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




 
              OVERSIGHT OF DEFENSE DEPARTMENT ACQUISITIONS

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

                             JOINT HEARING

                               before the

                   SUBCOMMITTEE ON NATIONAL SECURITY
                          AND FOREIGN AFFAIRS

                                and the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 29, 2008

                               __________

                           Serial No. 110-211

                               __________

Printed for the use of the Committee on Oversight and Government Reform


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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 HENRY A. WAXMAN, California, Chairman
EDOLPHUS TOWNS, New York             TOM DAVIS, Virginia
PAUL E. KANJORSKI, Pennsylvania      DAN BURTON, Indiana
CAROLYN B. MALONEY, New York         CHRISTOPHER SHAYS, Connecticut
ELIJAH E. CUMMINGS, Maryland         JOHN M. McHUGH, New York
DENNIS J. KUCINICH, Ohio             JOHN L. MICA, Florida
DANNY K. DAVIS, Illinois             MARK E. SOUDER, Indiana
JOHN F. TIERNEY, Massachusetts       TODD RUSSELL PLATTS, Pennsylvania
WM. LACY CLAY, Missouri              CHRIS CANNON, Utah
DIANE E. WATSON, California          JOHN J. DUNCAN, Jr., Tennessee
STEPHEN F. LYNCH, Massachusetts      MICHAEL R. TURNER, Ohio
BRIAN HIGGINS, New York              DARRELL E. ISSA, California
JOHN A. YARMUTH, Kentucky            KENNY MARCHANT, Texas
BRUCE L. BRALEY, Iowa                LYNN A. WESTMORELAND, Georgia
ELEANOR HOLMES NORTON, District of   PATRICK T. McHENRY, North Carolina
    Columbia                         VIRGINIA FOXX, North Carolina
BETTY McCOLLUM, Minnesota            BRIAN P. BILBRAY, California
JIM COOPER, Tennessee                BILL SALI, Idaho
CHRIS VAN HOLLEN, Maryland           JIM JORDAN, Ohio
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
JOHN P. SARBANES, Maryland
PETER WELCH, Vermont
------ ------

                      Phil Barnett, Staff Director
                       Earley Green, Chief Clerk
               Lawrence Halloran, Minority Staff Director

         Subcommittee on National Security and Foreign Affairs

                JOHN F. TIERNEY, Massachusetts, Chairman
CAROLYN B. MALONEY, New York         CHRISTOPHER SHAYS, Connecticut
STEPHEN F. LYNCH, Massachusetts      DAN BURTON, Indiana
BRIAN HIGGINS, New York              JOHN M. McHUGH, New York
JOHN A. YARMUTH, Kentucky            TODD RUSSELL PLATTS, Pennsylvania
BRUCE L. BRALEY, Iowa                JOHN J. DUNCAN, Jr., Tennessee
BETTY McCOLLUM, Minnesota            MICHAEL R. TURNER, Ohio
JIM COOPER, Tennessee                KENNY MARCHANT, Texas
CHRIS VAN HOLLEN, Maryland           LYNN A. WESTMORELAND, Georgia
PAUL W. HODES, New Hampshire         PATRICK T. McHENRY, North Carolina
PETER WELCH, Vermont                 VIRGINIA FOXX, North Carolina
------ ------
                       Dave Turk, Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 29, 2008...................................     1
Statement of:
    Sullivan, Michael J., Director, Acquisition and Sourcing 
      Management, Government Accountability Office; James Finley, 
      Deputy UnderSecretary of Defense for Acquisition and 
      Technology; and David Patterson, Principal Deputy 
      Undersecretary of Defense for Comptroller..................    39
        Finley, James............................................    65
        Patterson, David.........................................    81
        Sullivan, Michael J......................................    39
Letters, statements, etc., submitted for the record by:
    Davis, Hon. Tom, a Representative in Congress from the State 
      of Virginia, prepared statement of.........................    29
    Finley, James, Deputy UnderSecretary of Defense for 
      Acquisition and Technology, prepared statement of..........    68
    Patterson, David, Principal Deputy Undersecretary of Defense 
      for Comptroller, prepared statement of.....................    83
    Sullivan, Michael J., Director, Acquisition and Sourcing 
      Management, Government Accountability Office, prepared 
      statement of...............................................    41
    Tierney, Hon. John F., a Representative in Congress from the 
      State of Massachusetts, prepared statement of..............    33
    Waxman, Hon. Henry A., a Representative in Congress from the 
      State of California:
        Prepared statement of....................................    20
        Staff report.............................................     3


              OVERSIGHT OF DEFENSE DEPARTMENT ACQUISITIONS

                              ----------                              


                        TUESDAY, APRIL 29, 2008

        House of Representatives, Committee on Oversight 
            and Government Reform, joint with the 
            Subcommittee on National Security and Foreign 
            Affairs, Committee on Oversight and Government 
            Reform,
                                                    Washington, DC.
    The committee and subcommittee met, pursuant to notice, at 
10:04 a.m., in room 2154, Rayburn House Office Building, Hon. 
Henry A. Waxman (chairman of the Committee on Oversight and 
Government Reform) presiding.
    Present: Representatives Waxman, Cummings, Tierney, Watson, 
Davis of Virginia, Burton, Duncan, and Issa.
    Staff present from the Committee on Oversight and 
Government Reform: Phil Barnett, staff director and chief 
counsel; David Rapallo, chief investigative counsel; John 
Williams, deputy chief investigative counsel; Margaret Daum, 
counsel; Earley Green, chief clerk; Caren Auchman and Ella 
Hoffman, press assistants; William Ragland, Miriam Edelman, and 
Sam Buffone, staff assistants.
    Staff present from the Subcommittee on National Security 
and Foreign Affairs: Dave Turk, minority staff director; Andrew 
Su, minority professional staff member; and Davis Hake, 
minority clerk.
    Chairman Waxman. The committee will come to order. Today's 
hearing is this committee's 10th hearing in this Congress on 
waste, fraud and abuse in the Federal Government.
    The subject of today's hearing is weapons acquisitions 
programs at the Department of Defense. This hearing was 
suggested by Ranking Member Tom Davis, and I commend him for 
his bipartisan leadership on this important issue.
    We are holding this hearing for a simple reason: Weapons 
programs at the Defense Department are one of the biggest 
sources of wasteful spending in the Federal budget. The 
Department of Defense will spend hundreds of billions of 
dollars over the next 5 years buying weapons systems needed for 
our Armed Forces. And no one questions the need to give our 
troops the best possible equipment. But the American taxpayers 
are footing the bill for these weapons programs and no one 
seems to be looking out for their interests. Billions of 
dollars have been squandered due to waste and mismanagement at 
the Defense Department.
    According to a recent report from the Government 
Accountability Office, cost overruns in major weapons 
acquisitions programs now reach nearly $300 billion. At the 
same time, delivery schedules are slipping. The GAO says that 
delays of 2 years or more are the norm for weapons systems. The 
contractors and senior defense officials say that some cost 
increases and delays are inevitable given the complexity of 
building new weapons systems. I accept that. But that doesn't 
explain the persistent level of waste and mismanagement that 
GAO identifies.
    In 2001, a GAO report found pervasive problems in weapons 
systems acquisition, including poor planning, inadequate 
requirements, unrealistic cost estimates, and the use of high-
risk acquisition strategies.
    Today, 7 years after that report was written, GAO says 
nothing has changed. There seems to be absolutely no 
accountability to the taxpayer. Despite report after report 
documenting mismanagement in weapons acquisition, nothing seems 
to improve. The contractors keep getting richer, senior 
Pentagon officials keep receiving lucrative job offers, and the 
taxpayer keeps getting stuck with the check.
    In preparation for this hearing, my staff examined in 
detail one of the weapons acquisition programs identified in 
the GAO report, the Marine Corps' Expeditionary Fighting 
Vehicle [EFV]. And I ask that the staff report on the EFV be 
included in today's Record.
    [The information referred to follows:]

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    Mr. Davis of Virginia. Mr. Chairman, reserving the right to 
object, as I mentioned, we requested this hearing with you and 
you agreed to it. We are grateful for that. You and I and the 
subcommittee chairman and the ranking member signed joint 
invitation letters to witnesses, asking them to be prepared to 
testify about broad trends, incentives and challenges present 
in the defense system's current acquisition systems for major 
weapons programs.
    The briefing memorandum to witnesses and to Members 
discussed only departmentwide problems and issues, not any 
specific weapons system. So we were disappointed to learn just 
late last evening about the decision to release a majority 
staff report critical of one specific program: the EFV, the 
Expeditionary Fighting Vehicle. And even if the EFV is 
illustrative of some systematic flaw in the DOD acquisition 
process, refocusing on that project at the last minute does a 
disservice to our Members and the witnesses. It needlessly 
injects a ``gotcha'' element into what should be a discussion 
of good government.
    It was an unexpected and, frankly, an unnecessary departure 
from the the wholly cooperative and bipartisan approach leading 
up to this hearing. Had we had the opportunity to review the 
EFV analysis, we might have been in a position to agree it 
added a constructive case study around which to build today's 
discussion, but we weren't given that opportunity. So under the 
circumstances I would object to the unanimous consent request 
to include the staff report in the record of today's hearing.
    Chairman Waxman. I thank the gentleman for his statement, 
and I regret his objection to the unanimous consent request. He 
has made some good points which we will take into 
consideration. And I won't, at this point, pursue the matter. 
But I think at some point in the committee hearing, we will 
make a motion to include this in the committee report, which 
would subject it to a vote, but I won't do it at this time.
    Mr. Davis of Virginia. And I will remain open to discussion 
with the chairman on that.
    Chairman Waxman. Thank you very much. When the EFV program 
was launched in 1996, the goal was to build a new state-of-the-
art amphibious tank for use by the Marines, but the program has 
been so badly mismanaged that the Defense Department now says 
they have decided to start the program over again essentially 
from square one.
    The story of the EFV acquisition is an embarrassment. Six 
years ago, Defense Department auditors called the project a 
paper dream and said management does not have a handle on 
reality. They pointed out elementary flaws in the Marine Corps 
acquisition strategy, such as the failure to set a realistic 
schedule, the reliance on an expensive test-fix-test approach, 
and a lack of anyone with overall responsibility for 
integrating the various components of the project.
    But when a second set of auditors looked at the program 4 
years later, they told us they saw no improvement. They found 
disarray, uncoordinated design decisions, reliability issues 
and a general lack of planning and status monitoring. A key 
milestone for the EFV occurred in 2006 when the vehicle was 
subject to a battery of tests called an operational assessment. 
The EFV failed miserably. The prototype vehicles experienced 
over 600 breakdowns and could operate for only 4 hours before 
requiring extensive maintenance.
    We have obtained a copy of the report on the operational 
assessment. The list of problems it describes is nearly 
endless. The vehicles weighed too much. In the water, they 
could reach cruising speeds only if the Marines on board left 
their equipment behind. On land, the gun turret bent and broke 
from the stress of cross-country movement. There was poor crew 
visibility during water operations, and the driver's vision was 
periodically washed out by water spray. The ammunition feed 
jammed and crews were unable to identify vehicle targets. The 
vehicles were so noisy that the Marines on board had to wear 
both ear plugs and ear muffs and could not respond to voice 
commands.
    The contract with General Dynamics to develop the prototype 
EFVs cost the taxpayers $1.2 billion. But now this investment 
is going to be scrapped.
    Last year the Marine Corps announced that the EFVs 
performed so poorly that the entire system development and 
demonstration process would have to be redone. This means 
additional cost to the taxpayer of nearly $1 billion or more, 
and at least 3 more years of delay.
    While the project--and this is only one project we have 
singled out--has been a fiasco for the taxpayer, there has been 
at least one beneficiary, General Dynamics, the prime 
contractor. The contract for building and testing the prototype 
was a cost-plus contract, so the company got paid even though 
the vehicle flunked its tests.
    Incredibly, General Dynamics even received over $60 million 
for its work on the development contract. What's more, the 
Marine Corps says that General Dynamics will now get the new 
contract for $700 million to $800 million to build another 
prototype, while the signal it sends is unmistakable: No matter 
how bad a job you do, there will be no accountability.
    As we will learn today, the EFV experience appears to be 
the rule, not the exception. The GAO report that will be the 
focus of our hearing today looked at 72 weapons programs now 
underway at the Department. Not every program was as bad as the 
EFV project, but not a single one had followed the best 
practices recommended by both GAO and the Department of 
Defense.
    We need to find a new and better way to procure weapons for 
our military. Everyone on this committee wants our military to 
have the equipment it needs to protect our Nation. But we 
simply cannot afford to continue to waste hundreds of billions 
of dollars on poorly planned and mismanaged weapons programs. 
And I hope our witnesses today will be able to help you 
understand what has gone wrong in these programs and what steps 
can be taken to protect the interests of the American taxpayer.
    [The prepared statement of Hon. Henry A. Waxman follows:]

