* First phase of reforms generated savings
* More work needed to increase cost-consciousness at
* Final guidelines due out in January
By Andrea Shalal-Esa
WASHINGTON, Nov 13 The Pentagon on Tuesday
released the next version of its "better buying power"
initiative, saying the U.S. military needed to "wring every
possible cent of value" from the dwindling dollars in the U.S.
Deputy Defense Secretary Ashton Carter said the first
version of the initiative, launched in 2010 when he was the
Pentagon's chief weapons buyer, had generated some savings, but
there was more work to do.
"We've tried things that have worked, we've tried things
that haven't worked. We've learned," he told a news conference.
Carter said a focus on affordability had allowed the Navy to
shave $2 billion off the projected cost of a new program to
replace its aging Ohio-class submarines, plus $300 million more
from the DDG-51 destroyer program.
The Air Force was prioritizing affordability targets on its
program to build a new bomber, while the Army was cutting costs
on ammunition purchases by pumping up competition and
encouraging more small business participation, he said.
Frank Kendall, who served as Carter's deputy before moving
up to become undersecretary for acquisition, technology and
logistics, previewed the new initiative, dubbed Better Buying
Power 2.0, last week, noting that it had factored in concerns
voiced by industry in recent years.
He said companies and lawmakers could comment on the draft
that was released on Tuesday over the next two months, before
the department issued a final version in January.
"It turns out that defense acquisition is a pretty
complicated subject, and there aren't easy solutions that are
going to ... make everything infinitely better over night with
one or two policy changes," Kendall said.
Kendall said the department would develop a database to help
inform its reforms, try to come up with better incentives for
industry to do better on programs, and enforce new affordability
caps to give them more teeth.
He said the department would back off using fixed price
contracts for development programs, which were widely opposed by
industry, and apply them more to programs that were in low-rate
The Pentagon would also redouble its efforts to create a
preferred supplier program, and planned to target service
contracts for additional reforms, he said.
Lockheed Martin Corp, Boeing Co, Northrop
Grumman Corp, General Dynamics Corp, Raytheon Co
and other defense firms are carefully watching the
Pentagon's approach to contracts as they brace for lower defense
spending after more than a decade of growth.
In addition, the defense budget faces $500 billion in
further cuts due to start taking effect in January unless the
United States avoids the so-called fiscal cliff.
Kendall said that the budget crisis facing the Pentagon
could help accelerate the needed changes, although he warned
that additional across-the-board cuts due to take effect in
January would have a "devastating effect" on the whole effort.
In recent years, many of the companies have criticized the
Pentagon's war on overhead costs, arguing that government
oversight itself sometimes makes weapons more expensive. They
have also cited long delays in getting contracts signed.
Kendall told reporters on Tuesday that he was particularly
troubled by the long delays and vowed to work through the long
backlog in audits that were holding up quicker contract awards.
He said the first phase of the better buying power
initiative had already increased the "cost-consciousness" of
acquisition officials in the Pentagon, but more work and
training were needed. And ultimately, he said, the department
would likely have to revisit the reforms again in several years.
Cutting production rates would raise the cost of individual
weapons and stretch out development programs for longer than was
optimal, he said.