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Major Defense Acquisition Shakeup Coming

The Pentagon isn’t talking but senior defense industry execs certainly are, and they are mighty worried. Ashton Carter, the Pentagon’s chief weapons buyer, summoned execs from leading defense industry firms to Washington for a hastily called meeting today to discuss cost cutting, efficiency and policy changes in the way the military buys weapons.

The calls from Carter’s office went out Friday morning, sending anxiety through the executive suites of the big defense firms. Our own Colin Clark reports:

“This is so last minute,” said one industry observer, noting that the Pentagon has shared no information with industry yet. “If this was seen as collaborative effort on how to fix challenges you would see much less anxiety since it would then be predictable.”

Another defense source said “industry “is quite apprehensive about what cumulative impact this may have on profits.”

Carter will meet this morning to brief industrialists on what’s coming at the Center for Strategic and International Studies, located on the K St. corridor in Washington, D.C. A second meeting with military acquisition officials is scheduled for this afternoon at the National Defense University.

Carter’s message to industry is a follow up to Defense Secretary Robert Gates’ speech at the Eisenhower Library in Abilene, Kansas, where he quoted Eisenhower’s warnings about the “grave implications” of “an immense military establishment and a large arms industry.” Gates announced then a DoD-wide effort to cut overhead costs by eliminating redundant levels of management.

He also said larger changes were in the works in the basic budgeting process and how the military services come up with weapons requirements.

The Defense Department must take a hard look at every aspect of how it is organized, staffed, and operated – indeed, every aspect of how it does business. In each instance we must ask: First, is this respectful of the American taxpayer at a time of economic and fiscal duress? And second, is this activity or arrangement the best use of limited dollars, given the pressing needs to take care of our people, win the wars we are in, and invest in the capabilities necessary to deal with the most likely and lethal future threats?

As a starting point, no real progress toward savings will be possible without reforming our budgeting practices and assumptions. Too often budgets are divied up and doled out every year as a straight line projection of what was spent the year before. Very rarely is the activity funded in these areas ever fundamentally re-examined – either in terms of quantity, type, or whether it should be conducted at all. That needs to change.

– Greg Grant

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{ 21 comments… read them below or add one }

Bob June 28, 2010 at 1:03 pm

IOW, they are worried that they might not be able to continue to rape DOD, the American Taxpayer, and double or triple overcharge on everything from a screw to a jet engine. It is about time and a long time coming.

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Mr B June 28, 2010 at 3:09 pm

The axiom of "never attribute to malice that which can be explained by incompetence" holds here. I can't speak for all situations, but here is what I see in our little slice of the world.

Our customers often provide incomplete requirements, or requirements that conflict with each other. Program managers on both sides (contractor and DOD) often miss these because they involve technical details that they typically do not think about. Working out these problems costs money.

Another problem we run into is that sometimes the customer does not know what they want (not enough to write a coherent requirements document anyway). We spend months helping them define the project, all the while the schedule is never adjusted to account for the lost time. Then we get yelled at because we are late.

Having a good program manager (on both sides) is key to a successful project. But from what I have seen is that all the good managers get promoted up the chain, and their replacements have to start learning about all the "gotchya"s.

I'm sure there is some profiteering, but most of the problems are simple poor management.

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Oblat June 29, 2010 at 12:30 pm

No it's still profiteering. Industry knows that it can hire cheaper poor management and bank the savings because they don't have to compete and are never held accountable for failures.

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JSCS June 28, 2010 at 2:01 pm

I'm hoping there is no surprise on the part of industry…….you didn't see this coming? DOD has in effect been saying budgets will be tightened for some time now……..

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JPT June 28, 2010 at 2:15 pm

From:From Wikipedia, the free encyclopedia http://en.wikipedia.org/wiki/Military_budget_of_t...

When is the next time you will EVER see the facts below? I know that money gets blown, but I would rather send the millions of welfare CHEATS back to work before chopping programs that can or will eventually go into the civilian sector.

"For FY 2010, Department of Defense spending amounts to 4.7% of GDP.[23] Because the U.S. GDP has risen over time, the military budget can rise in absolute terms while shrinking as a percentage of the GDP. For example, the Department of Defense budget is slated to be $664 billion in 2010 (including the cost of operations in Iraq and Afghanistan previously funded through supplementary budget legislation[24][25]), higher than at any other point in American history, but still 1.1–1.4% lower as a percentage of GDP than the amount spent on defense during the peak of Cold-War military spending in the late 1980s.[23] Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, has called four percent an "absolute floor".[26] This calculation does not take into account some other defense-related non-DOD spending, such as Veterans Affairs, Homeland Security, and interest paid on debt incurred in past wars, which has increased even as a percentage of the national GDP."

