WASHINGTON — Improved acquisitions processes already are resulting in Defense Department cost savings, the undersecretary of defense for acquisitions, technology and logistics told a congressional panel today.
Ashton B. Carter outlined his plans to prune acquisitions spending, as part of a hearing before the House Armed Services Committee to discuss Defense Secretary Robert M. Gates’ broader initiative to redirect funding from duplicative and unnecessary overhead costs to high-priority warfighter needs. Carter was joined by Deputy Defense Secretary William J. Lynn III and Marine Corps Gen. James E. Cartwright, vice chairman of the Joint Chiefs of Staff.
Carter oversees the department’s $400 billion annual expenditures in contracted goods and services. Acquisitions reform is a major component of Gates’ initiative to identify $100 billion in savings over five years in the department’s $700 billion annual budget.
“We have to fundamentally change how we do business,” Carter said. “We cannot give our troops what they need unless we do so.”
Too often, Carter said, DOD leaders have returned to Congress to ask for more money for weapons systems or other products without improvement in the acquisitions monitoring process. As an example, he noted that department officials had to tell Congress last year that F‑35 Joint Strike Fighter costs ballooned from a $50 million per aircraft estimate in 2002 to $93 million per aircraft.
Department officials began working with contractors to bring down the costs of the F‑35 and other weapons systems, Carter said, either by changing designs without compromising capabilities, or by signing multi-year contracts. The services have been able to reallocate $580 million in savings through contractor redesigns, he said, and recently saved $600 million in acquiring the FA-18 aircraft by signing a multi-year contract.
Carter said department officials realized savings last year by cancelling programs that either hadn’t performed or had become obsolete.
With the new efficiencies initiative, he said, it’s imperative for the department to “find savings in programs we do need.”
Under the plan, Carter said, officials will strive for “productivity growth” – a business term meaning to do more without more – and consider what products and services should cost, rather than accepting what contractors say they will cost.
Gates also has directed that there be real competition for contracts. And much of that can be done, Carter said, through better processes in the department’s acquisitions office. In fact, he said, $55 billion in contracts last year were found to have received only one bid, usually by the incumbent contractor. Even two bids per contract are not enough, he said.
“Competition is the single, most powerful tool to drive productivity,” Carter said. “We must stop deluding ourselves that two bids is real competition.”
U.S. Department of Defense
Office of the Assistant Secretary of Defense (Public Affairs)