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



                         [H.A.S.C. No. 109-106]
 
         REVIEW OF MAJOR DEFENSE ACQUISITION REFORM INITIATIVES

                               __________

                                HEARING

                               BEFORE THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD

                             APRIL 5, 2006

                                     
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                   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 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, Professional Staff Member
                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, April 5, 2006, Review of Major Defense Acquisition 
  Reform Initiatives.............................................     1

Appendix:

Wednesday, April 5, 2006.........................................    49
                              ----------                              

                        WEDNESDAY, APRIL 5, 2006
         REVIEW OF MAJOR DEFENSE ACQUISITION REFORM INITIATIVES
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Hunter, Hon. Duncan, a Representative from California, Chairman, 
  Committee on Armed Services....................................     1
Skelton, Hon. Ike, a Representative from Missouri, Ranking 
  Member, Committee on Armed Services............................     3

                               WITNESSES

Giambastiani, Adm. Edmund P., Jr., Vice Chairman of the Joint 
  Chiefs of Staff, U.S. Navy.....................................    10
Krieg, Hon. Kenneth J., Under Secretary of Defense (Acquisition, 
  Technology & Logistics)........................................     7
Patterson, J. David, Principal Deputy Under Secretary of Defense 
  (Comptroller)..................................................    12
Walker, Hon. David M., Comptroller General of the United States, 
  United States Government Accountability Office.................     4

                                APPENDIX

Prepared Statements:

    Giambastiani, Adm. Edmund P., Jr.............................    98
    Hunter, Hon. Duncan..........................................    53
    Krieg, Hon. Kenneth J........................................    77
    Patterson, J. David..........................................   104
    Skelton, Hon. Ike............................................    57
    Walker, Hon. David M.........................................    59

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

Questions and Answers Submitted for the Record:

    Mr. Andrews..................................................   114
    Mr. Calvert..................................................   113
    Mrs. Drake...................................................   114
    Mr. Kline....................................................   115
    Mr. Marshall.................................................   113
    Mr. Miller...................................................   114
    Mr. Skelton..................................................   113
    Dr. Snyder...................................................   113
         REVIEW OF MAJOR DEFENSE ACQUISITION REFORM INITIATIVES

                              ----------                              

                          House of Representatives,
                               Committee on Armed Services,
                          Washington, DC, Wednesday, April 5, 2006.
    The committee met, pursuant to call, at 10 a.m., in room 
2118, Rayburn House Office Building, Hon. Duncan Hunter 
(chairman of the committee) presiding.

OPENING STATEMENT OF HON. DUNCAN HUNTER, A REPRESENTATIVE FROM 
       CALIFORNIA, CHAIRMAN, COMMITTEE ON ARMED SERVICES

    The Chairman. Good morning. The committee will come to 
order.
    And this morning the committee will continue its oversight 
of the defense acquisition system by receiving testimony from 
senior leaders of the Department of Defense and Government 
Accountability Office.
    Our witnesses today are the Honorable David Walker, 
Comptroller General of the United States; the Honorable Kenneth 
J. Krieg, Under Secretary of Defense for Acquisition, 
Technology and Logistics; Admiral Edmund P. Giambastiani----
    Admiral Giambastiani. Giambastiani.
    The Chairman. Giambastiani--I am sorry, Admiral, excuse 
me--Jr., Giambastiani, Jr., Vice Chairman, Joint Chiefs of 
Staff; and Mr. J. David Patterson, Deputy Under Secretary of 
Defense, Comptroller.
    So welcome to the committee, gentlemen.
    In 1986, the President's Blue Ribbon Commission on Defense, 
more commonly known as the Packard Commission, recognized the 
challenges facing the defense procurement system. The 
commission found that ``our weapons systems cost too much and 
take too long to develop.'' The report went on to note that 
defense programs ``embody not only overstated requirements but 
also understated costs.'' Finally, it noted that the process 
``does not adequately involve participants with a sophisticated 
knowledge of the cost and schedule implications of technical 
improvements.''
    Now, 20 years later, four major studies were recently 
released that conclude essentially the same things: Weapons 
systems still cost too much and take too long to develop; 
requirements are still overstated, and cost estimates are 
understated.
    Last week, the committee met to hear from representatives 
of three of these 2005 studies on acquisition reform, and today 
we look forward to hearing how the Department of Defense is 
approaching this decades-old problem. One thing is certain: 
This issue is extraordinarily complex and the numerous 
recommendations for reform found in those studies provide no 
simple solutions.
    To better understand the issues, the committee believes it 
is vital to hear what the Department of Defense plans to do 
with these volumes of recommendations. Each of our witnesses 
today will speak to these recommendations in their roles 
representing the three main components of the acquisition 
process.
    Admiral Giambastiani, in his role as chairman of the Joint 
Requirements Oversight Council, JROC, is responsible for 
coordinating, on behalf of all Combatant Commanders, the 
numerous capabilities sought by our warfighters through the 
requirements process.
    Secretary Krieg then must ensure that the Department 
undertakes the appropriate acquisition strategy to ensure that 
costs of system development are kept under control and that we 
are pursuing new systems that are technologically attainable 
and affordable.
    And, finally, Mr. Patterson, here representing the OSD 
comptroller, has the responsibility of maneuvering through the 
long and complex planning, programming, budgeting and execution 
process, PPB&E.
    Today's hearing will be an in-depth look into the entire 
acquisition process from the Department's key stakeholders and 
the Government Accountability Office (GAO). The committee is 
fortunate to have assembled these four witnesses to get a 
comprehensive view of the way ahead for defense acquisition 
reform.
    So, gentlemen, we are pleased that you are here today. We 
look forward to your testimony.
    And let me just say as an aside a thought here, that we 
have seen the Quadrennial Defense Review (QDR), we are putting 
together our own Committee Defense Review, and it appears to me 
that probably more than ever in recent history the acquisition 
process now has a major, major role in the overall blueprint 
for America's security future, because we have potential 
adversaries, like China, which I think is moving into the 
superpower shoes left by the Soviet Union, which has a robust 
and developing industrial base and the ability, thereby, to 
acquire not only the domestic products that they are expanding 
on an annual basis but also to move that capability, that 
robust, industrial manufacturing and technology capability into 
the defense sector.
    And at some point, if we have to match production or we 
have to match systems, we will be facing a potential adversary 
with an enormously efficient production capability, and we will 
be facing that with our own system, which turns out $3 billion-
plus DD(X)s and fighter aircraft well over $100 million and 
attack boats well over $2 billion. And acquisition 
inefficiencies may, in the end, drive American vulnerabilities 
more than any other dimension of America's national security 
complex or structure.
    So what you are doing and what you are commenting on today 
is very, very critical to the security future of the United 
States, maybe not in the current conflicts in the warfighting 
theaters, although moving technology quickly into the field to 
get warfighters the tools that they need is obviously very, 
very important in the war against terror, the ability to be 
agile and to be responsive to warfighters.
    But on the horizon, this ability to have an efficient 
acquisition industrial base for defense capabilities is going 
to be increasingly critical, and the look that I have taken, 
and I think most members of the committee have taken, at the 
price tags on major systems, giving everyone a pretty severe 
case of sticker shock, I think, leaves us--we always remember 
that statement that was made by one of the aerospace leaders at 
one time that at some point this country is going to have to 
figure out which ship it is going to buy that year and which 
airplane it is going to buy. And of course he said that 
facetiously. But looking at the price tag on some of these 
major systems we may see some truth in that.
    So having laid that out, thank you so much, gentlemen, for 
being with us this morning.
    Let me turn to the ranking member, Mr. Skelton, for any 
remarks he would like to make. And then, Admiral Giambastiani, 
we will turn to you for remarks.
    [The prepared statement of Mr. Hunter can be found in the 
Appendix on page 53.]

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

    Mr. Skelton. Mr. Chairman, thank you. I think you are 
right, we are very blessed with the panel today and hope we 
will be able to carry from their testimony some wisdom as to 
where we go.
    The Department of Defense and its affiliated organizations 
recently produced four reports on this subject, and, as you 
know, this is our second hearing on acquisitions that we have 
had in two weeks.
    Last week, I stated that the acquisition system had gotten 
seriously off track, and I am not going to go into great 
details. I will say that before we make any serious decisions, 
we are going to have to have hearings and people such as you to 
help us assess how to fix the problem. If we can't leave this 
room today with a clear idea how we are going to fix these 
problems, then we haven't performed our duty very well.
    The committee staff has laid out for us a chart comparing 
the recommendations of the four studies I mentioned. In three 
areas, these studies reached total consensus. It seems that 
should give us at least a place to start. All four of the 
studies recommend that much more weight be given to 
requirements generated by the combat commanders in the 
acquisition process. This isn't brain surgery. That should make 
sense.
    They all recommend a comprehensive restructuring of the 
Joint Capabilities Integration and Development System, which 
they indicate is broken. And all four studies recommend that 
something needs to be done to increase the funding stability 
for acquisition programs.
    These studies each had a slightly different take on how to 
tackle the problem, but it is clear that these problems need to 
be solved, and the sooner the better.
    I look forward to hearing the proposals of the witnesses. I 
am interested especially in hearing about your recommendations 
on legislation that we need to consider, particularly 
legislation we need to consider during the markup of the 
Defense Authorization Act that we will be marking up in the 
next few weeks. This is serious business, and we appreciate 
your serious help today.
    Thanks, Mr. Chairman.
    [The prepared statement of Mr. Skelton can be found in the 
Appendix on page 57.]
    The Chairman. I thank the gentleman.
    Mr. Walker, we are going to start with you. I have been 
informed that the panel would like to go left to right here. 
Entirely appropriate, so thanks for being with us. Thanks for 
the work you have done in this area too. You have put a lot of 
focus on it. We appreciate that and appreciate the folks on 
your team.
    The floor is yours, sir.

 STATEMENT OF HON. DAVID M. WALKER, COMPTROLLER GENERAL OF THE 
 UNITED STATES, UNITED STATES GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Walker. Chairman Hunter, Ranking Member Skelton, 
members of the committee, I am pleased to be here today, as 
well as to be on this distinguished panel, to discuss how the 
Department of Defense can get a better return on investment of 
taxpayer dollars and why we must ensure that they be held 
accountable for doing so.
    The Department of Defense (DOD) has a mandate to deliver 
high-quality products to our warfighters when they need it and 
at a price that the country can afford.
    I plan to use three boards, Mr. Chairman and members of the 
committee, which I will refer to a little bit later in my 
testimony, to reinforce the importance of the subject we are 
dealing with today.
    Cost is critical, given current long-term budget forecasts, 
which indicate that the Nation will not be able to sustain its 
currently planned level of investment in weapons systems. As 
our work has shown, DOD is simply not positioned to deliver 
high-quality products in a timely and cost-effective fashion.
    Specifically, DOD has a longstanding track record of over-
promising and un-delivering with virtual impunity. DOD's 
continued inability or unwillingness to separate wants from 
needs, incur cost increases of tens of millions of dollars and 
schedule delays of years must be addressed. The all too 
frequent result is that large and expensive programs are 
continually rebaselined, cut back or even scrapped after years 
of failing to achieve promised capability. This business-as-
usual approach is inappropriate and should not be tolerated.
    The supply of dollars available for weapons acquisitions is 
likely to decline in the next few decades as the Nation 
struggles to cope with large and growing structural deficits 
that threaten our future economy, standard of living and even 
potentially our national security.
    The first poster board shows that discretionary spending 
has declined dramatically over the last 40 years. The next 
poster shows very clearly that the supply of dollars available 
for the Defense Department, other areas of government and for 
weapons systems is likely to come under increasing pressure and 
likely to decline in the next few decades as the Nation 
struggles to address large and growing structural deficits.
    The Chairman. I would like for you to explain that chart a 
little bit. It is hard to see the writing from here.
    Mr. Walker. Yes, sir, Mr. Chairman. It is. I think it may 
be in my testimony. I believe it is, but let me try to explain 
it.
    The bar represents spending as a percentage of the economy, 
and it is divided up into Social Security, Medicare, Medicaid, 
all other spending and net interest. The line represents 
revenues as a percentage of the economy, and so inflation is 
taken out.
    I note here, by the way, that there is a color coding 
problem. The blue should be interest, and the--the yellow and 
the blue ought to be flipped here, so I apologize for that.
    The Chairman. Which one is defense? Have you got defense on 
the----
    Mr. Walker. Defense is part of the green, Mr. Chairman.
    The Chairman. Okay.
    Mr. Walker. Defense is all other discretionary spending, 
which you know is----
    The Chairman. Roughly half of the green, right.
    Mr. Walker. Right, national security, homeland security, 
education, transportation. You well know what is in there.
    Here is my point, Mr. Chairman: This is based upon two 
assumptions, which may or may not prove to be valid but which 
are plausible. If discretionary spending grows by the rate of 
the economy and if all tax cuts are made permanent and if all 
other assumptions made by the Congressional Budget Office prove 
to be valid, this is our future. Our future is that the most 
growing cost in the Federal budget is interest in the massive 
Federal debt. Even if----
    The Chairman. Okay.
    Mr. Walker. Yes.
    The Chairman. And I hate to--I know we have got a lot of 
panelists here, but let's go back to your first chart, if you 
can put that up.
    Mr. Walker. Yes, sir.
    The Chairman. On the first chart, I was a little bit 
surprised because you have 1965, 1985 and 2005 and you had a 
bump--the blue is interest.
    Mr. Walker. Yes, sir.
    The Chairman. Basically, 2005 is the same as 1965, 40 years 
ago. That is not reflected in the second chart. Pop that second 
chart back up, which shows it going up like a rocket.
    Mr. Walker. And let me tell you why, Mr. Chairman.
    The Chairman. Okay.
    Mr. Walker. First, on the first chart that you properly 
pointed out, we are paying about the same percentage of the 
budget for interest today that we were in 1965. The reason we 
paid so much higher in 1985 is, as you recall, interest rates 
were much, much lower at that point in time. Now, interest 
rates are relatively low.
    At the same point in time, we are adding debt at record 
rates. Therefore, because of adding debt at record rates 
because of large and growing structural deficits, this is what 
is expected to happen with interest in the future.
    So the first chart was the past; this chart is the future. 
And, by the way, this chart does not assume an uptick in 
interest rates if one were to occur, a dramatic uptick in 
interest rates. Because, as you know, we are getting the source 
of all of our financing for debt from overseas now.
    The Chairman. Okay. Please proceed. Thank you.
    Mr. Walker. Thank you, sir. I appreciate that.
    At the same time, however, weapons programs are commanding 
larger budgets, as DOD undertakes increasingly ambitious 
efforts. My last board shows the DOD's five most expensive 
programs--Joint Strike Fighter, Future Combat System, Virginia 
class submarine, DDG-51 and the FA-22--have already overrun 
original estimated costs by 29 percent. That is to date, and 
the clock is still ticking.
    Unfortunately, such cost overruns are all too typical and 
historically they have wrecked havoc on any attempt to maintain 
stability needed for effective program management. Taken 
together, the resulting unanticipated funding demands are 
running head on with the nation's unsustainable fiscal path. 
More money is not the answer; better outcomes are needed.
    DOD knows how to get better outcomes for its acquisition 
dollars. The answers must lie, in part, in tackling the so-
called ``big A'' process; that is, reconciling the difference 
between unlimited wants with true threat and risk-based needs, 
consistent with current and likely resource levels. DOD has 
repeatedly indicated, both in its presentations to you and its 
response to GAO's recommendation, that it will do better, and 
they are trying.
    Believe me, Under Secretary Krieg and other members of the 
panel are dedicated to change, but many times change is not 
forthcoming to any meaningful extent.
    DOD has repeatedly commissioned more and more studies in 
lieu of dramatic changes in actual line activities. Although we 
have seen some positive changes in policy and we know that 
people are committed to improvement, actual practice on the 
line, to a great extent, is business as usual.
    We must engage in a comprehensive and fundamental 
reexamination of existing and new proposed investments in our 
nation's weapons systems. We must better align the military's 
wants with our nation's needs and its ability to fund them.
    Once DOD's leadership makes the hard tradeoffs, and I might 
here, Mr. Chairman, the Congress has a critically important 
role to play because the Congress sometimes is putting demands 
on the Department, which complicates this task. Once DOD's 
leadership makes the hard tradeoffs, hopefully in consultation 
with and in cooperation with the Congress, the acquisition 
community must develop executable programs with realistic and 
definitive requirements being set upfront. Only then can all 
responsible parties be truly held accountable.
    I am testifying this afternoon on a report we recently 
issued that shows just how far off our accountable paradigm has 
gotten. For example, a recent GAO report noted that many 
current major weapons systems programs continue to suffer the 
same cost overruns and schedule delays, and another recent GAO 
report notes that DOD paid over $8 billion in incentive and 
award fees in situations where the program outcomes did not 
match DOD and contractor promises.
    But change is essential, and the Congress should insist on 
it.
    Mr. Chairman, you and members of the committee can help by 
supporting DOD as it seeks to rationalize the many wants versus 
the real needs and in a manner consistent with the nation's 
fiscal realities.
    And I hate to say it, Mr. Chairman, but I actually think 
that the ``big A'' delta is worse after the last QDR than it 
was before. There are very touch choices that need to be made.
    I am more than happy to answer any questions you and the 
other members may have, and I am looking forward to hearing 
from my co-panelists.
    [The prepared statement of Mr. Walker can be found in the 
Appendix on page 59.]
    The Chairman. Thank you, Mr. Walker, for a very crisp 
statement there.
    Secretary Krieg.

