[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]


 
                         [H.A.S.C. No. 109-104] 

             ISSUES RELATING TO DEFENSE ACQUISITION REFORM 
                               __________

                                HEARING

                               BEFORE THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD

                             MARCH 29, 2006

                                     
                [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                              -------

                     U.S. GOVERNMENT PRINTING OFFICE

32-970 PDF                 WASHINGTON DC:  2007
---------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office  Internet: bookstore.gpo.gov Phone: toll free (866)512-1800
DC area (202)512-1800  Fax: (202) 512-2250 Mail Stop SSOP, 
Washington, DC 20402-0001


















                                     
                   HOUSE COMMITTEE ON ARMED SERVICES
                       One Hundred Ninth Congress

                  DUNCAN HUNTER, California, Chairman
CURT WELDON, Pennsylvania            IKE SKELTON, Missouri
JOEL HEFLEY, Colorado                JOHN SPRATT, South Carolina
JIM SAXTON, New Jersey               SOLOMON P. ORTIZ, Texas
JOHN M. McHUGH, New York             LANE EVANS, Illinois
TERRY EVERETT, Alabama               GENE TAYLOR, Mississippi
ROSCOE G. BARTLETT, Maryland         NEIL ABERCROMBIE, Hawaii
HOWARD P. ``BUCK'' McKEON,           MARTY MEEHAN, Massachusetts
    California                       SILVESTRE REYES, Texas
MAC THORNBERRY, Texas                VIC SNYDER, Arkansas
JOHN N. HOSTETTLER, Indiana          ADAM SMITH, Washington
WALTER B. JONES, North Carolina      LORETTA SANCHEZ, California
JIM RYUN, Kansas                     MIKE McINTYRE, North Carolina
JIM GIBBONS, Nevada                  ELLEN O. TAUSCHER, California
ROBIN HAYES, North Carolina          ROBERT A. BRADY, Pennsylvania
KEN CALVERT, California              ROBERT ANDREWS, New Jersey
ROB SIMMONS, Connecticut             SUSAN A. DAVIS, California
JO ANN DAVIS, Virginia               JAMES R. LANGEVIN, Rhode Island
W. TODD AKIN, Missouri               STEVE ISRAEL, New York
J. RANDY FORBES, Virginia            RICK LARSEN, Washington
JEFF MILLER, Florida                 JIM COOPER, Tennessee
JOE WILSON, South Carolina           JIM MARSHALL, Georgia
FRANK A. LoBIONDO, New Jersey        KENDRICK B. MEEK, Florida
JEB BRADLEY, New Hampshire           MADELEINE Z. BORDALLO, Guam
MICHAEL TURNER, Ohio                 TIM RYAN, Ohio
JOHN KLINE, Minnesota                MARK E. UDALL, Colorado
CANDICE S. MILLER, Michigan          G.K. BUTTERFIELD, North Carolina
MIKE ROGERS, Alabama                 CYNTHIA McKINNEY, Georgia
TRENT FRANKS, Arizona                DAN BOREN, Oklahoma
BILL SHUSTER, Pennsylvania
THELMA DRAKE, Virginia
JOE SCHWARZ, Michigan
CATHY McMORRIS, Washington
MICHAEL CONAWAY, Texas
GEOFF DAVIS, Kentucky
                   Robert L. Simmons, Staff Director
                          Jeff Green, Counsel
                Andrew Hunter, Professional Staff Member
                    Heather Messera, Staff Assistant
























                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2006

                                                                   Page

Hearing:

Wednesday, March 29, 2006, Issues Relating to Defense Acquisition 
  Reform.........................................................     1

Appendix:

Wednesday, March 29, 2006........................................    29
                              ----------                              

                       WEDNESDAY, MARCH 29, 2006
             ISSUES RELATING TO DEFENSE ACQUISITION REFORM
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Hefley, Hon. Joel, a Representative from Colorado, Committee on 
  Armed Services.................................................     1
Skelton, Hon. Ike, a Representative from Missouri, Ranking 
  Member, Committee on Armed Services............................     2

                               WITNESSES

Chao, Pierre A., Senior Fellow and Director of Defense-Industrial 
  Initiatives, International Security Program, Center for 
  Strategic and International Studies............................    10
Hermann, Hon. Robert J., Task Force Co-Chair, Defense Science 
  Board Summer Study on Transformation...........................     6
Kadish, Lt. Gen. Ronald T., Chairman, Defense Acquisition 
  Performance Review Project, U.S. Air Force (Ret.)..............     3
Little, Terry R., Acquisition Advisor to the Director, Missile 
  Defense Agency.................................................    13

                                APPENDIX

Prepared Statements:

    Chao, Pierre A...............................................    50
    Hermann, Robert J............................................    58
    Hunter, Hon. Duncan..........................................    33
    Kadish, Lt. Gen. Ronald T....................................    41
    Little, Terry R..............................................    71
    Skelton, Hon. Ike............................................    38

Documents Submitted for the Record:
    [There were no Documents submitted.]

Questions and Answers Submitted for the Record:
    [There were no Questions submitted.]
             ISSUES RELATING TO DEFENSE ACQUISITION REFORM

                              ----------                              

                          House of Representatives,
                               Committee on Armed Services,
                         Washington, DC, Wednesday, March 29, 2006.
    The committee met, pursuant to call, at 10:06 a.m., in room 
2118, Rayburn House Office Building, Hon. Joel Hefley 
presiding.

 OPENING STATEMENT OF HON. JOEL HEFLEY, A REPRESENTATIVE FROM 
             COLORADO, COMMITTEE ON ARMED SERVICES

    Mr. Hefley. The meeting will come to order.
    Today the committee meets to continue its oversight of the 
defense acquisition system. Over the past several years, this 
committee has made major strides in the area of acquisition 
reform. Some of our most recent initiatives include rapid 
acquisition authority to field equipment needed to prevent 
combat fatalities; a statutory requirement for the Department 
of Defense to comply with its own policies, regulations and 
directives; and the revision of the Nunn-McCurdy amendment, one 
of the most powerful tools in the oversight arsenal.
    These reforms, however, aren't enough. Year after year, we 
face the same problems: rapid cost growth, an unconstrained 
requirements process which delays fielding of new systems, and 
assurances from the Department of Defense that these problems 
will be corrected.
    To the credit of the Department, they have commissioned 
numerous studies to identify the most pressing issues and to 
identify areas requiring reform. Today, our witnesses will 
review the results of these studies and share their findings 
with us.
    Next Wednesday, the committee will reconvene with senior 
leaders from the Department's acquisition, requirements and 
financial management communities to discuss their plans for 
implementation of the numerous reform recommendations.
    But, first, we have a unique opportunity to hear from the 
leading experts in the field of acquisition reform. Their 
perspectives on these ongoing challenges will be invaluable to 
the committee, as we continue our efforts to overcome these 
acquisition challenges.
    Our first three witnesses served as the key members of 
major acquisition reform studies and will provide a brief 
synopsis of their findings.
    First we will hear from Lieutenant General Ronald Kadish, 
United States Air Force, retired, for an overview of the 
recently completed Defense Acquisition Performance Assessment 
Panel commissioned in June 2005 by Deputy Secretary of Defense 
Gordon England.
    General Kadish will be followed by former Assistant 
Secretary of the Air Force Dr. Robert Hermann, who recently 
served as task force co-chair for a Defense Science Board 
Summer Study on Transformation.
    Our third witness, Pierre Chao, recently served as 
principal author of the Center for Strategic and International 
Studies' ``Beyond Goldwater-Nichols'' report, and is senior 
fellow and director of The Defense Industrial Initiatives Group 
(DIIG), with the International Security Program.
    Finally, we are fortunate to have a representative of the 
current acquisition system and one of the most experienced 
program managers in the entire Department of Defense. Terry 
Little, currently Acquisition Adviser to the Missile Defense 
Agency, offers a unique perspective as the voice of the current 
defense acquisition system.
    I should note that Mr. Little is here today not to discuss 
his current position, but rather to speak about some of his 
previous successes in the acquisition system as program manager 
of the Joint Direct Attack Munition and Small Diameter Bomb. 
His testimony will offer a perspective as to how aggressive 
program management testing and risk control are able to keep a 
program on cost and on schedule all within the current 
acquisition system.
    Gentleman, we are pleased that you are here today, and we 
look forward to your testimony.
    Let me recognize first, though, the committee's ranking 
Democrat, Mr. Skelton, for any remarks that he would like to 
make.
    [The prepared statement of Mr. Hunter can be found in the 
Appendix on page 33.]

