[Senate Hearing 109-469]
[From the U.S. Government Publishing Office]
S. Hrg. 109-469
NEEDED IMPROVEMENTS TO DEFENSE
ACQUISITION PROCESSES AND ORGANIZATIONS
=======================================================================
HEARING
before the
COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 27, 2005
__________
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COMMITTEE ON ARMED SERVICES
JOHN WARNER, Virginia, Chairman
JOHN McCAIN, Arizona CARL LEVIN, Michigan
JAMES M. INHOFE, Oklahoma EDWARD M. KENNEDY, Massachusetts
PAT ROBERTS, Kansas ROBERT C. BYRD, West Virginia
JEFF SESSIONS, Alabama JOSEPH I. LIEBERMAN, Connecticut
SUSAN M. COLLINS, Maine JACK REED, Rhode Island
JOHN ENSIGN, Nevada DANIEL K. AKAKA, Hawaii
JAMES M. TALENT, Missouri BILL NELSON, Florida
SAXBY CHAMBLISS, Georgia E. BENJAMIN NELSON, Nebraska
LINDSEY O. GRAHAM, South Carolina MARK DAYTON, Minnesota
ELIZABETH DOLE, North Carolina EVAN BAYH, Indiana
JOHN CORNYN, Texas HILLARY RODHAM CLINTON, New York
JOHN THUNE, South Dakota
Charles S. Abell, Staff Director
Richard D. DeBobes, Democratic Staff Director
(ii)
?
C O N T E N T S
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CHRONOLOGICAL LIST OF WITNESSES
Needed Improvements to Defense Acquisition Processes and Organizations
september 27, 2005
Page
England, Hon. Gordon R., Acting Deputy Secretary of Defense...... 7
Krieg, Hon. Kenneth J., Under Secretary of Defense for
Acquisition, Technology, and Logistics......................... 10
Giambastiani, ADM Edmund P., Jr., USN, Vice Chairman, Joint
Chiefs of Staff................................................ 17
Kadish, Lt. Gen. Ronald T., USAF [Retired], Chairman, Defense
Acquisition Performance Assessment Federal Advisory Committee.. 17
(iii)
NEEDED IMPROVEMENTS TO DEFENSE
ACQUISITION PROCESSES AND ORGANIZATIONS
----------
TUESDAY, SEPTEMBER 27, 2005
U.S. Senate,
Committee on Armed Services,
Washington, DC.
The committee met, pursuant to notice, at 9:30 a.m. in room
SR-325, The Caucus Room, Russell Senate Office Building,
Senator John Warner (chairman) presiding.
Committee members present: Senators Warner, McCain, Inhofe,
Sessions, Collins, Ensign, Talent, Chambliss, Thune, Levin,
Akaka, Dayton, and Clinton.
Committee staff member present: Charles S. Abell, staff
director.
Majority staff members present: William C. Greenwalt,
professional staff member; Ambrose R. Hock, professional staff
member; Gregory T. Kiley, professional staff member; Thomas L.
MacKenzie, professional staff member; Elaine A. McCusker,
professional staff member; Lucian L. Niemeyer, professional
staff member; Robert M. Soofer, professional staff member;
Scott W. Stucky, general counsel; Diana G. Tabler, professional
staff member; and Richard F. Walsh, counsel.
Minority staff members present: Gerald J. Leeling, minority
counsel; and Peter K. Levine, minority counsel.
Staff assistants present: Micah H. Harris, Jessica L.
Kingston, Benjamin L. Rubin, Catherine E. Sendak, Jill
Simodejka, and Pendred K. Wilson.
Committee members' assistants present: John A. Bonsell,
assistant to Senator Inhofe; Arch Galloway II, assistant to
Senator Sessions; Dirk Maurer and Mackenzie M. Eaglen,
assistants to Senator Collins; D'Arcy Grisier, assistant to
Senator Ensign; Clyde A. Taylor IV, assistant to Senator
Chambliss; Frederick M. Downey, assistant to Senator Lieberman;
Darcie Tokioka, assistant to Senator Akaka; William K. Sutey,
assistant to Senator Bill Nelson; Kimberly Jackson, assistant
to Senator Dayton; and Andrew Shapiro, assistant to Senator
Clinton.
OPENING STATEMENT OF SENATOR JOHN WARNER, CHAIRMAN
Chairman Warner. Good morning, everyone. The Senate Armed
Services Committee meets this morning in its capacity as an
oversight committee on one of the most important subjects that
we have had before us in some time. I first want to thank my
long-time friend and colleague, John McCain, for urging that we
move forward in these hearings. He is chairman of the
subcommittee that has jurisdiction of a significant part of the
responsibility for overall procurement. Senator McCain, we are
going to keep this subject at the full committee level, but
from time to time, Senator McCain will take the lead. Senator
Ensign likewise in his subcommittee has a portion of the
responsibility and from time to time he will be active in
operating these hearings.
We ask all members to give a certain priority to these
hearings and contribute their own ideas as to the witness panel
and the direction which we should proceed.
We are pleased this morning to have this distinguished
panel before us. Actually, the hearing is a follow-up on
Secretary England's nomination hearing, where many members of
our committee expressed concerns over how well the acquisition
system is working. The unfortunate events surrounding several
Air Force programs, including the tanker most specifically,
raised questions about the integrity of the acquisition
process, while reports of continued cost overruns on major
weapons systems called into question the Department's ability
to effectively manage many of these programs.
Twenty years ago, the President's blue ribbon commission on
defense management, commonly known as the Packard Commission--
and I always pay tribute to that fine man; I was privileged to
serve with him in the Department of Defense (DOD) when I was in
the Navy secretariat--that ushered in an era of acquisition
reform with its finding that the DOD weapons systems take too
long and cost too much to produce. The Packard Commission
attributed this problem in large part to unrealistic budgeting,
chronic instability in funding, overstated requirements, a
dilution of accountability for results, duplication of
programs, and inadequate testing.
Two decades later, major weapons systems programs still
cost too much and still take too long to field. It appears
that, despite 20 years of acquisition reform, many of the same
acquisition problems identified by David Packard still exist
today. This is an issue of great concern to the committee and
to Congress as a whole.
It also appears that many of the easiest reforms have been
implemented. You may now be left with the most difficult
management and organizational issues that will require
significant management attention and perseverance to address
and correct them.
Budgetary reform falls into this category. How DOD budgets
for programs has been the subject of concern for decades, but
DOD acquisition programs still appear hindered by underfunding,
unrealistic estimates, and year-to-year budget instability.
Requirements reform, or how DOD decides what it needs to
buy in the future, was to be addressed by the Packard reforms.
However, it seems we still have far too many Service-specific
solutions, overstated needs, and changing requirements that
increase program instability. We need to ask, for example, does
each Service really need to develop and procure unmanned aerial
vehicles, or can joint solutions more effectively meet the
warfighters' needs?
The men and women who comprise the acquisition workforce
are doing the best they can within the current system. Our
sailors, soldiers, airmen, and marines are still operating the
best weapons systems in the world, so something is working
right. However, I think we can do better, and we have to do
better tomorrow to maintain our military dominance in the
future, particularly in the face, Mr. Secretary, of what could
be some reduction in our budgets owing to the extraordinary
situation presented in our overall fiscal problem by the recent
tragedies of these hurricanes and the mounting costs to try and
bring needed relief to those who suffered.
I think we have to be mindful of that situation. We need to
look closely at the process of buying our weapons systems and
review whether DOD is organized effectively to perform the
acquisition mission. We also need to look at the professionals
who comprise our aging acquisition workforce. We need a human
capital management system. So many of our senior people are
understandably looking towards the retirements that they have
earned with hard work.
The committee is committed to doing all that is necessary
to ensure that the future defense acquisition system is
effective, adequately protects the taxpayer from fraud and
abuse, and continues to deliver the best products and services
in the world for our service members.
To address these topics, I am pleased to welcome: the
acting Deputy Secretary of Defense, Gordon England; Ken Krieg,
Under Secretary of Defense for Acquisition, Technology, and
Logistics; the Vice Chairman of the Joint Chiefs, Admiral Ed
Giambastiani; and Lieutenant General, Retired--emphasize,
Retired--Ronald T. Kadish, Chairman of the Defense Acquisition
Performance Assessment Project. I welcome each of you and thank
you for your participation.
Senator Levin.
STATEMENT OF SENATOR CARL LEVIN
Senator Levin. Mr. Chairman, first let me join you in
welcoming our witnesses. Today's hearing comes at a time when
the costs of the DOD's major acquisition programs is
skyrocketing, at least in part because the Department seems to
be unable to comply with its own acquisition policies. It comes
at a time when the DOD is spending more and more on contract
services, with less and less competition, and less and less
management attention. It comes at a time when the defense
acquisition workforce has been cut so deeply that the
Department has abdicated a significant part of its contracting
responsibility and is sending tens of billions of dollars to
other Federal agencies every year to spend on its behalf. In
short, this is an area that cries out for oversight.
Looking first at the acquisition of major weapons systems,
the Government Accountability Office (GAO) reported earlier
this summer that 26 of the DOD's biggest acquisition programs
have failed to meet cost and schedule expectations. According
to the GAO, the total projected research and development costs
of these programs has risen by more than 40 percent, the
acquisition unit cost has increased by roughly 50 percent, and
the acquisition cycle time has increased by an average of
almost 20 percent from initial projections.
Why has this happened? The GAO provides a clear
explanation: unstable budgets, immature technologies, and
fluctuating requirements. The Department has policies in place
that are designed to address those risks. Unfortunately, the
Department does not appear to have complied with its own
policies.
For instance, the GAO says that 49 of 50 technologies on
the Army's Future Combat System (FCS) lack the level of
maturity required by the Department's own guidelines in order
to ensure that it is producible in a timely manner without
driving up costs. According to the GAO, the Department is
unlikely to reach the appropriate level of knowledge about
these technologies until at least 2008, putting the program 5
years behind schedule when it has barely gotten under way.
The GAO says that Navy shipbuilding programs have
experienced a cost growth of more than $3 billion, in large
part because of poor cost estimating, unrealistic budgeting,
and frequent design modifications which require the contractor
to rework its program and even to rebuild completed areas of
ships to accommodate the changes.
The GAO says that the Department's missile defense system
is being developed without a fixed design or final architecture
and without program baselines and independent cost estimates
that are required by the Department's own policies. Despite DOD
directives requiring that we fly before we buy, we continue to
spend hundreds of millions of dollars to purchase and deploy
missile defense interceptors that have not yet had a single
successful intercept test.
Mr. Chairman, I wish I could say that these problems are
unusual, but they're not. They're typical of the status of
major acquisition programs throughout the Department. Moreover,
these are the programs that get the most management focus at
the DOD. DOD assigns its most capable managers to major
acquisition programs and tracks them closely at the highest
levels. Other types of acquisition, such as the acquisition of
contract services, get far less management attention and suffer
from problems that are even worse.
We have all heard about the billions of dollars in
contracts awarded sole source or on the basis of limited
competition to Halliburton and other companies in Iraq. We have
all read the stories about inflated prices, services paid for
but never received, the use of contractors to oversee the work
of other contractors, and the contracts extended despite poor
performance. Some of us have even had ex-employees of these
contractors call our offices to complain about defective
products, wasteful expenditures, and instructions to do make-
work so that the contractor could run up its bill.
Unfortunately, these kind of abuses are not unique to
either Halliburton or Iraq. DOD has no organizations devoted to
the acquisition of contract services, no career path for those
who work in the acquisition of contract services, and very
little training and guidance for the acquisition of contract
services. As a result, review after review has documented the
use of sole source awards to favored contractors, open-ended
contracts with no clear performance objectives, and an almost
complete absence of contract management and oversight.
These problems are made worse by the Department's
increasing practice of offloading contracts to other Federal
agencies. What this means is that the DOD funnels its money to
other agencies to enter and manage contracts on its behalf. The
result: neither the DOD nor the other agency accepts
responsibility for making sure that procurement rules are
followed and good management sense is applied.
This absence of accountability has led to a lack of
acquisition planning, inadequate competition, excessive use of
time and materials contracts, improper use of expired funds,
inappropriate expenditures, and an almost complete failure to
monitor contractor performance. Errors are more easily hidden
and swept under the rug when this offloading process, this
funneling of DOD money to other agencies, is utilized.
The use of contractors to interrogate detainees is one
dramatic example of how this practice can lead to abuse. DOD
officials in Iraq hired contract interrogators by routing DOD
money through a Department of the Interior contracting center
in Arizona. The GAO has found that both the DOD and the
Department of the Interior officials effectively abdicated
their responsibilities, leaving almost the entire contracting
process in the hands of the contractor, who actually drafted
the papers needed to use this offloading, funneling process.
As a result, a series of audits identified numerous abuses,
including the issuance of orders that were outside the scope of
the contract, the failure to comply with competition
requirements, and the failure to adequately monitor contractor
performance. The lack of clear accountability within the
Department for contractor employees at Abu Ghraib which
resulted from this offloading or funneling of dollars through
the Department of the Interior also contributed to the well-
documented abuse of detainees at Abu Ghraib.
American taxpayers will spend almost $500 billion this year
for national defense. When we spend that kind of money, or any
kind of money, for that matter, we have an obligation to spend
it wisely. Unfortunately, it appears that the Department is
doing far less than it should to live up to that obligation. We
have great hopes that you, Secretary England and Secretary
Krieg, in your new positions will promptly and decisively take
on these problems.
Thank you.
Chairman Warner. Thank you very much, Senator Levin.
As I indicated when we opened the hearing, I am extremely
grateful to Senator McCain for his constant encouraging to
progress with this series of hearings, as well as Senator
Ensign, who has also joined us this morning, both of them being
subcommittee chairmen with jurisdiction over this subject. So I
will first recognize Senator McCain.
Senator McCain. Thank you very much, Mr. Chairman. I want
to thank you for your commitment on this issue and your
continued interest and involvement. I know that all of us look
forward to working with you and Senator Levin and others as we
try to address this problem.
I want to thank the witnesses for being here. Let me just
describe the dimensions of the problem to some degree so that
we can inject a note of realism into what some may view as sort
of a policy issue, which it is, but it has real-time and real-
term impact. Cost for the second Virginia-class submarine is
now expected to be $2.7 billion, $520 million more than
originally estimated. A new aircraft carrier could well reach
$14 billion. Projected costs for the DD(X) have risen over 400
percent when research and development costs are included. This
is for a program with a planned acquisition of 12 ships. The
Congressional Budget Office estimates the lead ship could cost
$4.7 billion, with the cost of additional ships $3.3 billion.
That is for a destroyer, $3.3 or $3.4 billion for a destroyer.
Initial estimates for the total costs of the Army's FCS
were around $90 billion, with estimates now reaching as high as
$130 billion. The C-130J cost $65 million. In 2005 dollars, a
1964 version, the C-130B, cost $11.8 million.
The Air Force's FA-22 will average nearly $250 million
each. The Navy will spend $600 million to buy about 3,000
guided missiles, even though it originally expected to pay half
that amount for over 8,000 missiles.
The numbers go on and on. It is exacerbated by, the FCS's
contract was let under provisions of the law which were clearly
intended for small corporations and companies who are just
entering into the business--an obvious violation of the intent
of the law and Congress.
In the case of the C-130J, that contract was let under the
expectation that it would also be a commercial enterprise as
well. What was the effect of both of those? It was that the
normal constraints and accounting and reporting and auditing
procedures were avoided. So guess what? The FCS has gone from
$90 billion to $130 billion and the cost of the C-130J is now
$65 million.
How much do you have to pay to fly cargo? A C-130 flies
equipment and personnel around. We could lease a commercial
aircraft today for a very small amount of money, and yet we are
paying $65 million each for what is basically a cargo plane.
Well, this is, as the chairman pointed out, the first in a
series of hearings because it is going to take a while to
figure all this out. We thought it was very important to have
the experts before us today to open a series of hearings. There
is a lot of work being done, including from the Center for
Secure Information Systems (CSIS) and others who have come up
with some ideas and thoughts.
Finally, in a little bit of straight talk, in times of
large budget deficits and domestic crises defense spending goes
down, and yet we are seeing defense costs going up at a rather
dramatic rate. There is going to be some kind of a crunch time,
and if we are already at a point where we can only acquire four
ships for the United States Navy in 1 year that obviously has
significant national security implications over time.
I thank the chairman. I thank the witnesses for being here
today. I have the highest regard for all four of the witnesses
and I think they represent a degree of expertise and knowledge
that is very important and a way for us to begin this
examination of the procurement situation. I thank you, Mr.
Chairman.
Chairman Warner. Thank you, Senator. I anticipate that we
will have hearings this year following this and we will go on
into next year. This is going to be a long process.
Senator Ensign, thank you again for your participation in
urging that we move these hearings.
Senator Ensign. Thank you, Mr. Chairman. Just a couple of
brief remarks.
I think that among Senator Levin, Senator McCain, and
youselves, you have laid out some of the problems. This is a
highly complex issue and a lot of people have talked about it,
from the Packard Commission on down, of what needs to be done.
We have obviously looked at this problem and you can certainly
point out one glaring issue in that the acquisition workforce
has been cut by one-half over the last 10 years or so.
There are serious problems with people. Everybody here
today has not been in their positions a tremendously long time.
Every year it seems that when we come up and do these hearings
and try to figure out what is going on, people say, well, just
give us a little bit of time to figure this out. Then the next
time we have those hearings we have new people saying, well,
just give us a little bit of time to figure this out.
I think that it is a glaring part of the problem, because
when there is not leadership from the top and consistent on the
direction that we need to go you can end up with some of the
problems that we have. There have been a lot of good ideas over
the years, but there has not been consistency in the follow-
through of those ideas.
The military is all about systems and yet this is one of
the places where the system is not working. It is vital to the
national security of the United States that we get this right
for the future, because there are limited dollars and we do not
have for the future, if it continues down the line that we are
going in--we are not going to have the type of weapons systems
that we need to keep our warfighters far ahead of the rest of
the world.
The rest of the world does not have some of the same
problems that we have with weapons development. They do not
seem to have some of the bureaucratic nuances. Some of them do,
but a lot of them do not, and some of the newer countries do
not seem to have those kinds of problems. So we must make this
a national priority to figure out.
I appreciate the leadership from you and Senator McCain on
this issue, and we are going to have to go forward and take a
serious look into the future. Thank you.
Chairman Warner. Thank you, Senator, for your leadership.
Given the importance of this subject, I think the chair
would be happy to have short statements by any others. Any
other colleagues wish to address this issue? [No response.]
If not, Secretary England. This all started with your
hearing.
STATEMENT OF HON. GORDON R. ENGLAND, ACTING DEPUTY SECRETARY OF
DEFENSE
Mr. England. Yes, it did, and I appreciate the opportunity
to be back, sir. I do appreciate the opportunity to be back.
Also, know we are very sensitive to the concerns you have
expressed. As a matter of fact, we have some of those same
concerns. I do appreciate the opportunity to be at the hearing
today. I thank this committee for investing the time and the
commitment because, first of all, in the past Congress has been
very helpful. There has been a lot of legislation that is very
helpful to the Department.
I can tell you that it will take Congress and the
Department working comprehensively together on these issues to
come at a long-term solution. I am pleased that you are
committed, as we are, to work this over a period of time
because there is no quick solution. This is just hard work.
Now, are likely aware anyway, the Department is working on
our Quadrennial Defense Review (QDR) and that QDR defines
future military capabilities to meet the challenges our Nation
will face in the future. Now, this year, unlike prior years, in
the QDR we are also what I call addressing the other side of
the defense coin. That is, one side is the needed capabilities,
but the other side of the same coin is the business practices
and the acquisition processes that will allow us to efficiently
and effectively identify and acquire these new capabilities. So
we are comprehensively addressing this in the QDR this year,
which will be submitted to Congress in February.
I am pleased with the panel that you selected to be here
today. Ken Krieg in the QDR is leading the business practices
and acquisition activity. So he is the point person for this in
the QDR. Retired Lieutenant General Ron Kadish is leading a
Federal advisory committee and he is conducting a separate
acquisition assessment study that I specifically asked that he
put together. So these two acquisition efforts, the one in the
QDR under Ken Krieg, the one under Ron Kadish, combine with the
work previously accomplished by CSIS, which was the beyond
Goldwater-Nichols work. They will guide our recommendations to
address the challenges we face today.
Then finally, Admiral Ed Giambastiani, who is the Vice
Chairman of the Joint Chiefs, is with us today. He co-chairs
the QDR with me and he has broad experience in defining
requirements, both as a Navy flag officer and as the prior
commander of the U.S. Joint Forces Command. So hopefully we
have the group today that can be responsive to you and help
point the way forward.
Chairman Warner. Mr. Secretary, could I interrupt. Do you
have some sort of general time schedule for the completion of
these important reports?
Mr. England. Mr. Chairman, we do. Our objective is to bring
all of this together, integrate it, later this year and have it
in the QDR final report, which will be provided to Congress in
February.
So the CSIS study is complete. General Kadish's study will
complete in late November time period and the QDR effort under
Mr. Krieg has part of the QDR will complete in time for the
conclusion of the QDR. So they will all be integrated into what
will then be our formulation of the way forward for this whole
area of acquisition.
Chairman Warner. Would we be able to get the reports as
they are finished, prior to the integration? Or is the
Department--I hope that that could be arranged.
Mr. England. Sir, they will definitely be available. I do
want to tell you that in all of this effort, the key to this is
transparency, which I believe is very important as we go
forward, both as a Department in formulating our approach--we
have reached out, Mr. Chairman, to members of your staff. We
appreciate the help of this committee, other Members of
Congress, industry personnel. So this is very broad-reaching.
Transparency is the key, transparency not just in putting
the process together, but then in implementing this as we go
forward.
I do want to comment, Senator Ensign, you are right about
the time of people. So you know my intent is to help put this
together and then see it to completion. My sole objective is to
put a program in place and be able to measure progress and
stand before this committee and be able to defend what we are
doing and show progress in this regard. So you do have my
commitment. I intend to see this through and make sure that
this works well for America. That is my commitment to you.
I do want to say, at the core of all of this, of all the
regulations and everything we do, at the core in my judgment it
is highly ethical leaders with extensive experience and
tempered by some common sense, frankly, to evaluate
requirements, balance the risks and rewards, and make the best
possible decision in each case. There is no way you can
substitute for experience because at the end people do make
decisions in terms of programs and processes.
With that, I will turn it over to Ken Krieg for some
comments. But I do want this committee to know that the
Department takes this very seriously. This group before you
takes it very seriously. We are committed and we are invested
to make improvements. I appreciate the fact that the committee
is working with us and we look forward to this relationship to
show some positive improvement in this area as we go forward.
So I thank you also for your commitment and investment of your
time in this project.
Thank you very much.
[The prepared statement of Mr. England follows:]
Prepared Statement by Hon. Gordon England
Mr. Chairman, Senator Levin, members of the committee, thank you
for the opportunity to appear before you today to discuss acquisition
in the Department of Defense. My sincere thanks to everyone on the
committee for investing your time and energy in this very important
topic. In the past, Congress has been most helpful in crafting
legislation that has been beneficial to the Department in gaining
acquisition flexibilities, improved training for acquisition
professionals, improving the management and oversight of acquisition
processes and many others. It will require both the Department and
Congress working together to address comprehensively the issues that
face us today, and I thank you for that commitment.
As this committee is aware, the Department is engaged in a
Quadrennial Defense Review (QDR) to define future military capabilities
to meet the challenges our Nation will face in the future.
In addition, the QDR this year is also addressing what I call the
other side of the Defense coin; the business practices and acquisition
processes that will allow the Department to efficiently and effectively
identify, acquire, manage and then deploy the needed new capabilities.
I am particularly pleased that Ken Krieg is here today. Ken is
leading these business practices and acquisition activities in the QDR.
I am also pleased that retired Lieutenant General Ron Kadish is with us
today, as I have asked Ron to lead a Federal advisory committee in a
separate Acquisition Assessment Study. These two acquisition efforts,
combined with the study previously completed by the Center for
Strategic and International Studies (CSIS), ``Beyond Goldwater-
Nichols'', will guide our recommendations to address the DOD
acquisition challenges. Finally, Admiral Ed Giambastiani, the Vice
Chairman of the Joint Chiefs, co-chairs the QDR with me, and he has
broad experience determining requirements both as a Navy Flag Officer
and as a prior Commander of U.S. Joint Forces Command.
In all of these studies and efforts, the Department is reaching out
to experienced military personnel, civilian acquisition professionals,
industry leaders, this committee, other experienced Members of
Congress, and your staffs.
