Order Code RL34026
Defense Acquisition: Overview, Issues, and
Options for Congress
June 4, 2007
Stephen Howard Chadwick
Analyst in Defense Acquisition
Foreign Affairs, Defense, and Trade Division

Defense Acquisition: Overview, Issues,
and Options for Congress
Summary
Department of Defense (DOD) activities to provide military capabilities for the
defense of the nation are usually controversial and always complex. Those activities
are generally referred to as defense acquisition. The structure DOD utilizes to plan,
execute and oversee those activities is a highly intricate and multi-variate “system of
systems” composed of the requirements, resource allocation and acquisition systems.
This system of systems has evolved over time, its foundation being the report
published by the Packard Commission in 1986, with many of those recommendations
becoming part of the Goldwater-Nichols Department of Defense Reorganization Act
of 1986. This evolution continued after the Goldwater-Nichols Act as the
requirements system changed from a threat-based to a capabilities-based system; the
resource allocation system added execution reviews and concurrent program and
budget reviews; and the acquisition system changed from a structured, rigid process
to a flexible, tailored process.
The complexity of this system of systems combined with the magnitude of
personnel, activities and funding involved in its operation can result in problems,
including inefficient operations, fraud/waste/abuse, and inadequate implementation
or enforcement of the myriad laws and regulations that govern it. The Congress has
tried to help mitigate these types of problems and accompanying issues over the
years. Today, there are a number of challenging issues that Congress could consider
to further improve the defense acquisition structure. Some of those issues include
defense acquisition transformation, cost/schedule/performance problems in Major
Defense Acquisition Programs (MDAPs), unacceptable outcomes of cost-
reimbursement contracts, poor interagency and services contracting practices, and an
insufficient defense acquisition workforce. To address cost overruns in MDAPs for
example, Congress might consider establishing termination criteria if a program
reaches an unacceptable cost level. Supporters might argue such criteria would help
prevent “gold-plating” requirements and “low-ball” cost estimates since a program
breach would guarantee termination. However, opponents might argue that program
termination does not terminate the warfighter’s requirement for fielding a necessary
warfighting capability, and it could cause harmful delays by beginning a new
program to deliver the capability.
Annual National Defense Authorization Acts (NDAAs) are the primary means
by which Congress has addressed defense acquisition policies. For FY2008, as in
previous years, both the House (H.R. 1585) and Senate (S. 567) have included a title
in their versions of the bill dedicated to defense acquisition. Some examples of
provisions in the House bill include a requirement for a variety of acquisition
workforce studies and plans, a prohibition on procurements from sources that receive
government subsidies and a prohibition on awarding future contracts to Lead Systems
Integrators (LSIs). Some example of provisions in the Senate bill include a
requirement to establish an acquisition workforce development fund, the appointment
of a three-star military deputy to the service acquisition executives (SAEs), and the
establishment of statutory guidelines for multi-year procurement (MYP) savings.
This report will be updated as events warrant.


Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
DOD Defense Acquisition Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Origin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statutory Foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Recent Analysis of Defense Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Four Major Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Periodic GAO Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
DOD Efforts to Improve Defense Acquisition . . . . . . . . . . . . . . . . . . . . . . . 17
Potential Issues and Options for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Defense Acquisition Transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Cost, Schedule, and Performance Problems in Major Defense
Acquisition Programs (MDAPs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Questionable Outcomes from Cost Reimbursement Contracts . . . . . . . . . . 21
Poor Interagency and Services Contracting Practices . . . . . . . . . . . . . . . . . 23
Insufficient Defense Acquisition Workforce . . . . . . . . . . . . . . . . . . . . . . . . 27
FY2008/2007/2006 Defense Acquisition Legislative Activity . . . . . . . . . . . . . . 28
FY2008 National Defense Authorization Act (H.R. 1585/S. 567) . . . . . . . 29
FY2007 National Defense Authorization Act (H.R. 5122/P.L. 109-364) . . 29
FY2006 National Defense Authorization Act (H.R. 1815/P.L. 109-163) . . 30
Appendix A. Selected List of Additional Defense Acquisition Information . . . . 31
Appendix B. Evolutionary History of the Defense Acquisition Structure
Prior to Goldwater-Nichols . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Revolutionary War to World War II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
World War II to the Goldwater-Nichols Act . . . . . . . . . . . . . . . . . . . . . . . . 35
List of Figures
Figure 1. DOD’s Defense Acquisition Structure . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Figure 2. RGS vs. JCIDS and JCIDS Overview . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Figure 3. JCIDS Analysis Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Figure 4. PPBES Process Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Figure 6. PPBES Concurrent Program/Budget Review . . . . . . . . . . . . . . . . . . . . . 9
Figure 7. Defense Acquisition Milestones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Figure 8. Acquisition Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Defense Acquisition: Overview, Issues, and
Options for Congress
Introduction
Congress has been concerned with the defense acquisition structure-the
requirements, resources and acquisition “system of systems” that provides
warfighting capability-for many years. Congressional concern has ranged from
“micro-level” practices, such as characteristics of a particular contract, to “macro-
level” practices, such as DOD’s management and execution of Major Defense
Acquisition Programs (MDAPs).1 In response to these concerns, Congress has
legislated many changes to improve the defense acquisition structure and its
practices. Despite these changes, concerns remain about the structure and its
practices. One example of stated Congressional concern over the structure and its
practices was included in the House Armed Services Committee’s report on the
FY2007 defense authorization bill:
Simply put, the Department of Defense (DoD) acquisition process is broken. The
ability of the Department to conduct the large scale acquisitions required to
ensure our future national security is a concern of the committee. The rising costs
and lengthening schedules of major defense acquisition programs lead to more
expensive platforms fielded in fewer numbers. The committee’s concerns extend
to all three key components of the Acquisition process including requirements
generation, acquisition and contracting, and financial management.2
The unparalleled complexity of DOD’s defense acquisition structure lends itself
to the continued emergence of many problematic issues. Some of the most
significant issues involve defense acquisition transformation,
cost/schedule/performance problems in MDAPs, the defense acquisition workforce,
outcomes of cost reimbursement contracts, and, services and interagency contracting.
This report will provide an outline of DOD’s defense acquisition structure
followed by a discussion of the most recent major reports addressing defense
acquisition and DOD’s defense acquisition transformation efforts. This report also
includes a description of some significant issues the 110th Congress might consider
as well as some options to address these issues.
1 MDAPs are DOD acquisition programs whose value meets or exceeds $365 million of
Research, Development, Test and Evaluation funding or $2.19 billion of Procurement
funding in FY00 constant dollars, or are designated MDAPs by the USD (AT&L). MDAPs
are statutorily defined at 10 U.S.C. 2430.
2 Report 109-452. Report of the Committee on Armed Services, House of Representatives
on H.R. 5122. May 5, 2006, p. 350.

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Background
DOD Defense Acquisition Structure
Origin. DOD’s defense acquisition structure evolved over a long period of
time, since the founding of the nation.3 During this time, the United States has
fielded arguably the most technologically superior military force in the world.
Fielding such a force has been difficult and costly however, evidenced by numerous
reports of cost, schedule and/or performance failures in acquisition programs and
practices along the way. These problems occurred despite efforts to mitigate them,
such as revisions to DOD’s defense acquisition policy documents, reports and
recommendations of numerous Commissions, Studies and/or Panels, and efforts to
simplify and streamline defense acquisition processes such as Congress’ passage of
the Federal Acquisition Regulation System in 1980 and Deputy Secretary of Defense
Frank Carlucci’s set of 32 initiatives introduced in 1981.
The ineffectiveness of previous efforts combined with public reports of DOD
purchasing $600 toilet seats and $400 hammers4 led President Reagan to sign
Executive Order 12526, The President’s Blue Ribbon Commission on Defense
Management, on July 15, 1985. This Commission became known as the Packard
Commission after the President designated David Packard as its chairman. The
Commission was established to analyze and improve defense management practices,
specifically including acquisition. The President directed that the Commission’s first
task was to “devote its attention to the procedures and activities of the Department
of Defense associated with the procurement of military equipment and materiel.”5
After the Packard Commission’s report was released in June of 1986, its
recommendations had a high degree of policy significance. This was because many
of the Commission’s recommendations were included in the Goldwater-Nichols
Department of Defense Reorganization Act of 1986, viewed by many as the most
significant piece of defense legislation passed since the 1947 National Security Act.
Examples of Commission recommendations included in Goldwater-Nichols, other
related legislation, and presidential directives were the Undersecretary for
3 For a longer history of the evolution of the defense acquisition structure, see Appendix B.
4 Reports later surfaced that the $600 toilet seat was in fact not a toilet seat, but a corrosion
resistance shroud to cover the entire toilet system of a P-3 aircraft and the $400 hammer was
a matter of an incorrect invoice that the government never actually paid. For additional
detail, see the transcript of a Washington Post interview with President Reagan from
February 1986, at [http://www.reagan.utexas.edu/archives/speeches/1986/21086d.htm].
5 Executive Order 12526, [http://www.presidency.ucsb.edu/ws/index.php?pid=38892].

