Mr. William A. Benkavitch
19 Waleship Plaza
San Francisco, CA 94111
B&B Associates -

Date: Fri, 07 Aug 1998 17:45:42 -0700

Mr. Rod Welch
The Welch Company
440 Davis Court #1602
San Francisco, CA  94111 2496
To: Rod Welch 

Subject:  Fwd: Fiscal Facts of Life

Dear Rod,
Thanks for the email last month on the continuing COE discussion.

Thought you might find this interesting reading.


Date: Fri, 07 Aug 1998 06:54:24 -0700

Subject: Fiscal Facts of Life

From: Larry Archambeault (

To: Tom Minger (

National Defense             July/August 1998                Pg. 30

The 'Fiscal Facts of Life'
Can Make, Break Navy Programs

Improvements stem from allowing managers to use their best judgment

By Jeffrey J. Hinkle

As acquisition budgets continue to decline, industry leaders and naval program managers-- once confident of the future prospects of their particular weapon system-- may face a rude awakening.

A striking example of programs that have been abruptly sunk is the Navy's proposed arsenal ship. Other noteworthy failures are big ticket Navy attack, reconnaissance, and electronic warfare aircraft, according to Marvin Zumwalt, deputy special assistant for requirements and budget, OPNAV N88CB.

John W. Douglass, assistant secretary of the Navy for research, development, and acquisition, meanwhile, praised recent efforts to consolidate the acquisition system and noted how those efforts have strengthened remaining programs.

Douglass was among the naval acquisition leaders who briefed industry executives at Acquisition Warrior '98-- a conference recently conducted at the Navy acquisition center of excellence (ACE) in Washington D.C. The event was sponsored by ACE and organized by NDIA.

Conference attendees not only had the opportunity to participate in the acquisition wargaming, but they also were apprised of several unfolding trends in procurement.

Cookbook Approach

"I remember what acquisition reform used to be," said Douglass, "and I didn't like it. We printed a series of supplements. One white, one yellow, one blue, one green-- it was enough to turn your stomach."

Douglass called this a "cookbook" approach to reform-- a technique that he attributed to the Cold War mentality that permeated the Pentagon. "We really thought that if we gave people a set of instructions for every situation, then they would know what to do every time," he said. "We really didn't trust our own people to deal with this thing called 'acquisition."'

Douglass said, because of "legal battles, huge cost over-runs, and lots of red-tape," the Navy has been forced to reevaluate archaic aspects of the system and augment appropriate initiatives. "The old restrictions gradually melted away," he said. "What we are doing now is asking our people to use their best judgment."

Douglass credited many of the breakthroughs in acquisition reform directly to suggestions made by acquisition managers. Those officials were identify "barriers" in the process. Once the barriers were identified, eliminating them became the objective.

One stumbling block identified early on was training-- or the lack of it. Navy personnel complained of insufficient instruction provided to operate the commercial technologies the Navy was beginning to adopt. As a result, training procedures were expedited. Douglass attributed this simple innovation to a key ingredient: communication.

"If they have a good idea, we want to give them a fighting chance to try those ideas," he said.

Zumwalt said: "The most innovative thinking comes from out of the box-- not from acquisition professionals-- but from people who are desperate to find solutions with limited money.

Zumwalt, a self-professed "bean counter" responsible for budgeting more than $20 billion in naval aviation funds annually, believes Pentagon officials when they affirm their commitment to acquisition reform. But, he said, "once we get past the veneer of support on top-- once you get down in the trenches-- they are still cranking the models in the same old way."

He was critical of program managers who operate in a vacuum, remaining inflexible in the light of modern budget realities. "We've got to get away from that kind of thinking," he said.

Zumwalt described a scenario that has played out on more than one occasion. A program manager requests $3 billion for a platform when only $2.8 billion is available. Maybe there is a $2.8 billion solution-- maybe there's a $2.5 billion solution, but they insist they need $3 billion that we don't have," said Zumwalt. Often, he said, the result is the entire program is cut.

"If you need $100 worth of groceries and you only have $90, do you starve?" Zumwalt asked hypothetically. "No, you buy Hamburger Helper."

The Knives

Zumwalt urged program managers and industry executives to face up to what he called the "fiscal facts of life."