It is vitally important that we make substantive progress. To be
very frank, in spite of all the efforts of many smart and dedicated
people before us, we still do not have it right. Defense Acquisition is
an especially complex undertaking, involving myriad interests,
regulations, changing technologies and requirements. It takes leaders
with extensive experience, tempered by the rare gift of common sense,
to evaluate the requirements, balance the risks and rewards, and make
the best possible decision in each case.
It is essential that the Department continue to adapt its
acquisition processes to better support the warfighter and to better
manage the taxpayer's money. The Department is committed, and I am
personally committed and invested in bringing about positive change.
I'm hopeful that perhaps this time we have all the right people in the
right places in Congress, in the military, in industry, and in key
civilian government positions to make real progress.
I want this committee to know that the Department is conducting
this effort in a very open and transparent manner and that we value the
advice from this committee and other experts to design a fair and well-
managed acquisition process. Once again, thank you for the time and
energy you have committed to this topic and for your cooperation in the
future as we proceed together to address this very important issue.
Chairman Warner. Thank you, Secretary England.
Secretary Krieg.
STATEMENT OF HON. KENNETH J. KRIEG, UNDER SECRETARY OF DEFENSE
FOR ACQUISITION, TECHNOLOGY, AND LOGISTICS
Mr. Krieg. Thank you, sir. Chairman Warner, Senator Levin,
members of the committee: Thank you for the opportunity to
appear here today, as the acting Deputy said, to discuss this
important work that we all have in front of us and building a
roadmap toward acquisition excellence.
During my confirmation hearing before you, I committed to
work with you to guide the necessary changes throughout the
acquisition process with both integrity and a commitment to
making objective, fact-based decisions. I am quite pleased
that, 100 days into my tenure or so, we are having these
conversations because I think it is critical that we deal with
these issues as a Nation.
Our primary customer, the warfighter, expects our
acquisition community to deliver the capabilities they need to
defend America and its interests, not only today but long into
the future. But at the same time, we have a clear
responsibility to wisely invest taxpayer dollars. As I think
about the challenges we have ahead of us, I am mindful of a
certain staff member who sat in the back benches of the Packard
Commission, namely me, and of David Packard's view that he said
over and over, that we have to ensure a tight relationship
between the three departmental processes, those processes being
requirements, acquisition, and resources.
Though the Department and the Nation have instituted many
of the recommendations of that commission, I believe that we
must better integrate these three processes to get the kind of
commitment to systems and commitment among all the members and
all the interests represented. It is only with better
integration that we can make the timely and coherent decisions
about potential tradeoffs among cost, performance, and
schedule. To find the right tradeoffs and achieve the balances,
I plan to use three basic principles.
First, we must understand and define success in terms of
the customer's success, that being the warfighter, not simply
our own functional view of the world.
Second, we must align authority and responsibility and hold
those in charge accountable.
Third, we must base our decisions on data that links
acquisition to requirements and resource allocation, so the
facts are in front of us.
Finally, we must all accept the fact that we are in a
period of great change and that change is not an exception. It
is the constant we must manage.
In addition to changing the way we do business, we also
need to reassess the way we use new technologies. As you
pointed out, our force currently enjoys a competitive
advantage, but the global pace of technology development
continues to increase. To address this issue of rapid change,
we began implementing a year or two ago technology maturity
assessments to determine if acquisition programs require more
mature technology before entering the next phase--part of the
tradeoff between performance, cost, and schedule. In addition,
we have increased the number of demonstrations and prototypes,
as the Packard Commission recommended.
As we reassess our technology use, we must be mindful that
we cannot wait too long to field those technologies that give
our warfighters the advantage.
I look forward to working with this committee in particular
to identify the next generation technologies that can provide
the future disruptive and irregular capabilities. Identifying
those priorities will be a critical important task before us.
Now I would like to briefly touch on three other
important----
Chairman Warner. I am going to interrupt you just for a
minute. There appear to be some technical problems with the
acoustics, so I am going to ask all witnesses and encourage my
colleagues to address the microphone directly as you speak.
Thank you.
Mr. Krieg. Yes, sir. Thank you.
I would like to briefly touch on three other important
acquisition issues which you opened in your statement. First,
our people. I agree with my predecessor's concern with the
statutory reductions to the acquisition workforce that occurred
while workforce demands were beginning to increase
significantly. Developing opportunities that Congress has
helped us with, like the National Security Personnel System,
should give us the flexibility to hire and develop the
appropriate people to complete our missions, and I look forward
to continuing to work with Congress as we learn how to manage
this workforce better.
As the Deputy noted, the foundation for all acquisition
improvement efforts depends on a highly qualified workforce
that conducts itself in an atmosphere of transparency and
integrity. To that end, we are instituting tools of performance
management, 360 degree feedback tools for the senior leaders,
and a number of other changes recommended by the committees and
groups who have looked into this issue in the last year or so.
In addition, I have made it mandatory that our acquisition
staff complete an online ethics module by the end of the year.
Now let me address the issue of service contracting. My
staff is now reviewing all acquisition of services valued at $2
billion or more. Big number, but we are starting a process by
which we will at the conclusion of this review assess the
effectiveness of existing policy, management techniques, and
oversight techniques, and make or recommend any necessary
changes that we should to this important effort.
In addition, we are working to ensure the sound use of
performance-based acquisition approaches for services, so that
we understand pricing techniques, schedule, cost, and quality
management.
Regarding contracting for both products and services, we
are working to ensure the sound use of performance-based
acquisition approaches.
Finally, I would like to address the issue of our use of
contract vehicles that belong to other Federal agencies. We are
continuing to examine those processes of interagency
contracting. They can serve useful purposes in cases where we
are acquiring the right kinds of things, as we do through the
General Services Administration (GSA) schedules, to meet some
of those requirements for services and supplies.
But the recent Inspector Generals' reports for both the GSA
and DOD provided numerous lessons learned to the Department and
to the Nation. In fact, the Department recently issued policy
in this area and we have charged the military departments and
the other defense agencies to assess their compliance with
those kinds of policy changes. We will be doing that over the
next several months. The Department is also evaluating the fees
we pay assisting other agencies for their support.
Finally, we have developed in concert with others an online
training and conducted onsite regional training with both GSA
and Defense Acquisition University and established a community
of practice among the professionals who work in this area.
In conclusion, as the acting Deputy noted, we are working
on many of the broader issues in defense acquisition and they
are being addressed through two studies. I just add that in the
defense acquisition review Duncan McNabb, who is currently
serving as the J-4, has been my co-chair in working on that
group. We are, as the Deputy said, working to develop those
results to build a roadmap by February. I look forward to
continuing to work with this committee and look forward to the
advice, counsel, and support that you have provided in this
area and will continue to provide.
Thank you for your time.
[The prepared statement of Mr. Krieg follows:]
Prepared Statement by Hon. Kenneth J. Krieg
Chairman Warner, Senator Levin, and members of the committee: Thank
you for the opportunity to appear before you today to discuss
acquisition excellence. During my confirmation hearing before this
committee, I stated my commitment to guiding change; to integrity, and
to making objective fact-based decisions consistent with good
governance and to maintaining a constructive dialogue with the
committee. Today, I am providing additional insight into my philosophy
and vision for improvements and excellence in acquisition, technology
and logistics.
My primary focus in Acquisition, Technology and Logistics (AT&L) is
on the customer--the warfighter of both today and tomorrow. Customers
expect our acquisition community to deliver the capabilities they need
to defend America and its interests, not only today, but into the
future. In doing so, we must also provide timely information and
analysis to assist Secretary Rumsfeld in his efforts to balance
resources against requirements. As stewards of the American taxpayer,
those of us in the acquisition community have a responsibility to
wisely invest and manage the hard earned tax dollars of our citizens to
enhance and expand our national defense capability. To ensure that the
American people stay informed, we must make sure that all Members,
including this committee, are well informed of our efforts.
PEOPLE
As I participate in the Quadrennial Defense Review (QDR) and other
reviews, I am convinced that an integrated, strategic focus on people
is a necessary and important requirement for improving acquisition
outcomes and processes. Workforce capability is a reflection of the
right quantity and the right skills and competencies. We have
previously expressed our concerns about statutory reductions to the
AT&L workforce. Workforce demands have increased significantly. Using
2004 constant dollars, the contract dollars have increased from $118
billion in fiscal year 1998 to $241 billion in fiscal year 2004, a 105-
percent increase. Contracting actions over $100,000, often our most
complex, increased from 101,663 in fiscal year 1998 to 160,388 in
fiscal year 2004, a 58-percent increase. The increasing use of
interagency acquisitions has added further complexity. We need
flexibility to have the right numbers of the right people with the
right skills to support current and future warfighters. We will
exercise these flexibilities to ensure resources are used wisely, with
integrity, and with effective accountability.
Shortly after assuming my position, I immediately focused on
improving our workforce initiatives. I am fostering a more integrated
and strategic approach to AT&L workforce human capital planning,
workforce initiatives, and training. I have initiated a comprehensive
review of the AT&L workforce and will soon have in place (120 days
after the QDR) a human capital strategic plan incorporating National
Security Personnel System (NSPS) and aligned with the QDR results and
our analysis of the current AT&L workforce and evolving workload
requirements (services, contingency operations, etc.).
The problem of an aging workforce is still very real and needs to
be addressed. The average age of our civilian workforce is 46.7 years
old and the number of workforce members with 30-plus years of
experience continues to increase. We face losing a significant amount
of corporate knowledge, experience, and capability. I also have a
specific concern about the impending talent gap created by a 10-year
workforce drawdown. I am personally engaged and pushing hard to define
processes and tools to assess workforce capability; and to tactically
recruit, develop, and retain the right talent, with emphasis on smart
execution and implementation.
Let me end my thoughts on workforce by saying that thoughtful human
capital strategic planning and leadership development is critical for
our future success. The foundation for all acquisition improvement
efforts depends on a highly capable and qualified workforce that
conducts the business of government in an atmosphere of transparency
and integrity. To that end, I have initiated action to deploy
performance management and multi-dimensional 360 degree feedback tools
for the senior leadership team. Over 100,000 people have completed the
online ethics module that we initiated this year and I have made it
mandatory that the remaining members of the acquisition workforce to
complete this training before the end of the year. Ethical behavior is
a function of leadership. I have already met with my senior Flag and
Senior Executive Service officers to share my expectations and the
expectations of the Secretary. As the Secretary stated in his September
7, 2005 department-side memorandum entitled ``Ethics and Integrity,''
``Ethical conduct and integrity must be modeled by the Department's
leadership.'' I fully agree, and have sent this message to every member
of the AT&L workforce.
ACQUISITION PROCESS
Our Nation currently has warfighters in harms way and we can not
definitively predict who our next adversary will be or where the next
conflict will occur. As a result, we need an agile, capability-based
acquisition system that provides our primary customer--the warfighter--
with the means to achieve victory regardless of whom we fight or where
we fight.
I believe the Department has taken important steps to achieve that
objective by implementing policy aimed at reducing acquisition cycle
time while controlling cost. These new policies are streamlined and
flexible and based on an evolutionary or phased acquisition approach.
That approach mandates clearly stated requirements, developed in
conjunction with the warfighter and the acquisition community, a
thoughtful analysis of available alternatives, mature technologies and
independently assessed costs. My intent, now and in the future, is to
enforce these important disciplines while preventing requirements creep
and ensuring overall affordability.
I should note as well that we have taken important steps that will
help us to produce improved capability on time and within budget by re-
energizing our approach to systems engineering. This critical
discipline has always contributed significantly to effective program
management at every level and will receive sustained emphasis during my
tenure.
However, more must be done in the larger context of acquisition if
we are to achieve success in the uncertain conditions we will face.
Consequently, as part of our Quadrennial Defense Review, Acting Deputy
Secretary England has directed me to review our acquisition and other
business processes to ensure they are capable of meeting customer
needs. While doing that, I have identified a number of key principles I
believe we must follow to be effective and that I would like to share
with you.
First, we must understand and define success in terms
of the customer's success. In other words, we must be
successful in the customers eyes, not simply our own.
Second, we must align authority, responsibility and
accountability--all conceived in a joint context with
associated standards. This will facilitate delegation of
authority and decentralization of execution, while ensuring
accountability consistent with identified standards.
Third, we must base our decisions on authoritative
data captured in a comprehensive management information
approach linked not only to acquisition, but also to
requirements, and the planning, programming, budgeting and
execution system. This will help us to achieve insight and
clarity, and honestly balance risks at the portfolio level to
get the best value for the taxpayer.
We must develop policy that allows even greater
agility so we can acquire, mature, transition, and field
advanced technology in ever shorter cycle times.
Finally, we must accept forever the fact that our
acquisition environment is in constant change and our
acquisition system must also change consistent with that
dynamic. Change is not the exception, it is a constant that we
must manage. History has proven to us that those that respond
to changing conditions survive and succeed and those that don't
will inevitably fail. I am very much aware of that fundamental
lesson and will do all I can to develop an acquisition system
capable of responding to the rapidly changing world we live in.
INTERAGENCY ACQUISITION
Besides QDR, there are several examples of the Department examining
its processes for interagency acquisitions and acquisition of services.
The Department relies on ``Interagency Acquisitions'' and the assisting
agencies (General Services Administration (GSA), National Aeronautics
and Space Administration (NASA), Interior, Treasury) to meet many of
our requirements for services and supplies. The Department's recently
issued policy in the area of interagency acquisitions is designed to
ensure that interagency acquisitions are properly accomplished. The
recent GSA Inspector General (IG) and DOD IG review of GSA's ``Client
Support Centers'' has provided numerous lessons learned to the entire
Federal acquisition workforce in this area.
I recently issued a memorandum to the Military Departments and the
Other Defense Agencies requiring them to assess their compliance with
the policy, and specifically with section 803 of the National Defense
Authorization Act (NDAA) for Fiscal Year 2002 (competition requirements
for contracts for services). The Department will also evaluate the fees
that we pay assisting agencies (section 854, NDAA for fiscal year 2005)
for their support. We have developed online training, conducted onsite
regional training with GSA and Defense Acquisition University, and
established a Community of Practice on http://www.acq.osd.mil/dpap/
specificpolicy/index.htm.
We are committed to properly using interagency acquisitions to meet
DOD requirements.
SERVICES CONTRACTING
In order to more effectively manage the significant expenditures
being made in contracting for services, my staff is reviewing
individual service acquisitions valued at $2 billion or more. At the
conclusion of the review, we will assess the effectiveness of existing
policy and develop any necessary changes.
We are working to ensure the sound use of performance-based
acquisition approaches; pricing techniques; and schedule, cost and
quality management. In addition, we are adopting a private sector
``best practice'' of applying a strategic approach to our contracts for
services by developing a Defense-wide strategic sourcing process. Pilot
test programs include administrative clerical support services;
wireless services; and medical services. We believe the strategic
approach to acquiring services will enable the Department to reduce
total ownership cost, improve our ability to strategically address
socio-economic goals, and employ more standard acquisition business
processes. For example, this approach to administrative clerical
support services is resulting in a strategy that is 100 percent set
aside for small business with contracts planned to be available for use
in early 2006.
TECHNOLOGY
Our current force enjoys a huge capability advantage as a result of
the Department's development of technologies such as night vision, the
global positioning system, and stealth, but the pace of technology
development globally continues to increase. A stable research and
development program is necessary to maintain a technology. Over time,
potential adversaries will develop technologies to counter the current
U.S. advantage, so continued technology refresh is critical. To meet
this need, the Department is refocusing its science and technology
program to provide future disruptive and irregular capabilities, such
as hypersonic flight and weapons, oil independence, and
nanotechnologies, to name a few. The recently established Research and
Engineering Goals provide the framework to mature technology in
specific areas of emphasis and to field the disruptive technologies of
tomorrow.
Technology maturity is a factor in reducing program risk, thereby
reducing near- and long-term program costs. We implemented Technology
Maturity Assessments to assess if acquisition programs require more
mature technology before entering the next phase. In addition, we have
increased the number of demonstrations and prototypes, further ensuring
adequate technology maturity and military utility by ``trying before
buying.''
While most programs use the traditional acquisition process, we
have also established several alternate methods for transitioning
technologies to meet emergent needs. For example, the Quick Reaction
Special Projects (QRSP) program which demonstrates technologies within
1 year and most importantly are able to respond to technological
surprises encountered in the field. For instance under QRSP, the Urgent
Testing and Evaluation Alternative Materials for Small Arms Protective
Inserts (SAPI) Production identified, developed, and evaluated
additional qualified materials to allow manufacturers to increase their
production rate for SAPI and enhance the warfighters' Interceptor Body
Armor System.
The QRSP also supports the Combating Terrorism Technology Task
Force (CTTTF) and funded initial development of the Yuma Arizona Joint
Experimental Range Complex which is now used 24 hours per day. This
test range provides a representative environment in which all technical
and operational testing for the Department's counter improvised
explosive device (IED) countermeasure development is conducted.
The Advanced Concept Technology Demonstration (ACTD) Program is
helping to establish an agile, rapid, and adaptive acquisition process.
This program partners with science and technology producers to rapidly
insert technology into the appropriate phase of the deliberative
acquisition process, with the goal of providing on-ramps for
acceleration. The new Joint Capability Technology Demonstration Program
(JCTD) furthers this concept by developing and maturing technologies to
support the unique needs of the joint community in an even more
adaptive and responsive process.
ACTDs demonstrated their ability to rapidly insert technology in
recent use by U.S. Northern Command (NORTHCOM) in responding to the
Hurricane Katrina relief effort. NORTHCOM deployed products from two
ongoing ACTDs: the Homeland Security/Homeland Defense Command & Control
communication van. The communication van and an online information-
sharing system provide a seamless voice and data communications
capability between coordinating authorities. The communications suite
can relay phone and video communications via satellite, providing
immediate voice, data, and teleconferencing capabilities almost
anywhere. On September 21, the communication van was redirected and
pre-positioned for needs arising from Hurricane Rita. Although the ACTD
does not complete until fiscal year 2006, the spiral development of
this communication van is already transitioning, providing critical
capabilities that might take years longer in the normal acquisition
process.
Continued development of technology capability options requires
innovation from a stable workforce of science, math and engineering
(S&Es) skills. However, several trends show continued erosion of
domestic S&E production to a point where the U.S. may no longer be the
primary innovator in several areas crucial to national security.
To shore up this shortage in home grown technical talent, the
Department is actively engaged to institutionalize and expand the
fiscal year 2005 congressionally-directed Science, Mathematics and
Research for Transformation Program. The expanded program, called the
National Defense Education Program, should increase the pool of U.S.
scientists, mathematicians, and engineers eligible for security
clearances, thereby building our future workforce and enhancing our
future national security.
INDUSTRIAL POLICY
U.S. defense systems lead the world and the U.S. industry that
develops and builds them continues to be the most technologically
innovative, capable, and responsive in the world. Although the American
way of warfighting is evolving, the Department expects that U.S.
industry leadership will continue into the foreseeable future. The
Defense Industrial Base Capabilities Study (DIBCS) series of
assessments, represent a strategic (15-20 years into the future)
assessment that measures industrial base sufficiency against a new
warfighting focused, capabilities-based construct. The first round of
DIBCS reports \1\ identified 19 cases (less than 6 percent) where there
was a potential U.S. industrial base insufficiency. My office now is
reviewing the results of the assessments to determine how the
Department can best address the issues raised by the DBICS assessments.
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\1\ These reports can be downloaded at www.acq.osd.mil/ip.
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The Department's research and development, acquisition, and
logistics processes result in funding decisions that are normally
sufficient to establish and sustain those industrial capabilities
needed to secure the Nation's defense. DOD research, development, and
acquisition, and associated policies and program decisions, play the
major role in guiding and influencing industry transformation by
focusing market demand across a broad spectrum of industry segments to
meet emerging and projected DOD requirements. First, the Department's
weapons system acquisition policies and decisions shape the
technological and programmatic focus of industry. Second, decisions
made on defense firm mergers and acquisitions involving defense firms
continue to shape the financial and competitive structure of the
industry. Third, DOD evaluations and assessments of sectors or specific
industry issues help identify future budgetary and programmatic
requirements. Finally, the Department incorporates industrial base
policies into its acquisition regulations and strategies to promote
competition and innovation.
The industrial base supporting defense which includes an increasing
number of nontraditional suppliers is generally sufficient to meet
current and projected DOD needs. Nevertheless, there are and will
always be problem areas that the Department must address. The Annual
Industrial Capabilities Report to Congress summarize those industrial
issues of most importance to the Department and discuss DOD plans and
actions to address those problems.
CONCLUSION
There are two significant reviews underway that will certainly
provide additional insights and recommendations that will guide
acquisition change in the future. One--the Defense Acquisition
Performance Assessment Project (DAPA)--was initiated by the acting
Deputy Secretary in June. This important review is being conducted
through a Federal Advisory Committee and includes not only senior
officials from government but also industry officials. Issues and
solutions are being sought via public forums from a wide cross-section
of interested parties, interviews with government and industry program
managers, and collaborative teams of intermediate and senior members.
The DAPA Director regularly briefs the Deputy Secretary, me, and the
Service Acquisition Executives as well as congressional staff members
on the progress of the report. I look forward to reviewing the findings
and recommendations when the report is submitted to the acting Deputy
Secretary on November 15, 2005.
As I mentioned before, I'm part of the Quadrennial Defense Review
the Department is undertaking. We're trying to do something different
with this QDR than we've done in the previous two or three. Duncan
McNabb, who is currently serving on the Joint staff in J-4, is co-
chairing QDR business practices with me. We are working business
practices as part of strategy development.
The work that Duncan and I have underway includes five broad
business areas, including (1) supply chain, (2) medical readiness and
performance, (3) acquisition--not little ``a,'' or how you procure, but
big ``A,'' thinking through demand and supply, and then tying it to
logistics over time--(4) strategic process integration, or tying
planning to resource allocation and execution management, and finally,
(5) corporate governance.
I should note that I was a junior member of the Packard Commission
staff and I am ever mindful of his direction that we ensure a tight
relationship between the three Department processes. I think what we
have missed so far is the integration of requirements, acquisition and
resources--working together--to permit early and regular trade-offs
between cost, performance and schedule. Duncan and I are working hard
to ensure that an effective and complimentary relationship amongst
those processes is clearly and permanently institutionalized.
In closing Mr. Chairman, thank you for the opportunity to testify
before the committee about our acquisition policies and processes, and,
especially, our people. I would be happy to answer any questions you
and the members of the committee may have.
Chairman Warner. Thank you.
Admiral, you are going to follow.
STATEMENT OF ADM EDMUND P. GIAMBASTIANI, JR., USN, VICE
CHAIRMAN, JOINT CHIEFS OF STAFF
Admiral Giambastiani. Mr. Chairman, Senator Levin, members
of the committee: I too thank you for the opportunity to appear
before you today to discuss the acquisition process and
organizations inside the DOD and in particular the military's
role in this acquisition process. As I stated in my
confirmation hearings in answers to committee questions, both
verbal and in written form, I look forward to not only working
with Congress in improving our performance, but I give you my
personal commitment to improve in this incredibly important
area. As you have stated, we owe our best effort to our men and
women in uniform.
I look forward to your questions, sir. Thank you.
Chairman Warner. General Kadish.
STATEMENT OF LT. GEN. RONALD T. KADISH, USAF [RETIRED],
CHAIRMAN, DEFENSE ACQUISITION PERFORMANCE ASSESSMENT FEDERAL
ADVISORY COMMITTEE
General Kadish. Chairman Warner, Senator Levin, and members
of the committee: I would like to thank you for the opportunity
to appear before you today representing the Defense Acquisition
Performance Assessment Federal Advisory Committee, which we
refer to as DAPA, to outline the work being done by our
project.
The project was established as an independent review in a
June 7, 2005, memo from Acting Deputy Secretary of Defense
Gordon England. When complete, the project's work will provide
the Secretary of Defense and the 2006 QDR with recommendations
on how the DOD can improve the performance of the defense
acquisition system for major programs and restore confidence in
the process.
The work of the project is being accomplished by a Federal
advisory commission established in accordance with the Federal
Advisory Commission Act of 1972. To date our committee has held
four public meetings, received briefings from over 60
practitioners and stakeholders in the acquisition process,
placed in operation a Web site to encourage submission of
public comments, commissioned independent surveys and
interviews of industry and government program managers and
acquisition executives, as well as organized labor, and
established a baseline of previous acquisition reform studies
and recommendations.
