[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



                         [H.A.S.C. No. 110-34]

                                HEARING

                                   ON

                   NATIONAL DEFENSE AUTHORIZATION ACT

                          FOR FISCAL YEAR 2008

                                  AND

              OVERSIGHT OF PREVIOUSLY AUTHORIZED PROGRAMS

                               BEFORE THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

TERRORISM, UNCONVENTIONAL THREATS AND CAPABILITIES SUBCOMMITTEE HEARING

                                   ON

 BUDGET REQUEST ON HARNESSING TECHNOLOGICAL INNOVATION: CHALLENGES AND 
                             OPPORTUNITIES

                               __________

                              HEARING HELD
                             MARCH 14, 2007

                                     
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    TERRORISM, UNCONVENTIONAL THREATS AND CAPABILITIES SUBCOMMITTEE

                    ADAM SMITH, Washington, Chairman
MIKE McINTYRE, North Carolina        MAC THORNBERRY, Texas
ROBERT ANDREWS, New Jersey           ROBIN HAYES, North Carolina
JIM COOPER, Tennessee                KEN CALVERT, California
JIM MARSHALL, Georgia                JOHN KLINE, Minnesota
MARK E. UDALL, Colorado              THELMA DRAKE, Virginia
BRAD ELLSWORTH, Indiana              K. MICHAEL CONAWAY, Texas
KIRSTEN E. GILLIBRAND, New York      JIM SAXTON, New Jersey
KATHY CASTOR, Florida
                 Kevin Gates, Professional Staff Member
               Alex Kugajevsky, Professional Staff Member
                     Andrew Tabler, Staff Assistant













                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2007

                                                                   Page

Hearing:

Wednesday, March 14, 2007, Fiscal Year 2008 National Defense 
  Authorization Act--Budget Request on Harnessing Technological 
  Innovation: Challenges and Opportunities.......................     1

Appendix:

Wednesday, March 14, 2007........................................    35
                              ----------                              

                       WEDNESDAY, MARCH 14, 2007
FISCAL YEAR 2008 NATIONAL DEFENSE AUTHORIZATION ACT--BUDGET REQUEST ON 
   HARNESSING TECHNOLOGICAL INNOVATION: CHALLENGES AND OPPORTUNITIES
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Smith, Hon. Adam, a Representative from Washington, Chairman, 
  Terrorism, Unconventional Threats and Capabilities Subcommittee     1
Thornberry, Hon. Mac, a Representative from Texas, Ranking 
  Member, Terrorism, Unconventional Threats and Capabilities 
  Subcommittee...................................................     2

                               WITNESSES

Cohen, Dr. Brian S., Institute for Defense Analyses..............     9
Lehman, David H., Senior Vice President and General Manager, 
  Command and Control Center, The MITRE Corporation..............     2
Lewis, James Andrew, Director and Senior Fellow, Technology and 
  Public Policy Programs, Center for Strategic and International 
  Studies........................................................     6
Starr, Dr. Stuart H., Center for Technology and National Security 
  Policy, National Defense University............................    10

                                APPENDIX

Prepared Statements:

    Cohen, Dr. Brian S...........................................    51
    Lehman, David H..............................................    39
    Lewis, James Andrew..........................................    45
    Starr, Dr. Stuart H..........................................    58

Documents Submitted for the Record:

    ``I-Power: The Information Revolution and Stability 
      Operations,'' Defense Horizons, February 2007, by Franklin 
      D. Kramer, Larry Wentz, and Stuart Starr. Submitted by Dr. 
      Stuart Starr...............................................    71

Witness Responses to Questions Asked During the Hearing:

    [There were no Questions submitted during the hearing.]

Questions Submitted by Members Post Hearing:

    Mr. Smith....................................................    81
 
FISCAL YEAR 2008 NATIONAL DEFENSE AUTHORIZATION ACT--BUDGET REQUEST ON 
   HARNESSING TECHNOLOGICAL INNOVATION: CHALLENGES AND OPPORTUNITIES

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
                      Terrorism, Unconventional Threats and
                                 Capabilities Subcommittee,
                         Washington, DC, Wednesday, March 14, 2007.
    The subcommittee met, pursuant to call, at 3:00 p.m., in 
room 2118, Rayburn House Office Building, Hon. Adam Smith 
(chairman of the subcommittee) presiding.

  OPENING STATEMENT OF HON. ADAM SMITH, A REPRESENTATIVE FROM 
  WASHINGTON, CHAIRMAN, TERRORISM, UNCONVENTIONAL THREATS AND 
                   CAPABILITIES SUBCOMMITTEE

    Mr. Smith. I think we will go ahead and get started and 
call the meeting formally to order.
    I want to thank our witnesses and members.
    We have probably an hour-and-a-half, somewhere in that 
neighborhood, before they are going to call votes over on the 
floor. It is hard to say precisely. And when they do call 
votes, it is going to be about an hour's worth, because there 
is a motion to recommit in there.
    The importance of all of that is, we are going to try to 
get done--when the bells go off, hopefully we will be done with 
our witnesses and questions, and try to work on that timeframe.
    With that, I want to welcome everybody to the Subcommittee 
on Terrorism, Unconventional Threats and Capabilities. We are 
hearing today about technological innovations, specifically 
focusing on the Science and Technology (S&T) programs within 
the military, and how we can do a better job of making sure we 
get the absolute best technology to our military and to the 
warfighter as quickly and efficiently as possible.
    I think there is a lot of potential here. Certainly, the 
military is doing a lot of things right, but we have got some 
more things that I think we can do better.
    We have a good panel with us here today.
    I assume Mr. Lewis is joining us shortly? Nobody seems to 
know.
    Mr. Lewis is not here yet? All right.
    He will go last. But we will have him here shortly.
    We have James Andrew Lewis, who is director and senior 
fellow for technology and public policy programs--let us get 
the titles here right; David Lehman, senior vice president and 
general manager, Command and Control Center at The MITRE 
Corporation; Dr. Brian Cohen, Institute of Defense Analysis; 
and Dr. Stuart Starr, the Center for Technology and National 
Security Policy at the National Defense University (NDU).
    And I want to thank you very much. NDU has been enormously 
helpful in my efforts over the last few years.
    And with that, I will turn it over to the ranking member on 
the committee, Mr. Thornberry, for any opening comments he may 
have.

STATEMENT OF HON. MAC THORNBERRY, A REPRESENTATIVE FROM TEXAS, 
     RANKING MEMBER, TERRORISM, UNCONVENTIONAL THREATS AND 
                   CAPABILITIES SUBCOMMITTEE

    Mr. Thornberry. Thank you, Mr. Chairman. And I want to join 
you in welcoming our witnesses on this important topic.
    The globalization of the world's market presents a lot of 
opportunities, but also challenges for us. And how the United 
States can be innovative enough to protect our national 
security is something we all struggle with, given some of those 
globalization challenges.
    We have a terrific group of witnesses, and I look forward 
to hearing from them, as I know you do. And I yield back.
    Mr. Smith. Thank you, Mac.
    We will start with Mr. Lehman.

STATEMENT OF DAVID H. LEHMAN, SENIOR VICE PRESIDENT AND GENERAL 
   MANAGER, COMMAND AND CONTROL CENTER, THE MITRE CORPORATION

    Mr. Lehman. Mr. Chairman and honorable members, thank you 
for the opportunity to appear before your committee.
    My name is David Lehman. I am a senior vice president at 
The MITRE Corporation. I am also general manager of MITRE's 
Command and Control Center, which is a part of the Department 
of Defense's command and control, communications, intelligence, 
federally funded research and development center. Also, I was 
MITRE's chief technology officer for nine years, managing our 
internal research program.
    I would ask that my prepared statement be included in the 
record.
    Steve Jobs of Apple said, ``An innovation is an idea that 
ships.'' The idea may start as a technical curiosity, a result 
of scientific research. If someone connects that curiosity to a 
solution to a real-world problem, an invention is created. If 
people or organizations adopt that invention, an innovation is 
created.
    Too often, the research community lacks an understanding of 
real-world problems, and the potential users do not know that 
the enabling technologies exist. The result is too few 
inventions and even less innovation.
    To combat this, we must create an environment and process 
that carry research results through invention to widespread 
adoption. This will result in innovation.
    In my testimony today, I will present three recommendations 
to improve the processes and the environment to increase the 
yield of innovation from our science and technology community. 
I will focus less on research--the creation of technical 
ideas--and more on the management process necessary to increase 
invention and innovation.
    These recommendations are: align S&T investment with 
warrior needs and improve the funding mechanism to carry 
research inventions through to innovations; adopt open systems 
architectures for program of record, so that these programs can 
more easily accept and adapt innovations; and, three, change 
the business model used in programs of record to increase 
incentives for contractors.
    The key to a good research program is to align investments 
with the goals of the organization or the needs of the end 
user. When an organization fails to achieve such alignment, the 
researchers tell the developers, ``You do not use anything we 
invent,'' and the developers retort, ``You do not produce 
anything we can use.''
    This standoff occurs, because the two departments have not 
worked closely together to understand the needs of the 
customers or the organization, the research problems, the 
research risks and the funding profile that links the research 
schedule and budget to the production schedule and budget.
    When an organization can solve these problems, it can put a 
plan in place that includes continuous dialogue and adjust the 
plan as necessary over time. Optimally, this process bridges 
the chasm between research and production.
    I should caution that the linkage among the customer, the 
researcher and the developer should not be too tight. This only 
achieves incremental improvements, not disruptive, quantum 
leaps. A good research program balances this tension.
    Government organizations have proven that they can achieve 
optimal alignment between research and development. The 
National Reconnaissance Office (NRO), in the 1970's and early 
1980's, tightly linked its research investments in increased 
sensor sensitivity and satellite technology to production 
projects. This resulted in continuously improved intelligence 
collection capability.
    The NRO could achieve this alignment of budgets and 
schedules partly because the users, the programs, the 
developers and the research organization all reported to the 
same manager, creating unanimity of purpose and control.
    Then NRO also had exceptionally strong and technically 
competent program officers. They were essentially the technical 
peers of their contractors.
    Beyond organizational structure and technically strong 
program officers, there are four additional reasons why most 
organizations do not achieve this alignment. Currently, neither 
the research community nor the acquisition community fully 
understands the needs of the end user. And here we are talking 
about the warrior.
    The well-intentioned but overly bureaucratic documentation 
review process isolates the warriors from those who will design 
and build the system. The formal research and acquisition 
process, as practiced, offers too few opportunities for rich 
dialogue between the engineers, who know what technology can 
do, but do not understand the warrior's problems, and the 
warriors who have the experience, but not the technological 
insight.
    This dialogue, which links the technical curiosity or idea 
to the real-world need, leads to problem discovery, invention 
and innovation.
    To achieve this kind of interaction in the research and 
development cycle, we need to create a development environment 
in which the warriors and the technologists interact 
continuously, experimenting with new inventions and 
applications and rapidly incorporating those that prove 
themselves into the programs of record.
    Such a system would combine with what the acquisition 
process does best--training and sustainment--with what develop-
in-the-field does best--satisfy the users' requirements.
    Second, the S&T community's research portfolio is not well 
aligned with both the needs of the warriors and the program of 
records that exist to satisfy those needs. Tighter alignment 
must come from joint management of the investment through 
continuous dialogue among warriors, research and developers. 
Otherwise, we will continue the pattern of research results 
that are never used, and programs that are less technically 
advanced than they could be.
    Please note, only part of the S&T budget should be tied to 
users' needs in existing programs of record. The S&T budget is 
a portfolio, some of which must be invested in disruptive 
advances.
    Third, research schedules are not aligned with acquisition 
schedules. Achieving such alignment is understandably 
difficult, because research does not follow a schedule. 
Government programs must learn to manage the inevitable 
uncertainty.
    Service laboratories regularly present inventions to 
acquisition programs, but the acquisition program usually has 
little latitude to make changes. The acquisition process can 
manage the uncertainty with advanced, collaborative planning 
between the program and research communities and continued 
communication throughout the research and development cycle.
    The fourth failure in alignment relates to funding. The 
research and acquisition communities must plan for success from 
the moment they embark on a research project. The funding 
profile in the program objective memorandum must bridge from 
research funding through acquisition funding.
    Too often, research programs, advanced concept technology 
demonstrations, joint expeditionary force experiments, and the 
like, validate operational needs, but the budget lacks funding 
for follow-on development, acquisition and fielding.
    To deal with this uncertainty, the acquisition community 
needs to have a set of funds available that allow it to harvest 
the best ideas that have achieved practicable results. In 
economics, this approach is called ``real options.''
    Having a line in the Program Objective Memorandum (POM) 
that gives program managers the flexibility to apply funds to 
research investments, as they mature, and carry them into 
programs of record will increase the innovation yield from the 
S&T community.
    This line item should be large enough to harvest some, but 
not all, successes, forcing services and programs to prioritize 
user needs and control budgets.
    As a corollary to this observation, we must improve our 
ability to manage failure. If we recognize and deal with 
failure early, we can afford more new starts. That is my second 
recommendation.
    Once programs have achieved alignment, they must ensure 
that the systems they field are designed with open 
architectures. They must have defined interfaces and use well-
known and accessible commercial standards.
    A good architecture allows a system to be modified easily, 
and thus accept with relative ease some--though, unfortunately, 
not all--future innovations and improvements. Google, eBay and 
Amazon do this very well.
    The Department of Defense (DOD) acquisition community is 
striving to build systems with open architectures. To meet this 
goal, the DOD must find a new business model for its 
contractors. And that is my third recommendation.
    Under the standard model, the DOD lets a contract for an 
entire system, usually for its entire lifecycle. This gives the 
contractor little incentive to design an open system.
    The DOD should let a contract for a base infrastructure 
with as open a design as possible, then let separate, smaller 
contracts for the applications that will ride on the 
infrastructure, and bar the infrastructure contract from 
bidding on these applications.
    The contracting community will undoubtedly find it 
difficult to adapt to this change; however, such a structure is 
vital. It will allow the DOD to become a faster adopter and 
beneficiary of innovations.
    In summary, to increase the yield from our S&T investment, 
I recommend that the DOD strongly encourage the S&T community, 
the acquisition community and the warriors to manage the 
process as a team. They must be in constant dialogue to 
determine needs, create investment and align budget schedules, 
architectures and acquisition strategy.
    All this will maximize the impact of S&T procurement 
dollars for the warrior.
    The DOD already possesses the authority to act upon most of 
these recommendations. What is needed is some flexibility in 
the POM line.
    Finally, I would like to mention the possible contribution 
of Federally Funded Research and Development Centers (FFRDCs) 
in the context of these recommendations. FFRDCs could play key 
roles, because of their combination of technical expertise and 
their inherent, government-mandated impartiality. They are 
honest brokers.
    This impartiality is especially important, because 
commercial organizations can freely share their latest 
proprietary findings with FFRDC staff. And, because FFRDCs have 
no commitment to a particular vendor or system, FFRDCs can 
augment expertise of government program offices, to scan all 
sources of innovation and objectively evaluate technical 
innovations against measurable criteria.
    I believe that implementing the recommendations outlined 
above will keep the United States at the forefront of applied 
technological innovation and contribute to the success and 
safety of our warriors.
    Thank you, Mr. Chairman. I would be happy to answer 
questions.
    [The prepared statement of Mr. Lehman can be found in the 
Appendix on page 39.]
    Mr. Smith. Thank you.
    Mr. Lewis.