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Acquisition position, the SAE-PEO-PM6 structure, a simplified acquisition code, a
more professional acquisition corps and baselining requirements.7
Statutory Foundation. Title 10 of United States Code governs the defense
acquisition structure. Title 10 does not devote a specific chapter to “defense
acquisition” but its tenets are spread throughout, including the responsibilities of
many positions in Defense Acquisition’s organization, procedures that must be
followed in defense acquisition practices, provisions for different methods of
acquisition and Congressional reporting requirements. Title 10 also requires DOD
to use the Federal Acquisition Regulation (FAR) for its procurement (or contracting)
practices via its inclusion of and reference to the definitions and requirements
outlined in the Chapter 7 of Title 41 of the United States Code.8 National Defense
Authorization Acts enacted into law may add or modify sections of Title 10 which
address the defense acquisition structure or its practices, or even assign unique
statutory requirements above and beyond those prescribed within the title.
The Structure. DOD’s defense acquisition structure consists of three
interrelated and interdependent systems. The first system is the Joint Capabilities
Integration and Development System (JCIDS), known as the requirements system.
The second system is the Planning, Programming, Budgeting, and Execution System
(PPBES), known as the resource allocation or budgeting system. The third system
is the Defense Acquisition System (DAS), known as the acquisition or procurement
system, also referred to as “little a” acquisition. These three systems do not report
to or fall under an overarching “system”, but they do operate in a manner similar to
a “system of systems” (SOS)9 and are referred to as “Big A” acquisition. DOD’s
defense acquisition structure is characterized in Figure 1 below:
6 SAE-PEO-PM stands for Service Acquisition Executive, Program Executive Officer and
Program Manager, respectively. The SAE is a political appointee in the secretariat of the
military department who it responsible for all acquisitions and acquisition programs within
the Service as prescribed by Title 10. The SAE selects a number of PEOs who oversee some
number of acquisitions and acquisition programs while PMs are responsible for all aspects
of an individual acquisition or acquisition program. The Packard Commission
recommended this acquisition chain-of-command.
7 Murdock, Clark A., Flournoy, Michèle A., et al. “Beyond Goldwater-Nichols - Defense
Reform for a New Strategic Era - Phase 2 Report.” Center for Strategic and International
Studies. July 2005, p. 90.
8 DOD also issues a variety of Defense-unique supplements to the FAR which are referred
to as “_FARS”, the blank being a various designation depending on which DOD component
issues and maintains the supplement (D would stand for DOD, AF for Air Force, etc.)
9 Page GL-15 of Chairman of the Joint Chiefs of Staff Instruction (CJCSI) 3170.01E defines
a system of systems as “a set or arrangement of interdependent systems that are related or
connected to provide a given capability. The loss of any part of the system will significantly
degrade the performance or capabilities of the whole. The development of a SOS solution
will involve trade space between the systems as well as within an individual system
performance. An example of a SOS would be a combat aircraft. While the aircraft may be
developed as a single system, it could incorporate subsystems developed for other aircraft.
For example, the radar from an existing aircraft may be incorporated into the one being
developed rather than developing a new radar. The SOS in this case would be the airframe,
engines, radar, avionics, etc. that make up the entire combat aircraft capability.”


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Figure 1. DOD’s Defense Acquisition Structure
Source: Defense Acquisition Performance Assessment Report, February 2006, p. 4.
The three individual systems are described in more detail below.
Joint Capabilities Integration and Development System (JCIDS).
JCIDS is a system which is responsible for “identifying, assessing and prioritizing
joint military capability needs as specified in title 10, United States Code, sections
153, 163, 167 and 181.”10 The JCIDS is governed by CJCSI 3170.01E and utilizes
the procedures described in Chairman of the Joint Chiefs of Staff Manual (CJCSM)
3170.01B. Created in 2003, this system replaced the Requirements Generation
System (RGS), which has been the method for identifying warfighter requirements
for the previous 30 years. The primary reason behind changing the requirements
system from RGS to JCIDS was DOD’s policy shift from a threat-based assessment
of warfighter needs to a capabilities-based assessment of warfighter needs. In other
words, instead of developing, producing and fielding systems based on perceived
threats to the nation, DOD’s policy is to develop, produce and field capabilities based
upon strategic direction and priorities such as the National Military Strategy (NMS)
and National Defense Strategy (NDS). Figure 2 below illustrates the difference
between the two systems and provides an overview of JCIDS:
10 Chairman of the Joint Chiefs of Staff Instruction (CJCSI) 3170.01E, current as of 16
March 2007, p. 1, at [http://www.dtic.mil/cjcs_directives/cdata/unlimit/3170_01.pdf].



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Figure 2. RGS vs. JCIDS and JCIDS Overview
Sources: Contrast from brief by Major General Bromburg, USA, Deputy Director for Force
Projection, J8. February 1, 2006, Overview from CJCSM 3170.01B, May 11 2005.

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According to CJCSM 3170.01B11, the JCIDS analysis process begins with a
Functional Area Analysis (FAA). The outcome of the FSA is a list of capabilities
and their respective attributes. After the FAA is complete, the next step is a
Functional Needs Analysis (FNA). The FNA results in a list of capability shortfalls
and/or overlaps, including consideration of Combatant Commander (COCOM)
Integrated Priority Lists (IPLs) and issues. The FNA results will also prioritize the
shortfalls and/or overlaps for resolution. The FAA and FNA results are captured in
a Joint Capabilities Document (JCD) which lists and outlines the shortfalls and/or
overlaps identified in the FAA and FNA. Once a JCD is approved, it is used as a
baseline for the Functional Solutions Analysis (FSA). This analysis considers both
material and non-material solutions to resolve capability shortfalls and/or overlaps
to develop a range of alternative solutions to resolve capability shortfalls and/or
overlaps. Once the FSA is complete, a Post Independent Analysis (PIA) is conducted
by an independent group to assess and ensure that the FSA is complete, thorough and
reasonable. If the PIA confirms the recommendations then one or both of two
documents may be produced; an Initial Capabilities Document (ICD) for material
solutions and a Joint Doctrine Change Request (Joint DCR) for non-material
solutions. Once these actions are complete, any further material analysis or
acquisition is performed under the DAS instead of JCIDS, though further JCIDS
documents such as the Capability Development Document (CDD) and Capability
Production Document (CPD) will use information gained from the DAS’ efforts.
Figure 3 below illustrates the JCIDS analysis process:
11 See [http://www.dtic.mil/cjcs_directives/cdata/unlimit/m317001.pdf].


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Figure 3. JCIDS Analysis Process
Source: CJCSI 3170.01E, current as of March 16, 2007.
Planning, Programming, Budgeting and Execution System
(PPBES).12 According to the OSD Comptroller:
The ultimate objective of PPBE is to provide Operational Commanders with the
best mix of forces, equipment, and support attainable within fiscal constraints.
Based on the anticipated threat, a strategy is developed. Requirements of that
strategy are then estimated and programs are developed to execute the strategy.
Finally, a budget is developed to pay for the programs.13
The PPBES was originally the Planning, Programming and Budgeting System
(PPBS), first implemented in the early 1960s by then-Secretary of Defense Robert
McNamara. The policy documents that govern PPBES are DOD Directive (DODD)
7045.14 and DOD Instruction (DODI) 7045.7 though neither document has been
12 For additional detail, see CRS Report RL30002, A Defense Budget Primer, by Mary T.
Tyszkiewicz and Stephen Daggett and the OSD Comptroller’s iCenter website at
[http://www.defenselink.mil/comptroller/icenter/budget/ppbsint.htm]. Additionally, DAU
offers an online course on PPBES at [https://learn.dau.mil/html/clc/Clc.jsp], Prefix (class
number) CLB009.
13 OSD Comptroller iCenter, at [http://www.defenselink.mil/comptroller/icenter/budget/
histcontext.htm].



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updated since PPBS was modified to become the PPBES via Management Initiative
Decision 913 of 22 May 2003.. The PPBES process in its entirety is not exercised
every year even though DOD must request funding from Congress annually.
Planning and programming activities occur in even-numbered years (called “on-
years”) while budgeting and execution activities occur in both on-years and “off-
years” (odd-numbered years). In the off-years, Budget Change Proposals (BCPs) can
be requested by programs or result from DOD review of program execution metrics.
Figure 4 below illustrates the PPBES process:
Figure 4. PPBES Process Overview
S o u r c e : D e f e n s e A c q u i s i t i o n G u i d e b o o k , C h a p t e r 1 . 2 ,
[http://akss.dau.mil/dag/DoD5000.asp?view=framework].


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The PPBES process consists of four stages; planning, programming, budgeting,
and execution. The planning stage includes analysis of COCOM issues and problems
against the backdrop of the security and defense strategies of the nation. The
planning stage results in the production of the Joint Programming Guidance (JPG)
document, which guides DOD components’14 preparation of proposed programs to
meet criteria outlined in the JPG. The programming stage is when these proposed
programs are constructed and the Program Objective Memorandum (POM) is
submitted to propose these programs. If proposed programs do not meet established
criteria in the JPG or other issues necessitate changes to proposed programs, Program
Decision Memorandum (PDM) can be issued that direct what the programs will be.
The next stage, budgeting, occurs concurrently with the programming phase and
proposed budgets are reviewed in a different manner than proposed programs (see
Figure 5). Upon issuance of PDMs and/or as a result of budgetary reviews, Program
Budget Decisions (PBDs) are issued and once all PBDs are final the DOD
components have a final opportunity to appeal decisions by submitting Major Budget
Issues (MBIs) to the Secretary of Defense (SECDEF). The SECDEF may make a
decision based on information presented or consult the President if significant issues
remain between DOD’s top line budget prescribed by the Office of Management and
Budget (OMB) and DOD’s required programs. The final phase, execution, begins
once the President signs the annual appropriations bill for DOD. During this stage,
programs are evaluated on their ability to meet established performance metrics,
which can include funding obligations and expenditures.
Figure 6. PPBES Concurrent Program/Budget Review
Source: DAU PPBES Continuous Learning Course CLB009, [https://learn.dau.mil/html/clc/Clc.jsp].
14 DOD Components include the Office of the Secretary of Defense (OSD); the Military
Departments; the Chairman, Joint Chiefs of Staff (CJCS) and Joint Staff; the Unified
Combatant Commands (UCCs); the Defense Agencies; and DOD field activities.

