[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


                                     

                         [H.A.S.C. No. 111-54]
 
  REFORM OF MAJOR WEAPONS SYSTEM ACQUISITION AND RELATED LEGISLATIVE 
                               PROPOSALS

                               __________

                                HEARING

                               BEFORE THE

                             FULL COMMITTEE

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD

                             APRIL 30, 2009

                                     
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13

                                     




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                   HOUSE COMMITTEE ON ARMED SERVICES


                     One Hundred Eleventh Congress

                    IKE SKELTON, Missouri, Chairman
JOHN SPRATT, South Carolina          JOHN M. McHUGH, New York
SOLOMON P. ORTIZ, Texas              ROSCOE G. BARTLETT, Maryland
GENE TAYLOR, Mississippi             HOWARD P. ``BUCK'' McKEON, 
NEIL ABERCROMBIE, Hawaii                 California
SILVESTRE REYES, Texas               MAC THORNBERRY, Texas
VIC SNYDER, Arkansas                 WALTER B. JONES, North Carolina
ADAM SMITH, Washington               W. TODD AKIN, Missouri
LORETTA SANCHEZ, California          J. RANDY FORBES, Virginia
MIKE McINTYRE, North Carolina        JEFF MILLER, Florida
ELLEN O. TAUSCHER, California        JOE WILSON, South Carolina
ROBERT A. BRADY, Pennsylvania        FRANK A. LoBIONDO, New Jersey
ROBERT ANDREWS, New Jersey           ROB BISHOP, Utah
SUSAN A. DAVIS, California           MICHAEL TURNER, Ohio
JAMES R. LANGEVIN, Rhode Island      JOHN KLINE, Minnesota
RICK LARSEN, Washington              MIKE ROGERS, Alabama
JIM COOPER, Tennessee                TRENT FRANKS, Arizona
JIM MARSHALL, Georgia                BILL SHUSTER, Pennsylvania
MADELEINE Z. BORDALLO, Guam          CATHY McMORRIS RODGERS, Washington
BRAD ELLSWORTH, Indiana              K. MICHAEL CONAWAY, Texas
PATRICK J. MURPHY, Pennsylvania      DOUG LAMBORN, Colorado
HANK JOHNSON, Georgia                ROB WITTMAN, Virginia
CAROL SHEA-PORTER, New Hampshire     MARY FALLIN, Oklahoma
JOE COURTNEY, Connecticut            DUNCAN HUNTER, California
DAVID LOEBSACK, Iowa                 JOHN C. FLEMING, Louisiana
JOE SESTAK, Pennsylvania             MIKE COFFMAN, Colorado
GABRIELLE GIFFORDS, Arizona          THOMAS J. ROONEY, Florida
NIKI TSONGAS, Massachusetts
GLENN NYE, Virginia
CHELLIE PINGREE, Maine
LARRY KISSELL, North Carolina
MARTIN HEINRICH, New Mexico
FRANK M. KRATOVIL, Jr., Maryland
ERIC J.J. MASSA, New York
BOBBY BRIGHT, Alabama
SCOTT MURPHY, New York
DAN BOREN, Oklahoma
                    Erin C. Conaton, Staff Director
                Andrew Hunter, Professional Staff Member
               Jenness Simler, Professional Staff Member
                    Caterina Dutto, Staff Assistant


                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2009

                                                                   Page

Hearing:

Thursday, April 30, 2009, Reform of Major Weapons System 
  Acquisition and Related Legislative Proposals..................     1

Appendix:

Thursday, April 30, 2009.........................................    41
                              ----------                              

                        THURSDAY, APRIL 30, 2009
  REFORM OF MAJOR WEAPONS SYSTEM ACQUISITION AND RELATED LEGISLATIVE 
                               PROPOSALS
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

McHugh, Hon. John M., a Representative from New York, Ranking 
  Member, Committee on Armed Services............................     2
Skelton, Hon. Ike, a Representative from Missouri, Chairman, 
  Committee on Armed Services....................................     1

                               WITNESSES

Berteau, David, Director, Defense Industrial Initiatives Group, 
  Center for Strategic and International Studies.................     8
Chu, Dr. David, Former Under Secretary of Defense for Personnel 
  and Readiness, Former Director, Program Analysis and Evaluation     6
deLeon, Rudy, Senior Vice President of National Security and 
  International Policy, Center for American Progress, Former 
  Deputy Secretary of Defense....................................     4
Francis, Paul, Managing Director for Acquisitions and Sourcing 
  Management, Government Accountability Office...................    10

                                APPENDIX

Prepared Statements:

    Berteau, David...............................................    55
    Chu, Dr. David...............................................    52
    deLeon, Rudy.................................................    48
    Francis, Paul................................................    61
    Skelton, Hon. Ike............................................    45

Documents Submitted for the Record:

    [There were no Documents submitted.]

Witness Responses to Questions Asked During the Hearing:

    Mr. Andrews..................................................    81
    Mr. Bartlett.................................................    81

Questions Submitted by Members Post Hearing:

    [There were no Questions submitted post hearing.]
  REFORM OF MAJOR WEAPONS SYSTEM ACQUISITION AND RELATED LEGISLATIVE 
                               PROPOSALS

                              ----------                              

                          House of Representatives,
                               Committee on Armed Services,
                          Washington, DC, Thursday, April 30, 2009.
    The committee met, pursuant to call, at 10 a.m., in room 
2118, Rayburn House Office Building, Hon. Ike Skelton (chairman 
of the committee) presiding.

 OPENING STATEMENT OF HON. IKE SKELTON, A REPRESENTATIVE FROM 
        MISSOURI, CHAIRMAN, COMMITTEE ON ARMED SERVICES

    The Chairman. Good morning. We welcome to our hearing on 
Reform of Major Weapons System Acquisition and Related 
Proposals the distinguished panel before us. We have people of 
rare experience, technical expertise: Rudy deLeon, our Senior 
Vice President for National Security at the Center for American 
Progress, former Deputy Secretary of Defense, most importantly, 
former Staff Director of this committee, and we welcome him 
back; Dr. David Chu, an old friend, President, the Institute 
for Defense Analyses, former Under Secretary of Defense for 
Personnel and Readiness, and former Director of Program 
Analysis and Evaluation in another life, am I right? And he 
appears in a personal capacity; David Berteau, Director of 
Defense Industrial Initiatives Group at the Center for 
Strategic and International Studies, also former Department of 
Defense (DOD) official; Paul Francis, Managing Director for 
Acquisitions and Sourcing Management, and a 32-year employee of 
the GAO, Government Accountability Office, and we welcome you.
    It is worth noting that at least three of our witnesses 
participated actively in the debates surrounding Goldwater-
Nichols. It is a page out of yesteryear, but it is a very 
important page. And, Mr. Francis, you may have also 
participated in those debates. I am sure you will let us know 
if that is so. Since the recommendations of the Packard 
Commission led directly to the acquisition reforms in 
Goldwater-Nichols, it would be interesting if each of you at 
some point today would share your perspective on how to best 
apply the philosophy of the Packard Commission to today's 
problems.
    The Committee on Armed Services has under consideration two 
serious proposals to reform the acquisition of major weapon 
systems; not the entire, but the major systems. H.R. 2101 was 
introduced this Monday by myself and John McHugh, along with 
Rob Andrews and Mike Conaway, who led our Panel on Defense 
Acquisition Reform. A number of other Members cosponsored it. 
H.R. 1830 was introduced March 31st as the companion measure to 
the Levin-McCain bill in the Senate, sponsored by Ellen 
Tauscher and John Spratt, both of whom have also joined us as 
cosponsors of our bill, H.R. 2101. Both bills focus on the 
acquisition of major weapon systems, which represents about 20 
percent of the annual defense spending and purchases.
    Now, let there be no mistake. The committee, and especially 
the panel, are just as focused on the other 80 percent of the 
defense acquisition as on this, but this is a step in the right 
direction.
    H.R. 2101 introduces three significant new concepts. Number 
one, we require the Secretary of Defense to designate an 
official as the Department's principal expert on performance 
assessment. This official will provide the Department and 
Congress with unbiased assessments on just how successful our 
acquisition programs are or are not.
    Number two, we require certain programs to enter into a 
sort of intensive care for sick programs, programs that are not 
meeting the standards for system development or that have had 
critical Nunn-McCurdy breaches. They will get the additional 
scrutiny necessary.
    Number three, we require the Department to set up a system 
to track the cost growth and schedule changes that happened 
prior to Milestone B. That is--Milestone B is the decision 
point where we begin development of a production system. It is 
before Milestone B that some 75 or so of the program's costs 
are actually determined.
    Although there is a lot of commonality between the two 
bills, about 25 percent is the same--50 percent overlaps, and 
about 25 percent is in the House bill only. I am confident our 
committee and the Senate Armed Services Committee can find 
common ground in compromise legislation, as we have been in the 
past. And I look forward to the recommendations of our 
witnesses on how to improve these bills as they move through 
the legislative process.
    This is a major milestone. You know, when we were working 
on what turned out to be Goldwater-Nichols, we really didn't 
feel the great impact; though we dreamed it and guessed it, we 
didn't really feel the impact that it was going to have. And it 
changed the entire culture of the American military. And this 
can be just as sweeping and just as important.
    I want to give a special thanks to the panel, to Rob 
Andrews, Mike Conaway and all those that are on the panel that 
have helped come up with this legislation. But I must tell 
them, your work ain't done yet. This is the first step.
    [The prepared statement of Mr. Skelton can be found in the 
Appendix on page 45.]
    The Chairman. John McHugh.

  STATEMENT OF HON. JOHN M. MCHUGH, A REPRESENTATIVE FROM NEW 
       YORK, RANKING MEMBER, COMMITTEE ON ARMED SERVICES

    Mr. McHugh. Thank you very much, Mr. Chairman. Let me start 
by echoing your words of appreciation to our two colleagues, 
Rob Andrews and Mike Conaway, who have done a stellar job in 
leading their able Members in frankly what I think is something 
we all should take a great deal of pride in. We are deeply in 
their debt. But as you noted, Mr. Chairman, we have a ways to 
go.
    And particularly with the final touches on this piece of 
legislation, I want to add my words of welcome as well to our 
distinguished panelists. I noted to our former two Secretaries, 
deLeon and Chu, this is kind of like a Personnel Subcommittee 
reunion, only because we are on a different topic, they let us 
come into the big house here. We are usually in 2212. But it is 
good to see them back as well, and always appreciate their 
input, and we look forward to today's discussion.
    Last Friday, Mr. Chairman, I was pleased to join with you 
and Mr. Conaway and Mr. Andrews in helping to announce this 
legislation. And as you noted, too, this very important bill 
officially adds our committee voice to the conversation about 
reforming the Pentagon's system for acquiring weapons. And it 
is true, it has taken us a bit longer than our Senate 
colleagues in drafting the measure, but I think we can all 
agree we wanted to ensure that we had the benefit of feedback 
from industry, the Department and members of the Defense 
Acquisition Reform Panel.
    And I would certainly argue the resulting bill addresses 
the most substantive concerns we have heard in that regard. But 
there is always room for enhancement, and that is why, of 
course, we have asked our panelists to join us today and help 
us to perfect what I believe very strongly is already a very 
good piece of legislation. And as drafted, the bill properly 
reforms and increases focus on the early stages of the system 
requiring the evaluation of alternative solutions at more 
critical points and independent oversight earlier in the 
process.
    Focus on early stage acquisition is vital, as has been 
stated. And we know from experience the sins which cause cost 
overruns are very often created in the initial stages of the 
acquisition process.
    Mr. Chairman, this bill, as you know very well, makes both 
organizational and policy changes. And rather than cite them by 
rote, I would simply refer to my written statement that, with 
your permission and unanimous consent, I will have entered into 
the record in its entirety----
    [The information referred to was not available at the time 
of printing.]
    The Chairman. Without objection.
    Mr. McHugh [continuing]. And simply say beyond that we make 
use of the existing Panel on Contracting Integrity, which was 
established a few years ago by this very committee, urging it 
to make recommendations to minimize organizational conflicts of 
interest, especially for contractors who provide acquisition 
support to the Department, and who also may compete for future 
technical work.
    And as well, the legislation directs the Comptroller 
General to review the mechanisms DOD uses for considering 
tradeoffs between cost, schedule and performance, and 
thereafter make recommendations for improvement in that area.
    Despite the list of reforms, and there are several, our 
bill is really relatively narrow in scope. Acquisition 
workforce issues and acquisition of services have been 
addressed in prior years' bills and will continue to be 
considered by our colleagues on the Acquisition Reform Panel, 
which will carry on with its work, as the Chairman noted, and 
fulfill its mandate to consider initiatives that might well be 
addressed by the committee as part of the 2011 National Defense 
Authorization Act.
    The only area related to the workforce is the provision 
which would authorize the award of cash prizes to DOD personnel 
for excellence in acquisition. I know there are many, including 
the outgoing Under Secretary of Defense for Acquisition, 
Technology and Logistics, who have suggested that additional 
legislation in this area is not warranted. John Young recently 
told reporters, and I will quote, I just do not think you can 
mandate a process that will ensure successful defense 
acquisition. The bottom line, he went on, is people run 
programs, not documents or processes, end quote. The Secretary 
also noted and compared acquisition reform to mandating there 
will be no more crime. I have to say I find that particular 
analogy somewhat alarming, but I agree with him.
    In the end, implementation of sound acquisition policies 
and maintaining a skilled workforce is probably more important 
than passing new reforms. Nevertheless, we continue to see poor 
outcomes that might well have been avoided had there been a 
stronger independent voice earlier in the program and the 
warfighters had a clearer role in establishing the requirements 
up front. And that is in large measure what this legislation 
attempts to do. And indeed, both the Senate bill, S. 454, and 
our House bill seek to meet these objectives.
    And I encourage both Members here today and our witnesses 
to be really open with their questions and concerns. This is a 
time to make sure we get this important legislation right. And 
we look forward to working, as we have in the past, with 
industry, the Department and our Senate colleagues to enact 
meaningful reform within the Department of Defense.
    And with that, Mr. Chairman, I would yield back the balance 
of my time.
    Mr. Taylor. [Presiding.] The Chair thanks the gentleman 
from New York.
    And the Chair now recognizes the former Chief of Staff of 
the House Armed Services Committee, former Secretary of Defense 
for Acquisition, Rudy deLeon.