 STATEMENT OF JAMES ANDREW LEWIS, DIRECTOR AND SENIOR FELLOW, 
TECHNOLOGY AND PUBLIC POLICY PROGRAMS, CENTER FOR STRATEGIC AND 
                     INTERNATIONAL STUDIES

    Mr. Lewis. Thank you, Mr. Chairman, and let me apologize 
for being a moment or two late.
    I would like to thank the committee for this opportunity to 
testify. I am going to make four points in my testimony that I 
will summarize for you now.
    First, as you know, technological leadership has 
contributed to U.S. military superiority and economic strength 
for almost 70 years.
    Second, globalization and other changes means that the U.S. 
share of innovation and its technological leadership will 
decline.
    Third, some U.S. policies reinforce this decline. These 
policies include underinvestment in science, a more difficult 
regulatory regime and the unintended effects of some 
regulations put in place since September 11th.
    Fourth, while the U.S. faces challenges when it comes to 
technological leadership, it also has an opportunity to respond 
in ways that can advance its security.
    The key to technological leadership is innovation. This is 
an overused word, but it is the ability to use knowledge to 
create new goods or services.
    The U.S. has been a world leader in innovation. Our 
political and social makeup provide it with an advantage over 
other nations. The question is whether this comparative 
advantage is enough in an era of heightened global competition.
    Now, I should note, Mr. Chairman, that there is an anomaly 
in these concerns. And that anomaly is that the U.S. spends 
more than any other nation on science and on research and 
development. And it is reasonable to ask, if we spend so much, 
how can there be a problem?
    The answer to that, I think, is we are not spending enough 
to maintain our lead, and we are not spending enough on the 
things needed for military technology. Our spending levels are 
flat. Spending in other nations is increasing.
    If these trends continue, the long-term result will be the 
U.S. will no longer have the lead in important military 
technologies.
    The issue is complicated, because the results of 
underinvestment can take years to appear. It is also 
complicated, because the data is ambiguous.
    It is hard to measure innovation, so the normal practice is 
to use proxies, like the number of patents awarded, the numbers 
of Ph.D.s and engineers, or the number of scholarly articles 
published by scientists.
    When we look at this data, it is not clear that the U.S. is 
losing ground. But there are troubling trends. In a few key 
areas, scientists in other nations are publishing more than 
their American counterparts.
    In our technological workforce, we are coming up to a 
period where many engineers and scientists will be of 
retirement age, and they will not be replaced.
    From an economic standpoint, this may not be bad. We do not 
want to train engineers, only to find there are no jobs for 
them.
    But from a national security perspective, these are 
important warning signs. We should not ignore these warning 
signs, because they reflect significant changes in the 
international environment. These changes will challenge U.S. 
leadership.
    One change, as you know, comes from globalization. 
Globalization diffuses technology around the world. It has 
eroded the national character of science, because research is 
increasingly carried out by multinational teams.
    Another challenge comes from the rise of strategic 
competitors. Nations like China or India, or perhaps in the 
distant future places like Brazil or even Europe.
    These challengers have seen how important science has been 
to U.S. military leadership, and they are copying us.
    A related challenge comes from Asia's economic ascent. The 
Pacific Rim is the focus of global activity. The U.S. is part 
of this, but the most dynamic growth has been in Japan, Korea, 
Taiwan and now China.
    Asian nations hope to repeat the success they have had in 
manufacturing in scientific research. If today, Asia is the 
world's factory, its leaders hope that tomorrow it will also be 
the world's laboratory.
    Another challenge, and a broader challenge, comes from the 
way societies create wealth. In the 1800's, the U.S. 
transitioned from agriculture to manufacturing. That meant that 
the best way to generate wealth lay in industry, not in 
farming.
    Now we are transitioning from manufacturing to the creation 
of information and knowledge and services. This transition may 
be good for the U.S. economy, but it has serious implications 
for military technology.
    The cumulative effect is a new kind of risk for national 
security. The best way to describe this risk is that the 
vigorous research and technological base that has given the 
U.S. a military advantage for decades is in danger of being 
eroded.
    Congress can play a key role in stemming this erosion. The 
most important step is funding for research.
    While the U.S. continues to lead in many research areas, it 
is not spending enough to sustain this lead. U.S. spending in 
scientific areas that are key to national security is flat or 
declining, while other nations are accelerating their spending.
    These effect of underinvestment is damaging in physics, 
aeronautics, mathematics, computer sciences and engineering. 
Research in these areas provides the basis for military 
transformation, and in relative terms, these areas have been 
the most seriously underfunded.
    Underfunding is compounded by changes in the nature of 
research and development in the Department of Defense and in 
the private sector. Government and industry now have to spend 
more on development, rather than on coming up with new 
capabilities.
    These changing priorities mean that some key research areas 
are no longer funded.
    U.S. policies on immigration and technology transfer also 
damage technological leadership. This is an area where the 
Congress could provide assistance.
    U.S. national security and military power was strengthened 
in the 20th century by an influx of foreign scientists. The 
universities and institutions that received these scientists 
became global leaders.
    But the U.S. is a less attractive destination for 
scientific talent than it once was. Measures imposed since 
September 11th have the unintended consequence of deterring 
researchers from coming to the U.S.
    Other changes prevent researchers from staying here once 
they complete their education. Our universities produce great 
researches, and then we force them to leave.
    Restrictions on technology transfer also work against U.S. 
leadership. There are some restrictions that affect how 
scientists can work. There are other restrictions that 
encourage other nations to invest in their own research and 
technologies.
    The unintended effect of these restrictions, combined with 
the restrictions on immigration, is to move science outside of 
the United States. The U.S. is essentially creating its own 
competitors.
    This situation is troubling, Mr. Chairman, but it is not 
irreparable. And let me tell you two stories to show this.
    In 1957, after the Soviet Union launched Sputnik, President 
Eisenhower's science adviser predicted that, because of their 
lead in math and science education, the Soviets would surpass 
the United States in 10 years. He was wrong.
    In the 1980's, many pundits said that Japan's rapid growth 
and its trade policies and manufacturing skills would make them 
the leading economic power within a few years. They were also 
wrong.
    Now we hear similar predictions about China and India. In 
thinking about these predictions, it is useful to ask why the 
Soviets or the Japanese did not succeed. Some of this has to do 
with weaknesses found in those countries. Every nation has its 
own strengths and weaknesses. And the U.S., as I mentioned 
earlier, has some unique advantages.
    A more important factor lies in the U.S. response. In each 
case, in the 1950's and the 1960's and the 1980's, the U.S. 
changed its policies and practices. The lessons from this is 
that, if the U.S. finds the right set of responses, the 
problems it faces today are imminently manageable.
    There has already been some progress. There has been a 
number of eminent commissions. There have been reports. The 
President announced his American competitive initiative, the 
Competitiveness Initiative, and both parties have put forward 
programs for strengthening innovation.
    But these are only initial steps. There is still much to 
do.
    As the committee contemplates what to do next in harnessing 
technology for national security, I would like to conclude with 
four general recommendations.
    First, make the promotion of innovation a goal for policy 
law. This may require streamlining and simplifying the 
regulatory burden on innovators.
    Second, identify where government action can be effective. 
One area is funding for basic research in the physical 
sciences. Without government support, the U.S. lead in these 
sciences will decline.
    Third, look for ways to expand our comparative advantage. 
We have a competitive market economy, and that gives us a 
superiority over some other countries. Policies that reinforce 
markets and competition will help.
    Additionally, measures that strengthen institutions like 
the Defense Advanced Research Projects Agency (DARPA), the 
service labs, the National Science Foundation (NSF) or the 
National Institutes of Health (NIH) and the graduate research 
programs at our universities will be crucial for maintaining 
American power.
    Fourth, the U.S. should look for ways to expand 
international cooperation. We have benefited greatly from 
globalization, and closer cooperation with allies will improve 
national security.
    In conclusion, Mr. Chairman, we face challenges when it 
comes to technology and national security. But I am guardedly 
optimistic that we can overcome them.
    I thank the committee for the opportunity to testify, and 
ask that my full remarks be submitted for the record.
    [The prepared statement of Mr. Lewis can be found in the 
Appendix on page 45.]
    Mr. Smith. Thank you. We will do that with the full 
remarks.
    Dr. Cohen.

STATEMENT OF DR. BRIAN S. COHEN, INSTITUTE FOR DEFENSE ANALYSES

    Dr. Cohen. Mr. Chairman and distinguished members of the 
subcommittee, I am pleased to appear before you on behalf of 
the Institute for Defense Analyses, IDA, which is a federally 
funded research and development (R&D) center, whose sole 
mission is to support the Office of the Secretary of Defense 
and DOD on matters of national security.
    The topic of my discussion is on the globalization trends 
in the integrated circuit industrial base. My recent work has 
been focused on understanding and addressing concerns about the 
integrated circuit industry, and in particular on the Trusted 
Foundry Program.
    This program, while not necessarily a general solution, has 
been markedly successful. The Trusted Foundry Program has been 
well utilized from the start, providing secure and affordable, 
state-of-the-art, domestic semiconductor manufacturing services 
for custom-designed integrated circuits for a wide range of 
defense and national security applications.
    I have submitted a detailed statement for the record. And I 
would be happy at this point to answer any questions the 
subcommittee may have.
    Thank you.
    [The prepared statement of Dr. Cohen can be found in the 
Appendix on page 51.]
    Mr. Smith. Thank you very much.
    Dr. Starr.