We have regularly updated congressional staff and DOD
leadership regarding the progress of this assessment. We have
developed a database of observations based upon this input and
subsequent committee decisions and discussions and are
submitting the work of the committee to additional review teams
for analysis and comment.
We have heard from many people inside and outside of the
process, and we looked at the history of our country's attempts
to improve this process. The committee is nearing completion of
our data collection and starting the issue development,
recommendation, and implementation planning phase.
Now I would like to briefly comment on some of the
observations we have made to date. We all want the defense
acquisition process to deliver effective warfighting capability
as efficiently as possible. Although this process has been the
focus of numerous studies and reform initiatives, it still
remains plagued by numerous and highly publicized shortfalls in
efficiency, and efficiency measured in terms of cost and
schedule.
For example, 20 years ago the President's blue ribbon
commission on defense, most commonly known as the Packard
Commission, ushered in an era of acquisition reform with its
findings that DOD weapons systems take too long and cost too
much to produce. Many reforms have been undertaken since then.
Two decades later, many still believe that systems, programs,
cost too much and take too long to field.
This committee and others have asked a very key question:
Why is that the case? Yet the system, however flawed, has
produced the most capable and best equipped, most effective
military in the history of the world. We have met the
effectiveness test in the past. Now we need to do so for the
next generation in a very different and challenging security
environment.
I am convinced the sheer complexity of the system is a
major impediment to its efficiency and contributes much to the
confusion about the acquisition process itself. If you allow
me, I would like to briefly explain what I mean.
There are three fundamental and very complex processes that
the DOD operates. I will refer to these as big ``A''
accquisition, if you will allow that term. They are the
requirements process, the planning, programming, and budgeting
process, and the acquisition process. I will refer to the
acquisition process alone in this context as little ``a''
because it is embedded in that big ``A'' triumvirate.
As I read through the pages of the Packard Commission
report, the words characterizing the problems of weapons
acquisition ring as true today as they did 20 years ago.
Achieving a satisfactory acquisition system, the big ``A'' and
the little ``a'', will be a significant challenge to this
country.
As I have listened in panel meetings and studied this
problem over the past few months--and I have lived in this
system and in this environment for over 25 years--I am
convinced we can do better. But we must address the difficult
and long-entrenched problems, while ensuring and insisting on
personal and system integrity.
In our deliberations as a panel, we currently have more
problems identified than solutions. But I believe you can
expect us to offer ways to do better. Most reform and
improvements tend to focus only on that little ``a'' process.
We will address the key structural deficiencies in the big
``A'' acquisition processes as well, along with the workforce
that supports it and the industry that is its backbone. Simply
focusing on improvements in that little ``a'' acquisition
portion of this system, instead of the larger acquisition
process, cannot and will not substantially improve the
acquisition performance.
Our collective challenge, then, will be to overcome the
myriad of interests, conflicting policies, and incentives, the
inherent conflicts, so that we can exploit technology to
support our warfighters as efficiently as practicable.
Otherwise, we will have another effort in a few years
addressing the same issues we have today.
We must ensure that in our efforts to improve the system we
do not degrade our existing ability to provide our warfighters
with the systems and technologies they need to dominate on the
battlefield.
Thank you for the opportunity to appear before you today. I
want to emphasize that the work of the independent DAPA
committee is still in progress. I would be pleased to return
when the panel has completed its work and brief you on the
findings and recommendations in detail. On behalf of the panel
members, thank you for your efforts to improve our acquisition
performance and we look forward to working with you in the
future.
[The prepared statement of General Kadish follows:]
Prepared Statement by Lt. Gen. Ronald T. Kadish, USAF (Ret.)
Chairman Warner, Senator Levin, and members of the committee: Thank
you for the opportunity to appear before you today as the Chairman of
the Defense Acquisition Performance Assessment (DAPA) Federal Advisory
Committee to outline the work being done by the DAPA Project. The DAPA
Project was established as an independent review, in a June 7, 2005
memo from Acting Deputy Secretary of Defense Gordon England. Deputy
Secretary England directed ``an integrated acquisition assessment to
consider every aspect of acquisition, including requirements,
organizational, legal foundations, decision methodology, oversight,
checks and balances--every aspect.'' The Deputy Secretary also
requested that the output of the project be ``a recommended acquisition
structure and process with clear alignment of responsibility, authority
and accountability.'' When complete, the project's work will provide
the Secretary of Defense and the 2006 Quadrennial Defense Review with
recommendations on how the Department of Defense can improve the
performance of the Defense Acquisition System for major programs and
restore confidence in the process.
The work of the DAPA Project is being accomplished by a Federal
Advisory Committee, established in accordance with the Federal Advisory
Committee Act (FACA) of 1972 (Public Law 92-463). As a Federal Advisory
Committee, we are able to seek the advice and assistance of the public
as well as the input from all practitioners and stakeholders in DOD's
acquisition process. The FACA construct, under which the DAPA operates,
ensures that the committee remains independent of DOD and other ongoing
reviews and is objective in developing its findings and
recommendations. Responsive to the requirements of FACA, we have
adopted operating procedures and practices to ensure transparency of
process, established mechanisms to obtain maximum input from the public
and provided a venue for input from acquisition practitioners and
stakeholders.
To date, our committee has held four public meetings, received
briefings from over 60 practitioners and stakeholders in the
acquisition process, placed in operation a Web site to encourage
submission of public comments, conducted over 100 personal one-on-one
independent surveys and interviews of industry and government program
managers and acquisition executives as well as organized labor; and
established a baseline of previous acquisition reform studies and
recommendations having accumulated over 630 documents. We have
regularly updated congressional staff and Department of Defense
leadership regarding the progress of this assessment. We have developed
a database of observations based upon this input and subsequent
committee discussion and are submitting the work of the committee to
additional review teams for analysis and comment.
We have heard from many people in the process and looked at the
history of numerous attempts to improve the Acquisition System. The
committee is nearing completion of data collection and starting the
issue development, recommendation and implementation planning phases.
While still early in the process, I can comment on some key
observations that have been developed to put the problem in
perspective.
First, we want the Defense acquisition process to deliver effective
warfighting capability as efficiently as possible. Although this
process has been the focus of numerous studies and reform initiatives,
it remains plagued by numerous and highly publicized shortfalls in
efficiency. For example, 20 years ago, the President's Blue Ribbon
Commission on Defense (most commonly known as the Packard Commission)
ushered in an era of acquisition reform with its finding that DOD's
``weapon systems take too long and cost too much to produce.'' Many
efforts at reform have been undertaken since then. Two decades later,
many believe major weapon systems PGMS ``still cost too much and take
too long to field.'' This committee and others have asked a key
question--why?
Second, the existing system, however flawed, has produced the most
capable, best equipped, and most effective military in the history of
the world. We have met the effectiveness test in the past, now we need
to do so for the next generation in a very different and challenging
security environment.
Third, achieving satisfactory efficiency suggests fundamental
structural change in our processes is required. I am convinced the
sheer complexity of the system is a major impediment and contributes to
much confusion about the acquisition process itself. Let me explain.
There are three fundamental processes the DOD operates. I will refer to
these as the big ``A'' Acquisition process. They are the requirements
process, the planning programming and budget process and the
acquisition process. I will refer to the acquisition process alone as
``little a'' because it is embedded in the big ``A'' processes.
Delivering capabilities which the warfighter needs, on time and on
budget, requires the effective integration and operation of the
processes used to articulate what the warfighter needs (i.e., the
requirements process), the processes used to define, obtain, and apply
resources (i.e., the budget and programming process) as well as the
acquisition (procurement) process. Simply focusing on improvements to
the ``little a'' acquisition portion of this system, instead of the
larger Acquisition process, can not and will not substantially improve
Defense Acquisition Performance. The larger Acquisition process was
designed and optimized to respond to a security environment dominated
by a single strategic threat, the former Soviet Union. The security
environment is very different today--therefore, the processes need to
meet the demands of this environment. We must have the flexibility and
agility to respond to more dynamic security environments and rapidly
changing needs.
Fourth, adapting the larger Acquisition process to the realities of
a new security environment cannot be considered independently of the
organizations charged with its conduct and the system used to recruit,
train, develop and retain its workforce. The ``little a'' acquisition
workforce has been downsized and reorganized over the past 10 years
resulting in significant loss of experience. To make up for this loss
it appears we've imposed even more regulatory approaches to oversight
and introduced strategies that insert industry where we used to have
government with many unintended consequences. Key functions of the
``big A'' Acquisition process such as requirements development, system
engineering, operational testing and transitioning of science and
technology are being pursued as separate or independent entities adding
to the cost and complexity process.
Finally, the industrial environment has changed in fundamental
ways. Globalization and industry consolidation over the last 15 years,
as well as our ``outsourcing'' policies affect the processes and
strategies and techniques that we use and are required to be used. This
raises many key questions. Does competition produce desired outcomes?
Can we accommodate globalization? Why don't nontraditional suppliers
compete for defense business?
In conclusion, as I read through the pages of the Packard
Commission, the words characterizing the problems of weapons
acquisition ring as true today as they did 20 years ago. Achieving a
satisfactory acquisition system--``Big A'' and ``Little a''--will be a
significant challenge. As I have listened and studied this problem over
the past few months--and lived in this environment for over 25 years--I
am convinced we can do better. In our deliberations as a panel, we
currently have more problems identified than solutions, but I believe
you can expect us to offer ways to do better. Most reform and
improvements tend to focus only on the little ``a'' process alone. We
will address the key structural deficiencies in the big ``A''
acquisition process as well and the workforce that supports it and the
industry that is its backbone. Simply focusing on improvements to the
``little a'' acquisition portion of this system, instead of the larger
Acquisition process, cannot and will not substantially improve Defense
Acquisition Performance. Our collective challenge will then be to
overcome the myriad interests, conflicting policies and incentives and
inherent conflicts so that we can exploit technology to support our
warfighters as efficiently as practicable. Otherwise we will have
another effort in a few years addressing the same issues we have today.
We must ensure that in our efforts to improve the system, we do not
degrade our existing ability to provide our warfighters with the
systems and technologies they need to dominate the battlefield.
When the panel has completed its work and I would welcome the
opportunity to return to brief you on our findings and recommendations.
Chairman Warner. Thank you very much.
We will now proceed to a 6-minute round with our members.
First a question to you, Secretary England, on just procedure.
I find it very encouraging that the DOD on its own initiative
has begun to look at this situation and you have so many
different reports and wheels rolling towards trying to prepare
a comprehensive position for the QDR.
At the same time, I know my colleagues certainly on this
committee and perhaps others in the Senate are anxious to make
their contributions. I will talk with you in consultation with
my colleagues as to how we can have somewhat of a coincidence
of our work product such that we have an impact, we this
committee, on your analysis which will be reported in the QDR
process.
So let both of us think how best that can be done, with the
realization that we anticipate Congress will be concluding its
work for this year--I will not even mention when that will be,
but I know in the hearts and minds up here what it is--and then
we do not reconvene until the January time frame. So that
leaves precious little time for the confluence of viewpoints to
come together and influence your final report.
Do you have some thoughts initially?
Mr. England. Mr. Chairman, we have been working with your
staff, so our personnel, General Kadish's personnel, have been
working with the staff of the committee to receive input and
discussion. I value this interchange greatly, so I would just
be delighted if we had some mechanisms other than just a
hearing, which is fine. But I would value that.
Chairman Warner. I want to get the views of my colleagues,
but we will definitely work some system whereby our thoughts
can hopefully influence your outcome.
Mr. England. We would welcome that, sir, and I would
appreciate it. Thank you.
Chairman Warner. I come back to really one of the most
extraordinary chapters in my career here, and that is with the
problems associated with the tanker leasing program and the
revelations that ensued. You recall that this contract was
moving through Congress until it came to this committee, at
which time a group of us felt very strongly that we would not
concur in the reprogramming, and from that point on an
extraordinary sequence of revelations occurred.
In March 2005, the Defense Science Board (DSB) task force
issued a report on management oversight in acquisition
organizations and found that, and I quote, ``No structural or
policy mandates,'' exist to prevent a reoccurrence of a similar
case to the Darlene Druyun, who amassed considerable power over
the acquisition process without sufficient oversight and
external controls.
I hope I am incorrect in that, in that something has been
done since the issuance of that March 2005 DSB task force
report. Could you acquaint the committee with what you believe
has been put in place?
Mr. England. We have, and I would like to have Mr. Krieg
address that directly because he has implemented a number of
those corrective actions, Senator.
Chairman Warner. Thank you.
Mr. Krieg. Yes, sir. A number of steps have taken place in
the decisionmaking process and oversight process about
centralization of control, and it goes to who can make
decisions. We can get you the specifics on those.
One of the things I think is interesting in the report
was--and we have gone to it with the 360-degree evaluation--
there were a number of reports of her behavior that over the
tenure of time had different management in positions. So the
use of a 360 tool between an employee and a supervisor that
allows you to get a full-cycle evaluation of a person's
behavior and relationship would, I think, have helped unlock
that. At least that was the view of, I think, the DSB as it
looked at it, and that is one of the tools we are going to try
to put in place.
We have put in a number of ethics training, to go and
recertify what people are responsible for. That was one of the
clear needs, is to continually train people in their
responsibilities. So there are a number of those
recommendations that the DSB recommended to meet the needs of
the concerns that they had. There were 20 specific
recommendations. I can get the committee exactly what we are
doing on each 20. We report on it regularly and I would be
happy to provide you with those details.
[The information referred to follows:]
The DSB report contained 20 recommendations and highlighted the
need for the Department to emphasize the importance of ethics and
integrity. The Secretary of Defense agrees that ethics and integrity
need to be at the forefront of everything we do. We have actively and
expeditiously been working to implement the DSB recommendations as
outlined below. This will be an ongoing process that does not end with
just implementing the specific recommendations. Rather, we need to
ensure that ethics and integrity are part of the Department's values
and day-to-day operations.
The DSB report included 18 recommendations categorized in 4 main
areas: Processes, Oversight, Leadership, and People. The DSB also
recommended that DOD address two additional areas. The 20
recommendations and current implementation status follow:
Processes (1-5)
1. Recommendation: For major procurements, the Under Secretary of
Defense (Acquisition, Technology & Logistics) (USD(AT&L)) codify best
practices into policy.
Status: USD(AT&L)) will field a Best Practices Clearing House in
fiscal year 2006 at the Defense Acquisition University (DAU). The Best
Practices Clearing House will share and highlight ``best-in-class''
examples for the benefit of the acquisition workforce. Additionally,
the task force recommended that we use mistakes and failures as case
studies and communicate them broadly. We already have started action on
this recommendation, and one example will be an ethics-related series
of articles to be published in the bi-monthly Defense AT&L magazine.
2. Recommendation: USD(AT&L) ensure process for meaningful feedback
to bidders.
Status: OUSD(AT&L) is reviewing the feasibility of instituting
Acquisition Process Reviews (APRs) of the military departments. One
aspect that would be reviewed is whether the military departments have
instituted processes that provide meaningful feedback to offerors.
3. Recommendation: USD(AT&L) ensure distribution of delegated
acquisition responsibilities for major procurements.
Status: On March 1, 2005, the acting USD(AT&L) asked the military
departments and defense agencies to prepare policy/procedures that
ensure the separation of functions in acquisitions, so that complete
authority does not reside in one person. Currently, we are analyzing
responses to determine if additional guidance/policies are required.
4. Recommendation: Oversight, source selection and contract
negotiations should not reside in one person.
Status: Addressed by the action described in response to
recommendation 3 above.
5. Recommendation: Provide many avenues for voicing concerns.
Status: As part of the APRs described in response to recommendation
2 above, OUSD(AT&L) would review whether there are multiple avenues for
voicing and addressing of concerns.
Oversight (6-11)
6. Recommendation: USD(AT&L) should oversee processes as well as
programs.
Status: The APRs addressed in recommendation 2 above would address
this recommendation. In addition, in line with, but not undertaken to
specifically implement this recommendation, Acting Deputy Secretary
Gordon England established a Federal Advisory Committee, ``The Defense
Acquisition Performance Assessment Project'', on June 7, 2005. The
Committee is considering all aspects of acquisition, including
requirements, organization, processes, legal foundations, decision
methodology, oversight, and checks and balances. The Committee will
report to the Deputy Secretary in November 2005.
7. Recommendation: USD(AT&L) should identify and share best
practices.
Status: The Best Practice Clearing House described in the action
taken in response to recommendation one addresses this recommendation.
Also, the Director, Defense Procurement and Acquisition Policy, fielded
the Defense Acquisition Guidebook, which contains a repository of best
practices.
8. Recommendation: USD(AT&L) should question unusual practices and
organizational structures.
Status: Policy implementing this recommendation is expected to be
issued by November 2005. Also, the DAU will incorporate the policy and
best practices into its Acquisition Executive Courses.
9. Recommendation: USD(AT&L) should use mistakes and failures as
case studies and communicate them broadly.
Status: The DAU will develop case studies based on mistakes and
failures and incorporate them into senior level courses. In addition,
OUSD(AT&L) has developed on-line ethics training for the Acquisition
Professional Community.
10. Recommendation: USD(AT&L) should require defense components to
perform periodic self-assessments and demonstrate continuous self-
improvement.
Status: The OUSD(AT&L) commenced 360 degree assessments on key
leaders in October 2005. They will cover approximately 1,500 SES and
non-SES acquisition personnel. Inclusion of non-SES personnel expands
the pool of individuals that was recommended by the DSB.
11. Recommendation: USD(AT&L) should develop and periodically
review metrics rollup on senior acquisition leaders.
Status: The OUSD(AT&L) and (P&R) are developing metrics onsenior
acquisition leaders.
Leadership (12-15)
12. Recommendation: DOD should articulate more explicitly its
vision and values as a high integrity organization and expect the same
of its contractors.
Status: The Secretary of Defense and all of the senior Department
leadership understand the importance of integrity and this
recommendation. While this will involve ongoing emphasis from the
Department's leadership, some communications already issued include:
Secretary of Defense memorandum of September 7, 2005, ``Ethics and
Integrity''; USD(AT&L) memorandum of September 26, 2005, ``Acquisition
Integrity and Ethics''; USD(AT&L) memorandum of March 22, 2005,
``Acquisition Integrity & Ethics''; and USD(AT&L) memorandum of March
1, 2005, ``Ethics and Integrity.''
13. Recommendation: DOD/SECDEF should put ethics at the forefront
of Department communications.
Status: The Secretary of Defense issued a memorandum on September
7, 2005, to the entire Department workforce emphasizing the importance
of ethics and integrity in all of our work.
14. Recommendation: DOD/SECDEF should institutionalize an
orientation program in OSD for incoming senior leadership that
addresses:
Values/objectives of DOD and SECDEF.
Importance of leadership to sustain an ethical
culture.
Performance expectation tied to both of the items
above.
Status: OUSD(Personnel & Readiness) is reviewing the recommendation
and expects to implement it by March 2006.
15. Recommendation: Senior DOD leadership ensure flow-down.
Status: This will be addressed as part of the Department's action
on recommendation 14.
People (16-18)
16. Recommendation: SECDEF place priority on filling political
acquisition positions.
Champion reforms to streamline nomination and
confirmation processes.
Institute a succession planning process.
A void more restrictions that would limit interest by
experienced personnel.
Status: The Department supports the efforts of the administration
to address this issue. The Department appreciates the importance of
this issue.
17. Recommendation: Under Secretary of Defense (Personnel &
Readiness) (USD(P&R)) modernize SES performance management practices
Institute 360 degree feedback (see response to
recommendation 10).
Implement 5-year DOD-wide rotation policy.
Reissue bonus and new award system.
Status: See the response to recommendation 14.
18. Recommendation: Standards of Conduct--add disclosure
requirement for employment of majority children.
Status: OUSD(AT&L) is considering issuance of a memorandum
addressing the importance of being aware of such associations. A
decision is expected by November 2005.
DSB Additional Issues Raised (19-20)
19. Recommendation: DOD needs to closely monitor new defense
component services acquisition oversight processes as they mature,
especially in confirming that these contracts represent the best use of
DOD resources.
Status: The OUSD(AT&L) has commenced a comprehensive review of the
Services Acquisition Oversight Processes that have been implemented by
the military departments. Completion of this review is expected by
January 2006.
20. Recommendation: DOD leadership undertake a top-down internal
assessment to simplify and streamline the acquisition system and better
align the workforce as a result.
Status: Although not undertaken specifically to respond to this
recommendation, the acting Deputy Secretary Gordon England established
a Federal Advisory Committee, ``The Defense Acquisition Performance
Assessment Project'', on June 7, 2005. The Committee is considering all
aspects of acquisition, including requirements, organization,
processes, legal foundations, decision methodology, oversight, and
checks and balances. The Committee will report to the Deputy Secretary
in November 2005. This report will also be used by the Quadrennial
Defense Review that is ongoing.
Chairman Warner. Anyone else wish to contribute to that
response? [No response.]
To both Secretary England and Mr. Krieg: In your testimony,
you cite that the CSIS report on, ``beyond Goldwater-Nichols,''
as a potential source for ideas to improve the acquisition
system. Indeed, this committee will soon access the knowledge
of that distinguished group of people at CSIS in the course of
our ensuing hearings.
A fundamental point made in the report is that the
requirements process has to be taken out of the hands of the
Services and structured around the combatant commanders so that
the advocates for solutions are not also writing requirements.
This would require a restructured Joint Requirements Oversight
Council (JROC), on which service vice chiefs or chiefs are
replaced by deputies to the combatant commanders.
This is quite a recommendation. Have you all had a chance
to review that?
Mr. England. I am going to turn it over to Admiral
Giambastiani. But first let me say we did have CSIS come into
the Department and brief all of the results, Senator. So we
have considered all the results. But frankly, we have also held
them all in abeyance until we also get the results of the other
two efforts that are under way. We would like to be informed by
all three of these studies before we really start reaching our
own conclusions.
So CSIS, the issue dealing with requirements is obviously
critical because if requirements are stable and if they are
affordable and if we have the right balance between
affordability and requirements, then of course we are a long
way in terms of having affordable weapons systems. How you do
that in terms of a JROC, or today we have what we call Joint
Capability Integration and Development System (JCIDS), is still
open for decision. But they have definitely identified, I think
in all of our views, a very key aspect of this and that is the
setting of requirements, requirements that are affordable and
also requirements that reflect reasonably mature technologies
so we have confidence in the schedule and cost for the program.
I would defer a specific answer, although I would
appreciate it if Admiral Giambastiani would make a few comments
here because that function is under his perusal.
Chairman Warner. I wonder if I might superimpose this
question. In your opinion, should the service chiefs have
primary responsibility for acquisition management and execution
of acquisition programs? So that sort of ties it up.
Mr. England. Can I make a comment on that before I turn it
over? These areas are hugely important questions, and I will
tell you it is going to take a lot of deliberation to come to a
conclusion. I will tell you the issue here. First of all, the
Packard Commission, that was one of the decisions, was to take
it out of the Service chain. So one of the decisions was not to
have it--on the other hand, my view, at least on a preliminary
basis, is that we have diffused the authority and the
responsibility, because Mr. Krieg has the full authority for
the acquisition itself, and that goes back to the acquisition
executives in the Service; on the other hand, the service
secretaries and the service chiefs have budgetary authority.
So while they can be reconciled, nonetheless you cannot
point to one person who has actual responsibility for the
entire acquisition process. So this is a very critical point
that needs to be examined.
Chairman Warner. I am not asking you to pronounce today how
you are going to decide it, but I tell you, I really believe
that our service chiefs--I like the idea of one person, one
accountability. So we will see how we go along.
Admiral, do you have a view? That will complete my question
time.
Admiral Giambastiani. Yes, sir. If I could, let me just
follow on the deputy's comments with regard to the requirements
process. Having lived in the Pentagon and been on the
requirements side of a Service and now on the requirements from
the joint perspective, and having lived as a combatant
commander with a deputy and in the case of Joint Forces Command
dealing with about 1.3 million service personnel under that
combatant command and preparing them and doing concept
development, experimentation, and the rest, I have been asked
this question numerous times, and we will have debates and
discussion internally on it, but I would tell you that
replacing--my own personal view is replacing the service vice
chiefs with deputy commanders will not solve this problem,
because those combatant command deputy commanders do not have
the staff and are focused on different types of problems.
