USA — Undersecretary Outlines Cost-saving Strategy

WASHINGTON, Nov. 16, 2010 — Afford­abil­i­ty, incen­tives and pro­duc­tiv­i­ty growth are the ingre­di­ents to get the most out of the next Defense Depart­ment bud­get, a top Pen­ta­gon offi­cial said today.
The depart­ment will have to become more effi­cient to sup­port troops while the bud­get flat­tens, Ash­ton B. Carter, under­sec­re­tary for acqui­si­tion, tech­nol­o­gy, and logis­tics, told a Cen­ter for Amer­i­can Progress audi­ence here.

In the exist­ing $700 bil­lion defense bud­get, Carter said, $400 bil­lion goes to con­tract­ed goods and ser­vices. Defense Sec­re­tary Robert M. Gates wants bet­ter pro­duc­tiv­i­ty growth – or more for their mon­ey — on that $400 bil­lion, he said.

Carter said he and Gates recent­ly co-authored a 20-page, 23-point strat­e­gy for find­ing bet­ter buy­ing pow­er in defense spend­ing. The strat­e­gy is a reflec­tion of the new, tighter bud­get era fol­low­ing a peri­od of “dou­ble-dig­it, year-after-year growth in the defense bud­get that’s been nec­es­sary by a war that’s still ongo­ing,” he said. “We need to man­age to a dif­fer­ent real­i­ty,” Carter said.

The depart­ment must “get to the point where we have things we do want and do need,” rather than acquir­ing items that are not nec­es­sary to sup­port the troops, he said.

Afford­abil­i­ty is key for new pro­grams and those under­way like the SSNBX nuclear mis­sile sub­ma­rine that will “age out” around 2020, Carter said. Orig­i­nal­ly, the design for each new sub­ma­rine was esti­mat­ed at $7 bil­lion in 2020 dol­lars, he said, but at that rate, a redesign would cost around $200 bil­lion over time, and “we wouldn’t be able to build any ships.” “We looked at fac­tors dri­ving the costs of the sub­ma­rine, and with­out com­pro­mis­ing crit­i­cal mil­i­tary capa­bil­i­ties, we cut back on the design in the inter­est of afford­abil­i­ty,” Carter said. The depart­ment is on track to cut the esti­mat­ed cost for the sub­ma­rine designs by 35 per­cent.

Stick­ing to what is afford­able, Carter said, “comes from dis­ci­pline, upfront, of say­ing I’m not going to pay that kind of mon­ey.’ ”

Like­wise, “We’ll do the same for the new pres­i­den­tial heli­copter, for replac­ing the can­celled bomber, and the next gen­er­a­tion of the Army’s ground com­bat vehi­cle,” the under­sec­re­tary said.

Carter used the joint strike fight­er as an exam­ple of a project in progress. “This is the cen­ter­piece of tac­ti­cal air mod­ern­iza­tion, the back­bone of tac­ti­cal air fleet,” he said. “Esti­ma­tors told us it would cost $50 mil­lion when the pro­gram began in 2002, but now it’s $92 mil­lion. I said ‘No, that’s not hap­pen­ing. We’ve got to get back to the orig­i­nal cost.’ ”

Anoth­er ele­ment to save mon­ey is by giv­ing incen­tives to con­trac­tors to spur pro­duc­tiv­i­ty growth, Carter said.

If a project’s cost comes in under bud­get, he said, the con­trac­tor and the depart­ment would share in the sav­ings, and if there’s an over-run, both share “the pain of it,” Carter said. That way, he said, “Both have incen­tives to con­trol costs and hit the cost tar­get.”

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

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