  STATEMENT OF DR. STUART H. STARR, CENTER FOR TECHNOLOGY AND 
     NATIONAL SECURITY POLICY, NATIONAL DEFENSE UNIVERSITY

    Dr. Starr. Mr. Chairman, distinguished committee members, 
ladies and gentlemen, I am very pleased to have the opportunity 
today to address this subcommittee on the important topic of 
actions to enhance the use of commercial information technology 
in DOD systems.
    I have more extensive remarks, and, of course, I would like 
to submit them for the record.
    In my remarks, I try to set the tone, the stage for this 
activity. But most of my colleagues who have been testifying 
have already done that well, so I will go ahead and pass on 
that.
    What we have been doing at the Center for Technology and 
National Security Policy (CTNSP) is looking at this issue over 
the last four years. To that end, we have done over 40 
different studies.
    We try to take advantage of the best knowledge from 
government, industry, academia and think tanks. And from that 
we have distilled six key obstacles, and we have tried to 
suggest a set of recommendations that could be derived to deal 
with those obstacles.
    What I would like to do is submit for the record a more 
formal characterization of the studies that we performed and 
our synthesis of them into a characterization of the problem 
and potential activities.
    I would like to briefly summarize what we see as the key 
six obstacles that prevent the effective use of commercial 
Information Technology (IT) in DOD systems.
    Basically, they fall in the categories of a non-attractive 
market, non-transparency, lack of agility, lack of dominance, 
an isolating market and the challenge associated with primes 
and lead system integrators.
    I would like to very briefly comment on those obstacles so 
you have a sense about what we have synthesized from our 
various pieces.
    With respect to non-attractive market, one of the initial 
things that we did was conducted a survey among people who 
refuse to do work with DOD and people who did work with DOD.
    And to give you an example, in the survey, when people 
spoke of it as a non-attractive market, they said that DOD does 
not know what it wants, it takes too long to acquire key 
products and there are too many barriers to the bid process.
    DOD had a complementary study. And there they noted that 
commercial firms are reluctant to enter, due to the fact of 
intellectual property rights and the question of cost 
accounting, auditing and oversight responsibilities.
    So, all of those factors combined to create a non-
attractive market for the small to medium-sized firms that are 
the most the creative in commercial IT.
    The second part of our survey dealt with the question about 
their ability to understand how to work with DOD. And there, 
this issue of non-transparency emerged.
    The comment was that the process is too difficult, too 
slow, too confusing and exclusionary. So the net effect is the 
people we are trying to reach out to find us too distant and 
too difficult to work with.
    The third area is perhaps the most difficult one. It is 
this issue of non-agility in dealing with organization the size 
of the Department of Defense.
    Typically, you are all familiar with the planning, 
programming, budgeting and execution system. And people have 
observed that it takes between 18 and 24 months to transition 
from S&T into an actual acquisition.
    People in the community refer to that as ``the valley of 
death.'' I mean, a system can be sitting there waiting for 
transition, but is unable to begin to bridge that gap. That is 
an issue we have to begin to attack rapidly and effectively.
    The fourth issue, of course, is one that was alluded to by 
several of the other presenters: the non-dominance of the DOD.
    If we look back to the 1960's, DOD was calling the shots as 
the dominant player. That is clearly not the case anymore.
    And, in fact, when we have been dealing with many venture 
capitalists, they threaten to pull their money out of these 
small and medium-sized companies, if they, in fact, deal with 
DOD. So, this is an issue that has to be dealt with.
    The fifth issue is this question of an isolating market. If 
you go to the DOD labs, they will have a mantra which says, 
``adopt, adapt and develop.''
    And the idea of adopt is, take a commercial product and use 
it effectively. Adapt is go ahead and bring in some of the 
attributes one needs. And then finally, if all else fails, 
develop.
    What we have been finding all too often is that people 
neither adopt or adapt, that they immediately jump to develop. 
And so, they are missing enormous opportunities that they 
should be exploiting.
    The last barrier that we find is in this issue of the prime 
and the lead system integrator. What we are finding there as we 
have done various case studies is that many of them prefer 
internal technology and may have conflicting objects about 
commercial, off-the-shelf products. And they are concerned 
about time limits and complexity of external technology.
    So, in many ways, they are not amenable to taking these 
kinds of activities and risks on, even though they offer 
extraordinary opportunities.
    Now, the question is, in light of these barriers, what are 
the options that we have to begin to address them?
    Well, a colleague of mine likes to say that, for every 
complex problem there is a simple, eloquent solution that is 
wrong. And so, in our view, one is going to have to go ahead 
and look at a complex set of these activities and balance them 
off in an intelligent way.
    And we have identified basically six steps, and we think 
that the challenge for the committee is to think about 
identifying and supporting the right six in a balance that 
begins to make sense.
    And these six step solutions deal with enhancing 
communications in organizations; increasing resource 
flexibility; reducing the acquisition barriers that I just 
alluded to; promoting cultural change; creating a system-of-
systems engineering and integration organization and enhancing 
testing; and finally, adopting requirements for specific 
missions.
    What I would like to do is very briefly amplify on each of 
those solutions, so you have a sense about where our studies 
have taken us.
    The first one was enhancing communications and 
organization. And one of the things that we have been finding 
is this barrier between the Department of Defense and these 
small and medium-sized companies. And we have a number of 
initiatives that we think would begin to bridge that chasm.
    First, we have extraordinary opportunity with Web portals 
and the kind of technology that we use every day to enhance the 
communication between those communities. And we have looked at 
prototypes we believe that can make a major difference in 
bridging that gap.
    Another key point, you will remember, is that when we dealt 
with these small companies, they found out that the system was 
too complicated, too opaque. And so, what we recommend is the 
creation of tech prospectors and acquisition guides, who can go 
ahead and understand the needs of the DOD, appreciate the 
technology and communicate effectively with these companies.
    It is too much to ask these small, austere organizations to 
begin to do all those things unto themselves.
    Now, we believe there is an extraordinary initiative that 
has begun at Joint Forces Command (JFCOM), and this is the 
Office of Research and Technology Applications, which would be 
getting to go ahead and systematically deal with those issues. 
And we believe that they can add a great deal more with 
adequate resources and authorities.
    The second question and second potential solution is 
increasing resource flexibility. And one of the areas that our 
colleagues have worked closely with have been the Defense 
Security Cooperation Agency, the DSCA, as a model. And there is 
a case where DSCA is used a middleman, where it has resources 
and it ties into organizations that are best equipped to go 
ahead and do the acquisitions.
    So, we would argue not to create a new acquisition group, 
but to go ahead and take advantage of existing models and 
exploit them effectively.
    One of the thoughts that we have here is that a joint task 
force could be set up, led by the Joint Chiefs of Staff, that 
would work closely with the combatant commands. And our sense 
is, if they had a fund for prompt procurements to deal with the 
``valley of death'' that we were alluding to, that it can make 
an enormous difference in transitioning things from good 
science and technology into products that the warfighter could 
actually use.
    The next area was this question of removing barriers. As we 
alluded to, small and medium-sized companies are very concerned 
about intellectual property rights, about the complexity of the 
acquisition process and the need for other transactional 
authority.
    We argue that a proper mix of those three can go ahead and 
make them much more effective in responding to the issues that 
we have begun to pose.
    The fourth issue is probably the most challenging. I am 
sure all of you remember the edict from Machiavelli, that 
nothing is more difficult than changing the culture of a 
complex organization. And certainly, we have that problem with 
the Department of Defense.
    So, we believe that the essence of cultural change is 
education, that organizations like the Defense Acquisition 
University and organizations like Industrial College of the 
Armed Forces (ICAF), over at the National Defense University, 
are the place to turn to, to begin to get some of the necessary 
educational change to promote the cultural modifications that 
people need.
    Typically, you have got to work with the program managers 
and the Lead Systems Integrators (LSIs) to go ahead and give 
them incentives to use commercial technology and adopt 
Government Accountability Office (GAO)-recommended best 
practices to go ahead and implement them.
    The fifth recommendation we had dealt with the creation of 
a systems-to-systems engineering and integration organization. 
And this is one of the issues that one faces, because when one 
develops these activities, they are not deployed in isolation. 
They are part of a complex system of systems.
    And one needs an architectural vision. As David indicated, 
ones needs an open system architecture to begin to integrate 
those capabilities in. What we would like to see is an 
organization created, so we could begin to test things at a 
systems level, so one would have an appreciation of whether 
people's promises are actually realized.
    In addition, we would like to see another comment that 
David made about looking at things in a mission context to 
understand the contribution that new systems would make to 
overall mission effectiveness. So, we believe an organization 
that dealt with that would begin to deal with that problem.
    Our last solution was really dealing with particular 
mission requirements. And one of the areas that we are very 
sensitive to and have been looking at very carefully over at 
CTNSP, is the question of using commercial IT to support 
stability operations.
    And what I would like to do is enter into the record a 
recent study that we did called ``I-Power: The Information 
Revolution and Stability Operations.'' And we argue that, if 
commercial IT is used there effectively, it could have 
tremendous leverage in going ahead and dealing with all the 
other problems that one faces in stability and reconstruction, 
to provide a basis for dealing with medical needs, education 
needs--all of the infrastructures that people require.
    [The information referred to can be found in the Appendix 
on page 71.]
    Dr. Starr. So, commercial IT is the key point of leverage 
that one would begin to use.
    Let me complete my remarks by just observing one or two 
other things that we are doing at NDU that are germane.
    We are embarking on a theory of cyber power. And one of the 
things we are trying to do is to establish a framework to see 
how the cyber infrastructure, if enhanced effectively, can 
enhance the levers of power for the United States and go ahead 
and empower us against adversaries like transnational 
criminals, terrorists, potential peer individuals.
    We believe that one needs this macro framework to begin to 
look at issues of policy, legal issues, et cetera, to go ahead 
and make intelligent decisions.
    One of the most important issues is the question of the 
Internet. We have been using that to great advantage, but we 
are deeply concerned about its security deficiencies.
    And so, one of the things that we emphasize strongly is to 
pursue the activities at the National Science Foundation and 
DARPA, to go ahead and re-imagine the Internet, in a way, that 
would begin to fundamentally deal with those security issues, 
so we would have a firm foundation to build on.
    Currently, we see it as a foundation of sand. And we need 
to go ahead and to buttress that capability.
    The last comment I would like to make deals with a recent 
study that was done at NDU on ``The Science and Technology 
Innovation Conundrum,'' and I would like to enter this into the 
record, as well.
    [The information referred to is retained in the committee 
files and can be viewed upon request.]
    Dr. Starr. My colleague, Tim Coffey, who is the former head 
of Naval Research Laboratory (NRL), has observed that there are 
two key aspects of S&T. One is prospecting, and the other is 
mining.
    In prospecting, one can go ahead and do basic research, and 
there are issues about the long-term payback. In mining, one 
gets immediate gratification.
    Tim's argument is that we have a major void in governance 
in the prospecting phase. And that is a major challenge for the 
government to go ahead and take a strong role there to provide 
that particular foundation.
    I hope these recommendations are of value to you, and I 
truly look forward to answering any questions you might pose.
    [The prepared statement of Dr. Starr can be found in the 
Appendix on page 58.]
    Mr. Smith. Thank you all very much.
    We have just a few members here, so I think we will be a 
little flexible on the five-minute rule. We will try to keep it 
close to five or six minutes, but if members have questions 
beyond that, we will not be too much of a stickler for details 
on that.
    If I could start--actually, Mr. Lewis, your comments about 
our inability--just lack of funding, certainly, for innovation. 
I am curious exactly where we need to spend more money, and 
definitely agree with you.
    But then also, the second piece of it, which is, in a post-
9/11 world, we are not doing as well at attracting the 
technologists and innovators to come.
    I mean, an enormous advantage that this country had, that I 
think people underestimate is, throughout the 1960's, 1970's, 
1980's and into the 1990's, the smartest people in the world, 
almost universally wanted to come here. And we, by and large, 
let them, and benefited greatly from that.
    Now, we are a little bit more concerned about the process 
of letting people into this country. And I understand that, but 
I definitely think there is a downside we need to highlight 
more.
    So, a second question for you is, how can we change that 
process a little bit, keeping in mind the security needs? I 
think we can all agree we have gone too far in the other 
direction.
    The final point, you mentioned some of the controls on 
exports. And this is really just an observation to put into the 
record for me. I battled the export control issue on this 
committee for a long time.
    The first time it came up--and this, I believe, was dealing 
with the encryption piece--I was, you know, I lost the vote in 
the amendment 46 to 1 in the committee, because the mindset is, 
we have to protect all of the technology and innovation we have 
developed here. We cannot let it slip out into the rest of the 
world, lest they figure out something and it falls into the 
hands of our enemies.
    So, they viewed it as sort of defense versus business. And 
I have always disagreed with. And you made the point very well.
    If the U.S. companies are the leaders in technology in the 
world, then they are going to put us in a better position to 
defend ourselves. If we lose that leadership, if it drifts 
overseas, then we have totally lost any control we have.
    So, you know, it is sort of the more we tighten our grip, 
the more it slips through our fingers kind of thing. And I just 
wish we could grasp that point.
    And as we are making it more and more difficult for 
domestic U.S. technology companies to export what they do, they 
ship the innovation overseas and we lose it, and our national 
security drifts backwards, not forwards--a debate we will have 
further on this committee, I am sure.
    You can comment on that, if you like. But I am curious 
about the first two parts of the question.
    Where can we spend more money? And how can we make some 
adjustments to get the best and the brightest to start coming 
here again?
    Mr. Lewis. Great questions, Mr. Chairman. Let me try and 
answer them.
    And let me mention that the points you made on export 
controls reinforce some of the issues we have on research and 
on immigration, because American companies will say we are in a 
worldwide competition for brains.
    There are brains, and we would rather have them than our 
competitors. And if that means we have to go to China or to 
India or to Europe to set up our research centers to get those 
brains, that is what we will do. Because if they do not, their 
competitors will. So you have put your finger on it.
    The place I would look for a change in the future is in our 
aerospace industry, which might be suffering some erosion, 
because of export controls. So, a serious problem for defense.
    On the post-September 11 restrictions, one of the things 
that has happened is that other countries have gone out of 
their way. They have looked at what the U.S. did. They love it. 
They want to copy it. And they are competing with us.
    And so, you see, for example, the British had big signs in 
a Middle Eastern country on the way to the airport.
    ``Can't get a visa to study in the U.S.? Call the British 
consulate.''
    The Chinese have awards now they call the ``sea turtles''--
which I guess is some Chinese pun for sea turtles--returning 
Chinese scientists, who come from Silicon Valley, bring not 
only their technical skills, but their management skills. And 
they get funding, they get housing allowances. They get 
government recognition. Singapore is famous for this, 
Australia--the list goes on and on.
    To compensate for this, we have to remember that the most 
important factor is, our universities are still strong. And 
this relates to the basic research question. If we have strong 
universities, people will come here to study.
    An easy change would be to say, once they study, once they 
get their doctorate, once they are at the peak of their 
educational skills, we should let them stay. Our current policy 
is to make them leave.
    Mr. Smith. And that is something that we, you know, on the 
immigration debate, that is a piece that a number of us are 
talking about putting in; if you get that degree, you get an 
automatic work visa, basically, if you have those skills, you 
know.
    We spend all the money in our university system to educate 
them, and then we tell them to leave.
    Mr. Lewis. It is interesting to me that other countries are 
considering a similar approach. If you come in with an advanced 
degree, they will accelerate your residency permit, or they 
will give you automatic residency status.
    So, we may not have recognized that we are in this 
competition for brains as a country, but other countries have 
recognized it. And there are some things we could do.
    This is just a tiny slice of the immigration debate. We are 
not talking about millions of people. We are talking about a 
high end of students who are getting very advanced degrees, and 
how do we get them to stay here.
    We have innate advantages. They came here for a reason. How 
do we get them to stay? And changing our rules to accommodate 
that would help.
    Related to that is the question, I think, of basic 
research.
    Funding for basic research is not something that companies 
will do. They cannot afford it, because basic research does not 
result in a product that you can sell, right. Or if it does 
result in something, it is usually open to your competitors.
    So, this is an area where the government plays an 
absolutely crucial role. And it has been an area of strength 
for the U.S. in the past, because of DARPA, NSF, some of the 
other activities.
    We have made two fundamental problems. We have made two 
fundamental errors.
    The first is, we have kind of rested on our laurels. And 
so, if you look at the spending--and I know it is a tight 
budget environment. It is very difficult to argue for more 
money. And I usually tell the scientists, do not go in and ask 
for money right away, because, you know, no one is going to be 
happy.
    But our spending has been flat; other countries are ramping 
up. Particularly flat in areas that I think relate to military 
technologies, whether that is aeronautics, IT, physics, 
chemistry, engineering.
    You know that about a decade ago, the Congress decided to 
double investment at NIH, and that has had very powerful 
results for the American economy.
    But the speaker at the time has even said that perhaps it 
was an oversight not to, at the same time, double funding for 
NSF, because we have weakened the base of basic research on 
which so many of these other activities rest. So, I would look 
for ways to increase the funding there.
    I did look at the numbers, Mr. Chairman, since I thought 
someone might ask that. And there has been a small increase in 
the last year. It is a little less than two percent.
    When you think about it, that is nice, two percent. But 
gross domestic product (GDP) increased about 3.2 percent, and 
inflation increased a little more than 3 percent. So, in 
effect, a two percent increase is really a cut.
    So, my argument would be, in the areas of military 
significance, increase the funding for basic research.
    Mr. Smith. Thanks.
    Mr. Thornberry.
    Mr. Thornberry. Thank you, Mr. Chairman.
    I guess I want to step back for just a second. It seems to 
me there are two broad categories of issues. One is spending, 
how much and on what. And the other is processes, how it is to 
deal with the Federal Government.
    And I think nearly all of you, if not all of you, have 
dealt with that in some way or another, Dr. Cohen by way of a 
positive example in his written testimony.
    I guess I would just like just to go down the line briefly 
and ask each of you: How much more could we get out of the 
money we spend, if we improve our processes, if we make it 
easier to deal with the Federal Government and harvest some of 
that small, middle-sized companies who are the innovative 
leaders in IT? But I suspect it is true across the board, too.
    So, Dr. Starr, let me just start with you. And if you do 
not mind, let us just go down the row on it.
    Mr. Smith. If I could just place an emphasis on the 
``briefly.'' If we get a five-minute answer from each of you, 
that is going to leave some folks behind here, so let us shoot 
for a minute, minute-and-a-half, thereabouts.
    Go ahead.
    Dr. Starr. Okay. That is really a brilliant question. And I 
think process is vital.
    As one example, I have worked with the Defense Venture 
Catalyst Initiative--DeVenCI--that OSD did. And it went ahead 
and used venture capitalists as a way of identifying where 
there were interesting capabilities and leading these people 
through so they could be more effective.
    The challenge of those efforts is that they are too little 
too late. And so what we need is to begin to expand those on a 
large enough scale to reach out commensurate with the nature of 
the problem.
