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2 UNDERESTIMATING THE IMPORTANCE OF MANTECH
LIMITS ITS rMPACT
The existing Manufacturing Technology program could
have been the strong program advocated in the previous
chapter. Its accomplishments have fallen short of DOD's
needs, however, because the program's direction was not
sufficiently integrated into overall DOD strategy. In the
few instances when leadership was present and coordinated
groups of ManTech projects were aimed at significant
future performance requirements, the program succeeded in
greatly improving the production of weapon systems.
Since this study began, major reductions in the Army
and Navy ManTech programs have left the Air Force as the
only service with a meaningful ManTech program. The
Army budget, formerly the largest of the three, has been
reduced to S16 million and supports only government-owned
arsenals, depots, and ammunition plants. The Navy
ManTech budget has continued its historical pattern of
extreme fluctuations. In 1987, its budget was reduced by
$20 million to S29 million. Despite planned growth, the
Air Force ManTech budget has remained constant. These
declines in ManTech support and funding have made more
urgent the needs for adequate investment in manufacturing
technology and broad systemic changes in the program.
MANTECH: A COLLECTION OF SMALL, LOW-RISK PROJECTS
To determine the strategy implicit in the current
ManTech program, the committee analyzed the 238 multi-year
projects that received funding in 1985 or 1986 and that
had total budgets of at least S1 million. These projects
represented a spectrum of projects begun between the
late 1970s and 1986, equaling 40 percent of all ManTech
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projects funded during 1985 and 1986. They had a combined
total budget exceeding $800 million over the duration of
the projects.
Our project analysis, described in Appendix A, led to
several broad conclusions:
· The program spread small amounts of funds across
many diverse projects.
modest
~ The projects, particularly in the Axmy and Nary,
were largely unrelated and did not comprise coordinated
thrusts focused on particular technological innovations.
· The projects' objectives were severely limited in
scope, risk, and technical challenge.
· As a result, the program's overall impact has been
We believe that the S1 . 2 billion expended by the
ManTech program during 1980-1986 could have produced
major advances in manufacturing technology. Indeed,
the small portion of ManTech funds spent on technically
challenging, related sets of projects has produced a far
greater aggregate impact than the much greater amount
spent on unrelated projects of limited scope.
The Superlative Few
~ few of the projects in the ManTech program were
designed to create technological innovations for future
weapon systems. In three areas--electronic materials,
infrared sensing materials, and composites--related sets
of ambitious projects were directed at process develop-
ments to improve the material's performance and increase
yield and quality. The Air Force program offers other
examples of well-directed technological thrusts that
yielded new products and product features, while reducing
manufacturing cost and increasing quality:
· new processes for unusual materials substantially
increased the performance of Jet engines,
· flexible machining of short runs of parts,
· noncontact gauging and testing technologies to
improve the in-process quality control of a variety of
products, and
· production of new types of aircraft made possible by
advances in the production of composite structures.
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The Integrated Computer-Aided Manufacturing (SCAM)
program was one of the largest sets of related Air Force
ManTech projects. The ICAM program mobilized teams of
defense contractors and universities to attack several
dozen aspects--including management as well as technol-
ogy--of a highly significant problem. Not all projects
were ultimately incorporated into the solution of the
problem; those that were technically ready at a cutoff
date were combined in a demonstration of an integrated
sheet metal manufacturing center.
The advances achieved in these process technologies
will play B part in weapon system production for years to
come. Because of their breadth and importance, successful
sets of ManTech projects in areas such as electronics,
composites, and computer-integrated manufacturing will
continue to stimulate further advances.
In each of these innovations, the following circum-
stances helped shape the investment and were critical to
its success:
1. Weapon system program managers recognized that
advances in manufacturing technology were indispensable to
the feasibility and ultimate performance of the weapon
system.
2. Funding for product development was closely
paralleled by funding for process development.
3. No commercial application was apparent to stimulate
development of the enabling manufacturing technologies
quickly enough to meet the defense needs of the country.
These successful examples provide a model that, if ex-
tended to a broader set of technologies, would constitute
a highly effective ManTech program.