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Oblat June 28, 2010 at 10:37 am

Maybe finally news of the the end of the Cold War reaches the socialist military establishment with their guaranteed profits and unending excuses for failure.

Pity the Soviets didn't win huh guys ?

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William C. June 28, 2010 at 9:13 pm

If the end of the Cold War involves burying our heads in the sand, destroying our national defense and industry, and becoming a bunch of weak willed leftist nutcases like you want, then I would rather the Cold War never ended.

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Dan Miller June 29, 2010 at 2:48 pm

Thank you. I had a much harsher comment in mind, but at least you was civil.

Someone should remind him that the liberals can't put the existing unemployed back to work. What will they do with the additional people put out of work due to these traitorous acts of cutting our military in a time of war.

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Oblat June 29, 2010 at 4:44 pm

So Bill wishes we hadn't won the cold war, yea a real patriot - to his own interests.

The bright light of capitalism needs to be shone on those in the industry that have spend years undermining the military with their greed and incompetence. The Cold War is over, you lost, time for your overwhelming sense of entitlement to crawl back into it's hole.

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William C. June 29, 2010 at 4:55 pm

Nope. I said given the choice between the leftist "utopia" you want America to become and a continued Cold War, I would rather have the Soviet Union still be around. At least that threat would ensure our priorities are in the right place.

You need to pick up some reading comprehension skills boy. I lost the Cold War? I don't recall being a citizen of the USSR. Saying "the Cold War is over" justifies nothing!

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Jawaralal O'Fudd June 28, 2010 at 3:17 pm

There is incompetence, plain negligence and waste and abuse on both customer and contactor/vendor sides. As for fraud, there is some of that, too, and if a minor percentage it is still many billions of dollars. DoD and the services have been living in a dream world for a decade and they have shown little regard and respect for the taxpayers. No, preparing for and fighting wars cannot be done on a blank-check basis. And to fight waste, fraud and abuse in the defense sector, as well as just saving money by being smart, is completely patriotic because it ensures the troops will have what they need. Remember, our bumbling, incompetent defense bureaucracy could not even get flak vests or proper vehicles into a hot war for years. They did not give a damn. Ditto today's multibillion pursuit of the IED defense. The wastrels are out in force.

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john June 28, 2010 at 3:29 pm

see:
Pentagon Is Losing the Softwar(e) http://www.defensenews.com/story.php?i=4677662&am...

maybe it helps?

For years, the U.S. military has been losing an asymmetric battle that involves not improvised explosive devices, bullets or al-Qaida, but instead swarms of defense industry contractors seizing control of taxpayer-funded ideas because government policy and regulations were engineered to buy iron and steel, not to deploy a software-based military.

Much like the battles in Iraq and Afghanistan, the rapid and continual evolution of technology demands that the military accelerate just as rapidly, and the only way is to manage the ideas it has funded.

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Tony C June 28, 2010 at 4:14 pm

This is the first shot at shrinking the defense budget, then what? Those empire builders in DOD don't care about budgets, they only care about power and prestige. Cutting the budget will get their attention until they figure out how to shift their priorities and justify a bigger budget. There is alot of FAT in the DOD to cut, but by who and how?
The defense industry went through a 800,000 reduction in force in 1990, so to say they are
still over sized is not entirely true. The industry will only become as large as the customer supports. The problem arises with letting specialized expertise dissappear due to lack of requirements and funding (shipbuilding for example). You don't fund a capability, the industry will let it die. You need it back at a later date and they will charge you more to reinvest in that capability.

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Dfens June 28, 2010 at 5:46 pm

Stop paying defense contractors profit on weapons development! It seems to me that paying a company profit to design a weapon is asking to be screwed. Would you pay a contractor enough money to not only cover their expenses, but also add profit to that so they could design you a remodelled bathroom? Of course you wouldn’t. You’d never see that new bathroom. They’d spend years coming up with first one design and then another. They’d string you along for as long as possible. Well, guess what happens in the defense industry ever since the mid-90’s? Fighter jets that used to take no more than 5 years to develop now took 25 years.

