Box 1, Folder 34 – HP Management
February, 1986 – Remarks on Spectrum Project
Not clear who the audience is. Packard presents his thoughts on the Spectrum computer program.
2/86, Text of Packard’s remarks
Packard says he and Bill Hewlett have been watching the spectrum “with a great deal of interest.” “It is a difficult technical challenge and a large management challenge. At the same time there has been continued growth in both our technical capability and our management capability. I have never had any doubt about how the spectrum program will turn out. It will clearly be a strong foundation on which we can continue to build technological leadership in the computer industry for many years in the future.
“I can really feel the excitement and genuine sense of achievement behind this program. I know Bill Hewlett feels the same way.
“Shortly after Bill and I founded the company in 1939 we decided we were going to concentrate our efforts on making a real contribution in our field of endeavor. We did not want to be a me too company – we wanted to do things that had not been done before.
“From the first product – the 200A audio oscillator – we have made a great may important contributions, microwave instrumentation, digital counters, medical instruments, electronic calculators. Product after product over the years we have demonstrated that making a contribution in new products has always been a key to a successful product.
“As our activity in the field of computers increased, we learned that teamwork as well as technical excellence is essential to making important contributions in the computer and data products area. Spectrum is a great program in the history of HP for we have demonstrated a great team effort in combining technical inputs from various parts of the company, a team effort among software and hardware people, and a great team effort in melding the various components into a real contribution to the needs of our customers.
“The Spectrum program will bring an important contribution to the needs of our customers not only this year and next year but for many years ahead.
“While the spectrum program has been the largest new product development in the history of the company, it has not overshadowed our other R&D efforts. We have an outstanding program to strengthen and expand our technology base. We will be announcing this year a great vintage of other new products, electronic instruments, medical instruments and including computer peripherals, all of which will be the same kind of important contributions we have made in the years past.
“I want to congratulate everyone who has taken part in this great team effort. But I want to add – don’t stop running hard now because that’s just what our competitors are going to continue to do.
“We have to demonstrate by our continuing performance that all of our old customers will benefit if they continue to depend on HP. And also we have to demonstrate to a lot of new customers that their future will be better.”
Box 5, Folder 12A – General Speeches
March 26, 1986 – Remarks to The Brookings Institution on the work of the President’s Blue Ribbon Commission on Defense Management, Washington D. C.
Packard gave many speeches covering work of this Commission, see end of this speech for a complete list of such speeches.
3/26/86, Copy of the typewritten text of Packard’s speech
DEFENSE MANAGEMENT REFORM
INTRODUCTION
“It’s a pleasure for me to address you today on the subject of reforming defense management. The forum here addresses military procurement. However the broader issue of management includes the way we do planning and budgeting, the way we’re organized to make decisions, as well as the actual process of procurement. So I’d like to ask you to take a stop back and look at some very fundamental issues relating to the defense that underlie the procurement activity.
“Last year the President established our Commission to look at essentially every aspect of defense management. In our Interim Report we covered four major subjects:
- National Security Planning and Budgeting
- Military Organization and Command
- Acquisition Organization and Procedures
- Government-Industry Accountability
“Our Interim Report was intended to be a terse summary of the Commission’s conclusions and recommendations to date. [See speech May 5, 1986 to The Heritage Foundation.] I thought today I would give you some of the rationale and philosophy underlying the report that involve military procurement.
Packard says the Commission members were able “to agree on recommendations to change the JCS structure that will, we believe, improve national security planning and budgeting and also military organization and command. Our recommendations also mesh closely with the legislation on JCS reorganization being considered by the Congress.”
PLANNING AND BUDGETING
“There has been no rational system whereby the Executive Branch and the Congress reach coherent and enduring agreement on national military strategy, the forces to carry it out, and the funding that should be provided. In the absence of such a system, instability and uncertainty plague our defense program. In turn, they cause imbalances in our military forces and capabilities, and increases in the costs of procuring military equipment.
“Since World War II, planning has been dominated by each military service’s own perception of its role and mission. The Services have done their own long-range planning and determined, to a great extent, their force level and weapon system requirements. Final decisions on weapons required are made more often on a piecemeal basis characterized by a process of negotiation rather than through a coherent and preconceived master strategy.
“Congress adds to this management by fits and starts. The present method of Congressional budget review centers on either the minutiae of line items or the gross dollar allocation to defense. This approach obscures key defense issues. It also causes instabilities which require program stretch outs, cancellations and other actions that will result in substantial waste.
Packard reviews Commission recommendations to change these procedures.
“We recommend that the President propose and the Congress approve defense budget levels for five years ahead. We are recommending that the Chairmen of the JCS be asked to plan military forces that can be procured and supported within those budget levels. To do this effectively, the Chairman must be able to balance the inputs of the military departments against each other and also take into account the requirements of the unified and specified commanders (CINCs) who are the ultimate users of the forces which are provided by the military departments.
“To enable the Chairman of the JCS to provide the best, most objective professional advice on this very important issue, he must have his own staff and not be dependent on the Service staffs for advice. We are also recommending that a Vice Chairman of the JCS be established and that he be specifically responsible to provide inputs from the CINCs for the Chairman to take into account in developing the military plans for the Secretary.”
Getting the Congress and the Administration to agree on defense budget levels looking five years ahead is an important goal Packard says. “We do not believe these budget levels need to be established down to the last dollar – or the last billion dollars. A projection with even a 5 percent uncertainty would be much better than the FYDP has been over the years and would provide a much more useful long-range plan for the management of the Defense Department.
And another major weakness in the defenses budget system Packard points out “is that the President and the Congress have not been provided with a satisfactory way to determine whether or not US military forces are adequate to support our worldwide national security requirements. To do this, an assessment of the capability of the forces of the United States and its allies versus the capability of enemy forces needs to be made, the so called net assessment of military forces.
“This is a complex problem and difficult to do in a way that is useful. We believe a better net assessment can be made by the Chairman of the JCS working in cooperation with the DCI, since the Chairman is less dependent on the Service Chiefs.
“We are recommending that such a net assessment be made and provided for the President and the Congress so that each can be better able to evaluate the overall adequacy of the US military forces in relation to the threats they will have to deal with around the world.”
The Commission wants to see more effective teamwork within the national defense establishment. “In the Defense Department,” Packard says, “this will require better teamwork between the Secretary, the Chairman, the Joint Chiefs, and the CINCs.”
“These recommendations are highly dependent on the support of the Congress. Some new legislation will be required, but our recommendations are consistent with that which the Congress is already considering. There is recognition that stability in defense planning an result in very substantial savings and so the incentives are strong for the Congress to support these recommendations.
“We realize that absolute stability in five-year budget projections is not likely to happen. The Congress will want to keep some control of funding. In fact, Congress has already provided stability for some major programs. We believe a major improvement in this long range planning aspect of defense management can be achieved at this time. If it can be done, the payoff will be very substantial.”
ACQUISITION ORGANIZATION AND PROCEDURES
Packard continues saying, “Another major recommendation of the Commission is intended to improve the management of the new weapons development and production.
“Our Commission looked at some successful examples of systems acquisition both inside and outside the DoD and concluded that they had the following characteristics:
“First, clear command channels. That is the program manager had clear responsibility for his program and a short unambiguous chain of command to the CEO, General Manager, or comparable decision maker.
“Second, stability. Meant that the program manager made a ‘contract’ with his CEO at the beginning of the program specifying performances, schedule, and cost.
“Third, limited reporting requirements. The program manager was required to report only to the CEO, and typically on a management by exception basis.
“Fourth, small high quality staffs.
“Fifth, communication with the user. That is, the program manager established a dialog with the customer and maintained it throughout the program.
“Sixth, prototyping and testing.
Packard interjects a statement to the effect that his own experience has validated these principles many times. “Successful programs,” he says, “result from assigning good program managers and giving them clear cut authority to get the job done. My experience has also shown me that prototyping is absolutely essential. Every successful new product development in the commercial world must meet both a performance target and a cost target. There is no valid reason why this cannot be done with military equipment. Thus, we are recommending the slogan, ‘Fly and know how much it will cost before you buy,’ to be the guiding principle of all future new weapons programs.”
Packard says the Commission has recommended a procurement process which will “result in better decisions, made early and with more resolve. To encourage the right decisions, we recommend a streamlined acquisition organization, headed by a full time Under Secretary of Defense for Acquisition on the same level as the Deputy Secretary and the Service Secretaries.
Responding to what he says has been “some concern” that establishment of such a position as Under Secretary of Defense for Acquisition would encourage greater centralization of the acquisition process, Packard says, “In the present system the Secretary and the Deputy Secretary provide the overall final authority for the entire acquisition process in the Department of Defense. These two officials have a tremendous range of other responsibilities. In the past the Deputy Secretary has been given the primary responsibility for the acquisition process, but even so he is able to devote only part of his time to this tremendously important job. We believe the defense acquisition process, which is one of the largest and most important management challenges in the world, will be substantially improved with an experienced manager in charge full time.
“Putting an experienced manager in charge of acquisition full time has nothing to do with whether the acquisition work is centralized or decentralized. The person would need a much larger staff to centralize the entire acquisition process. That is not what we are recommending. The acquisition work should continue to be decentralized to the Services and agencies just as Secretary Weinberger has done. Unified policies must be established and implemented and performance must be evaluated.
This recommendation adds one person, not another layer of management to the system. It reduces the span of control of the Secretary and his Deputy which is now far greater than good management practice would dictate.”
Government-Industry Accountability
“In recent years there has been increasing public mistrust of the performance of private contractors in the nation’s defense programs. Wide coverage in the news media of questionable practices on the part of industry have eroded public confidence in corporate morality.
“This country relies heavily on the private sector to carry out weapons system development and production. Cooperation between government and industry is essential if private enterprise is to fulfill its role in the defense acquisition process. Contractor or government actions that undermine public confidence in the integrity of the contracting process jeopardize this needed partnership.”
Packard says the Commission’s Interim Report urges “that the laws continue to be aggressively enforced. We also recommend that both defense contractors and the Department of Defense take steps to apply the highest standards of ethics and conduct.”
And Packard adds that he believes “industry itself will be far better off by cleaning up its own act rather than relying on the federal government to do the policing. In the long run, lax internal auditing leads to public outrage and resulting reaction by enforcement agencies. The result is damage to the corporate reputation, personal suffering on the part of corporate executives, loss of revenue to the corporation, and cost to the nation as a whole.”
Role of Congress
Packard says he wants to reemphasize the point that “Congress needs to focus on larger issues and stop trying to micromanage the Defense Department….No matter how well DoD streamlines its own organization and procedures, Congress can undo most of it by continuing to get involved in day-to-day management.”
Packard cites one central theme in his remarks:
“If you want the job done, pick a qualified person to do it, say what you want done, leave him alone but hold him accountable for the outcome.” [A statement of HP’s Management by Objective policy.] And he adds that this message “should apply both to DoD and to the Congress.”
Closing Remarks
As I mentioned earlier, the Commission’s final report will be issued by the end of June. We hope to amplify on some of the recommendations already made, and we may issue two or three more reports on special topics. These reports will probably deal with acquisition, personal conduct and accountability, and planning.
“The response to our Interim report has been very positive, both on the part of the President and Congress. Those of us on the Commission have been extremely encouraged by this. We feel very strongly that reforms in defense management are long overdue. Now is the time to do something and stop talking about it. I hope all of you will support us.
“In closing I want to emphasize that our recommendations are not in any way intended to be a criticism of Secretary Weinberger. I pointed out in my covering letter to President Reagan that our military forces are stronger and their morale is higher than at anytime in recent memory.
“Secretary Weinberger has already undertaken a number of the management improvements we suggest. He has developed an outstanding relationship with the JCS, and he has saved billions of dollars by stabilizing major programs.
“He was also responsible for seeking out and discovering a number of serious problems that have been in the establishment for a long time. Unfortunately, the news media blame him as though these problems were the result of his management. They should instead be complimenting him for discovering the problems and for taking steps to correct them.
“We believe the adoption of our recommendations will enable Secretary Weinberger to do an even better job in the next three years and will provide the foundation for better Defense Management by future Secretaries.”
3/11/86, Letter to Packard from A. Lee Fritscher, Director, The Brookings Institution, expressing delight that he has agreed to be their luncheon speaker. He encloses a preliminary agenda.
3/24/86, Letter to Packard from B. K. MacLaury, President, The Brookings Institution, inviting him to an “off-the-record discussion with 18 people listed on the enclosed sheet prior to your remarks….”
The following is a list of Packard speeches which cover work of the Blue Ribbon Commission on Defense Management. Many were similar to other speeches and thus are not summarized here.
Packard speeches wherein he discusses work of the Commission on Defense Management:
March 26, 1986 – Remarks to the Brookings Institution, Washington D.C.
May 1, 1986 – Keynote Address to The American Institute of Aeronautics and Astronautics, Arlington, VA
May 5, 1986 – The Heritage Foundation, Washington D.C. (Not summarized here)
May 21, 1986 – American Electronic Association, no location (Not summarized)
July 24, 1986 – Another to AEA, Palo Alto, CA
July 25, 1986 – Lakeside Talk, Bohemian Club
September 10, 1986 – The Commonwealth Club, San Francisco, CA
September 23, 1986 – Aerospace Industries Association/ National Security Industrial Association. (Not summarized here.), Williamsburg, VA
October 7, 1986 – Keynote address Electronic Industries Association, San Francisco, CA
Novembeer 6, 1986 – Committee for Economic Development, New York, NY. (Not summarized here)
December 4, 1986 – American Enterprise Institute, Washington D.C.
March 1, 1988 – The Thomas Jefferson Research Center, Beverly Hills, CA
June 14, 1988 – Defense Systems Management College, Fort Belvoir, VA
July 22, 1988 – Bohemian Grove
July 27, 1988 – Testimony before the Senate Armed Services Committee, Washington D. C.
October 24, 1989 – YMCA Enlisted Personnel Military Awards Dinner. [Offers retrospective comments on the work of the Commission.]
August 1, 1991 – Testimony before the Subcommittee on Science, Space, and Technology of the House of Representatives
Box 5, Folder 12B – General Speeches
April 15, 1986, Statement before the Subcommittee on Civil Service, Post Office and General Services, U.S. Senate, Washington D. C.
4/15/86, Typewritten copy of speech
“Mr. Chairman and members of the Subcommittee, I am pleased to have this opportunity to discuss with you the subject of personnel in the federal government. I cannot overemphasize the need to make sure that we get high quality people to fill critical positions in the government. Presidential Commissions may recommend, and Congress may legislate the creation of new positions or more effective organization structures. But without the right kinds of people in these jobs, the structure alone will not solve the problem.
“I will base my remarks today on my experience as a former Deputy Secretary of Defense, on the review of federal laboratories that I chaired for the White House Science Council, as well as on my present work with the President’s Commission on Defense Management. My focus will be on federal scientists and engineers and on critical acquisition personnel in the Department of Defense.”