  STATEMENT OF RUDY DELEON, SENIOR VICE PRESIDENT OF NATIONAL 
    SECURITY AND INTERNATIONAL POLICY, CENTER FOR AMERICAN 
          PROGRESS, FORMER DEPUTY SECRETARY OF DEFENSE

    Mr. deLeon. Thank you, Mr. Chairman and members of the 
committee, for this chance to testify and comment this morning 
on the Skelton-McHugh bill and to be part of this dialogue.
    Congressman Skelton did mention Goldwater-Nichols that was 
passed almost 26 years ago. It did create a revolution in the 
military culture. Making the United States military preeminent 
in terms of operational planning command and control. It was a 
huge change largely to correct at the time the problems in the 
planning for Desert One rescue of the hostages in Iran in 1980, 
and then the peacekeeping deployment in 1983 to Lebanon.
    Goldwater-Nichols created a revolution, and I think since 
then on so many fronts, intelligence, homeland security, now in 
terms of trying to get the State Department and the U.S. Agency 
for International Development to become more operational. One 
of the ingredients of Goldwater-Nichols was the vigorous 
participation of both the House and Senate Armed Services 
Committees in the lead-up, the debate, working with the then 
Reagan White House, and then in the oversight of 
implementation. It was a very rigorous process. And so I think 
the Chairman and the Ranking Member have started that process 
on acquisition, as have their counterparts in the Senate Armed 
Services Committee.
    No need for me to replicate what is in the written 
statement, and if I can just have it be part of the record. 
Thank you.
    One of the things I think our panel will have consensus on 
is that we do need to focus on regenerating the expertise in 
the career civilian federal workforce in both contracting and 
in engineering. It is a core competency that the government 
needs to have. It is not a significantly large number of 
people. It is more the cadre of key people that are fully 
versed first on the contracting side. We saw that in Iraq where 
operation and maintenance contracting is so critical. We did 
not have the depth of people that could deploy with our 
military forces to go and do the logistics support and the 
contracting. In many cases we pressed some of our talented 
people in the Corps of Engineers, who had really spent their 
careers on the federal waterway side, to deploy to Baghdad. But 
they had gone from managing tens of millions of dollars of 
contracts per year to several billion dollars' worth of 
contracts per month in the military environment.
    So one, we have got to put tremendous emphasis on the 
career personnel that are masters of standing up for the public 
interest on the contracting side. That is one. Two, we need to 
invigorate the engineering side of the federal workforce as 
well in the contracting process, because engineering is what 
has made U.S. equipment for our military forces so capable. The 
engineering is analytical, and it produces solutions. And so we 
have moved away--as our federal workforce has gotten smaller--
we have lost some of the core competencies. The illustration I 
use is the heroic effort surrounding Apollo 13, where the folks 
in the back room who created a return mission plan for the 
astronauts, those were all government workers in their thirties 
and early forties who did that work, they were all engineers, 
they were all leading edge. We are not saying replicate that 
capability today, but we need a cadre of capable engineers, 
particularly on the information technology (IT) side, who can 
really advise the government, write requirements, and then make 
sure those requirements are filled.
    In terms of the measures of your bill that is before us 
today, the performance assessment is very important, looking at 
cost and schedule. It will also be important to factor in some 
of the unintended things that increase cost and schedule. One 
is when the government side changes requirements and keeps 
adding to requirements. The poster for that program right now 
is the Presidential Helicopter, but we could go through a 
variety of programs where, after the program is initiated, 
someone on the government side has said it needs to have more 
capability, so then everything has to be rebaselined. Capable 
engineering on the government side can help minimize that and 
force the tradeoffs.
    Equally, the budget process, when dollars get tight, 
programs will shift to the right in terms of doing the kinds of 
independent cost assessment that the program analysis and 
evaluation sector of the Office of the Secretary of Defense 
(OSD) does. With programs shifting to the right, you are adding 
costs, you are adding years to the program. So it is important 
that we be able to factor all of these things, because they are 
all critical to the process.
    Finally, just in terms of one Goldwater-Nichols issue to 
have revisited here, and I think your bill references the need 
to bring in the component commanders into the system on 
requirements. Goldwater-Nichols created something called the 
Joint Requirements Oversight Committee, JROC, and it was to be 
comprised of the vice chiefs of each of the services. And so 
the service chiefs, the Joint Chiefs, are responsible for 
organizing, training, and equipping, but they really don't have 
a legal role in the requirements process.
    So I think you have noted in your bill the need to get the 
military advice on the requirements process. I think that at 
some point we will want to further discuss the role of the 
chiefs, because I think the chiefs feel that this is a legal 
requirement that they don't currently have, but something that 
is operationally important to them. So the role of the chiefs 
in the requirement process, I think, is an important issue. I 
think your bill mentions that, and you make a first start.
    And with that, I will certainly put my time back, but I 
certainly welcome this chance to be back to the committee.
    Mr. Taylor. The Chair thanks the former Secretary.
    [The prepared statement of Mr. deLeon can be found in the 
Appendix on page 48.]
    Mr. Taylor. The Chair now recognizes Dr. David Chu, former 
Under Secretary of Defense for Personnel and Readiness, for 
five minutes, sir.

 STATEMENT OF DR. DAVID CHU, FORMER UNDER SECRETARY OF DEFENSE 
FOR PERSONNEL AND READINESS, FORMER DIRECTOR, PROGRAM ANALYSIS 
                         AND EVALUATION

    Dr. Chu. Mr. Chairman, Congressman McHugh, it is a great 
privilege to appear again before this committee this morning. I 
do have a written statement that I hope may be accepted for the 
record.
    Mr. Taylor. Without objection.
    Dr. Chu. Thank you, sir.
    I am testifying today based on my prior defense experience, 
not in any way affiliated with my current employer. This does 
not necessarily represent its perspective on these same issues.
    I had the privilege of starting in the Department of 
Defense in 1981, at a time when the then-Deputy Secretary Frank 
Carlucci focused in his set of management initiatives on 
improving the estimation of costs for major weapon systems. And 
he took as his instrument a notion advanced originally by David 
Packard when he was deputy secretary some years before that 
independent cost estimates ought to be seriously considered 
during the formulation of the Department's plans; independent 
because the proponents of a system obviously have an interest 
in the cost outcome that may affect their judgment regarding 
the realism of the numbers that are brought forward.
    Carlucci's decision, in my estimation, signaled that the 
role of independent cost estimates would be more than just 
playing an advisory function in the acquisition process itself, 
that it would be central to how he as Deputy Secretary of 
Defense managed the programs of the Department, made so-called 
programming decisions, and how he as Deputy Secretary would 
formulate his budget recommendations to the Secretary and on to 
the President and their embodiment in the President's budget 
request.
    That management emphasis in that period was focused in 
annually the review of two significant overlapping issues that 
I think are important in the objectives the committee has set 
forward to achieve with the proposed legislation: First, that 
systems should be budgeted to their most likely cost; and 
second, that systems ought to be procured at efficient 
production rates. And in each year during the 1980s, Under 
Secretary Carlucci, then Secretary Thayer and Secretary William 
Howard Taft, IV, those two issues were an important management 
review at the conclusion of the programming phase of the 
planning-programming-budgeting system. I think it is very, very 
important in ensuring that the costs that came forward were 
closer to the likely level that the Department was going to 
confront when actual execution took place.
    Everyone agrees in the wisdom of having independent cost 
estimates. The challenge always, of course, is how you are 
going to pay for the additional resources that they might 
entail, the offsets, so to speak. The Department does budget 
planning, as you appreciate, just as the Congress does here, 
operates within a fixed top line. So if program A needs to 
enjoy more resources to ensure it can be executed correctly, 
programs B, C, D, E or F are necessarily going to suffer or 
perhaps face elimination from the Department's proposals. And 
that is, in my judgment, where the tension arises when 
difficulty starts to move the Department away from what might 
otherwise be best practices.
    In that environment, what can be done? First, I should note 
I agree with Congressman McHugh's point that in the end there 
is really no substitute for good people, good discipline and 
good sense in managing the processes of the Department. I do 
think Congress has been careful over the years to leave the 
actual organization of the Secretary's office to his or 
eventually her discretion, and I do think that principle is 
embodied in the House bill.
    I believe five things might be considered: First, to 
resurrect what was required in the 1980s, and that is a report 
to the Congress on the utilization of independent cost 
estimates, how the issues they raised are indeed confronted in 
the budget request that I believe is part of the House bill as 
it is drafted.
    Second, I think attention needs to be paid to the staffing 
of the cost estimation function within the Department. It is a 
subset of what Secretary deLeon raised in his comments, 
staffing both at the service level and at the level of the 
Office of the Secretary of Defense (OSD).
    Third, I would urge--and this is, I think, in contrast to 
the Senate bill--I would urge that the cost function be kept as 
part of the larger analytic enterprise, the Department not 
separate it out. Unity of effort in this domain improves the 
quality of the efforts and ensures that there is the both 
cross-fertilization and professional challenge that the 
estimators ought to face.
    If you look at how two large advisory organizations on 
budgetary matters are organized in our government, the 
Congressional Budget Office and the Office of Management and 
Budget, they both embody the cost--they both embrace the cost-
estimating function as part of their responsibilities, and I 
would keep it that way, in my judgment, within the Department 
of Defense.
    Fourth, some years ago, the Committee on National 
Statistics, a branch of the National Academy of Sciences, has 
recommended to the Department that it create in essence a 
federated database of the performance data of all systems from 
birth to death, from the early developmental testing days 
through operational tests through actual fielding. I do think 
that would be an important adjunct to the performance emphasis 
that the House bill advances.
    And finally, most important, this comes back to Secretary 
Carlucci's decision in 1981, to the spirit, I think, of the 
House bill. I think it is critical to send a signal that these 
independent cost estimates are important, and that they will be 
paid attention to in deliberations of the Department and of the 
Congress.
    I thank you, Mr. Chairman.
    Mr. Taylor. The Chair thanks the gentleman.
    [The prepared statement of Dr. Chu can be found in the 
Appendix on page 52.]
    Mr. Taylor. The Chair now recognizes Mr. David Berteau, 
Director of the Defense Industrial Initiatives Group, Center 
for Strategic and International Studies (CSIS), for five 
minutes, sir.

   STATEMENT OF DAVID BERTEAU, DIRECTOR, DEFENSE INDUSTRIAL 
   INITIATIVES GROUP, CENTER FOR STRATEGIC AND INTERNATIONAL 
                            STUDIES

    Mr. Berteau. Thank you, Mr. Chairman. It is quite a 
privilege to appear before you this morning. The last time I 
was before this committee, the subject was base closures, and I 
assure you this is a much happier topic to be here today.
    I do have a written statement with considerable background 
on a number of both general and specific comments, and I would 
love for it to be inserted in the record.
    Mr. Taylor. Without objection.
    Mr. Berteau. I will make a few points orally and then yield 
back the rest of my time.
    I should point out that although my day job is at the 
Center for Strategic and International Studies, and I do draw 
in my statement on a number of our research and reports, my 
comments here this morning don't necessarily reflect the views 
of either my boss or my employment, or any other organization 
with which I might be affiliated. The lawyers make me say that 
so that it protects somebody, probably not me.
    I think it is important to note that there are four very 
powerful dynamics that are at work today as you undertake your 
efforts to reform defense weapons acquisition, and I would like 
to note those as a starting point here. One is that the 
political climate that we operate under with regard to defense 
contracting is about as poisonous as I have seen in 30 years 
here, and it is actually difficult to have a rational 
discussion because of that poisonous political environment. It 
wasn't even this bad in the mid-1980s when we had the Mel 
Paisley jailing and the spare parts horror stories, et cetera. 
So I think it takes a certain amount of courage and balance, 
and I applaud this committee for tackling that.
    The second, though, really offsets that, because defense 
today has an unprecedented level of dependence on contractors, 
and I think that we all recognize that. We all recognize that 
we are not going to dramatically change that. The amount of 
money and time it will take is long and much. But I think it is 
also important to note that dependence is largely 
underrecognized, especially by the combat arms parts of the 
military. And so there is an amount of education that has to go 
on as well.
    The third, and the Chairman--both the Chairman and Mr. 
McHugh noted this in their introductory comments, there is a 
substantial agreement that it is time to do something about all 
of this, and that is a very powerful element or dynamic that 
comes into play, because I think it gives us the opportunity, 
even despite the poisonous political environment, to tackle 
these.
    And the fourth is a complicating factor of the money is not 
going to be quite as abundant over the next five years as it 
has been in the past five years, which will make it a little 
bit more difficult.
    And I think you all are at the center of all four of those 
dynamics, and it is useful for you to keep them in mind as you 
go along.
    In my statement I go into a number of the things that we 
see as key elements for reform. You do address a number of them 
in your bill.
    I also spent some time on trying to answer the question of 
why is it that acquisition reform has not worked as well as it 
would like to. I have been privileged over the last 30 years to 
have been involved in a great number of these efforts, all the 
way back to the Carlucci Initiatives where Dr. Chu and I shared 
a number of hours together, and down through the Packard 
Commission, et cetera. And it leads me to ask the question that 
I think is useful for this committee to ask: If these are such 
good ideas, because the same ideas keep getting repeated over 
and over again in every study, why is it so hard to do them? 
And I attempt to come up with some of the pitfalls that I think 
have befallen previous efforts, and they are in my statement, 
and I look forward to continuing to work with the committee and 
the staff as you move forward here.
    Finally, Mr. Chairman, I think it is useful to note that I 
don't think there is any ability to do acquisition reform 
without a change in the way we do requirements. There is a 
tendency today for requirements to become locked in almost as a 
sacred text, and the only changes that can be made is to add to 
them and to make them more demanding and more difficult.
    I think that Secretary Gates has laid out a path which is 
actually quite constructive. It is one that says maybe we ought 
to look at the 75 percent solution; we can get it quicker, we 
can get it cheaper, it might be good enough.
    And I would commend you to that, and also to the 
President's statement in his March 4th memorandum on government 
contracting where he basically says we need to do a better job 
of doing contracting, have more competition, create more fixed-
price contracts in order to control cost. Now, there is a lot 
of pitfalls in that process, but at its core it can only be 
done if we do a better job of defining requirements and then 
using those requirements as an element of the tradeoffs that 
have to be made with cost and schedule not only inside the 
Department, but actually in contract negotiations, so that you 
can achieve a performable program at the kind of schedule and 
money that you have in the budget. And I think that you make 
some steps in that direction in the bill.
    I have a number of comments on other provisions.
    The final point I would leave you with, Mr. Chairman, 
really goes back to the Goldwater-Nichols and the Packard 
Commission. And I did have the privilege of serving on the 
Packard Commission staff and working particularly with my 
colleague Mr. deLeon to the right in his role with this 
committee at that time. One of the things that the Goldwater-
Nichols bill is widely recognized now to have not paid much 
attention to is actually the role of the Office of the 
Secretary of Defense in the Pentagon. It dramatically 
strengthened the joint staff, it dramatically changed the 
relationship of the military departments, but it didn't really 
address OSD.
    Some of what your bill does is tackle that question. I urge 
you to keep that in mind. I think the most fundamental 
principle that David Packard had in mind was that it is 
important to let the Secretary of Defense manage and organize 
the Department as he needs to in order to achieve his 
objectives, and I think that is a principle that requires a 
strong OSD. And I think that you should be well to keep that in 
mind as well as you move towards final passage of your bill.
    With that, Mr. Chairman, I will conclude my remarks, and I 
look forward to your questions. Thank you.
    Mr. Taylor. The Chair thanks the gentleman.
    [The prepared statement of Mr. Berteau can be found in the 
Appendix on page 55.]
    Mr. Taylor. And we now recognize Mr. Paul Francis, Managing 
Director for Acquisitions and Sourcing Management, United 
States Government Accountability Office, for 5 minutes, sir.

