From the inception of the United States, military operations have been intrinsically linked to contracts with civilian entities. The efficient administration of these agreements has consistently been a critical factor in ensuring the readiness and effectiveness of military forces. This article delves into the history of defense contract administration, tracing its evolution from the Revolutionary War to the complexities of modern defense procurement. Understanding this history provides valuable insights into the ongoing efforts to refine and optimize how the Department of Defense manages its crucial contracts.
The Genesis of Military Contracting: Lessons from the Revolutionary War
The roots of defense contracting in America can be traced back to the Revolutionary War. In 1775, the Continental Congress recognized the need for organized supply chains and established the positions of Quartermaster General and Commissary General. These roles were responsible for procuring and distributing essential goods to the troops. However, this early system lacked sufficient oversight, leading to inefficiencies.
By 1781, a Superintendent of Finance took over subsistence procurement, initiating contracts to supply rations, clothing, and other necessities. Notably, the first clothing contract in 1785 included quality inspection provisions, signaling an early awareness of contract administration principles.
However, the contract system faced significant challenges. Issues such as inflated prices and substandard supplies were common, drawing criticism and highlighting the need for improvements in oversight and accountability. Even figures like John Paul Jones, tasked with overseeing ship construction, expressed frustration with the inefficiencies of the contracting process at the time.
Structuring Procurement: Early Constitutional Era and the War of 1812
The U.S. Constitution, while not explicitly detailing contracting, implicitly empowered the executive branch to enter into contracts. The establishment of the Department of War and the Treasury Department in 1789 formalized government contracting for military supplies. Early legislation in 1792 and the creation of the Office of Purveyor of Public Supplies in 1795 aimed to centralize procurement. However, this was soon reversed, granting the War and Navy departments autonomy in procurement, except for subsistence handled by the Secretary of War. Competitive bidding through public advertisement became standard practice during this period.
The War of 1812 exposed significant weaknesses in the subsistence contract system. Accountability was severely lacking, leading to failures in supplying troops effectively. In 1818, Congress reverted to a commissariat system, abandoning contracting for subsistence, which resulted in improved ration delivery and cost reductions.
Between 1815 and 1860, military departments implemented more structured contracting procedures for both the Army and Navy, emphasizing accountability and cost-effectiveness.
The Civil War Test: Strains and Scandals in Wartime Contracting
The Civil War placed immense pressure on the existing contracting system. The demand for supplies for a rapidly expanding army overwhelmed the procurement infrastructure, which was understaffed with experienced officers capable of managing the system effectively. Despite legislation in 1861 reiterating competitive bidding and awarding to the lowest bidder, widespread scandals emerged amidst the urgent need for food, weapons, and equipment.
Legislation in 1862 aimed to combat fraud by supply officers, contractors, and inspectors. However, enforcement was limited. The Quartermaster’s Department was responsible for procuring a vast array of supplies, from clothing and equipment to transportation and construction materials. While negotiated purchases were necessary during wartime, the postwar period saw a return to formally advertised contracts and increased emphasis on controls to prevent abuses.
Post-Civil War Reforms to World War I: An Era of Refinement
Post-war investigations revealed that fraudulent practices were more extensive than initially thought. The period from the Civil War to World War I became an era of contracting reform. The Spanish-American War in 1898 demonstrated improved procurement practices compared to the Civil War.
Congress re-emphasized competitive bidding after the Spanish-American War, particularly for naval shipbuilding contracts. The Dockery Commission in 1893 identified issues like lack of standardization and duplication of functions in procurement. The 1894 amendment and subsequent Executive Orders led to standardization of contract documents and procedures, limiting individual contracting officer discretion.
Technological advancements, notably in aviation, presented new challenges and opportunities for contracting. The 1908 contract with the Wright brothers for a military aircraft marked the beginning of military aviation contracting. However, contract management was primarily limited to final product inspection at this stage.
World War I and Interwar Period: Centralization and Innovation
World War I necessitated a massive mobilization, leading to the suspension of competitive bidding. The focus shifted to rapidly equipping and supplying troops. The nascent aircraft industry struggled to meet wartime demands, highlighting the need for improved contract management.
Complaints from Army aviators about aircraft quality spurred improvements in contract management. In 1916, funding was allocated for aircraft inspectors, and in 1917, the Army Signal Corps formed an aircraft inspection department – the first dedicated organizational unit for managing military aircraft contracts, paving the way for in-plant inspection.
The sheer volume of contracts during WWI – over 30,000 by the War Department alone – led to inter-service competition for resources. The War Industries Board was established in 1917 to manage war materials, priorities, and prices until the war’s end.
The interwar period saw a return to formal advertising and peacetime procedures. However, the war highlighted the benefits of centralized procurement control, which continued into the 1920s and 1930s. The National Defense Act of 1920 granted the President wartime contracting flexibility and centralized procurement for common supplies under the Quartermaster General.
Aviation dominated procurement during this period. The Army Air Service established the first peacetime in-plant inspection office at Boeing in 1921, shifting from final inspection to continuous quality checks throughout production. This approach proved effective and was expanded to other aircraft manufacturers. The Army Air Corps Act of 1926 aimed to stimulate the aviation industry and introduced greater flexibility into aircraft procurement, establishing procurement district offices and plant representative offices.