    So, I agree with you completely, that we need new 
processes. We need these tech prospectors, we need acquisition 
guides, but we need enough of them to make a difference in the 
problem.
    Mr. Thornberry. And my question is, how much is that going 
to help? I mean, a lot? Could we get a whole lot more bang for 
our buck, if it were easier to deal with the Department of 
Defense?
    Dr. Starr. Yes. I believe there is an extraordinary payoff, 
not only in terms of intellectual tie-in, but in addition, if 
one had brought technology to bear in terms of Web portals and 
made it much more transparent for people to understand what is 
going on.
    I mean, the barriers that I spoke about were the questions 
of opacity, complexity and things of that nature. It could make 
a big difference.
    Mr. Smith. If I could interrupt, just as we go down the 
line. I think that the big thing to focus on here, when you 
talk about the process--you know, why is it so cumbersome, why 
is it such a problem--there is kind of an implicit assumption 
that it is just, ``Eh, bureaucracies, that is the way they 
are.'' And that is not really true.
    To my mind, the biggest reason that all of this is in place 
is, we are talking about a lot of money. And everybody wants to 
make sure that, when that money is spent, and if anything goes 
haywire, they can say, well, you know, we did the 55 forms, and 
we bid this through the 6 different companies, we crossed all 
the T's and dotted all the I's about 5 different times. And 
even though everything went haywire, hey, we did what we could.
    And so, if we are going to do this and fix this, we have to 
be willing to take a little bit of a risk, which I personally 
am willing to take, to say we are going to empower decision-
makers at every step along this process to say, you know, 
assistant whatever for procurement, you get to decide.
    Is this the right thing? Buy it. We are not going to make 
you fill out forms and go up four levels of command.
    As you answer this question, if you could touch on that 
tradeoff between protecting against that and the way it bogs us 
down, I think that would be helpful. If we can go down the 
line, is fine.
    Dr. Cohen. Let me offer my personal opinion. The idea that 
once defense dominated industries, have now become commercially 
dominated, yet we could still use the same processes that we 
had in the past, really has to come under close examination.
    I think, my work with the Trusted Foundry has made clear to 
me that, actually, new approaches, whether they be business 
structures, ways of partnering with commercial industry, offer 
significant opportunities for innovation.
    As Dr. Starr had noted, while the Department has 
traditionally developed things very well, they have not always 
adopted them. And our ability to use commercial technologies 
and get them quickly into practice is really hindered by the 
processes that we have in place.
    So, I would speculate that there would be significant 
advantages in innovating in those sorts of business practices 
and processes to allow you to take commercial technologies, 
partner with these commercial industries, protect the 
intellectual property that is at the heart of the profit-making 
in commercial industries, but at the same time accelerate 
getting those technologies into place for the Department at 
much lower cost.
    Thanks.
    Mr. Lehman. I would agree that I think we can get a lot 
more out of some new processes here. I think one of the 
examples is, In-Q-Tel has done a very good job of--and they 
have gotten the users together with the venture capitalists 
very early on in this process and said, you know, if you do 
this to the product, there is a market for it, and we will 
supply that market.
    And it has ended up that they have had to invest much less 
in these companies than they originally thought they would 
have, because the venture capitalists like the fact that they 
are bringing a market, and they do not really want the 
government to have equity stake in the company, because that is 
less for them. But they are willing to put more money in it 
themselves, because the government has said that there is a 
market here.
    So, I thought that was a very innovative approach and is 
showing the kinds of results that you can get if you do that.
    In my prepared statement, I had an anecdote in there from 
iRobot, which is a small company. You may have seen the Roomba 
vacuum cleaner. But they also make a PackBot, a robot, which 
the DOD uses for exploring caves, and the like, in Afghanistan.
    They had to hire a retired admiral to help them through the 
acquisition process and the mire of regulations. And so, if we 
can lift those regulations, it will make it a lot easier for 
other companies to do, as iRobot did, bridge that gap from 
small business innovative research (SBIR)s into real products.
    Mr. Lewis. You know, it is a great question, and I think 
all the points have been useful.
    If you remember CORONA, which was our first spy satellite, 
CORONA was finally launched after 13 successive failures. So, I 
wonder if we could ever have a program like that again, where 
the people would be able to--yet it was a tremendous success.
    And so, the point about accepting more risk is crucial. We 
are more risk-averse and that hurts us.
    Streamlining would be great. I do think there would be some 
bang. I was trying to do some really cheap calculations in my 
head, so I apologize if they are a bit informal, but this would 
buy us a few years, maybe five years. But at the end of the 
day, we are going to have to ante up a bit more.
    Mr. Smith. Thank you all.
    Mr. Marshall.
    Mr. Marshall. Mac, were you finished?
    Mr. Thornberry. Yes.
    Mr. Marshall. This is territory that is relatively 
unfamiliar to me. And I find myself, as I listen to you and 
glance at your testimony--I have not had an opportunity to read 
it thoroughly--finding that you are in agreement with one 
another that we are too cumbersome, too over-regulated, too 
slow to be as effective as we might be.
    And all of you are very familiar with the reasons why we 
are too slow. And each of you says we ought to lessen the 
regulatory burdens, lessen the--but you know why we do that. 
The chairman here kind of described.
    Is there reform out there that keeps the baby and tosses 
the bathwater that you are aware of? Or are people simply at 
the level of frustration where it is beyond human scale? We 
really do not understand how we got into the mess that we are 
in; we just recognize that it is a mess.
    It is too complicated, and consequently is slowing us down, 
costing us lots of opportunities and making it very difficult 
for us to accomplish our objective at a reasonable expense.
    Or is there something specific that we ought to be adopting 
that you are aware of? Has somebody come up with this is the 
way we ought to be doing it, it meets the objectives that are 
served by the current system and it also enables us to do this 
quicker, more efficiently?
    Dr. Starr. Let me take that first. And I think there are 
some real innovations that are going on that we want to take 
advantage of and build on.
    In my testimony, I alluded to ORTA, the Office of Research 
and Technology Application that has been created down at Joint 
Forces Command. And they have gone ahead and signed multiple 
contracts with various companies to go ahead and share 
development activities, working SBIR activities, holding fora 
to explain to small and mid-sized businesses what their needs 
are.
    But the thing is, ORTA is a miniscule activity, just a few 
people, limited authorities. And so, one point would be to go 
ahead and build on that activity, to provide them with more 
prospectors and acquisition guides to begin to expand things.
    So, I think that is a useful thing.
    Mr. Marshall. Let me interrupt.
    Dr. Starr. Go right ahead.
    Mr. Marshall. All right, let us assume that we are not 
going to begin by changing the entire system and using the 
model that you just described as the model for the entire 
system.
    What work do you funnel to ORTA that would best--if you are 
going to expand, how do you expand?
    Dr. Starr. Well, I think one of the key points about ORTA 
is that, Joint Forces Command tries to speak for the combatant 
commands, so, the user. And so, it has been a good window for 
them to go ahead and have the combatant commanders explain what 
their immediate needs are, and to reach out to organizations.
    You are right. And again, there is no single, silver bullet 
that is going to solve all these problems.
    Another area that I think is a complementary activity, is 
just about every service in OSD--and David alluded to In-Q-
Tel--has been trying to take advantage of venture capitalists.
    And they have done very different models. I mean, almost 
everybody, in fact, has pursued a slightly different path.
    But they are probably underfunded. I think they are doing 
some very useful work, and they should be working much more 
cohesively together.
    When In-Q-Tel finds something that is not quite useful for 
them, they should be able to pass it off to the Army or the 
Navy, or whatever organization is appropriate.
    So, I think there is strength in unity there, where the 
venture capital activity has been very fragmented. And more 
cohesiveness there could make that a more potent technique.
    I certainly agree with you that there is no one mechanism 
that will resolve all of these issues. But there are a few that 
have promise, and one can build on and expand.
    Mr. Marshall. I guess, to any of you, who is working on--
who is it that is trying to reform this process in a way that 
makes sense? And who has come up with some--is anybody doing 
that? I mean, you have got some suggestions, and then you 
observe that the rest of it is just----
    Mr. Smith. If I could interrupt just a second.
    We are. Our committee is. And I will say that the report 
that Dr. Starr referenced a few moments ago was as a result of 
a request from this committee, that I and some others worked 
with Dr. Starr on.
    In last session we then tried to implement some aspects of 
that report--unsuccessfully, but I am hoping for a more 
favorable review this time.
    And we are going to continue working on that and trying to 
expand upon what is going on at the Joint Command to try to 
expand those opportunities. It is one of the big things in the 
science and technology are that I want to get to.
    I want to get to the point where we are empowering the--you 
know, however the command structure works. If it is the 
combatant command, you know, the theater, wherever it is, let 
us empower them to make more decisions so they can cut through 
the acquisition process.
    So, and Dr. Starr.
    Dr. Starr. Let me just amplify one point, as well.
    You asked, is anybody trying to deal with this. We have, in 
fact, briefed the chairman of the Joint Chiefs of Staff and key 
players on the Joint Staff. So, they are working it.
    It is just that they have not quite converged on good 
solutions at this point. They have been interested in what we 
are saying. They are absorbing it and they are trying 
initiatives. It is just a question about work in progress.
    Mr. Marshall. The process of reforming the process is what 
we are talking about right now. And if the process of reforming 
the process is as ad hoc as was just described by our chairman 
and you, then we are missing the boat.
    There ought to be a more formal, understood way to tackle 
what is recognized by all of you gentlemen and us as a problem 
than this committee trying to drive it with the limited lights 
we possess.
    Mr. Smith. No offense intended to our staff, I suppose. I 
do not think we are quite as limited as that, Jim, but I 
respect what you are saying.
    And one of the challenges that we face, and one of the 
things that we are working on, is to get the military on board 
with this. And, you know, they have got a lot to do.
    Number one and number two, they do not want to be dragged 
too far down a road that they are left holding the bag on, 
which I respect. But we are working with them to try to get to 
that point.
    Mr. Marshall. May I----
    Mr. Smith. Sure.
    Mr. Marshall [continuing]. Just one more observation about 
it. I cannot remember the name of the professor, but a couple 
of guys wrote a book some time ago about businesses that get 
beyond human scale, and described the challenges those 
businesses face.
    The Pentagon has been beyond human scale for a long time. 
And we are kidding ourselves if we think this committee and its 
limited staff is going to be able to solve this problem.
    It is processes. You put together a process to attack the 
process, if you are going to be successful, it seems to me.
    And we ought to at least talk a little bit about that, and 
that is why I asked the questions I asked.
    Mr. Lewis. Can I add something on that, Mr. Chairman?
    Mr. Smith. Certainly.
    Mr. Lewis. Thanks.
    I think you are right, because I know that sometimes I have 
been in meetings where we have talked about doing projects on 
acquisitions reform. And people run screaming from the room. It 
is an overwhelming task, and it will take a very long time to 
untangle this knot.
    In the interim, there are a couple of things you can do. 
The usual approach is to create some new organization outside 
of the existing dinosaur. And say, the new organization--it is 
small, it is flexible. Let them try it. If it does not work, it 
goes away. In-Q-Tel is a good example.
    Another one is to find a way to give an organization the 
power to waive some of the acquisitions requirements, and if it 
needs to be, an emergency or a crisis or mitigating 
circumstances.
    But those are the two steps that most people use while you 
confront what is a crucial problem, but a problem that may take 
awhile to solve.
    On a note of consolation, let me say that, when I think 
about our processes, our processes are very complex. You could 
even describe them as ``bad,'' but they are less bad than the 
processes you see in other countries. So, we are still a little 
bit ahead there.
    I do not know if I would want to rest on that one very 
long, but in the interim, there are intermediary steps we can 
take to speed things up.
    Mr. Smith. And I am realistic about the challenge here. I 
do not think you can invent a process that saves you from the 
problems of process. As the sentence would imply, the process 
itself can strangle you.
    And there is only so much--we are spending a lot of money. 
And a lot of people are involved in that process, from the 
warrior right up through the chain of command, to the 
congressional side of it.
    There is no way to sort of peel all those people back and 
create some seamless, streamlined dictatorship. We have to 
understand that is the way the system works, but we have to--
you know, look for the places, as all of you have done, where 
we can make some improvements on that.
    Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman.
    I share your idea about being willing to take greater risks 
on trusting people to make decisions, but until you and I and 
our colleagues give up the Monday morning quarterbacking and 
the, you know, tour the battlefield, shoot the wounded kind of 
mentality that we live in, where we punish decisions that we do 
not agree with, where we punish decisions that lead to failures 
that, in hindsight we would have something different--till we 
get rid of that mentality, then no one on the uniform side of 
those tables--you know, they have got a tough job to do.
    Because we get to evaluate what happened, and then Monday 
morning quarterback, say, well, I have would have done it 
this--now that we know the results of those experiments, I 
would have done it a whole lot differently in my infinite 
wisdom.
    But I think we all recognize our penchant for that, and it 
goes with the territory, just part of the system, 
unfortunately.
    Could you gentlemen help me understand? We spend $3 billion 
at DOD, or $80 billion, I think, somebody's testimony showed, 
overall, the government.
    How do we start with or vet? How do we figure out what we 
want to research, what we want to look at?
    I do not understand, really, how we decide collectively 
where we want to go. It seems like we have a zillion little 
places to get to. But is there a board of science and 
technology research that says we need to focus here, here and 
here? Or is it just ad hoc, whoever has come up with today's 
best idea goes at the funders?
    How does that system, top-down, look? I mean, how do we 
apportion our efforts, whether it is dollars or efforts 
themselves, across that huge spectrum of science and technology 
and research?
    How do we focus? Or do we focus?
    Mr. Lehman. Well, there are multiple--it is not a single, 
top-down activity. The Office Director, Defense Research and 
Engineering (DDR&E) has some responsibility for that. Each of 
the service labs has some responsibility for that.
    And there is a huge requirements process out there that 
starts out at the combatant commands that rolls up through, and 
the service labs will respond to the requirements in those 
documents.
    That is a good start. But as I said in my testimony, you 
miss the rich interaction of the service lab people actually 
getting out in the field and seeing what the problems are.
    And they respond to that, but then they are disconnected 
from the acquisition programs that are actually going to build 
those programs.
    So, the planning process needs to be----
    Mr. Conaway. Is this research focused on just the applied 
research, as opposed to----
    Mr. Lehman. It is both.
    Mr. Conaway [continuing]. We do not know what we do not 
know?
    Mr. Lehman. It is both. It is both.
    Mr. Conaway. We ought to have folks out there who are just 
trying to explore for the sake of exploring.
    Mr. Lehman. And there are people doing that.
    Mr. Conaway. So, if everybody is in charge of that, then 
nobody is in charge of that.
    Does the pyramid not shrink to the top, where at least one 
small group of people says, we need some folks out here 
thinking about the unthinkable, and we need some other folks 
thinking this warfighter needs X, a way to defeat improvised 
explosive devices (IEDs), so you have got it coming from both 
ways?
    Do we have any system like that anywhere?
    Mr. Lehman. I think there are multiple pyramids. There is 
not a single pyramid.
    Mr. Conaway. So then if everybody is in charge, nobody is 
in charge.
    Mr. Lehman. Well, it is not everybody, but there are 
multiple pyramids. There is a pyramid for each service, and 
there is an Office of the Secretary of Defense (OSD) pyramid.
    Mr. Conaway. Okay. Thank you, Mr. Chairman.
    Dr. Starr. Let me just amplify on that just a bit, because 
I believe you are going to have John Young giving a 
presentation here.
    And over the years, I have been a member of the Technology 
Area Review and Assessment Process, whereby there was project 
reliance and they took the various S&T activities and 
structured them, and began to make some judgments about how 
they were doing and where there were important shortfalls.
    So, there is, in fact, a formal process that is used. There 
are questions about it. I know, as a reviewer, I was unhappy 
with it, because it was incomplete and it did not give us an 
opportunity to really weigh in the way we thought we should.
    But there is a foundation to build on, and you should 
certainly speak to Mr. Young, and I am sure he can amplify it.
    Mr. Lewis. You also are going to have, I think, Dr. Tether 
from DARPA. DARPA has a relatively interesting system where 
they take young researchers, mid-career researchers, bring them 
in for a few years to manage programs.
    These are people who know what is going on in the research 
community. They have an idea where to spend the money. They 
hear from DOD what some of the bigger problems are.
    And then after four or five years, they leave and go back 
into the scientific community. That process of refreshment is 
really helpful in doing the kind of targeting you are talking 
about. He may have more information on it.
    Mr. Smith. Ms. Gillibrand.
    Mrs. Gillibrand. Thank you, Mr. Chairman, and thank you for 
holding this hearing. I think the topics that we are discussing 
today are of vital importance for our national security and for 
our economic growth.
    In my district--I am in upstate New York--we have begun to 
focus a model on bringing universities together with the DOD in 
a very innovative and exciting framework. So we have the State 
University of New York (SUNY) campus that is doing the Center 
for Nanotechnology. And almost half of those contracts are DOD 
contracts.
    We also have the Request Progression Interface (RPI) 
system, and they are doing enormous amounts of innovation.
    And from these two areas of learning and education have 
spurred a number of small business. So I have one small 
business who has created this ball that a soldier can roll into 
a war zone, and it has a 360-degree view of what is happening 
around that corner, to give the soldiers real-time intelligence 
about what is happening.
    Other producers are making a great new material to make 
stronger vests to protect our soldiers, a material that we are 
now using on the space shuttle to fix the tiles that come 
loose. It is impervious to heat and is very strong, but very 
lightweight.
    And so, what I would like to ask you to comment on is, how 
can we as legislators improve the likelihood of the DOD using 
this model to its benefit, to center its research around 
educational facilities and to have those kinds of contracts 
where you have the benefit of innovation, but you also have the 
security of having these labs based in the United States, so 
all this work is not continually outsourced?
    I read somewhere that chip manufacturing is continually 
being outsourced to other countries, and that really creates 
security concerns for us, because we need them manufactured 
here. We need to be on top of the intelligence designed here.
    And what I would like to know from you, I would like to 
have guidance on how you think we, as legislators, can improve 
the regulations, create funding models, perhaps, where we can 
have these centers of innovation, where they can be surrounded 
around these university systems where you have the best new 
ideas coming out, and have the DOD actually be part of those 
facilities, so that they can build from within and have that 
technology be in-house?
    I have read through your testimony that you have some ideas 
about public-private partnerships, which I think are strong. 
But we need to maintain ownership of this technology.
    And I do not think just contracting out to the private 
sector is the solution, because then you have the problem of 
the current DOD acquisition timelines, that are very, very 
long--one year, two years, three years out--when you have 
already come up with a new idea.
    So, I really want you to advise our committee on what are 
some ideas for looking at the most innovative frameworks for 
innovation and growth and design and new technologies, which I 
think is the education system hubs that we are doing well in 
our district, and how that could be used with the DOD.
    Dr. Starr. Well, let me make one quick observation.
    We have probably the world's expert in the audience here, 
Dr. Bill Berry, who recently joined National Defense 
University. And he was deeply involved with overseeing research 
in the Multidisciplinary University Research Initiative (MURI) 
program and things of that nature.
    So, I am certainly not an expert, but Bill is. And so, 
perhaps for the record, he could go ahead and respond to your 
comments.
    Mr. Smith. Yes, that is permitted. And we will just--if you 
could come forward. And he is a member of the same organization 
as Dr. Starr.
    Just state your name for the record, so we can get that.
