The Pentagon is launching a preferred supplier program to incentivize its vendors as part of a larger effort to promote competition and curb unnecessary paperwork and other bureaucratic hurdles in the procurement process.
Ashton Carter, the Pentagon’s acquisition chief, said the Defense Department is making changes in hopes of driving down the cost of programs. He and Defense Secretary Robert M. Gates last year first unveiled a departmental effort, dubbed the “better buying power initiative.”
Speaking at the Heritage Foundation last week, Carter offered an update on the effort to date.
He said the Pentagon is readying the Superior Supplier Incentive Program, designed to recognize contractors who receive high marks in the Defense Department’s performance-tracking system.
The recognition won’t help suppliers win work, but if they do receive orders, they could see better performance payments, among other rewards, said Carter.
Additionally, Carter said he is now requiring all program managers to have a competitive strategy, or an explanation for how they will use competition to reduce the cost of their program.
Acknowledging that head-to-head competition isn’t always feasible, Carter said there are other ways to cut program costs, such as contract provisions that provide companies a share of any savings they produce.
The Pentagon also plans to reduce “non-productive processes and bureaucracy,” Carter said.
Paperwork the department mandates not only costs money, but also obstructs companies unaccustomed to defense work, he said.
“It’s important that we have an open defense system that is attractive and isn’t so exotic to sell to that companies, particularly small companies, can’t do it,” Carter said.
He said the Pentagon will consider canceling more existing weapons programs but will also focus on driving down the costs of new programs.
“You see that philosophy reflected in the new tanker,” Carter said of the Defense Department’s recent award to Boeing to build the next-generation aerial refueling tanker. The fixed-price contract means “we, the government, are insulated against cost growth in the tanker program, both in development and production.”