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Pentagon eyes remedies as spending 'bow wave' looms

By Andrea Shalal

WASHINGTON (Reuters) - U.S. weapons makers must focus on affordability and be more upfront about the cost of new, cutting-edge technologies given a large "bow wave" of increased spending facing the Pentagon in the 2020s, Comptroller Robert Hale told Reuters on Tuesday.

Hale, who will leave office soon after five years as the Pentagon's top financial officer, said he worried that constant increases in military requirements would undermine a range of efforts under way to drive down the cost of weapons systems.

He said efforts to develop a new long-range bomber would be the "canary in the coal mine" that showed whether budget caps would be effective in curbing runaway weapons costs. The department has said it plans to spend no more than $550 million apiece for 80 to 100 new bombers.

"That would be an enormous achievement," Hale said in an interview, saying it would be a "struggle" for the Air Force to stay under the cost cap since it developed a new bomber only once every 30 years. Boeing Co and Lockheed Martin Corp have joined forces to compete against Northrop Grumman Corp for the multibillion-dollar order.

Typically, new weapons wound up costing two to three times as much as the ones they replaced, Hale said.

He said the Pentagon faced a "bow wave" or large increase in weapons spending in the 2020s when it hopes to buy the new bomber, large numbers of new ground vehicles for the Army, and hundreds of Lockheed Martin Corp F-35 fighter jets.

The Navy is also working on a new submarine to replace the nuclear-armed Ohio-class submarines, and the Air Force needs to replace the Minuteman nuclear ballistic missiles, he said.

Given those pressure to fund those new systems, he said it was critical for firms to find ways to cut costs, and to ensure that military leaders understood the true cost of new technologies.

"I hope more of them will have to courage to say, 'Look this is going to be very expensive, maybe you ought to consider (something else),'" he said.

Companies could help government by "sounding an alarm" about the cost of new technologies. That would help firms in the long run, he said, because otherwise the military would simply buy fewer numbers of ships, planes and ground vehicles.

Hale said he hoped the Pentagon could still avoid breaking a multiyear procurement deal with Sikorsky Aircraft, a unit of United Technologies Corp, and Lockheed for new MH-60 helicopters, a Navy plan that has worried industry.

"But ultimately if we have to choose between readiness and multiyears, it would be a tough call," he said.

Hale said companies needed to "sharpen their pencils" and cut costs, but the Pentagon understood that industry needed to make profits to keep shareholders happy. "They've got to make money or they can't stay in business," he said.

(Reporting by Andrea Shalal; editing by Gunna Dickson)

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