Better Buying Power Drives Acquisitions
By Cheryl Pellerin
American Forces Press Service
WASHINGTON, Feb. 23, 2011 Supporting the war effort and managing the budget are top jobs in the office of acquisition, technology and logistics, and both have intensified with the Pentagon’s mandate to do "more without more," the Defense Department’s acquisition executive said.
Ashton B. Carter, undersecretary of defense for acquisition, technology and logistics, briefs reporters at a Sept. 14, 2010, Pentagon news conference about a Defense Department initiative to save up to $100 billion over five years by implementing reforms in acquisition and procurement policy. DOD photo by R.D. Ward
(Click photo for screen-resolution image);high-resolution image available.
Ashton B. Carter gave the keynote address on the defense efficiency initiative to an audience of 500 here last night at a meeting of the Center for a New American Security.
“As one of the prongs of the efficiency initiative, [Defense Secretary Robert M. Gates] asked me to devise a plan for finding efficiencies within $400 billion of the $700 billion defense budget that is my area of responsibility,” Carter said, “namely, that which is contracted out of the department for goods and services.”
Gates introduced the efficiency initiative during a May 8 speech at the Eisenhower Library in Abilene, Kan.
“This led to something called ‘better buying power,’” which he and Gates introduced Sept. 14, Carter said.
“It takes the form of guidance from me to our acquisition work force -- 147,000 acquisition professionals -- on how they can get, as I put it, more without more, because we’re not going to have more.”
The objective is to deliver the warfighting capabilities needed for the money available, he added, by getting better buying power for warfighters and taxpayers.
The 23-point strategy seeks to restore affordability in defense procurement and to improve defense industry productivity, Carter said. Each point was devised with input from the defense acquisition work force and from partners in industry, he said.
Major themes of the strategy, according to Carter’s guidance roadmap, include targeting affordability and controlling cost growth, providing incentives for defense industry productivity and innovation, promoting competition, improving the acquisition of services, and reducing bureaucracy.
“Our first effort has to be at affordability, and that has to be for new programs we’re beginning and ones we’ve already begun,” Carter said. An example, he said, is the the next-generation ballistic missile submarine that will replace the Ohio-class nuclear missile-carrying submarine in the 2020s.
“When we got the first design and cost estimate for the SSBNX, we were coming in at $7 billion apiece. If the Navy spent that much in the period 2020 to 2030 on the SSBNX, it wouldn’t be able to buy any other ships. Said differently, that ain’t happening,” Carter said.
“Rather than head down a road that was sure to lead to a broken program, we had to back up and look at the drivers of the design,” he said. These were tube number, tube diameter, degree of stealth, flank speed and other factors that drove the overall cost.
“We began to shape the design with affordability as a requirement,” Carter said. “And we found we could do that.” The Navy’s cost now is down to about $6 billion per submarine, with a target of $4.9 billion, he added.
“And that’s the kind of thing we’re going to have to do with everything we’re starting now,” Carter said.
But some programs are already in progress, Carter noted. “They were started, and now here we are,” he said. “We have them, and we need to control costs on them.”
Competition is another big driver of efficiency, and the Defense Department tries to use competition as creatively as possible, Carter added.
In the recent case of the littoral combat ship, he said, two different sea frame makers asked to prepare bids for a subsequent buy.
“When we got the bids in,” he continued, “the numbers suggested to me that both shipbuilders believed they were entitled to build these ships for us.”
Defense Department officials decided that only one shipbuilder would win the contract, and asked each contractor to bid on building 10 ships, based on the assumption that only one company would win. Other incentives were added to the contract, Carter said, and when the bids came in again, “they were substantially lower, because the people comparing them had been able to think of plausible ways to reduce the costs.”
The bids were so attractive, Carter said, “that we decided to buy all 20. It was a great deal.”
The Defense Department doesn’t make anything, he noted.
“All of the weapons systems and equipment that make us the best military in the world -- and that is, next to our people in uniform, our greatest asset as a military power -- are made in industry.”
The defense industry and its technological health and vitality are a national asset, Carter said.
“In that sense, the taxpayer and the warfighter, whom I represent, have the same interest as a long-term shareholder in the defense industry.”