How To Build Affordability Into Defense Contracts by Mtichell Griffiths

Due to the poor economic situation over the past few years it is important that we pay a lot of attention to the expenditure being done on the weapons program. Most of the defense contracts that are being made now a days think about the economic aspect and most of the defense contractors make sure to include cost cutting in the plans for development. Recently, in an address to defense industry executives, the Pentagon?s chief weapons purchaser sent a clear message. He stated that in all the new weapons programs, including the SSBN-X, vehicles for ground, and weapons for long range strike , making them affordable will be the primary goal.

This is because the days of oversized defense budgets are gone. Over the past two decades there was no hindrance in the flow of funds and so a lot of money was wasted on defense. But with the hard economic conditions, now the defense industry will also work on incentives which will help in making it more efficient and productive.

Defense contractors will now have to consider adapting the same changes that make the rates of products and services drop gradually in the private sector. Carter is of the opinion that if the prices of computers can fall every year then why not the prices of weapons.

This new approach is certain to lead to a lot fewer cost-plus contracts and fixed price contracts will be encouraged a lot more. The reduction of over $400 billion in the defense budget of coming 12 years is bound to have an impact on the defense contractors.

To make a contract more affordable you have 4 alternatives. The first point is to make sure that you improve the way you understand and manage the requirements the incentives and many schedules , which will help in improving cost management. Improving the product and improving the process for production are two important aspects for making it affordable. To incorporate affordability into these contracts the final product can be enhanced by using better material or by improving the production process. Also, by making changes in the workflow and the production plan the contract can be made affordable.

One of the bets methods to make the contracts more affordable is by encouraging a lot more competition. It is important for the government to remove any useless capabilities and make sure that there is more direct acquisition management at every level. This will also help in removing hurdles for competition. Negotiation of all single bid offers through cost or price analysis and also through non-certified data will go a long way in encouraging competition. It will also help if the criteria for evaluation were made better and the time it takes for evaluating is improved. To increase the competition the government can also for competing knowledge based services more frequently.