Whether it's bombers or cookies, filling Pentagon orders is a drag
The latest round of scandals surrounding military procurement - charges involving high-priced consultants and privileged information - is generating pressures for more detailed regulation. But government contractors are already the most closely regulated sector of the American economy. A very different strategy is needed to get the benefits of using private enterprise to design and produce weapon systems. Anyone who examines the seemingly endless array of requirements imposed on companies doing business with the Pentagon must wonder why some deregulation has not been applied.
It is hard to overestimate the involvement of Defense Department officials in the internal operations of the companies producing aircraft or missiles or ships for the armed forces. The regulations governing military procurement are more than 2,000 pages long, including 500 pages of standard clauses to be inserted into defense contracts and 300 pages of standard forms to be used. This mountain of bureaucratic detail is followed by 16 more-technical appendixes.
Military contracting officers and their defense industry counterparts must master the intricacies of the massive ``Federal Acquisition Regulation'' (a two-volume handbook), the even larger Department of Defense ``Federal Acquisition Regulation Supplement,'' the defense acquisition circulars issued periodically to modify the supplement, and the special instructions issued by the individual services and purchasing commands. Any one regulatory issuance may cover topics ranging from cancellation of forms to logistic support for contractors in South America.
The result is more than a fascinating exercise in bureaucracy. As the customer, the government has power to review and veto company decisions regarding which activities to perform in-house and which to subcontract, which firms to use as subcontractors, which products to buy at home rather than abroad, what internal financial reporting systems to set up, and how much overtime work to authorize.
Many of the federal powers over defense contractors are designed to respond to highly publicized incidents of waste or to avoid the repetition of scandalous practices that resulted in embarrassing headlines. But rarely are the bits and pieces seen as a total process. The differences between military and civilian buying procedures are staggering. The 400 pages of specifications required for a commercial airliner contrast with the 16,000 pages for military aircraft. The 250 separate commercial data submissions are very modest compared with the 30,000 that the military requires.
It is eye-opening to juxtapose the excruciating detail imposed on defense contractors and the cost overruns and quality deficiencies of weapons production. The awesome amount of second-guessing of defense contractors surely contributes to their poor performance. The time and effort needed to comply with the military's bureaucratic requirements are not available to design and produce weapons and equipment.
The trivia included in the military procurement process often border on the ridiculous. The Army has 15 pages of specifications for the sugar cookies it purchases for soldiers' desserts. Buying a whistle for the military police means dealing with 19 pages of detail. My favorite example is Military Specification MIL-F-1499F. These 14 pages, covering the requirements for fruitcake to be sold to the Pentagon, provide (among other things) that the vanilla flavoring be of sufficient quantity to be ``organoleptically detected.''
Regulation of weapons production is far more intricate. For a large defense company, an entire suite of offices is assigned to the military's full-time resident inspectors and reviewers.
The time has come to deregulate the military procurement process. The potential benefits are substantial. One Pentagon study estimated that meeting regulatory requirements accounts for one-third of all procurement costs. A deregulation approach would streamline the way the military buys weapon systems, speeding up the process and curbing costs.
The ultimate protection to the military would remain. Every contract provides that the Department of Defense can unilaterally cancel its commitment ``for the convenience of the government'' and merely repay the allowable costs the company has incurred.
For the United States to receive the full benefit of the innovation and efficiency it expects from the private sector, military contractors must be given more freedom from public-sector interference and more exposure to the forces and effects of competition.