 STATEMENT OF PAUL FRANCIS, MANAGING DIRECTOR FOR ACQUISITIONS 
   AND SOURCING MANAGEMENT, GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Francis. Thank you, Mr. Chairman, Mr. McHugh and 
members of the committee. I appreciate your inviting me here to 
participate in the discussion of acquisition reform today.
    Let me start off just by saying that the need for reform is 
not debatable. I think by any measure the cost growth and 
schedule delays that we see in weapon systems are excessive. 
These have a number of consequences, but I think of two right 
off the top of my head, and one is buying power. The money we 
set aside for individual programs in some cases buys less than 
half of what we thought that it was going to buy. And then the 
other thing I think about is opportunity cost. What could that 
money have done if we were able to use it elsewhere, either on 
other programs, somewhere else in the Department, or even 
somewhere else in the federal budget?
    We have tried adding more money. I think in the past ten 
years, the amount that we put in the investment accounts, 
research and development and procurement, has doubled, yet the 
outcomes have not gotten better, so I don't think more money is 
necessarily the answer.
    So you ask yourself the question what does need to change? 
And one of the consistent findings that GAO has had over the 
past ten years is DOD needs to have a knowledge-based 
acquisition process. And while there has been some improvement 
in that area, the portfolio of weapons today largely are not 
knowledge-based, and I think a main reason for that is the 
requirements process, the funding process and the acquisition 
process do not foster a knowledge-based approach to 
acquisition. In fact, in some cases they work against it.
    For example, the requirements process today still is 
service-centric, still has a preference for high-performance 
and, I think in Secretary Gates' terminology, exquisite 
requirements. And the funding process, I think, still creates 
an unhealthy environment for competition. Programs have to 
compete for funds, and there is pressure on program sponsors to 
keep program estimates artificially low. When you finally do 
get into the acquisition process now, you start off, and it is 
overpressured. The requirements are very high, the cost 
estimates are very low, and the process at Milestone B 
typically begins before the programs know enough to really get 
a sound basis for cost schedule and performance. Once they get 
started, they become schedule-oriented, and they will go 
through their engineering gates, if you will, like design 
reviews also with insufficient information.
    The consequences of these problems, the cost growth and 
schedule delays, are assuaged through cost-plus contracts, 
reductions in quantities, delays and do-overs. So cumulatively, 
when you look at all three processes, they are not very good at 
saying no when no should be said. They are very good at saying 
yes. And that is why it took, I think, the extraordinary 
efforts of Secretary Gates to come in and say no at a time when 
it was really hard to do so. So these processes have to do a 
better job of that.
    So then I would like to think about the reform measures 
that are proposed in that context. And I think simply about the 
model of let's do the right thing the right way, and the 
``thing'' in this case being an acquisition. So along those 
lines I think about reform in three areas. One is how do we get 
to a good program start? And I am thinking there about the pre-
acquisition processes, particularly requirements in funding. 
And I really think that the proposals to strengthen cost 
estimating and systems engineering will go a long way to 
identifying the tradeoffs that need to be made in the 
requirements and funding processes, and help then to make them, 
because that is where they need to be made. When a requirement 
comes out of the requirement process it needs to be technically 
reasonable and financially reasonable, and they aren't today.
    The second area of reform I like to think about is what 
does it mean to have a good start on a program? And there I 
think about some of the metrics that are in title II. The 
reforms that have to deal with strengthening technology 
maturity, the design review process, test and evaluation and 
competitive prototyping, I think those need to be turned into 
metrics. This is the lens. Particularly for oversight you need 
to look at a program, at milestone B, to see if, in fact, it 
does measure up.
    And I think the third area of reform, at least in my mind, 
is following through on execution. And I am thinking there of 
the performance assessment function. And to me that means 
providing the enablers, the resources to execute properly, and 
that is people, authority, and incentives and awards. It is 
also metrics to see when programs get out of line. And it is 
also then the consequences, establishing consequences for 
programs that do get out of line. And I think those three 
really are important to follow through on execution.
    And I will just wrap up with one thought. And I like the 
point that Dave Berteau made, that rhetorical question about 
why haven't these things worked. In my mind, there can be a 
tendency, particularly for a person like me, to look at these 
processes as broken, and we are going to go in and fix them. 
But because they have generated the same types of outcomes for 
decades, I think we have to look at these processes as being in 
equilibrium. They generate these results over and over again, 
and to try to get something that is in equilibrium to behave 
differently, I think there is a greater challenge for reform 
than going in and fixing something.
    And the last point I will make is the people. I think the 
people in the program offices and in the staff offices in the 
Pentagon really, in my experience, are fabulous. And so from a 
reform standpoint you have to say, why aren't good people 
getting better outcomes? And I think that is part of our 
challenge as well.
    Thank you, Mr. Chairman, and I would be glad to answer any 
questions.
    The Chairman. [Presiding.] I thank you very, very much.
    [The prepared statement of Mr. Francis can be found in the 
Appendix on page 61.]
    The Chairman. Let me ask one question, if I may. And, Mr. 
deLeon, we will start with you. The House bill that we have 
introduced focuses the majority of it on, number one, on the 
early stages of program's development when the major decisions 
that will shape the program are made; and second, on programs 
that have demonstrated problems by violating Nunn-McCurdy or 
are not meeting entrance criteria for milestone B.
    Are we correct in focusing on the early program stages and 
on the so-called sick programs that violate Nunn-McCurdy or are 
otherwise in trouble?
    Mr. deLeon. I think what your assumptions are at the 
beginning of a program live with that program throughout its 
life. So if you have a particular rate of aircraft or ships, 
how you baseline the program lives with it from a requirement 
point of view, from a calendar point of view and then from a 
cost point of view. So you have got to really begin with 
programs in their very earliest stages, understand what the 
requirement is, why you need to buy it, and then lay that out 
and look at how you are going to execute.
    And where the independent cost analysis becomes important 
is that in the internals of both the--and remember, you have 
got an acquisition process and a budget process that intersect 
at critical times, and that at other times are completely 
separate from each other. So you can live in a world of logical 
assumptions on rate and numbers in the acquisition decision, 
but then the budget is going to be compressed by operation and 
maintenance (O&M) requirements, by other areas. So the baseline 
becomes very important.
    Now, when those programs start to breach Nunn-McCurdy, it 
will be important why are they breaching. Were the original 
baseline numbers incorrect, overly optimistic? Have there been 
requirement changes? Are budgets being stretched? But once a 
program goes against those baseline breaches, it needs a lot of 
critical attention, otherwise, as our GAO witness just said, 
the culture will just absorb those changes.
    So, I think appropriately, that front end--is the 
requirement right, are the assumptions on cost and schedule 
legitimate assumptions to make that are likely to drive the 
whole program--that is the critical phase, and that is where 
the independent cost estimating comes in.
    There are many budget battles where the Secretary and the 
Deputy and the Chairman and the Vice Chairman have to 
adjudicate are we going to use service numbers. Or, as Dr. Chu 
and I know, there was an exceptional cost analyst in the 
program evaluation system for years. I am going to--his name 
was Dave McNicol. He was the embodiment of what a public 
servant would be. And we would be in these budget sessions, and 
Dr. Chu at one point in his career, myself at another, he would 
be pressing the services on some of the assumptions in their 
programs, and sometimes it would be ten against three. It is 
not a good ratio in those meetings.
    But the thing about Mr. McNicol as a public servant was he 
was always well prepared. His numbers were always rooted in 
fact. And these were among the most important deliberations: 
Are we going to put the optimistic estimates into the budget, 
or are we going to put the independent Cost Analysis 
Improvement Group (CAIG) assessments into the budget? And these 
could delay program decisions by months in some cases.
    But the Secretary and the Deputy, traditionally the Program 
Analysis and Evaluation (PA&E) was their budgeting function. So 
your independent analysis becomes critical; and then the 
culture of the Secretary, the Defense Resources Board, the 
Chairman and the Vice Chairman, who use these same resources, 
knowing why these independent numbers are different, but at the 
end of the day, those independent numbers, the history shows, 
are usually more correct than some of the early service 
assumptions, and that is a critical milestone.
    The Chairman. Do you think we adequately address that in 
our House bill?
    Mr. deLeon. I think if you are able to attract the capable 
people who will become dedicated public servants like Mr. 
McNicol, then you have addressed that correctly, yes.
    The Chairman. Dr. Chu.
    Dr. Chu. Mr. Chairman, I think you are right to emphasize 
what you call sick programs. I might more neutrally term them 
outliers. When you look at the cost history, which is what I 
focused on this morning, cost history programs, there tends to 
be a reasonably good-sized group that performs well, but then 
there are a number that perform extremely badly. And so I think 
the emphasis that you give to what I would call the outliers as 
the focus of management attention is the right one. Why did 
they go wrong? What is wrong? Did we ignore the independent 
cost estimate, et cetera.
    Second, regarding the issue of emphasis early stage, I 
could not agree more. In that regard I would like to underscore 
the emphasis that both Mr. Berteau and Mr. Francis gave to the 
setting of the so-called requirements statement. Indeed, I 
plead that we move away from that term in our vocabulary. The 
problem with saying something is a, quote, ``requirement'' 
means there is no compromise possible when it turns out that 
technology or cost or schedule make it very difficult to get to 
that objective. Indeed, I do believe the Department continues 
to suffer from what in the Cold War might have been a 
defensible outlook, but in present circumstance is much less 
justifiable, as Secretary Gates has underscored in his comments 
aiming very high on the technology performance front, so high 
that it is very difficult to see when you start the program 
from the engineering or scientific perspective how are we 
really going to get there. And I think you pay a price both in 
cost and schedule and ultimately in performance, because it 
turns out that is not achievable.
    And so I think a more nuanced view and a more energetic 
willingness to think about tradeoffs in performance to meet the 
broader capability goals would go a long way. And I would urge 
as part of the vocabulary change that the system think about 
backing away from the word ``requirements'' except in those 
cases where it really is a requirement; that the system must 
operate with some other system in a software sense, for 
example, or that the cargo must fit inside the box of the 
airplane. Yes, those are requirements. But beyond that, many of 
these statements are really technological objectives, not 
perhaps requirements. And if we chase them, we pay, as you all 
know, often a very large price in terms of what is required to 
get the last five or ten percent of performance. Maybe that is 
not worth getting. And we often pay a huge schedule price in 
their achievement.
    The Chairman. Mr. Berteau.
    Mr. Berteau. Mr. Chairman, your focus at the front end is 
critical, and I just really have one comment to reinforce that. 
Before DOD has spent 10 percent of the money on a program, more 
than 70 percent of the total cost of that program has been 
determined, and so that is why you need to pay attention at the 
front end.
    The Chairman. Mr. Francis.
    Mr. Francis. Mr. Chairman, I am in total agreement with 
focusing on the front end and the requirements process. I would 
add a couple of things. One is we have to make sure from a 
resource standpoint if we want better analysis done up front, 
then we have to make sure we have the organizations, the people 
and the analytical tools in the Department to do a better job.
    And then the second thing is what you do with money 
decisions is really going to reinforce what you do in reform. 
So if you set out really good standards for programs to meet, 
then the programs that meet those standards are the ones that 
should win money. And those that don't measure up will have to 
lose in the money competition. And I think that will be really 
important to making your reform stick.
    The Chairman. Thank you so much.
    Mr. McHugh.
    Mr. McHugh. Thank you very much, Mr. Chairman.
    I am going to go back to a point that was just explored by 
Dr. Chu, and also Mr. Berteau made comments to it in his 
opening remarks. And when I spoke at the beginning, I talked 
about the ability to trade cost schedule and warfighting 
utility. And, Dr. Chu, I apologize, I agree with your comments 
about requirements, but until we get a new word for it, I am 
going use the word.
    Requirements, as we have all recognized, based on the 
Chairman's previous question, are established pretty much in 
the front end of the acquisition process, but those key 
performance parameters are articulated in terms of desired 
performance, minimally accepted performance. And I don't see 
any prioritization amongst requirements or, probably equally 
important, any kind of dollar schedule or scheduled goals to 
those requirements. And you can have five key performance 
parameters, but it is certainly in most instances unclear which 
is most important and which could be eliminated if unaffordable 
or if something is needed sooner.
    From a warfighter's perspective, there is an opportunity 
cost to systems, weapon systems, cost growth, because as I 
believe as Mr. Berteau mentioned, as that evolves, it makes 
other programs to become unaffordable.
    So I wanted to run it through the grist mill again and give 
the other panelists a chance. How can we make the acquisition 
process more responsive to the warfighter needs in terms of 
identifying those capabilities; when they are needed, and at 
what price, and how to buy it off at 75 percent? Do you have 
any thoughts as to how we could formalize that into an actual 
structure, anybody?
    Mr. deLeon. I think, Mr. McHugh, we are back to budget 
tradeoffs as well as programmatic tradeoffs. But I would 
acknowledge it took the drive from Congress to get the mine 
resistant ambush protected vehicle (MRAP) program going, and 
that was hugely a game changer once those new vehicles were 
integrated. So being as your bill says--talks about, bringing 
in the inputs from the operational side, I think, becomes more 
and more important in understanding what you are willing to 
trade off.
    Now, the problem is that in our current acquisition, you 
are making decisions on systems that you won't see in the field 
for eight to ten years. And so the urgency of a tradeoff is 
really lost as contrasted to expeditiously needing to get a 
ground vehicle into Iraq that was survivable for our troops 
where you created some carve-outs. So the timing issue here, 
and we are back to Mr. Skelton's question, dealing frankly with 
what it is you are buying up front and what the assumptions 
are, the military utility, that becomes very critical.
    Mr. McHugh. Is there a way--let me just add a component to 
it. Beyond the formality of changing that system in the regard 
you just mentioned, Mr. Secretary, is just emphasizing the 
importance of reviewing that and making those decisions 
repeatedly along a time frame--can that actually change the 
culture to get us to make those sometimes hard decisions?
    The Presidential Helicopter obviously is the primary 
example of nobody doing anything of the sort. It just kept 
being added on, added on, added on. And then ultimately, 
frankly, the manufacturer gets blamed and the contractor. I am 
not so sure that was a fair assessment to blame across the 
board there.
    Dr. Chu.
    Dr. Chu. Congressman McHugh, I think the door that you open 
the House bill to invite the combatant commanders to have more 
of a voice in this process is helpful, because in my 
experience, that is always the voice of reality. They are the 
here and now. They have actual war plans they must be prepared 
to execute and getting their advice.
    I do think you are right that insisting that there be 
periodic reviews of whether the, forgive us all, requirements 
as stated are still valid is helpful. I do think there are two 
different kinds of requirements problems. One is what you 
signaled happened in the Cold War with missile programs often 
where people will keep adding new features they thought were 
needed. And so deployment was delayed, costs rose, sometimes 
appropriately, I would argue, as those requirements are added.
    A different problem is they are set unrealistically high, 
and there is no give, there is no debate, there is no mechanism 
for backing off. And I do think in both problems more attention 
to the effects we want to have with the system or the outcome 
