Acquisition Talk: A daily blog on the theory and practice of weapons system acquisition

That is a new blog by Eric Lofgren, an Emergent Ventures recipient.  Here is an excerpt from one post:

The story was from 1938. It sounds astounding to modern ears. Congress did not earmark money for special projects. Pitcairn was a bit of a political entrepreneur by convincing his representative to get a project funded that funneled money back to his own district.

Back then, the Army and Navy were funded according to organization and object. Project earmarking only started becoming routine with the implementation of the program budget in 1949 (and really not until the rise of the PPBS in 1961).

I often say that the budget should be the most important aspect of defense reform, not the acquisition or requirements processes.

By the way, the French parliament doesn’t earmark defense funding. There’s actually quite a bit to learn from the French experience.

Here is his post on cost disease in weapons acquisition, and more on that here: “It’s clear that defense acquisition costs are growing at least as fast, and probably much faster, than education and healthcare costs. Defense platform unit costs grow nominally from 7-11% per year. Doing some adjustments, DOD production costs probably grow twice the rate of inflation.”

Here is his general post on acquisition reform and the limits of decentralization, maybe the best introduction to his overall point of view.

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Leading public intellectual giving platform to potential leading public intellectual. Along with some funds to help out with the process.

Self-recommending, obviously.

Any resemblance to a shell game is purely coincidental of course. And remarking on the details of how individuals get established in the public eye as part of the establishment and/or elite would probably be considered churlish. After all, the people that play this game are charmingly reticent about how it works, and those who point out the game being played are easily written off as being excessively negative, without giving any credit to the undoubtedly pure motives of those involved.

What? You're from Germany, right? Dude, start paying for your own defense. Quit depending on my country's tax dollars.

I think if the United States wanted to stop defending Germany they could do so via the process of not defending Germany. Technically it's not necessary to wait for Germany to stop depending on your country's tax dollars.

The really amusing thing is that currently, there are about 50,000 American military personnel in all of Europe.

The Cold War has been more or less over for a quarter century, though for some reason, that message still hasn't seemed to crossed the Atlantic.

And oddly, some Germans think that America's ignoring German advice not to invade Iraq the second time has led to significant problems in Germany, such as waves of refugees from a destabilized Middle East.

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'You're from Germany, right?'

Nope, I'm an American citizen, one who files his 1040 every year.

'Quit depending on my country's tax dollars.'

Our country, to be accurate.

Sorry, maybe I'm thinking of prior_approval. clockwork_prior, you have as much pizzazz as Bob from Ohio.

Same person - you will know when I have given enough offense (maybe more specific links to a recent Fairfax County court case involving, in part, the following, written by the current GMU president - 'As a result of a FOIA request, last week I was made aware of a number of gift agreements that were accepted by the university between 2003 and 2011 and raise questions concerning donor influence in academic matters. The gifts were in support of faculty positions in economics and granted donors some participation in faculty selection and evaluation. Except for the most recent one, these agreements have expired.') It isn't as if self-censorship is not something intimately familiar to anyone who has worked in PR, after all.

Then either a new variation on 'prior' or else simply adding a number will be necessary.

And as a note - that a leading public intellectual is leading a fund designed to allow that public intellectual to spend that money as he sees fit to support developing other public intellectuals, while also supporting those budding public intellectuals at a public policy institute that he is the chairman and general director of is perfectly acceptable.

And a refreshing change from the sort of story originally used to explain MRU (that is, a couple of professors, a cheap app, and youtube) or the use of 'at' to imply that a public policy institute has any actual affiliation to GMU.

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From my time in both the military and healthcare I can say that the biggest problem are the compliance costs.

For example, I have a phone app that allows me to send texts. We pay very good money to have said app. It does nothing that my phone cannot innately do - except be HIPAA compliant. EMR software is clunky, an active time suck, and adds little or no value ... but we are required by law to use it. In each case there are scads of less specific programs out there which are insanely cheaper and more functional, but those programs cannot justify the costs of becoming compliant for a small niche of their business.

In the military we had similar difficulties. If you want systems to be secure, you need to pay extra as the marketplace does not do real security for consumer goods. Likewise, if you worry about logistical tails, building in assured access drastically increases costs.

And I fully suspect that prices will continue to diverge. As ever more of the internet ends up in a giant interconnected mess there will be fewer people able to code in a secure fashion. There will be fewer parts of the ecosystem that can be used by security conscious actors.

