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August 5, 2011 By AMK

Ashton Carter named as new deputy secretary of Defense

The Obama administration named Ashton Carter as the next deputy secretary of Defense, giving an official who has already presided over hundreds of billions of dollars’ worth of military-related spending cuts the power to help shape the coming era of Pentagon austerity.

Carter, a mild-mannered physicist and former Harvard professor, currently serves as the Pentagon’s chief weapons buyer. National Journal reported last week that he was the front-runner to succeed William Lynn as the Defense Department’s second highest-ranking official.

If confirmed for his new post, Carter will face the difficult task of mediating between the White House and congressional leaders, who are looking to slice defense spending as part of broad push to close the nation’s yawning budget deficit, and the Pentagon’s senior military and civilian leadership, who are anxious to protect cherished weapons programs – and the overall size of the armed forces themselves – from being placed on the chopping block.

The deficit-reduction deal reached this week to avoid a potentially catastrophic debt default calls for $350 billion in defense cuts over the next 10 years as part of an agreement to reduce federal discretionary spending by $900 billion over that same time period. The legislation doesn’t mandate cuts of that size – congressional appropriators will largely retain the power to slice or preserve defense spending as they see fit – but Carter and other senior Pentagon officials acknowledge that significant spending reductions are coming to the Defense Department after a decade of runaway growth.

“We’re not going to have the ever-increasing budgets of the post-September 11 decade,” Carter told a group of Pentagon contractors and logistics personnel in a late June speech. “This is going to feel very different to a group of government and industry managers and congressional overseers who have grown accustomed to a circumstance where they could always reach for money when they encountered a managerial or technical problem or a difficult choice. Those days are gone, for all of us.”

Tuesday’s announcement caps a meteoric rise for Carter, whose appointment as the Pentagon’s top weapons buyer two years ago was questioned by lawmakers who noted that he had no background in acquisitions or in managing large organizations. Skeptics like Sen. John McCain, R-Ariz., questioned how well Carter would be able to oversee the department’s sprawling purchasing arm, which spends roughly $400 billion a year on goods and services.

But Carter quickly forged a close relationship with then-Defense Secretary Robert Gates in working to scrap underperforming systems and free up money for the wars in Iraq and Afghanistan. The two men scrapped dozens of futuristic programs that were over budget and behind schedule, in part to free up more money for drones, surveillance blimps, and equipment earmarked for Iraq and Afghanistan. In June 2009, Carter canceled the Army’s $200 billion Future Combat System initiative, which envisioned building a new generation of armored vehicles linked by advanced communications equipment. He also helped Gates halt new purchases of Lockheed Martin’s costly F-22 Raptor fighter and wind down the troubled effort to build a new fleet of presidential helicopters. All told, they cut roughly $300 billion worth of programs.

Carter will now be charged with working with Gates’s successor, Secretary Leon Panetta, to identify even deeper cuts and then sell them to skeptical lawmakers. Many contractors expect him to reduce the military’s planned purchase of 2,500 F-35 Joint Strike Fighters, the most expensive weapons program in history. The cost-per-plane has soared by more than 90 percent, from $69 million to $133 million, even as technical problems have marred the program. Carter has also signaled that he may limit spending on the Army’s next-generation ground combat vehicle (an armored truck meant to replace the iconic Bradley fighting vehicle) or the Marines’ V-22 Osprey (a tilt-wing aircraft meant to take off like a helicopter and fly like a plane).

Carter has tried to soften the sting of the coming cutbacks, which will be the most severe since the end of the Cold War. He wants to limit how often his department “moves the goalposts” by demanding that defense firms add new technical capabilities to their weapons systems – a process that slows programs down and significantly increases their costs. He has also implemented new “share line” agreements, which allow contractors who bring programs in under budget to keep some of the money they saved the government.

Still, Carter – and whoever is named to replace him as the department’s acquisitions chief – is virtually certain to face sustained political pushback from emboldened congressional Republicans who want to preserve as much Pentagon spending as possible. Gates, a Republican and George W. Bush administration holdover, had given Carter political cover on Capitol Hill. It’s far from clear whether Panetta, who has a far more partisan reputation, will be able to shield his new No. 2 in quite the same way.

