EDGEWOOD, Md. (Jan. 19, 2011) -- The U.S. Army is significantly changing the way it does business with defense contractors, a senior Aberdeen Proving Ground leader said Jan. 18.
Industry has a vital role in helping the military save money as it faces budget cuts, said Brig. Gen. Harold Greene, deputy commanding general, U.S. Army Research, Development and Engineering Command.
"There is an initiative to change how we do business. It's going to greatly change how we interact with industry partners," he said. "We are going to do more without more. We are going to take that money and put it back into the programs."
Greene spoke to about 75 people, mostly representatives of defense contractors near APG, at the Association of the U.S. Army-Aberdeen Chapter's monthly meeting.
Secretary of Defense Robert Gates has announced a goal of saving $100 billion over the next five years. Along with cutting unnecessary projects, Gates is looking for efficiencies within the $400 billion per year the Department of Defense spends on contracts for materials, goods and services.
Greene encouraged local industry leaders to embrace cost savings as a way for their companies to remain competitive.
"We're not out to cut industry's profits -- quite the contrary. What they would like to see is a sharing of the savings with industry," Greene said. "The caveat is that the total cost to the taxpayer has to go down.
"They gave an example of a contract of $100 million with a profit of $10 million for a total of $110 million. If you get the cost down to $80 million versus $100 million, [the Army has] no problem with a $15 million profit. The total cost to the taxpayer is only $95 million now."
Dr. Ashton Carter, Under Secretary of Defense for Acquisition, Technology and Logistics, will visit APG Feb. 17 to discuss his initiatives. Greene recommended the audience read Carter's memorandum titled, "Better Buying Power: Mandate for Restoring Affordability and Productivity in Defense Spending."
Greene emphasized that those who embrace the new contracting philosophies will fair best.
"There is going to be a tremendous amount of push to understand where the money goes to drive productivity. It's going to change our relationships. It's going to change how we do business, how you get work and how we get work done," he said.
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