The Pentagon’s top weapons buyer on Tuesday said the cost overrun penalty proposed in the 2016 National Defense Authorization Act is unlikely to be effective as a way to hold officials accountable for going over budget.
If signed into law, the new rule would require a military service to pay a 3 percent fine on any cost overrun for a defense acquisition program. That money would go into a fund for prototyping controlled by the undersecretary of defense for acquisition, technology and logistics.
“It’s an interesting idea,” Frank Kendall, undersecretary of defense for acquisition, technology and logistics, said during a Defense One event. “The problem with it that I see is that it would [kick in] long after whatever decision it was that got us in trouble financially.”
Another issue is that the NDAA doesn’t specify how to transfer the money from the services to the prototyping fund, he said. “We’re looking at that now to see how we could do this legally because we can’t arbitrarily take money away from specific accounts,” he said. One option is using a reprogramming request to move funding around.
Kendall’s office is already looking into what it will take to implement the new acquisition reform rules because he predicts that—although Obama has said he will veto the NDAA over concerns about a boost to wartime spending—the president will eventually sign it once those funds are stripped from the bill.
After the Senate and House armed service committees unveiled their versions of the NDAA earlier this year, Kendall noted his opposition to several provisions in the Senate bill. Those more “egregious parts” were removed by lawmakers during the reconciliation process, resulting in proposed legislation that gives the office of secretary of defense (OSD) “far more latitude” in implementing the new policies, he said.
Senate Armed Services Committee Chairman John McCain (R-Ariz.), one of the staunchest supporters of the cost overrun penalty, told Defense Daily he would be willing to work with Kendall.
“We’ll be glad to look at any recommendations he might have,” he said Tuesday afternoon.