However, those deputy commanders and those combatant
commanders should be intimately involved in the process of
joint requirements, and that is one of the areas that I think
needs to be emphasized significantly. We have gone up and down
on how much or how little combatant command involvement is
required, but that integration of their thoughts and what
capabilities they believe are necessary for us out in the
hinterland for the regional combatant commands and in the case
of the functionals, like Strategic Command, Transportation
Command, Special Operations Command, the integration of that is
essential to coming up with reasonable requirements.
So just simply stated, I would tell you we could work on
this for a long period of time, but I am not sure that that is
going to be an answer, just snapping our finger and making an
organizational change like that. I think it requires better
integration of the Services and the combatant commanders. That
is part of what we are trying to do inside the Joint
Requirements Oversight Council (JROC).
With regard to the service chiefs, let me follow on to
Secretary England's comment. I have been, once again, on the
resource side of this three-legged stool as a resource sponsor
and also been on the requirements side. But I was not on the
acquisition side formally under the current system, but I found
being embedded with the service acquisition executive while I
was a resource sponsor was critical to the success of any
program I was involved in. I was fortunate to have one that
welcomed me in every discussion--this transparency that
Secretary England was talking about.
So I have met with the service chiefs and talked to them
about this very issue, and they all have somewhat different
opinions on this recommendation out of the CSIS. Some range
from, sure, I would love to have it all, to others saying, I am
very happy with the level of involvement. It all depends on
which department you are in, service department that is, and
what the relationship is with the Secretary and the senior
acquisition executive.
But what I would tell you is is that if you do not bring
acquisition requirements and the resource side together in a
way where you are working constantly together, we will not have
what we want out of this incredibly complex acquisition
process, the big ``A'', as Ron Kadish has mentioned.
So my experience has been that you can reside all of this
responsibility in one person, but it is such a complicated
process that it requires a lot of people to be very dedicated
to the success of the overall end product, cost, and schedule
and what the product is. So what I would tell you with this is
I am going to follow on with Secretary England on it. I think
there are things we can do to make this process work much
better, and I look forward to working with you on this. But I
do not think just arbitrarily saying the service chiefs take it
over, it is going to work, will be the answer.
Chairman Warner. We will not decide that now. Thank you
very much.
Senator Levin.
Senator Levin. For years the DOD has understood that its
efforts to incorporate immature technologies into weapons
systems are a major factor in delays and in escalating program
costs. The acquisition guidance of the Department has been
revised continually to require a greater level of technological
maturity. We have acquiesced in new acquisition techniques,
such as incremental acquisition and spiral acquisition, and in
effort to get the Department to focus its efforts on mature
technologies that are actually ready to be produced.
Despite that, according to the GAO only 15 percent of the
Department's programs begin development with mature
technologies, as required by the guidance. With the Army's FCS
program, with over $4.5 billion already invested, 2 years after
its launch, only one of the 50 technologies on the program
meets the Department's maturity requirements. In the Global
Hawk program, we have several critical technologies needed to
provide the advanced capabilities that it has and hopes to
have. Several of them are so immature that they will not even
be tested on the new air vehicle until late in the program, by
which time most of those UAVs will have been bought.
What has been the problem with the Department complying
with its own policy guidance? Why has it not followed its
guidance? Mr. Secretary?
Mr. England. Senator, this is sort of a conundrum here if
you think of the situation we are in. On the one hand, it takes
too long to get weapons systems developed, meaning by the time
they are fielded the technology is old rather than new
technology. On the other hand, we try to get the latest
technology because that is what wins on the battlefield. So on
the one hand we try to get the very latest breakthrough
technology to help our men and women in combat.
I will say, I think in some of those cases we aggressively
go after new technology and it ends up by delaying the program.
It has the perverse effect that, instead of getting the
technology faster, it is actually slower.
I am not sure there is an answer to this, except to have
good developmental programs, good research and development
programs, and go forward from a baseline that we clearly
understand and that experienced people make rational decisions
in terms of how they go forward. But we do need research and
development (R&D) programs with outputs that we can rely and
count on before we go forward in our development programs.
So again, it is a judgment issue. There is a pressure,
frankly, in both directions on this and there is no question
there has been some programs where we have missed and missed by
a lot and it has cost us money and it has taken us a lot of
time.
Senator Levin. But there is policy guidance that resolves
these conflicting goals, right?
Mr. England. Senator, I just do not know if there is policy
guidance per se. There is definitely guidance relative to
science and technology (S&T) development, relative to R&D,
baseline technologies. I do not know if I would call that
policy per se, but there is at least practices that we go by.
Perhaps Ken Krieg is a little more familiar with that. He might
comment a little bit more.
But it is a conundrum that we face in this area.
Senator Levin. There is always that. There are always those
competing goals.
Secretary Krieg.
Mr. Krieg. There is clearly policy guidance. As you said,
the challenge comes in the will to trade between the desire for
more technology and more requirement with the technology
maturity at the point of decision. It is that point of trading
between cost and performance and schedule, because you have
immature technology, schedule is often the result.
So I think your point is the will to trade off. The policy
is clear.
Senator Levin. On the question of contract services, we are
at the point now where the Department spends perhaps as much on
acquisition of contract services as it does on acquisition of
products, including major weapons systems. But despite that
fact, the Department has no organizations that are devoted to
the acquisition of contract services, no career paths for those
who work in the acquisition of contract services, very little
training and guidance for the acquisition of contract services.
Rather, the responsibility for services contracts remains
dispersed throughout the DOD, with little management or
oversight.
What are you going to do to change that?
Mr. England. Senator, first of all, I believe they are all
valid comments. Services have grown over the years until they
have become a very large part of our expenditure. We have had
discussion just recently, as a matter of fact, Ken Krieg and I,
on this whole area. Now, he has started some initiatives with
some of the larger procurements, because obviously they are the
ones that are most at issue to us now, which is over the $2
billion, in terms of understanding that.
But we do need to have practices, just like we do for
hardware in the DOD. Still working that. That is something that
has grown and has not had the right sort of attention in the
past, is on our--is on our agenda to go work and put those
processes in place. So it needs a lot of attention yet. We have
started that. Perhaps Ken can comment on his larger, the $2
billion and up sort of categories. But it is an issue that
requires attention. It is part of what we are working.
Senator Levin. Let me then move on because I want to get to
one other area. Sorry, I do not want to interrupt that flow,
but I am afraid I have to.
Because of the low priority given to the acquisition of
contract services and the chronic understaffing of the defense
acquisition workforce, what the DOD does is send billions of
dollars every year to other agencies. It funnels this money to
other agencies, leaving it up to those agencies to award and
manage contracts on its behalf. At least it is supposed to
manage contracts on its behalf.
The DOD Inspector General (IG) reviewed 72 interagency
purchases earlier this year, determined that 67 did not have an
adequate interagency agreement, 64 of the 72 did not have an
acquisition plan that justified the use of this process, 44
improperly used government funds. This is out of 72. 44 of 72
improperly used government funds. The DOD did not adequately
monitor contractor performance on any of the 72.
Just to give you one example of the kind of problem that
results from this so-called, interagency contracting, the IG of
the GSA reported last December on a $230 million award to the
Titan Corporation to provide employee assistance and counseling
services to military families. According to that GSA IG, Titan
immediately subcontracted the job to a subcontractor, which did
substantially all the work. Titan's role was to charge a 10-
percent fee, $23 million, for which the DOD got nothing.
Now, I made reference before to this interagency
contracting for at least some of the people who did
interrogation of detainees at Abu Ghraib, and I believe the
same thing is true at Guantanamo. Here you have a situation
where the DOD offloads, funnels money to the Department of
Interior (DOI), which does not have the slightest idea as to
what it is doing, except acting as a funnel for the DOD.
Then a contractor is hired. That contractor takes care of
interrogations. Now, you talk about transparency. This is
opaqueness at its rawest form. You have a contractor out there,
hired by an agency which does not engage in interrogations of
detainees, is doing it on behalf of the DOD, is paid by the
DOD, so the DOI is given money by the DOD to perform this
function through this contractor.
Now, who is responsible to see that the contractors who are
engaged in detainee interrogations did not engage in
inappropriate conduct? When we go through this offloading
process, who is responsible here? Secretary England? I am just
using this as one example of offloading, which is a big
contracting problem now. But in that particular one, who is
responsible at the DOD to make sure that that contractor--I
think it is Consolidated Analysis Centers, Inc. (CACI) is doing
what it is supposed to do under the contract? Do you know?
Mr. England. Senator, I do not know for sure, but I would
expect if it had to do with interrogation issues in theater it
would be under the combatant commander to make sure that was
being done----
Senator Levin. But that is not a contracting officer. Who
is the contracting officer for the DOD?
Mr. England. If it is a contract from DOD then the
responsibility would be in DOD. That would be my view.
Senator Levin. But it is not. It is a DOI contract, through
the GSA, that is twice removed. Who at the DOD is responsible
to see that that that contractor is performing appropriately
when you use this offloading mechanism, this funneling of
dollars through another agency?
The answer, I will give you the answer. You can disagree
with it if you want, but the answer is nobody is accountable at
the DOD. That is the answer, in terms of making sure that that
contractor is performing that contract appropriately. There is
no one up the line at the DOD who is responsible to see to it
that that contractor is performing that contract appropriately
and is not behaving inappropriately. The DOI does not have the
vaguest idea, but they are the contractor here.
Why do you use the DOI? Why the offloading?
Mr. England. Senator, I just do not know. I do not know
why. I can understand in some cases why they are in different
departments, because they are proficient in whatever we are
buying, so we do things with GSA. There are obviously things
that make a lot of sense to do. I obviously do not know every
reason that we go through another department. Certainly there
are reasons why that is good business for DOD and for the
government. But I am not at all familiar with every case.
Ken, perhaps you can comment?
Mr. Krieg. Yes, I just note, Senator, that we work
closely--I will not comment on the specific case you are
working, but in the general case--with the DOD IG and with the
IG at GSA. We agree with their findings. We are evolving that
policy. We are trying to put the management controls in place
that clearly have us use interagency contracting for those
kinds of purposes for which it should be used and not for
others.
That will be--you are obviously right that we have a
management challenge in front of us and we accept that.
Senator Levin. I would close by asking you to report to
this committee, with the approval of the chairman: Using that
contract as the example, who is it that is reviewing the
activities of that contractor to see to it that that contractor
complied with the contract that was entered into, which had no
relevance to the DOI, like most of these offloading contracts?
According to the GSA IG, 64 of the 72 interagency purchases did
not have a plan that justified the use of that offloading
approach.
But I'm going to ask you, subject again to Senator Warner's
approval, to look into that contract and to tell us who was
looking into that contract, who was overseeing it on behalf of
the DOD, and whether or not that contractor carried out the
contract that was entered into and did not act inappropriately.
Because, as far as I know, there has been no oversight.
[The information referred to follows:]
The contract to which you refer actually was 11 delivery orders
placed by a DOI contracting officer against a GSA Federal Supply
Schedule. These orders have been terminated. The current DOD contract
for interrogation, intelligence, and security services in Iraq is
overseen by the Department of the Army, as the Executive Agent.
The Department is working to ensure use of non-DOD contracts and
interagency acquisitions is done properly. Specifically, in October
2004, the acting Under Secretary of Defense (Acquisition, Technology,
and Logistics) (USD(AT&L)) and the Principal Deputy Under Secretary of
Defense (Comptroller) jointly issued a policy memorandum on the
``Proper Use of Non-DOD Contracts.'' The memorandum provides criteria
that must be considered before a DOD organization acquires products or
services under a non-DOD contract to ensure that is the best method to
satisfy the requirement. It also requires each of the military
departments to establish procedures to ensure that the use of non-DOD
contracts is the right business decision, which they have all
accomplished. On July 20, 2005, USD(AT&L) issued a memorandum to the
military departments and defense agencies asking them to report on
their compliance with the ``Proper Use of Non-DOD Contracts'' policy.
Reports are due in December 2005. The Department is working closely
with other Federal agencies, such as the GSA and the DOI, to ensure
that interagency acquisitions are properly justified and executed.
The Department is working with four of the assisting agencies (GSA,
DOI, NASA, and Treasury) to establish a Memorandum of Agreement that
will address not only compliance with statutes, regulations, and
policies but also other areas of concern, such as oversight and
surveillance, data capture, and fees. In response to recommendations
made by recent GAO reports regarding interagency contracting and
service contracts, the Department is also modifying the Defense Federal
Acquisition Regulation Supplement requiring that contracting officers
appoint a properly trained contracting officer's representative, in
writing, before performance commences on any contract action for
services awarded by a DOD component or by another Federal agency on
behalf of DOD.
Senator McCain. The Senator's time has expired some time
ago.
Senator Levin. Thank you very much. Thank you.
Mr. England. We will get back with you, Senator.
Senator McCain. I thank the witnesses again for being here.
I read carefully the statements that were submitted and also
listened carefully to the oral statements that were given here
this morning. From both experiences, one would think if one
just walked into the room that this is a new issue, that
somehow we just discovered that we have procurement problems.
I did not see one single concrete recommendation--and maybe
you can help me out here--as to how we can fix this problem. I
know we have the QDR. I understand the parameters of the
problem and it is helpful to know the parameters of the
problem.
So I will begin by asking each of the witnesses, beginning
with you, Secretary England: give me one concrete proposal as
to how to fix this problem?
Mr. England. Senator, I can give you a few proposals how to
fix the problem. First of all, obviously make sure you have
stable requirements, make sure we understand the requirements,
make sure----
Senator McCain. Give me one specific fix?
Mr. England. Okay. Put a--make sure within the Department,
through what we now have is a JROC, but if you want, strengthen
that process so that we have firm requirements----
Senator McCain. How do you do that?
Mr. England. We can do that by making sure in the JROC
process we have the right people reviewing those, along with
the budget people, because we need to--and I think the comment
was made earlier, requirements do not stand alone. They have to
be tied in with the budget and make sure we do the right
tradeoff. So the process of doing that tradeoff is really what
we are looking to do to make sure we understand, that we do not
go try to buy something we cannot afford.
So the budgeting process, the resource process, tieing in
with the requirements, I think all of us at this table would
agree is the key to make sure that we contain costs and meet
the needs of the warfighter. Now, the mechanism to do that
within the DOD is what we are trying to come to grips with in
these various approaches, because every single thing we do also
has a down side to it. Everything is not just a benefit. We do
have to look to see if we bring in other issues and problems.
So I think we all agree that fundamentally we need to tie
the resources, the budget, and the requirements closely knit
together, and in that way we will have much greater confidence
in our programs. The mechanism to do that is a large part of
what these studies are about, so we understand how to implement
this within the DOD.
Senator McCain. Secretary Krieg, I repeat my request: one
specific fix?
Mr. Krieg. I can give you a specific. As we come to
milestone reviews, particularly early, the Vice Chairman and I
are going through, particularly in challenged programs, having
the program manager or program executive officer, whichever one
it is, sit and go through what are the key performance vectors,
what is the relative technical maturity of the knowledge to
fix, to provide that capability, and what is the relative cost
given the desire, the technical maturity, and the cost.
We have literally worked on several programs where we have
gone through and said, interesting that we had that desire, we
are not at the state of maturity to get there, and we have
begun collectively to work at the trade space in major
milestone, early milestones A and B, to get that tradeoff
between cost, performance, and schedule, all three parties
together.
Senator McCain. Admiral?
Admiral Giambastiani. I would echo what you just heard
Secretary Krieg say. Specifically what I mean by that is where
you bring in the requirements people into the Defense
Acquisition Board from the JROC side so that we can combine the
requirements and acquisition process to see what makes sense.
For example, there may be five capability areas for a
system. We have done this, for example, in the Joint Tactical
Radio System to try to get a handle on this and get a grip on
the overall system. Look in capability area A, for example, and
say: This is the range of requirements and capabilities that we
are looking at; in order to get from this side to the other
side, it costs a huge amount of money. We say, we can live over
here at something less than that because that makes sense and
is the art of the possible.
We then go to capability B. It may be that the cost to get
to the highest level of capability that we had written as
requirements over on this end is very small. Okay, let us go
all the way; it is possible industry-wise, technologically,
program manager-wise. In other words, we are trying to remove
risk from the program.
This is something we are doing on the requirements
generation side. We have just done it in a series of satellite
imagery programs in the last 6 weeks since I have been here and
we have done this now in one of our defense acquisition boards.
So that is a concrete way we think we have to proceed in the
future. We need to refine this and we need to improve on it,
but that is where we are going, to bring both of these sides
together. That is something that the Packard Commission and
almost every acquisition review I have ever seen say you must
do.
Senator McCain. I wonder why we have not over 20 years.
General Kadish.
General Kadish. Senator, I would just choose the workforce
improvement recommendation that we discussed in the panel, but
have not come to a conclusion at. I would require, just as we
have required the acquisition personnel at all levels in that
little ``a'' stovepipe to be certified, trained, educated, and
experienced, I would require the same for requirements officers
and budget officers in this activity.
Senator McCain. Thank you.
Finally, Secretary England, recently the Defense Science
Board (DSB) released a report in March: ``One of the task
force's key findings is that, while current acquisition
practices make an incident on the scale of the Druyun case
unlikely, there are currently no structural or policy mandates
in place that would prevent this situation from recurring.''
Did that finding of the DSB in March concern you?
Mr. England. Senator, we put a lot of corrective actions in
place. It did say that there is a remote possibility that this
could happen again.
Senator McCain. Actually, they say that: ``there are
currently no structural or policy mandates in place that would
prevent this situation from recurring.'' That is the DSB report
last March.
Mr. England. Ken, I will let you address it. But Senator,
my understanding from the report was they recognized a lot had
been accomplished and there was still the possibility that
things could obviously go wrong in the future. But my
discussions with the DSB were not quite that strong, frankly.
Their view was there was a remote possibility you could still
have a problem in the future, and we agreed to work with them.
Senator McCain. I do not want to quote from their report to
you for the third time, but I would like very much for you to
submit for the record, because my time has expired, actions
that have been taken to prevent a reoccurrence. I would
appreciate it.
Mr. England. I will, will do, Senator.
Senator McCain. Secretary Krieg, I am sorry I am out of
time, but go ahead real briefly, please.
Mr. Krieg. Just to note, they had 20 specific
recommendations. We are implementing a number of them. We will
provide you those, where we are in status and where we are
working through it.
Senator McCain. Thank you. Maybe you could submit that to
us so we would be better informed.
Mr. Krieg. Will do. We would be very happy to.
[The information referred to follows:]
The DSB report contained 20 recommendations and highlighted the
need for the Department to emphasize the importance of ethics and
integrity. The Secretary of Defense agrees that ethics and integrity
need to be at the forefront of everything we do. We have actively and
expeditiously been working to implement the DSB recommendations as
outlined below. This will be an ongoing process that does not end with
just implementing the specific recommendations. Rather, we need to
ensure that ethics and integrity are part of the Department's values
and day-to-day operations.
The DSB report included 18 recommendations categorized in 4 main
areas: Processes, Oversight, Leadership and People. The DSB also
recommended that DOD address two additional areas. The 20
recommendations and current implementation status follow:
Processes (1-5)
1. Recommendation: For major procurements, the Under Secretary of
Defense (Acquisition, Technology & Logistics (USD(AT&L)) codify best
practices into policy
Status: USD(AT&L) will field a Best Practices Clearing House in
fiscal year 2006 at the Defense Acquisition University (DAU). The Best
Practices Clearing House will share and highlight ``best-in-class''
examples for the benefit of the acquisition workforce. Additionally,
the task force recommended that we use mistakes and failures as case
studies and communicate them broadly. We already have started action on
this recommendation, and one example will be an ethics-related series
of articles to be published in the bimonthly Defense AT&L magazine.
2. Recommendation: USD(AT&L) ensure process for meaningful feedback
to bidders.
Status: OUSD(AT&L) is reviewing the feasibility of instituting
Acquisition Process Reviews (APRs) of the military departments. One
aspect that would be reviewed is whether the military departments have
instituted processes that provide meaningful feedback to offerors.
3. Recommendation: USD(AT&L) ensure distribution of delegated
acquisition responsibilities for major procurements.
Status: On March 1, 2005, the acting USD(AT&L) asked the military
departments and defense agencies to prepare policy/procedures that
ensure the separation of functions in acquisitions, so that complete
authority does not reside in one person. Currently, we are analyzing
responses to determine if additional guidance/policies are required.
4. Recommendation: Oversight, source selection and contract
negotiations should not reside in one person.
Status: Addressed by the action described in response to
recommendation 3 above.
5. Recommendation: Provide many avenues for voicing concerns.
Status: As part of the APRs described in response to recommendation
2 above, OUSD(AT&L) would review whether there are multiple avenues for
voicing and addressing of concerns.
Oversight (6-11 )
6. Recommendation: USD(AT&L) should oversee processes as well as
programs.
Status: The APRs addressed in recommendation 2 above would address
this recommendation. In addition, in line with, but not undertaken to
specifically implement this recommendation, Acting Deputy Secretary
Gordon England established a Federal Advisory Committee, ``The Defense
Acquisition Performance Assessment Project'', on June 7, 2005. The
Committee is considering all aspects of acquisition, including
requirements, organization, processes, legal foundations, decision
methodology, oversight, and checks and balances. The Committee will
report to the Deputy Secretary in November 2005.
7. Recommendation: USD(AT&L) should identify and share best
practices.
Status: The Best Practice Clearing House described in the action
taken in response to recommendation one addresses this recommendation.
Also, the Director, Defense Procurement and Acquisition Policy, fielded
the Defense Acquisition Guidebook, which contains a repository of best
practices.
8. Recommendation: USD(AT&L) should question unusual practices and
organizational structures.
Status: Policy implementing this recommendation is expected to be
issued by November 2005. Also, the DAU will incorporate the policy and
best practices into its Acquisition Executive Courses.
9. Recommendation: USD(AT&L) should use mistakes and failures as
case studies and communicate them broadly.
Status: The DAD will develop case studies based on mistakes and
failures and incorporate them into senior level courses. In addition,
OUSD(AT&L) has developed on-line ethics training for the Acquisition
Professional Community.
10. Recommendation: DSD(AT&L) should require defense components to
perform periodic self-assessments and demonstrate continuous self-
improvement.
Status: The OUSD(AT&L) commenced 360 degree assessments on key
leaders in October 2005. They will cover approximately 1,500 SES and
non-SES acquisition personnel. Inclusion of non-SES personnel expands
the pool of individuals that was recommended by the DSB.
11. Recommendation: USD(AT&L) should develop and periodically
review metrics rollup on senior acquisition leaders.
Status: The OUSD(AT&L) and (P&R) are developing metrics on senior
acquisition leaders.
Leadership (12-15)
12. Recommendation: DOD should articulate more explicitly its
vision and values as a high integrity organization and expect the same
of its contractors.
Status: The Secretary of Defense and all of the senior Department
leadership understand the importance of integrity and this
recommendation. While this will involve ongoing emphasis from the
Department's leadership, some communications already issued include:
Secretary of Defense memorandum of September 7, 2005, ``Ethics and
Integrity''; USD(AT&L) memorandum of September 26, 2005, ``Acquisition
Integrity and Ethics''; USD(AT&L) memorandum of March 22, 2005,
``Acquisition Integrity & Ethics''; and USD(AT&L) memorandum of March
1, 2005, ``Ethics and Integrity.''
13. Recommendation: DOD/SECDEF should put ethics at the forefront
of Department communications.
Status: The Secretary of Defense issued a memorandum on September
7, 2005, to the entire Department workforce emphasizing the importance
of ethics and integrity in all of our work.
14. Recommendation: DOD/SECDEF should institutionalize an
orientation program in OSD for incoming senior leadership that
addresses:
Values/objectives of DOD and SECDEF.
Importance of leadership to sustain an ethical
culture.
Performance expectation tied to both of the items
above.
Status: OUSD(Personnel & Readiness) is reviewing the recommendation
and expects to implement it by March 2006.
15. Recommendation: Senior DOD leadership ensure flow-down.
Status: This will be addressed as part of the Department's action
on recommendation 14.
People (16-18)
16. Recommendation: SECDEF place priority on filling political
acquisition positions.
Champion reforms to streamline nomination and
confirmation processes.
Institute a succession planning process.
Avoid more restrictions that would limit interest by
experienced personnel.
Status: The Department supports the efforts of the administration
to address this issue. The Department appreciates the importance of
this issue.
17. Recommendation: Under Secretary of Defense (Personnel &
Readiness) (USD(P&R) modernize SES performance management practices.
Institute 360 degree feedback (see response to
recommendation 10).
Implement 5-year DOD-wide rotation policy.
Reissue bonus and new award system.
Status: See the response to recommendation 14.
