DoD: Private-sector practices will lead to savings

In a report released Monday, the Defense Department reaffirmed that it intends to adopt private sector practices to generate savings to fund weapons modernization efforts.

Jacques Gansler, undersecretary of Defense for Acquisition and Technology, said DoD will tackle its biggest reform challenges by applying lessons from the commercial sector. The Defense Systems Affordability Council (DSAC) issued the report, "Into the 21st Century: A Strategy for Affordability."

"We will make mistakes along the way. And we may be criticized for these mistakes, but dramatic effects can only come when we take and manage risks and begin to act more as the competitive, commercial sector does," Gansler said.

DSAC, created to set and monitor top-level defense reform goals, outlined three priorities in the report. First, DoD hopes to meet commercial sector standards for product development by reducing systems acquisition cycle time by 50 percent in 1999, among other efforts. Second, DoD wants to lower weapon systems' ownership costs- which includes development, production, operations, support and disposal- by surpassing cost targets by 50 percent for all programs by 2000. Finally, the Pentagon wants to reduce the overhead cost of its acquisition and logistics infrastructure. DoD plans to adopt private-sector cost management techniques such as activity-based costing and activity-based management in order to keep a tight rein on its spending.

DoD will continue to outsource functions the private sector is better equipped to perform, Gansler said. "The United States private, commercial sector has proven itself to be very competitive in the world today. If we take advantage of these efficiencies, private and government costs can be reduced and funds can be shifted to modernization," he said.

Although acquisition reform efforts have been made, procurement fraud and mismanagement are real threats at DoD, Eleanor Hill, inspector general at DoD, testified before a Senate Armed Services Subcommittee on Readiness and Management in March. According to Hill, so far DoD has made improvements in acquisition lead time, but is still lagging in other areas. "We have not yet seen significant across-the-board improvements in cycle time and unit costs," she said.

In particular, acquisition of major weapons systems at DoD is poorly managed, Louis J. Rodrigues, director of defense acquisitions issues at the General Accounting Office, testified at the same hearing. Compared to the private sector, DoD's acquisition process takes longer, costs more and delivers less than promised, Rodrigues said. Simply "attempting to graft commercial best practices onto the existing acquisition process," he said, is not enough.