The New ‘Gansler Report’

The New ‘Gansler Report’

Seven years after the commission he chaired released its landmark report, Jacques Gansler assesses the current state of defense acquisition

Army AL&T magazine usually looks outside the world of defense acquisition for our Critical Thinking feature, but for this issue, with its theme of revamping acquisition, we could think of no better person to address the topic than a former undersecretary of defense for acquisition, technology and logistics who has spent much of his professional life working in and studying defense acquisition—the Hon. Jacques S. Gansler. He’s currently director of the Center for Public Policy and Private Enterprise at the University of Maryland School of Public Affairs, where he holds the Roger C. Lipitz Chair in Public Policy and Private Enterprise.

Gansler holds a Ph.D. in economics from American University, an M.S. in electrical engineering from Northeastern University, an M.A. in political economy from the New School for Social Research and a B.E. in electrical engineering from Yale University.

His name and reputation should be familiar to all Army AL&T readers. His role as undersecretary was not his first in government. He served for much of the 1970s as the deputy assistant secretary of defense for materiel acquisition and as assistant director of defense research and engineering for electronics, responsible for all defense electronics research and development (R&D).

Because of his expertise, Gansler has served on more than one committee that has looked into revamping acquisition. One in particular bears his name—the Commission on Army Acquisition and Program Management in Expeditionary Operations, which he chaired and which produced the October 2007 report “Urgent Reform Required: Army Expeditionary Contracting.”

He talked with Army AL&T Feb. 13 about the commission’s work, what’s happened since then and many other aspects of revamping acquisition.

Army AL&T: Do you think that the Defense Acquisition System is out of date? If so, is it possible to bring it up to date?

Gansler: Yes. It can be significantly improved, but it’s a challenge. [Niccolò di Bernardo dei] Machiavelli warned us that trying to make change in government is hard. [Former] Defense Secretary [Chuck] Hagel made it very clear that we are, in many areas, losing our strategy, which is technological superiority. He said it in terms of air, ground, sea and space. But the major areas that I think we need to address in terms of change are the ability to buy commercial, the ability to have civil-military-industrial integration and the ability to take advantage of [an] international, global [marketplace].

There are a significant number of areas where the Department of Defense is no longer technologically ahead. The most obvious fix for this is not necessarily changing the rules, but looking at where the budget’s going. We’re buying ships, planes and tanks from the 20th century instead of doing research for the 21st century, and we’re not even shifting the types of things that we’re going to see in the 21st century. Cybersecurity, for example, is a major issue for the 21st century. [GEN Sir] Rupert Smith wrote a book [“The Utility of Force: The Art of War in the Modern World,” 2005], saying that what we should think about is that we’re shifting from tank-on-tank [warfare] to war among the people. That’s another area.

Another thing that’s happening in the world, and certainly in America in defense, is a shift from a focus on goods to a focus on services. I did a Defense Science Board study in 2011 or so, in which I looked at the total expenditures in the acquisition area for DOD, and found that 60 percent of the dollars are going to buying services. Yet all of our rules, our policies and our practices are based upon buying goods. There’s a big difference between buying an engineer and buying a tank: You don’t need to put the engineer through live-fire testing.

If we are focusing mostly on services, one of the examples is information technology. The commercial world is way ahead of the Defense Department in buying IT. If we learned how to do civil-military-industrial integration, we could take full advantage of it.

The proof that we have big obstacles to doing that is two things: One is the example of Boeing, which was forced to split their commercial and military transports. They had been co-­producing them in Wichita, KS. Instead, they moved the commercial to California, left the military in Kansas, and the price of both went up because they lost the economies of scale from putting them together. Another proof of it is in the Better Buying Power [initiative]. It’s even got a special line item for removing the barriers to buying commercial.

Also, when Boeing was going to ship a 767, a commercial transport, out of the country, it had to pay an extra $15 million because there was a chip inside its electronics that also happened to be in the Maverick missile. Congress passed a law that says that any subsystem in a [DOD] system is not allowed for export, [just] like a weapon system—you’re not allowed to export it. So that chip … couldn’t be exported—not because it was inherently sensitive, just because it was in the missile. And so, therefore, the total commercial airplane was under export control.

That’s just one of the many “barriers.” There’s a whole pile of regulations. The Code of Federal Regulations is now 186,000 pages. If you were a commercial supplier and weren’t allowed to export and you had to meet all of these regulations, would you really want to do the business in the Defense Department?

I’d say that the barriers to collaboration between both the commercial and the global market and the defense market are primarily things that Congress introduced. There’s one other big barrier that Congress has recently introduced, which is elimination of public-private competitions … for work that’s not inherently governmental. For example, would you say that wrench-turning is inherently governmental?

