BURTON/COX: Reforming defense procurement

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By Robert Burton and Jerry Cox

OP-ED:

President Obama promises to inject enough "fiscal responsibility" into the budget process to cut the federal deficit from one unheard-of amount to another unheard-of, but lower, number.

There can be little hope this or any future president will be able to get federal finances under control without taking aim at the U.S. defense budget, and that means fundamental changes in how the Pentagon spends money.

Regardless of whether war costs go up or down, it is essential to develop weapons more quickly and less expensively and to reduce cost overruns in every type of defense contract. Those objectives are impossible to meet without defense procurement reform. The administration will have to be truly transformational to achieve success here, for three reasons:

(1) Bad habits in government cannot be broken without bipartisan support.

(2) Procurement reform is the most effective way to combat pork-barrel politics.

(3) Only the Pentagon can give American taxpayers literally more "bang for the buck."

The first step to transformation, therefore, must be for the president to make Arizona's Sen. John McCain, the top Republican on the Senate Armed Services Committee, his new best friend. Credibility is crucial, and Mr. McCain has the confidence of military personnel, 70 percent of whom reportedly voted to make him their commander in chief.

Mr. McCain also enjoys the respect of his colleagues, who watched him challenge the Defense Department's Republican leadership repeatedly. They also cosponsored his legislation to institutionalize four key principles of defense procurement reform - competition, accountability, oversight and transparency.

With a Republican leading the Defense Department, no one will mistake Mr. McCain's activism for partisan politics. The greatest challenge will be to convince weaker-kneed politicians in both political parties to stop wasteful procurement practices by turning those four theoretical principles into reality.

The best place to start would be to defend competition, which is gravely threatened by the meteoric rise in bid protests. Instead of buying aerial refueling tanker aircraft, combat helicopters and new Humvees last year, the U.S. government produced 1,652 bid protests. This 17 percent, year-over-year increase made fiscal 2008 the worst in the last 10 years, according to the Government Accountability Office.

The most egregious example is the perpetually ongoing tanker procurement. It threatens the most far-reaching consequences because it involves the most money - more than $35 billion - and because it undermines some hard-won steps toward greater competition.

After Mr. McCain exposed a sweetheart, sole-source deal in 2002, the Air Force took bids from Boeing and Northrop Grumman, which came in with a $3 billion lower price tag. Unfortunately, a congressional agency faulted how the bids were evaluated and the process degenerated into exactly the sort of pork-barrel politics the president and Mr. McCain both railed against during the campaign.

This outcome - or lack of an outcome - casts a pall on every future defense procurement. Why should any qualified contractor spend millions of dollars to prepare a winning bid if a multimillion-dollar lobbying campaign can vitiate the results?

Defense Secretary Robert Gates terminated the tanker contract in September 2008 to "cleanly defer this procurement to the next team." Now that Mr. Gates finds himself the leader of "the next team," Mr. McCain is better-situated than any Democrat to keep Congress from interfering when, as promised, Defense restarts the competition early this spring and selects a contractor strictly on the merits. Otherwise, there is little hope of making competitive bidding the rule.

The need for reform is even more apparent with contracts that made it through all the politics and protests and actually got awarded. Cost overruns and delays will continue without serious attention to the second key principle, oversight. Mr. McCain may not fulfill his campaign pledge to eliminate "cost-plus" contracts, which often invite poor procurement practices. But the administration can require top-level program managers to get a better grip on poorly defined task orders and out-of-scope service agreements that drive program costs skyward. They also should comply with existing law more faithfully and stop paying "incentive" fees that are not performance-based.

In his final breakfast with reporters, the Bush administration's last defense acquisition chief, John Young, highlighted the need for greater adherence to the principle of accountability. He gave low marks to the military services, which bear primary responsibility for conducting the Pentagon's business, and gave himself, at best, a passing grade. He said Mr. Gates "wants to see a higher standard of performance," but Mr. Young did not mention there is only one way to get it. Instead of continuing to award contracts to people who deliver runaway costs and interminable delays, he must demand excellent results. Like President Lincoln, Secretary Gates must keep changing "generals" until he finds one who can stand and deliver.

Republicans fared poorly at the polls in November, but Mr. McCain has unique credibility, respect and commitment to make defense procurement reform a reality. The president must seize the opportunity for a bipartisan alliance, make it one of his most substantial and lasting contributions to American government, and ensure that purchasing practices at the Pentagon are truly transformed.

Robert A. Burton, a partner at Venable LLP in Washington, was deputy administrator of the Office of Federal Procurement Policy in the Executive Office of President George W. Bush. Jerry W. Cox, a founder of the Forerunner Foundation, a Washington policy institute, is a former U.S. Senate procurement counsel.