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



                         [H.A.S.C. No. 111-52]
 
THE DEPARTMENT OF DEFENSE AT HIGH RISK: THE CHIEF MANAGEMENT OFFICER'S 
   RECOMMENDATIONS FOR ACQUISITION REFORM AND RELATED HIGH-RISK AREAS

                               __________



                                HEARING

                               BEFORE THE

                             FULL COMMITTEE

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD

                              MAY 6, 2009

                                     
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13

                                     
                   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:

Wednesday, May 6, 2009, The Department of Defense at High Risk: 
  The Chief Management Officer's Recommendations for Acquisition 
  Reform and Related High-Risk Areas.............................     1

Appendix:

Wednesday, May 6, 2009...........................................    37
                              ----------                              

                         WEDNESDAY, MAY 6, 2009
THE DEPARTMENT OF DEFENSE AT HIGH RISK: THE CHIEF MANAGEMENT OFFICER'S 
   RECOMMENDATIONS FOR ACQUISITION REFORM AND RELATED HIGH-RISK AREAS
              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

Lynn, Sec. William, Deputy Secretary of Defense, Department of 
  Defense........................................................     4

                                APPENDIX

Prepared Statements:

    Lynn, Sec. William...........................................    42
    Skelton, Hon. Ike............................................    41

Documents Submitted for the Record:

    [There were no Documents submitted.]

Witness Responses to Questions Asked During the Hearing:

    Dr. Snyder...................................................    55
    Mr. Taylor...................................................    55

Questions Submitted by Members Post Hearing:

    [There were no Questions submitted post hearing.]
THE DEPARTMENT OF DEFENSE AT HIGH RISK: THE CHIEF MANAGEMENT OFFICER'S 
   RECOMMENDATIONS FOR ACQUISITION REFORM AND RELATED HIGH-RISK AREAS

                              ----------                              

                          House of Representatives,
                               Committee on Armed Services,
                            Washington, DC, Wednesday, May 6, 2009.
    The committee met, pursuant to call, at 10:03 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, ladies and gentlemen. We 
welcome you to today's hearing on the Department of Defense 
(DOD) at high risk, the recommendations of the chief management 
office on acquisition reform and related high-risk areas.
    I should note up front that this hearing is a follow-up to 
our hearing on March the 12th with the Government 
Accountability Office (GAO) about their 2009 high-risk update 
and helps satisfy the committee's oversight obligations under 
the Tanner resolution.
    Our witness is Deputy Secretary of Defense Bill Lynn, who 
also has the distinction of being the Department's Chief 
Management Officer, a responsibility given to him largely as a 
result of GAO's recommendations. He has with him Mr. Shay 
Assad, Acting Deputy Under Secretary of Defense for Acquisition 
and Technology, and Beth McGrath, Assistant Deputy Chief 
Management Officer. They will assist Secretary Lynn in 
answering questions.
    The focus of today's hearing is narrower than the earlier 
hearing with GAO. We will focus today on acquisition reform.
    However, Secretary Lynn, the committee expects that you 
will provide us with a full response to the findings and 
recommendations of the GAO in its 2009 high-risk update for the 
record.
    The committee is committed to addressing all of the 
Department's high-risk areas and will remain focused on all of 
these issues, not just this year, but, of course, beyond, until 
we are able to reduce the risk in these areas to manageable 
levels.
    I should note that as the budget is not yet released, 
Secretary Lynn will not be addressing budget issues in his 
testimony today, and we have told the Secretary that, and so 
that will be out of bounds.
    The focus on acquisition informing today's hearing is more 
than timely. Tomorrow, the committee will mark up H.R. 2101, 
the Weapons Acquisition System Reform through Enhancing 
Technical Knowledge and Oversight (WASTE TKO) Act of 2009. 
Ranking Member McHugh and I, along with our partners, Rob 
Andrews and Mike Conaway, the leaders of our panel on defense 
acquisition reform, introduced the WASTE TKO Act to match the 
good work of our colleagues in the Senate, Senators Levin and 
McCain.
    We believe our bill will help substantially improve the 
oversight of acquisition of major weapons systems, but I point 
out that the bill we are going to mark up tomorrow deals with 
major weapons systems, which is only about 20 percent of the 
Department of Defense acquisition, but it is a significant step 
in the right direction.
    That bill 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 who will give us unbiased assessments of acquisition 
reforms.
    Number two, we create an intensive care unit for sick 
programs. Those are programs that are not meeting the standards 
for system development or have had critical Nunn-McCurdy 
breaches, and they will get additional scrutiny.
    Number three, we require the Department to set up a system 
to track the cost, growth, and schedule changes that happen 
prior to milestone B. It is before milestone B, as we all know, 
that 75 percent of the program's costs are actually determined.
    We will mark up the legislation in committee tomorrow with 
the goal of moving it through the House as a standalone measure 
and completing conference with the Senate before Memorial Day. 
However, many, and especially our panel on defense acquisition 
reform, will continue to work on acquisition reform this year 
and next and on the 80 percent of acquisition which lies 
outside the scope of the bill we will be marking up.
    We look forward, Secretary Lynn, to your testimony and the 
full range of acquisition testimony today.
    Now let me turn to my good friend, my colleague, the 
gentleman from New York, John McHugh.
    [The prepared statement of Mr. Skelton can be found in the 
Appendix on page 41.]

  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 join 
you in welcoming our distinguished guests.
    Mr. Secretary, welcome for your inaugural visit. I hope it 
sets the stage for many more pleasant appearances before this 
committee, and we wish you all the best in your new duties.
    As the Chairman noted, today is a follow up to a hearing we 
held in March on some of the findings with respect to GAO's 
assessment of high-risk federal programs, and that is certainly 
important, but, as well as the Chairman noted, this is a quite 
timely opportunity as we will be marking up the acquisition 
bill.
    I want to add my words of appreciation to Mr. Andrews and 
Mr. Conaway and to the panel that they led in coming up with, I 
think, a terrific product to deal with this issue.
    GAO found a lot of frustration in managing some of these 
high-risk programs. It seems when a DOD program makes the list, 
it simply does not get removed, and we have to ask ourselves: 
Does either DOD management systems and processes represent an 
inherently risky undertaking, or perhaps has, historically at 
least, DOD management been incapable of addressing the root 
causes? The fact is we just cannot throw up our hands and 
accept that the Department cannot or will not address these 
challenges, but rather we have to take action.
    And, Mr. Secretary, I know you understand full well in 
large measure that responsibility falls on your shoulders, 
particularly as the Chief Management Officer, and it is one we 
share on this committee. It is a responsibility that we hold, 
along with you, to assume a leadership role in advocating for 
reforms, particularly for areas deemed at high risk, such as 
defense acquisition, and speaking for myself, I pledge we will 
stand ready to work with you in achieving those objectives.
    Many in this body have argued, not so much in this chamber, 
that curtailing the cost of weapons programs through reforms to 
the acquisition system will generate sufficient revenue to 
offset what they view as both possible and desirable cuts in 
defense budgets.
    I want to be clear: I fully agree that reforms are needed. 
We have to keep in mind, however, that any cost savings are not 
going to materialize overnight. As the Chairman noted, along 
with many of our colleagues on this committee, we introduced 
legislation on acquisition reform and added our committee voice 
to the ongoing efforts to reform the defense acquisition 
process. It is similar in many ways to the bill introduced in 
the other body by Senators Levin and McCain. Yet our proposal 
would create a more transparent procurement system with added 
competition and independent scrutiny.
    And while creating, as what the Chairman rightfully noted, 
was intensive care for programs that have already entered into 
production, our approach focuses heavily on the early stages of 
development where, as he noted again very accurately, most of 
the sins of high-risk programs are created. This should, in our 
view, enable the Department and military services to save 
significant money on new starts, thus providing better outcomes 
over the life of these weapons programs. However, the fewer new 
acquisition programs created, the fewer opportunities there may 
be to capitalize on these reforms.
    Mr. Chairman, I would ask that my entire statement be 
entered into the record.
    [The information referred to was not available at the time 
of printing.]
    The Chairman. Without objection, of course.
    Mr. McHugh. And I will simply say in conclusion, as I 
reiterate, although I strongly believe continued reforms of 
procurement processes and other DOD business processes are 
essential, I have to break with those that point to waste and 
mismanagement in DOD as grounds for tightening the defense 
budget. Cuts in programs that suffer from cost overruns are 
warranted when they reform behaviors that led to negative 
procurement outcomes, but employing across-the-board cuts, as 
some have suggested, is, in my judgment, a blunt instrument 
that does little to resurrect the Defense Department's business 
practices.
    Secretary Lynn, thank you, again, for being here, for 
taking the time to be with us this morning, and we look forward 
to the discussion ahead and, as I said, working with you.
    Thank you, Mr. Chairman. With that, I would yield back.
    The Chairman. Thank you, Mr. McHugh.
    I will announce again tomorrow that we will be marking up 
the acquisition bill, and besides a special thanks to Mr. 
Andrews, Mr. Conaway, the two leaders of the panel, additional 
thanks go to members of the panel--Mr. Cooper, Mr. Ellsworth, 
Mr. Sestak, Mr. Hunter, Mr. Coffman--for their work on it, and 
we hopefully will be able to finish the markup tomorrow and 
take it up on the floor within the very, very near future.
    Secretary Lynn, an old friend of ours, we appreciate your 
being with us today, and we look forward to your testimony. So 
please proceed.