Packard first addresses the issue of scientists and engineers, and says that
research and development are key to both our national security and industrial competitiveness. In the past 10 years both federal and private support for R&D in the United States have been increasing in constant dollars, and in 1985 this support reached an all-time high of $107 billion, about 47 percent of which was federal. Ironically, with more national emphasis on R&D than ever before, the federal government’s inability to attract and retain qualified scientists and engineers has become a major problem.
“At the heart of the problem is pay, with rigidity and inertia of the personnel administration system being a less important but contributing factor. The pay disparity between government and industry began to grow with the last cycle of inflation, when increases in federal salaries failed to keep pace. The problem is particularly acute in the scientific and engineering fields, where industrial pay scales have risen faster than the rest. Congress has made the problem worse by insisting on linking congressional and civil service pay. Because Congress is reluctant to raise its own pay, civil service salaries have been capped for at least six years; in 1986 the salary ceiling is $72,300. The result is not only lower federal salaries, but also severe salary compression at the senior levels, which penalizes some of the most highly trained and experienced people entrusted with critical responsibilities.”
Packard cites 1984 studies by the GAO and the Air Force that showed engineer and computer science people were from 30 to almost 50 lower paid than those in industry, and adds that data from other agencies tell a similar story.
“There are indications,” he says, “that problems exist in other critical career fields as well. For example, in my role as Chairman of the President’s Blue Ribbon Commission on Defense Management, I found that the Defense Department is losing many of its best contracting specialists at critical stages in their careers, principally at the journeyman level of GS-9, 11 and 12. In 1984 there was a 68 percent increase over previous years in the number of contracting specialist resignations.” And he adds that 45% of those resigning said they did so to join private industry, where they expected higher pay and better promotional opportunities.
He also cites an independent survey made by purchasing managers which showed that salaries in private industry were from 16 to 51 percent higher than Department of Defense pay scales for jobs of comparable experience and responsibility.
“Faced with problems in recruiting, federal agencies often have to choose between accepting a less qualified candidate or leaving a position vacant. Defense Department data show that the aptitude score of newly hired scientists and engineers are declining relative to national norms. This situation illustrates that the nation is getting only what it is willing to pay for.
Fringe benefits are also being eroded, Packard says. “Although the federal pension plan is still relatively generous, it has been affected by recent budget cuts and is often matched or exceeded in the private sector. Federal health and life insurance provisions, and annual and sick leave allowances, are far less generous than those offered by many private companies and universities.”
Packard mentions his work on the White House Science Council panel established in 1982 to review the federal laboratories, which he chaired. “The panel concluded,” he says, “that the inability of many federal laboratories – especially those under civil service restraints – to attract, retain, and motivate qualified scientists and engineers limits the productivity of the laboratories. If not corrected, this situation will seriously threaten their vitality.”
When the Federal Laboratory Review Panel compared administrative practices in government operated laboratories with those in industrial R&D organizations, “…they found that industry typically places more administrative control over technical personnel in the hands of technical supervisors than do government operated laboratories. In the federal system, personnel administration is handled by a more or less autonomous bureaucracy focused on procedures and standardization rather than on technical achievement. The federal government also commonly imposes personnel ceilings as well as budgetary controls on the laboratories, while the general industrial practice is to use budgetary control alone. Our panel recommended that government operated laboratories, also, use budgetary control alone.”
Another problem cited by Packard is that federal personnel administration tends to emphasize length of service over quality of performance in determining pay. “Thus,” he says, “a federal employee who has a clean service record is assured of a step increase at regular intervals regardless of productivity. Conversely, the process regarding high performers is administratively cumbersome, and most bonuses and promotions are difficult to push through the system.”
Packard recommends a greater exchange of scientists and engineers between government and academia, saying it would provide an exchange of new ideas to the laboratories involved, and to the federal R&D program offices as well. “Unfortunately,’ he says, “the current structure and rigidity of the federal personnel system inhibits the mobility of technical personnel between government and universities. Pay comparability would do a lot to improve the situation, as would additional flexibility in retirement accounts. There is no reason for example, why academics who join a federal organization should not have the option of retaining their own pension plans rather than being required to join the federal one.
“The Navy is attempting to rectify some of these personnel management problems in a demonstration project started in 1986 at two of its California laboratories, the Naval Weapons Center at China Lake and the Naval Ocean Systems Center in San Diego. An alternative personnel management system has been created at each facility that, among other things, aggregates the numerous civil service grades into broad pay bands, links pay to performance, and simplifies personnel administration. The broad pay bands give supervisors more flexibility in making initial salary offers and giving subsequent in-grade raises; they also permit more generic job descriptions and greater latitude in rewarding deserving individuals without having to promote them. In contrast, the existing civil service system, with its many narrowly and rigidly defined grades, makes it difficult to match market rates for scarce talent. This system also forces supervisors to rewrite job descriptions, thereby justifying promotion to higher grades, in order to give employees pay raises.”
Packard expresses his belief that the more general approach to personnel management demonstrated by the Navy at China Lake needs to be expanded and applied elsewhere in the federal work force. “In particular,” he says, “we have identified a need to stop talent drain among scientists and engineers as well as critical Defense acquisition personnel. We need to bring modern personnel management practices into the federal government, and this will require some structural changes as well as greater flexibility in the pay system.”
Packard says the China Lake system works quite well at entry and middle levels, and provides salary comparability with the private sector. “However,” he says, “we must also make allowances to have some top quality people in the very senior positions. These are the people who will provide the ideas and leadership to keep our R&D and systems acquisition activities above the level of mediocrity.
“Today, for example, the directors of large federally operated laboratories are paid only about half as much as their counterparts in contractor-operated laboratories. Some provision must be made to pay them above the current ceiling before the government loses the majority of its best talent. Adopting the China Lake approach solves part of the pay problem, but this issue of the pay cap must be dealt with in order to solve the whole problem.”
Realizing that the of such an approach as he recommends is an important question, Packard says, “I believe that present budgetary controls are adequate to limit costs. A program or laboratory manager, given a fixed budget for personnel costs, can make the necessary trade-offs between quality and quantity. In other words, the manager must understand that getting better people at higher salaries will mean having fewer of them within the budget constraint. From the defense systems acquisition point of view, this would certainly be a move in the right direction, since indications are that there are already too many people cluttering up the acquisition process.”
Packard emphasizes the need to do something about this situation very soon…. “Time is running out.” he says, “Many of the best senior people are nearing retirement age, and many of the subordinates who would have replaced them have left the government. Congress has an opportunity to pass remedial legislation this year, and I urge you to do so.”
“I appreciate the opportunity to appear before this Subcommittee, and I will be pleased to respond to your questions.”
Box 5, Folder 13 – General Speeches
May 1, 1986, Keynote Address, AIAA, Arlington VA
T. A. Wilson, Chairman of the Board of the Boeing Company, invited Packard to be the keynote speaker at the AIAA (American Institute of Aeronautics and Astronautics) 1986 Annual Meeting and International Aerospace Exhibit, April 29 – May 1, 1986. Packard was Chairman of the President’s Blue Ribbon Commission on Defense Management, and his speech here covers the interim recommendations of the Commission. The Commission’s Interim Report was issued February 28, 1986. See speech March 26, 1986 for complete listing of speeches which include comments on the work of the Blue Ribbon Commission on Defense Management.
5/1/86, Copy of typewritten text of Packard’s speech
When he was asked to speak at this meeting Packard says he realized that it would be “an excellent opportunity …to talk to many of the key people who would be putting the recommendations of the Commission on Defense Management into action on a day-to-day basis.” He says he is “confident that our major recommendations will be implemented.
“The old way of doing business with the Defense Department is going to change, he says, “we hope, in important ways. Many of you will be the ones responsible for putting the changes into action. We hope you will understand and embrace the changes we are recommending, and make sure that the men and women who work for you down the line do, too.”
Packard says that the reports which have been delivered to the President are brief, – “each represents a great deal of hard work and effort, and careful, and at times agonized, analysis of this country’s defense management policies by a group of Commissioners with diverse and impressive backgrounds. We had decades of Chief Executive and flag Officer experience to draw on; — academic expertise, government and Capitol Hill knowledge, also. We were fortunate to have a highly talented, experienced and hard-working staff.”
The Commission had been appointed in June of 1985 and Packard says that “one of the most overwhelming obstacles to our success was the simple fact that more than 30 reports on defense management have been issued since the last major reform during the Eisenhower Administration – and not much has changed.” However, he says he has been optimistic that the current climate for reform would “give our Commission a real chance for success. Each of our recommendations has received our careful consideration as to how it should be implemented – to insure that our reports would not end up on the shelf, like those of many other Commissions.”
Packard says he would like to “review the major recommendations the Commission has made – the rational behind them and what they mean to you.”
He explains that they separated their recommendations into four major areas: “National Security Planning and Budgeting, Military Organization and Command, Acquisition Organization and Procedures, and Government-Industry Accountability.” He stresses that “none of these recommendations stands alone – they are intended to work together as a package and they were arrived at with considerable thought and deliberation as to how one will affect the others.
“National Security Planning and Budgeting.
“One of the most serious problems in our defense management process has its roots in the way we plan and budget. The Commission concluded that there is today no rational process by which the Executive Branch and the Congress reach an agreement on funding, forces or strategy.
“As we all realize, the Defense Department budget has been for a long time too largely the product of parochial in-fighting between the Services and of an agonized Congressional examination of line-item minutiae. There has been too much lobbying by industry and too much pork barrel politics by the Congress. We know that cannot be completely eliminated but we need to do better long-range planning.
“Our piecemeal assessment of forces and weapons means that we lose all focus on matters of strategy, operational concepts, and key defense issues. Lost, too, are many opportunities for dramatically greater management efficiency. Avoidable instability, program stretch-outs, cancellations and waste are the unfortunate results of the way we conduct our planning and budgeting process.
“The Commission has recommended means for achieving better management of this process at the highest level, including that the President propose and the Congress approve defense budget levels for five years ahead and then a specific two-year operational budget. These changes would realize major improvements.”
“Military Organization and Command.
“The Chairman of the Joint Chiefs of Staff would play a key role in this new process. He would be the principal military advisor to the President, the National Security council and the Secretary of Defense.
“To date, we have not fully realized satisfactory ways of evaluating whether we are buying the right number of weapons, or in fact even the right kind of weapons. This has been the Secretary’s responsibility, but we believe it can be improved.
“This should be part of the job of the Chairman of the Joint Chiefs of Staff. He should be able to balance the interest and needs of the services for new weapons, against the readiness requirements of the unified and specified commanders in the field.
“He should also be responsible for working with the JCS and the Director of Central Intelligence to prepare a net assessment to evaluate the military capabilities of our forces, and those of our allies. This would provide information indispensable to making better long-term decisions.
“The Chairman should have the authority, staff and responsibility to accomplish all this. It is my belief that in the past we have had Chairmen more than equal to this job, but we have never told them that this is what we want them to do.
“I want to emphasize that these recommendations are in no way intended to reduce the authority of the Secretary. They are designed to enable the Chairman of the JCS to give the Secretary better advice.
“To assist the Chairman in this critical process, we are recommending that there be a Vice Chairman of the Joint Chiefs of Staff. He should be specifically responsible to represent the interests of the CINCs, and take an active role in the process of determining weapons requirements.
“Acquisition Organization and Procedures.
This Commission was established in part because of the spare parts horror stories. We looked at these cases, but we concluded that there were other more serious systemic problems in the acquisition process that cost billions of dollars. Correcting these will improve the management problems causing the horror stories.
“We have recommended, — and the necessary legislation already has been introduced in Congress – putting a senior OSD official, with experience in industrial management, in charge full time of defense acquisition policies. Today at DoD, you have the biggest acquisition operation in the whole world, and no one in charge full time.
“The new organization we are recommending includes the position of Under Secretary of Defense for Acquisition. A level II appointee, this person would be given the authority and responsibility to oversee the entire acquisition system.
“We are recommending that the Services retain the responsibility for all new major weapons systems from the beginning of full-scale development through production and deployment. The procurement procedures should be uniform, hopefully, embracing the best features of each Service.
“We have recommended a process with greater emphasis on the early stages of weapons development that picks the right system early in the process and uses more prototypes for adequate developmental and operational testing.
“The most important decisions are those made at the front end of the acquisition process. That’s when the analysis is done to determine if the technology is really adequate and can be converted into a useful military capability. If this is done correctly, with the first 3 to 5% of the expenditures, you will be able to stabilize costs and assure better performance further along in the program’s life span.
“The new Under Secretary would have the authority to establish appropriate policies for this part of the process. Only when it could be determined that program uncertainties have been addressed and dealt with adequately would Congress be asked to authorize high rate production and make major commitments of funding. The guiding principal of this new approach is: ‘Fly and know how much it will cost before you buy.’
“We are calling for more prototypes and more operational testing in the early stages of major programs. To do this may add some time and so streamlining will be very important at this stage. In addition to recommending a streamlined acquisition organization and a better balance of weapons system cost and performance, we have proposed other ways – for example, expanding the use of commercial products, and improving procurement competition – to run the Defense Department more like a successful commercial business.
“Government-Industry Accountability.
“Industry has a big role to play in the defense reform initiatives. The defense industry has to shape up and do a better job of keeping its own house in order, but defense contracting is a two-way street. What we need is a more honest and a more productive partnership between government and business.
“Public trust in our defense effort has eroded, and, more often than not, industry is seen as the villain. Whether this is fair or undeserved is irrelevant, because it is absolutely vital that a healthy government-industry relationship be restored. This country relies heavily on the private sector to carry out weapon system development. It could not be done without private industry.
“We have made some specific recommendations to industry in our interim Report, and will be making some additional recommendations in our final report in June. I want simply to stress today that industry will be far better off by cleaning its own house rather than relying on the federal Government for more regulation and enforcement.
People
“Improvement in senior level appointment system.
“SecDef to have more flexibility in personnel management policies.
“Expanded opportunities for education and training of all civilian acquisition personnel.
“Thank you very much, ladies and gentlemen. I will now be happy to answer your questions.”
1/16/86, Letter to Packard from T. A. Wilson, Chairman of the Board of the Boeing Company, inviting him to speak at the Annual Meeting of the AIAA (American Institute of Aeronautics and Astronautics)
1/24/86, Copy of a letter from Packard to T. A. Wilson saying he would be pleased to speak at the meeting
4/29/86, Copy of the printed program of the AIAA meeting
Box 5, Folder 13A – General Speeches
May 5, 1986, Address on Defense Management, the Heritage Foundation, Washington D.C.
5/4/86 Typewritten copy of speech.
This speech is very similar to others given by Packard on the subject of the Blue Ribbon Commission on Defense Management and, therefore, it is not covered again here. See speech March 26, 1986 for complete list of speeches covering work of the Commission.
2/26/86, Copy of letter to Packard from Edwin J. Feulner, Jr. President of The Heritage Foundation, inviting him to visit the Foundation for a public discussion on the work of the President’s Blue Ribbon Commission on Defense Management.