Congress passed a law that says 50 percent of all depot maintenance work must be done by government workers—sole source, of course—in government depots. Well, if you had one of them in your district, you’d understand why that law was passed. The House Military Depot, Arsenal, Ammunition Plant, and Industrial Facilities Caucus is the largest caucus on Capitol Hill—135 members—and they insist that all this depot maintenance work be done by government workers. But where they’ve had thousands of competitions between the public and private sectors, the average savings has been over 30 percent, and the performance, when measured, has improved.

If you think about the barriers on a global basis, there clearly are some areas where the U.S. is no longer ahead.

The largest killer of Americans today [in combat] is roadside bombs. And so we decided we would armor those vehicles, and we got the armor from the country that has the most unfriendly neighbors in the world. Who do you think that is? Israel. So we are now using this Israeli armor on our infantry fighting vehicles, and that makes sense—to take advantage of the technology that exists in different parts of the world. And the Israeli company fortunately set up their factory in Vermont.

Army AL&T: Is government R&D losing the relevance it once had? Should the government just leave it to the private sector?

Gansler: There’s no evidence that the government is leading the research. There is lots of evidence that, for example, what DARPA [the Defense Advanced Projects Research Agency] funds does lead in many areas. But there’s still significant cultural resistance in the question of what we buy.

There are four parts to acquisition. The first question is, “What do I buy?” And that should relate to the future, not the past. The past is based on cultural bias: I want another airplane, I want another ship, I want another tank—that kind of thing. Congress likes that because it’s being built in their districts. So the first issue is a question of, “How do I spend my money?” And I think there’s an example of where [doing] research versus buying some old stuff is one of the key questions.

Then the second question that relates to that is, “Who will I buy it from?” And that relates to buying commercial and buying foreign, and buying from a defense industry that is highly competitive and state-of-the-art. Those are the options you have, and you want to create a defense industry that is state-of-the-art, that is highly competitive, and by that I mean at least two companies in each area that is critical. In many areas, we’ve gotten below that. That’s a question of what should the defense industrial base be for the future, and should it include commercial? Should it include civil-military integration, like the example I gave about Boeing having to split up? Should it include any foreign sources? And should you plan on making sure that it always has competition at least in all critical areas or next-generation critical areas? That’s the kind of thing that we try to research in our research center here [at the University of Maryland]. So the second question, who do you buy it from, is [related to], “What do you want for your industrial base?”

And then the third question is, really, “Who does the buying?” And there’s one of the biggest problems we have right now—the experience of the acquisition workforce. You really want your senior people, experienced people, knowledgeable people to be making those decisions. But unfortunately, we have had an aging workforce, and they were replaced by “interns.” In fact, today 55 percent of the DOD’s acquisition workforce have less than five years of experience, with few mentors remaining to help them.

Army AL&T: Do you think that the Better Buying Power (BBP) initiative of building the professionalism of the workforce is really making a difference, or is it too early to tell?

Gansler: Well, it’s an important initiative—let’s start it that way.

In order to try to address this need, here in my research center, we’re running a program on acquisition specialization for graduate students—case studies and things like that, which we’re teaching and getting certified. But even the Defense Acquisition University is somewhat resistant to the needed change in the sense that they don’t teach the best practices of the commercial world, and there are many areas where commercial best practices truly are the best. They teach, “Here’s how we do it,” the 186,000 pages of the Code of Federal Regulations. And they teach buying goods and not buying services.

The BBP professionalism initiative is something we should be doing, because there aren’t mentors out there nowadays. One thing we might want to think about is creating an organization that has some experienced people who can help as counselors or mentors for the contracting and acquisition practices. I think that’s a step we need to take. The world changes. Why are we teaching the way we used to do it, instead of recognizing that technology’s changed, the scenarios have changed, the threat has changed?

We didn’t have to worry about cybersecurity 15 years ago. And the sort of things that you could have—automation and other techniques, robotics, things like that—we want to make sure we’re taking full advantage of from the commercial world or even the global world, and not just constraining ourselves to the way we used to do it.

Army AL&T: Who would be the best entity to take up that responsibility for providing experienced counsel, then? Would it be academia?

Gansler: Well, that would be in the right direction. And you also need to make sure you’ve got some of the creative and senior experienced government and industry people doing it, because the old way isn’t giving much authority to the program manager. The contracting people now tell them what to do, and you’d like to have the program manager experienced as well as the contracting people. You’d like to have the program manager be able to have some flexibility to make some choices instead of having the old laws and rules dictate the way we do it.

