DEPUTY SECRETARY OF DEFENSE ASHTON B. CARTER: Thanks, Kim, for that introduction, for the opportunity to be in this great organization and forum; for everything you do for the Department of Defense and have done over the years for national defense. Much appreciated.
To Dave Berteau, I know he's not here, but to him and his family, we wish you strength and send you our condolences.
This is really an initiative that is to the credit of Frank Kendall. It's his show and I'm just the warm-up act here. But I'll give you a little background on -- on this. First of all, I'm delighted to see all my colleagues from the acquisition community here -- good friends and very skilled people.
Let me take you back. It was two years ago (sic) two [three] at the Eisenhower Library that then-Secretary of Defense Gates spoke presciently, it turns out, about the days of ever-increasing defense budgets soon coming to an end as our elected leaders grappled with our fiscal circumstances. What he said at the time, famously, was "the gusher has been turned off and will stay off for a good period of time."
And in acknowledgement of that coming fiscal reality and in an effort to minimize the impact of it, Secretary Gates launched an initiative across the department to ensure that the department would not be forced to sacrifice, wherever possible, an ounce more force structure than was necessary.
Better Buying Power, which was -- now we have to call it Better Buying Power 1.0 -- which was introduced in September 2010 by me and my partner, Frank Kendall, was the acquisition system's contribution to this overall initiative. And it was directed at the approximately $400 billion a year that the department spends in the acquisition of goods and services.
Better Buying Power's goal was, as we said then, more capability for the warfighter and more value for the taxpayer by obtaining greater efficiency and productivity in defense spending -- what economists call productivity growth.
To achieve these objectives, we directed 23 principal actions in five major areas: first, to target affordability and cost growth in our programs; second, to incentivize productivity and innovation in industry through profit and partnership; third, to promote real competition wherever we could; fourth, to improve our tradecraft in the acquisition of services, as opposed to goods; and fifth, to reduce nonproductive processes and bureaucracy in the government, as well as in industry.
And I won't go over each of these areas, but it's worth noting that over the past two-and-a-half years, we've worked hard and with some considerable success in some major programs to implement these directives.
But at the same time, though, we acknowledged at the time we released Better Buying Power 1.0 that we wouldn't get everything right; that we weren't -- hadn't captured every good idea that was out there; that we knew that in some cases, the data sets upon which we were basing decisions were still incomplete; and we knew that we would need to adjust based on initial implementation experience.
We also knew that industry would continue to come to the table with good ideas and constructive criticism. And in in this regard, let me address a few industry concerns that I share and I think our leadership shares that we've learned up front. The first, I recognize that industry needs profits and margins to be successful. While incentivizing cost-consciousness will continue to be centrally important to our work, we need to do also to pay more attention and be attentive to best total value and program risk so that transactions are successful for both parties.
Second, I share industry's concern about an excessive oversight culture. I've long been concerned that the number of approachers was -- I'm sorry -- that the number of watchers was approaching the number of doers in the department. You have the doers in front of you here. And we may in fact be reaching that threshold, especially with respect to things like audits. And we're trying to work internally and work with industry to address these issues.
And third, we've listened to and are addressing industry concerns about contracting practices and so forth, where it's possible for us to do that.
More broadly, a notable feature of Better Buying Power 2.0, as Frank will explain in more -- more detail, is improving the professionalism of the total acquisition workforce, which encompasses program management, engineering, contracting and product support disciplines. We know that the quality of our people is an essential ingredient to our success as an acquisition enterprise.
As we continue to implement Better Buying Power, we look forward to working with our industry partners and our acquisition work force to do more and more each and every year to get more value for the taxpayer and the warfighter. In fact, that's what Better Buying Power 2.0 is all about, just like Better Buying Power 1.0. And I salute Frank, who was my partner then and is now the leader of this effort, and his team, which is here, for their excellent work.
Now, achieving Better Buying Power would, of course, be an important goal in any budget environment, but its importance has only grown given the strategic and budgetary challenges we now face. Since Better Buying Power was first unveiled, Congress passed the Budget Control Act, which required the department to cut $487 billion from our defense plans over 10 years.
A year-and-a-half ago, we did that, first by devising a new defense strategy to guide us as we turn a strategic corner from the post-9/11 era dominated by the wars in Iraq and Afghanistan, to an era defined by new challenges and new opportunities.
