A Businessman Looks At Procurement Reform
Former Lockheed CEO says Congress needs to change its oversight of Pentagon weapons-buying programs.
by Sydney J. Freedberg Jr.
Saturday, April 25, 2009
Norman Augustine, retired chairman and CEO of Lockheed Martin, has held multiple positions in the Pentagon and the private sector since 1958. A legendary figure in the defense industry and a regular contributor to National Journal's National Security expert blog (security.NationalJournal.com), Augustine spoke to NJ about his decades in military procurement. An edited transcript follows.
NJ: Why have the problems in military procurement persisted for so many years?
Augustine: This isn't the real world of competitive business. You've got a monopsony [a market with a single buyer]; you've got monopolies within the monopsony; you've got the media all over you.
In the private sector, if you run a grocery store and you're having a problem with people stealing cans of soup, you'd probably put a guard on the loading dock. If you're the government, you put a guard on every can of soup because you can't afford the publicity of a can of soup being stolen. So the price of soup doubles.
[And] we buy such small quantities that the unit costs are so high. If you go to a commercial firm and say, "I don't want the product you normally make; I want a different kind of product, and I want 10 of them," they probably wouldn't do business with you, but if they did, the cost would be out of sight.
NJ: So how do you prevent overruns and delays?
Augustine: A lot of it comes down to having really experienced people. More and more, we're finding people in government with no experience in business and people in business with no experience in government; and we do that to avoid conflicts of interest, [but as a result], it's just really hard to get people who are really experienced and good at procurement in government. It's an esoteric business.
And the environment today is so politicized that I'm afraid it's not a very pleasant place to work. Not long ago I was asked to chair a commission, unpaid. They sent me a package of 72 pages of forms that I had to fill out. And if you make a mistake on one of them, somebody may try to put you in jail. There's nothing in law or the Constitution that requires all that.
When I first was asked to serve in government, in 1965, you didn't turn down an invitation to serve in government. It was your duty; it was a great place to make a contribution, to work on really challenging things. Today there's a long line of people turning down the jobs. As a result, we get some very good people, but we also get some that are the 15th choice.
NJ: What's your take on the reform proposal from Senators Carl Levin, D-Mich., and John McCain, R-Ariz.?
Augustine: I think it's clearly in the right direction, and I also think that reform will have to come from both sides of the river. The Defense Department alone or Congress alone can't bring this about, but together they can. And Congress has got to look at how it conducts itself, because it's a nontrivial part of the problem.
The Founding Fathers were setting up a country, not a business process. They imposed many, many checks and balances that produced inefficiencies, but the price was worth it. [But] nowhere did the Founding Fathers say that Congress had to get into the details of how to execute the business--how many rotor blades a helicopter should have or how many tons a tank should weigh. The role of Congress is to set objectives, to provide resources to carry out those objectives, monitor, and make changes where necessary.
NJ: What would your approach to reform be?
Augustine: If I were king for a day, I would do a lot more prototyping. Some of the systems I just wouldn't put into production. I would get things that were high-risk, high-payoff, and prototype them. If they worked, I might decide to put them in production then. And when you prototype, as opposed to designing an aircraft for production, the costs are much less.
One of the most perishable pieces of a corporation, most difficult to replace, are design teams. They're not huge, but that's where a key piece of your talent is. One way to keep those design teams is to do prototypes. The Lockheed Martin "skunk works" [a secret operation that developed stealth aircraft] is an example of what can be done. They would draw the centerline of an aircraft and have one flying nine months later. It was not an aircraft you could ever put in production, probably, without redesigning it, [but] it's a great way to test new technology and to keep design teams alive and doing useful things.