FISCAL FIXES
costs down. “If you look back over the long period of our budgetary history, it seems like new generations of weapons cost about two to three times as much in terms of real unit costs,” Hale said. “You have to get at this early in the life cycle of a weapon in order to really control its cost. We need to break this rule of con- stant growth.”
TOUGH TRUTHS
Under Secretary of Defense (Comptroller) Robert F. Hale addressed DoD’s financial outlook during the PEO/SYSCOM Commanders’ Conference. “We face large cuts in the defense budget over the next few years, and they’re mandated in law. I know we’re going to need to slow modernization, but we’ve got to do it in a way that is strategic and modernize in the areas of highest priority,” Hale said. (DoD photo by Erica Kobren.)
IMPORTANCE OF AUDITING Hale discussed the role that audits can play in reducing costs, particularly in acquisition programs. He encouraged the use of the Defense Contract Audit Agency (DCAA) to help develop auditable finan- cial statements.
readiness,” Hale said. “You need more than just trained people. You also have to give them the equipment that they need to win on the battlefield.”
Hale cited examples in DoD history— the 10 percent real reduction in the total defense budget from 1985 to 1989, which included a 29 percent reduction in procurement; and the 23 percent cut in the defense budget from 1989 to 1994, representing a 51 percent real cut in procurement—to show that “cuts in modernization will be disproportionately large early in the reduction.”
He sees these large procurement cuts as the result of the services’ reluctance to reduce force structure. “Holding on to force structure means we keep up our operat- ing costs, our fixed top line that tends to cause the focus to be on modernization.”
Acquisition also is affected in the develop- ment of major weapons and the necessary decisions to restrain requirements to keep
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Hale acknowledged that DCAA is deal- ing with problems that have hindered audits in the past, and he requested assis- tance from program executive officers and program managers to improve the audit process while also helping to ensure that audits are requested on time and with rel- evant information.
“Leave enough time in your acquisition plans for an audit if you’re going to have one. There may be areas where you say, ‘I know these costs are within reason. I don’t need an audit.’ … But if you’re going to do it, you need enough lead time,” he said. “… Most of all, we need your help in lean- ing on contractors to give us good pricing proposals. That’s the single biggest cause of delay. We get into these things and find out the information is not reasonable, par- ticularly with regard to subcontractors.”
Auditing also is an important process for Panetta, who has requested that the process be sped up and given more emphasis, Hale added. DoD is one of only two federal agencies, the other being the Department of Homeland Security, that have never had a “clean opinion” on financial statements, he said.
In addition to complying with the Govern- ment Management and Reform Act of 1994, which requires auditable statements at all federal agencies, Hale said the biggest rea- son that auditable statements are vital is “… to reassure the public that we’re good stew- ards of their money. Although we do a lot of things right in financial management and we do know where we are spending money, I think it is really tough to convince the public that we are reasonable stewards when we keep flunking these audits.”
CONCLUSION Hale stressed the need for involvement and cooperation from all areas of DoD, particularly the acquisition community.
“You have some of the toughest problems, as usual, in the financial management area,” he said.
Finding realistic ways to cut the defense budget and protect national security is a huge task, especially when coupled with the uncertainty of sequestration.
“We face large cuts in the defense budget over the next few years, and they’re man- dated in law. I know we’re going to need to slow modernization, but we’ve got to do it in a way that is strategic and mod- ernize in the areas of highest priority,” Hale said. “And most of all, we’ve got to look for ways to hold down costs, and I know you hear that all the time, but it’s important. I hope that you’ll work with me to make good use of organizations like DCAA and … on things like auditable financial statements, to reassure the pub- lic that we’re good stewards of their funds.”
BRITTANY ASHCROFT provides contract support to the U.S. Army Acquisition Sup- port Center through BRTRC Technology Marketing Group. She has nearly 10 years’ experience in magazine editing and holds a B.A. in English from Elmhurst College.
Army AL&T Magazine
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