Why The Military Can’t Get The Figures Right

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McNamara spent a lot of effort on what was called totalpackage procurement, and the C-5A transport plane was the big trial of that idea. We would have a competition and make a complete contract to develop and build the airplane to certain specifications, with a price agreed upon in advance. We made allowances for inflation, but basically the real costs were specified in advance, and the supplier was taking a risk.

What happened was that the bid Lockheed submitted was far below what it actually cost them to produce the plane. They expected that the contract would be renegotiated, and when it wasn’t, they ran into a situation where they would be losing a lot of money or even going broke. So they and the rest of the defense industry orchestrated a campaign against that kind of contracting; they wanted to go back to the old cost-plus contract. Eventually they were able to prevail; now we don’t have much competitive contracting.

Was anything learned during that period to help us control costs better?

That we should have competition and that we should write firm contracts. Unfortunately, the Congress didn’t learn the lesson at that time. Perhaps now that it sees the bad experiences we’re having, it will get interested in controlling costs again.

I do believe that the kind of contracting we were trying to do with the C-5A was the right idea. At the time, when Lockheed got into trouble, the defense industry said, in effect, “This is impossible; there are too many unknowns; you can’t ask a contractor to write a firm contract for such a plane.”

In answer to that, 1 would note that Boeing, having lost the contract for the C-5A—which 1 think they lost because they bid much more honestly on the price—then decided to develop the 747, an airplane of similar size and technology. They risked their own money on it, and they managed to produce it for the amount they estimated and in the time they estimated. So you can’t say it would have been impossible for Lockheed to estimate the costs accurately and then produce the plane for what they said.

In the book that you wrote about your experience at the Defense Department, you said the single greatest need in that field was to create an independent force, outside the professional military, that could look at military decisions in relation to cost and other considerations. What progress has been made on that?

It’s not very encouraging. When Nixon came in as President, instead of continuing this work, he announced that he was going to “root out the whiz-kid approach from the Pentagon,” which meant in effect to turn the decison-making over to the professional military. There have been ups and downs since then. The tragedy is that there is no powerful interest group in favor of cost effectiveness in national defense.

Some people want to spend less on defense because they want to see money spent on welfare, or health care, or education, or something else. But they don’t really care how the money is spent on defense; they just want to spend less. Other people, led by [Secretary of Defense] Caspar Weinberger these days, want to spend more and, I think it’s fair to say, don’t seem to care very much how it’s spent. While it is definitely in the interest of the American people in general for there to be a tough scrutiny of the cost effectiveness of every defense program, it’s often not in the interest of any individual strongly enough to back it. And for the typical member of Congress, cost-effectiveness analysis could be like a loose cannon rolling around on the deck. We might come along and analyze some program in his district, and want to cut it back or shut it down.

More missiles don’t get you more target destruction, because you’ve shot at evrything worth destroying

Members of Congress don’t like that.

Exactly. Similarly with bases—we closed a lot of bases in those years. We found that there were Indian forts in South Dakota that hadn’t seen action in a hundred years. And we wanted to get the soldiers out of the Indian fort and up into Germany, where we needed them.

Well, the problem we found was that there’s a man who owns a drugstore and another man who owns a gas station across the street from the Indian fort. When we talk about closing the fort, their livelihoods and the value of their property are threatened. They write to their senator and say, “I’m going to donate a thousand dollars to whoever runs against you in the next election if you let them close that Indian fort.” So the senator gets all upset and sees the real problem of national defense not as “How do we have a cost-effective, efficient defense program?” but rather as “How do I keep that Indian fort in my district?” or “How do I keep that airplane plant?”

 

One of the most striking pieces of research you did was a comparison of NATO and Warsaw Pact forces on the ground. Our rationale for deploying tactical nuclear weapons in Europe is that the other side has a vastly larger number of men and tanks and guns, so we need a superweapon, or else we will be overwhelmed by sheer numbers. Your study showed that there is approximate parity between the two sides if you count men under arms, and tanks, and guns. But we’re still worried about these vast Asiatic hordes that overwhelm us in divisions. How did your research findings get lost?