Office of the Secretary of Defense

Pentagon’s Kendall: Budget Climate ‘Worst I’ve Seen’ for Planning

The current budgetary environment for Defense is “the worst I’ve seen for doing a sound plan and executing it with any kind of confidence,” the Pentagon’s top acquisition official said on Thursday at a think tank discussion of procurement reform.

Frank Kendall, undersecretary of Defense for acquisition, technology and logistics, added that the federal pay freeze, furloughs and government shutdown have combined to make recruiting a professionalized acquisition workforce “a real challenge” because “people now are not sure they want to be in government because it is not a secure place to work.”

Speaking at the Center for Strategic and International Studies, Kendall outlined his plans for acquisition reform for an era of austerity. ”I shy away from the term acquisition reform and prefer acquisition improvement,” he said, which is deeper because it implies a need for “specific things you can do because you can’t just do away with the whole thing and start over.”

(Related: Budget Cuts Put Acquisition Reform Back in the Spotlight)

Reciting a litany of familiar characteristics of the budget climate—a divided political establishment, Congress alarmed at costs and contractors scattered across all states — he noted that this was the situation in 1794 when the fledgling U.S. government commissioned the original six frigates built for the Navy.

Problems in acquisition, Kendall said, may involve “fundamentals, not just the organization of the Office of the Defense Secretary or the contract type,” noting that both fixed-price and cost-plus contracts mysteriously seem to produce the same results. Such fundamentals include the need for “professionalism, in both industry and government,” he said, as well as leadership, hard work and the courage to step back and rethink a business deal when “it is more expedient just to spend more money.”

The solution “is not a checklist — it’s about people and their ability to do their jobs,” he added. “It’s complex. There’s no easy answer.”

Kendall’s recent efficiency initiative called Better Buying Power 2.0 was criticized, he said, for rising from 20 items to 35. “But you improve by attacking on a lot of fronts,” and there must be a willingness to take risks, though well-managed ones, he added.

Some contractors are being “paid higher fees for poor performance,” he said, summarizing the proprietary information on profit margins he’s seen in Defense’s Annual Report on Cost Assessment Activities.

Kendall said he has recently spent weekends editing a coming update of Defense’s main acquisition directive (5000.02), which he joked might “help get me on The Daily Show.” Working with Congress to review all the laws and rules “piled on” since the Goldwater-Nichols reforms of 1986, the staff revising the directive will “emphasize simplification and more tailoring to structure of an acquisition, not the one-size-fits all that makes life difficult for program managers,” Kendall said.

He said he hopes to establish mandatory professional qualification boards to provide a stamp of approval on senior acquisition leaders, from program managers to chief engineers, based on their experience, education and references “to strengthen the overall level of professionalism.”

While praising industry as a vital part of the national security force structure, Kendall said he has been seeking company input on identifying “things that are adding costs but not adding value.” He also wants to publish more procurement data, which, though requiring years of preparation during which officials rotate to new jobs, document “who was in charge of a contract and made the decision that all was okay.”

On the budget, he said the Pentagon has been “scrambling” to limit damage that the 8 percent cut is doing, warning that the ability to move funds around will be far more limited if sequestration remains for fiscal 2014. He acknowledged that he has deferred some contract awards to conserve funds for the future.

(Related: After the Shutdown, Uncertainty Still Plagues Pentagon)

Kendall bemoaned what he called the “orange triangle” of limits over the next few years imposed by the need to alter the force structure and trim civilian workers quickly without a clear strategy. The main three problems, he said, are uncertainty, the lack of a “ramp” or a “graceful slope” in budgeting that makes changes manageable, and lack of a clear direction. “The worst case is to lurch forward from budget crisis to crisis like the last few years,” he said. Cutting training, investment and research and development will mean “a hollow force” in the next few years, he warned.

What keeps him awake at night, he said, is thinking how the military will recover once budget cuts are implemented. He likened his situation to that of former Defense Secretary Robert Gates, who, when asked by college students about his strategic thinking, replied, “I’m just trying to get through the day.”