4/4/86, Note to Packard from his secretary, Maddie Schneider, saying that she had talked to representatives of the Foundation , and they suggest three choices of format for the discussion – should Packard decide to accept. They recommend a presentation in the morning, (attended by about 100, including members from the administration, business, Congress, the media, and the Foundation)followed by further discussion over lunch with about a dozen attendees – Foundation members, congressional members and staff, and key administration representatives.
4/9/86, Copy of a letter from Packard to Mr. Edwin J. Feulner accepting his invitation.
Undated, Two typewritten sheets giving schedule for the meeting
Undated, Typewritten sheet listing projected guests
Undated, Typewritten sheet listing guests of honor
Box 5, Folder 14 – General Speeches
May 15, 1986, Statement before the Committee on Science and Technology, U.S. House of Representatives, Washington D.C.
5/15/86, Copy of typewritten text of Packard’s speech
Packard thanks the Committee for the opportunity to discuss the findings and recommendations of the White House Science council’s Panel on the Health of U.S. Colleges and Universities, and says he has had the “privilege and pleasure of chairing the Panel since its inception.”
He says they talked to more than 100 universities and over 40 private sector organizations. While these discussions bolstered their belief that America still enjoys a strong scientific and technological enterprise, Packard says a number of disturbing problems and questions concerning both the short and long-term health of this area were raised.
“In our Report,” he says, “we address these problems and questions and make specific recommendations directed to each of the federal government, the universities and private industry. Although we recognize that fully implementing many of these recommendations will be difficult, particularly given the continuing need to bring Federal spending under control, we are confident their implementation over time will preserve the health and vitality of a higher education system that has served this nation well in the past, and will be even more critical in the future as the worldwide technological competition becomes increasingly intense.”
“If we are to meet this competitiveness challenge, it is critical that we preserve and expand America’s science and technology base. The President’s Commission underlined the importance of science and technology to this country’s ability to compete when it noted that ‘Without doubt, [technology] has been our strongest competitive advantage. Innovation has created whole new industries and the renewal of existing ones. State-of-the-art products have commanded premium prices in world markets, and technological advances have spurred productivity gains. Thus, America owes much of its standard of living to U.S. pre-eminence in technology.’
“In the United States, we depend upon our universities and colleges to educate our scientists, mathematicians and engineers and to perform the basic research necessary to our technological enterprise.”
Historically, the United States’ commitment to maintaining a strong, stable higher education system dedicated to creative scientific inquiry and exploration has permitted industry to acquire the talent and technologies necessary to carrying out these chores. Yet there are worrisome signs that colleges and universities may not be able to play this role as sell in the future as they have in the past.”
He outlines a few of these signs:
- “The costs of research continues to increase, in most cases substantially faster than the ability of university revenues to keep pace with them.” Some 50% faster than the inflation rate, he says.
- “Scientific and engineering faculty salaries remain uncompetitive with those of private industry. As a result, fully one-tenth of the nation’s engineering faculty positions are vacant. In critical fields like electrical engineering and computer science, some universities report half their positions unfilled.
- “Universities are not producing enough new scientists and engineers. For instance, in 1983, the American Electronics Association projected that 200,000 new positions for electrical engineers and computer scientists would be created over the 5-year period ending in 1987 – more than twice the number our universities will have graduated during that time.
- Due to long years of forced neglect, university physical plant is decaying and scientific equipment is becoming obsolete. According to the Association of American Universities, the median age of instrumentation in our nation’s universities is twice that used in industrial laboratories. Universities are unable to upgrade this plant and equipment at a fast enough rate to ensure adequate future levels of scientific productivity.
“In response to these needs and problems the Panel produced a set of specific recommendations aimed at ensuring that colleges and universities would be able to meet the scientific and technological demands that will be placed on them over the next several years.”
Packard discusses three of the recommendations:
“First, the Federal Government must increase its commitment to the colleges and universities. There simply must be a greater and more focused Federal R&D effort.
“Second, the government should provide more realistic accounting and reimbursement of university research costs. The Panel recommended that the Federal Government fully fund all of the research it supports, rather than demanding an arbitrary level of ‘cost sharing,’ since, in fact, universities’ continuing support of personnel, support of students and provision of an environment conducive to the conduct of research and training in themselves constitute a very real and significant cost contribution.”
“Finally, and most importantly, the Federal Government should stop treating its basic research funding as an exercise in procurement and start treating it as what it is – a long-term investment. This change in approach would greatly enhance the efficiency and creativeness of university research, while at the same time eliminating unnecessary and burdensome administrative expenses that consume increasing percentages of every research dollar. Key elements of this investment approach that the Panel recommended be put in place are stability of funding, greater discretion on the part of researchers in the use of their research funds, and greater use by the government of block grants or contracts to support groups of investigators having shared research interests.”
“The Panel believes that if the U.S. Government, industry and higher education institutions undertake these and other steps cited in the Report, the United States will be able to restore and protect its most important scientific and technological resources – that is, its colleges and universities. In so doing, the United States not only will ensure that it remains on the cutting edge of science and technology, but also will help ensure that American industry remains competitive far into the future.
“In closing, let me emphasize again that, where recommendations urge additional funding, we recognize that fiscal constraints require that many of these objectives be long-term rather than immediate goals. However, we urge that the government at least start –now – down this increasingly important path of preserving the health of America’s higher education institutions. In this way our colleges and universities, so vital to building and expanding the nation’s scientific and technological base, will remain as effective in the future as they are today– the continuing envy of the rest of the world.
“Thank you very much. I will be happy t answer any questions you might have.”
There are no other documents in the folder.
Box 5, Folder 14A – General Speeches
May 21, 1986, Address to Amereican Electronics Association on the Presidents’s Blue Ribbon Commission of Defense Management
Since this speech is very similar to others on the same subject it is not included here. See listing March 26, 1986 for complete list of speeches covering work of the Blue Ribbon Commission.
Box 5, Folder 14B – General Speeches
June 24, 1986, Address on work of the President’s Blue Ribbon Commission, at Symposium on Defense Acquisition Issues sponsored by the National Defense University, Washington D.C.
6/24/86, Copy of typewritten text of speech
This speech is very similar to that given to the AEA on July 24, 1986 so it is not summarized here. See speech March 26, 1986 for complete list of speeches covering work of the Commission
5/12/86, Letter to Packard from Lt. General Richard D. Lawrence inviting him to speak at their symposium. He says the audience will include corporate executives from throughout the defense industry, as well as key leaders from the executive and legislative sides of the defense establishment.
Undated, Copy of printed pamphlet describing the National Defense University Foundation.
Box 5, Folder 15 – General Speeches
July 24, 1986, Remarks to American Electronics Association, Palo Alto, CA
At this meeting – an Executive Briefing of the American Electronics Association’s Northern California Council, Packard continues to report on the recommendations made by the President’s Commission on Defense Management – this time following issuance of the final report. See speech March 26, 1986 for list of speeches covering work of the Commission.
7/24/86, Copy of typewritten text of Packard’s speech
Packard explains that the Commission [of which he was the Chairman] had its last meeting in June. They had met with the President [Reagan] who asked that they return in six months to give him a progress report on implementation.
Packard says he was very pleased that the President asked for a progress report on implementation. “I was well aware,” he says, “that this was not the first commission to study and make recommendations on the management of the Defense Department. There have been at least thirty reports and studies of defense management since 1958. Not much has come of any of them.”
In accepting chairmanship of the Commission Packard says he thought the environment was ripe for change. “This turned out to be true,” he says.
“In April, the President directed the Defense Department to implement our recommendations not requiring legislative action, and the Congress is moving ahead in three areas that do require legislation.
Packard reviews the Commission’s Interim Report which had been submitted to the President on February 28, 1986, In this Report Packard says that the Commission “made a number of recommendations relating to the organization and the responsibilities of the Office of the Joint Chiefs of Staff.
In making these recommendations, the Commission had two objectives in mind. First to improve the command of the United States military forces deployed around the world under the Unified Commanders, including both the established worldwide commands and those assigned for specific actions, such as Lebanon and Grenada.
Second, the Commission’s recommendations were designed to give the Chairman of the Joint Chiefs and the Unified Commanders a stronger role in the process of deciding what new weapons should be acquired and in distributing the resources available among the Military Departments. An important part of these recommendations involved developing a more effective long-range planning process to keep the overall military plans within limits of the financial resources that are likely to be provided by the Congress for the period of at least five years ahead.”
“Packard says that the practices that have evolved since the last major reorganization of the Department of Defense in 1958 have become very wasteful of our national resources. They have all but destroyed the one clear advantage the United States has over the Soviet Union: Technical Superiority.
“U.S. technology is clearly ahead of the Soviet Union in every area of military importance. The process of developing and deploying weapons utilizing our technical advantage has become so burdened with what can only be described as garbage that it now requires ten to fifteen years to deploy a major new high technology weapons system. This process should take no more than five years.
Packard gives two examples: the Polaris system which took five years to deploy over the period 1955-1960, compared to the Trident system which took sixteen years from 1972 to 1988. Another example which he describes is the Minuteman program which took 4 ½ years to deploy, compared to the MX system which is eight years along and will need several more years before a “meager 50 missiles” are deployed.
Packard says there are several reasons for the “disastrous deterioration of the United States military acquisition system.
“The first is poor decisions at the beginning of a new weapons program and the failure to develop a strong consensus to support those decisions that are made.
“The second is adding a plethora of unnecessary baggage to these important programs. Congress imposes much of the unnecessary baggage by legislating many detailed requirements. The Department of Defense makes the situation worse by issuing and enforcing rules that all too often go beyond the intent of the Congress.
“The new structure of the Joint Chiefs can make a major contribution to getting the whole acquisition process back on the right track.
“First, the decision to proceed with the development and deployment of a proposed new weapons should be determined by the contribution that weapons will make to the unified military capability of U.S. forces, rather than by the desires of the Military Departments.
“Second, stability can be greatly improved by assuring that all of the new weapons systems authorized can be properly funded for efficient development and production with the resources that are likely to be available for at least five years in the future.
“Better decisions at the beginning and better long-range planning are both essential steps to better defense acquisition management.
“A different philosophy of management must be introduced throughout the system. The sheer magnitude and complexity of a program to develop a modern high technology system put these programs beyond the ability of one man alone to plan and implement the work.
“These programs require a team of people working to achieve the basic objectives of the program, unfettered by laws and regulations that have little or nothing to do with the main job of designing and building the system.
“Another major recommendation of the Commission is the establishment of the position of an Under Secretary of Defense for Acquisition as a level II Presidential appointee. He will have the responsibility for establishing the overall policy in all of the acquisition areas in the Department of Defense. In many ways, this is the most important acquisition job in the whole world, and right now there is no one in charge full time.
“The final area requiring legislation is the establishment of a unified transportation system. This is being worked on now and will require more time, but I am confident that it will happen.
Packard says the Commissions third report on the National Security Planning and Budgeting section in the Interim Report was released June 23.
“This report is an aid to assist the Defense Department which has started work on the first two-year budget scheduled to go to the Hill in January for consideration by the Congress.
“There are no guarantees that Congress will adopt this budget which will be for FY 88-89, but in my view it is imperative that there be more stability and long-range planning in our budget and planning process starting with the President, and continuing with the Defense Department and in the Congress.”
“Much more is going to be required besides passing legislation to make our recommendations work. It will require a new way of doing business and a better partnership between all the members of the defense establishment. This is a major theme in all our reports.
“It means the Executive Branch needs to chart a better course for our national defense; the Defense Department needs to give better advice to the President to assist him in doing this, and in matters of acquisition the department needs to conduct its business more like a successful commercial enterprise.
“The Congress needs to make some changes in the way it operates as well. There is too much lobbying and pork-barrel politics which probably contributes as much to the instability in the Department as anything else. Granted, our democratic form of government provides some unique demands on the system, but the whole process has just gotten out of hand. And finally, the defense industry needs to be a part of this new partnership as well.
“Industry and defense have been playing games with each other. This was going on even when I was Deputy Secretary of Defense fifteen years ago.
“As a result, public trust in our defense effort has eroded, and more often than not, industry is seen as the villain. Whether this is fair or undeserved is irrelevant, because it is absolutely vital that we get away from this police-sate attitude. A healthy government-industry relationship must be restored. This country relies heavily on the private sector to carry out weapon system development which could not be done without private industry.”
Packard says the Commission’s final report includes specific recommendations to industry. “The thrust of these recommendations is that industry needs to be self-governing rather than relying on regulation by the government.
“Doing business with the government is different from doing business in the commercial marketplace. The defense industry has a higher accountability to the taxpayers, the Congress and the men and women in uniform whose lives often depend on their products.
“Business with the government is different in other ways as well. In commercial business, for example, profits and overhead for different product lines can be transferred from account to account, and it is perfectly legal and sensible. However, this is illegal in defense accounting and is an open invitation to hordes of auditors and investigators.
“These are lessons the defense industry has learned, and they have caused a lot of heartaches and hard feelings on all sides. However, I am convinced that a new page will be turned over.
“The key to this effort is to make it the responsibility of every individual in the industry and the department to know what good behavior is, what is expected of them, and to have the opportunity to report anything they see without danger of retribution. We need to get the entire defense establishment dedicated to a higher level of performance.
Packard says, “Twenty-four Chief Executive Officers have developed a set of Defense Industry Initiatives on Business Ethics and Conduct to do precisely this. The initiatives will be made public with the release of our final report. I feel confident that the entire defense industry is going to adopt these initiatives. I think you will find that this will put a whole new spirit of enterprise into your business.
“The higher level of performance cannot be legislated or mandated. It must come from a spirit of enthusiasm and dedication from every individual in the work place – or centers of excellence.
“These Centers of Excellence flourish in environments where individuals can identify with a team or unit, and take pride in their work. Centers of Excellence encourage entrepreneurial initiatives and give each person the necessary authority and responsibility in a management environment where policies are established centrally and implemented through a highly decentralized management structure. [He is describing the typical HP management structure.]
“This management technique is common in the business world and has been used to a limited extent by the Department of Defense in its Model Installations Program.
“This program has been very successful – base personnel have found innovative ways to accomplish their missions while saving money and improving the quality of goods and services.”
“We have recommended that the Chairman of the Joint Chiefs of Staff have increased authority and responsibility. This is another example of where there should be a Center of Excellence in the department committed to the job of providing the best, non-parochial military advice possible to the President.
“Centers of Excellence need to be established not only in the department, but also within the entire Defense establishment to include contractors and auditors. I am pleased to report that a first step in that direction has been taken by industry.
“Our Final Report contains some recommendations on data rights and the revolving door issues. The Defense Department and Congress have gone too far on both these issues, and a proper balance needs to be restored.
“Before I close, I want to spend a few minutes discussing our recommendations which will have a direct effect on some of you here today.
“The Commission was established in part because of the spare parts horror stories. We looked at these cases, but we concluded that other more serious systemic problems in the acquisition process cost billions of dollars.
“Many of you are familiar with these problems which plague the defense acquisition system, such as goldplating, overarching regulations and an inflexible bureaucracy. There are other serious problems that severely erode our ability as a nation to defend ourselves. Today it takes 8 to 10 years from start to finish to get a new weapons system in the field, and by that time the technology is out of date.