In 1934, the Army Air Corps contracted with Boeing for the B-17 bomber design, marking a major aircraft procurement program. Simultaneously, the Vinson-Trammell Act of 1934 addressed concerns about excess profits in naval contracts, requiring contractor transparency and audit access.
World War II and Post-War Reorganization: Negotiation and Consolidation
As global tensions rose in the late 1930s, it became clear that peacetime procurement practices were inadequate for impending wartime demands. President Roosevelt’s call for massive aircraft production in 1940 signaled the shift towards wartime contracting.
Following Pearl Harbor in 1941, the US entered World War II, prompting immediate wartime contracting needs. The First War Powers Act of 1941 authorized contracts “without regard to provisions of law,” delegating this power to the War and Navy departments. The War Production Board, established in 1942, directed war procurement and prioritized resource allocation, favoring negotiated contracts over formal advertising. Cost and pricing analyses and negotiated pricing became hallmarks of WWII procurement.
The expansion of the Army Air Forces led to the establishment of procurement district offices across the US, staffed by thousands of personnel. Plant representative offices (AAFPROs) and area offices were created to manage contracts at major defense plants and industrial centers. After the war, procurement districts were replaced by air procurement field offices, and plant representative offices were reduced in number. The newly formed U.S. Air Force inherited this contract management structure in 1947.
The Armed Services Procurement Act of 1947 standardized procurement methods across military departments and mandated formal advertising, implemented through the Armed Services Procurement Regulation (later the Defense Acquisition Regulation).
1950s and 1960s: Decentralization and the Rise of DCAS
The 1950s saw a trend towards negotiated and cost-reimbursement contracts, particularly for complex weapons and aerospace systems. Efforts to increase competition and improve contractor performance evaluation also emerged. The 1960s focused on refining pricing and controlling excessive profits.
The Air Force decentralized procurement in the early 1950s, establishing air procurement districts, regional offices, and expanding plant representative offices (AFPROs). In 1962, air procurement districts became Air Force contract management districts (AFCMD), and procurement offices became contract management offices. A major Air Force procurement realignment in 1969 granted procurement authority to various commands and agencies.
Army procurement during WWII was managed by technical services. Post-war, the trend was towards regionally centralized procurement. In 1962, the Army Materiel Command assumed responsibility for most Army procurement functions.
The Navy’s centralized procurement by technical bureaus continued post-WWII. Navy Systems Commands replaced technical bureaus in 1966, and the Office of Naval Material became the Naval Material Command, setting Navy procurement policy.
The increasing complexity of defense contracts and the need for uniform field contract management led to the establishment of the Defense Contract Administration Services (DCAS) in 1964 under the Defense Logistics Agency (DLA). DCAS consolidated contract management functions from military departments and DSA, aiming to reduce manpower, costs, and streamline procedures. DCAS provided services including contract administration, performance surveillance, inspection, property accounting, security clearances, and contractor payments. Key plant representatives and construction contracts remained outside DCAS consolidation.
Eleven Defense Contract Administration Services Regions (DCASRs) were activated in 1965, further subdivided into management areas and plant representative offices. NASA became a major non-DoD user of DCAS services.
1970s – 1990s: Streamlining and the Birth of DCMA
In 1975, a major review of defense contract administration led to streamlining efforts. DCAS districts were eliminated in 1976. DLA studies in the late 1970s led to DCASR consolidations, reducing regions from 9 to 5 and management areas from 47 to 37 by 1979. Despite consolidations, military services retained 43 plant representative offices in FY 1986. The Federal Acquisition Regulation (FAR) was introduced in 1984 to standardize federal procurement practices.
In 1989, the Defense Management Report proposed consolidating almost all defense contract administration under a new Defense Contract Management Agency (DCMA). In 1990, the decision was made to consolidate within the existing DLA framework, creating the Defense Contract Management Command (DCMC) as a subordinate DLA command in February 1990. Military services transferred plant representative offices and contract administration functions to DCMC by June 1990. DCASRs became defense contract management regions (DCMRs), management areas became area operations (DCMAOs), and plant representative offices became defense plant representative offices (DPROs).
DCMC districts were established in 1990, and Defense Contract Management Command International (DCMCI) was created. By 1991, DCMC managed over 500,000 contracts worth over $750 billion. Process Oriented Contract Administration Services (PROCAS) was introduced in 1992 to improve contractor processes.
The 1990s brought relocations and new missions, including support for military contingencies and humanitarian operations like DESERT SHIELD/DESERT STORM, Somalia, Rwanda, Haiti, and Bosnia. DCMC also played a key role in acquisition initiatives like the DoD Single Process Initiative. DCMC continued to evolve, with further organizational changes and expansions in its responsibilities.
Modern Defense Contract Management: Complexity and Global Reach
By the late 1990s, the Defense Contract Management Command was managing a vast portfolio of over 352,000 prime contracts worth over $855 billion, covering more than 23,000 contractors globally. DCMC’s contract management encompassed diverse items and services across the entire acquisition lifecycle. The command has received numerous awards recognizing its accomplishments in defense acquisition.
The history of defense contract administration reflects a continuous evolution driven by wartime needs, technological advancements, and the constant pursuit of efficiency and accountability. From the rudimentary systems of the Revolutionary War to the sophisticated global operations of the modern Defense Contract Management Agency, the principles of effective contract administration remain vital to ensuring military readiness and responsible stewardship of taxpayer dollars.