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Defense Acquisition System (DAS). The DAS is:
the management process by which the Department of Defense provides effective,
affordable, and timely systems to the users (and it) exists to manage the nation’s
investments in technologies, programs, and product support necessary to achieve
the National Security Strategy and support the United States Armed Forces.15
This management process begins in acquisition program offices. The offices are
headed by a Program Manager (PM) who is the single individual in the program
office responsible for all facets of the office’s operations. The PM is usually
supported by a staff of engineers, logisticians, contracting officers and specialists,
budget and financial managers, test and evaluation personnel, etc. who are
responsible for their individual facets but also provide guidance and advice to the
PM. PMs can be military officers or federal civil servants and usually report to a
Program Executive Officer (PEO).16 PEOs can have many PMs who report to them.
PEOs can also be military officers or federal civil servants and report to a Component
Acquisition Executive (CAE).17 Most CAEs report to the Undersecretary of Defense
for Acquisition, Technology, and Logistics (USD(AT&L)), who also serves as the
Defense Acquisition Executive (DAE).18 This PM-PEO-CAE-DAE organizational
construct was one of the recommendations of the Packard Commission.
DOD uses decision milestones to oversee and govern the initiation and progress
of acquisition programs, each of which have a specific set of statutory and regulatory
criteria that must be met for approval by the Milestone Decision Authority (MDA).
Formal initiation of acquisition programs19 by the MDA occurs upon Milestone B
approval except for ships which can occur upon Milestone A approval. Figure 6
below illustrates this process:
15 Department of Defense Directive 5000.1. “The Defense Acquisition System.” May 12,
2003, pp. 2-3.
16 Some PMs are labeled “Direct Reporting Program Managers” (DRPMs), who report
directly to the Component Acquisition Executive or Milestone Decision Authority.
17 A Service Acquisition Executive (SAE) is the CAE for a military department.
18 DODD 5000.1 states that the DAE takes precedence on all acquisition matters after the
Secretary and the Deputy Secretary of Defense. Examples of some other reporting chains
include the Defense Information Systems Agency (DISA), who reports to the Director of
DISA and the Special Operations Command (SOCOM) Acquisition Executive, who reports
to the SOCOM Commander.
19 Per the DAU Glossary of Defense Acquisition terms ([http://akss.dau.mil/
jsp/Glossary.jsp]), at program initiation, a program must be fully funded across the Future
Years Defense Program (FYDP) as a result of the Program Objectives Memorandum
(POM)/budget process, that is, have an approved resource stream across a typical defense
program cycle, for example Fiscal Year (FY) 2006-2011. Concept Refinement (CR) and
Technology Development (TD) phases are typically not fully-funded and thus do not
constitute program initiation of a new acquisition program in the sense of DODI 5000.2.


































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































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Figure 7. Defense Acquisition Milestones
Source: DODI 5000.2 from the Defense Acquisition Guidebook, [http://akss.dau.mil/dag/DoD5000.
asp?view=document].
An acquisition program can enter the above framework at any one of the three
milestones, depending on factors such as technological maturity, when the capability
is required and resources available for the acquisition. Each stage of the framework
has different purposes and entrance criteria, which can be regulatory or statutory.
During concept refinement, an initial concept developed during JCIDS efforts is
refined, an analysis of alternatives (AOA) is conducted and a Technology
Development Strategy (TDS) is developed, based on results from the AoA. If a
program receives Milestone A approval at the end of concept refinement, technology
risk reduction efforts outlined in the TDS will be executed to determine what
technologies are appropriate to be introduced into the intended system.
All technologies intended for the system are not required to be mature to
proceed to Milestone B. Some technologies that may be appropriate but are
immature may remain in technology development while others proceed to Milestone
B as long as the technologies proceeding to Milestone B provide an affordable,
militarily useful capability.20 If a program receives a Milestone B approval, then the
program proceeds to begin development of the capability and reduction of integration
and manufacturing risk. This stage consists of two sub-stages, system integration and
system demonstration. During system integration, the various subsystems that
together will make up the entire system are integrated and a development model or
prototype is produced. During system demonstration, the development model or
prototype enters into developmental testing to demonstrate its military utility and
identify/correct operational, logistical or manufacturing deficiencies. If demonstrated
20 DOD’s approach to proceeding with detailed design and integration of mature
technologies while continuing risk reduction of other less mature technologies that will be
integrated later is called Evolutionary Acquisition. For additional information on
Evolutionary Acquisition, see CRS Report RS21195, Evolutionary Acquisition and Spiral
Development in DOD Programs: Policy Issues for Congress
, by Gary Pagliano and Ronald
O’Rourke.

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performance and supportability are acceptable, manufacturing risks are not
significant and other criteria are met, a program may receive a Milestone C approval.
Milestone C represents the beginning of low rate initial production (LRIP),
which is intended to both prepare manufacturing and quality control processes for a
higher rate of production and provide production-representative articles for
operational test and evaluation (OT&E). Upon completion of OT&E and
demonstration of adequate control over manufacturing processes, a full rate
production decision may be granted, allowing the program to produce the remaining
assets planned for the program. When enough systems are delivered and other pre-
defined criteria are met, an Initial Operating Capability (IOC) can be attained,
allowing for some degree of operations. Eventually, full operational capability
(FOC) will be achieved when the system is ready to operate as much as required.
Management and oversight of acquisition programs increases as the value of the
program increases. Programs are divided into acquisition categories (ACATs) based
primarily on program value. The most significant DOD and Congressional oversight
activities apply to MDAPs21, which are categorized as ACAT I programs. Figure 7
below illustrates the thresholds and decision authorities for all ACATs:
21 A number of statutory reporting and oversight requirements applicable only to MDAPs
are codified in Chapter 144 of Title 10 USC.



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Figure 8. Acquisition Categories
Source: DODI 5000.2, [http://www.dtic.mil/whs/directives/corres/pdf/500002p.pdf].

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DOD procurement activities are governed by three sets of federal government
regulations. The first set of regulations is which apply to the entire federal
government (including DOD unless specifically noted otherwise) are outlined in the
Federal Acquisition Regulation (FAR); the second set of regulations apply only to
DOD and are outlined in the Defense Federal Acquisition Regulation Supplement
(DFARS); the third set of regulations apply only to individual DOD Components are
outlined in Component-unique FAR Supplements.22 Procurement actions in DOD
must adhere to the various regulations, including those executed as part of DOD’s
acquisition programs, and PMs must take the regulations into account during the
planning and execution of their programs.
Recent Analysis of Defense Acquisition
Despite the reforms generated by the Packard Commission’s report and the
Goldwater-Nichols Act, managing the implementation of these reforms historically
has presented the greatest challenge for both DOD and Congress. This challenge was
apparent when upon review the Packard Commission’s recommendations were “a
virtual mirror-image of the Fitzhugh Commission report”23 of 1970. In 1989, the
House Armed Services Committee held oversight hearings to determine what
remaining work DOD had to fully implement the Commission’s recommendations.
It was found that important recommendations “such as the JRMB (Joint
Requirements Management Board) and milestone budgeting were either never
implemented or attempted but quickly abandoned.”24 Some believe that the
Commission and Goldwater-Nichols efforts were very constructive, making major
contributions in reforming DOD’s acquisition structure and practices. Others argue
however, that “(a) case can be made that Goldwater-Nichols never implemented the
Packard Commission principles”25 and that “Goldwater-Nichols reforms attempted,
but ultimately failed, to get at the root of DoD’s acquisition execution problems.”26
Today, DOD acquisition structure and practice challenges continue, as do efforts to
improve them.
Four Major Reports. Four major reports were published between 2004 and
2006 that discuss the challenges facing defense acquisition and make
22 The Army, Air Force, Navy and Marine Corps, Defense Logistics Agency and US Special
Operations Command each have unique supplements.
23 Reeves, p. 16. The Fitzhugh Commission report was the result of a major examination of
Defense Acquisition practices. It is both summarized and published in its entirety in CRS
LTR 88-1399, available through request to CRS.
24 Murdock, Flournoy, et al., p. 90.
25 Murdock,, Flournoy, et al., p. 96.
26 Scruggs, David, et al. “Beyond Goldwater-Nichols - An Annotated Brief - Department
of Defense Acquisition and Planning, Programming, Budgeting and Execution System
Reform - Phase III”. August 2006, p. 19. Additionally former Senator Sam Nunn, who was
instrumental in the formulation and passage of Goldwater-Nichols, states in the foreword
of Locher’s book that “Although the services now fight jointly, greater jointness may now
be required in how the department ‘organizes, trains and equips’ - the title 10 U.S. Code,
functions assigned to the separate services.”

CRS-15
recommendations to mitigate them. These reports are the Quadrennial Defense
Review (QDR)27, the Center for Strategic and International Studies’ (CSIS) Beyond
Goldwater-Nichols (BGN) series volume two28, the Defense Science Board’s (DSB)
Summer Study on Transformation: A Progress Assessment, volume one,29 and the
Defense Acquisition Performance Assessment (DAPA).30
The four major reports make many observations and recommendations on how
to improve defense acquisition. Some in each report focused on common subject
areas including the following:
! Recognize the interrelated nature of the military requirements,
resource allocation and acquisition processes and view the defense
acquisition structure in a similar manner.
! Change the roles and responsibilities of a variety of senior civilian
and military officials within the Department, including the
Combatant Commanders (COCOMs), OSD and the military
departments.
! Implement specific reforms relating to the office of the USD(AT&L)
such as elevating the role of the Director of Defense Research and
27 Within the QDR, Defense Acquisition is addressed in the section entitled “Reshaping the
Defense Enterprise”. There is only a brief subsection that is specifically titled Defense
Acquisition which notes that “there are several ongoing reviews of defense acquisition
improvements being conducted both within and outside the Department in an effort to
address these issues. Their results will inform the Department’s efforts to reshape defense
acquisition into a truly 21st century process that is responsive to the joint warfighter.”
Many of the concepts presented in the QDR have the potential to impact Defense
Acquisition in breadth and depth that may be dependent upon the specific reform proposals
that are selected and implemented. See [http://www.defenselink.mil/qdr/report/
Report20060203.pdf].
28 Of the three volumes published in the BGN series, volume two includes the most focused
analysis of defense acquisition, including a dedicated chapter. The chapter gives a brief
history of acquisition reforms in the 1980s, an outline of current challenges and three
recommendations for improving Defense Acquisition. The chapter also gives consideration
to the “Big ‘A’” and “little ‘a’” definition of Defense Acquisition and also makes
recommendations to improve the JCIDS and PPBES processes elsewhere in volume two and
the annotated brief of volume three respectively. See [http://www.csis.org/media/csis/pubs/
bgn_ph2_report.pdf].
29 See [http://www.acq.osd.mil/dsb/reports/2006-02-DSB_SS_Transformation_Report_Vol_
1.pdf].
30 The DAPA report focused solely on Defense Acquisition as was clearly directed by the
Acting Deputy Secretary of Defense Gordon England in his June 7, 2005 request for “an
integrated acquisition assessment to consider every aspect of acquisition.” The DAPA
report contains six individual major elements; organization, workforce, budget,
requirements, acquisition and industry. Each major element contains the panel’s
performance assessment, major findings, performance improvement and implementation
criteria. See [http://www.acq.osd.mil/dapaproject/documents/DAPA-Report-web/DAPA-
Report-web-feb21.pdf].