Of course, we could go back to the way we used to buy weapons. Tell the contractors that the government is interested in an fighter airplane and let the contractors show up with thier best effort on a given day in a given place with their best effort, have some pilots give them a go and buy the best one. We could do that, but then we wouldn’t have a military where 85% of them did nothing but polish a seat with their backside. That’s the least efficient military in the world. We can all be proud of that.

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TMB June 28, 2010 at 6:02 pm

I don't think that's how our contracting laws work though. If the DoD doesn't specifically spell out in a requirements document what they want, the contract will never be completed. Recall all the articles here on the tanker contract? They didn't cross the ts or dot the Is and the other company sued saying the document was too vague. If there was a simple fly-off with no requirements document, then the other company would charge favoritism because the selection board awarded the contract based on their pet feelings at the moment rather than something concrete. As Mr. B pointed out above, we'd probably have significantly fewer problems if the guys in charge of the program on the DoD side were as educated as the guys on the contractor side. The former rotates every few years to another project, the latter does it for a career.

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Brian June 28, 2010 at 7:24 pm

Are you an idiot? Of course I'd pay someone a profit to remodel my bathroom. If I didn't, they wouldn't remodel it. No one is going to do work for you if you only offer to pay for their expenses. I tell you what, I need someone to landscape my yard. I'll buy you a plane ticket here, pay for your meals, and let you sleep in my garage. But I won't pay you a dime beyond that. Sound good? Didn't think so.

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Dfens June 28, 2010 at 8:46 pm

The government telling private industry what it wants and paying it to carry out its wishes is the very definition of a fascist economic model. What is forgotten is that we beat the fascists with a capitalist procurement system. The vendor that provided the best weapon at the best price won. It was that simple. It worked for 200 years.

Now we're all just as smart as Brian. We're so damn smart we can't see the forest for the trees. You taxpaying idiots deserve to be screwed by the contractors if you're too stupid to understand the game that's being played. It's not complicated. Pay us the same 10% to design weapons as you do to build them, and we prefer to design them because there's more profit to it. Screw you if you want more than 22 B-2's or 176 F-22's.

You set the rules. You make it more profitable to design weapons than to build them. Then you complain when we make record profits doing what you provide us the economic incentive to do. You're all morons.

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Stephen Russell June 29, 2010 at 12:11 am

Yes the cut " red tape" & DoD bureaucracy alone & see how defense Ind is revived ala Reagen for the millenium & beyond.
Then who will?
Send those clerks to the US Mex border.
Privitize Defense R&D
Fund "Iron Man" suits & or Robocop style suits for Troops.
More drones
Declassify Area 51 NV
Revive F16 as Stealth Figher BUT Less than F22.
Make public the inner workings of Defense procurement ( IE keep rest Classified IF warranted)

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STemplar June 29, 2010 at 7:48 am

How about buying weapons we need as opposed to Xbox upgrades. We keep dreaming up excuses for programs to justify systems that were intended to penetrate Warsaw Pact airspace or fight a massed land battle in central Europe. Those missions don't exist anymore. Those systems were very expensive.

We know exactly the kinds of fights we will be in 10 and 20 years out. 20 years ago all the true experts were talking about low intensity conflicts and cleaning up after the Cold War. What did we do to prepare? zero. We kept buying systems to win the war we ended up not having to fight and we still are.

Listen to the real experts and not the former officers bought off by the defense industry. You want real reform in what we buy and the costs and control over the budget, pass a law that requires defense companies to build an entire system in one or two states maximum, to limit their ability to buy off Congress. That would be a big step in the right direction. The C17 is parted out to 44 states, that hasn't got anything to do with manufacturing efficiency, that is so Boeing can choke Congress into to keeping the production line open.

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jsallison June 29, 2010 at 9:42 pm

How about demanding version 1.0 of product X is produced according to the @#$%ing contract, with any ‘improvements’ moved to later versions. I’m convinced that the ineffectual-ness of DOD contracting is the result of too many senior @$$holes having the ability to exercise their incompetent egos to ‘enhance’ the product at the expense of the taxpayer.

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@Earlydawn June 30, 2010 at 4:46 am

Why is collaboration appropriate for this type of event? Let's put it quite simply; the defense industry has done well, and needs to absorb a downswing like the rest of the country for a while. The Pentagon is the customer, and the MIC is the producer. If they don't like it, have them take their (largely restricted) business elsewhere.

Suck it up and do right by the country for a little while.

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