The Limitations of Investing Without a Strategy
In contrast to these few high-impact areas, most of
the 238 ManTech projects we analyzed showed the following
general trends:
· Purpose: More projects (40 percent) had cost
reduction as the primary purpose than any other single
purpose. In addition, cost reduction was made a secondary
objective for numerous other projects.
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· Materials: Many of the projects (36 percent) were
focused on metals. Emerging technologies for processing
new materials, such as ceramics and composites, received
much less attention.
· Breadth: More than half the projects were directed
at a narrow technical objective, a single product, and,
particularly in the Army, a single facility.
· Technology: The Army expended more than 30 percent
of its funds on projects aimed at the inspection process,
while the Navy and Air Force divided their funds largely
among other processes, such as machining, assembly, and
forming.
These characteristics add up to a DOD NanTech program
concentrated on the near-term needs of DOD, with narrowly
focused, unrelated projects. Only the Air Force program
had discernible groups of projects focused on achieving
particular goals. The wide variety of technical projects
undertaken by the ManTech program testifies to the number
and variety of technologies incorporated in current
weapon systems. However, without a strategy that targets
important technologies, the program's resources have not
been directed toward areas of maximum impact.
THE MANTECH PROGRAM NEEDS TOP MANAGEMENT ATTENTION
Managing ManTech--that is, identifying technical needs,
setting priorities, selecting projects, allocating funds,
monitoring progress, and communicating results--is a
complex process involving many levels of authority and
many different units within the services and DOD. The
dispersion of projects indicated by our analysis suggests
that these strategic choices have not been made.
To get further insight into the management of the pro-
gram, we interviewed officials at 22 defense contracting
companies, 10 ManTech program managers and officials in
the Office of the Secretary of Defense, 3 staff members of
the House of Representatives Defense Appropriations Sub-
committee, 11 senior officials--including career civilian,
military, and political--in OSD and the services, and
5 former senior officials of DOD. These interviews
confirmed that the lack of high-level policy direction,
and the relatively low priority given to manufacturing
technology within DOD, had caused the fundamental problems
of the program.
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Common Myths
Our interviews pointed to four myths about manufac-
turing technology and the defense industrial base that
are insupportable but are still widely held. Videspread
belief in these myths has reduced support for and under-
standing of the ManTech program.
Myth #1. The defense industrial base, if forced to
compete, will develop and invest in state-of-the-art
manufacturing technology.
Myth #2. Once excellent products have been designed
and developed, excellent processes for producing them will
be routinely available.
Myth #3. Investment in manufacturing technology is
worthwhile only if it causes verifiable short-term cost
reductions.
Myth #4. "Overhead" is bad; it connotes inefficiency
at best and virtual fraud at worst.
The first myth perpetuates the belief that direct DOD
funding for manufacturing technology development is
inappropriate and that indirect actions, particularly to
stimulate increased competition, will be sufficient to
assure adequate manufacturing processes. The myth ignores
the unique nature of weapon systems and the unusual market
in which only one primary buyer exists for products that
require years to develop and produce. Although competi-
tion for defense contracts is intended to provide the
advantages of a free market, the ability of that competi-
tion to stimulate manufacturing technology development is
limited by several factors:
· Price is negotiated. As the only buyer, DOD exerts
a level of control absent in a free market, which
increases the contractor's risk and vulnerability.
· The time lag between the decision to pursue the
concept of a new weapon system and production is often
between ~ and 10 years. It is, therefore, natural that
awards of contracts emphasize design capability.
· Uncertainty over winning a production contract is
likely to deter a contractor from considering or investing
in manufacturing technology during product design.
· Most production contracts have annual competitions
or renegotiations, and prices are reduced to reflect
reductions in costs.
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Many also believe the second myth that process technol
ogy automatically follows product development. If that
were so, then process development would not require the
attention of DOD. However, process technology often must
precede or coincide with product development; otherwise a
long, difficult effort is required to develop essential
and efficient new manufacturing processes to support a
weapon system. This second myth also reflects lack of
understanding of how new manufacturing technology can
permit creation of new product designs and performance
features as well as facilitate the production of products
already planned.
