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welcome to "this week in defense news." i'm vago muradian. britain is soon to unveil a new defense industrial policy. we talk to uk acquisition chief peter luff later in the show. but, first, the pentagon spends nearly $7 billion a year and has long been criticized as being inefficient and wasteful. last year the defense secretaryy was also ordered to serve as the pentagon's chief management officer. it also created the post of deputy chief management officer, a job filled by beth mcgrath who has 20 years of defense management experience. ms. mcgrath, thanks very much for joining us. >> thanks very much for having me. >> let's start out, you've been on the job for about a year, what have you accomplished and what do you hope to finish in the remainder of your term?

>> i think that to your point about the congress establishing the role of chief management officer last year was very significant and really a highlight of some of the activities and statutory requirements they've levied on the defense department, really, since 2005, so i watched throughout that time frame more and more progress and a business pace towards achieving greater efficiencies and effectiveness and i would say entirely across the board from personal readiness types of activities to the way we acquire information technology, logistics management. it's really been quite significant, again, given the time and focus of the congress. >> what are some of the top priorities that you're trying to drive forward? >> in fact, last week the deputy secretary assigned out the latest strategic management plan which is the business plan tied to overall strategy which everyone is familiar with at qdr and there's a place in there that ides seven of the

main priorities in the business space, if you will, total work force management, i.t. acquisition, infrastructure, you know, how do we really optimize that i.t. space. secretary carter's better buying initiatives, are we really maxizing our investments when we're establishing these contracts. there's what i'll call a very typical, you know, are we really optimizing these processes, are we doing things most efficiently and effectively as we can, very much a continuecy focus as well with all of our activity in iraq and afghanistan, how do we execute our business in the contingency environment. those are, if you will, a snapshot of the priorities that are identified. >> the first year really has been trying to get your arms around all of this stuff that you're basically going to have to do over the next decades or the department is going to have to do to kind of unwind the somewhat awkward positions it's gotten itself into from a management perspective? >> i would say yes. and the business space has really matured, and, again,

today we talk about cross functional and end to end the way we actually execute our business from the predetermined activity all the way to the payment whereas before we were very functionally focused, very focused on one piece of the business as opposed to lifting up and looking. >> creating, not fully realizing we're creating other for your left side if you do a certain thing on the right side. how do you get -- i mean, one of the most important things, obviously is to drive a cost consciousness throughout the department and, obviously you're looking at a more financially secure austere feature. what are you drawing from the wrongs at the pentagon, to greater efficiency, greater aforethought as everybody goes about doing their business? >> i think it really started with secretary gates' efficiencies initiative last year when we looked across not only the major weapons systems, but really how do we operate and execute as an enterprise. and so all of us had the opportunity to identify areas to become better at what we do,

and it does require you to partner with other folks around the organization because most times you have a piece as opposed to the entirety. so we've identified opportunities from organizational changes, some of the disestablishments of organizations from last year, we're looking at i.t., not only the infrastructure, but the systems and in particular on the business side, do we need as many as we have, is there a way to optimize them better, look at things more corporately. >> do we have a total yet of how much money those efficiency initiatives have saved so far? >> well, in the -- last year during the efficiencies conversation, if you will, they were tied predominantly to the fiscal '12 budget. although we have captured all of the efficiencies initiatives, will it realize those savings during the fy '12 time frame. as we go into the '13 billed,

same conversation happening, everything is on the table, we're looking at how can we do things better from weapons procurement, i.t., infrastructure process, we're really looking at everything. >> how do you benchmark progress? there's an old saying that says if you can measure it, you can influence it. what are the ways you're making sure that what you're doing is actually stuff that's saving you money at the end of the day? >> specifically on the efficiencies initiatives, mr. hale, the comptroller and i are assessing and tracking, you know, did we save the amount of money or the people that we thought we would last year. as we look across the entire enterprise, i mentioned the strategic management plan and the business goals, we have initiatives under each -- under each one of those goals we have measures, under each one of those goals tied to best business practices and there's actually a sense of accountability, quarterly management reporting and those kinds of things, and so we've got greater transparency about the progress that we either are