we want to achieve and less on the engineering parameters per 
se would be meritorious.
    Going back to the basic cost operational effectiveness 
analysis or analysis alternatives and ask, okay, what we were 
trying to do here was X, and let's look at how well this system 
is doing, and do we really have to have this last margin; do we 
get close enough with what is being achieved as opposed to what 
might require additional resources to realize.
    Mr. Berteau. Mr. McHugh, I think I could add three things 
to that. Number one, I agree with Dr. Chu about the word 
``requirements.'' It has probably 20 different meanings. But I 
also agree we won't expunge it from our vocabulary. I prefer to 
use the phrase ``real requirements,'' which has no, as yet, 
joint staff-approved definition, and therefore we can define it 
to mean those things that really matter here. And I will 
illustrate.
    The Air Force tanker, which, of course, is a subject that 
many in this room have spent a lot of time looking at, there 
are, I believe, some 35 unnegotiable requirements built into 
the tanker solicitation and 800 negotiable requirements. I 
would respectfully submit, sir, that when you have 800 of 
anything, it cannot be a requirement. That is just too much to 
trade off.
    I think there are three things that you can do. One of 
them, you do make a step in that direction by consulting with 
the combatant commanders as part of this process, and I think 
you could strengthen that role.
    The second is I really do believe there needs to be a 
strong role for the Office of the Secretary of Defense there. 
The original proposal by the Packard Commission co-chaired the 
Joint Requirements--what was then the Joint Requirements 
Management Board, later the Joint Requirements Oversight 
Council. That was to be co-chaired by the Vice Chairman of the 
Joint Chiefs of Staff and the Under Secretary of Defense for 
Acquisition. The joint staff has carefully maneuvered over time 
to make sure that participation by OSD is at their discretion, 
not at the Secretary's, and I think that is something that 
could be looked at.
    The third is actually to make cost a requirement, because 
ultimately if we can't pay for it, it doesn't matter what else 
is in the list there. And I think that is an important element 
to bring into consideration.
    Thank you.
    Mr. Francis. Mr. McHugh, I would add the requirements 
process I really think needs a lot more analytical rigor. And 
we have to have, I think, particularly with the joint staff, 
more ability to challenge requirements. I think Mr. Taylor will 
remember quite vividly how a couple of years ago the Navy made 
a very impassioned case for the DDG-1000 here, and it had to be 
approved exactly as they had laid it out, and then two years 
later they testified they didn't need it. That just tells me 
that there is room in requirements to challenge.
    We need the analytical rigor, and we need data. And that is 
where I think we do need technical information. I think we need 
a group sort of like what Dr. Chu led in PA&E, Program Analysis 
and Evaluation, to be involved in that process and ask those 
questions. And I think we have to think about acquisition maybe 
saying we need time certain development. Let's put a limit that 
we are not going to engage in an acquisition that will take 
more than X years; pick a number, five or six years. If you 
can't develop and field a solution in that amount of time, then 
those requirements aren't actionable. I think we need to bring 
that kind of rigor up to the front.
    Mr. McHugh. Thank you all very much.
    Mr. Chairman, I yield back.
    The Chairman. Thank you very much.
    Moving right along under the five-minute rule, Mr. Taylor.
    Mr. Taylor. Thank you, gentlemen.
    Let me pose a very timely question to you. I don't think 
there is a single person in the United States Navy who can tell 
me what littoral combat ship (LCS) No. 1 ought to cost or LCS 
No. 2 ought to cost.
    And thirdly, I don't think there is a single person in the 
United States Navy who knows what the electromagnetic launch 
should look like. I can look behind me. We have expertise of 
people on this staff who have flown fighters; we have people on 
this staff who have been captains of submarines. They have a 
pretty good idea what the next fighter should look like or what 
the next generation of submarines should look like. But when 
you are dealing with something like the electromagnetic launch, 
where we haven't done it before, where should we be looking for 
the expertise to make sure that this is done in a timely manner 
and that we don't end up in the year 2015 with a nuclear-
powered helicopter carrier that should have been an aircraft 
carrier?
    Rudy, do you want to start?
    Mr. deLeon. One of the things unique about the U.S. system 
is the fact that on the engineering side we are always pushing 
technology, coming up with new ways of thinking about things 
and new ways to use technology. That is partly what has made 
our equipment so unique. We get in these technology pushes, and 
we sometimes get into the optimistic assumptions, things like 
that.
    If we look back historically on the acquisition system, 
there was a set of tools created across acquisition. They were 
called the Federally Funded Research and Development Centers, 
the Institute for Defense Analyses used often by the committee, 
RAND, Massachusetts Institute of Technology Research and 
Engineering (MITRE), the aerospace effort out in California. 
These are federally funded, nonprofit, largely engineering 
operations that can serve both as complements to government 
procurement managers, but also on the critical engineering side 
as a real reality check. The Center for Naval Analysis is 
another group in this category.
    So as we look for both technical expertise, and at the same 
time not wanting to rely on the contractors for the technical 
expertise, we have these other tools that are available. Now, 
as with our acquisition profession----
    Mr. Taylor. But to those specific points, Mr. deLeon, where 
should we be looking for some expertise?
    Mr. deLeon. I think if you have got technical issues, you 
have got to get technical expertise. So the Federally Funded 
Research and Development Center (FFRDC) is one place, 
Massachusetts Institute of Technology (MIT), some of our 
leading--Georgia Tech, some of our leading engineering schools. 
But the independence in the system can come from the government 
side. But we also have, again, a technology base in the country 
that is very unique and extremely capable.
    Mr. Taylor. So you feel comfortable that we can prevent an 
LCS type problem, a Coast Guard 123 type problem, going to the 
electromagnetic launch? You think they have the expertise to 
see to it that we don't repeat that mistake when we go to it on 
the Ford carrier?
    Mr. deLeon. If you bring in the potential technology 
troubleshooters that are out there, that are not going to be in 
the contractor, probably not going to be in that service 
program office. So you reach out to some of your leading focal 
points of engineering. You might ask the GAO to go and talk 
with some of our leading universities on the engineering side 
to test some of these technologies. But what you are really 
doing is back to Dave Berteau's ten percent, you are forcing 
the tough question to be asked in that initial phase. And we 
can't take just on faith that some of these advanced 
technologies will work. We have got to bring in the 
troubleshooters who will ask and help the Congress, the Office 
of Secretary of Defense, the services themselves, to focus on 
the tough engineering technical questions that are there. The 
debate will be very helpful.
    Mr. Taylor. Thank you. In the minute that I have left, 
would anyone else like to?
    Mr. Berteau. Mr. Taylor, I spent a year on the Defense 
Science Task Force that looked at the LCS and the Presidential 
Helicopter, and I would say I looked at the 29,000 pages of 
Navy vessel rules that were imposed on the LCS contractors 
after the contract had been signed. I say I looked at them in 
the sense that when the two carts with the 29,000 pages were 
wheeled into the room, I observed them.
    I would say to you that at one level you are right, 
precisely saying what it is going to cost is very difficult. 
But it was quite clear looking from the perspective that we had 
that what we did know, it was not going to cost $220 million in 
2 years. And everybody except one person in the Navy knew that 
and largely agreed with that.
    And so I think one of the questions that you have in your 
bill actually addresses this, is how do you make sure you don't 
let that sort of thing happen? We can ignore the reality of 
what we know something is not going to be.
    There is another element, though, that comes into play. 
Because what you have got is an emphasis on the bill as well on 
technological maturity before making critical decisions, and it 
is absolutely key that these two things go hand in hand. Until 
you have got better development of your technology and greater 
maturity, you can't do a proper cost estimate. So I think those 
two elements of the bill have got to stay hand in hand here, as 
you put them.
    The Chairman. I thank the gentleman.
    Mr. Bartlett.
    Mr. Bartlett. Thank you. Until you know what the problem 
is, it is hard to draft a solution to the problem. And I am not 
sure I know what the problem is here, and I wonder in the few 
moments we have if you would help me to try to understand that 
better.
    There are several reasons for increase in cost growth. One 
is inflation. These are big programs, they take a long time and 
the dollar deflates. And the other is commodity price increases 
in excess of inflation. Let's take those off the table because 
we understand them, and I think that for the usual program they 
are fairly small.
    I categorize the reasons for increased cost under three 
categories. Let's imagine for the moment that they represent 
the totality of the reasons for increase in cost.
    One is requirements creep. We just keep changing the 
goalpost.
    The second is intentional underbidding. I worked for IBM 
for eight years, and we were at a competitive disadvantage 
because our bosses wouldn't let us lie. Our competitors would 
underbid knowing that they could more than make it up on 
engineering change proposals, and I couldn't do that when I 
worked for IBM. I have no idea how much of this goes on in 
these major platform acquisitions.
    And the third one, I hardly know what to call this. If I am 
charitable, I guess I will call it being overly optimistic. 
More realistically, you might call it incompetence, not 
understanding the complexity of the challenge.
    If you would do me a favor and write these three things 
down on a piece of paper: requirements creep; the intentional 
underbidding. And the third one, call it whatever you want, 
incompetence, over-optimism. And then if you would put a number 
by each of those and make those numbers add up to 100 percent, 
the extent to which they contribute to cost growth. Again, the 
requirements creep, intentional underbidding, and the third one 
overly optimistic or incompetent, whatever you want to call 
that category.
    When you have those numbers down, if you could just give me 
those numbers, it would be very helpful to me understanding. I 
am not sure I understand this problem, and you are four experts 
and I would like your assessment of what these are.
    Mr. deLeon, do you have those numbers down?
    Mr. deLeon. Well, I have got them in front of me.
    Mr. Bartlett. What do you have for requirements creep?
    Mr. deLeon. I would say that is probably 50 percent of the 
problem.
    Mr. Bartlett. 50 percent. And underbidding?
    Mr. deLeon. I would say that is the most easily corrected 
by the independent cost tools your bill seeks to initiate. So 
you can do that with vigorous independent analysis. So you 
could conceivably reduce that.
    Mr. Bartlett. We could make that zero if we--but what do 
you think it is now? Has been?
    Mr. deLeon. I think it is probably 25 percent.
    Mr. Bartlett. Which would mean that incompetence is 25 
percent.
    Mr. deLeon. Well, you used the term ``optimism.'' I think a 
technologist is going to always--if we go back to our original 
comment, which is let engineering drive the system, then 
engineers can solve those problems if you focus on them as 
engineering problems rather than as budget problems.
    Mr. Bartlett. So at least half the problems are ours, the 
requirements growth?
    Mr. deLeon. I think that drives programs.
    Mr. Bartlett. Number two, what are your numbers here?
    Dr. Chu. Sir, I put more weight than my good friend Mr. 
deLeon on the last category, excessive optimism, which I think 
is typically--and this is a case-by-case issue, so it is very 
dangerous to generalize.
    Mr. Bartlett. I understand. I just----
    Dr. Chu. But in general, I think that is on the order of 
half the problem.
    Mr. Bartlett. Okay.
    Dr. Chu. Often associated with schedule, because we think 
we are going to achieve something much faster than the reality. 
And, of course, if it takes longer, you carry all that overhead 
burden on for additional years.
    And then I would put second requirements issues. It is not 
just creep, because in some cases yes, it is, additional 
requirements, but in others we have aimed far too ambitiously 
relative to what science and engineering can actually produce.
    On the underbidding, I would emphasize it is not always 
purposive. A statistician who had nothing to do with defense 
procurement came to me and said, you know, you ought to think 
hard about decision rules that say you would give the contract 
always to the lowest bidder. That may be the one player who 
least understands exactly what is required to produce the 
article. So it is a bias in terms of the perceptions of those 
who are----
    Mr. Bartlett. Roughly what?
    Dr. Chu. Again, speaking off the top of my head, I think 
the underbidding problem or the misbidding problem is the 
smallest part of the problem, maybe 20 percent or less.
    Mr. Bartlett. With few moments left, I would like the 
numbers from Mr. Berteau. What are your numbers?
    Mr. Berteau. Mr. Bartlett, I actually can only get to 100 
if I add a fourth category.
    Mr. Bartlett. And what would that be?
    Mr. Berteau. And that is the disruptions of the budget on 
programs, and particularly the last.
    Mr. Bartlett. Let's imagine for a moment that doesn't 
happen.
    Mr. Berteau. I would also echo Dr. Chu. One of the hardest 
memos for a procuring contracting officer to write is the memo 
that says: I went with the more expensive program for the 
following reasons.
    But I will tell you, sir, I can't put a number on those 
four categories without much more thought than I am able to put 
into it in this five minutes. I will get you my detailed 
analysis of that down the road.
    Mr. Bartlett. Thank you, sir.
    [The information referred to can be found in the Appendix 
on page 81.]
    Mr. Francis. Mr. Bartlett, I split them evenly. I 
considered the requirements, not only requirements creep but 
unreasonable requirements, I think like Dr. Chu said. I think 
that was the case on electromagnetic launch. Underbidding is 
not only contractors, it is inside the Pentagon. We have got 
information that shows, even when you do have an approved 
baseline, that we don't put those numbers in the Future Years 
Defense Program, we put a lower number. So we underbid inside 
the Pentagon.
    And optimism I think extends not only to the cost 
estimates, but the entire schedule. And I think any program you 
can get derailed at the start, you can get derailed in the 
middle, or you can get derailed at the end.
    Mr. Bartlett. Thank you all very much.
    The Chairman. I thank the gentleman. The chairman of the 
Acquisition Reform Panel, Mr. Andrews.
    Mr. Andrews. Thank you, Mr. Chairman. Thank you and Mr. 
McHugh and my partner in this, Mike Conaway, for the teamwork 
that we have had. It is a pleasure serving with three such 
distinguished gentlemen. And I would like to thank the panel 
and some members of the audience as well for contributions you 
have already made to the panel's work. It has been invaluable, 
and this morning was just an extension of that.
    I have learned a couple things in the time we have been 
looking at this. The first is that when we look at the $296 
billion figure in the March 30 report from the GAO, that most 
people jump immediately to the wrong conclusion, which is that 
that is a measure of poor manufacturing and oversight in the 
manufacturing process. To some extent it is, and I very much 
enjoyed Mr. Bartlett's way of trying to score those. I thought 
that was very intriguing. I hope maybe everybody supplements 
their answers for the record.
    What I have learned, though, is that very often it is 
driven by poor baseline definition, which we spent quite a bit 
of time talking about today. And to further peel this back, the 
poor baseline definition I think very often is driven by an 
irrational and inaccurate requirements process. And I think all 
witnesses have been very good about that today. So it is 
interesting to hear the consensus that our bill's focus on pre-
milestone B decisionmaking is a good place to look. But that we 
have to go back to, as early as we can in this, to the 
requirements process and take a good look at the way that is 
done in a way I don't think the present legislation has quite 
touched yet. I appreciate that constructive criticism.
    I notice that Mr. Francis on page five of his testimony 
makes reference to a September 2008 GAO report where they 
reviewed Joint Capabilities Integration and Development System 
(JCIDS) documentation for new capability proposals, found that 
most were sponsored by the military services with little 
involvement from the joint community, including the combatant 
commanders.
    Now, would everyone on the panel agree that that is a bad 
thing; that the lack of jointness and lack of involvement from 
the combatant commanders is a profound negative in the process? 
Would anybody disagree with that?
    Okay. And then Mr. Berteau in his testimony I think 
correctly said acquisition reform cannot happen without 
requirements reform, and urges us to engage in some flexibility 
for tradeoff against cost and schedule. And I think what I 
heard this morning across the panel was that this is ultimately 
about--and I like this formulation of real requirements versus 
aspirational ones, or optimal, perfect performance versus 
sufficient performance. I hear what you are saying.