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    Chairman Waxman. I want to recognize Mr. Davis for his 
opening statement.
    Mr. Davis of Virginia. Thank you, Mr. Chairman. Chairman 
Waxman and subcommittee Chairman Tierney, I want to thank you 
for agreeing to our request to convene this hearing on chronic 
and costly problems plaguing major weapons system programs at 
the Department of Defense. This is critical oversight that 
transcends party, as the challenges we will discuss today have 
been faced in some form or another by virtually every 
administration since the earliest days of our Republic.
    The recent report by the Government Accountability Office 
on 72 large-scale acquisitions once again found most programs' 
outcomes ``sub-optimal.'' Apparently, that's understated 
auditor shorthand for ``incredibly bad.'' In the aggregate, the 
systems analyzed exceeded original budget targets by $295 
billion and were 21 months behind schedule.
    This committee has spent substantial time and effort 
probing allegations of malfeasance and wrongdoing by 
contractors in Iraq and elsewhere. This GAO report reminds us 
there are far larger problems on the other side of the ledger, 
far from the war zone, where program managers continually fail 
to follow established best practices to measure the technical 
maturity and feasibility of these complex projects.
    To put these cost overruns in perspective: The $295 billion 
in cumulative cost growth found by the Government 
Accountability Office is more than 2,000 times the alleged 
overage in the State Department's Baghdad Embassy project which 
the committee continues to probe extensively. We welcome 
sustained attention to deeply ingrained abuses and 
inefficiencies in weapons system programs already budgeted to 
costs many hundreds of billions of dollars.
    As I have said, the problems cited by GAO--systemic 
failures to refine requirements, acquire mature technologies, 
and capture production efficiencies--are not new. In 1794, 
Congress authorized construction of six frigates. In order to 
``spread the work among the several States as equitably as 
possible and with the greatest political advantage,'' six 
private shipyards were leased to carry out the shipbuilding. 
The project was soon behind schedule. The six keels were not 
laid until the end of 1795, 17 months after construction had 
been authorized. Subsequent mismanagement, delays and cost 
overruns resulted in scaling back the ultimate requirements to 
three frigates. Does any of this sound familiar?
    From those frigates to the F-22, that has been the sad 
history of weapons systems development throughout our history. 
In the modern era, major system acquisition has been on GAO's 
``high risk'' list for many years because DOD processes ``have 
often proved costly and inefficient, if not wasteful.'' In 
1997, GAO found ``many new weapons systems cost more and do 
less than anticipated, and schedules are often delayed.''
    To address these issues, the Pentagon has convened any 
number of task forces, working groups, committees and 
commissions, whose reports have resulted in sequential case 
waves of promised reforms and layers of ambitious initiatives. 
But, as cautious GAO auditors often conclude, ``Challenges 
remain.'' Perhaps that's because DOD reforms, as well as 
congressional attempts to tame this inefficient process, have 
focused too often on symptoms, while overlooking the root 
causes of chronic dysfunction in major system development 
projects.
    This GAO report blames a lack of skilled managers, overuse 
of contractor employees, and the tendency to ``gold-plate'' new 
designs with immature technologies for cost, performance and 
schedule problems. But we've known about these issues in 
varying degrees for decades.
    Today, we should look beyond the persistent symptoms to the 
broader, deeply ingrained personnel and management practices 
that can empower, or cripple, complex procurements like these. 
Freed from the cold war imperative to beat the Soviets by 
rushing into high-risk production of new weapons platforms, we 
now have the opportunity to retool the major systems 
acquisition process. Technical knowledge and sound management 
decisions should drive programs to key benchmarks, not internal 
DOD budget duels or military service rivalries.
    In this discussion, it has to be acknowledged these are 
highly complex, large-scale, inherently risky programs. 
Commercial and industrial best practices provide many valuable 
lessons, but offer only limited wisdom about packaging and 
projecting lethal technology across continents. Very often this 
is rocket science, not an automobile assembly line, and some 
measure of budgetary risk, even the occasional failure, may be 
an unavoidable cost of doing this aspect of the Nation's vital 
defense business.
    This is a government problem. But the major defense 
contractors can exploit the system's weakness as well. If the 
Pentagon asks for a gold-plated flying Cadillac, that is what 
contractors will bid on, even if both sides of the deal know 
they are going to get much less that will end up costing much 
more. Even companies that should know better play the game.
    The Boeing Corp. is the prime contractor on 16 of the 72 
major systems in which GAO found requirements creep, schedule 
delays, or significant cost overruns.
    Oversight like this, when consistent and constructive, can 
help mitigate those inherent risks while modernizing and 
improving major acquisitions at the Department of Defense and 
throughout government. We appreciate the extensive body of work 
GAO has undertaken on this subject and we hope this will be the 
beginning of an extended, in-depth focus by the committee on 
these issues. Thank you.
    Chairman Waxman. Thank you very much, Mr. Davis.
    [The prepared statement of Hon. Tom Davis follows:]

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    Chairman Waxman. This is a joint hearing with the 
subcommittee of our committee on National Security and Foreign 
Affairs, and I want to recognize the chairman of that 
subcommittee, Mr. Tierney, for his opening statement.
    Mr. Tierney. Thank you, Chairman Waxman and Ranking Member 
Davis, both for scheduling the hearing and agreeing to hold it 
with the subcommittee. The Government Accountability Office's 
report--and, Mr. Sullivan I thank you and your colleagues for 
it--as the centerpiece of this hearing is pretty striking and 
should be reason for concern by Congress and the American 
people for at least two reasons: First, the scope of the money 
that we are talking about is immense. We currently spend as 
much as on military as every other country in the world 
combined. Last year we allocated 53 percent of all of our 
discretionary funding to Defense, $549 billion. And that 
doesn't even include the $115 billion as supplemental funding 
for the wars in Iraq and Afghanistan.
    As the Government Accountability Office points out, we have 
$1.6 trillion in total planned commitments for weapons, and in 
2007 the Pentagon exceeded original budget estimates by $295 
billion.
    Second, the Pentagon stewardship of our taxpayer money 
seems to be getting worse. In 2000 the Pentagon exceeded cost 
by $42 billion. Now it is exceeded by $295 billion. In 2000 
original weapons cost grew by 6 percent. This year it was 26 
percent in growth. In 2000 our average delays in delivering 
initial weapons capabilities were 16 months. Now it is almost 2 
years. So today's hearing certainly asks the question whether 
we are being responsible to our taxpayers.
    In other words when it comes to developing and buying 
weapons, are we spending America's tax dollars wisely? On that 
front, the report raises many, many important questions. Why 
are things getting worse when it comes to cost overruns and 
delays, especially when the underlying problems have been known 
about for years and years? In other words, why can't we do 
better? Why has the Pentagon failed to meet industry-accepted 
best practices in any of the 72 programs surveyed by GAO?
    Why do we continually reward contractors, who now make up 
nearly half of the work force on these weapons programs. When 
they apparently are not delivering on budget and on time?
    Is it unreasonable to ask that any proposed weapons systems 
have clear expectations, realistic technology, and appropriate 
testing? Why do we continue to buy before we fly? Tomorrow this 
subcommittee is going to hold its third hearing on the missile 
defense program, which I think exemplifies some of these issues 
very well. That is a decades-old program that has already cost 
taxpayers $120 to $150 billion. And according to the 
Congressional Budget Office, it may cost an additional $277 
billion over the next 20 years. It has been plagued by delays 
and cost overruns and a lack of realistic testing. Yet we 
continue to throw good money after bad.
    Our core defense budget, that is the defense excluding the 
hundreds of millions of dollars being funding for Iraq and 
Afghanistan has grown by an average of 8 percent per year over 
the last 8 years. As part of the problem here in terms of cost 
overruns, the fact that we currently lack any discipline or any 
budgetary pressures on the Defense budget with these nearly 
double-digit yearly percentage budget increases; is there any 
fiscal discipline being exerted to hold down costs and to make 
difficult tradeoffs between what we really need and we can 
afford versus a system that gives everybody what they want?
    Where is the evidence that the Pentagon or this 
administration has any broad strategy for identifying all of 
the threats or risks to our security; that is, threats or risks 
ranging from concerns of penetration of our seaports all the 
way through acts of terror in foreign territories that result 
in any prioritization of defenses to be engaged?
    If it is clear that we have that kind of strategy, then 
let's have the joint chiefs of staff in, Mr. Chairman and Mr. 
Davis, and have them explain to the American people and show us 
how in fact there is any prioritization of weapons system 
production with those threats and the realistic likelihood of 
deployment against the United States.
    Further, let's see what the cost/benefit analysis is when 
you compare those weapons systems with the value of other 
defensive systems that could have been or are being employed, 
or the need to strengthen the core of this country; the 
physical infrastructure and human capital, for instance.
    One gets a sense from reading this Government 
Accountability Office report, and those that have preceded it, 
that the Pentagon is functioning as if the resources were 
unlimited and there are no competing demands existing. 
Moreover, as Defense Secretary Gates himself has repeatedly 
pointed out, national security in the 21st century must 
emphasize smart power as much as hard. He stated, ``My message 
is that if we are to meet the very challenges around the world 
in the coming decades, this country must strengthen other 
reports of national power, both institutionally and 
financially, and create the capability to integrate and apply 
all of the elements of national power to problems and 
challenges abroad.''
    At a time of economic hardship and these myriads of foreign 
challenges facing us, couldn't we find a better way to spend 
$295 billion other than for weapons cost overruns? Thank you, 
Mr. Chairman.
    Chairman Waxman. Thank you Mr. Tierney.
    [The prepared statement of Hon. John F. Tierney follows:]

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    Chairman Waxman. The Chair would like to recognize Mr. 
Duncan for a statement.
    Mr. Duncan. Well, thank you, Mr. Chairman. And I thank you 
and Ranking Member Davis and subcommittee Chairman Tierney for 
calling this very important hearing. When I read the front-page 
story in the Washington Post on April 1st concerning this 
situation, I was disgusted. But I am sad to say that I doubt 
that anybody was very surprised by it, although everyone should 
have been shocked by this story.
    I want to put in the record a couple of paragraphs from 
that story that said ``Government auditors issued a scathing 
review yesterday of dozens of the Pentagon's biggest weapons 
systems, saying ships, aircraft and satellites are billions of 
dollars over budget and years behind schedule. The Government 
Accountability Office found that 95 major systems have exceeded 
their original budgets by a total of $295 billion, bringing 
their total cost to $1.6 trillion and are delivered almost 2 
years late on average.''
    Apparently there are no fiscal conservatives at the 
Pentagon. Apparently they believe that the Congress will just 
keep giving them more money no matter how wasteful or 
inefficient they become. Of course, the International Herald 
Tribune said a few years ago--had a major article about the 
revolving door at the Pentagon, and the fact that all the 
defense contractors had hired, I think it was, 300 retired 
admirals and generals over the previous 10 years so that most 
of these contracts seemed to be sweetheart deals in the first 
place.
    But it is really shocking; $1.6 trillion in total costs and 
$295 billion in cost overruns, and this was just on the major 
systems. No telling how much has been wasted on the hundreds of 
smaller contracts the Pentagon has; $295 billion would run the 
entire Government of the State of Tennessee, our schools, our 
health care, roads, prisons, parks, and on and on for the next 
11 years.
    Conservatives, above all, should realize that any gigantic 
government bureaucracy is always going to ask for more money 
and always find reasons to justify it. And Congress is afraid 
to cut the Defense Department for fear of being seen as 
unpatriotic. Yet it is a very false and very blind patriotism 
that allows the Pentagon to continually waste megabillions and 
allows the Defense Department to spend like there's no 
tomorrow.
    In a few short years we will not be able to pay all of our 
veterans pensions and Social Security and all the other things 
we promised our people if we do not bring spending under some 
type of control. Conservatives, above all, should realize, as 
Jonah Goldberg wrote in a recent issue of National Review, that 
the insight that government abroad fuels the expansion of the 
State was central to the formation of the modern conservative 
and libertarian movements.
    In other words, perpetual war leads to bigger government 
and goes very much against traditional conservativism.
    Finally, Mr. Chairman, I would just like to read something 
that was in a column in the Washington Post yesterday by Dov 
Zakheim and Ronald Kadish. They wrote this. They said, ``The 
GAO report lays bare a festering problem in our Nation's 
military procurement system: Competition barely exists in the 
defense industry and is growing weaker by the day.
    ``It was a different story just two decades ago. In the 
1980's, 20 or more prime contractors competed for most defense 
contracts. Today, the Pentagon relies primarily on six major 
contractors to build our Nation's aircraft, missiles, ships and 
other weapons systems.
    ``It is a system that largely forgoes competition on price, 
delivery and performance, and replaces it with a kind of 
`design bureau' competition, similar to what the Soviet Union 
used--hardly a recipe for success.''
    I think this is a very sad situation that we have at the 
Pentagon. And I suppose it will continue. But I certainly am 
pleased that at least we are trying to do a little something 
about it.
    And I will ask, again, are there no fiscal conservatives at 
the Pentagon? Thank you, Mr. Chairman.
    Chairman Waxman. Thank you very much, Mr. Duncan.
    Ms. Watson, did you have any comments?
    Ms. Watson. Thank you, Mr. Chairman. And I, too, want to 
join my colleagues in reflecting on the findings of the recent 
GAO report which I find very disturbing as well.
    The report, as we know, found that the Defense Department's 
95 major weapons acquisition programs currently exceed their 
original budgets by nearly $300 billion and are, on average, 21 
months late in delivering these weapons systems to warfighters.
    The GAO report concludes that the current underperformance 
must be rectified, particularly in light of competing needs 
from other military and major nondiscretionary programs. In a 
time of declining discretionary spending, the fact that the DOD 
is not receiving expected returns on large investments in 
weapons systems has implications far beyond the DOD, where 
other government agencies and departments are competing for 
increasingly scarcer resources.
    $300 billion in excess spending on weapons systems is a 
sizable amount of money that could be put to use for many other 
competing and worthy projects governmentwide. This is 
particularly true in an age of declining discretionary spending 
where every dollar not spent optimally translates into less 
money available for other budget priorities, both for domestic, 
entitlement, and other national security programs.
    Mr. Chairman, the GAO Report on Defense Acquisitions notes 
that DOD has begun to develop several initiatives to improve 
outcomes. But GAO notes that there also must be a change in the 
DOD culture that led the military services to overpromise 
capabilities and underestimate costs in order to sell new 
programs.
    If the DOD's current culture remains in place, it will 
circumvent and I believe, ultimately, undermine any new systems 
that are put in place to improve outcomes. I am looking very 
forward to hearing from our witnesses to see if they can make 
some sense of this procedure.
    Thank you, Mr. Chairman.
    Chairman Waxman. I turn to Mr. Burton if he has an opening 
statement.
    Mr. Burton. Mr. Chairman, I think the defense of the Nation 
is one of the most important things that we are charged with in 
our responsibilities as Congressmen. And we want to make sure 
that we have the weapons and the ability and the equipment 
necessary to preserve and protect and defend this country.
    I am a fiscal conservative, of course, and I want to make 
sure there is no waste, fraud and abuse in the Department of 
Defense, or at least we keep it to a minimum. So I am anxious 
to hear our witnesses today and to question them about this to 
see if there are ways we can economize and cut out waste, fraud 
and abuse.
    But at the same time, I think one of the things we ought to 
keep paramount in our mind is that the defense of the Nation is 
our No. 1 consideration. And also we ought to make sure that we 
don't waste any money in the process. Thank you Mr. Chairman.
    Chairman Waxman. Thank you, Mr. Burton.
    Mr. Davis.
    Mr. Davis of Virginia. Mr. Chairman, you had made a 
unanimous consent request, and I had raised an objection. I am 
prepared to withdraw my objection and make a unanimous consent 
that the majority report on the Expeditionary Fighting Vehicle 
and the GAO report on the Capitol Visitors Center, just to show 
that Congress isn't always great when we do our own 
procurements, that both of these be allowed to be entered into 
the Record to show the systematic problems we have throughout 
government.
    Chairman Waxman. I think that is a reasonable request and I 
will certainly go along with it. Any objection? If not, then 
the unanimous consent agreement is ordered.
    Well, we are pleased to welcome Michael J. Sullivan, 
Director of Acquisition and Sourcing Management Division at the 
Government Accountability Office, James Finley is the Deputy 
Undersecretary of Defense for Acquisition and Technology at the 
Department of Defense. And David Patterson, the Principal 
Deputy Undersecretary of Defense for Comptroller at the 
Department of Defense.
    We want to welcome all three of you to our hearing today. 
It is the practice of this committee that all witnesses testify 
under oath. So I would like to ask if you would please stand 
and raise your right hands.
    [Witnesses sworn.]
    Chairman Waxman. The record will indicate that each of the 
witnesses answered in the affirmative.
    We have your prepared statements, and they will be made 
part of the record in its entirety. We would like to ask, if 
you would, to try to keep the oral presentation to around 5 
minutes. We have a clock that will indicate green while the 5 
minutes is going. The last minute will be yellow, and then red 
when the 5 minutes has concluded.
    Mr. Sullivan, there is a button on the base of the mic. Be 
sure it is pressed in. And we want to hear from you first.

