The end of LSIs? U.S. House bill would force DoD to run its own arms programs By William Matthews Defense News May 28, 2007 As the U.S. Navy and the Coast Guard did earlier this spring, the House of Representatives has declared war on lead systems integrators (LSIs). A provision passed by the House would ban the use of private companies to manage major new defense contracts after Oct. 1, 2011. And between now and 2011, the House instructs the Pentagon to rebuild its own acquisition work force to take over the work now being done by LSIs. “We gave them a try and they failed,” Rep. Gene Taylor, D-Miss., said of lead systems integrators. From cost overruns to schedule delays to excessive price markups to defective products, “their record is bad,” Taylor said. Taylor, chairman of the House Armes Services seapower subcommittee, and Rep. Duncan Hunter, the most senior Republican on the Armed Services Committee, introduced the ban on LSIs as an amendment to the 2008 Defense Authorization Act May 9. Some defense industry experts question whether a complete ban on LSIs is desirable. More importantly, they doubt that the Pentagon can recruit a cadre of engineers, program managers, accountants and others capable of taking back work that has been handed over to contractors. For at least two years, members of Congress have expressed increasing concern about the Defense Department’s dependence on private companies to manage major defense programs. From programs as complex as national missile defense to functions as seemingly simple as buying tires, private contractors are now in charge where generals, admirals and senior civilian employees used to rule. All too often, especially in the Pentagon’s priciest programs, the results have not been good. • The Army’s Future Combat Systems (FCS) program — run by Boeing and SAIC, not the Army — has more than doubled in cost to more than $200 billion, and is years behind schedule. • The Navy canceled one of three Littoral Combat Ships when the $220 million price soared to $350 million or more under lead systems integrator Lockheed Martin. • After five years, the Coast Guard’s $24 billion Deepwater contract managed by Northrop Grumman and Lockheed has produced eight patrol boats that failed seaworthiness tests and a cutter that is behind schedule, over budget and has possible design flaws. Deepwater has also produced successful aircraft and helicopter upgrades and new communications systems. Legislation to ban the use of lead systems integrators in the future is the product of bipartisan alarm, say House aides. For Hunter, R-Calif., the main concern is cost increases and poor program management under LSIs, said the committee’s Republican spokesman, Josh Holly. Hunter is also worried about whether corporations hired to manage military programs can be trusted to do what’s best for taxpayers versus what’s best for their shareholders, Holly said. For Taylor, a critical issue is whether the federal government has surrendered too much of its responsibility and capability to the private sector. “The purchase of destroyers, cruisers and patrol boats is inherently governmental” and should be done by U.S. government employees, Taylor said. Too many of those actions are being performed by lead systems integrators, he said. “Core functions and core competencies have been outsourced,” a House aide said, and as a result, the government’s ability to manage its own programs has withered. “We’re really in a pickle now.” Agencies, including the Navy, Army and Coast Guard, have lost the ability to judge accurately whether their programs are efficient or cost effective, he said. Rebuild the Acquisition Corps To fix that, the Hunter-Taylor amendment requires the defense secretary to develop a plan by Oct. 1, 2008, for expanding the Defense Department’s work force to take control back from lead systems integrators. Jobs that “are inherently governmental in nature” should be performed by government employees, according to the amendment. Acknowledging that hiring the needed personnel may take more than the four years allotted, the amendment says the Pentagon may “continue to award contracts for acquisition support services.” But those contractors may not perform work that is inherently governmental and may not subcontract to entities “owned in whole or in part by the contractor.” Separate legislation in the Senate would require the Coast Guard to stop signing new Deepwater contracts with the Northrop Grumman/Lockheed team. The LSI could complete work on existing contracts, but those contracts would receive greater scrutiny. “The underlying presumption of [the House] legislation is that the federal government can get these people back,” said Stan Soloway, president of the Professional Services Council, which represents companies that provide services to the government. “In four years they might have a plan, but they won’t get people back in the numbers and scope you need” to manage the massive defense programs now managed by LSIs, Soloway said. The Defense Department began using lead systems integrators in the late 1990s “because they determined that they lacked the in-house technical program management expertise needed to execute large, complex acquisition programs,” said Thomas Jurkowsky, spokesman for Lockheed Martin, which serves as LSI on the Navy’s presidential helicopter program as well as with Northrop Grumman on Deepwater. As LSI, Lockheed is “able to mobilize and take advantage of 75,000 scientists and engineers to creatively integrate in innovative ways the capabilities sought by our customers,” Jurkowsky said. “Integrating large program systems is a core attribute of this company.” Lengthy Rebuilding Process Can the Defense Department do that on its own? Doubtful, said Soloway. “You can’t snap fingers and all of a sudden re-create capabilities” that have ebbed away from government over more than a decade, he said. The Defense Department’s acquisition shrank by half during the 1990s and early this decade, according to the Government Accountability Office. “You’re looking at a 10- to 20-year process” to rebuild the government’s capability to manage big defense programs, Soloway said. But Taylor says future military acquisition officials are being trained right now in service academies at Annapolis, Md., and West Point and Kings Point, N.Y. Officials at Boeing, which is lead systems integrator for the Army’s FCS and the Pentagon’s missile-defense effort, said it was too early to comment on the House amendment. Even if the government could rebuild a vast program management domain in the Pentagon, that might not be the best answer to the military’s acquisition problems, said Baker Spring, a defense analyst at the Heritage Foundation. “I’m not prepared to say it’s never a good idea to use lead system integrators,” he said. For a program like missile defense, where Boeing is the LSI, “I don’t see how you could do it otherwise,” Spring said. “There’s so much modularity in the system that needs to be developed simultaneously. If it’s not coordinated carefully, you will end with mismatches in the end.” It’s easy for the critics of lead systems integrators to point to mistakes LSIs have made, “but the critics are not comparing that to what would happen if the government were to try to put the parts together and have them fit,” Spring said. (Archives)