In the weeks and months to come, the Pentagon agency responsible for buying everything from paper clips to jet engine parts is preparing itself and its vendors for a new era driven by Defense Secretary Robert Gates’ plans to adjust defense spending in the fiscal 2012 budget.
And the Defense Logistics Agency, which had revenues of about $48 billion in 2009, has a pretty good idea of how it will contribute to DoD’s overall efficiency efforts.
“We will pursue price reductions of as much as 10 percent in selected areas by profiling greater focus on price reasonableness, incorporating price reduction factors and establishing more long-term contracts,” said Navy Vice Admiral Alan Thompson, director of the DLA, during a conference call with reporters Wednesday at its Enterprise Supplier Conference and Exhibition in Columbus, Ohio.
Robert Hale, Under Secretary of Defense and comptroller, reiterated that Gates’ spending reforms are not so much a cut in spending as a reallocation of resources based on necessity.
“This is not designed to reduce the topline of the Department of Defense, but to reallocate funds from lower-priority programs and support actives and into higher priority activities,” he said. “We began with a fiscal 2010 budget that began with weapons; we successfully ended the F-22 program, the VH-71 helicopter, continued in this fiscal year with the efforts to end the C-17 and not to buy the spare engine for the Joint Strike Fighter.”
Hale said in 2011 and beyond DoD will emphasize efficiencies in business operations.
Thompson said DLA is embarking on a crackdown on suppliers who use counterfeit parts as one way to save money.
The agency also will be tweaking DLA’s Enterprise Business System, which will help them do a better job of demand planning and forecasting, an effort to leverage information technology to avoid over buying or under buying, he said.
Thompson also said DLA is leveraging the Pentagon’s buying power to purchase in volume at a lower price by consolidating purchases across agencies, where practical, rather than approving smaller individual contracts.
Thompson said DLA has taken advantage of this week’s conference to speak to suppliers one-on-one about what’s ahead:
“We have been more than fortunate to gather more than 2,500 defense logistics agency suppliers here in Columbus, there is certainly some notice that the environment is changing,” he said.
Thompson said the goal in basic terms is DLA needs to be more affective and will redouble its efforts to do so.
DLA plans to work collaboratively with their suppliers to try and help everyone with the changes ahead.
And that’s good news, according to Stan Soloway, president of the Professional Services Council.
“The efforts to reach out to the vendor community are essential, and they deserve a lot of credit for that,” he said.
Soloway, whose organization represents companies providing goods and services to the government, acknowledged that change is in the air, both for the Pentagon and the companies that do business with it.
“Everyone who’s been following the federal budget knows that the budget is under tremendous and unprecedented strain and DoD is no exception,” he said.
Soloway said that in the weeks and months to come there will be more aggressive actions taken to reduce spending and costs. He said because there still is much uncertainty about specific impacts from proposals to trim spending this might provide an opportunity for smaller vendors to proactively trim costs and spending unrelated to a good or service provided to DLA.
According to Soloway, PSC and its member companies have sent dozens of suggestions to Pentagon officials designed to address the costs of many services now provided to DoD and encouraged PSC members to work with those officials to find additional areas for cost and spending reductions.
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