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Kendall Touts Acquisition Gains, But Warns of Troubled Programs

The U.S. Defense Department's chief weapons buyer touted policy changes that he said have helped curb the cost of major weapons programs, but acknowledged that some acquisition efforts remain problematic.

Frank Kendall, an attorney who serves as the Pentagon's undersecretary of defense for acquisition, technology and logistics, discussed the issues in the third annual report analyzing the performance of the defense acquisition system. The document was released Monday.

"Incentives are motivating better performance, but we must use them appropriately and carefully to avoid unintended consequences," he wrote in the summary. "The linkage between prime contract profit margin and performance is being strengthened. New data confirm that first-tier subcontract margins are generally higher than those on our prime contracts. This factual observation needs further analysis from a policy perspective. Subcontract margins should be reasonable and also tied to performance. The data suggest that we have more work to do in this area."

He added, Cost growth on our major programs is generally at or better than historical levels, but outliers remain a problem."

The document cites as outliers such programs as the Army's Paladin howitzer, digital radio and network systems, the Navy's DDG-1000 guided-missile destroyer program and Littoral Combat Ship; and the Air Force's RQ-4 Global Hawk and MQ-9 Reaper drones, Space-based Infrared System and Advanced Extremely High Frequency satellite systems.

During a panel discussion moderated by DefenseOne's Marcus Weisgerber on Tuesday in Washington, D.C., Kendall and other military acquisition officials warned that hundreds of weapons programs -- from C-130s cargo planes to AH-64 Apache attack helicopters -- may be cut or stopped altogether if Congress can't agree on a budget for fiscal 2016, which began Oct. 1.

At the event, Kendall also warned about the risks of further consolidation in the defense industry. Lockheed Martin Corp., the world's largest defense contractor, this summer entered into an agreement to buy Sikorsky Aircraft Corp., the helicopter maker, from United Technologies Co. for $9 billion.

“If this trend continues, which is what I was pointing out, we will end up at the point where we have two or maybe three primes who are essentially the sources for all the commodities being bought," Kendall said.

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