Gates outlines plans to shave $100b from defense spending

Over the past decade, the Pentagon’s spending has averaged a growth rate of 7 percent a year, adjusted for inflation, including the costs of the wars in Iraq and Afghanistan.

Gates insisted the Pentagon must get “more bang for its buck and shift its focus to the military’s needs for the future.’’

“We’ve not seen productivity growth in defense,’’ Gates said. He noted that consumers buy “more powerful computers and mobile phones every year, but the taxpayer has had to spend significantly more in order to get more. We need to reverse this.’’

Money saved in cutting overhead and other inefficient costs on weapons programs will go toward modernizing and recapitalizing military equipment and sustaining troops, Pentagon officials said.

The savings plan he detailed yesterday includes a five-step road map on how the Pentagon can be more efficient when it buys roughly $400 billion worth of goods and services that range from advanced aircraft, ammunition, and submarines to contracts for feeding US troops overseas, mowing lawns at military bases, and running complex computer networks.

As part of the plan, the Pentagon will set a price of what it can afford to pay for a weapons system that would fit within its budget. Analysts say that often contractors bid on weapons and then return with ideas that can lead to runaway cost increases. The plan also includes incentives for contractors to keep costs low, better manage how contracts are run, and get rid of some unnecessary, bureaucratic reports.

“In too many instances, past mismanagement has deprived contractors of the incentives to bring down costs,’’ Gates said.

The Pentagon is closely considering what it can afford on several weapons programs, including the presidential helicopter, a new class of missile submarines, a long-range strike system, and ground combat vehicles.

Ashton Carter, the Pentagon’s top weapons buyer and a former Harvard University professor, said in an interview that officials are looking to trim some of the “bells and whistles’’ on a new fleet of the Ohio class submarine. The program is expected to cost $100 billion, but the Navy’s initial design was unaffordable. The service has since worked to reduce the initial cost estimates by 16 percent and is trying to reach a 27 percent cost savings.

Carter also said the Pentagon plans to reduce much of the tasks involved in filing forms and writing reports, adding that some of the work is a “waste of time and money’’ and noting that the Pentagon produced 719 reports at a cost of $350 million.

In a related development, a Senate panel yesterday refused to add funds for General Electric Co.’s backup engine for the F-35 Joint Strike Fighter in its defense budget for next year.

The Senate Defense Appropriations subcommittee followed the lead of its committee that authorizes defense programs in not funding the GE engine. The House has taken a different view, with the House Defense Appropriations subcommittee in July adding $450 million for it.

Supporters, including members of the Massachusetts congressional delegation, say the backup engine would create jobs and generate competition that would lower the overall cost of the engine. As many as 1,000 of those jobs would be slated for the GE plant in Lynn, Mass.

Obama and Gates say the backup engine is a waste of money. The primary engine would be built by Pratt-Whitney.

Material from Bloomberg News was used in this report.