 STATEMENTS OF MICHAEL J. SULLIVAN, DIRECTOR, ACQUISITION AND 
 SOURCING MANAGEMENT, GOVERNMENT ACCOUNTABILITY OFFICE; JAMES 
 FINLEY, DEPUTY UNDERSECRETARY OF DEFENSE FOR ACQUISITION AND 
       TECHNOLOGY; AND DAVID PATTERSON, PRINCIPAL DEPUTY 
           UNDERSECRETARY OF DEFENSE FOR COMPTROLLER

                STATEMENT OF MICHAEL J. SULLIVAN

    Mr. Sullivan. Chairman Waxman and Chairman Tierney, Ranking 
Member Davis, and other members of the committee, it is my 
pleasure to be here today to discuss our sixth annual 
assessment of the Department's major weapons systems 
acquisition programs. My statement today will focus on outcomes 
for the major acquisition programs, what we believe are the 
reasons for them, and potential solutions, some of which we 
believe the Department recognizes and is now trying to 
implement.
    With regard to outcomes since we began these assessments in 
2000, the number of major weapons system acquisitions has grown 
by 20. The total investment has doubled. Cost overruns have 
increased from 27 percent, on average, to 40 percent. Overall 
acquisition cost overruns have increased from 6 percent to 26 
percent. And delays in delivering initial capability have 
increased from 16 months to 21 months.
    Our analysis of 72 separate programs reveal the lack of 
knowledge-based decisions at three critical junctures as some 
of the causes for this. For example, 88 percent of these 
programs started before required technologies to meet weapons 
systems capabilities were ready. Because technology development 
cannot be scheduled, neither can the cost of these programs be 
credibly estimated. A lack of technology design and 
manufacturing knowledge at critical junctures in each program 
accounts for the additional cost and time from original 
estimates to field the weapons system.
    There are systemic problems that we believe contribute 
mightily toward these poor outcomes. At the strategic level, 
there are simply too many programs chasing available dollars. 
Two key processes in the Pentagon that precede the acquisition 
process, the requirement setting process and the funding 
process, should be responsible for ensuring a balanced 
investment strategy that matches the warfighters' needs with 
available funds. However, they do not work together very well 
to ensure that this happens.
    The requirements process, which validates the need for a 
new program, tends to be stovepiped, meaning each of the 
services may offer different solutions to fill the same 
capability gap. This means that candidate programs, in order to 
compete, usually must promise very high, sometimes unachievable 
performance requirements, given available resources. They must 
also promise very low cost in order to fit into the 
Department's funding plan.
    Because the funding process starts with overly optimistic 
cost estimates, problems with cost and schedule are a fait 
accompli for most programs. Each program begins with an 
unmanageable business case: cost and schedule estimates heavy 
on optimistic assumptions and light on data. Their definition 
of success is usually to become a program of record with a 
funding stream attached to it. As a result, programs begin with 
cost and schedules that are, frankly, impossible to forecast.
    To be sure, problems resulting from a poor match between 
program requirements and the resources available will quickly 
cascade into design changes, manufacturing inefficiencies, 
quality problems, parts shortages, and delays to testing that 
must eventually demonstrate the weapons systems capabilities.
    Solutions are available. A well-balanced, well-prioritized 
mix of candidate acquisition programs would alleviate the 
pressure that each program now faces in winning the competition 
for funding. This means the Department must make early hard 
decisions and must truly move toward a joint process for 
validating requirements.
    A business case that applies solid systems engineering 
practices to properly match a program's capability requirements 
with available resources before a program is approved would 
allow more predictable cost and schedule estimates at the 
outset of the program.
    Finally, rules once a program begins, that require program 
managers who now, by the way, would be empowered with a 
business case that was much more reasonable, to show evidence 
that technology design and manufacturing knowledge have been 
achieved at the right places before moving past critical 
investment points in a program. This would bring accountability 
to each program as it is executed.
    The Department understands all of this and, to its credit, 
it has been trying very hard in the past, I would say 12 to 18 
months, very hard to move things in that right direction. 
However, the issue is large and complex. We have recommended 
several ways that we believe this process can be improved, such 
as limiting acquisition timeframes and embracing evolutionary 
knowledge-based product development processes that would allow 
earlier fielding of new weapons systems and then incrementally 
improving them as new technologies become mature.
    However, as was stated by this committee earlier, the 
cultural barriers remain high. The transitory nature of the 
positions at the top in the Pentagon that can guide change 
makes this difficult.
    Often, policy does not translate into practice because of 
this. Significant and lasting change can only take place with 
greater and continued support and advocacy from the 
Department's leadership as well as sustained oversight from 
this Congress. I conclude with that, and I look forward to any 
questions you may have.
    Chairman Waxman. Thank you Mr. Chairman, Mr. Sullivan.
    [Note.--The GAO report entitled, ``Defense Acquisitions, 
Assessments of Selected Weapon Programs, GAO-08-467SP, March 
2008,'' may be found in committee files.]
    [The prepared statement of Mr. Sullivan follows:]

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    Chairman Waxman. Mr. Finley. We will hear from you next.

                   STATEMENT OF JAMES FINLEY

    Mr. Finley. Good morning. Chairman Waxman, Ranking Member 
Davis, subcommittee chairman Tierney, and distinguished members 
of the Committee on Oversight and Government Reform and the 
Subcommittee on National Security and Foreign Affairs, I am 
pleased to come before you today to address the broad trends, 
incentives, and challenges present in the Defense Department's 
current acquisition system for major weapons programs. I will 
also discuss the report recently issued by the GAO entitled, 
``Defense Acquisitions Assessments of Selected Weapons 
Programs.''
    I am fully committed to acquisition excellence and the 
restoration of the confidence in our leadership for our 
acquisitions system. Thank you for the opportunity to appear 
here today.
    The history of acquisition reform for the Department of 
Defense covers more than 60 years. The most recent studies of 
the Defense Acquisition Performance Assessment [DAPA], the 
Center of Strategic International Studies [CSIS], and the 
Defense Science Board [DSB], serves to assist my preparation 
for confirmation as the Deputy Undersecretary of Defense for 
Acquisition Technology by the U.S. Senate in February 2006.
    My perspectives come from industry, with over 30 years of 
experience in aerospace and defense, have been shaped utilizing 
that experience along with the acquisition reform and 
transformation initiatives, especially those most recent 
studies by DAPA, CSIS, DSB and the GAO reports.
    At the time of my confirmation hearing, the consensus 
seemed to be that the DOD acquisition process, the DOD 5000.2, 
was broken.
    Once confirmed, we quickly moved to recruit and fill key 
positions with civilian executives that had significant 
industry and military experience and a passion to serve our 
country. We eliminated a layer of management to tighten 
communication. We aligned the organization for better 
accountability and we improved the efficiency of our work force 
within AT&L and OSD, the joint staff and the components.
    After my first 90 days in office, where I listened, 
discussed, and reflected on the leadership perspectives of 
Congress, industry, and DOD military and civilian personnel, my 
opinion was that the acquisition process was not broken. We 
needed to add discipline into the process and ensure that the 
basic blocking and tackling in executing the acquisition 
process was being done correctly. We also needed to properly 
scale and tailor processes, where and when needed, to implement 
changes that streamlined and simplified processes, to reduce 
cycle times to increase competition, and to broaden 
communications up down and across with Congress industry, 
academia, our coalition partners and within DOD.
    We developed a 3-year plan, established our vision and 
strategy, and implemented goals and initiatives with a sense of 
urgency. Today, we are 26 months into implementing that plan.
    We are striving for acquisition excellence with a broad set 
of objectives by using short- and long-term initiatives. These 
objectives include: One, enabling decisionmaking for balancing 
the program and portfolio trade space with convergence of 
affordability, schedule and performance. Two, getting programs 
started right with improved upfront planning and awareness of 
risk. Three, improving process efficiency with focus on 
tailored, agile, open and transparent communications with 
checks and balances. Four, providing program stability with 
program management tenure, utilization of capital funding 
accounts and configuration steering boards.
    These objectives and initiatives are examples, with more 
examples provided in the semiannual section 804 Congressional 
Report, in accordance with the John Warner National Defense 
Authorization Act of Fiscal Year 2007.
    In addition, contracting terms and conditions for weapons 
systems have shifted over the past couple of decades due to 
increased technical complexity, associated affordability 
issues, and predictable performance challenges. Accordingly, 
DOD has shifted from the fixed firm price environments to the 
fixed price incentive and cost-plus award, incentive fee 
structures to motivate and encourage industry performance.
    Our goal is to utilize objective criteria to measure 
contract performance where incentive structures are being 
implemented. A comprehensive analysis of the GAO report 08-467 
SP, Assessments of Selected Weapons Systems, has not been 
completed. However, we are developing questions to better 
understand the report and work with the GAO.
    For example, our initial perspectives of conclusions from 
the GAO report are summarized as follows: One, the GAO report 
opening statement excerpt, ``Of the 72 programs, none of them 
proceeded through systems development and meeting best 
practices standards for mature technology, stable design or 
mature production processes by critical junctures of the 
program, each of which are essential for achieving planned 
cost, schedule, and performance outcomes.'' That statement is 
not understood.
    The DOD drives Lean Six Sigma, continuous process 
improvement as an example for best practices and best of best 
practices with CPI across all our organizations in Department 
of Defense, including acquisition.
    Two, the GAO report opening statement talks about ``The 
average tenure to date of program managers has been less than 
half of of what is called for by DOD policy.'' The DOD policy 
is 24 months. The actual average tenure of program managers 
today across all services is 23.8 months with an expected 
tenure of 42 months average. I see I am out of time so I will 
cut to my summary.
    We look forward to working with the GAO to better 
understand their data, methodologies, and conclusions 
associated with the assessments of selected weapons systems.
    In summary, measurable progress for acquisition excellence 
has been accomplished on a broad front of initiatives. We have 
traction. We will continue to improve. Much work remains to be 
done. A plan for that work has been established.
    Chairman Waxman, Congressman Davis, subcommittee Chairman 
Tierney and distinguished members of the committee, thank you 
for supporting our troops. I will be pleased to address any 
questions.
    Chairman Waxman. Thank you very much Mr. Finley.
    [The prepared statement of Mr. Finley follows:]

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    Chairman Waxman. Mr. Patterson.