    If we were going to develop a way of understanding the 
difference between the perfect performance in some metaphysical 
way and a robust, strong, terrific performance in a way that is 
more practical, who do you think should help us draw that line? 
If we were to delegate that responsibility, looking at the 
services, at the joint structure, the OSD, who is best 
positioned to define carefully for us in a way that absolutely 
protects the lives of people in uniform as the first 
priorities? Who would be the best person to draw that line or 
the best organization to draw that line? Mr. deLeon?
    Mr. deLeon. I would start with the chiefs, the service 
chiefs. And right now, the service chiefs don't formally sit on 
the requirements board; the vice chiefs do. And so yet, you ask 
the service chief to be accountable for personnel and readiness 
and all of the other issues of organizing, training, and 
equipping. So I think a role for the chiefs on validating those 
requirements. And then you have got to force the chiefs to 
interact and to have the same jointness on requirements that 
they have on the battlefield on operations.
    Mr. Andrews. Because I only have a minute, I would ask the 
others, if they could very briefly answer that question and get 
it on the record. Dr. Chu.
    Dr. Chu. Sir, I think ultimately that is what you must hold 
the Secretary of Defense responsible for. So, ultimately, it is 
the Secretary's office who must support him or her in that 
deliberation. Yes, the chiefs have a role. But they are, in a 
sense, stakeholders in the process. They have a division for 
their service. You emphasize jointness. That is a key aspect 
here. What is going to be the common position? Is it possible 
to have a common position?
    So I think it is ultimately the Secretary and his office 
that you have to hold responsible.
    Mr. Andrews. Mr. Berteau.
    Mr. Berteau. I agree with Dr. Chu. I think this ultimately 
lies at the feet of the Deputy Secretary of Defense, and he has 
got to take the chiefs and the military considerations into 
account, but I think it is the deputy secretary who has got to 
make the call.
    Mr. Andrews. Thank you. Mr. Francis, what do you think?
    Mr. Francis. Agree. We believe that the Deputy in his 
current role, dual role as Chief Management Officer, should be 
making that kind of a decision. And I think the Joint 
Requirements Oversight Council (JROC) does have to get 
bolstered by help I think from Program Analysis and Evaluation 
and DDR&E to do the analytics.
    Mr. Andrews. I thank the chairman for his indulgence. The 
one comment we would be interested in supplementing on the 
record is, if we establish that dichotomy of real requirements 
versus, whatever we want to call them, would that then lead to 
a different set of decisionmaking dynamics? What is 
nonnegotiable? What is negotiable? I don't have time to ask you 
for an oral answer for that, but I would be very interested in 
thinking about what consequences would flow from that change in 
definition in the requirement process.
    Thank you, Mr. Chairman.
    [The information referred to can be found in the Appendix 
on page 81.]
    The Chairman. Thank you.
    Mr. Kline.
    There is just one 15-minute vote as opposed to what the 
bells rang a few moments ago. But we will proceed for a short 
while, get the one vote, and come right back.
    Mr. Kline.
    Mr. Kline. Thank you, Mr. Chairman. Thank you, gentlemen, 
for your years of service and your testimony today. I have been 
scratching my head, like most of you, over this it seems like 
all my life, and noticing that we have had Secretaries of 
Defense and Deputy Secretaries of Defense and Under Secretaries 
of Defense for Acquisition (USDAs) and Under Secretaries of 
Defense for Acquisition, Technology, and Logistics (USDAT&Ls) 
and Program Analysis and Evaluation (PA&Es) and Directors of 
Defense Research and Engineering (DDR&Es) and on and on and on 
in an endless stream trying to solve this problem. And so, Mr. 
Berteau, I had great sympathy and empathy with your comments 
of, if this is such a good idea, how come we haven't done it? 
Because clearly there have been great ideas after great ideas 
after great ideas.
    I appreciated very much the discussion this morning about 
the requirements process, and it always has seemed clear to me 
that it has been badly broken for a very, very long period of 
time. A lot discussion here today about requirements creep or 
overreaching or looking at the stars to put a requirement in. 
And, Dr. Chu, I appreciated your question, what is the 
requirement? It is the box that has got to fit in the airplane. 
Presumably the airplane has to fly, and you have got to--so 
there is a level there for a requirement. But, clearly, if it 
doesn't do more than what we have, there is no point. We will 
just make some more M-151 Jeeps instead of Humvees or 
something. And so it seems to me anything we can do to fix that 
requirement process is going to be time very, very well spent.
    I happen to think there are lots of other problems still 
existing in the acquisition from developmental testing, 
operational testing, organizations itself and the services and 
in OSD. And this bill that Mr. Andrews and Mr. Conaway and 
others put together, with the guidance of the chairman and the 
ranking member, gets at this early end, and that seems to me to 
be a pretty good thing. But we are going to make law here. We 
are going to pass some legislation. We are going to put some 
things out there.
    And so my only question to you is, does this do harm? Does 
this bill do harm? And maybe it is marginally better, maybe it 
is a lot better. But is there something in this legislation 
that you looked at and said, ``We had better not do this''? 
And, if so, this will be your chance to say so.
    It is open to anybody who has looked at something in this 
bill and said it is not a good idea, this will hurt.
    Dr. Chu. If I may, sir. I have less concern with provisions 
of the House bill than some provisions of the Senate bill, and 
two specifically would concern me. One is splitting the cost 
function out from the larger analytic enterprise. I think you 
will diminish its excellence over time by that. But that is a 
specific.
    More generally--and this is I think supportive of the House 
version. More generally, I think Congress in my estimation 
wisely has left the specifics of the organization of the 
Secretary of Defense to the Secretary. It needs to be tailored 
to his or her needs, to the needs of that era, to his or her 
decisionmaking style, et cetera. So be very careful about hard 
wiring, which I don't believe to my reading--I am not a lawyer, 
but to my reading the House bill does not do.
    Mr. Kline. I knew there was something about you I like.
    Dr. Chu. But I would be very careful of hard wiring the 
Secretary's office in statute. It will not necessarily produce 
the results that you desire.
    Mr. Kline. And you don't think that this bill does that. So 
you don't see harm there----
    Dr. Chu. You ask, if I understand the House bill correctly, 
that there be an official designated for this responsibility. 
So you call out certain capacities you want to see in the 
Secretary's office, but you leave it, as I understand the 
legislative language, to the Secretary to decide how is he or 
she going to achieve that end.
    Mr. Kline. Anybody else see it, is there harm in this 
thing? In the do no harm? There may be some physicians in the 
room.
    Mr. Francis. Mr. Kline, I think as written I don't see 
harm. As it gets implemented, there is potential for harm that 
I think you want to watch out for. I think one is what you do 
with the role of the Cost Analysis Improvement Group. As part 
of the larger organization for cost estimating, I think care 
would be--you need to take care to keep the integrity of that 
organization and not have its, I think, its expertise lost in a 
larger organization. And so I think that can be protected.
    I think how the principal assistants are charged with their 
responsibilities, I think that will be important. Because 
somehow, somewhere out there, there is a line between making 
people, say, champions for function so these functions don't 
get traded away like they do today. But at some point, if that 
becomes too powerful, then I don't know where the Under 
Secretary of Defense for Acquisition, where his 
responsibilities, say, end, and then no one is accountable. So 
there is a line out there.
    And I think the third thing is the pre-milestone B 
thresholds for cost and schedule. I think that is a good thing 
that when a program, let's say, has a 25 percent increase 
before milestone B, you want to know that so you can make 
trades. But by the same token, you don't want that threat of a 
threshold to suppress programs from actually admitting they do 
have a cost increase, because that could happen.
    Mr. Kline. Thank you very much, Mr. Chairman. I see my time 
is out. I yield back.
    The Chairman. We will recess very briefly for the vote and 
return immediately.
    [Recess.]
    The Chairman. Mr. Kissell.
    Mr. Kissell. I would like to thank the panel.
    I was just talking to a group of people from my home state 
and telling them the importance of what we are doing, that the 
procurement process is one that obviously goes to the regular 
citizen is one, why can't you solve it? You know what the 
issues are. Why can't you solve it? I was just talking to them 
about some of the complexities behind the notion of why can't 
you solve it, and I was talking to them about how much I 
appreciate you all coming in and the interest that you have in 
helping us to solve this and what it can mean to our nation to 
be able to have these savings to reinvest in another place.
    The question that I know you have been addressing, and I 
hate to ask you again, but trying to get in my mind as we look 
to solve it that balance between is more of our issue breaking 
that mindset of putting in a cost that someone knows is not 
realistic but it has been accepted for so long that they can 
get away with it and add to later on, versus how much where we 
ask for a system of some type. And then the requirements of 
that system. And I heard someone mentioning as I was going to 
meet another group of people, the requirements could be--I 
think it was on the tanker where you might have 800 options to 
be considered. Are we not defining the systems well enough? And 
whoever wants to jump on this one. You know, where in your 
opinion is the biggest challenge we have, that mindset that we 
can do anything in terms of adding costs or the mindset that we 
are not defining well enough what we want?
    Mr. Francis. Mr. Kissell, I will start off. I think to some 
extent the requirements process is not well enough informed 
about our limitations of technology and cost. And I think there 
is the impression that if you write the requirement in great 
detail, you make it so. And I think that is where the 
disconnect is.
    So to some extent the requirements I think get overly 
detailed to prescribe a solution, and they aren't informed as 
to whether in fact those are achievable. And I think that 
gets--that is part of the problem right at the start.
    And then the cost estimate is no better than the 
information at the time. So if you are writing what I would 
consider to be relatively uninformed requirements in high 
detail, you don't have good enough cost estimates to challenge 
those requirements so you can proceed then. And then the end 
result is you get a lot more programs started through the 
requirements process than you can ever finish through the 
acquisition process.
    Mr. Kissell. And if that is the case, we have also talked 
about the lack of the persons in the Department of Defense to 
manage the projects anymore, that we have contracted that out. 
And to get that expertise back in--once again, whoever wants to 
go with this--how long do you think that would take and where 
do we find those people?
    Mr. Berteau. It is a job that will actually never be 
finished in terms of how long it will take. It is an ongoing 
process. I do think it is useful to recognize that this is a 
great time to be doing it. The economy works in our favor as 
well as it ever will.
    There are three challenges really in terms of that. One, 
this committee I think addresses some of the areas like cost 
estimating and systems engineering, both of which are critical 
success factors to addressing the very question you raise: How 
do you bring realism into your programs and into your budget? 
And by putting somebody at the top, you create a pole for that 
as a career field. I think that is a very important factor to 
come into play.
    People want to come to the work for the government and do 
good work. They particularly want to come to work for national 
security because you are working on something that matters. And 
as we have looked at the individual people who make these 
decisions, there are two critical things. One is their first 
decision to come. The second is their decision to stay. And 
that is by far the harder part, because it means you have got 
to give them something useful to do. You have got to give them 
training, you have got to give them a real job. If you bring 
smart people in and you give them nothing to do, they are going 
to stick around for no time at all. You can't legislate that, 
but you can fund it and you can make sure that in fact the 
support is there for them.
    Mr. Kissell. And one last point, and maybe more an 
observation than a question, is that we have got to also 
increase that mindset to reward the people that do do well. We 
had a hearing on that, and we know that it is very hard to 
quantify a system that in effect gives bonuses to people that 
do well, the measurements there. I worked in a manufacturing 
site for years where you got paid on what you did; and if you 
didn't do anything you didn't get paid. And I know it is very 
hard to come up with that system in government. But we have got 
to be able to reward people enough in ways that if they see 
something not working and they let us know, that they are not 
penalized.
    My office was trying--this is just one example. My office 
was trying to contact somebody on behalf of someone in our 
district that was interested in doing some contracting work for 
DOD, and the answer we got is we don't do education. Hire a 
lobbyist. And that was just one example. So we have got to 
break that mindset.
    And thank you, Mr. Chairman, for this opportunity. Thank 
you all for being here.
    The Chairman. Mr. Conaway, the ranking member of the panel.
    Mr. Conaway. Thank you, Mr. Chairman. I appreciate the 
panel being here today.
    I would like some comments on two things. One would be, Mr. 
Francis, you mentioned a fixed timeframe for programs that 
would have to live within, so to speak, in terms of I guess one 
of the requirements, because it seems to me that the longer 
something takes, that the more temptations there are to add 
things to something that was not necessarily originally 
contemplated in the deal. And then, also, the differences 
between what the program managers are estimating the programs 
to cost versus what the independent body does.
    I would prefer to see our bill require a reconciliation of 
those two numbers. In other words, it seems to me that the 
decisionmakers ought to have access when they are deciding 
which numbers to use as to why there is a difference. And your 
comments as to whether or not this bill has enough teeth in it 
that we can require the decisionmakers to know why there is a 
difference. They get to decide which way to go, but I think it 
would be helpful to know that issue.
    And then maybe a third one, if there is time. The idea that 
should there be a career path in the uniformed services that 
puts a greater emphasis on requirements service so that it is 
not just looked upon as a way station within my career. I have 
got no upside. I have got to do it well. If I do it well, there 
is no benefit; but if I do it badly, my career is over. So some 
sort of a comment on the uniformed services having an extended 
role within the requirements piece that would add to our 
knowledge base.
    Mr. Francis. Mr. Conaway, I will start with the time 
certain development of putting a bound of time on a program. I 
don't suggest that to be draconian in that if you can't get the 
program done in this amount of time, it is not a program. But I 
think it is instructive to think about what is a reasonable 
period of time for an acquisition to incentivize a couple of 
things. One is, policy does prefer the evolutionary approach, 
but practice seems to go to revolutionary approach.
    So I think, if we talk about getting something done in five 
years, then it is going to create incentives for more 
evolutionary type approaches to acquisition.
    I also think part of the problem we are dealing with today 
is we are throwing some science and technology over the fence 
into acquisition, and programs become a good way to get big 
money to do some of the things you should have done earlier. I 
think if you put a limit there on what can be done after 
milestone B, you may actually then have to get some things done 
before then. And I don't know that that happens today.
    The third thing is accountability. It is very hard to hold 
people accountable for a project that extends 10 years. 
Something around 5 years, I think some of the people might 
still be around for that.
    Dr. Chu. Congressman, to your question on reconciling the 
conflicting cost estimates, I do think the requirement in House 
bill, as I understand it, the report that you asked the 
Department to render could be the vehicle for coming forward to 
the Congress with that kind of reconciliation. I would be 
careful not to be too precise, because these things vary in 
terms of their specifics each time.
    To the career path issue, I think one interesting question 
is the issue of tenure of program managers. I am one who is a 
fan that it would be useful to try to construct career paths so 
managers could serve from one milestone to the next. That means 
that they are responsible essentially for the outcomes that 
they promised at the prior milestone. That would take some 
adjustment, candidly, in how the promotions systems work in 
military services, because those intervals are quite long in 
character and it is one of the reasons I think the military 
department is a little bit reluctant to allow someone to serve 
for that period of time. But I do think that is an issue worth 
looking at.
    Mr. deLeon. Congressman, on the independent cost analysis, 
