Pressure on defense companies grows, will continue to mount.

• Author: Farrell, Lawrence P., Jr.
• Position: PRESIDENT'SPERSPECTIVE

Much has been said about the approaching and converging financial storm fronts on the defense industry and the projected budget adjustments. One element of the coming change has been the efficiency initiative unveiled by Defense Secretary Robert Gates and its accompanying efforts in the weapons-acquisition area announced by Undersecretary of Defense Ashton Carter.

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Industry CEOs are just now beginning to learn details about the proposed reforms and their implications. The initiatives will focus on internal Defense Department processes and procedures that deal with, among other things, the contracts that will be used in the future for development and production of defense articles and services.

The trend seems to be away from cost-plus award fees to fixed-price contracts that shift more of the risk to industry. Specifics on the implementation and policy/process to achieve these initiatives will likely roll out over several months. NDIA will follow this closely. Stay tuned as we continue to learn more about the new measures.

Two other areas of concern, meanwhile, are now working their way through the regulatory system: One is the Interim Federal Acquisition Regulation rule on executive compensation reporting. The second is the 3 percent tax withholding law that is scheduled to become effective Jan. 1.

The interim FAR rule implements the Federal Funding Accountability and Transparency Act (FFATA) of 2006 which requires the Office of Management and Budget to establish a free public website containing full disclosure of all federal contract award information. The Government Funding Transparency Act of 2008 (Section 6202) subsequently amended this rule. This last act was buried in the Government Wide Supplement Appropriations Act for 2008. The amendment requires the website to include the names and compensation of the five most highly paid employees of companies that receive prime contracts worth more than $25,000.

The General Services Administration incorporated an additional rule that called for compensation disclosure for so-called "tier one" subcontractors. NDIA, in concert with The Council of Defense and Space Industry Associations (CODSIA), objected to this proposal. The letter to GSA can be obtained at: codsia@pscouncil.org. CODSIA concluded that not only did the law place excessive burdens on industry, but that it went beyond it in adding subcontractors to the requirement. The recommendation from CODSIA is asking the...