CRS-16
Engineering (DDR&E); requiring the USD(AT&L) to develop a
multi-year business plan relating resources to mission purposes; or
assigning execution responsibilities of a Joint Capabilities
Acquisition and Divestment Plan.
! Change the military departments’ acquisition structure. The
principal recommendation is the reintroduction of the Service Chiefs
of Staff into the Services’ acquisition chain of command.
! Implement acquisition “best practices” including 1) risk-based
source selection; 2) time certain development; 3) a return to spiral
development; 4) using judgment-based instead of requirement-based
execution and; 5) expanding and rationalizing the use of rapid
acquisition.
! Improve the defense acquisition workforce by: 1) emphasizing the
recruitment of the best technological leaders and specialists from
industry; 2) creating a personnel float to afford personnel
developmental opportunities; 3) creating a pool of pre-qualified
executives to fill positions; 4) increasing the number of federal
employees in critical skill areas and 5) establishing a consistent
definition of the acquisition workforce.31
Periodic GAO Reports. The Government Accountability Office (GAO)
regularly produces in-depth reports that address specific issues and make
recommendations on those issues to improve the defense acquisition structure and
practices. In one example, GAO report number GAO-07-235R, Suggested Areas for
Oversight for the 110th Congress,
the GAO makes the following recommendations:
!
Require agencies with significant acquisition budgets, such as the
Department of Defense (DoD) and the National Aeronautics and
Space Administration (NASA), to better align requirements,
budget, and acquisition processes to reconcile the differences
between wants, needs, affordability, and sustainability, given
current and future demands and resources.
!
Monitor the implementation of agency action plans to address the
GAO high-risk areas related to acquisition and contract
management. These include contracting at DoD, the Department of
Energy, and NASA, as well as interagency contracting practices
through the General Services Administration and other means.32
31 This brief list may not be all-inclusive or as detailed as the individual reports themselves,
but is meant to serve as a brief summary of the common themes of the reports. An
additional source which compiled the recommendations of each of the reports was published
by CSIS and can be delivered upon request.
32 GAO-07-235R, p. 8, [http://www.gao.gov/new.items/d07235r.pdf].

CRS-17
In short, GAO recommends that better alignment among interrelated processes
combined with resolution of high-risk areas33 may result in improvements in how
acquisition programs and individual procurements are executed in the federal
government, including DOD.34
DOD Efforts to Improve Defense Acquisition
DOD has begun experimenting with measures aimed at improving the defense
acquisition structure and its practices. The USD(AT&L) published a broad set of
goals and associated outcomes in 2006 to “help guide Acquisition, Technology and
Logistics in adapting to (the new realities from the QDR) and to do our part to keep
the Department on course....”35 The goals and associated outcomes are part of the
Strategic Goals Implementation Plan (SGIP), which has an internal oversight
mechanism.36 While the end results of these goals may not be evident for many
years, DOD has designated a “Goal Champion” for each who will report in August
2007 on completed actions as part of an overall DOD assessment to ensure the goals
are accomplished and aligned with other DOD Enterprise goals.37
Congress has acted in its oversight role to stay informed of the latest DOD
efforts. Section 804 of the Fiscal Year 2007 National Defense Authorization Act
(H.R. 5122/P.L. 109-364) requires DOD to submit biannual reports on the
implementation of acquisition reform in DOD. The report is required to take into
consideration the four major reports discussed earlier and must be submitted by
January 1, and July 1 of each year until December 31, 2008 when the report
requirement ends. DOD submitted their first report on February 8, 200738 which
summarized the initiatives DOD is pursuing in six areas; workforce, acquisition,
33 Details of GAO’s high-risk areas, including the acquisition and contract management ones
described above, can be found in High Risk Series: An Update, GAO report GAO-07-310,
January 2007. See [http://www.gao.gov/new.items/d07310.pdf]. The GAO describes their
high risk series as an attempt to “focus on the need for broad-based transformations to
address major economy, efficiency, or effectiveness challenges. Since 1990, GAO has
periodically reported on government operations it has designated as high risk. In this 2007
update for the 110th Congress, GAO presents the status of high-risk areas identified in 2005
and new high-risk areas warranting attention by Congress and the executive branch. Lasting
solutions to high-risk problems offer the potential to save billions of dollars, dramatically
improve service to the public, strengthen confidence and trust in the performance and
accountability of the U.S. government, and ensure the ability of government to deliver on
its promises.”
34 A summary of GAO reports on various DOD challenges, including Defense Acquisition
and related topics, can be found at [http://www.gao.gov/pas/2005/DoD.htm]
35 “In the Line of Fire”, remarks as delivered by the Under Secretary of Defense for
Acquisition, Technology and Logistics Kenneth J. Krieg to the Contract Services
Association, San Antonio, TX, March 21, 2006, p. 4, at [http://www.acq.osd.mil/usd/
previous_krieg_speeches/03-21-06%20NR-ContractServicesAssoc.doc].
36 See [http://www.acq.osd.mil/goals/ATL%20Implementation%20Plan.pdf].
37 USD(AT&L) Strategic Goals Implementation Plan, pp. 6-7.
38 See [http://www.acq.osd.mil/documents/804Reportfeb2007.pdf].

CRS-18
requirements, budget, industry, and organization. The initiatives were often linked
to aspects of DOD’s SGIP.
Potential Issues and Options for Congress
Some in Congress believe that DOD can do more to better its acquisition
structure and processes, which all admit is extremely complex taking into account
that sometimes there exists conflicting objectives. For example, the highly
publicized Mine Resistant Ambush Protected (MRAP) vehicle program has been
accelerated to be able to field as soon as possible, filling an urgent warfighting
operational need. The trade-off in executing an acquisition program on a highly
accelerated basis however, is a reduced opportunity to minimize the life cycle costs
of the vehicles through reliability, maintainability or production line enhancements.
In the case of the MRAP, the urgent operational needs of operational commanders
took precedence over the need of DOD to minimize the life cycle cost of the
platform.
This section examines some major challenges and issues facing DOD to
improve its acquisition structure and processes. One such challenge is in making
changes through “transformation”, a term inclusive of numerous initiatives to address
a range of acquisition issues. Others include cost/schedule/performance problems
in Major Defense Acquisition Programs (MDAPs), questionable outcomes of cost
reimbursement contracts, poor interagency and service contracting practices, and an
insufficient defense acquisition workforce. The challenges and issues are examined
below along with potential options Congress could pursue to address them.
Defense Acquisition Transformation
DOD’s current defense acquisition transformation efforts are in their infancy.
The Strategic Goals Implementation Plan (SGIP) was first produced in September
2006 and many of the dates associated with each initiative’s measures of progress are
between 12 and 24 months in duration, though some have been completed as of
March 2007. Additionally, DOD submitted their first Section 804 report to Congress
in February 2007. The infancy of DOD’s acquisition transformation raises three
questions Congress might consider: 1) When is it probable that acquisition
transformation will succeed? 2) How will Congress know that acquisition
transformation has succeeded? To help address those questions, Congress could
consider the following options:
! Establish a date to complete acquisition transformation.
Congress could require that all improvements DOD intends to make
via its acquisition transformation efforts be accomplished by a
prescribed date so that transformation’s effectiveness may be
captured and evaluated. Supporters could argue that defining a
completion date will accelerate the pace of improvements and allow
DOD to focus more quickly on promising initiatives and cancelling
problematic ones. Supporters could also argue that establishing a
timeline would allow for a before and after comparison to help

CRS-19
gauge effectiveness. Opponents could argue that setting a date could
discourage or inhibit continuous improvement efforts as a way to
constantly transform. Opponents could also argue that DOD may
execute a lower number or less effective improvements than would
be optimal so that the deadline could be met.
! Establish performance criteria for DOD’s entire acquisition
structure. Individual defense acquisition programs have cost,
schedule and technical performance objectives and thresholds that
collectively define program performance. However, DOD’s defense
acquisition structure does not appear to have a similar standard for
performance. Congress could establish such a standard which
DOD’s acquisition structure must meet or operate within, so that
transformation efforts have a defined goal to achiever. Supporters
could argue that establishing such criteria or metrics may allow
DOD to maintain tradeoff flexibility within the performance
parameters. Supporters could also argue that such parameters could
serve as a useful link between the defense acquisition structure and
the warfighting capabilities of the nation. Opponents could argue
that such parameters would add new and complex tracking,
reporting, and management requirements that would impair
structural performance. Opponents could also argue that criteria or
metrics could either change so frequently or become obsolete due to
many factors that DOD may never be able to meet targets or if DOD
did that they would no longer be the best ones.
! Require DOD to develop risk management techniques to help
with its acquisition transformation. Many programs and projects
in both government and industry experience failure. Risk is a term
often used to represent the chances that a program or project may fail
due to any number of factors. DOD’s approach towards acquisition
transformation, arguably similar to a weapon system that attempts to
concurrently develop and integrate a number of immature
technologies, may have risks that necessitate the use of risk
management to ensure success. To date, DOD has not published a
risk assessment or risk management plan for its acquisition
transformation efforts. Congress could require DOD to use this
approach in its acquisition transformation efforts to ensure that
mitigation plans exist if and when problems or challenges are
encountered. Supporters could argue that requiring risk management
will ensure that DOD develops alternatives to the initiatives
currently being pursued in the event one or many of those initiatives
fail. Supporters could also argue that risk management will ensure
detailed planning and tracking of initiative and transformation
progress. Opponents could argue that DOD must identify risks and
obstacles before fully engaging risk management practices, which is
why DOD is initially using experiments and pilots to pursue
improvement. Opponents could also argue that risk management
could impair the pace of improvement through additional tracking,
reporting and management activities.

