Bipartisan bill targets Pentagon waste

WASHINGTON (Reuters) - A bill designed to reward success and punish failure in managing hundreds of billions of dollars of Pentagon spending has been introduced by leaders of the House of Representatives Armed Services Committee.

The bipartisan measure rolled out Wednesday would boost the use of incentives to pull the Defense Department's financial management practices more in line with the private sector's.

The bill would promote individual performance assessments tied to "pay, promotion and the scope of their authority," said Representative Robert Andrews, chairman of a panel set up by the committee 13 months ago to study the Pentagon's contracting fiascoes.

It would give the defense secretary the ability to shift work among Defense Department organizations, "which is a very significant consequence" for failure to perform, the Democrat from New Jersey told reporters.

Andrews said the bill contained nothing that would disrupt employees' collectively bargained rights and predicted labor unions would support it.

Committee Chairman Ike Skelton, a Missouri Democrat, said he expected the legislation, if enacted into law, to save up to $135 billion taxpayer dollars over the next five years.

Referring to waste in Defense Department purchasing, Skelton told reporters at a press conference on the House lawn: "We've seen it spiral out of control."

Congress last year passed the Weapon Systems Acquisition Reform Act, signed into law by President Barack Obama in May. This required the Pentagon to step in earlier than before to combat cost overruns in major weapons programs.

The Pentagon's latest "selected acquisition report" to Congress for the year ended December 31 showed a net cost jump of $107 billion, or 7.2 percent, on its biggest arms programs.

Pricey hardware such as fighter jets, warships and missiles make up only about 20 percent of the Pentagon's acquisition spending. The Pentagon's biggest suppliers by prime contract value are Lockheed Martin Corp, Boeing Co and Northrop Grumman Corp.

The new legislation would address the remaining 80 percent of what the Pentagon buys -- much of it services -- with the $549 billion it has requested for defense spending next year, excluding funding for the wars in Iraq and Afghanistan.

The measure would use a carrot-and-stick approach to spur progress among Defense Department agencies toward producing auditable financial statements.

As of now, the U.S. Army Corps of Engineers, Civil Works, and the National Reconnaissance Office, a Pentagon intelligence arm, are alone among Defense Department agencies in achieving clean audit opinions on their financial statements, Representative Mike Conaway of Texas, the top Republican on the special panel that studied the matter, told Reuters.

He said auditable financial statements, a goal the Pentagon is scheduled to belatedly accomplish by 2017, would have the greatest impact of any overhaul on reducing waste, fraud and abuse.

The Defense Department had no immediate comment on the bill. Skelton said it would be incorporated into the House version of a fiscal 2011 defense spending measure to be voted on by the committee next month. That would force the Senate to weigh the measure when both chambers blend their authorization bills into a final product for Obama to sign into law.

The Aerospace Industries Association, military contractors' chief trade and lobbying group, said it was looking forward to working with the House and Senate on the matter.

"The bill contains some good provisions that could be helpful with acquisition reform," said Richard Sylvester, the group's vice president of acquisition policy.

(Reporting by Jim Wolf; Editing by Tim Dobbyn)