In fact, the United States is becoming increasingly
dependent on foreign suppliers for critical equipment.
Change must occur quickly if several existing domestic
sources of leading-edge technology are to survive.
The third myth, which stresses measurable cost
reduction as the primary goal, manifests itself in two
ways. Some in DOD top management support the ManTech
program because of its potential to reduce costs, while
others question the need for the program when it cannot
show demonstrable cost reductions. ManTech program
managers, in response to these reactions, have emphasized
projects where cost reduction can apparently be measured
objectively.
The program's current emphasis on short-term,
demonstrable cost reduction is self-defeating. While
improvements in quality, lead time, flexibility, and
other manufacturing characteristics can often lead to
substantial cost reductions, the pursuit of measurable
cost savings generally leads to low-payoff projects that
address near-term needs.
In addition, despite the continuing emphasis on
demonstrable cost savings, cost reduction efforts can
rarely be measured accurately. If a new technology is
used on a system that has Just entered production, there
is no baseline against which to measure savings. Even for
systems already in production, present cost accounting
practices will produce faulty estimates of cost reduction
(as described in Appendix B).
The fourth myth, that overhead is always bad, is as
pervasive as the first three though it stems from a
different set of false assumptions. It reflects a
misunderstanding of the difference between overhead rates
and overhead accounts--and a fear of both. An overhead
rate is the ratio of indirect costs to direct labor
costs. As direct labor decreases, the overhead rate
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will increase even if the actual indirect costs remain
constant. Overhead accounts are a bookkeeping category.
Neither the rate nor the account is a measure of
efficiency or of total cost.
Acting to reduce overheat limits investments in
manufacturing technology in two ways. First, investments
that improve manufacturing technology will increase the
fraction of total costs that appear in overhead accounts.
Second, many advances in manufacturing technology are
directed at reducing direct labor and may increase
some indirect costs such as computer programming or
maintenance. In both cases, the overhead rate will rise.
Thus, a company that is successfully implementing advanced
manufacturing technology is likely to increase its
overhead rates and overheat expenditures--although the
total cost of production can be expected to decrease even
while lead times, quality, and yields improve. ~ goal to
control the increase in overhead rates will surely feat to
less efficient and less effective manufacturing processes.
Elevating the Status of the Program
The lack of understanding of manufacturing technology
is evident not only in the absence of policy direction
from DOD or in the prevalence of manufacturing technology
myths, but also in the organizational location of the
ManTech program. The ManTech program has been located far
down in the hierarchies of all three services.
Some of the individuals interviewed attribute the
limited use of the ManTech program to its small sloe,
especially relative to many other programs--such as weapon
system procurement budgets. Even at the program's highest
level of funding in 1982, only S204 million was appro-
priated for all three services, an amount representing
just over 0.1 percent of the defense procurement budget
Of S150 billion. Nevertheless, ManTech's importance far
exceeds its share of the budget because of its enormous
leverage and potential to strengthen the competitiveness
of the U.S. industrial base.
CONCLUS ION
Much of the ManTech program of the past decade has had
only a modest impact. Within the program, however, there
have been highly successful examples where related sets of
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technically challenging projects were aimed to solve
fundamental problems in producing the next generation of
weapon systems. Examples include composites, integrated
computer-aided manufacturing, and electronic materials.
If the entire program were managed to solve challenging,
fundamental manufacturing technology problems, the overall
effect of the program's modest expenditures would have
been enormous.
The actual impact of the program, however, was limited
by the lack of strategic guidance from the Department of
Defense. Several groundless but widely held myths have
been used to support the erroneous belief that manu-
facturing technology was either an unimportant or an
inappropriate concern of DOD. Continued acceptance of
these myths could be devastating for the next generation
of weapon systems. DOD must provide direct support for
manufacturing technology development if the defense
industrial base is to produce high quality, reliable
weapon systems in a timely, efficient manner.
Representative terms from entire chapter:
mantech program
