The top brass at the Pentagon is signaling in no uncertain terms that the defense industry needs to clean up its act and accept that the government can no longer throw away money on ill-conceived military projects.
Air Force Chief of Staff Gen. Norton Schwartz on Wednesday had some tough talk for defense contractors, saying firms must stop “blowing smoke” and over-promising about what they can deliver.
The comments were the latest example of Pentagon officials speaking bluntly about the future of the U.S. defense sector, which they say must change rapidly to accommodate the nation’s new fiscal reality.
“If industry makes a commitment, you will have to deliver,” Schwartz said. “There will be less tolerance … for not delivering.”
Officials say the future of the defense sector will be considerably different from the flush days after 9/11, when companies were handed what amounted to a blank check as the country fought two wars and took on terrorism.
Now, budgets are shrinking in Washington, and this time even the military isn’t immune. There is general agreement among Democrats and Republicans that defense cuts must be “on the table” as the country looks to pare back the spiraling deficit, though differences remain over how large those reductions should be.
Defense Secretary Robert Gates has already announced that the service will reduce its spending by $78 billion over the next five years, and the service’s austerity drive is likely to accelerate in the years ahead.
Schwartz, who is rumored to be on the short list for the next Joint Chiefs chairman, said the budget crunch means the Pentagon will have “no patience” for exaggerated weapons-sales pitches.
“Cost-control will be an issue in everything we do,” from weapon programs to healthcare, the air chief said.
Contractors often focus their bids for Pentagon work on platforms and subsystems that cannot realistically be developed, tested and delivered on the proposed budget and schedule. The results typically are program delays and cost overruns that force the military to buy fewer models or cancel programs altogether.
A defense industry insider said it was notable that the blunt warnings about cost overruns came from Schwartz.
“Gen. Schwartz is not a harsh person, so the tough talk clearly is aimed at sending a message,” said Loren Thompson of the Lexington Institute. “The message is that the easy times are over for contractors, and companies that don’t perform will be punished.”
Richard Aboulafia of the Teal Group said Schwartz is “understandably mindful of the last big defense downturn, in the early 1990s, [when] underestimating program costs was a frequently used way of getting ambitious new starts [into the budget] ‘under the wire’ as spending fell.”
In recent weeks, Pentagon leaders have pulled fewer punches about the changes that are needed to navigate choppy budgetary waters, employing frank rhetoric in an attempt to prepare industry, Congress and their own subordinates for life on a leaner budget.
The picture these officials are sketching is one of “hard times” that will require military services to rein in their combat hardware appetites and contractors to stop promising a dollar’s worth of technology on a dime-sized budget. And the message for both the services and industry is clear: The days of pursuing overpriced vehicles and outdated aircraft are over.
During the George W. Bush administration, Pentagon officials largely tolerated the services’ expensive pursuit of gold-plated weapons. At the time, there was an ever-deepening well of defense dollars to throw at technical problems and what has come to be known in defense circles as “exquisite” platforms.
But senior Pentagon brass say those days have come to an end, and stress that the industry needs to promise less and deliver more.
About 12 hours before Schwartz’s blistering message, Adm. Michael Mullen, the Joint Chiefs chairman, delivered a similar the same wake-up call to his own defense industry audience.
The next few years will bring “hard times in terms of resources,” Mullen said, and though the military is “built to run through walls,” smaller military budget levels will mean that “leaders will have to start deciding how to prioritize.”
Mullen said even special-operations forces — which perform the toughest missions in the most dangerous environments — would not be “immune” to the austerity drive.
Thompson and Aboulafia pointed out that the military shares the blame for weapons programs failures during the post-9/11 era. Aboulafia said the Pentagon was “along for the ride” during the spending spree.
Schwartz conceded Wednesday that the problems can’t be blamed solely on industry mistakes.
The Pentagon also on Wednesday sent signals about how the defense industry might look to consolidate to reflect leaner times.
Pentagon acquisition chief Ashton Carter said U.S. defense officials will not oppose defense contractor mergers as military spending comes down unless such moves involve the six biggest firms.
During an interview with Bloomberg Television, Carter said DoD officials are “far from being discouraging to [merger and acquisition] activity — we’re actually quite welcome to that because we expect industry to make adjustments to new times.”
But the Pentagon will not stand aside and endorse every proposal, Carter said — DoD will not support any plan for consolidation among Boeing, General Dynamics, L3 Communications, Lockheed Martin, Northrop Grumman and Raytheon.
“But with that exception, basically everything else is on the table,” he said.
Schwartz said smaller budgets mean the military will likely have to “scale back our ambitions” for new platforms. That means selecting technology that requires less development time and funding.
“Lower risk is the better strategy for this time,” said Schwartz. One example is a new bomber aircraft program the service soon will start — to keep costs down, the specs for that airframe will be less complex than initially planned.
But “I think it will make it easier for industry to deliver,” Schwartz said.
Schwartz said improving weapons program performance means both industry and the Pentagon will have to change.
“I’m ensuring the Air Force is doing its part,” he told The Hill. “Industry has to do better.”