STATEMENT OF HON. KENNETH J. KRIEG, UNDER SECRETARY OF DEFENSE 
            (ACQUISITION, TECHNOLOGY AND LOGISTICS)

    Secretary Krieg. Chairman Hunter, Congressman Skelton, 
members of the committee, thank you for the opportunity to 
appear with my colleagues before you today to discuss 
acquisition reform.
    As you noted, in the last few months, several studies have 
been released. The Department is evaluating the best path 
forward to implement a number of the initiatives and 
recommendations from these studies to benefit our number-one 
customer, the joint warfighter.
    Today, I will briefly describe in my opening statement what 
we are doing to change the way the Department of Defense 
governs, manages and----
    The Chairman. Okay, Mr. Secretary. And while you are at it, 
all written statements by our witnesses will be taken into the 
record. So feel free to summarize as your written statement 
will be in the record.
    Secretary Krieg. I am going to summarize it, but there are 
a couple key points I want to get on the table so that you can 
understand the context.
    We have been working on this for several months. Our goal 
is to make a clearer and more transparent link from strategy to 
outcomes. The approach will delineate decision-making 
responsibilities of governance, management and the execution 
levels of the Department of Defense. This will enable senior 
leadership to focus on strategic choice and empower management 
to carry out their responsibilities in a manner that ensures 
transparency, accountability and sound performance management.
    As part of this effort, we will work to improve the 
Department's analytic framework, build more transparent 
business information systems across the Department, integrate 
decision processes to enable strategic choice and align roles 
and responsibilities in a way that maximizes decision-making 
effectiveness across the enterprise.
    We plan to enhance our strategic governance capabilities by 
clarifying lines and responsibilities and accountability and 
establishing a closer, more effective relationship among the 
key business processes in the Department. As you noted, this 
includes the requirements generation system, planning, 
programming and budgeting, an execution system and defense 
acquisition. The three of them together represent the ``big 
A.''
    The Department is planning, programming, budgeting and 
execution process is key to ensuring efficient and effective 
acquisition. Budgeting for acquisition programs requires 
managers to continuously balance tradeoffs among cost, schedule 
and performance until we can attain an acceptable level of risk 
and assure affordable capabilities.
    Unstable funding makes this balancing process elusive and 
can result in schedule slips, less optimum production rates and 
other efficiencies that result in cost overruns.
    We must also, though, be willing to wait until technologies 
are mature enough and performance requirements and designs are 
stable. I also realize that there are factors outside that we 
cannot control, and we, as the acquisition organization, must 
remain flexible in order to balance risk so that our nation's 
overall needs are met.
    Collectively, we are implementing several initiatives to 
achieve these goals. I will briefly touch on some; the written 
lays them out in great detail.
    The first initiative breaks down the investment decision 
process to three levels of capability decisions, each informing 
the next. The first is strategic choice; second, portfolio 
choice; and then, third, weapons systems choice.
    At the corporate level or enterprise level, Department of 
Defense level, strategic choice. Senior decision-makers must 
balance and choose among priorities across portfolios. The 
focus is on operational effects and a determination of what 
types of capability portfolios and how much of those 
capabilities are needed?
    The level within a capability area is portfolio choice. And 
in that, we must balance the capabilities within a portfolio to 
provide the most effective mix to deliver desired effects, and 
we will be glad to talk to you at length. We will be 
experimenting with several joint capability portfolio 
management approaches this year as part of the implementation 
of QDR.
    Finally, at the systems level, systems choice is the 
determination of the best solution to provide the needed 
capability but by balancing performance requirements with cost, 
schedule and technical risk.
    That was the heart of the Packard Commission 
recommendation, it is the heart of many of the recommendation 
in the other reports that have been issued recently.
    Building on the last point, the second initiative we have 
under way is a pilot effort called concept decision. This is a 
decision point where the DOD requirements community, 
acquisition community and resource processes converge at the 
point of investment. Our goal here is to bring together each of 
these process leaders to drive early tradeoffs among cost, 
schedule and performance.
    The third initiative is a time-defined acquisition, which 
focuses on the need in time of that warfighter. This initiative 
envisions employing risk-based criteria to determine which of 
the three different but related acquisition approaches should 
be selected to satisfy the capability of the requirement. And 
those criteria--and we will be glad to describe those later--
include technical maturity, time needed to delivery and 
requirement certainty.
    The best solution for the joint operator is not necessarily 
the sum of the best solutions for each of the services and 
agencies. This set of first three initiatives is designed to 
bring the multiple efforts of the Department together, look at 
them from the perspective of the joint operator and, as 
necessary, rearrange the portfolios and investment.
    The fourth initiative we have under way is in our Defense 
Business System. DOD has recently taken steps to improve our 
business practices, processes and systems. We aim to create 
streamlined, end-to-end integration of our supply chain, 
greater financial transparency and improved personnel 
knowledge, among others. These efforts and the governance 
process developed to guide them or describe in some detail in 
an enterprise transition plan, which we sent the second edition 
to you all, I think, about two weeks ago.
    The fifth initiative under way involves streamlining and 
improving the Defense Acquisition Board, or DAB, process. The 
DAB process should work to establish a common set of facts, 
bring the issues into sharp relief so senior leaders can make 
decisions. To move from where we are to where we should be, I 
have commissioned a group of senior executives to use Lean Six 
Sigma techniques to examine the oversight process and 
documentation requirements for the DAB process.
    I have asked them for their recommendations that will 
reduce cost in time, while improving the effectiveness of 
oversight by the end of this month.
    All these initiatives are within the Department's current 
authority, I believe. If we determine that some of these 
initiatives require legislative relief, I will gladly work with 
the committee to do that. But we also, of course, be glad to 
keep you apprised of these initiatives as we go forward.
    Several other points. We must consider the overall 
investment portfolio for science and technology. To that end, 
the Congress has been very helpful in the near term in 
providing funds for Combating Terrorism Task Force the quick 
reaction special projects. And this committee, I know, has been 
very interested in those areas, and thank you for your support.
    In addition, the Department's supply chain is now a 
strategic weapon, or should be. The Department is pursuing a 
number of strategic supply chain initiatives, including 
expanding the joint supply chain distribution by establishing 
Transportation Command (TRANSCOM) as the distribution process 
owner and by strengthening my position as the defense logistics 
executive. Together we are making the joint supply chain more 
responsive. And, in fact, joint supply chain is one of those 
joint capability portfolios that we will work on this year in 
that experiment I described earlier.
    Last, I just wanted to note for the opening that our 
workforce is key to making this happen. Our acquisition 
technology and logistics workforce analysis and the human 
capital strategic planning efforts to grow it over time or to 
develop it over time are progressing. I will be publishing the 
first DOD acquisition technology and logistics human capital 
strategic plan in January, and I know this committee is 
interested in that, and we will look forward to working with 
you.
    In closing, Mr. Chairman, there is much under way in 
improving the effectiveness and efficiency of the Department of 
Defense. We are committed, and I personally am very committed 
to this program of change.
    Thank you for the opportunity to be here today, and we look 
forward to answering your questions.
    [The prepared statement of Secretary Krieg can be found in 
the Appendix on page 77.]
    The Chairman. Thank you, Secretary Krieg.
    Admiral Giambastiani, thank you, sir. Thanks for all the 
work you have done over the years in this important area. 
Obviously, the challenge at this point is huge.
    Admiral Giambastiani. Yes, sir.
    The Chairman. Thanks for being with us this morning.

STATEMENT OF ADM. EDMUND P. GIAMBASTIANI, JR., VICE CHAIRMAN OF 
              THE JOINT CHIEFS OF STAFF, U.S. NAVY

    Admiral Giambastiani. Thank you, Chairman Hunter, Mr. 
Skelton and other members of the distinguished committee.
    I am pleased to be here today to testify again this 
morning. In particular, though, I would like to take just a 
moment on behalf of our soldiers, sailors, airmen and Marines 
and their families to thank each and every one of you for this 
strong bipartisan support that you bring to our armed services.
    I will truncate my discussion, I will cull it down, but 
there are some important points, though, Chairman, that I think 
I have to make here in the verbal part of this.
    The Chairman. Absolutely.
    Admiral Giambastiani. Improving our ability, if you will, 
in the requirements and acquisition process to deliver 
capabilities for that joint warfighter is a key element of the 
Department's ongoing agenda. This transformation imperative 
informed the Quadrennial Defense Review's direction on business 
process reforms that Under Secretary Krieg talked about. These 
business process reform efforts will be driven by a series of 
what we call QDR execution roadmaps and overseen 
collaboratively by the senior leadership of the Department of 
Defense, co-chaired by Deputy Secretary England and myself in 
what we call the Deputies Advisory Working Group.
    In my testimony today, I would like to focus on the role of 
the requirements process and what it should play in acquiring 
these truly joint capabilities and the efforts that we, on the 
JROC, and also on the Defense Acquisition Board have undertaken 
to achieve this goal. So I am going to try to talk about the 
JROC and the DAB here for just a moment.
    As a prelude to this, numerous reviews of the acquisition 
process that you have talked about have pointed to key aspects 
of the requirements generation process. You referred to it, Mr. 
Chairman, in your opening statement, as did Mr. Skelton. And 
this process has driven up costs and delayed delivery. Among 
these cost drivers are the establishment of what I would call 
unrealistic or unachievable requirements and then the evolution 
or creep of requirements over time.
    The first time, unrealistic requirements, reflects an 
aspiration that science and technology, or S&T, will advance in 
time to deliver a desired future capability. We do not have 
unlimited money, and we don't have unlimited time to deliver 
these.
    It is often an aspect of programs with inherently long lead 
times, such as some in shipbuilding and aviation stealth 
programs, for example.
    The second problem, requirements creep, occurs when 
technology advances faster than our acquisition process 
expects, often in those areas in which the commercially driven 
research and development outpaces that in the Department in 
areas such as communications or information technology.
    In both cases, they result from a laudable desire to 
deliver the best possible state-of-the-art capability to the 
joint warfighter, but they also result in inefficient and 
expensive programs, which often deliver late, as you have 
heard, and sometimes deliver not at all. This is the state-of-
the-art versus the state-of-the-practical is what I am talking 
about.
    The Chairman. Yes. Our staff director, Mr. Simmons, used to 
be Chief Executive Officer (CEO) of Ketema Aerospace, and he 
called this, this is when you get all your engineers in a room 
and you break their pencils.
    Admiral Giambastiani. Yes, sir.
    The Chairman. Right?
    Admiral Giambastiani. Exactly. And you take their pads 
away. [Laughter.]
    In our efforts to improve this requirements process, we on 
the JROC and also on the Defense Acquisition Board are working 
collaboratively and very closely--I would say that Under 
Secretary Krieg and I would probably describe this as being 
locked at the hip--to craft a process which achieves a series 
of objectives. I am only going to read two. There are more in 
my written testimony.
    To link requirements to approved concepts and incorporate 
the capability needs of the Combatant Commanders. There is a 
series of others that are in the full list in my statement for 
the record.
    But, importantly, we want to provide appropriate review by 
senior leadership early in the requirements process and 
throughout the acquisition process so that the rational and 
informed risk-balancing decisions can be made by the senior 
civilian and military leaders in the Department. Needless to 
say, this is a tall order but not unachievable.
    I am pleased to report that in each of the JROC meetings 
and 12 Defense Acquisition Board meetings I have attended since 
becoming the vice chairman 7 months and 3 weeks ago, most of 
these topics have and are being addressed. We are working and 
learning together and taking an incremental and pragmatic 
approach to reforming these processes to give the best 
capabilities to the joint warfighter.
    I am encouraged by our progress to date. I will mention one 
or two of these. We have now four joint operating concepts that 
I talked to you about in acquisition, and we are relating them 
to the requirements process. This will help all of us involved 
in the capability development services--defense agencies, 
Combatant Commanders and the joint staff--think more clearly 
and more jointly, including our allies and coalition members.
    These are just some of the initiatives--again, more 
described in the statement for the record--that Under Secretary 
Krieg and I have taken with the DAB and the JROC together. This 
teamwork and collaboration, in my view, is important and cannot 
stop, because there is much work to be done. We need to make 
our system more agile, more responsive, frankly much less 
bureaucratic and fully informed by this joint concepts and 
experimentation and our lessons learned.
    This challenge I am committed to meeting. As I close, it is 
one of the reasons why I came to Washington as the vice 
chairman of the Joint Chiefs of Staff, having lived with a non-
optimal system as a warfare requirements director, as a service 
programmer and then almost three years as a combatant 
commander.
    I look forward to continuing our work with the acquisition 
community, the resource community and with the Congress to 
tackle these challenges, and I look forward to the support and 
advice we receive from your committee, sir. Thank you.
    [The prepared statement of Admiral Giambastiani can be 
found in the Appendix on page 98.]
    The Chairman. Admiral, thank you very much.
    Mr. Patterson, thank you for being with us this morning.