STATEMENT OF HON. IKE SKELTON, A REPRESENTATIVE FROM MISSOURI, 
          RANKING MEMBER, COMMITTEE ON ARMED SERVICES

    Mr. Skelton. Thanks so much, Mr. Chairman.
    And I commend the holding of this hearing today on 
acquisition reform.
    Acquisition has been an area of focus for both of us over 
the years, and now is the time for this committee to provide 
aggressive oversight, because our acquisition system has gotten 
seriously off track.
    Last fall, when we examined the issue, I laid out the 
problems as I saw them. They are unchanged today.
    Our existing weapons systems are aging rapidly, the cost of 
buying new weapons is growing astronomically, and in the past 4 
years, the cost of the top 5 acquisition programs grew 46 
percent. The budget for procurement grew hardly at all. As a 
result, we buy less and what we have keeps getting older.
    I believe a handful of mistakes are driving this negative 
cycle. First, we are too aggressive in setting our requirements 
because we have become fixated on technology over soldiers. 
Second, we no longer have the right mix of people in our 
acquisitions system, and we have to invest in these 
professionals to get better results. Third, we have to repair a 
process that routinely ignores the time-honored policies and 
practices that have led to success in acquisition.
    Now, Mr. Chairman, we took many good steps to fix the 
process in our bill last year, and I know we will continue to 
focus on this as we put this bill together this year.
    Today's witnesses are uniquely qualified to help us find 
solutions. They have studied them in depth. And the sheer 
number of major studies that have been performed in recent 
years tells us just how serious a problem we have.
    I must note, Mr. Chairman, in particular, that we have with 
us today Pierre Chao from the Center for Strategic and 
International Studies.
    Dr. Chao, I want you to know I hold very little grudge for 
the fact that you stole from me my ex-acquisition expert J.J. 
Gertler. I don't hold grudges too long, a couple years maybe. 
But we will get through it.
    I might say, Mr. Chairman, ``Beyond Goldwater-Nichols''--I 
will review your study with complete objectivity, Mr. Chao.
    Thank you so much.
    [The prepared statement of Mr. Skelton can be found in the 
Appendix on page 38.]
    Mr. Hefley. General Kadish, the floor is yours.

   STATEMENT OF LT. GEN. RONALD T. KADISH, CHAIRMAN, DEFENSE 
 ACQUISITION PERFORMANCE REVIEW PROJECT, U.S. AIR FORCE (RET.)

    General Kadish. Thank you, Mr. Chairman.
    I am pleased to be here today to talk about the commission 
that I chaired. I am here in my capacity as chairman of the 
Defense Acquisition Performance Assessment Panel, in accordance 
with the Federal Advisory Committee Act of 1972, to outline the 
assessments and the findings of the panel and to provide a 
perspective on the issues.
    The panel's review process was held in an open and 
transparent as possible to engage the public while gathering as 
much input as practical from all the practitioners and 
stakeholders in the Department of Defense (DOD) acquisition 
process.
    This initiative was established by then-acting Deputy 
Secretary of Defense Gordon England on June 7, 2005, in a memo 
that he wrote. And he directed ``an integrated acquisition 
assessment to consider every aspect of acquisition, including 
requirements, organizational issues, legal foundations, 
decision methodology, oversight, checks and balances--every 
aspect.''
    The deputy secretary requested that the results be a 
recommended acquisition structure and process with clear 
alignment of responsibility, authority and accountability.
    Our findings were reported to the deputy secretary in 
November of 2005, and a final report was released in January 
2006.
    Our conclusions covered a broad scope of recommendations.
    We determined that the problems we faced are deeply 
embedded in many, many DOD acquisition management systems, not 
just in a narrow field called acquisition. Also, a new approach 
to improvements is needed to adapt to a new security 
environment that we face.
    We reviewed over 1,500 documents to establish a baseline of 
previous recommendations. We held open meetings and maintained 
a Web site to solicit comments from the public. We heard from 
over a hundred experts and received over 170 hours of 
briefings. Over 130 government and industry acquisition 
professionals as well as organized labor union executives were 
interviewed.
    From all this, we developed over 1,000 observations. Then 
we boiled them down to 42 areas, and ended up outlining in our 
report the major elements of the acquisition system. And we 
boiled them down to organization, workforce, budget, 
requirements, acquisition and industry.
    History shows numerous studies and reform initiatives have 
occurred over the years. It still remains, however, plagued by 
numerous and highly publicized shortfalls in efficiency.
    For example, 20 years ago, the president's Blue Ribbon 
Commission on Defense, most commonly known as the Packard 
Commission, ushered in an era of acquisition reform with its 
findings that DOD's weapons systems take too long and cost too 
much to produce.
    Two decades later, many believe the weapons systems 
programs we have today still cost too much and take too long to 
field. We should ask ourselves a key question: Why?
    The existing system, however flawed, has produced the most 
capable, best-equipped and most effective military in the 
history of the world. We have met the effectiveness test in the 
past. Now we have to adapt to a different security environment 
as well.
    Fundamental structural changes in the acquisition system 
are needed to adapt to this security environment. And an 
effective system requires stability and continuity that can 
only be achieved through the integration of all the major 
processes and elements upon which it depends.
    I would say that incremental change to the acquisition 
process as we know it alone usually assumes that the other key 
processes are cohesive and stable. In reality, they are 
disconnected and unstable.
    We are convinced that the sheer complexity of the system is 
a major impediment and contributes to much of the confusion 
about the acquisition system and processes.
    Let me explain. There are three fundamental processes that 
DOD operates. And if you will allow me, I would like to call 
these the Big A acquisition system. This includes the 
requirements process, the planning, programming and budgeting 
process, and the acquisition process. I will refer to the 
acquisition process among those three alone as Little A because 
it is embedded in the Big A system.
    Simply focusing on improvements to that Little A 
acquisition portion instead of the larger acquisition system, 
the Big A, cannot and will not substantially improve defense 
acquisition and performance.
    The larger acquisition system was designed and optimized to 
respond to a security environment dominated by a single 
strategic threat: the former Soviet Union. But today, key 
functions of the Big A acquisition system--such as the 
requirements development, systems engineering, operational 
testing and transitioning of science and technology--are being 
pursued almost as separate, independent entities, adding to the 
cost and complexity of the process.
    As I said, the security environment is very different 
today. Therefore the processes we need to meet the demands of 
this environment must have the flexibility and agility to 
respond in a timely way. Adapting the acquisition system to the 
realities of this new environment cannot be considered 
independently of the organizations charged with the conduct and 
the system to recruit, train and develop and retain its 
workforce.
    Let me characterize this new security environment in maybe 
a little bit different way than you have heard in the past, and 
why it is important not to view these recommendations of the 
report or this whole subject of reform in isolation as a 
management problem or an organizational issue.
    I would submit that the security environment we face today 
is a real challenge for our decision cycles. Where we spent and 
I spent much of my career trying to figure out how to turn our 
decision cycles inside those of our adversary and we have been 
very successful.
    What we see in the processes today, faced with a new 
security environment with the Global War on Terror, is that we 
are in danger of having our adversaries turn inside our 
decision cycle. And that in and of itself is very worrisome.
    Finally, the industrial environment has changed in 
fundamental ways, as well as the security environment. The 
globalization of industry and the consolidation over the last 
15 to 20 years, as well as our outsourcing policies, affect the 
policies and strategies and techniques that we used to use.
    This raises many key questions.
    Twenty years ago, we had 25 prime contractors plus a 
subcontractor base that was very robust. And we were producing 
thousands of units of weapons systems per year. Today, we have 
six primes, depending on how you count. We are producing tens 
of things a year and we are very vertically integrated in our 
industry.
    So things like how we use competition to get the benefit 
that we expect, how can we accomplish our mission with the 
globalization of the economy and why don't we have more 
nontraditional suppliers in our base become key elements of the 
discussion and worthy of very big national dialogues.
    We believe our process for this project was very 
disciplined. And we sought to validate all these requirements 
and assessments and recommendations.
    Mr. Chairman, I would submit the report of all those 
recommendations and assessments for your consideration for the 
record. I won't go through all of them right now, but would be 
welcome to have some questions about the wide-ranging 
capabilities that we are suggesting in the process, in the 
interest of time. But we did propose sweeping changes to 
dramatically improve the department's ability to stabilize and 
integrate key elements of the acquisition system.
    As I said before, simply focusing on improvements to that 
Little A, without looking at budget and requirements, workforce 
issues, organizational issues and so forth, cannot and will not 
substantially improve the acquisition performance. We have been 
reforming that Little A for years, and we need to do more. But 
we have got to look at those systems that interface with that 
Little A.
    As I have listened in panel meetings and studied this 
problem over many months now and lived in this environment for 
over 25 years, I am convinced that we could do better to face 
our new security environment.
    Our collective challenge, then, will be to overcome the 
myriad of interests, conflicting policies and incentives and 
inherent conflicts so that we can exploit technology to support 
our warfighters and turn inside our adversaries' decision 
cycles as much as practical. Otherwise, we will have another 
effort in a few years addressing the same issues that we face 
today.
    However, we must ensure that in our efforts to improve the 
system we do not somehow degrade our existing capabilities and 
not provide our warfighters with the systems and technologies 
we need to continue to dominate the battlefield.
    Thank you for listening, Mr. Chairman. And I will end it 
there.
    [The prepared statement of General Kadish can be found in 
the Appendix on page 41.]
    Mr. Hefley. Thank you, General.
    Mr. Hermann.

