Defense Budget Spending: Doing More with Less
The Dawn of a New Political Era of Fiscal Restraint
Setting the Stage
Clearly the deficit problems in the US are emerging as a National Security threat. With the DoD Budget being a large part of the Federal Budget Debate, there will be no more top line DoD budget growth. The way forward for the DoD as defined by SECDEF Gates is clear: funding and programs will be established in the following ways--reset through program terminations, mandated efficiencies and unprecedented policy/procedural reform, not annual budget increases. This revised process will allow the DoD to self-fund itself at current (or slightly reduced spending levels) during the Five Year Defense Plan (FYDP) for R&D, O&M and Procurement. The days of big spending on “… any and all things needed, wanted or even desired…” are now over. These changes at the DoD are really nothing short of transformative in the nature of the way the Pentagon conducts and will conduct its business in the future.
The Politics of the US DoD 2012 Budget
The DoD will be entering the FY 2012 Budget Debate with the upcoming hearings scheduled on Capitol Hill in Mid-February and March for both House and Senate Defense Authorizations and Appropriations Bills. These spending Bills will be considered, along with separate Appropriations Supplemental Bills to pay for the Global War on terror, including funding for the conflicts in Iraq and Afghanistan. I thought we should look at some of the political and business issues that will arise from this debate that are important to the microwave technology community in particular and the defense industry in general. I submit we need to get “ahead of the curve” as this debate evolves if we want to continue to be successful. I will suggest a series of ideas for revised behavior—some straightforward and simple, and a few others more controversial and possibly a bit scary to traditional practices—to prepare for the anticipated upheaval. It all starts by being aware of the winds of change and taking the right steps to position us for future success.
Budget Setting and Priorities: It Sure Looks Like Sausages Being Made
Yes, there will be partisan fights on just about every issue. And, yes, there are also calls for defense spending cuts, big spending cuts so “everything is on the table.” Whether it is about fundamental tax law reforms, reigning in the growth of entitlements, or pushing a pro-business agenda, we are all in for a circus atmosphere on the Federal Budget Debate unlike anything we have ever seen before. As our democracy stretches its legs and goes about the lawmaking process, it will indeed be an uncomfortable sight, very much like the analogy--"watching the making of sausages." Sausages may taste good, but you wouldn’t ever want to see the details of the way they are made. In the end, somehow and some way, the Federal budget will come together, and will finally become law. However, it will not be a moment of dignity and honor as the Budget Bills pass. Nor will it be even close to the way lawmaking was described in your high school civics class.
Some “What Ifs” to Consider
There is a lot of political rhetoric in the air today, with some discourse far more inflammatory than usual. There is really no general agreement on whose definition of “what the American people” really want applies. And just what exactly is that “voice of the people” so often cited by politicians referenced as a result of the last elections? What happens in the Congressional debate on funding for certain DoD programs if there is an uprising in the Middle East--Egypt, Tunisia, Iran--or if North Korea continues its defiance of the United Nations and acts more aggressively towards its neighbors. Will the emergence of the Tea Party in Congress and their radical ideas and plans to cut government spending make an impact? Are their views of across the board cuts without recourse to security threats just a short-term battle of a bottom line approach to reduced spending and impose fiscal austerity?
Impacts to the Microwave Industry
All these issues, and how they could potentially be factored into the final DoD Budget Battle on spending priorities, will play out in hearings and debates in Congress. And they do matter to us in the microwave technology community. So what do you do? How do you prepare for what the budget may be, could be, or ultimately will be? Why will some things get cut or cancelled? How do you do “smart things” to protect your business position in the marketplace? Everything seems to be a moving target here without a well defined path forward. I submit that a well run microwave company that has in place a robust technology investment plan has a good handle on its costs of doing business, and a comprehensive business strategy will do very well. The winners in this turbulent time will have the following: 1) highly focused approach to their customers' problems and their technology, program and manufacturing needs; 2) an ability to articulate a solid and enduring value proposition to their customers; and 3) the ability to quickly and effectively adapt to the highly charged and changing circumstances of the Defense Marketplace. Those microwave companies that can adapt themselves along these lines will do just fine.
Some Issues for Microwave Technology Companies to Consider
Here is my list of issues for all of us to consider in the microwave industry:
First: Perform to Your Commitments
The largest percentage of the problems reported on defense contracts are described as schedule slippages, meaning hardware or system delivery delays were experienced. When you dig deeper, you find that technical issues, work scope creep and overly optimistic performance expectations are at the heart of all problems. However, what happens is that there usually are cost increases and overrun problems tied to these technical issues. Unfortunately, it is those cost issues, not technical ones, that are usually cited and highlighted by the media, the GAO and congress. Overruns have been identified to have cost the DoD over $100 B dollars in a recent yearly report. That headline is one that never gets forgotten and is emblazoned on the mind of every congressional staffer and DoD Procurement and Program official.