or aren't making. >> we'll have more with beth mcgrath, the pentagon deputy chief management officer in just a moment. you're watching "this week

welcome back, we're continuing our conversation with elizabeth mcgrath, the chief deputy officer of the pentagon. let me take to afghanistan. what does the pentagon do well and what does the pentagon need in terms of what it manages? >> i would say there are many things that the pentagon and our military does extremely

well. one area i would highlight is our supply chain. we actually do get the material where it needs to be all around the globe, you know, where it needs to be, when it needs to be there. so our operational readiness has been significant and extremely productive. some of the areas that -- and i think everybody has their list of areas of improvement for us, not the least of which is the government accountability office and we do own quite a few of their high-risk areas and predominantly in the business space, an area that i'm very much interested in, things like the information technology, that is definitely an area that we're putting time and attention, i think i mentioned, as part of our strategic business priorities. we've certainly recognized that acquiring business i.t. solutions are different than command and control so we've adopted our instructions and policies around a more agile approach to acquiring those capabilities so that we can

deliver capability faster. i also do want to take the opportunity to highlight that we did after 20 some years -- >> get off the list? >> we got one of our items off the list. it was the personal security clearances. it had been on there since 2005 when the backlog of cases was over 100,000 and it took 165- plus days to actually send a case through the system. now i'm happy to say the backlog has been eliminated and the total processing time is down to 47 days. >> let me ask you about -- which is a great achievement, getting off of anybody's bad list is always progress. in terms of knowing your costs and having it auditable, obviously that's a question that congress has been asking you guys a lot. have you made any progress and how long do you think you guys are going to have better sort of cost data that's also auditable? >> the department is very much committed to achieving the 2017 audittability goal, ready for audit in 2017 and mr. hale has

identified an approach that really focuses on the management information that the department uses the most to make decisions. we've also focused our attention on the existence of incompleteness of assets so we can account for all of our major military assets. each of the military departments has a plan tied to the overarching strategy, again, with measures so we both have near-term and long-term goals. there are many pieces to that, so processes internal control systems, i mean, it will take all of us to achieve that goal because it is not just the responsibility of the comptroller, but really will take everybody and it does have the leadership's attention across the department. so it's not just mr. hale or myself, but it's all of the functional owners as well. >> how do you -- i mean, you obviously work very, very closely with the deputy defense secretary who is the chief management officer, bill lynn, congress has confirmed ash carter to be the next defense secretary. what is the division of labor between what you do and what

the deputy does given that the deputy has a wider perview, you have a much more focused purview, obviously on management? >> the chief management officer, the deputy secretary does a lot of things that come through the office, both business and non-business related. those areas that are business oriented are the things that i really put my time and attention on in terms of execution and followup. we establish together the strategy and it's not certainly just the two of us, but the undersecretaries of the military departments are also the chief management officers for their respective military departments. so it really puts a management focus not only at the departmental level, but the military dments where the execution happens, and so establishing the strategy is certainly done by secretary now lynn, soon-to-be carter and the execution done really is my day- to-day focus. >> we've got about a minute left. one of the things to me, obviously the pentagon has its own inertia, has its own power centers, if you will. how do you enforce discipline

in a system that sometimes can be very ill disciplined? >> to me that's a culture question, it's how do you move an enterprise as large in complex as the department and i think really the establishment of shared goals and shared business outcomes, clarity in your focus areas, that really has been significant. you mentioned -- i actually have quite a bit of time in the defense department and the way things are moving now really is a much more holistic approach to not only the business conversation, but the way we fight, the way we acquire the piece sparts spares, it is a broader much more corporate perspective and that is the only way to combat. >> and budgetary limitations. >> certainly. >> beth, thanks for joining us, we appreciate it. up next, british acquisition chief peter luff acquisition chief peter luff for the outlook

