Defense Science Board: Procurement Policies Hurting Industry

By Nick Wakeman, Senior Editor


NOV. 30 ? Policies that guide the way the government buys weapons systems and other high-technology items are weakening the competitiveness and profitability of the defense industry, according to a new report released this week by the Defense Science Board.


To address these concerns, the board is recommending a variety of changes, such as streamlining procurement regulations and making it easier to export defense technology to close U.S. allies.


Because many of the procurement regulations that the board wants changed also dictate how the rest of the government buys goods and services ? including information technology ? any changes would have an impact beyond the defense industry, said Philip Odeen, vice chairman of the science board and the leader of the task force that wrote the report. Odeen also is executive vice president of Washington operations for TRW Inc. of Cleveland.


The report recommends the government rely more on "share-in-savings" clauses in contracts. Under most contracts, the contractor has no incentive to find cheaper ways to perform its work because the government keeps all of the savings.


The report also recommends that companies be allowed to earn a higher profit margin on successful contracts, especially when cost, schedule and performance goals are met.


While the report is focused specifically on the defense and aerospace industry, IT companies face many of the same issues, Odeen said.


"I think [the recommendations] will help anyone doing business with the government," he said.


The Defense Science Board is an advisory group to the secretary of defense. The group is composed of leaders in the areas of science and technology and their application in military operations.


The report recommended that government contract personnel be trained to take advantage of current procurement regulations. Some procurement officers avoid risk because they are afraid that they won't be supported if they try new approaches, said the report.


Odeen said the government already is acting to implement some of the recommendations. For example, regulations have been proposed that would allow companies to pass on to the government part of the cost to recruit and retain technology workers. In addition, regulations have been proposed to reward cost-reduction measures by contractors.