Wednesday, September 8, 2010

DoD Assembles Teams to Find Ways of Cutting Costs

Last June, Defense Secretary Robert Gates announced he wanted to find $100 billion in overhead savings over the next five fiscal years, starting in fiscal year 2012. Last week, DoD announced the creation of five teams to lead its effort to improve efficiency across the Defense Department. These teams, focusing on contracting where the Department spends $400 of its $700 billion budget, will work on a different area that the DoD believes can lead to cost savings. These five areas are;
  • Affordability
  • Incentives
  • Contract Terms
  • Metrics
  • Service Contracts

Service Contracts. Service contracts are an important area for the Army in particular as 58 percent of the service's $585 billion in active contracts goes toward service contracts today.
Affordability. The services must start thinking about affordability at the outset of a program not halfway through, This may include using "affordability targets" at program milestones.

Incentives. For incentives, the question is what will really make a difference to the contractor, "One of the things we were talking about was it might not necessarily be a concern as to how much profit a contractor makes as long as the cost to the government is lower, the product is better and more sustainable."



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