    STATEMENT OF J. DAVID PATTERSON, PRINCIPAL DEPUTY UNDER 
               SECRETARY OF DEFENSE (COMPTROLLER)

    Mr. Patterson. Thank you, Mr. Chairman and members of the 
committee. I am very pleased to be here to discuss what is 
clearly an important topic, not only for you but for the 
Department: acquisition reform.
    Let me open my remarks speaking as a relatively recent 
addition to the Comptroller's Office by saying that the process 
to acquire weapons systems and services, to meet current and 
future capability needs can and should be better, especially in 
this era of multiple combat operations abroad, terrorist 
threats at home and competition for budget.
    To that end, the goal of the Office of the Under Secretary 
of Defense Comptroller is to provide the Department with a 
rational, balanced budget, with sufficient internal control to 
achieve efficient, effective acquisition programs that meet 
cost objectives.
    To my knowledge, before the completion of the most recent 
Defense Acquisition Performance Assessment, or DAPA, some 128 
studies had been conducted over the course of the last several 
years to address perceived and real problems with the defense 
acquisition system.
    In the 1980's, the focus was on fraud, waste and abuse. In 
the 1990's, we reflected the desire to make the process faster, 
better, cheaper. More recently, the goal has been to make the 
process more flexible and responsive.
    Indeed, for nearly 60 years, the Department has been 
engaged in a continuous process of self-assessment to identify 
and improve the way it acquires weapons systems. But many of 
the same problems, particularly those related to cost and the 
timely delivery of needed capabilities, have been themes in 
most of the studies.
    In many of the reviews conducted, almost since the 
Department was established in 1947 with the Hoover Commission, 
the focus was on procurement practices but not necessarily 
budget issues. And this is significant, because those practices 
that impact the ability of the procurement process to deliver 
effective capabilities on time and within cost requires the 
Department to create a stable budget environment.
    Past reviews were also limited in their assessment of the 
interrelationship between the workforce performance, industry 
responsibility and the oversight and control mechanisms 
intended to make the system work efficiently and with financial 
discipline.
    Last June, in response to the growing concern of Congress 
and the Department, Deputy Secretary of Defense Gordon England 
authorized an assessment of every aspect of the acquisition 
process, from requirements, organization and legal foundations, 
such as Goldwater-Nichols, to decision methodology, oversight 
and checks and balances, with the goal of integrating all 
acquisition reform activities into a single coordinated 
roadmap.
    The project became the Defense Acquisition Performance 
Assessment. I served as the director for the DAPA project and 
have read General Kadish's testimony and believe he covered 
well the details very well. However, it is important to note 
that, broader than previous studies, the DAPA panel's approach 
addressed not only the ``little A'' acquisition process, which 
tells us how to buy things, but the ``big A'' acquisition 
system that integrates the three interdependent processes of 
budget, acquisition and requirements.
    Among the important findings of the panel that are relevant 
here today is the idea that the program's stability leads to 
predictability in the program, as measured by cost, schedule 
and performance.
    When program progress is predictable, in other words, when 
milestones are being met, estimated costs are actual costs and 
performance to contract specifications and Key Performance 
Parameters are achieved. Senior leadership in the Department of 
Defense and Congress will have their confidence in the 
acquisition process strengthened or renewed.
    Additionally, it is critical for acquisition program's 
success that clear lines of accountability are established and 
maintained. When program managers have stable programs with 
predictable funding, it is much easier to hold the program 
managers accountable for program performance and cost 
discipline.
    Achieving stable program budgets as a key element in 
building and maintaining stable acquisition programs is a 
Department of Defense objective for implementation. To achieve 
that goal, the Department has an initiative under way, as part 
of the Quadrennial Defense Review recommended roadmap, on 
improved governance and management to implement a DAPA report 
recommendation for a stabilization account or capital funding 
of programs.
    We have established a working group that is, first, 
preparing a description of exactly what such a funding program 
would look like. Now, there are several ideas of what 
stabilization funding process would be; second, determining how 
rigorous internal controls would be established and maintained; 
gaining the confidence of Congress and the Department demands 
that strong spending controls be in place; and, third, 
identifying which programs would be the best candidates for 
successful implementation of a capital or stabilization account 
for major programs. Not all program profiles lend themselves to 
a stabilization account.
    And, last, we are looking for solutions to the challenges 
that will no doubt be encountered by implementing stabilization 
accounts for major defense programs.
    The outcome of this working group will provide the body of 
the report on this subject, required by the National Defense 
Authorization Act of fiscal 2006, due to Congress in July. But 
any worthwhile solution to achieving budget stability and the 
resulting acquisition program stability, will require a 
collaborative effort among the major Department players and 
Congress.
    I am pleased with the opportunity to discuss this important 
subject of acquisition reform and stand ready to answer any of 
your questions.
    [The prepared statement of Mr. Patterson can be found in 
the Appendix on page 104.]
    The Chairman. Mr. Patterson, thank you.
    And to all of the panelists, thanks for your opening 
statements.
    This is a big, big area, and we are going to have a lot of 
questions, but let me just offer one observation. First, you 
folks are going through lots of scrubs on how you can make the 
system more effective and more efficient.
    It occurs to me that the systems that we are designing, 
even if you achieve extremely efficient construction schedules 
and funding schedules, if you look at the big ticket items that 
we have got out there right now, the $14 billion aircraft 
carrier, $3.5 billion DD(X), $2 billion submarine, that just 
starting with the blueprints for those systems and the way they 
are designed and the features that are designed in them, you 
are going to have perhaps a light drawdown on the cost of those 
systems if you have enormous reform in what I would call the 
subacquisition process. But, nonetheless, you are still going 
to have very substantial price tags.
    Let me offer a question that I think goes to the threshold 
of this problem, and that is, when we designed the system, when 
JROC makes the final call on what the requirements are, do you 
have production engineers, that is do you have people in the 
room, technical people, who when you describe the requirements 
and everybody weighs with what components and subcomponents 
they would like to have in a particular system, do you have in 
the room production experts who can say, ``If you do that, 
Admiral, you are going to jack your costs up 10 percent or you 
are going to raise it 5 percent or you are going to raise 25 
percent or that is going to make it very difficult for the 
yards to mobilize and to do that or that is going to require a 
new technology.'' Do you have the producers in the room?
    And the reason I say that is because in the domestic area a 
lot of designs are put into place not simply because they are 
sought after by consumers but to lend themselves to production 
efficiency. For example, if you are building houses, you can 
build production housing in this country in many places for $60 
a foot. And they meet all the codes, and make all the 
requirements, all the insulation, all the safety requirements, 
all the livability requirements that are fairly standard 
throughout the nation. They will all pass code, they will all 
get their permits, they will all be accepted by the governing 
bodies.
    You could build next door to that $65-per-square-foot 
production housing $300-per-square-foot housing, which is not 
built with the intersession or the participation of the 
production engineers, it is done purely as a response to the 
requirements people, which in this case is usually the person 
that wants to build a custom home and wants nooks, crannies, 
elevations, room divisions and all the things that go into what 
people like to have and like to see.
    My sense is that you don't have in these requirements 
councils hardcore technical people who are production people, 
not philosophers, not people with dreams of what technology 
might be but production people who say, ``If you are not going 
to let me weld this thing in a straight line, your costs are 
going to go through the roof, and here maybe is a suggestion on 
how you can weld it in a straight line, here is a suggestion on 
a configuration that will save you a lot of money.''
    Do you have those people in the room?
    Admiral Giambastiani.
    Admiral Giambastiani. First of all, I would tell you that 
we don't have commercial or industrial folks in the room when 
we go through the actual approval of what I would call, what 
used to be called a mission needs statement, which is now an 
initial capability document, ICD. Okay, same approximate thing.
    But what I would tell you is, when we actually make the 
determination, the answer is, no. When we develop up to the 
point that the document comes forward is there participation by 
technologists, engineers, et cetera, the answer is, yes, but in 
the room when we make the decision for the initial capability.
    Now, what I would say to you to extend this answer on is 
that we have got a classic example of this where in late 2004, 
before I became the vice chairman, we issued an initial 
capabilities document for a program, the B-52 standoff jammer. 
It said, ``Here is what we want in a limited scope program that 
covers a very small segment of the standoff jamming 
frequencies.''
    We then approved that document out of the JROC and recently 
here in the budget process for the submission, we canceled the 
program. And the reason is because folks in industry and within 
the Air Force, good and well-meaning people, started tacking on 
all kinds of other requirements and production designs, if you 
will, and capabilities that we did not ask for in the ICD.
    So the answer, I would tell you is, is the cost grew from 
$1 billion to probably close to $7 billion and we looked at it 
and said, ``There is no way we are doing this,'' and that is 
why we killed the program.
    The Chairman. But maybe it would have been good if you 
would have had some real good judgment early from production 
people and you asked the question in a different way, which is, 
``Can we get this capability cheaply if we design it in the 
right way?''
    Admiral Giambastiani. Sir, we did that, and that is why we 
picked the B-52 as a platform because it had electrical 
capacity generators and they were available aircraft. The 
problem is, is that when we started tacking on too much else, 
we knew that it wasn't going to be possible to do within, if 
you will, cost and time constraints.
    And what is important about this is, we killed this before 
it ever even reached what we call milestone A in the process. 
So we never even got to approving key performance parameters, a 
capability development document or any of those things that are 
much farther along in a program. And if you are going to do it, 
this is where to do it, early on in the process.
    So that is an example that I want to give you of how we are 
trying to bring these cost and time constraints in based on 
what we know from not only production engineers but frankly 
from the scope of the requirements.
    But I take your comment on bringing them in earlier as a 
very important one.
    The Chairman. Okay. My astute staff member just gave me a 
note that said, ``Industry advisors will always say yes to new 
requirements.''
    Mr. Green, I knew that. Just want to put that on record, 
but I think that is an excellent point, because when we--we 
just built a house or we are in the process. I sat down with a 
designer and put in all these great things that would be nice 
to have. I discovered after we had the house designed that when 
we tried to shrink the house a little bit these cuts that I 
made on the perimeter, notches, ended up taking away space and 
costing me more money to construct. I realize now that if I 
would have had a production engineer, that is a guy who builds 
houses, who understands construction costs upfront when we put 
the requirement, we would have saved a lot of money.
    And so Mr. Green's second note is, ``Do you folks have that 
organic capability to sit in at the initial meetings where you 
might ask the question this way: Do you think we could build an 
aircraft carrier for less than $14 billion with the 
requirements that meets, generally, the present requirements 
and maybe with a few innovations that will carry us into the 
future?''
    That is kind of what I am talking about, Admiral, because I 
think once you set a basic platform into motion and you set 
down a base design, I think you are in the position you just 
talked about where you can veto or not veto subsystems on the 
basis that they are too expensive. You can cancel things. But 
you can't start a program ab initio and go in a direction that 
is going to give you lots of explosive on target for the same 
cost or for a lower cost.
    Admiral Giambastiani. Yes, sir. Let me respond with two 
answers, briefly.
    Number one, with regard to the comment about contractors 
and industry will tell you, that is what I was referring to in 
my opening statement by the art of the possible versus of the 
art of the practical, and that is what you are referring to, I 
believe, here.
    The Chairman. Right, but the production engineers don't 
have to be out of industry.
    Admiral Giambastiani. Right.
    The Chairman. They could be organic to you folks.
    Admiral Giambastiani. Let me give you an example of how 
Under Secretary Krieg and I have brought production engineers 
into the process of looking at a program, and it is called the 
Joint Tactical Radio System. This program has opportunities for 
some substantial cost growth. And, frankly, within a week and a 
half of my arrival here, we started working on this program by 
bringing, if you will, people with experience in systems 
engineering and production engineering into the process.
    Ken Krieg had named one to be the joint program manager, a 
person I am very familiar with by the name of Dennis Bauman who 
I have worked with for years inside the Naval Space and Warfare 
outfit.
    And we have had, how many, Ken, three DABs on this, at 
least? And what I am telling you is, is that we have gone 
through and looked at every single cost driver and requirement 
based on production engineering to come out with what is the 
art of the practical, just the question you are asking, is it 
even practical to go do this.
    And we have gone through and looked at each one of the key 
performance parameters that were mandated before he and I ever 
came into these jobs, and we have said, ``Okay. Where are we 
going to cut back? Where are we going to make appropriate risk-
based decisions so we can move this program forward to bring 
joint warfighter capability that can be produced on time, on 
cost and on schedule within a cap and not giving you another 
dollar more within the program?''
    The Chairman. Okay. Thank you.
    Dr. Snyder.
    Dr. Snyder. Thank you, Mr. Chairman.
    Mr. Chairman, I appreciate you holding this hearing and 
this series. I think this is so important and so complex, and 
it became even more complex when I heard you use the phrase, 
``ab initio.'' I knew I was really over my head then.
    I appreciate you all being here and----
    The Chairman. That is a small town in Texas.
    Dr. Snyder. I bet it is, yes.
    Mr. Walker, in your written statement, I am going to read a 
couple of paragraphs that I think really illustrate, and this 
is quoting you, Mr. Walker: ``As I have testified previously, 
our nation is on an imprudent and unsustainable fiscal path. 
Budget simulations by GAO, the Congressional Budget Office and 
others show that over a long term we face and large and growing 
structural deficit to primarily the known demographic trends, 
rising health care costs and lower Federal revenues as a 
percentage of the economy. Continuing on this path will 
gradually erode, if not suddenly damage, our economy, our 
standard of living and ultimately our national security.''
    And then just before that, you refer specifically to DOD 
and you say, ``In the past five years, DOD has doubled its 
planned investment in weapons systems, but this huge increase 
has not been accompanied by more stability, better outcomes or 
more buying power for the acquisition dollar. Rather than 
showing appreciable improvements, programs are experiencing 
recurring problems with cost overruns, missed deadlines and 
performance shortfalls.''
    I think those are two very powerful statements. One is in a 
narrow category of what you all are focusing on and trying to 
do your best job of improving, and you all have pointed out 
that it has occurred over decades.
    And then, Mr. Walker, you put it in the context of we are a 
nation that does not have unlimited resources, and our national 
security also depends on our economic strength and our fiscal 
strength. So we have some real challenges.
    Mr. Walker, in your written statements, you have some 
little charts in here. You have one for DOD, I think you have 
one for, let's see, one for the Secretary of Defense, one for 
military services and joint developers. You don't have one for 
Congress in terms of actions that we might do, and I am one 
that feels like the Congress has just dropped the ball in terms 
of providing oversight in a whole lot of different areas. But 
would you create for us a chart for Congress? What should we be 
doing?
    Mr. Skelton had to leave and he specifically would like to 
know, his question is, ``What is the single most important 
thing this committee can do to help DOD get on a path to fix 
the problems with acquisition?''
    So if you would respond to that, Mr. Walker, and then the 
rest of you respond to what this committee could do.
    Mr. Walker. If I can, Mr. Snyder, let me do this: Let me 
tell you the six things that I think need to be done, some of 
which involve action by the executive branch and some of which 
will involve efforts by the Congress.
    Number one, there must be a reconciliation of the so-called 
``big A,'' a reconciliation between unlimited wants versus true 
threat and risk-based needs versus how much resources we are 
likely to have to be able to fund those needs. That has never 
been done. It requires tough choices, it requires tough love, 
and it requires decisions both within the Department and by the 
Congress.
    Second, to se realistic and sustainable basic requirements 
that you can stick with, which requirements are informed by 
what the chairman mentioned, then input of production experts 
and other technology and other experts that can tell you what 
is realistically possible given what you are trying to 
accomplish and given the resources that you have.
    Third, take steps to try to provide some funding stability 
in connection with programs that, A, have gone through the 
``big A'' reconciliation and survived it and that meet the 
second requirement that I mentioned.
    Fourth, use commercial best practices, including making 
sure, as Under Secretary Krieg mentioned, appropriate level of 
technology maturity in the design, development and production 
phases before you change into the next phase. Make that an 
absolute hard and fast condition.
    Fifth, move to more streamlined and simplified contracting 
approaches that better balance cost and risk and that are 
focused on achieving desired outcomes: cost, timing and 
performance.
    And, sixth, structure incentive and award fee arrangements 
so that the government is paying for positive outcomes based 
upon cost, schedule and performance.
    Now, I would respectfully suggest, and I can think of 
others, this is just over a few minutes, I respectfully suggest 
that, and we are happy to work with this committee to try to 
come up with some more specifics, but I think there are things 
the executive branch should do here, and there are things that 
through the authorization and appropriations process could be 
done in order to make sure that these conditions are met.
    Because in many cases, the policy manuals are beautiful but 
the difference between the policy manuals and actual practice 
can be wide. And a lot of it, quite frankly, is a cultural 
issue, and a lot of it is because in the past when there had 
been unaccepted outcomes there hasn't been any accountability. 
There have been no consequences, either internally or frankly 
from the Congress.
    Dr. Snyder. Do the rest of you have any comments on that 
area?
    Secretary Krieg. Yes. I never pass up an opportunity. I 
think the most important thing that we all can do is strategic 
choice. At the end of the day, strategic choice is not about 
what we decide to do as much as it is about what we decide not 
to do.
    I sat at tables like this in my short tenure in this role 
and had people say there are requirements defined by X, Y or Z. 
You, as the Under Secretary, are choosing not to fulfill that 
requirement. Therefore, all unfunded requirements ought to come 
to the Congress and the Congress ought to pick and choose among 
unfunded requirements.
    I am being provocative to say, if the bag is too full, 
putting more in the bag is not the way to get out of the 
problem, and our national problem on many of these issues is we 
are not willing to determine the difference between what we 