— by Yochi J. Dreazen – National Journal – August 2, 2011 at http://www.govexec.com/story_page.cfm?articleid=48416&dcn=e_gvet

Filed Under: Government Contracting News Tagged With: acquisition strategy, AT&L, budget cuts, deficit reduction, DoD, spending

June 8, 2011 By AMK

How to cut costs and improve performance

The federal government faces an estimated annual structural deficit of $500 billion to $700 billion. A deficit of this magnitude represents a major threat to the economic health of the nation. The structural deficit is defined as the portion of the total annual deficit that results from a fundamental imbalance in receipts and expenditures, not just one-time occurrences or changes in the economic cycle. Steps to reduce and eliminate this structural deficit are urgently needed.

Congress, the Obama administration, and state and local governments must put government spending on a path of fiscal sustainability for the longer term. Policy makers have focused on three cost-cutting opportunities for doing this:

  • Eliminating wasteful programs,
  • Taking a longer-term view that focuses on entitlement program policy changes,
  • Using proven cost-saving strategies from the public and private sectors to make the daily operation of government much more efficient and deliver improved performance at a lower cost.

Recent discussion of the fiscal crisis has been limited to these three approaches, and discussion centers on draconian, across-the-board spending reduction or equally sweeping tax hikes. Based on the experience of the technology industry, there is a better way. Government has an opportunity to dramatically reduce spending and cut the deficit, while also improving its level of service. By harnessing major technological shifts and adopting proven, commercial best business practices, leaders and managers can not only make government far more productive, but also foster greater innovation in areas ranging from health care to education and energy — innovation that will generate economic growth and job creation.

Innovative approaches have been used effectively throughout the past several decades to create new technology models. Again and again, new capabilities have simultaneously reduced costs and sparked innovation. While businesses and governments are inherently different in many ways — responsibilities, objectives and mandates — both employ millions of professionals to provide goods and services to hundreds of millions of customers and constituents. Not all private-sector solutions are applicable or advisable in a government setting. In both the public and private sectors, the more productive and efficient the operations, the more services can be delivered at the lowest cost. Given the current fiscal outlook for governments at all levels, maximizing government productivity will be essential to maintaining the services citizens want at prices taxpayers can afford.

Traditional Budget-Cutting Exercises Will No Longer Work

We have heard it before — the need to “do more with less.” But the situation is different this time, and much more difficult. Drastically reducing costs is a major undertaking, not a normal budget-cutting exercise. And, importantly, it presents an opportunity to not just cut programs and discretionary costs, but to transform how government does its business.

Across-the-board cuts and undifferentiated freezes that affect all programs and services in the same way can have perverse effects. Such cuts erode the quality of services and affect the morale of public servants. Over time, they erode citizens’ confidence in government. Too often, budget-cutting exercises involve a small number of people working in relative secrecy. In contrast, drastic austerity measures require a more open and inclusive approach, one that engages a large set of stakeholders and gives greater emphasis on program evaluations and cost/benefit analyses than occurs in the normal budget process. Rather than looking only at program cuts, leaders and managers should view the need to achieve drastic reductions as an opportunity to reconsider their entire organizational structure as well as program business models.

Traditional Cost-Cutting Exercises Often Prove to be Temporary

Government organizations often cut discretionary costs, such as information technology, travel, and training, which can have an immediate, significant impact. Unfortunately, as soon as the external pressure is gone, these costs creep back into the cost base. More successful organizations invest in central staff who help identify systemic costs associated with organizational and program complexity and supply chain improvements. In doing so, they must be mindful of two important points:

  • Establish top-down cost savings targets. Delegating the responsibility for cost-cutting to the frontline organizations often results in cuts to long-term investments, like training, not to low-priority or poorly performing projects. Central staff focused on operational improvements can provide an enterprise-wide view to objectively identify high-priority and high- performance activities, not just set overall cost-reduction targets for the organization.
  • Recognize and capitalize on the cost of complexity. Failing to estimate and account for the cost of too many separate operations and support activities can lead organizations to overlook savings from reducing, standardizing, or sharing services, or making supply chain improvements. Central staff are in a better position to identify enterprise-wide and cross-agency opportunities to capitalize on redundancies.

