Defense Contractors: Now is the time to tell the DOD how changes in policy can save you money! In 2010, the Undersecretary of Defense for Acquisition, Ashton Carter, launched the DOD’s Better Buying Power Initiative. The purpose of the program was to get feedback from contracting industry officials on what guidelines instituted by the DOD were causing overhead and other costs to increase for defense contractors, while realizing little or no actual gain or increase of value to overall work. The DOD is fully aware that many current regulations do just this, either needlessly hurting contractors (by lowering efficiency & productivity) or adding un-needed expense to what the government buys. In an effort to cut over 100 billion dollars from the DoD budget in the next 5 years (starting FY 2012), this initiative is a good start to reducing waste and increasing efficiency not only in industry, but within the management of the DOD itself. Given the economic reality of today’s shrinking budgets and rising competition among contractors, it is crucial to take this opportunity to give the government a piece of your mind about what rules and regulations drive up your costs. Under the DOD’s Initiative, contractors still have until March 31st to submit ideas and concerns to the DOD. Click the following link to submit your ideas to the DOD:
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There is currently a lot of debate about the cuts in defense spending that are being proposed by both the President as well as the efficiency programs proposed by Secretary Gates. You may hear some comments that this will weaken the United States. You may hear other comments that we can't afford to be the world's police force and we should spend more on programs at home. What is right? President Eisenhower's fairwell speech on January 17, 1961 offers some insight.
As most of us are aware of now, Defense Secretary Gates make sweeping proposals to cut overhead spending in the Defense Department over the next 5 years (reference our blog from Sept. 10, 2010). The goal is to find $100 billion over the next 5 years by improving efficiencies and cutting unnecessary overhead. So what does this mean to the average government contractor? I listened to Rich Wilkinson, government contracts Vice President at Deltek, Inc, last week as he accessed this question. Secretary Gates' proposal includes trimming 10% of the funding for service support contractors each year for the next three years. Rich's point is that this could mean serious re-adjustment for small to medium sized businesses that are supplying what is known as Professional, Administrative & Management Support Services (or PAMS). It could result in the elimination of close to $4.5 B in PAMS spending. Obviously other areas will be cut such as the closing of the JFCOM in Virginia. If you are a small business supporting this area of the Department of Defense you need evaluate your business model immediately in order to survive over the next 3 years. Now, more than ever, is the time for strategic planning for the future. Rich has some recommendations in his paper and we can help you here at Tech Biz evaluate your business model as well. I think everybody that has enjoyed supplying the Department of Defense with products and/or services over the last 10 years needs to be proactive right now in order to survive in the future.