absolutely need as a requirement and what the sum of people's 
desires are as a requirement.
    And as long as we reach for the ultimate capability, which 
is a cultural norm within the Department and as long as people 
are not willing to have someone's desire of requirements to be 
left off the table, this job will be very hard to meet those 
cost, schedule and performance and your desires for that kind 
of performance.
    The Chairman. I would just observe that sometimes those 
unfunded requirements are things like ammunition, body armor, 
armor for Humvees, jammers.
    Secretary Krieg. I understand, sir, and I am said it is all 
our problems to choose what the right choice is. And I 
understand your role. I know that the role of the President is 
to propose the budget; the role of the Congress is dispose. The 
Constitution is very clear about that. I am not trying to get 
at that. I was trying to get at the point of strategic choice.
    Dr. Snyder. Mr. Chairman, I also respectfully suggest those 
are fundamental needs. You shouldn't have to get involved in 
that. And that ties back into the issue of we need to make 
tough choices and, candidly, it is going to be tough for the 
Congress. There is no way we are going to be able to fund all 
these programs.
    And here is what my concern is, my concern is, if we don't 
change and we don't change now, every dollar we spend on a want 
is a dollar we are not going to have for a need down the road.
    The Chairman. Any other comments on the gentleman's 
question?
    Admiral Giambastiani. I might just add one comment. I take 
the discussion between the wants and the needs and the 
important piece we try to do from the military side is provide 
military advice on what the needs are. And that is what 
Goldwater-Nichols tried to really solidify was our ability to 
provide military advice.
    Now, the question remains how you translate that military 
advice through a sensible requirements process to work hand-in-
glove with acquisition and resourcing to bring in program 
stability and the rest. I could talk, as you know, Chairman, 
and we have talked at length over ten years on how to bring 
resource stability, requirements stability and acquisition 
stability to programs.
    But what I would say to you is, that in the President's 
budget that we came forward here, we have given the Congress a 
series of choices on programs to take out and we said the bulk 
of the QDR would be instituted and brought forward in the 
Program Objective Memorandum (POM) 2008, or in other words, 
President's budget 2008 and the beyond, the Future Year Defense 
Program, and we have some substantial hard choices.
    But I would tell you, I think we have made some pretty hard 
choices just in the submission in that short time of creation 
of the QDR. And you will see more coming through this process, 
I can guarantee you.
    The Chairman. Thank the gentleman.
    The gentleman from Minnesota, Mr. Kline.
    Mr. Kline. Thank you, Mr. Chairman.
    Thank you, gentlemen, for being here and your testimony. I 
don't even know where to begin. I think the acquisition system 
is horribly, horribly broken, has been for many years.
    Secretary Krieg, your predecessors going back have 
recognized that this system is broken. And we have JROC would 
and DAB would and done all sorts of bureaucratic things.
    Just a comment, I think that, Mr. Walker, I think it was 
your comment that we had some culture that we had to change, or 
was it yours? I am sure that all of you recognize that.
    And we just seem to be unable to do that on so many ways, 
whether it is the requirement process, which seems, Admiral, to 
be tremendously slow and cumbersome. It is not agile, 
responsive and less bureaucratic; it is cumbersome, 
unresponsive and tremendously bureaucratic.
    And I am not telling any of you any--you know all of those 
things. It just is. So I have some despair that we keep trying 
to fix it and trying to fix it and trying to fix it and we 
don't fix it. Still, I wish you good luck, and I would like to 
know what we can do to help.
    Let me go to another, sort of, related point, and maybe the 
chairman or somebody knows the answer to this; I don't. We 
became frustrated on this committee, and I think all of us in 
the Department of Defense and elsewhere became frustrated 
because we had soldiers, Marines and others who were being 
wounded and killed in action, and we wanted to provide a way to 
get agile, responsive, immediate help to those soldiers.
    And so under the leadership of this chairman, we put into a 
law that the secretary of defense could, sort of, waive this 
bureaucratic entanglement, Federal acquisition regulations and 
the like and go buy it. If we needed it, go buy it.
    If one of you knows, I would like to hear from you. If you 
don't, I would like it for the record. What have we bought 
under that provision? I know that we have had frustration here 
that armor getting on vehicles, Humvees and trucks, was slow 
coming even after we had approved it. It seemed like other body 
armor and so forth was slow coming. There has been great 
frustration expressed by members to his committee that we 
haven't perhaps purchased enough jammers or other technology to 
help in the fight against Improvised Explosive Devices (IEDs).
    Even when we passed what I thought was extraordinary 
legislation granting extraordinary power to the secretary, we 
slipped, it appears from here and I would like to hear 
otherwise, back into this standard culture, the normal process. 
We haven't verified the requirement, we haven't completed the 
developmental testing, we haven't gotten the operational 
testing. Something has slowed us down.
    So that is my speech. The question is, for the record or if 
one of you knows, what have we purchased under that authority 
granted to the secretary of defense? And am I completely wrong 
in my assessment that we have fallen back into bureaucracy?
    Anybody?
    Admiral Giambastiani. If I could, Mr. Kline, what I would 
like to do is, first off, tell you that I think working very 
carefully with the Joint Improvised Explosive Device Defeat 
Task Force, now under the leadership of retired four-star 
general, Montgomery Meigs, United States Army, who was brought 
on board on the 12th of December specifically for his 
capabilities, we are using those types of authorities inside 
that Joint IED Defeat Task Force.
    We spend a lot of time with the chairman of this committee 
and his staff director on this very issue, going back and forth 
on are we doing it right, are we doing it fast enough, are we 
doing it in the right areas. But I can tell you that General 
Meigs is using that to bring on board countermeasures and other 
devices in a way as rapidly as possible.
    And, also, to cut through this bureaucracy, the stonewalls 
and everything else that are out there, the deputy secretary 
has signed a series of directives that allow us to fast track 
money out of my good friend, the Comptroller's Office, here to 
eliminate many of those requirements that we have along the 
process to produce these systems so that we can get them in the 
hands of our troops as quickly as possible.
    And I would tell you we are deploying things much faster 
now. I could quote a series of statistics. I won't go through 
them right now, but that is probably one of the primary areas 
that we are really exercising the authority that the Congress 
has given us.
    Secretary Krieg. I want to add to that. We built a small 
joint rapid acquisition cell, a direct report to me and a 
direct report to the comptroller, who are the ombudsmen for 
those IED defeat and other urgent operational needs, for if 
someone is in the road, call there and they will clear it out. 
And that is the role they play to make sure that we have a 
rapid process to link need to solution.
    Mr. Kline. Okay. Thank you. My time has expired.
    If I could just get from maybe it is from you, Mr. 
Secretary, a list of those things that the Department has 
acquired specifically under this authority granted in the 
statute.
    Admiral Giambastiani. We would be glad to do that.
    [The information referred to can be found in the Appendix 
beginning on page 115.]
    Mr. Kline. Thank you, and I yield back.
    Admiral Giambastiani. Happy to do that, sir.
    The Chairman. Thank the gentleman.
    Under the initial thing, I would just tell the gentleman, 
partial answer to his question, under the initial authority we 
gave the secretary that said he could waive every acquisition 
regulation in America to get stuff quickly to the troops, we 
got one system out that the Army gave us a 13-month fuse on and 
we got it out the door in 70 days, 10,000 of them, to support 
the troops. Moved very quickly with great agility and lots of 
folks in the system have said that will never happen again. 
That one got through the door, we are going to study the rest 
of them forever.
    So I am waiting for--if we get the second one out the door, 
then I will have some faith in that system.
    Mr. Kline. So that is a list of one.
    The Chairman. It may be a list of one. That is under the 
secretary's special authority. That is the only one that has 
ever been used on that.
    Secretary Krieg. I would note, I think the system is 
reacting--I would like to give you a broader list than just 
that authority, because I think the overall system is reacting 
faster, and we don't necessarily need that authority in order 
to make things happen.
    Mr. Kline. Mr. Secretary, with respect, that is the list I 
wanted. If it is a list of one, then----
    Secretary Krieg. I will give you that list, but can I give 
you the other list in the timeframes of----
    Mr. Kline. You can, but this is an extraordinary authority 
that we have given the secretary to get past all of this 
culture and bureaucracy and red tape, and I would like to think 
that it had some effect.
    Secretary Krieg. I will give you that list.
    Mr. Kline. All right.
    The Chairman. I think we are going to get that list.
    The gentleman from Washington, Mr. Larsen.
    And, incidentally, he has just produced a ship, a so-called 
sea fighter, that is 1,000 tons, goes 60 miles an hour. You put 
mid-range missiles on it, you can load it up with 100 times the 
firepower of a battleship with a crew of 26 people. So the 
gentleman just produced something in his district which is an 
extraordinary manifestation of moving quick, but in this case 
it was the ONR, the Office of Naval Research, that got that 
ship out the door.
    The gentleman is recognized.
    Mr. Larsen. Thank you, Mr. Chairman. I didn't personally 
produce it, but----
    The Chairman. Oh, sure you did.
    Mr. Larsen. Yeah, right. A lot of good folks in the 
district did and they are very proud of the work they have 
done, and I am looking forward to meeting ONR this Friday to 
talk about that.
    Do you need new legislative authority to fix this or did 
Goldwater-Nichols provide enough authority and we just haven't 
done it after 20 years?
    Secretary Krieg.
    Secretary Krieg. Well, we have offered some small 
authorities that we need. I would argue that you have given us 
broad authorities to make hard choices and to drive the systems 
together. We have the authority to do what we are doing. I 
believe that several of the experiments we have under way to do 
portfolio management may ultimately need some authorities, but 
I cannot today tell you what those are. But we have got a 
number of experiments under way.
    This concept decision, the investment review decision, the 
general management decision, we have to understand what that is 
and how to do that, and we would look forward to working with 
the committee if we determine we need authority.
    I do feel that you have given us tremendous authority that 
we need to exercise.
    Admiral Giambastiani. Here is the way I would answer it: In 
my experience, we keep coming up with systems to try to do 
better here. And, unfortunately, through some regulations 
inside the Department, some that are from within the committee 
and, frankly, many that are what I would call self-imposed 
within the Department, we have a tendency to create a very 
complex and cumbersome system, there is no doubt in my mind.
    I will give you an example. I am a combatant commander who 
served for three years and am now up here as the vice chairman. 
I complained bitterly about this process I now run called a 
joint capability integration and development system. And I can 
tell you as a combatant commander I hated it because it took 
too long, was too bureaucratic and was too darn painful, and 
didn't have the staff to push stuff through. Plus, if something 
costs $10 or $10 billion, it seemed like we had to treat it the 
same way.
    So up here we are trying to throw out most of this, break 
these down into joint capability portfolios which requires an 
overall approach to governance, management and execution.
    So what I would tell you is, the Deputy Secretary, Under 
Secretary Krieg and I, I guarantee you, we will be to you if we 
need legislative relief on this one. I think a lot of it is 
self-imposed, frankly, inside the Department.
    Mr. Larsen. Well, and if that is the case, we want to help 
you self-impose that. I think that is, kind of, one of the 
purposes of these hearings.
    I think another frustration reflected--and I want to use 
this to bounce off Mr. Walker--the President's budget proposal 
for the defense is $439 billion or so, and I couldn't tell you 
if that is too big or too small. I can't tell you that we could 
do the same with less or that we could do the same better with 
more. And I think that is the great frustration. We know what 
we buy, but we don't know really what we get.
    And so, Mr. Walker, you released an assessment of major 
weapons programs and high-risk programs. Can you give us some 
common themes that were just driving up program costs in some 
of these high-risk programs?
    Mr. Walker. First, we haven't recognized the ``big A''--
wants, needs, affordability and sustainability.
    Second, we haven't nailed down specifications or 
requirements upfront and stuck with them over a period of time.
    Mr. Larsen. Let me ask you about that. How do you stop--the 
yellow light is on here--how do you stop requirements from 
getting ahead of technology? And then how do you stop people 
just adding on requirements?
    The Navy is doing the new Multimission Maritime Aircraft 
(MMA) and it is being built and it is near the 737 plant in 
Benton, Washington. And I am just kind of tracking that a 
little bit, and I keep telling them, ``Don't let anybody add 
anything to this thing until it is flying and it is up in the 
air, and we are actually using it. Otherwise, it will never get 
up in the air and it will never fly.''
    Mr. Walker. Yes. I think one of the things we have to 
recognize in reality is that technology advances very rapidly. 
If you just look at information technology, we have a new 
generation every 18 months. Similar trends happen in other 
areas of technology. You have to be able to design and freeze 
that design and then you can play plug and play in the future 
if you want. The problem is, if you are always trying to build 
state of the art, if you are always trying to build a 100 
percent solution rather than an 80 percent solution, you will 
in ever get done.
    And so we need to be able to figure out what do we really 
need, what is realistically feasible within a realistic 
timeframe and given our budget. We need to lock that down, and 
we need to recognize that, look, we have got platforms, and I 
am sure the admiral and others can tell you, we have got 
platforms that have been in existence for decades and we have 
modernized those platforms after they were developed.
    Look at the B-52. It is basically been rebuilt almost.
    And so we have got an ability to deal with situations down 
the road, and we need to be able to adjust accordingly.
    I think they have plenty of authorizations, and I think, 
quite frankly, one of the things you need to think about, this 
committee needs to think about is, what type of conditions 
might you impose and require them to meet before they can move 
to different stages.
    Admiral Giambastiani. Let me give you one classic example 
of this where we can do this on time, on cost, on schedule, and 
we can do it exceptionally well. The President proposed in the 
QDR that was submitted by Secretary Rumsfeld on the 30th of 
September, 2001, to convert four Trident submarines to Nuclear 
Powered Guided Missile Submarines (SSGNs). It was put in the 
budget in the President's budget submission to the Congress in 
February of 2002. I had the pleasure of recommissioning the USS 
Ohio on the 6th of February, and the second of this class will 
be recommissioned in May, next month, followed within the next 
15 to 16 months by the other two. That is pretty impressive.
    And if you look at these selected acquisition reports on 
this, you will find that that program was on cost, on schedule, 
delivery and the rest of it. So it can be done. There are many 
other examples, just like there are those that are huge cost 
overruns or time overruns or both.
    Mr. Larsen. Thank you.
    The Chairman. I thank the gentleman.
    The gentleman from Texas, Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman.
    Playing off of that answer, General Walker has got a list 
of six, some big, some small, programs and the common theme is 
that they are all over budget and didn't work--not say they 
didn't work but they cost a whole lot more money than we 
thought.
    Are there equivalent-sized programs, and maybe the 
submarine is, where the system did work, we were able to make 
tougher choices and lock in capabilities that could afford at 
the time we had them so there are some lessons to be learned 
there, some ways that we did it right in those as opposed to 
looking at the ones that we have done wrong where there are 
some lessons to learn? Equivalent programs that are as big as 
the ones in the chart?
    Admiral Giambastiani. I will let Under Secretary Krieg 
speak on the acquisition side, but I think if you take a look, 
I have only read the summary of the GAO report, which I believe 
was released yesterday, but I have only read the overall 
summary.
    What I would tell you is, is that I noted that the SSGN, 
which is not a small program, it is about $4 billion, was not 
in this list of 52 programs they looked at. But, in my view, it 
is a very successful one, as I have said.
    Now, are there other examples of that?
    Secretary Krieg. We do have a number of them. We have 
programs that--C-17 works well. F-16 was a good--eventually, 
those were good airplanes. Their early days were tough. I mean, 
those were both failing airplanes early on, and we got together 
and made decisions and building blocks in the case 16. And the 
17, you had to put a lot of discipline into the management 
structure in order to do it.
    So we often stumble early in programs. I note that several 
of these are very early in the development, and we will see 
what they are. Several of them are very much longer.
    So, I mean, I think the programs that have good, hard 
choices made early on and people make tradeoffs and provide 
stability, the programs work fairly well.
    Admiral Giambastiani. I can actually give you a few more 
here that I think were pointed out by GAO that have been 
working programs and have mature technology and will probably 
turn our reasonably well: small diameter bomb, Aegis Ballistic 
Missile Defense System, SM-3.
    Mr. Conaway. The point of my question, Admiral, was what 
worked correctly in those systems that doesn't work here? We 
don't need to brag on the systems themselves. I just want to--
--
    Secretary Krieg. Making trades early.
    Admiral Giambastiani. Making trades early. And has been 
pointed out, if you use stabilized technology, clearly, you 
reduce the risk overall of a program. It is very important to 
do that. We have done this now, Secretary Krieg and I, with 
regard to some satellite programs.
    Frankly, we have had a lot of trouble with these when he 
came in as Acquisitions, Technology and Logistics (AT&L) and I 
came in as the vice chairman. And we had to sit down and look 
at what the art of the practical was here, what could industry 
do. And those are the types of lessons we learned from these 
types of programs and how could we stabilize the technology. 
Those are some of them.
    Secretary Krieg. Mr. Conaway, real quickly, I think at 
least two common denominators. Number one, they set realistic 
and sustainable requirements upfront. It wasn't a dream, it was 
a need and they stuck with it. Second, they use commercial 
beset practices in design, development and production to make 
sure that they had the appropriate maturity of technology 
before they moved to the next stage. I would respectfully 
suggest those are probably two common denominators. There may 
be others.
    Admiral Giambastiani. The third common denominator, I would 
tell you, is that in most of these programs there is some 
budget stability. My experience says budget stability. The 
comptroller general mentioned that earlier, sir.
    Mr. Conaway. What do you mean by budget stability?
    Admiral Giambastiani. What I am talking about is where you 
are not changing the resourcing on a program every single year. 
For example, I need----
    Mr. Conaway. Congress is doing that or you are doing that?
    Admiral Giambastiani. Where we in the Department would do 
it or potentially where you would do it or both of us would do 
it. Frankly, you need to keep some stability. My experience is, 
if you keep stability, you take risk out of the program.
    Mr. Conaway. Yesterday, we sat through a meeting on future 
combat systems and modularity subcommittee meeting. Obviously, 
the growth and the overall cost of that program, all of these 
are over what they originally budgeted. How does the Department 
control that? I mean, if you look at that one program, getting 
to a point where you just flat out can't afford it. It is a 
good program, it is one we need to have, but it crowds out 
everything else.
    One of the things I have been particularly impressed with 
is the incredible number of moving parts in DOD procurement and 
acquisition. It is staggeringly complex. How do you make sure 
that we don't wind up and say, ``Oh, my gosh, how did we get us 
