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welcome to "this week in defense news." i'm vago muradian. what's the right balance between freedom of speech and protect, sensitive information? we'll hear from pentagon spokesman geoff morrell. but first we're joined by ash carter, undersecretary of defense for acquisitions, technology and logistics who unveiled new guidelines for how the pentagon will purchase everything from weapons to services. his plan to find 23 initiatives, grouped into five categories -- affordability and cost control, incentivizing productist, promoting real competition, and improving services acquisition and reducing bureaucracy. ash, great to have you back on the show. >> good to be back with you you. >> i'm sure you happy you have weekend back, working for months. >> we're not going to get weekends back because now it's time to implement, and i'm dogged. and so we're moving into the implementation phase. >> into implementation phase, obviously the report. the focus, there's a lot of

discussion on major platforms so everybody senses a more prime contractor but what does it mean for everybody? both the prime contractors and everybody who supplies them. >> it is for everybody. and all tiers and thought just products but services also. but in one sentence it is. let's find a way together to have in the defense economy productivity growth of the kind that we're all used to in the commercial economy, so that we can continue to offer the same program that we promised the taxpayer for the money the taxpayer can afford to provide us. so every program we're looking for a consistent effort at reducing unnecessary costs. >> and each stage. let's go first to services. most people don't recognize half of what you spend on contractually every year of the $412 billion, 212 of that is services. what are some. things you're got to do better on services and which areas of services you have to do better? >> you're absolutely right. most people think of weapons

buying and defense buying, ships, tanks, planes -- half of our spend, 200 of the 400, per year goes to services, and i'll give you some of the things that we know we don't do enough of. we have a large number of services, contracts rewarded non-competitively. and we know that competition needs to better results and services, and there are a number of reasons some mundane dane why we sometimes don't leave time for competition, and so forth some we can increase that. level of competition. the frequency with which we compete. different parts of the services industry are different. it matters whether you're mowing a lawn at a base, whether you're providing professional services, maintaining an f-22 fighter. and each of those areas we've identified things that we can do to increase the productivity with which we get those services. so this is just an area that hasn't been looked at enough of it's growing faster than the

rest of the buying budget, and it's very plausible that we are going to get some real savings women and proving our trade craft. >> folks repeatedly ask the question, what do you mean by real competition? the question from industry is, well, okay, so what do you mean by that, especially in an era where there's likely more con doll sayings and fewer competitors? >> the adjective meal comes from secretary gates, who was -- the initiator of this efficiencies initiative, and he uses real contrasts to what we began to see in the case of the combat ship. it was what he calls washington competition, where you have two suppliers, but it's not real competition because each one knows they're going to get a certain share of the work, nobody will go out of business. >> right, they're not going to downsize one but both of them. >> which is one of concerns we v for example, that led to the secretary not to be persuaded to get an extra engine for

joint strike fighter. but in the la tomorrow combat ship it was in the unreal competition, we just changed the acquisition strategy so as to rekindle real competition and combat program and we can tell from the results that we'll have real savings. >> right, subsequent blocks that design that you choose would be produced to see who can do it most effectively and efficiently. one of things tenets here that you're discussing is this to i competition every three years on certain programs. does that not become something that actually undermines a relationship for example with the contractor that is doing a good job continuously decreases costs, or very sophisticated, for example, locking on the trident missile. does that make sense to compete that every three years? >> no, none of these is a blanket victim. so people have to use their heads and apply the circumstances. and if you have a very good incumbent, then obviously, you're not going to get as much value out of a competitive

process. it's also true, however, that if the incumbent is so good, they'll win. the competition. >> so then even injecting competition for something that could be that expensive could lead to downstream savings at some point? >> yes. we really have to look at the circumstances and ask yourself whether it's just too much of a hassle to recompete or whether you might not get some real value. even if the incumbent remains doing the work for you, it's a -- it's a moment for everybody to scrutinize costs, get them under control, bring them down. >> assume that you think there's enough savings to be had there, i guess. how does the -- initiatives apply to something in the pipeline now, for example, the new ballistic missile sub menino? you said it applies to existing and new programs. and how has it managed to save money already on something, for example, as large as jso? >> well,. >> joint strike fighters, excuse me. >> to take a new program, the

ssb and x is a program whose total dollar value will exceed $100 billion, and when the ship design first came in, the costs we estimated to produce that ship design was so high that it would have taken the lion's share of the navy shipbuilding budget for the whole decade, from 2020 to 2030. that's what we mean by unaffordable. you could see it that, we couldn't afford it. and what the navy has very successfully done and what one of things i directed that we do in all of our new starts and there are a number of them this year, is take that engineering design, let me see how the cost of the submarine varies with each critical design parameters, speed, diameter, and so forth so that we can see where without sacrificing

critical military capabilities we can alter the design and the navy's done that to such an extents that the design we're looking at now is 16% cheaper than the original design and the goal is to get a 27% cheaper. this is something that is more than $100 billion total program value. >> we'll come back and discuss the joint strike think about the internet.