   STATEMENT OF HON. ROBERT J. HERMANN, TASK FORCE CO-CHAIR, 
      DEFENSE SCIENCE BOARD SUMMER STUDY ON TRANSFORMATION

    Mr. Hermann. Yes, good morning. I want to thank you for 
inviting me to testify on this subject. It is a complex issue, 
and I welcome the opportunity to convey some of what I think I 
have learned over the past decades.
    You have, I believe, provided a full statement that I would 
like to have accepted for the record.
    Mr. Hefley. All full statements will be put in the record, 
without objection.
    Mr. Hermann. Let me just talk to a few points and leave 
some time for questioning.
    I became formally engaged with this subject in 1993 when 
Dr. Perry, who was then the deputy secretary of defense, asked 
me to chair a Defense Science Board on acquisition reform. In 
the next six years, I chaired many task forces on that subject, 
and since that time, have worked and studied this problem as an 
avocation, as it turns out, until now.
    I would say that the best articulation of what I believe 
needs to be done does, in fact, reside in the summer study that 
we produced on ``Transformation: A Progress Report.''
    In addition to studying it from the point of view of a 
defense adviser, I am obliged to say there are other things 
that form what I think about the subject. I spent 16 years, 11 
of which as a chief technical officer, for a major public 
corporation in the manufacturing sector. I served as a manager 
in a government agency. I have served in the Office of the 
Secretary of Defense. I was the service acquisition executive 
for the Air Force before we called it that. And I served 2 
years as a special assistant to Commander in Chief European 
Command (CINCEUR), Supreme Allied Commander Europe (SACEUR) at 
the time, and so believe I have some familiarity with the 
command issues. And from that, I have drawn whatever lessons 
that I would like to convey today.
    This subject is complicated enough that it is possible to 
miscommunicate from time to time, because each of us comes with 
different background and different use of language. And so I 
think the opportunity to miscommunicate is very, very large.
    I am going to try to convert to a communications style 
which says that I have some propositions that I want to put 
forward and then they do not end up being the complete 
description of everything that should be done, but they are the 
salient propositions that I would offer to you.
    First of all, acquisition, as General Kadish has said, is 
not just about buying things. From my perspective, the role of 
the Department of Defense is to create, deploy and employ armed 
forces to defend and support the political interests of the 
country. The things it must require or put in place are joint, 
allied and coalition military forces. The end product of the 
enterprise is effective forces, fielded forces, for today and 
for the future.
    And so, the notion that we just buy things--it turns out we 
have to figure out what is the value of what we buy. You must 
relate back to the mission. You must buy things for value. And 
in order to understand value, you have to understand 
alternative uses of the money.
    There are many observers and commenters on what is wrong 
with DOD. And each will have their version. My summary is as 
follows.
    The first and most important is the Department does not 
have a plan for what it is trying to achieve in outcome terms. 
It makes no attempt to measure how well it is achieving its 
objective. And it has no system for understanding the true cost 
of any of its activities. This fragmented decision-making leads 
to overly optimistic cost and schedule estimates and results in 
destabilized program execution.
    The DOD requirements process is very destructive. I might 
note that in the private sector and in a large public 
corporation we never used the word ``requirement.'' There isn't 
anything that is a requirement.
    For a long time I noticed that the Comanche was certainly 
required. I know there was a requirement for it because the 
Bible told me so. However, it was canceled, so it must not have 
been required. So the notion that things are required is in 
itself destructive. It separates the question of what is needed 
from the cost of fulfilling that need.
    The requirement is usually fixed by a committee of people 
that have neither mission responsibility or financial 
accountability. This requirement is passed, in recent years, as 
unbreakable guidance to a procurement process that has no right 
or confidence to make trades between performance specified by 
the requirement and the cost and schedule implications of 
implementing the requirement.
    Requirements should inform the judgment of accountable 
objectives but should not dictate performance outcomes.
    Next, the Combatant Commanders have the ultimate mission 
responsibilities of the Department. As you stand at the 
secretary's position and say, ``What is my mission?'' I 
accomplish my missions through the Combatant Commanders, but 
they are not effectively permitted to participate in the makeup 
of the forces that are needed for the future missions of their 
command.
    Although there are operational plans for tomorrow, there 
are no guiding plans for evolving the future force for that 
mission responsibility. The Combatant Commands do not have 
adequate technical support to manage the very technically rich 
system that is their force or to contribute to the evolution of 
that force for the future.
    The Department spends a great deal of resources under the 
name of logistics, but does not have a quality logistics 
system. Management of this area is fractionated. The costs are 
huge and the effectiveness of the system is mediocre.
    Finally, the way the Department implemented Goldwater-
Nichols to move the leadership of the armed services from the 
armed service Title X organize, equip and train role--this 
removed an important source of military competence from the 
process and placed undue dependence on the destructive 
requirements process.
    This was not required by the law, and no legislative action 
is needed to fix the problem. And I believe the Department is 
on the way toward fixing this problem.
    In putting forth propositions that I would recommend to 
address these issues, I extracted part of the DSB reports that 
I have been chair, co-chair or participant in.
    And I would say that the most important recommendation is 
that the DOD should have a business plan. They have a strategy, 
and they have a budget, but they do not have a business plan.
    In the sense of a businessman, it means that I have to 
describe not only to my shareholders--in this case, me, the 
citizen--I have to describe to the people who are working in 
this enterprise what is it we are trying to accomplish and how 
are we going to get there? With what resources and by what 
schedule are we going to achieve what capabilities for this 
department?
    Such a plan does not exist. So there are recommendations as 
to how to go about it.
    And since this is a complicated recommendation--I know that 
from practice--I would start first by noting that it is 
important that the responsibilities, authorities and 
accountability within the Department be sorted out correctly.
    There is a role for the armed services. And to achieve this 
objective, no change to Title X is required because the armed 
services should still be the primary source, along with the 
Defense agencies, of all the assets necessary to operate the 
Department.
    There is a role for the Combatant Commands because they are 
the users. They are the place where the forces come into being 
and only there. We only have forces as a complete system under 
the command of combatants; the units that are provided by the 
armed services are not a complete force.
    There is a role for the Chairman and the Joint Staff. There 
is a role for the Secretary and his staff, the Office of the 
Secretary of Defense. And we have outlined those in the report.
    One of the key recommendations is that the secretary 
should, in his own management process, account for every dollar 
and resource allocated--should account for them under the 
mission heading of the Combantant Commander (COCOM) mission. 
That is, if there is a dollar given of mine, the taxpayer, to 
the secretary, he should be obliged to explain why it is that 
that relates to some mission that he has.
    And therefore we have put a matrix together in which the 
program and budget formulation must be allocated or accounted 
for along the lines of the mission, so to give the Combatant 
Commander visibility of the resources of the Department that 
are being used in support of his mission today and in the 
future and visibility to the problems of the Department.
    Because unless that is the case, the combatant commanders 
will not have any clout in Washington. It is about the money. 
And it is much more about the money than it is the mission, 
because the mission is not actually represented at the table 
very often, either here or in the counsels of the Department.
    So anyhow, it is a heavy change in process, but it requires 
no change in the actual identification of resources, no change 
in Title X, no change in submission of resources to the 
Congress, but it actually has to do with the internal 
discipline associating the resources we put to the Department 
to the missions that we accept for the Department.
    The increase in the ability of the Combatant Commanders 
derives from that recommendation in our report. And also, in 
order to support a more complete role, they need technical 
support.
    We also describe a way in which to fix the Goldwater-
Nichols change in the departmental process to include in the 
acquisition process the secretary of the armed service, the 
chief of staff of the armed service and his staff.
    I think all of us have, in one way or another, tried to 
address the logistics problem. Our particular form of 
addressing the logistics problem is to say that there should be 
a Logistics Command. We currently have a Transportation Command 
and we have a Defense Logistic Agency and we have service 
logistics commands.
    And our recommendation is that we pull those together into 
a single organized entity in which there is a commander of 
Logistics Command, which is basically the integration of 
Transportation Command (TRANSCOM) in with Defense Logistics 
Agency (DLA), and then dual-hatting the service logistics 
commands to provide support that is service-peculiar to them, 
et cetera. And so we have some description as to how that ought 
to be.
    I think there is, perhaps, more than one right way to 
handle the logistics problem. But our version, I believe, is a 
very plausible outcome and will add discipline to the game and 
improve the efficiency of the Department.
    Mr. Chairman, there are many other issues that are 
important to this process. One left that I don't plan to 
address is how to address the problems of the Department that 
are truly multi-departmental. That is, most of the serious 
problems facing this department actually involve the execution 
of coordinated missions by many of the departments of the 
executive branch. And we are poorly served by the current 
process.
    Operational concept development is required to lead much of 
this. The people to mention. Managing the technological 
industrial base. The role of competition in the process, 
because that has been discussed in many ways. Balancing 
fairness, whatever that means, with enterprise results. And 
then allied and coalition force development.
    I thank you for listening to me.
    [The prepared statement of Mr. Hermann can be found in the 
Appendix on page 58.]
    Mr. Hefley. Thank you, Mr. Hermann.
    Mr. Chao.