Army AL&T: You’ve said, to quote the Gansler Commission report, that contracting people are “understaffed, overworked, undertrained, under-supported and, I would argue, most importantly, undervalued.” Given all that government civilian employees have been through over the last year with furloughs and sequestration, why would someone want a government job?

Gansler: Especially with what it pays, you mean, besides that.

Army AL&T: Besides that.

Gansler: My son [Douglas F. Gansler] was attorney general of Maryland [from 2006 to 2014], and he’s just gone to work for a law firm and his salary has skyrocketed. I was impressed with that. It makes the point you’re making. I think what you need now is for [Secretary of Defense Dr.] Ash Carter to sort of take the lead in emphasizing the importance of an acquisition workforce career path, and they will be listened to.

Army AL&T: It seems as though government employees are often maligned as bureaucrats in a bloated bureaucracy and, while there are bad apples everywhere, you look around and it’s hard not to respect members of the acquisition workforce. How do you respond to that kind of a slap against the government workforce?

Gansler: I agree with your assessment totally. That was my experience when I was in the government twice, the first time in charge of electronics R&D. At the time I was a vice president at ITT, and [then-Secretary of Defense] Bill Perry called me and asked if I would come to the Pentagon and run electronics R&D. And so I did. At that time, I took only an 80 percent salary cut.

The next time, when I came as an undersecretary, I took a 90 percent salary cut. But I found the government people to be extremely qualified, extremely dedicated and extremely competent.

A lot of those people have retired. Now we clearly need to focus on trying to have people come from the private sector and/or universities into these jobs and not make barriers to them doing it and leaving when they’re finished.

I think there are people in industry—maybe in the think tanks or even in the labs of industry—who could make some significant contributions but aren’t being encouraged, as you suggested with your question, to take the job, because then they’re the “bureaucrats.” That’s why I think we need more flexibility in the decision-making process—because we need to have the ability to work across the sectors. There are people in the government who need to have industry experience, commercial experience, preferably even some global exposure. It really is different in the rest of the world. When I was a vice president of ITT, obviously a global company, I was forced to see the rest of the world. To the extent we can, [we need to] get people coming into the government who have industry experience, global experience and preferably even commercial experience, because today the commercial world is ahead in many areas.

We need to clearly stress the education and training aspects. I just completed a National Academy of Engineering study where I was shocked to find that the government has been questioning the value of paying for people to get master’s and doctoral degrees—even via distance learning. That just shocked me, because I think there’s no question that understanding what it is you’re doing makes sense.

I got my Ph.D. while I was working in the government. And now we’re running this acquisition specialization as part of the master’s and doctoral degrees here at the University of Maryland, and that usually is paid for by the company or the government. I had both of my master’s degrees paid for by the company I was working for, and my Ph.D. by the government. [Otherwise] I probably wouldn’t have done it—I couldn’t have afforded it.

Army AL&T: The Gansler Commission put a lot of emphasis on the need for leadership, particularly senior military leadership, to raise the visibility and importance of a professional contracting corps. Is there anyone in your eyes who’s exemplifying that leadership for the Army?

Gansler: I think there are people in the Army, retired as well as current, who have really stressed that. But I’d rather not name one or two. There’s still a set of controls over them in this 186,000 pages of the Code of Federal Regulations, and by Congress. When Congress brings them up on the Hill to attack them for screwups on the programs, Congress keeps writing corrective actions by adding more pages to that document. They fix things, they think; but they’re not giving the flexibility or the value of the acquisition workforce that they should be. Instead of attacking them and writing new laws to control them, they need to give them the experience and flexibility and recognition.

Army AL&T: You’ve said that people don’t think that cost is a requirement, but that cost should absolutely be a requirement.

Gansler: Absolutely. When you buy something today in the real world, you have a design-to-cost objective: This is how much I’m willing to spend. Do you pick your heart surgeon on the basis of the lowest hourly rate? You wouldn’t make that your basis. You’d use prior experience, and you’d say, “What kind of references do they have?” and things like that. Why can’t the government do that? The government doesn’t do a very good job of keeping past performance data, for example. That’s something the government should be making “best-value” judgments on the basis of—a combination of performance, reliability and cost—not just the cheapest. And yet, there’s been a move in that direction, even more so in the services area, where professional, skilled services really matter. If they have experience to provide that service, don’t go for the lowest hourly rate.

But that’s unfortunately what I hear from a lot of the service companies. The thing I hear from the small businesses, where a lot of innovation comes from—I get calls all the time from the man or woman who runs a startup company, saying, “Can you get these auditors off my back? I’m spending all my time just trying to satisfy the specialized cost accounting rules.” Or, “The auditor’s running through my factory and asking me questions and tying up my personnel.” It’s a lack of trust.