                  STATEMENT OF DAVID PATTERSON

    Mr. Patterson. Chairman Waxman, Ranking Member Davis, 
subcommittee Chairman Tierney, and distinguished members of 
this committee and subcommittee, thank you for the opportunity 
to discuss the Department of Defense's current acquisition 
process for major weapons systems and other concerns arising 
from the Government Accountability Office's recent report on 
this issue.
    First, let me make it very clear that we appreciate the 
mutually beneficial relationship that the Office of the 
Undersecretary of Defense Comptroller shares with the GAO as we 
strive to ensure that the American taxpayer is well served.
    We also appreciate Congress' frustration with what is quite 
literally one of the oldest problems in government. And to 
Ranking Member Davis' point it was George Washington, I 
believe, who first complained about the ineffective response to 
his request for cannon castings. And we have been trying to 
improve the process for acquiring weapons ever since.
    In more than 130 acquisition studies, reviews and 
evaluations that have been conducted over the past two decades, 
most, if not all of them, found that the key elements in 
successful programs are program stability and funding 
predictability. Instability drives cost growth. Schedule 
slippages, and in some cases, failure of the weapons systems to 
perform as anticipated.
    Several initiatives have been cosponsored by the 
Undersecretary of Defense for Acquisition Technology and 
Logistics and the Department to address this problem. But from 
a Comptroller's perspective, the most noticeable is the Capitol 
Funding Pilot Program. Under the capital funding concept, the 
Department guaranties a certain level of funding for a fixed 
period of time--from Milestone B, the beginning of system 
development and demonstration to initial operating capability 
of the program. Funding is then held at a guaranteed level by 
avoiding up-and-down adjustments until the project is 
delivered.
    When industry and program managers know that the annual 
program funding will be provided at a predictable level and 
that other aspects of the program, such as unfunded performance 
or requirements changes are not allowed, there is an increasing 
probability that the program will be delivered on schedule and 
within budget.
    To qualify for capital funding, a program must have a well-
understood funding profile from Milestone B to initial 
operating capability, will not be used as a bill-payer by the 
services or the Department. It will provide by biannual reports 
to the Congress on cost, schedule and performance progress, 
will have a technology readiness level of at least six at 
Milestone B. It will be time-definite.
    Finally, capital funding programs will be canceled if they 
fail to make established cost, schedule, and performance 
objectives three reviews in a row.
    The capital funding concept is being formalized in three 
pilot programs: The Combat Search and Rescue Helicopter program 
by the Air Force, as soon as that program is a program of 
record; the Joint High Speed Sea Lift Vessel managed by both 
the Army and the Navy; and the General Funds Enterprise 
Business Systems managed by the Army. Because these systems are 
within the Department's current authorities, they can be 
implemented in the near-time term.
    Finally, I would offer that this administration has made 
solid financial management a serious and successful priority. 
With sound financial management, successful acquisition program 
management is far less likely.
    In 2001 critics predicted that the Department would be 
unable to turn around its complex management operations. Today, 
the Department is poised to achieve a clean audit opinion in 
2009 on more than two-thirds of the $2.4 trillion of assets and 
liabilities--an extraordinary achievement.
    We are on track to eliminate the remaining 18 of the 
original 116 managers' internal control weaknesses, and we are 
lowering costs and increasing productivity and saving the 
taxpayer billions of dollars.
    The Defense Finance and Accounting Service alone has 
increased productivity by 52 percent, saving $317 million since 
2001.
    Audits conducted by the Defense Contract Audit Agency on 
fiscal year 2007 contracts not only saved the Department $2.4 
billion, but armed investigators with information that 
recovered an additional $225 million. These are only a few 
areas where we have made progress since 2001.
    Whether it is sound financial management or providing the 
American taxpayers with the most effective weapons systems 
acquisition process, the Department of Defense is absolutely 
committed to the wise and efficient management of resources. 
The American people deserve nothing less.
    Thank you for this opportunity and I am ready to take your 
questions.
    Mr. Tierney [presiding]. Thank you, Mr. Patterson.
    [The prepared statement of Mr. Patterson follows:]

