SEC. GATES: Good afternoon. Before taking your questions, I'd like to give a brief update on our ongoing efforts to change the way we do business. Yesterday, our top military and civilian leadership came together to discuss progress on the department-wide efficiencies initiative launched this summer. This meeting included the 10 combatant commanders, who lead our operational military.
It is absolutely critical in our view that the COCOMs be involved in shaping all aspects of these initiatives, especially those that affect military capabilities, missions and their organizations. And their contributions yesterday reflect their important role in our efforts.
I'm determined that those responsible for executing these changes and reforms be involved in developing both options and recommendations.
In the meeting I also underscored this is a team effort. These initiatives, designed to instill a culture of savings and restraint, have buy-in from the civilian and military leadership of the department. These leaders recognize the need to shift resources from overhead to real military capabilities. They believe in the specific measures we have announced and are committed to implementing them and further developing our plans. We must all make every dollar count to ensure that our military has the forces and capabilities needed in a dangerous world.
An example of the savings of this new approach -- this new approach is delivering is the contract for the fourth lot of the F-35 Joint Strike Fighter. After extensive negotiations, the department has reached an agreement to use a fixed-price incentive fee contract for the purchase of 30 F-35s for the U.S. military.
This type of contract shares the cost of overruns between the government and industry up to a fixed ceiling. It also shares the rewards when the programs come in under cost. The per-unit price we've negotiated for this new contract is 15 to 20 percent below the independent cost estimate for the F-35 prepared earlier this year.
The contract as structured will enhance the productivity of the Joint Strike Fighter program to reduce overall costs. The department will continue to closely monitor and aggressively manage this important program.
As part of the guidance issued to our industry partners and defense contracting professionals last week, I made it clear that we need to see more of these types of contracts in order to provide more value and better programs for the American taxpayer and provide good business opportunities for our industrial partners. (end of excerpt)
(EDITOR’S NOTE: Overnight news reports from Washington indicate that the LRIP-4 contract is worth over $5 billion, but as of noon GMT on Friday neither DoD nor Lockheed had made an announcement.
Click here for the full transcript, on the Pentagon website.