18. Recommendation: Standards of Conduct--add disclosure
requirement for employment of majority children.
Status: OUSD(AT&L) is considering issuance of a memorandum
addressing the importance of being aware of such associations. A
decision is expected by November 2005.
DSB Additional Issues Raised (19-20)
19. Recommendation: DOD needs to closely monitor new defense
component services acquisition oversight processes as they mature,
especially in confirming that these contracts represent the best use of
DOD resources.
Status: The OUSD(AT&L) has commenced a comprehensive review of the
Services Acquisition Oversight Processes that have been implemented by
the military departments. Completion of this review is expected by
January 2006.
20. Recommendation: DOD leadership undertake a top-down internal
assessment to simplify and streamline the acquisition system and better
align the workforce as a result.
Status: Although not undertaken specifically to respond to this
recommendation, the acting Deputy Secretary Gordon England established
a Federal Advisory Committee, ``The Defense Acquisition Performance
Assessment Project'', on June 7, 2005. The Committee is considering all
aspects of acquisition, including requirements, organization,
processes, legal foundations, decision methodology, oversight, and
checks and balances. The Committee will report to the Deputy Secretary
in November 2005. This report will also be used by the Quadrennial
Defense Review that is ongoing.
Senator McCain. Thank you.
Senator Dayton.
Senator Dayton. Obviously there are a lot of culprits here.
One of my concerns stems from the involvement that Senator
Inhofe and I had with the decision to terminate the Crusader
program, because that was an incident where the contractor,
United Defense, by their account--and I never saw it disputed--
was ahead of schedule, under budget, meeting performance
requirements, doing everything properly, and then had the rug
literally pulled out from under them, and that cost of
terminating the program, through Senator Inhofe's leadership
efforts and others of us involved, salvaging some aspects of
it. But the cost of that way of proceeding on a project and
then reversing the decision and then trying to pick up the
pieces after the proverbial egg has been shattered just to me
is one of the reasons why these lack of cost accountability can
accumulate.
What are the incentives for either the procurement
officers, the contractors, anybody in this system, to be doing
things well, as opposed to, and properly and under budget and
ahead of schedule and meeting performance? What are the rewards
and, conversely, what are the penalties for failing to do so?
Mr. England. Senator, I go back to my Navy experience. We
tried to build in incentives into the contract so that there
were incentives for the contractors to perform well and, on the
other hand, there were generally financial penalties if they
did not perform well. So profitability was based on good
performance, and if you were--that is, we would have a target
cost and expectations for the programs in terms of technical
performance, and if you did not meet those objectives then
there was basically a financial penalty for the contractor.
So we tried to structure the contracts--many of them had
already been in place, but a number of them we were able to
renegotiate to build those incentives into the contract. So we
tried to build in and negotiate with the contractor levels of
performance and expected performance in terms of schedule and
cost, and that was the way we tried to handle that on at least
all of our major procurements.
Senator Dayton. Is that standard operating procedure or
contracting procedure throughout the four service branches now?
You said you tried to go back and restructure existing
contracts. Is that standard contracting procedure?
Mr. England. Senator, I do not know--that was before my
time. I do not know how the Crusader contract was structured. I
am just not familiar with that contract. It was not in my area
of responsibility at the time.
Senator Dayton. Going back to the point Senator Levin made
about some of the sole source contracts in Iraq and at least
some of the published reports of failure to perform, regarding
those, are there penalty clauses in those contracts? Have they
been invoked?
Mr. England. Senator, I do not know.
Senator Dayton. Would you find out, please?
Mr. England. Yes, I can.
Senator Dayton. And respond to that?
Mr. England. Yes, I can.
[The information referred to follows:]
The U.S. Army is the executive agent for program and acquisition
management for the reconstruction mission in Iraq. It supports
reconstruction through the Joint Contracting Command--Iraq/Afghanistan,
which to date has awarded 18 firm fixed-price sole-source or limited
competition contracts, including purchase orders, using the Iraq Relief
and Reconstruction Fund (IRRF). These contracts contain the same
remedies that other contracts for similar services or supplies contain,
which may be exercised in the event a contractor's performance falls
short of what is required by the contract.
Additionally, some contracts contain provisions that authorize such
things as incentive fees or award fees that are designed to encourage
good performance.
Finally, the contracts contain a termination for default clause,
which provides the harshest remedy for failure to perform. To date,
none of the 18 contracts has been terminated for default.
Senator Dayton. Thank you.
The other question I have relates to the disconnect between
what is going on in the field with the troops and procurement
decisions. I came across just last month in Minnesota the
father and mother of a soldier from Minnesota who is a tank
crewman in Iraq. I can give you more of the details of his
company and the like, but basically they were repairing these
tanks in the 115-degree temperatures of the Iraq summer and
their gloves that they were using were literally burning off
their hands. They were not sufficient to protect them. They
were tearing the sleeves off of their shirts and using those to
protect their hands, burning their hands, while they were doing
these tank repairs.
The soldier himself had the idea, being a NASCAR
aficionado, of the fact that those pit crews have gloves that
protect their hands under very hot conditions. They were not
able to obtain those, so the father has set up his own project
to purchase these NASCAR gloves and send them to his son and
others in that situation.
But I guess my larger question is, when there is that
disconnect between procurement and the sufficiency of the
product in the field or, conversely, if someone in the war zone
experiences a failure of an item, how do you get that? How do
you empower people to make that decision to buy something
different, and how do we unshackle procurement so that we can
be responsive in those situations? Anybody who wants to
respond?
Mr. England. Senator, with the help of Congress, we do now
have quick acquisition processes, so situations like that--I
mean, if something like that occurs, we do have mechanisms in
place that we can rapidly respond and buy those types of goods.
So that now--again, I do not know what the situation was in
that particular case, but there are mechanisms in place that we
can respond very, very quickly to buy whatever those kinds of
goods are that we need to buy. So those mechanisms are in place
in the DOD now.
Senator Dayton. Mr. Secretary, this is present tense. It is
still ongoing. The father is still sending gloves as we speak
over there. So if you could put me in touch with the proper
person who can--all right. Secretary Krieg, I will follow up
with you then subsequently.
Admiral Giambastiani. Senator, if I could just add.
Senator Dayton. Please.
Admiral Giambastiani. There is a burden on the chain of
command. If we are failing to take care of these service
personnel, then we are not doing our job. So we will have to
look at this. I have not heard about these burned gloves. I am
sure we have other instances of these types of things, but our
job is to go figure out how to give them the tools to do their
job.
Senator Dayton. Thank you, Admiral. I would just point out,
my time has expired, but this is one instance of what we have
also found with the armoring the vehicles, the armoring of the
troops over there. I do not know where--and again, this is not
a perfect world, but whatever needs to be done to make these
more efficient and to have a direct connection between people
who are feeling the needs or the failures and then getting them
resolved I think is essential.
Thank you, Mr. Chairman.
Admiral Giambastiani. If I could just add one last thing.
Senator Dayton, each of the Services has an urgent requirement
process to try to deal with these, to follow on Secretary
England's comment. These urgent requirements are designed to do
just what you are looking for and what really that soldier is
looking for, so that we do not have to go to this other
extreme. We will have to look and find out why this was not
done.
Senator McCain. Senator Inhofe.
Senator Inhofe. Thank you.
Let me just follow up on something Senator Dayton has said
that does concern me. I am a real believer in the JROC process.
I think it is very deliberative. You have the right people. You
have the vice chiefs. They determine what our critical needs
are going to be for the national defense. They deal with
organizations that they charter, such as the Functional
Capabilities Board, and it goes on and on. They get the
information and a lot of input from the combatant commanders.
So this process works, I believe. I have looked at it. Now
I am addressing not the costs in the process that the hearing
is really addressing, but the fact that JROC does work. Now, it
seems to me that you used the example of the Army Crusader. You
had all this process determining that we had this need, this
critical need for the Crusader for the future, for national
defense. Then all of a sudden this is cancelled, and nobody
knew it was going to be cancelled. In fact, we were in markup
at the time that it was cancelled.
Now, when it was cancelled, I was a supporter of the
program. I called up three of the combatant commanders at the
time. They were all unaware of the proposed cancellation and
they felt it should not have been cancelled. I called up the
chief of staff of the Army and they were not consulted either.
I guess what I am saying is if we have a system that is
identifying our critical needs and it is working somewhat
successfully, why can you not during this process you are going
through right now see to it that if there is going to be a
change in the program or a cancellation of a program that they
go through just as elaborate a process as they did when they
established it? Do you have any thoughts about that? [No
response.]
I guess not.
Admiral Giambastiani. Senator Inhofe, what I would say to
you is that if we do not get a bite at the apple, if you will,
on the requirements side of the business, obviously from the
military perspective, from the JROC perspective and the
Services--we state requirements and we bring them into the
system. But I guess what I would tell you is that on the
Defense Acquisition Board when we terminate problems we get a
bite at the apple on that side.
I am a co-chair along with Secretary Krieg on this. I
cannot speak to the Crusader, if you will.
Senator Inhofe. I am not really concerned about that.
Forget about the Crusader. The fact is that you go through this
elaborate process in determining what our needs are going to
be, our critical needs, and then all of a sudden they are
completely left out of the process when they totally terminate
a project.
I am only suggesting that we use the resources and the
effort you are involved in right now to make sure that that
does not happen and that they are involved in the downsizing or
the elimination the same as they are in identifying the needs
and building the project.
Admiral Giambastiani. Could I further my answer and just
tell you that we have just done that in a series of satellite
imagery programs. What happened is there was a proposal to
terminate some of these classified programs and I convened the
JROC. We brought forward all of the original requirements for
all of the programs that we laid down on the military side. We
went and reviewed what we call a senior warfighters
requirements review (SWaRF) and we went through every one of
those requirements and restated the need in certain areas for
what we felt was our red line, if you will, on a military
perspective.
We brought those forward to the acquisition system. We
brought them forward to the Director of National Intelligence
and we negotiated through that, and we were able to come out to
a satisfactory conclusion. So I think we are trying to do
exactly what you are talking about.
Senator Inhofe. I hope so, Admiral. You might go back and
look at that particular project and see. Maybe that is an
isolated case, but it is one that certainly is worth looking
at.
First of all, let me compliment you, Secretary England, for
the choice of calling up General Kadish to do the job that he
is in the process of doing right now. I do not think there is
anyone who has had a longer background in acquisition than he
has. He has handled some--I think you were the point man of the
C-17 program, of course the missile defense. Those are
successful programs.
Back during the 1990s when they were talking about the
peace dividend, they did the downsizing of the acquisition
force. I was chairman of the Readiness and Management Support
Subcommittee at that time and I remember I was quite outspoken,
asking the question, did we do too much? We reassigned a lot of
the military components of the acquisition process. We had a
hiring freeze on the non-military or the civilian side.
I guess, General Kadish, in taking on the project they are
taking on now, do you think we may have downsized too much and
do you have the personnel still now necessary to do the job
that you are trying to do?
General Kadish. Senator Inhofe, what we have seen in the
commission meetings and in the data that we have been gathering
and looking at, I think the trend is that we probably have gone
too far in that regard. That is where the complexity of the
process gets very onerous to be imposed on a workforce that is
neither experienced nor in a position to make some common sense
judgments that you need for these types of efforts.
So that is a problem that has long been brewing over 10,
almost 15 years now. It may take a little bit of time to fix
it. But we have to go back to basics in our workforce and start
teaching them what they need to do. As I tried to say earlier,
one of the fixes that seems to be emerging is not only for the
little ``a'' acquisition workforce, the traditional ones we
have been talking about, but also a reorientation of the people
who write requirements at all levels, who handle the budget
systems at all levels, to be more aware and more accountable
for what they do and the decisions they make. So this is a very
serious problem.
Senator Inhofe. I would suggest if you find that you do not
have the resources or the personnel resources that you let us
know, so that we can try to correct it.
My time is expiring right now, but I would just like to ask
one last question, a little differently than Senator McCain
asked it. Does anything specific come to your mind right now
that you did that was different back in one of the two
successful programs, either MDA or C-17, that might be elements
of those successful programs that you might want to use or
resurrect for your current mission?
If nothing comes to mind, maybe you could answer that for
the record.
General Kadish. I would be happy to answer it for the
record. But the situations that I have been in, especially in
the C-17 program, that was very troubled at the time, having
the same kind of things we were talking about today in terms of
its problems, it ended up being a management process with short
lines of communication, very quick decisionmaking, stabilized
requirements, and the willingness to trade requirements and put
the costs and stability issues in front of us to allow us to
fix the problems. That is a major characteristic of successful
programs in the end, and what we should try to do is emulate
that as much as possible.
[The information referred to follows:]
See response to QFR number 3.
Senator Inhofe. Thank you, gentlemen.
Thank you, Mr. Chairman.
Senator McCain. Thank you.
Senator Clinton.
Senator Clinton. Thank you very much.
General Kadish, the last sentence in your prepared
testimony says when the panel has completed its work you would
welcome the opportunity to return. When do you expect to
complete the work of the panel?
General Kadish. Senator Clinton, we are on track by the end
of November to have a report and an initial set of
recommendations at that time. Now, we may be a little bit later
than that, depending on how it plays out between now and then.
But that is the target area that we are shooting for.
Senator Clinton. So could this committee expect to welcome
you back some time after the first of the year?
General Kadish. I would be happy to come back, Senator,
about that time period.
Senator Clinton. General Kadish, does your charge for the
Defense Acquisition Performance Review Project include contract
services?
General Kadish. Secretary England's charge was very broad
in chartering us and we have looked at the operations and
service contracting activities. But right now our major focus
is on weapons systems and hardware procurements and not
services as the top priority.
Senator Clinton. So does that mean--and this is not a
comment about your work. I am just trying to understand the
scope of your responsibility. Does that mean then that when you
finish this report in November it will not cover contract
services?
General Kadish. I am not willing to say that now, Senator
Clinton. We are looking at all these areas and how it affects
everything the DOD does. We will have to--just because of the
sheer volume, we will have to make cuts somewhere. But I am
fairly confident that a lot of these recommendations will
affect service contracting in general and the way we procure
services as well.
So it may not be a specific area of concentration or a
chapter in a report, but it certainly will apply.
Senator Clinton. General, are you aware of a study that the
British government did in the last several years looking at
their acquisition process?
General Kadish. We have done a literature search of all the
acquisition systems, not only the United States. I am pretty
sure it included the foreign systems as well. I am not sure I
am aware of that specific study. But if there is something of
interest there, we can certainly look at it.
Senator Clinton. Secretary Krieg, you are nodding your
head. Are you aware of that study?
Mr. Krieg. I am not aware of a specific study per se, but
aware of the kind of changes. In fact, I have been over once.
They have divided their requirements group from their
procurement group. They have centralized their procurement
function. They are struggling with many of the same kinds of
issues. We actually use them as--we use each other and try to
share lessons learned, because we have pursued some different
paths. But we are in close communications with them both
through the acquisition side and the requirements side and work
together on that.
Senator Clinton. I would be very interested in additional
information about that, because it is my understanding that
they went totally outside. They went to an international
consulting firm. They did not use retired people. They went to
people who had expertise in supply chain and just in time
inventory and the like. They embedded consultants with their
troops in southern Iraq.
Out of that experience, I am told, came some very useful
recommendations. They were able then to cut lots of the red
tape and the bureaucracy. Now, that might or might not be
directly applicable to large weapons systems, but it certainly
did help to solve some of the problems they faced, which are
problems we still face in getting adequate materials into
combat theaters and all of the problems we have had now going
on 3 or 4 years with up-armored High-Mobility Multipurpose
Wheeled Vehicles (HMMWVs), body armor, et cetera.
So I would like very much to know more about what they
determine. But based on what you just said, then, am I to
assume or not that you have done some lessons learned coming
out of Iraq and Afghanistan about some of the procurement
acquisition challenges we faced in very real-time situations?
Secretary Krieg, have we done that, or Secretary England?
Mr. England. Senator, if I could just address at least one
of the specific cases, one I am particularly familiar with.
That is how we counter improvised explosive devices (IEDs)
which are obviously a serious issue for our men and women and
also for the Iraqi civilians. We have in that particular case,
the group responsible, they have budgetary authority directly
to the general, so the general can literally himself authorize
$25 million of expenditures. He reports directly to me also
with the vice chairman, so he has a direct pipeline to both of
us.
They have people literally embedded in the field with the
operating people. We have operating people here. We have
dedicated test sites set up that we have put together here in
the United States to test equipment. So we put together as a
result of lessons learned in Iraq, we have tried to apply a lot
of those lessons learned in literally how we develop what the
requirements are, how we field, how we train, comprehensively
trying to deal with those kind of problems.
So I can tell you that there are examples where I think we
have learned a lot and applied a lot of those lessons learned
in terms of what we do every day to be as quick and responsive
as we can to our men and women in Iraq and Afghanistan.
Senator Clinton. I think the IED story is a good story,
because clearly there has been a concerted effort to try to
deal and defeat this particular form of attack. But I for one
have never quite gotten straight all of the problems we had on
a lesser level with adequate vehicles, with adequate armor. We
have read lots of news accounts, but have there also been
lessons learned that you are applying in this ongoing process
that General Kadish is running as to what we have learned that
will inform the decisions that this panel is making about
recommendations? General Kadish?
Mr. England. Go ahead, Ron.
General Kadish. Senator Clinton, we did an extensive set of
sessions on the agile combat support type of activities that
each of the Services are putting in place, have put in place.
Those lessons learned will trickle--``trickle'' is the wrong
word--will be a part of the overall process that we are going
to recommend.
There are some wonderful things that happened in these
processes. Some of the other issues were very interesting--I
just might point out--is that people in the process that were
trying to do these very difficult, fast-paced type of
activities, did not think they had the authorities to do them
in the bureaucracy.
What one of the major lessons learned, at least for me, was
that we have to fix that somehow, because they did have the
authorities. That is a training issue, it is a workforce issue.
So I think you will see that that will be a major part of our
emphasis.
Senator Clinton. I appreciate that, because you know we are
now getting reports that, for the Guard that was assigned to
the Gulf Coast, their equipment was inadequate, their
communications systems were scarce. It all is part of the same
set of issues that we are trying to confront. So thank you.
Admiral Giambastiani. If I may, just to add, Senator
Clinton. There is a very extensive lessons learned effort going
on for this hurricane relief, both in Katrina and in Rita.
Joint Forces Command has upwards of 25, 30 people forward
deployed, in addition to reach-back. We have a governmental
lessons learned effort we are participating in right now.
Northern Command has embedded personnel. We have sent teams
forward. They were there before, during, and after Rita, for
example. So we are trying to collect a significant amount of
this to report on those types of issues.
Thank you.
Senator McCain. Senator Ensign.
Senator Ensign. Thank you, Mr. Chairman.
I want to--first of all, I think that one of the points
that Senator Clinton was making about getting an outside view
sometimes can be very helpful. We all know that private
industry does that quite often. They will bring in somebody or
a team from the outside to take a look at something, because
sometimes when you are down in the weeds it is hard to see a
clear view of what is going on.
So I want to try to maybe raise this up to 30,000 feet and
look down and try to look at maybe a different way. I mentioned
in my opening statement about we have cut the acquisition
workforce. Some have suggested that that is part of the
solution, is beefing the acquisition workforce back up.
But when we had the acquisition workforce beefed up we
still had these problems. We had the Packard Commission
reports. As everybody said, this is not a new issue. This has
been going on. So whether the acquisition workforce is up or
down, that does not seem to have fixed--or maybe it has
worsened the problem, but it certainly does not--it is
obviously not the major fix in the problem.
So what I want to try to look at here is, we have the
budget system. We have talked about that with acquisition and
acquisition reform. Those to me--and maybe we can get you to
comment. How do you fix one without fixing both of them at the
same time? It seems to me that they are integral to each other.
Secretary Krieg or Secretary England, would you like to
start?
Mr. England. Senator, just let me make a comment. I think
General Kadish said it very well when he said it is a big
``A''. It is not little ``a'', it is big ``A''. Big ``A'' is
the entire system, so it is requirements, it is the budgeting
system, and it is the resources and it is the balance between
those, and then along with all the other things, the tests that
you do. But it is the big ``A''.
So we have asked, like in Ron Kadish's advisory group,
Federal advisory group, to look at big ``A'' and to look at
every aspect of this, because you can get down into the
acquisition itself and that is not, frankly, where the solution
is. I believe he made that in his opening statement. This is a
big ``A'' issue and that is why we have asked to address this
comprehensively.
I actually worry about doing piecemeal implementation of
things without understanding the whole system. I also want to
comment, my general feeling about this is, I know everyone
wants to increase the size of the acquisition workforce. My
feeling looking at this, I believe it is too complex. I believe
the system is overly complex. Over the years it has just
become, frankly, bureaucratic. We have maybe too much in place.
I tend to think that when we look at these recommendations
that we will want to simplify. Frankly, if we simplify it then
it is easier in terms of authority and responsibility and
oversight. Part of this is just--the difficulty is just
understanding on any program what has happened, because there
is a high degree of complexity in these systems.
Now, maybe that is unavoidable. Maybe when all this work is
done we conclude we need this degree of complexity. But will
tell you my instincts, after a lot of experience in both
industry and now government, is if you can simplify it is much
easier to manage, much easier to control. So my tendency is to
try to make this a simpler process rather than a more complex
process.
Again, maybe that is not the point here. We will know in a
few months as we get more and more insight in terms of how we
actually do business.
Senator Ensign. Secretary England, that is why I asked the
question the way that I asked it. General Kadish, you made that
point about simplifying and that was the question that I had
written down, is actually how do we simplify. When Senator
McCain mentioned, give me one thing, that was going to be my,
give me one thing that we can do to simplify. But there is no
one thing. I realize there is no one thing that we can do.
In my just short period of time that I have been on the
committee here, we have all these rules and regulations and
laws put into place for us to have oversight of what you do.
You have all of the internal regulations and everything that
goes on to make sure that everybody is informed along the
processes and all of--basically, we have a lot of CYA type of
regulations in place because nobody wants to get in trouble for
making the wrong decision.
When you look at the private sector and when they have
reformed themselves, because bureaucracies, whether they are
private sector or whether they are government bureaucracies,
have a tendency to put these rules into place, it ends up a lot
of times costing more money, becoming less efficient, the more
oversight that you are doing.
So I am glad that you are looking at that idea of
simplification, because I honestly believe, my gut tells me
that that is the direction that this whole process needs to go
as well. But it is going to be difficult and we are going to
need some concrete reasons why, so that we can simplify the
processes that we make you all go through as well.
This has to be a joint process that we are going through
with you. As we have all said, it is complicated and we need to
simplify that complexity.
Mr. England. That is my tendency, Senator. If you think
about it, if you think about what makes a defense contractor,
it is not the products that they build; rather, it is
understanding the complexities of how to do business with us.
That is what makes them unique. Commercial companies are
separate because they do not understand how to do business with
us. They do not understand the complexities of these rules and
regulations and processes.
So frankly, to the extent we can simplify the way we do
this in the DOD, I believe we then open up more of American
industry to do business with the DOD, which helps us from a
competitive point of view. So I believe there are some
structural issues that we need to address long term and not
just fixes to ``acquisition.'' That is sort of my vision of
where we need to go longer term in this endeavor.
Senator Ensign. Secretary Krieg?
Mr. Krieg. I would only add one thing and that is, in
comparison to private industry where you have--a grand
challenge for us is to create a commonality of data available,
that integrates the data from the acquisition world, from the
resources world, from the actual performance world, that gives
general managers an ability to see it all and creates a
transparency about plan versus performance.
That tool, which the private sector uses very well to
discipline both choice and behavior in the back side, is one of
the grand challenges we have in the public sector, in
government, and clearly one of the things that the deputy and
all of us are engaged in trying to get to.
General Kadish. Senator Ensign, I just want to try and
clarify one thing. My remarks on the workforce should not imply
increasing the workforce. I am looking and I would like to see
more quality issues associated with that, to lower complexity,
get more common sense experience into the force, because the
way the downsizing was done did not backfill the middle
management and the people to gain the experience we need. So
the numbers are not necessarily the issue.
We have to do the big ``A'' acquisition workforce, not just
the one we have been laying off.
Senator Ensign. Thank you, Mr. Chairman.
Senator McCain. Senator Akaka.
Senator Akaka. Thank you very much, Mr. Chairman. I want to
add my welcome to our distinguished panel this morning and I
look forward to your responses.