  STATEMENT OF PIERRE A. CHAO, SENIOR FELLOW AND DIRECTOR OF 
DEFENSE-INDUSTRIAL INITIATIVES, INTERNATIONAL SECURITY PROGRAM, 
         CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES

    Mr. Chao. Mr. Chairman, thank you for inviting me to 
testify before this committee.
    Mr. Skelton, thank you for giving us J.J. Gertler. He has 
been a great addition to CSIS. I am hoping your grudges don't 
extend beyond my opening statement.
    Mr. Chairman, first, let me commend you for holding a 
hearing on this topic. It is extremely important and very 
complex.
    It has been clear that after 15 years of post-Cold War 
adjustment, reform and transformation that the military side of 
the Pentagon has made great strides in adapting to the new 
environment of the 21st century. It fights more jointly. It has 
altered doctrine, training, and changed its organizational 
structures.
    However, the business processes of the Pentagon have been 
much, much harder to transform, as you know, and today probably 
represent, in my opinion, the strategic weak link in the chain.
    This is particularly evident in the arena of acquisition 
reform. And by acquisition, I use General Kadish's definition 
of Big A acquisition that also encompasses the requirements 
processes, the Little A acquisition processes and the budget 
processes of the Pentagon.
    There has been certainly no lack of trying--actually, no 
lack of trying over the last 200 years. What is amazing is when 
you read the congressional record following the Civil War, the 
First World War, Second World War, the same questions are being 
raised. If you were the committee chairman in 1867 looking back 
at Civil War, you might be talking about cannons and wagons, 
but you would still be asking the same question.
    And there has certainly been no lack of trying in the last 
year. We have had four major analytical studies--the CSIS 
study, Defense Science Board DAPA panel and the QDR--which have 
all looked at the acquisition reform issues.
    I was privileged enough to have worked, actually, on all 
four efforts. And although my comments will focus mostly on 
Goldwater-Nichols study, I would like to share my thoughts on 
some of the cross-cutting themes that emerged.
    If I may start with the Goldwater-Nichols study, a copy of 
which I have here and I would like to introduce into the record 
formally, when you look at the Goldwater-Nichols, one of the 
key things of our study was to identify any negative unintended 
consequences of those 1986 reforms and see where the 
fundamental landscape has changed and that is causing problems 
today.
    [The Goldwater-Nichols study is retained in the committee 
files and can be viewed upon request.]
    Clearly, when Goldwater-Nichols was passed, there was 
certainly a lot of controversy in the acquisition world then, 
just as there is today. We all still remember the lurid 
examples of the $600 toilet seats and the $427 hammers that 
filled the press. There was huge pressure to ensure that 
similar mistakes were not repeated.
    And so when a solution was created in 1986, the supreme 
objective of the reforms process was to fix the mechanical 
processes of buying things. Some have said it wasn't actually 
acquisition reform; it was really procurement reform.
    Congress reflected this by creating a new position, the 
Under Secretary for acquisition, which is now the Under 
Secretary for Acquisition, Technology and Logistics (AT&L). And 
one of the unintended consequences, however, of this 
legislation was the devaluing of the previous position of the 
Director for Defense, Research and Engineering, the DDR&E.
    In fact, since the end of the Second World War, the DDR&E 
was the third most important position in the civilian hierarchy 
at the Pentagon. It sent the signal that technology was of 
strategic importance to the Pentagon and to the nation, and it 
ensured that there was a strong institutional champion.
    And the Goldwater-Nichols reforms have changed the role of 
the Pentagon's number-three person from being focused on what 
to buy, and instead made them focused on how to buy types of 
issues. Dr. Hamre has used the phrase, ``It shifted the focus 
from marksmanship to gunsmithing.''
    Today, the acquisition system inside DOD is a bewildering 
complex of processes and procedures. Clarity of action in many 
ways is missing.
    Clearly, personalities of the people holding that AT&L 
position can shift and change. I must point out that the 
current AT&L person, Ken Krieg, has been trying to focus quite 
a bit on the what-to-buy issues, but the institutional 
pressures that drag him back to focus on how-to-buy issues are 
there on a day-to-day basis.
    Another problem identified with the DOD's current 
acquisition systems: the fractured accountability that was 
created by the original Goldwater-Nichols reform legislation. 
It created a fault line inside the Department. It divided the 
acquisition system into a differentiated process that insulated 
it from the procedures that established requirements in budget.
    Our study has found that this fault line between the 
acquisition process on the one hand and the requirements and 
budgetary process on the other is one of the primary 
contributors to lack of institutional accountability in our 
system today.
    The study concluded in many ways that the primary problems 
are institutional and that institutional change was required, 
and it recommended a few key things.
    The first one was creating a clear advocacy for supply 
versus demand. Today, the service vice chiefs, in many ways the 
representatives of the suppliers inside the Pentagon, comprise 
the Joint Requirements Oversight Council, the JROC.
    CSIS study team believes that this needs to be changed and 
that the JROC needs to be populated by the demand-oriented 
institutions inside the Pentagon; in this case, represented by 
the Combatant Commanders, the users of the system.
    It also advocates adding on to the JROC those who represent 
the longer-term views within the Pentagon, which would include 
the Under Secretary for AT&L, the Under Secretary for Policy 
and Program Analysis and Evaluation (PA&E) to provide the 
analytical engine, as well, behind the JROC.
    Second, the study recommended returning the military 
service chiefs to the chain of command for acquisition. You 
have heard from the other two major studies; that theme has 
been echoed. It solves another institutional faultline that was 
placed. It creates, once again, a central belly button that can 
be pushed by the taxpayer and by yourselves for accountability 
in the acquisition systems. The service chiefs need to be held 
accountable for the whole supply function, and they need the 
authority to carry this out.
    Third, focus the Under Secretary of AT&L on the 
marksmanship aspects of the job, the strategic element, rather 
than the gunsmithing, or the day-to-day management of programs.
    And the fourth area that we focused on in our study has to 
do with the rapid acquisition process. Because one lesson that 
has been learned and relearned by this nation since the 
Revolutionary War is that the acquisition system is designed 
and optimized for peace. And each time it hits wartime, the 
wheels fall off the cart.
    What makes this situation even harder is the fact that the 
Nation is in a dual-mode today. We have half our system focused 
on being in a wartime mode, where time is critical, 
technologies must be off the shelf, testing, in many ways, is 
less relevant because you are doing it in the field today, and 
agility, innovation and experimentation and risk-taking are 
absolutely critical.
    Meanwhile, the other half of our system is focused on 
longer-term potential near-peer competitors 20 years out, where 
the traditional acquisitions system actually works fine. The 
central focus is cost and performance. We can afford to move 
more slowly, deliberately, and where efficiency is critical. 
One size simply does not fit all, and it argues that we may 
need very distinct and different tracks for the acquirers to 
work on.
    I must commend your efforts, actually, in the fiscal year 
2005 budget process and authorization act to create the rapid 
acquisition tools for the Department. But our study would argue 
that the current rapid acquisition system should be expanded 
beyond where you have taken it, establishing preset waivers to 
particular laws and processes be made more permanent and pots 
of money being made available. Because it turns out that the 
budget process in some ways is becoming the choke point in the 
rapid acquisition system.
    So in conclusion, Mr. Chairman and members of the 
committee, I again applaud you for holding this hearing. 
Acquisition reform will need some congressional champions if it 
is to move forward meaningfully. I can only hope that this is 
the beginning of a long and fruitful dialogue, and I know that 
I and my colleagues at the Center for Strategic and 
International Studies (CSIS) are prepared to support you in any 
way as you tackle this critical issue.
    [The prepared statement of Mr. Chao can be found in the 
Appendix on page 50.]
    Mr. Hefley. Thank you, Mr. Chao.
    Mr. Little.