We must keep our technological edge both in the laboratory, and in the field where this ‘edge’ is deployed. Our ability to mobilize our industrial base in the event of a national emergency is also seriously threatened because of our encumbered defense acquisition system.
“The new Under Secretary [of Defense for Acquisitions] is the key to many of our other recommendations. Getting the right person in that position is critical to making the other recommendations fall into place correctly.
“We have also specified a streamlined chain of command in the acquisition organization with only four layers: The new Under Secretary, a service acquisition executive, a program executive officer and the program manager. This streamlined system will mean fewer people and bureaucratic layers, and a more responsive system.”
“We have recommended that the weapon system decision structure be changed so that program initiation, full-scale development and production decisions are made by the Joint Requirements and Management Board. This Board, to be co-chaired by the new Under Secretary and Vice Chairman of the Joint Chiefs of Staff, would change the focus of the decisions to concentrate more on requirements and operational suitability.
“We have recommended a process with greater emphasis on the early stages of weapons development which picks the right system early in the process and uses more prototypes for adequate developmental and operational testing. The idea is to evaluate a system using hardware instead of paperwork.
“The most important decisions are those made at the front end of the acquisition process. This is when the analysis is done to determine if the technology is really adequate and can be converted into a useful military capability. If this is done correctly, with the first 3 to 5% of the expenditures, you will be better able to stabilize costs and assure better performance further along in the program’s life span. The Services will retain the responsibility for all new major weapons systems from the beginning of full-scale development through production and deployment.
“The new Under Secretary will have the authority to establish appropriate policies for this part of the process. Only when it is determined that program uncertainties have been addressed and dealt with adequately, would Congress be asked to authorize high rate production and make major commitments of funding. The guiding principal of this new approach is ‘Fly and know how much it will cost before you buy.’
“In addition to recommending a streamlined acquisition organization and a better balance of weapon system cost and performance, we have also proposed increased use of baselining, improving procurement competition and expanding the use of commercial products.
“A perfect example of how money can be saved by increasing the use of commercial products is in the area of integrated circuits. The Defense Department uses $2 billion a year worth of integrated circuits. The mil spec integrated circuits cost anywhere from four or five to ten times as much as the equivalent commercial products. And, the quality and reliability is not as good. This one use of commercial products can save $10 billion a year or more and make more reliable equipment.
“Although our recommendations are being accepted and acted on in an encouraging way, it will require some very strong follow up work to achieve any real progress. The Defense Department bureaucracy has a way of accepting such recommendations with lip service yet nothing changes. I sense a broad interest among a great many organizations in some strong and continuing follow up activity. I am pleased about the active interest of the AEA in this important issue. Your continued active support of the Commissions recommendations will help in finally achieving much needed improvement in the management of the Department of Defense.”
7/17/86, Letter to Packard from Alice Zatarain Member Services Manager, AEA, thanking him for agreeing to address the AEA meeting, and discussing details of the luncheon.
7/25/86, Newspaper clipping covering the speech, clipped from the Times Tribune
Box 5, Folder 16 – General Speeches
July 25, 1986, Lakeside Talk, Report on President’s Commission on Defense Management, Bohemian Grove, San Francisco, CA
See speech March 26, 1986 for complete list of speeches covering work of the Commission
7/25/86, Copy of typewritten text of Packard’s speech
Packard starts with a short history of the Defense Department, beginning with its inception by legislation in 1947. “Until that time,” he says, “the U.S. military establishment consisted of the Secretary of War, established in 1788, and the Secretary of the Navy, established in 1798. The Marines were established in 1775 and were under the Secretary of the Navy.
“By the end of World War II, air power had been established as a major military force and the Army [Air] Corps had become a very important part of the Army.
“The experience of World War II demonstrated that all future military operations were likely to be joint or unified operations of the four services. This view was strongly held by General Marshall and General Eisenhower and was a major consideration in the military reorganization Act of 1947. This act established the Defense Department, and a separate Air Corps and brought the three military departments we have today under the Secretary of Defense. The Secretary of Defense was given limited power and the 1950s were characterized by strong service influence on defense policy and intense competition among the services.
“During President Eisenhower’s second term he became quite concerned about this excessive service influence. He proposed to put a military chief over the services, reduce their influence and strengthen the hand of the Secretary of Defense.
“Legislation was passed in 1958 to make some but not all of the changes Eisenhower recommended. The authority of the Secretary of Defense was strengthened, the power of the service secretaries was reduced, the Joint Chiefs were excluded from any executive function in the assignment of military missions, but there was no effective military authority established to control the services.
“Secretary McNamara brought to the office of the Secretary of Defense a very strong team and he took charge of the Department. The military services, however, never fully accepted Secretary McNamara’s authority. When I joined Mel Laird at the Pentagon in 1969, the depth of resentment of the McNamara policies by the professional military people was still very strong and very evident.
“During this period the Joint Chiefs were asked to prepare plans for the military forces they thought would be needed to deal with the worldwide national security interests of the United States. These plans were essentially the combined with lists of the four services. These plans would require budgets substantially higher than likely to be provided by the Congress. Secretary McNamara would then prepare his own plans and budgets and take credit for the great savings he had achieved.
“This procedure gave strong incentives to the services to find ways to get their programs into the budget and encouraged lobbying efforts by industry and log rolling practices in the Congress. The most serious problems resulted from low estimates on the cost of a new weapons program to get it into the budget. The real costs which became apparent later built up a large bow wave of cost in future budget requirements. To keep within funding as it became available in future years, programs had to be stretched out or cancelled. In effect, there has been no effective long range planning in the systems since 1958 and tens of billions of dollars have been wasted every year because more programs are started than can be funded on an efficient basis.
“President Reagan took office in 1980 with a strong commitment to strengthen our military forces and to eliminate fraud and waste from the military establishment.
“Secretary Weinberger had a good understanding of some of the basic problems I have described when he took office. He established a good rapport with the joint Chiefs. He gave the unified commanders a larger role in resource allocation and he gave service secretaries and their services a stronger role. From FT1981 until FY1985 he obtained substantial increases in the defense budget from the Congress. Over this period there was about a 50% increase in the defense budget in constant dollars. This gained for him the enthusiastic support of the professional military people and he achieved a quantum increase in the strength and capability of U.S. military forces.
“I believe Cap[Weinberger] had every right to be pleased with what he had accomplished in his first four years. There was, as usual, criticism of waste. There was, however, a feeling that the country had not received its money’s worth for this substantial build up in our defense budget. This was not easy to evaluate because considerable money had gone to improve the readiness and sustainability of our deployed forces – factors that are not obvious to the untrained observer.
“Other problems caused concern. The U.S. operations in Lebanon indicated serious problems in our command control capability. Grenada raised other questions that troubled the Congress and the public.
“The actions taken by the Secretary to deal with fraud and waste were a sharp departure from long established policy in the relationship between the Department and the defense industry.
“About 1982 the Congress established legislation to assign Inspector Generals to the auditing problems with the defense industry as well as problems in the Department. The Inspector General has authority to bring criminal indictment and to assess penalties for actions it finds in violation. Questionable charges were investigated by the Inspector Generals assigned to industry and what had for decades been a matter for negotiation with the contracting officer became a legal violation. Unfortunately, this was done without any notice or discussion with the defense industry.
“The contracting people in the Department were also called to task for not adhering strictly to the rules. A great deal of real fraud was uncovered at military supply depots around the country as well as in the industry.
“What had been done by Cap in his first four years in a real contribution to the military strength of our country began to fall apart in 1984, and by 1985 had lost credibility with the Congress and with the general public. Both the Department and the industry were in a state of crisis.”
Having brought his discussion to this point, Packard moves on to the subject of the Commission which he headed.
“There had been some discussion about the appointment of a commission to deal with this problem initiated by Republican members of Congress. Cap was not very enthusiastic unless the commission would agree to convince the Congress and the general public that he had, in fact, done an excellent job and there was no need for any substantive change in the management of the Department.
“I had been aware of the discussion about the pressure on the President to appoint a commission to deal with this problem and I was not entirely surprised when the President called me and asked me to take on the job. I agreed to do so because I sensed that this was a very serious problem, yet might be a unique window of opportunity to make a substantial improvement in the procedures in the Defense Department management.”
Packard says he was able to select the majority of the members of the Commission – and he says he received strong support from the White House. “Some of the Commissioners were doubtful at the beginning that the Commission work would be either interesting or useful,” he says. However he found that after a few meetings, “all of the Commissioners became excited about the challenge we had accepted and our work was a real team effort from then on and every Commissioner made a substantial contribution to our work.” He adds that the report ended with the unanimous support of all of the Commissioners.
“I had been aware,” he says, “of the discussions which had been going on for considerable time about the role of the JCS and about the command control problems of the military establishment. I saw this as an opportunity to bring better professional military advice to the make up of our overall forces, to the selection of new weapons programs, and to the allocation of resources among the services. If this could be done I believed it would greatly increase our ability to undertake more effective unified military operations.
“The Marines were not very enthusiastic about unified military operations. General P. X. Kelley, the Marine Commandant, testified quoting one of his predecessors. He said it was all right to work with the other services but to expect a man to love the other services as he loves his own is just like asking a man to love all of his girl friends just as much as he loves his wife.
“It became very clear as we began to realize what a broad range of issues we were expected to deal with that we had a real problem in determining whether our recommendations should be limited to broad strategic recommendations or whether we should try to describe how our recommendations should be implemented.
After discussing this subject, Packard says they decided to develop a “grand strategy about how to improve the management of our national defense establishment,” – and they also provided “some specific guidelines as to how this [could] be done.”
“Now I want to say one more thing before I talk about our specific recommendations.
“There have been at least 30 separate reports by commissions and other knowledgeable groups about how to improve the management of the Defense Department since 1958. None of them have had any significant impact on the management of the DOD. There is, therefore, no evidence from the history of these attempts that our commission will have any useful influence toward improvement.
“I believe that the recommendations we have made have a good chance of breaking traditional behavior in the DOD and the DOD can indeed move to a higher plane of performance in its all important role of preserving peace and the freedom of people in this troubled world.
“The Commission had its last meeting in June [1986], and we issued our final report at the end of that month. At our last session we met with the President, and he asked us to come back in six months to give him a progress report on the implementation of our recommendations.
“The first two recommendations, National Security Planning and Budgeting, and Military Organization and Command, require changes in the structure of the JCS. These changes are consistent with both the Senate and House legislation and will be put into effect this year.
“Our second report titled ‘A Formula for Action,’ makes detailed recommendations on the Defense Department system for developing and acquiring new weapons. It was done by a sub committee of the Commission chaired by Bill Perry who has served in DOD as the Director of Research.
“Our third report was done under the leadership of Vince Puritano who had been Comptroller of DOD. It is titled ‘National Security Planning and Budgeting’ and it is intended to help DOD implement our recommendations on this subject.
“Our fourth report is titled ‘Conduct and Accountability’ and it makes a number of recommendations to both the DOD and the defense industry to improve their working relationship.
“We say in this report – ‘Our study of defense management compels us to conclude that nothing merits greater concern than the unnecessarily troubled relationship between the defense industry and the government.’ The United States relies on private industry for its military equipment. It follows that the vigor and the capability of the industry is indispensable to the successful defense of America and the security of our people.
“It is a long complex business with 60,000 prime contractors and hundreds of thousands of other suppliers and sub-contractors. Contracts worth $164 billion were placed in 1985, seventy percent of which went to 100 large firms. An average of 15,000 contracts are placed every day.
“It is not surprising that in an enterprise of this size fraud and waste can be found. While fraud is a serious problem it is not as costly as many Americans believe. It is, as far as we could determine, less than 1% of total expenditures.
“In a public survey we found that Americans believe that half the defense budget is lost to fraud and waste and that most of this is simply pocketed by defense contractors.
“We recommend as the best way to deal with this problem a greatly expanded program of self discipline, the establishment and self enforcement of codes of ethics, better auditing by both the contractors and the auditing profession.
“The Commission stated in its first report that:
Management and employees of companies that contract with the Defense Department assume unique and compelling obligations to the people in our armed forces, the American taxpayer and our nation. They must apply (and be perceived as applying) the highest standards of business ethics and conduct.
“I am very pleased that the defense industry has enthusiastically accepted our recommendations on this important matter. The industry leaders have voluntarily undertaken to expand and strengthen the enforcement of codes of ethics and work is under way to improve the auditing procedures of the defense industry.
“I believe there will be real improvement in the industry and in the Defense Department as the recommendations of the Commission are put into effect.
“I want to note that this will probably not change the public perception quickly. The politicians will continue to use DOD as the whipping boy. This is nothing new .In the 1930s the industry, although relatively small at the time, was characterized as ‘merchants of death’. Harry Truman gained public visibility by criticizing the defense industry. It is not always that way. In both World War I and II, the American defense industry was ‘the savior of democracy’.
“Whatever the public view and the pronouncement of the politicians, the American defense industry produces the best weapons in the world. We must keep the industry healthy and re-establish a better relationship between DOD and the industry.”
Saying that he has taken more time than he should have on the DOD/industry problems, Packard moves on to others which he says are “much more important”.
“We note in our interim report that – ‘Today, there is no national system whereby the Executive Branch and the Congress reach coherent and enduring agreement on national military strategy, the forces to carry it out, and the funding that should be provided – in light of the overall economy and competing claims on national resources.”
“There is simply no effective long range planning in the system and the decisions on what weapons to produce are distorted by service competition, contractors lobbying the Congress and far too much pork barrel log rolling by members of the Congress. These practices result in tens of billions of dollars of waste and are therefore much more serious than the waste resulting from fraud which is in the range of tens of millions of dollars a year.
“To improve the defense management we make a number of important recommendations.
“First: Military forces should be planned so that our unified military capability can be optimized to support our overall world wide national security objectives.
“Second: Military force should be planned under a five year fiscal plan agreed to by the Administration and at least tacitly supported by the Congress.
“Third: Military budgets should be on a two year cycle rather than one year.
“Fourth: The Chairman of the JCS should have a larger role in planning military forces, the ability of the forces to sustain their action over an appropriate period of time and the level and type of modernization that should be provided for our forces with new R&D and acquisition programs.
“Fifth: The unified commanders who are the users of the forces should have a larger role in the budget development and in decisions about what new weapons to acquire.
“I do not have time today to go into more detail about our recommendations. In the foreword to our Final Report I emphasized the need to establish and support strong centralized policies to achieve the objective of the Department. These policies should be long in range, and should have broad support.
“The Administration has given strong support to our recommendation. It is a big bureaucracy to deal with and it is very resistant to change.
“Congress causes many of the problems. During the defense budget review in 1985 Congress made over 1800 changes and directed the Department to conduct 458 studies from the feasibility of selling lamb products in commissaries to the status of retirement benefits for the Philippine Scouts.
“We hope our recommendations will encourage the Congress to direct their attention to the larger issues of National military strategy and the overall capability of our military forces rather than the line item detail.
“We realize that Congressional log rolling can not be stopped, but perhaps it can be reduced somewhat.,
“I have no illusions that even if all of the Commission’s recommendations are adopted the problems of defense management will be eliminated.
