UPDATE 2-Obama plan vows to end waste in U.S. arms programs

(Adds comments from defense secretary)

WASHINGTON, Feb 26 (Reuters) - The Obama administration on Thursday vowed to end years of cost overruns and schedule delays in U.S. weapons programs, calling acquisition reform one of the Pentagon’s highest priorities.

The fiscal 2010 budget overview released on Thursday called for a 4 percent increase in the Pentagon’s base budget to $533.7 billion, to increase the size of the Army and Marine Corps, improve medical services for wounded troops, and reform the way the Department of Defense buys weapons.

The plan did not include any details about specific weapons programs that may be targeted for cancellation or cutbacks, although President Barack Obama this week said he would end Cold War programs that are not being used.

Those reform efforts are being closely watched by the Pentagon's biggest suppliers, including 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 other big contractors.

The companies are girding for a leveling off of spending on big weapons programs after nearly a decade of massive growth. They are particularly worried about Obama’s promise to cancel some programs outright, but details are still scant.

Analysts say the F-22 fighter jet built by Lockheed, U.S. missile defense programs, a big Army modernization program led by Boeing, and a new Navy destroyer built by Northrop Grumman and General Dynamics are among the most vulnerable to cuts.

“The administration is committed to reforming the defense acquisition process so that taxpayer dollars are not wasted,” the budget outline said. “When it comes to the defense of our nation, it’s critical that every dollar is spent in the most effective way possible.”

Defense Secretary Robert Gates said the Pentagon was still reviewing which programs would be affected, but rising personnel costs are taking up more and more of the overall Pentagon budget, which leaves less money for procurement.

“We’ve been given a little more space than I expected. I’m grateful for that but I still think we’re going to have to make some hard choices,” Gates told reporters.

New weapons now being developed were among the largest, most expensive and technically difficult ever undertaken by the Pentagon, which put them at risk for performance failure, cost increases and schedule delays, the budget said.

The nonpartisan Government Accountability Office last year estimated that the Pentagon’s 95 major acquisition programs had average cost growth of 26 percent, amounting to around $295 billion -- more than half the annual budget.

To end these chronic problems, the administration said it would clamp down on the military’s practice of adding new requirements after weapons programs begin and set strict standards before program funding began to flow.

“The administration will set realistic requirements and stick to them and incorporate ‘best practices’ by not allowing programs to proceed from one stage of the acquisition cycle to the next until they have achieved the maturity to significantly lower the risk of cost growth and schedule slippage,” it said.

Gates said the process needed more discipline. “If we decide to take a risk with technology, it needs to be a conscious decision ... rather than stumbling into it.”

One big change would be better implementation of existing polices and procedures, said one administration official.

The Pentagon would focus more on further developing existing systems, rather than putting its money into risky new high technology weapons, said the official.

The administration would also seek to increase the size and quality of the Pentagon’s acquisition workforce through enhanced training.

The Senate Armed Services Committee this week introduced a package of reforms also targeted at ending massive cost overruns in weapons programs. (Reporting by Andrea Shalal-Esa, editing by Jackie Frank and Tim Dobbyn)