Northrop CEO Tells of Defense Cost Woes

Defense contractors bear a significant share of the blame for cost overruns in major U.S. weapons programs, said Ronald D. Sugar, chairman and chief executive of Century City-based Northrop Grumman Corp.

The government’s estimates and expectations may often be unrealistic but the industry’s performance also is often poor, Sugar on Wednesday told an independent panel that the Pentagon appointed to review the U.S. military’s weapons-buying programs in an effort to cut costs.

“We’re a big part of the problem,” Sugar said when asked by the panel’s chairman, retired Air Force Lt. Gen. Ronald Kadish, about the industry’s overall accountability for overruns.

“The significant accountability on our part for overruns” traces to “a failing to do what we said we would do and being too optimistic going into it,” Sugar said in a telephone conference call with the panel, which is composed of former Pentagon acquisition officials.

Gordon R. England, acting deputy secretary of Defense, created the panel after repeatedly hearing complaints about cost growth from members of the Senate Armed Services Committee during his nomination hearing in June.

The panel is one month into a six-month review that aims to recommend changes to the Pentagon’s acquisition process. Sugar’s remarks will be factored in along with those of executives from Lockheed Martin Corp., Raytheon Co., General Dynamics Corp., BAE Systems North America and L-3 Communications Holdings Inc.