Pentagon procurement, budget pose big challenges

By Andrea Shalal-Esa

WASHINGTON (Reuters) - The next U.S. administration must take quick action to reform the way the Pentagon buys weapons, terminate some programs, and revamp how it creates annual budgets, according to a think tank led by one of the leading contenders for the job of defense secretary.

The Center for Strategic and International Studies said it had carefully studied defense reforms begun by the Bush administration over the past eight months, so the Pentagon's new leaders could hit the ground running.

A few of the reforms undertaken by the Bush administration had been successful, it said, but most "either somehow missed their mark or were never fully implemented."

Two other initiatives aimed at improving the budget process and pushing the services to develop joint military concepts had failed or even damaged efficiency, the study said.

CSIS is headed by John Hamre, a deputy defense secretary under former President Bill Clinton whose name has emerged as a possible defense secretary for President-elect Barack Obama.

Kathleen Hicks, who directed the study for CSIS, also thanked other defense experts for their help, including Michele Flournoy, the president of the Center for a New American Security who is part of Obama's Pentagon transition team, and Jacques Gansler, a former arms buyer under Clinton who has been named as a contender for the deputy defense secretary job.

Defense companies, worried about the long-term fate of big-ticket weapons programs, have been waiting anxiously for any news about Obama choice for defense secretary and other key positions in the Pentagon.

10 REFORMS

Mounting budget pressures, the global economic crisis and an expected drawdown of U.S. troops in Iraq have convinced many analysts and industry officials that defense spending will level off or decline over the coming years.

CSIS said it identified a list of 10 reforms, topped by the urgent need to improve how the Pentagon buys its weapons.

The study said the Pentagon continued to face fundamental problems with its acquisition system despite repeated reform efforts, including cost increases that continued to plague major programs, and signs that many programs were significantly underfunded in long-range budget plans through 2015.

CSIS said the current administration had explored various acquisition reforms, goaded by more than 130 reports and commissions, but "the missing element ... has been a strong focus on implementation, execution and follow-up."

The next administration should institutionalize initiatives begun by the Pentagon's current chief arms buyer John Young, including a push for competitive prototypes, efforts to control costs and requirements, and tough early program reviews.

"Acquisition improvements will not occur without realistic costing of programs and alignment of the budget with those costs. Full funding will be unaffordable without termination of some programs," it said, without naming any specific programs.

The Obama administration will have to address these issues promptly and can't wait until it is building its fiscal 2011 budget to make tough choices, CSIS said.