CRS-20
Cost, Schedule, and Performance Problems in Major Defense
Acquisition Programs (MDAPs)

Cost overruns, schedule slips and performance shortfalls have plagued large
weapon system acquisition programs since World War II. Despite statutory reporting
requirements on a regular basis and when cost or schedule problems occur, current
MDAPs continue to experience overruns, slips and shortfalls during their execution.39
Observers have identified a range of contributing factors to these problems including
requirement and funding instability, less then optimal knowledge at decision points,
and technology immaturity among others. Some may argue that some level of each
problem is unavoidable due to DOD’s longstanding practice of pursuing
technological superiority over all potential threats. Some could also point out that
even private industry experiences similar issues, such as the well publicized wiring
problems with the Airbus A380 aircraft or component problems and shortages with
Sony’s Playstation 3 video gaming console.40 However, others may argue that DOD
has experienced the same problems for over 50 years and that controls should be in
place by now to prevent more occurrences.
To address the challenges of reducing future MDAP execution problems,
Congress might consider the following options:
! Require DOD to send more information to Congress prior to
MDAP initiation. Currently, prior to the formal initiation of a
MDAP, DOD performs a range of analyses, prepares related
documentation, and holds a tiered series of reviews prior to initiation
of an MDAP. DOD is not required to deliver that information to
Congress, although a program summary and limited characteristics
of the initiated program are outlined in the Selected Acquisition
Reports (SARs). Congress could require DOD to “propose” MDAPs
to Congress in a manner that is similar in detail as defense
contractors who respond to “requests for proposals” (RFPs) so that
Congress could openly discuss important programs early and make
any potential necessary changes. Supporters could argue that such
a construct would enhance program stability by making ensuring
program changes in areas such as requirements or funding are only
made when necessary. Supporters could also argue that poorly
structured or high risk MDAPs would be prevented from initiation
or at least monitored more closely. Opponents could argue that
DOD best knows what it needs and how to manage it. Opponents
39 The GAO submits annual reports of many DOD MDAPs. The most recent report is GAO-
07-406SP. See [http://www.gao.gov/new.items/d07406sp.pdf].
40 For example, on problems with the Airbus A380, see Wall, Robert, “EADS Confirms
Further A380 Delays”, Aviation Week , Sept ember 24, 2006, at
[http://www.aviationweek.com/aw/generic/story_generic.jsp?channel=awst&id=news/
aw092506p3.xml]. Also for example on problems with the Sony PlayStation 3 gaming
console, see the June 9, 2006 press release from Sony Computer Entertainment Europe
regarding the European launch delay, at [http://www.scee.presscentre.com/Content/Detail.
asp?ReleaseID=4268&NewsAreaID=2].

CRS-21
could also argue that the time necessary to initiate a MDAP may
increase and therefore delay the timely fielding of necessary
capability to the warfighter.
! Establish Congressional MDAP termination criteria. Neither
statute nor policy requires the cancellation of a MDAP due to cost,
schedule or performance problems. DOD is required to certify to
Congress that a program needs to continue if the unit cost of a
MDAP exceeds a certain threshold. Both DOD and Congress have
the option of terminating programs that experience these problems,
but have rarely done so.41 Congress could establish MDAP
termination criteria such that if a cost, schedule or performance
measure met or breached the criteria the program would
automatically cancel. Supporters could argue that such criteria could
help prevent requirements “gold-plating” and “low-ball” cost
estimates or proposals since a program breach would guarantee
termination. Supporters could also argue that fiscal responsibility in
DOD could be enhanced since moving funding around to new or re-
prioritized programs could cause others to terminate. Opponents
could argue that program termination does not terminate the
requirement and the fielding of warfighting capability would be
delayed due to the cancellation and start of a new program to deliver
capability.
Questionable Outcomes from Cost Reimbursement Contracts
The two types of contracts most commonly used for the procurement of goods
and services in the federal government, including DOD, are cost-reimbursement and
fixed-price.42 Fixed-price contracts are typically used in procurements that are
judged to have little or manageable risk whereas cost-reimbursement contracts are
typically used in procurements that are judged to have more significant risk. History
shows that developmental efforts procured for Major Defense Acquisition Programs
(MDAPs) are among those procurements that are commonly judged to have the most
significant risk and therefore justify the use of cost-reimbursement contracts.43
41 For example, data provided by DOD indicates that only three programs with Nunn-
McCurdy unit cost breaches not caused by cancellation since 2000 have been cancelled by
DOD; Air Force B-1 Defense System Upgrade Program (DSUP), Navy Area Theater
Ballistic Missile Defense (TBMD), and Army Tactical Missile System-Brilliant Anti-Armor
Submunition (ATACMS-BAT). Congressional cancellations in general are rare and are
usually due to many issues which may or may not include cost, schedule and performance
problems. Examples include the MEADS program in 1998, the Seawolf submarine program
in 1996 and the XM-803 Main Battle Tank program in 1971.
42 A matrix comparing characteristics of each contract type can be found at
[http://www.acq.osd.mil/dpap/contractpricing/vol4chap1.htm#1.1].
43 The Defense Federal Acquisition Regulation Supplement (DFARS) section 235.006
permits the use of fixed-price contract types for certain procurement types, including those
typically associated with MDAPs. Such use requires the approval of the USD(AT&L). See
(continued...)

CRS-22
Cost-reimbursement contracts have come under renewed scrutiny especially as
a result of the Department of the Navy’s termination of its cost-reimbursement
contract for the third Littoral Combat Ship (LCS) that was being built by Lockheed-
Martin.44 This contract was terminated due to a significant escalation in the cost of
the ship and the inability of the Navy and Lockheed-Martin to agree on a
modification to change the contract from cost-reimbursement to fixed-price for the
ship’s completion in order to better control costs.
Many experts believe the desire for technological superiority in DOD weapon
systems and military capabilities arguably necessitates the continued use of cost-
reimbursement contracts because of the risks involved in developing such cutting
edge technology. To improve the outcomes of such contracts, Congress could
consider the following options:
! Require congressional approval to use cost-reimbursement
contracts. Currently, DOD may not award a Multi-Year
Procurement (MYP) contract that exceeds $500M unless certain
statutory criteria are met and authority is provided in an
Appropriations Act.45 Congress could consider a similar construct
for DOD’s use of cost-reimbursement contracts which meet or
exceed specific criteria and exceed a set threshold. Supporters could
argue that with additional approval authority, Congress could gain
additional insight into the details surrounding the cost-
reimbursement contract. Supporters could also argue that an
approval requirement could promote more technology
demonstrations and other risk reduction activities by DOD.
Opponents could argue that Congress already approves such
contracts since DOD discloses certain contract information in the
budget material delivered to Congress. Opponents could also argue
that acquisition programs could be significantly delayed while
waiting for Congressional approval or in the event of a disapproval.
! Require cost-reimbursement contracts to convert to fixed-price
contracts as risk is reduced. When DOD awards a cost-
reimbursement contract, the contract typically remains cost-
reimbursement throughout its life even as efforts are completed. As
these efforts are completed however, the uncertainty in a contractor’s
tasks is reduced and risk is lessened. Congress could require that
upon accomplishment of certain events or criteria that remaining
43 (...continued)
[http://farsite.hill.af.mil/VFDFARA.HTM].
44 For additional information on the LCS, see CRS Report RL33741, Navy Littoral Combat
Ship (LCS) Program: Oversight Issues and Options for Congress
by Ronald O’Rourke.
45 10 USC 2306b. A MYP is a particular type of contract where DOD agrees to buy many
years of goods or services at once, committing future Congresses to fund the contract in the
agreed-upon manner. This is different from a multiple year contract where the goods or
services may be procured over multiple years, but only the first year is guaranteed to be
bought while a MYP guarantees all years will be bought unless the contract is terminated.

CRS-23
effort be converted to a fixed-price to complete remaining efforts
under the contract since the level of risk remaining may no longer
support continued use of a cost-reimbursement contract. Supporters
could argue that as a contract is performed, more knowledge is
gained and eventually there is insufficient risk inherent in remaining
performance to justify continuing the cost-reimbursement
arrangement. Supporters could also argue that a conversion would
better prepare contractors for fixed-price follow-on or development-
to-production procurements. However, opponents could argue that
funding regulations could prevent such a conversion as cost-
reimbursement contracts may be incrementally funded while fixed-
price contracts must be fully funded, which may force DOD to
“guess” when the accomplishments may happen to ensure that full
funding is available. Opponents could also argue that the costs in
terms of time, complexity, and additional planning to segregate cost-
reimbursement and fixed-price efforts would outweigh any potential
benefits of such a conversion.
! Require contractors to submit both a cost-reimbursement
contract proposal and a fixed-price contract proposal to
quantify contract performance risk.
When DOD determines the
level of risk inherent in an effort, factors such as schedule
requirements, level of detail in technical performance requirements
and the technical maturity of the system and its components are
typical considerations. However, quantifying those risks in terms of
dollars can be nearly impossible without feedback from prospective
contractors regarding what a contract’s value would be for different
contract types. To help quantify the difference between a cost-
reimbursement development contract and a fixed-price development
contract, Congress could require DOD to acquire proposals of both
types when procuring developmental efforts. Supporters could argue
that only a contractor’s proposal offers sufficient data to measure
how much risk is inherent in a particular effort. Supporters could
also argue this approach could spur industry to identify other risks
that may not have been apparent to the government and result in a
better contract type selection. Opponents could argue that the costs
and time associated with the preparation of two proposals and their
evaluation outweighs the potential benefits of the additional
information. Opponents could also argue that this may make
competitive procurements impossible as it would be impossible to
fairly evaluate multiple offerors on a standard set of criteria.
Poor Interagency and Services Contracting Practices
Two particular types of contracting that have come under renewed scrutiny
recently are interagency contracting and services contracting. Interagency contracting
is a process where DOD uses the contracts of other federal agencies to procure goods
or services from private industry. DOD typically uses these contracts to save time
and/or money compared to using its own contract vehicles. DOD procures services
from private industry when DOD does not have sufficient numbers or expertise