   STATEMENT OF TERRY R. LITTLE, ACQUISITION ADVISOR TO THE 
                DIRECTOR, MISSILE DEFENSE AGENCY

    Mr. Little. Thank you, Mr. Chairman.
    I come at this from a bit of a different perspective than 
these other three gentlemen, in that I have no study that I 
have done, no formal study.
    What I have done is have had 25 years managing major 
acquisition programs. Most of that has been with the Air Force, 
but I have had the opportunity as an interested observer to 
look at large programs in the other services. And I have drawn 
some conclusions from that that I would like to share with the 
committee, recognizing that these represent my opinion and not 
reflective of either the Missile Defense Agency or the 
Department of Defense.
    From inside the process, I would have to say that I believe 
that Goldwater-Nichols, as it pertains to acquisition, is 
fundamentally sound. What is not sound is the Department's 
implementation of it. And I want to be more specific.
    Oversight and review, a necessary function, but what has 
happened is, it has created a massive bureaucracy of highly 
focused stovepipe people insisting that they get their way with 
the program. And the end result is something that not only is 
not helpful to the success of the program, but in a general way 
tends to undermine program execution by giving the program 
manager too many masters that he has to satisfy.
    There is a lot of talk about the requirements process and 
who should set requirements. I believe that the current 
approach is reasonable and that the JROC is reflective of a 
check and balance in that you have very seasoned people, plus 
the vice chairman, who represents the Combatant Commanders.
    The trouble with the requirements process, though, is not 
who sets the requirements, it is how they are set and when they 
were set. We set them too early, before we know enough to 
really set them. We are too specific. We don't leave trade 
space. And we create a situation where the program is doomed to 
fail or at least to disappoint.
    And that is troublesome to me because over my 25 years, one 
of the things I have observed is most requirements are made up. 
They are made up by users who get inputs from both government 
people and contractors about things that are possible, and they 
use those as a basis for setting their requirement as to what 
they want.
    So, to me, it is kind of a very troubling thing, that we 
are too specific and too early.
    A lot of talk about the budget and budget stability. The 
services do that to themselves, in my estimation, by having 
more programs than they can afford and by sanctioning, at least 
implicitly, underestimates to cost and underestimates to what 
is going to be required to actually execute the program.
    And so, what ends up happening is, when an important 
program runs into cost trouble, the departments look to other 
programs to solve that. And so to fix one, you break others. 
But that is a departmental execution problem, in my estimation.
    So how do you get better results? I have a bit of a 
prescription which is oversimplified, but I am going to give it 
anyway.
    One is, if you want better results, two things need to 
happen: set more realistic expectations at the start and get 
better program managers. I want to talk about each of those.
    When a program starts, there are enormous pressures to be 
optimistic: optimistic about performance, optimistic about 
cost, optimistic about schedule. We are in a military culture. 
And when we are in a military culture and we have a problem, we 
don't call it a problem, we call it a challenge. And a 
challenge is meant to be overcome.
    So when the typical program manager gets pressures to add 
requirements or understate costs or understate the schedule, 
the typical answer is, ``Yes, sir, we can do that, we can do 
that,'' because we want to please.
    So if you go back and look at the history of the 
disappointing programs, you will find that in most cases the 
seeds for that disappointment were sown very early when the 
expectation for the program was set.
    Now, how do you resist if you are a program manager? The 
way you resist is you develop a conviction, number one, and, 
number two, an expectation that you are going to be accountable 
personally for the outcome. So if I overpromise, I am going to 
be there to be in front of someone explaining why when the 
chickens come home to roost.
    Most program managers don't have an expectation of 
continuity. Their expectation is they will be with the program 
a couple of years, somebody else will replace them. And so, it 
is easy in that kind of a situation to set expectations because 
someone else will have to deal with the problem when those 
expectations turn out to not be realized.
    I mentioned better program managers. What do I mean by 
that? As I look around at the managers of the major acquisition 
programs across the services, I would say that about 20 percent 
of them are stars--real stars. About 60 percent are okay, 
meaning they are unlikely to make huge mistakes, but if the 
program gets in real trouble, they are probably not going to be 
able to pull it out. And about 20 percent I would characterize 
as incompetent.
    Now, how does that happen? We don't do a very good job 
developing, training, picking, mentoring, coaching and keeping 
program managers. We need to do a much better job.
    In my estimation, the program manager should be as well 
prepared to manage a major acquisition program as a pilot is to 
fly an aircraft. And that means more training; more selection, 
not just looking at resumes; and putting people to the test 
where they have to produce results and outcomes and seeing how 
they fare.
    Defense Systems Management College has done some studies of 
program managers of successful programs, and they have 
concluded that the most important factor in a program's success 
is who the program manager is and, more precisely, his basic 
approach to the job. Many program managers see the job as one 
of dealing with technical complexity, making decisions, being 
an advocate for the money.
    The successful program managers understand it is not about 
management; it is about leadership, it is about dealing with 
change, it is about confronting issues, it is about recognizing 
that you have to develop alliances, it is about creating 
confidence on those who are following you as well as those to 
whom you report. We don't take that approach when we select 
program managers.
    There is another factor that really relates to some of the 
things that I think were brought up. There is a prevalence in 
our acquisition workforce of what I want to call a cost-plus 
mentality. Now, let me explain that.
    In the 1980's, we had a bad bout with fixed-price 
development contracts. And it produced some really bad stories. 
So we made the transition where virtually all of the 
development contracts are cost-reimbursive. And what does that 
produce? The first thing that it produces, and in fact 
encourages, is a lack of discipline and, in particular, a lack 
of discipline in planning.
    Just because something is cost-reimbursable, that is not a 
license to make it up as you go along. But in fact what 
happens, as a practical matter, is we have lost the art of 
doing detailed planning and the discipline of executing to a 
plan. And by ``we,'' I am talking about not just the government 
program offices but also the contractors to whom we give these 
cost-reimbursable contracts.
    Second, we have tolerated and continue to tolerate 
inefficiencies. Our government program management teams are 
way, way, way too large. They generate needless work, in my 
estimation. And they cause the contractor to hire additional 
people that really don't contribute to the end product.
    And the third thing is, it has encouraged us to undertake 
high-risk ventures. I believe, as some of the other studies 
have shown, we need to be looking more precisely at spiral 
development, moving a step at a time, with low-or moderate-risk 
activities, with parallel efforts to develop the technology 
outside the main-line development program and, as the those 
technologies mature, to be able to fold them in.
    So what I have is much more predictability about what 
performance I can get, what it is going to cost and how long it 
is going to take.
    Finally, I want to say that I think the GAO has done a good 
thing with setting up the notion of knowledge points. They have 
not gone far enough, however, in that they have only focused on 
technology readiness. I think they should be focused, as well, 
on engineering or on manufacturing readiness.
    We have a lot of technologies today that we can get 
enchanted because of what they promise in the way of 
performance, but if we can't manufacture those affordably and 
repeatably, we are going to have a major problem. And I don't 
think we give near enough credence to that.
    So my view is we don't need fundamental structural changes. 
What we do need is different implementation, different 
attitude, and overall a different way of buying what we buy 
that is really reflective of a cultural change as opposed to an 
institutional change.
    Thank you, Mr. Chairman, for the opportunity to give my 
remarks.
    [The prepared statement of Mr. Little can be found in the 
Appendix on page 71.]
    Mr. Hefley. Thank you very much, all of you.
    I am going to defer my questions.
    Mr. Skelton.
    Mr. Skelton. Mr. Little, thank you.
    And thank each of you gentlemen for your excellent 
testimony.
    Mr. Little, it is good to hear your positive comments about 
getting the Goldwater-Nichols acquisition piece right.
    My question of you is: How can we as a committee help the 
Department of Defense get it on the right path? In other words, 
if you had a magic wand and this committee would do what your 
magic wand said, how would we help them get it right?
    Mr. Little. I would offer a couple of thoughts.
    I said I think the Goldwater-Nichols is fundamentally 
sound. One thing that is not sound is the Defense Acquisition 
Workforce Improvement Act. It has too many holes to allow for 
waivers and deviations. I believe that should be strengthened 
substantially. That would be one step.
    Second step would be to take the AT&L office out of the 
acquisition program oversight business and put that down at the 
service level with a limited staff and essentially have that 
staff be comprised of people who weren't functional experts but 
who were seasoned program managers who could help the program 
succeed.
    What I don't need are functional experts telling me at the 
headquarters level how the contract needs to be, how the 
finances need to be, how the technical needs to be. I get 
enough of that help at my own level. What I need is someone who 
has been there and done that who can help me with the balance, 
with how do I balance all of these things.
    We don't have that today. In fact, on the military side, 
when we have seasoned program managers, people who have 
