[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

                               __________

         Printed for the use of the Committee on Armed Services



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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

                               __________

                    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.]

                                 
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