I have been here long enough to have been a member of this
committee and also in particular a member of the Readiness and
Management Support Subcommittee with my friend Chairman Ensign
from Nevada over the years here. I have been concerned about
what has happened to our defense acquisition workforce over the
last 15 years. We have cut our acquisition workforce in half
over this period. These cuts continued even after the
procurement holiday of the early 1990s came to an end and even
after the global war on terrorism brought record levels of
procurement expenditures. It continued even as we took on new
procurement challenges with vastly increased purchases of
services and information technology.
We have made these cuts in a haphazard way, I feel, without
giving consideration to the recruitment, training, and career-
building needed to ensure the ongoing vitality of our
acquisition organizations.
At a Readiness and Management Support Subcommittee hearing
earlier this year, Mike Wynne, who was then Under Secretary of
Defense for Acquisition, Technology, and Logistics, told us:
``I believe we are at a point where any further reductions''--
and this is reductions in defense acquisition workforce--``will
adversely impact our ability to successfully execute a growing
workload. The numbers are startling. The defense acquisition
workforce has been downsized by roughly half since 1990, while
the contract dollars have roughly doubled during the same
period. The global war on terrorism and an increasing defense
budget places greater demands on acquisition workers' ability
to support the warfighter. We need to continue to renew and
restore the defense acquisition workforce. We need to ensure
that we have the right people in the jobs to perform the
functions required to support our warfighters. Now more than
ever, I believe we need to increase the size of the acquisition
workforce to handle the growing workload, especially as
retirements increase in the coming years.''
I would like to ask each of you, beginning with Secretary
England: Do you agree with Mr. Wynne's assessment of the state
of the acquisition workforce? If so, what do you think we
should do about the problem? Will this issue be addressed in
your acquisition reviews? Secretary England, good to have you
here.
Mr. England. Senator, thank you. Senator, the issue will be
addressed in all of our work looking at the whole acquisition
problem. Again, as General Kadish said, it is an issue of not
just number, but the quality and the training of the workforce,
and also again in my judgment hopefully simplifying the system
so it is not as complex and does not require as many people
with as much specialized knowledge.
But this is an integral part. We cannot operate this whole
system of requirements and budget and resources without a well-
trained and well-qualified workforce. So at the core, it is
indeed about people and it is about experienced people who can
make the kinds of decisions and judgments that are necessary at
every step along the process. This is not just a single
decision. These are decisions made every day by people on the
front lines, particularly with our major weapons systems.
So it requires experienced people, very capable people, and
people who can exercise wise judgment in terms of understanding
problems and progress. So people, vitally important, and we
will be working to shape and do everything we can to have the
right kind of workforce consistent with the total acquisition
process that we will be recommending come February.
Senator Akaka. Thank you, Mr. Secretary.
Secretary Krieg, if you have any further comment?
Mr. Krieg. I just echo all of what the deputy said, but add
the additional: If you look at the age distribution of the
workforce. By the way, it is an issue not just for the defense
acquisition workforce, but for the DOD workforce and I think
for the Federal Government workforce largely. Our average age
in the civilian acquisition workforce is 46.7, 48 years of age,
with a big gulf of people in their 30s. So it is in front of us
now that we have to begin replenishing the workforce.
I just note that this committee has worked with us over
time on acquisition demonstration reform. The advent of the
National Security Personnel System (NSPS) built off of many of
those learnings, gives us a tremendous opportunity, a new set
of tools to address this, that have not been in front of us
before. So implementing NSPS becomes a very critical part of
continuing to renew the defense acquisition workforce.
Senator Akaka. Admiral, do you have any further comments?
Admiral Giambastiani. What I would say, Senator, is that my
experience is from a uniformed side of the business, is if you
do not have highly professional, experienced people who have
been in this business for a while and understand it, as you
have just heard, you are not going to be successful in it. It
is absolutely imperative to have that kind of workforce in this
operation.
Senator Akaka. General, any further comments?
General Kadish. Senator Akaka, I think most of that has
been answered. The only thing I would add is that the workforce
that we are training today will be the workforce of the future.
So we cannot look at this only as a today issue, and by today I
mean the next year or 2 or even 3. It is for the next
generation, because these things have lead times associated
with it. It took us 10 or 15 years to get where we are. It will
probably take about the same amount of time to get to a
solution that the next generation can live with.
So we have to take a long view here and a consistent view
of the workforce and not declare victory if we just fix it
once. So I would argue for a longer term view of the workforce
improvement.
Senator Akaka. Mr. Chairman, I thank the panel for their
responses and I will place my further questions in the record.
Thank you.
Senator McCain. Senator Sessions.
Senator Sessions. Thank you, Senator McCain. I will be
submitting some specific questions for the record dealing with
space programs and some other ideas and areas that have some
difficulties.
I would say that we do have difficulties. I think those,
the chairman and Senator McCain and others who have called for
these hearings, are correct. It is time for us to really
confront this issue. We have been going somewhat spasmodically,
as Senator Inhofe discussed with the Crusader. That was going
full speed ahead 1 minute and it is gone the next. Obviously
that is not the best way to do business.
I would note this. Nearly half of our discretionary budget
is defense. We have had nice increases in the last number of
years, particularly under President Bush's leadership. I am not
sure we are going to be able to sustain those increases. We
have funded the war pretty much with supplemental spending, and
I hear that perhaps defense is able to effect some positive
changes out of that supplemental. That would be good for the
long-term future. But we cannot expect that to continue.
There will be some in the Defense Department who say, well,
you do not love us any more. But this budget--this train wreck
is coming. I think Secretary Rumsfeld has been clear about it
from the beginning. We know that we have a procurement crunch
coming, a bow wave that leaves us in difficult circumstances
under the best of conditions. But when we are over budget and
way over budget in some instances, that makes things even more
difficult.
So I do not see any alternative to confronting the issue
honestly and directly. I think the Defense Department is
committed to that. We have a war to fight, but we have some
things to do.
I would ask you to do a couple of things. One is, try to
use plain language, please. I do my best to understand the
jargon of the Defense Department, but the American people need
to participate in these discussions and were they listening
in--and some are--I am not sure they could understand much of
what we say. Sometimes that leads to an impression that we
really do not want people to understand and it creates power in
those who know how to use the acronyms. I do not like it
myself.
Costs have overrun more than we can justify and I am
concerned about that. I hope that we can do a better job of
allowing small businesses to participate. We are concerned
about a consolidation in a few big companies. Maybe we need to
look at how we contract. Maybe we could create some bigger
companies if we made it easier for smaller companies to be a
player in some of these matters. This bundling and things like
that might be easier for managers so they have to look at one
company, but in the long run I am not sure that has proven to
be effective for us. I think we should look to allowing smaller
businesses to participate.
We could get into a long discussion of this, but it seems
to me that we fund a lot of research and development, we move
forward with new technology, we develop a new expensive weapons
system, and then the next thousand or so are just as expensive
as the first one. Secretary England or Secretary Krieg, can we
do a better job of recognizing that once the technology has
been developed and the aircraft or system has been produced
that the reproduction of that is far less expensive as each
unit goes by?
Mr. England. Senator, I believe where you see reasonable
rates we do have learning curves. My experience, industrial
experience, on the F-16 is there is a learning curve every
year. That is, the costs went down at a predictable rate as we
got better and better and better and learned how to build it
better and better and workers became more efficient and
proficient.
So we do have learning curves where we have reasonable
build rates. Now, even on our ships the cost goes down across
the ships, even if it is 8 or 10 ships. But mainly I think we
are plagued with small quantities. So small quantities, you do
not get much of a learning curve when you are only building
small numbers or you build one and it takes you a few years and
you build it again. So where you have a long cycle time and
small quantities you do not get the same benefit as a large
quantity with a short cycle time.
Senator Sessions. Some of these ships, for example, are
going up rather than down in cost, it seems.
Mr. England. I would expect with spiral new capability--I
have to look at each specific case. I just do not know the
specific case, Senator.
Senator Sessions. I do not think the HMMWV costs went down.
Mr. England. Pardon?
Senator Sessions. I do not think the HMMWVs' costs have
gone down in any significant way. Those kinds of things can be
driven down. It seems to me once they have learned how to make
this and the system is in place and we negotiate or have the
right kind of contracts, we might do better in that area.
I remember on ships--this stuff has been going on a long
time. Matthew Fontaine Maury in the 1850s, the pathfinder of
the seas, wrote a speech in which he said: ``Why is it it costs
more to refurbish a ship than to build a new one,'' and
scathingly criticized some of our contracting procedures. So we
have been at this for some time.
General Kadish, you were involved in the missile defense
process and did a superb job. You had an evolutionary process,
a spiral development. Could you briefly share with us what role
that may have in the future of contracting from your opinion?
General Kadish. When you are in an environment where the
technology is either immature or has not been invented yet, you
need a mechanism to mature that technology over time, while at
the same time you are building things and gaining experience
with it. That is what this idea of evolutionary development
gives us.
The traditional requirements process does not allow you to
do that in a major sense because they want a final design type
of activity. So as we go forward and recommend ways of doing
this in terms of acquisition strategies and so forth, we are
going to have to balance the need for what I call a grand
design by requirement, the perfect missile defense system, if
you will, versus the way we actually build it, to mature the
technology to get there. That is the major difference between
the two approaches.
If you have a grand design, you will spend any amount of
time and money trying to reach it, and we are seeing that today
in our weapons systems programs. Schedule lengthens. Schedule
lengthens, costs go up. Schedule and cost are directly related.
As opposed to a more deliberate approach, to take chunks of the
maturity at a given time.
That should not be mandated for everything, because you
have to use common sense when you apply these issues. But the
lessons of evolutionary development activities are things that
we ought to try to encourage. I give you the example of the F-
16. The first F-16 did not--could not pass an operational test
today, could not pass it, because it was basically a day, no
weather type fighter. You would have to ask yourself, why would
we spend millions building an airplane that basically could fly
in the daytime?
Well, we built it so we could make it better. Now today we
have 4 or 5,000--I cannot remember the number--of the most
sophisticated airplanes that the world has seen in that class,
and we did it evolutionarily. So there are structural issues we
have to address.
That is kind of a long answer, but fundamentally there are
ways we can do this, that we can make things better.
Senator Sessions. Your experience in aircraft and national
missile defense should really qualify you for this commission,
and we are hoping and looking forward to good things from it.
General Kadish. Thank you, Senator.
Senator Sessions. Thank you, Mr. Chairman.
Senator McCain. Thank you.
Senator Chambliss.
Senator Chambliss. Thank you, Senator McCain. Let me thank
you for being the person pushing behind the scenes to make sure
this hearing happened. You and I have talked about this issue
for a long time now. We are going to make something happen here
and it has a lot to do with your commitment to making sure that
we spend our tax dollars wisely.
General Kadish, what you said is truly interesting relative
to the F-16. I know we could look at virtually every weapons
system that we have out there and we could see similar
problems. But what you highlight is the fact that, along the
lines of what Secretary England said earlier, and that is that
we are at the point right now where providing the latest
technology on a weapons system slows down the acquisition
process.
Obviously, 20 years ago with the F-16 we just built it, and
then we started making positive changes to it after we started
flying it. Secretary England and I have talked about the F-22.
If we had done that with the F-22, we would have had that
weapons system in the inventory years ago and we would still be
making these improvements to it. But instead, now we are
continuing to put the latest technology on board before we ever
get it to the testing stage.
I do not know. We have to find the right happy medium here
that causes the angst among folks, everybody on this committee,
but I think Senator McCain said it best, why in the world we
are paying what we are paying for specific weapons systems now
versus what we used to pay for them, somewhere along the line
does not make sense.
Secretary England, in talking about making sure that we get
this latest technology on a weapons system, the one thing that
has kind of always bothered me--and I am more familiar with the
F-22 from a parochial standpoint because I am so appreciative
of the weapons system than others--is the fact that we compete
these weapons systems early on and we award a contract to
develop a weapon system, such as the F-22 as an example. But we
have been really in the R&D and the acquisition stage and now
we are in the production stage, but this has been about a 20-
year process.
The competition that we had to award that contract got left
behind at the time the contract was awarded. Now, I do not know
how we continue this competition as we move through the changes
from a technology standpoint that we add to these weapons
systems. There may not be a way to do it, but it is pretty
obvious that, having gone through building a house, every time
you made a change it cost you a lot of money. So we know that
when you make a change on a weapon system it is going to cost
you a lot of money, and it is money we cannot afford any more.
So my question is that, as we develop new weapons systems
now is there a way to make sure that we either take advantage
of off-the-shelf technology or can we devise a way to continue
that competition all the way through from the time the contract
is originally awarded until the time we get to the procurement
stage?
Mr. England. Again, sort of an interesting dichotomy,
Senator. An example: We are buying the multi-mission maritime
aircraft (MMA) airplane, which is basically a modified 737, for
the United States Navy. It replaces another airplane in
inventory, but it is a modified commercial airplane. Now, once
you go under contract you do want, as Senator Sessions said,
you do want long enough a run that you get the benefit of a
production run, with learning curves and efficiencies and
quality improvements, et cetera.
So once you let these contracts, it is for a significant
number, and to have another competition later would be very
expensive. So we do rely on the competitive process at the
front end, which is generally a development program and then a
production program with options for the government that we can
elect in terms of numbers of production to buy at certain
prices. So we try to lock in production.
We do have the competition early on. When you look at the
number of contracts let without competition, a lot of that is
follow-on to what we are doing. We do try to find competitive
environments. That said, we only have one submarine producer,
we only have one aircraft carrier producer. The industry has
consolidated, plus some of those systems do not lend themselves
because other people do not have the capability in unique
areas, like submarines or aircraft carriers, et cetera.
So each area you have to look at independently. We do try,
whenever we can, obviously to get competition. Again, I like to
try to find more companies to come into this environment and be
able to compete in the defense industrial place. I believe that
would be beneficial, frankly, for the country and for the DOD.
So it is a complex issue. Every program has to be examined on
its own.
Senator Chambliss. I do not know how we do this, but you
and any number of other folks at the DOD now bring a vast
amount of private sector contractor experience to the table. We
are going to have to do it a little bit differently than is
done in any other area of the government that I can think of,
because this is so--to purchase a weapons system, particularly
complex weapons systems, is a very complicated and
sophisticated business. But there has to be a way to continue
that competitive edge on the part of the government or insist
on that competitive edge.
Secretary Krieg, along that same line, it is a fact that
many of the things that we are now accusing you of doing, such
as commercial contracting or using other agencies to pursue
inter-agency contracts and downsizing the acquisition
workforce, we in Congress and this committee specifically told
you to do that. So with that in mind, I think we should partner
with you to make this process better. I know Senator McCain and
I are committed to making sure we do that.
I would like to note for the record that there are some
programs at DOD that are working well and that have produced
tremendous results. The C-17 is a good example of that. Both
the procurement program as well as the public-private
partnership for sustaining that weapon system is a success by
any standard.
Also, the C-130J program, which this committee has focused
on so much, and rightly so, is without question a success
story, particularly when you talk to those folks that are
flying it, as we are doing today, hurricane hunting as well as
delivering troops and supplies in Iraq. The people that are
criticizing that program are inside the Beltway and the folks
outside the Beltway that are flying it love that weapons
system, but they do not have to worry about the price of it
like we do.
I think, Mr. Krieg, you would agree that there is a time
and a place for commercial contracting and in fact that it does
save money and can be used effectively in the right
circumstances. Can you elaborate on when you think the use of
commercial contracting is appropriate?
Mr. Krieg. Yes. I tie commercial contracting to generally
commercial products. When the military is buying military-
unique products, we enter a different domain. That does not
mean necessarily that there are not streamlined ways to do it,
there are not better ways to think about it. But I tend to
think that commercial contracts should be used in the domain of
commercially available products with good competition and other
factors out there that discipline the system.
Where you move to military-unique programs, there is not
the disciplining of the market that exists in a commercial
environment and therefore we need other tools to do that.
Senator Chambliss. Thank you.
Senator McCain. Thank you very much.
Do you want to add something, Secretary England?
Mr. England. Could I clarify one thing, though? Pardon me,
Senator. Senator Chambliss, I commented on one submarine maker.
There are actually two companies, but they each build half the
submarine. So for purposes of competition it is like having one
company. But to clarify, there are two companies that actually
build the submarines for the United States Navy. Pardon me. I
just wanted to clarify the record.
Senator McCain. Thank you.
Thank you, Senator Chambliss, and I look forward to
continued working closely with you on this issue.
Just a couple of points. General Kadish, I think you have
to think outside the box here a little bit. One of the areas
that I think you are going to have to consider is the nature of
the threat, because that has obviously a direct impact on
procurement policy. There are a lot of threats that do not
require F-22s to respond to. There are a lot of threats that
some low-tech old military presence aspects of it are
important.
One of the greatest public relations acts of the United
States of America was having an aircraft carrier to supply the
tsunami victims. It did not take a $4 billion destroyer to do
that or a $14 billion aircraft carrier. So I hope you will look
at that end of our requirements as well.
Another area that I hope that you and DOD would look at. We
have a very successful high-tech information technology
industry in this country that is the engine of our economy.
Maybe we ought to look at the way they do business. Maybe we
ought to try to ring them into some kind of involvement in our
acquisition process.
The smartest people in the world now reside in Silicon
Valleys all over America. I would argue that somehow they are
able to compete, somehow they are able to keep costs down,
somehow they are able to mass produce, and each advance in
technology lowers costs, rather than in the case of defense
acquisitions costs go up with improvements in technology.
So I hope you will maybe expand your charter a bit,
General, into looking at other aspects of this issue besides
simply why widget A costs more than it used to, et cetera, as I
was guilty of in my opening statement.
So we need to do some innovative thinking and look at new
ways to fix this process. By the way, one of the lessons of
history I think is that in the 1980s we basically did away with
cost-plus contracts. We had incentive contracts. Somehow we
have crept back into cost-plus contracts and I still do not
understand why we have, why we have done that.
Then of course, we have to confront, as Secretary England
brought up a long time ago, this issue of single sources for
specific weapons systems. If there is only one company,
corporation, in America that is capable of building an aircraft
carrier, then we may have to regulate costs if there is no
competition. You get the worst of all worlds when you have an
unregulated monopoly.
So there may be--as a free marketer, everything that I
believe in cries out for not doing it. We may have to look at
some kind of regulation of costs if there is only a sole source
contractor and if there is a lack of competition. But we also
ought to look at ways to instill competition in some of these
areas.
I think there are a lot of success stories and we can look
at those. But I also would argue that we are almost in a crisis
when we look at our capability of acquiring a lot of weapons
systems which now have basically reached such a point where our
defense appropriations simply will not handle very much of
those badly needed systems.
So I would ask if there are any final comments, beginning
with you, Secretary England.
Mr. England. Senator, I guess my final comment: This is a
very complex, vexing problem. Obviously, a lot of smart people
before us have worked this problem and here we are today. I
think, as General Kadish said, 20 years after Packard you have
about the same description. My view is there are some
structural changes we need to make in this system. It is more
than just how we do a specific item.
I can just tell you this, Senator. We are committed to work
this problem, to try to put a system in place. We will work
with Congress to do this. It will take both of us working
together, because I am convinced we will want some changes in
terms of the regulation and law as we go forward with this. So
we will work with you in this.
I can tell you we are trying to tap all the best people we
can. We have been out to a lot of industry, even outside our
defense industry. We will tap into the Silicon Valley folks.
Everybody who can help us, we will take whatever help we can
get in this and input to put together a system that is
responsive to our military and affordable to our taxpayers. So
you do have our commitment to go work this earnestly, to try to
solve some of these systemic problems. We will be working
between now and February with a number of efforts under way
that will be culminating in about that time period. It will be
very transparent, so we will deal with you in a completely open
process throughout this whole effort.
Senator McCain. Secretary Krieg?
Mr. Krieg. Just to echo that, those thoughts, and say I
look forward to continuing to work with this committee, look
forward to input from the members and the staff. We have a lot
of work ahead of us, but we look forward to working with you to
handle these problems.
Senator McCain. Admiral?
Admiral Giambastiani. Senator, I personally and our joint
requirements group is committed to working with you and working
within the DOD to deliver the capability the country, our
soldiers, sailors, airmen, marines, and coast-guardsmen require
to get the job done that this Nation demands, at an affordable
rate. We are going to do the best we can. I will just tell you,
I am dedicated to do that with you.
Senator McCain. Thank you.
General?
General Kadish. Senator McCain, we will take your
admonition to heart and we will provide some interesting grist
for the mill for consideration.
Senator McCain. Thanks very much.
This hearing is adjourned. Thank you.
[Questions for the record with answers supplied follow:]
Questions Submitted by Senator James M. Inhofe
JOINT REQUIREMENTS OVERSIGHT COUNSEL
1. Senator Inhofe. Secretary England, Secretary Krieg, Admiral
Giambastiani, and General Kadish, I support the need for acquisition
reform. I believe there are programs, such as the C-17, that the
Department of Defense (DOD) brought online very effectively. However,
as we have seen recently, programs such as a new generation refueling
aircraft (767) or tactical airlift (C-130-J), have not been managed as
successfully, for very different reasons. The Joint Requirements
Oversight Counsel (JROC) is set up to identify critical needs to
support and enable our national defense. The Joint Staff and
organizations they charter such as the functional capabilities board
encourage early and continuous collaboration with the acquisition
community to ensure that new capabilities are conceived and developed
in the joint warfighting context. In other words, these vital programs,
programs that JROC reviews, develops, and integrates into our Services,
in conjunction with the acquisitions community, are based on input from
our combatant commanders, those on our warfighting front. However, it
seems that when there is a decision made by DOD to cancel such a
program, the service chiefs and combatant commanders have no input. Let
me give you an example. The Army's Crusader was deemed a critical
mission system by the U.S. Army and by our combatant commanders. I was
a vehement supporter of this program. When I was notified that it was
being cancelled I called up three of the combatant commanders at the
time. They were all unaware of the proposed cancellation and felt
strongly that we still needed the Crusader. The Chief of Staff of the
Army was not consulted either. It seems to me that whereas we value the
combatant commanders' input in identifying the mission gaps that we
then green-light for program development, when it comes to canceling or
augmenting a program, we do not give these experienced, highly informed
military leaders who are in the fight, the same degree of
consideration. It strikes me as wrong-headed, that this is the way the
process flows. As you look at acquisitions reforms, can you please tell
me how JROC, and by extension the combatant commanders, will weigh in
on program cancellations and augmentation?
Mr. England and Mr. Krieg. The chair of the JROC is responsible for
serving as the spokesman for the commanders of the combatant commands,
especially on the operational requirements of their commands.
If a program has significant augmentation calling for adjustment of
its Key Performance Parameters (KPPs), the program is required to vet
those changes through the JROC before proceeding. We consult with the
JROC on program cancellations and seek their recommendations on
alternative capabilities solutions to develop future capabilities
consistent with cost, schedule, and technical feasibility.
The JROC provides the best military advice on the requirements
being addressed by the program, their continued validity and the effect
of program cancellation on meeting these warfighting requirements.
Furthermore, as the Defense Acquisition Board (DAB) looks at any
review of a program for cancellations and augmentation, the Vice
Chairman of the Joint Staff is also the Vice Chairman of the DAB. The
Vice Chairman is able to provide the best advice to the DAB, and the
Defense Acquisition Executive (the Under Secretary of Defense for
Acquisition, Technology, and Logistics), and represent the combatant
commanders, weighing in on program cancellations and augmentation
decisions.
Admiral Giambastiani. Having been delegated by the Chairman of the
Joint Chiefs of Staff, as the Chairman of the JROC, I am empowered to
bring any program into the JROC for review, at any time. The JROC's
responsibility in those instances remains the same--to validate
warfighter capabilities and to meet the three statutory purposes of
title 10 USC, section 181:
(1) identify and assess the priority of joint military
requirements (both systems and equipment) to meet the military
strategy;
(2) consider alternatives to any acquisition program by
evaluating cost, schedule, and performance criteria; and
(3) ensure that the assignment of such priorities conforms to
and reflects resource levels projected by the Secretary of
Defense.
If a program has significant augmentation calling for adjustment of
its KPPs, the program is required to vet those changes through the JROC
before proceeding. If a program is a possible candidate for
cancellation, I am committed to involving the JROC leadership in this
decision to afford the JROC the opportunity to review and evaluate the
program from a capabilities standpoint. The JROC can then provide their
best military advice on the requirements being addressed by the
program, their continued validity and the effect of program
cancellation on meeting these warfighting requirements. Furthermore,
representing the JROC and combatant commanders in my capacity as Vice
Chairman of the DAB, I will weigh in on program cancellation and
augmentation decisions under consideration at any DAB program review.