into this position?'' Who is looking ten years down the road at 
the growth in all these programs and telling us when we have 
got to quit in order to be able to keep the ones that are just 
absolutely necessary?
    Secretary Krieg. On that latter point, we actually do the 
kind of analysis that the comptroller general is worried about, 
about what does the future look like and will your likely 
revenue meet the needs of the future.
    And I will tell you I did that with the director of Program 
Analysis and Evaluation, and I will tell you I can finish his 
sentences on many of the problems he lays out in the macro 
case, which is why as the capital acquisition head now, I am 
extremely concerned about driving choices earlier in the system 
so that we have a sense of what we can really do in order to 
deal with the likely revenue picture we will have out in the 
middle of the next decade.
    Mr. Conaway. The ``If everybody owns a problem, nobody owns 
it,'' who owns that problem? Besides the President and Rumsfeld 
and the chairman of the Joint Chiefs of Staff, who owns that 
issue at the DOD?
    Secretary Krieg. Well, the strategic choice is ultimately 
owned by the secretary and the deputy. I mean, these are the 
hard trades that one needs to make. We have derivative work 
that we do underneath it, but that balancing among various 
portfolios, that part of it is the senior most level. The fact 
that we have got to drive requirements, cost and schedule 
together is, I think--I believe the three of us think we own 
it.
    Mr. Conaway. Okay.
    Secretary Krieg. We have to bring our three processes 
together. Is there one bellybutton to do that? The answer is, 
no, not at the moment. But we feel collectively the need to 
drive that. Ultimately, the deputy and the secretary are 
driving that as well.
    Admiral Giambastiani. I think you have got a hold of us 
accountable here between the resources, the requirements and 
the acquisition, and if we can't bring this together to make 
recommendations to the Secretary and the Deputy, then we are 
making a mistake. That is the bottom line.
    Mr. Walker. The only thing I was going to say real quickly 
is, I want to get on the table at some point in time, not to 
talk about it at length, that no matter how capable the 
individuals are that are sitting at this table, they are only 
going to be in their position for a limited period of time.
    And one of the things that has to happen, in my view, at 
the Defense Department, and I realize that not everybody agrees 
on this, is that we need a chief management official who has a 
term appointment, statutory qualification requirements, a 
performance contract and a pro who would be there at the right 
level, with the right authorities and be there long enough to 
be able to deal with these issues.
    DOD has 14 of 25 high-risk areas, and it is not because 
they don't have good people trying to do the right thing; they 
do. But you don't have the right people there long enough. 
These are cultural transformation challenges, and even in the 
private sector they take seven-plus years from the time that 
you start to the time that you have got something that is 
sustainable beyond the individual involved. And I think it has 
got to start with that executive branch, but the Congress has a 
critically important role to play. But Congress, obviously, is 
a lot of people.
    Mr. Conaway. Yes, we change seats a lot too.
    I yield back, Mr. Chairman.
    Thank you. Appreciate those comments.
    The Chairman. I thank the gentleman.
    The gentlelady from California, Ms. Davis.
    Ms. Davis of California. Thank you, Mr. Chairman.
    And thank you all for being here.
    Could we follow that line of questioning a little bit, 
because we had some testimony earlier last week talking about 
capacity building and the importance of having managers that 
were well trained, that we were holding accountable, that 
basically rang the bell when things weren't going the way that 
they should, when they were getting out of hand, when people 
weren't communicating, all those things.
    And I wonder if you could give some assessment of that, the 
role that you think that that plays.
    I am concerned, and I know, Admiral, you mentioned that 
sometimes the Navy is not consulted necessarily, that your 
input isn't always asked for, welcome. I think there was some 
indication, perhaps, of that.
    So I am just trying to get a better sense of how we fix 
this. I really appreciate what you just said about having some 
continuity and staying power. How does the Congress fix that 
then, specifically? You say it is not legislative, but we know 
that we need to have people that are accountable, that are 
around long enough to do that.
    And the other thing I just wanted to follow up is, would 
you be willing to even assess how much of this is ideologically 
driven? Is it a very small percentage, a large percentage at 
times?
    Mr. Walker. Well, let me just talk about the people 
element, which is what you are talking about. Any organization 
is only as good as its people, and if you don't have the right 
type of leadership that is there long enough, you are not going 
to be successful over the long term.
    My view is, is DOD has, at least since I have been in my 
job, has always had very bright, capable, dedicated people. But 
one of the things that ends up happening is, turnover. I showed 
a chart on the Senate side to Armed Services to show how many 
different players are program managers, under secretaries of 
AT&L, all the different critical players just in the 
acquisition. It is no wonder we have got a problem.
    I mean, nobody is there long enough, you get this kind of 
action whenever something goes wrong. And so my view is we need 
to make sure that we have enough people, with the right skills 
and knowledge, that stay in the critical positions long enough.
    Now, obviously, that is easier to do when you are talking 
about civil servants and when you are talking about military 
officials than it is for political appointees.
    I think one of the problems that we have is if you look at 
all the high-risk challenges that DOD has, acquisition is only 
one. Contracting is another, human capital is another, 
information technology is another, financial management is 
another, I can keep going on.
    If we look at all those, we need to take a more strategic 
and integrated approach. Those deal with business 
transformation, not military transformation, business 
transformation. We need somebody at level two, call it 
principal under secretary, call it deputy secretary, call it 
whatever you want, reporting to the secretary who is working 
directly with the under, who is working directly with the 
service secretaries, who is also matrixing, obviously, with the 
military in order to try to help facilitate some of these tough 
decisions, in order to try to help deal with the structural 
reforms that are necessary across these different areas, who is 
going to be there long enough to be able to try to get the job 
done. And I am happy to provide more details.
    But then you need to make sure you have got an acquisition 
workforce with enough people, with the right skills and 
knowledge and training, and that workforce is at risk. It is a 
lot smaller than it used to be, with a lot more complex 
systems, involving a lot more money and a very large percentage 
of those people will be retiring within the next few years. And 
we are not well-positioned.
    Ms. Davis of California. Can you share with me how long has 
that kind of recommendation been out there for this reporting 
secretary, level two? Is that something that has been talked 
about for years or is it a relatively new revelation?
    Mr. Walker. It is relatively new. It is something that I 
have been talking about probably about a year or two. When 
Deputy Secretary England came in, it was an issue that was on 
the table at that point in time, and Deputy Secretary England 
requested, and I thought it was a reasonable request, for him 
to have a year in the job to determine whether and to what 
extent he thought it was humanly possible for one individual to 
be able to do all the things that need to get done. It has been 
about a year, and so I look forward to talking with Deputy 
Secretary England.
    My view is he is an extremely capable individual. I don't 
think there is a human being on the planet that can be deputy 
secretary and do all the things that have to be done, 
especially at a time of war, and be the chief management 
official and deal with all this business transformation effort, 
which is going to be a seven plus year effort. And even if he 
could do it, he wouldn't be there long enough. By definition, 
he won't be there long enough.
    Secretary Krieg. What is going on is the Congress of the 
United States asked for a report studying a report of that in 
the last National Defense Authorization Act. We have 
commissioned that study. In addition, the deputy said that he 
believed he was the chief operating officer and he wanted a 
year to think about it, so he has been doing it. We have been 
building the management infrastructure and decision-making 
infrastructure, part of what I described earlier, that has been 
under way, to try to do it, to try to put it into place.
    And so to the chief management officer, there is a decision 
process that Congress asked us to do and we are working on 
that.
    To the people, I think the people, frankly, is an issue 
that the Nation has had in front of it, civil service issues 
have had in front of it for several years. I think there have 
been two Volcker commissions that have looked at this over the 
last 15 years. As I said, it is my number-one initiative to try 
to get it framed and put in front of us.
    The workforce was several hundred thousand. It is now down 
to 135,000. I have got it now documented by what kinds of jobs 
they do, where they are, what their age peers are. Eighty 
percent of them are civil service and 60 percent of those are 
in the old retirement system. For those folks, there is a 
number of age and years, and at some point they will leave.
    And so I believe that is our--fundamentally, we talked a 
lot about portfolio management. The intellectual property 
management of the workforce is, I believe, the most important 
thing that I have got to get done in the next couple years is 
to frame that, put action plans in place and get us on the road 
to keeping the intellectual property capability that we are 
going to need for these complex systems in the future.
    Admiral Giambastiani. Ms. Davis, if I could, I don't want 
to leave you with the impression that I wasn't asked as a 
combatant commander for input. My frustration was not that I 
wasn't asked, it was I am always asked but trying to get those 
requirements and capabilities through the system was incredibly 
painful and cumbersome. And so what I am trying to do, and what 
my staff is trying to do on the joint staff, is to make this 
easier.
    We just came back from a Joint Requirements Oversight 
Council trip to all nine combatant commands for the first time 
ever. We brought Under Secretary Krieg as AT&L along with us. 
We brought the comptroller, David Patterson's boss, Ms. Jonas. 
But how do we cut this process back so that we can cut to the 
chase, if you will, and find out what the real needs are and 
get them into the system rather than taking months and 
thousands of hours? That is really what my frustration was.
    Ms. Davis of California. I appreciate your talking about 
it. Thank you.
    Admiral Giambastiani. Thank you.
    The Chairman. I thank the gentlelady.
    Gentleman from Michigan, Dr. Schwarz.
    Dr. Schwarz. In general, what I need to know is how in 
today's world you really get to where the rubber meets the road 
when it comes to requirements. Let me give you an example.
    About ten months ago or so, a very widely discussed item in 
this committee was getting the up-armored Humvees into theater, 
the 1114s and the fact that they weren't moving as rapidly as 
possible, and the armoring process in theater was really not 
satisfactory. It was better than nothing.
    I picked up the telephone and I called AM General, which is 
not in my district but just south of my district in Southbend, 
Indiana, and I have a good relationship with the UAW, the 
United Auto Workers. And so I talked to the president of that 
local. I said, ``Why is production of the 1114s not higher? Why 
are we not getting more into theater? Why aren't you getting 
more of them off the line?''
    He said, ``Congressman, I can put a second shift on 
tomorrow to increase the production, I can do it tomorrow. I 
have the workers, I have the skills there. It is not a matter 
of training anyone. They are working a shift Monday, a shift 
Tuesday, a shift Thursday, a shift Friday and that was it.
    Now, I think that message got through and that is precisely 
what happened, and production was ramped up. And I thank the 
Department of Defense and I thank the United Auto Workers for 
doing that.
    The object is how do we deal with today's priorities, the 
immediate needs where capacity exists and, well, not ignore, 
know what level of importance, what degree of importance 
conceptual needs, quite frankly, the DD(X) and the F-22 come to 
mind in that category. How do you make the decision of what has 
to be done now and what is out there in the future but really 
isn't helping the men and women in theater and how do you deal 
with that?
    Admiral Giambastiani. What I would tell you is, I can't 
speak to the up-armoring of the Humvees, I wasn't around at the 
time. But, obviously, we went to the production and, frankly, I 
understand we have gone from 500 to probably almost 12,000 of 
these now.
    Dr. Schwarz. You fixed it.
    Admiral Giambastiani. Right.
    Dr. Schwarz. You fixed it.
    Admiral Giambastiani. Yes, sir. Now, what I wanted to tell 
you is, is our Combatant Commanders get to come in with what is 
called a joint urgent operational needs statement. So if you 
take a look at General Abizaid at Central Command, for example, 
or any of the other Combatant Commanders, they can come in with 
what we call JUONS, joint urgent operational needs statement.
    In addition, each of the services has their own operational 
needs statement urgent variety, and they will come in through a 
service chain to produce those.
    Now, I am currently going through a review of how we do 
this so that we can put some discipline in the system and make 
sure that we are being as responsive as possible as a vice 
chairman, but I can't give you a firm answer on exactly how it 
is coming out. But I am essentially assessing and auditing this 
process to make sure we are doing what you are asking about.
    Dr. Schwarz. The key word is responsive, and thank you, 
Admiral, for using it. I was about to use it.
    Admiral Giambastiani. Yes, sir.
    Dr. Schwarz. Is there any way that the Congress can help 
assist and be more responsive?
    Admiral Giambastiani. What I would tell you is that there 
are a couple of things. One, support for joint urgent 
operational needs, like the IED Defeat Task Force. You have 
been incredibly supportive of this across the board. Please 
continue to do that. We will come forward with others that 
generally are being put into these war supplementals, and your 
support of those is incredibly important.
    We have to come forward and make sure that you understand 
where we need this help, but those are the mechanisms I would 
tell you right now.
    Dr. Schwarz. Thank you very much.
    With one comment, I would yield back, Mr. Chairman, and 
that is, we are on your side.
    Admiral Giambastiani. Yes, sir.
    Dr. Schwarz. This committee is on your side, and whatever 
we need to do to make it more responsive, I am certain that the 
members of the committee, and I speak for myself only, but I 
think I speak for most of the members of the committee, that we 
will do what is necessary.
    Admiral Giambastiani. Yes, sir. Thank you very much.
    Secretary Krieg. Could I try, just on your how do you 
balance among priorities. The way I think about it in 
acquisition is we have got to be able to work in three broad 
timeframes at a time. On the one hand, we have to be able to 
deliver against urgent needs now. We have to be able to deliver 
capability to Combatant Commanders who have got needs in the 
intermediate term. And at the same time, we have got to be 
developing, whether it is a hedge against changes in the future 
or dissuasion against potential competitors in the long term, 
we have got to be able to work in all three of those time zones 
at the same time.
    They are not maybe necessarily one process that does each 
of those, but the balancing among the priorities is one of the 
hardest things that we all do. But that is kind of how I look 
at it as we are beginning to think about this time and 
acquisition working together.
    Admiral Giambastiani. If I could add, Dr. Schwarz, just one 
other comment on this because this is very important, and I am 
sorry that I did not bring it up before. In this recent 
combatant commander trip that we went on with the JROC, if you 
will, and the senior civilian leadership, for the time ever 
what we tried to do was bring together all of the Combatant 
Commanders' requirements, whether they were urgent, mid-term or 
long-term, display them across all of the combatant commands, 
make sure that we had what they were requesting correctly--we 
had never done this before--and then look at the gaps in the 
capabilities, if you will, through each of our functional 
areas.
    And this turned out to be a very, very good way to show 
this to the combatant commands and their staffs to make sure 
that we were capturing their urgent needs, their mid-term and 
their longer-term capability requirements.
    Dr. Schwarz. Thank you, gentlemen.
    Thank you, Mr. Chairman.
    The Chairman. Thank the gentleman.
    The gentleman from Colorado, Mr. Udall.
    Mr. Udall. Thank you, Mr. Chairman.
    Welcome, to the panel. Thank you all for your service.
    Mr. Walker, I want to direct a question to you, if I might, 
and wanted to preface it with an old story that you hear on the 
Hill about a legislator that is asked where he stands on a 
piece of legislation. He responds, ``Some of my friends are for 
it, some of my friends are against it. I am for my friends.''
    In your situation, you have been for the taxpayers, and I 
want to really thank you for that. I know not everybody waves 
at you with all five fingers up here on the Hill, but I think--
--
    Mr. Walker. I have been pretty lucky. I haven't had a ``we 
are number one,'' yet.
    Mr. Udall. Well, thank you again for your service.
    I think what we are trying to do is get at the problem that 
we face, which is there is no limit to virtue and there is no 
limit to defending this country, and we have to settle on some 
key priorities. On page two of your report, I thought there was 
a very powerful sentence there that, ``Continuing on this path 
will gradually erode, if not suddenly damage, our economy, our 
standard of living and ultimately our national security.''
    I know you have been making that case all over the land.
    In the spirit of function follows form, I wanted to focus 
on the QDR for a minute and wondered if you would speak to your 
comments that the QDR doesn't do a very good job of separating 
needs from wants. How would you see the Department going about 
doing this? And, finally, is the QDR still an effective tool, 
an effective process, if you will?
    Mr. Walker. Well, let me speak intellectually as to 
theoretically how I think the process ought to work, and then I 
will comment briefly on the QDR.
    In theory, you would develop a national security strategy, 
which is the broadest. You would then develop a national 
military strategy. You would then make sure that your QDR is 
consistent with the first two. And that is the logical order. 
We don't necessarily do it in that order, but that is the 
logical order.
    I have read the QDR document, and there are some good 
things in the QDR document. At the same point in time, I will 
tell you that I do not believe, based on my preliminary 
reading, that tough choices were made nearly to the extent that 
they need to be made with regard to the ``big A.'' And I said 
before, I didn't say any of them were made, I just don't think 
that the tough ones have been made.
    And, quite frankly, Congress is going to have to be part of 
that process, because Congress many times asks the Department 
of Defense to do thing that it wants done but are not threat 
and risk-based and are far beyond the Department's ability to 
deliver needed capabilities within an appropriate timeframe.
    So this is not going to just be changed management within 
DOD. This is changed management on Capitol Hill. I lead that 
document, and I just wondered how much that document cost in 
terms of person hours and in terms of hard dollars.
    And I was reminded of the commercial that we have probably 
all seen on TV where you have these business people sitting 
around the table trying to cut cost and somebody asks the 
question, ``How much did all this paperwork sitting on this 
table cost?'' Millions. Well, God knows what the QDR cost. I 
question the cost-benefit of what came out. That doesn't mean 
it wasn't a decent exercise, but we are not making tough 
choices, and my question is, why are we not making tough 
choices?
    Secretary Krieg. A couple things. Both the Secretary and 
the Deputy and as the Vice said earlier, our view is to step 
back. If you think that the QDR will be an all-encompassing 
document that will go all the way from strategy task and will 
completely reorder the defense enterprise, in one document, in 
one year, which is sort of how the statute lays out its 
challenge, respectfully, that is not going to happen. It is too 
hard.
    And so I think you need to look at it, and the vice noted 
this, you have got to look at it as a continuum of decision-
making and strategic planning over time, and the role the 
document and the debate behind plays is how it begins to shift 
the emphasis, it begins to lay out the vectors of change, which 
is good because that starts to set where you want to go.
    The hard choices of what you are going to do without versus 
what you want more of is that process of strategic choice that 