as part of a broad effort to reduce its record national debt, britain plans to cut $118 billion, 74 billion pounds from planned defense spending over the next decade. meanwhile, top officials are working to develop a new defense industrial policy, a draft policy issue inside a so- called green paper last year said the government would buy as much as possible off the shelf to save money, while investing to preserve a handful of national defense industrial capabilities. i was in london recently for the defense and security international trade show and caught up with peter luff, britain's defense acquisition chief. i began by asking him what he could tell us about the industrial policy due out later this year. >> well, frustrating if you're not a huge matter right now because we will have to make an announcement from polland. we're expecting that quite soon now. i wouldn't, though, expect to see significant changes of the green paper itself. a lot of the consultation is actually endorsed in that green paper and the gem themes of

that -- general themes of that will largely survive. it's very important detail in areas, for example, how we treat s.m.e.s. >> small and medium sized enterprises. >> and the way we list exports. there'll be detail in some areas. i think the board's strategies that set out in the green paper will remain in place. >> there are critics of the government who say there are inherent contributions in both the s.m.e. strategy, you guys have said s.m.e.s are critical to the future, but also exports are critical to the future, at the same time you're reducing research and development spending, and those who say that mls britain is developing platforms, those s.m.e.s will remain at the top of the game. is there an inhairpt contribution in the direction you're moving? >> i don't think so. i understand the premise of the argument, but i disagree with it. for start, the s.m.e. is very powerful in the government which we believes brings fresh innovation to the defense. i think you can bring the s.m.e.

into defense, developing the the products of the future. we have a chance to make sure the work is being done by the enterprise, resulting in real products going to the battlefield, i agree with that. i think we're in the right place there. also having a very open approach to markets generally actually places advantage in a country. many american defense contractors based here who have a very large export market from the uk to other countries. they're attracted by the openness of the environment. i appreciate sometimes there's some tough calls, people say, you know, why are you buying that from a british company, but generally opens up, sharpens competition, keeps british defense companies on their toes and by supporting the technology base. by the way, we are sustaining the r and d spending, it's a tough environment. i think we're actually in a very good place to take on the world markets and give the british troops a tax cut they need. >> can you do that in the long run? >> i think that's a ocomplicat answer.

i'm standing in front of the joint strike fighter, some of the bigger more complex platforms, it's difficult for individual countries, even the united states of america finds some of these challenging now. but we will be developing new products. look, for example, the fox hound, the light protective patrol vehicle which are doing force protection, europe, that's a new platform we're developing which i think will have huge export potential. we are still doing many good things in important areas of defense. >> one of the things that the government is doing is trying to price more honestly its programs and secretary fox told the parliamentary defense committee recently that that number was about $5.5 billion pounds between what you optimistically thought a program was going to cost and what is actually going to cost over time. that number is being relooked, rescrubbed and we hear some folks tell us it may be as small as 3 billion or 4 billion pounds, is there any change in that number? >> i think the 5 number is near the mark. it's very important we take account of what happened to programs in the past by being more realistic about the defense budget in the future,

what it's going to buy for us, what the cost of the loans are likely to be. it's a great tragedy in british defense, it's been the program's right because we haven't accurately forecast what it will cost in the years. we have to get that right and the contingency we're putting in place is a sensible one. >> you're also working on a 10- year major equipment plan to sort of map out industry better than what you've been doing. i know that that's still a little ways off, but what are some of the conclusions we should be looking forward to see from that document when it comes out? >> we're still discussing that. it's going to be audited by the national audit office. it's a very big part of the honesty agenda that what we're saying about the defense is sustained in reality. >> you don't want the national office telling you you're wrong in your numbers? >> i suppose we give them a chance to say in advance it happens. we are still working out the precise details of that. obviously, as you understand, as we move forward year and year and after each strategic