“Spending a year on this subject has impressed me again that defense management is a large and complex endeavor. I am convinced there is no possibility whatever for a complete reorganization of the entire system as some critics have suggested. I do believe that significant improvement can result from the Commission’s recommendations. I hope this will have your support.”
7/28/86, Letter to Packard from H. Leonard Richardson, Chairman, Lakeside Talk Committee, thanking him for speaking to Bohemian Club members
8/5/86, Letter to Packard from Wm David Smullin asking for a copy of Packard’s speech
9/5/86, Copy of a letter from Packard to Dr. Roger Heyns, The Hewlett Foundation, sending a copy of his speech
Box 5, Folder 17 – General Speeches
September 10, 1986, President’s Commission of Defense Management, Commonwealth Club, San Francisco, CA
See speech dated March 26, 1986 for complete list of speeches covering work of the Commission
9/10/86, Copy of the text of Packard’s speech
Packard says he wants to begin with a brief “sketch” of the history of the Department of Defense, “which,” he says, “was established by legislation in 1947. Until that time the U.S. military establishment consisted of the War Department under the Secretary of War, established in 1788, and the Navy Department under the Secretary of the Navy, established in 1798. The Marines had been established in 1775 and were under the Secretary of the Navy.
“Prior to World War II the United States had a limited national security problem. We were not threatened by land forces and had no need for a large standing army. We did need to control the seas around our continent and the Navy with its Marine Corps provided our main military capability ready for action. The Navy and the Marines had a long, proud tradition.
“In light of this tradition it is not surprising that the Navy and Marines were opposed to unification with the other services in the negotiations that established the Department of Defense in 1947, and have not been very enthusiastic about unification ever since.
“By the end of World War II, air power had been established as a major military force and the Army Air Corps had become a very important part of the Army.
The experience of World War II indicated that all future major military operations were likely to be joint or unified operations of the four services. This view was strongly held by General Marshall and General Eisenhower and was a major consideration in the Military Reorganization Act of 1947. This act established the Defense Department, and a separate air corps and brought the three military departments we have today under the Secretary of Defense. The Secretary of Defense was given limited power and the 1950s were characterized by strong service influence on defense policy and intense competition among the services.
“During President Eisenhower’s second term he became quite concerned about this excessive service influence. He proposed to put a military chief over the services, reduce their influence and strengthen the hand of the Secretary of Defense.
“Legislation was passed in 1958 to make some but not all of the changes Eisenhower recommended. The authority of the Secretary of Defense was strengthened, the power of the service secretaries was reduced, the Joint Chiefs were excluded from any executive function in the assignment of military missions, but there was no effective military authority established to control the services. The fact that his recommendations were not completely implemented in the Reorganization Act of 1958 is what caused President Eisenhower to warn the country about the danger of the ‘Military Industrial Complex’ in his farewell address.
“The Joint Chiefs organization was intended to be a mechanism for developing our overall military strategy and planning the forces to support that strategy. Because its recommendations were the joint recommendations of the four chiefs, they generally involved an accommodation of the views of the four services and its recommendations were thus almost always at the level of the lowest common denominator.
“Secretary McNamara brought to the office of the Secretary of Defense a very strong team and he took charge of the Department. The military services, however, never fully accepted Secretary McNamara’s authority. When I joined Mel Laird at the Pentagon in 1969, the depth of resentment of the McNamara policies by the professional military people was still very strong and very evident.
“During the McNamara regime the Joint Chiefs were asked to prepare plans for the military forces they thought would be needed to deal with the worldwide national security interests of the United States. These plans were essentially the combined wish lists of the four services. These plans would require budgets substantially higher than would be provided by the Congress. Secretary McNamara would then prepare his own plans and budgets and take credit for the great savings he had achieved.
“This procedure gave strong incentives to the services to find ways to get their programs into the budget and encouraged lobbying efforts by industry and log rolling practices in the Congress. The most serious problems resulted from low estimates on the cost of a new weapons program to get it into the budget. The real costs which became apparent later built up a large bow wave of cost in future budget requirements. To keep within funding as it became available in future years, programs had to be stretched out or cancelled. Thus, there has been no effective long range planning in the systems since 1958. Tens of billions of dollars have been wasted every year because more programs have been started than can be funded on an efficient basis. This is by far the most important problem dealt with by the Commission.
“President Reagan took office in 1980 with a strong commitment to strengthen our military forces and to eliminate fraud and waste from the military establishment.
“Secretary Weinberger understood some of the basic problems I have described when he took office. He established a good rapport with the Joint Chiefs. He gave the unified commanders a larger role in resources allocation and thus supported more effective unified operations. However, he gave service Secretaries and their services a stronger role. The better cooperation that he brought about among the Joint Chiefs and the unified commanders resulted in some improvement in unified operations. The more freedom he gave the service Secretaries badly fragmented policies that should have been unified. From FY1981 until FY1985 he obtained substantial increases in the defense budget from the Congress.
“Over this period there was about a 50% increase in the defense budget in constant dollars. This gained for him the enthusiastic support of the professional military people and he achieved a quantum increase in the strength and capability of U.S. military forces.
“In 1982 the Congress established legislation to assign Inspector Generals to the auditing problems and other problems with the defense industry as well as problems in the Department. The Inspector General had authority to bring criminal indictment and to assess penalties for actions it found in violation. Questionable charges were investigated by the Inspector Generals assigned to industry. What had for decades been matters which were resolved by negotiation with the contracting officers became legal violations. Unfortunately, this was done without any notice or discussion with the defense industry.
“The contracting people in the Department were also called to task for not adhering strictly to the rules. A great deal of real fraud was uncovered at military supply depots around the country as well as in the industry.
“It was the Inspector Generals’ actions that brought to light the high priced spare parts and numerous examples of fraud and waste in the Department and in the industry.
“These cases of fraud [and] waste provided headline news and political hay for members of Congress to hold up a high priced toilet seat before the TV camera and propose some legislation to solve the problem.
“Secretary Weinberger should have been given credit by the public and the Congress for dealing effectively with these problems of fraud and waste. Instead, he was blamed for these problems even though they existed long before he took office.
“What had been done by Cap [Weinberger] in his first four years in a real contribution to the military strength of our country began to fall apart in 1984, and by 1985 the DOD and the industry had lost credibility with the Congress and with the general public. Both the Department and the industry were in a state of crises.
Having provided this historical background, Packard turns to the work of the President’s Commission on Defense Management which he was asked to chair in June, 1985.
“I had been aware,” he says, “of the discussions which had been going on over the last several years about the role of the JCS and about the command control problems of the military establishment. Because of this I thought the Commission had an opportunity to make a fundamental change in the role of the JCS. If we could do this, it would bring better professional military advice to the make up of our overall forces, to the selection of new weapons programs, and to the allocation of resources among the services. This change in the role of the JCS could strengthen our ability to mount unified military operations and provide an effective procedure for long range planning.”
As the Commission began its deliberations, Packard says “It became very clear…what a broad range of issues we were expected to deal with [and] that we had a serious problem in determining whether our recommendations should be limited to broad strategic recommendations or whether we should try to describe how our recommendations should be implemented.
In the end, Packard says they tried to develop “a grand strategy about how to improve the management of our national defense establishment”, but they also provided “some specific guidelines as to how this can be done.
“The Commission had its last meeting in June [1986] and we issued our Final Report at the end of that month. At our last session we met with the President [Reagan] and he asked us to come back in six months to give him a progress report on the implementation of our recommendations.
“The Commission issued five reports. Our first report titled, ‘An Interim Report to the President’, dated February 28, 1986, covers most of our major recommendations. This first report is our grand strategy and makes most of our major recommendations. The other reports provide detail to support and help implement our major recommendations.[See also speeches dated May 1, 1986, July 24, 1986, and July 25, 1986]
“Our second report titled, ‘A Formula for Action’, makes detailed recommendations to improve the Defense Department system for developing and acquiring new weapons. It was done by a subcommittee of the Commission chaired by Bill Perry, who had served in DOD as the Director of Research.
“Our third report was done under the leadership of Vince Puritano, who had been Comptroller of DOD. It is titled, ‘National Security Planning and Budgeting’, and it is intended to help DOD implement our recommendations on this subject. It clearly indicates that our recommendations in this area can and should be accomplished with a smaller bureaucracy.
“Our fourth report titled, ‘Conduct and Accountability”, makes a number of recommendations to both the DOD and the defense industry to improve their working relationship.
“Our Final Report entitled, ‘A quest for Excellence in Defense Management’, is a summary of our other reports with a few additional specific recommendations.
“We note in our Interim Report that – ‘Today, there is no national system whereby the Executive Branch and the Congress reach coherent and enduring agreement on national military strategy, the forces to carry it out, and the funding that should be provided – in light of the overall economy and competing claims on national resources’.
“As I have said, there has been no effective long range planning in the system and the decisions on what weapons to produce are distorted by service competition, contractors lobbying the Congress and far too much pork barrel log rolling by members of the Congress. These practices result in tens of billions of dollars of waste and are therefore far more serious than the waste resulting from fraud, which is in the range of tens of millions of dollars a year.”
Packard says the Commission’s recommendations on this last issue are: [quotes from report]
‘To institutionalize, expand, and link a series of critical Presidential determinations, we recommend a process that would operate in substance as follows:
‘The National Security council would develop and direct a national security planning process for the President that revises current national security decisions directives as appropriate and that provides to the Secretary of Defense Presidential guidance that includes:
- A statement of national security objectives;
- A statement of priorities among national security objectives;
- A statement of major defense policies;
- Provisional five-year defense budget levels , with the advice and assistance of the Office of Management and Budget, to give focus to the development of a fiscally constrained national military strategy. Such budget levels would reflect competing demands on the Federal Budget as well as projections of gross national product and revenues; and
- Direction to construct a proposed national military strategy and strategy options for Presidential decision in time to guide development of the first biennial defense budget for fiscal years 1988 and 1989.
- The Chairman of the JCS would be given the specific assignment to construct the military strategy and to recommend the military forces necessary to support the strategy. The most important new element in this plan is that the Chairman of the JCS would be requested to recommend those forces that could be supported within the five-year defense budget levels and his recommendations would not require the concurrence of the other Chiefs.’
Continuing with his quote of the Commission’s recommendation, Packard says:
‘Following receipt of the Secretary’s recommended national military strategy, accompanying options, and a military net assessment, the President would approve a particular national defense program and its associated budget level. This budget level would then be provided to the Secretary of Defense as five-year fiscal guidance for the development of biennial defense budgets such that:
- The five year defense budget level would be binding on all elements of the Administration.
- Presidential guidance, as defined above, would be issued in mid-1986 to guide development in this transitional year of the first biennial defense budget for fiscal years 1988 and 1989 to the maximum possible extent.
- The new national security planning process would be fully implemented to determine the course of the defense budget for fiscal years 1990 to 1994.’
And back to his speech text Packard says, “These recommendations on planning and budgeting have been supported by the Congress and the Administration. The changes in the JCS to implement these recommendations is covered in legislation passed by both houses of the Congress and will be in place early this fall. The President has instructed the DOD to implement those recommendations that do not require legislation.
“Our second report entitled, ‘A Formula for Action’, analyzes the problems of the DOD’s new weapons acquisition system and makes a number of specific recommendations for improvement.
“We point out that there is an ‘unnecessarily long acquisition cycle – ten to fifteen years for major weapons systems’. This leads to unnecessarily high acquisition costs, for time is money. More important it leads to obsolete technology in our fielded equipment. We have at least a five year advantage over the Soviets in advanced technologies in the laboratory. We forfeit this lead in the time it takes to get technologies from the laboratories into the field.
“We studied a number of successful new development programs, in the private sector, in other governmental agencies as well as in the DOD. We found that these had six underlying common features:
- Clear command channels
- Stability
- Limited Reporting requirements
- Small, high quality staffs
- Communication with users
- Prototypes and testing
“We noted that defense acquisition programs differ from these successful models in nearly every aspect. We made a number of recommendations which, if implemented, could greatly improve defense acquisition.
“One of the recommendations was to utilize more standard commercial products that are available on the open market. In the case of large scale integrated circuits, commercial products are in many cases more reliable than military specification products and often cost only one tenth as much. In this one area alone savings could be at least $1 billion dollars a year and we would have more reliable military products with the use of off the shelf commercial products instead of military specification products.
“We say in this report – ‘Our study of defense management compels us to conclude that nothing merits greater concern than the unnecessarily troubled relationship between the defense industry and the government’ The United States relies on private industry for its military equipment. It follows that the vigor and the capability of the industry is indispensable to a strong national defense.
“This is a large, complex business with 60,000 prime contractors and hundreds of thousands of other suppliers and sub-contractors. Contracts worth $164 billion were placed in 1985, seventy percent of which went to 100 large firms. An average of 15,000 contracts are placed each day.
“ It is not surprising that in an enterprise of this size fraud and waste can be found. While fraud is a serious problem, it is not as costly as many Americans believe. It is, as far as we could determine, much less than 1% of total expenditures.
“In a public survey we found that Americans believe that half the defense budget is lost to fraud and waste and that most of this is simply pocketed by defense contractors.
“We recommend as the best way to deal with this problem a greatly expanded program of self discipline, the establishment and self enforcement of codes of ethics, better auditing by both the contractors and the auditing profession and the DOD.
“The Commission stated in its first report that:
“Management and employees of companies that contract with the Defense Department assume unique and compelling obligations to the people in our armed forces, the American taxpayer and our nation. They must apply (and can be perceived as applying) the highest standards of business ethics and conduct.
“I am very pleased that the defense industry has enthusiastically accepted our recommendations on this important matter. The industry leaders have voluntarily undertaken to expand and strengthen the enforcement of codes of ethics and work is underway to improve the auditing procedures of the defense industry.
“I believe there will be real improvement in the industry and in the Defense Department as the recommendations of the Commission are put into effect.
“I want to note that this will probably not change the public perception quickly. The politicians will continue to use DOD as the whipping boy. This is nothing new. In the 1930s the industry, although relatively small at the time, was characterized as ‘Merchants of Death’. Harry Truman gained public visibility by criticizing the defense industry. This was his ladder to the presidency. It is not always that way. In both World War I and II, the American industry was ‘The Savior of Democracy’.
“Whatever the public view and the pronouncement of the politicians, the American defense industry produces the best weapons in the world. We must keep the industry healthy and re-establish better relationships between DOD and the industry.
“In the foreword to our Final Report I emphasized the need to establish and support strong centralized policies to achieve the objectives of the Department. These policies should be long in range, and should have broad support within the Administration and the Congress. The implementation of these policies, however, should be decentralized to the greatest extent possible. The structure of the Department can be streamlined, lines of authority and responsibility shortened and the number of people can be reduced.
“Here we have the largest, most complex and the most important acquisition enterprise in the world and no one in charge full time. Our recommendation on this issue is to establish a full time acquisition official at the same level as the Deputy Secretary of Defense to see that uniform policies are established and adhered to and to see that the delegation of the work is decentralized down to the people who know how to do it. If this is done, layers of micromanagement within the Department can be eliminated and we will have much more defense for the billions of dollars we are spending.
