June 3, 2008 / 9:23 PM / 11 years ago

US Senators decry weapon costs, eye further reform

WASHINGTON, June 3 (Reuters) - Weapons costs have continued to soar despite recent reforms efforts, but the problem has now now reached crisis proportions and must be addressed by the Pentagon, Congress and industry, U.S. senators said on Tuesday.

Senate Armed Services Committee Chairman Carl Levin, a Michigan Democrat, sounded the alarm at a hearing on Tuesday. He cited a recent Government Accountability Office (GAO) report which said cost overruns on 95 major weapons programs now amounted to a staggering $295 billion — money Levin said could have been spent on additional weapons for U.S. troops.

“For $295 billion, we could buy, at current prices, two new aircraft carriers for $10 billion each and 8 Virginia class submarines for $2.5 billion each, and 500 V-22 Ospreys for $120 million each, and 500 Joint Strike Fighters for $110 million each, and 10,0000 MRAPs (mine-resistant vehicles) for $1.4 million each — all of that and still have enough money left over to pay for the entire $130 billion Future Combat System program,” Levin said.

Katherine Schinasi, managing director of acquisition at the nonpartisan GAO, said the Pentagon and Congress had taken steps to reform weapons procurement, but weapons programs continued to take longer, cost more and deliver fewer capabilities than originally planned.

Spending on development and procurement was expected to total $900 billion over the next five years, she said, noting that poor outcomes reverberated across the government. “Every dollar wasted ... is money not available for other internal and external budget priorities — such as the war on terror and mandatory payments to growing entitlement programs,” she said.

She said not much had changed over the past 10 years, but recent efforts by the Senate committee and the Pentagon’s new acquisition chief, John Young, who was confirmed in his job last November, could signal the start of meaningful reforms.

“This is the closest we’ve come,” Schinasi told Reuters after the hearing. “If there’s a time to do it, it’s now because the consequences are so grave.”

Levin said he would offer an amendment to the defense spending bill, which is coming up for a vote in the Senate later this month, to establish an independent Pentagon cost assessment office. That office, he said, could help end the current self-defeating cycle of too-optimistic cost estimates and unrealistic performance assessments.

Young, the former Navy acquisition chief, stressed his commitment to improving the acquisition process and said he had already implemented measures to improve oversight, halt growth in military requirements, stabilize funding and ensure that programs did not rely on technologies that were not ready.

He said reforms — such as requiring industry to build weapons prototypes before the Pentagon approves large-scale orders — needed time to take effect, possibly years.

“Our acquisition system is not on a downward spiral — it is on a path to improvement,” he said. “We need to give this program a chance to work,” he said.

Young said the recent GAO report overstated the magnitude of many issues by focusing on a few poor performers. Some material costs had also doubled or more in recent years, which also drove prices higher despite the Pentagon’s best efforts.

In addition, cuts in quantities ordered — such as Navy decision to trim its purchases of Lockheed Martin Corp (LMT.N) F-35 Joint Strike Fighters — also drove unit costs higher, but could not be blamed on individual contractors.

Sen. Claire McCaskill, a Missouri Democrat, said one key area of concern was rapid turnover among Pentagon program managers, which limited the ability to hold individuals accountable when their programs went awry.

“How can we expect any accountability if you know you’re going to be gone when the you-know-what hits the fan,” she said, noting managers were now “turning over like hot cakes.”

Young said at least seven or eight government managers had been disciplined for problems with their programs, as well as some officials in industry.

Lack of adequate staffing was an issue, he said, noting the Pentagon development budget had increased by 70 percent and procurement by 34 percent, but there had been no increase in the number of acquisition experts to handle the extra work.

It was particularly difficult to entice mid-level industry experts to do a short stint in government, Young said, citing congressional restrictions on post-government employment.

“This legislation will certainly make the wall between industry and government even higher,” he said.

Congress tightened the rules after the former No. 2 Air Force acquisition official, who took a lucrative job with Boeing Co (BA.N), was sentenced to federal prison in 2004 for violating conflict of interest laws. (Editing by Tim Dobbyn)

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