Defense Industry: What Does Change Really Mean?
By Sandra I. Erwin
There is unease in the defense industry about the coming wave of procurement reform, mostly because it is not yet clear how companies will be affected by new rules that Congress is about to pass and by revamped procurement practices promised by the Pentagon. Industry executives by and large agree that change is needed. They would particularly like to see the Pentagon beef up its workforce with knowledgeable acquisition and contracting experts. What perplexes them is a statement made earlier this year by President Obama in which he predicted $40 billion in savings from procurement reforms. “That’s a lot of money,” says an industry insider.
“The talk about reform sounds good, but how will it be done?” Analysts speculate that some savings will come from cutbacks in the use of contractors in Iraq. But that may take years. The Pentagon’s 2010 budget funds the military’s current contractor workforce of 260,000. Others predict savings will come from shifting contracts from cost-reimbursable to fixed-price agreements. “Everyone’s hung up on fixed-price development right now,” the insider says. For now, the only certainty is confusion about what’s to come.