    Mr. Berry. I am Bill Berry. I am at the Center for 
Technology and National Security Policy at the National Defense 
University.
    And the issue you raise, I think is an important issue. I 
think there are some models that the Defense Department is 
already using, which establish center-like organizations.
    We have a number of different models that are used. There 
are university-affiliated research centers in various parts of 
the country.
    Another interesting model, I think, is one that the Army 
Research Lab is using called Collaborative Technology 
Alliances, where they work directly with the Army Research 
Laboratory, either at Aberdeen Proving Ground here in Maryland, 
or in Adelphi, in a number of areas where we bring in work done 
in the universities, but also in the defense laboratory in this 
case, and working closely with industry, so that the new ideas 
that are generated there have a pathway from the university and 
the laboratory directly to industry.
    There are a number of other models, I think, that are not 
so much regional. But we do have the Multidisciplinary 
University Research Initiative, which is a center-like program, 
that generally involves a number of universities across the 
United States.
    And a major effort has been done over the past four or five 
years to link those institutes with our defense laboratories 
more closely, so that the products and the ideas that are 
generated there do feed directly into our laboratory systems, 
like the Naval Research Lab, the Army Research Lab and the Air 
Force Research Laboratory.
    So, I think a lot is being done in that regard to try and 
set up these kinds of opportunities for integration across 
academia to defense laboratories and industry. And I actually 
think we have done a reasonable job there.
    Some of those are regional, as you suggest, in the case of 
the New York State model you mentioned. But some of them are 
spread across the United States to take advantage of 
universities in any state that can contribute in a given area 
of research.
    Mrs. Gillibrand. Is there something that we can do 
legislatively, in terms of regulatory aspects, or in terms of 
appropriations, that would facilitate that process?
    And second, do you think the work that has been done in 
those kinds of university hub paradigms, is it effective? Is it 
proving to be effective in the design and creation of new 
technologies that benefit our soldiers?
    Mr. Berry. My answer to that immediately would be ``yes.'' 
I think it is being very effective. And I think any time when 
you can bring those three communities together--that is, the 
defense laboratory, which has a lot of unique capabilities that 
you will not find either in academia or industry and has the 
ability to work across the domain of classifications--that is a 
real benefit.
    But I can give you examples of lots of things that have 
come out of these kinds of unions, like control algorithms for 
autonomous systems that go directly from university ideas for 
algorithms to control these things, tested in the defense 
laboratories, and industry picking those up and actually 
developing them into these autonomous air vehicles, for 
example. That is one that comes to mind immediately.
    I think, things that you have heard here, the need for 
increases in fundamental research, that is really the stimulus 
and lays the foundation for all of the things that the 
Department of Defense is going to use in the future, is an 
important----
    And I always applaud the ideas that we have to increase 
basic research, primarily in physical sciences in the United 
States, and people always want to lift up the National Science 
Foundation and National Institute of Standards and Technology 
(NIST) and other places.
    But a very large part of the engineering research, in 
particular, and physical sciences research in this country is 
actually done by the Department of Defense. And we have not 
really included increases in basic research in the Department 
of Defense basic research programs, I think, to the extent that 
we should.
    Mrs. Gillibrand. Thank you.
    Mr. Lewis. Let me give you another example, if I could, 
that would be quick.
    One of the states that has been very successful in doing 
this is, actually, I think, North Dakota. And what I usually 
say is, if North Dakota can do it, anybody can do it.
    But what they have done is focused on their universities as 
a place where you have got human capital. They have looked for 
ways to bring in the support you need. And if you need lawyers 
who know about intellectual property, you need a way to hook 
into venture capital, these are things the state has to do.
    And, you know, there are ways to help state governments 
think about that.
    One thing that is crucial, in addition to increasing the 
pot of funding that they are going to be competing for, though, 
is finding a way for these state universities to figure out how 
to deal with Washington, because, as you have heard from all of 
us, it is complex. It can be confusing.
    The states that have figured this out, like the California 
system do very well and they are a powerhouse in science.
    So, that would be one area you could think about. How do I 
make it easier for my state to navigate the various channels 
and pathways you have to get through here?
    Mr. Smith. I think that is, you know--if we did not do 
anything about the process, and all we did was invested more in 
innovation and created the atmosphere where the world's 
innovators could come here and prosper--if that is all we did 
and did not change the process at all, I think we would make an 
enormous difference on that alone.
    Mr. Kline.
    Mr. Kline. Thank you, Mr. Chairman.
    And thank you to the witnesses.
    I am sorry, as is so often the case here, we have to step 
out for a bit to attend other committee business. And so, I 
understand that I missed Mr. Thornberry's question. I just got 
a thumbnail catch-up on it. So I do not want to recover that 
ground, but I think it will connect to my interest and concerns 
here.
    I am looking, Dr. Starr, at your testimony and I listened 
with some interest to your recommended actions. You had six of 
them and they are captured here.
    It just kind of makes me want to cry, not because I 
disagree with the recommendations, but with my own personal 
experience, I know for almost 20 years, personally, and I know 
from stories way preceding that, that we have been grappling 
with almost exactly these same problems and, frankly, many of 
the same recommendations.
    Defense acquisition official, under secretary of defense 
for acquisition, DDR&E after DDR&E, director of DARPA after 
director of DARPA has grappled with the same issues.
    We have an acquisition system in the Department of Defense 
that is badly, seriously broken. And everywhere you turn in 
that process, it seems to me, it is broken.
    We have a requirements process. We have to verify 
requirements in a process that sometimes takes years instead 
of, arguably, weeks or certainly months.
    And as you pointed out, we have, what was it, a valley of 
death. I forget, one of you pointed out that valley of death.
    And so, I am sort of laboring in despair here as I look at 
these recommendations--``reduce acquisition barriers.'' That 
just sort of makes me--as I said, my shoulders are sagging 
here, because that is an enormous problem.
    ``Promote cultural change.'' Everyone, I am sure--and I 
should never speak for my colleagues, because we are a fairly 
diverse group here. But I would hazard a guess that we probably 
would certainly agree with that.
    But I do not know that the gentlelady's question, how 
legislatively we fix that. We are looking for those ideas. You 
have some expansion here.
    But I am just frustrated like all of us. And I know you 
are, I can tell in your testimony. You are experts in this 
field and you have been working with them for a long time.
    So, let me just focus back to where I think there is a 
piece here that I am really intrigued by. And that is in your 
number one recommendation, enhance communications organization, 
where you say--and I am reading from your testimony--to enhance 
communications, technology prospectors should be created to 
conduct more focused searches and facilitate the injection of 
commercial off-the-shelf (COTS) products into DOD systems.
    Absolutely. Web portals should be created to coordinate the 
use of commercial IT, and acquisition guides should be provided 
to smaller companies.
    And I think that was a part of Mr. Thornberry's question. 
You have got smaller companies who have great ideas. And how do 
you get them in there?
    And then you mention JFCOM.
    But I am sort of open to any of you. If you think in terms 
of the frustrated entrepreneur out there, or university 
professor or researcher, who really has this great idea, and 
you really want to get it in front of somebody, it looks to me 
like that is what you are suggesting here, is there a way for 
that--whatever, the round ball that you throw around corners, 
or speech translators or--there is a lot of good--my district, 
like others, has lots of small companies that have fabulous 
ideas.
    And I can tell you that it is pushing a rope to get those 
in front of somebody who is a decision-maker, and, in fact, 
then, to determine who the decision-maker is, because of all 
the rest of this stuff--the culture, built-in decades of 
bureaucracy and process, a testing system that is broken, 
developmental testing and operational testing. When do you 
start and where do you start over again?
    It is an enormously complicated and, frankly, antiquated 
and bad system.
    I am desperate for a way to wave a legislative, which we 
could get bipartisan support on, and fix that. I do not know 
what that is.
    But this idea, where would you go to create such a Web 
portal? From anybody.
    Dr. Starr, it is your testimony, so I should go to you.
    Dr. Starr. Well, that is a great point. I mean, we see that 
as potentially one of the contributors to a solution.
    In fact, over at CTNSP, one of the initial prototypes we 
did was create something called Early Military Involvement 
Speed and Accelerated Results (EMISARS), which was designed--
our vision would be that you would have a mall of capabilities 
and various boutique things that were geared to particular 
problems of interest.
    And EMISARS is meant to be one of the elements that would 
fit into that mall.
    So, at this stage, we have done a prototype activity and 
worked with JFCOM. It has been stalled, but at least we began 
to demonstrate--and I note, we share the frustration that you 
have, obviously. But we think----
    Mr. Kline. I did not mean for that to show on my face so 
clearly, but I am sorry.
    Dr. Starr. But, I mean, it is clear that, in the way we do 
our normal business these days, I know if I book a trip or if I 
buy something on eBay or Amazon, et cetera, it is very, very 
than the way I did things 5 or 10 years ago.
    DOD has not kept up.
    Mr. Kline. Exactly.
    Dr. Starr. And so, it has to exploit that kind of 
technology to begin to use it, to take advantage of prototypes 
and expand their capability to make things more transparent and 
enhance connectivity.
    Mr. Kline. But one of the things, the ideas that we have 
been exploring a little bit in this committee through the last 
couple of Congresses, at least, is the answer to the question: 
Where does one go with one's good idea?
    And we have tried--we have had various testimony. The 
director of DARPA on a couple of occasions has sort of offered 
that, well, DARPA is the place that you go. And so, everybody 
who has a good idea should somehow bring the idea to DARPA.
    I do not know if that is the answer, but it does seem to me 
that there ought to be a place. You recommend an acquisition 
guide.
    I would like it to be--I know about the simple solution to 
the complex. But, nevertheless, it should be as simple as 
possible, that there is one place to go to get started and let 
somebody else do the navigating, rather than, in the case of a 
small company, a small business, a small college or university, 
it is very difficult to find the time and the resources to 
figure out how to navigate what is a minefield of bureaucratic 
traps.
    Mr. Smith. But if you could hit that one specific point. 
You have got a good idea out there. And I know this works, 
because we all have examples of companies we know that have 
technologies that have found their way into the field.
    If you could hit on that one point, Mr. Kline. I mean, it 
is, okay, we have got some new way to defeat IEDs, some 
technology company out there, or some new, better material that 
is going to produce body armor.
    What is the process? In an ideal world--well, forget the 
ideal world. How does it work right now? And how could it work 
better?
    Mr. Lehman. Well, Joint Improvised Explosive Device Defeat 
Organization (JIEDDO) itself is sort of overwhelmed. JIEDDO 
itself is overwhelmed with too many ideas right now, and 
sorting through that process has been very difficult. Now, that 
is a schedule problem, and everybody wants to help with a very, 
very difficult problem.
    But they have gotten thousands of ideas. And sorting 
through those ideas has proved very, very challenging for them. 
It is a staffing problem.
    If we talk about the process in a sort of more regular 
basis, I suggest that maybe the DOD should reach out to the 
technology transfer offices in the colleges and universities 
and say, here are the kinds of things that we are looking for 
and provide them a list, so that they are not just looking for 
commercial applications for the technology, but they are 
looking for DOD applications for the inventions coming out of 
the universities and colleges.
    Mr. Smith. And how do those partnerships work? Because I 
know there is a ton of research going on in the university 
level.
    And it is my impression, by the way--and we have had a lot 
of testimony about what does not work here. But by and large, 
we have generated a fair amount of technological solutions that 
have helped both in the military context and in the commercial 
context, as well. So, there is a process out there.
    How does the coordination work between the military and the 
various research universities that we have in this country? 
Fairly well is my impression. But how could it work better?
    Mr. Lehman. Well, I would say that it does work well at the 
research level and producing results.
    I do not think there is a close enough tie between the 
research investment and the programs that could use it. And 
that could be fixed by some greater planning, you know, the 
research community that is making the investment in the 
university, working with the programs of record at that point 
and say, three years from now we should have some results here.
    Where are you going to be in your program, and how will you 
be able to receive it? And that the money is POM'ed and planned 
at that point to start inserting the technology.
    Mr. Smith. I had one question, and then I will open it up 
to other members.
    We have got a bill on the floor this week, as a matter of 
fact, dealing with the issues that we are talking about to some 
degree, which has to do with conflicts of interest between the 
public sector and the private sector, and focusing on--I think 
it might be more broad than just the military--but trying to 
place greater restrictions on the so-called revolving door of 
people moving from defense contractor companies into the 
Pentagon and the government and elsewhere.
    I do not know if any of you are familiar with that. You are 
not. Okay. Well, all right.
    The question I have is, do you have any specific guidance 
in terms of within that bill, because we are trying right now, 
and we have been successful to get some of the stuff out of 
there that could harm specifically DARPA.
    And we mentioned--I think, Mr. Lewis, you mentioned you 
have the mid-career researchers at DARPA who we bring in there, 
because they have specific experience in the private sector 
with a given technology. They work on it and then go back out.
    That has not being prohibited, but there are some 
restrictions on working on a project within DARPA, specific to 
a given company, then going out and working for that company in 
less than a year.
    Any thoughts on that?
    Mr. Lewis. You know, it is a rule that you see across the 
Federal Government and when--the rule being that if you are at 
least a senior manager, that you are not supposed to go back 
and lobby your organization or get contracts for your 
organization or do work for the organization for a year.
    In general, I think people accept that. I think that people 
are comfortable with it.
    You need to be careful that it does not close off some area 
of research. And that is where science is a little bit 
different from, say, contracting.
    But my own sense is, the places where people have not 
observed this rule--and you may have seen the articles recently 
about the Department of Homeland Security having to adjust its 
regulations to make it clear that senior managers could not 
come back and lobby or search for contracts in less than a 
year.
    Where they have not followed that rule, there have been 
problems. So, if there is a way to do that without hurting 
research, it sounds like a good idea.
    Mr. Smith. And it is possible. I mean, it is not--because 
we are getting concerns about, you know, it will limit DARPA's 
ability to get the best and the brightest. And I suppose the 
devil is in the details there, but I appreciate that 
perspective.
    Anybody else?
    Mr. Thornberry. Let me just ask. We have touched on it, but 
my question is, when you consider national security, what areas 
should we spend more research S&T money on?
    I think you have said, and maybe you all agree, basic 
materials research. But I guess I am just curious, if you are 
going to place greater emphasis with where you spend your 
dollars on things that are the most important for national 
security, what are those areas?
    Mr. Lehman. I would venture that cyber security is at the 
top of the list today. And we are creating a command and 
control system that is dependent on information. The net-
centric, it is indeed the right thing to do to create a very 
effective command and control and lethal force.
    But we are not paying sufficient attention to the security 
of the network and survivability of that network, because we 
are becoming more and more dependent on that information to 
conduct operations.
    Dr. Starr. I would like to second that point. That was the 
thing I would emphasize most strongly. It is the type of things 
that we are seeing at DARPA right now, where they are re-
changing the priorities for the Internet. Rather than 
connectivity being most important, it is information assurance.
    And again, we have people in the audience here who are 
really expert in that.
    And there is a second dimension also. And it is that the 
military is inherently mobile. And the way our infrastructure 
is designed, it is more for a static kind of situation.
    And so, in reconceiving the network, it is how one would 
have many mobile users who have secure access and would be 
continually plugged in and available to deal with it.
    So, I think those are the two most important issues that we 
could deal with.
    Mr. Lewis. I would kind of like to disagree a little bit. I 
used to have a bumper sticker, Mr. Chairman and Mr. Thornberry, 
that said ``the country with the most physicists wins.''
    And I do think that physics is an area that we need to 
spend more on--chemistry, materials. We do a good job on 
nanotechnology, but there are other material areas that we do 
not do as well--direct contributions to the military.
    Engineering--someone mentioned the large-scale integration 
problem. And that is an area of American strength, but it is an 
area where we could benefit from more research.
    I agree that IT, computing sciences, broader than simple 
cyber security, is an important area. People say it is 
underfunded. It looks like there is a little bit of truth to 
that.
    And finally, aerospace. So much of our money has gone to 
programs, that you see problems in things like keeping the wind 
tunnels open to do aerospace research.
    So, those would be the five areas, I would think: 
aerospace, IT, engineering, chemistry and physics.
    I am not a physicist, by the way.
    Mr. Lehman. If I might add, I have here the Defense Science 
Board summer study from 2006, ``21st Century Strategic 
Technology Vectors,'' which has done a very good job of laying 
out three or four vectors for technology research.
    Mr. Smith. A final question I had was, going back all the 
way to the beginning, we were talking a little bit--I think it 
was Lehman--you were actually talking about connecting the 
warrior to the technologist.
    Now, we have jurisdiction in this committee over special 
ops, and have visited a lot of them. And it seems to be working 
fairly well in that area. They seem to be able to go directly 
to the people and say, this is the kind of gun we want, this is 
the kind of Intelligence, Surveillance, Reconnaissance (ISR) 
capability we want.
    I can see that that would be unique to the special forces. 
Is that a larger problem for the rest of the military? And what 
would be an idea of how you would want to better connect the 
warrior with the people making the stuff that he needs?
    Mr. Lehman. I would agree that special forces does that 
better than anyone else. And I think it is because of their 
size and their Title 10 authority.
    The notion that I have in working in command and control is 
that we need to put these systems together, in peacetime or in 
garrison, with a cadre of operators and the contractors that 
are building these systems.
    And we need to run these systems in peacetime, not in a 
scripted exercise where it is sort of scripted for success, but 
as a real experiment with simulation, and see what works and 
what does not work, as opposed to only putting this together in 
the field.
    The intelligence community, since they are really working 
24 hours a day, 7 days a week on intelligence problems, many of 
these systems come together that way in the intelligence 
community. They are real analysts working with technologists on 
day-to-day problems.
    And the problem in command and control is that it only 
comes together in these scripted exercises or when we go to 
war.
    Mr. Smith. Well, let me just say, if could interrupt, 
because I think that is what is happening. In talking with 
people, prior to 2004 we had major problems in this area. In 
the last three years what I hear is we are doing better. And 
the reason is, we do not need the scripted exercises. It is 
happening out there in the real world, which is, of course, not 
the ideal place to learn----
    Mr. Lehman. Right.
    Mr. Smith [continuing]. What equipment you need.
    Mr. Lehman. And we have been evolving those systems in the 
field very rapidly with the contractors out there to great 
effect.
    What is missing is the sustainment, because we will lose 
that capability, that software that has been written, because 
the training manuals were not written along with the software 
as it was built.
    And so, that kind of capability will be lost, and we will 
have to rebuild it for the next one.
    Mr. Smith. We have to run across the street and vote.
    Does anybody have anything else? I do not want to cut off--
and get to the order here.
    If not, we will probably submit more questions for the 
record to you, the ones we have in the book. And look forward 
to your responses and look forward to working with you on these 
problems.
    This is very, very helpful. I thank all of you for your 
testimony.
    And thank you, Mr. Thornberry and the members of the 
committee.
    And with that, we are adjourned.
    [Whereupon, at 4:36 p.m., the subcommittee was adjourned.]
?