 STATEMENT OF SEC. WILLIAM LYNN, DEPUTY SECRETARY OF DEFENSE, 
                     DEPARTMENT OF DEFENSE

    Secretary Lynn. Thanks very much, Mr. Chairman, Congressman 
McHugh.
    The Chairman. You may want to pull that real close to you.
    Secretary Lynn. Okay. Generally not accused of having a----
    The Chairman. There you go.
    Secretary Lynn [continuing]. Low-speaking voice, but thank 
you.
    Thank you very much for the opportunity to provide an 
overview of the Defense Department's plans for acquisition 
reform. As you have noted, Mr. Chairman--Mr. McHugh also 
noted--I am the Chief Management Officer of the Department, and 
underneath that rubric, I have the primary responsibility for 
ensuring the smooth functioning of the Department, and this 
includes oversight of the weapons acquisition process.
    On several occasions, the President has talked about the 
urgent need for acquisition reform. He has stated that it is an 
important part of the overall attempt at reforming government 
practices, gaining efficiency, and improving our national 
security.
    I know that this committee shares the President's concern 
about how the Department makes acquisition decisions and is 
preparing legislation that the Chairman mentioned will be in 
markup tomorrow, and this legislation will address those areas 
that need reform. I and the rest of the Department look forward 
to working with you, as well as your counterparts in the 
Senate, in addressing these longstanding issues.
    And I will ask that my full statement be put in the record, 
but let me make a few points and then turn to your questions.
    The Chairman. Without objection.
    Secretary Lynn. The first step in reforming our acquisition 
system is to have a firm grasp of the major problems. The 
problems start with the process where we establish the 
requirements for new weapons systems. Too often, we establish 
requirements that are at the far limit of technological 
boundaries.
    A related problem is our difficulty in making tradeoffs 
between improved performance on one hand and cost and schedule 
parameters on the other. In what is often an admirable effort 
to get the best technology in the hands of the war fighter, we 
choose to reach for one last performance improvement, but the 
end result of this so-called requirements creep is that we 
delay getting any improved system to the war fighter and we pay 
so much for the capability that we displace other priorities 
from the budget.
    One of the critical reasons for some of our shortcomings in 
the acquisition process is the lack of critical skills in the 
acquisition workforce. Over the last ten years, defense 
contract obligations have nearly tripled, while our acquisition 
workforce has fallen by more than ten percent. In the absence 
of these personnel, we have outsourced too many functions that 
should be performed inside the Department.
    We also rely on over-optimistic cost estimates that assume 
that every step in the development process will go as planned. 
These estimates do not include sufficient provision for 
unexpected technological production or other challenges, and in 
the end, it is impossible to attain budget stability if we 
underestimate the cost of our weapons systems from the start.
    Finally, the entire weapons development cycle is too 
lengthy, as long as two decades from concept development to 
full production. This means that the Department has to go 
outside the normal acquisition process for urgent war-fighting 
needs, as was the case with the Mine Resistant Ambush Protected 
vehicle (MRAP) to address the Improvised Explosive Device (IED) 
problems in Iraq. Every additional process, every additional 
review that we add to the acquisition cycle in an effort to 
reform it can undercut itself by lengthening the overall cycle 
time.
    To address the problems that I have just outlined, the 
Department is undertaking a far-reaching set of reforms, a set 
of reforms that I think is consistent with the direction of the 
bill that you have before you in your markup and similar to the 
Levin-McCain bill in the Senate.
    Our initiatives start with people. It is our most important 
resource. In order for the acquisition system to function 
effectively, it must be supported by an appropriately sized 
cadre of acquisition professionals with the right skills and 
the right training to successfully perform their jobs. In the 
budget that we will submit tomorrow, we will propose increasing 
the number of acquisition personnel by 20,000 positions over 
the fiscal year 2010 to 2015 Future Years Defense Program 
(FYDP).
    This will include over 9,000 contracting, cost-estimating, 
pricing, as well as contract oversight positions at the Defense 
Contract Audit Agency and the Defense Contract Management 
Agency. These new positions will ensure that DOD knows what it 
is buying and gets what it pays for. The remaining 11,000 new 
hires will come from the conversion of existing contractor 
positions to federal civilian positions. These are positions in 
systems engineering and program management and logistics and in 
business management.
    Second, we would propose several steps to put greater 
discipline into the front end of the acquisition process. Each 
major program will be subject to a mandatory process entry 
point, the material development decision milestone prior to 
milestone A. This will ensure programs are based on approved 
requirements and a rigorous assessment of alternatives. The 
objective will be to balance performance needs with schedule 
and cost limitations.
    To reduce technical risk, our standard practice will be to 
conduct a preliminary design review before milestone B. In 
addition, independent reviews must certify the maturity of 
program technologies, and we will use competitive prototypes 
whenever possible and cost effective. While we ensure 
oversight, we must not overburden the process with reviews. The 
lead time to design and deliver capability is already too long. 
As a result, we will be mindful to not overburden ourselves 
with more checkers than those being checked.
    A third improvement we would propose to make is in the area 
of cost estimating. To strengthen our cost analysis capability, 
we plan to expand the size and the capabilities of the 
Department's independent cost arm, the Cost Analysis 
Improvement Group, or CAIG. To reduce the risk of cost 
overruns, we will establish a preference for funding 
acquisition programs to the CAIG's estimate of the President's 
budget request and to include those estimates in the Future 
Years Defense Program.
    There is one important caveat, however. We should avoid 
separating the cost-estimating function that is inherent in the 
CAIG from the overall Program Analysis and Evaluation (PA&E) 
organization. PA&E performs a wide variety of planning and 
programming functions that require accurate cost estimates. 
These include the Quadrennial Defense Review, program 
assessments, FYDP analysis, as well as weapons systems cost 
estimates. All of these functions require a strong cost 
analysis team, and that cost analysis team should be integrated 
inside PA&E.
    A fourth proposal would be to strengthen the execution 
phase of our weapon development process.
    First, we plan to explore greater use of fixed-price 
development contracts. In the past, we have defaulted to the 
use of cost-type contracts for development programs. And there 
are risks inherent in using fixed-price contract vehicles for 
development programs that involve cutting-edge or exotic 
technologies. But if we succeed in reducing the technological 
risks of many programs through the strengthened front-end 
process that I just described, we should be able to make 
greater use of fixed-price contracts in development programs. 
This should make cost estimates more predictable and cost 
overruns less frequent.
    Second, to address the issue of requirements creep, we will 
continue to use configuration steering boards to provide a 
mechanism to preclude destabilizing requirements from being 
introduced midway through a weapons development process and, 
further, to match requirements with technology that is mature.
    Third, to align profitability with performance, we have 
several initiatives. Most contract fee structures, for example 
incentive fees, will be tied to contractor performance. We will 
restrict the use of award fee contracts to those situations 
where more objective measures do not exist. We will also 
examine the use of unpriced contractual actions whenever 
possible. Excuse me. We will eliminate the use of unpriced 
contractual actions whenever possible, and we will ensure the 
use of multi-year contracts is limited to instances when real 
and substantial savings will be accrued to the taxpayer.
    Let me sum up by saying DOD acquisition reform is 
extraordinarily complex and challenging. We are mindful of the 
fact that since the end of World War II, there have been nearly 
130 studies of acquisition reform. Many very smart people have 
tried and have met with only limited success.
    In this regard, we need to keep in mind the importance of 
not making the system worse in our efforts to achieve reform. 
But with these lessons in mind, we will move forward and 
continue to improve our acquisition workforce, our procurement 
and acquisition processes. We are confident that the results we 
achieve on behalf of the war fighters and the taxpayers will be 
well worth the effort.
    This committee and the Senate have both formulated 
legislation aimed at improving our acquisition system. We agree 
with the strategic direction of both bills, and we wish to work 
with the Congress to ensure that we get the best-designed 
initiatives that can be effectively implemented.
    As the DOD Chief Management Officer, I am committed to 
improving the Department's business operation, and there is no 
doubt in my mind that significant improvement is achievable in 
this area.
    I look forward to working with you, Mr. Chairman, and am 
happy to take any of your questions.
    [The prepared statement of Secretary Lynn can be found in 
the Appendix on page 42.]
    The Chairman. Thank you so very, very much. It is good to 
have you back before us, and I assume that Mr. Assad and Ms. 
McGrath will be available for questions.
    Secretary Lynn. When they get that tough. Yes, sir.
    The Chairman. When they get that tough. All right.
    Secretary Lynn, it sticks out all over your testimony about 
the need for good personnel in the acquisition field. Would you 
care to expand on that? How do you get them and how do you keep 
them? This is, I think, the pole star of any solid reform, 
getting the good people to follow the law that we pass and to 
do it correctly.
    Secretary Lynn. You are absolutely right, Mr. Chairman. The 
foundation of any acquisition reform effort is to expand the 
workforce, to improve their quality through enhanced training 
and better standards.
    We are proposing, as I said in my testimony, 20,000 
additional acquisition workforce personnel. Frankly, we are 
correcting a process where I think we oversteered in the 1990s 
and subsequently. We took too many people out of the 
acquisition workforce. I think that was actually an example of 
where an acquisition reform effort went awry. That was intended 
as a reform effort, but I think it, as I say, oversteered.
    We are trying to get back to the center line with these 
additional 20,000 people. We are gearing up our human resource 
process to be able to hire them. We will be both hiring new 
personnel and we will be looking to replace some positions that 
are now outsourced to government contractors.
    The Chairman. In the House bill that we plan to mark up 
tomorrow, we focus on the early stages of acquisition as well 
as on programs that have demonstrated poor performance. I would 
appreciate your thoughts on whether this focus is correct, or 
if we should be pursuing a different path.
    Secretary Lynn. I think your focus on the front end is 
absolutely right, and I would point out three areas that I 
think are in your bill, but let me emphasize them.
    One, I think, at the front end, we need to make as much use 
of competitive prototyping as we are able to. We are not able 
to do it in every instance. You cannot competitively prototype 
aircraft carriers, for example, but you can do it for 
subsystems of the bigger systems and so on. That competitive 
prototyping will lead to more mature technologies and a better 
understanding of our ability to meet the requirements.
    Second, we need better cost estimating. Too often, our cost 
estimates are success oriented. They assume everything will go 
right. There is no malice in this, but very seldom in these 
kinds of complex endeavors does everything go right. So we need 
to price in the kinds of risks that we expect so that we have 
the best cost estimate.
    And then finally, we need to make sure that we are in the 
front end putting in technologies that are mature. Towards that 
end, we are proposing to do technology readiness assessments at 
each stage of the process so we ensure that we have 
technologies at the appropriate readiness level before we 
introduce it into a weapons system.
    The Chairman. Thank you.
    Mr. McHugh.
    Mr. McHugh. Thank you very much, Mr. Chairman.
    Mr. Secretary, you mentioned in your testimony about how 
complex and challenging this acquisition reform effort is, and 
that is certainly true. You also referenced the Cost Analysis 
Improvement Group. The chairman of that group reports to the 
director of Program Analysis and Evaluation. There is also an 
official responsible for systems engineering and developmental 
test and evaluation, the director of systems and software 
engineering who reports to the Under Secretary of Acquisition, 
Technology and Logistics.
    It sounds as though I am going to make a joke here. I am 
not, and I am not suggesting any of those positions are 
unimportant, but I would like to refer to the House bill and 
the Senate bill. We have some proposals in both of those to 
account for authorities and the execution of the 
responsibilities under those positions, and in the Senate bill, 
it is proscribed pretty tightly. They create an independent 
office and name and direct where those authorities shall go. In 
the House side, we allow the Secretary of Defense to assign 
these functions versus establishing the independent director.
    If you want to choose the Senate or House approach over the 
other, I would be happy to hear that, but without trying to put 
you in too difficult a position, I would be interested if you 
could speak to the advantages and disadvantages of doing it one 
way versus the other, providing the Secretary with the 
authority to assign those functions versus mandating, fiating, 
an outside independent source.
    Secretary Lynn. Well, with accepting your admonition 
without expressing a direct preference for one bill or the 
other--and we do support the direction of both bills, by the 
way. We think both bills move in the right direction, and we 
are discussing here just how best to do it. So I want to make 
that clear.
    With regard to those organizational changes, I think, as a 
general rule, the Secretary would like as much flexibility as 
the Congress is prepared to give them to achieve the objectives 
that the Congress lays out in these bills.
    With regards specifically to the question of the CAIG and 
where it should be placed, I believe, as I indicated in my 
testimony, that because of the diverse duties of the CAIG that 
extend beyond just weapons systems costing, it is better placed 
in the overall Program Analysis and Evaluation office. In that 
way, it still has the independence. It does not report to the 
acquisition side of the house, so it is independent of that, 
and it reports in a line through PA&E directly to the 
Secretary. But I think keeping it inside the larger whole of 
PA&E will strengthen the cost analysis in areas other than 
weapons systems.
    Mr. McHugh. I should note, if you want to pick the House 
bill over the Senate bill, you are free to. I just did not want 
to be the one to pose the direct question.
    Secretary Lynn. Yes. Yes, I occasionally testify before the 
Senate as well, so----
    Mr. McHugh. I have heard rumors to that effect.
    So, looking at the data, it is interesting that programs 
that experience a Nunn-McCurdy breach, it appears, are rarely, 
if ever, cancelled. I suspect there is a variety of reasons for 
that. By the time you get to that point, there is a lot 