Knowing the trilateral nature of the system, how it works, and its inherent conflicts aid in understanding those facts. Zumwalt identified the three principal players. There is a customer with an immediate need. "They don't want to hear about budgets, they don't want to hear about acquisition lead time-- they want it today." he said. Acquisition officials, the second part of the equation, are required to maintain the "best business-based program they can." Comptrollers--"guys like me"-- make up the final third of the system. They are interested only in programs that stand a chance of being funded and executed.

Once a program is approved there is another fact of life that needs consideration: a program's longevity. Zumwalt warned officials that no program is immune.

"If you're not flexible, you'll go out of business," Zumwalt said. "If you think your program is blessed, those shields only last a few years. There's no defense against the knives-- we'll get those protected programs sooner or later, The only stable program is a dead program."

He named several former Navy aircraft systems such as the A-12 Avenger attack plane, the P-7 patrol plane, and the EA6B (ICAP) Prowler electronic warfare platform whose demise, he said, was in part due to the inflexibility of their program managers.

Zumwalt called program stability an "impossible dream." He offered some suggestions to program managers who wish to protect a particular system: "You've got to get away from the kind of thinking where you have one airplane that does one thing very well.

"We're evolving out of the Cold War Navy. The threat out there is not 10-feet tall anymore. Every year we shed old missions. We're looking for force consolidation. We need off-the-shelf, We need multiple platforms. We need common-mission systems," Zumwalt said.

He advised program managers to cooperate with each other and be adaptable. "Know who your allies are as well as your enemies. You survive as a program only on consensus. If we try and keep everything, we'll have nothing. We have to do it smarter, or someday someone will do it with a chainsaw."


War Games: A Chance to Think Out of the Box

Paul Schneider, executive director of the Naval Sea Systems Command, encouraged those about to participate in Acquisition Warrior '98 to be bold in their thinking.

"You'll have no better opportunity to talk something out or try new ideas than you do right here. Its a great chance for you to look at new opportunities. Each of you will walk away with new insights." Schneider predicted.

The goal of the three-day symposium was to give business leaders and Navy and Marine Corps program managers a chance to interact on a proposed project while negotiating real-world obstacles and constraints. The game was structured to enable participants to play a number of roles, thereby giving them a chance to see the system from a number of perspectives

John W. Douglass, assistant secretary of the Navy for research, development and acquisition, encouraged players to view the role reversals as an opportunity: "Take this chance to talk to one another-- to get another perspective. You'll see the problems others face when you play their roles," he said.

More than 160 participants were assigned to 10 teams. Those teams worked towards achieving an integrated topside for the CVN 77 carrier.

Schneider, Douglass, and other speakers briefed the participants before the gaming exercises began.

Schneider admonished that the experience may surprise them. Stifled budgets and the push for outsourcing have changed longstanding rules. "We're faced with issues unlike anything you've ever seen before," he said.

Schneider shared the experience he gained while participating in a similar business-gaming exercise in 1993. He and his team mates were asked to determine the fate of a dormant Navy yard. After much "constructive debate" his group concluded that -- because of the upgrading expenses and construction costs the yard required -- it would better serve the Navy to sell the facility to real estate developers intent on gutting the works and erecting condominiums.

He admitted it was a decision his group later regretted. Even that decision, he said, was "too conservative. Don't make the mistake that we did. This is an opportunity for you to think out of the box,11 said Schneider.

Another official explained the educational importance of these kinds of exercises. "We've trained our people to not risk adversity. We actually punish them for innovative thinking. They're trained to -- and rewarded for -- avoiding risk as opposed to managing risk," he said.

The game itself was structured into three "moves." The first move required teams to submit strategies for integrating the topside of the CVN carrier and mesh those strategies with one other team.

The second move of the game reshuffled assignments. Participants were assigned to multi-disciplinary teams which examined the strategies proposed in the first move. A person assigned to an aviation team, for instance, in the first segment was then selected to integrate the aviation strategies from the first segment into recommendations that were submitted to program managers.

In the third and final move, participants were once again reassigned and given new tasks. They were asked to take the suggestions offered in the game's second move and turn them into a reality. --JJH