I think the committee is exactly right on on that issue, and it 
is the resourcing on the independent side. If we can get those 
capable people, because this is--we have a slight disagreement 
among ourselves on whether the Deputy Secretary should 
adjudicate requirement differences with the Joint Chiefs or 
not. But on the reconciliation of the independent cost 
accounting versus service, that is a responsibility that the 
Deputy Secretary has. And, generally, the rule is that we 
divert from the CAIG numbers in the Deputy's office only with 
compelling analysis otherwise. And this is an irritant between 
the Services and the Deputy, but the CAIG is to be independent 
and removed in doing----
    Mr. Conaway. Is there some history we can look at where the 
CAIG's estimate has proved more accurate than the program 
manager's? In other words, that irritant, is it just because 
they don't like it or is it because the CAIG gets it right? Or, 
is it because CAIG gets it wrong and they are right? Can we 
look at a more historical track record on that?
    Mr. deLeon. Usually because it is vigorous and it makes 
people uncomfortable. Rather than just anecdotally answering, I 
think that would be a great GAO issue just to look at the 
numbers. But my view would be, historically--my first budget 
markup was in this room in 1977, so I probably have been 
through almost 35 rounds of this--but that those CAIG numbers, 
particularly up front, tend to have more reality.
    On the acquisition career management, there is an 
interesting thing. There is a unique--it is the Rickover Navy. 
The nuclear piece of the Navy has its own unique program 
management culture. Largely, you are taking most capable coming 
out of the academy in engineering, physics, things like that, 
and this Special Program Office that the Navy has had has been 
an exceptionally capable system largely manned by military 
personnel supplemented by leading engineering, by some of the 
FFRDCs. But it is--the committee actually looked at it in the 
late 1980's because it was an exceptional program system.
    Mr. Conaway. Thank you, Mr. Chairman.
    The Chairman. Mr. Wittman, Mrs. Davis, Mr. Coffman, in that 
order. Mr. Wittman.
    Mr. Wittman. Thank you, Mr. Chairman. I appreciate the 
opportunity. I want to thank the members of the panel for 
joining us today. I want to thank the chairman and the ranking 
member, Mr. Conaway, and Mr. Andrews for their efforts in 
putting together this bill. I think it is a great step.
    I wanted to get each of your opinions about the bill itself 
as it relates to decisionmaking. I think we all hear about 
where decisionmaking goes wrong, whether it is on the cost 
estimate side, whether it is on operational testing and 
evaluation, whether it is on the requirements side, systems 
engineering. We see at points that the system breaks down and 
we don't have good outcomes as far as decisionmaking.
    My question to each of you is, does this bill accomplish 
what you would like to see accomplished or what you think needs 
to be accomplished to make the decisionmaking process as good 
as it can be? And, are there things that should be added or 
subtracted to the bill to get us to that point of that best 
scenario for decisionmaking? And the thought is, too, is to try 
to get us to a scenario where we have the best value coming out 
of the decisionmaking.
    So I would like to get your thoughts and ideas on any 
additions or subtractions to the bill to get us to that point.
    Mr. Francis. Mr. Wittman, a couple of things that I can 
think about. One is I really do think there could be some more 
specificity about the analytical rigor that can be brought to 
the JROC and JCIDS process. I think right now it is very 
difficult for that staff to actually do what they have been 
chartered to do, and I think they can use some help in being 
able to broker and establish priorities among programs. So I 
think some more could be done there.
    I had mentioned earlier, I think it is going to be 
important when we are dealing with the cost estimating to--I 
think I would like to see the role of the CAIG preserved, but 
there does have to be some kind of a reconciliation process I 
think for cost.
    We have actually done some of the analysis on cost, and you 
have a service estimate that is a number. The CAIG estimate is 
higher. But what actually goes into the budget is lower than 
the service numbers. So we already have some data, and I think 
that does need to be corrected.
    And the other thing I would think about is there are a 
number of, I think, functions that the legislation calls for 
that do need to be buttressed with resources, people, money, 
and time, and some specificity there might be useful.
    Mr. Berteau. Congressman, I would add one thing in terms of 
the bill's ability to help foster better decisionmaking. It is 
often easy to avoid paying attention to issues as if they 
inconvenience where you like to go otherwise. And I think a 
number of the provisions of this bill make it more difficult 
for those issues to be ignored in that process. And I think 
those are positive contributions.
    Dr. Chu. Congressman, as I have commented, I think the 
House bill is careful to leave the specific organizations of 
the Secretary's office to the Secretary's discretion. I think 
that is meritorious. I do want to underscore something Mr. 
Francis said: It will be important that there are resources 
sufficient to these functions. And perhaps, without being 
unduly intrusive or recommending micromanagement, some 
encouragement in the report that you ask from the executive 
branch about, okay, what resources have been devoted to these 
functions, particularly relative to what was devoted earlier. 
In other words, has there been the added resource effort that I 
suspect will be necessary to carry out the function that you 
outlined, might be helpful.
    Mr. deLeon. Congressman, this bill creates tools, and it 
will be as effective or ineffective only as the tools are 
utilized. And as I said early on, one of the things that made 
Goldwater-Nichols so unique was the congressional commitment 
not only to creating the tools but then to make sure that the 
tools were implemented and resourced. And so I think that will 
be the challenge, is to stay on this topic. And then, 
additionally, and this may be the first effort, I think at some 
point you may want to also just factor in how to think about 
O&M contracting, because that is becoming increasingly a larger 
segment and medical contracting a piece of that as well. But 
this creates usable tools to decisionmakers and then usable 
tools for the legislative branch to render oversight, but it 
will require sticking with it much in the same way that the 
committee's history of Goldwater-Nichols, not just simply 
creating the tools, it was monitoring how those tools were 
being used, and that created a revolution.
    Mr. Andrews. [Presiding.] The gentleman's time has expired. 
Thank you very much.
    The gentlelady from California, the Chair of the Personnel 
Subcommittee, Mrs. Davis, is recognized.
    Mrs. Davis. Thank you. Thank you, Mr. Chairman. Thank you 
all for being here. You have really been an excellent panel. As 
you know, in addition to the committee that is really looking 
at acquisition, the Oversight and Investigation Committee has 
also done that. And we focused a lot more I think on service 
contracts and even the culture that has been created, and 
perhaps the changes that really need to be made in that way to 
incentivize people to want to go into the field and stay in the 
field and bring the best, get the best out of it.
    What I would like to know is how some of the issues that we 
have looked at in terms of the service contracts really do have 
relevance in these much larger weapons systems, contracts as 
well. And one thing that I think we haven't had a chance to 
really look at is you mentioned the track record that people 
have had. In service contracts, we know that folks have gotten 
contracts after they have performed very poorly.
    What do you see within the larger weapons contracts that is 
relevant in that regard? Is there a way of looking at that in a 
way that we actually can track? And it goes back to the 
accountability. I think that there are certainly performance 
incentives that you have spoken about. Maybe the carrots are 
better than the sticks. But can we track? Not just the larger 
contractors. And I want to talk a little bit about competition. 
But the subcontractors as well. Do even larger contractors know 
about subs who have performed poorly in some cases? How do we 
work with that information? And do you see a part of that in 
the bill that has already been addressed, or is that something 
that should be addressed in some other fashion?
    Mr. Francis. On the contracts, I think in the weapons 
systems area versus service contracts, one of the things is we 
kind of know almost exactly how bad things are and in services 
we don't. The data on services isn't very good at all. And I 
think over time we have been letting service contracts to 
bolster, let's say, our workforce, if you will, without really 
consciously deciding on where we want to be in terms of service 
contracts. No normative vision there.
    I think, in the weapons system areas on contracts, one of 
the things that I had mentioned earlier is we do use cost 
reimbursable contracts. There is a place to use them and a 
place not to use them. And where we are starting to use them 
where I think we have to really be careful is in production. 
When you are using a cost reimbursable contract in production, 
then to me that raises a flag that we really don't know what we 
are producing yet.
    The other area I think is using award fees. And we have 
done a number of reports on award fees now where what you 
described is exactly what was happening, that contractors were 
getting pretty big award fees for not performing well. I think 
the issue of visibility into subcontractors is a key one. I 
don't know that the primes have good visibility, and it 
especially becomes a problem when you are doing systems of 
systems.
    So I think to the extent that you can address a little bit 
more about what goodness looks like, matching contracting 
instruments to what is being acquired, and protecting the 
government's interest, I think there is some things that could 
be addressed there.
    Mrs. Davis. Mr. Berteau, did you want to comment on that?
    Mr. Berteau. I have spent a lot of time looking at the 
services contracts. We do a lot of analysis of that at CSIS, 
and I also was on the Gansler Commission looking at contracting 
in Iraq and Afghanistan.
    I think that for purposes of this bill the focus is 
appropriately where it is now, and I think that there is much 
that you can do as a committee in the services contracts area. 
But I would urge the committee to save that for subsequent 
legislation even though there are some overlaps.
    Mrs. Davis. And I know that you mentioned--go ahead, 
please.
    Mr. deLeon. For many years we regarded contracting and the 
people responsible for contracts as part of the tail. And I 
think what we found coming out of ongoing military operations, 
that the people that write O&M contracts are part of the tooth; 
and, that is if you don't have those people up front you get 
some of the issues that you talked about: poor execution, poor 
accountability, dollars squandered and unaccounted for. But we 
have got to change our mindset. The people, the civilians that 
do contracting, particularly battlefield contracting, are part 
of the tooth.
    Mr. Berteau. I come from alligator country, and we know 
that alligators can kill with their tails just as effectively 
as they can kill with their teeth.
    Mrs. Davis. Thank you.
    Mr. Andrews. Thank you very much. Thank the gentlelady.
    The gentleman from Colorado, a very involved member of the 
panel, is recognized for five minutes.
    Mr. Coffman. Thank you, Mr. Chairman.
    When we talked about major weapons system acquisition, it 
would seem to me that we ask the contractors, the defense 
contractors, sometimes to develop technologies that are not yet 
mature, to not simply to produce the system but to develop a 
system. What would the world look like if we in fact truly 
bifurcated those two elements? And then one was that we 
contracted for the development of a specific system to meet 
whatever requirements were laid down and separated that out 
from the production of a system? Could you, anybody, speak to 
that?
    Dr. Chu. I think that is a very interesting idea, but it 
would require substantial revision to the U.S. Government's 
stand on how profits are allowed. The current reality is the 
major profits of most contracts are in production, not in 
development phase. So while your idea is if you invite separate 
contract development without any--and in fact I think you 
almost have to go to the point of saying these will not 
necessarily be firms who are going to get the production 
contract, because I think that is part of the current paradigm 
that does cause some of the dysfunctional behaviors that are 
being implemented. It will take a major change in how the U.S. 
Government thinks about this function. One advantage of course 
is that you could encourage more designs if you were willing--
in fact, discipline issues that my fellow panelists have 
underscored, if you are willing to say no. No, we are only 
going to do one or maybe we are going to do zero of these, even 
if the development is successful, so that you separate the 
development function from the production function in terms of 
how you think about weapons system procurement. But that would 
be truly a revolutionary step, in my judgment, in terms of how 
the United States has typically done it.
    Mr. deLeon. To the gentleman's question, I think 
engineering gives you technical data. So the engineer from the 
contract, the engineer from the government, the engineer from 
MIT all are giving you data that you can then analyze. If you 
don't analyze it and force the tradeoffs, then I think you are 
missing an opportunity. But we need to make sure that some of 
our most successful programs have been driven by the 
engineering rather than driven by budgets, things like that.
    The Global Positioning System (GPS), that was a revolution. 
It was generated by the engineering of it. David Packard 
always, though, when he testified in 1986 was enamored with the 
Advanced Medium-Range Air-to-Air Missile (AMRAAM) program 
because there was a competition between competing engineering 
houses. The winner was selected on the design, but then both of 
the engineering houses ended up producing part of it. So it was 
an extremely competitive environment and an extremely 
successful program in terms of the advanced air-to-air missile. 
I think it is still very much in the inventory and very much 
leading edge.
    Mr. Berteau. Mr. Coffman, I think you have hit on a very 
important issue that goes well beyond the scope of the bill but 
is worth the attention of the committee for three reasons. One 
is of course our past history is we rely upon technology 
advancement to sustain our defense advantage worldwide and our 
national security advantage worldwide. But what has allowed 
that to happen is not only the model that Dr. Chu described. 
There was in fact a world in which defense was a big driver on 
a lot of these technologies. And we are now facing a future 
where defense is not the driver it once was. In fact, there are 
a whole lot of elements of the economy that are bigger drivers 
both within the U.S. and globally. We were also the driver at 
the technology edge globally, and there are some who still 
believe that 95 percent of all the important defense technology 
originates in the U.S. I do not count myself amongst those. I 
think we need to have a system that allows us to take better 
advantage of what is being developed elsewhere. And I think, 
ultimately, we have to ask ourselves the question: Where is 
innovation going to come from? And how is defense going to take 
advantage of that when we are not the ones who pay for it?
    So I think you have raised some very, very critical issues.
    Mr. Francis. Mr. Coffman, a couple of thoughts. One of the 
risks in separating, if you will, the system development phase 
from production is in the past we have had problems with the 
engineering in the system phase not paying enough attention to 
production, and then when we went into production you had to 
redo the design to make it producible. And I think what we 
found in the best industry practices is they are actually doing 
more teaming there and making design build teams to bring that 
production discipline into the design process.
    Where I would think more about making the separation is 
between the technology development and the system development. 
Right now, we are pushing technology into system, and then we 
can't get the system development done right. So I would think 
more about making the dichotomy right there.
    Mr. Coffman. Thank you very much, Mr. Chairman. I yield 
back the balance of my time.
    Mr. Andrews. Thank you very much, Mr. Coffman. The Chair is 
pleased to recognize the gentleman from Pennsylvania, who has 
made a very important contribution to this bill in the area of 
bringing out confidence points in estimates, Mr. Sestak, for 
five minutes.
    Mr. Sestak. Thanks, Mr. Chairman. And that was going to be 
my first question.
    Mr. deLeon, you have the ability to be over here and to be 
over there across the river. The aircraft carrier which is in 
the budget, the Future Years Defense Program (FYDP), is going 
to cost I think $13 billion. The internal confidence factor of 
the Navy, which is not provided over here, is about 37 percent. 
The other day when the Littoral Combat Ship was told it wasn't 
going to cost $250 billion but $450 billion, when asked what 
the internal confidence factor was, they said about 50 percent.
    Now, you can get that information if you get a letter 
signed by the chairman, not this young one. But the point here 
is, don't you think that in this transparency and as we are 
dealing with this issue, it would be good for us to receive the 
confidence factors of the costing that we are about to 
appropriate national treasury in so we don't come back and beat 
you up, of what do you mean it is going to cost more? Well, I 
told you 50 percent confidence.
    What do you think?
    Mr. deLeon. I think that is absolutely right. And, in fact, 
the GAO as a tool that the House Armed Services Committee has 
played a historic role.
    Mr. Sestak. Thank you. That is what led me into this.
    The second question I have, Dr. Chu, because I was taken 
