OSD Official: Defense Companies Have a Right to Earn Profits

By Stew Magnuson
BALTIMORE — New Pentagon initiatives to reduce the amount of money spent on weapon acquisition programs are not a threat to the defense industry's bottom line, a Pentagon official insisted.
Gil Klinger, deputy assistant secretary of defense for space and intelligence, told attendees at the Milcom conference Nov. 8 that the Pentagon's "better buying power" initiative, which can be summarized as "doing more without more," is not about putting the squeeze on contractors.
"Whatever else these new initiatives are about, they are not about reducing rightfully earned corporate profits," he said. "That's not what the Defense Department is interested in."
"It is about finding ways to take costs out of the programs upon which the nation depends," he said.
For space programs and the companies that build and provide satellite services, the current budget climate is a double-edged sword.
"You are unambiguously the dial tone for U.S. national security'" he said. Space programs are completely interwoven into the fiber of the military and intelligence communities.
"The bad news is you are the dial tone for national security. And exactly like the dial tone on the telephone, you are taken for granted," he said.
Despite the high value placed on space-based services such as communications, navigation and remote sensing, these are different times, and costs must come down, he said.
"We have to recognize that our programs are too expensive and there are too many in the pipeline," he said.
He suggested that companies developing spacecraft will have to put equal emphasis on engineering for meeting schedules, cost control and cost avoidance as they do on performance.  
Klinger said he does not buy the argument that reducing costs will automatically result in a loss of performance.

Topics: Defense Contracting, Defense Department, DOD Budget

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