President Barack Obama said yesterday he will nominate Pentagon acquisition czar Ashton Carter to replace Bill Lynn as the deputy secretary of defense.

The tapping of Carter for the Pentagon’s No. 2 spot kicks off speculation in the defense industry about who will replace him in the powerful undersecretary of defense for acquisition, technology, and logistics post.

He principal deputy is Frank Kendall.

Kendall “has a government and business background–he worked at Raytheon and we believe he is quite mindful of providing contractors the ability to earn competitive returns when they perform on well on defense programs,” analyst Byron Callan, director of Capital Alpha Partners LLC in Washington, said yesterday.

Several defense observers predicted Carter will easily be approved as deputy defense secretary by the Senate Armed Services Committee (SASC) and full Senate.

The Pentagon announced that Lynn would step down on July 7, shortly after Defense Secretary Leon Panetta replaced Robert Gates as the civilian head of the Department of Defense.

Lynn, a former Pentagon comptroller and Raytheon [RTN] lobbyist, is credited with creating new Pentagon energy and cyber strategies.

Cater took the acquisition chief role in April 2009. He previously worked as chair of the International and Global Affairs faculty at Harvard University’s s Kennedy School of Government and co-director of the Preventive Defense Project.  He served as former president Bill Clinton’s assistant secretary of defense for international security policy from 1993 to 1996.

Obama also appointed Carter last week to a new Government Accountability and Transparency Board charged with cutting government waste, fraud, and abuse.