invested.
    But it would suggest, at least on the face, that those 
programs at the Nunn-McCurdy breach touchstone are really 
deemed a higher priority than other DOD objectives since you 
have to restructure after a breach, you have to spend money, 
and those dollars have to come out of usually other programs.
    I am just curious to what extent does DOD or do you 
envision DOD allowing and involving the senior leadership to 
consider impacts on those other programs when a Nunn-McCurdy 
breach happens? When the program is reconfigured to go forward 
and, as a result, has new investments placed in it, how do you 
consider the tradeoffs prior to that? Do you have any thoughts 
on what might happen in those circumstances in the future?
    Secretary Lynn. Yes, sir, Mr. McHugh. I will make a couple 
of points introductory. I think you are right. Cancellations 
are infrequent even with Nunn-McCurdy breaches. It does take a 
substantial amount to be able to go through with that. That 
said, we are proposing the cancellation of the VH-71A that did 
just suffer a substantial Nunn-McCurdy breach. So there is one 
example in the other direction.
    Really the opportunity cost, I think, is what you are 
talking about. Is that considered when you are looking at 
putting additional resources towards a system that is overrun? 
We do look at that as part of the certification process. I 
would say we probably pay even more attention to it as part of 
the overall strategic review and the program and budget 
reviews. As you put those together, you very much look at the 
opportunity costs of proceeding with a now more expensive 
system at the expense of some other programs that will have to 
suffer within the constrained budget.
    Mr. McHugh. Thank you very much, Mr. Secretary.
    Mr. Chairman, I will yield back.
    The Chairman. Thank you.
    Mr. Ortiz.
    Mr. Ortiz. Thank you, Mr. Chairman.
    You know, Congress has set forth criteria and oversight 
mechanisms intended to ensure discipline in the acquisition 
process. Yet, despite these reforms, major defense acquisition 
programs are consistently over schedule and over budget. How 
much of the cost growth in the programs is due to inaccurate 
cost estimations and poor planning up front, and how much is 
due to mismanagement or waste after the programs have been 
initiated?
    And maybe you can respond to that because I have been here 
27 years. I have seen helicopters that were supposed to be 
built that never flew. I could go on and on. But maybe you 
could give us an estimate as to how much the cost has gone up 
or increased because of poor planning up front and how much is 
due to mismanagement, and maybe you can enlighten us a little 
bit, Mr. Secretary.
    Secretary Lynn. Yes. Let me try and help with that. I think 
the two biggest reasons for cost overruns and schedule delays 
are the acceptance of too much risk at the outset, is, I think, 
the largest reason. I think we take too much technological risk 
at the outset. We have a tendency to reach for the exotic 
technology that looks like the highest performance.
    It is appealing on a PowerPoint slide. Unfortunately, we 
need the engineering and the technological maturity to make it 
happen, and we do not always have that, and I think that drives 
getting into programs that do not have sufficient technological 
maturity, taking risks in that area, are the biggest driver.
    The second biggest driver, I would say, is the success-
oriented cost estimation, that we do not get the cost estimate 
right at the beginning because we have not taken account of all 
of the things that might happen along the path of the 
development process. I think those two reasons drive the 
biggest portion of those cost overruns you are referencing.
    Mr. Ortiz. On that point, you mentioned about maybe hiring 
20,000 new people to help you. How are you going to go about 
knowing exactly what type of skills you need? I mean, you hire 
20,000 people. That is a pretty good size number of people. Do 
you have something planned as to how you are going to hire 
these people and what specific skills you need?
    Secretary Lynn. Yes. Yes, we do. We think we need program 
managers. We need cost estimators, we need software engineers, 
and we need systems engineers. And we do have a plan, at least 
at a general level, as to what types of people and what 
organizations and in what year we would try and hire them.
    Mr. Ortiz. In my opinion----
    Secretary Lynn. I would be happy to provide that for the 
record.
    [The information referred to is retained in the committee 
files and can be viewed upon request.]
    Mr. Ortiz. Yes, sir.
    In my opinion, I think that we contracted out a lot of 
positions, and we did not have a discipline as to all the 
allegiance that they had towards the contractor or the Defense 
Department. This is only my estimate. I think that when you 
contract too much, you lose that chain of command, and maybe I 
am wrong, but this is what I have seen throughout the years, 
and we are talking about something happened when we are short 
20,000 people.
    Something went wrong, Mr. Chairman, somewhere.
    Go ahead, sir.
    Secretary Lynn. Well, I was going to agree with you, Mr. 
Ortiz. I think we oversteered in the 1990s, and we saw 
outsourcing of government functions as a good in and of itself, 
and I think what we need to do--in some cases, outsourcing is, 
indeed, the right way to go. There are some functions that are 
far more appropriately or more efficiently done by a contractor 
workforce.
    But there are other functions that are inherently 
governmental or that need to be performed for other reasons by 
government personnel, and you need to make an assessment up 
front of which functions you think should be performed by 
government personnel, which should be performed by contractor, 
before you undertake the outsourcing efforts, and we think that 
was not done.
    Mr. Ortiz. I agree. Sometimes I feel that we need to 
contract out when it makes sense, but I do not think we need to 
lose those employees that should be truly committed to the 
Defense Department.
    Thank you, Mr. Chairman.
    The Chairman. In the process of having fewer contractors 
and bringing that back in house to people that work for the 
Department of Defense, will you have a significant personnel 
challenge to bring on board highly trained, capable people. It 
is not going to happen overnight, is it?
    Secretary Lynn. No, it is definitely not going to happen 
overnight, Mr. Chairman, and it is a significant challenge for 
our human resource organizations. We are trying to gear them up 
this spring and summer with the anticipation and the hope that 
Congress will approve these proposals so we will be ready to 
act on them at the beginning of the fiscal year.
    But let me acknowledge up front that we have front-loaded 
these increases, and it is an aggressive proposal. We think it 
is a needed proposal, but it is aggressive, and for the reasons 
that Mr. Ortiz indicated, we need to be aggressive here, but we 
are mindful that this is going to be a difficult organizational 
challenge to bring all these people on and to properly train 
them and get them in the right places.
    The Chairman. Thank you.
    Mr. Bartlett.
    Mr. Bartlett. Thank you.
    In a recent hearing, we asked the witnesses to kind of help 
us quantify the reasons for overrun and schedule delay, and we 
asked them to quantify three different categories that could 
account for the overrun. One was the requirement creep, a 
second was intentional underbidding so you look competitive, 
and the third was being overly optimistic, which you have 
commented on at some extent.
    This group of four generally felt that requirement creep 
was the largest of these three, that the second was being 
overly optimistic, and the underbidding had a meaningful 
percentage, but not as high as the other two.
    The requirement creep is understandable. If a program takes 
decades in its development, if we, in fact, fielded what was 
originally bid, it would be obsolete when it was fielded, would 
it not? And so the requirement creep is very understanding. As 
time goes on and new technology develops, there is a desire to 
make this as good as it can be because we are not going to have 
a new one for 30 to 50 years. That is how long these major 
platforms last out there.
    How do we get around this? The presidential helicopter is a 
good example of it, way over budget. I think it was an enormous 
requirement creep here, more and more requirements piled on as 
the program went on, and how do we get around this? Can we have 
an open architecture so that we can, in fact, bid what was 
originally bid and know that we can upgrade it so it is not 
going to be obsolete when it gets in the field?
    Secretary Lynn. Yes, I think we can, Mr. Bartlett. That was 
one of the reasons I was indicating that, as we look at 
acquisition reform, we need to be careful that we do not add so 
many reviews and checks, in an effort to reform the process 
that we lengthen it further and get into the cycle that you 
just described.
    We do need to try and shorten the development cycle. The 
length of the cycle itself is part of the reason for 
requirement creep. I think where you are headed--and it is not 
a new idea, but it is an important one to make sure that we 
institutionalize--is so-called spiral development, that you 
develop the initial capability in a more constrained timeframe. 
You look at additional capabilities on a second and third 
spiral.
    When those technologies are sufficiently mature to be 
introduced, I think that walks the line between getting needed 
capability to the war fighter and making changes that 
technology allows you at the appropriate time.
    Mr. Bartlett. Don't you think that the MRAP development 
showed us that we might be able to do things quicker? We went 
from a blank piece of paper to something in the field in a 
remarkably short period of time. Do you really have to take as 
long as we take for these systems development?
    Secretary Lynn. Clearly not, and the MRAP is an example of 
that, although the startling thing about the MRAP is it largely 
circumvented all of the acquisition processes. So the----
    Mr. Bartlett. Doesn't that tell us something about the 
acquisition processes that we were successful and we 
circumvented them?
    Secretary Lynn. Actually, I should correct myself. We 
shortened them significantly. You know it helps to have the 
Secretary of Defense as the program manager. That tends to 
drive people's attention, and you cannot do that for every 
program. But I agree with you. I think it does indicate that we 
can do things faster.
    Mr. Bartlett. Thank you.
    I think these two things are key to any successful 
improvement. One is making sure we avoid the creep in 
requirements, and we can do that if we have a really short 
cycle because then we know what we field is not going to be 
obsolete.
    What we field many times is not what we bid on, and the 
costs will be higher if you are including new technology. So it 
is kind of unfair to say that we have really poor management. I 
think putting in new technologies is good management, don't 
you, so that the war fighter has the best available?
    Secretary Lynn. That is absolutely the case, Mr. Bartlett. 
I just think we need to balance between the admirable desire to 
get the best technology to the war fighter and the schedule 
that you indicated at the start of your remarks, as well as the 
cost. And you need to balance those three, and I think on 
programs that have gone awry, you will almost inevitably find 
that the balance was not maintained.
    Mr. Bartlett. Well, we seem to be slow learners. I have 
been here 17 years now, and it really has not changed. Let's 
hope that it changes now.
    Thank you, sir.
    Secretary Lynn. Thank you.
    Mr. Ortiz. [Presiding.] The Chair recognizes Mr. Taylor.
    Mr. Taylor. Mr. Secretary, thank you for being with us, and 
I will start by saying I agree with almost everything you said. 
The devil is in the details.
    So let's start with the electromagnetic launch for the next 
generation of carrier. One of the things that I have discovered 
over the years, starting with the Littoral Combat Ship (LCS) 
program and others, is that by handing off the baton every year 
or two within the program, everyone leaves saying, ``Everything 
was fine on my watch. When I left, that program was on track,'' 
passes the baton. ``When I left, that program was on track.'' 
And we wake up at about the 90 percentile with a ship where the 
main reduction gear was cut backwards. No one even caught it 
until it is in the ship and you have to cut the ship open to 
pull it out. A $220 million ship becomes a $500 million ship, 
18 months late, and they are bragging on it. They should not be 
bragging on it.
    I say this because I would hope one of the things you are 
going to change is accountability, that someone becomes 
responsible for a program, like the Electromagnetic Aircraft 
Launch System (EMALS), that you name someone who says, ``You 
are going to take this from concept through prototype.''
    And once that prototype is approved, you are going to take 
one other person, because that is going to be about another 
three-and-a-half, and say, ``You are going to take this from 
prototype to the ship that is delivered by the Navy, and your 
whole career rests on that. If you fail, you are fired. If you 
succeed, you get promoted.''
    Because we have seen with the LCS, we have seen with so 
many other programs, unless someone pays attention to this 
electromagnetic launch, we could wake up with a $7 billion 
helicopter carrier that was supposed to be an aircraft carrier.
    Now I am hearing you say all the right things, but what are 
you doing as far as accountability where somebody's career 
rests on that program, that $7 billion program being delivered 
on time and on budget?
    Secretary Lynn. I agree with you, Mr. Taylor, that 
accountability is a critical element of this. I think 
lengthening the tours for acquisition personnel is part of 
that. There is a tradeoff to be made on the military personnel 
side where part of the leadership dynamic of the military is 
going through a number of different types of positions so that 
we build those leaders.
    That is in tension with the need to maintain someone in a 
relatively long period of time in an acquisition position, so 
you do not want to disadvantage those people, but you want to 
gain what you just said, is the length of time in the seat so 
that they are seeing at least a stage through to completion. 
And we are trying to balance that. With regard to EMALS, it is 
critical to the next aircraft carrier, and we need to get----
    Mr. Taylor. So, while I have you up here, who is that 
person going to be? Who is going to be responsible for seeing 
to it that EMALS works because, if it does not work, it is my 
understanding that Secretary Stackley has said, ``We are going 
with EMALS. We are not even going to have a fallback plan on 
steam.''
    Again, I respect his opinion, but since that is the plan 
and there is no fallback, this has to work, or we have a $7 
billion aircraft carrier that is only good for launching 
helicopters.
    And we will not really know until about 2013, and by that 
time, we are really way down that line towards the $7 billion 
aircraft helicopter carrier. So who are you going to name in 
the near future to be responsible for this program, and how are 
you going to empower him to get the job done?
    Secretary Lynn. Mr. Taylor, I am going to have to get back 
to you for the record on the EMALS program.
    [The information referred to can be found in the Appendix 
on page 55.]
    Secretary Lynn. The Office of the Secretary of Defense 
(OSD) staff is working with the Navy staff on that program as 
we speak, and we will come back to you with what our plan is to 
ensure that the support program----
    Mr. Taylor. Well, let's take it down to a simpler program.
    Secretary Lynn. I am sorry?
    Mr. Taylor. Who in your organization can tell me what the 
LCS 1 version should cost, what we should be allocating for 
next year's budget? Who in your program can tell me what LCS 2 
should cost? And, again, I appreciate everything you said, and 
I am not disagreeing with what you said, but I have to believe 
in your core competency that you have right now that someone in 
that organization ought to know what that ship should cost. And 