I talked about earlier. And I think that that is an ongoing 
process. As the vice said, the secretary has made clear he 
believes that 2007 of the budget was just a small down payment 
in the choice that is going to have to be made; 2008 is next. 
And it is a process of change. Too hard to do it all in one 
fell swoop. I mean, it is a big set of choices.
    The document lays out some visions. The hard choices 
associated with it will continue to flow.
    Admiral Giambastiani. I would tell you, if I could, sir----
    Mr. Udall. Admiral, we have been waiting for years for a 
Navy captain to sit in the chairman's seat, so it is great to 
see Congressman Schwarz there, but----
    Dr. Schwarz [presiding]. Unfortunately, I never made 
captain. Let's make that clear, or anything close to it.
    Admiral Giambastiani. You look like you are the captain 
now, sir.
    Dr. Schwarz. Thank you, Admiral.
    Admiral Giambastiani. If I could, Mr. Chairman?
    Mr. Udall. Please.
    Admiral Giambastiani. Congressman Udall, what I would say 
to you is to follow this on. The comptroller general mentioned 
you would take the national security strategy and then come out 
with a national defense strategy, really, and a national 
military strategy. That is exactly what we did.
    And the exact same people that worked through this then 
brought it to the next logical step, which was the Quadrennial 
Defense Review. This is a strategy document; it is not an 
execution document.
    Now, what should you expect from us in the Department, 
military and civilian? Ken has mentioned this already. I would 
tell you, you should expect for us to bring forward the bulk of 
these tough choices in this QDR as we build the President's 
2008 budget and the Future Year Defense Plan from there.
    We made the down payment in 2007, but we are working very 
hard on this. I think the QDR will matter for one very, very 
important reason, and that is the same people who brought you 
this QDR are now going to be working through the execution 
piece of this as we build eight execution roadmaps and we bring 
forward the President's budget for 2008 and that Future Year 
Defense Plan.
    And there is great consistency in this team. You have heard 
a lot of discussion about having the same players in place, and 
there is significant consistency in the people who put it 
together, and now we have for the first time put into place a 
Deputy's Advisory Working Group, which the deputy secretary and 
I co-chair, comprised of all of the senior military and 
civilian under secretaries, vice chiefs of the services, et 
cetera, and these are the same people that put this QDR 
together.
    So I think there is goodness here. Frankly, you are going 
to have to grade us as we build it. Are we going to fix 
everything in a minute? No. This is a very long-term process. 
You can't fix all of the requirements that have been instituted 
in the program for the last 10 or 20 years, but my view on this 
is, is you have to stay on it every single day, and that is 
what we are doing.
    Secretary Krieg. Mr. Chairman, 20 seconds, can I just close 
out on that?
    The Chairman. Please.
    Secretary Krieg. Do not underestimate the degree of 
difficulty that will be necessary in reconciling the ``big A.'' 
What has been done for 2007 is an immaterial, immaterial down 
payment on what needs to be done, just like what Congress did 
for the last Deficit Reduction Act, it was very tough, highly 
immaterial as to what needs to be done. The line barely moved 
on the long-range imbalance.
    So we are talking about dramatic, fundamental changes and 
very tough choices.
    Mr. Udall. Which, Mr. Chairman, the Congress has to also 
make at some point.
    Thank you for your indulgence.
    Dr. Schwarz. Thank you, Mr. Udall.
    The gentleman from Georgia, Mr. Marshall.
    Mr. Marshall. Thank you. I apologize for not being here at 
the beginning of the hearing. This is a subject that I am very, 
very interested in. I had an Ag Committee markup, and that is 
what delayed me, so I may be covering ground that has already 
been covered, and for that, I apologize.
    I am also struck by your statement, which you have, Mr. 
Walker, repeated time and time again that the large and growing 
structure deficit that is facing us is going to have the 
effects that you describe, gradually eroding our economy, our 
standard of living and ultimately our national security.
    You are not suggesting--I know you are not suggesting, but 
I would like you to go ahead and say it if you haven't 
already--you are not suggesting that by injecting more 
efficiencies and cost-effectiveness in the Defense Department's 
procurement, management, et cetera, processes, that somehow 
this structural deficit that we face is going to be cured.
    Mr. Walker. No way.
    Mr. Marshall. And, in fact, if I am not mistaken, the 
percentage of the projected structural deficit that could be 
attributable to perceived inefficiencies, real inefficiencies, 
no question about it, inefficiencies in the process of 
acquisition within the Defense Department is miniscule.
    Mr. Walker. I think if we do the six things that I 
mentioned before, we can save billions of dollars a year.
    Mr. Marshall. I absolutely----
    Mr. Walker. But it is immaterial to the long-range 
imbalance.
    Mr. Marshall. And when you say it is immaterial to the 
long-range, what you are talking about really, and you could do 
the estimate, I am sure, but what you are talking about is it 
is a percent or two percent of the long-range structural 
deficit that we face.
    Mr. Walker. Right. Immaterial generally means less than 
five percent.
    Mr. Marshall. Okay. So no matter how efficient the Defense 
Department becomes, no matter how many tough choices it makes, 
et cetera, it is still going to be faced with--unless we deal 
with other matters, the structural deficit that we have 
created--it is still going to be faced with a huge problem and 
unable, in your opinion, to adequately defend ourselves.
    Mr. Walker. There is no question that you have got do 
things far beyond the Defense Department. You need to look at 
entitlement programs, you need to reengineer the base of entire 
discretionary spending, most of which is based on the 1940's, 
1950's and 1960's, conditions that existed in the United States 
and the world in the 1940's, 1950's and 1960's, and you need to 
look at tax policy, including tax preferences.
    Mr. Marshall. All right. So what goes out and what comes 
in? And you can look at what is projected to go out and what is 
projected to come in and you see a huge deficit in the future, 
which all the improvements we are talking about today won't 
even come close to touching.
    Mr. Walker. No, but we ought to make them.
    Mr. Marshall. I agree with that, but everybody needs to 
understand that the structural deficits we face in the future 
threaten our national security, simple as that.
    Now, one of the things that we are intently interested in 
on this committee is ``Buy American.'' We try to do what we can 
to maintain the infrastructure that we think ought to be 
maintained within the United States in order for us not to be 
dependent upon some foreign government for critical supplies to 
our military, to our defense establishment.
    And so from time to time, we will do things like look at 
shipbuilding capacity here within the United States and how do 
we maintain that shipbuilding capacity? And if we opened up 
competition for the development of a particular vessel, a 
particular platform and, say, let it be built in Malaysia, we 
might get that same platform for a fraction of the cost.
    Let's assume that we have concluded that as a matter of 
national security we are going to maintain within our country a 
basic infrastructure, not whether we should but we are going to 
do that. How do we go about doing that?
    Mr. Walker. Well, I think one of the things you have to do 
in this area, which is going to have to be done in other areas 
like health care and a few others, is you talked about one of 
the key words, ``basic,'' and, ``essential,'' is the second 
word.
    What is the basic and essential level of capacity that we 
need to have for national security reasons? And that may be 
different than what we have right now. It may be less than what 
we have right now. May be more than what we have right now, but 
we need to engage in that discussion and debate.
    Mr. Marshall. Well, and I am hoping to get some guidance 
from you on this subject, because as things are trending here 
in the United States, it is becoming more and more expensive 
for us to produce, maintain, supply, et cetera. And, in part, 
it is because our capacity to do that as a country is being 
diminished, just eroded away, as we outsource, move industrial 
production, et cetera, overseas.
    So we have got this national security need for essential 
services, essential platforms, those sorts of things, let's 
define it. In the long run, how do we have a cost-effective 
ability to maintain that capacity within the United States 
without making some major structural changes in the way we are 
doing world trade, in that way we are just, sort of, generally 
manufacturing things worldwide. That is the question.
    Mr. Walker. I understand. I will be happy to provide some 
more for the record. I do think that we have to recognize that 
we are in a global economy and that if you focus on basic and 
essential and making sure that we have that and recognize there 
are a lot of things that we need and in some cases want that 
are not basic and essential. And there is no reason that we 
shouldn't be able to acquire those elsewhere, especially if 
they are trusted allies. But we really haven't had that 
discussion and debate.
    Same thing like health care, for example, and I will get 
off it real quickly. We have never had a national discussion 
and debate on what are basic and essential health care services 
that every American needs, every American. We have never had 
it.
    And what is the appropriate division and responsibilities 
between the government, employers and individuals?
    [The information referred to can be found in the Appendix 
beginning on page 113.]
    Mr. Marshall. I see my time has expired, Mr. Chairman.
    Dr. Schwarz. The ranking member, Mr. Skelton.
    Mr. Skelton. Secretary Krieg, my understanding is that you 
have a 23-point plan; am I correct?
    Secretary Krieg. We are tracking 23 items that came out of 
the QDR that we are moving into either implementation and the 
signing responsibility. We are evaluating how to make a 
decision, looking at a number of the studies and trying to 
figure out whether I disagree. But, yes, we have got 23 things 
we are tracking.
    Mr. Skelton. I was led to believe that you would be 
covering those 23 points today. Was I wrong?
    Secretary Krieg. I covered a number of the points that----
    Mr. Skelton. I am sorry, I had to step out, but did you 
cover the 23 points?
    Secretary Krieg. I didn't cover all 23, but I covered what 
I thought were the big five or six.
    Mr. Skelton. All right. Name them very quickly, the five or 
six.
    Secretary Krieg. The five or six items? Portfolio choice, 
building concept decisions and the investment review between 
and among acquisition requirements and resources; time defined, 
working time as an acquisition element; supply chains, building 
a joint supply chain capability--concept decisions was the 
choice one--manpower issues, the whole acquisition workforce, 
for which there are a number of the 23. And then the business 
systems improvement, which is another one of them.
    Mr. Skelton. When will you have the 23 prepared to present 
to us?
    Secretary Krieg. Well, my written testimony lays out nine 
of them.
    Mr. Skelton. No, let me ask the question again. When will 
you have the 23 prepared to give to us?
    Secretary Krieg. Yes, sir. Of the 23, some of them we are 
still deciding whether or not to do. We are working that all 
this year. I will be glad to provide you where we are on all 23 
of them and make that available.
    Mr. Skelton. Well, your proposals for reform require 
legislation.
    Secretary Krieg. We have sent several small pieces over to 
you already, particularly on rapid acquisition and a couple of 
other ones. I think most of them that I know of today are 
inside our control. I think there are several of them that 
might--the manpower piece we will need to work with you on.
    The joint portfolios, we will at least need to describe--
whether we need legislation or not, I think we need your 
understanding of what we are doing. So whether that requires 
legislation to do it, I don't know. We clearly need you to 
understand what we are working there. But I don't foresee a 
need, Congressman, right now for specific pieces of legislation 
that I can see today.
    One point, we talked about capital budgeting or 
stabilization accounts or something like that. Obviously, that 
will be one where we will have to come together. We will bring 
you a report by statute in June or July. We will bring that up 
here.
    Mr. Skelton. When will you have your 23 points formally 
submitted to us?
    Secretary Krieg. I will take it as a question for the 
record, and I will get back to you.
    Mr. Skelton. Well, give us your best judgment today.
    Secretary Krieg. I mean, I can go back in the next couple 
of weeks and show you where we are. I mean, that is not hard to 
show you where we are.
    Admiral Giambastiani. When do you think it will be 
finalized?
    Secretary Krieg. When it will be finalized? Today, sir, I 
don't know when I will get all 23 finalized. I can't answer 
that. I can tell you where we are tomorrow when I go back and 
look at my notes.
    Mr. Skelton. Would you do that?
    Secretary Krieg. Yes, I would be glad to.
    [The information referred to can be found in the Appendix 
beginning on page 113.]
    Mr. Skelton. Thank you.
    The Chairman. Are there further questions of members of the 
committee?
    Mr. Larsen.
    Mr. Larsen. Mr. Patterson, I am sorry I wasn't here. I am 
sure when I was gone you were just rattling away. Nobody wants 
to ask you a question, but I have got one for you. I have got a 
couple for you.
    Because you are involved with the Defense Acquisition 
Performance Assessment (DAPA) study, one of the recommendations 
is to elevate the role of the Director, Defense Research and 
Engineering (DDR&E), and I wanted you to walk through why that 
is necessary, elevate to what level and what different role you 
might see for DDR&E than currently exists.
    Mr. Patterson. Actually, Congressman, that was a 
recommendation of the Center for Strategic and International 
Studies (CSIS).
    Mr. Larsen. Okay.
    Mr. Patterson. That is not ours, and I will leave that to 
Pierre Chao to get back to you to----
    Mr. Larsen. I am sorry, in our staff memo it has DAPA in 
the synopsis of the four studies. It has elevate role DDR&E 
under DAPA.
    Can someone answer that question?
    Mr. Walker. Yes. I mean, the----
    Mr. Larsen. I am sorry. I gave you an opportunity and you 
just----
    Mr. Patterson. I know, but I hate to put words in Pierre's 
mouth.
    Mr. Larsen. Okay. I will follow up with Pierre. Thanks.
    Mr. Walker. I won't try to put words in Pierre's mouth 
either, but I think the notion was that technology choice is 
one of the most important things that the senior most level of 
the Department does. And so remember that in the history of 
things, the precursor to the under secretary for acquisition 
was the director of defense, Research and Engineering.
    Mr. Larsen. Right. Yes. Like the number three.
    Mr. Walker. And so now the under secretary of defense for 
acquisition, technology and logistics is that position with the 
DDR&E being one of my direct reports.
    In their argument, they would put technology as the lead. 
John Young, the new DDR&E, clearly has a very strong role, both 
in the technology maturity determination but also, I think, in 
the what I call strategic vectors for technology. What are the 
strategic vectors? What are the capabilities we need in this 
next generation of competition, and what then are the 
implications for technology, and how do we organize our 
technology effort in order to drive capability over time?
    John has got that portfolio to work on.
    The third big piece then is, and the comptroller general 
will know this one in great detail, the gap between technology 
development and programs. The great divide has been of 
challenge in defense acquisition for a long time. That is 
clearly one of the areas that he is particularly interested in. 
So I feel he is taking the role of DDR&E and has the authority 
to take the role in the direction that CSIS intended. I don't 
know exactly what they meant in terms of elevating its role, 
but I think those were at least some of the things they were 
after. And John has got that responsibility.
    Mr. Larsen. There is a question that DAPA did talk about 
and that was the acquisition stabilization accounts. And could 
you explain what you all meant by that and what you hope to 
achieve with that?
    Mr. Patterson. Yes, sir. What I would like to point out 
very quickly first is that none of what the panel recommended 
are single-point solutions, and they all work together. But the 
stabilization account, as it was envisioned, is an account 
where a program is funded at some point. Milestone A was the 
recommendation through Initial Operation Capability (IOC). So 
the program manager knows how much money that entire program is 
going to cost.
    Within that, however, it must be a time-definite program. 
It can't be open-ended. So you have a specific amount of money 
over a specific amount of time, and the trade space then 
becomes technology within that.
    And the program manager then understands what that person 
is accountable for, and you can hold them accountable for 
maintaining cost, schedule and performance, because it is 
pretty clear.
    Mr. Larsen. To do that, I haven't read the report that, but 
for the stabilization accounts would we step outside the animal 
year-to-year annual process and say this account is going to 
have this much in it over this amount of time; is that what----
    Mr. Patterson. Correct. That was envisioned, exactly right.
    Mr. Larsen. Was management reserves discussed?
    Mr. Patterson. They were and they were also recommended.
    Mr. Larsen. Just if I may, Mr. Chairman, just one last 
question with regard to management reserves. I think, is it the 
Young panel--yes, Tom Young's panel, right--talked to us last 
year a little bit about--and Strategic Forces Subcommittee on 
satellite issues and so on, space issues--about a management 
reserve.
    My question on the incentives on that is, if you create a 
management reserve, it is technically the reserve but how do 
you stop someone from spending it because it is there? How do 
you all address that?
    Admiral Giambastiani. Well, the way we address that is, 
taking it from the top down, is that you look at all the 
successful corporations. Every corporation has a capital 
budget. They also have a management reserve in order to take 
care of those things that come up that are unexpected. You take 
care of that by setting a set of rules, and those rules apply 
to how you are going to spend the management account. And if 
you don't meet the rules, you don't get to use the account.
    Mr. Larsen. I understand that, and that sounds great from a 
corporate perspective, a private corporate perspective. One of 
the problems we have is in a lot of government those rules 
never actually migrate over into the public sector as well as 
they should.
    Admiral Giambastiani. We don't generally codify the rules. 
That is the problem.
    Mr. Walker. Well, even if they are codified doesn't 
necessarily mean they are followed. I think what is important 
is I personally believe that some type of reserve funding is 
appropriate to provide funding stability provided that certain 
conditions are met that deal with reform of the acquisition 
process.
    And in addition, you would have to make sure that you had 
appropriate transparency over these funds, separate accounting 
for these funds, periodic reporting, appropriate controls and 
if people violate it, there need to be consequences.
    Mr. Larsen. And speaking to that, the thinking behind the 
panel that you would have a--because, quite frankly, we are not 
so naive as to believe that this will be smooth sailing through 
the appropriators.
    But if we are required to come over and breathe twice a 
year on how they are program is going, then there is, at least 
the oversight that might not be there otherwise in any format. 
But if the program manager is required to come and say, ``This 
is what we are doing, this is how it is going,'' and we make 
that person accountable with a responsibility and authority----
    Dr. Schwarz. Mr. Marshall, I think you have one more 
question. Is that true? Please go ahead.
    Mr. Marshall. I would be very interested in seeing what 
you--if you could share with me whatever you supplement the 
record with with regard to this ``Buy American'' business that 
we were talking about.
    And back to the structural deficit problem that we face. It 
is not going to get cured by all the things that we are talking 
about today, but it is going to affect our national security 
because defense spending is discretionary, basically.
    Have you done anything that you could share with me, have 
you all written something on this subject? I mean, reams of 
things on the general subject, but specifically is it going to 
affect defense? No.
    Secretary Krieg. I will be happy to provide you something.
    [The information referred to can be found in the Appendix 
beginning on page 113.]
    Mr. Marshall. Have you also done--and this is almost a 
complete digression, I am getting back into the weeds--have you 
done anything looking at the trend that seems to be growing 
here, and that is preference for leasing as a financing 
technique in order to get a platform now or get something?
    Secretary Krieg. Well, I don't know that there is a 
preference leasing. I would ask the under secretary or others 
to comment. I will say this, the way you keep score matters.
    Mr. Marshall. And how you handle that budget-wise.
    Secretary Krieg. That is correct. And, therefore, we have 
