CHAPTER 8

THE ACQUISITION PROCESS

A. INTRODUCTION

The purpose of this chapter is to examine the process used by the Department of Defense to develop and procure major weapon systems and other defense equipment. Part of the discussion is concerned with the formulation of military requirements; and part, with the acquisition function itself.

Over the last two years, there has been a great deal of press and public attention devoted to the defense acquisition process. Most criticisms of the process have dealt with subjects and issues that are not organizational in nature, but instead reflect shortcomings in management procedures. The purpose of this chapter is not to consider all defense procurement problems. Rather, the chapter is intended to examine organizational issues. Therefore, this chapter will address only a limited set of acquisition problems that are caused, at least in part, by organizational deficiencies and for which organizational adjustments might be solutions. Moreover, the problems identified in this chapter focus on those organizational relationships that exist among the principal DoD offices: the Office of the Secretary of Defense (OSD), the Organization of the Joint Chiefs of Staff (OJCS), and the Military Departments. Excluded are organizational issues that are internal to the Military Departments, such as the structure of the Service buying commands. Though such internal Service issues may be important, they are beyond the scope of this study.

Despite the relatively narrow focus of this chapter, the substantial public interest in non-organizational procurement issues is recognized. For this reason, Appendix A to this chapter discusses the procurement process more generally and identifies defense procurement issues that are not organizationally based. However, since this study is not focused on such general management problems, there are no conclusions or recommendations with respect to issues discussed in the appendix.

B.EVOLUTION OF THE ACQUISITION PROCESS

1. Prior to World War II

The characteristics of the current defense acquisition process have developed since 1945. Prior to World War II, the Department of War and the Department of the Navy independently developed and used procurement procedures for equipping and supplying their respective Services. During World War I and World War II, attempts were made to establish a central agency to develop government-wide procurement policies and procedures, but in practice

specific authority remained decentralized in the Military Departments.

By the end of World War II, a consensus had developed in the Legislative and the Executive Branches that a new organization was needed to coordinate defense production, distribution, and supply, as well as research and development, in the Military Departments. This consensus was a direct result of the World War II experience of trying to manage a full-scale conversion of the national economy from civilian to military production and of the recognition that the importance of science and technology in modern warfare was steadily increasing.

2. National Security Act of 1947

The National Security Act of 1947 established similar mechanisms to coordinate both military procurement and research and development. The Act established a Munitions Board and a Research and Development Board, each consisting of a civilian chairman and representatives of the Military Departments. In practice, inadequacies in the organization of these boards prevented them from performing their statutory functions in an effective manner. Three of the four members of each board were essentially required to judge the requests and programs of their Service. Moreover, the complicated administrative mechanism inherent in the board-type structure prevented the establishment of a clear line of civilian authority from the Secretary of Defense. In recognition of these inadequacies, the Munitions Board and the Research and Development Board were abolished in June 1953 and their functions were transferred to the Office of the Secretary of Defense.

The role of the Secretary of Defense in the procurement of major weapon systems, however, remained limited throughout the 1950's. The lack of an integrated DoD resource allocation process allowed each Military Department, using its own resources, to develop and procure weapon systems for the type of conflict that it envisioned. The higher military budgets resulting from the increased international role of the United States following the Korean War presented this system with a twofold challenge. This decentralized decision-making apparatus had to attempt to both efficiently manage the first peacetime defense industry in U.S. history and effectively coordinate military research and development efforts. David D. Acker characterizes the defense acquisition environment of the 1950's as follows:

Money was authorized to develop almost any new defense system that appeared capable of giving the United States a performance advantage over any potential adversary. Such considerations as "should-cost," "design-to-cost," and "life-cycle cost" were not uppermost in the minds of defense planners until the late 1950's. Both development and production were carried out under cost-reimbursement contracts. In this environment, production costs did not pose a major constraint on engineering design. When a design was discovered to be impractical in production or to be inoperative in field use was modified in accordance with government-funded engineering changes . . .

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The lack of a well-organized and integrated DoD financial management system, along with the practice of "piecemeal" procurement, led to unstable employment in defense industry and the emergence of a transient work force. Many of the contractors being challenged to develop and produce defense systems on the outer fringes of technology found it difficult to create and maintain smoothly functioning program management teams. ("The Maturing of the DOD Acquisition Process, Defense Systems Management Review, Summer 1980, page 14) 3. The 1958 Amendment to the National Security Act

The Department of Defense Reorganization Act of 1958 recognized the need for greater OSD involvement in the acquisition of major defense systems. In addition to providing the Secretary of Defense with greater authority in the administration of defense funding, the Act also gave the Secretary the authority to assign the development and operational use of new weapons to any Military Department or Service. This legislation provided the groundwork for the expanding role of OSD in the management of defense acquisition programs.

4. Program Management Concept

The experience of developing technologically advanced weapon systems also led to the development of an integrated program management concept in the late 1950's. This concept, first formalized by the Air Force Systems Command, uses a centralized authority for the business and technical management of selected tasks. In the case of a major defense program:

This process consists of a complex cycle that commences with identification of a need and the conception of a system to satisfy the need. The cycle ends -following deployment (and possible modification) of the system -with the retirement of the system from the inventory, or the expenditure of the system in service, as in the case of an air-to-air missile. A program...may be considered as an aggregate of controlled, time-phased events designed to accomplish a definite objective. Often, a program involves a pyramid of contractually interrelated government, contractor, subcontractor, and supplier organizations for long periods of time. In this complex environment, the performance of any one organization can affect the others. ("The Maturing of the DOD Acquisition Process," page 9)

Each Service adopted some variation of this process for the management of major programs. The program management office provided the mechanism for integrating various functional areas and overseeing defense contractors' internal operations that was required by the large number of sole-source contract awards. The program management framework has proven sound in practice, although such centralized management can result in the type of layered bureaucracy that stifles innovation and flexibility.

5. Secretary McNamara's Tenure

Secretary of Defense Robert McNamara, whose tenure spanned much of the decade of the 1960's, used the authority provided in