General Kadish. The combatant commanders should be involved in
major program decisions. The Panel proposes that the combatant commands
play the lead role in defining needed capabilities and Services and
Department of Defense agencies compete to provide the solutions. Our
proposed requirements development process includes two major activities
designated to help the Department procure a balanced portfolio of
capabilities that is responsive to current and future operational needs
of the combatant commands to buy the right things. The first activity
is a 2-year, recurring process to produce an integrated time phased and
fiscally informed Joint Capabilities Acquisition and Divestment (JCAD)
Plan. The second is a continuous Materiel Solutions Development process
to identify and initiate development of materiel solutions to satisfy
needs identified in the JCAD Plan.
RECOMMENDATIONS TO IMPROVE PROCESSES
2. Senator Inhofe. General Kadish, you are an experienced military
program director with an extensive background working in acquisitions.
As such, Secretary England has called on you to lead the Defense
Acquisitions Performance Assessment Project, as we look to innovate and
tighten our acquisitions process. You directed the C-17 systems program
office, one of the Air Force's development and acquisitions success
stories that I mentioned earlier today. You were also the director of
the Missile Defense Agency (MDA) one of DOD's most involved
acquisitions programs. We have had other witnesses testify before this
committee and offer insight into this acquisitions issue. We have heard
that as we have downsized our military, in search of a so-called peace
dividend during the Clinton administration, one of the areas we have
hurt critically is that of our acquisitions professionals. Based on
your history in this career field, can you comment on the effect of the
elimination of so many of these military and civilian positions?
General Kadish. A successful acquisition program requires a
professional, dedicated workforce with subject matter expertise. No
doubt, there has been a concerted effort to reduce the government
acquisition workforce since 1990. As a result, the government workforce
has become increasingly overburdened as the demands have increased with
the nature and complexity of the acquisition system and with the
technology challenges of our programs and requirements.
One unintended consequence of removing the Army and Air Force Chief
of Staff and Chief of Naval Operations from acquisition is that the
Services are now isolated from their acquisition workforce stewardship
responsibilities. We recommend seeking legislation to retain high
performance military personnel to include allowing military acquisition
personnel to remain in uniform past the DOPMA mandated years of
service. Also we recommend increasing the number of the Department's
acquisition Federal employees and establishing new systems command
structures with four star leadership.
3. Senator Inhofe. General Kadish, what two or three key elements
have you seen in the MDA, the C-17 program, or other programs you have
managed that DOD should strongly consider in its acquisitions reform
initiative, that will permit the flexibility needed by DOD and yet
preclude recent missteps we have seen in the process, like the 767
contract?
General Kadish. Three key processes have to work together for
programs to be successful. The processes are defined as acquisition,
requirements, and budget. The theory is that requirements, budget, and
acquisition work together to provide both flexibility and discipline in
the system. In practice they are disconnected and unstable. Therefore,
we are continually surprised and frustrated by the outcomes produced by
this instability. The people who work in this system succeed in
producing our systems and capabilities despite the processes not
because of them.
There are fundamental disconnects in DOD management systems and
congressional oversight that is driven by competing values and
objectives that create government induced instability in our
acquisition programs. Incremental improvements in any area will not be
successful unless the entire system is stable and operate in a
predictable manner. The DOD needs a new and integrated acquisition
system to deal with this instability as we face a new security
environment in the coming decades.
ACQUISITIONS REFORM REVIEW
4. Senator Inhofe. Secretary England, I laud the work that the DOD
is doing to improve the defense acquisitions process. There are
multiple parts to this reform process and we all play a role in its
progress, progress as you said in your opening statement that must be
substantive. I appreciate the fact that many smart and dedicated people
have been working on this and that you believe there is still some
substantial work to do. This is an involved endeavor with complex
wheels and cogs. I believe you state accurately, that input is required
by Congress, military leaders, the DOD's acquisitions professionals,
both military and civilian and industry leaders. You have General
Kadish's Acquisitions Performance Assessment and Secretary Krieg's role
in the QDR that will both contribute vitally to this necessary reform.
I don't question the dedication of this group. I don't question the
honesty and dedication of the larger group you have assembled to look
at this issue. However, after reform proposals are made, should we
consider an independent review to ensure we have the best improvements
in the interest of the taxpayer and all parties?
Mr. England. As you know, I have initiated the activities you
mentioned to accelerate review of the acquisition process and of our
department-level business processes. Our objective is to improve our
ability to satisfy warfighter needs while achieving cost and schedule
goals. We will be describing our plan to achieve that objective in the
QDR report we will submit to you early next year and look forward to
the opportunity to discuss our approach with you as soon as feasible
thereafter. I intend to sustain the partnership we have established as
we continue to pursue our common goals and initiate process
improvements that are in the best interest of the taxpayer and service
men and women.
SMALL BUSINESS INITIATIVES AND INCENTIVES
5. Senator Inhofe. Secretary Krieg, the industrial base shrinks
with more buyouts and mergers between defense contractors which wind up
with fewer and larger conglomerations. In this country, historically,
innovation has begun with small businesses. Over the last two decades,
the advent of a few large contractors has made it more difficult for
small business to effectively engage in the contracting process. My
office has gotten many calls on such issues. For example, consider when
big business competes for a bid against a small business and that
contract is awarded to the small business. The big business is able to
protest the bid and keep it embroiled in legal purgatory for so long
that the small business eventually is worn down, has no money to
continue the fight, and gives up. These large military businesses have
deep pockets compared to the small business entrepreneur. This
situation is exacerbated further when the big business already had an
existing contract that is up for renewal. Many times the prolonged
protest process allows the large business to continue to supply the
government with the product while the protest is settled. In the
interest of the taxpayer and our national defense, small business
provides competition to keep costs realistic as well as innovative
approaches and solutions that ``group think'' can sometimes eliminate
in large corporations. What are we looking at with regard to small
business representation to ensure the improved acquisitions process
includes consideration for small business?
Mr. Krieg. Small businesses have, indeed, been the source of much
of our important innovation; the changes in the industrial base do
present new challenges to them; small businesses do provide
competition, and small businesses are often the antidote to ``group
think.''
Bid protests are, most frequently, filed with the Government
Accountability Office (GAO). Relevant regulations are at part 4 of the
Code of Federal Regulations. While any manipulation is too much
manipulation, and while those regulations are within the purview of
GAO, not DOD, we note that the bid resolution process is designed to be
both inexpensive and relatively speedy. From the receipt of the protest
by GAO to its final disposition by GAO, the process takes 100 calendar
days (65 calendar days if using GAO's express option). Additionally,
frivolous protests can be dismissed even before an agency submits the
report that is required prior to the 30th day after the agency is given
notice of the report.
In situations where the protest has been made before award, the
contract award can proceed if the head of the contracting agency
determines that there are urgent and compelling circumstances that
significantly affect the interest of the United States which will riot
permit awaiting the decision of the GAO. This aspect of the bid protest
rules also helps discourage manipulation.
Some protests are filed with the contracting officer conducting the
procurement. Agencies are directed to make best efforts to resolve
agency protests within 35 days of the filing of the protest.
The Department of Defense recognizes the contributions of our
Nation's small business community are essential to supporting our
industrial base, and to meet future national security challenges.
Existing programs such as the Department's Small Business Innovative
Research (SBIR) program have been very successful and hundreds of SBIR
contracts are awarded each year to non-traditional, innovative small
businesses to provide technologies that quickly respond to warfighter
needs.
______
Questions Submitted by Senator Pat Roberts
SPACE ACQUISITION
6. Senator Roberts. Secretary Krieg, the Evolved Expendable Launch
Vehicle (EELV) procurement makes up an overwhelming portion of the
annual military space launch budget. In April 2005, the Air Force
issued requests for proposals on a sole source basis to existing
providers for 23 launches from ``fiscal year 2006 through fiscal year
2011 or beyond.'' The RFPs indicate that the Air Force already has
allocated all of these launches to the two existing EELV providers.
Would it not better serve the national interest to encourage market
competition?
Mr. Krieg. The Air Force EELV acquisition strategy, as recently
revised for Buy 3, allows for competition by awarding launches on a
year-by-year basis. A Notification of Contract Action (NOCA) in the
Commerce Business Daily will precede these awards. The current EELV
Request for Proposal (RFP) will result in orders for fiscal year 2006
only, with projected launch dates in fiscal year 2008. These orders
cover only the first 3 of the 22 planned national security launches in
the EELV Buy 3 plan. Presently, two launch vehicles meet EELV
requirements. No emerging new launch provider has yet demonstrated the
required capability to meet the EELV program requirements. When and if
another supplier demonstrates such capability, the Air Force EELV
acquisition strategy and the U.S. Space Transportation Policy allow
that supplier to compete for launch orders.
7. Senator Roberts. Secretary Krieg, what is the rationale for
locking up EELV launches over the long-term through ``fiscal year 2011
or beyond''?
Mr. Krieg. The current EELV RFP will result in orders for fiscal
year 2006 only, with projected launch dates in fiscal year 2008. We
must order these launch services beginning in fiscal year 2006 because
there is a 2-year lead-time from order to launch. Future launch
procurement will continue on an annual basis. Currently, only two
contractors, Boeing and Lockheed Martin, have the launch vehicles and
facilities that satisfy EELV requirements. Therefore, for the purposes
of mission and manufacturing planning, the Air Force has allocated
planned upcoming missions to the EELV provider on which they are likely
be flown if other capability is not developed. The Air Force will
review and adjust this allocation as necessary annually prior to the
award of a new contract.
8. Senator Roberts. Secretary Krieg, what is the Air Force doing to
allow maturing EELV class providers to participate in the EELV market?
Mr. Krieg. Should a third company develop a reliable EELV class
launch capability that meets program requirements, the Air Force EELV
acquisition strategy already allows new suppliers to participate in
future procurements, consistent with the U.S. Space Transportation
Policy (National Security Presidential Directive NSPD-40). Section 1.4
of NSPD-40 directs that ``New commercial space transportation
capabilities that demonstrate the ability to reliably launch
intermediate or larger payloads will be allowed to compete on a level
playing field for United States Government missions.'' Any launch
providers who develop a capability to launch EELV-class payloads will
have the opportunity to submit proposals for evaluation by the Air
Force for future Buy 3 launches.
______
Questions Submitted by Senator Jeff Sessions
TRANSFORMATIONAL SATELLITE PROGRAM
9. Senator Sessions. Secretary Krieg and General Kadish, the
Department's new approach to space acquisition appears to be evident in
the Transformational Satellite (TSAT) program: requirements appear to
be locked in; critical technologies appear to be maturing before
product development begins; and there appears to be strong government
oversight of the program and the contractors. Nevertheless, both the
Senate and House Armed Services Committees expressed some unease about
TSAT's ambitious acquisition schedule, given the integration challenges
one might expect from such a complex program. For fiscal year 2006, the
House reduced funding by $400 million, while the Senate Armed Services
Committee bill includes a $200 reduction from the President's $835
million request. Quite frankly, much of the unease associated with the
TSAT program derives from the troubled record of space acquisition
programs. This begs an important question: how will Congress know when
the space acquisition process is sufficiently reformed such that
Congress can have confidence that TSAT--and other satellite programs--
will be delivered on schedule and close to cost?
Mr. Krieg. The space acquisition process will be sufficiently
reformed to deliver programs on schedule and cost when these programs
exhibit:
Well-defined and stable requirements
Mature technologies for program success
Stable budgets
Robust risk management process
Mature test programs that provide rigor and prove-out
the developing system design
Robust systems engineering and end-to-end systems
integration
Production processes which are under configuration
control
The DOD has implemented key recommendations from the joint Defense
Science Board and Air Force Scientific Advisory Board task force on
Acquisition of National Security Space Programs into the TSAT program.
These changes show DOD's commitment to keeping this program on track.
Technical demonstrations will continue to be conducted to ensure
progress in program development and to help maintain program
confidence.
General Kadish. There are unique challenges that space acquisition
issues present. It is unfortunate that new programs still labor under
the lack of confidence produced by a serious of missteps over the last
5 to 10 years in space programs. There is a lead time for any
improvement or fix to take affect and be recognized. I suspect programs
like TSAT will have to prove that they could be successful under the
circumstances. One caution, however. Strategic technology exploitation
is a key factor that allows the U.S. to maintain dominant military
capabilities. One factor in exploiting this advantage is to fund
programs adequately in the start-up phase and not to expect that
schedules could be met or costs controlled if the resources don't match
the task.
10. Senator Sessions. Secretary Krieg and General Kadish, are there
a set of criteria one can use to assess the viability of space
acquisition programs?
Mr. Krieg. While there is no ``one'' set of criteria that can be
used to assess the viability of space acquisitions, there are a number
of recognized criteria that are used to assess an acquisition program's
overall viability. The Department currently tracks a program's progress
using a number of criteria to include the cost, schedule, and
performance parameters associated with a space program's approved
Acquisition Program Baseline (APB). This includes tracking
accomplishment of key program events, design reviews, and critical
developmental test (DT) activities. In addition, cost and schedule
adherence of key contracts is tracked via our Earned Value Management
System (EVMS). These and other management parameters are assessed
quarterly and highlighted as part of our Defense Acquisition Executive
Summary (DAES) process.
General Kadish. Time should be the key performance parameter. Move
the Department's preferred acquisition strategy for developmental
programs from delivering 100 percent performance for any cost and
schedule to delivering useful military capability within a constrained
period of tome.
11. Senator Sessions. Secretary Krieg and General Kadish, should
Congress rely on independent assessments?
Mr. Krieg. Independent assessments are very useful for evaluating a
program's status. As noted by the joint Defense Science Board and Air
Force Scientific Advisory Board task force on Acquisition of National
Security Space Programs report, implementing independent senior
advisory reviews (using experienced, respected outsiders) at critical
acquisition milestones will help ensure realistic budgets and cost
estimates.
However, there is also great value in getting feedback directly
from senior DOD and industry executives after they have observed and
evaluated program demonstrations and participated in critical milestone
reviews. With support of the executives serving as the key decision
makers for the program, detailed issues can be addressed, focus can be
adjusted, and solutions can be agreed on in an efficient manner that
avoids delays. To foster this success, the DOD is committed to
maintaining senior executive involvement in critical program reviews.
General Kadish. Independent assessments have a place especially in
dealing with an entrenched bureaucracy. However, extensive reliance on
this approach indicates a loss of confidence in the leadership and
workforce. Rather than rely on independent assessments, we should
recognize the systematic problems that result in the lack of trust that
generates the need for such assessments. The Department must be
transparent in all acquisition decisions and programs.
COST ESTIMATES
12. Senator Sessions. Secretary Krieg and General Kadish, GAO and
the Defense Science Board task force have reported that cost estimates
are intentionally low-balled by DOD and its contractors to allow more
programs to be started and funded. What incentives or procedural
changes would encourage more realism in cost estimates?
Mr. Krieg. It is not DOD's intent or its policy to intentionally
understate program costs. In fact, I believe it is essential that those
estimates be accurate to ensure we have a clear understanding of
program affordability at every staff level. Realistic cost estimates
are founded on clearly articulated and achievable requirements. Once
the requirement is well understood and formally approved we employ
multiple independent entities, such as our Cost Analysis Improvement
Group, to develop an estimate. We rely on the objectivity and historic
accuracy of those estimates to ensure that programs are adequately
funded and to support our assessment of contractor cost realism. These
are sound procedures we will continue to employ and enforce.
General Kadish. The Panel determined that successful acquisition
requires a stable environment of trust and confidence between
government the industrial partners. This fosters competition for ideas
and solutions to efficiently and effectively provide requirement
capabilities and guaranteed best value for the government. Our
assessment was that consolidation of the industrial base, caused by
unstable defense demand, has reduced the benefits of competition,
introduced industrial organization conflict of interest issues and made
every defense contract a ``must win'' situation for the prime
contractors.
Cost estimates for budgeting tend to be used differently than cost
estimates for source selection purposes. Budgeting and programming
estimates tend to ensure adequate resources are available while source
selection estimates tend to be on the cost control side. In both cases
bad behavior could result from the external environment and pressures
in the system. One solution to this problem is to use the government
estimate for both situations and base the source selection on risk and
technical approach rather than cost estimated through a competitive
source selection.
13. Senator Sessions. Secretary Krieg and General Kadish, have you
studied what could realistically be done to address this cause?
Mr. Krieg. We believe our current policies provide us with
reasonable assurance of the accuracy of our estimates. For Major
Defense Acquisition Programs at Milestone B, Milestone C, or the full-
rate production decision review, we also require an independent cost
estimate to be performed by the Department's Cost Analysis Improvement
Group.
General Kadish. Yes, see #12 above.
14. Senator Sessions. Secretary Krieg and General Kadish, what
progress has DOD made in setting priorities for its desired space
capabilities in the event that programs are funded at a higher level of
confidence or estimates are more realistic (higher)?
Mr. Krieg. The Department has complimentary processes for
determining priorities of our weapon systems, including the Joint
Capabilities Integration and Development System; the Planning,
Programming, Budgeting, and Execution (PPBE) system; and this year, the
Quadrennial Defense Review. As we develop the program for the upcoming
year, we make conscious decisions on all of our major programs,
including space programs, to ensure we provide the joint force with the
best mix of capabilities we can afford. I am committed to work with
both the resources and requirements communities to ensure that programs
at major milestones achieve an acceptable balance among cost, schedule,
and performance; that risks are identified and management plans are
established; and that adequate funds are available.
General Kadish. In addition to the specific recommendations
mentioned above, the Panel proposed that the Department and Congress
evaluate the impact of industrial consolidation and its unintended
effects especially in its effects on the use of competition. Such a
review should be conducted with an acute awareness of the current
security environment and the nature of fundamental assumptions about
industry upon which our policy, laws, and regulations are based.
15. Senator Sessions. Secretary Krieg and General Kadish, does DOD
possess the analytic tools to make trades across space systems?
Mr. Krieg. The Department does have a process, including the
appropriate tools, to conduct trades between systems. Both the
Secretary of the Air Force, as the Executive Agent for Space, and the
Department staff scrutinize the space portfolio during the annual
program review. Space programs are evaluated, phased, and funded with
respect to warfighter needs, appropriate time lines, and available
funding. The analytical tools are improving but much of managing the
trades between and among systems will come down to informed judgment.
General Kadish. As stated previously we did not address space
specific acquisition processes. However, we noted that over the past 20
years acquisition reform recommendations have focused on making
incremental improvements to a narrowly defined acquisition process.
Complex processes do not promote program success--they increase costs,
add to schedule, and obfuscate accountability. We must consider every
aspect of acquisition, change the culture, and create a clear alignment
of responsibility, authority, and accountability.
SPACE SYSTEMS
16. Senator Sessions. Secretary Krieg and General Kadish, unlike
the DOD 5000 acquisition policy, National Security Space (NSS) 03-01
policy does not direct space acquisition programs to have all critical
technologies demonstrated in a relevant environment before program
start and before an acquisition program baseline is established.
Because the space policy assumes more risk by allowing unproven
technologies, GAO has been critical of it. Given the difficulties that
space systems have experienced because technologies have not matured as
promised, would you be in favor of changing NSS-03-01 to conform with
DOD 5000?
Mr. Krieg. NSS 03-01 is the space acquisition community's
implementing guidance for DOD Directive 5000.1 and from that
standpoint, I recognize its value. Space programs, unlike their DOD
5000.2 based counterparts, expend approximately two-thirds of their
life cycle dollars in the development phase of the program and NSS 03-
01 was designed to phase Key Decision Point reviews more frequently and
earlier in the acquisition cycle. The Department shares GAO's desire to
reduce program risk; however, a healthy balance must be found within a
program that both reduces risk, and at the same time, allows us to
pursue much-needed capabilities. Space vehicles are now living longer
and staying on operational orbit longer. To maintain our lead, we must
incorporate current technology prior to launch.
Unlike other programs, space programs cannot effectively segregate
all technology development and test in an operational environment prior
to product development so, unlike its DODI 5000.2 counterpart, the NSS
03-01 does not mandate specific Technology Readiness Levels (TRL) for
each decision. Instead, it requires detailed technology readiness
assessments at each Key Decision Point, assessing maturity via
Independent Program Assessments (IPA) and the Key Decision Point
reviews. It also synchronizes the Key Decision Points with crucial
system engineering reviews to ensure the Milestone Decision Authority
has the most current and complete picture of the program before a
decision is rendered on its maturity to enter the next acquisition
phase.
I do not favor changing NSS 03-01 to specifically conform to the
DOD 5000 process but remain committed, together with the DOD Executive
Agent for Space, to continually assess NSS 03-01 with the goal of
incorporating more mature technologies, incorporating lessons-learned,
and improving the overall viability of the space acquisition process.
General Kadish. No. Incorporating high risk technology in systems
under stringent requirement demands generally leads to significant cost
and schedule slippage under any process or regulatory regime.
Contingency plans, technology assessment, and exit opportunities must
be developed in cases where technologies do not mature as anticipated.
If technologies do not mature as expected, then flexible strategies
with multiple paths for capability development would provide program
managers with opportunities to take alternative action or stop efforts
altogether, if appropriate. Endorsing Time Certain Development as the
preferred acquisition strategy for major weapons systems development
programs would be one way of controlling technology risk and balancing
requirements demanded by the operational user.
DEFENSE AGAINST LONG-RANGE BALLISTIC MISSILES
17. Senator Sessions. General Kadish, as Director of the MDA, you
pursued an evolutionary approach to the development and fielding of a
missile defense capability for the protection of the United States
against long-range ballistic missiles. What lessons can we derive from
this approach to weapon systems acquisition--especially for providing
capabilities where none previously existed?
General Kadish. Complex technology and its application to difficult
problems like missile defense requires a different management and
programmatic approach than advancing the state-of-the-art in mature
technology. Because of the technology risks involved, leadership must
be patient and time must be a controlling in the trading performance.
Everyone in the system from engineer to brigade commander must learn to
deal with the new technology and apply it as we learn more about the
system.
______
Questions Submitted by Senator Susan Collins
DD(X) SHIPBUILDERS AND CG(X) CRUISER PROGRAM
18. Senator Collins. Secretary Krieg, in July--with your
concurrence--the Navy announced plans to release initial DD(X)
``transition design'' funding to General Dynamics' Bath Iron Works and
Northrop Grumman Ship Systems' Ingalls. This was done, according to
Navy and OSD statements at that time, in order to maintain DD(X)
program momentum and minimize impact on the major surface combatant
ship design industrial base. I am pleased that the Navy--again with
your concurrence--followed the initial announcement with the recent
release of $53 million of long-delayed fiscal year 2005 appropriated
design funds, that I secured. The DD(X) program recently achieved a
major milestone with a successful flag-level Critical Design Review. I
understand that you plan to conduct a DD(X) Milestone B review and
render a decision on any changes to the acquisition strategy later this
year. I have also been pleased to hear that you intend to fully consult
with and understand the concerns of Members of Congress before you
decide on any revision to the current dual-shipyard acquisition
strategy for the DD(X) program. I strongly encourage you to do so.
During this past year, Congress ultimately felt it had no recourse but
to statutorily prohibit the Navy's proposed ``winner-take-all'' one
shipyard DD(X) acquisition strategy. The fiscal year 2006 Defense
Authorization bill--reported from this committee and pending further
floor action--contains a continued statutory prohibition on the ill-
advised one shipyard approach. Recent tragic events along the Gulf
Coast have reminded us how reliance on a single major surface combatant
shipbuilder could create a serious strategic vulnerability for our
country. The same would be equally true should a catastrophe befall our
Nation's experienced major surface combatant shipbuilder in the
northeast. The bottom line is that the country needs both shipbuilders
to meet the Nation's long-term security needs. I urge you not to send
forward a revised plan that ultimately represents a delayed path to a
``winner-take-all'' one shipyard outcome. Will you not only work with
us in Congress but also actively engage the DD(X) shipbuilders in
discussions toward developing and implementing an effective acquisition
strategy for the DD(X) program going forward, not only for the design
and production of the DD(X) ship class but for the follow-on CG(X)
cruiser program, as well?
Mr. Krieg. I will continue to work with Congress, the Navy, and the
shipbuilding industry on all of our major shipbuilding programs to
ultimately provide our warfighters with ships that are operationally
superior, and have a price the taxpayers can afford.