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    Mr. Tierney. I thank all of you for your testimony here. 
Mr. Waxman has been called away for a short period of time.
    We are going to have initial 10-minute rounds from the 
ranking member and the chairman before we move to 5-minute 
rounds to the Members.
    Mr. Davis, you are recognized for 10 minutes.
    Mr. Davis of Virginia. Let me start with our GAO rep. You 
state that improving acquisition outcomes will require changes 
in environment and incentives as well as improved processes.
    Is there anything we in Congress can do to help change that 
environment that leads the DOD to overpromise capabilities and 
underestimate the cost of these programs? Or is this basically 
just executive branch management issues?
    Mr. Sullivan. I think that the oversight capability that 
the Congress has is critical to keeping these, the Department 
on track. But I think basically it's the Department. The way we 
see it is the Department has plenty of funding to invest 
properly in the major weapons system acquisitions that they 
believe they need to equip the warfighter; and even within that 
universe within the Department, oversight within there needs to 
improve significantly.
    Probably the bigger problem is between the Department and 
the stovepipes that they have to deal with, meaning the 
acquisition communities, the various acquisition communities 
within the Pentagon.
    You know, there is an oversight mechanism that these 
gentlemen obviously have to take care of. The services all have 
different solutions that they want to provide in terms of 
capabilities. And there are other acquisition agencies in the 
Department as well. That is the critical place. I think when 
you have the parochial nature and the stovepipes of the 
acquisition community coming forward, the oversight that 
happens within the Pentagon is critical. That is where hard 
decisions have to be made. Of course, I think the Congress, 
your responsibility and your power of the purse, obviously, is 
critical to all of that.
    Mr. Davis of Virginia. You have mentioned that the DOD 
often asks contractors to develop cutting-edge systems under 
cost-type contracts, in essence reimbursing the firm for its 
best efforts rather than results. Do you think that the Defense 
Department would be better served by awarding some of these 
contracts under fixed-price contracts and placing more of the 
risk on the contractor, and do you think they would get the 
requisite number of bidders there?
    Mr. Sullivan. You know, Congressman, that is a very 
sensitive issue because of the technical nature, the really 
cutting-edge nature of these programs. There are a number of 
reasons I think that the, cost-plus contracts are important for 
these major development programs.
    No. 1 is these companies, no matter how well you understand 
the technologies for these, there is going to be tremendous 
risk in moving forward to build a thoroughbred system that is 
going to meet all the performance requirements they have. So 
even integration risk, which we think is a little more 
knowable, probably there are no contractors that would take on 
that kind of risk with a fixed price, in a fixed-price kind of 
environment.
    But in addition to that, the low volumes and the lack of a 
market, an after market for products and things like that, just 
makes it much easier for contract. If they are going to expend 
the $20 or $30 billion that it sometimes takes to develop a 
weapons systems, they have to have protection to do that. So we 
understand that.
    The critical thing there is that if you're going to take on 
a risky project like that, the first thing that you want to 
know is you need to understand the requirements. And you don't 
want to sign that contract until you've done really proper 
systems engineering analysis, maybe even to the point of 
prototyping before you would actually begin a weapons systems 
program.
    The way that is done today is many of these programs are 
started before they even do a preliminary design. You know the 
requirements process comes out with the needed capabilities, 
the funding process, the process that is going to resource 
that, tends to get cost estimates, one from the program office 
that is going to run the acquisition, and maybe another one 
from the Department of Defense's cost analysis improvement 
group, that are based on very little systems engineering 
analysis, very little reality. There has not been, you know, 
forget about prototypes. They are not even close to that.
    So these programs begin without any knowledge about, you 
know, the studies that we've done in the past, on some of the 
big major weapons systems, F-22 or the B-2 bomber long ago, 
those programs began and received a funding stream that would 
allocate billions of dollars in investments to them over the 
years, before they really had any true understanding whether or 
not they would ever be able to build that weapons systems.
    And so I would say that cost-plus contracting, that is a 
contracting mechanism that certainly is important here. You 
have to be able to keep risk under control for the defense 
industrial base.
    But if you don't have the requirements, well established, 
well understood, with available technologies and the funding 
process has the available funding stream, this is going to 
continue to happen.
    Mr. Davis of Virginia. I have always felt cost-plus was 
probably appropriate in these cases, given the flexibility and 
changing requirements. But you know what? If you went out fixed 
price, somebody would bid; they would just be much higher. But 
given the cost overruns here, I am not sure that shifting the 
risk, I think that is the----
    Mr. Sullivan. Congressman, an analogy. If you are building 
a new house or if you want to buy a new car and you just want a 
contract, you expect that there are going to be some cost 
overruns. So you're not necessarily signing a fixed price with 
them. You get their estimate and you have an agreement that 
they're going to deliver within 10 percent of that perhaps.
    Well, if you then ask for, you know, a nuclear-powered 
furnace to power the heating and cooling in the house--and what 
is the contractor going to say to you? ``That is impossible.'' 
Well, in the Department of Defense they might have a 
requirement like that, and the contractor is not in any way 
constrained at that point to say, ``You know, we don't think we 
can do that.'' Because it is a requirement that has been put 
on, it is best effort.
    Mr. Davis of Virginia. They always say they can do it don't 
they?
    Mr. Sullivan. They always say they can do it because they 
have been released from the cost risk.
    Mr. Davis of Virginia. That is part of the problem. I don't 
know how you get at that, but there may be a portion that you 
can fix prices on pieces of that or somewhat.
    Mr. Sullivan. I think those are things that can be looked 
at, but the critical thing to me there is not to start that 
program unless you have documented you know what you want.
    Mr. Davis of Virginia. You know what you want.
    We just held a hearing on this, the chairman and myself, on 
the Census Bureau with some hand-held computers that 
jeopardized the census now, because they didn't know what they 
wanted. They came in with so many changes and it is way behind 
schedule. It is not getting what we wanted. This is not just 
DOD. It has been going on for a long time. But I tell you what 
we will spend time on the floor fighting over $20, $30 million 
for funding for the arts, and then you have cost overruns here 
that go into billions of dollars.
    And it seems when government needs to lose weight in a 
tight budget, then we chop off fingers and toes, but in point 
of fact, the fat is layered throughout the system in the way we 
do our acquisition in our business processes. And we need to 
give a lot of focus to that. And this is just a prime example.
    Let me ask this. Your report recommends that DOD holds 
program managers more accountable. What do you mean by holding 
managers more accountable? I don't think anybody is ever fired 
over this. Is anybody ever fired for any of these? Are you 
familiar with any managers being fired over these acquisitions? 
I know you are paying out, the contractors are getting their 
fees, their award fees. But are managers being fired?
    Mr. Finley. Yes, there are actions taken in the Pentagon to 
remove program managers from their duties and reassign them. 
Yes.
    Mr. Davis of Virginia. They are reassigned. They don't lose 
their job.
    Mr. Finley. Well, they are serving their country. They get 
reassigned to another requirement for the service. They are 
removed from their positions.
    Mr. Davis of Virginia. Does it happen very often?
    Mr. Finley. In my short tenure, I have probably seen it 
happen more than I have seen in industries in a comparable 
time.
    Mr. Davis of Virginia. What's the downside? Traditionally, 
managers are risk-averse. I understand. That is good or it's 
bad. But, in a case like this, in managing something that's 
difficult, what does a manager do in a situation like that? Do 
they go upstairs for help when they have to get the change 
orders? Explain to me the manager's perspective on this. 
Because they are seeing these things creep out of control. They 
can't be too comfortable with with it.
    Mr. Finley. I believe Mr. Young is very focused in this 
area as well to help facilitate the environment for program 
managers to come forward and be far more open and transparent 
about what are the real issues. And in that respect, we have 
done a lot of streamlining and simplifying of the monthly 
processes for executive reviews. For example, risk management 
of these programs is fundamental to making the proliferation of 
cost overruns, you know, a thing of the past. And it is an 
absolute must-do. And it is an absolute--my opinion--doable.
    The programs, in my opinion, should not be starting--a CAT 
I one program should not be starting with low technology 
levels. We have TRL's, Technology Readiness Levels that are 
measured. Programs do not go through Milestone B without a 
level 6 approval. We believe that is adequate to start.
    Programs in the pipeline that have been cited in the GAO 
report, for example, have started with IIs, IIIs, IVs. All of 
the histories and all of the stories are there of why these 
programs should not started.
    Mr. Davis of Virginia. Let me just ask this last question.
    GAO reports that a significant increase in the number of 
major defense acquisition programs since 2000, huge increase, 
but the acquisition work force has remained static in terms of 
numbers. With this type of program growth and the lack of 
concurrent increase in the numbers of acquisition personnel, 
should we have seen the current growth in the use of 
contracting support for the management of these systems? Has 
that been a problem?
    Mr. Sullivan. Is that for me?
    Mr. Davis of Virginia. It is for all of you.
    Mr. Sullivan. You know, this year when we did this, this is 
a survey we do and we send it out to all these programs. This 
year because of interests, congressional interest and the use 
of service contracts and things like that, we included a 
question on how much of your program office work force is 
contracted out. The response we got back, I don't think that we 
are prepared to say if that is good or bad yet. But it is 
something that seems questionable to us where the use of 
outsource contractors is growing and it just is a trend that we 
want to keep an eye on.
    We don't have anything, any evidence, that's good or bad at 
this point.
    But if I could go back to the program manager discussion, 
you brought up the accountability of program managers. The 
report that we did, that was another thing we asked in the 
survey. We asked--Secretary Finley had the numbers that DOD 
has, and those are probably more up to date and more universal 
than what we had.
    I just want to make it clear that in our report we indicate 
that our analysis of that included 39 of these programs that 
gave us information back on what the tenure was of their 
program managers. Of those 39, it was 17 months. But, in 
addition, the way we hold program managers more accountable is 
you give them a better business case, I think we were talking 
about early.
    I don't think you can really hold someone accountable for 
managing risk given the business case of the capabilities that 
they are going to need to achieve with the funding that they 
are going to be given and the cost estimates that are based on 
really not enough data at the time. Not only that, but the 
timeframes of these programs can be 10, 12, 15 years.
    Mr. Davis of Virginia. Let me ask you this. If you are 
doing a $25 billion program or $50 billion program and you 
manage it under time or under budget, what about a bonus 
system? Does that make sense?
    Mr. Sullivan. Yes, I think that would make a lot of sense.
    Mr. Davis of Virginia. You certainly would get a bonus if 
you were in the private sector.
    Mr. Finley. Yes, I think a bonus system does make sense. I 
think that----
    Mr. Davis of Virginia. It certainly would be cost-
effective, as opposed to these other issues.
    How about you, Mr. Patterson?
    Mr. Patterson. As a matter of fact, when we have civilian 
employees who are program managers, they do get bonuses; and 
their bonus is commensurate with their success in the program. 
But military program managers, it's a little bit more 
problematic, as you might suspect.
    Mr. Davis of Virginia. All right. Thank you.
    Chairman Waxman [presiding]. Thank you, Mr. Davis.
    We are talking in a more general way, and GAO gave us a lot 
of examples, but I want to focus on one example that I brought 
up in my opening statement earlier of just how money seems to 
be used without any accountability and without any result.
    The Expeditionary Fighting Vehicle, supposed to be an 
amphibious tank that was developed to transport Marines from 
ship to shore and then to conduct land-based combat operations; 
and this was thought up in 2001. The Marine Corps awarded a 
contract to General Dynamics to design and test the EFV in 
order to prepare it for large-scale production, and they 
thought through a schedule. They were supposed to finish this 
phase of development by 2003, and then the Marines would have 
the vehicle available to them by 2006.
    The original budget was $712 million. Through a series of 
contract modifications, the budget grew to $1.2 billion, and 
the deadline for completing the system development and 
demonstration was pushed back to 2006. When the Marine Corps 
tested the EFV in 2006, it broke down every 4\1/2\ hours; 
crucial parts for the vehicle, including the bow flap and the 
gun turret, had serious structural problems.
    I have a chart that I am going to put up on the screen. It 
shows the slide that the Marine Corps prepared discussing the 
results of this test--and I don't know if it's visible enough 
to you--but, according to the slide, the vehicle will only 
reach high speeds in the water if Marines don't bring their 
combat and personal equipment with them on the craft. Well, 
that means that the vehicle could only work as envisioned if 
the Marines left behind their battle gear.
    Since those tests failed, the program has gone back to 
square one.
    Last year, the Defense Department announced that the EFV 
would have to go through a second development and demonstration 
process at an additional cost of the taxpayer of nearly $1 
billion more. In effect, the Department said, even though we 
spent $1.2 billion and 6 years on the first system development 
contract, we need to start the process all over again and spend 
another billion dollars to build a new prototype vehicle.
    Mr. Finley, how could this have happened? Why didn't the 
contractor deliver what it promised? Why didn't the Defense 
Department manage the program better? Why are the U.S. 
taxpayers out over $1 billion as a result?
    Mr. Finley. Thank you, Mr. Chairman.
    I do not have the facts on EFV with me. I am not as 
prepared as I would like to be for this particular subject.
    I will share with you that, in my tenure, this program came 
up for Nunn-McCurdy. It was recertified as a program and 
restructured last year, 2007. It is my understanding that 
coming into the Nunn-McCurdy as part of the causal mechanisms 
behind the performance on this program was funding stability, 
and yet for some number of years, the funding on this program 
had been cut dramatically from some level but approaching 50 
percent of what they had.
    Chairman Waxman. I don't see any cuts. I see only increases 
in the amount of money that went into this program. It was a 
cost-plus project, and the costs were paid. In fact, at the end 
of the day the contractor got bonuses for a failed effort.
    Mr. Finley. I would have to take the question for the 
record, sir.
    Chairman Waxman. Mr. Sullivan, I believe you have looked at 
this EFV contract. What, in your view, went wrong?
    Mr. Sullivan. I think with the EFV they had very tough 
requirements to begin. Actually, in the beginning of this 
program, they tried to go forward before they had mature 
technologies, particularly with the engine, the propulsion that 
you would need to literally skip across the ocean like a stone 
with this thing.
    To their credit at the time--we are going back to the mid-
'90's--the Navy told them to hold up and work on some of those 
technologies. I think that led to some of the--you know, the 
annual funding increments they did reduce, a lot of the annual 
funding increments in the beginning, which slowed them down in 
that regard.
    But once they did get mature technologies and begin, they 
had reliability--as you mentioned, I believe it was 4 hours 
between breakdowns on this. I think the reliability requirement 
was 47 hours.
    So when they finally got to a point where they thought they 
had designed a full-up prototype, they had ignored the critical 
design review. That second thing that we talk about is, you 
know, managing the design, building a prototype before you go 
forward, having a good critical design review at about 
midpoint. That was ignored, I think. As a result, they got the 
reliability problems that they have, and they have to start 
over.
    Chairman Waxman. Well, there were plenty of warning signs 
that the contract was not going to work, but nobody seemed to 
pay attention to those warning signs.
    In 2002, the Defense Department auditors issued a scathing 
report that found that the program was being poorly managed. 
Here is what the 2002 report said, ``Management does not have a 
handle on reality, particularly with unrealistic schedules.''
    The report also said the project lacked leadership, and 
there seems to be ``no one steering the ship'' and that the 
project was a ``paper dream that everyone accepts but has only 
a casual resemblance of reality.''
    Mr. Finley, that was 6 years ago. These warnings weren't 
heeded in 2002. Why do you think that happened? You don't know 
specifically about this, but if there are warnings, doesn't the 
DOD take those warnings seriously?
    Mr. Finley. That's an unequivocal yes. We do take all 
warnings seriously. I cannot speak for 2002. I will be happy to 
take the question for the record, though, sir.
    Chairman Waxman. Well, in 2006, they had another audit that 
was performed; and this audit found exactly the same problems 