also with what Mr. deLeon said, force the tradeoffs. When then 
Senator Nunn, who wasn't even a member of the Senate Armed 
Services Committee (SASC) committee stepped onto the House 
floor and said, let's start having us know when you break 
thresholds, and he said--which became the Nunn-McCurdy 
threshold, we have had 30 programs since January 2006 break 
Nunn-McCurdy. It is a wonderful monitoring system, but there is 
no teeth. All of them got approved, and, yep, that is great, 
continue on.
    What do you think about forcing the tradeoffs, that when 
you have a significant break, that you come back and you say, 
look, here is what the real cost is, and here is the confidence 
factor on it. It is about 80, 85 percent. And if we go to the 
critical break, you know, the 15 percent more, here is where we 
will trade it off. In other words, forcing the tradeoffs. I 
thought Mr. deLeon had a very key point there. I am kind of 
talking about Nunn-McCurdy on steroids.
    Dr. Chu. Congressman, I am told that the recent revisions 
to Nunn-McCurdy have made it more effective in the direction 
that you----
    Mr. Sestak. No sir, not this way. I have read both bills.
    Dr. Chu. No, I am not speaking to the bills here, but 
changes in the last several years to Nunn-McCurdy are alleged 
by some. I am not expert on recent developments to have 
improved that process.
    I think the real tradeoff problem, however, is not Nunn-
McCurdy per se. Nunn-McCurdy does require the Secretary to 
certify, as you know, if there is a break that he is going to 
report on why that has got to be true. The real tradeoff 
problem is inside the Department. And the same thing happens 
here in the Congress, as I know you would acknowledge. If you 
are going to recognize a higher estimate for system A against a 
fixed top line, it means someone else has to give up resources. 
And that is why the tension that Mr. deLeon described occurs 
when the cost doesn't go forward, not because the estimators 
are unpleasant people; it is because they are raising an issue 
of, at the highest level of the Department, sacrificing some 
other objective in order to make this program right. And that 
is always a very painful decision.
    Everyone is enthused about the wisdom of the higher 
estimate. It would be more likely to predict correctly the 
cost. The real tension, the read tradeoff, in my judgment, is 
what do you have to give up within a fixed set of resources in 
order to sustain that higher-priority program?
    Mr. Sestak. Sir, I have four questions. Could I have a 
second round if I don't finish these four after everybody else?
    Mr. Andrews. We have to consult with the Minority about 
that.
    Mr. McHugh. I think I can speak for our side. That is fine.
    Mr. Andrews. I know Mr. Taylor is also going to have a 
second round, so, yes.
    Mr. Sestak. I understand that. But if you take that as a 
given, this tyranny of optimism that is inherent in the 
Pentagon with defense industry, however, does that then say but 
Nunn-McCurdy doesn't matter, why bother to tell you about it--
in other words, just to go down to another level, having made 
that decision there, should we then have more than a monitoring 
system, but one that continues to force tradeoffs, which they 
don't presently do? You would like to get that at the 
beginning, but shouldn't we continue that throughout?
    Dr. Chu. I am not arguing against your point, sir. I think 
I make obviously a different observation. I think the real 
problem when it comes to recognizing these issues in the budget 
specifically, the President's budget request, is that to do so 
requires some other objective be sacrificed. And that is where 
the tension arises. So, yes, there is the optimism out there, 
all those problems, but in the end it is not as if people don't 
know they are taking risks. They know that. The question is 
where do they want to take those risks?
    Mr. Sestak. I agree. I think you have hit it right on the 
head, and I just didn't know if still had to force those 
tradeoffs later on.
    Can I ask you a question, sir? JROC. I was quite taken, and 
I have told Mr. Andrews, that after Goldwater-Nichols was 
passed, and the Chairman walked into the tank that day, the 
other four members of the Joint Chiefs of Staff stood up for 
the first time. He was now not one of equals, he was the 
decisionmaker.
    I have watched JROC evolve. That was operations. It is not 
procurement. And JROC over the years, as you were over there, 
seemed to get so little bit of OSD into it on the lower levels, 
you might even sit at JROC today, but I am quite taken that it 
is not dissimilar, in my opinion, than the Joint Chiefs of 
Staff or pre-Goldwater-Nichols. I have got my program, you have 
got yours; why don't we kind of agree how we are going to do 
them both. It kind of gets to the tension question here.
    Should legislation, Goldwater-Nichols II, be brought about 
to say, well, wait a minute, the Chairman, who really is in 
charge of the JROC, by the way, even though the Vice Chairman 
sits there, should be the decider of the tension of the 
tradeoffs rather than the committee?
    Mr. Francis. Mr. Sestak, I don't know that legislation just 
to make the Chairman the decider is going to change the status 
quo much. I think our analysis shows that the joint staff is 
basically overwhelmed with the amount of volume that comes in, 
and they simply don't have either the people or the analytical 
tools to come in and look at what the priorities are or what 
tradeoffs are necessary. So a new Chairman with that power 
would still be limited by the abilities of his staff.
    At the same time, most of the requirements coming in are 
still servicecentric, so I think we would have to do more to 
get at those kinds of problems.
    The Chairman. [Presiding.] I thank the gentleman.
    We will go to a quick second round. Mr. Taylor. Anyone else 
that has additional questions, we will go to them, and Mr. 
Taylor.
    Mr. Taylor. Thank you, Mr. Chairman.
    And I appreciate you gentlemen to stick around this long.
    Going back to Mr. Berteau's comments on the thousands of 
pages of requirements, when I think we correctly went back to 
having the LCS made with military specs rather than civilian 
specs since this is a military craft. But to your point. My 
impression is that the people, the superintendent of 
shipbuilding, are very good at looking at a set of specs, 
looking at what the contractors are doing, but really aren't 
qualified enough to say, do you know what, there is a better 
way to get to this place. They are pretty good at seeing that 
the specs are being made; I don't think they have enough 
expertise to say, you know what, another yard is doing this 
quicker, better, faster by acquiring this piece of machinery.
    If you think about it, guys like Admiral Sestak had many 
years of training to become ship drivers, Captain Ebbs to 
become a submarine captain, et cetera, et cetera. What I sense 
we are lacking within the military is a dedicated career path 
with the adequate training to become acquisition experts. And 
again, given the vast variety of your expertise of you four 
gentlemen, if you think I am wrong, tell me so; if you think we 
are on to something, I would like to know that.
    The second thing is when I visit Walter Reed, as all of us 
do, I encounter a lot of people who want to stay in uniform. 
And they realize they have lost an arm, a leg, their hearing is 
not what it was, their eyes aren't what they were, but they 
want to stay on the team. Should we be making a greater effort 
as a nation to take some of those folks who are no longer going 
to be special forces-qualified or no longer flight-qualified or 
no longer infantry-qualified and offering them the option of 
pursuing a career in the military as an acquisition expert, 
which I think you can be trained to become?
    So it is a two-part question, and I would welcome your 
thoughts on it.
    Dr. Chu. If I may, Congressman, on the second part, in my 
judgment, the military services are forging a new path in this 
regard and have been quite open to continued service in a 
different specialty, not necessarily acquisition per se.
    Mr. Taylor. Have they pushed acquisition as one of those 
options, Dr. Chu? I would think that would be a natural.
    Dr. Chu. That certainly could be one of them. But they 
have, in my judgment, opened the door on a whole wide range of 
possibilities for people. And so you do have individuals doing 
all sorts of things, including one officer lost his eyesight 
teaching at West Point, for example, as an extreme case. But I 
have had individuals--as you know, in fact, one individual 
returned to combat with a prosthetic leg. So I do think 
military services have grasped the spirit of your second 
challenge.
    On the first, whether it is adequate or not is obviously a 
judgmental issue, but I think it is important that, to 
direction from the Congress, the Department in the last 20, 30 
years has invested a lot in Defense Acquisition University, in 
the notion of an acquisition career professional and what that 
certification might entail. So I do think there is in both the 
civilians and the military a good set of tools once again.
    Mr. Taylor. So help me out. I know, for example, the 
nuclear school is in Charleston. Where do we train people to be 
an acquisition expert?
    Dr. Chu. Not exclusively, but a good deal of it goes on 
right down the road here at Fort Belvoir at Defense Acquisition 
University Program Defense System Management College. And there 
is a well-worked-out curriculum, a set of standards. In terms 
of certification you get various levels of certification 
depending upon the training that you have received. Now, 
whether it is enough is another issue.
    Mr. Berteau. Mr. Taylor, we spent a lot of time looking at 
this on the Gansler Commission from the narrower set of just 
contracting career fields, not overall program management and 
acquisition, and we found that there had been a dramatic 
lessening of both the number of military who are pursuing that 
career and the opportunities to those military for promotions. 
In fact, the general officer billets have essentially 
disappeared. We went from about 20 18 years ago to 1 last year. 
Now, some of that is being reversed in large part due to some 
intervention by the Congress.
    On the broader career field for program management and 
acquisition, there is still an awful lot of dynamics at work 
that does not make it the most attractive career field for 
military promotions. It is not a warfighter field. I think the 
proposition that you put on the table of warfighters who no 
longer can be warfighters is not a bad one to look at, but it 
is a tough game to start late in your career and become the 
level of expertise that you need to have.
    The nuclear, I think, is a perfect example. Mr. deLeon 
brought it up earlier. You have got to build that in from the 
01, 02 level if you really want to have flag rank who are 
capable of really managing the complexities that we have out 
there today.
    Mr. deLeon. But, Mr. Taylor, you are asking one of those 
core questions where the more we delve into it, the more we 
sort of are striving to actually get the truth here. Most of 
the schools that focus on program management are focused on the 
business side of that, acquisition policies, things like that. 
And when the Members broke for the vote, we sort of caucused 
here and we talked about the electromagnetic propulsion as 
contrasted to steam-generated catapults. And so when do you 
know that you are ready to take a jump in technology that will 
actually help the warfighter versus when are you pushing 
technology simply because your technical and scientific world 
says you can do it differently and you can do it fancier?
    And so that kind of tradeoff doesn't get taught in the 
schools, but that was actually an excellent example. And we 
caucused and talked about it because we all have different 
views on it sort of. But that is going to drive cost 
tremendously.
    And so is there a flaw in the current system that says we 
have got to change the technology? If we go to the advanced 
technology, will it be a game changer? But as we school people 
on the program management side, we don't really focus on the 
engineering and the technical. And I think one of the tools 
your bill creates would be--and the testimony of our former 
colleagues Paul Kaminsky and Dr. Gansler really focusing on 
this technical piece, not that the government is going to be 
designing these systems, but so that the government can 
adequately get into the middle of the tradeoffs on the 
engineering side. So long-winded.
    But our schools really focus on business side issues. And 
at the core of some of these critical decisions are engineering 
and technical rather than business and budget. And so we have 
got to acknowledge that and factor that into the tools that we 
have.
    Mr. Taylor. Thank you, sir.
    Thank you, Mr. Chairman.
    The Chairman. Mr. Sestak has additional questions.
    Mr. Sestak. Thank you, sir. I just have two.
    Dr. Chu, I think you are right about this, having to look 
at this tension at the beginning, or let me just phrase it that 
way. And I would like to ask that question, but first another 
one.
    Back when Alan Antovin established--you weren't born then--
what became PA&E and the CAIG was born, the costing office, and 
no other service had a costing office in the 1960s. Now you got 
a couple of people there, and you mentioned worried they don't 
have the resources, joint staff. This bill talks about having a 
person bless the cost from the services. How can he if the 
CAIG, which traditionally is almost always right, even they 
suboptimize the cost, if he doesn't have the resources and the 
independent assessment of what the services under this tyranny 
of optimism give him? Don't you really have to take it the 
whole next step and have an independent office which comes to 
Congress as the cost?
    Dr. Chu. I wouldn't recommend a separate office do a 
reporting responsibility. I think that is not going to work 
well over the long term. I do think you raise a critical point 
I touched very briefly on earlier, which is does the CAIG and 
do the service independent cost functions have adequate staff 
to carry out what is expected in this statute? And I do think 
encouraging some reporting on that point in the report the bill 
asked for would be meritorious without being unduly intrusive.
    It is the case, apparently, that the costing staffs were 
cut back as part of the general reductions in the 1990s. And it 
is not clear, therefore, that the cost staff numbers today----
    Mr. Sestak. If I might, just because of time, I think it is 
a great point, but if there is no teeth in them--it is nice for 
them to make an assessment--shouldn't that--since they are 
almost always every time much better, more realistic, and, you 
know, studies have been done on this, why don't we just take 
their costs?
    Dr. Chu. That is obviously the Congress' privilege.
    Mr. Sestak. Could I ask a second question, because I think 
you hit it on the head actually. You have something called the 
JROC, the Joint Requirements Oversight Committee. That is where 
this inherent tension should be decided. It should be decided 
by a committee, but it needs to be decided at the very 
beginning.
    How do you--I mean, I honestly believe that the unfinished 
business of Goldwater-Nichols I, which was tremendous, but the 
unfinished business was Program and Budget Analysis Division 
(PBAD) sitting down there in J8, a little budget office, and 
then under JCIDS--and General Cartwright, when he was the 
three-star there, created that wonderful modeling, and the 
JCIDS process and all the analysis that gives you the inherent 
tension gets to the JROC. That is the decision point.
    How can we, unless we change JROC, like we did the Joint 
Chiefs of Staff, ever get--and, Mr. deLeon, if you would 
comment on it, too--truly joint requirement that resolves up 
front the inherent tensions between my requirement and my 
requirement? And that is what Goldwater-Nichols I did on the 
operational side. And everything is resident in JCIDS, sitting 
in J8, with OSD participating to resolve it at JROC.
    Either comments, both of you?
    Mr. deLeon. This is another one of those questions where 
when you start peeling back the layers, you get to ground 
truth.
    After Goldwater-Nichols the prime focus was changing the 
way we did military operations, because that was the most 
pressing.
    Mr. Sestak. Can you speak up closer, sir?
    Mr. deLeon. After we approved Goldwater-Nichols, the most 
pressing was to make the changes in how we did military 
operations, stressing jointness. Now, where the JROC had 
success was really in creating that joint environment. So it 
was a command and control structure that all of the services 
could use; it was the integrating tools that would integrate 
air, land, sea and space.
    And I remember walking into a DRB meeting, the Defense 
Resources Board, where not the acquisition, but the budget 
decisions are made. And the services are grumbling about the 
large C3I bill and the intel bill, because those are areas 
where the JROC has had an impact, and were very definitive in 
terms of integrating forces in the joint combat arena. And so 
there would be grumbling from the services about the expense of 
these systems. But then you would ask, well, give us a show of 
hands who don't believe these are the budget priorities, and 
those hands would never appear.
    So where the JROC did do its job very well was creating the 
integration of the joint environment from a technology point of 
view. Where the JROC probably needs to go to a new phase, to 
the second Goldwater-Nichols, which is an appropriate 
description of it, is how to get to the joint environment on 
the prime warfighting tools that are unique to the services and 
to force those tradeoffs.
    And then back to Mr. Taylor's issue. To have that 
discussion up front, is a--and I don't know the answer--is a 
steam-generated catapult sufficient, or do you need to have an 
electromagnetic generated catapult system? It is going to be a 
cost driver. It is going to have operational effective issues. 
But forcing that kind of thing into a JROC environment up 
front.
    Mr. Sestak. Thank you.
    The Chairman. I thank the gentleman, and a special thanks 
to our panel for this excellent testimony and advice. We go 
from here. We will mark this bill up, the House bill up, on May 
7th, and we look forward to that moment. Good day.
    [Whereupon, at 12:45 p.m., the committee was adjourned.]