      
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                            A P P E N D I X

                             March 14, 2007

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              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                             March 14, 2007

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                   DOCUMENTS SUBMITTED FOR THE RECORD

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              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                             March 14, 2007

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                    QUESTIONS SUBMITTED BY MR. SMITH

    Mr. Smith. 1) Mr. Lehman, please describe the unique role and 
capabilities of a Federally-Funded Research Development and Center 
(FFRDC). Why should the federal government maintain this construct as 
opposed to funding more research and development (R&D) internally or 
contracting it out to the for-profit private sector?
    Mr. Lehman. DOD divides its FFRDCs into three categories, which 
differ in their roles and capabilities: (a) research and development 
laboratories, (b) study and analysis centers, and (c) systems 
engineering and integration centers. For example, the DOD C31 FFRDC, 
which MITRE operates, is a systems engineering and integration center; 
MITRE also operates FFRDCs for the Federal Aviation Administration and 
the Internal Revenue Service. My response focuses on the unique role 
and capabilities of systems engineering and integration FFRDCs, 
especially those supporting the DOD, but many of these points apply 
equally to other FFRDCs.
    FFRDCs help our government sponsors to be smart buyers of systems 
and capabilities, understanding what technologies, systems, or 
commercial products will perform the most essential functions in the 
most reliable and cost-effective way. We are able to do this because:

          A set of limitations imposed by the Federal 
        Acquisition Regulation, the DOD Management Plan for FFRDCs, and 
        the Sponsoring Agreements with the DOD ensure that FFRDCs can 
        be fully objective, with extremely strong protections against 
        organizational conflict-of-interest. The major limitations are 
        our not-for-profit status, a prohibition against manufacturing 
        products, a prohibition against competing for any federal 
        contract except for operation of an FFRDC, strict limitations 
        on work for or teaming with any profit-seeking company, and a 
        requirement that DOD or one of our other FFRDC sponsors approve 
        in advance any work they undertake.

          FFRDCs are given a unique role with unusual access to 
        government personnel, information, and future plans. Because 
        FFRDCs do not compete with for-profit companies and have strong 
        conflict-of-interest policies, for-profit companies are willing 
        to share with FFRDCs proprietary information relevant to 
        technologies being sought by the government.

          The status of FFRDCs as private corporations allow 
        them to manage their technical workforce in accordance with 
        industry practices, rather than the government model. In 
        particular, they can make rapid decisions to hire, fire, 
        promote, or transfer technical staff on the basis of the 
        expertise needed for the tasks at hand. Additionally, FFRDCs 
        can set compensation levels to reflect the market for each of 
        the needed skill sets, including the possibility of rewarding 
        careers for technical experts who have no interest in a 
        management role.

    FFRDCs enable the Defense Department and related elements of the 
Intelligence Community (IC) to integrate systems and technologies that 
were developed at different times, for different purposes. by different 
organizations. FFRDCs are able to do this because:

          Integration of disparate systems and capabilities is 
        one of their major functions, whereas for most government 
        program offices it is a secondary issue, and for industry it 
        often looks like making a competitor's product more useful.

          They support many different DOD and IC organizations, 
        and they are trusted to provide an objective, conflict-free 
        account of the technical issues involved in making their 
        systems work together effectively.

          The continuity of FFRDC efforts over many years means 
        that they often have insights that government personnel lack 
        into why a particular system was designed in a particular way.

    FFRDCs are uniquely positioned to provide the government with a 
broad ``architectural'' view of government systems. In addition to 
strong government program offices, real progress towards integration 
requires effective problem definition, evaluation of alternative 
solutions and an analysis of execution feasibility. This requires an 
in-depth knowledge of the systems involved and how new systems can be 
integrated with legacy government systems. The long term relationship 
between FFRDCs and their government sponsors provides the basis for the 
development of an overarching plan (or architecture) for the 
integration of government systems and increases the likelihood of 
successful acquisitions.
    FFRDCs as organizations combine depth of technical knowledge with 
the distinct mission to estimate risks accurately. One of the major 
difficulties faced by the DOD is that the most senior decision-makers, 
who want an objective assessment of the level of risk associated with 
each of the alternatives they must decide among, receive most of their 
information from organizations that have incentives either to be 
excessively optimistic about the cost, schedule, and technical 
performance of the capabilities they are selling or buying--or to 
overstate their resource requirements in order to achieve 
organizational growth. An FFRDC has no economic incentives to support 
the funding of one capability over another, and no bureaucratic 
incentives to see any organization increase its role or size. FFRDCs 
do, however, have incentives to be viewed as technically astute, 
objective, and trustworthy, and understand very well that the extent to 
which the DOD will want our support tomorrow will depend on their 
assessment of how good our technical support is today.
    Mr. Smith. 2) Mr. Lehman, what is the key to aligning R&D 
investments with the goals of an organization or the needs of the end 
user? How can this be assured? How can this situation be created in the 
DOD?
    Mr. Lehman. The key is leadership from the top, measuring the 
success of organizational units on the basis of an overarching 
enterprise view, not simply their own organizational responsibilities. 
For instance, the person in charge of logistics can be doing an 
adequate job by fulfilling requirements that came from calculations 
when the prime mission equipment was in development. The warfighter 
focuses on the day-to-day duties using the prime mission equipment. It 
is the job of leadership to create dialogue among these organizations, 
so they are not simply trying to improve metrics that measure their 
individual success, but focus on metrics that measure the success of 
the entire enterprise.
    Enterprise metrics have to be established and managers have to act 
to improve those metrics, which may entail real stress within an 
individual organization. For example, Hewlitt Packard uses the metric 
``percent of sales from new products.'' New products come from R&D, and 
R&D has to talk to Sales about what customers are demanding. Products 
have to be built efficiently, so Manufacturing is also part of the 
dialogue.
    Results of the dialogue may be painful. An R&D lab may have to shed 
a whole group of employees in a skill area that was important ten years 
ago but is no longer relevant (an action not possible under the current 
civil service system). It may have to kill a favorite project. 
Logisticians may find when in continuous dialogue with warfighters 
using the equipment they support that they have been producing more of 
one kind of part and not enough of another, thus forcing labor 
dislocations in the private sector. These arc all hard decisions for 
managers, and it takes leadership from the top to act internally for 
the good of the enterprise.
    This kind of leadership cannot be assured in business, and it 
cannot be assured in the DOD. Large organizations cannot expect 
behavior changes by simply declaring the expected result. Desired 
behaviors must be incentivized, rewarded, and held up as examples for 
others.
    Congress could help. The growth of earmarking has made it 
increasingly difficult for DOD leadership to take a strategic view of 
R&D priorities. It would greatly change the atmosphere within DOD if 
Congress began to send signals that alignment of R&D with the most 
important needs of the end-user is more important than preserving R&D 
projects in Members' districts. It would also help if the rules for 
reprogramming funds during the year of execution provided incentives 
for DOD managers to hold costs below the budgeted amount.
    Mr. Smith. 3) Mr. Lehman, has there been an erosion in management 
expertise within the DOD? If so, what is the current state of this 
situation? Has it reached catastrophic proportions?
    Mr. Lehman. I know many very good managers in the DOD. Congress has 
recognized the erosion in the acquisition force from retirements, lack 
of funding, and the inability to compete with industry salaries for 
talent. Congress has already taken action to correct this situation, 
but it will take time. Good acquisition managers require experience as 
well as training. The acquisition field has never been viewed as a path 
of advancement to the highest levels in DOD. Establishing acquisition 
as a career track with positive rewards would increase the incentive to 
remain and gain experience in that area.
    Making civil service salaries more competitive with private 
industry, while initially costly, could provide substantial savings in 
the future by providing the DOD with an experienced cadre of 
acquisition managers and reduce the financial incentive for experienced 
government personnel to move to the private sector.
    Mr. Smith. 4) Mr. Lehman, you cite DOD's budgetary documentation 
and review process as having an adverse impact on innovation. Assuming 
we were to modify and perhaps streamline this process to create a more 
``positive development environment,'' how might we guard against the 
ills of improprieties and conflict-of-interest abuses?
    Mr. Lehman. The DOD is a very large organization, and you cannot 
legislate a process that will make improprieties impossible. The rules 
are already in place. There will always be those who want, and will 
try, to cheat the system, regardless of the level of regulation. If 
someone infringes on the rules, prosecute them to the full extent of 
the law. The DOD audits, regulations and reporting requirements make it 
very difficult for small innovative companies to contract with the DOD; 
they do not have the overhead resources and financial structure to 
handle it. These companies end up subcontracting to the primes, and the 
government loses the opportunity for direct interaction with the 
innovation and innovative thinking of these companies.
    Streamline the system. Yes, there will be abuses but many of these 
abusers will be caught and prosecuted, and that will deter others. 
Responding to every abuse with a new regulation makes the system 
cumbersome in ways that cost the taxpayers far more than a few bad 
people could steal.
    Mr. Smith. 5) Mr. Lehman, can you be more specific about how 
research schedules are not aligned with acquisition schedules? Please 
cite a few examples.
    Mr. Lehman. Research projects have uncertainty of outcome and time 
and may fail entirely. But all research programs must have some failure 
or the program is probably not taking enough risk. They may not obtain 
the hypothesized results on the timeline the researcher expected, 
either for practical reasons like delays in equipment delivery, or 
scientific reasons like encountering unanticipated results.
    This uncertainty means that usable results from a research project 
cannot be predicted to the accuracy required for an acquisition program 
to plan program expenditures. Acquisition programs have a contractor, a 
contract, a schedule, and a budget, all of which make it difficult to 
change course and accept a new result from a lab or industry.
    On the other hand, when DOD labs start with 6.1, 6.2, or 6.3 
research money, and solve a problem which begets an acquisition program 
built around the solution, the process works well.
    Labs build their research program from requirements developed in a 
systematic process. Unfortunately, it usually lacks tight coordination 
with programs of record that might use their results too late in the 
acquisition process. What is needed is a fund at the program offices' 
disposal to harvest technologies when they mature to enable more 
effective transitions from labs to programs of record. See answer to 
question 8 below.
    Mr. Smith. 6) Mr. Lehman, is the for-profit private sector 
unwilling or unable to reform itself to provide the most-capable, most-
innovative product?
    Mr. Lehman. I do not think the for-profit sector is unable or 
unwilling to reform itself. The for-profit-sector responds to the 
incentives in the market. Change the incentives and the sector will 
change. The DOD has asked the for-profit sector for large acquisitions 
that small innovative companies cannot respond to. These acquisitions 
permit the contractor to develop a proprietary architecture that only 
that contractor can further develop and innovate. The contractors try 
to lock themselves in as the only contractor that can work on the 
system so they can make money on the long-term evolution and 
sustainment of the systems. They are doing nothing wrong; they are 
following the incentives in the market to make money for their 
stockholders.
    The proprietary nature of these systems has been made worse over 
the years by such ``reforms'' as Total System Performance 
Responsibility, which required the contractor to have end-to-end 
accountability for how the system performed when fielded. In theory 
this is an excellent idea, but in practice the contractors refused to 
make government requested changes to open the architectures. The 
contractors quite rightly reasoned that they should not take 
accountability for total system performance for a system for which they 
did not have total design control. Large Scale Integration (LSI) 
contracts have further exacerbated this problem by the government's 
outsourcing of responsibility to control the architecture of the system 
being procured.
    If the government controls the architecture and makes it open (i.e. 
all interfaces are well understood and available to all competitors), 
then the government can hire small (or large) innovative contractors to 
deliver capabilities into that architecture. The for-profit contractors 
will respond.
    Mr. Smith. 7) Mr. Lehman, precisely how can we encourage the DOD 
S&T, acquisition and user communities to manage the development process 
as a team?
    Mr. Lehman. This question is similar to question 2, above, and I 
will elaborate on my answer there by emphasizing that the desired 
behavior can be achieved through incentives--recognition, promotion, 
cash awards, and publication of successes as examples for others to 
follow. Give the Service Secretaries a significant cash budget to award 
to those who develop cross-organizational or enterprise processes and 
metrics that lead to real results and cost savings. It does not need to 
be limited to aligning S&T, acquisition, and user communities. There 
are opportunities throughout the DOD, as there are in business, for 
better managing the enterprise.
    Mr. Smith. 8) Mr. Lehman, please explain your proposal to have a 
separate ``innovation program element (PE) line'' at the disposal of 
each program manager. How might this work in practice?
    Mr. Lehman. If the R&D community investments are aligned with the 
acquisition program, we have solved half the problem--the R&D community 
is working towards solutions the acquisition community can use. 
However, their timing and success are unpredictable, as discussed in 
the answer to question 5 above. It is impossible for an acquisition 
program to budget against this uncertainty. I proposed a program 
element that would be available to acquisition programs upon request, 
when the technology matures, without having to wait two years to insert 
the request in the POM cycle. The programs requesting the funds would 
have to justify the return on investment to the warfighter. The 
adjudication of these requests could be done within each service's 
acquisition organization, with annual reporting to the committees of 
jurisdiction. To force proper prioritization, the fund should be large 
enough to accommodate some but not all requests. It should not be used 
to complete existing programs, but to insert innovations into existing 
programs.
    Mr. Smith. 1) The work of the Institute for Defense Analyses (IDA) 
in support of DOD's effort to secure domestic source production 
capacity for critical technologies is impressive. Might DOD have 
accomplished the success found in the ``Trusted Foundry'' effort 
without the assistance and guidance of an FFRDC? If not, why not? If 
so, why did this not occur?
    Dr. Cohen. During the process leading up to DOD's decision to 
pursue the Trusted Foundry, there were conflicting perspectives offered 
by various people and organizations within the Defense Department, as 
well as by representatives of industry and Congress. IDA was asked to 
provide an independent, objective assessment of the issues. In doing 
so, IDA helped ensure that DOD's decision was based on the best 
available technical information, analyses and insights, provided by 
knowledgeable researchers and an organization with no financial or 
other interests in the outcome. This is a common role for FFRDCs like 
IDA. In recognition of this role, Congress often requests that FFRDCs 
conduct independent assessments of controversial issues, as evidenced 
by several studies in the FY08 Defense Authorization Act, including 
ones dealing with the size and mix of airlift forces, the roles and 
missions of the Missile Defense Agency, the civil reserve air fleet, 
and options for ballistic missile defenses in Europe. IDA helps the 
government make informed decisions. We defer to our sponsors to assess 
what might have happened in the absence of our support on any 
particular issue.
    Mr. Smith. 2) A 2005 Defense Science Board Study suggested the need 
for a ``domestic Integrated Circuit competitiveness'' policy as a 
national priority. Why is this important? In your view, what mechanisms 
would be necessary to adopt such a policy?
    Dr. Cohen. A healthy domestic integrated circuit infrastructure 
would be desirable both for assured access and for lowering--though not 
eliminating--risks that adversaries might tamper with or exploit 
defense-related integrated circuits. The challenge has been finding 
practical solutions. It is important to note that there are a range of 
ways that DOD can manage these risks through its engineering and 
procurement practices and given support in the future through the use 
of new technologies such as those being explored by DARPA. In general, 
we agree with the DSB that many of the actions that would be required 
to address domestic integrated circuit competitiveness ``are beyond the 
scope and function of the department.''
    Global and commercial interests dominate today's integrated circuit 
market. As cited in the DSB report, defense purchases of integrated 
circuits are estimated to be 1-2% of the global market and even that 
small share is shrinking. Thus, the DOD demand for leading-edge 
integrated circuits is too small to influence business decisions in the 
largely volume-driven commercial market. DOD's demand is also too small 
to justify--based on business case analyses--developing and sustaining 
a captive capability, except perhaps for narrow elements in the supply 
chain.
    One area where DOD has attempted to sustain domestic fabrication 
capabilities is in the supply of radiation-hardened electronics. 
Despite significant investments in two domestic suppliers, the lack of 
demand has hampered efforts to attain profitability. As a result, the 
radiation-hardened market sector lags significantly behind commercial 
capabilities in terms of transistor size. Moreover, even these 
radiation-hardened capabilities are not fully domestic, as the prime 
U.S. suppliers depend on a broad network of global secondary suppliers 
for equipment, materials and technology.
    A major challenge has been addressing the cost of new advanced 
technologies, particularly as the feature sizes shrink down to 45nm \1\ 
and below. A recent assessment \2\ of semiconductor costs noted, ``at 
the 45-nm node, a new 300-mm fab costs about $3 billion, process 
technology R&D runs $2.4 billion and a ``mask set'' is up to $9 
million.'' This assessment further predicted that it would take annual 
sales of $13.3 billion to achieve a Return on Investment (ROI) at the 
45nm technology level. This makes it challenging to get an acceptable 
ROI.
---------------------------------------------------------------------------
    \1\ The most advanced IC technologies, now available from companies 
such as Intel contain transistors patterned with 45nm features. Intel 
processors at this features size became available in November 2007, 
(http://download.intel.com/pressroom/kits/45nm/45nmSummaryFoils.pdf)
    \2\ Costs cast ICs into Darwinian struggle, Mark LaPedus, EE Times, 
03/30/2007.
---------------------------------------------------------------------------
    The projected IC ranking \3\ of the top 20 suppliers of 
semiconductors in 2007 is shown in Figure 1. Given the high investment 
required for 45nm technologies, few companies are going to be able to 
justify investing in 45nm capabilities based on the current levels of 
revenue from sales of ICs. Further, only one or two domestic companies 
might be expected to have a business justification on their own to 
pursue these new technologies. The world leader Intel will likely have 
sales that support its pursing the next generation of technology on its 
own, but it is likely that much of the rest of the market will shift 
toward collaborative global alliances, sharing the costs and risks 
associated with the more advanced technologies.\4\
---------------------------------------------------------------------------
    \3\ Winners, losers in 2007 chip ranking, Mark LaPedus, EE Times, 
11/28/2007 (The market analysis in the article was provided by 
iSupply).
    \4\ IBM, Toshiba extend semiconductor R&D collaboration to 32nm, 
EDN Electronic News, Ann Steffora Mutschler, 12/18/2007 (IBM is 
reported to be partnering with Toshiba, AMD, Chartered Semiconductor 
Manufacturing Ltd., Freescale, Infineon and Samsung).
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    Given today's global commercial market place for integrated 
circuits and the high costs of creating and sustaining the next 
generations of technology, DOD is collaborating with selected domestic 
semiconductor suppliers as a way of continuing to mitigate security 
concerns.
    Mr. Smith. 3) Please provide more detail about counterfeit 
components? How widespread and serious is this?
    Dr. Cohen. Counterfeit semiconductor components are a serious 
concern not only for DOD, but also for the broader commercial 
electronics industry. A 2005 study by IDA \5\ concluded, ``Counterfeit 
chips repeatedly have made their way through our supply chain and into 
deployed systems.'' The broader commercial concerns also recently 
resulted in the Semiconductor Industry Association (SIA) creating the 
Anti-Counterfeiting Task Force (ACTF).\6\ One conservative estimate of 
the dollar volume of counterfeit integrated circuits entering the DOD 
supply chain in 2005 was between $15 and $21 million.\7\ The 
counterfeit efforts could involve a range of deceits, including 
remarking or relabeling parts, providing non-working or substandard 
parts, providing stolen parts, illegal manufacturing, establishing 
false provenance (from a different manufacturer, newer/older, or 
different part number or specifications like temperature range), 
overbuilding products, or actually reverse engineering and cloning.
---------------------------------------------------------------------------
    \5\ USG Integrated Circuit Supply Chain Threat Opportunity Study, 
FOUO, Donald J. Goldstein et al, IDA Document D-3222, January 2006, 
publication pending.
    \6\ SEMI and the SIA Launch SEMI Anti-Counterfeiting Standards Task 
Force at SEMICON West 2007, (http://www.semiconwest.org/Showlnfo/
LiveatWest/CTR 011164)
    \7\ Stradley, J.; Karraker, D., ``The Electronic Part Supply Chain 
and Risks of Counterfeit Parts in Defense Applications.'' IEEE 
Transactions on Components and Packaging Technologies, vol.29, no.3, 
pp. 703-705, Sept. 2006.
---------------------------------------------------------------------------
    DOD is paying more attention to the counterfeit problem and more 
significant numbers of counterfeits are being detected and reported. 
The GIDEP \8\ acts as a clearinghouse for disseminating government wide 
reports of counterfeits. Figure 2 shows reporting rates throughout the 
government have increased dramatically.
---------------------------------------------------------------------------
    \8\ GIDEP (Government-Industry Data Exchange Program) 
(www.gidep.org)
    \9\ Counterfeit Electronic Parts, Dr. Diganta Das, University of 
Maryland, DMSMS 2007 (http://dmsms2007.com/media/proceedings/
Gen_Sessions/Gen4_Thu/Gen4_Thu_1045_Das.pdf)


