Product Support Manager Conference Incentivizing Industry Panel Vice Chair, Logistics Division National Defense Industrial Association 15 January 2015

Incentivize Productivity in Industry and Government: Align profitability more tightly with Department goals. This is another “core” initiative. Our data shows that the Department does a reasonably good job of aligning profit with performance. There are exceptions, however, and they need to be eliminated. Profit is the reason that the firms we rely upon exist, and we should not use profit as a cost cutting measure; industry should expect a reasonable profit for the products and services it provides. Profit should not be excessive, however, and higher profit levels should be tied to better performance and lower levels to poorer performance. Our data analysis shows clearly that the way we structure our business deals does affect how industry performs. We all want a defense industry that is lean, competitive, innovative and productive. Profit is an effective tool to achieve these ends, when we use it appropriately. Better Buying Power 3.0

Goal: A defense industry that is lean, competitive, innovative and productive Tenets: Profit is the reason that the firms we rely upon exist Industry should expect a reasonable profit Higher profit levels should be tied to better performance and lower levels to poorer performance We (the Department) should not use profit as a cost cutting measure The way we structure our business deals does affect how industry performs Method: Profit is an effective tool to achieve these ends, when we use it appropriately Direction: Align profitability more tightly with Department goals Incentivize Productivity in Industry (BBP 3.0)

Tenet: Profit should not be “excessive” Incentivize Productivity in Industry (BBP 3.0)

Richard T. Ginman Defense Procurement and Acquisition Policy Responsible for domestic, international, and contingency contract policy, Acquisition policy and oversight of DoD and 2, oversight of the DFARS and the DoD member of the FAR council. Also serves as co-leader and proponent of the Pricing and Contracting Community within the Department of Defense. More than 44 years experience in government and commercial business in the fields of contracting, acquisition management, logistics and financial management. Previous assignments include: Vice President, Maritime Information Systems for General Dynamics Advanced Information Systems; Director of Contracts, Digital System Resources; Commander, Navy Exchange Service Command; Deputy for Acquisition and Business Management for the Assistant Secretary of the Navy (RD&A); and Deputy Commander for Contracts, Naval Sea Systems Command. Retired from uniformed service as a Rear Admiral in 2000.

James M. (“Jim”) Zortman Sector Vice President, Global Logistics and Operational Support, Northrop Grumman Aerospace Systems Provides sector-level leadership for the full spectrum of logistics and product support functions. Responsible for ensuring that Northrop Grumman design and production excellence is fully realized in product support. Joined Northrop Grumman in 2008 following a career in the U.S. Navy, where he attained the rank of vice admiral. As commander Naval Air Forces and chief executive officer, Naval Aviation Enterprise he led a combined team of more than 180,000 military, government, civilian and contractor personnel responsible for operations, readiness and life cycle management of 3,800 aircraft and 12 aircraft carriers. Previous assignments include Commander, Naval Air Forces, Pacific Fleet; Commander, Naval Air Force Atlantic Fleet; Commander, John C. Stennis Battle Group; Director, Operations and Politico-Military Affairs; and Executive Officer to the Vice Chairman of the Joint Chiefs of Staff. Serves on the National Museum of Naval Aviation and United Through Reading boards and the San Diego Regional Economic Development Corporation executive committee.

Tenet: Profit should not be “excessive” Question: Does the government/industry view excessive profit as a specific number? For example: “In general, any profit margin above xx% would be considered excessive.” Incentivize Productivity in Industry (BBP 3.0)