While the U.S. Federal Defense Budget is being affected by a sluggish economy, budgetary cuts and politics, cuts in overhead costs could preserve the one-percent project growth over the next five years, Defense Undersecretary Ashton Carter said publicly, according to a Reuters article.
The results of the mid-term elections of some Tea Party Republicans has worried some defense insiders, who believe cuts could be coming to defense. In response, Carter met with industry chief executives at the Center for Strategic and International Studies (CSIS) think tank, and then with more than 300 defense program officials to assuage any fears to defense spending. He said affordability needs to be relentlessly designed into new weapons programs to keep defense spending stable given rising health care and personnel costs, according to Reuters.
While David Berteau, a senior adviser to the CSIS, welcomed the Pentagon’s greater outreach to industry, he admitted to being worried that the new approach failed to incorporate cost saving suggestions by companies.
“The missing section is what would connect the affordability piece to the incentive fees,” he told Reuters. “It’s too late by the time you’re negotiating the contract.”
Carter than issued a detailed seven-page memo with specific cost-savings steps. The memo also detailed that executive at top defense firms including Lockheed Martin, Boeing, Northrop Grumman, General Dynamics and Raytheon have been working closely with the military to cut costs in order to preserve funding for new weapons programs.
In September, Carter issued a memo that said Defense Department program managers must incorporate new cost and technology considerations during milestone reviews in an effort to trim $100 billion in overhead spending over the next five years.
The new memo instructed the secretaries of the military services to establish affordability targets for weapons programs that are on a par with performance parameters. It also now targets smaller weapons programs. Any savings, the memo stated, could translate into additional quantities.