19. Senator Collins. Secretary Krieg, after Congress blocked the
Navy's revised ``winner-take-all'' acquisition strategy earlier this
year, the Navy is now proposing another acquisition strategy for the
DD(X) destroyer. The newest proposal under consideration calls for
equal detailed design work and dual-lead ship construction at Ingalls
and Bath Iron Works. While there are acceptable elements to the new
strategy, such as collaborative detailed design processes, shared
design work for each shipbuilder based upon the engineering strengths
of each shipyard, and a sense of urgency to maintain the program
schedule and avoid industrial base resources losses, there are also
flaws in the latest strategy. Building two simultaneous lead ships
carries risk and may be the highest cost approach. If there are design
errors on one ship, the problem will have to be fixed on both ships.
There is also concern over the ability of major suppliers to provide
two lead ships the needed sets of equipment. An alternative exists to
move forward with the program of record. The current strategy requires
the first DD(X) be built at Ingalls, the second at Bath Iron Works, and
contracts for building the first six DD(X)s would be equally divided
between the two shipbuilders. Continuing with the current program would
allow ship detailed design to begin now, with both shipbuilders equally
involved in the design supporting the first and second ship. What is
the Department doing to put the DD(X) program and acquisition strategy
back on solid footing, taking into account the advice from the
shipbuilders?
Mr. Krieg. The Department is considering alternative acquisition
strategies that would balance the competing demands in the acquisition
of the DD(X) ships.
20. Senator Collins. Secretary Krieg, do you agree that the
constant shifting in proposed acquisition strategies for the DD(X)
destroyer has led to program instability and the inability for
shipbuilders to plan, budget, or rightsize their workforces?
Mr. Krieg. The Department, Congress, and the shipbuilding industry
have worked to resolve the sometimes conflicting needs of both
shipbuilder stability and program suitability. The Department has taken
many actions to maintain schedule and key technology developments while
we finalized the strategy. In addition, the DDG-LPD swap signed in
2002, and the ships Congress authorized and appropriated in support of
that agreement, provide stable surface combatant workload for the
companies until at least the middle of 2007, when the last DDG 51s
start construction at each shipyard. It is important for the Department
to provide a clear intent to industry as we move ahead.
21. Senator Collins. Secretary Krieg, what can be done to craft and
implement a more viable shipbuilder acquisition plan for DD(X) that
leverages the capabilities of both major surface combatant shipbuilders
in design and construction?
Mr. Krieg. The Department is considering alternative acquisition
strategies that would balance the competing demands in the acquisition
of the DD(X) ships.
22. Senator Collins. Secretary Krieg, just last week, I met with
the President's nominee to be the next Secretary of the Navy, Dr.
Donald Winter. We agreed that there are many challenges facing the Navy
right now, to include the troubling increase in the cost of
shipbuilding. One reason for this, however, is the uneconomical buy
rate for ships and the corresponding peaks and valleys this creates in
planning and shipbuilder workforce sizing. Unfortunately, instability
and dramatic changes have held back some progress of the DD(X) program.
Initially, the Pentagon planned to build 12 DD(X)s over 7 years. To
meet budget constraints, the Department slashed funding and now
proposes to build only five DD(X)s over 7 years, even though the former
Chief of Naval Operations has stated on the record before this
committee that the warfighting requirements remain unchanged and
dictate the need for 12 DD(X)s. The Navy's next-generation DD(X)
destroyer is a complex surface combatant that will have capabilities
not available on any other Navy ship. These capabilities include:
a. Far greater offensive and precise firepower;
b. Advanced stealth technologies;
c. Numerous engineering and technological innovations that will
allow for a reduced crew size; and
d. Sophisticated, advanced, weapons systems, such as the
electromagnetic rail gun.
Dr. Winter and I discussed the potential for ``spiral acquisition''
on the DD(X). This could create the possibility of deferring some
capabilities on earlier ships in the class, instead of trying to put
every new technology on the first DD(X). Would providing incremental
capabilities on each DD(X) and later retrofitting them seem feasible?
Mr. Krieg. The use of ``spiral acquisition'' can be a powerful tool
to provide an initial capability to the warfighter, while providing
improved capability when technology allows in a cost effective manner.
At present, the DD(X) design baseline introduces 10 key new
technologies demonstrated via Engineering Development Models, all of
which have satisfactorily completed testing. In your question, you note
electromagnetic rail gun as an example of DD(X) technology. This is not
quite accurate. The Advanced Gun System for the DD(X) uses a
propellant-powered round. The electromagnetic rail gun would be an
example of a potential technology, not yet fully mature, that could be
introduced into the DD(X) at a later date if the technology can be
incorporated in a cost effective manner.
23. Senator Collins. Secretary Krieg, how does ``spiral
acquisition'' help maintain program schedules and reduce costs, if
employed effectively?
Mr. Krieg. The intent of a spiral or ``evolutionary'' approach is
to deliver capability in increments, recognizing, up front, the need
for future capability improvements. The intent of the strategy is to
balance needs and available capability with resources, and to put
capability into the hands of the user quickly. The strategy relies on
well understood and achievable requirements, mature technologies, and
full funding to ensure that schedule and cost objectives can be
achieved.
SHIPBUILDING AND CONVERSION
24. Senator Collins. Secretary Krieg, it is crucial that not only
do we have the most capable fleet, but also that we have sufficient
numbers of ships to meet our national security requirements. Today,
however, our fleet is already below 300 ships and dropping. Based on
testimony before the Senate Armed Services Committee, the Navy's
recently departed CNO confirmed the warfighting requirement for an
increased number of ships. Former Chief of Naval Operations, Admiral
Clark, has also said, ``We cannot build the Navy of the future with the
funding mechanisms we have today.'' The CNO has also said he needs
about $12 billion a year for level shipbuilding funding. Ship
procurement presents very unique challenges: ships take years to
produce and they can cost into the billions of dollars. Current budget
rules, however, do not reflect the realities of ship construction.
Currently, the entire procurement cost of a ship must be fully funded
in the year in which the item is procured. This severely distorts the
shipbuilding accounts, and does not allow the Navy to budget in the
most efficient way possible. The key to controlling the price of ships
is to minimize fluctuations in the shipbuilding account. Earlier this
year, I cosponsored a provision by our esteemed Chairman, Senator
Warner, to the budget resolution that was passed by the full Senate
providing authority for advanced appropriations for shipbuilding. This
will help us to ensure that ships are procured in the most sensible and
efficient way possible. The provision provides the authorizing and
appropriations committees the flexibility to consider revisiting last
year's shipbuilding plan through providing additional budget authority
of $14 billion in advanced appropriations in fiscal year 2007 and
fiscal year 2008. Do you agree that the traditional method of funding
the Shipbuilding and Conversion account must be revisited to better
meet national security requirements?
Mr. Krieg. Procuring Navy ships is very different from other
Department of Defense acquisition programs in terms of the scope of the
design and construction effort, the time frame required to design and
build ships, and the low production rate at which ships generally are
procured. The fundamental problem is a 4 to 8 year design and build
cycle for Navy ships which is subject to significant fluctuations in
the annual budget process. This creates many opportunities to effect
change and cause instability across the Navy shipbuilding accounts.
There are financing alternatives available that can be considered on a
program by program basis.
25. Senator Collins. Secretary Krieg, do you agree that the use of
advance appropriations will help the Navy and our Nation's shipbuilders
to better plan, and thus minimize the unnecessary costs that come from
the erratic fluctuations in our ship procurement rate, as well as let
us maximize the number of ships that we can procure?
Mr. Krieg. It is critical to realize that none of the alternative
funding mechanisms known to date will result in the Navy being able to
acquire more ships for any given funding allocation. They can, however,
provide the Navy with opportunities to stabilize the ship procurement
accounts.
SHIPBUILDING/ACQUISITION
26. Senator Collins. Secretary Krieg, it is a mistake from a
national security perspective and from an industrial base standpoint
for the Navy, or the Department, to pursue policies that will
jeopardize the future of one of our Nation's two surface combatant
shipyards. The taxpayers also are not well-served by acquisition
policies that would lessen or eliminate competition in the shipbuilding
sector. Several years ago during this administration's first term in
office, Deputy Under Secretary of Defense for Industrial Policy,
Suzanne Patrick, explained that the Department of Defense and the
Department of Justice had a unified view in opposition to General
Dynamics Corporation's then-proposed acquisition of Newport News
Shipbuilding on the grounds that the government's and taxpayers'
interests would not be served by eliminating competition going forward
for nuclear powered attack submarines. When asked about the
considerations that went into the decision that ensured two separately
owned shipyards would produce Virginia class submarines in a hearing
before the Military Procurement Subcommittee of the House Armed
Services Committee in March 2003, Deputy Under Secretary of Defense
Suzanne Patrick responded saying:
. . . We explicitly look at the impact on competition. We
look at the impact on the warfighter. . . . With regard to the
Newport News deal . . . our view there was that we really had
to maintain competition. We could not afford to let the yard go
to what would end up being a sole source for us of submarines
in the future, especially in the fact that we have a Trident
submarine replacement moving in 2020. We had to maintain the
capability to compete future submarine purchases in order to do
them affordably as we went forward.''
Yet, within the last year the Navy has proposed two revised
acquisition strategies for the DD(X) destroyer program, including one
that would single-up construction of complex surface combatant ships to
one shipyard . . . and, not just for DD(X) destroyers but CG(X)
cruisers and all subsequent such ships. In your view, was the DOD's
reasoning on the General Dynamics/Newport News shipbuilding acquisition
issue in 2001 correct?
Mr. Krieg. The case of the proposed General Dynamics acquisition of
Newport News was based, in part, on projected shipbuilding needs at
that time and was correct.
27. Senator Collins. Secretary Krieg, given how much in conflict
the reasoning behind that major decision seems to be with the supposed
reasoning behind the Navy's DD(X) ``one shipyard'' acquisition
strategy, please explain to me how the DOD's position in these two
critical decisions could be seen as being in any way consistent?
Mr. Krieg. In the case of nuclear submarine procurement, the
potential remains that both nuclear attack submarines and nuclear
ballistic missile submarines will be built in concurrent years in the
future. The Navy's current projection is that the large surface
combatant construction profile will remain at no more than one ship per
year, DD(X) then CG(X), for the foreseeable future.
28. Senator Collins. Secretary Krieg, in your opinion, what message
does this send to our industrial base?
Mr. Krieg. The message to our shipbuilding industrial base is that
the Department believes that competition is the most effective vehicle
to encourage innovation and best value. We think that competition or
the potential for competition will encourage shipbuilders to better
control and improve cost and schedule performance so that we can
provide world class, capable, and affordable ships to our warfighters.
Additionally, fixed price contracts provide the financial motivation
for shipbuilders to control their costs.
The U.S. shipbuilding industry produces the finest warships in the
world, but cost growth continues to erode the purchasing power of the
Navy's Shipbuilding and Conversion budget. A recent benchmarking study
commissioned by my office concluded that the use of best practices in
the U.S. shipbuilding industry has improved significantly over the last
5 years as a result of Navy and industry initiatives and investments.
The technology gap between the U.S. industry and leading international
shipbuilders is closing. However, there are still large gaps that
present opportunities for U.S. shipyards to make further substantial
improvements, particularly in the pre-production functions that include
design, production engineering, and planning.
______
Questions Submitted by Senator Lindsey O. Graham
COMMERCIAL OFF-THE-SHELF PRODUCTS
29. Senator Graham. Secretary England, Secretary Krieg, Admiral
Giambastiani, and General Kadish, I am concerned that the DOD often
creates products that are only fractionally different from existing and
available commercial products, and this is often done at many times the
cost. In your opinion, what is the best way to ensure greater use of
commercial off-the-shelf (COTS) products so the Department does not
recreate products which are only marginally different?
Mr. England and Mr. Krieg. The best way to ensure greater use of
products is to conduct a thorough market analysis early in the process
and to consider the results of that analysis in the development of
requirements. In fact, that is our policy. Where feasible, our intent
is to modify our requirements, consistent with the user's needs, to
facilitate the employment of available and cost-effective commercial
products.
Admiral Giambastiani. I encourage the use of COTS products wherever
possible to provide an affordable, militarily-useful capability to the
warfighter. The best way to ensure greater use of COTS products is to
conduct a thorough market analysis early in the process and to consider
the results of that analysis when developing requirements. When the
JROC evaluates the solution space for capabilities, COTS solutions are
considered as part of that analysis. Where feasible, the JROC will
consider adjusting the requirement when there is a COTS solution that
will substantially meet the warfighter's needs. The Light Utility
Helicopter is one example where the Army is seeking an entirely COTS-
based solution to a warfighter need.
General Kadish. I have not studied this issue. However, based on my
experience DOD has made significant progress in using COTS products in
our weapon and information systems development.
30. Senator Graham. Secretary England, Secretary Krieg, Admiral
Giambastiani, and General Kadish, what process is in place to allow
vendors who feel their products are being duplicated to challenge DOD
decisions?
Mr. England and Mr. Krieg. The Federal Acquisition Regulation (FAR)
and its Defense Supplement provide policy and procedures for vendors to
protest contract actions to either the agency or the GAO, or to use
alternative dispute resolution (ADR) procedures to resolve their
concerns. In addition, the acquisition regulations provide policy and
procedures relating to copyright, patent, and technical data rights and
allegations of infringement of those rights. The specific process
varies depending on the facts for particular cases.
Admiral Giambastiani. The JROC encourages full and open competition
to ensure that all vendors have the same opportunity to provide
warfighting capabilities. The JROC, however, is not involved in the
source selection or protest processes of the Department. The Federal
Acquisition Regulation and its Defense Supplement provide policy and
procedures for vendors to protest contract actions and for allegations
of infringement of copyright, patent, and technical data rights.
General Kadish. I have not studied this issue.
______
Questions Submitted by Senator Daniel K. Akaka
CONTRACTORS
31. Senator Akaka. Secretary England, Secretary Krieg, Admiral
Giambastiani, and General Kadish, I am concerned that as we have cut
the acquisition workforce, we have become more and more reliant on
contractors to assist us in conducting acquisition functions. As a
result, we often depend on contractors to assist us in selecting other
contractors, managing the work of other contractors, and even making
major acquisition decisions regarding programs of other contractors. I
am told that in many cases, the DOD simply does not have the expertise
any more to conduct these functions on its own. Do you agree that we
have become too reliant on contractors to help us manage acquisition
functions, and if so, what do you think we should do about the problem?
Mr. England and Mr. Krieg. As you are aware, the acquisition
workforce has been substantially reduced by directed reductions and
retirements. In major DOD acquisition organizations, the number of
civilian and military personnel (exempting the civilians assigned in
maintenance depots) shrank from roughly 460,000 in fiscal year 1990 to
about 206,000 in fiscal year 2004, a 55-percent decrease. Using 2004
constant year dollars, the contract dollars have increased from $117.7
billion in fiscal year 1998 to $241 billion in fiscal year 2004, a 105-
percent increase just since 1998. These changes, in combination with
other factors, pose major acquisition workforce and mission capability
challenges for the Department. One means of mitigating risk is
selectively hiring contractor support with necessary skills. While
those contractors have substantive duties, it is our policy that they
not be assigned to inherently governmental functions such as
participating in source selection boards, determining policy, or
assessing performance. Having said that, we believe it is important to
strategically grow the capabilities of our government acquisition
workforce so we have the skills necessary to satisfy current and future
acquisition challenges and to avoid the kind of issues raised by your
question. Consequently, we appreciate your continued support for both
the National Security Personnel System and for the Department having
the right workforce size and capability.
Admiral Giambastiani. Although the Joint Staff is not directly
involved in acquisition workforce decisions, I support the efforts of
Secretary England and Secretary Krieg to improve our government
acquisition workforce.
General Kadish. The Federal acquisition workforce has been
downsized too much. The Department should immediately increase the
number of Federal employees focused on critical skill areas, such as
program management, system engineering and contracting. This is a long-
term problem and it will require a long-term fix.
32. Senator Akaka. Secretary England, Secretary Krieg, Admiral
Giambastiani, and General Kadish, will this issue be addressed in the
acquisition reviews?
Mr. England and Mr. Krieg. The Department will continue to review
the operations of acquisition programs to ensure effective, efficient,
and appropriate use of government resources.
Admiral Giambastiani. I understand that Secretary England and
Secretary Krieg are committed to ensuring that the Department will
continue to review the operations of acquisition programs to ensure
effective, efficient, and appropriate use of government resources. I
support their efforts.
General Kadish. As stated above, the Panel was extremely concerned
about the impact of lack of acquisition expertise in the Department and
the dependence upon contractor support for significant roles in the
acquisition process. This has contributed to the multiple layers of
Integrated Product Teams and the Panel recommends that these teams need
to be eliminated since they add cost and time to critical decision.
33. Senator Akaka. Secretary England, Secretary Krieg, Admiral
Giambastiani, and General Kadish, one new issue that has been raised by
the Department's extensive reliance on contractors to assist in
acquisition functions is the potential for conflict of interest on the
part of contractor employees. On February 8, 2005, the acting Director
of the Office of Government Ethics (OGE) wrote a letter explaining the
problem as follows:
``In recent years, executive branch ethics officials--
particularly those from Department of Defense agencies and
certain civilian agencies--have identified various issues and
concerns that are a result of the growing presence of
contractors in the Federal workplace. The issues predominantly
relate to the fact that, unlike Government employees,
contractor personnel are not subject to a comprehensive set of
ethics rules, yet they are often performing some of the
Government's most sensitive and critical work. This disparity
is true even when contractor personnel are working side-by-side
with Government employees in the Federal workplace or on the
battlefield, and, for all practical purposes, may appear to the
public to be [Federal] employees. The problem is most likely to
occur when contractors perform work that historically was
considered a Federal function, as well as when contractors
perform functions closely associated with inherently
governmental functions.''
Do you agree with OGE's assessment of this issue, and if so, what
do you think we should do to address the problem?
Mr. England. The increasing use of contractors to perform
commercial activities that historically have been treated as a function
of the Federal Government, particularly when contractor personnel are
working along side Federal personnel in the Federal workplace, poses
several challenges. One is how to protect the integrity of the
procurement and decisionmaking processes by contractor personnel in a
manner that is at least commensurate with that of Federal personnel. As
you know, Federal personnel are subject to conflict of interest laws,
limitations on employment after they leave Federal service, procurement
integrity restrictions, laws protecting certain trade secret data, laws
limiting political activities, and standards of conduct regulations
that seek to isolate official decisions from personal interests.
Although some of these measures may not be appropriate for contractor
personnel, it is necessary that some measures be implemented. The
Department of Defense, as well as other Federal agencies including the
Office of Government Ethics, is examining this issue. In fact, the
Services Acquisition Reform Act Advisory Committee (SARA), authorized
by the National Defense Authorization Act for Fiscal Year 2004, is
including this issue in its study, which we expect will be completed in
early 2006.
Mr. Krieg. I think this is an area that deserves more attention. We
must never contract for inherently governmental functions. We also must
be extremely careful when we contract for work that historically has
been performed by Federal employees, even if that work is not
inherently governmental, to ensure that we have the appropriate checks
and balances in place that prevent any conflicts of interest. This
responsibility rests with those who decide to contract out these
services and those who write, negotiate, and review contracts in DOD.
But there is also a responsibility on the part of the industry to
ensure that their employees understand their roles and the span of
their responsibilities, as well as all of the ethical issues relating
to those responsibilities.
Admiral Giambastiani. I recognize that contractors make an
important contribution to our national defense and that it is incumbent
upon us to ensure they are not performing inherently governmental
functions in accordance with Department of Defense Directive (DODD)
1100.4, dated 12 February 2005, which restricts the Department from
contracting for inherently governmental functions as defined in 31 U.S.
Code, Section 501. Adherence to this directive ensures the Department
retains decisional authority and maintains appropriate checks and
balances that prevent potential conflicts of interest.
General Kadish. This is a direct consequence of a deliberate effort
to outsource traditionally government tasks over many years. Unless
this policy is modified or changed in a significant way leadership in
government will have little choice but to rely on contractors to fill
these roles. We must either accept this as a way of doing business and
impose the appropriate rules and regulations on the contractors or
define in detail what is inherently a government role and hire back
government employees to perform them.
34. Senator Akaka. Secretary England, Secretary Krieg, Admiral
Giambastiani, and General Kadish, will this issue be addressed in the
acquisition reviews?
Mr. England. The substantial acquisition workforce reductions of
the last decade have presented the Department with significant manpower
challenges. One means of mitigating these challenges is selectively
hiring contractor support with necessary skills. While those
contractors have substantive duties, they must not be assigned to
inherently governmental functions, either in the Federal workplace or
on the battlefield. We believe it is important to grow the capabilities
of our government acquisition workforce strategically so we have the
skills necessary to satisfy current and future acquisition challenges.
Reducing the risks that you have highlighted will be addressed as the
Department develops that strategy.
Mr. Krieg. As Deputy Secretary England responded, the substantial
acquisition workforce reductions of the last decade have presented the
Department with significant manpower challenges. One means of
mitigating these challenges is selectively hiring contractor support
with necessary skills. While those contractors have substantive duties,
they must not be assigned to inherently governmental functions, either
in the Federal workplace or on the battlefield. We believe it is
important to grow the capabilities of our government acquisition
workforce strategically so we have the skills necessary to satisfy
current and future acquisition challenges. Reducing the risks that you
have highlighted will be addressed as we develop that strategy.
Admiral Giambastiani. The Department recognizes the importance of
developing the capabilities of our government acquisition personnel
following the substantial reductions in the defense acquisition
workforce over the last decade. Secretary England and Secretary Krieg
are developing a strategy to grow and nurture the skills necessary in
our acquisition workforce. I support their efforts.
General Kadish. Yes.
ACQUISITION OF MAJOR WEAPONS SYSTEMS
35. Senator Akaka. Secretary England, Secretary Krieg, Admiral
Giambastiani, and General Kadish, the Comptroller General attributes
the problems we are having with the acquisition of major weapon systems
to unstable funding, fluctuating requirements, and immature
technologies. Here is how the Comptroller General explained the problem
at a hearing of the Readiness and Management Support Subcommittee
earlier this year:
``Problems occur because the Department of Defense's weapon
programs do not capture early on the requisite knowledge that
is needed to efficiently and effectively manage program risks.
For example, programs move forward with unrealistic program
cost and schedule estimates, lack clearly defined and stable
requirements, use immature technologies in launching product
development, and fail to solidify design and manufacturing
processes at appropriate junctures in development.''
Do you agree with GAO's assessment of this issue, and if so, what
do you think we should do to address the problem?
Mr. England and Mr. Krieg. The Comptroller General identified
issues that certainly contribute to program instability, and,
consequently, increased costs and extended cycle times. We are familiar
with these issues and have implemented policies that require mature
technology, full funding, and approved requirements before a program
can be initiated. More specifically, technology maturity must be
formally and independently assessed and reported; program funding must
be supported by an independent estimate; and, requirements must be
formally endorsed by the Joint Staff. These policies are designed to
resolve these issues and I plan to ensure they are enforced.
Admiral Giambastiani. The Comptroller General's assessment is, by
and large, fair and accurate in describing acquisition programs which
have failed to meet cost, schedule, or performance. The Department has
implemented policies that mitigate program risks and I work closely
with Secretary Krieg to execute these policies. Specifically, the JROC
evaluates capability needs and validates requirements to ensure that
programs have clearly defined and stable requirements and, as the co-
chair of the Defense Acquisition Board with Secretary Krieg, I have the
opportunity to review technology maturity and assess program funding
and schedules prior to program initiation and to revisit requirements
and acquisition strategy where acquisition programs face unexpected or
insurmountable challenges which require senior leadership engagement to
resolve.
General Kadish. We consulted with the GAO during the course of our
deliberations and shared perspectives on the data used by Congress, the
Department, and the Government Accountabilty Office to determine the
success or failure of major weapons systems. We determined that there
are great discrepancies in how each of us determines the status of
these programs and we agreed that a consistent method is necessary to
determine the status of these programs. The Department does not have a
single consistent, sufficient set of metrics applicable across programs
to manage acquisition or measure success. Conflicting criteria in
performance evaluations contributes to confusion about program
performance in the community. We should develop a predictable,
transparent set of metrics to measure performance by the entire
community.
36. Senator Akaka. Secretary England, Secretary Krieg, Admiral
Giambastiani, and General Kadish, will this issue be addressed in the
acquisition reviews?
Mr. England and Mr. Krieg. This issue is being addressed in the
context of the ongoing acquisition reviews.
Admiral Giambastiani. Yes.
General Kadish. The Panel determined that consistent metrics will
provide greater transparency and accountability.
[Whereupon, at 11:54 a.m., the committee adjourned.]