U.S. Navy names best-performing arms suppliers for 2014

Fri Jun 13, 2014 7:59pm EDT

* Top weapons buyer says "No silver bullet"

* U.S. Navy names General Dynamics, Lockheed units "superior suppliers"

* Shipbuilder Huntington Ingalls fails to make U.S. Navy list

By Andrea Shalal

WASHINGTON, June 13 (Reuters) - The U.S. Navy on Friday named units of top arms makers General Dynamics, Lockheed Martin Corp and Raytheon Co as part of its list of the top-performing nine suppliers for 2014 based on their performance over the last three years.

The Pentagon said on Friday it would use such public recognition of "superior suppliers," incentives and competition as key tools in its ongoing drive to end years of cost overruns and schedule delays on key weapons programs.

Top U.S. arms buyer Frank Kendall said the Navy developed the list as a pilot project this year, but he had asked the Air Force and Army to compile their own lists this year as part of the continuing effort to improve defense acquisition.

"We want to recognize their performance, but we also want to motivate our performers who are not on that list to do better," Kendall told reporters as he released a second annual report on the Pentagon's procurement, development and operating budgets, which totalled over $350 billion in fiscal 2015 budget request.

The nine companies also included units of General Electric , Northrop Grumman Corp, a venture of Lockheed and Sikorsky Aircraft, a unit of United Technologies Corp, and Britain's Rolls Royce Holdings Plc.

One notable exception was Huntington Ingalls Industries , one of the Navy's largest suppliers, and builder of aircraft carriers, submarines and other warships.

Navy acquisition chief Sean Stackley said the suppliers that did make the list would be offered the chance to reduce certain contract requirements, including removal of some procedures, inspections or requirements, which could lead to cost savings.

Kendall said the Pentagon had imposed affordability targets on 30 of its biggest programs and all but two or three were within those caps. But he said uncertainty about future budget levels continued to hamper more efficient investment decisions.

He said the Pentagon remained focused on improving the way it buys hundreds of billions of dollars of weapons and services each year, but there was no single "silver bullet" to do that.

Instead, he said the department needed to work on multiple fronts, including efforts to simplify the overlapping laws that govern defense acquisitions, better training for federal workers that administer contracts, and deeper analysis of past programs.

"Defense acquisition is complicated and varying," he wrote in the 116-page report. "We must empower, encourage and train our workforce to think - not dictate a cookbook that workforce members blindly follow."

The report cited good results from contracts with incentive fees, but said incentives were sometimes counterproductive and the Pentagon did not always use such measures as well as it could.

Kendall also highlighted the importance of competition, but said the department needed to get more creative about injecting competition into the process given declining defense budgets and growing consolidation in the industry. (Reporting by Andrea Shalal; Editing by Diane Craft)

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