Carter: Budget Cuts Demand More DOD Buying Power

WASHINGTON, April 20, 2011 — As the Defense Depart­ment seeks addi­tion­al cost cuts to sup­port Pres­i­dent Barack Obama’s deficit-reduc­tion efforts, weapons sys­tems and oth­er major pro­cure­ment pro­grams cer­tain­ly will be on the table, but won’t be enough to achieve the president’s goals, the Pentagon’s acqui­si­tions chief said today.

DOD also must iden­ti­fy effi­cien­cies in the $400 bil­lion it spends each year on con­tract­ed goods and ser­vices and find ways to increase its buy­ing pow­er, Ash­ton B. Carter, under­sec­re­tary of defense for acqui­si­tion, tech­nol­o­gy and logis­tics, told a Her­itage Foun­da­tion audi­ence.

Defense Sec­re­tary Robert M. Gates has acknowl­edged that the Defense Depart­ment can’t be immune from the nation­al secu­ri­ty bud­get reduc­tions the pres­i­dent has called for, Carter said. As DOD pre­pares to launch a com­pre­hen­sive review of the impact of those reduc­tions in fis­cal 2013 and beyond, Carter said, it’s already clear that the days of “ever-increas­ing bud­gets of the post‑9/11 decade” are gone.

“What­ev­er the bud­get lev­els are, this will feel very dif­fer­ent to a group of gov­ern­ment and indus­try man­agers and con­gres­sion­al over­seers who have grown accus­tomed to a cir­cum­stance where they could always reach for more mon­ey when they encoun­tered a man­age­r­i­al or tech­ni­cal prob­lem or a dif­fi­cult choice,” he said.

And more than ever before, it’s clear that every­one –- from the pres­i­dent to the defense sec­re­tary to the tax­pay­er –- expects DOD to make every dol­lar it gets count. “In short, they want bet­ter val­ue for the defense dol­lar,” Carter said. “This is what the coun­try should expect, no mat­ter what size the defense bud­get is.”

DOD already has made big strides in improv­ing effi­cien­cy, he not­ed. Over the last cou­ple of years, the depart­ment has can­celled more than $300 bil­lion in acqui­si­tion pro­grams -– some that were under­per­form­ing, some that had become too cost­ly and some for capa­bil­i­ties DOD already had.

“We are 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,” Carter said, “and [we need] to get them for the mon­ey the coun­try can afford to give us.”

Addi­tion­al acqui­si­tion pro­grams are like­ly to get the ax as the depart­ment seeks addi­tion­al ways to cut costs, Carter said. And although DOD will con­tin­ue to ini­ti­ate new, need­ed pro­grams, he said, it won’t do so with­out a close eye on the bot­tom line.

“We aren’t going to start any­thing we can’t prove to our­selves will be afford­able in the time­frame it will be bought,” he said.

Carter used the exam­ple of the Ohio-class replace­ment mis­sile sub­ma­rine, now in the design stage and expect­ed to be built between 2020 and 2030. The first design pro­ject­ed a unit cost of $7 bil­lion per sub –- caus­ing the depart­ment to send it back to the draw­ing board to find changes that would bring down the cost with­out com­pro­mis­ing crit­i­cal capa­bil­i­ties. “We are not going to start some­thing that is so obvi­ous­ly not going to hap­pen,” Carter said. The same scruti­ny is going into the Air Force’s new long-range strate­gic strike bomber, the Army’s ground com­bat vehi­cle and the Marine Corps’ pres­i­den­tial heli­copter, he added.

While eye­ing acqui­si­tion sav­ings, Carter empha­sized that weapons sys­tems pro­cure­ment rep­re­sents about $100 bil­lion -– or one-sev­enth — of the defense bud­get. And of that, about 70 per­cent goes to sus­tain­ing sys­tems that already have been pro­cured. So as DOD seeks ways to cut costs, he said, it’s impos­si­ble to ignore the $400 bil­lion DOD spends each year on con­tract­ed goods and ser­vices.

“We need to take a com­pre­hen­sive look at our spend­ing, includ­ing, but not lim­it­ed to acqui­si­tion pro­grams,” he said. “And that is exact­ly what bet­ter buy­ing pow­er does.”

A 23-point roadmap already being imple­ment­ed seeks to improve that buy­ing pow­er, Carter said. It tar­gets afford­abil­i­ty and cost con­trols, gives indus­try incen­tives to be more pro­duc­tive and inno­v­a­tive, and pro­motes real com­pe­ti­tion. In addi­tion, he said, it aims to improve the way the depart­ment does busi­ness, improv­ing trade­craft in how it buys ser­vices and cut­ting through non­pro­duc­tive process­es and bureau­cra­cy.

“The alter­na­tive is bro­ken pro­grams, can­celled pro­grams, bud­get tur­bu­lence, uncer­tain­ty, ero­sion of the tax­pay­ers’ con­fi­dence that their tax dol­lar is well spent and, of course, ulti­mate­ly and most dam­ag­ing, fore­gone capa­bil­i­ty to the warfight­er,” Carter said.

In look­ing toward the future, Carter cit­ed the fis­cal 2011 bud­get as an exam­ple of how DOD can’t con­tin­ue to do busi­ness. The impact of con­tin­u­ing res­o­lu­tions and a bare­ly avert­ed gov­ern­ment shut­down caused what he called “not just inef­fi­cien­cy, but anti-effi­cien­cy” with­in the depart­ment.

“Each and every pro­gram man­ag­er in the depart­ment has had to upset care­ful­ly cal­i­brat­ed plans, stop or slow activ­i­ties only to restart them lat­er, defer the com­mence­ment of impor­tant new pro­grams and so forth,” he said. “And the result of this is not only delay, it is inef­fi­cien­cy. It is an uneco­nom­i­cal way to pro­ceed in this herky-jerky fash­ion with all of our pro­grams, pro­cure­ments and activ­i­ties.

“I don’t know how much this has cost us — [per­haps] bil­lions –- to oper­ate in this way,” he said. “It adds a dol­lop of cost over­head to every­thing we are doing. It is like a hid­den tax.”

As he focus­es on bud­gets, Carter said, his “Job 1” always is fixed on sup­port­ing troops involved in cur­rent oper­a­tions.

“That is an area where effi­cien­cy comes in, too, but effec­tive­ness is most of the chal­lenge,” he said. “It is a dai­ly chal­lenge … to make sure that the needs of those warfight­ers are met very rapid­ly. This means under­stand­ing what they need, fig­ur­ing out what to do about it [and] get­ting fund­ing.”

It’s crit­i­cal, he said, that DOD and Con­gress devel­op more respon­sive “fast lane” process­es that don’t “steal time from the warfight­er.”

Carter expressed lit­tle patience with inef­fi­cien­cies and red tape that bog down that sup­port.

“It’s April now in Afghanistan,” he said. “And every day that some­thing is sit­ting in some guy’s inbox [or] some con­tract audit has­n’t been accom­plished, is a day stolen from the fight. And that is out­ra­geous and unrea­son­able that we allow that to hap­pen, and we just can’t let it hap­pen.”

U.S. Depart­ment of Defense
Office of the Assis­tant Sec­re­tary of Defense (Pub­lic Affairs)

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