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    Information from GIDEP was obtained as part of the 2005 IDA study 
\5\ on the impact of counterfeiting on DOD systems, and reports on a 
number of counterfeit cases spanning the years 2002-2005 were provided. 
The results of IDA's inquiry are shown in Table 1. No doubt, a more 
current inquiry would result in a larger list. It is important to note 
that although programs are listed as being affected, this does not 
imply that there was any impact. In some cases, the parts were caught 
by existing processes and were not introduced into the operational 
environment.
---------------------------------------------------------------------------
    \10\ Extracted by GIDEP records and communicated through personal 
communication by Stan Green, GIDEP to Vashisht Sharma (IDA), 20 July 
2005.


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    There are other examples of counterfeit parts being sold to DOD.
    In July 2005, two Florida men were sentenced to prison terms of 46 
and 36 months respectively for selling to DOD counterfeit parts valued 
at between $4 to $12 million.\11\ The counterfeit parts were sent to 
troops in Iraq and Afghanistan. The guilty parties admitted to sending 
thousands of parts to the Defense Supply Center Columbus (DSCC). A 
quality assurance specialist at DSCC said that while no loss of life 
can be attributed to this fraud, the actions delayed plans, sometimes 
for weeks and interfered with military operations. The two men started 
this operation when they learned how to bid on supply contracts over 
the Internet while

---------------------------------------------------------------------------
    \11\ Bogus military suppliers sentenced, St. Johns County men sold 
U.S. $4 million in phony parts sent to troops in Iraq, Afghanistan, 
Florida Times-Union (Jacksonville), July 26, 2005, (http://
www.jacksonville.com/tu-online/stories/072605/met_19333168.shtml).
---------------------------------------------------------------------------
attending community college in Jacksonville, FL. They would send 
substandard components to DSCC; when the parts were identified as 
defective, the men would simply change the name of their company and 
continue bidding. DSCC does not perform background checks on 
procurements of less than $100,000 and therefore was unable to track 
the men when they changed their companies' names.
    In October 2007, a Florida man pleaded guilty to defrauding the 
DOD.\12\ A federal judge ordered the man, who ran a St. Petersburg 
aerospace company, to spend two years in prison for selling used parts 
as new to the DOD. Prosecutors claimed that the government paid him 
$202,510 for 91 fraudulent contracts. The judge in the case ordered the 
defendant to repay that much in restitution.
---------------------------------------------------------------------------
    \12\ Man gets two years in defense fraud case, October 13, 2007, 
St. Petersburg Times, http://www.sptimes.com/2007/10/13/Hillsborough/
Man_gets_two_years_in.shtml
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    Documents indicate that the defendant was president of Triton 
Aerospace between July 2004 and October 2005. Prosecutors said that the 
defendant fraudulently supplied parts for Navy and Air Force planes, 
including the B-52 bomber. The prosecutors claimed the defendant would 
shop around for surplus or overhauled parts, which he bought at a 
discount, and then in turn fraudulently sell them as new to the 
Department of Defense.
    In summary, counterfeit components are entering the defense supply 
chain, and improved processes are detecting them more frequently. For 
instance, improvements by BAE to incoming inspections and testing have 
improved the detection of counterfeit parts.\13\ BAE found that 
employing acquisition practices that monitor the provenance of parts 
and audit the origins of parts back to their original manufacturers 
reduces the opportunities for counterfeits to enter the supply chain. 
These types screening and authentication processes should mitigate much 
of the potential impact of the most damaging counterfeits.
---------------------------------------------------------------------------
    \13\ BAE Systems: Counterfeit Electronic Components, Henry 
Livingston, DMSMS 2007, http://dmsms2007.com/media/proceedings/
Gen_Sessions/Gen2_Tue/Gen2_Tue_1035_Livingston.pdf
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    Mr. Smith. 4) It appears that policy recommendations include a 
relaxation of export-control measures in some areas and efforts to 
ensure more secure, domestic-production capabilities in other areas. 
When, where and how might we apply these two different approaches?
    Dr. Cohen. The DSB report noted two approaches that could be 
employed to improve DOD's ability to meet needs for access to secure 
supplies of advanced integrated circuits: modifying export control and 
ensuring secure domestic production. The DSB report recommended that 
export controls be strengthened to assure ``that potential adversaries 
do not have access to leading edge design and wafer fabrication 
equipment, technology and cell libraries.'' This recommendation focused 
on strengthening export controls by, among other things, getting the 
U.S. government to persuade Wassenaar members to restrict exports of 
semiconductor material and equipment to China. As noted in the DSB 
report, U.S. attempts to do so have been rebuffed.
    The DSB report also notes that ``Advanced semiconductor 
manufacturing and design equipment with roughly comparable performance 
characteristics is produced in a number of Wassenaar signatory 
countries. As a result, under the Wassenaar regime a Chinese buyer who 
cannot obtain desired equipment items from U.S. makers because the 
Department of Commerce has not granted an export license can often 
acquire comparable equipment from competing sellers based in Europe or 
Asia who are able to obtain licenses from their governments.''
    It is important to note that some important countries are not 
members of Wassenaar. In particular, Taiwan plays a dominant role in 
the global market for semiconductors and has a leading business 
position in the development of semiconductor manufacturing in China. 
This complicates the formulation of export control policies in this 
market area.
    A recent IDA study \14\ found that ``Semiconductor device firms and 
semiconductor materials and equipment firms did not report significant 
lost sales or competitive impacts from application of U.S. export 
controls.'' This is likely due to a climate of ongoing favorable 
licensing decisions by the Department of Commerce. The same report, 
however, noted, ``where U.S. export controls interfere with foreign 
partnering
---------------------------------------------------------------------------
    \14\ ``Export Controls and the U.S. Defense Industrial Base, Volume 
I: Summary Report and Volume 2: Appendices'', Richard Van Atta, Project 
Leader. Appendices, Van Atta et al, IDA Document D-3363, January 2007 
(http://handle.dtic.mil/100.2/ADA465592)
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in high tech systems development, they encourage advanced technology 
and manufacturing investment to take place overseas.'' In summary, IDA 
found that ``As the locus of advanced IC consumption and production 
moves to Asia, including China as well as Taiwan and Korea, the 
underlying rationale for controlling microelectronics technologies 
appears to be negated.''
    It is not clear whether relaxation of export-control measures would 
have any impact on DOD's ability to obtain secure supplies of advanced 
ICs. In contrast, as I noted in my earlier testimony, the efforts to 
ensure more secure, domestic-production capabilities (primarily through 
the Trusted Foundry) have been quite successful in meeting DOD needs 
for secure advanced ICs.
    Mr. Smith. 5) You mention challenges in the field of packaging and 
circuit assembly. Please explain further.
    Dr. Cohen. The assembly, test and packaging segments of the 
semiconductor supply chain were the first segments to move offshore. 
During the 1960s-1980s, much of the assembly, test and packaging moved 
to Taiwan, Hong-Kong and Malaysia, primarily for cost reasons.\15\ 
Almost all packaging of integrated circuits--regardless of where the 
circuits are produced--is performed overseas, largely in Asia. Many 
companies vertically integrated these activities into their operations. 
Other companies outsource these elements of the supply chain, and some 
companies outsource the entire packaging, test and assembly portion.
---------------------------------------------------------------------------
    \15\ ``U.S. Semiconductor and Software Industries Increasingly 
Produce in China and India'', GAO Report, GAO-06-423, September 2006.
---------------------------------------------------------------------------
    In the packaging market, a good way to estimate the amount of 
packaging being performed in various parts of the world is to look at 
the sales of packaging materials. Plastic is the most frequently used 
material for packaging ICs and as shown in Figure 3, almost no large-
scale plastic packaging takes place in North America. Even American 
firms will often package products overseas for cost reasons.
---------------------------------------------------------------------------
    \16\ Packaging Materials: Regional Markets, Dan Tracy and Jan 
Vardaman, Semiconductor Equipment and Materials International (SEMI), 
(http://wps2a.semi.org/wps/portal/_pagr/103/248?docName=P037398)


