The Pentagon overreacted when it emphasized its desire for a variety of fixed-price contract with industry and will acknowledge the need for varied types of business deals in a new acquisition effort, a senior official said.

Under Secretary of Defense for Acquisition, Technology and Logistics Frank Kendall provided more details yesterday about “Better Buying Power 2.0,” an updated version of a program to make the defense acquisition system more efficient that Deputy Defense Secretary Ashton Carter created two years ago.

Kendall said the new and revised Better Buying Power effort will be rolled out to the defense industry in the coming weeks. It is intended to get Pentagon officials “thinking better about the contract type they use” for deals with the defense industry, he said.

“(In) the first iteration of Better Buying Power, we emphasized fixed-price, incentive-fee contracts. What happened was a bit of an overreaction,” Kendall said yesterday at a Capitol Hill event sponsored by the Aerospace Industries Association (AIA).

He said some Pentagon officials incorrectly thought having that type of contract–which is popular with lawmakers–was the “solution” to use as they work to keep weapons programs on track. Contractors, meanwhile, tend to not like fixed-priced contracts–which require them to pay for cost increases–for programs that have new technologies and future costs that are hard to predict. Kendall said Pentagon officials are acknowledging that other types of contracts still have their place in deals with the defense industry.

“We want them to use the right type of contract for whatever it is they’re doing,” Kendall said. “We have eight contract types for a reason.” Those eight contract varieties include cost-plus ones that put government on the hook for at least some cost overruns.

The Pentagon still wants to use “more” fixed-price, incentive-fee contracts, Kendall told the Capitol Hill audience, particularly for weapon systems in early production.

Kendall talked earlier this month about his plans to revise the Better Buying Power initiative, telling a defense-industry conference that Pentagon officials found over the past two years that “some of those things worked very well, some of them have not turned out to be all that productive, others have been difficult to implement, and we have more work to do.” (Defense Daily, Sept. 10)

Kendall provided more details yesterday about the revamped effort. He said the Pentagon will provide a draft of the new program to defense firms “in the next few weeks” to garner feedback.

He said the effort will still “require affordability,” having it as a requirement of weapons programs. The Pentagon can no longer keep alive programs that it simply can’t afford, he said.

“We should have realized that we couldn’t afford them,” he said about programs canceled after costly research efforts. “We should not have started them.”

He gave the example of the Marine Corps’ decade-long program to develop an Expeditionary Fighting Vehicle, a costly program canceled before any of the vehicles were fielded.

Kendall also said “should-costs” analyses of programs are “here to stay.”

“Should-cost is part of a cultural change as far as I’m concerned,” he said. In that new culture, he said, Pentagon officials are encouraged to save money on programs, using their should-cost analyses as guides instead of the presumably-higher funding in the budget.

The revamped Better Buying Initiative also seeks to “eliminate bureaucracy” in the Pentagon and improve workforce development for the Pentagon’s acquisition community, Kendall said. He also wants service chiefs to have a more-active role in developing requirements for weapon systems.

Kendall also is undertaking the task of rewriting DoD Instruction 5000.02, which dictates how the Pentagon acquisition system operates.