By Emelie Rutherford
The heads of the Senate Armed Services Committee (SASC) said yesterday they hope to seriously curtail the use of cost-plus contracts through the extensive defense-acquisition- reform bill they introduced Monday.
SASC Chairman Carl Levin (D-Mich.) told reporters the legislation is intended to thwart defense program cost overruns resulting from, at the Pentagon, rosy assumptions made at program inception, unrealistic performance expectations, unreasonable cost and schedule assumptions, and alteration of program requirements in mid-cycle.
“Everything about this bill is aimed at producing fixed-cost contracts,” Levin said about the Weapon Systems Acquisition Reform Act of 2009. “The reason we have so few fixed- cost contracts is because of all the risks that are now in a contract. If you don’t do prototyping, if you don’t do preliminary testing…if your technologies are not mature, if all those things occur–and that’s what’s happening now–then you’ve got contractors who are going to say, ‘Wait a minute, that is a high-risk contract. You’re asking me to sign a fixed-price contract when there are huge risks in there.'”
Levin said he and SASC Ranking Member John McCain (R-Ariz.)–the bill’s primary co-sponsor–are “trying to eliminate those risks so that we can promote…more fixed-price contracts.”
“To get there, you’ve got address…as many as you can of the uncertainties that now exist and the risks…that now exist in these contracts,” Levin said.
McCain, joining Levin at a press conference at the Capitol, said they are not “trying to reinvent some things.”
“Twenty or 30 years ago we just didn’t have cost-plus contracts,” McCain said. “They were the rarity. Now they’re the norm.”
The senators’ bill includes an array of proposed mandates for the Pentagon: reestablishing a director of developmental testing, creating a new independent director of cost assessment, requiring preliminary design reviews before new acquisition programs are approved, and tightening the criteria for continuing programs that suffer cost breaches requiring reviews under the Nunn-McCurdy law (Defense Daily, Feb. 24).
Levin said the bill would “put some teeth” into the Nunn-McCurdy law, and ensure that post-cost-breach certifications by the Pentagon are “no longer routine.”
“Under our bill, if the Nunn-McCurdy line is breached, we’re going to assume that that program is going to end unless the Department of Defense can specifically demonstrate from the beginning, as though they were starting a program fresh, why it is essential that the program be developed, what the alternatives are,” he said. “They’re going to have to go back and rejustify the cost and necessity of that program once the Nunn-McCurdy line is breached.”
“They can’t just send a boilerplate certification” under the bill, McCain said. “They’re going to have to go through the kind of a financial assessment that they do when they start up a weapons system. That is a major requirement for the Department of Defense, and it’s going to be a major incentive not to breach those Nunn-McCurdy limits.”
Levin cited cost overruns with programs including the Army’s Warfare Information Network and Navy’s Littoral Combat Ship (LCS).
McCain bemoaned “a broad array (of programs) where the cost have gotten completely out of control,” naming the LCS, VH-71 presidential helicopter, and Army’s Future Combat Systems programs.
“As far as defense acquisition is concerned and the defense budget is concerned and spending is concerned, we’re facing a train wreck,” McCain said.