that were reported in 2002. Four years had passed, hundreds of 
millions of dollars had been spent, but there was no 
improvement in the contract management.
    Here is what the auditor said in their 2006 report: 
``Oversight of the program is ineffective.''
    ``The system's engineering process is inadequate and a 
major shortcoming of the EFV program. It is a root cause of 
disarray, uncoordinated design decisions, reliability issues, 
and the general lack of planning and status monitoring.''
    Well, it appears that everyone who examined the EFV 
contract knew for years that it had serious flaws, yet the 
Defense Department still committed more than $1 billion of 
taxpayer funds to the contract.
    Mr. Sullivan, you mentioned this earlier, there are 
supposed to be checks and balances in this process to prevent 
this kind of thing from happening. What do you think went wrong 
here? Why weren't there checks and balances to take these 
warnings seriously?
    Mr. Sullivan. One of the things that happened on this 
program is they signed the contract to go to system 
demonstration and development, which is the cost-plus contract 
to go ahead that opens up the funding. In December 2000, they 
declared the design stable. In January 2001, in 1 month, they 
had a complete critical design review that OKed the program to 
continue toward manufacturing, engineering, manufacturing and 
development.
    Obviously, in 1 month--and I don't think that they had the 
proper engineering prototypes--they had not accumulated the 
knowledge that any program manager in any world-class company 
would have to accumulate before they got more investment 
dollars in that timeframe. So I really think probably, as a 
major defense acquisition program, it wasn't getting the 
oversight it probably deserved.
    Now, that's back in the 2000 timeframe--that's probably the 
genesis of when this really started going wrong.
    Chairman Waxman. If I hire a contractor to do work for me 
and they run over budget and run out over time and then they 
fail, I would want my money back. Why can't the government get 
its money back?
    Mr. Sullivan. I think, probably, you know, one of the 
things that has to happen in this environment that we are 
talking about is decisions like that have to be made. This is a 
program that probably was a very good candidate for, you know, 
if not termination, then somehow, you know, scaling back the 
dollars that were going into it back in that timeframe.
    Chairman Waxman. Is it possible to get the money back if 
it's a cost-plus contract? Or do the contractors say they are 
not taking the risk; it's the government that's taking the 
risk?
    Mr. Sullivan. I don't think--you know, that's kind of 
outside--I would have to talk to some of our lawyers that we 
have to understand the legalities of that. But I don't think 
it's--it's not easy to get the money back. I know that.
    Chairman Waxman. Well, the problem I see is that nobody in 
this process is advocating on behalf of the taxpayers. The 
company is doing fine. It has a contract. It's structured so 
that it will get paid no matter what the result, even if the 
result is total failure.
    The responsible officials at DOD are not being disciplined. 
In fact, they may get lucrative job offers from other defense 
contractors.
    But the Marines who need this equipment have to go without, 
and the taxpayers that foot the bill pay out billions of 
dollars, and we get nothing in return. That just can't be a 
system that we ought to be sustaining. I think that's the 
reason we are holding this hearing, and many of us are very 
concerned.
    Mr. Finley, I do want you to be able to respond to the 
record. I don't think you were adequately advised we were going 
to focus in on this weapons system. So I apologize to you for 
surprising you. But this is something that the GAO looked at 
and our staff looked at, and I do think it's an illustration of 
our frustration with this whole system that we have.
    Mr. Finley. I would be happy to, sir.
    Chairman Waxman. Thank you very much.
    Mr. Burton.
    Mr. Burton. Thank you, Mr. Chairman.
    Well, from your testimony, it sounds like there needs to be 
improvement in oversight and management; and, in many cases, 
it's inadequate. But if you have a cost-plus contract, the 
contractor pretty much, as long as he is doing the best he can, 
you can't really go back and say, hey, we want our money back, 
as long as he is going to perform as he said he was going to.
    Some of these weapons systems--and I have tried to follow 
this over the years. You are talking about such things that are 
so complex that, even if you have a design, once you get into 
the actual production of a prototype, you start finding design 
flaws that you didn't think there were. I mean, it's not an 
exact science, is it?
    Mr. Sullivan. No, it isn't.
    Mr. Burton. Because of that, the contractor pretty much has 
to work with the Defense Department. The contractor has to work 
with the Defense Department in order to make sure that those 
flaws or the design changes are corrected and need to be made. 
That sometimes involves cost overruns, right?
    Mr. Sullivan. Yes, sir.
    Mr. Burton. I think that's one of the things we want to 
talk about. I don't think anybody here--Democrat, Republican 
liberal or conservative--doesn't want to make sure that we 
minimize waste, fraud and abuse in the Defense Department or 
any other department, but the thing that is important to me is 
that we have the defense capability to defend this country 
against any enemy, domestic or foreign.
    That means sometimes we have to look at weapons systems 
that may be new and on the drawing boards that we think are 
going to be necessary to defend this country and we let a cost-
plus contract for design and engineering. Once they get into 
it, we find out that, hey, this thing really needs a lot more 
work. So you have to go back to the drawing boards and try to 
make those corrections.
    Then when you get a prototype built, you find, many times, 
more design problems and changes that have to be made; and the 
contractor and the Defense Department have to go back to the 
drawing boards one more time to make sure that those 
corrections are made.
    I have seen helicopters that are supposed to be the best in 
the world, and we have seen them crash. I have seen planes that 
we have developed that were supposed to be the best in the 
world. During the test phase, and even after the test phase, 
they found flaws and they caused crashes and people were 
killed. When you are talking about defense items, many times 
you are going to have to make those changes.
    Now, one of the things I want to ask is, you know, we go up 
and down with Defense budgets; and the Defense Department has 
to pick and choose which Defense programs, which weapons 
systems that they want to produce. Do the fluctuations between 
administrations, for instance, change the amount of money that 
could be allocated, say, for different defense programs, 
different programs?
    I mean, do you have a program to say, OK, we are going to 
allocate this much, this amount of money through the Defense 
Department for a program and then the Defense budget is reduced 
and so the funds aren't there and you have to pick and choose? 
What kind of an impact does that have on defense design and 
programs?
    Mr. Sullivan. Is that for me?
    Mr. Burton. For any of you.
    Mr. Sullivan. You know, we have looked at--the trend of 
acquisition funding over the past, I would say, 25 years shows 
a kind of a buildup in acquisition funding for weapons systems 
beginning in the 1980's. And then, as the Soviet Union fell and 
world events changed, we talked about the peace dividend. So 
you do see a trough beginning in the late 1980's when the 
Soviet Union fell, through the 1990's, and it is up again now. 
A lot of that is due to the war and other things.
    But acquisition spending, the RDT&E budget and the 
procurement budget right now are as about as high as they have 
ever been, probably, for the last----
    Mr. Burton. Let me pose this question. Let's say we have a 
weapons system that we are developing right now that we think 
is going to be very imperative for the 21st century to deal 
with nuclear development by an enemy or a lot of other things; 
and a new administration comes in and says, OK, we want to cut 
the Defense budget. There's too much going on, and the Defense 
Department has to pick and choose the programs that they want 
to proceed with.
    Isn't it possible that some of those programs will be 
shortchanged and so they have to cut back on research and 
development? And then as time goes by, if it becomes necessary 
for that program to be restarted or funded to a higher degree 
because of the necessity of it, that there needs to be changes, 
design changes, and there needs to be more money because enough 
money wasn't allocated in the first place?
    Mr. Sullivan. If I could just take a minute, and I think 
you just gave a very good description of what happens to a 
weapons system. Everyone knows you are going to have to deal 
with a lot of unknowns and contractors. You signed a cost-plus 
contract for a reason, because contractors are going to have to 
deal with a lot of risk, just as you explained.
    I think the problem we have here is there are two 
processes, the requirements process that validates a need and 
the funding process that will establish the available funding 
for that. What comes out of the requirements process may 
validate a need that would overwhelm a threat that they see 10 
or 15 years out. But the reality of it is that there's nothing 
available today that can achieve that need. It's got to come 
out of the tech base.
    They begin the product development for that before that 
tech base has even invented it. That's where they need--there's 
a process and the 5,000 process, the acquisition policy. 
There's a milestone A, and then you work maybe a 2-year process 
between the milestone A to a milestone B to where that's where 
you get your big money and you start your program.
    That process is really what you are talking about. That's 
where the need and the available resources and technologies 
have to--somebody has to come in and apply some reason to that 
and say, you know, can we get that F-22 fighter to do all of 
these things by 1996? The systems engineers have to say, no, we 
can't do that. Let's try to get this--you know, the 
requirements have to be level. Oftentimes, that's not done; and 
that's what really gets them in trouble.
    If these programs were coming in at 25 percent, 30 percent 
even, over cost in product development, I think, while that's 
not acceptable, that is not in the area, really, of wasteful 
dollars. I think we would understand. But often these programs, 
EFV is an example, that's over 100 percent over cost.
    Not only that, the quantities eventually have to be 
reduced. So the warfighter doesn't get the numbers that they 
were talking about; and they are always late, as a result of 
that.
    Mr. Burton. Mr. Chairman, let me just make one final 
comment.
    No question. I agree with you and everybody on the 
committee that we need to really police the amount of money 
that's being spent on these weapons systems. Wherever possible, 
Congress ought to, you know, pound whoever is in charge over 
there to make sure that they are not wasting taxpayers' 
dollars.
    But, on the other hand, it's extremely important that we 
realize on these cost-plus contracts with defense systems that 
are extremely important in the opinion of the people at the 
Defense Department and the administration that we properly fund 
those, even though we know that there may be cost overruns, to 
make sure that this country is well protected.
    Thank you very much, Mr. Chairman.
    Chairman Waxman. Thank you, Mr. Burton.
    Mr. Tierney.
    Mr. Tierney. Thank you, Mr. Chairman.
    Let me continue on that vein, because I am not sure that it 
looks like anybody ever makes a decision that some of these 
systems ought not to proceed.
    When you look at 92 systems and so many of them behind 
schedule by such large periods of time and so many over budget 
by so many dollars, let me ask you, Dr. Finley and Mr. 
Patterson, have any of these systems ever been scaled back or 
eliminated?
    Has there ever been a decision where somebody finally says, 
you know what? This thing has been going on for decades showing 
no progress. We can build now only a fraction of the ones we 
really intended to build, doesn't meet the original 
specifications or the change requirements. Let's move on. Let's 
just put this one on the burner and move on.
    Mr. Patterson. Yes, sir.
    Mr. Tierney. Maybe about a half a dozen of those?
    Mr. Patterson. Joint common missile comes to mind, where we 
determined that the requirement was not sufficient to continue 
the program; and the program was terminated. That's the most 
recent example.
    Mr. Tierney. Well, how about the F-22, where at one point 
Vice President Cheney was all for eliminating it? It's, what, 
two or three decades overdue now. It's billions of dollars--
tens of billions of dollars over budget. It was originally 
designed to go deep in the Soviet Union. That doesn't exist any 
more. Is the real problem that some parts of it are made in 48 
States, and we can't get Congress to kill this beast? Or what's 
going on with that?
    Mr. Patterson. I believe it's the Defense Department V-22 
that Secretary Cheney had a problem with. As you know, the V-22 
is performing quite well in Iraq today. Had we canceled it, it 
probably would have been a bad thing, but it did take a long 
time.
    But your point is well taken, quite frankly, the fact that 
we oftentimes live under a circumstance where we live in hope. 
We hope that it will perform the way that we intended it to. We 
hope that it will be on budget. But the fact is that the 
circumstances we find ourselves in oftentimes make that 
impossible.
    I would like to point out and to comment on the GAO's 
reports that have, in fact, prompted a great deal of effort on 
the part of the Department of Defense. Back in 2005, the GAO 
reported a report similar to this one that was used extensively 
in the confirmation hearing for the Deputy Secretary of Defense 
that then prompted him to ask for a complete review of the 
Defense Department acquisition system from the bottom to the 
top; and those recommendations, which we have started to 
implement, as Secretary Finley has expressed, are beginning to 
show progress and promise. Things don't happen overnight, but 
the fact is that we have started to do that, and I think that 
we will show success in the future.
    Mr. Tierney. One of the problems, I think, is that people 
keep changing; and it's always, we are talking about the past. 
That's not us. We are doing a better job. Then you move on. 
Somebody comes in and says that was them. That's not us. But we 
are doing a better job.
    But, Mr. Sullivan, you laid out in the report pretty 
clearly the best practices. At what point in time do you do the 
concept refinement and technology development? Then you should 
move on to the system development and demonstration and then 
move on to production and deployment.
    From your report, it looks like these are overlapping 
significantly. That just doesn't seem to make sense. We are 
flying before we are buying on so many of these systems, and 
then it just creates more work down the line.
    The story in the New York Times on the littoral ship being 
one of those cases where they put it all together and they 
thought it would work in small spaces and they go backward on 
the project. So do you see that this is going to change?
    Mr. Finley, I would ask you to answer as well. Are we going 
to get back to the best practices where we actually test and 
get them to a point of time where we have some assurance they 
will be able to work in a realistic operational environments 
before we can move to the next stage? You certainly are not 
recommending that we don't do that, that we just continue to 
keep building and paying, building and paying when they don't 
work and go to the point go.
    Mr. Sullivan. You know, the way that we look at this, the 
recommendations that we come up with would be literally it 
would be a good idea to fully fund a product development 
program. In order to do that, the thing pretty much has to take 
5 years or less. So you have to have requirements that you know 
are achievable in that timeframe, and that way you can upgrade.
    We talk about an evolutionary knowledge-based acquisition 
process that might get you an F-22A, an F-22B, an F-22C, 
understanding your requirements all the way along.
    There's significant overlap still in most of the big 
weapons systems that they are building now. The joint strike 
fighter, there's overlap now. They are going into production. 
They are in the limited procurement contracts now, and they 
have just begun testing the aircraft, so that's risky to us.
    I would like to say that in the past couple of years--in 
fact, the Congress, with this section 804 from the Defense 
Authorization Act a couple of years ago, asked the Department 
to start looking at things.
    I really, to be fair, would like to say in the past 18 
months or so there have been--even us, GAO, looking at it from 
the outside, we have seen things happening at the OSD level 
that indicate that harder decisions are being made.
    I think the JLTV you could probably talk about better that 
I, but that is an example where they have asked them to go back 
and look at the requirements before they let them be in a 
program.
    That, as we say in our statement, there's reason for 
optimism. But, as you said, the transitory nature of the people 
at the top is really what keeps anyone from being able to 
change the underlying culture.
    Mr. Tierney. That and I think just the unending desire, 
apparently, by Congress to keep writing a check. Nobody ever 
says this is how much money we have to spend, given all of our 
other challenges here.
    We have to keep the core of the country solid as well as a 
better defense and morality, but we say, well, that will have 
to just set aside. Because we will keep writing the Pentagon as 
many checks they want, no matter how many billions of dollars 
they go over budget or how many decades they go behind 
schedule.
    I would suggest that some of these auditors ought to come 
up at some point and say, you know what? Here are X billion 
dollars off the table. Now realign your strategy here and tell 
us what you can do.
    Mr. Finley. I think we are completely aligned on that, 
Congressman Tierney. We have made a lot of changes, probably 
way too many, to discuss in this particular hearing, as pointed 
out by both Mr. Patterson and Mr. Sullivan. And they are very 
wide-ranging. They are very sweeping.
    To your point about people, people oftentimes ask me, you 
know, I have 265 days to go--my wife is counting.
    Mr. Tierney. Counting, yes.
    Mr. Finley. But when I came in we brought in very senior 
executive people that had the industry experience and the 
military experience and the passion to serve their country, our 
country. That has made an astounding difference from a 
leadership point of view. These are career SESs.
    What we have been doing for these 26-some odd months is 
getting the traction empowered and embedded and, you know, 
deployed throughout the building, if you will. So the 