done work in the past where there have been proposal to 
structure transactions as leases in order to get the 
capabilities quicker because of the way the budget rules work. 
But in some cases, they didn't meet the substance-over-form 
test for meeting operating leases. They were really capital 
leases, and they really should have been treated that way.
    There are clearly circumstances in which these versus 
purchase makes sense. At the same point in time, I hope that we 
can ultimately get to where our rules, including our budget 
scoring rules or such where we are making sound economic 
decisions based upon what is in the best economic interest of 
the government and the taxpayers rather than just what gets the 
best scoring rules. Because sometimes you can end up making 
uneconomic decisions by entering into lease transactions that 
end up causing you to pay less today but ultimately you are 
going to paying a lot more.
    Mr. Marshall. And I agree that leasing is a good vehicle in 
the right circumstances. One of the way that local 
governments--I was a mayor--imposed fiscal discipline upon 
themselves is to pay for things in cash. So you force yourself 
each budget year to make hard choices.
    One of the things you have talked about trying to create a 
regime in which we make hard choices within the Defense 
Department, choices that you don't think we are making right 
now with much aggressiveness. And what we wouldn't want to 
see--and I guess I need a financing vehicle that enables not to 
make those hard choices. Is that essentially what you are 
getting at?
    Secretary Krieg. Right, and I agree with that. And the 
other thing you have to keep in mind is, as you know, many 
states, for example, and you were a mayor, have balanced budget 
requirements, constitutional requirements of 49 out of 50. But 
it all depends on how you define balanced budget. California 
defines it as balancing cash flows; therefore, you borrow the 
difference. Well, on that basis, we have a balanced budget, but 
it is not a balanced budget.
    Mr. Marshall. Thank you, Mr. Chairman.
    Thank you.
    Dr. Schwarz. Chairman Hunter.
    The Chairman. Thank you, and I want to thank the gentleman 
from Michigan for doing such a great job in chairing this 
hearing.
    Let me go over a couple things real quickly.
    Mr. Walker, you talked about touch choices, but, actually, 
if you look at some of the things that has been done by DOD 
recently, they have made some tough choices in terms of just 
absolutely canceling systems. The Army canceled its foremost 
ground system, which was the Crusader artillery system. Then 
they canceled their bright and shining new helicopter system, 
Comanche, I mean, two major, major cancellations.
    And if you look at the array of aircraft in the Air Force, 
bombers are anchored by a system, the last one of which was 
built in, I think, June of 1962, B-52. We have got, count them, 
21 B-2 bombers, a handful of B-1s, a large number of which were 
scheduled for retirements, and we have got major retirements, 
which to some degree are troubling to me and I think other 
members of the committee in our deep strike portfolio today. We 
have got ancient tankers.
    I mean, 20 years ago you could look at a list of 10 or so 
new aircraft being produced. Today, you have just a handful, 
and F-22 has taken marked decreases in numbers, largely as a 
product of sticker shock and budgetary constraints. Those 
decreases in numbers, in turn, lead to higher per unit costs.
    So I have a little different perspective than you do in 
that I think perhaps our defense apparatus is not as robust as 
it needs to be and that we are going to have to spend more 
money on defense. We are now down to about 3.9 percent of gross 
domestic product (GDP). Kennedy, President Kennedy was at 9 
percent of GDP spent on defense; President Reagan, 6 percent. 
We are down to about 3.9 and my question is whether in this 
dangerous new century that we thought was going to be a fairly 
easy century we can get along on that percentage of GDP.
    Now, my second issue goes to the procurement personnel 
system, the acquisition system. During the 1990's, we made a 
study on this thing, and we had 300,000 professional shoppers. 
Now, those are not people who were engineers, they were not 
people designed the systems. They were people who did paperwork 
on buying and selling systems.
    When we calculated how much each of the 300,000 shoppers 
was paid, on average, that is two United States Marine Corps as 
professional shoppers. And we brought in the services who had 
paltry procurement budgets in the 1990's. The Army, for 
example, spent on the acquisition personnel, and, again, it is 
not the designers, not the engineers, but people did paperwork. 
If they bought, and I recall what the ratio was, if they bought 
a $10 million helicopter, they paid the guy who did the 
paperwork to buy it $3 million.
    Now, if you translated that to 30 percent of the money that 
was then being expended by the Army on procurement, if you 
translated that into new procurement by eliminating the 
overhead of the acquisition Army, literally, you could have 
bought a heck of a lot more. And if you compared that to 
private industry, I mean, if you told General Motors or Wal-
Mart or anybody else that the guys that went down and bought 
their stuff, who did the paperwork to buy their stuff, were 
going to get a third of the money, well, their jaws would drop.
    And so I think the problem hasn't been that we have got too 
few people in the acquisition system. So we set about asking 
you guys to reduce it. Now, arguably, you reduced the wrong 
folks, but I was reminded by industry that for every one of 
that Army of 300,000 professional shoppers that you maintained, 
there was a counterpart Army of 300,000 interactors that 
industry maintained to interact with and do the briefings and 
do the analyses and respond to the reports and requests of the 
300,000 shoppers in DOD.
    So in reality, the American taxpayer was carrying an army 
of 600,000 people shuffling papers for an extremely small 
procurement budget in the 1990's.
    Now, we have knocked that down fairly substantially, and I 
think we have to take credit for a lot of the blame in that we 
have a lot of oversight requirements that we have legislated 
that mean you can't operate as efficiently as a Wal-Mart or a 
General Motors or a domestic company.
    But I think the problem isn't that we have got too many 
folks or we have got too few folks in the acquisition system. 
If you look at the amounts of the lead times that it took for 
us to develop systems in the 1990's, that army of shoppers, the 
300,000 in the government and the 300,000 in industry did not 
leave to shorter fuses on these weapons systems. In fact, I 
think, arguably, they led to longer lead times and they led to 
a lack of agility.
    So just two issues there. Do you think that we can live on 
under four percent of GDP being spent on defense in this new 
dangerous century? And, second, do you really think we need to 
have more people in the acquisition system?
    Secretary Krieg. Well, let me clarify my position, Mr. 
Chairman. I think it is very important.
    Number one, only elected officials can make the decision on 
what percentage of GDP we should be spending on defense. 
However, I would respectfully suggest that those decisions 
should be based on a comprehensive threat and risk-based 
approach on all three dimensions, today, intermediate term, 
long term.
    And whatever you decide that percentage is going to be, you 
need to figure out how you are going to pay for it, because 
right now we already have a large and growing structural 
deficit. And so if you want to spend more than 3.9 percent of 
GDP, then how are you going to pay for it?
    Second, I agree with you that in some cases tough decisions 
were made in the past and are still being made. I would 
respectfully suggest that the connection with crusader and 
Comanche they were made way too late. We wasted billions of 
dollars. So the question is, how can we make them earlier. We 
use strategic choices, how can we make these decisions earlier?
    Third, and also related to that, yes, some choices have 
been made but I would respectfully suggest that Tactical Air 
(TACAIR) may not have made those choices yet. The numbers are a 
default. You plug the number, how many you can buy with the 
money.
    And, third, on the workforce, I am not saying you need more 
people, necessarily. And it is clearly understandable, in part, 
why the workforce is smaller, because we had acquisition 
reform, and that took out a lot of paperwork, and taking out a 
lot of paperwork is really good. Okay? Not just for the 
government but also for the private sector.
    What I am saying is, is we need to figure out how many we 
need, what kind of skills and knowledge they need to have. It 
could be less than this, but what kind of skills and knowledge 
do they need? And we need to be aware that a very high 
percentage of our current workforce is scheduled to retire 
within the next few years. And that is both a challenge and 
potentially an opportunity too.
    The Chairman. Okay. Thank you.
    And, Mr. Chairman, could I be allowed to have--I hate to 
have to beg for more time, but could I be allowed to have 
another question here.
    Dr. Schwarz. Mr. Chairman, I think you can have as many 
questions as you want.
    The Chairman. You are very kind.
    The Challenge Program, we developed this idea of the 
Challenge Program a couple of years ago that made a lot of the 
questions that Admiral Giambastiani and Secretary Krieg talked 
about. And that is that we need to get the most efficiency that 
we can out of the system, and in this age of rapidly developing 
technology, we are lured by--when we are developing a base 
system that has taken a number of years to develop, we see 
something that gives us an efficiency component that gets you 
from A to B quicker and we want to now retrofit or put that in 
the system.
    The one problem we have is having smart people that have 
got this judgment, this capability of weighing the pros and 
cons of disrupting the system, putting something new in, what 
is it going to do to the base program.
    We put the challenge system in because we figured, having 
little insight into this thing, that the guys that really know 
if you can get there with a quicker with a system, if you have 
got a new technology that leapfrogs something, if you have new 
efficiencies available. The guys that really know that, 
generally, are the competitors. Our entire system is based on 
competition. If the people of the 52nd District want a better 
congressman, they can go out and elect one, right? They get a 
challenger out there and he ends up beating the incumbent.
    So we put together this challenge system that said, 
basically, if you have a company that comes along and says, ``I 
can make a better hubcap for the F-22 and more combat effective 
and cheaper and you can integrate it easily, I want to have the 
opportunity to challenge the incumbent on that. The idea that 
if it made sense, first, you would have DOD could dismiss them 
if these were hair-brained ideas and didn't have some substance 
to them, you could dismiss them out of hand, so you are under 
no obligation to give a review to assist them.
    But if it made sense, if it made a prima facie case, you 
would have a Blue Ribbon panel that would take a look at this 
component and if was something that looked like proven 
technology, maybe a product that actually existed right now, 
that you could save money and you could produce more combat 
effectiveness to take it, and this Blue Ribbon panel approved 
it, you would then have an array of options as DOD and you 
could say, Okay, incumbent you are out of there. Or the next 
phase of this program is starting in March and we are going to 
insert this new system in in March, or maybe we won't do 
anything because the integration of the system is too cost 
prohibitive.
    My point is that, especially in this area, in this time 
when you have fewer and fewer contractors, the challenge system 
was designed to get the meritorious cost-effective guys with a 
good idea upfront where they could challenge, and that would 
put pressure on the incumbents to not grow their programs, not 
feel like they captured their position and therefore could not 
be dislodged and therefore they could let cost growth occur and 
they could rationalize it to the services, and the services 
would be captive to it.
    Now, we passed the Challenge Program. DOD minimized the 
Challenge Program. They thought that Congress wanted to get a 
little pork out of them and so they got these little small 
programs where they toss a couple of crumbs of the table, which 
was not the intent. We didn't want a darn thing out of this for 
our constituents.
    What we wanted was the ability of a company to come in, 
whether it is big or small and say, ``I can do that more cost-
effectively. There is a new technology here. I can lower your 
price, DOD and have this Blue Ribbon capacity at DOD level to 
evaluate the challenge.'' And if it proved meritorious to 
dislodge the incumbent, put in the new system and move ahead.
    Now, Admiral, what do you think about that? Do you think 
something? Because we have got the law in place to do that, and 
you folks have a Challenge Program. But it scared the heck out 
of the bigger guys and industry, and they managed to minimize 
this thing when it went into implementation.
    What do you think?
    Admiral Giambastiani. If I could, Chairman, I am going to 
ask, if you don't mind, ask Secretary Krieg, to take the bulk 
of this answer, because to be frank with you, I have not read 
all of the legislation on the Challenge Program, but I would 
like to go back to my ten years of experience dealing with what 
you are driving at, which is competition of ideas and a 
competition of capability and efficiency. I think you are 
driving in the right area.
    Now, I am going to ask Secretary Krieg to talk about this, 
because in the eight months I haven't focused on this specific 
problem.
    The Chairman. Okay. Great.
    Secretary.
    Secretary Krieg. I actually went and looked at what we did 
with it and, respectfully, it actually is creating some 
interested opportunities. But leave that aside, I thought some 
about this notion of creating competition in an outsider 
reviewer of it. I have only thought something about it, but I 
am having a hard time conceptualizing how to implement it 
without--I am having a hard time conceptualizing how to 
implement it.
    I understand your point and your desire, but----
    The Chairman. Well, we actually laid this thing out fairly 
pragmatically. You would have a Blue Ribbon panel, let's say 
you have got some smart guys, technically, and they have the 
availability of the National Laboratories and all of your 
analytical tools that are available for DOD: ranges, testing 
capability, et cetera.
    So you have a weapons system, and either the weapon system 
itself or a component of that system, again, I use even 
something small, not de minimus but something small that you 
have a competitor, an entity in the aerospace industry that 
says, ``You guys are paying this contractor, prime contractor 
or sub, $50 million for this program. We have new technology. 
If you will let us come and explain it to you, we are going to 
show you how you can get it for $10 million, even though you 
are two years into this program. And we guarantee you we think 
we can plug this in with a minimum of disruption to the program 
and with easy integration, and we want a chance to make our 
case.''
    You take a look at it preliminarily, and if you don't like 
it, you reject it out of hand. You say, ``This is wild and 
crazy. We are not going to allow it.''
    When we did the Challenge Program initially, I was told 
there an Arizona aerospace firm that said, ``We want to 
challenge on the F-22.'' And everybody went nuts and said, 
``Well, you can't do that, that is too big.''
    But my point is, you make the challenge, okay, for this 
particular component and if it looks like you make a prime 
facie case, you then review it, you then have your Blue Ribbon 
panel look at this thing. If they say, ``There is substance to 
this and we can cut costs 50 percent or we can have better 
warfighting capability or a combination thereof, better 
effectiveness and better cost-effectiveness,'' you then have 
your array of options that you can utilize.
    You can say, ``We are not going to do anything because we 
are too far down the line in this program.'' You can say, ``We 
are going into a second phase in March, and so we are going to 
put you in in March,'' or you could say, ``Incumbent, you are 
out of there because it makes sense for us to terminate your 
contract. This thing is so good and so effective that we will 
pay termination costs, which we have a right to do under most 
contracts, and we will pay termination costs. And besides that, 
we think the incumbent has gotten kind of fat and lazy on us 
here.''
    And so if you have a--you know, this is what is going to 
make board of directors sit around saying, ``You know, guys, we 
let these costs go up an extra ten percent, I have heard 
rumblings in the industry, we are going to get challenged. And 
if we get challenged, we could lose this little gravy train 
here, and I would recommend you engineers go back and sharpen 
your pencils because we haven't captured this program. DOD is 
not our hostage on this thing anymore, and we better darn well 
get these costs down or we are going to be out of here.''
    Now, that is what makes people move all the time in the 
private sector, but especially with these big primes now who 
have their partners and in some cases their subsidiaries doing 
the components. There is not much incentive for these guys to 
give you folks a sharper pencil.
    Secretary Krieg. How about this, I will offer you a deal. I 
will get my staff to take a hard look at it if you will accept 
a willingness to look at the recent numbers on the Acquisition 
Workforce and move from 300,000 to the 135,000 we have today.
    I will work on the one if I can bring the other one to you, 
how does that sound?
    The Chairman. We are glad we could bring that number down a 
little bit. Yes, we will look at both of them. Let's do it.
    And thank you, Mr. Chairman. You have been very kind.
    Dr. Schwarz. Gentleman from Mississippi have any questions?
    Mr. Taylor. I want to thank all of you, gentlemen. And I 
apologize for my absence. Your time is very valuable, and I am 
sorry I wasn't here for every minute of it.
    Mr. Walker, how long have you been on your job?
    Mr. Walker. It will be 7.5 years on April 26. My wife is 
counting.
    Mr. Taylor. Okay. And the reason I ask is, and it really is 
the form of a question, but my observation would be that five 
years ago, right now, our nation was running a small annual 
operating surplus. Bush's budget comes along and is voted on in 
May of 2001, calls for substantial increases in spending, 
substantial decreases in revenue, and I really don't--and, 
again, I am asking this in the form of a question because my 
memory is far from perfect, but I don't recall a single 
administration official, appointed or elected or career, 
saying, ``This isn't going to work, that we are going to run up 
big deficits.''
    We are now $3 trillion deeper in debt, and so I am asking 
this in the form of a question: Did you see this coming?
    Mr. Walker. I testified in February of 2001 as to several 
things. Number one, the current surpluses that we were 
experiencing at the time were temporary. We knew that we would 
enter a period of large and growing structural deficits due to 
known demographic trends and rising health care costs.
    I also testified that the ten-year projected surpluses were 
just that, projected, that they may or may not ever really 
happen.
    And I also testified as to an approach that Congress might 
consider taking based on modern portfolio theory as to how it 
might make decisions with regard to spending increases and tax 
cuts and debt reduction that might be more prudent and take a 
more balanced approach, given the fact that we knew that the 
surpluses were temporary and that the ten-year numbers were 
projected and may disappear.
    Unfortunately, some of the choices that were made were 
directly contrary to prudent risk, including Medicare Part B.
    Mr. Taylor. For the record, can I get a copy of your 
statement from then?
    Mr. Walker. Be happy to.
    Mr. Taylor. Because I was really--I remember any number of 
people coming before the committee who were asking for 
increases. I remember at the time we were going through, we had 
just grounded about 950 Dewey helicopters for maintenance 
problems. And I remember the day of one of those votes asking 
the Army aviation guys, ``What is more important, fixing the 
helicopters or tax breaks?'' of course they weren't real 
comfortable answering that.
    But if there was someone on the record saying, ``This isn't 
going to work,'' I would like to see that, because I didn't 
hear much of that. I was looking for people to be saying things 
like that.
    Mr. Walker. Well, I will provide it. The other thing is, 
let me say, Mr. Taylor, express my condolences for the loss of 
your property. I have been on your property in southern 
Mississippi.
    Mr. Taylor. Pick up the beer cans next time. Just teasing. 
I am sure that wasn't yours.
    Mr. Walker. The Transportation Security Administration 
(TSA) wouldn't let me take them on the plane, probably.
    Mr. Taylor. Okay. Thank you. But I would welcome that, and 
since your memory strikes me as being pretty sharp, if you can 
think of anyone else who was sounding that alarm, because one 
of the people who I was disappointed in is I don't feel like 
Chairman Greenspan spoke up very well. I thought he was pretty 
wishy-washy on that. He has come back later and said it didn't 
work, but I don't recall him saying it before. But if you know 
anything contrary to that, I would like to see it as well.
    Thank all you gentlemen for sticking around.
    Dr. Schwarz. Gentlemen, thank you.
    Comptroller General Walker, Secretary Krieg, Admiral 
Giambastiani and Secretary Patterson, thank you very much for 
being here.
    We stand adjourned.
    [Whereupon, at 12:40 p.m., the committee was adjourned.]


