Department of Defense Secretary Robert M. Gates earlier this week outlined 23 changes for how DoD contracts goods and services aimed at boosting efficiency and productivity in defense spending.
The strategy is part of Gates’ efficiencies initiative created to save the department $100 billion over the next five years.
“We have not seen the productivity growth in the defense economy that we have seen and expect from the rest of the economy,” Gates told reporters during a Pentagon news briefing. Gates preceded Ashton B. Carter, undersecretary of defense for acquisition, technology and logistics who delivered a more detailed briefing of the changes.
Gates said defense contracting makes up roughly $400 billion out of the $700 billion the department spends each year.
“Consumers are accustomed to getting more for their money — a more powerful computer, wider functionality in mobile phones — every year,” he said. “When it comes to the defense sector, however, the taxpayers had to spend significantly more in order to get more. We need to reverse this trend.”
Under the guidance, the department will require program managers to set a new affordability target that cannot be changed without authority from Carter. Managers have to make sure the initial design is “constrained by its ultimate schedule and cost,” Gates said.
“This guidance will make programs more affordable without sacrificing capabilities,” Gates said, “and prevent us from embarking on programs that will need to be canceled when they prove unaffordable.”
The Pentagon will be launching several new programs in the near future, including the next-generation ballistic missile submarine, the ground combat vehicle, long-range strike systems for the Air Force and Navy, and the Marine Corps presidential helicopter, the defense secretary said, adding that the acquisition cost of these new programs is more than $200 billion.
Affordability will be incorporated from the start for all new programs, Gates said. The goal is to avoid another “half-billion-dollar presidential helicopter,” he said.
Providing an example of the affordability concept, Gates cited the next-generation ballistic missile submarine program, in which the Pentagon is trimming requirements without sacrificing capability. The per unit rate for the submarine had risen to $7 billion, he said, but now is about $5 billion. The goal is a reduction of 27 percent in a program where costs are projected to be more than $100 billion, he added.
Gates also wants to create leaner programs that will require not only an estimation of what they will cost under business as usual, but what they should cost if programs are managed effectively and hit cost objectives.
Reaching these goals will be good for both government and industry, the secretary said, as higher performance leads to higher financial reward. A number of changes will reward increased productivity and innovation, he added.