New Approaches are Needed to Truly Transform the Way Government Does Business

Faced with the need to make severe budget cuts, government organizations may react in one of two ways:

  • One group of leaders and managers will use the necessity for cuts as a catalyst for change. They will seize the opportunity to streamline business processes, shed unnecessary functions and optimize IT systems.
  • Another group will adopt a bunker mentality and sideline management reform, cutting projects and jettisoning management improvements, believing that management reforms represent a luxury they can no longer afford.

A big risk in the current cost-cutting debate is that not enough attention will be focused on the opportunity to improve operational performance by being smarter about the way government does business. The IBM Center for the Business of Government’s Strategies to Cut Costs and Improve Performance describes seven specific initiatives where technology-enabled productivity solutions can make a material difference in the performance of government programs, based on the experience of real cost savings and efficiencies achieved by public and private sector organizations. These seven strategies constitute a starter list of initiatives of this type.

By aggressively implementing these strategies, sustainable cost savings can be realized while, in many cases, improving operational performance.

    Seven Strategies to Cut Costs and Improve Performance

  • Consolidate information technology infrastructures
  • Streamline government supply chains
  • Reduce energy use
  • Move to shared services for mission-support activities
  • Apply advanced business analytics to reduce improper payments
  • Reduce field operations footprint and move to electronic self-service
  • Monetize the government’s assets

Source: Charles L. Prow, Debra Cammer Hines, and Daniel B. Prieto, Strategies to Cut Costs and Improve Performance. IBM Center for the Business of Government. 2010.

Getting It Done

The problems of mounting debt and deficits can’t be solved overnight, but must be addressed now. An initial step in achieving dramatic cost savings — the “how” it will be done — is deciding “who” will do it. In the private sector, this would be the job of the chief financial officer. However, in many government organizations, the CFO or the budget officer, as one former CFO expresses it, is very good at getting money from Congress to fund various programs and making sure that money is spent — but is not experienced with considering how effectively or efficiently that money is spent.

The chief executive officer/chief operating officer model that is prevalent in the private sector does not work as well in government. Cabinet secretaries have huge jobs. With many direct reports just in the Office of the Secretary, they need their deputy to serve as an alter-ego in many capacities, not just as a chief operating officer. While some deputy secretaries have been very attentive to management, others have not.

The best approach is for top officials to appoint and empower a single individual to manage cost-cutting activity. While they may be supported by departmental staff or outside volunteers, someone needs to own the task and, ideally, report directly to the agency head. The secretary or deputy secretary should recruit a highly respected and experienced former CFO from the private sector to serve as the department’s “uber-manager” with the explicit mission to achieve dramatic cost saving.

People often ask how the role of Cabinet secretary, department head, or legislator fits into this model and whether these officials should own cost-savings activity in their areas of influence. These leaders will be critical enablers for cost-savings ideas, but we recommend that someone outside the impacted agencies be appointed to take the lead role for two reasons. First, those officials, like their elected bosses, have a great deal on their plate. Their days are filled with a constant stream of crises. Second, we believe that appointing an external voice can help inform the decision-making of agency heads as they make the tough choices about what must be cut.

The Role of Leaders and Managers

Cost-cutting is tough, unpleasant work. It requires choices that most of us would rather not make. Therefore, unwavering leadership is the most important characteristic for senior officials to display in a successful cost-cutting effort. While an individual department head might be able to reduce costs for a few years in an agency, it is very hard to bend the overall cost curve unless top leadership demands it.

How this process will play out over the next few years remains to be seen. In many respects, identifying sources of savings (whether policy changes or operational improvements) is the easy part. The challenge will be to turn ideas into action. Most important, we know that the proposed operational and process improvements do not just cut costs; they also foster collaboration, idea sharing, and a culture of innovation.