what I am afraid--just to reinforce your point, I am not so 
sure there is anyone in your organization who knows what one 
linear foot of quarter-inch steel costs to weld, and I would 
welcome you telling me that I am wrong.
    And the other thing that I do not see that I would hope you 
would make as one of your challenges--I think you have a lot of 
people in your acquisition force who can look at a spec and 
say, ``Yes, they welded it the way they were supposed to. Those 
are the materials that are in there.'' What I do not see is 
anyone in your force who can say, ``And you know what? You 
could have done this better. You could have done this faster. 
You could have done this cheaper.'' And I would hope that you 
would also make that part of what you are trying to accomplish 
because, quite honestly, we are dealing with a couple of 
shipyards--they are my friends, but they want the most money 
for the ship.
    We as a Nation have to be getting the most ship for the 
money, and that does put us at opposite points of view, but, 
for the sake of the taxpayers, we are the ones that have to 
prevail.
    Secretary Lynn. I think that is right, Mr. Taylor. That is 
one of the reasons for our proposal to pull more personnel back 
into the acquisition workforce, is to make sure we have the 
right expertise, the right engineering talent, to understand 
those trades and to be able to judge what the contractors are 
doing and make our own analysis of where we stand rather than 
just rely on outside estimates.
    Mr. Taylor. Would you get back to me on the LCS 1 and 2 
please----
    Secretary Lynn. Yes, sir.
    [The information referred to can be found in the Appendix 
on page 55.]
    Mr. Taylor [continuing]. For the record? Thank you.
    Mr. Ortiz. The Chair recognizes Mr. Conaway from Texas.
    Mr. Conaway. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary, welcome to the new team.
    I want to go down two different lines of questioning.
    One gets back to the personnel plan that you have in place. 
It is a multi-year plan. It looks similar to a multi-year 
acquisition of a weapons system, and I want to make sure that 
we are not overly optimistic as to being able to fulfill that 
plan.
    Can you also visit with us a little bit about your analysis 
of the cost differential between the current system we have in 
place versus this new system that you are talking about where 
you have pulled all these contractors in, put them on the 
federal payroll for a career? How does that look like with 
respect to the, you know, long-term employee benefits that they 
will accrue and those obligations that will come to us? Where 
is the differential? How much more money are we going to spend 
under this new plan, new system, that you are proposing versus 
the way we have been going?
    Along with that--and it may be a part of that cost 
analysis--have you built into the system certain new advantages 
with respect to this new workforce that will be more directly 
controlled by DOD that if you do not--are not able to hire 
against that schedule that you have laid out until 2015 that 
that is not going to happen. In other words, the same kind of 
risk analysis on this employee plan that you would have on a 
major weapons system, that if you do not meet those milestones, 
you do not have those people in place, you know, what impact 
will that have to the system that you are putting forward, and 
then we will talk a little bit about the preference to the CAIG 
estimates in your budgeting process.
    So, if you would talk a little bit about the overall hiring 
thing, we had some conversations with some folks at Raytheon 
and others that the contractors' side is shorthanded in this 
arena as well. It is a graying workforce. It is a group of 
folks that are reaching the end of their careers, and so you as 
DOD are now going to be in direct competition with the private 
sector who need those similar type skills to be able to 
maneuver this complex acquisition scheme that, you know, we 
currently have in place. So flesh out a little bit more about 
the new employee plan that you have.
    Secretary Lynn. Sure. As I said, we are pushing to front-
load this process to get people on as quickly as possible. I do 
not think we have gone beyond the bounds, but we are going to 
get people on absolutely as quickly as we can.
    In terms of the cost, we think, actually, the cost for 
bringing them into the government will be somewhat cheaper than 
having them in the contractor workforce. That goes into the--we 
talked about with Mr. Ortiz the question of where do you use 
government personnel, where do you use contractor personnel.
    In general, it is more cost effective to use contractor 
personnel if the need is episodic. If you need them for a 
couple of years and then you do not need them for several 
years, you can bring in contractor expertise rather than hiring 
full-time personnel with the benefits and the pension and so on 
that you indicated.
    These personnel are not like that. We see these as long-
term, full-time government employees that will be part of the 
weapons acquisition process over the long haul. In those kinds 
of cases, it is generally cheaper to have them on the 
government payroll. You are not paying a profit to a contractor 
and so on. And that is the type we have, so we think that this 
will be cheaper.
    I do not know. Shay, do you want to add anything?
    Mr. Assad. Yes, sir. Yes, sir. We plan on bringing on board 
in 2010 4,100 people. It will be 1,585 contract oversight 
professionals. Twenty-five hundred or so will be program 
management, systems engineers, logistics professionals, 
business management professionals, mostly from contractor 
conversion.
    The Secretary is absolutely right. There is no doubt that, 
over the long term, the cost of contractors is higher than what 
it would cost us to have----
    Mr. Conaway. I understand that is intuitively the case, but 
have you put pencil to paper----
    Mr. Assad. Yes, we have.
    Mr. Conaway [continuing]. To show that? And so you are 
expecting to be able to convert existing contractor personnel 
who make more money in the private sector to the public sector 
because, one, you are going to say those contracts go away. So 
they are out of work. They do not have any choice. So you are 
going to bring them on for less money than they are making?
    Mr. Assad. No. Actually, what we are converting is not the 
contractor themselves. We are converting the position.
    Mr. Conaway. Well, I understand that, but----
    Mr. Assad. It will actually compete the position at one of 
the most talented----
    Mr. Conaway [continuing]. Where are those people going to 
come from?
    Mr. Assad. Well, some of them may, in fact, come from the 
contractor community. Others will come from the private sector.
    Mr. Conaway. All right. Well, I just want to make sure that 
we are not overly optimistic in this deal because this is 
important stuff, and I agree with you bringing these folks 
back, but I also want to do it with eyes wide open, knowing 
that if you are over-aggressive here, over-optimistic as to 
what you can do, that there may be some impacts down the road 
as well.
    You mentioned in your testimony that you are going to have 
a preference for the CAIG estimates. Help us to understand 
that. And will that include a formalized process of reconciling 
the differences between what the independent estimate is for a 
particular program versus what the program manager and the 
contractors are coming up with? Will that difference be 
reconciled so that the decision maker can make a rational 
decision as to what your preference is going to be?
    Secretary Lynn. Yes, the decision maker, which, in most 
cases, will be the Under Secretary for Acquisition, Technology 
and Logistics, will have both estimates. We will be able to 
understand what the differences are between both estimates, 
have some flexibility, but, as I said, we are going to put in a 
preference that, all things being equal, we should go to the 
CAIG estimate, and the thinking is that over time you will have 
the overall program better funded and there will be less churn 
and less disruption in the weapons acquisition program if you 
get those cost estimates right up front.
    Mr. Conaway. All right.
    Thank you, Mr. Chairman.
    I look forward to working with you, Mr. Secretary. Thank 
you.
    Secretary Lynn. Thank you.
    Mr. Ortiz. The Chair recognizes Mr. Andrews.
    Mr. Andrews. Thank you, Mr. Chairman.
    Mr. Secretary, thank you and your team for your help. I 
appreciate your testimony and the input you have had on the 
legislation on which we are working, and I realize why it is of 
such high quality because I read your biography, saw you 
attended the finest law school in the United States of America, 
Cornell Law School, which you may also guess is my alma matter 
as well from that comment.
    I appreciate your observations about our emphasis on pre-
milestone B, and I wanted to ask you another question which 
flows from the panel we had last week, and that was the 
discussion about how to deal with requirement creep. Now this 
is not in the bill that we are considering tomorrow, but it is 
a question we are interested in as we go down the road.
    The first idea from that panel was that we need to 
institutionalize the process of listening to combatant 
commanders and others in the field at the very outset of the 
requirements process. Do you agree with that general direction?
    Secretary Lynn. Yes.
    Mr. Andrews. And we would welcome your suggestions in 
writing at a later time about how we might flesh that out.
    And then the second consensus of that panel was that we are 
confusing the way we presently operate this, a requirement with 
an aspiration, that we label things as requirements that really 
are things to which we would aspire in a perfect world. But we 
are doing a pretty poor job of sorting out what we really need 
from what we would like to have, and then an enormous amount of 
money is spent on that what-we-would-like-to-have category. A, 
do you agree with that assessment? And B, if you do, what kind 
of changes do you think we might make to solve that problem?
    Secretary Lynn. I think that is an important point, Mr. 
Andrews. Requirements creep is what gets the attention, as I 
mentioned it, and that is where we change the requirements as 
we go along as something better comes, and that is certainly 
part of the problem, and we have some proposals--configuration 
steering boards and the spiral development I talked about with 
Mr. Bartlett--that would help to address that.
    But you are talking in some ways about a different but 
related problem----
    Mr. Andrews. Yes.
    Secretary Lynn [continuing]. Which is the desire at the 
start to reach for requirements that do not match the 
technology. You have requirements, and it looks nice on the 
PowerPoint slide, and it would be great if we could do it, but, 
you know, PowerPoint is not engineering, and we do not have the 
technology at a sufficient level of maturity, and it turns out 
to bring that technology to that level of maturity, it costs 
far more and takes far longer than we ever imagined.
    Mr. Andrews. And may offer only marginal improvement in the 
goal that we are trying to achieve. May, in fact, exceed the 
goal we are trying to achieve.
    Secretary Lynn. And I think that is right, and we need to 
rebias the system away from the 99 percent solution more 
towards the 80 percent solution that can be achieved in a 
definable period of time. I think that is, frankly, what 
happened with MRAP. I mean, MRAP was not perfect, but it was 
more than good enough to meet the IED threat.
    Mr. Andrews. And I would note it was very much driven by 
the commanders in the field. This committee under former 
Chairman Hunter's leadership with present Chairman Skelton very 
much brought in the field people, listened to them, and that 
drove the requirements process.
    Let me ask one final question that pertains back to the 
bill. Do you have any suggestions for us about the amount of 
discretion that we give the Secretary of Defense with respect 
to assigning the functions among various directorates? Do you 
think that the flexibility we assign is sufficient?
    Secretary Lynn. I think that you do need to provide the 
Secretary some discretion. I think it is very hard to legislate 
an organization. You need an agile organization to be able to 
deal with the problems as they come up. I think, as I 
understand the bill, you ask the Secretary to report how he is 
going to do it is the appropriate balance between discretion 
and the direction.
    Mr. Andrews. Thank you.
    The final thing that I would say is that, when hopefully 
this bill becomes law, we certainly want the Secretary to take 
very seriously the conflict of interest provisions, as I know 
you do, but we did not want to micromanage those rules either, 
and I think you will note that in our bill we have very strong 
anti-conflict of interest provisions, but we try not to foresee 
every circumstance and leave to the Secretary's discretion in a 
rulemaking procedure the best way to deal with that. Do you 
concur with that approach?
    Secretary Lynn. I think that is the right approach. As we 
have indicated, we want to move away from this lead systems 
integrator approach that brought too much of what really is an 
inherently governmental function out or pushed it out to the 
private sector.
    That said, we do not want to go too far in the other 
direction. We do want to retain the system of having prime 
contractors, and that relies on the fact that there is some 
discretion among those contractors, and maintaining strict 
rules on conflict of interest is important, but you do not want 
them to be so strict that you cannot operate.
    So, again, it is a balancing issue. It is a matter of 
nuances.
    Mr. Andrews. Said like a good Cornell lawyer. We appreciate 
that.
    Mr. Ortiz. The Chair recognizes Mr. Coffman.
    Mr. Coffman. Thank you, Mr. Chairman.
    Just a statement: This is all about weapons acquisition, 
which is the modernization of our armed forces, and I know that 
there is some discussion that we do not have a peer competitor 
right now so we do not need to modernize, and I would hope that 
the discussion would be that we do not want a peer competitor, 
that we do need to modernize.
    On the issue of immature technologies, it seems like 
oftentimes we are envisioning a threat, and so we are trying to 
leapfrog forward. Is there any way or is it your thinking where 
we can bifurcate the process in terms of the development of the 
technologies versus who produces the system?
    Secretary Lynn. Well, that is exactly what the competitive 
prototyping proposal that we want to utilize would do, is that 
you have several contractors develop the technology, and then 
you choose between those competitors, so those would be 
separate contracts, yes.
    Mr. Coffman. Very good.
    On the issue about bringing folks in house, I think 
Congressman Conaway had gone in this direction, but I want to 
stress a concern, and that is it is sometimes difficult to 
understand the ebb and flow of a workforce in terms of what is 
episodic and what is not, and I think you used those terms, and 
it seems like once somebody goes into the federal workforce, 
they are in the federal workforce, irrespective of where those 
workflows go.
    And so I really want to caution you on a go-slow approach 
in terms of doing that because we may wind up with some 
problems in terms of efficiencies by virtue of having folks 
where there is not a consistent enough workload, and yet we are 
stuck with them inside the system. I do not think that our 
current structure is flexible enough to say to somebody who is 
inside the personnel system that the workload is not 
substantial enough, that we are going to lay you off, that that 
simply just does not occur in the federal workforce.
    Secretary Lynn. Well, I think you are right in the sense 
that, as I indicated, I think we oversteered earlier in pushing 
too many positions out to the contractor workforce. I would 
agree with your point similarly we do not want to oversteer in 
the other direction and bring too many positions in and have 
people in for whom we do not have permanent functions because I 
agree with you. A federal hiring decision is not an absolutely 
permanent decision, but it is relatively so.
    So we want to make sure that we think we have those 
