If one wants to see the future of Defense Department procurement, look no further than the Littoral Combat Ship competition.
Instead of buying two ships that require different parts and provide a variety of capabilities, Pentagon officials told the two prime contractors, Lockheed Martin and General Dynamics, that unless they could lower their price and make the ships interchangeable to a greater degree, DoD would spend billions of dollars only with one vendor.
Ashton Carter, the Under Secretary of Defense for Acquisition, Technology and Logistics, said both vendors came back with an improved technical specifications package and much lower bids.
“We took them both because the bids were so low,” said Carter Tuesday during a speech at the Center for American Progress in Washington. “We will buy half the fleet from each of them because the deals were so good.”
This example offers a glimpse of how DoD will take on large and small procurements in the future as part of their effort to become more efficient and move $100 billion in spending away from back office function towards the warfighter.
“We have to be agile and think all the time about competition,” Carter said. “We can’t always have a one-on-one competition in the shootout sense, but we always will ask our program managers to have a strategy if what we are buying doesn’t work or ends up being too expensive.”
Carter said there are other examples, current and future, where DoD will put this concept to the test. For instance, the Navy planned to spend about $20 billion each on a replacement for the Ohio Class submarine. Carter said DoD went back to the vendors, Newport News Shipbuilding and Electric Boat, and figured out why the sub was costing so much.
“We looked at what was driving the costs and figured out where we could scale back the design,” he said. “We expect to save about 35 percent of the original cost by doing that. And the Navy will spend more than $200 billion over the life of the program so we aren’t talking a little bit of money here.”
Carter added that DoD is taking the same approach to the new Presidential helicopter and the Joint Strike Fighter.
Carter said this approach is all about affordability for DoD. Pentagon officials are looking at all products and services and deciding what can they pay for and what they can’t.
Carter highlighted several others during his speech including increased competition, developing a preferred supplier program later in 2011, looking at the fee structure of contracts so the government shares the risk with vendors instead of DoD holding all or most of it, and ensuring they hire and train the acquisition workforce.
“We will succeed in becoming more efficient because we have reasonable targets, we are focused on how to get specific savings and after a decade of year-on-year growth, there is fat in there,” he said. “To those who resist this, I say the alternative is broken programs, unpredictability which is not good for vendors and the worst of all warfighter capabilities will not be delivered.”
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