Deputy U.S. Defense Secretary William J. Lynn spoke recently about the bitter reality faced by the Defense Department and government contractors in the incongruous era of budget deficits and spending cuts, according to an article in Aviation Week.
The Defense Department says it needs between 2 and 3 percent growth, but Lynn said it is likely to only receive 1 percent.
So the difference must be made up creatively.
To help offset the cost overruns, which more than 40 percent of contracts suffer from, Lynn offered a deal to contractors. DoD will buy greater quantities, he said, if contractors cut unit costs, Aviation Week reported.
Lynn’s strategies have implications for defense contracting.
Namely, continued sales and profits for contracting, even as the Pentagon institutes a sharp reduction in its budget.
But it’s not exactly clear how the new strategies and realities will play out, and Lynn has acknowledged that much himself.
Also some “analysts are skeptical that the Pentagon can ‘guarantee’ to buy in higher quantities, noting that final funding authority rests with Congress,” Aviation Week wrote.
But credit should be given for “moving aggressively to get out in front of the problem,” the magazine concluded.