positions for the long haul and not just be meeting a temporary 
need. Where we are meeting a temporary need, assuming it is not 
an inherently governmental function, often an outsourced 
approach is the better one.
    Mr. Coffman. Thank you, Mr. Chairman. I yield back the 
balance of my time.
    Mr. Ortiz. The lady from Guam, Ms. Bordallo.
    Ms. Bordallo. Thank you very much, Mr. Chairman.
    Secretary Lynn, thank you for your testimony and 
congratulations on your new assignment.
    I look forward to working with you over the coming months, 
especially on Guam-related issues, and to that end, I am 
wondering what, if any, lessons learned has the Department of 
Defense taken from this recent Government Accountability Office 
report on high-risk programs and applied to other major 
programs like the Guam buildup?
    I understand the GAO report focused on major weapons 
systems programs, but I do not see why such lessons could not 
be applied to major military construction programs. So, 
similarly, we have seen significant cost increases in 
implementing previous Base Realignment and Closure (BRAC) 
decisions. What will the Department of Defense do to ensure 
that these cost increases are mitigated against on Guam and 
with other similar major realignments?
    Secretary Lynn. Well, I think you are right that there are 
certainly parallels between weapons systems costing and, 
frankly, any major project funding, and that would include 
construction, and the solutions are similar.
    You need to make sure you know what you are buying before 
you get into it. So you need to have--in weapons systems, that 
means you need technological maturity. In construction, it 
tends more to mean that you want the percentage of design 
completion to be very high before you commit resources to 
construction, and that is certainly the approach we want to 
take on Guam as well as other BRAC-related----
    Ms. Bordallo. Mr. Secretary, can I say then that we will be 
on your radar screen?
    Secretary Lynn. Oh, you already are on my radar screen.
    Ms. Bordallo. Thank you.
    Thank you, Mr. Chairman.
    Mr. Ortiz. Mr. Wittman.
    Mr. Wittman. Thank you, Mr. Chairman.
    I thank the panel members for joining us today.
    Secretary Lynn, a question, you know, as we look at this 
process and we see how things have developed, I know we have 
focused on places where it has broken down, but I think there 
are also, if we dig deeply there, some examples of excellence 
in the decision-making there. What do you think are ways that 
we can pick out those lessons of excellence that have happened 
in the decision-making process, stand those up, and look at 
ways to maybe reward those or ways to take those models where 
things have worked extraordinarily well and apply them into the 
future in the acquisition process?
    Secretary Lynn. Well, I think that is part of what the 
Secretary was talking about when he indicated he wanted to make 
sure that we had the lessons of the recent conflicts resident 
in our weapons acquisition process. So we have had a remarkable 
success with the MRAP, and that success, I think, is a credit 
to the Department. It is a credit to the contractors. It is a 
credit to the Congress for providing the resources in a timely 
way.
    So we are trying to look at that model and seeing, you 
know, what can we--you cannot single out systems quite in that 
way every time, but what general lessons can we learn, and, in 
particular, how do we expedite the process in the way it was 
done with the MRAP?
    Mr. Wittman. I think that is a great point.
    I also want to look at, too, how do we place--or what are 
your thoughts about how we place incentives in the program to 
reward good decision-making, especially when we have, you know, 
problems with cost estimates that some of the technological 
aspects of trying to stand up these systems.
    What do you think would be a good system of incentives at 
each point in the process where we have had problems to place 
those positive incentives there to lead people toward good 
decision-making or to lead them to say, ``Wait a minute. We 
have hit a problem with this program.'' Where decision-making 
ought to stop, or we ought to be forthright in saying, 
``Listen, we cannot do what we are being asked to do within 
this set of requirements, within these set of particular budget 
guidelines.'' To create some incentives there for people to be, 
you know, much more judicious and focused in their decision-
making?
    I mean, do you have some thoughts or ideas about how we can 
accomplish that?
    Secretary Lynn. Yes, sir. I have two thoughts. Let me 
answer it on two levels. One is process. The other is culture.
    On the process side, we are attempting to realign the 
contract process and the fee structure so that it rewards 
performance to a greater degree than it does today, and so our 
contractor base is going to be very responsive to how we set up 
our fee structure, and if we are able to do it in a way that it 
rewards performance and the kind of performance we want, I 
think we will see change in that regard and see it quite 
quickly. That would be the process side.
    Inside the Department, it is less of a process issue and 
more of a cultural issue. We have talked about requirements 
creep. Well, requirements creep comes from a very natural 
desire to get the best product out to the war fighter, and 
there is absolutely nothing wrong with that. In fact, it is all 
right.
    But the cultural change you have to get in the acquisition 
workforce is that, in some cases, getting a technology or going 
for a technology that is not mature and takes additional time 
and additional funding may not be the best thing for the war 
fighter. You may not get anything to them for a while, and the 
additional cost may displace other higher priority things out 
of the budget.
    So we need to get that a little bit broader view inside the 
acquisition workforce, along with the natural and admirable 
desire to get that best technology to the war fighter.
    Mr. Wittman. I think those are absolutely necessary, and I 
also think, too, your comment on the side of the contractors to 
provide incentives for them on the performance side, I think 
that is absolutely critical.
    What we ought to look at, too, is making sure that we 
provide incentives for them along the way that if they see the 
process not able to get to where everybody believes it ought to 
be on the requirement side or the cost side, to provide some 
incentives for them to be able to stand up and say, ``Well, 
wait a minute. Things have to stop. This is not going where we 
think it ought to go'' or ``It is not going where everybody has 
pointed out where it should be going.''
    If we can also provide some incentives there, I think that 
also makes a process that engages them to make sure they are 
making good decisions at every point in the process.
    Thank you, Mr. Chairman. I yield the balance of my time.
    Mr. Ortiz. The Chair recognizes Mr. Ellsworth.
    Mr. Ellsworth. Thank you, Mr. Chair.
    I thank the witnesses.
    Secretary Lynn, I would like to--we have heard today talk 
about competition and fixed pricing and sole sourcing. I would 
like to concentrate and have an explanation or your thoughts on 
the Joint Strike Fighter and particularly the engine.
    If you could walk through for me your thoughts on that--I 
know that earlier in history we have had, you know, the great 
engine war in regards to the F-16--and why that might not be 
good for the program, for the Joint Strike Fighter, why that 
would not be good for the American taxpayer.
    If the DOD is truly going with a single-source engine, is 
that smart thinking, in your opinion, and should we not look at 
a second source for the engine for that Joint Strike Fighter? 
Could you explore that for me? Are you familiar with that?
    Secretary Lynn. Sure. We have looked at it.
    We have talked a lot about the CAIG today. The CAIG did a 
study of the benefits of the alternative engine, and the CAIG 
came to the conclusion that it did not pencil out, that the 
initial--it takes a pretty substantial initial development cost 
to develop that second engine, and then you have to split the 
production.
    So you do not get quite the learning efficiencies between 
two lines. You balance those costs against the benefits that 
you get--and we do think you will get some benefits in terms of 
pricing down the line--and you do a calculation and determine 
the net present value, and the CAIG came to the conclusion that 
the initial cost outweighed any benefits that you would get 
down the line.
    Similarly, we asked one of the independent federal research 
centers, the Institute for Defense Analyses, to do a similar 
analysis, and they came to a similar conclusion.
    Mr. Ellsworth. Are the engines to your knowledge pretty 
similar? Do you know any kind of percentage of how close the 
engines are between the companies on----
    Secretary Lynn. I do not know. I mean, obviously, they 
would have to go into the same airplanes, so they obviously 
have to have the same kind of capability, but I could not go 
beyond that.
    Mr. Ellsworth. Thank you very much.
    I would yield back. Thank you, sir.
    Mr. Ortiz. Ms. Fallin from Oklahoma.
    Ms. Fallin. Thank you, Mr. Chairman.
    Secretary Lynn, we appreciate you coming today and sharing 
some of your views.
    With the tremendous amount of acquisition--I have to get 
that word right. I do not want to use the wrong word--
acquisitions being done within Department of Defense, it must 
be challenging to balance the workforce needs with the 
acquisition needs of DOD.
    What type of systems do you have in place to maintain that 
acquisition workforce, and how do you have a proper balance to 
make sure that you are keeping pace with the tremendous amount 
of needs that you have to let those contracts, the rules, the 
regulations, the changing needs of Congress, and edicts that 
you have from here?
    Secretary Lynn. Well, as I indicated, we have a proposal to 
substantially increase the size of the force. Together with 
that, we have proposals to increase the training and the other 
support elements.
    And we have Shay Assad who is really the expert in this 
area, and I will ask him to provide more detail along the lines 
of what you asked.
    Mr. Assad. Yes, sir.
    We actually have within the Acquisition, Technology and 
Logistics organization reporting directly to the Under 
Secretary a director of human resources and human capital. He 
is responsible for having developed the human capital strategy 
plan together with acquisition and technology.
    So we very specifically have a plan about how we want to 
grow the workforce. It is, in fact, a five-year plan, and we 
have a very good sense of both the contractor portion of the 
acquisition workforce--that is, the contractors who support the 
acquisition workforce--as well as what our organic capability 
is.
    And we are really trying to do two things, as we go along 
in this five-year period. We are trying to grow our organic 
capability and we are changing the mix so that there are less 
contractors supporting the acquisition workforce, but still a 
substantial number, approximately 40,000. So it is not like, 
you know, this shift that we are making is going to eliminate 
contractor support to the acquisition community. That is not 
where we are headed.
    But we very much will be attentive on an annual basis to 
sit down and present to the leadership where we are at in terms 
of what is the progress we are making on hiring, what changes 
do we see in the throughput, and we do competency assessments 
of our workforce.
    We did a very substantial competency assessment, probably 
the biggest in federal government, with the contracting 
workforce over the last year, some 18,000 to 19,000 employees 
participated in that. And it gives us a good sense of what 
their capabilities are.
    And we will measure that not just in the contracting 
community, but across the entire 127,000 to 147,000 folks who 
do acquisition so we can have a better sense of what progress 
we are making in terms of training and their capability and how 
do we adjust that to the most important thing, which is meeting 
the needs of the war fighter.
    Ms. Fallin. So are there any other factors that you are 
going to use to determine if you are achieving the results 
between a balance between the federal employees and the private 
contractors?
    Mr. Assad. Absolutely. We will have metrics that we will 
measure on a quarterly basis, and we will report those up to 
the Chief Management Officer.
    Ms. Fallin. And are you working with any of the higher 
education institutions when it comes to our college graduates 
coming out to try to encourage them to get into these types of 
fields to build up that workforce in future years?
    Mr. Assad. The Defense Acquisition University has several 
partnerships and very successful partnerships with some 
organizations. The Air Force Logistics Command comes to my 
mind. They have a very good partnership with Macon College in 
terms of the college has actually created a contracting and 
procurement curriculum, and so graduates will be coming out of 
that and going right into our intern programs. So that is a 
very big part of our intern program and our strategy as we go 
forward.
    Ms. Fallin. Okay. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Ortiz. The Chair recognizes Mr. Spratt.
    Mr. Spratt. Mr. Secretary, we are fortunate to have you 
where you are with your experience, your intellect, but I have 
to sit here and wonder if even you with your intellect can 
really--the daunting task that lies before you to do the things 
you described today, I do not think you would diminish that 
yourself.
    But, as I listen to some of the solutions you propose, I do 
have a sense of sort of deja vu. I have heard it said before 
from the Department that we will have more fixed-price 
contracting. Then you run into the problems of doing highly 
sophisticated systems that contractors shrink from undertaking 
on a fixed-price basis.
    More prototypes in competition--we have had that before. 
Sometimes it worked, sometimes it did not, but we tended to 
stray away from it. Cost analysis always comes up, is, I think, 
yet to realize its potential.
    So I think you have a daunting task, not least of which is 
to take the procurement force and make it into an expert force.
    I am a little underwhelmed by the sentence you used to 
describe where you hope to be in five years. I am not saying 
that this was even consciously designed that way, but it says 
in your testimony, ``The five-year planned workforce will 
result in a properly sized, well-trained, capable, and ethical 
workforce.''
    I would like to hear you say one with an ethos of 
excellence, one that is rigorous and sharp and analytical and 
hard charging and bushy-tailed and all of these things, so 
that, you know, you bring to the task the kind of energy that 
is necessary to take on these large contractors.
    It is a daunting task for a GS-12 or something like that to 
deal with the companies they have to deal with, and when the 
Packard Commission last looked at this, they decided the best 
way to get good personnel into the procurement system as soon 
as possible was go to uniformed military.
    The one-word verb you did not use here was ``recruit.'' How 
will you recruit the best and brightest to come work for the 
Defense Department on some of the biggest and most challenging 
systems that are being built in the country today? What is your 
pitch? What is your come-on?
    Secretary Lynn. Well, we are actually having quite a bit of 
success at this point. Maybe a little bit is the economy. In 
terms of our recruiting efforts, we are recruiting in colleges, 
universities, in graduate schools, as well, as Mr. Assad 
indicated, you know, some of the recruiting will come from 
contractors who are supporting the government at this point.
    But the economy being where it is, the fact that we are in 
two conflicts, there is a great deal of patriotism in the 
country. I think we can offer an attractive position and that 
this is very, very important work, and, in the end, that is our 
pitch.
    Mr. Spratt. Well, this is really important work, it is very 
challenging work, because, in most cases here with these major 
systems, you are pushing the envelope, and if you could just 
get bright, young procurement types to come work for you for 
five years, that would be a plus, I think, to the quality of 
