Trump Transition

Trump poised for cost-cutting battle with defense contractors

Cheryl Casone reports from New York

 

President-elect Donald Trump’s preemptive strike on the price tag of two major projects with leading defense contractors has fiscal hawks hopeful the incoming administration can rein in Pentagon contract costs even as Trump vows to invest in rebuilding the U.S. military.

“I hope this will be an opportunity to look at the Pentagon more clearly from someone who has not been part of the system,” Mandy Smithberger, director of military reform for the Project on Government Oversight (POGO), told FoxNews.com.

Since early December, Trump has been browbeating Boeing and Lockheed Martin over the costs of the next Air Force One and the F-35, respectively.

“I don't need a $4.2 billion airplane to fly around in,” Trump told “Fox News Sunday” earlier this month, referring to Air Force One.

His criticism led to meetings last week with Boeing CEO Dennis Muilenburg and Lockheed Martin CEO Marillyn Hewson.

Muilenburg afterward committed to deliver the next Air Force One for far less than $4 billion. Trump then turned up the heat on Lockheed, tweeting, “Based on the tremendous cost and cost overruns of the Lockheed Martin F-35, I have asked Boeing to price-out a comparable F-18 Super Hornet!” 

TRUMP ASKS BOEING TO 'PRICE-OUT' ALTERNATIVE TO LOCKHEED'S F-35

Hewson put out a statement Friday, after another conversation with Trump, saying she heard his message “loud and clear.”

“I gave him my personal commitment to drive the cost down aggressively,” she said. “I know that President-elect Trump wants the very best capability for our military at the lowest cost for taxpayers and we’re ready to deliver!”

The cost of the F-35 Joint Strike Fighter has grown to $400 billion for 2,457 planes to be used by the U.S. and its allies, about twice the initial estimate. Boeing, for its part, was awarded the Air Force One contract in January 2015. The Air Force budget in research and development for the contract is reportedly $2.9 billion through fiscal 2021, while procurement is $1 billion.

Trump’s early intervention on these two projects, taking a nearly unprecedented level of interest in contract negotiations for a president-elect, has buoyed groups that for years have tried to control costs for what President Dwight Eisenhower first dubbed the “military industrial complex.”

Trump also wants “lifetime bans” for Pentagon acquisition officials from ever going to work for defense contractors.

But watchdogs say, going forward, Trump will have to take more far-reaching actions to keep costs in line.

Smithberger said reforms should include modernization, greater transparency, and comprehensive testing, which POGO calls a “fly before you buy” policy.

“That would absolutely be a key first step if he wants to drain the swamp,” Smithberger said. “The Pentagon is not the only problem. Congress aids and abets by using the Pentagon as a jobs program.”

As he signals changes for defense contracts, Trump also has vowed to grow the military itself. In a September speech, Trump said he will ask Congress to eliminate the budget-tightening measure known as the defense “sequester” while pursuing a force build-up in the Army and Marine Corps, an increase in ships and submarines for the Navy, and an increase in fighter aircraft for the Air Force. How he balances those goals with his push to cut costs remains to be seen.

Key to any Pentagon reforms will be Trump’s choice for Defense secretary, retired Marine Gen. James Mattis. The general, however, has been on the board of directors for defense contractor General Dynamics since 2013.

“It raises some concerns about his ability to reform the system,” Smithberger said of Mattis.

Still, the retired general’s experience as head of U.S. Central Command and as a NATO commander might provide a useful perspective for reform, said Ben Fitzgerald, director technology and national security at the Center for a New American Security, a Washington-based national security think tank.

“Trump could be more focused and demand results and accountability” from the Pentagon, Fitzgerald told FoxNews.com. “General Mattis is not a contract guy, but he understands the importance of having the right equipment in the hands of our war fighters.”

Boeing and Lockheed both have stressed they want to deliver value for the U.S. government.

“Boeing is committed to providing the best value for warfighters and taxpayers,” company spokesman Todd Belcher told FoxNews.com in a statement. “That’s a goal we share with our partners in the Department of Defense. We work closely with them every day to ensure that we are making strong progress on meeting that goal.”

The two firms on the receiving end of Trump’s critiques, Boeing and Lockheed Martin, also are in a partnership for the United Launch Alliance, which manufactures rockets. This year, the joint venture got an $860 million contract for maintenance and sustainment.

Former House Speaker Newt Gingrich backed Trump’s tougher tone on contractors, predicting he’ll act more like a governor than a traditional president in his level of involvement. He told “Fox News Sunday” the Pentagon’s acquisition process needs to be “totally redone.”

“Serving notice that we are not trapped by large contractors with big armies of lobbyists is going to shake up Washington as much as any single thing you can do,” Gingrich said on “Fox News Sunday.”

The record of skyrocketing costs and less-than-ideal transparency is ample, pointing to the magnitude of the task ahead.

The Defense Department hasn’t issued a single statement of budgetary resources since the enactment of the 1990 Chief Financial Officers Act, which required such statements from agencies, according to POGO.

In February, the Defense Department inspector general concluded the Air Force didn’t properly negotiate maintenance contracts at the Robins Air Force Base in Georgia, and improperly paid between $9.6 million and $24.9 million in questionable fees to Boeing, Northrop Grumman and Honeywell. In a 2014 report, the Government Accountability Office determined the cost of growth for the Pentagon’s weapon programs in 2013 grew by $448 billion with an average delay of two years for completion of projects.

The Defense Department risks losing its technological advantage over other countries, according to a new report by the Center for a New American Security. The report says the military must create a more market-oriented competitive system. Further, the report states this wouldn’t have to increase costs if done effectively.

“Under such a strategy, the DoD could leverage the almost $2 trillion of global commercial research and development more effectively, mitigate the risks of overruns and program cancellations (estimated from $58 to $116 billion between 1997 and 2015, not including classified programs), and better manage its operational and maintenance costs,” the report says. “Above all, this strategy will help the DoD avoid the incalculable costs of losing the nation’s military-technical advantage.”