Time is right to clean up defense acquisition.

• Author: Farrell, Lawrence P., Jr.
• Position: President's Perspective

* When the Defense Department submitted its fiscal year 2014 budget, the possibility of sequester was not considered. Industry executives, administration officials and politicians on Capitol Hill all assumed that some solution would be found. The prevailing thinking could be summed up as follows: "Sequestration won't happen, but I don't know how it won't happen."

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Well, it did happen, and maybe we all need to consider that if we don't know how something won't happen, then we need to prepare for it to happen. The resulting budget crisis has the Pentagon scrambling to catch up. To be fair, many leaders in the defense industry's largest companies always expected the worst, and those firms, while hurting like other businesses, are much better positioned to weather the storm. The real problem, though, is the considerable damage that will happen to the nation's industrial base at large as the military builds down in an unplanned and inefficient way.

Since the sequester for fiscal year 2013 was triggered March 1, the Defense Department has been allowed to reprogram funds to balance its accounts, and is preparing a major amendment to the 2014 budget. The 2015 spending plan, now in preparation, will assume that the Budget Control Act of 2011 (BCA) caps will remain in place. The real issue that now must be faced, and can no longer be ducked, is where will another $500 billion be found in an already depleted budget? The needs are many, but the pressing imperative for operations and maintenance funds puts research, procurement and force structure squarely in the crosshairs.

Investment funding represents approximately 30 to 40 percent of the budget. It remains to be seen how much of that money will be taken from these critical accounts to pay the BCA bill. Obvious answers are program cancellations and reduced procurement quantities.

There is a better way to save money, though, and that is through administrative changes to the Pentagon's acquisition system. Many studies show that cost overruns in major acquisition programs average around 70 percent. Some large programs have unit costs overrunning many times the average unit cost targets. A much more efficient and disciplined acquisition system has the potential of lowering weapons costs substantially, perhaps as much as 10 to 20 percent. The savings over time could add up to hundreds of billions of dollars.

So how is this efficiency to be achieved? One place to start is the...