your workforce, if you get the right people to come.
    One of the things that we have struggled with over the 
years, and I think has been true in the E ring of the Pentagon 
as well, is information systems. Sitting on top of this huge 
mountain down there at the Defense Department, how do you know 
what is happening out in the field? How do you know what is 
happening at the shop level? And one of the devices we devised 
years ago was the Selected Acquisition Report (SAR).
    Are you satisfied today that you have the kind of 
management information systems you need to really take hold of 
this system and sit where you sit and run the system from that 
vantage point?
    Secretary Lynn. Well, I think the management systems we 
have are very good, but, no, they are not perfect. It is 
difficult to get timely information, and it is particularly 
difficult--you mentioned the size of the Department. The 
biggest difficulty is the integration of all the information. 
There has been a lot of talk about auditable statements, and 
that was actually in the GAO report Chairman Skelton mentioned.
    The challenge for the Department actually in getting 
auditable statements is less the information on the financial 
side of the equation, and it is all the information on the 
other sides--in the logistics area, in the medical area, in all 
of the various support areas--and integrating those into the 
financial network. That is the challenge. So integrating all 
that information into a system that provides leadership-level, 
management-quality information--that is the biggest challenge 
the Department has.
    Mr. Spratt. I worked in the office where the SAR was 
created, not to suggest it is the end-all, but it was at least 
an effort to finally get all this information together in 
manageable form, and I came back here 12 years later, and I 
pulled down a copy of the SAR just to see what it looked like, 
and it had not changed at all. And it finally occurred to me 
after that first year on this committee, the reason it had not 
changed is it really had not been used that critically.
    And periodically we will have a system come before us that 
is in bad shape. You remember the Ajax or the Afton-Ajax mine 
attack program? Clear situation where a good management 
accounting system would have told us much, much sooner that 
there were problems in the system. They had one guy on the 
plant floor who was the nexus between the plant, the shop, and 
the Defense Department, and this guy's sole experience in 
procurement was working with repair work at Japan Air. You get 
some obvious cases like that where anybody looking at the 
management structure would say, ``Wait a minute. Here is a weak 
link.''
    One of the things that I proposed in the past--we never got 
it passed--was that somehow you would sit down before you enter 
EMD--engineering, manufacturing, development--and you write out 
the specific areas that you would want to watch. For example, 
on the AA, there were certain known vulnerabilities, known 
problem areas, which you would, I think, want to watch to see 
if problems were developing there and needed an early 
intercession.
    Have you given any thought to that, to sitting down and 
saying, ``We are not going to have the standard template for 
the SAR or for some other executive management reporting 
systems, but we are going to have one designed for every major 
system we have that goes to the particular things that we think 
need to be watched and watched carefully and closely.''
    Secretary Lynn. No, I think some kind of risk assessment, 
which is, I think, what you are talking about, is what are the 
high nails that are likely to cause us problems, and where are 
we on each of those. I think that makes sense.
    Mr. Spratt. One last question: The first bill filed in this 
subject area was Levin-McCain. The chairman will have a 
substitute to it, and comparing from the two, the Levin-McCain 
tends to emphasize multiple systems, multiple oversight, and 
the Chairman's would lean more towards having one identifiable, 
accountable individual who would be largely charged with the 
responsibility to a particular system.
    Have you any wisdom to leave to us about these two 
approaches, about either of these two bills, that we should 
keep in mind as we mark them up?
    Secretary Lynn. Not on that particular issue, no.
    Mr. Spratt. Okay.
    Thank you, sir.
    Mr. Ortiz. The gentleman from New York, Mr. McHugh.
    Mr. McHugh. Thank you. Thank you, Mr. Chairman.
    Mr. Secretary, when you and I last got together, about an 
hour ago, we spoke about opportunity costs, Nunn-McCurdy 
breaches, and how you make those kinds of judgments. Certainly, 
I believe--and I think the rest of the members of this 
committee believe--that Congress has to be a part of that, 
which means transparency in data information is critical as 
well.
    Back in the latter part of April, I wrote a letter to all 
the Joint Service Chiefs and others asking for, as we routinely 
do, their unfunded requirements (UFR) list so that, as we went 
forward, this committee could have that kind of information and 
judge and make judgments on tradeoffs that come about. As I 
said, every year of the 17 I have been here, we have made that 
request, and as far as I can recall, it has been met.
    I have a memo issued on--the date I have on it is April 30. 
That is a stamp date, so I am not exactly sure when the 
Secretary of Defense put it out, but you were carbon copied, 
along with the secretaries of the military departments, the 
chairman of the Joint Chiefs, and Under Secretary of Defense, 
the comptroller, and it causes me some concern.
    The Secretary of Defense wrote, ``I understand''--this is 
to the service chiefs and those to whom I addressed the 
letter--``you received a request from Congress to provide your 
assessment of unfunded military requirements resulting from the 
fiscal year 2010 President's budget. I am told the provision of 
unfunded requirements list to the Congress is a longstanding 
practice that dates back over a decade. As you are aware, the 
existing statutory framework provides for members of the Joint 
Chiefs to make recommendations to Congress after first 
informing the Secretary of Defense.''
    ``Accordingly, should you determine there are fiscal year 
2010 unfunded requirements that are responsive to the request 
in Congress, I expect you to inform me of such a determination 
so we can schedule the opportunity for you to brief me on the 
details,'' signed by the Secretary of Defense.
    Without getting into the possibility of the memo itself 
having a chilling effect, I want to ask you, because I assume, 
as the principal recipient of this, that you or one of the 
principal recipients had a chance to discuss it. Can you give 
me and this committee assurances that that is just a method of 
informing the Secretary of Defense?
    We are not now, for the first time as far as I know, 
establishing the requirement that the UFR list goes through the 
Secretary of Defense for review and perhaps alteration?
    Secretary Lynn. I think what you read was exactly what the 
Secretary intended, is the legislation says that the members of 
the chiefs are to provide Congress with their personal views 
when asked, but prior to that, they are to inform the 
Secretary. I think the Secretary wants to make sure he is 
informed prior to the submission of the list, but the advice 
that the chiefs would give would be their own.
    Mr. McHugh. Thank you very much, Mr. Secretary. I 
appreciate your providing that assurance.
    Mr. Chairman? I would yield back as soon as the Chairman is 
back. I yield back.
    Mr. Ortiz. Mr. Snyder is recognized--I just came back--and 
then Mr. Murphy.
    Dr. Snyder. I am sorry, Mr. Secretary, that I was not here. 
The Veterans' Committee is having a markup at the same time. So 
could you please summarize everything that has been said for 
the last hour and a half so that I can----[Laughter.]
    Secretary Lynn. Sure.
    Dr. Snyder [continuing]. Get caught up?
    I will ask you one repetitive question, if I might--well, a 
two-part question.
    Number one, the bills that are pending before the House and 
the Senate--how big a piece of the total Pentagon spending will 
fall under their--well, for want of a better word--
jurisdiction.
    And, second, I would like to hear your comments. I think we 
have been told it is about 20 percent or so, but----
    Secretary Lynn. Twenty, 25, I am told.
    Dr. Snyder. So then my follow-up question: Well, what 
happens to the rest of that?
    And then my second question, I understand that you were 
asked about any comments about the differences between the 
Senate and the House bill, if you have any specificity there or 
recommendations.
    Secretary Lynn. Well, the focus of the bills is on the 
acquisition side. That would be 20 or 25 percent. Equally 
important is the services side, and we are paying attention and 
trying to improve the oversight there as well.
    The personnel systems themselves, which are quite a large 
part, do not have the same kinds of issues as we find in the 
acquisition and the services side, so that is not within the 
realm of what we are addressing.
    With regard to the two bills, I mean, I think we find we 
like the direction of both bills, the focus on the front end, 
the focus on bringing more expertise into government, the 
effort to assign responsibility and accountability in the 
Department for the acquisition functions. We think those are 
all to the good.
    We have specific comments, and I am happy to provide more 
for the record. For example, we feel that the Cost Analysis 
Improvement Group (CAIG), which is the independent cost arm of 
the Pentagon, should remain part of PA&E. That is, I think, the 
direction the House bill has. The Senate would make it a 
standalone. We think the limitations of making it a standalone 
office are that you have it doing only weapons systems costing 
when there are other cost estimation functions that are 
important as well.
    Costing the alternative courses of action in our strategic 
review, the Quadrennial Defense Review, and our program 
assessments and our budget builds are also very important, and 
we want to make sure the expertise the CAIG has, which is the 
best in the building, probably the best in the government, goes 
to that broad array of responsibilities and not to narrow it 
down.
    And I am happy to provide other comments for the record.
    [The information referred to can be found in the Appendix 
on page 55.]
    Dr. Snyder. And I assume, assuming these versions will pass 
or some variant of them will pass the Senate and the House, 
that you all will be involved in the discussions that lead to a 
final conference.
    Secretary Lynn. We would certainly be available for that.
    Dr. Snyder. Sure.
    Thank you, Mr. Chairman.
    Mr. Taylor. [Presiding.] The Chair thanks the gentleman.
    The Chair now recognizes the gentleman from Texas, Mr. 
Conaway, for five minutes.
    Mr. Conaway. I will not take five.
    Mr. Secretary, you mentioned the problem with lengthy times 
of development and the fact that, as an example, and not to 
speak to it individually, but the F-22 1986 to 2006. Talk to us 
about your thoughts about how we should either in some way 
legislate a shorter timeframe or have some sort of ability to 
discipline ourselves on the length of time we allow for 
something to exist before we make hard decisions. Can you talk 
to us about what your thoughts are?
    Secretary Lynn. I would be hesitant to legislate that. I 
think what you want to do is along the lines of what we have 
been talking about is set guidelines. There may be reasons to 
exceed those guidelines in certain instances, but what you want 
to do is try and pull them back into the closer timeframe so 
that you get more mature technology.
    You do not spend excess time. You do not delay the delivery 
to the war fighter. But I think it is too difficult to foresee 
all of the different circumstances to put it in as hard a shell 
as legislation.
    Mr. Conaway. Thank you, Mr. Chairman. I yield back.
    Mr. Taylor. The Chair thanks the gentleman.
    The Chair now recognizes the gentlewoman from California, 
Mrs. Davis, for five minutes.
    Mrs. Davis. Thank you. Thank you, Mr. Chairman.
    And, Secretary, welcome. We are glad you are here to think 
about these next moves that we are going to make in this area 
which are very important.
    I wanted to ask about two areas. One is competition because 
we know that it has been cited on a number of occasions, GAO in 
their recent report, that that is an issue.
    We have major contractors, not so many of them, who are 
bidding on the major systems. But we also have subcontractors. 
And there are many concerns out there that the bundling of 
contracts hurts the competition among some of our small 
businesses. Could you comment on that and whether you think 
that there should be greater recognition of that in the bill, 
if you think that there is language that should speak to 
competition, in a stronger way, I think?
    And the other issue really is with the performance that you 
mentioned, past performance, and whether or not there should be 
a better depository of past performance so that we can check on 
the track records of businesses as those contracts are being 
decided. Do you see that in this particular legislation?
    I know that my colleague, Mr. Andrews, has been so involved 
in this, is looking at, you know, down the line that we need to 
have some kind of depository like that so that we really can 
check on these past performances and, in many ways, it is the 
subcontractors in that regard, not necessarily the primes.
    Secretary Lynn. Well, let me take your questions in reverse 
order.
    With regard to past performance, there is a database that 
we use that is part of the contracting process that measures 
past performance on relevant programs. So that already exists. 
Mr. Assad is an expert on that, but I will ask him in a second 
if he has anything in addition.
    On the competition, we do think more competition is a 
useful tool in terms of managing the acquisition process, and 
towards that end, we are proposing to make greater use of 
competitive prototyping, try and bring competition to bear at 
the front end of the process so we have the technologies that 
we are going to put into the weapons system more fully 
developed, and we have the competitive impulse to deliver the 
best product at the best price.
    With regard to your bundling comment, I mentioned that we 
want to move away from the lead systems integrator concept, and 
one of the reasons is we think we bundled too much up into 
that. It needs to be done at a lower level, and I think that 
would address some of the concerns that you mentioned with 
regard----
    Mrs. Davis. Do you think that the bill needs to spell out 
less bundling of contracts? How would you do that without it 
being terribly prescriptive?
    Secretary Lynn. I do not have a proposal as to how to do 
that in legislation. As I say, the Secretary's proposal on 
Future Combat Systems comes directly from that impulse to move 
away from the bundling, and then that was probably the best 
example of a lead systems integrator contract. So we are moving 
in that direction. I do not have a legislative proposal to 
increase the speed.
    Did you want more detail on the past performance database? 
Maybe Shay could----
    Mrs. Davis. Yes, please. And for subcontractors.
    Mr. Assad. Yes. In terms of subcontracts, ma'am, as part of 
our strategic sourcing initiatives, we are--in fact, one of the 
fundamental underpinnings of our strategic sourcing initiatives 
is more competition, is less bundling. We are not looking to 
bundle things together. We are just looking to align behaviors 
on how we go about doing it, which is, in fact, improving our 
ability to subcontract, especially with small business.
    So I think that we are on track in terms of making sure 
that the organization fundamentally understands from a 
strategic sourcing point of view that that is where we are 
heading, which kind of is the overarching vision of how we are 
buying our goods and services.
    With regard to past performance, the system that the Deputy 
Secretary referred to is called the Past Performance 
Information Retrieval System. What we are doing in that regard 
is we are looking at working with our brothers and sisters in 
the rest of the federal government because that is a federal 
