With Ashton Carter as Pentagon Chief, Defense Industry Has a Friend and a Foe

By Sandra I. Erwin
President Obama's selection of Ashton B. Carter as the next secretary of defense should give the defense industry reasons to both cheer and fret.
While serving as deputy secretary, Carter saw firsthand the impact of congressionally mandated sequester cuts on the military. He was an ardent critic of spending cuts that he characterized as dangerous and irresponsible. As Pentagon chief, Carter will be again on the front lines of that fight.
But Carter also has been an unabashed critic of Pentagon overspending, and not a big fan of the ways of the military-industrial complex.
As chief Pentagon procurement officer during the early days of the Obama administration, Carter was at the forefront of the Pentagon's war on waste. He was the brain behind a sweeping campaign to reform defense contracting — known as “better buying power" that is now in its third iteration.   
In a move that rankled many contractors, Carter in 2011 appointed a “director of defense pricing" specifically to scrutinize deals signed with vendors and ensure the Pentagon did not overpay for products and services.
After the Pentagon was abruptly hit by across-the-board spending cuts in the wake of the 2011 Budget Control Act, Carter warned Defense Department buyers that the days of money-is-no-object buying were over. Fixed-price contracts would replace many "cost-plus" deals in which the government reimbursed all contractor expenses. Contractors that expected to win awards for the "high performance” of their weapon systems would have to compete against less-costly and less-sophisticated alternatives. “Affordability requirements for programs is on par with performance,” Carter said.
Carter at the time worried that procurement officials and contractors were still living in the world of the post-9/11 era of unrestricted budgets. His better-buying guidance was intended to change that mentality. Carter irked some contracting officials when he questioned their competence in negotiating service contracts. He directed that buyers of contract services take a “basics of good buying” crash course. He called out both government officials and contractors for chronic bad habits such as pursuing projects that don’t result in useful products for the military. “Our principal frustration is that you can do a lot of research and development, but it never goes anywhere,” he said.
When the Pentagon's largest ever weapons contract, the F-35 joint strike fighter, was on the brink of collapse under soaring costs and technical setbacks, Carter was the mastermind of the program's controversial restructuring. He told Congress that the Pentagon needed the F-35 and was committed to buying it, but that sweeping changes in management and contracting methods were needed to control costs. So far, it appears that Carter's actions helped to save the program.
On occasion, Carter reassured industry audiences that the Pentagon was on their side. “Industry is a core part of everything we do,” he said. “We don't build anything in the Pentagon, we rely on industry to make things for us.”
Defense industry consultant Loren Thompson, of the Lexington Institute, hailed media reports that Carter was the top choice to replace Chuck Hagel. "This is good news for anybody who values competency in federal managers," Thompson wrote in Forbes.com. Carter, a 60-year-old Rhodes Scholar and holder of a doctorate in physics from Oxford has "seemingly spent much of his adult life preparing for the role of defense secretary," Thompson observed. "Carter is nearly certain to be confirmed by the Senate."
Thompson argues that Carter is the only candidate who truly understands how the Pentagon works. And he is the one contender "willing to take the job who can get the Obama administration’s drifting defense posture back on a steady course" in the two years left before a new president is elected.
Defense industry CEOs will be looking for Carter to guide the military's investments in new technology. In his last speech in November 2013 as deputy defense secretary, Carter cautioned that the military is at risk of losing its technological edge as the United States no longer has a monopoly on innovation. “The quickening pace of technological change has increasingly ‘flattened’ the world, connecting all of us in ways that can increase common understanding and drive social change, but that can also be misappropriated by rogue states, violent extremists, and sophisticated criminal syndicates to wreak havoc on society,” he said.
Carter served for five years under three defense secretaries — Chuck Hagel, Leon Panetta and Robert Gates — first as the undersecretary for acquisition, technology and logistics, and for the past two years as the deputy secretary. He had an earlier tour at the Pentagon in 1979, and returned in various capacities under 11 secretaries of defense.
Photo: Ashton Carter (Defense Dept.)

Topics: Defense Department, DOD Leadership, Procurement

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