The DoD contract cost overrun, in today’s climate, is now being viewed as a huge unacceptable problem. The DoD position has now tuned against the contractor in trouble. The DoD now says it is better off spending money on other weapon systems and priorities rather than “covering escalating development costs from a non-performing contractor.” While there are a lot of reasons for program delays and schedule issues, most tend to follow this similar “technical-schedule-cost-technical-cost pattern. In the old days, delivery slippages, requirements creep and ill defined specifications were a normal way of doing business. Cost growth was routinely covered by government agencies, and business moved on. In today's DoD budget environment, there will be no acceptable reasons for a program slippage. We in the miicrowave community must meet our commitments, regardless of the issues. Get back on schedule ASAP, or you face your program’s cancellation.
Second: Perform Beyond the Customers Specification and Expectations
As an industry, we in the microwave business supply advanced technology parts and technology to a lot of important DoD weapons programs. Some programs are in good health and some are in bad. However, as microwave technology folks, we always build “the hard system stuff”--the complex microwave subsystems and components that are usually the key parts in the eyes and ears of most military systems. We are usually the critical path in all milestone charts and program plans. What can we do while the budget debates are ongoing, blame is cast across the landscape and the mud is flying on who is responsible for DoD program slippages and cost overruns? I believe the microwave community needs to be more proactive and truthful in dealing with our customers and the problems we may encounter using our advanced technology to support the warfighter. We have to become far more focused on performing and supporting our customers in the following two areas. By focusing on performing 1) to our “contractual commitments” on our hardware development contracts and deliveries; 2) performing at higher levels, to go far beyond that--to what I characterize as our “implied commitments and responsibilities” that go along with receiving contracts.
When we receive an order, our customers have turned to us as the experts for a particular job, covered by the specification. As such there is also a strong implication (indeed an expectation) that we need to not just know about how our part performs, but how it will interact and function embedded in the system environment (block diagram) of our customers. We need to be open with our customers on these matters. We are looked at as a source of knowledge, beyond the specification, a resource who understands “the intended purpose” of the hardware and its use. We must somehow show our customers we will exceed their expectations of us, and we must demonstrate to them through our actions that we are committed to their success.
Third: Be Open Minded about Supporting Your Customer
We in the microwave community have a greater responsibility to our customers than just the stated contractual specification. As the designer of these microwave circuits we understand our parts and how they will operate under all circumstances. Most importantly, we know how our hardware will function as part of the system’s block diagram. We must help our customers understand how to use our microwave parts more effectively and convey to them as much knowledge as we can about their intended use. Too many microwave companies play hardball on this issue, saying they are not required to do this as it is beyond the scope of their contract. The customer today will likely need more performance in some areas, possibly some hardware block diagram changes, or some additional trade off studies to help them deliver their system. The response to a customer's call for assistance is too often that it is out of scope, and going to cost you, the customer, for additional work. Yes, that is technically correct. However, I think in today’s challenging business environment there is a shared responsibility implied here. If we supply complex custom microwave parts for a defense weapons application that meet all the hardware specification requirements --but in the end it didn’t work in the system due to some unforeseen issues--we own our share of this problem. We also lose if the system gets cancelled.
If we for a moment take the viewpoint of the customer across the table--who is in trouble and needs help--aren’t we all better off working together to resolve matters? Is there is a new paradigm of customer support that will be required to perform in the new DoD budget environment. We in the microwave community have a critical place in the hierarchy of responsibility. If you adapt to this new way of working with your customers, you will be a more attractive supplier, partner and collaborator on future business endeavors.
Fourth: Microwave Suppliers Need to Embrace More Systems Engineering, Simulation and Modeling Techniques
There is a huge effort on the part of the DoD today to adopt more systems engineering principles and practices into the acquisition process of defense systems. This is the mantra of Zack Lemnios, DDR&E, the CTO of the Defense Department. While this sounds like a simple idea for the Weapons Programs companies, its implementation is a big step for the DoD to take from an acquisition point of view. Somehow this aspect of what we all learned while we were getting our engineering degrees many years ago has been lost in the DoD contracting/weapons development process of today. The “cost plus” mentality to do design things serially, not in parallel, has contributed to the lack of formalized system engineering discipline as a first principles engineering practice.