actually had some successes, amazingly enough we move them out 
of that position so that they no longer have access to people 
like me and others coming up. And I would do something about 
that. I don't know what that something is.
    I mentioned the program manager tenure. In my simple mind, 
if we want accountability, we need to put a program manager in 
place with an expectation that he is going to live with the 
results that he has promised.
    And what I would say to that is: Five years, you die, you 
get fired or you retire. Those are the only ways that you get 
out. If you get promoted, we will figure out how to deal with 
that.
    You know, the fact that the Joint Strike Fighter (JSF) has 
had who knows how many program managers in its time, I think, 
in a significant way is at the root of why that program has had 
and will continue to have so many issues associated with it.
    So that would be my magic wand, sir.
    Mr. Hefley. Mr. Kline.
    Mr. Kline. Thank you, Mr. Chairman.
    Thank you, gentlemen, for being here and for years and 
years and years of very hard work trying to solve a problem 
which many of us, looking at it for over these many years, 
think is unsolvable.
    I think, Mr. Hermann, you mentioned or someone mentioned 
Secretary Perry and the study that he had asked for. And you go 
back to Secretary Perry going back to probably when he was 
DDR&E, and we were talking about fixing the acquisition system.
    All of you have said that it is a system that has been 
broken for many years. General, you talked about language 20 
years ago and you are looking at it again. It is the same 
language.
    And so, I am kind of wringing my hands, and have been, as 
have undersecretaries of defense for acquisition, year after 
year after year. We can't seem to fix it.
    And I am struck by a couple of things. I think that there 
is a model out there that many of us have looked at for a long 
time. If you put things under a cloak, like the skunk works, 
and you get a project that comes out ahead of time and under 
budget, I know that you have all looked at that process. And I 
am wondering if somebody has a comment as to why that worked 
relatively well, if you are willing to share that with us.
    And then, just a couple of more comments on my part, and 
then I would like to throw a question out for all of you.
    We in this committee, in this Congress, gave the Secretary 
of Defense this rapid acquisition authority, which was supposed 
to bypass the Federal acquisition regulations and allow the 
Combatant Commanders to recognize something that they needed to 
save lives in the theater and allow the secretary to bypass the 
process and buy what we needed to save those lives.
    And yet, I know that we on this committee are frustrated, 
week after week, when we see that things aren't getting fielded 
as rapidly as we think we should.
    The chairman of this committee has held hearings trying to 
get at the bottom of why that has happened, because we 
streamlined the process as well as we think it could possibly 
be done. We just waived everything and said, ``Mr. Secretary, 
go buy it if you need it.''
    And yet, we hear, when we talk to folks who are trying to 
field equipment, ``Well, we are verifying the requirement,'' or 
``We haven't finished the testing,'' or ``We have only done 
developmental testing and not operational testing,'' or 
something. We seem to get immediately mired back into a system 
that has been with us not for years but for decades.
    Mr. Little, you talked about needing to change the culture. 
We don't have that wand to change the culture. So we are 
looking for something. What could we do that would allow that 
culture to be changed?
    So a couple of questions. The rapid acquisition authority, 
what do you know about it, and why do you think it gets hung up 
and we can't get the things we need into theater as rapidly as 
we would like them to get in there?
    And then, many of you talked about the requirements process 
being broken. We have had some suggestions. Again, if you could 
wave a wand on the requirements process, I would be interested 
in what you have to say.
    Thank you.
    General Kadish. I would like to take a crack at answering 
the question on the requirements. I think it is one of the most 
important issues that we face.
    And one of the things that we could do, and it is 
recommended in our report in the Defense Acquisition, 
Performance Assesment (DAPA) commission, is to value time. We 
call it time-certain development, where schedule counts in the 
process.
    What you find in the requirements development and testing 
activities is that they are willing to trade time for something 
better. And unless and until we make time equal to those 
performance variables, we will get the same behavior you 
described.
    So schedule is important, especially in this security 
environment. That is why I mentioned earlier about turning 
inside our adversaries' decision cycles.
    So as we talk about how fast it goes, how far it goes, how 
lethal it is, we should also specify when we want it. And then 
that generates more evolutionary approaches to testing and 
development activities.
    So I would strongly recommend that we look at time equal to 
or better than the performance required out of the weapons 
systems.
    Mr. Kline. Thank you, Mr. Chairman. I apparently preambled 
too long. I see my time has expired.
    I would be interested in any written responses that you may 
have on those three issues that I covered.
    Thank you, Mr. Chairman.
    Mr. Hefley. Mr. Snyder.
    Dr. Snyder. Thank you, Mr. Chairman.
    We appreciate you gentlemen being here.
    This is incredibly complex and confusing, I think, for a 
lot of us and for a lot of Americans. But we know how vital it 
is.
    And what I want to do is I have two specific questions I 
want to ask you about, maybe as a test of how a good 
acquisitions system ought to deal with challenges.
    Number one is, probably the number-one priority in this 
committee for the last three years has been armor--personal 
protection for our troops. And we have been assured multiple 
times--and the chairman has worked on it and the ranking member 
has worked on it--about, yes, we are moving in the direction we 
want to be in terms of personal protection for body armor and 
protection for vehicles.
    I learned yesterday--and the fact that General Schoomaker 
said that in June of 2005 that we were on track to have the 
number of enhanced small-arms protective inserts, the small 
arms protective insert (SAPI) plates; we are on track to do 
that in fiscal year 2007.
    The requirement had been set by the Army to buy 40,000 sets 
a month. And it is my understanding, in the last couple weeks, 
the Army has let it be known that they are only going to be 20 
sets a month.
    And I am not sure why that is but there were suppliers out 
there of these composite materials, six competitors, that had 
ramped up in anticipation of 40,000 sets a month.
    And you need competitors because this a changing 
technology. I mean, you don't want a material that will just 
stop the first bullet; you want it to be able to stop 
subsequent bullets after it has been hit and shattered and 
already had velocity to it.
    Now, the situation is, the Army is saying, ``We are going 
to cut back from six suppliers''--that is my understanding--
``to three suppliers.'' And the ones that are going to be 
retained are the ones that the Army has dealt with, not 
necessarily the ones that have the best technology for stopping 
a bullet.
    Now, we talk about our business community out there, our 
suppliers--how should this system work?
    I don't expect any of you to have any personal knowledge 
about enhanced SAPI plates and where that contract is and all 
that. But here is, then, probably the number-one priority for 
the Congress, and we have had industry ramp up, and now it is 
my understanding they are getting some information that, ``Oh, 
you are not going to be making money at this after all because 
we are going to cut the requirement in half and we don't need 
but six of you; we are only going to use three of you.''
    Now, how should this system work?
    Mr. Chao. In some ways, we have also been looking at 
defense industrial base issues at CSIS. And one of the biggest 
issues that you come across, particularly when you are trying 
to get at a nexus of acquisition reform and defense industrial 
issues, as you know, it gets to be an extremely complex issue, 
and it is very hard to peel out what is relevant versus what is 
not.
    One of the biggest things that we have done in terms of 
trying to think through those issues is look at where an 
industry is or where a technology is in its maturity cycle.
    So to your point, in areas where there is lots of changing 
technology, you have lots of competitors, that you let 
competition reign as much as possible, the taxpayer gets as 
much of the benefits as possible. In areas where the 
technologies are more mature, in some cases the one-size-fits-
all solution of competition is probably a bad place to be, and 
trying to force competition and mature technologies may not be 
the right area.
    Dr. Snyder. This seems like an area where we benefit from 
having an increased number of suppliers. And certainly if we 
are going to cut back, it ought to be cut back on who has the 
best technology at the time.
    Mr. Chao. And it is always that tradeoff between the cost 
of having the suppliers initially versus the savings that you 
get from competition.
    General Kadish. May I make a comment about----
    Dr. Snyder. I want to get my second question, if I can, and 
maybe you can comment on both of them.
    My second question is: We have had this horrendous 
situation in the last few months with our former colleague Mr. 
Cunningham who pled guilty to felonious conduct that he and 
everyone in this institution, every American, thinks should 
never have occurred.
    My question is: He was able to, by his own words, accept 
bribes to get contracts through the Congress that the Pentagon 
funded that they didn't want. They didn't want this stuff. And 
the only way it was done is because somebody out there was able 
to hire a zealous advocate on the behalf of those contracts.
    Now, where did our system break down? Where in the Big A is 
there to be something? Where is the oversight that says, ``We 
don't want this stuff. We are firing off a red flag. We don't 
want this stuff, regardless of what led to it to be inserted in 
the first place''?
    I didn't see much of a role in any of your discussion about 
congressional oversight, but where do the red flares go off 
that says, ``Just because this comes from Congress doesn't mean 
it is the right thing to do''?
    General Kadish. It is a tough question to answer, but I 
will just make a mechanical response to you--is that, when you 
have a program and the appropriations and authorizations that 
come down and there are specific directions to spend money in 