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                            A P P E N D I X

                             April 30, 2009

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                             April 30, 2009

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              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                             April 30, 2009

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             RESPONSE TO QUESTION SUBMITTED BY MR. BARTLETT

    Mr. Berteau. My analysis includes my fourth category of budget 
disruptions. Mr. Bartlett could, if he chose, combine my fourth 
category of budget disruptions with his third category of excessive 
optimism, since many budget disruptions are caused by someone's 
optimistic belief that DOD can procure the same amount of capability 
for less money. Here are my percentages:

    Requirements Creep: 20%
    Underbidding: 20%
    Excess Optimism: 40%
    Budget Disruptions: 20%
    [See page 21.]
                                 ______
                                 
            RESPONSES TO QUESTIONS SUBMITTED BY MR. ANDREWS
    Mr. Berteau. Mr. Andrews, what you propose would in my judgment and 
experience result in substantial and positive change in the 
decisionmaking dynamics of the requirements process. If DOD were forced 
to prioritize its requirements for systems and then to assess the cost 
impact of those requirements, it would be possible for decisionmakers 
inside DOD and in the Congress to decide if the match of requirements 
priorities and cost is the right match. It would make it possible to 
make a tradeoff decision that today is very hard to make, because the 
information is largely not available. This would be a big improvement, 
and I thank you for asking the question. [See page 23.]
    Mr. Francis. My experience has been that once a program is 
underway, its requirements do in fact become negotiable. For example, 
quantities are often cut to offset cost increases; reductions in 
performance characteristics, like the range of an aircraft are found to 
be acceptable; and lower than expected reliability is found acceptable 
as well. These requirements are not offered up as negotiable at the 
start of a program. It is too often the case that the dollars 
appropriated for a program buy less than expected--reducing buying 
power. If more was known about what a program could really deliver, 
then more requirements could be negotiated at the start and DOD could 
make better decisions as to which programs warrant investment and at 
what levels.
    A key reason why such tradeoffs are not made at the start of a 
program is that too often, programs are allowed to enter and proceed 
through the acquisition process with overly optimistic requirements 
that are not fully understood or technically feasible. This is due in 
part because early systems engineering has been lacking before weapon 
systems are approved to start development. Systems engineering 
translates customer needs into specific product requirements for which 
requisite technological, software, engineering, and production 
capabilities can be identified through requirements analysis, design, 
and testing. Early systems engineering provides the knowledge a product 
developer needs to identify and resolve performance and resource gaps 
before product development begins by reducing requirements, deferring 
them to the future, or increasing the estimated cost for the weapon 
system's development. Because DOD often does not perform the proper up-
front requirements analysis to determine whether or not a program will 
meet its needs, significant contract cost increases can and do occur as 
the scope of the requirements change or become better understood by the 
government and contractor.
    Recent DOD-initiated changes to the acquisition system as well as 
the enactment of the Weapon Systems Acquisition Reform Act of 2009 
could provide a foundation for establishing more realistic requirements 
and sounder business cases for weapon programs. The emphasis on 
improved systems engineering, early prototyping and preliminary design 
reviews, and strengthened technology readiness assessments should make 
the critical front end of the acquisition process more disciplined and 
provide key DOD leaders with the knowledge needed to make informed 
decisions before a program starts. However, to achieve improved program 
outcomes, DOD must ensure that these changes are consistently 
implemented and reflected in decisions on individual programs. 
Furthermore, to produce lasting change, the weapons acquisition 
environment and the incentives inherent within it will also have to be 
confronted and addressed, such as the unhealthy competition for funding 
that encourages programs to pursue overly ambitious requirements and 
appear affordable when they are not. [See page 23.]

                                  
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