defense review, the process will change, the repriorityization within the 10- year budget, that's inevitable in the challenges we face. so the precise level of granule airt we're working through, but it will give industry a much greater clarity about the future of the program and if it's affordable. >> any sense of the priorities yet off the top whether naval, air or land? >> the fundamental strategy is still set out in the strategic review from last october. >> one of the questions i've heard in the halls of this great show is whether this government is committed to the idea that the national defense industrial base is actually a strategic asset, that in order to get best value, the government is going to go and just buy what's on the shelf at the expense of british industry. what's the message -- i'm sure you're getting the same question, what are you telling your defense contractors? >> default where you can, buy off the market, off the shelf, in an open market and free

competition. but there are many occasions where national security requirements give us the operational advantage, the freedom of action we need to fight wars in the future, ups the demand in the uk we will do that and we'll encourage smes and encourage exports. the british industry, the thought is fleurishing in a challenging world. >> the department is under an enormous amount of pressure as washington struggles with its defense cuts but also program cost increases. you guys shifted -- the united kingdom shifted from the short takeoff and landing version to the carrier variance, so, obviously you have a lot at stake and you're a partner on the program. what's your view, what's your sense? is the program going to succeed, is it going to survive and what are your specific concerns with it? >> i can't honestly answer that question. that's a decision for the american administration to take up at present. i know the usa faces a very challenging budget situation right now, the level of defense it faces and it'll have difficult decisions to make. we took difficult decisions a

year or so ago. what it does is obviously for us, for them to consider. but the carrier variance in the program is a program to which we attach great importance. we think it's a very fine aircraft, we're excited about the purchase. we haven't come up with a prenice number for 20 feap. it's not just the acquisition cost, it's life support costs, we're committed to it, we think it's a fine aircraft. >> are you concerned with the cost increase? >> we are concerned with the cost increases and i will discuss shortly that issue with my colleagues in the pentagon. we have to make sure this is economical as promised and the life costs are minimized. >> the uk secretary both uniformed and civil service is looking at cuts and historically when cuts of such magnitude are made, you lose a lot of intellectual capital, guys that know unique things and how things are done and two, three, five years later you have all sorts of cost

increases because people have lost that knowledge base. what are you doing now to keep from having these problems five years in the future? >> we're making sure we don't lose the wrong people. your question answers itself. we have to behave in that way. that's very cautious of the things you've highlighted. but equally well, reducing numbers, it forces new disciplines in the organization. that's very good. i think it's a lack of at kibility, often too many people are involved in making decisions. when you do cover a senior level of management, quite often younger people, newer people have a chance to excel as well. >> better process controls as well. >> better process controls absolutely key. we have to look at the way we do a lot of things. we're sometimes too concerned with checking things out, checking details, checking forms, filling out paperwork. we have to give a sense of accountability and responsibility. if we do that, i think our people can fleurish. >> sir, thanks very much.

coming up next

after an extraordinary 47 years in uniform, admiral mike mullen last week retired as chairman of the joint chiefs of staff, replaced by army general marty dempsey. history will remember mullen as a straight-talking leader of enormous integrity who focused on strategic trends, whether highlighting the national debt as a top security issue or tirelessly working towards success in iraq, afghanistan and elsewhere. he regularly visited pakistan to persuade its leaders to better fight extremists and had the guts to publicly criticize them for failing to do so. mullen was effective because he was nonparochial and unemotional about the challenges facing the nation. he was also always a visible and articulate spokesman who

carried moral authority with the american public, tirelessly using his bully pulpit to remind all the long-time moral obligation to care for troops physically and emotionally scared by war. he remembers his dual role as joint military adviser to the president, but the voice of 2.7 million men and women in uniform. when he concluded it was time to allow gays to serve openly in the military, few could argue against him. it's a good thing the navy exhibited the wisdom to give lieutenant mullen a second chance after he accidentally drove his ship into a buoy. as mullen's successor, dempsey is equally capable and will have to navigate an increasingly complex afghanistan war while shepherding d.o.d. through coming budget cuts with strategic creativity. thanks for joining us for "this week in defense news." i'm vago muradian. you can watch this program online at defensenewstv.com or e-mail me at vago@defensenews tv.com. i'll be back next week at the same time. until then, have a great week.