Several studies of troubled programs by different investigative agencies, including the DoD Inspector General (IG) and the GAO, has revealed that a lot of the program delays and cost problems on troubled programs were directly tied to the lack of solid engineering practice, especially systems Engineering. It has been clearly documented that not enough time was spent “up front” on weapons systems development doing the necessary preparatory system engineering work prior to program kick off. What this means for us in the microwave technology community is to ensure that we do our homework, not just on meeting our requirements, but being proactive in working with our customers in doing good engineering work including trade off studies, to ensure our design approach meets the technical and environmental requirements. We must develop an understanding on how our parts can impact system architectures.
For example, we can suggest as a sub tier supplier the way in which block diagrams for radar T/R modules are realized and optimized for various antenna polarizations such as vertical, circular and horizontal, and how by looking at tradeoffs, can offer significant benefits and advantages (both technical and cost savings) to our customers. Today we have so many tools and programs to aide us in the design process. Use these tools to their fullest extent.
Fifth: Bring Your Best and Mature Technology to the Table
There have been huge advancements in the technology base in the past five years for advanced RF, MW and MMW semiconductors. This has led to the development of advanced capability for modules, circuits and devices, including advanced MMW MMICs, ultra low noise amplifiers, broadband phase shifters/switches, GaN power amplifiers and miniature antenna radiating elements. Passive interconnection technologies have closely followed these developmental circuits, enabling higher levels of integration of these device technologies for RF/MW/MMW modules and subsystems. This sets the stage for smaller systems, lower power consumption and advanced modular sensor systems for the warfighter.
This was highlighted during the recently held IEEE Phased Array Conference and Symposium last October in Boston, MA. This symposium in particular highlighted the advancements made by the microwave industry in highly integrated technologies for T/R modules and their potential applications to advanced phased array systems and architectures. Of particular note was the excellent work (System on a Chip) done at UC San Diego by Dr. Gabe Rabizz. All of these technologies have direct application in Phased Array Antenna Systems/ESAs (Airborne, Surface and Ground Based Radar), Broadband Electronic Warfare Jammers, Satellite Communications Array Systems and Advanced Concept Missiles/PGMs. However, where we fall short sometimes as a microwave community in our desire to beat our competition to market, is by pushing our advanced technology into the marketplace perhaps a bit too quickly. Announcing results that are indeed groundbreaking, yet whose ability to impact a system is many years away due to technical maturity, will not cut it today. Unfortunately, we are not in an environment that embraces long gestation defense programs anymore.
Sixth: One Voice for the Microwave Community
What has not kept pace with this technology advancement is the need to invest in the manufacturability of these technologies for greatly reduced cost, higher reliability, and smaller/more efficient sized microwave modules and subsystems. This has traditionally been addressed by government programs such as ManTech or Title III Programs. While there have been some significant advancements in the technology base by individual companies and universities in certain product and technology areas, there has been no focused government endorsed, supported, funded community wide efforts to make this technology more affordable, more available and user friendly to weapon system designers. The last efforts here were over 25 years ago. We as a microwave industry need to find a way come together in this challenging DoD budget environment and promote an agenda for manufacturability--showing the benefits of microwave technology to the nation, the warfighter and all our customers. We need to do this in congress, the DoD laboratories and the service technology leaders at the Pentagon. We must speak for ourselves and our voices need to be heard. We must advocate for this investment, tied to corporate IR&D funding, to move our tech base to the next level. However, no mechanism to bring the microwave companies together to effectively lobby exists for our industry. I was Chairman of the Electronic Industries (EIA) Microwave Division for most of the 1980s and acted as an “unofficial” spokesman in Congress, lobbying on behalf of the microwave tndustry. We were very successful advocating for and obtaining funds for our technology. After my tenure was finished, however, interest in the microwave industry collaboration faded and ultimately the EIA Division was disbanded. We need to find a way to rekindle that movement.
What is lacking is the need for support of advanced technology investments by government and industry in the manufacturability of these advance microwave parts. During the early 1980s, DARPA, led by Program Manager Elliott Cohen in partnership with all the services, led the DoD's wide effort on several large industry-government-academia cooperative microwave technology development programs. They were called “The MIMIC Program” and that was followed by “The MAFET Program.” These highly successful multi-year/multi-phase initiatives, implemented through multiple teams and program awards, were the defining technical moment for the broad application of advanced module and GaAs technology. Indeed, all MMIC development for commercial and military programs had their roots and origins in these DARPA programs. There might not be any cell phones today without the results of MMIC/MAFET as these government industry programs drove the commercial industrial base as well.
In conclusion, we all should keep these issues in mind as we sort out our own individual business strategies, and define our plans on how we will compete and win in the turbulent defense marketplace. Yes, some of these issues may require us to come together as a united industry front, and bring our case to the DoD leadership/government labs/politicians to argue our positions on technology and policy issues. Regardless, I would challenge you to think out of the box in this transformative DoD budget situation.