While the budget that we derived from our new strategy absorbed significant reductions in defense spending, it made important strategy-driven investments in the Asia-Pacific region, where so much of our future economic and political interests lie; in special operations forces; in future-focused domains such as cyber and space; in countering weapons of mass destruction; and in certain areas of our science and technology portfolio, including electronic warfare and command and control.
It's still true today, as it was then, that every dollar not wasted is a dollar that can be invested in these new capabilities.
At the same time as we have made reductions to our base budget spending plans, our overseas contingency operations funding, which is not included in the base budget and which is largely for Iraq and Afghanistan, is also decreasing. Taken together, these reductions in base and OCO compare in pace and magnitude to historical cycles in defense spending the nation has experienced in the past, either after Vietnam or after the Cold War.
However, as this audience well knows, due to the collateral damage of political gridlock here in Washington, we are now also operating under sequestration, which requires us to subtract an additional $37 billion from our budget for the remainder of fiscal year 2013. Sequester presumes that we take equal or proportionate share from each and every part of the budget, which is the worst managerial approach possible.
Sequester is not only regrettable in its own right, but it distracts from the true strategic and managerial tasks before us. Secretary Hagel and I and the entire leadership of the department are doing everything we possibly can under this deliberately restrictive law to mitigate its harmful effects on national security. But as the Joint Chiefs have emphasized repeatedly, the impacts on our readiness are real and in many cases irreversible.
Now, while the sequester for F.Y. '13 ends October 1st, there's no way to know for sure what's next here in Washington. Virtually no one believed that sequester -- sequestration would actually go into effect in the first place. Now, we in DOD can adjust and adapt to a wide range of contingencies, but this will be easiest if we have stability, time and flexibility.
The president has submitted a budget that meets these goals, as part of a balanced deficit reduction plan. For defense, it contains $150 billion more in 10-year cuts compared to last year's plan, in addition to the $487 billion reflected in the Department of Defense's fiscal year 2013 budget. Most of these cuts occur beyond 2018, which gives us time to plan and adjust.
While no agency wants to cut its budget, the president's plan is much more practical than the cuts that could occur under persistent sequestration -- cuts that could amount to $52 billion in F.Y.'14 alone and could cost $500 billion over 10 years.
We urgently need Congress to grant us stability, time and flexibility. The House budget resolution, the Senate budget resolution, and of course, the Budget Control Act actually have a wide range of future scenarios for our budget, not the stability we seek.
For this reason, in March, the secretary asked me -- Secretary Hagel asked me, working with Chairman Dempsey, to conduct a strategic choices and management review, to examine the choices that underlie our defense strategy, posture and investments, including all past assumptions and systems. The review will define the major choices and institutional challenges affecting the defense posture in the decade ahead that must be made to preserve and adapt our defense strategy and the department's management under a wide range of future circumstances that could result from a comprehensive deficit reduction deal, or the persistence of the cuts that began with this year's sequester.
Everything's on the table: roles and missions, war planning, business practices, force structure, personnel and compensation, acquisition and modernization investment, how we operate, how we measure and maintain readiness.
We plan to complete our work and tee up decision points and recommendations to Secretary Hagel and the present -- and the president in the coming weeks and months. The choices that are made will inform how we execute our F.Y. 2014 budget, our F.Y. 2015 budget submission, and will serve as the foundation for the Quadrennial Defense Review due to Congress next February.
And I hope that one of the principal benefits of the review for our acquisition programs and correspondingly for industry will be to bound the uncertainty that we currently face.
Uncertainty is anathema to good management. In our -- in -- for us, and also for our partners in industry, it discourages investment, it causes the hording of capital, prevents the national -- natural rationalization of our industrial base, and harms growth.
I should also mention that in conducting our review, we have been very mindful of how the choices we are considering will affect industry, which is the basis of the CSIS forum we speak to today.
As I've said many times before, the success of our Better Buying Power effort, and the Defense Enterprise, for that matter, is clearly dependent on having a healthy, robust, and vibrant industrial base as dependent upon that as it is getting best and superior value for the taxpayers' dollar and for the war fighter.
Let me close again by congratulating Frank, the entire acquisition team that has worked so hard for the taxpayer and for the war fighter, does it every day, and so hard on this important effort.
Frank, especially to you, my friend, my partner for a long time -- he's done a tremendous job of implementing Better Buying Power 1.0, and a fantastic job of moving beyond that to an improved version of Better Buying Power, which he'll outline today.
Frank and the rest of the team here, you've made a tremendous difference.