As the Pentagon prepares to search for $400 billion in future savings partly by cutting weapon systems, its top arms buyer said he plans to continue incentivizing industry through programs such as a new Superior Supplier Incentive Program.
Pentagon acquisition chief Ashton Carter said recently that more cuts to weapon programs–akin to the proposed termination of the Expeditionary Fighting Vehicle and Medium Extended Air Defense System–will be made in the fiscal year 2013 budget proposal early next year.
“There will undoubtedly be more cancellations of that kind,” he said during a speech at the Heritage Foundation, a conservative think tank in Washington.
Carter, however, did not name specific programs, and repeatedly said that the entire defense budget will come under scrutiny during a forthcoming review, “not just the dollars that are being spent on acquisition programs.” He hinted there will not be widespread weapon-system cancellations in the future.
“We’re getting to the point where most of the programs we now have under way, or which are getting under way, are military capabilities we do need and do want,” he said. “And we need to get them for the money the country can afford to give us.”
Thus, Carter described several ways he expects to “get more” goods and services “without more” money. This will be done through “better buying power” efforts–part of Defense Secretary Robert Gates’ push for $178 billion in efficiency savings over five years–now being implemented at the Pentagon, he said.
Since Carter began planning those purchasing reforms last year, President Barack Obama announced last week he plans to undertake a through review of the Pentagon’s budget and mission with military leaders to cut $400 billion in national-security spending by 2023.
The better-buying-power initiatives getting underway, Carter said yesterday, “cover the ways that government can improve its own performance and incentivize better performance in industry.”
Those efforts include “incentivizing productivity and innovation in industry,” “targeting affordability and cost growth” with new and existing weapons programs, promotion of “real” competition for programs, improving the Pentagon’s purchase of services, and reducing “nonproductive” processes and bureaucracy, he said.
To encourage cost reduction and innovation by industry, Carter said the Pentagon will start a new Superior Supplier Incentive Program, or SSIP, this year.
It “will reward and recognize superior performers in the defense industry on making technology investments, including through independent (research and development), to reward and incentivize innovation,” he said.
Carter said the superior-supplier program grew out of a similar Navy-specific effort that was in the works; however, before it was implemented he decided to expand it to apply to all of the Pentagon.
Defense officials will use a database that documents the performance of suppliers to identify which ones are “superior,” Carter said. Those companies will receive their bonuses after they receive contracts from the Pentagon.
“This will not figure in source selection, it will figure in the things like performance payments and other things that are real incentives and real rewards,” he said.
And the Superior Supplier Incentive Program will indirectly identify poor-performing contractors, he added, because “by implication those who are not on the list are not doing what we’re asking them to do.”
Carter said that in general “idea of incentives (for defense contractors) is very important.”
“What we’re trying to reduce here in these ongoing activities, whether they be procurement of goods or services, is cost,” he said. “It’s not about profit for those performing the work. That’s not only wrong, it’s sort of backwards. We use profit as an incentive to cut cost.”
Carter also made a pitch yesterday for creating a fund that the Pentagon can readily tap to buy urgently needed equipment for troops in theater. The Pentagon requested the establishment of such a fund in its FY ’12 budget proposal now before Congress. This setup would help the Pentagon buy war-related equipment quickly, without waiting for congressional committees to review requests to reprogram funds in the Pentagon’s coffers, he said.