Under Secretary Carter Comments On Lexington Efficiency Brief

Pentagon acquisition chief Ashton Carter called me today to clarify a key point about his ongoing efficiency drive. Carter said he was an avid reader of Lexington’s briefs and liked this week’s assessment of the efficiency initiative, but despite his polite and positive comments he was clearly questioning the premise of the brief that policymakers don’t plan to use profits as a motivator for promoting greater productivity. In fact, Secretary Carter said, the department is “emphatically” thinking about how to use profits as a lever to encourage greater efficiency on the part of industry.

Secretary Carter stated that his office’s briefings to industry have explicitly committed the Pentagon to “rewarding higher productivity with higher profits,” and he said the alignment of private-sector interests with department efficiency goals is a core feature of his initiative. Carter conceded that many of the “debilitating” practices currently detracting from efficiency in the acquisition system are traceable to policies the government itself put in place. He said his team is working to elicit inputs from industry on how to improve, and recognizes that the profit motive is “crucial” to achieving the goals of the efficiency drive.

Secretary Carter certainly comes across as a person who is trying to do the right thing, and who understands the role of self-interest in motivating change. Whatever reservations industry may have about where the Pentagon is headed, it isn’t likely to get a more open or reasonable person in the acquisition chief’s job. Therefore, the best path forward for industry is to engage early, in particular on the issue of what sort of incentive structure the department is willing to back in pursuing productivity gains.