If you want to go back to the original question about cost being a requirement, the JDAM [Joint Direct Attack Munition] missile’s a perfect example, where we allowed them to use commercial parts for [about] 30 percent of the sensors and actuators and things like that, and then the independent cost analysis went down dramatically. The Air Force had estimated that a single GPS receiver would be something like $150,000 per airplane. Now, you and I carry a GPS receiver around in our iPhone, and we didn’t pay $150,000 each for that chip.

The chief of staff of the Air Force said there were only three requirements for the JDAM weapon. Because we have so many of them, it should cost under $40,000 each, and because the important point is to hit the target, it should have proven accuracy. And then the other important consideration is [that] when I push the button, it works. The guidance system for the JDAM missile went from the independent cost analysis, using military parts, of $68,000 each, to $18,000 each as a result of using commercial parts—rather dramatic—and also using competition, which is another thing that the government needs to emphasize more.

So you want performance, reliability and low cost. And so people always say, “Well, gee, can you really get higher performance and lower cost?” Of course you can. That’s what innovation’s all about.

Lanchester’s law says the total force effectiveness is proportional to individual weapon effectiveness times their numbers squared. Numbers are more important than the individual weapon’s performance, and numbers are directly correlated with unit cost. And so it really matters what things cost: if you can get enough of them within the budget and if you plan ahead for what we’ll need in the future.

That’s one of the things that I think we need to place more emphasis on, the programming aspect of the budgeting process, the five-year plan: thinking about what we’ll need in five years and making sure we’re thinking about that for the future. That’s the purpose of research, and that’s one of the reasons that you want to get some of the university people who are looking at global research to take part in that planning process. I think it’s very clear that we don’t have a requirements process that is looking ahead. It tends to be more looking back, and that’s something we can’t afford to do because the world is changing too fast.

Army AL&T: Can you point out any country that does acquisition especially well?

Gansler: My impression is Israel, because they’re in an unfriendly neighborhood. They’re forced to do things faster and cheaper. They have to figure out a way to respond rapidly to their unfriendly neighbors [who are] shooting rockets and missiles at them. They developed the defense system, including electronic warfare and missile defense and things like that, fast, and they had to do it well because their own society is being threatened—the whole country, literally.

Army AL&T: So it’s the existential threat that drives them?

Gansler: Exactly. We, right now, are facing as much of an existential threat. You figure North Korea and Iran—that’s one set of potential existential threats, with their missiles and their nuclear weapons. And then the other end of the spectrum is the terrorist threat and even the cybersecurity threat. We have to figure out ways to protect against each of those. There are a lot of things we could be doing better in that area, like the terrorism threat in the sense of better integration of the intelligence activity. The president just announced we’re going to set up a new organization for cybersecurity, and that’s helpful because it’s clear that that’s one of the real current threats.

Army AL&T: Is there anything that you’d like to add?

Gansler: I think it’s very important that we learn how to streamline our regulations. It’s very important that we continue to focus on affordability. We have a history of continuous cost growth of our weapon systems. The largest program in history right now is the F-35, and that, when it was started as a DARPA program, had a design cost of $35 million. Now its estimated cost is over $100 million, and so we keep not emphasizing cost as much. And the way that emphasis has been interpreted is: Let’s get cheap—and that’s not what I’m talking about. I’m talking about “best value,” getting higher and higher performance, higher and higher reliability, and lower and lower cost.

One lesson learned that we should have followed is to look at the actual data on the so-called “great engine war” for the F-16 and -15. They had two engines competing continuously, GE and Pratt & Whitney, and both of them got higher and higher performance, higher and higher reliability, and lower and lower cost because of the continuous incentives for innovation. Now with the F-35, the decision was made not to dual-source the engines. How do you throw out all that historic data?

Same thing with the public-private competition that I mentioned earlier. When we’ve had thousands of examples with average cost savings of over 30 percent, it’s now against the law. I come up with a lot of cases where the facts should be used, and the same thing with flexibility and management judgment—if you have senior, experienced people in the acquisition workforce, both the program managers and the contracting people, allow them some flexibility so they don’t always have to “follow the rules” if the rules aren’t the best answer.

We can make change, and that’s the leadership challenge. And I think we need to stress that. I talked to [Rep.] Mac Thornberry [R-TX, chairman of the House Armed Services Committee] yesterday and offered to help in any way we can. I think that there’s still lots of opportunity, and there’s lots of need for the future. If we’re going to maintain our strategy of technological superiority with fewer dollars, we have to take some actions. And one obvious step is making sure we’re adequately funding research.

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This article was originally published in the April – June 2015 issue of Army AL&T magazine.