The Pentagon is so awash in cost-bloated weapon systems that it now needs a pricing czar to double-check estimates that have missed the mark by a staggering $295 billion in just the past several years.
Senate Armed Services Committee Chairman Carl Levin, Michigan Democrat, said Tuesday that the cost cop would "develop its own independent cost estimates to ensure that the information on which so many of our program and budget decisions is based is fair, unbiased and reliable." He said he will propose on the Senate floor legislation authorizing the post.
Mr. Levin commenced a committee hearing with the Pentagon's top weapons buyer to learn why next-generation systems such as the Navy-Air Force Joint Strike Fighter (JSF) and the Army's Future Combat System have ballooned in price collectively by nearly $80 billion.
Mr. Levin said he knows why. Pentagon cost estimators are putting initial price targets at unrealistic numbers. Program managers then are layering the systems with wish lists of futuristic gadgets that drive the prices even higher.
One example: The Navy said it would need $220 million to buy two Littoral Combat Ships. Auditors later found the price tag so overly optimistic that the cost doubled, and the Navy canceled the shipbuilding.
In all, the Government Accountability Office (GAO) found earlier this year that 95 major weapons systems grew in cost by $295 billion, to a total $1.6 trillion.
Meanwhile, a private watchdog group, the Project on Government Oversight, released a leaked Pentagon document that showed major defense contractor Lockheed Martin does not follow proper guidelines for containing cost. Lockheed has the nation's two largest programs for combat aircraft: the F-35 JSF and the F-22 Raptor, a futuristic stealth fighter.
The memo from the Defense Contract Management Agency (DCMA) said Lockheed's Fort Worth, Texas, division in 2007 failed to adhere to 19 of 32 industry standards. The memo for John Young, the Pentagon's undersecretary of defense for acquisition, said the lapse means Lockheed cost estimates are "suspect."
It also said Lockheed does "not provide the requisite definition and discipline to properly plan and control complex, multibillion dollar weapon systems acquisition programs."
Mr. Young told the committee that the Pentagon has imposed a 12-point corrective plan on Lockheed. The government can withhold $10 million in payments for each unmet milestone, he said.
The memo said Lockheed overbilled the government $267 million, which went for fees paid to its subcontractors. Since the DCMA review, Lockheed has reimbursed the government.
Lockheed Martin, the U.S. government's largest contractor, said in a statement that it takes all audits seriously and is addressing the problems.
"We have worked closely with the DCMA team since November, resulting in an approved corrective action plan," spokeswoman Cheryl Amerine said in the statement, adding that the company has been in compliance with every DCMA recommendation since March.
DCMA, in its report, said the lack of compliance "will ultimately jeopardize the long-term stability of [Lockheed Martin Aeronautics Co.] programs at Fort Worth, Texas, facilities and diminishes the purchasing power of the Department" of Defense.
Katherine Schinasi, who directs the GAO's weapons audits, told the committee that the Pentagon buying system has "failed the war fighter, because it's delivering capability late and in fewer quantities than planned or both. And many times, when equipment is delivered to the field it is not what's needed for the current operations."
Mr. Young conceded that his bureaucracy is flawed. He said one problem is too few employees.
The Defense Contract Management Agency employed 20,000 people in 1990, but today, in a time of war, has fewer than half that number, at 9,899.
"The personnel system is one of the most dysfunctional things in the government," he told the committee. "You could have money but not billets. You could have billets but not money. And then the hiring process is excruciatingly long. All of these have not contributed to people with the right talents wanting to come to work for the government."
"Shouldn't we fix it? Shouldn't we change that?" Sen. Claire McCaskill, Missouri Democrat, said of the personnel system. "Obviously, it's not working. We have cost overruns. We have scheduling. I mean, this is a disaster. We're talking about hundreds of billions of dollars. Isn't it time for someone to stand up and say, 'This is a crisis, and we can no longer use this model in terms of the kind of longevity it's producing in these critical oversee-and-accountability positions?'"
Mr. Young explained one segment of the JSF's $37 billion overrun.
The Pentagon chose the prime contractor based on flying prototypes. But it turned out the short-takeoff/vertical landing component for the Marine Corps was too heavy for production models. It took engineers 18 months to remove sufficient weight, adding $7 billion to the total JSF cost.
*Jennifer Haberkorn contributed to this report.