CRS-24
within its civil service staff to accomplish department needs, or believes time and/or
money could be saved compared to using civil servants, or finally, if the need is
temporary and does not justify hiring a permanent employee.
The GAO and Department of Defense Inspector General (DODIG) have
published reports on the poor practices in DOD’s interagency contracting and DOD
services contracting as distinct from equipment contracting practices.46 Some of the
problems noted in the reports include:
! Circumventing numerous procurement and funding regulations; the
GAO and DODIG reports cited examples including inadequate
competition, issuing task orders outside the scope of the overarching
contracts, inadequate justification of actions, and potential violations
of the Anti-Deficiency Act (ADA).
! Insufficient management oversight capacity and practices; the GAO
and DODIG reports cited examples such as some contracts not
having oversight personnel assigned to them, some were without a
quality assurance surveillance plan, and increased managerial
difficulty in those contracts where the requiring agency (DOD) is not
also the contracting agency.
While the problems raised by the GAO and DODIG reports can contribute to
undesirable and costly outcomes in interagency and services contracting, it is unclear
whether they directly or indirectly resulted in fraudulent, wasteful or abusive
practices by government or contractor personnel.
In October 2006, DOD published a new acquisition of services policy47 in
response to Section 812 of the Fiscal Year 2006 National Defense Authorization Act
(H.R. 1815/P.L. 109-163). This policy established new requirements for services
acquisitions including:
! standards and procedures for all services acquisitions,
! a new management structure for services acquisitions,
! acquisition strategy requirements, and
! data collection requirements.
46 For example, see GAO report GAO-07-359T, DEFENSE ACQUISITIONS DOD Needs
to Exert Management and Oversight to Better Control Acquisition of Services
,
[http://www.gao.gov/new.items/d07359t.pdf]; GAO-07-20, DEFENSE ACQUISITIONS
Tailored Approach Needed to Improve Service Acquisition Outcomes
,
[http://www.gao.gov/new.items/d0720.pdf]; DODIG report D-2006-010, Acquisition:
Contract Surveillance for Service Contracts
, [http://www.dodig.mil/Audit/reports/FY06/06-
010.pdf]; and DODIG report D-2005-096, Acquisition: DoD Purchases Made Through the
General Services Administration
, [http://www.dodig.mil/Audit/reports/FY05/05-096.pdf].
47 DOD’s policy can be found at [http://www.acq.osd.mil/dpap/Docs/new/10-02-
06%20AT%26L%20812%20Acq%20of%20Services.pdf].

CRS-25
DOD has not published an interagency contracting or interagency acquisition policy
similar to its acquisition of services policy, nor has it been required to do so.
However, DOD has entered into a new memorandum of agreement (MOA) with the
General Services Administration (GSA), which outlines 22 objectives to achieve
acquisition excellence.48
It is currently unclear whether or not DOD’s new acquisition of services policy
or its MOA with the GSA will improve DOD’s interagency and services contracting
practices. In addition to congressional oversight on these new DOD initiatives,
Congress could consider additional options to improve other aspects of these
contracting practices including:
! Establishing a services acquisition corps and training program.
The size and capabilities of the entire defense acquisition workforce
is an issue Congress could consider and is discussed in a later
section. However, services acquisition and oversight present unique
size and capability challenges to the acquisition workforce
responsible for such actions. DOD has training courses for services
acquisition and oversight, but does not have a curriculum or program
dedicated to producing services acquisition and oversight experts.
Congress could consider establishing such a program that would
produce certified services acquisition personnel. Supporters could
argue that services acquisition is so complex that only a specialized,
detailed training program with “graduation” criteria is adequate to
ensure DOD has sufficient expertise to protect taxpayer and DOD
interests. Supporters could also argue that the establishment and
maintenance of such a cadre of experts is the only way to
institutionalize services acquisition best practices. However,
opponents could argue that most DOD services acquisitions are
executed well, and current or emerging challenges can be addressed
through updated training courses. Opponents could also argue that
career opportunities for corps members could become limited due to
the specialized nature of their work.
! Require quantitative cost/benefit analysis for each services or
interagency procurement action and establish minimum savings
criteria.
One of the most common rationales used by DOD to
procure a service or to use an interagency contract is the savings in
time and/or dollars such use will generate for the requiring
component compared to using internal resources to fulfill its
requirements. DOD is not currently required to discretely estimate
and capture these cost and/or schedule savings to support such a
procurement decision. Congress may consider establishing
minimum cost and/or schedule savings criteria and the
documentation of specific cost/benefit analysis to ensure that those
criteria are met to pursue a service or interagency contract.
Supporters could argue that such a requirement is the only way for
48 The MOA can be found at [http://www.gsa.gov/graphics/fas/DoD_GSA_MOA.doc].

CRS-26
Congress to ensure that DOD actually saves significant time or
money through the use of such procurement actions. Supporters
could also argue that this requirement will help ensure that thorough
market research is performed for a procurement action. But,
opponents could argue that the cost and time necessary to perform
the analysis may consume any potential cost or schedule benefit
from the procurement of a service or use of an interagency contract.
Opponents could also argue that DOD may forego substantial
savings in a procurement and cause a procurement to be
unnecessarily expensive or lengthy only because it didn’t meet a
minimum savings criteria.
! Limit the amount of funding that may be used for the
acquisition of services and/or the use of interagency contracts.
Each services acquisition or procurement through an interagency
contract can have its own sets of advantages and disadvantages. The
advantages and disadvantages of an individual action, when weighed
against each other, may not obviously indicate whether the action is
prudent or not. To avoid questionable use of these actions, Congress
could consider limiting the amount of funding used for them.
Supporters could argue that such a restriction would incentivize
DOD to only pursue those that produced the greatest benefit.
Supporters could also argue and DOD would be incentivized to
better plan and analyze potential actions to gauge advantages and
disadvantages. Opponents could argue that such a restriction would
limit the flexibility of Program Managers and Contracting Officers
to meet component needs. Opponents could also argue that such a
restriction could result in increased cost or time to DOD since some
procurements may be forced into a costlier or more time-consuming
vehicle or process to meet DOD requirements.
! Require a DOD and/or GAO report on actual benefits of
services acquisition and interagency contracting. Despite the
scrutiny that each of these practices has received, no data appears
available to judge whether procuring services or using interagency
contracts is actually saving DOD time or money compared to using
comparable internal resources. Congress may consider requiring
DOD or the GAO to investigate and report on whether savings in
either category have been realized and if so quantify how much those
savings were. Supporters could argue that legislative and/or policy
actions to improve these practices could be better informed by a
rigorous analysis of whether DOD has benefitted from their use.
Supporters could also argue that such a study could be a good way
to evaluate the effectiveness of current statute and policy.
Opponents could argue that capturing such data may be prohibitively
difficult given personnel turnover, trying to recreate assumptions or
knowledge at the time an action was pursued, etc. Opponents could
also argue that new policies in place for both the acquisition of
services and interagency contracting would not be reflected in the
data, therefore making the data set obsolete.

CRS-27
Insufficient Defense Acquisition Workforce49
The size and capabilities of the defense acquisition workforce has been a subject
of much debate for over 15 years. Some believe the defense acquisition workforce
is undersized and incapable to do all that is asked by DOD, evidenced by poor
performance in both acquisition programs and Iraq reconstruction efforts.50
The current Undersecretary of Defense for Acquisition, Technology and
Logistics (USD(AT&L)) has made a “high performing, ethical, and agile workforce”
his number one goal.51 The AT&L Human Capital Strategic Plan (HCSP)52 is the
USD(AT&L)’s plan to achieve this objective. The HCSP consists of five goals, each
of which are refined into enabling objectives, outcomes and measures. For example,
one of the HCSP’s goals is to establish a comprehensive, data-driven workforce
analysis and decision-making capability. To achieve this goal, DOD is pursuing
improvements in the metrics and data that quantify the capabilities, needs and
characteristics of the acquisition workforce. DOD is also pursuing improvements in
the information systems that capture and analyze the metrics and data along with
making the metrics and data more transparent to enable workforce leadership to
better plan and decide on departmental strategy.
The HCSP appears quite comprehensive and the linkage of goals all the way
back to metrics appears sound. However, the details of how each link is measure
appear vague and the HCSP does not appear to outline how these goals and
supporting linkages will improve acquisition programs and practices.
Some options Congress may consider to improve the defense acquisition
workforce include:
! Increase the size of the defense acquisition workforce. During
the 1990s, Congress required DOD to reduce the size of its
acquisition workforce as a result of a perceived “peace dividend”
from the 1991 Gulf War. DOD’s current operational requirements
could compel Congress to take the opposite approach now and
require DOD to increase the size of its acquisition workforce.
49 For additional information on the defense acquisition workforce, see CRS report 98-938,
Defense Acquisition Workforce: Issues for Congress, by Valerie Grasso. Current defense
acquisition workforce statistics from DOD can be found in the USD(AT&L) Human Capital
Strategic Plan at [http://www.dau.mil/workforce/hcsp.pdf] and in a presentation made by
Scott Ilg of the Defense Acquisition University at [https://acc.dau.mil/GetAttachment.
aspx?id=120926&pname=file&aid=25176].
50 For examples, see GAO report GAO-07-640R, Defense Services Acquisition: Questions
for the Record
, pp. 6-8, [http://www.gao.gov/new.items/d07640r.pdf]; GAO-06-1130T,
REBUILDING IRAQ: Continued Progress Requires Overcoming Contract Management
Challenges
, [http://www.gao.gov/new.items/d061130t.pdf], pp. 8-10; GAO-07-730T,
SPACE ACQUISITIONS: Actions Needed to Expand and Sustain Use of Best Practices,
[http://www.gao.gov/new.items/d07730t.pdf], pp. 16-17; and p. 12 of the DAPA report.
51 February 2007 Section 804 report, p. 7.
52 See [http://www.dau.mil/workforce/hcsp.pdf].