“The Congress has caused many of the problems for DOD. During the defense budget review in 1985 Congress made over 1800 changes in the budget and directed the Department to conduct 458 studies from the feasibility of selling lamb products in commissaries to the status of retirement benefits for the Philippine scouts.
“The Administration budget for FY 1986 was presented to the Congress in January 1985. It was intended to be approved by October 1985, the beginning of the FY1986 year. We are now within a month of the end of FY1986 and no budget has yet been approved by the Congress.
“We hope our recommendations will encourage the Congress to direct their attention to the larger issues of national military strategy and the overall capability of our military forces rather than the minutiae of line item detail. This detail discussion by the Congress causes hundreds of thousands of man days of work by DOD and contributes absolutely nothing to our military capability.
“We realize that Congressional log rolling can not be stopped, but perhaps it can be reduced somewhat.
“I have no illusions that even if all of the Commission’s recommendations are adopted, the problems of defense management will be eliminated. In our democratic system, defense is and will continue to be a political issue. It will never have the efficiency of a private enterprise.
“Spending a year on this subject has impressed me again that defense management is a large and complex endeavor. I am convinced there is no possibility whatever for a complete reorganization of the entire system as some critics have suggested. I do believe that significant improvement can result from the Commission’s recommendations. It will depend a great deal on what the Congress does and that in turn will depend on the general public’s view of our defense management problems and whether our recommendations will have strong public support.”
6/20/86, Letter to Packard from Michael J. Brassington, The Commonwealth Club of California, inviting him to speak to their members on the subject of the President’s Commission on Defense Management
6/27/86, Copy of a letter from Packard to Michael Brassington saying he would be pleased to speak to the Commonwealth Club
9/19/86, Letter to Packard from Richard C. Otter, President of The Commonwealth Club expressing their gratitude for his addressing their meeting
9/22/86, Copy of the publication of The Commonwealth Club covering the speech
Undated, A clipping from a newspaper covering the speech
Box 5, Folder 18 – General Speeches
September 23, 1986, Keynote Speech at Joint AIA/NSIA Government Quality Conference, Williamsburg, MD
Packard was invited to be the Keynote Speaker and address the recommendations of the President’s Commission on Defense Management.
9/23/86, There is no copy of Packard’s speech in this folder. However, it is likely that it was similar (and possibly identical) to the speech he gave on October 7, 1986 to the Electronic Industries Assoc., also on the subject of the President’s Commission. A copy of the October 7 speech is included in the folder for this speech. See speech dated March 26, 1986 for complete list of speeches covering work of the Commission.
9/23/86, Copy of typewritten program for the conference
6/12/86, Copy of an internal HP memo to Packard from Roy Baker (Irvine Sales Office), and Greg Michels (Fullerton Sales (Office), passing along an invitation from Tom McDermott to be the keynote speaker at the conference. They mention that Dr. Wade, Assistant Secretary of Defense and “chief procurement officer of the Department of Defense” will also speak. They say this conference would be a good opportunity for Packard to speak on the recommendations of the President’s Commission on Defense Management.
6/20/86, Internal HP note from Roy Baker to Margaret Paull (Packard’s Secretary), among others, saying that Stan Siegel of the AIA will send Packard a formal invitation and acknowledgement of his acceptance of their invitation to be the keynote speaker.
7/2/86, Letter to Packard from S. N. Siegel saying they are pleased that Packard will be able to address their conference, and giving further information on program details
8/26/86, Letter to Packard from T. C. McDermott, giving more information on the program schedule
9/30/86, Letter to Packard from Don F. Bonhardt, Conference Program Chairman, thanking him for speaking at the Conference
Box 5, Folder 19 – General Speeches
October 7, 1986, Keynote Address, AIA Government Division, Requirements Committee Symposium, San Francisco, CA
See speech dated March 26, 1986 for complete listing of speeches covering work of the Commission
10/7/86, Copy of Packard’s speech on the subject of the President’s Commission on Defense Management.
Packard says he will discuss the Commission’s major recommendations and then make a few observations about what might happen in the future. He begins with a brief overview of recent Department of Defense activities in the Reagan Administration.
He says, “President Reagan took office in 1981 with two basic commitments concerning our military establishment. First, he wanted to substantially increase our military capability. Second, he wanted to eliminate waste and fraud from the military establishment. President Carter had already begun a build-up in the defense budget….He started in his first two years on the assumption that his administration was going to work out some accommodation with the Soviets and that it wouldn’t be necessary to increase our military strength. They changed that view in the last two years and began a build-up which was underway when Secretary Weinberger took office.
“The first budget that the Secretary had a major influence on was the FY 1983 budget. For that year, it was a projected 7.5 percent increase for the full five years, and the same for the following year. To point out how unrealistic it turned out to be, the projection called for nearly $400 billion in expenditures for FY 1987. In actuality, it will barely get $300 billion.”
“By 1984, Secretary Weinberger had been able to achieve a substantial build-up of our military capability. He had to decentralize the operation in the Defense Department to a considerable extent. He developed a better working relationship with the Joint Chiefs than any Secretary had in recent years and gave the Services a free rein in what to do.
“This resulted in an increase in our military strength and higher morale and spirit [among] the uniformed men and women than there had been in recent years. In many ways, this was a very important contribution. Unfortunately, he did not anticipate that there were going to be some problems with the federal deficit. By the end of 1984, it was quite clear that Congress was not going to continue to support increases of the kind they had up to that time. Also, there was beginning to be criticism about the operations in Lebanon and Granada.
“Secretary Weinberger also established the Inspector General system as a result of Congressional action. This system was turned loose to look into auditing and potential fraud problems in the industry, as well as in the Department. This generated a very bad atmosphere between industry and the Defense Department. For some reason, Secretary Weinberger was not willing to spend much time talking with industry. In fact, he hardly talked with anyone in industry up to the time the Commission was started. The Commission had very extensive reports from the Inspector Generals, and some of the things they reported to us were worse than what you read in the papers. This all backfired on Secretary Weinberger. Instead of getting credit for uncovering all these things, which had been going on long before he was in office, he was blamed for them. The combination of these things resulted in complete loss of confidence by congress and by the general public in the defense establishment. The appointment of the Commission was recommended to President Reagan by some of the members of Congress who saw the Commission as a possible way to deal with these issues.
“Therefore, in this situation I saw an opportunity to make some recommendations and possibly accomplish some structural changes in the defense department that some of the Commission members, including myself, thought would be desirable. Since the last legislation in 1958, thirty other commissions have addressed the issue of defense management but none of them have had any significant impact on the operations. I thought this might be a little different.
“We got very good support from the White House. We also worked directly with the National Security Council staff. I picked the members of the Commission and two or three were appointed. They all turned out to be very good people. We had a good working relationship within the Commission. A good many of the members started by wondering whether this was going to be a futile exercise, but they all got quite enthusiastic about it , and it was indeed a team effort.”
“As we looked at this job, it was quite clear that we had a broad range of issues to address. We spent some time talking about whether we would just make some broad strategic recommendations and let somebody else implement them, or whether we would spend some time trying to get into enough detail that would be useful to the people who would be expected to implement the recommendations. Eventually, we decided to spend time trying to provide back-up material to enable our recommendations to be implemented.”
Packard says the Commission produced five reports:
The first one was an interim report to the President and contained most of the major recommendations.
The second was a detailed report on acquisition.
The third covered national security planning and budgeting.
The fourth was on relationships between the defense industry and the Defense Department
The final report contained a summary of the other reports with some additions.
Packard says their recommendations on national security contained this statement: ‘Today there is no national system whereby the Executive Branch and the Congress reach a coherent and enduring agreement on national military strategy, the forces to carry it out, and the funding that should be provided in light of the overall economy and the competing claims on our natural resources. In effect, the Secretary has pre-empted this decision, and decided what he should recommend in terms of what share of our natural resources are applied to defense. It is not really the Secretary’s responsibility. It is only the President who should do this. The result has been no effective long-range planning. The long-range planning that had been done was very unrealistic and the decisions on what weapons to produce have been distorted by service competition and contractors lobbying the congress. These practices, in the view of the Commission, resulted in tens of billions of dollars of waste and, therefore, were far more serious than the waste that resulted from fraud and abuse which has attracted the attention of the media. The losses from those are only in the range of tens of millions of dollars.’
“This recommendation to try to bring the system under a more rational procedure for long-range planning can, if properly implemented in my opinion, have a very large impact on the effectiveness of the Defense Department and on the return we get for the dollars spent. On this issue we made the following recommendations:
‘In order to institutionalize, expand and make a series of presidential determinations, we recommend a process in which the National Security council would develop and direct a national security planning process for the President that revises the current national security decision directive, as appropriate and provides to the Secretary of Defense presidential guidance that includes the following items:
- …a statement of national security objectives. This is being done.
- …a statement of priorities among the national security objectives, and
- …a statement of major defense policies. Neither of these last two items have been done, but they have been developed in the pentagon as a result of a lot of interacting factors.
- Finally, the most important item is a provisional five year defense budget level. These budget levels will be developed with the advice and assistance of OMB and will be designed to give focus on the development of a fiscally constrained national military strategy. Such budget levels would reflect competing demands on the federal budget and projections of the gross national product and revenue. They would also give direction to construct a proposed national military strategy and strategy options for the presidential decision, in time to develop the first bi-annual budget for the FYs 1988 and 1989.’
“More importantly, we recommend that the Chairman of the JCS be given the specific assignment of constructing the military strategy and recommending the military forces to support that strategy. These recommendations would then be given to the Secretary of Defense so the Chairman would not be able to override the Secretary. The Chairman would be asked to develop these forces in terms of the basic force level, and the amount of readiness, sustainability and modernization.
“In order to do this, the Chairman needs to be independent of the other chiefs and maintain his own staff. One other important element in this plan is to bring the views of the united commanders more directly into the considerations of all these important matters. Secretary Weinberger has done this to some extent by bringing the unified command in at a lower level. It was quite apparent that the people using the equipment will often have a different idea than the service people in Washington. We think a larger input from the ultimate users will result in better decisions regarding what weapons should be developed and also in terms of the balance of these last factors.
“We also recommend that a better procedure for making a military net assessment be made. We recommend that this task be given to the Chairman of the Joint Chiefs together with the director of the CIA. This would provide the military plan, evaluation of effectiveness and the budget levels for the development of bi-annual defense budgets.
“We would hope that the five year budget levels would be binding on all elements of the Administration. It would be desirable if you could get budget levels which were binding on the Congress, but to my opinion that is not feasible. On the other hand, in talking about what might be recommended five years from now, I think it is very likely to find an area where the Congress and the Administration could agree very closely, which would provide very important stability to the program.
“We were very anxious that the changes in the JCS structure and other issues that are required to put this system into effect be implemented as quickly as possible. We hope this could be done in developing the first bi-annual defense budget by FYs 1988 and 1989, and then in the second round, the budgets for 1990 to 1991 , the whole system would be in place.
“These recommendations on planning and budgeting have been supported by the Congress and the Administration. As you know, the legislation necessary to make these changes in the JCS structure was signed into law last week by the President. Everything is in place to go ahead.”
“The second report, which is entitled ‘A formula for Action’, was done by Bill Perry. This report addresses the specific problems [as well as the] related [subject of ] acquisition [i.e. procurement]. I might make a comment about our discussions on the JCS. We had some very heated discussions in the Commission because we had a former commandant in the Marines, Bob Barrow. In the first few meetings, every time we talked about any changes in the JCS circle, he got up and pounded the table and said we would destroy the capability of our whole military establishment if we do anything. We finally convinced him that what we were doing was giving the uniformed military people a role in the process. He finally agreed.”
“The recommendations on acquisitions were done by Bill Perry. I think the most important recommendations in this area is the establishment of the Under Secretary for Acquisition who is expected to spend full-time on the acquisition process. I think you know that the Deputy Secretary of Defense has generally been responsible for managing the acquisition affairs. When I was there I spent a good deal of time on that subject, but I had a lot of other things to do. Looking back, I’m sure I could have done better if only I had more time to do it.
“Secretary Weinberger, in a sense, has been lucky in this matter because Frank Carlucci came in first and actually made some good recommendations for improving the management. But before they were implemented, he left. Paul Thayer came in and it took him a little time to understand how everything worked. About the time he did, he got involved with a personal problem and had to leave. Then Will Taft, a very bright young lawyer, took over, but had no experience in acquisition.
“This highlighted a serious problem. We came down very strongly on the recommendation that this is the most complex and probably the most important acquisition job in the world and nobody is in charge full-time. There are 60,000 prime contractors and hundreds of thousands of suppliers. In 1985, the expenditures were $164 billion, 70 percent going to large firms. To illustrate the dimensions of the problem, 15,000 contracts were awarded per day.
“This required the establishment of this new Under Secretary for Acquisition position and dividing the job of the Deputy Secretary into two pieces: the acquisition job being given to the new position, and the remaining responsibilities being left with the Deputy.
“In order to be effective, this person needs to be at the number two level. He has to have authority over the service Secretaries, and essentially over everybody in acquisition matters. We had quite a time convincing the congress that was necessary, but they finally authorized the position the way we wanted it. Dick Godwin, former President of Bechtel and a very capable manager, was sworn in last week.”
“There is one part of the plan that may not be obvious to everyone. We are recommending a major change in the point at which new weapons program decisions are made. We set up a procedure when I was there called DSARC. That was a small group that worked very well, but it has gotten to be a very large committee and has become almost ineffective.
“We are recommending that the major decisions on new acquisition programs, in fact, on all acquisition policies that are at a high level, be done at the level of the Joint Requirements Management Board, which is an organization of the Joint Chiefs. This will be restructured to be co-chaired by the new acquisition Under Secretary and the vice-Chairman of the Joint chiefs, because we think it is very important that we bring the unified commanders views more into focus when decisions are made on new weapons. These two will co-chair this group and its members. It is our recommendation that these two alone make the recommendations without requiring a majority vote of the group. If they can’t agree, then they will go to the Secretary.
“Our recommendations anticipate that the services will continue to have a large role in the acquisition process. Specifically, we are recommending that the services be responsible for all the major programs, from the beginning of full scale development through to operation. The services will also continue to have a large role in the advanced development area, but we are hoping that the role of DARPA can be increased in order to do some things that the services themselves are not likely to do.
“We are proposing that all of these new major programs be funded on a milestone basis. The first of the key milestones is from the beginning of full scale engineering development through to low-level production. The second milestone is the beginning of full scale production through to deployment.
:Our recommendations contain some guidance on operational testing, which as you know, has been somewhat controversial. We recommend strongly that operational testing should begin at the advanced development stage early on, with the very simple proposition that if you don’t know how a new weapon is gong to be tested, how in the world are you going to be able to design it. The operational testing procedure needs to start early and integrated through the program.
“The final operational testing should be done on articles that are from the production line, because there are always things that show up in the initial production that don’t show up in the development. It is for that reason that we are recommending that the first milestone extend through limited production so that the final operational testing can be done on limited articles before undertaking full-scale development.
