How Will New War Change Defense Policies?

In the wake of the terrorist attacks of September 11, the urgency of transforming U.S. forces to prepare for 21st century warfare became palpable. Indeed, the assaults on the World Trade Center and the Pentagon, in many ways, changed the rules of war, and the president responded with a focused, resolute call-to-arms to the American people, informing them that fighting terrorism will not be a short-term struggle.

For today's generation of young adults, the war on terrorists is likely to be the rough equivalent of what the Cold War was for "baby-boomers." But it will be characterized by a country united in outrage and buttressed with worldwide support that has only strengthened as a result of these attacks.

At press time, much was unknown. How would retaliation rake place? How would the Quadrennial Defense Review (QDR) and the budgets for 2002 and 2003 be affected? How would the new Office of Homeland Security work with the Defense Department? And how would all of this affect the defense industry?

Will the administration continue to support another round of base closures? Will the new focus on homeland defense undercut the two-war strategy? Should we lift the historic ban on the use of military forces for domestic law enforcement? Are we prepared to surge the production capacities of parts of the defense industrial base?

Before September 11, there was some doubt that Congress would approve the additional $18.4 billion that President Bush requested for national defense. But now it is certain that this amount and more will be enacted.

In fact, $20 billion of the $40 billion emergency supplemental funding provided in the wake of the attacks will be allocated in the 2002 appropriations bills. The $343.5 billion defense budget requested before September 11 will serve as a floor--not a ceiling--as Congress rushes to provide the men and women in uniform with tools to confront the nations enemies during the long struggle ahead.

Earlier, Defense Secretary Donald H. Rumsfeld was criticized roundly by some elements within his own department, as well as by members of Congress, for his handling of the military services and Capitol Hill. Now, however, he looks almost prescient, because of a number of studies that he chartered before beginning the QDR.

One of these studies, on crisis management, positioned him well to confront the unexpected when it became reality. And, though he may not have addressed dealing with the loosely affiliated terrorist organizations known as al-Qaeda head-on, it is clear that by allocating the department's initial supplemental appropriation to intelligence operations, he took precisely the correct first step toward engaging an amorphous enemy.

Rumsfeld reviewed one topic that quickly will guide his dealings with industry, and that is acquisition reform. Though there have been more than 100 such studies since the department's creation, this secretary especially is committed to improving efficiencies. He testified on Capitol Hill that the department should be able to achieve a 5-percent savings, across the board, through management improvements. Furthermore, he recommended that the president veto the 2002 Defense Authorization Act if it contained provisions in the House version of the bill, severely restricting competitive sourcing of defense services.

Moreover, as a businessman who has surrounded himself with service secretaries selected as much for their business acumen in the defense industry as for their leadership skills, Rumsfeld clearly recognizes that the future of national security requires not only an efficient and properly funded infrastructure, but a capable and competitive industrial base as well. He understands that if the war fighter is to receive equipment and services at affordable prices, business policies must be a priority. Burdensome regulations and laws that either delay efficient procurement of equipment and services or impose significant costs on the private sector, thus, are likely to be changed.

As mentioned above, the administration sided with NDIA and other industry groups in strongly opposing certain sections in the House's 2002 Defense Authorization bill. For example, a provision of the bill would have arbitrarily limited the number of full-time equivalent positions that could be studied for potential conversion to private sector performance. The department opposed such a provision, arguing that limiting the number of positions eligible for study would undercut its ability to take advantage of savings and efficiencies prevalent in the private sector.

The Pentagon also objected to a provision mandating public-private competition for all service contracts, including both new ones and work currently being performed by the private sector. The department said these provisions would have delayed the implementation of new services and resulted in increased management costs upwards of $2 billion.

The Pentagon, in addition, fought a provision to remove the $10 million threshold for demonstrated savings in public-private competitions, asserting that the proposal would not allow the department to take advantage of savings greater than $10 million but less than 10 percent of the value of the contract. Currently, the department may outsource work if it demonstrates cost savings of 10 percent or $10 million.

The department further objected to a provision that it said would impose increased and unnecessary requirements that federal contractors report indirect costs and proprietary information. The department said that these requirements would provide little or no value in ensuring contract performance, noting that the language was not clear as to who would pay the increased costs of these requirements.

Although the way ahead is far from clear, one thing that is sure is that this administration is going to focus more sharply on the industrial base. As has been noted in these pages previously, Rumsfeld acknowledges that the decline in the defense industrial base is a serious problem. This concern certainly was valid before September 11, but the events of that date have served only to heighten it.