certain areas, there is very little opportunity to change that.
    And the only tools that I am aware of is reprogramming, or 
those types of efforts that tend to be not very productive, 
because you probably don't get the answer you are looking for.
    So it is issued as part of the bureaucracy, and the 
bureaucracy is designed to make sure you comply with the law. 
So once it is there, it is very hard to say, ``No, we are not 
going to spend the money as directed.'' And it really is a 
tough problem for program managers to deal with earmarks and 
those types of directive activities.
    Mr. Hermann. Can I just say that in the large sense that 
this question represents, you must get the incentives correct?
    Now, the way in which money is spent on defense is Congress 
appropriates it and the executive branch executes it. So there 
are a lot of folks in there who have incentives for wanting 
something to occur. Some of it has to do with constituency, 
some of it has to do with conviction, some of it has to do with 
institutional representation, but you got to actually--
everybody is operating in some sort of incentive and reward-
risk domain.
    And there is no question, if you are going to do 
acquisition reform from the department's point of view, you 
have to account for the fact that there is an incentive to fund 
resources across the whole nation in what is loosely called an 
earmark, or pork, situation, but that is overcomable.
    But what is missing in many cases is the mission of the 
Department of Defense and the mission of the security of the 
United States. And that mission is not present at the table in 
many places where bad deals are done. And because the mission 
is not there, it permits a lot of things to occur, some noble 
and some ignoble, that are not correct.
    Thank you.
    Mr. Hefley. Ms. Davis.
    Ms. Davis of California. Thank you, Mr. Chairman.
    And I am going to actually ask the rest of the panelists to 
try and follow up on that question, because I think it is an 
important one. Obviously, it is one of concern to all of us.
    And I wonder if you would incorporate within that, is there 
some--I think to answer it--but then if you have former DOD 
officials or former military officers who are acting on behalf 
of contractors, should there be better reporting requirements 
for them? Is that an area that also is a concern?
    And if you can address the first part and then the second, 
that would be great.
    But I also just wanted to say, Mr. Chairman, I mean, this 
has been very dry and difficult, and I think that a lot of 
members aren't necessarily able to be here. But I think it has 
been, actually, very interesting and somewhat, I think, 
shocking and disconcerting at the same time.
    And so I appreciate the fact that you have been here to 
discuss that. And if we have time after the follow up, I am 
just curious about some other interplay between your responses.
    Thank you.
    Mr. Chao. To follow up, Congresswoman, to your question, I 
think one of the issues in allowing the three systems--the 
requirements process, the acquisition process and the budget 
process--to drift apart somewhat in the last 10 or 20 years 
allows what you have discussed to come about, because in the 
absence of a strategic vision being driven by the requirements 
process and by the other processes to tie it together with the 
acquisition process.
    We, in the end, brute-force all these strategic decisions 
at the last minute through the budget process, which then gives 
disproportionate power, I think, to what has been going on.
    So the more work that is done in advance at the front end 
of the system, I think the more we end up solving. If you look 
at almost all the acquisition reform that we have been trying 
to do and what part of the system we end up fixing, we keep 
putting more and more oversight on the back end of the system 
to trap things and to brute-force them back into shape, when if 
we spent as much energy at the front end in terms of how the 
requirements are set, the broader strategic issues that are 
being raised, frankly, the efforts that you are making in doing 
a parallel Quadrennial Defense Review (QDR)-type effort and the 
types of broader strategic issues are exactly where the focus 
ought to be on.
    And therefore, when someone comes in with an earmark or 
something that looks incongruent with that overall strategy, it 
then becomes easier to put that within context and sit there 
and say, ``Boy, we really don't want this. And, oh, by the way, 
here is a strategy that we developed and a business plan that 
it doesn't fit with, which makes it easier to say yes or no to 
those kinds of things.''
    Shedding sunlight onto the system in terms of reporting is 
always a good thing, right, that disclosure always helps and is 
always useful and, frankly, cannot hurt.
    Ms. Davis of California. Is there a limit in terms of the 
amount of the contracts that you think is appropriate? There 
was a bill at one time to do that, at $10 million, I believe.
    Mr. Chao. I would have to sort of think about it. I would 
have to get back to you on where you would set that----
    Mr. Hermann. I would argue no. I would argue a firm no, 
because whoever is going to pass that law or regulation is not 
smart enough to know what the right answer is and is very 
likely to create more problems than was intended to help.
    I just don't think that setting an arbitrary specific 
number is likely to be helpful, and it will not actually fix 
the much larger problems that we have been talking about.
    Ms. Davis of California. Thank you.
    Mr. Little, did you want to comment on----
    Mr. Little. Well, just a couple of things. You asked about, 
do we need stronger, I will call them, integrity rules for 
former government military officer.
    The rules that we have right now are very strong, and they 
are enforced rigidly, not just on the government side, but also 
on the company side. So I would say, as a result of scandals 
with Boeing and whatnot, that that is an area where I think we 
are as good as it gets.
    With regard to the earmark, I think it would be helpful if 
we in the executive side could understand the intent of the 
earmark. In other words, is it to get a constituent into the 
process? That would be helpful as a kind of a check and 
balance, and helpful here in the Congress looking at those 
earmarks and trying to understand are those legitimate, 
reasonable things to be doing or what is up with this.
    Ms. Davis of California. Okay, thank you.
    Thank you, Mr. Chairman.
    And I hope that perhaps some of those multi-faceted 
managers that you are speaking of that are well-trained could 
also be helpful in that as well.
    Thank you.
    Mr. Hefley. Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman.
    Gentlemen, thanks for coming. You were supposed to come 
here and help us out.
    And, General Kadish, just as an example, your testimony 
says that we should enhance the stature of the Under Secretary 
of Defense for AT&L. Mr. Little has told us that we need to 
decrease the stature of the Under Secretary of AT&L. And Mr. 
Chao has told us keep him where he is, keep the position where 
it is, just add more to it.
    It is a complex enough issue for us to deal with, defense 
acquisition reform, which we need to deal with. And you are all 
smart folks. And so I am curious, to help me understand where 
you are all coming from, how you came to very different 
conclusions on just one aspect of acquisition reform.
    General Kadish. Well, Congressman, maybe I heard it 
different or wasn't paying attention, but I think when you lay 
those together, they are more similar than they are different 
in the process.
    And we struggle with that in all these types of studies, 
because in this particular panel, we had six or eight people 
that sat around the table and we argued about things from a 
point of view. This is not a scientific effort, and so you will 
get disconsonant types of recommendations.
    However, I think what is important is that there is general 
consensus--at least what I heard at this table--that AT&L and 
the structure is useful and important. How to make it more 
useful you might be able to argue about in the process.
    We recommended that the AT&L get the budget authority for a 
stabilized account, be a part of the Joint Requirements 
Oversight Council (JROC) approach. I think you heard some of 
the same things from the other panel members today.
    But you are always going to have dissenters in the process. 
And I would just ask you to try to sort through that and look 
for what is more common than any specific recommendation.
    Mr. Chao. I think if you, sort of, take a look at the 
recommendation--again, it is interesting because I was on the 
Defense Science Board summer study and it was interesting to 
see the arguments evolve over the year.
    I think you will find a lot of resonance between what Mr. 
Little said and our recommendations, to the extent that we, in 
the ``Beyond Goldwater-Nichols'' studies, thought that AT&L 
should be focused at that front end of the strategic dialogue 
far more so than trying to interfere in his day-to-day actions 
and trying to brute-force the solution by hammering him on the 
head on a daily basis; let's get the requirements and the 
initial issue upfront.
    And so from that perspective, we have said, ``Focus on the 
front end. Focus at that. Return back to the older role in some 
ways of focusing on what to buy rather than how to buy.'' And 
so in some ways, we didn't see it as adding things on, but in 
some ways taking things away, getting them out of the day-to-
day management focus.
    Your question, in some ways, highlights a broader issue, 
which is, it is kind of smelling like the early 1980's these 
days, in terms of there s a crescendo of activity about 
acquisition reform. There are articles, there are scandals, 
there are lots of reports being written.
    What hasn't yet happened that occurred with Goldwater-
Nichols was it all coming together where somebody actually did 
create a congressional commission or something that would sit 
there and say, ``Fine, we have had a lot of fine work. Let's 
figure out which ones of these recommendations we, as an 
institution, as a body, should take forward and move ahead with 
so that way we can get into this next generation of reforms.''
    Mr. Larsen. Mr. Little.
    Mr. Little. If I may make just one comment, I said that I 
thought the Goldwater-Nichols was fundamentally sound. One of 
the reasons that I say that is the basic principle that the 
Packard commission espoused--and it is carried through the 
Goldwater-Nichols--is for the program manager to have short, 
clear lines of authority.
    And one of the problems that we have today is that is all 
kind of muddied up by staff and different people want to put 
their fingers in the process.
    And that short, clear, unambiguous line of authority in my 
estimation is absolutely critical if we want to make headway on 
