Video: President signs military spending reform

updated 5/22/2009 11:17:21 AM ET 2009-05-22T15:17:21

President Barack Obama granted the Pentagon new power to rein in wasteful defense spending Friday, a change he said was long overdue.

Standing with leading congressional players on the South Lawn of the White House, Obama signed the weapons acquisition overhaul bill, which passed unanimously in both the House and Senate this week. The president said the bill will crack down on defense programs with huge cost overruns and increase competition for contracts.

"Every penny we waste on this effort because of no-bid contracts or cost overruns is not only an affront to American taxpayers, it's an affront to our military," Obama said.

The president said he would do whatever it takes to ensure the safety of the American people, but rejected the notion "that we need to waste billions of dollars to keep this nation secure."

Obama cited one government study which found that roughly $295 billion of taxpayers' money was wasted last year on cost overruns involving 95 defense programs.

"At a time when we're fighting two wars and facing a serious deficit, this is inexcusable and unconscionable," he said.

Lawmakers passed the legislation with unusual speed to meet Obama's request that they get it to his desk before the Memorial Day holiday.

The bill creates a new director of independent cost assessment, appointed by the president and subject to Senate confirmation. Early warning systems will also be put in place to address cost problems before they get out of hand.

There are no predictions for how much will be saved by increasing control over Pentagon procurement practices, but with multibillion-dollar cost overruns a common occurrence, lawmakers said there is potential for huge financial rewards.

Obama has emphasized the need to make Pentagon operations more cost-efficient. Defense Secretary Robert Gates has taken steps to cut the military budget by curtailing weapons — including the F-22 fighter — that cost more than originally expected or are behind in development.

Unanimous approval
The House passed the weapons acquisition overhaul bill 411-0 Thursday, a day after the Senate unanimously approved it. The two sides came together this week on a compromise bill, moving with unusual speed to meet a request by Obama to send him legislation before lawmakers leave for the Memorial Day recess.

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The Obama administration has emphasized the need to make Pentagon operations both more cost-efficient and more attuned to future combat needs. Defense Secretary Robert Gates has taken steps to halt or curtail weapons, such as the F-22 fighter, that are costing far more than originally expected or are behind schedule in development.

"Too often," said Rep. Ike Skelton, D-Mo., chairman of the House Armed Services Committee, the system results in "too few weapons that cost us too much and arrive too late."

Senate Armed Services Committee Chairman Carl Levin, D-Mich., said the Pentagon persistently relies on unreasonable cost and schedule estimates, insists on unrealistic performance expectations and uses immature technology.

New requirements for competition
The bill creates a new director of independent cost assessment appointed by the president and subject to Senate confirmation. The director would report directly to the secretary of defense, removing layers of bureaucracy between those reviewing programs and top officials.

Video: Defense Secretary proposes deep cuts Early warning systems would be put in place to address cost problems before they get out of hand. There's required use of competitive prototyping so the Pentagon selects the best systems and proves they work before it starts building them.

There are also new requirements for competition throughout the process and steps to prevent contractor conflicts of interests.

The measure also strengthens a 1982 law that allows for the termination of programs with chronic cost or delay problems. Programs running 25 percent over the original baseline during development would have to get new approvals to proceed or be ended.

There would be a presumption of termination, said Levin, who sponsored the bill in the Senate with Sen. John McCain, R-Ariz.

"It is going to be a lot harder to jump that hurdle should programs be failing in the middle or costing a lot more or taking a lot longer," Levin said.

Squandered funds
There was no specific figure on how much the legislation could save taxpayers, although lawmakers cited a recent congressional report finding that 96 major weapons systems are now running almost $300 billion over original cost estimates and are on average 22 months behind schedule.

"If we had not squandered that $300 billion," said Rep. Rob Andrews, D-N.J., a key sponsor, "we would have had enough to pay the salaries of the troops, the health benefits of the troops and their families, for more than two years."

Unlike past congressional responses to $600 hammers and other specific Pentagon spending abuses, "what we're here dealing with today are ways in which we can bring about reductions in spending for massive large weapon systems," said Rep. David Dreier, R-Calif.

The legislation deals specifically with major weapons systems, which comprise about 20 percent of total Pentagon acquisition spending. About one-third of annual Pentagon spending usually goes to weapons.

Levin said earlier that just two major weapons programs — the next-generation Joint Strike Fighter and the Future Combat System — are now running over budget by $80 billion, with an average unit cost now 40 percent above original estimates.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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