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as the economic engine that's creating jobs now. working together, investing, keeping information and ideas flowing freely, we can ensure that the internet will continue to grow and influence the future... in ways we can only imagine. because the future has always been our business. at&t. i'm back with ash carter undersecretary of defense. let's pick up where we left off, which is how did the initiatives helped you save money on the joint strike fighter program ongoing effort? >> what happened with jsf is since 2002, when the program began, the estimated per aircraft cost, we learned late last year, had grown from $50 million to $92 million. when the secretary found that

out last december, i had to tell him that, he ordered a restructuring of the program. we change the program management. and really determined that we're not going to pay $92 million. we need to manage that cost, which is crept into it over the course of a decade now, out of the program. that's what we call should cost management. we have a will cost estimate that says if you keep doing what you're doing it will cost $92. but we say it should cost less than that, so we city down with the. anders of the work and program managers and go through item by item of cost of that program and every single one, why is it cost that much? why did it cost more this year than last year? where is the growth coming from? and identifying all those sources, and putting ourselves on a path item by item by item to squeeze that excess cost out. that's the process that we're -- is underway now with the

joint strike fighter program. as one of many managerial steps we're taking to try to bring that program. >> so that the should cost approach is showing -- benefits on it. you've advocated a roof sharing bottle where when a program goes over an x cost that you accepted, the government and the industry would share the cost on a 50-50 and beyond which the contractor is responsible for it as an incentive tool. look, the cost ends up creeping up sometimes because you keep changing requirements. how do you make sure do you this in a way that everybody walks away equally satisfied that it's a fair shake? >> okay. it is in contract type there's no one size fits all. however, a fixed price incentive contract has a lot of attractive features to it. doesn't mean you use it in all circumstances, particularly when trying to invent something new. a fixed price is -- contract is only appropriate when the government knows what it wants and isn't going to change its

mind. >> right. >> and when the performer of the work has his processes and costs under control enough that he can name a price, those circumstances have to obtain for it to be realistic to have a fixed price some it's not in all circumstances. on the other hand e those are good circumstances. we should be in circumstances. when that is the case, a contract of this type is appropriate and then you get to a 50-50 share line or share game, you share pain if you overrun, and what i'm saying is that if -- if 50-50 share line says that you and i, industry and government, should have a common is assessment of whether this will unrover or not. sometimes we won't. sometimes there's a good reason for that. sometimes there's a reason to depart from the 50-50 share line so i don't want people to behave rigidly with respect to this. but the share line is the place where the managers on -- industry and government should

be depart from, because the 50- 50 share line says looking we're at the target price, where the probability of overrun and underrun are equal. >> let me dust jump in a little bit because we're running short on time, ask you about the use it or lose it budget mentality in the department. there's oftentimes major program, for example, future combat systems if cancelled, services still have money so they quickly move to launch for example ground combat vehicle that might not be as well thought through and then this gets underway. you've tossed that. isn't that where you'll get the biggest savings to change people's man tells to say you don't have to spend everything to get more money, you can come under and if you need more money next year, i'll give it to you. >> i don't know how big the savings are in that particular item, but i certainly see the behavior. and you have on remindites not your money. not your -- if you're not ready to spend it this year, even though we put it in the budget, if you're not ready to spend it, for good value. it's not your money. it's not your program's money. it's the taxpayers' money. and we'll take it and apply it

to another -- >> you're get it back with a good program that is in good shape. >> exactly. >> let me ask you a question and concern that comes up by industry, which is as there are more auditors pin suspectors fanning out there in order to give you that visibility and programs, there's a concern that that's raising their overhead costs because now they've got to hire people to answer auditors and folks going out there, as well a concern that some of these folks are out there who are auditing or becoming increasingly confrontational. how do you answer that concern? >> i'm very concerned about that, but that's not the intent of what -- i'm talking about a collaborative process of engineering and examination of costs between us and the permers of our performers of our work getting costs under control, because the alternative is program termination. so it's in the interests of every program and every company, everything program manager to control the costs of

their program. new subject -- very concerned about that. overauditing. we're spending the taxpayers' dollars, so they want to know that we're doing it appropriately, they deserve a certain amount of oversight and auditing. what bothers me is when we learn from our colleagues in industry that there are two or more different u.s. government oversight agencies in the same plant, asking for the same data, in two different formats. >> right, and you let -- >> you're creating busy work. and that's an allowable cost some of when you impose inefficiency on a contractor, they put it in their overheads and charge it back to the taxpayer. >> sir, you're welcome back any time, especially as you grind to implementing this across the department. >> we're working hard and appreciate time to be with us. >> thank you, ash. appreciate it. coming up next, spike the right

secrets leak out of the

pentagon on a weekly basis and each year veterans write books about their exploits. offering require the pentagon to review then contents to block secrets from being disclose. but it isn't offering they consider not only blocking a book but buying up an entire print run to keep its secrets under wraps. that's what the pentagon is considering in this case, with the book, new book, operation dark heart by anthony schaeffer, an intel officer who con cells u.s. operations in afghanistan and pakistan, charging that american leaders missed opportunities to beat the taliban. the author and publisher says the army approved their book before publication but dod contends that the book contains classified information that can't be made public. this is the second time in as many months where the pentagon is trying to block the release of classified information. earlierer they released more than 70,000 military down. s and promises to rely nor bam of more sensitive papers to in a few weeks. here to talk about both incidents and the tensions between the military and the media is the man who deals with this every day, geoff morrell. thank you for joining us. >> thank you, vago.