“The Congress is likely to go along with milestone funding on major programs. They have already done this on the B-1 program and are sympathetic to the general idea. Obviously, these key points can not always be precisely defined, but we think this will provide a better environment of funding so that contractors will know what the funding will be through this period, and have some stability that it won’t be revised every year.
“One of the more serious problems in the whole matter is the fact that we are ahead of the Soviets, maybe by quite a few years in the laboratory, but it takes so long to get the equipment into the field that we are behind. Our recommendations are that the new Under Secretary of Acquisition be encouraged to manage the development part of the program with some streamlining procedures. Some of you know that the impact of the Inspector General on the general environment has increased the time to award contracts. To award a contract for DARPA, it previously took 90 days, which was too long. It actually should take only 60 days. In some days it is up to over 200 days. Some things like this need to be cut back.”
Packard says the Commission looked at several successful acquisition programs, both in the government and in private industry. They found they all had several things in common:
- “clear command channels
- stability
- limited reporting requirements
- small, high quality staffs
- good communications with the users of the equipment
- extensive prototyping and testing”
“It is quite clear,” he says, “ that most defense acquisition programs differ from successful programs in almost every respect and in most cases.”
Moving to matters relating to national security and budgeting, Packard says their report “…sets out a way to get long-term planning in the system without setting up a whole new bureaucracy in the Defense Department. Vince Puritano, former Comptroller, spent some time looking into this and making detailed recommendations as to how to implement this part of the program.
“The [Congressional] Defense Appropriations Subcommittees have greatly increased their surveillance of line items. Line item mark-up of the defense budget has played a major role in moving Congressional review of the defense budget toward narrowly focused financial action on individual items and away from oversight based on operational concepts and military effectiveness.
“During the 1985 defense budget review, for example, the Congress made changes to over 1800 line items, directed the Defense Department to conduct 438 studies, ranging from the feasibility of selling lamb products in commissaries to the status of retirement benefits for Philippine scouts. This kind of tinkering and financial fine tuning has really contributed to instability in the acquisition process and has cost a lot of money. These actions keep programs in an uncertain status and usually they do not cancel very many items. But in order to get everything within the budget, they stretch out adjustments and so forth that are very, very wasteful.
“Our conclusion was…that the procedures and systems already in the Office of the Secretary an be used to provide the data that the Chairman of the Joint chiefs will need. In fact, if done properly, it will take fewer people to do what we recommend than the number of people required in the present system.
“Our next report is on conduct and accountability and it follows on the fundamental proposition that the United States has been dependent upon private industry for its weapons, and therefore, the vigor and capability of our defense industry is indispensable to our national security capability.”
Packard says they conducted a variety of public surveys on a number of issues relating to defense budgeting. He says “There were two very interesting conclusions that came out of this study. One was that the general public holds the uniformed military in very high esteem. On a scale from one to 100, professional military people are rated at about 80, the same as doctors and the same as professors the most distinguished profession in society. Military officers are also considered by the general public to be at that level. The defense industry, on the other hand, is at a level of 25 on the same scale, about the same rate as the Congress. Lawyers are also in that category.
“Beyond that the public thinks that 50 percent of the defense budget is lost to fraud and waste and that defense contractors simply pocket the money. The fact is that fraud and waste amounts to, at most, one percent or so of the total defense budget. It may be a little more than that, but not much more, therefore the perception by the public is entirely different than the facts.
“The horror stories in which you hear all the bad things and not any of the good things have been created by the media. There is serious concern about what can be done about this. The fact is that the industry has not dome as good a job as it should establishing codes of ethics and maintaining accounting procedures which are different for defense business than for commercial business. We decided that the best way to handle this would be to recommend that the industry establish codes of ethics and establish procedures so those codes of ethics would be implemented and understood by everybody in the organization. Furthermore, we recommend that some changes be made in the accounting procedures, which would eliminate some of the problems that evolved.”
Packard says he is pleased that industry leaders are in agreement on the need for a code of ethics and are already working on one.
Turning to the final report of the Commission Packard says it was “entitled ‘A Quest for Excellence’, and contains, in the foreword, some of [his] personal observations. Specifically, there must be established centralized policies, objectives and goals for the Defense Department and every element of the Defense Department.
“Excellence, however, cannot be created by policy, objectives or goals. Excellence can only be created by the people who do the work. You can only flourish when individuals identify with a team, take professional pride in their work, and above all, have the freedom and incentive to explore new and better ways to get their job done. There are many examples in the military over the years where this has been done, i.e. fighting units.”
“We think that most of the recommendations that have to do with basic structure are going to be put into place by legislation. There is one area where we made a recommendation dealing with improving the environment for people. This is based on the idea that whatever you do in the structuring of policies, getting better people in the department would improve the performance.
“We wanted to institute a system that provides more flexibility and that will reward people for accomplishment rather than survival as a civil servant, which this system tends to do. This idea was rejected in an intercommittee dispute in the congress. We had the exact legislation we wanted proposed by the Senate Armed services committee, but Ted Stevens of the Post Office committee considered it their baliwick. He was all for it, but he got the legislation put aside.
“In my opinion, the major issue we now have is whether people are going to really work hard in trying to get some of these recommendations completed. The President has directed the Secretary. to implement the recommendations. The Secretary has come to realize that if they are implemented, it will improve the job he can do. We have a big problem with the Congress. My speculation is that that is probably going to be the most difficult situation we could have.
“In my opinion, the major issue we now have is whether people are going to really work hard in trying to get some of these recommendations completed. The President has directed the Secretary to implement the recommendations. The Secretary has come to realize that if they are implemented, it will improve the job he can do. We have a big problem with the Congress. My speculation is that that is probably going to be the most difficult situation we could have.
“In the final analysis, these recommendations will be held to the extent that they can be supported by people in the industry and the general public. I hope that you will have some time to review these recommendations. I do not say they are perfect by any means, but we think they are a step in the right direction. If they can be implemented, we think that good results and a better defense capability for the dollars we are spending will be achieved.
“I understand you are going to be talking about the defense environment for the next few years. I might just relate my view of what is likely to happen in this five year plan. It was the recommendation what I made to the people at the White House that this five year plan be given to the Defense Department and involve a 1.5 percent real growth over the next five years, from about a little under the $3 billion level. Secretary Weinberger is talking about a 3 percent goal and the Congress will probably support 3 percent. If we could get rid of some of the red tape and the other things we are doing, we could indeed have adequate defense capability for budgets around that level. The job is simply then to find some way to get these recommendations done.
“Thank you very much for giving me the time to discuss these recommendations and I hope we can have your support in one way or another to see if we an make some significant changes in the management of the defense Department.”
6/16/86, Letter to Packard from Jean A. Caffiaux, Senior Vice President of the Electronic Industries Association inviting him to be the Keynote speaker at a symposium titled ‘The Military Electronics Market: Outlook on Future Opportunities’.
7/14/86, Copy of a letter from Packard to Jean Caffiaux saying he would be pleased to speak at the symposium
8/12/86, Letter to Packard from Frank A. Mitchell, of EIA, giving details on the program
11/3/86, Letter to Packard from Jean Caffiaux, Thanking him for participating in the symposium
Box 5, Folder 20 – General Speeches
October 31, 1986, Remarks at the 40th Anniversary Symposium of the Research Laboratory of Electronics at Massachusetts Institute of Technology
10/31/86, Copy of the text of Packard’s remarks
Packard says he is pleased to participate in this symposium on the occasion of the fortieth anniversary of the Research Laboratory at MIT. “This occasion,” he says, “has a special personal meaning to me, for the life of this laboratory coincides very closely with my professional career, both in the time span and in the area of my personal involvement. Our company has also benefited greatly from its relationship with this laboratory. Thus, there are many reasons why I am pleased to be included in this symposium.”
Packard explains that the laboratory at MIT had its start from a report prepared by Vannevar Bush in 1945 which recommended a continuing high level of federal support for research and development.
“This program was implemented first through the Office of Naval Research. Centers of excellence…were identified in several scientific disciplines, including electronics, and were supported with funds administered by the Office of Naval Research. This laboratory as well as the laboratories at Stanford University and several other universities were supported in electronics.”
Saying that, after World War II, there was not agreement about the future of electronics, Packard lists some of the important military contributions of electronics: radar, electronic counter measures, the proximity fuse, sonar, electronic navigation, and not the least, the atom bomb.
He says “There were those who questioned whether the great advances in electronic technology, as well as other technology, made during the war would be translated into comparable contributions to a peacetime economy.”
“Fortunately, the optimists of that era prevailed and electronics has made an immense contribution to progress in every aspect of our society since the establishment of this laboratory.
“Federal support of research at university laboratories began after the war with policies that were enlightened by scientists who understood university research. Individual faculty members or groups of faculty who had demonstrated capability and interest in various scientific fields were identified and supported. Federal support was provided without excessive supervision in or influence on their work. Funds were provided for the equipment they needed as well as for the salaries of the people doing research. Graduate students were supported so that they could be effectively involved in the research work.”
“The widespread hope that World War II would mark the end of worldwide military conflict and that the energies of research could be devoted to a world at peace turned out to be a false illusion.”
“The Korean War was probably the turning point in the events that have shaped the world since 1953. The military budget of the U.S. reached a low point in the early 1950s. We hoped at that time that moderation on our part would be answered with moderation on the part of the Communist world. We were wrong in that hope and consequently had to respond with the defense of South Korea.”
Packard says he emphasizes this point to show that federal support of R&D since the founding of these laboratories has been largely influenced by military considerations.
“Total federal support of research and development increased from $4.5 billion in 1953 to $18 billion in 1966 in constant (1972) dollars. federal support of research and development at universities was only a small part of the total but a very important part. In 1953 federal support of research at universities was at about $210 million. It increased, in constant dollars, to over 1.8 billion by 1968.
“Federal support of research and development leveled off in 1969, declined a bit and began to increase again, in real terms, eight or nine hears later. It is not easy to explain why federal support of research and development deteriorated so seriously from 1968 to 1978. It coincided with the national anti-establishment trauma, caused in part at least with disillusionment about U.S. involvement in Vietnam. While military requirements were a driving force for the substantial increase in federal support of R&D from 1953 to 1968, it had been administered under an enlightened policy that encouraged commercial fall out from military research. The Defense Department policies on independent research and development were developed to encourage defense contractors to develop products from their military research. The Mansfield amendment of a defense bill in 1969 prohibited independent research and development to be used to develop commercial products, it constrained these funds to be used for research having potential military applications only. This was in direct opposition to the original purpose of independent R&D.
“During the hiatus in the growth of federal funding for research and development two unrelated things exacerbated the situation.
“The first was a greatly increased involvement by the federal government agencies, the Congress and the Administration in trying to manage the research the federal government was funding. This is what has come to be called micromanagement.”
“Because of this micromanagement by the federal government the universities…and faculty members were required to spend too much time in administrative detail, paper work that detracted from their time and effort in their research work. This resulted in a serious decrease in the amount of real research a federal dollar could support.
“The second trend during this period was that the real cost of research increased. In electronics, for example, good research could be done in the 1940s and early 1950s with a modest amount of instrumentation and equipment. As electronics advanced into solid state technology and then large scale integrated circuits, very expensive equipment was required to work at the frontier of knowledge. Equipment costing millions of dollars became necessary for electronic research in the 1980s, contrasting with equipment costing only thousands of dollars in the 1940s and 1950s.”
Packard feels the damage done by the hiatus in federal support of university research is not easy to assess.
“One important indicator is that the number of scientists and engineers employed in research and development peaked in 1969 at 558,000 and declined to 530,000 by 1975. In universities the number of scientists and engineers was relatively constant from 1968 until 1975. By contrast the total number of scientists and engineers employed in research more than doubled from 1954 until 1964.
“I takes time for the research work of scientists and engineers to be converted into useful products that strengthen our economy or strengthen our military capability. In my view, the fact that we are losing our clear advantage in worldwide technology today is a direct result of the fact that we are supporting much less effective research and development than we supported in 1968…We must find some way to restore this deterioration in federal support of research.”
Packard points to the concern in the country about the deterioration of the United States economy in its ability to compete in worldwide markets and says that while the causes are complex, “I believe we should look at those factors that have changed and that can be corrected. Federal support of research and development has clearly deteriorated since the late 1960s both in quantity and quality. There is ample evidence to support the proposition that research at our universities has made a major contribution to our economic well being. Not just since World War II, the period when this laboratory has made its great contributions, but clear back to the beginning of this century when research at our agricultural colleges made the United States agricultural enterprises the most productive in the world.
“I was pleased to be asked in May, 1982 by Dr. Buchsbaum, Chairman of the White House Scientific council, to chair the panel on the Health of U.S. colleges and Universities, with Dr. Allan Bromley as Vice Chairman. Your President, Dr. Paul Gray, was a member of the panel.”
Packard says their report “…began by saying, ‘One conclusion is clear. Our universities today simply can not respond to society’s expectations for them or discharge their national responsibilities in research and education without substantially increased support.’
“While the panel did not make recommendations on specific dollar amounts for increased federal support, some of us believe it would not be unreasonable to ask the federal government to double its support for university research and development over the next three budget years.
“As I have tried to indicate to you already, the problem is not just in the level of federal support for university research. The panel makes several recommendations to improve the administration of the federal funding that is provided.
“Research grants or contracts with universities should be for a longer period of time, at least three and preferably five years.
“Investigators should be freed to use up to 10% of their time on a discretionary basis and they should be permitted to carry over unexpended funds to the next fiscal year.
“Greater use should be made of block grants to groups of researchers.
“Except for young research people who do not have a record of achievement, the achievements of research people should receive more emphasis in making awards.
“The importance of involving students, both graduate and undergraduate, should receive more consideration in federal support of university research.
“The panel recommended more joint research activity among universities, federal laboratories and other federal research activities and private sector organizations doing research.
“The panel agreed that the federal government is not always paying the full cost of university research and that it should do so.
“To compound the problem the federal government is driving up the cost of overhead by asking for far too many reports and is doing excessive micromanagement of university research programs.
“In my view it is high time to get federal support of university research back on the right track again. There is support in the Congress and in the Administration for a watershed change in this matter. There is not, however, very good understanding of the problem. In a meeting only a few weeks ago some of us recommended a substantial increase in the support of basic research in our universities, from about four billion to about eight billion, over the next three budget years. I was shocked to find that four of the most influential people at the White House did not understand how an increase in federal support of university research could strengthen the economic future of our country. Those who believe in the importance of university research as I do have a very important job to do. We must convince the Administration, the Congress, indeed the American public, of the importance of university laboratories, of which the Laboratory of Electronic Research at MIT is a great example.”
10/31/86, Copy of the program for the symposium
10/31/86, Copy of the printed invitation to dinner banquet
10/1/86, Copy of an agreement to have his presentation videotaped signed by Packard
10/4/86, Letter to Packard from Jonathan Allen, Director of MIT’s laboratory giving details on the symposium arrangements
11/17/86, Letter to Packard from Jonathan Allen thanking him for participating in their fortieth anniversary celebration.