    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    The outsourced semiconductor assembly and test market is also 
mainly located in Asia as shown in Figure 4. There remain significant 
operations in the U.S. with Amkor, which has headquarters and 
significant operations located in the U.S. However, nine out of top ten 
outsourcing firms in this market segment are in Asia.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    In 2000, there were concerns about the potential overseas migration 
of semiconductor wafer fabrication plants. The biggest concern was that 
it would be costly and time consuming to reestablish domestic 
semiconductor fabrication capabilities.
---------------------------------------------------------------------------
    \17\ Outsourced Semiconductor Assembly and Test '05: Boom Cycle 
Continued, but Profits Sagged, ChipScale Review, Subash Khadpe, 
Contributing Editor, April 2006, (http://www.chipscalereview.com/
archives/0406/article.php?type=feature&article=f2)
---------------------------------------------------------------------------
    In the case of packaging, test and assembly, the situation is 
different, because the industry is much less capital and research 
intensive. There is little concern that U.S. would be denied access. 
Should the capability to perform these processes be disrupted, they 
could be reestablished domestically with less cost and delay. The 
security concerns are still important, and it is for this reason that 
DOD is interested in maintaining strong domestic packaging test, and 
assembly suppliers, rather than depending on a less expensive overseas-
outsourced suppliers.
    There continues to be sufficient domestic core competencies 
supporting defense needs as noted in the Linkages report by the 
NRC.\18\ The report noted that ``Some very competent capability exists 
in a variety of places, such as (1) military facilities, including 
laboratories with limited production capabilities at the Warner Robins 
Air Logistics Center in Georgia and the Naval Surface Warfare Center, 
Crane Division, in Indiana; (2) small shops and boutique contractors; 
and (3) some defense prime contractors and their major 
subcontractors.''
---------------------------------------------------------------------------
    \18\ Linkages: Manufacturing Trends in Electronics Interconnection 
Technology, Committee on Manufacturing Trends in Printed Circuit 
Technology, National Research Council (2005) (http://books.nap.edu/
catalog.php?record_id=11515)
---------------------------------------------------------------------------
    The Department, through the Trusted Foundry manufactures trusted 
integrated circuit dies \19\ in the U.S. However, without secure on-
shore assembly, test or packaging, these dies would have to be shipped 
overseas to a supplier for these steps, potentially compromising the 
security of these completed integrated circuits. It is in the 
Department's interest to address these issues by maintaining a core set 
of on-shore trusted capabilities in assembly, test and packaging. This 
area has generally been manageable given the levels of specialized 
defense-related IC production that continue to reside in the U.S. DOD 
continues to actively monitor the situation.
---------------------------------------------------------------------------
    \19\ A wafer is produced by a semiconductor foundry at diameters 
currently up to 300mm. The wafer, composed of many instances of 
individual chips, is then diced into individual chips, each of which is 
called a die. Each die is then ``assembled'' into a package and tested, 
thus producing a packaged integrated circuit.
---------------------------------------------------------------------------
    Mr. Smith. 6) You mention DARPA has pursuing a few promising 
research efforts in the field of circuitry security and access. How are 
the DARPA efforts encouraging and are there are promising efforts 
within DOD?
    Dr. Cohen. A brief description of the DARPA Program follows.\20\ 
Representatives of DARPA are the best sources of information on DARPA 
programs, and we would
---------------------------------------------------------------------------
    \20\ IDA has provided some focused technical assistance to DARPA in 
the formulation and solicitation processes for this program.
---------------------------------------------------------------------------
urge you to discuss this Program with them directly. DARPA is pursuing 
a TRUST in Integrated Circuits (Trust in IC) program to ``.. develop 
technologies that will ensure the trust of integrated circuits (IC) 
that are used in military systems but that are designed and fabricated 
under untrusted conditions.'' \21\ This DARPA effort is by far the 
largest research effort throughout DOD focused on integrated circuit 
security concerns. The goal of the Trust in IC program is to provide 
assurance that an IC is free from maliciously inserted ``Trojan 
Horses'' that might disrupt operation, thereby affecting the 
confidentiality, integrity or availability of end systems. Attacks on 
ICs may take place anywhere in the supply chain, but the Trust in IC 
Program is addressing three of the most difficult elements of the 
supply chain. These elements are design, die fabrication and Field 
Programmable Gate Arrays.
---------------------------------------------------------------------------
    \21\ ``DARPA TRUST IN INTEGRATED CIRCUITS PROGRAM'', DARPA News 
Release, December 2007, (http://blogs.spectrum.ieee.org/tech_talk/
trust_f_s.pdf)
---------------------------------------------------------------------------
    This Program is being pursued because there is a belief that 
progress can be made in the elements. The ideal result of this Program 
would be a process that can be applied to achieve a quantified level of 
assurance that an IC obtained from an untrusted supplier is free from 
malicious tampering and will operate as intended. The program will have 
its initial four-month program review in March 2008.
    Mr. Smith. 1) You recommend greater resource flexibility and a 
greater role for the military combatant commands in the acquisition of 
IT systems yet you seem to stop short of granting these commands full 
acquisition authorities. Explain.
    Dr. Starr and Mr. Kramer. [In response to prior testimony before 
the HASC, six questions have been submitted for more detailed 
responses. Although specific testimony on the subject was provided by 
Dr. Starr, the principal investigators for the study on DOD use of 
commercial IT were Dr. Starr and Mr. Franklin D. Kramer. Thus the two 
of us have collaborated in preparing the responses to these questions. 
Note, however, that the answers represent the personal views of Dr. 
Starr and Mr. Kramer and they do not reflect the views of the National 
Defense University or any other U.S. Government entity.]
    Our recommendation had two key parts. First, we recommended greater 
resource flexibility in the acquisition of IT systems. We made this 
recommendation because the current IT acquisition processes are too 
rigid and not easily adapted to dealing with commercial IT products. 
Second, we recommended that there be a greater role for the military 
combatant commanders (COCOMs) in the acquisition of IT systems. There 
are two key reasons why the military COCOMs should play a greater role 
in the acquisition of IT systems. First, it is vital to get them 
involved early in the process. By doing so, they can articulate their 
needs (to support their operations plans) and can state the unique 
constraints that are characteristic of their area of responsibility 
(e.g., interoperability with allies and coalition partners). Second, it 
is vital to get them involved continuously in evaluating candidate 
products and providing feedback.
    However, we have several reasons for not granting COCOMs full 
acquisition authorities. In order to execute that responsibility, it 
requires key skills and experiences that are not generally present at 
COCOMs (e.g., systems engineering and systems-of-systems engineering). 
Furthermore, the COCOMs tend to focus more intently on near-term issues 
rather than on the longer-term planning horizon that is representative 
of major IT acquisitions. Thus, we believe that it would be extremely 
inefficient to have each COCOM take on this role.
    However, we believe that Joint Forces Command (JFCOM) could 
assemble a ``critical mass'' in the needed intellectual capital and 
could focus on longer-term issues (consistent with its experimentation 
and testing activities). Thus, it should play the leading role for the 
COCOMs in the acquisition of commercial IT systems. [Note: We amplify 
on this expanded role for JFCOM in our response to Question 3]
    Mr. Smith. 2) Describe the acquisition model of the Defense 
Security Cooperation Agency (DSCA) and discuss how it might be used 
more broadly in the acquisition of IT systems.
    Dr. Starr and Mr. Kramer. The responsibilities of the DSCA are 
spelled out in DOD Directive 5105.65. That Directive notes the 
following:
    ``DSCA reports to the Under Secretary of Defense for Policy through 
the Assistant Secretary of Defense (International Security Affairs). 
DSCA serves as the DOD focal point and clearinghouse for the 
development and implementation of security assistance plans and 
programs, monitoring major weapon sales and technology transfer issues, 
budgetary and financial arrangements, legislative initiatives and 
activities, and policy and other security assistance matters through 
the analysis, coordination, decision, and implementation process. DSCA 
directs and supervises the organization, functions, training, 
administrative support, and staffing of DOD elements in foreign 
countries responsible for managing security assistance programs and 
supports the development of cooperative programs with industrialized 
nations.''
    One of the Principal Investigators on the CTNSP Study Team had 
served as the Assistant Secretary of Defense (International Security 
Affairs) in the Clinton Administration. As such, he has had intimate 
involvement in the direction and guidance of DSCA. He observes that an 
analogous organization could be a highly efficient and effective 
mechanism to direct and guide the acquisition of commercial IT. The key 
point would be to create such an analogous mechanism to leverage the 
acquisition organizations of the Services to support the needed 
capability. Thus, one would have a lean focal point that would take 
full advantage of the acquisition organizations in the individual 
Services and Agencies.
    Mr. Smith. 3) What resources and authorities do you recommend for 
the Office for Research and Technology Applications (ORTA) at Joint 
Force Command (JFCOM)?
    Dr. Starr and Mr. Kramer. We would like to respond to this question 
by decomposing it into two parts. First we would like deal with the 
authorities issue. We will first characterize the authorities that ORTA 
currently has and contrast that with the authorities that we believe 
that they need to perform their job effectively and efficiently. 
Second, we will discuss the resources that ORTA needs to build upon 
those authorities.
    In the area of Authorities, JFCOM currently has very little 
flexibility to support research or development of new technologies. 
They have found Cooperative Research and Development Agreements (CRDAs) 
to be useful, but limited. For example, both universities and small 
industries can not justify CRDAs because they need to receive some 
funding. In addition, JFCOM is currently under the OSD Small Business 
Innovation Research (SBIR) Program. However, we believe that they do 
not get benefits commensurate with their contribution.
    To address these concerns, we believe that JFCOM should have 
greater technology transfer authority. These would include Other 
Transaction Authority and small Grant Authority with funds. In 
addition, we believe that JFCOM should have its own SBIR program.
    In the area of resources, note that ORTA has recently expanded its 
staff size to five (i.e., three government personnel, one contractor, 
and one administrative person). We believe that its new size is 
probably sufficient for its current mission. These resources have 
enabled ORTA to effectively perform ``needs'' analyses. Note that JFCOM 
has Limited Acquisition Authority (LAA) for systems that are less than 
$50 million. However, we are aware that continuation of that authority 
is in question. In addition, JFCOM's LAA has never been accompanied by 
funding.
    Looking to the future, we believe that the ORTA staff should be 
increased significantly to perform additional vital functions. For 
example, if ORTA is to be effective, it should undertake the following 
additional functions: perform ``tech prospecting''; perform ``gap'' 
analyses and explore options to fill gaps; provide support to 
experimentation and testing; and work with rest of JFCOM to develop 
concepts of operations (in concert with J9/J7/JFHQ) and training 
packages (in concert with J7). In order to support those additional 
functions, it would be desirable to more than double the ORTA staff 
over a three year period.
    Mr. Smith. 4) A diffusion of system acquisitions has been cited as 
one cause of the DOD inefficiency in the realm of IT and a reason for 
more conformity and centralized decision-making with DOD.
    Issues

          What is your view of this characterization?

          How does your recommendation to create a greater role 
        and influence at the COCOMs support or undermine this proposal?

    Dr. Starr and Mr. Kramer. We believe that multiple processes are 
required. First, a ``normal acquisition'' process is needed that would 
address such vital issues as long term system-of-system engineering to 
ensure interoperability. In addition, there is a need for an 
``expedited acquisition'' process that can take full advantage of 
commercial IT products to address immediate needs that emerge in key 
areas of operations.
    We believe that the COCOMs have a major role to play in both 
processes. In the ``normal acquisition process'' they must be active 
participants in the requirements process (e.g., through the Integrated 
Priority List (IPL) process) and in the evolutionary acquisition of IT 
systems. In the latter case, they should get early versions of evolving 
systems and provide feedback to the acquisition agent (e.g., 
characterize how effectively the system is satisfying requirements; 
identify key functions that future systems should support).
    In the ``expedited acquisition process'' the COCOMs should be 
active participants throughout the life cycle. This includes clarifying 
requirements, absorbing the new systems in their architectures, 
training personnel to use the new systems, and suggesting opportunities 
to improve evolving systems.
    Mr. Smith. 5) You recommend an increase in the threshold under 
which the simplified acquisition process might be applied to IT 
systems. At what level should this threshold be established?
    Dr. Starr and Mr. Kramer. In the Federal Acquisition Regulations 
(FAR) (dated 24 December 2007), the term ``simplified acquisition 
threshold'' is defined as follows:
    `` `Simplified acquisition threshold' means $100,000, except for 
acquisitions of supplies or services that, as determined by the head of 
the agency, are to be used to support a contingency operation or to 
facilitate defense against or recovery from nuclear, biological, 
chemical, or radiological attack (41 U.S.C. 428a), the term means--

        (1) $250,000 for any contract to be awarded and performed, or 
        purchase to be made, inside the United States; and

        (2) $1 million for any contract to be awarded and performed, or 
        purchase to be made, outside the United States.''

Note that the threshold was initially established in Federal 
Acquisition Streamlining Act of 1994, P.L. 103-355, October 13, 1994.
    We are aware that in Fiscal Year 2000, Congress authorized a test 
program to simplify the procedures for the acquisition of commercial 
supplies and services, allowing government buyers to eliminate certain 
procedural requirements when purchasing commercial items not exceeding 
$5 million. Subsequently, in April 2001, the GAO assessed that test 
program in a study entitled ``Benefits of Simplified Acquisition 
Procedures Not Clearly Demonstrated''. In that study, GAO cited a 
survey of procurement executives in federal agencies by the Office of 
Federal Procurement Policy that revealed ``a positive impact on (1) 
time required to award a contract, (2) administrative costs, (3) 
prices, (4) small business participation, and (5) delivery of products 
and services.'' However, the GAO observed that ``the survey did not 
collect empirical data that would have supported these views.''
    The GAO report made the following observations in the section 
``Matter for Congressional Consideration'':
    ``Before providing permanent authority for using simplified 
procedures to acquire commercial items costing up to $5 million, 
Congress should consider extending the authority until 2005 and 
requiring the Administrator of the Office of Federal Procurement Policy 
to develop a method for demonstrating that the use of the simplified 
test program is producing the desired results. This demonstration 
project should be done in a fashion that would not deter government 
buyers from using the simplified procedures. This demonstration project 
should include an assessment of the extent to which (1) time required 
to award contracts was reduced, (2) administrative costs were reduced, 
(3) prices reflected the best value, (4) small business participation 
was promoted, and (5) delivery of products and services was improved.''
    In general, we agree with these observations by the GAO. We would 
conduct a test program that should run for five years. We would set the 
simplified acquisition threshold at $5 million for Fiscal Year 2009. 
However, we would index this number to the inflation rate to ensure 
that this threshold does not erode over the five year period. In 
addition, we would require an evaluation process of the five factors 
cited by the GAO.
    Mr. Smith. 6) You recommend a ``bridge fund'' for the acquisition 
of IT systems

          How large a bridge fund should this be?

          Would it be a Central Transfer Account?

          Who should manage and control it?

    Dr. Starr and Mr. Kramer. It is recommended that, to begin the 
process, the ``bridge fund'' should be on the order of $200 million to 
$300 million/annum for the following reasons. As we noted in our 
earlier testimony, the community is deeply concerned about the ``Valley 
of Death'' (i.e., the lack of resources to go from a good idea that has 
emerged from R&D into an acquired capability). To ``bridge'' this 
``Valley of Death'', this ``bridge fund'' could used to provide timely 
resources to support key Test & Evaluation functions (particularly to 
ensure interoperability) and Sustainment (e.g., personnel training; 
upgrading systems as technology evolves). Ultimately, we believe that 
the precise size of the ``bridge fund'' should be based on successful 
performance (e.g., if it is used successfully and additional resources 
are needed, the fund should be increased to sustainable levels). Thus, 
it is vital to put in place a process that would continually assess the 
effectiveness of the ``bridge fund'' and help determine its appropriate 
size.
    We believe that the ``bridge fund'' should be a Central Transfer 
Account. In addition, we believe that it would be appropriate for it to 
be managed and controlled by the Assistant Secretary of Defense for 
Networks and Information Integration (ASD(NII)).

                                  
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