Pentagon Agency Wants Suppliers to Slash Prices

The agency that supplies food, uniforms and fuel to troops says it can cut costs by seeking price reductions and weeding out procurement fraud.
 
The Defense Logistics Agency will pursue price reductions of 10 percent across the board for materials it acquires for the military, Director Vice Adm. Alan Thompson told reporters during a break at a conference with suppliers in Columbus, Ohio.
The Defense Department is looking to cut $100 billion between FY 2012 and FY 2016. Though Thompson could not yet pinpoint an exact or even approximate savings target for his $41 billion agency, he said DLA already has taken several steps toward greater efficiency.
This year, the agency formed an “operational evaluation team” that investigates vulnerabilities and ways to eliminate procurement fraud. Along the same lines, DLA, which supports 1,700 weapon systems, is updating specification documents to avoid buying counterfeit parts.
 
The Government Accountability Office in April reported that the Defense Department’s supply chain had been impacted by counterfeit parts, and that it had no way of determining the extent of the problem.
 
“We work with thousands of suppliers and the vast majority are above board,” Thompson said. “We must weed out those suppliers and individuals who knowingly supply parts that don’t meet specifications or are counterfeit.”
 
The DLA is talking with suppliers, mostly small businesses, about driving down prices. The agency, which processes nearly 10,000 contract actions each day, can get more bang for its buck by increasing strategic sourcing opportunities and establishing more long-term contracts, Thompson said. This may mean that small businesses find themselves in the role of subcontractors more often, he explained.
 
“The environment is changing,” he said. “Certainly, there is some level of concern” among DLA’s suppliers. While the agency has prided itself on being effective, the focus now needs to shift to being more efficient, Thompson said.
 
For example, the agency is consolidating its procurement software so supply orders for all military services are merged into one contracting tool. This will allow DLA to make larger buys and drive down costs, Thompson explained.
DLA's cost cutting mood in DLA falls in line with other Defense Department agencies.The goal for FY 2012 alone is to find $7 billion in savings within defense departments, military services and agencies with appropriated funds, said Pentagon Comptroller Robert Hale, who joined Thompson on a brief call with reporters.
 
 “We realize we owe the American people every effort to be efficient since we’re asking for large sums of money in a period when the country is having some serious economic problems,” Hale said.

Topics: Defense Contracting, Defense Department, DOD Budget, Logistics, Procurement, Defense Contracting