We almost titled this article, “The Vast DOD Conspiracy,” because it seems to us that there is something amiss here, as if the Department of Defense didn’t get the memo about jobs and exports and manufacturing and—did we mention jobs? We decided to go with a less catchy, more awkward title, because we have no evidence the Secretary of Defense Gates and his military service chiefs are engaged in a conspiracy to sabotage President Obama’s attempts to jump-start the economy (and perhaps win reelection) through focusing on manufacturing and exporting durable goods such as defense articles.

You be the judge.

Fact 1:

On March 11, 2010, President Obama issued Executive Order 13534, entitled “National Export Initiative”. EO 13534 established as policy the initiative—

… to improve conditions that directly affect the private sector’s ability to export. The NEI will help meet my Administration’s goal of doubling exports over the next 5 years by working to remove trade barriers abroad, by helping firms—especially small businesses—overcome the hurdles to entering new export markets, by assisting with financing, and in general by pursuing a Government-wide approach to export advocacy abroad, among other steps.

EO 13534 established an Export Promotion Cabinet (EPC) to develop and coordinate implementation of the NEI. Fourteen (14) positions were named to the EPC—among them the Secretary of State, the Secretary of Commerce and the Secretary of Labor. Notably absent from the EPC was the Secretary of Defense, even though aerospace/defense exports are a large component—and among the fastest growing—of total U.S. exports.

Fact 2:

On December 9, 2010, the Whitehouse announced significant changes to the existing export control system, designed to “ease restrictions on items that are less security-sensitive,” according to one report. This editorial at National Defense Magazine notes that, “Unlike previous attempts at revamping export regulations, this one comes at a time when the United States needs to create jobs, and export sales are seen as essential to future recovery.” Although Secretary of Defense Gates has supported arms export control reforms in past speeches, his voice seemed to be missing from the current efforts, as were the voices of the Joint Chiefs and the leaders of the military services. A search of the DOD website failed to locate any recent articles on the topic.

Fact 3:

On December 15, 2010, President Obama held “his largest private meeting with [private industry] chief executive officers since he entered the White House,” according to this story at Bloomberg.com. Among the CEOs at the meeting were James McNerney (Boeing), David Cote (Honeywell), Greg Brown (Motorola), and Jeffrey Immelt (GE). According to this Wall Street Journal report, “President Barack Obama pressed 20 corporate chief executives Wednesday to suggest policies that would spur them to ‘start investing in job creating enterprises.’”

Fact 4:

A recent editorial by Lt. General Lawrence Farrell, Jr. (USAF, Retired) in National Defense Magazine questioned the Department of Defense’s commitment to its industrial base. He wrote—

As the defense sector heads toward a future of flat or declining budgets, the health of the industrial base and its critical capabilities becomes a prime concern.

It is not yet apparent that senior policy makers have begun to assess what industrial capabilities must be preserved. Ensuring that the United States is able to maintain core industrial competencies must be a priority before a fiscal downturn becomes reality.

Although General Farrell listed several specific concerns, one that caught our attention is the impact of bureaucratic procurement processes—and intrusive DCAA audits—on the ability of munitions industry to support the needs of warfighters. General Farrell wrote—

For many companies, the contracting process continues to create unnecessary burdens that hamper their ability to support the military’s needs. … [Munitions industry] Survey responders said that a lack of timely procurements has affected business …. Seven of 12 said these delays have caused production lines to go cold, and half of the companies laid workers off. Finally nine of 12 stated that these delays in contracting caused a reduction in revenue for the year. Based on the results of the survey, it appears that the cutbacks in industry were not a result of reduced budgets, but were caused by bureaucratic delays — including Defense Contract Audit Agency (DCAA) audits — that have impeded the timely execution of appropriated funds.  … One company reported that a post-award audit started in 2007 and is currently on hold. Another reported that a contracting officer removed a DCAA auditor after a year of little progress and restarted the audit. In some cases, the trouble is inconsistent DCAA procedures, which may vary from one region of the country to another. Different audit functions within a single program are conducted separately and not coordinated. This has resulted in multiple repetitive audits by different agencies and individuals. Adding to these issues are poor communications between procurement contracting officers and auditors, and a general lack of experience in contracting officers. All of the issues have led to slow, cumbersome processes and a lack of qualified experts in critical positions.

We are not going to make any over-the-top accusations in this article. We will ask, however, whether Pentagon leadership shares its Commander-in-Chief’s focus on job creation through partnership and the easing of regulatory burdens (such as antiquated arms export control rules). From our perspective, DCAA and DCMA are well into the process of imposing bureaucratic roadblocks, attacking defense contractors through flawed (but headline-grabbing) audit findings, and paralyzing the already slow-as-molasses defense acquisition system.

President Obama clearly has signaled that he understands the U.S. economic recovery is dependent on job creation and that manufacturing exports are an important part of that initiative. DCAA and DCMA are acting in ways that tend to undercut the President’s agenda. It is time for DOD leadership to provide some course correction to these wayward agencies.

Why have Pentagon leaders gone silent?