CRS-28
Supporters of such a requirement could argue that the cost of the
additional workforce would be outweighed by probable benefits
such as reduced cost overruns on acquisition programs and more
reasonable pricing and delivery on procured hardware and services.
Supporters could also argue that a larger workforce could be better
prepared to handle future unexpected contingency operations where
demand on the acquisition workforce could spike. Opponents could
argue that increasing the workforce would divert needed funding for
operational and equipment requirements. workforce demands are
already at an all-time high and increasing the workforce to meet that
demand will result in excess workforce capacity and less money for
operations and acquisition needs.
! Specify a maximum level of contractor support allowed for
acquisition or acquisition-related functions. To better identify
shortfalls or gaps in its acquisition workforce, Congress could
specify a DOD-wide, DOD Component-specific or acquisition
program-specific maximum level of contractor support for
acquisition or acquisition related functions. Supporters could argue
that holding contractor support levels constant will allow DOD to
hire only the best and brightest contractor support for acquisition and
acquisition-related functions. Supporters could also argue that a set
maximum level could increase competition for available
procurements and thereby reduce support costs. Opponents could
argue that Program Managers would be unnecessarily restricted in
their ability to staff their program offices in a manner they believe
is best for their program. Opponents could also argue that the
industrial base and level of qualified contractor support in the private
sector may be diminished as fewer opportunities exist for
procurements and employment.
FY2008/2007/2006 Defense Acquisition
Legislative Activity
The primary mechanism for which Congress has exercised its legislative powers
to improve the performance of the defense acquisition structure on a recurring basis
has generally been the annual National Defense Authorization Acts (NDAAs),
though annual Appropriations Acts still exert significant influence via Congress’
“power of the purse.”53 Sections of the acts have prescribed requirements applicable
to both specific acquisition programs and the structure overall, the latter of which has
typically been addressed in section VIII of the acts which is usually titled
“Acquisition Policy, Acquisition Management, and Related Matters”. Generally, the
53 For a brief overview of the Authorization and Appropriations processes, see CRS Report
RS20371. For a history of Defense Authorization and Appropriations Bills from FY1970
through FY2007, see CRS Report RL33405, Defense: FY2007 Authorization and
Appropriations
, by Stephen Daggett and CRS Report 98-756, Defense Authorization and
Appropriations Bills: FY1970-FY2007
, by Thomas Coipuram, Jr.

CRS-29
requirements prescribed in this section have tended to be focused on specific issues
rather than comprehensive reform of the defense acquisition structure.
FY2008 National Defense Authorization Act (H.R. 1585/S. 567)
On May 17, 2007, the House passed their version of the FY2008 NDAA, H.R.
1585. Title VIII of the bill is a dedicated section on Acquisition Policy, Acquisition
Management, and Related Matters was subdivided into five subtitles; Subtitle A -
Acquisition Policy and Management; Subtitle B - Amendments to General
Contracting Authorities, Procedures, and Limitations; Subtitle C - Accountability in
Contracting; Subtitle D - Contracts Relating to Iraq and Afghanistan; and subtitle E -
Other Matters. Each subtitle included a number of sections that addressed a variety
of topics within each subtitle. Some of the most significant mandates proposed in the
bill include a requirement for DOD to publish guidance on the use of interagency
contracts (Section 803), a prohibition on procurement from sources that receive
government subsidies (Section 804), a prohibition on new contracts being awarded
to Lead Systems Integrators (Section 806), a provision making the United States
Special Operations Command (USSOCOM)’s acquisition executive equivalent to the
military departments’ acquisition executives (Section 817), and a limitation on the
length of non-competitive contracts (Section 821). The bill also includes three
acquisition workforce provisions, one requiring a dedicated section in DOD’s
Strategic Human Capital Plan for the acquisition workforce including the
identification of workforce needs (Section 802); a second as a requirement for DOD
to develop a plan to establish the appropriate size of the acquisition workforce to
accomplish inherently governmental functions on major weapons systems (Section
806); and a third requiring a study by the Administrator of Federal Procurement
Policy on the composition, scope and functions of the workforce (Section 825).
The Senate version of the FY2008 NDAA (S. 567) also includes a title
dedicated to Acquisition, Title VIII, which is organized in a similar manner to the
House bill but excludes subtitles C and D of the House bill. On May 24, 2007 the
Senate Armed Services Committee (SASC) passed S. 567, with a vote on the bill by
the full Senate expected in June 2007. According to the SASC’s press release, some
of the most significant proposed mandates include the establishment of an acquisition
workforce training fund, the appointment of three-star military deputies to each
military service’s acquisition executive, the establishment of statutory guidelines for
savings to be achieved in multi-year procurements (MYPs), a strengthening of
statutory criteria necessary for a Major Defense Acquisition Program (MDAP) to
enter Systems Development and Demonstration (SDD), and a DOD re-examination
of its MDAP investment strategy with a focus on the portfolio management pilot
currently being executed by DOD.
FY2007 National Defense Authorization Act
(H.R. 5122/P.L. 109-364)

The FY2007 Defense Authorization Act’s section on Acquisition Policy,
Acquisition Management, and Related Matters was subdivided into five subtitles;
Subtitle A — Provisions Relating to Major Defense Acquisition Programs; Subtitle
B — Acquisition Policy and Management; Subtitle C — Amendments to General

CRS-30
Contracting Authorities, Procedures, and Limitations; Subtitle D — United States
Defense Industrial Base Provisions; and subtitle E — Other Matters. Each subtitle
included a number of sections that addressed a variety of topics within each subtitle.
Some of the most significant mandates include a new requirement for the department
to update Congress biannually on the implementation of acquisition reform in the
department (Section 804), the establishment of a pilot program on time-certain
development in acquisition of major weapon systems (Section 812), a requirement
for the Milestone Decision Authority (MDA) of a Major Defense Acquisition
Program (MDAP) to select the contract type used for development programs and
document the rationale for that decision (Section 818), the establishment of a
Strategic Materials Protection Board (Section 843) and the development of a strategy
to enhance DOD Program Managers (PMs) in developing and carrying out Defense
Acquisition programs (Section 853).
FY2006 National Defense Authorization Act
(H.R. 1815/P.L. 109-163)

The FY2006 Defense Authorization Act was organized in the same way as the
FY2007 Defense Authorization Act to the level and nomenclature of the subtitles.
Each subtitle in this act also included a number of sections that addressed a variety
of topics within each subtitle. Some of the most significant mandates include a
certification requirement prior to a MDAP proceeding to Milestone B (Section 801),
revised guidelines for the department’s reporting of programs that exceed baseline
costs (otherwise known as Nunn-McCurdy reporting, Section 802) and the
establishment of a management structure within the department for the procurement
of contract services (Section 812).

CRS-31
Appendix A. Selected List of Additional Defense
Acquisition Information54
Glossary of Defense Acquisition Acronyms and Terms
[http://akss.dau.mil/jsp/Glossary.jsp]
Defense Acquisition University Training and Continuous Learning55
[https://learn.dau.mil/html/clc/Clc.jsp?BrowseCertCourses]
[https://learn.dau.mil/html/clc/Clc.jsp]
DOD Policy Documentation
DOD 5000 series56
[http://www.dtic.mil/whs/directives/corres/html/50001.htm]
[http://www.dtic.mil/whs/directives/corres/html/50002.htm]
[http://akss.dau.mil/dag/]
[http://akss.dau.mil/ifc/]
Chairman of the Joint Chiefs of Staff (CJCS) 3170 series
[http://www.dtic.mil/cjcs_directives/cdata/unlimit/3170_01.pdf]
[http://www.dtic.mil/cjcs_directives/cdata/unlimit/m317001.pdf]
Planning, Programming, Budgeting and Execution System (PPBES)
[http://www.dtic.mil/whs/directives/corres/html/704514.htm]
[http://www.dtic.mil/whs/directives/corres/html/70457.htm]
[http://www.DoD.mil/comptroller/icenter/budget/ppbsint.htm]57
Financial Management Regulation (FMR)
[http://www.DoD.mil/comptroller/fmr/]
54 This list of information sources for Defense Acquisition is not comprehensive but focused
on more significant and recent publications. However many of the sources listed also
include additional references within their text that may be helpful. For additional historical
references, see pp. 31-35 of the previously noted report by Edward Bair on Defense
Acquisition at [http://stinet.dtic.mil/cgi-bin/GetTRDoc?AD=ADA288662&Location=
U2&doc=GetTRDoc.pdf]
55 The first link here is for DAU training curriculum, which covers a variety of acquisition
functions such as program management, contracting, test & evaluation, etc. Users should
begin with ACQ-101, the basics of Defense Acquisition. The second link is for continuous
learning courses which can cover more specific topics. Both will allow you to browse
courses without the need for testing or grading of progress.
56 The first two links are the policy documents, the third is a guidebook to the documents
and their concepts while the fourth is an integrated framework chart of the Defense
Acquisition System.
57 This is not policy documentation but is also helpful in understanding PPBES.

CRS-32
Federal Acquisition Regulation (FAR) and supplements
[http://farsite.hill.af.mil/]
Undersecretary of Defense for Acquisition, Technology and Logistics (USD(AT&L))
Strategic Goals Implementation Plan
[http://www.acq.osd.mil/goals/ATL%20Implementation%20Plan%20(Nov%2021
%2006)%20rev1.pdf]
Undersecretary of Defense for Acquisition, Technology and Logistics
(USD(AT&L)) Human Capital Strategic Plan
[http://www.dau.mil/workforce/hcsp.pdf]
Major Reports
February 2007 Section 804 Report
[http://www.acq.osd.mil/documents/804Reportfeb2007.pdf]
Quadrennial Defense Review (QDR) 2006
[http://www.defenselink.mil/qdr/]
Defense Acquisition Performance Assessment (DAPA)
[http://www.acq.osd.mil/dapaproject/]
Defense Science Board (DSB)
[http://www.acq.osd.mil/dsb/reports.htm]
Center for Strategic and International Studies (CSIS) Beyond Goldwater Nichols
Series
[http://www.csis.org/isp/bgn/]
Selected Government Accountability Office (GAO) reports58
Major Management Challenges at the Department of Defense main site59
[http://www.gao.gov/pas/2005/DoD.htm]
Assessments of Selected Weapons Programs
[http://www.gao.gov/cgi-bin/getrpt?GAO-07-406SP]
An Integrated Portfolio Management Approach to Weapon System Investments Could
Improve DOD’s Acquisition Outcomes
[http://www.gao.gov/cgi-bin/getrpt?GAO-07-388]
DOD Needs to Exert Management and Oversight to Better Control Acquisition of
Services
[http://www.gao.gov/new.items/d07359t.pdf]
58 Some links are to testimony given by GAO vice major reports.
59 This will provide a list of various GAO reports on Defense Management challenges,
including Defense Acquisition.