relationship with the four-stars, the three-stars, all the way 
down to the iron majors is what's been going on.
    I can do the tests. I can go to the field today, and I can 
see things like Lean Six Sigma, continuous process and 
improvement working in the field in terms of dramatic 
performance at that end.
    At our end of the food chain up here in acquisition, where 
they think of us at the front end, you know, early preliminary 
design reviews. We're pushing this entire acquisition process 
to the left by years. That's what we are talking about. We are 
talking about competitive prototyping, one of Mr. Young's top 
strategic initiatives to prototype at milestone A or sooner.
    Industry, I believe, is more than happy to invest their R&D 
money to get better performance out of products before we start 
making major milestone decisions at B early. And more 
competition even through milestone B, more competition through 
milestone C, I believe, will enable us to get our industrial 
base far more mobilized and able to afford affordable solutions 
for our warfighter needs.
    Right after we sign contracts, for example, at milestone B, 
we have also instituted what we call a B prime. At B prime, 
within 30 days, what we want to try to do is have a meeting of 
the minds that what we are going to sign on the contract is, in 
fact, what we actually need. Eyeball to eyeball, what have we 
really got here that we think that we need, make sure we are 
both talking from the same sheet of paper.
    I have heard a lot about contracting. We have shifted from 
fixed firm price. We are trying to get ACAT 1 programs with 
predictable performance. That means it needs an additional 
acquisition strategy. That means it needs a block acquisition 
strategy. ACAT 1 programs should not have a spiral acquisition 
strategy mainstreamed into that program planning.
    The discovery of some of the programs--in fact, that is 
what we have found. That is where you see technology, low 
maturity starting at the get-go, and that's where you see 
requirements creep at the get-go. It just does not get stopped 
without having mature technology.
    I fundamentally believe today we have got technology 
maturity and requirement creep in hand. We have those systems 
stopped. We have the processes working so that we can move on 
to other critical issues like funding stability. I think 
funding stability is imperative to be fixed.
    Chairman Waxman. Thank you very much.
    Mr. Issa.
    Mr. Issa. Thank you, Mr. Chairman.
    260--how many days?
    Mr. Finley. Five, 265, I think.
    Mr. Issa. Is your wife also counting when you go from four 
to five grandchildren? Does she keep track of all of these 
things for you?
    Mr. Finley. No.
    Mr. Issa. I appreciate your service.
    Since we have a wealth of historic information here and we 
are in the waning days of an administration, I am not going to 
dwell on what this administration can't change; and I am 
certainly going to try not to overly dwell on the fact that 
this administration doesn't seem to have done worse than its 
predecessors. It's just we are disappointed it may not have 
done as much better than we would have hoped.
    Just historical, you know--I mean, I grew up in the 
military during the MX missile, failed night vision devices, 
secure radios that were never secure. They were theoretically 
secure, but they couldn't stay secure long enough to 
communicate, so, ultimately, you transmitted in the open.
    I watched the Vulcan system repeatedly fire an amazing 
amount of rounds and never hit anything. I know that the A-10 
was a disaster, unable to kill or survive in a Soviet 
environment, and we kept buying and building them. But I was 
told it got better. They got so good that the Governor of 
Pennsylvania objected when we tried to retire them on him 
because he needed them for homeland defense in case there was a 
riot in Pittsburgh.
    I have sort of enjoyed a little bit of history here with 
you, but I would like to dwell for a moment on how we can 
change the future so that the next administration and, more 
importantly, the next Congress can make sure we do a better 
job.
    Mr. Patterson, you are intimately familiar with the C-17.
    Mr. Patterson. I have been acquainted with the C-17 for a 
very long time, yes.
    Mr. Issa. I am going to dwell for a moment--by the way, I 
noticed you are an old 19O2 Ford observer.
    Mr. Patterson. That's correct.
    Mr. Issa. Now there was an inexpensive contract. We just 
bought a Cessna 182, put a big engine in it and hoped it would 
stay in the air. I hope it always did for you in Vietnam.
    Mr. Patterson. It did, quite frankly. I wouldn't be here 
otherwise.
    Mr. Issa. Well, that's how you do something on the cheap. 
You buy a Cessna and say, can you make it a little more 
powerful? We will put the radios in it and hope that no one 
shoots it down, because it has no armor.
    The C-17 has been a tremendous success. Why is it--two 
questions. Why is it that the C-17 continues to be bought in 
bits and pieces? We never shut down the line, because, 
ultimately, it is a great performer, and we keep realizing that 
we can and should have more of them. But, at the same time, we 
have never made a purchase essentially for the end game. Even 
today, we are not really accurately stating the end game. We 
zero it out, and then we plus up in order to keep the line 
running.
    I will make it a two-part question for a good reason. The 
GAO, rightfully so, talked about the C-130J. The C-130J appears 
as though we are trying to morph endlessly the C-130 from a 
basic short field, deliver a small amount of cargo in theater 
to something in many, many fields that it wasn't. As a result, 
it creeps up to the cost of a C-17 and it exceeds it on a 
payload basis.
    Can you touch on those two areas and how we got there? I 
really want to know how we got through this trouble. We are not 
going away from it yet. How is this Congress going to begin 
thinking about giving instructions to this next generation so 
we will stop making the same mistake we made in plain sight?
    Mr. Patterson. Let me talk to the C-17 first. The C-17, in 
fact, continues to perform in a more capable way than we had 
anticipated. It performs its night mission. It lands in the 
short field, carrying the amount of cargo that we had thought 
it would; and it continues to do that.
    While the C-17 performs as well, we have problems that you 
are well aware of in terms of the C-5 and re-engining the C-5 
and having it available----
    Mr. Issa. Please don't go to the C-5. I am on record as 
saying, except for special missions, we should shut them down. 
It is the worst decision of the Air Force, but because it is an 
ongoing Air Force decision that I have fought and lost, I would 
rather not go there.
    I am concerned about these other aircraft--including, by 
the way, the short-field version of the C-17. We look and say 
that's sort of like the Cessna 182 with the big engine. We know 
it can work. We know we can get a guaranteed contract to 
deliver it at a fixed price and make sure that it meets that 
requirement or we don't pay. But, at the same time, we continue 
to go buy C-130's as though it's the only thing that can do a 
short-field message.
    That's why I am limiting you in my limited 5 minutes.
    Mr. Patterson. The C-17, in fact, does land in short 
fields, carries a lot of stuff, carries three times what the C-
130 carries. The fact that the C-130 is truly a less expensive 
airplane that the Air Force believes that it can use that in an 
effective way in the intratheater mission and has chosen to 
emphasize the intratheater mission.
    The C-17, on the other hand, has been used in its long 
range and long-range direct delivery capability. It is a 
question of the instant mission that they are having to deal 
with, and I think that's where the Air Force is going.
    I don't want to put words in the Air Force's mouth--and 
they are probably better able to tell you why they do things--
but those are the issues that I believe continue to make the 
two airplanes marketable to the Department of Defense.
    Mr. Issa. Mr. Chairman, if you could just finish up on the 
C-130J and how we can justify the continued cost increases 
there, because that is sort of the mirror of the first half he 
has answered.
    Mr. Patterson. I believe--and I will get you the precise 
answer for the record--but Lockheed has come in with a reduced 
cost for the C-130J, which is an appealing cost for a continued 
purchase of that airplane, and that is why the Air Force has 
seen this as an opportunity, sir.
    Mr. Issa. Thank you, Mr. Chairman.
    I would only say that you can tell I would love to have a 
whole hearing on sort of our lift capability and those--because 
I believe those, in the long run--you and I will be long 
retired, and we will still be paying for a fleet of C-5s that 
can't be cost justified.
    Thank you, Mr. Chairman.
    Chairman Waxman. Thank you, Mr. Issa.
    Ms. Watson.
    Ms. Watson. Thank you so much, Mr. Chairman.
    Dr. Finley, can you justify paying General Dynamics $60 
million in bonuses to build a vehicle that didn't work and had 
to be scrapped?
    Mr. Finley. Congresswoman, I am not familiar with the 
facts. I would, I think, certainly be honored to take the 
question for the record.
    Ms. Watson. Well, let me inform you that over $25 million--
and you better write this down, since you don't have the 
facts--over $25 million in bonuses was paid to General Dynamics 
for doing its work on time and under budget. But the work 
wasn't done on time and wasn't done on budget.
    Under the contract, General Dynamics was supposed to build 
a working prototype by the year 2003. It's now 2008, I believe, 
and we still don't have a working prototype. In fact, the 
Defense Department is about to issue a new contract worth 
nearly $1 billion to build a new prototype because the one 
General Dynamics built didn't work.
    I just feel that if you set out a contract, regardless of 
the problems the contractor runs into, how do we reward poor 
behavior? I would like to know how the Defense Department can 
justify giving a bonus--and this is taxpayers' money. We have a 
war going on in Iraq, and we still have conflicts in another 
nation, and we are giving a bonus to a contractor who failed to 
live up to the contract.
    So you can give it to me in writing and please help me to 
understand so I can go back to my constituents who pay their 
taxes and let them know what is happening with their precious 
dollars. Thank you.
    Mr. Finley. You are welcome.
    I would just comment, shortly after I was confirmed, award 
fee policy was one of the first things that came up on my radar 
screen, and we immediately did initiate policy change.
    Where we are today is we really do not believe award fee 
structures are appropriate. We are promulgating policy to 
conduct business with objective goals and requirements for 
being paid in terms of incentive fees and not award fees.
    We will be happy to take this question for the record.
    There's rollover provisions that our contracts had 
historically that we have eliminated. You know, the rollover 
provisions that they used to have, you know, when not earned in 
one period could roll over to the next period. So we will be 
delighted to take the question for the record and get back to 
you.
    Ms. Watson. Mr. Chairman, reclaiming my time, may I ask Mr. 
Sullivan to respond to the question I was raising with Mr. 
Finley.
    Mr. Sullivan. This is something--if you would like, I could 
look into that further and get back to you. You are talking 
about the expeditionary fighting vehicle contract?
    Ms. Watson. Yes.
    Mr. Sullivan. The one thing I would add to that is I think 
the new contract they have established has a lot more 
incentives in it today that are tied to achieving reliability 
targets. So the Department may have at least looked back at the 
mistakes they have made with it.
    Ms. Watson. Well, let me ask you this. How is it you would 
say they justify paying the bonus money out when they didn't 
meet their contract at all and we are looking at maybe a new 
contractor? It's inexplicable to me. Maybe you can help me.
    Mr. Sullivan. Well, Congresswoman, you know, we, actually, 
wrote a report about award fees in general and the policies 
that the Department uses. Because we feel, you know, we had the 
same idea, that the award fee policies were a bit too generous, 
given the outcomes that they have. I think we found that the 
Congress did, I think, eventually pass some laws in one of the 
authorization acts for the Department to look at that. I think 
that's what Mr. Finley is talking about now, is that the 
Department has looked at that thoroughly. I think they did 
recognize that the award fee process had gotten a little bit 
undisciplined and are trying to tighten it up now again. So I 
don't think it is justified. I agree with you.
    Ms. Watson. I would hope so, because there's another 
emergency supplement coming our way, and we have to find out a 
way to fund it. We want to protect our troops and give them 
what they need. But when we throw money away and reward bad 
behavior, it's unjustifiable to me.
    Thank you so much. I yield back.
    Chairman Waxman. Thank you very much, Ms. Watson.
    Mr. Cummings.
    Mr. Cummings. This is a very interesting discussion, and I 
am trying to figure this thing out. Because, to be very frank 
with you, it's a bit confusing.
    The question is, how do we move to a culture of excellence? 
I think that we are mired in a culture of mediocrity, a culture 
of complacency and a culture of just don't give a hoot. I mean, 
if we listen to everything that was said--and, Mr. Sullivan you 
just said something that was very interesting. You were talking 
about items delivered, delivery of items, and you said they are 
always late.
    I am not here knocking anybody. I am really not. You know, 
I sit as a chairman of the Deepwater--of the Coast Guard 
Subcommittee on Transportation, and this thing--I tell you, if 
I closed my eyes and didn't read a document I would swear I was 
going through Deepwater.
    It's the same kinds of problems: product not delivered on 
time, bonuses given out to people who don't deserve them, not 
getting what we bargained for. That's a basic contract concept. 
You pay. You get what you bargain for.
    I mean, I could go on and on; and it seems to me that there 
is some type--I think we can back up. You just keep backing up, 
backing up, backing up, and say, OK, guys, it's going to be all 
right. Just slap your hand. We will correct that for you.
    But what is happening is that we have this--time passes on, 
money being spent, product not being produced, bonuses being 
given out, American people being cheated. That's a problem; 
and, at the same time, our national security--and this is 
probably No. 1--our national security being compromised.
    So I guess what I am trying to figure out is, you know, in 
the Deepwater program, one of the problems was they didn't have 
the kinds of people--this is my opinion--in the Coast Guard who 
had the skill to even put together a contract that made sense.
    As I said to the Coast Guard, I believe that a first-year 
law student could have done a better job than having, for 
example, the person who--the contractors deciding whether they 
get bonuses, for example.
    But I am trying to figure out where are--I heard you, Mr. 
Finley, talk about we are bringing in all of these people, and 
then I hear us talking about how we have this turnover and how 
at what point--going back to some of the things that Mr. Issa 
was saying--how do we make sure that we are not--we are in a 
place where we are not having this same discussion 5 or 10 
years from now, for example, Mr. Finley, when you are retired 
and chilling out, you know, in the summer sun.
    I am very serious. I mean, what kinds of things must we do 
now? Because a lot of this stuff comes down to reaching for the 
very best in America.
    I have this saying I tell my kids. I tell them, you know, 
we can--at some point, you have to meet your maker.
    What I say is that people will--you can jive and play games 
and act like we are doing something successfully and everything 
is going to be fine, but sometimes the rubber is going to have 
to meet the road. And the sad part is sometimes we discover 
there's no road. This is happening more and more in this 
country. It's not just you guys. Like I said, the Coast Guard 
is almost a mirror image of this.
    So the question then is, how do we make sure that we have 
the kind of people that we need? How do we lift up that 
standard of excellence? Because if we are going to be No. 1 in 
the world and maintain No. 1 status in the world, we have to be 
on that level. We just can't say, well, they are going to be 
late.
    I see my time is run out, but I hope I can get an answer to 
that question.
    Mr. Finley. Well my answer to that question is, sir, we do 
not accept mediocrity. It does start with the leadership. We do 
set the pace. We set the bar. I am a very big believer in Lean 
Six Sigma, been through it numbers of times with a number of 
companies. It is being implemented in the Pentagon.
    There's a shift in the way we do business in the Pentagon 
to measure performance objectives. Performance bonuses don't 
come unless you have achieved your objectives. If you have 
excelled in your objectives, then maybe you get a little bit 
more. But it starts with leadership; and it ends with the fact 
that you simply do not accept mediocrity, as you have very 
eloquently stated.
    In the Lean Six Sigma--the good thing about the Lean Six 
Sigma is you establish a bar of performance, and that 
performance bar is not measured by who is in charge or 
personalities. That's measured by process control.
    Once you have achieved that processability, you then raise 
the bar another notch, and you raise the bar. They call it Six 
Sigma for a reason. You can go to Nine Sigma if you want. It's 
a continuous process of improvement.
    The balance you have to strike is we cannot invest in 
process improvement at the cost of complex outputs. My process 
can be so complicated, as 5000.2 has been accused of from time 
to time.
    The process is so complicated we can't find our way through 
it. That's where we have to slash, cut and simplify the process 
for better outcomes, not compromise quality, do not accept 
mediocrity. This is a way of doing business, and we do it as a 
team.
    Mr. Cummings. Thank you.
    Chairman Waxman. Thank you, Mr. Cummings.
    Mr. Tierney.
    Mr. Tierney. Thank you very much.
    There's a lot to go over that we won't have time for here 
today, but I appreciate the give and take on this a little bit.
    I want to clarify something if I can between Dr. Finley and 
Mr. Sullivan. Mr. Patterson, if you have something to say--I am 
not sure where you are with Dr. Finley's role--sort of overlap 
a little bit.
    Can we be comfortable now going forward that all the 
projects, the 92 various programs, are going to go through sort 
of the knowledge achievement process that the GAO outlined in 
its report? Do you have that confidence, Mr. Sullivan?
    Mr. Sullivan. Well, if you look at the portfolio that we 
are examining, the 95 programs, many of them are beyond that. I 
mean, this is a snapshot in time of all the major----
    Mr. Tierney. Some of them have gone by the by.
    Mr. Sullivan. We have F-22 in there. We have Global Hawk. 
There are a lot of programs beyond that.