      
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                            A P P E N D I X

                             April 5, 2006

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              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                             April 5, 2006

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             QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD

                             April 5, 2006

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                   QUESTIONS SUBMITTED BY MR. SKELTON

    Mr. Skelton. Secretary Krieg, my understanding is that you have a 
23-point plan. When will you have your 23 points formally submitted to 
us?
    Secretary Krieg. [The information was not available at the time of 
printing.]
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. CALVERT
    Mr. Calvert. I am pleased with the success of the Army's efforts to 
rapidly develop and field its Common Remotely Operated Weapons Station 
(CROWS). The testimonials from Soldiers and their leadership on the 
lives saved by CROWS demonstrate exactly the type of program that 
urgent needs acquisition authority granted by was designed to support.
    However, I am concerned that significant funding is being spent on 
a foreign producer of Remote Weapon Stations in order to bring the 
foreign product up to the specifications that are already being 
procured in CROWS. This appears to be counter to the effort the Army 
undertook to develop a ``Common'' system. It also appears that this 
``non-competitive'' product improvement of the Stryker RWS is an 
inefficient use of scarce Army resources.
    Please provide this committee an understanding of why the Army is 
providing significant government funding to a foreign company (through 
a contract with General Dynamics Land Systems) to develop its 
stabilization and improve its sensor and display capabilities for the 
Stryker RWS when the Army already has developed and fielded a U.S. 
built and privately developed ``Common'' system known as CROWS.
    Secretary Krieg and Mr. Walker. [The information was not available 
at the time of printing.]
                                 ______
                                 
                  QUESTIONS SUBMITTED BY MR. MARSHALL
    Mr. Marshall. How do we have a cost-effective ability to maintain 
that capacity within the United States without making some major 
structural changes in the way we are doing world trade, in that way we 
are just, sort of, generally manufacturing things worldwide. That is 
the question.
    Mr. Walker. [The information was not available at the time of 
printing.]
    Mr. Marshall. I would be very interested in seeing what you--if you 
could share with me whatever you supplement the record with with regard 
to this ``Buy American'' business that we were talking about.
    And back to the structural deficit problem that we face. It is not 
going to get cured by all the things that we are talking about today, 
but it is going to affect our national security because defense 
spending is discretionary, basically.
    Have you done anything that you could share with me, have you all 
written something on this subject? I mean, reams of things on the 
general subject, but specifically is it going to affect defense?
    Secretary Krieg. [The information was not available at the time of 
printing.]
                                 ______
                                 
                   QUESTIONS SUBMITTED BY DR. SNYDER
    Dr. Snyder. Mr. Walker, in your written statement, I am going to 
read a couple of paragraphs that I think really illustrate, and this is 
quoting you, Mr. Walker: ``As I have testified previously, our nation 
is on an imprudent and unsustainable fiscal path. Budget simulations by 
GAO, the Congressional Budget Office and others show that over a long 
term we face and large and growing structural deficit to primarily the 
known demographic trends, rising health care costs and lower Federal 
revenues as a percentage of the economy. Continuing on this path will 
gradually erode, if not suddenly damage, our economy, our standard of 
living and ultimately our national security.''
    And then just before that, you refer specifically to DOD and you 
say, ``In the past five years, DOD has doubled its planned investment 
in weapons systems, but this huge increase has not been accompanied by 
more stability, better outcomes or more buying power for the 
acquisition dollar. Rather than showing appreciable improvements, 
programs are experiencing recurring problems with cost overruns, missed 
deadlines and performance shortfalls.''
    I think those are two very powerful statements. One is in a narrow 
category of what you all are focusing on and trying to do your best job 
of improving, and you all have pointed out that it has occurred over 
decades.
    And then, Mr. Walker, you put it in the context of we are a nation 
that does not have unlimited resources, and our national security also 
depends on our economic strength and our fiscal strength. So we have 
some real challenges.
    Mr. Walker, in your written statements, you have some little charts 
in here. You have one for DOD, I think you have one for, let's see, one 
for the Secretary of Defense, one for military services and joint 
developers. You don't have one for Congress in terms of actions that we 
might do, and I am one that feels like the Congress has just dropped 
the ball in terms of providing oversight in a whole lot of different 
areas. But would you create for us a chart for Congress? What should we 
be doing?
    Mr. Walker. [The information was not available at the time of 
printing.]
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. ANDREWS
    Mr. Andrews. Mr. Krieg, although today's hearing focuses on major 
defense acquisition reforms, I would like to ask you about ongoing 
reforms to the Prime Vendor program. I commend the Department for 
taking a hard look at the abuses in the Prime Vendor program. But I am 
concerned that you may not be drawing a needed line between the few 
abusers and the vast majority of vendors who play by the rules. Most 
importantly, I worry that your investigation is gravely slowing down 
the delivery of crucial equipment to warfighters on the front lines.
    Please answer the following questions: 1) How many Prime Vendors 
are there?; 2) How many require further investigation?; 3) What is the 
Department's policy toward the rest of the Prime Vendors who have been 
cleared of any wrongdoing? 4) What are you doing to expedite the 
ordering process for the Prime Vendors so that the military receives 
their orders in a timely manner?; and 5) What is being done to create a 
data base of approved Prime Vendor products and pricing within DLA so 
that Prime Vendor Contractors can get quicker approvals on their 
purchase requests.
    Secretary Krieg. [The information was not available at the time of 
printing.]
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MRS. DRAKE
    Mrs. Drake. Under Secretary Krieg, over the last year, I have heard 
various witnesses and subject matter experts talk about the increased 
role of our combatant commands with regards to acquisition policy. It 
seems to me that those closer to the warfighter and those close to the 
front lines would be better situated to determine military need in 
terms of capability. In the Defense Science Board's recent summer study 
on transformation, an increased role for Joint Forces Command (JFCOM) 
in terms of concept development and experimentation was recommended. 
Building upon this recommendation, I would like to inquire as to the 
Department's views not only on the feasibility of an increased 
acquisition role for the combatant commands in general, but an 
increased acquisition role for JFCOM in specific.
    Secretary Krieg. [The information was not available at the time of 
printing.]
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. MILLER
    Mr. Miller. Defense News recently reported that a new type of 
program review, known as a concept decision review, ``was borne during 
deliberations over the Quadrennial Defense Review.'' It goes on to say 
that ``OSD says it will help the department's leadership to `make 
stronger corporate investment decisions by coordinating the DOD 
requirements, acquisition and programming at the point of investment.' 
''
    My understanding is that the first review of this type looked at 
the CSAR-X program and on March 23 mandated no major changes to the 
services acquisition strategy. Additionally, the CSAR-X program is 
supposedly still on schedule for an August Defense Acquisition Board 
(DAB).
    Is my above understanding correct and is it true that this program 
was developed during the QDR planning process?
    What value added does the ``concept decision review'' bring to the 
acquisition and requirements development process and how does its 
personnel makeup (Under Secretary Krieg, J-8, etc.) differ from a DAB?
    Secretary Krieg. [The information was not available at the time of 
printing.]
                                 ______
                                 
                    QUESTIONS SUBMITTED BY MR. KLINE
    Mr. Kline. If I could just get from maybe it is from you, Mr. 
Secretary, a list of those things that the Department has acquired 
specifically under this authority granted in the statute.
    Secretary Krieg. [The information was not available at the time of 
printing.]

                                  
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