Acting Pentagon acquisition chief Frank Kendall warned the defense industry yesterday that failing to effectively execute programs in an environment of budget constraints and fewer resources will put them at risk of being cut.
“You’re in a competition you need to be aware of,” Kendall told industry representatives at a conference hosted by Aviation Week. “The competition is if you’re not succeeding, if you’re not executing well, if you’re not delivering on cost and schedule and so on you are vulnerable in this environment.”
“You’re going to have to be, I think, leaner to be successful,” he added. “You’re going to have to be competitive. You’re going to have to be smart about where the (Defense) Department is going. You have to execute well.”
Kendall pointed to the Air Force’s decision in its fiscal 2013 budget proposal released Monday to terminate the block 30 version of Northrop Grumman’s [NOC] Global Hawk unmanned aerial vehicle. While axing the program was in part driven by affordability, “a factor in that decision was: how was the program executed?” he said.
“If you’re not executing successfully I think you’re in trouble,” said Kendall, whose nomination to become undersecretary of acquisition, technology and logistics is before the Senate.
Kendall predicted the defense industry will emerge from the era of downsized spending healthy and stable, but is going to have to look for ways to compete effectively and reduce overhead costs. By making such requests, he emphasized that the Pentagon is not trying to cut into profit margins but instead wants improved performance.
“There has to be a reason to be in the defense business,” Kendall said.
Kendall acknowledged that the change in the acquisition community that must take place in the years ahead will be a “painful adjustment for all of us.” He said the Pentagon is going to have to better incentivize the value of completing programs under budget rather than continuing the culture of spending everything in the budget in one year to avoid cuts in subsequent years.
“We have a culture which tends to be about getting the contact awarded and getting the money obligated before the comptroller takes it away or because somebody will cut your budget next year if you don’t spend all your money,” he added. “We’ve got to overcome that.”
“We’ve got to reward people who do a much better job of trying to get as much value as possible–or provide as much value as possible from the industry side,” he said.