The Pentagon on Monday told the US defense industry to bring down costs and find more savings in a “new era” of more modest military spending.
Ashton Carter, chief arms buyer for the Pentagon, delivered the belt-tightening message to a gathering of hundreds of defense chief executives and senior managers at the Center for Strategic and International Studies, a Washington think tank.
The appeal for cost savings was part of an initiative announced by Defense Secretary Robert Gates last month to free up funds for weapons and other vital military needs, amid increasing pressure on the federal budget.
The industry CEOs understood the fiscal climate had changed, Carter said after the closed-door meeting.
“Everybody knows we’re entering a new era,” he told reporters. “They can do the math.”
The US defense budget would no longer grow at the same dramatic pace that marked the years after the September 11, 2001 attacks, and instead would expand at a more modest rate, said Carter, who also issued an open letter to industry.
As a result, weapons programs and services from private contractors would have to be carried out more efficiently starting next year, he said.
By slashing overhead, the Pentagon could increase funding for “war-fighting capabilities” by two to three percent, said Carter, or “in effect, doing more without more.”
Gates told the same news conference that the Defense Department was looking for more than 100 billion dollars in savings from overhead costs over the next five years, starting with the budget for the fiscal year 2012.
“Over the past month, I’ve directed the Pentagon to take a hard, unsparing look at how the department is staffed, organized and operated,” he said.
Carter, undersecretary of defense for acquisition, technology and logistics, said the defense industry needed to show greater productivity, similar to other economic sectors.
“In the rest of the economy we expect it. You get a better computer every year, and cheaper,” he said.
But in the defense industry, he said: “More has been costing more. And we need to reverse that trend and restore affordability to our programs.”
Out of the annual 700 billion dollar US defense budget, about 400 billion is devoted to weapons and services provided by private contractors.
Carter released a draft of guidelines for industry to try to rein in overhead costs, including an emphasis on fixed-price contracts.
He invited industry and lawmakers to comment on the draft before he issued a final version “later this summer.”