More than new policies needed to manage rising costs of Pentagon weapon systems.

• Author: Sledge, Nathaniel H., Jr.
• Position: Viewpoint

Seasoned Pentagon hands have witnessed many "transformations" and reform initiatives designed to fix defense acquisition.

The latest management directive aimed at reducing weapon cost is the requirement that all programs conduct "should-cost" reviews.

Should-cost reviews are part of the latest round of procurement reforms led by Undersecretary of Defense for Acquisition, Technology and Logistics Frank Kendall. The "should-cost estimation" process is intended to serve as the primary tool for ensuring that major programs are achieving targeted cost savings. The estimates, developed by project managers, are used by senior leaders to gauge program performance.

But as the Defense Department tries to put its financial house in order and rein in the cost of weapon systems, there is a risk that program managers, suffering from transformation fatigue, will find a way to muddle through the near-term budget crisis and appease congressional critics while avoiding substantive change.

Program managers have been asked to shift their paradigms numerous times. The same goes double for experienced contractors. But how many senses of urgency can PMs and contractors muster? Is anyone serious about improving performance and reducing long-term costs?

There are multiple incentives for improved cost performance. Many are positive. But whether they are as powerful as the negative incentives influencing behavior is questionable.

The right incentives could help motivate project managers and contractors to support should-cost efforts. Bringing costs under control would improve the likelihood of program success, ensure stewardship of taxpayer dollars, satisfy well-established cultural norms that put excellence above all else, plow cost savings into more important program areas, improve the program's reputation, avoid critical--and sometimes hostile--attention and oversight that sap morale and, consequently, make a program even more challenging to manage.

The potential outcomes following should-cost reviews and decisions put incentives in a more clarifying light. If costs are not sufficiently controlled, senior leaders might take immediate action to ward off Nunn-McCurdy breaches, retain withheld funding at the service headquarters and offer prescriptive "help" to improve program performance.

Because of institutional impediments to change, a program manager has a less than 50-50 percent chance of a favorable outcome from a should-cost review, which doesn't offer much of...