March 26, 2009 / 7:30 PM / 8 years ago

Harvard defense expert aims to fight Pentagon cost overruns

WASHINGTON, March 26 (Reuters) - President Barack Obama's nominee to fix Pentagon purchasing problems vowed Thursday to root out cost overruns in major arms programs, fearing the $150 billion arms-procurement budget may be on its way to becoming unaffordable.

Ashton Carter, a physicist, international-security expert and Harvard University professor, told his Senate confirmation hearing he expected funding for big-ticket programs to be under "increasing pressure in the future."

If confirmed as expected, Carter would become under secretary of defense for acquisition, technology and logistics. He said he would go program by program to "see if there isn't more to that iceberg" of budget overruns, schedule slips and performance shortfalls.

"We cannot change history," he added in reply to advance questions from the Armed Services Committee. "But it is important to assess whether programs that have already experienced cost growth are still out of control and whether they can still be afforded."

Taken as a whole, Carter's remarks could spell problems for a range of programs led by Lockheed Martin Corp (LMT.N), Boeing Co (BA.N), Northrop Grumman Corp (NOC.N), General Dynamics Corp (GD.N), BAE Systems Plc (BAES.L) and Raytheon Co (RTN.N) -- respectively the Pentagon's top six suppliers by sales.

The acquisition complex that Carter would take over has been widely faulted for a series of institutional, bureaucratic and contracting failures, including what Carter called "low-balling" costs and schedule estimates at arms programs' outset.

The bill for the Defense Department's 95 major weapon procurement programs now totals $295 billion over their original budgets even though unit quantities and performance expectations have been cut to hold costs down, the nonpartisan Government Accountability Office found last year.

Obama said on Tuesday there was a consensus on a need to fix this problem. But, he said, taking on defense contractors, their lobbyists and parochial interests in Congress -- sensitive to jobs that arms programs provide constituents -- would be politically difficult.

"I think everybody in this town knows that the politics of changing procurement is tough," Obama told a prime-time news conference.

Defense Secretary Robert Gates has said the post Sept. 11 "spigot" on military spending is closing as the government devotes hundreds of billions of dollars to the worst financial crisis since the Great Depression.

Carter was asked in a questionnaire released by the committee about the affordability of more than $150 billion now going to buy major weapons each year.

A growing share funds a few very large systems such as Lockheed's F-35 Joint Strike Fighter, the Boeing-led Army modernization centerpiece known as Future Combat Systems and ballistic missile defense, the questionnaire said.

"Do you believe that the current investment budget for major systems is affordable" given U.S. budget trends and competing priorities? he was asked.

"I am concerned that it may not be," Carter wrote. Asked in the hearing about the roughly $10 billion spent annually on missile defense, the Pentagon's largest single weapons development outlay, he said there were a lot of ways the United States could be attacked with nuclear, chemical or biological weapons, not just those carried by a ballistic missile.

"I would say we have to have walls as well as a roof," he added.

Responding to Sen. Carl Levin, the Michigan Democrat who chairs the committee, Carter said he considered it imperative to subject costly missile defense systems to "operationally realistic testing."

In an exchange with Sen. John McCain of Arizona, the panel's top Republican, Carter said he would push for as much competition for contracts as possible despite industry concentration over the past 20 years.

McCain, citing Future Combat Systems and the F-35 fighter, told Carter without elaborating: "I just don't see the funding being there to fund these programs that have already been initiated."

In response to Carter's testimony, the Aerospace Industries Association, the chief lobbying and trade group for U.S. arms makers, said it would be a mistake to sacrifice defense modernization -- "and our future readiness" -- for short-term budget relief.

Carter served as assistant secretary of defense for international security policy during former President Bill Clinton's first term.

He is chairman of the International & Global Affairs faculty at Harvard's John F. Kennedy School of Government. Carter also serves as co-director of the "Preventive Defense Project" with former Defense Secretary William Perry. The project aims to thwart security challenges to the United States.

Reporting by Jim Wolf; editing by Bernard Orr

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