government-wide system. How do we improve the timeliness of the 
information, and how do we ensure that there is a consistency 
between incentive and award fees being earned and, in fact, 
what is being said about contractors in the Past Performance 
System?
    So those are two specific areas that we are looking to 
improve----
    Mrs. Davis. Can I----
    Mr. Assad [continuing]. With regard----
    Mrs. Davis. Can I----
    Mr. Assad [continuing]. To past performance.
    Mrs. Davis [continuing]. Does that include the subs as 
well? I mean, does it cover all subs and----
    Mr. Assad. It is primarily a prime contractor type of a 
system, but when we do our source selections, we very much get 
inputs on major subcontractors and their past performance. We 
do look at that.
    Mrs. Davis. Do you see the system being able to encompass 
all the subs that it works with, that particular system, or do 
we need to respond in some other way?
    Mr. Assad. I do not think that we could--if we got down to 
all the subs, that would be literally hundreds of millions of 
pieces of information, but I think we do need to look at our 
major subcontractors that we identify and perhaps working with 
the rest of the federal government to see if it is appropriate 
to include those in.
    Mrs. Davis. Thank you, sir.
    Thank you.
    Mr. Ortiz. [Presiding.] The Chair recognizes Mr. Murphy.
    Mr. Murphy of Pennsylvania. Thank you, Mr. Chairman.
    Secretary Lynn, Mr. Assad, Ms. McGrath, thank you for your 
testimony for the past hour and 40 minutes and for your 
continued service to our country.
    I served in Iraq six years ago with the 82nd Airborne 
Division in Baghdad, and there is no doubt that the situation 
on the ground over there has changed. In fact, when I was there 
with the 82nd, we had the top-of-the-line equipment. We had the 
M4 rifle. Most of us had the M16. Now everybody has the M4. So 
technology has changed. The weapons required in the fight have 
clearly changed. And our philosophy in the Armed Services 
Committee and the Department of Defense, obviously, is we do 
not want a fair fight. We want our troopers to have a 
technological advantage.
    The GAO report states that for the Department of Defense's 
fiscal year 2007 portfolio of major weapons programs being 
developed, there is an average of a 21-month delay in 
delivering initial capabilities to the war fighter.
    So, listening to the testimony today, Mr. Secretary, you 
know, as conditions in the theater have changed and one of 
these delayed programs suddenly becomes badly needed by the 
troops in the field, what does the Department of Defense need 
to have the flexibility and agility to rapidly get the weapons 
systems up to speed and ready for deployment?
    Secretary Lynn. What you are talking about, I think, 
Congressman Murphy, is the balance between performance on one 
hand and cost and schedule on the other. And I think too often 
the system weights performance too highly, and that we need to 
give equal weight to the cost and the schedule. And I think you 
are talking there about the schedule, and we may need to spiral 
additional performance improvements into a later model. We may 
need to go with the 80 percent solution that we can get 
immediately versus going for the 99 percent exotic solution 
that we only have on PowerPoint slides.
    So we need to fundamentally change the culture that makes 
these tradeoffs because it is not an unnatural thing, but there 
is a logic in the system now that constantly pushes toward 
those performance improvements and does not take sufficient 
account of the schedule and the cost implications of doing 
that.
    Mr. Murphy of Pennsylvania. Right. Mr. Secretary, roger 
that. I hear you, and I understand, you know, we do not want 
the perfect to be the enemy of the good. I got it.
    But, you know, in earlier testimony, in, you know, your 
testimony today was, ``It is difficult to get timely 
information in auditable statements.'' You talked about 
logistics, medical issues, you know, and that is a challenge. I 
think what we would like is what is the solution or what do you 
propose the solution is?
    And what do you need from us to empower you because, you 
know, to go back to Gene Taylor's comment today, I mean, 
listen, you know, there is a different philosophy out there. 
The contractors, the shipbuilders, whoever it is, you know, 
they want, you know, the most money for the ship, where the 
Congress and the taxpayers that we represent want the most ship 
for the money or the most, you know, weapons system for the 
money, and so that is what our focus needs to be, as your focus 
is.
    So is there anything that you could articulate today, like 
what do you need? What systems do you need? What do you need 
from the Armed Services Committee and the Congress of the 
United States to empower you to get after this?
    Secretary Lynn. I think the direction we need to go is to 
make sure that the technologies that we have and that we are 
putting into weapons systems are mature. So we need technology 
readiness assessments at each stage of the process so that we 
are not buying into technology that we cannot deliver in a 
timely fashion.
    We need competitive prototyping in the developmental phase 
so that we put the contractors against each other to achieve 
the best possible product at the best possible price on the 
schedule, and we need cost estimates that are not just success 
oriented, but that take into account the kinds of risks in 
terms of development, in terms of production, and in terms of 
technology so that we understand going in what our best 
estimate is of what the costs are so that we do not later on 
find out that we are going to have to increase by 20, 50, or 
100 percent the cost and, therefore, disrupt the entire program 
and possibly slow it down.
    Mr. Murphy of Pennsylvania. And, Mr. Secretary, these are 
metrics that I agree with you. And I think, you know, the 
technology readiness assessments the cost estimate better, just 
not success estimates, these are metrics that are music to my 
ears and my colleagues' ears.
    I think, though, when you look at the GAO report, when it 
says, though, ``The Department of Defense has not designated a 
senior management official at an appropriate level with the 
authority to be responsible and accountable for enterprise-wide 
business transformation''--and I know that it is business 
transformation, but, you know, where does the buck stop?
    And we are looking for people to be on the hook here, both 
on the Department of Defense side, but also on the contractor 
side. And we need to hold folks' feet to the fire because our 
constituents who are in this economy are making sure that they 
are getting their bang for the buck.
    Secretary Lynn. I am afraid the person you referred to is 
me. To assist me in that, the Congress has recently created 
the--I am the Chief Management Officer--position of Deputy 
Chief Management Officer. Ms. McGrath here is the senior career 
civilian in that office, and we are developing a slate of 
potential political appointees to put into that. So that would 
be kind of one organizational answer.
    And then the other answer is the Under Secretary for 
Acquisition is the principal individual in terms of oversight 
of the weapons acquisition process itself.
    Mr. Murphy of Pennsylvania. I know my time is up, Mr. 
Chairman, but I would say we need to partner together in a 
bipartisan way with Democrats, Republicans, and you to 
articulate to the American public that we are getting after 
this, and that we are hitting these metrics, and that we are 
articulating those and the success stories and the failures as 
we move forward.
    Thank you so much for your testimony today. I appreciate 
it.
    Secretary Lynn. Thank you.
    Mr. Murphy of Pennsylvania. Mr. Chairman, I yield back.
    Mr. Ortiz. Thank you. I think the gentleman has raised some 
very, very good points, and if we can help through legislation 
to empower you, anything that we can do, but taxpayers' money 
is very sacred, and we want to be sure that they get their 
money's worth.
    And I will have another question after Mr. Taylor.
    Mr. Taylor from Mississippi.
    Mr. Taylor. Mr. Lynn and the other guests, I want to thank 
you again for sticking around so long.
    And I am going to get way down in the weeds, but I think it 
has been a long time, again, going back to your testimony, and 
I think you are exactly right that the lead systems integrators 
did not do our Nation any service. They did a great job of 
looking out for the contractors, but not for us. And so, again, 
I am in agreement with everything you are saying.
    I am going to bet that anyone who bids on a ship for our 
Nation or a large aircraft has a computer-assisted design 
program, and they know every frame, every bulkhead, every piece 
of plating on that ship, every watertight door, every piece of 
piping. When they bid on it, they know everything that goes in 
there. They have a pretty good idea what it is going to cost 
per foot, per pound, whatever. They have a pretty good idea of 
how many linear miles of welds there are, et cetera, et cetera.
    What I am asking you is, in your research, do we have that 
sort of information? I know we have some phenomenal research 
going on at David Taylor Model Basin and some other labs, but 
does anyone get down into the weeds and say, ``You have this 
many miles of welds. You have this many pounds of aluminum. You 
have this many pounds of steel. You are buying this much plate. 
You are buying this much angle iron.'' Does anyone on our side 
of the equation in order to get the best price for the citizens 
get down into the weeds as far as that pricing?
    And I am going to give you a for-instance, and, again, I 
appreciate that we have a new Administration, you are trying to 
turn this around, but in the past two years, the price of steel 
has been cut in half. In the past two years, the price of 
aluminum has been cut in half. In the past two years, the price 
of titanium is down by a third.
    Now no one on the Navy acquisition side ever walked into my 
office and said, ``Hey, we can get a better deal on ships or 
airplanes or whatever.'' It was my local salvage dealer that 
told me the price of all this stuff was down, not anybody in 
the Administration, not any of our vendors, and, again, you 
know, we are automatically growing eight percent in the budget 
to finish out the year. I think ten percent in next year's 
budget. We are automatically spending more money. But who in 
your department is just getting down in the weeds and trying to 
get us some savings on basic things like this?
    Secretary Lynn. Well, the----
    Mr. Taylor. And if that has not happened yet, I would hope 
to hear from you you are going to make that one of your 
priorities.
    Secretary Lynn. Well, it is a priority, and let me answer 
that in two ways.
    The CAIG, the independent cost arm, does the kinds of 
things that you are talking about. The way they do a cost 
estimate is they do it by analogy. So they look at the most 
comparable systems that have been developed. They look at the 
prices of the inputs. They look at the learning curves that 
have been involved in putting that kind of system together, and 
they try and estimate----
    Mr. Taylor. Okay. Do they have a CAD? Do they have a 
computer-assisted drafting program?
    Secretary Lynn. No, the CAIG would not, no, but that is not 
how they do a----
    Mr. Taylor. Someone at David Taylor had that. Again, every 
mom-and-pop shipyard that is bidding for a project has one, and 
the question is: Why doesn't our Nation have one to see if we 
are getting a decent price?
    Secretary Lynn. Go ahead, Shay.
    Mr. Assad. Yes, sir. The specifics that you are talking 
about is what we call in the world of cost estimating and 
pricing, table negotiations--knowing the details of what it is 
that we are buying.
    Included in the Secretary and the Deputy Secretary's and 
the Department's plan for workforce growth over the next 5 
years is to grow 800 pricers. We are going to add 800 pricers 
to the workforce. Included in that 800, about 200 of those 
folks will be resident in the Defense Contract Management 
Agency to do the very specific kinds of things that you are 
talking about. That capability does not exist within the 
Department today.
    At one point in time, frankly, 20 or 25 years ago, we did 
have those kinds of capabilities. I know because I was on the 
other side of the table dealing with very competent, capable 
government folks, and the fact is we are going to grow that 
capability. It is going to take us a while, but we are going to 
get to the point where we are going to be able to answer your 
questions in very, very specific detail.
    We are growing an integrated information system within the 
Defense Contract Management Agency. All of our business 
clearances will be resident there, and we will have folks 
specifically expert in ships, aircraft, missiles, the kinds of 
products that we are buying so that we can get that information 
to our contracting officers and our prices in the field so they 
can be more effective at the table and get a better deal for 
the taxpayers.
    Mr. Taylor. Mr. Assad, I am really pleased to hear you say 
that. What is the timeline that you have in mind for 
implementing this?
    Mr. Assad. Well, we have a plan that is going to take us 
about five years because these are experienced people. So it is 
going to take a while to grow. We are going to bring a lot of 
young folks in, but it is going to take a while to grow that 
workforce. But the very first emphasis is on growing the 
integrated capability at DCMA.
    Mr. Taylor. Thank you, Mr. Chairman.
    Mr. Ortiz. Thank you.
    You know, we have been fighting this war--I think we are 
going on about eight years, and it takes about five, six years 
to develop weapons. This is a different war that we are 
fighting. We have not fought a war like this. Do you see the 
necessity--or maybe you are not working on future weapons that 
we might be able to fight and give an advantage to our war 
fighters, to our warriors who are fighting this war. Is there 
something in the pipeline now that you know of?
    Secretary Lynn. Yes. Yes, there is, Mr. Chairman. In the 
budget that we are going to submit to you tomorrow, there is an 
emphasis on bringing things forward that are going to help us 
in the war fight.
    We are going to increase the ISR assets--Intelligence, 
Surveillance, and Reconnaissance assets--available to the war 
fighter. We are going to increase the unmanned aerial vehicles, 
the Predators and particularly the Reapers, that have been 
helping out so much in Afghanistan. We are going to increase 
the number of special operations forces by 2,500. Those forces 
are on the front lines of our effort in Afghanistan.
    So, yes, we are proposing things that are going to be of 
immediate benefit to the conflict we are in. That is, frankly, 
one of the principal themes that the Secretary has in the 
budget that he constructed for submission to Congress tomorrow.
    Mr. Ortiz. And, you know, the reason I ask these questions 
is because I feel that sometimes we are preparing ourselves and 
preparing development weapons to fight a war that we will never 
fight. But now we have this war going on eight years, and I 
just pray to God that we will be able to find the right 
technology and the right equipment to support our warriors.
    Secretary Lynn. Well, we need the right balance. I agree. I 
agree with you, Mr. Chairman. We certainly want to make sure--
and we are steering more towards supporting the immediate war 
fights. That does not mean we want to give up the long term.
    As I think one of the members of the committee indicated, 
it is not only whether there will be a near peer competitor, 
but we want to dissuade one from emerging. So we need to make 
sure our development programs are on that track as well.
    But, frankly, the programs on that track have generally 
been quite strongly supported. The war fighter programs' more 
immediate needs we felt needed some additional impetus, and 
that is what we tried to put into this budget.
    Mr. Ortiz. Do I hear any further questions?
    Mr. Secretary, thank you so much to you and your staff for 
your excellent testimony.
    And hearing no further questions, this hearing stands 
adjourned.
    Secretary Lynn. Thank you very much, Mr. Chairman.
    [Whereupon, at 11:55 a.m., the committee was adjourned.]


