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  • Red Tape Ties Up Industrial Base

    Defense officials need to rethink the way they award contracts, says Daniel Goure, vice president of the Lexington Institute.

    Goure argues that, in its effort to promote competition, the Pentagon has actually convoluted its system and potentially weakened the defense industrial base. Frequent changes to regulations make it difficult for companies to take advantage of economies of scale, as they must continually adapt to new requirements.

    Instead of adding layers of bureaucracy to its buying practices, the Pentagon should promote a robust defense strategy in the larger context. The duty of the military is to preserve national security, and the U.S. Constitution mandates that Congress provide for the common defense. In recent years, neither has been able to effectively carry out these responsibilities due to across-the-board defense cuts. No amount of acquisition modification will reverse an atrophying industrial base if defense spending continues to rapidly decline.

    Underlying America’s withering defense budget is the Obama Administration’s disregard for national security. Rather than writing budget requests that reflect threats to America’s sovereignty and security, Obama has slashed the defense budget to appear fiscally responsible. His strategy is fundamentally flawed, however, as he has failed to address the real debt drivers: entitlement spending. Defense spending is less than one-fifth of the federal budget, yet it has already accounted for half of deficit reduction efforts. The Administration could reduce the defense budget to zero today, but programs such as Social Security and Medicaid would continue to consume the lion’s share of federal spending.

    Pentagon officials are justified in their attempt to promote competition amongst the industrial base. This is the cornerstone of capitalism, after all. However, there are better ways to go about acquisition reform then increasing the amount of red tape companies must go through to contract with the military. James Carafano offers a number of suggestions to this end, such as killing the Jones Act and other “Buy America” provisions.

    Amidst dramatically shrinking defense budgets, Pentagon officials should continue to strive for best business practices. However, they also need to realize that frequent, confusing procedural changes make it difficult for companies to navigate the federal business world. Excessive regulation harms America’s industrial base and, as a result, weakens national security.

    Posted in Economics [slideshow_deploy]

    2 Responses to Red Tape Ties Up Industrial Base

    1. Chris says:

      It’s getting increasingly more difficult to compete for and win aerospace and defense industry contracts. This article spells it out quite clearly for the American public. Thank you.

    2. Mike Mott says:

      This article misses the mark by a half mile.
      1. Defense spending, as a % of the federal budget, has declined from 52% to 18% over the past 50 years. There is nothing new in this trend.
      2. What do we want the DoD to do? There are a set of scenarios that drive the size of DoD and inform them as to which weapons systems to procure. The first step to reform is to rethink America's role in the world and then to update these mission scenarios.
      3. Non-state bad actors, who are supported by rogue states, is among the chief threats to America's security. However, consistent with point #2, the DoD remains structured for the Cold War.
      4. Point #3 results in a mismatch between DoD force structure and response to the threats we face. The Pentagon continues to spend billions on a war plane when troops are being maimed and killed by IEDs.
      5. Point #4 highlights the badly broken procurement system, a result of regulations to prevent procurement of $400 hammers. It takes years and years to buy anything … terrorists, our current adversaries, change their tactics in days and weeks. From contract award to first flight of the U2 took less than a year; for the Tanker, the competition has been running for more than a decade. Ultimately it will take nearly 2 decades to buy and build the Tanker. This means that DoD systems cost 10x more than they once did.
      6. To sum it up: America needs to rethink its role in the world and then update the DoD missions to be consistent with this new role. It needs to remove the layer upon layer of red tape that results in taking far too long and costing much to much for weapons systems. America must recognize that to be secure in this transition to a leaner and more cost efficient DoD will take an INCREASE in spending in the short run.

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