    But a study should be done of what is starting now and 
begin to track these new ones. So the 95 programs that we are 
talking about, these are not all new starts. I would hope 
that----
    Mr. Tierney. I would just ask Dr. Finley just that. The 
programs that you are starting now, Dr. Finley, can we 
anticipate that they will follow the knowledge achievement 
system that the GAO talks about in its report?
    Mr. Finley. Well, the knowledge achievement system in 
itself is one I don't understand necessarily; and I need more 
work with my friend, Mike, to figure that out.
    Mr. Tierney. Where did you get that, Mr. Sullivan? This 
isn't something you invented, is it?
    Mr. Sullivan. It's something that we probably articulate 
for the first time, but I think the three points that we talk 
about are----
    Mr. Tierney. Pretty confident.
    Mr. Finley. Yes, but the programs that are in this pipeline 
of acquisition at the ACAT 1 level, all of these programs are 
in the process of going through very simplified, very 
streamlined reporting to OSD, first of all.
    These have leading metrics. We are looking ahead 8, 12 
months, performance, cost, schedule performance and 
survivability.
    We are also, as a result of all the Nunn-McCurdy actions 
that we have had last year, are looking at what we call triage; 
and we are able to discern programs that may not be in trouble 
today but at leading indicators that's where they may be 
tomorrow. As he implied, not only the pipeline but to programs 
that are typically outside of the so-called OSD pipeline and 
milestone C.
    Once you get into production, once you get in sustainment, 
oftentimes, these programs lose our radar screen. We are 
bringing all of those back into our radar screen; and we are 
pushing the front end of the radar screen, if you will, at the 
very, very beginning into the format 13170 requirements process 
to help facilitate dialog about our critical technologies, what 
our readiness is to make the entire process end to end far more 
streamlined and effective.
    Mr. Tierney. Thank you.
    Mr. Sullivan, can you talk a little bit about the ground-
based, mid-course defense systems block system of finding--the 
spiral development thing, whether they are developing it in 
blocks and so forth. Does that comport with best practices in 
the industry, and how does that affect or not affect the 
ability to make sure we don't fly before we buy?
    Mr. Sullivan. Is this part of the Missile Defense Agency?
    Mr. Tierney. It is.
    Mr. Sullivan. Congressman, it is something I can look into 
and get back to you on. I don't know enough. I know a little 
bit about how the MDA is going through the three points or not 
going through the three points that we talk about. I can get 
something for you and give you my opinion on that in writing.
    Mr. Tierney. Thank you. I would appreciate that if you 
would.
    Dr. Finley, do you have any say over that MDA program?
    Mr. Finley. I am sorry? Can you repeat the name of the 
program at MDA?
    Mr. Tierney. Missile defense?
    Mr. Finley. No, I am familiar with missile defense, but 
which program?
    Mr. Tierney. It was the ground-based, mid-course defense 
system itself. We also involved the Aegis, airborne laser, that 
stuff.
    Mr. Finley. I am sorry. What is the question again?
    Mr. Tierney. The question had been whether or not you are 
directly involved with establishing that block sort of 
accountability process.
    Mr. Finley. Yes, sir, we are involved. Oversight of MDA and 
ballistic missile defense has fallen into the four different 
committees, subcommittees, standing subcommittees. I am on two 
of those standing subcommittees as co-chairman.
    One committee that Mr. Patterson and myself are involved in 
is the budgeting and the programmatics end of the business. The 
other committee is testing evaluation.
    Mr. Sullivan. One of the things that I thought of there is 
the Missile Defense Agency is interesting in that it has one 
selected acquisition report; and there are probably 20--I am 
not sure how many--but many major acquisitions going on within 
that. And that's a--you know, there's a difference being able 
to manage properly and being able to fund elements across a 
wide matrix of things you are trying to get done and oversight.
    But from our point of view it's very difficult to have 
oversight of 20 different programs when they are all part of 
one report. That's just kind of an aside.
    Mr. Tierney. That's our point as well, and we have issues 
on that.
    Let me just, if I can--and I don't want to overstay my 
welcome here, but I want to talk a little bit about the 
contractors that are out there.
    Mr. Sullivan, you indicated, of the 72 programs, about 48 
percent of the personnel involved in that were contractors. So 
I guess the question is, are we relying too heavily on 
contractors? What are the dangers? If we are--dangers in terms 
of how that might affect the program and the inability to say 
no when it's necessary? But also dangers--are we not having 
enough people on the government payroll able to manage these 
contracts? Whether that seems to be a problem with people 
retiring. I have noticed that the age group is in the 40's and 
up on that. And from all three of you, what are we going to do 
about that, and what are the problems of having so many 
contractors?
    Mr. Sullivan. If I can clarify, we did look at 72 programs 
overall. But when we sent the survey out, I am not sure--there 
was some percentage of those programs that actually answered 
that question for us. So it is some--probably half of those we 
have data back on. So it's a much smaller subset.
    Mr. Tierney. Of half of those programs they had almost half 
of the personnel.
    Mr. Sullivan. That's right. I think the reason we were 
asking that question is because of interest in the Government, 
generally, speaking about, well, are you raising it? Are you 
contracting out some of the things that the government really 
needs to keep in hand?
    As I stated earlier, we have not found any evident bad 
effect of that yet, but we question it a lot. We think that the 
Government should try to maintain a more organic work force 
than they have now. I think it goes to some of the things that 
Mr. Cummings was talking about. You know, as you contract 
things out, you lose the organic capability and probably get 
more mediocre and lose the Government's interests in the 
process.
    Chairman Waxman. Thank you, Mr. Tierney.
    Mr. Issa, do you wish a second round?
    Mr. Issa. Yes, Mr. Chairman. Thank you.
    Mr. Sullivan, when did you join the government?
    Mr. Sullivan. 1986.
    Mr. Issa. I apologize. Yours was the only bio I couldn't 
get.
    So you sort of came in at the height of Nixon's buildup. 
The 600 ships was somewhere in sight over the horizon.
    Mr. Sullivan. Six hundred ship Navy, right.
    Mr. Issa. During that period of time, was contracting 
better or less well done than it is here today? Did we do a 
better job? Was there less waste?
    Mr. Sullivan. Just kind of generally speaking, I would say 
that it is about the same, really.
    Mr. Issa. Ten years into your career, midway through your 
rise, was it any better, any worse in 1996?
    Mr. Sullivan. From my perspective, the things that were 
taking place in the Department, there was an acquisition reform 
movement that began with the end of the cold war. It seems to 
me that there was at least initiative and the idea that things 
could improve, a lot of acquisition reform with very good 
thinking trying to be put in place by people like William 
Perry.
    Mr. Issa. Did they pull it off?
    Mr. Sullivan. No.
    Mr. Issa. And I am not going to overly pick on one thing, 
but the Crusader was ordered, designed, nearly procured all 
post cold war so that we would have a big frigging gun that 
could shoot a long way and weighed not just a ton but more tons 
than any road can hold.
    Isn't it essentially true that if we're going to really 
improve government procurement to get us the right systems, the 
right time, with the minimum mistakes--and there will always be 
mistakes. When you say I want to see at night, I want to fight 
at night, I want to know where the enemy is and where the 
friendlies are, and I want to be able to pinpoint them with a 
smart bullet, that is not going to be easy to do. But if we are 
going to do that, we are going to have to take career 
professionals like yourself and not these two gentlemen who 
came from industry but the people who worked on the BFE 
program, and we are going to have to change how they do 
business. We're going to have to do another reform. Isn't that 
true?
    Mr. Sullivan. I think that the culture needs a change, yes.
    Mr. Issa. And just for the record, because I think it is 
critical. And not only are you a career professional but how 
many people on these programs that you cite in your report that 
failed, how many people in one of those programs was a 
political appointee? Out of every 10, essentially 10 were 
career professionals. Either they were active duty military or 
they were career professional civilian.
    Mr. Sullivan. Yes, sir.
    Mr. Issa. So because the other side of the aisle sometimes 
wants to make it seem as though a change in Congress or a 
change in administration really hasn't made any change in your 
oversight, your job and how well it is done, could I ask it 
straightforward--the administration per se or the previous 
administration, this Congress or the previous Congress, 
realistically, although we may have failed to improve things, 
did we really have any impact? Or isn't it essentially what you 
are complaining about in your report part of a culture that has 
been unwilling or unable to be changed by both previous 
administrations and this administration, previous Congresses 
and this Congress?
    Mr. Sullivan. I would say that is fair. It is about the 
culture of this acquisitions community that we talk about has 
been impervious.
    Mr. Issa. Secretary Finley and Mr. Patterson, I am going to 
ask you both together. You both came from industry. You both 
have been on both sides now on this. Going forward as part of 
your legacy to the next administration, because you have tried 
for 7 years, I am sure, to improve things, and I know you can 
cite things you have improved, but what is it that this 
committee, the primary Committee of Government Reform--and the 
oversight's worked. We found out that this is a problem that 
has been around since not the cold war but since World War II. 
What is it you leave us with that should be the beginning of 
our process of reforming the system so that these career 
professionals who want to do a good job will do a better job?
    Ms. Patterson. Well, I think the first thing that I would 
recommend is that--and I don't want anybody to get the idea 
that, despite that we have a great relationship with the GAO, 
that I embrace this particular study. I don't. But----
    Mr. Issa. We will assume for a moment that, if it wasn't 
there, there would be other things that could be done.
    Mr. Patterson. That I do embrace, yes. But what I would say 
is we should be directed to work together with the Government 
Accountability Office to come up with a mutually agreeable way 
forward that takes into consideration the pressures and 
limitations and resources that the Department has, the kinds of 
requirements and budgetary and acquisition rules, regulations 
and limitations that we have, with the clear--the clarity that 
the Government Accountability Office brings in terms of what 
the government and its oversight requirements need in order to 
achieve the end state of on cost, on schedule and performing. 
And that is really what we are all about.
    And I think that also having been the executive director of 
the Defense Acquisition Performance Assessment, having had over 
1,000 different observations, over 100 different people coming 
and talking to us, I concluded that, because we have a dearth 
of competent people as a consequence of us reducing the real 
skill levels during the 1990's, we have to replace it with a 
series of rules.
    And Secretary Finley has talked to you about the process in 
which we are starting to implement those kinds of things. But 
something very simple; and he raised this, that you build what 
you bid. I know it sounds simple. But the fact is that, 
oftentimes, while the ink is drying on a contract, everybody 
has better ideas; and we start to change what we had originally 
asked for. We have to stop that kind of behavior.
    And those are the kinds of things that I would offer, and 
that came out of the DAPA study. And I appreciate the question, 
and we certainly appreciate being here with the Government 
Accountability Office.
    Chairman Waxman. Thank you, Mr. Issa.
    Mr. Issa. Mr. Sullivan, had one more comment.
    Mr. Sullivan. You know, I was thinking through this as Mr. 
Patterson was talking. I don't know how long ago it was but the 
Goldwater-Nichols Act by the Congress, 20 years ago, whenever 
it was----
    Mr. Patterson. 1986.
    Mr. Sullivan [continuing]. The year I came into the 
government--looked at how the warfighters fought wars and 
wanted more jointness in that and wrote a law to do that; and I 
think we now have warfighters that fight wars jointly very 
well. I think the same thing, that kind of focus has to be 
given to how we acquire weapons systems, too. Because in a lot 
of ways it is the stovepipes and the parochial nature of this 
culture that creates all of the inefficiencies.
    Mr. Issa. So you are calling for a Waxman-Issa reform 
before the Senate beats us to it. It is OK to say yes, as long 
as the chairman lets you.
    Mr. Sullivan. Sounds good.
    Mr. Issa. Thank you, Mr. Chairman.
    Chairman Waxman. Thank you, Mr. Issa. This hearing was 
requested by Mr. Davis, so I am thinking we will have him as 
the co-author of the reform.
    Mr. Issa. We will make it the Davis-Waxman, just one for 
the Gipper.
    Chairman Waxman. Sounds good to me.
    Ms. Watson, did you want a second round?
    OK, I had some further questions to wrap up the hearing. 
Because we want to be constructive, but we can't be 
constructive unless we get accountability in the system. And I 
talked about the EFV program. I am troubled even more by the 
complete lack of accountability for the mistakes in that 
program. There were massive screw-ups that cost the taxpayers 
billions of dollars.
    Yet, Dr. Finley, you seem--you are going to get back to us 
on the record on some of these things. I am looking forward to 
your responses. But GAO has reported that the Defense 
Department failed to follow best practices in its weapons 
development programs. Your comments were that, to the GAO, that 
the GAO was wrong. On page 10 of your written statement you 
said, ``the best practices are embraced and practiced 
throughout the Department of Defense.''
    So I want to ask you about specifics. First, as I 
understand it, you are generally supposed to complete your 
engineering drawings before you conduct the critical design 
review. Mr. Sullivan, in the GAO report, you say that a program 
should complete at least 90 percent of the engineering drawings 
before the critical design review, is that right?
    Mr. Sullivan. That is general. And when we speak to large 
world-class firms that do these sorts of things, that is the 
general rule.
    Chairman Waxman. And I think it makes sense.
    Mr. Sullivan. In fact, the Department of Defense has 
policies that agree with that.
    Chairman Waxman. You want your engineers to plan everything 
out and make all their calculations to make sure the project 
will work on paper before you proceed. You agree with that, Dr. 
Finley.
    But in the case of the EFV, the Defense Department didn't 
do that. They didn't wait until the engineering drawings were 
done. In fact, they started the critical design review in 
January 2001. That was just 1 month after the program started, 
and GAO concluded this was a major problem. GAO warned that 
this did not allow adequate time for testing, evaluating the 
results, fixing the problems and retesting to make sure that 
the problems are fixed before moving forward.
    So, Dr. Finley, this contradicts what you said in your 
testimony. The Department didn't follow the best practices. It 
did not complete the engineering plans before it launched the 
critical design review. GAO warned that this would cause major 
problems; and, in fact, it did.
    What I would like to know is who made that decision? And 
you may have to supply that for the record. Who decided not to 
follow the standard procedure? Who decided that you didn't need 
to complete the engineering plans before proceeding? And what 
accountability has there been for that mistake?
    That decision has resulted in more than $1 billion in 
taxpayer funds being wasted. Has that person been fired? Has 
that official been disciplined?
    And I assume that you're not prepared to answer that 
question now, but you will get an answer to us.
    Mr. Finley. I will be pleased to take it for the record, 
sir.
    Chairman Waxman. Another best practice according to GAO is 
to have an official responsible for ensuring that all of the 
different parts of the program work together and a senior-level 
engineer whose job it is to make sure that all the plans make 
sense when combined into one coherent system. But the Defense 
Department didn't do that.
    According to the audit from 2002, ``There is no overall 
system engineer or architect with the authority and 
responsibility to ensure products meet their allocated and 
integration requirements.'' Here is what the auditor said. 
``There seems to be no one steering the ship.''
    Dr. Finley, this also appears to me to contradict your 
testimony that the Pentagon follows best practices. What 
accountability has there been for this mistake? And we will 
look forward to getting your answer on that.
    Our oversight and GAO's oversight both show the same thing. 
The same problems happen over and over and again. One reason 
that this happens is that there seems to be a culture of 
complacency at the Defense Department. When mistakes are made, 
there is no accountability. That leads to more mistakes and 
more ways to spending. There seems to be no one looking out for 
the taxpayer, and that is the concern that we have about this 
system.
    And I know you are not prepared to answer the questions 
about this particular system at this moment, but we would like 
to have you submit in writing for the record responses to these 
questions.
    Mr. Finley. Yes, sir.
    Chairman Waxman. Members may want to ask additional 
questions for the record, and we would like to ask the three of 
you to be prepared to respond in writing to further questions, 
and we will hold the record open for such requests.
    I thank you for your participation at this hearing. I think 
it has been a good one to get to the point where maybe we can 
change the direction and in another 10 years, Mr. Sullivan, you 
won't come back here and say, it is pretty much the same now as 
it was 10 years ago. We'll have you come in and say, things 
have improved a lot; and then we will argue with you why we 
haven't even done better. But with all of your help we will do 
better in the future.
    That concludes our hearing today, and the hearing stands 
adjourned.
    [Whereupon, at 12:15 p.m., the committees adjourned.]

                                 
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