improving acquisitions, where I have got a boss I can count on 
to support me or tell me I have been smoking dope, and he has 
got a boss, and you have got an accountability chain.
    What is frustrating, it seems to me, is when something goes 
wrong. If I were sitting in your seats and I look around to 
see, okay, who is going to explain this to me? Who is 
accountable? Who is responsible? There is nobody there. There 
is nobody there. And I think we have to fix that.
    Mr. Chao. We would actually quibble a little bit. I think a 
lot of the people at this table would sit there and really 
endorse the Packard commission, because it stands the test of 
time. We would actually argue that it was never really fully 
implemented, and that is part of the problem. If it was, then 
we would be right with them.
    Mr. Hermann. I would just say that in my testimony, if you 
look, there is a chart on accountability and who ought to be 
doing what.
    I think that the current AT&L's position is not badly 
formed. And I don't have a problem with General Kadish's 
argument to have a stabilizing fund and so forth, but I don't 
think it is the center of the problem.
    When Goldwater-Nichols cleaned up the line of command and 
put it straight up through the acquisition chain, it took for 
granted that the acquisition chain would know what to buy. They 
do not.
    I served in 1964 with McNamara and when Harold Brown was 
Director, Defense Research & Engineering (DDR&E). I served with 
Harold Brown when he was Secretary and Perry was and so forth. 
And in all of those times, the issue was: What is the right 
thing to put your money on? Foster in the early 1970's. And the 
way in which, as an example, Brown and Perry did it is they 
actually forced through their own operational judgment; and, 
mercifully, it was good.
    What we need to strengthen is the side of the department 
that is accountable for the mission and force there to be a 
coherence around some planning structure--we call it a business 
plan--so that the incentives to get the mission right are in 
the hands of whatever structure you put together.
    But I do not think wickering with the structure is going to 
fix it without actually changing the incentives process.
    Mr. Little. May I offer one brief comment? And that is----
    Mr. Hefley. Go ahead.
    Mr. Little [continuing]. There is a lot of focus on 
changing the lines on the wiring diagrams as a way of fixing 
things. For example, putting the Chiefs of Staff and the Chief 
of Naval Operations (CNO) somewhere in the acquisition chain.
    Let me tell you from personal experience: They may not have 
a line, you know, an organizational chart, but the Air Force 
chief of staff is personally involved in F-22. I think the CNO 
is fully involved in DD(X); Army with the Future Combat System.
    So I am not discomforted that somebody doesn't have a line 
running to them and saying that somehow puts them out of the 
process, because they are not out of the process.
    Mr. Hefley. Mr. Snyder, do you have a follow-up question?
    Dr. Snyder. I wondered if we were going to go around again, 
Mr. Hefley.
    Mr. Hefley. Go ahead if you want to ask a question. We are 
going to have a vote here in a few moments, so we are going to 
have to kind of hurry. But go ahead.
    Dr. Snyder. Okay. Maybe you want to put the clock on that?
    Mr. Hefley is leaving us at the end of this Congress, so it 
really does me no good to suck up to him anymore. [Laughter.]
    But I will do it anyway. You know, he has been overseeing 
the military construction on the authorization side for a 
number of years now and has really insisted that, you know, 
members want to add on or move up projects in bases in their 
district or around the country, but he has insisted that the 
projects be in the military's Future Years Defense Plan (FYDP).
    Now, there has been some exception to that, but you have 
got to make a real strong case why that is an exception to 
having it on the FYDP. That was a control. That is part of that 
business plan that I think one of you were talking about.
    Going back to the problems with Mr. Cunningham in the 
Congress, I have written three letters to this committee--
January, February and March--asking for what I thought was 
going to be done anyway, which was: What happened? How was this 
committee, or was this committee, part of a process that became 
the subject of felonious conduct?
    One of you talked about putting energy at the front end. In 
my view, Mr. Hefley's approach is putting energy at the front 
end. You do all your looking at this stuff as part of the FYDP, 
not then coming back later to see what went wrong. Because it 
is very hard to figure out what went wrong with something like 
a project that never should have been funded, that the Pentagon 
didn't want.
    The specific question I want to ask is, today or yesterday, 
the per capita income numbers came out--I think for the 
country--but for Arkansas. Arkansas is now 48th. We are only 
above the two states that were ravished by the hurricanes, 
Louisiana and Mississippi.
    Our per capita income is a little over $26,000. 
Connecticut, for example, at the top, is like $47,000.
    And so when my constituents and Arkansans see what seem to 
be incredibly lucrative deals going on in a wartime 
environment, they feel ripped off as taxpayers.
    Now, again, I appreciate everything you all are doing, 
because you understand; I don't understand your business. But 
one of you talked about the difference between peacetime and 
wartime.
    There is clearly fraud, and if not fraud mismanagement, in 
what is going on with these huge contracts as part of the Iraq 
war effort. Where does that fit into this Big A acquisition 
system that you are talking about?
    Where are our safeguards for protecting the taxpayers with 
the $25,000 and $30,000 income in Arkansas when people overseas 
are just seemingly, through abuse of the taxpayers, making big 
sums of money?
    Where do you see that aspect of things fitting into the 
system, in terms of oversight and being sure that taxpayers are 
getting the best bang for their buck?
    General Kadish. Let me make a distinction between those 
types of procurements and the types that we have been talking 
about here to some degree.
    Because the operations in wartime have two aspects for it. 
One is that the system that we are discussing today, the Little 
A acquisition system, is fundamentally a peacetime, long-term 
development of major weapons system type of activities. And a 
lot of dollars are spent on that action. And the processes we 
use and our discussions tend to be focused on that.
    The only time we end up practicing and having processes 
developed in a wartime environment is when there is a war going 
on. And two things happen in that environment. One is that our 
processes are not necessarily adapted to the wartime situation 
very quickly. We don't train people to do that. And when we 
actually get into the wartime scenario, time is of the essence, 
so people tend to make mistakes in the process.
    Dr. Snyder. General Kadish, but you say we should not have 
to wait until a wartime situation to say we may have a worse 
situation that requires additional fuel or we may have a 
wartime situation that requires civilian transport planes that 
we have to contract with.
    I will give you an example, again, from Arkansas. We have 
got those, I think, maybe now 10,500 manufactured homes that 
have been talked about as part of the FEMA thing.
    I talked with James Lee Witt about it. He would never have 
used manufactured homes. He would have used small, portable 
trailers that you can pull up in your driveway and hook up that 
everybody calls little fishing trailers. And you have bigger 
sizes for families of four and smaller for a single person.
    But they had those contracts ready to go even before there 
was any hurricane coming. So you don't have to get to the war 
or the hurricane before you have the contracts.
    Now, we were in a situation with this management of the 
Federal Emergency Management Agency (FEMA) where nothing was 
done, and we ended up with 10,000 trailers sitting in Hope, 
Arkansas, that nobody knows what is going to happen with them.
    So you can't be saying that we don't prepare for a ramp-up 
at a time of war. I mean, we have to look ahead, do we not?
    General Kadish. No, I misspoke if I led you to that 
conclusion. There are preparations going on in wartime all the 
time. But there is an old saying that says that a plan doesn't 
survive the first shot in a war.
    Dr. Snyder. I understand that.
    General Kadish. And as things develop, we don't necessarily 
have trained contracting officers to deal with the real-time 
situations as much as we should have in the process.
    Dr. Snyder. Well, my time is up, and we have votes.
    And the president is now calling this--the administration 
is now calling this the long war, which may be an appropriate 
time. But we cannot somehow say we are going to be in a wartime 
mentality for 2 or 3 decades or however long this long war is 
going to be, which means we are going to have inappropriate 
oversight of many of our taxpayer dollars, because the 
taxpayers aren't going to stand for it. The Congress isn't 
going to stand for it.
    General Kadish. I couldn't agree with you more.
    Let me just make one more distinction. The dollars that we 
tend to oversight and argue about how to fix are research and 
development, procurement dollars. The dollars you tend to be 
talking about in an Iraq wartime situation are operations and 
maintenance, as well as a little bit of these types of dollars. 
We have got to start looking at the O&M services type of 
activities, like we do major weapons systems.
    Dr. Snyder. Thank you, gentlemen.
    Thank you, Mr. Chairman.
    Mr. Hefley. Well, gentlemen, I want to thank you for being 
with us this morning. We could spend a lot more time on this 
and need to spend a lot more time on this. And I think you have 
been very helpful.
    Several of you mentioned, when you started your statement, 
that this is a very complex area. And it is a very complex 
area. But we need to come to grips with it on both aspects: the 
one that Mr. Snyder brought up at the last, as well as what we 
have talked about most of the day.
    So thank you, and we may be calling on you again.
    With that, the committee stands adjourned.
    [Whereupon, at 11:38 a.m., the committee was adjourned.]


      
=======================================================================




                            A P P E N D I X

                             March 29, 2006

=======================================================================



=======================================================================


              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                             March 29, 2006

=======================================================================


    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                  