CRS-33
Contracting for Better Outcomes
[http://www.gao.gov/new.items/d06800t.pdf]
DOD Faces Challenges in Implementing Best Practices
[http://www.gao.gov/new.items/d02469t.pdf]
Better Matching of Needs and Resources Will Lead to Better Weapon System
Outcomes
[http://www.gao.gov/new.items/d01288.pdf]
Employing Best Practices Can Shape Better Weapon System Decisions
[http://www.gao.gov/new.items/ns00137t.pdf]
Improved Program Outcomes Are Possible
[http://www.gao.gov/archive/1998/ns98123t.pdf]
Eliminating Underlying Causes Will Avoid Billions of Dollars in Waste
[http://www.gao.gov/archive/1997/ns97143t.pdf]
High Risk Series: Defense Weapon Systems Acquisition
[http://www.gao.gov/archive/1997/hr97006.pdf]
[http://www.gao.gov/archive/1995/hr95004.pdf]
WEAPONS ACQUISITION: A Rare Opportunity for Lasting Change
[http://archive.gao.gov/d36t11/148208.pdf]
DSMC Comparisons of Foreign Acquisition Systems
[http://www.dau.mil/pubs/misc/acq-comp-pac00.pdf]
[http://www.dau.mil/pubs/misc/acq-comp-euro00.pdf]
CRS
LTR 88-1399 available by request60
Literature
Jones Jr., Wilbur D. Arming the Eagle: A History of U.S. Weapons Acquisition since
1775.
Defense Systems Management College Press. 1999.
Lederman, Gordon Nathaniel. Reorganizing the Joint Chiefs of Staff - The
Goldwater-Nichols Act of 1986.
Contributions in Military Studies, Number 182,
Greenwood Press. 1999.
Locher III, James R. Victory On The Potomac: The Goldwater-Nichols Act Unifies
the Pentagon.
Texas A&M University Press. 2002.
60 This CRS report includes a summary and full text of other major commission reports that
address Defense Acquisition from 1949-1988.

CRS-34
Appendix B. Evolutionary History of the Defense
Acquisition Structure Prior to Goldwater-Nichols
The evolution of the defense acquisition structure can be generally categorized
into three distinct periods; the Revolutionary War to World War II, World War II to
The Goldwater-Nichols Act and The Goldwater-Nichols Act to the present. While
each period experienced challenges unique to their times, each also exhibited some
characteristics that one could argue are similar to varying degrees and are useful in
consideration of defense acquisition issues today. The first two periods are discussed
below while the third is discussed in the main body of this report.
Revolutionary War to World War II
In comparison to the other two eras in the evolution of the defense acquisition
structure, there is relatively little documented analysis or examination of the structure
during this time period. Such limited information appears to have been due to four
principal reasons; first was a political environment unfavorable to focused analysis
of Defense Acquisition evidenced by:
strong antimilitary sentiments (that) dominated public attitudes from the time of
independence until Pearl Harbor (and) Americans focus(ing) on the military’s
technical skills, producing an overemphasis on engineering and science....61
Second, “(f)or most of our history prior to 1940, the federal budget was
balanced, except in years of war or economic recession.”62 Third, and possibly as an
acknowledgment of the shortcomings in engineering and science:
Until World War II, weapons acquisition in the United States was more a
political than a military problem. Shielded from large external threats, the
country had no pressing need for sophisticated weapons; with few exceptions it
was content to let European militaries take the lead in developing and fielding
new weaponry.63
Finally, while there were instances of fraud and waste during the era, no
occurrences of cost overruns or other poor performance in the execution of major
programs as have been experienced since WWII appear evident. The lack of such
instances of poor major program performance may be primarily due to the fact that
prior to WWII, the US defense “industry” was made up of “a mix of public arsenals
61 Locher III, James R. Victory On The Potomac: The Goldwater-Nichols Act Unifies the
Pentagon.
Texas A&M University Press. 2002, p. 16.
62 Cogan, John F. “Federal Budget”. The Concise Encyclopedia of Economics. Indianapolis:
Liberty Fund, Inc., ed. David R. Henderson, 2002, at [http://www.econlib.org/
LIBRARY/Enc/FederalBudget.html].
63 McNaugher, Thomas L. “Weapons Procurement: The Futility of Reform”. International
Security.
Volume 12, No. 2 (Autumn 1987), p. 67.

CRS-35
and ad hoc private efforts to produce weapons systems.”64 The combination of the
environmental characteristics described above gave the public (and therefore
Congress) little reason to devote attention to the structure. However, that involatile
mix did not completely stifle Congressional action. Despite such an environment:
Legislators worried, on the one hand, that private industrialists would rob the
federal treasury by charging high prices for shoddy weapons. Yet they sought,
on the other, that the industrialists in their own states and districts got their fair
share, or more, of the military contracts there were to be won.65
Congress appeared to have been aware of issues relating to such a basic conflict,
but taking significant action appeared to require a significant catalyst, usually a time
of war or national economic distress. In 1809, Congress first called for competition
in government contracting; in 1861 the first commission to study defense acquisition
fraud was formed (which was followed by numerous related commissions through
the early 1900s); and the 1930s saw Congress focus intensely on the concept of
government procurement for socioeconomic benefit.
The era prior to WWII was one of infancy for the defense acquisition structure.
While there was little to distinguish the challenges of the structure with those of
federal government acquisition overall, the structures’s subsequent evolutionary eras
would bring about significant change.
World War II to the Goldwater-Nichols Act
Nearly every factor influencing and shaping the defense acquisition environment
changed just after WWII. Not only were the nation’s antimilitary sentiments reversed
due to the attack on Pearl Harbor66 but the existence of and potential for external
threats to the nation became cemented. Additionally, the emergence of the Cold War
presented the US with a persistent, international security threat. “(T)he ‘real’ enemy
was always the spread of communism beyond the Soviet periphery. Likewise,
weapons systems would now be developed almost exclusively against a Soviet
‘threat’ counterpart.”67 Not only did the US have a persistent, international enemy,
but the enemy’s characteristics forced weapons system development down a road in
which “(t)he perceived Cold War imperative to attain qualitative superiority ensured
that state-of-the-art technological advances would be applied rapidly to weapons
systems capabilities”68 in contrast with the previous defense acquisition landscape,
64 Bair, Edward T. “Defense Acquisition Reform: Behind the Rhetoric of Reform -
Landmark Commissions Lessons Learned”. The Industrial College of the Armed Forces,
National Defense University. 1992, p. 5.
65 McNaugher, p. 67.
66 Locher notes that the antimilitary attitudes of the nation ended with the Pearl Harbor
attack on pages 16 and 18.
67 Reeves, p. 10.
68 Bair, p. 5.

CRS-36
even “in 1947...(where) the emphasis was on simplicity, reliability and
producibility.”69
While just before this era “(d)eficits returned...and remained for the rest of the
decade — due to the Great Depression and the spending associated with President
Roosevelt’s New Deal” it was “World War II (that) forced the Nation to spend
unprecedented amounts on defense and to incur corresponding unprecedented
deficits.”70
Now, not only was the American public intensely interested in defense activities
due to the Soviet threat but it also became interested in how the nation’s resources
were being applied, especially in the Defense sector of the economy. In fact the first
of three questions one scholar notes regarding the resolution of budget deficits is
“(h)ow much should we spend on national defense versus domestic programs?”71
The “guns vs. butter” debate has been a significant political topic since the nation
was founded and this very debate led to the beginning of the end of the Reagan
administration’s increases in defense spending as:
[b]y the mid-1980s...Congress stopped the buildup. With the budget deficit
soaring and with important domestic needs going unmet, members of Congress
argued that the nations could no longer afford the Reagan administration’s
ambitious plans.72
One final contributing factor to the defense acquisition environment was the
establishment and maintenance of a permanent domestic defense industrial base.
However for this establishment to occur, there had to be a market for its products as
a catalyst; this market was born when:
the comparatively small and unsophisticated U.S. peacetime ‘militia’ envisioned
by the Federalists and the U.S. Constitution was becoming a permanent, large
peacetime force. Supporting this force was an even larger industry dedicated to
developing and producing sophisticated, technologically superior weapons.
These developments began the hothouse environment of military research and
development that produced the international arms race, military-industrial
complexes here and abroad, and the expansion of military interests into new
realms such as computers, communications, spaceflight, microelectronics,
astrophysics and a host of other fields.73
In sum, a number of factors contributed to the defense acquisition structure
becoming a significant issue not just to those directly involved in its oversight or
practice, but a significant issue in the nation’s political landscape. Acquisition
69 Przemieniecki, J.S. Acquisition of Defense Systems. American Institute of Aeronautics
and Astronautics. 1993, p. 13.
70 See [http://www.whitehouse.gov/omb/budget/fy2002/guide04.html].
71 Kettl, Donald F. Public Budgeting In Its Institutional and Historical Context. 1992, pp.
38-39.
72 Kettl, p. 42.
73 Reeves, p. 11.

CRS-37
programs and practices became more complex, more costly and more prominent than
at any time in the nation’s history. President Eisenhower recognized this
development relatively early on and “warned of a military-industrial complex that
would demand a huge share of America’s wealth to perpetuate its power.”74
The environmental factors discussed above, in combination with other factors
such as the advent of joint military operations and organizational change within the
military, thrust the defense acquisition structure into a greater role in national debate.
The results of the defense acquisition structure appear to have served as a
springboard for a characteristic of this era that has perpetuated into defense
acquisition today; the use of Commissions, Studies and/or Panels to cure the ills of
the defense acquisition structure. It was one of these Commissions, the Packard
Commission, that helped thrust defense acquisition into its present era.
74 Kettl, p. 39.