Box 5, Folder 21 – General Speeches
November 6, 1986, President’s Commission on Defense Management, The Committee for Economic Development, New York, NY
Packard spoke on this subject on several occasions (See speech dated March 26m 1986 for complete list of speeches covering work of the Commission.) In view of the similarity of this speech with others on the subject it is not included here.
11/6/86, Copy of the typewritten text of Packard’s speech
6/20/86, Letter to Packard from Edmund B. Fitezgerald, Chairman, Committee for Economic Development inviting him to speak to their group on the subject of the President’s Commission Report. He says they would be interested in hearing what the CED might do to help.
6/27/86, Copy of a letter from Packard to Edmund B. Fitzgerald saying Nov. 5th or 6th would be acceptable. He also says that the CED could help to convince Congress to avoid ‘micromanaging’ defense programs and confine themselves to major defense matters.
7/9/86, Letter to Packard from Edmund B. Fitzgerald saying that he is pleased that Packard will be able to speak to their group. He adds that the CED can no doubt help to promote the recommendations suggested by the Commission.
10/23/86, Copy of CED announcement of Nov. 6 meeting where Packard will speak
Box 5, Folder 22 – General Speeches
December 2/3, 1986, Issues on Maintaining a Quality Ethic, Second NASA Symposium on Productivity and Quality, Washington D.C.
12/3/86, Copy of notes for speech, handwritten by Packard
12/3/86, Copy of typewritten transcript of Packard’s remarks prepared by NASA
Packard says he has concluded there is not a lot he could add to what other speakers are saying about how they could rejuvenate their organization, so he has decided to “reminisce with them about some of the experiences he has had during his career that have had an impact on his own thinking about productivity and quality.
He tells of his first job with General Electric Company – 51 years ago. “I worked in the vacuum tube engineering department where they were working on a new kind of tube –an ignitron – which was a controlled mercury vapor rectifier.”
At this point, before getting into his story, he says he would like to digress a few moments to tell them how he happened to get the job with GE. He tells of graduating from Stanford and interviewing with someone from GE and telling him that he was interested in electronics. He says the interviewer’s reply was ‘There is no future in electronics.’ Packard says he persisted in his interest in electronics and asked permission to talk to people in some of the departments to see if he could find something of interest to him. Receiving permission, he found the job in the vacuum tube engineering department.
Continuing with his story of work in the tube shop, he says “I’d been there about two months when something began to happen down in the factory. They had been producing one of these tubes with no problems when all of a sudden their yield went down. Only about 20 percent of the tubes would pass the final test. They asked me to see what I could do about it.”
Packard describes the testing process as a simple one. He says. “The final test is just to see if the tubes can handle the maximum load. If they can, they pass. If they can’t, they lose control and blow up. All you have left is a bunch of glass.”
Worse yet, he explains that each tube contains about a pint of mercury, so if the tube fails you get not only flying glass but floating mercury vapor as well. In this event he says all personnel must leave the room until the mercury settles.
Packard says “I finally decided that the only way we could deal with this problem was to spend some time in the factory, close to the manufacturing process.” He tells of talking to the employees working on the production process and, even after three weeks, they could not find any reason for the failures. However, the yield starting going back up, seemingly by itself, returning to the goal of 90%.
Packard says he learned two things from that experience. “Quality and productivity are highly dependent on paying a great deal of attention to every detail involved in the process. And, if you can get the people doing the work to take some interest in the problem it will almost always result in something positive.”
Next Packard tells how Bill Hewlett, after they had started their company, had to leave due to the World War II. Packard was left to run their little company. With the war effort everyone was interested in quality and productivity and Packard says they visited other companies to see what they were doing to promote productivity and quality. He says they visited the Lincoln Electric Company which had a profit-sharing program which allowed employees to participate in the success of the company. “They gave their employees,” Packard says, “an incentive to produce a better quality product at a lower cost than their competitors…There was another company called Jack & Hines that was set up in Cleveland. Their management also provided financial incentives for employees and they, too, were able to produce their products with greater efficiency than their competitors.
“We’d been thinking about this ourselves and came up with a system whereby all of our employees would benefit from higher productivity. We had only a few hundred employees at the time, but this system was the basis for a management policy still in place today.
“Our idea was to pass on to employees any savings they could make in direct labor costs. The company would benefit from savings in overhead.
“This had a tremendous effect on our people. At the end of every period, everybody would just work like the devil to get that last item out the door. That system worked so well during those years that our productivity was about double at the end of the war what it had been at the beginning.
“This system did have one bad effect, however. There’s additional pressure at the end of the period and it’s very hard to get the work distributed uniformly throughout the period. But there is no question that financial incentives have a very big influence on productivity and the dedication to quality that people develop.
“Now we’ve changed that incentive system but we’ve kept the basic policy. We have a profit-sharing plan and also an opportunity for our people to buy stock in the company at 25 percent below the market. These have been very important incentives for our company and I’m sure many of you have had similar experiences.
Packard says that HP perhaps had more reason that most to emphasize quality because they made instruments which were used by other people to measure the quality of their products.
“We spent a good deal of time looking how we could improve quality. One method we found very effective was to structure the lines in our manufacturing operation so that the final test and the final assembly areas operated close together. We were able to get feedback from the final test area back to the people in final assembly directly and immediately without having to go through procedures and reporting.
“This was very much like what has come to be known as a ‘quality circle’ because here were people working closely together with effective, informal communication. We found, over a period of time, that there were many ideas that came from those people doing the work down on the factory floor. If they hadn’t had an opportunity to work close to and directly with each other, we probably wouldn’t have benefited from these ideas. The ability to get immediate feedback, plus those financial incentives I mentioned earlier, contributed a great idea to keeping an emphasis on quality and productivity.”
Moving on to another story, Packard tells to a joint venture in Japan which HP formed in 1963. He says the Japanese partner was “a company that has been involved in process instrumentation and had some compatibility with our product line. It’s interesting to recall the early discussions that led to this organization, which was called Yokogawa-Hewlett-Packard, or YHP. This was before the Japanese had become famous for things you’ve heard about in recent years.
“When we were first considering the venture, I spent some time with our prospective partner and concluded that the only way we could possibly work out a partnership was to get them to agree that the company would be managed our way rather than their way. We were pretty tough on this point and they were kind of anxious to get us to join them, so they agreed to it. And, during YHP’s first few years, they picked up some of the things we’d been doing and found them to be beneficial.
“Now, HP is structured into many relatively small divisions. Every year we get all of the division managers together and spend two or three days reporting, comparing notes, evaluating performance and so forth. One of our sessions always had to do with how well we’re doing on quality. We kept a record on the failure rate of every product we had in the line and we kept a detailed record on our warranty costs.
“During the first few years of our Japanese joint venture, the YHP manager came to the meeting and reported along with all of our other managers. YHP’s performance was usually just about in the middle. They were neither at the top nor the bottom in product failure rates or warranty costs.
“After this had gone on for some time, a bright young Japanese manager who was really doing good work over there cornered Bill and me one day. He said, ‘Why don’t you let me run this operation? You send an American manager over there to look over our work. We spend a lot of time – in fact, waste a lot of time – talking to him, and if something goes wrong, he’s the fellow we blame. Besides that, you’re not sending over very good people anymore.’ And he was right. So we said, ‘Okay, Kenzo, you go ahead – run the operation from here on in.’
“The following year, YHP’s growth rate was much more rapid than it ever had been before. They even showed a little bit of improvement in the quality of their product. They started to move up toward the top of the HP list . The following year, the manager came back with some reports that were just amazing in terms of what they had done. Their record on failure rates with the product they were building was better than any of our other divisions. And the year after that, YHP received Japan’s Deming prize for productivity and quality.
“Let me give you an example of what they were able to do. We had been making printed circuit boards in various parts of the company. Our best failure rates were about four in a thousand. We thought that was fairly good – a little less than one-half percent. And that was the target we found a lot of other people were achieving.
“Well, our Japanese division came in with a failure rate in their printed circuit boards of only 10 per million. That’s 400 times better than anything we had been able to do. Obviously that shook up a lot of people in the company. It simply demonstrated that our targets on quality just were nowhere near what could be achieved, and it opened up a whole new ball game for us.
“So, we found that we can learn something from the Japanese and we’ve been carefully watching what they’ve been doing since. The encouraging thing is that the work they were doing at YHP was soon reflected all over the company. Our people in the U.S. divisions were not going to be outdone, so we were able to raise the quality targets in a great many areas, far beyond anything we thought could have been done before.
The final story Packard relates shows that quality and productivity are important in every area of the company, not just in engineering and manufacturing and production.
“Our company,” he says, “has been committed from the very beginning to financing our growth by reinvesting profits. Bill Hewlett and I were raised during the Depression and we took a very dim view of any kind of debt, so we didn’t go for this business of leveraging. We wanted our company to continue to have no long-term debt.
“In about the middle of the 1970s we found that we were running a little short on capital. Our management people got together and decided they were going to go out and raise $100 million in long-term debt. After thinking about this, I said something else was wrong. So we looked into the situation and found that our people had lost control of assets, lost control of inventory and lost control of accounts receivable.
“Drawing on my early experiences, I decided that there was a simple way to handle this. I went around the company and gave a lecture to every division about how to manage assets. I managed to get everybody worrying about this. And it turned out that, as is quite often the case, a lot of managers had simply forgotten that all the little details count.
For example, they were sending shipments out with one or two pieces missing. That, of course, gave the customer a perfectly good excuse not to pay the bill until it was fixed. There were a whole series of things that our people learned they hadn’t been doing right. They went to work to fix the problem areas and a year later we had $100 million more in the bank We didn’t have to borrow the money after all.”
“Our first-hand experiences in this matter of quality and productivity have taught us some lessons I’d like to offer today.
“You’ve got to have a real commitment to quality and productivity. I’ve often thought about that in terms of the difference between a winning team and a team that doesn’t win. I was interested in athletics in my younger years and have followed sports ever since. I’ve noticed that there are many cases when there are two teams that are very closely matched, player for player. There are two differences between the winning team and the losing team. The winning team has better teamwork and the winning team has greater desire to win, a stronger will to win.
“I think this applies to almost any competitive situation. Look at NASA. In the Apollo program, you had a tremendous incentive to prove you could win, you had the will to win and you had every reason to promote great teamwork.
“I’ve also seen it in defense programs. During the development of the Polaris system, led by Admiral Rayburn in the late 1950s the Navy was determined to prove that they could do a better job than the Air force. You might have read about this in a book called The Mind of the Organization.
“They put a good team together. And they fostered a spirit of competition. Admiral Rayburn got the whole organization working together, almost as one man, with a tremendous amount of cooperation and enthusiasm and a commitment to win. There hasn’t been a major new military product or weapons program since then that has come as close to being as efficient as that one in terms of the time it took and the success they realized.
“We need to learn to make a new commitment to winning. First, we need to get the best people that we can, and then encourage teamwork and a will to win.
“That has to do with another matter that I’ve had some interest in. I think a good many of you know that the U.S. has not kept its basic education system up to standard during the last decade and a half. We’re not graduating as many engineers and doing as much basic research as we should.
“We can’t have a winning team without winning players. Now, we do have quite a few winning players in the business, but we simply need more. Look at what’s happened in Japan and some of the European countries. Unless we can correct our situation down the line, we’re not going to have enough winning players to have a winning team. This has to be a very high priority in what we do to say ahead.
“Second, we need a stronger commitment to teamwork. This has to include not only you people out there doing the real work in your program. It has to involve the people here in Washington, the Congress and the Administration. Everyone has to work together as a team. I don’t know whether this is possible, but I’ll tell you that if it can’t be done, we’re going to be in for some real competition – and trouble – down the line.
Finally, we’ve got to want to be first. That shouldn’t be hard. After all being number one has been a characteristic of America from the very beginning. Maybe we lost that drive for a while but it seems to me that a lot of people are now sensing that we are threatened by competition from the Japanese and from the Europeans. This realization in itself should get us back on track and set those critical ingredients in place so that we can, indeed, have a winning team and stay ahead for the long run.
That’s my message for today, ladies and gentlemen. I’d be pleased to respond to a few questions if you’d like. Thank you very much.”
12/2-3/86, Printed invitation and preliminary program for the symposium
12/2-3/86, NASA news release about the symposium
8/20/86, Letter to Packard from David R. Braunstein, Co-Chairman of the symposium, inviting him to be the keynote speaker
10/1/86, Letter to Packard from David Braunstein, requesting that he write President Reagan urging him to attend the symposium for a short opening address
10/16/86, Copy of a letter from Packard to President Reagan urging him to attend the symposium
10/17/86, Letter to Packard from David Braunstein, asking Packard’s help in securing a room in the Old Executive Building for a reception, and thanking him for writing the President
10/20/86, Copy of a NASA form giving various releases
1/27/86, Copy of a general letter to symposium speakers giving details on the arrangements
11/4/86, Letter to Packard from NASA asking if he would be willing to participate in a video taped interview
11/6/86, Copy of a letter to symposium speakers giving more details on arrangements
11/17/86, Letter to Packard from Gene Guerny of NASA asking if he would agree to be interviewed by a reporter from Quality and Productivity magazine
1/12/87, Letter to Packard asking that he sign a copyright release on his speech
4/16/87, Letter to Packard from C. Robert Nysmith of NASA sending him a copy of the video tape of his address
5/1/87, Copy of a letter from Packard to Robert Nysmith thanking him for the tape
Box 5, Folder 23 – General Speeches
December 4, 1986, – Management of America’s National Defense, American Enterprise Institute, Washington D. C.
This is another speech on the recommendations of the President’s Commission on Defense Management which Packard chaired. Since it is similar to the other speeches on this subject it is not repeated here. For other speeches on this subject see list with speech dated March 26, 1986.
By way of epilog Packard does tell of government reaction to the Commission’s recommendations: “At the end of June this year,” he says, “the President’s Blue Ribbon Commission on Defense Management completed its work with its final report to President Reagan. Since that time legislation to reorganize the Office of the Joint Chiefs consistent with our recommendations has been enacted by the Congress and signed by the President.
“Legislation to establish a new Undersecretary position in DoD, which the Commission recommended, to provide for a full time professional manager for the defense acquisition process has been enacted. A well qualified man has been appointed and is already hard at work in the Pentagon.”
5/30/86, Letter to Packard from William J. Baroody, Jr, President, Enterprise Institute for Public Policy Research,. inviting him to deliver the tenth annual Francis Boyer Lecture and receive the Francis Boyer Award
6/17/86, Copy of letter from Packard to William J, Baroody, Jr. accepting his invitation
8/14/86, Letter to Packard from Paul W. McCracken, discussing the printed text of Packard’s speech
12/18/86 Letter from Patrick Ford, AEI, enclosing a draft of his speech which they wish to publish in their newsletter, and asking for Packard’s OK
5/7/87, Letter to Packard from Isabel Davidow, AEI, enclosing several copies of Packard’s speech printed in booklet form. One copy is attached here.
Copies of printed invitation and other material from AEI
