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Pentagon weapons purchasing reform underway

WASHINGTON, Oct 31 (Reuters) - Pentagon chief arms buyer John Young has laid some key groundwork in a drive to reform how the U.S. military buys billions of dollars of weapons, but he acknowledges it will fall largely to the new administration to keep the ball rolling.

Young told reporters on Thursday he was continuing to implement a wide range of reforms in the waning days of the Bush administration, including efforts to curb expensive additions of new requirements once a program begins.

A former congressional aide and one-time Navy acquisition chief, Young said he planned to keep pushing his reforms until the new administration tells him to leave.

He is generally well-regarded by lawmakers from both sides of the political aisle, so Young may wind up staying for several months into a new administration that will take office in January.

And the reforms he has begun will likely endure, analysts say, noting that both Democratic presidential candidate Barack Obama and his Republican rival, John McCain, have said they will take a hard look at runaway costs in defense programs.

Among other reforms, Young has stepped up scrutiny of new program starts, is requiring full funding of new programs, and has set up joint panels to review programs to develop new radars and other equipment to avoid costly duplication.

Young has also pressed the services to fund the development of competitive prototypes before they make decisions about picking a winner in big-ticket competitions.

He said Defense Secretary Robert Gates and Deputy Secretary Gordon England have given him the power to ensure that acquisition programs run on budget and on schedule.

Gates and England were “tired of seeing cost growth, and I’ve got a lot of license to go stop it,” Young said.

Young said any incoming administration would carefully evaluate major programs, but the Pentagon was working hard to finalize a budget proposal for 2010-2015 that would provide a good template for the future.

CONTESTED CONTRACTS

The Pentagon's handling of major weapons deals has come under increased scrutiny in recent years after a huge procurement scandal in 2004 that sent a former top Air Force acquisition official and Boeing Co's BA.N former chief financial officer to federal prison for ethics violations.

In addition, the nonpartisan Government Accountability Office has upheld challenges against some big weapons contracts, and a federal claims court has ruled against the military services in several others.

The Pentagon recently decided to defer action on two of the contested contracts -- a $35 billion competition between Boeing and Northrop Grumman Corp NOC.N for new refueling tankers, and a $15 billion competition for new combat helicopters -- until the new administration is in place.

Young's office also canceled a $6.2 billion Army helicopter deal with Textron Inc TXT.N due to cost overruns and delays, and the Navy announced it would halt a new destroyer program after three ships instead of seven.

Young said it was clear that some changes were needed, but bristled at any suggestion that the Defense Department’s acquisition system is “totally broken,” and insisted that the Pentagon works on hundreds of programs successfully each year.

Jim McAleese, a Virginia-based defense consultant, said Young’s efforts would “certainly generate continued value into the next administration.”

He cited Young’s work on tying contractor performance to profits through award fees and said the services knew Young would aggressively challenge all aspects of a program’s technical, schedule and cost performance.

Young said his staff had identified about $10 billion in savings across the Pentagon’s proposed budget for fiscal years 2010 through 2015, and $5 billion more in later years. He said he had set a target of $30 billion in additional savings.

The GAO reported earlier this year that cost overruns on 95 major Pentagon programs amounted to $295 billion, a report that has already generated hearings in Congress as lawmakers explore ways to get Pentagon weapons-buying problems under control.

Young said the savings identified would come from moves to buy weapons in bigger quantities, or to accelerate purchases, moves that would reduce costs in the longer term.

Nearly a dozen major weapons programs would be adjusted in the next Pentagon budget to reflect the changes, he said, although he did not name any specific programs.

AIR FORCE DISAPPOINTMENT

Young singled out the Air Force as one service that has repeatedly underfunded programs like the Transformational Satellite program (TSAT) in its budget each year in the hope that the Pentagon or Congress would make up the difference.

“This one of those cancers on the enterprise that I don’t totally control,” Young said.

Young said he was disappointed about the Air Force’s handling of the $15 billion combat helicopter contest. He said he was poised to approve a contract award, but the decision had to be delayed because the Air Force did not properly inform bidders that it had added an evaluation factor to the competition.

“I’m actually, to be honest with you, somewhat disappointed in that. I can tell you my leadership is approaching unhappy with that,” Young said. (Reporting by Andrea Shalal-Esa; Editing by Tim Dobbyn)

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