Then we get to actual procurement itself. People worry that arcane institutions will somehow make off with lots of money and spend it either poorly or nefariously. Absent easily observed price and cost data in both sectors we began developing rules. These rules drive firms out of the market (e.g. we needed some light interior remodeling to comply with a regulation that specified inches between things, the contractor who has been most affordable and highest quality refused to bid because the hassle on his side was too great). Eventually the rules become too complicated and you start needing specialists to interpret them. Costs skyrocket and firms abuse rules to pad profits. Then the lawyers get involved and things get more expensive. Again, medical and military consumers become a captive market facing greater monopoly as fewer firms can navigate the thicket of rules to even try to make money.

Then we have the problem that people look at these sectors and say that it is public money. All public money should help with goal X (e.g. going "green", affirmative action, boycotting South Africa/Israel, patriotism, "America first") and then we become even more overly constrained. Find vendors who meet one hurdle is hard, finding ones that meet 30 is nigh unto impossible unless the vendor is engineering the firm to market solely to this niche - and charging monopoly rates as his reward.

Any single thing would not be too bad for prices, but the marketplace in general is diverging from military and healthcare. Even education is diverging with mandates in FERPA and political business constraints. We have pretty effectively restricted supply, why exactly would we not expect an increase in cost?

Another excellent comment.

People who actually care about reducing cost in these areas should be aggressively and proactively reducing regulation toward minimum levels. Its yet another example of 80/20, where the quest for perfection and zero risk drives costs up. The self interest (power, iron rice bowls) of the compliance mafia just reinforces this tendency.

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We pay very good money to have said app. It does nothing that my phone cannot innately do - except be HIPAA compliant."

SMS is not encrypted so it's not something your phone can "innately" do.

EMR software is clunky, an active time suck, and adds little or no value ... but we are required by law to use it.

How do you send your imaging or lab orders and get your results without an EMR? Paper? How do your patients make appointments? Just call and wait until someone answers and adds you to the big appointment book vs. doing it online?

My guess is you really have no idea what you're talking about.

I think HIPAA would require archive management, and hopefully availability as patient record.

When Doctor A sends raw SMS to Patient X, Doctor B would not see it.

Though of course a good patient management system would deliver via SMS while doing all that.

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Why do I need encrypted SMS? All of my patient data refers to their medical records numbers, if you can decode those we already have a HIPAA violation. If you hack my SMS you will see things like "anesthesia wants to know the MVC's drug history". Well over half of the messages are "hey Doc X wants you to call" with a MRN attached. Industry can quite easily just use regular SMS for little things like scheduling appointments. We have to be HIPAA compliant and that adds costs, even if we never actually need the functionality.

Well the local dermatologists don't do EMR so yes I have a human being call and schedule an appointment and fill out a paper form. When we totaled up the costs of paying for the EMR, hiring the support staff to keep it working, training time for everyone, and the actual time of entry for "meaningful use" it would be a net negative without the reimbursement differential for our department.

Sure, in theory, EMRs are worthwhile and allow for better continuity of care. But the systems that actually exist are utterly massive time sucks and resource drains. I can hire an awful lot of MAs for the price of keeping the EMR happy.

As far as imaging orders, we have the CT in department so I assume I would literally just keep telling the tech what I want (which most of the time is going to be a non-con head CT anyways) verbally. Viewing my results and sending them off for reads ... well my EMR doesn't do that either (or it's native capabilities are so bad we may as well not bother). Instead we shell out for more software (and dedicated hardware in radiology) that allows for rapid viewing and sharing of imaging.

What would make sense would be for hospitals to make their own decisions about what sort of software to buy, how to use it, and how to update it. Instead we have regulations which deeply influence these decisions and result in massive bloatware and wasted time. Every single day I blow at least $100 of time simply clicking buttons that add absolutely nothing to patient care. My nurses spend more.

Because healthcare and the military have unique security mandates we cannot use generic commercial software. This makes it expensive to buy software, more expensive to train people to use the software, and even more (prohibitively) expensive to upgrade the software.

For what it's worth, I've used industry derived standards that were pretty hairy and terrible for the same reason .. either at once in a committee or over time with multiple clients and accretion, a "solution" gathers everyone's desires.

So sure, a hospital *could* contract a pure custom solution, but more likely a vendor would try to shoe-horn your desires into a package that had already been sold and customized many, many, times.

"The way to make good decisions is to construct a committee of a hundred, leave out the people who actually implement it, and then make it onerous to change," said no one ever.

Industry standards also have trouble, but at least those are slightly closer to end users than Congress. Likewise without legal mandates there is always the theoretical possibility that someone might defect and start doing something new (e.g. Blu-ray).

As is, compliance means that healthcare is ghettoized from larger software services. Just like the military, this means we pay more for the same functionality. Even looking at basic cryptographic messaging apps, I can download text apps with superior cryptography, for free. Yet I am not allowed to use those, I must use ones that have been *certified* HIPAA compliant.

