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Gates Tells Defense Contractors To Increase Efficiency, Cut Costs

Translation: "Santa Claus doesn't live here anymore, boys!" I remember doing a defense story years ago and being surprised to learn that defense c

Translation: "Santa Claus doesn't live here anymore, boys!" I remember doing a defense story years ago and being surprised to learn that defense contractors typically use a research and development approach of several teams working on the same program at once, something they said enabled them to pick best practices from each team.

Oh yeah, and it's an extraordinarily expensive approach virtually unheard of in the private sector:

The Pentagon on Monday told the US defense industry to bring down costs and find more savings in a "new era" of more modest military spending.

Ashton Carter, chief arms buyer for the Pentagon, delivered the belt-tightening message to a gathering of hundreds of defense chief executives and senior managers at the Center for Strategic and International Studies, a Washington think tank.

The appeal for cost savings was part of an initiative announced by Defense Secretary Robert Gates last month to free up funds for weapons and other vital military needs, amid increasing pressure on the federal budget.

The industry CEOs understood the fiscal climate had changed, Carter said after the closed-door meeting.

"Everybody knows we're entering a new era," he told reporters. "They can do the math."

The US defense budget would no longer grow at the same dramatic pace that marked the years after the September 11, 2001 attacks, and instead would expand at a more modest rate, said Carter, who also issued an open letter to industry.

As a result, weapons programs and services from private contractors would have to be carried out more efficiently starting next year, he said.

By slashing overhead, the Pentagon could increase funding for "war-fighting capabilities" by two to three percent, said Carter, or "in effect, doing more without more."

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