Pentagon Acquisition Chief Says Space Industrial Base May Warrant Protection

by

WASHINGTON — Senior Pentagon officials must weigh the industrial implications of major program decisions and may have to protect key niche areas like space systems and stealth, said Pentagon acquisition chief Ashton Carter.

“I feel industrial base issues are completely legitimate because having the best defense industrial and technology base in the world is not a birthright,” Carter said in a Sept. 2 interview. He became undersecretary of defense for acquisition, technology and logistics April 27.

The U.S. defense industrial base, still the world’s most capable, may weaken within a few years due to extensive consolidation, an aging work force and a lack of new major Department of Defense (DoD) programs.

In recent months, some Republican lawmakers and industry officials have expressed concern about Defense Secretary Robert Gates’ April comments that he did not consider industrial base implications when he canceled, delayed or otherwise altered about 50 major programs.

But in the interview, Carter called defense firms the Pentagon’s “partners” and said he wants an open relationship with them.

“I have tried to open up the channels of communication between this building and industry in the spirit of partnership,” he said. “I expect industry to behave in the public spirit, as well as a business.” Carter also said he wants to keep a close eye on the various sets of skills that undergird the U.S. defense industry’s ability to design and build what the Pentagon orders.

The cancellation of the U.S. Air Force’s future bomber and Transformational Satellite communications system eliminated two of the biggest reasons to keep certain types of aerospace engineers employed. Many are approaching retirement age, which raises the specter of those skills disappearing from the U.S. work force.

“It’s not about jobs, it’s about certain kinds of jobs: very rare kinds of skills that are not easily replicated in the commercial world and, if allowed to erode, would be difficult to rebuild,” Carter said.

Some defense analysts called all of this an apparent reversal of Gates’ comments.

David Berteau, a former Pentagon official who is an analyst at Washington’s Center for Strategic and International Studies, said for industrial base ramifications to become a part of program deliberations, “you have to do the analysis and integrate that into the budget process.”

“It’s pretty clear that didn’t occur with the 2010 budget decisions,” Berteau said. “It’s not yet clear whether just doing more of this will lead to different decisions.”

Mackenzie Eaglen, an analyst at the Washington-based Heritage Foundation, said: “Thank goodness someone over there has finally come to their senses.”

She attributed the apparent switch to a July report from the Aerospace Industries Association (AIA), which concluded the Pentagon no longer understands how program changes can hurt the industrial base.

The July 13 report also declared that American defense and aerospace companies are quickly approaching a day when they cannot deliver needed combat systems. The Pentagon traditionally has “made decisions on its strategic postures — what kind of wars to prepare for and how to prepare for them — with the belief that the defense industry would be able to support whatever course DoD set,” AIA wrote. “That belief is no longer valid.”

Eaglen said the report “got the attention of a lot of people around town.” In the interview, Carter said improving the Pentagon’s understanding about the impact of program decisions on industry and various skills would require difficult-to-obtain empirical research.

Such research will likely be furnished by the Pentagon’s industrial policy office, newly helmed by Brett Lambert. He was recruited from his post as managing director of Civitas, a homeland security consulting group, for his industry knowledge and analytic horsepower.

One former Pentagon official said getting serious about this will require getting Lambert’s office more “involved in preparing and reviewing [programs’] acquisition strategies.” The Pentagon also will have to draw more heavily on research by federally funded research and development centers like the Institute for Defense Analyses, RAND, Mitre and the Aerospace Corp.

Eaglen welcomed the Pentagon’s apparent shift, but said she wondered whether “the damage is already done. This conversation needed to happen before the program cuts in the 2010 budget.” After nearly two decades of industry consolidation and the advent of winner-take-all mega-programs like the Joint Strike Fighter, some experts said program cuts could force the Pentagon to live with monopolies in some markets.

Carter said he would like to avoid situations like Boeing and Lockheed Martin’s 2006 merger of their government space launch businesses.

“In some cases, that may not always be possible, in which case you must try to harness competitive juices in other ways,” he said. “But that option is always a last resort.” The former Pentagon official said that’s easy to say.

As deficits mount and the White House looks for ways to reduce military spending, defense observers said, the Pentagon will have to buy from foreign firms, either because certain components are no longer produced in the United States or because they offer the only competition to a consolidated U.S. industry.

Carter said President Barack Obama’s administration, like  George W. Bush’s administration before it, is open to purchasing foreign-made systems that satisfy U.S. requirements and provide best value. The new administration wants more international cooperation and engagement, a message Carter said he would carry to Europe in early October for his first meeting with his fellow NATO armaments directors.

Carter said a top priority is revamping how the Pentagon buys everything from weapons to logistics.

Of the three primary factors that shape weapon programs — cost, schedule and performance — he said he views the second as most critical.

“Time is money,” Carter said.

Defense analysts said program managers’ margin for error will be dramatically smaller than during the Bush administration, which often tried to fix troubled programs with more money.

Indeed, Carter vowed to terminate unneeded or underperforming programs.

“My approach to troubled programs is to go at them one by one, solve the underlying problems, get them on track,” he said. “And if they cannot be gotten on track, face the music. If a program is not performing, we need the discipline to end it.”

More important than process changes are “good discipline, common sense, and above all, good people involved in the process,” Carter said. “Any acquisition reform proposal that doesn’t have those three ingredients probably isn’t going to get anywhere.”

The former Pentagon official applauded that approach.

“Undersecretaries spend their entire time in the chair rewriting the 5000-series process [that guide DoD procurement], but it hasn’t gotten us very far,” he said.

Steve Grundman, a former Pentagon industrial affairs chief and currently an aerospace and defense consultant at Charles River Associates in Boston, was “heartened” by Carter’s philosophy for tackling the range of complicated topics he will face.

“He is a rule of reason guy … who will not shy away from taking on the grubby details of these issues,” Grundman said. “His agenda is not that different from any other undersecretary, but his comments suggest he will bring a different disposition to that agenda.” But the former official warned against focusing too much on any particular purchasing efforts.

“The thing is, if he’s going to do all this fireman duty on programs, he isn’t going to have much time for anything else,” he said. “And it’s pretty clear he wants to do more than just that.”