This locks me out of the entire open source sector. It locks me out of any developer who does not have deep enough pockets to demonstrate compliance, and it keeps me at least half a generation back waiting for new versions to demonstrate compliance (e.g. some of the web products I use lock me in IE rather than Edge, let alone Chrome or Mozilla because validating for a modern browser is too costly).

Thus I expect Medicine and the Military to not only have the standard cooking by committee problems, but also lose out on general productivity improvements when there is no individual firm with a strong enough stake to validate new tools.

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+100

Compare and contrast what the military used to pay in support costs compared to current contracts for Lockheed Martin and Boeing "systems and personnel management" services.

During the financial crisis people made the joke that GM isn't a car company, it's a healthcare, pension and financial services company. You could say the same thing about the US military.

It is hard to look at the data and conclude anything but that the US government is an insurance company with an army.

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EMR software is clunky, an active time suck, and adds little or no value ... but we are required by law to use it.

Q: Who is the real customer for EMR software?
A: The people who have to purchase the EMR software and show that the EMR software is HIPAA compliant. The people who actually use the EMR software? They are NOT the customers.

Here's another example of this phenomenon: my company has an agreement with a financial services company for corporate credit cards; the employees are issued the cards for things like company travel expenses. If I use the card for a per-diem expense such as a meal, I don't claim that specific meal on my expense report - it's covered by per diem, so I pay the card expense out of my per diem amount. The online portal I use for this looks and acts like a website put together by somebody whose entire life has been spent writing COBOL and SQL - it is one of the most user-belligerent web sites I've ever seen. The reason? The employees aren't the customers of the financial services firm. But I'll bet that the interface that the company travel accounting people use to manage the cards, payments, look to see if employees are reimbursing the cards on time, etc., looks and works great...

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The assumption is that earmarking defense spending increases defense spending without necessarily achieving defense policy goals. Of course, we have been having this debate about earmarking generally for years. On the plus side, earmarking avoids gridlock because it encourages legislators to work together for compromise (I earmark you, you earmark me). On the negative side, earmarking becomes a means to bring home some federal bacon without regard to policy goals. A neighbor works for DOD in procurement. According to my neighbor, the biggest problem with procurement is that it often is in response to an event long ago that becomes the standard even though conditions have long since changed. My neighbor mentioned how 9/11 resulted in significant, and very expensive, increases in security in and around military bases here in the U.S., even bases that have no military capability (such as training centers). No doubt somebody has a financial stake in the increased security and resists any change. We have become accustomed to very expensive and poorly performing military hardware that, like groundhog day, keeps getting funded year after year. I'm not sure ending earmarking would solve these two types of problems.

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Shouldn't the story clearly call out defense megaprojects wasting colossal amounts of taxpayer dollars, clearly more even than subsidized research universities, regardless of whether those megaprojects go over budget or not? If you start talking deflators you're wasting time on immaterial details that add nothing to the main argument. If you start talking procurement minutiae and hedonic Indexes you enter a rabbit hole you won't get back out of, and you're exactly where those obfuscators want you to be, not getting the main point out to the taxpayer? If you do a calculation, shouldn't it be "you my friend paid $5k in taxes last year for our aircraft carriers, which strategically we don't need: we have bases all over the world and they're sitting ducks against submarines."

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It was one of my neophyte, Reagan Era, beliefs that defense should be funded by a block grant to be spent by the generals as they saw fit.

I guess my older self might worry that you are just moving Agency problems elsewhere..

Not a bad first strike at the problem.

But yeah, agency problem doesn’t go away.

Air Force generals want to heavily invest in air to air capabilities. So they dump the warthog.

As always, this is a public choice economics problem.

We get what we incentivize. The incentives align for useless crap that costs trillions. Osprey? F35? Bradley IFV? Littoral combat ship?

Time to cut the budget, bigly.

If you put ground support back in the Army Air Corps..

Maybe it could work, with proper divisions of responsibility and congressional oversight.

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I hope the author gets more of a web presence. I googled his name and basically found the acquisition talks blog, which has great content, but seems pretty unpolished and unappealing as a website. I feel this is such an important topic and we really need an expert weighing in and publicizing findings, so I hope he gets a bigger web presence and a better website to show off the great content.

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TL/DR but it probably doesn't address offsets, and civilian offsets in particular. Purchasing governments can pack anything into a purchase agreement that they want - hospitals, roads, palaces, FDI, even public swimming pools.

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Soon it might be as bad as the growth in college tuition.

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