      
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                            A P P E N D I X

                              May 6, 2009

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              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                              May 6, 2009

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             RESPONSES TO QUESTIONS SUBMITTED BY MR. TAYLOR

    Secretary Lynn. Direct responsibility for executing the EMALS 
program of record is the Program Manager for Aircraft Launch & Recovery 
Equipment (ALRE), PMA 251. He reports directly to Program Executive 
Officer for Tactical Aircraft (PEO TACAIR) to support delivery of this 
new technology within cost and schedule. PMA 251 will deliver fully 
tested systems to the Program Manager for the Future Aircraft Carrier, 
PMS 378, who will install EMALS into CVN 78-class carriers. Senior Navy 
Oversight is maintained by an Executive Committee, comprised of the 
Deputy CNO for Integration of Capabilities and Resources, Commanders of 
the Naval Sea Systems Command and Naval Air Systems Command, and the 
Principal Military Deputy for the Assistant Secretary of the Navy for 
Research, Development, and Acquisition (ASN(RDA)). This executive 
committee convenes quarterly for reviews and to provide guidance and 
assistance to PMA 251 and PMS 378. [See page 14.]
    Secretary Lynn. The LCS program is subject to the same level of 
Navy/OSD budget review as any other ACAT 1D program. At Milestone A (MS 
A) on May 27, 2004, the Navy developed an independent cost estimate 
which was accepted by the OSD Cost Analysis Improvement Group (CAIG). 
The program cost estimates are updated periodically during program 
execution by NAVSEA 05C to reflect the latest return cost data, 
quantity profile, and acquisition strategy in support of the Navy POM/
budget program review. At MS B, planned for FY11, the CAIG will update 
its independent cost estimate for the program. [See page 15.]
                                 ______
                                 
              RESPONSE TO QUESTION SUBMITTED BY DR. SNYDER
    Secretary Lynn. The Department of Defense and the Administration 
supported provisions in both the Senate (S. 454) and House (HR. 2101) 
bills that were included in the final engrossed version, including: 
Awarding DOD personnel for excellence in the acquisition of products 
and services (Sec. 301); articulating that the Joint Requirements 
Oversight Council seek input from the Combatant Commanders (Sec. 105); 
Director of Defense Research and Engineering assessing critical Major 
Defense Acquistion Program (MDAP) technologies (Sec. 104); requiring 
unit cost reporting for planned increments or spirals, a provision 
within the Critical Cost Growth in MDAPs section (Sec. 206).
    The Department was also concerned with provisions in both the 
Senate and House bills that would dilute the authorities of the Under 
Secretary of Defense for Acquisition, Technology and Logistics, or that 
added duplicative or potentially burdensome layers of additional 
oversight, ultimately hindering the Department's ability to deliver 
necessary capabilities to the Warfighter.
    The Department of Defense is pleased to work with Congress to 
effectively implement the reform initiatives in the Weapons Systems 
Acquisition Reform Act of 2009 (P.L.: 111-023). [See page 28.]

                                  
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