not ideology-based, or good idea-based.

A Pipe Dream

I am not naive.  I doubt that anything approaching these ideas will happen in my lifetime.  Our national conversation is too polarized, partisan, and ignorant of ground-truth to allow a grown-up discussion of how to cut the Defense Budget.  Still, I have an opinion, and I have expressed it.