This will be where government leaders and managers come in. They will be the ones who do the heavy lifting to implement major program adjustments and cutbacks, as well as harness major technological shifts and not just cut costs, but also adopt innovative practices to make government far more productive.

This article was reprinted from GovExec.com on June 3, 2011 at http://www.govexec.com/story_page_pf.cfm?articleid=47935&printerfriendlyvers=1 and is adapted from “Seven Management Imperatives,” a report by the IBM Center for the Business of Government on broad societal trends that are changing the way federal agencies and their leaders must operate. The report’s authors are Mark A. Abramson, Gadi Ben-Yehuda, Jonathan D. Breul, Daniel J. Chenok, John M. Kamensky, Michael J. Keegan and Frank B. Strickland Jr.

Filed Under: Government Contracting News Tagged With: budget cuts, cost reduction, deficit reduction, efficiency, innovation, performance, sustainability, technology, waste

March 31, 2011 By AMK

Pentagon resists automatic suspension of indicted contractors

Mandatory suspension or debarment of indicted contractors could have a “chilling effect” on contractor relations, the Defense Department’s top acquisition official told the Commission on Wartime Contracting on Monday.

In February, the congressionally chartered commission released an interim report on how the department could reduce waste, fraud and abuse through enhanced oversight and improved deployment of government resources in contingency contracting.

The report offered 32 specific legislative, regulatory and policy proposals, including limiting the government’s reliance on armed private security contractors. The commission’s final report is due out in July and likely will be considered by Congress for possible legislation.

Defense agreed with most of the suggestions in the interim report and already has begun to implement some, according to Ashton B. Carter, undersecretary of Defense for acquisition, technology and logistics. But Carter told the panel that other ideas would do more harm than good.

For example, the commission recommends automatic suspension or debarment for indicted contractors. The group would mandate that suspensions and debarments no longer be subject to the terms of agreements the contractors make with the Justice Department — agreements that allow firms to avoid prosecution in criminal actions. Also, contingency contractors operating overseas should no longer be guaranteed a hearing to dispute facts in a suspension or debarment case, according to the report.

Carter disagreed with those recommendations, noting suspension and debarment officials need the flexibility and discretion to judge each case on its own facts and circumstances.

“There is a potential unintended consequence of turning suspensions and debarments from tools to protect the government’s interest into tools that automatically punish contractors,” he testified. “Such an approach may have a chilling effect on contractor cooperation in identifying and fixing real problems, including those that affect the health and safety of our personnel.”

The department also is not on board with the commission’s recommendation to limit past performance evaluations exclusively to those records in a federal database. Carter argued some contractors could have valuable experience working for foreign governments that should be considered as part of a past performance appraisal.

“We don’t want to erect a barrier for contractors that have not worked for the [U.S.] government,” he said.

Defense also is opposing commission recommendations that would mandate broader governmentwide access to contractor records by oversight personnel and establish offices of contingency contracting at Defense, the State Department and the U.S. Agency for International Development.

Nonetheless, Carter conceded the department’s contingency acquisition process remains too slow and outdated to effectively serve the warfighter. “We have to create a fast lane for contingency acquisitions so requirements are not done in the ponderous usual way,” he said.

Congress recently approved a Defense request to reprogram some of its fiscal 2011 funding. But, the annual budgeting system — and the absence of permanent funding for the rest of the fiscal calendar — has created a constant headache for Defense.

“The budgeting system is not adequate for dealing with ongoing wars,” Carter said, calling for a more rapid system to implement and issue wartime contracts.

Carter is leading Defense’s Better Buying Initiative to increase contractor competition, improve acquisition practices and reduce costs. Thus far, the department has identified $100 billion in unnecessary spending that has been cut and reinvested in warfighting operations. An additional $78 billion has been returned to the treasury for deficit reduction.

—  by Robert Brodsky – GovExec.com – March 28, 2011 – at http://www.govexec.com/story_page_pf.cfm?articleid=47439&printerfriendlyvers=1 

Filed Under: Government Contracting News Tagged With: acquisition strategy, budget cuts, contractor performance, debarment, deficit reduction, DoD, procurement reform, suspension

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