By Marina Malenic
Defense Department officials yesterday unveiled their plan to find more than $100 billion in savings within the Pentagon’s arms-purchasing budget.
Defense Secretary Robert Gates told reporters at the Pentagon that the department is “reforming the way it does business” in an attempt to find greater efficiency in its purchasing process.
“This process will take time, but I’m confident we’ll succeed,” Gates said yesterday.
Defense officials said earlier this month that the military services will each have to identify $2 billion in annual overhead and “lower-priority” programs in their five-year spending blueprints. The department is ultimately looking to divert $100 billion to current forces and modernization priorities. The armed services, Pentagon agencies and combatant commands are expected to submit cut proposals by July 31 (Defense Daily, June 7).
Top Pentagon arms buyer Ashton Carter, who met with industry officials earlier in the day to discuss the new initiative, said he and other defense acquisition officials are seeking to identify inefficiencies in contracting. He told reporters he is initiating a review of Pentagon acquisition and contracting, which will be to be run by a “value task force.” The review is expected to wrap up at the end of the summer and will culminate with new guidance from Carter on purchasing practices.
Carter also said inefficiencies in specific programs will be identified through the use of “should-cost” reviews. For example, the RQ-4 Global Hawk surveillance drone, by Northrop Grumman [NOC] has been criticized by the Air Force for higher than expected cost growth (Defense Daily, June 23). Carter said that program is “on a path to being unaffordable” and will be studied in detail to determine what is causing the suspected inefficiencies.
The Obama administration has requested $548.9 billion for the Pentagon’s fiscal 2011 spending, a number that does not include costs for the wars in Iraq and Afghanistan. The top line is a 1.8 percent over the current year’s budget. Approximately $400 billion out of the $700 billion overall budget, which includes war costs, is spent on weapons and services from contractors.
Carter insisted that profits for defense firms would not be hurt by the new initiative because it aims to cut costs and increase productivity. He said production processes “can be leaned out, with fewer people or less material.”
The Aerospace Industries Association, a top lobbying group for the defense and aerospace sector, said in a statement released yesterday that one of the most significant challenges to reducing costs “is that the government continues to impose new government-unique contracting regulations” on industry. The group argues that these rules were shown in 1994 to have increased the cost of defense products by 18 percent. And since then, “new requirements and additional costs continue to be imposed.” AIA recommended that the auditing firm Coopers and Lybrand, which conducted the 1994 estimate, provide a fresh review of those numbers.
In addition, the group called for:
- reform of the U.S. export control regime that favors U.S. businesses;
- legislation that uses the acquisition process to help purchase the best equipment at the best price;
- ratification of the U.S.-UK and the U.S.-Australia defense trade treaties;
- elimination of duplicative and overlapping auditing of industry; and
- stabilization of the Pentagon’s program requirements, procurement plans and budgets.