>> so what the problem with operation dark heart, as far as you're concerned to consider buying up the 10,000 copy print run is. >> i have not been extensively dealing with this. but my understanding of it is that as you said, it contains a considerable amount of classified information that obviously should not go out to the public domain or it could compromise operations or perhaps even the lives of our forces. this is a real dilemma, though, and part of it was brought on by ourselves and part of it is teams if not most of it was brought on by this author, who clearly knew better, than to publish his information. this is a career case intelligence case officer, who is for some reason want to go publish a book that discloses sensitive information. >> what is the book, the breakdown? there's a system that you're supposed to be through. >> as i understand it, he's an army reservist. he went to his unit, asked for clearance to publish this book. the unit cleared it. that component of the dent

cleared it. he then went to the publisher and said i have the okay. they ran off a first run of this book, roughly 10,000 copies, meanwhile the intelligence component in the department hadn't yet finished vetting the book. though saw a lot of information there that greatly concerned them. you know, stuck up their hand and said watt a mind are minted here. which that time there was a first batch published and what is more there have been several copies, advance copies thash had gone on the for review some here we are with this catch-22, what do we do the fact there's 10,000 books sitting there ready to go out which contain information, which could -- potentially compromise our personnel and operations. and these advance copies are also out there. we've been working with the publisher, it's been a cooperative engagement thus far. we have not come to a final resolution but frankly there's not a good outcome. >> because the cat is out of the bag. >> yes. there's more tension ever gotten because of this controversy.

so in some ways, we're playing right into this author's hands. >> more people will end up reading it that might otherwise have. secretary gates has -- >> again, the responsibility is first and foremost on him, especially as a military officer, to know that this is completely inappropriate from the outset, to be disclosing classified information to the public. >> let's go to that. we leaks was a military member of you are obviously doing -- >> we don't know that yet but clearly there's a military member -- with person of interest. >> how -- and the secretary has been repeatedly expressed concerns about military folks holik as well -- anybody in the defense department who leaks information the wrong level. how do you make sure that you maintain that openness which is very important in terms of answering folks' questions and also in an age when electronic communications become much easier and ability to move huge amounts of documents are more easily down to maintain security?

>> let me separate the two issues and let's go back to how we deal with the balance between transparency and operations and protecting secrets and so forth with the normal press, mainstream press. with any press for that matter. i don't consider weekee leaks the press. it's an organization that enticing people inn inducing people to break the law and share with them secret documents, classified information. they are any my estimates voyeurs, peeping toms into a whole segment of secret for a reason. it could get people killed. so how do we deal with them? this is a brave new world. normally when the mcchrystal assessment leaked to bob woodard we have a conversation about what in it could potentially harm our operations, and the washington post being a responsible news organization that it is, takes our input into consideration and takes out of their publication those issues which could potentially harm our forces. we can't -- we were never afforded the opportunity to

have that kind of information with wikileaks. they're not in my mind exercising any sort of editorial judgment over this material. their altitude is posted on the internet and let the chips fall where they may. and we still don't know the full ramifications yet. we've got a team of weekend 20 people that have been going through every document trying to pick out who is potentially harm. >> geoff, we'd like to have you back any time. coming up in my no

after months of grueling work, penalty gone acquisition chief ash art carter issued a 17-page template to improven how america's military buys goods and services. key tenets klugman dating affordability, using time limits, using competition to control costs and innovation and eliminating redundant weapons. another suggestion, to cut by half the mandated reports they must produce for congress. they estimate reviews over 10 years cost at least $350 million. many aren't worked the cost and no longer convey valuable information, he says, as a person who spends time looking

at reports he's got a good point. fewer, shorter reports would be taken more seriously and save trees. a bigger problem is the government's ingrained use it or lose it culture when it comes to budgets, unless you spend it you won't get more next year and everyone wants more next year whether they need it or not. services sometimes rush ahead with programs that aren't well thought through, as was recently the case with the ground combat vehicle in the army. changing the wasteful habit will be the biggest challenge and where a vast savings can be reached. thanks for joining us for "this week in defense news." i'm vago muradian. a very happy 63rd birthday to the united states air force. you can watch this program online or you can e-mail me. i'm be back next week at the same time. until then, have