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





              DEFENSE ACQUISITIONS: ONE YEAR AFTER REFORM

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

                                HEARING

                               before the

                   SUBCOMMITTEE ON NATIONAL SECURITY
                          AND FOREIGN AFFAIRS

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 19, 2010

                               __________

                           Serial No. 111-151

                               __________

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




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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                   EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania      DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York         DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio             MARK E. SOUDER, Indiana
JOHN F. TIERNEY, Massachusetts       JOHN J. DUNCAN, Jr., Tennessee
WM. LACY CLAY, Missouri              MICHAEL R. TURNER, Ohio
DIANE E. WATSON, California          LYNN A. WESTMORELAND, Georgia
STEPHEN F. LYNCH, Massachusetts      PATRICK T. McHENRY, North Carolina
JIM COOPER, Tennessee                BRIAN P. BILBRAY, California
GERALD E. CONNOLLY, Virginia         JIM JORDAN, Ohio
MIKE QUIGLEY, Illinois               JEFF FLAKE, Arizona
MARCY KAPTUR, Ohio                   JEFF FORTENBERRY, Nebraska
ELEANOR HOLMES NORTON, District of   JASON CHAFFETZ, Utah
    Columbia                         AARON SCHOCK, Illinois
PATRICK J. KENNEDY, Rhode Island     BLAINE LUETKEMEYER, Missouri
DANNY K. DAVIS, Illinois             ANH ``JOSEPH'' CAO, Louisiana
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
JUDY CHU, California

                      Ron Stroman, Staff Director
                Michael McCarthy, Deputy Staff Director
                      Carla Hultberg, Chief Clerk
                  Larry Brady, Minority Staff Director

         Subcommittee on National Security and Foreign Affairs

                JOHN F. TIERNEY, Massachusetts, Chairman
CAROLYN B. MALONEY, New York         JEFF FLAKE, Arizona
PATRICK J. KENNEDY, Rhode Island     DAN BURTON, Indiana
CHRIS VAN HOLLEN, Maryland           JOHN L. MICA, Florida
PAUL W. HODES, New Hampshire         JOHN J. DUNCAN, Jr., Tennessee
CHRISTOPHER S. MURPHY, Connecticut   MICHAEL R. TURNER, Ohio
PETER WELCH, Vermont                 LYNN A. WESTMORELAND, Georgia
BILL FOSTER, Illinois                PATRICK T. McHENRY, North Carolina
STEVE DRIEHAUS, Ohio                 JIM JORDAN, Ohio
STEPHEN F. LYNCH, Massachusetts      JEFF FORTENBERRY, Nebraska
MIKE QUIGLEY, Illinois               BLAINE LUETKEMEYER, Missouri
JUDY CHU, California
                     Andrew Wright, Staff Director














                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 19, 2010.....................................     1
Statement of:
    Sullivan, Mike, Director, Acquisition and Sourcing 
      Management, U.S. Government Accountability Office; John 
      Roth, Deputy Comptroller for Program/Budget, Office of the 
      Under Secretary of Defense--Comptroller; and Nancy Spruill, 
      Ph.D., Director, Acquisition Resources and Analysis, Office 
      of the Under Secretary of Defense for Acquisition, 
      Technology and Logistics...................................     7
        Roth, John...............................................    30
        Spruill, Nancy, Ph.D.....................................    35
        Sullivan, Mike...........................................     7
Letters, statements, etc., submitted for the record by:
    Roth, John, Deputy Comptroller for Program/Budget, Office of 
      the Under Secretary of Defense--Comptroller, prepared 
      statement of...............................................    32
    Spruill, Nancy, Ph.D., Director, Acquisition Resources and 
      Analysis, Office of the Under Secretary of Defense for 
      Acquisition, Technology and Logistics, prepared statement 
      of.........................................................    37
    Sullivan, Mike, Director, Acquisition and Sourcing 
      Management, U.S. Government Accountability Office, prepared 
      statement of...............................................    11
    Tierney, Hon. John F., a Representative in Congress from the 
      State of Massachusetts:
    Information concerning competition...........................    56
    Prepared statement of........................................     4

 
         HEARING ON DEFENSE ACQUISITIONS: ONE YEAR AFTER REFORM

                              ----------                              


                        WEDNESDAY, MAY 19, 2010

                  House of Representatives,
     Subcommittee on National Security and Foreign 
                                           Affairs,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2154, Rayburn House Office Building, Hon. John F. Tierney 
(chairman of the subcommittee) presiding.
    Present: Representatives Tierney, Murphy, Welch, Foster, 
Driehaus, Quigley, Flake, and Luetkemeyer.
    Staff present: Andy Wright, staff director; Talia Dubovi 
and Scott Lindsay, counsels; LaToya King, professional staff 
member; Boris Maguire, clerk; Bronwen DeSena and Aaron 
Blacksberg, interns; Adam Fromm, minority chief clerk and 
Member liaison, Stephen Castor, minority senior counsel; Ashley 
Callen, minority counsel; and Christopher Bright, minority 
senior professional staff member.
    Mr. Tierney. Good morning. A quorum being present, the 
Subcommittee on National Security and Foreign Affairs hearing 
entitled, ``Defense Acquisitions: One Year after Reform,'' will 
come to order.
    Before we begin this hearing, I would like to quickly 
address one piece of business that was left over from the 
subcommittee's April 28, 2010, hearing that was entitled, ``The 
Rise of the Drones II: Examining the Legality of Unmanned 
Targeting.'' We have an additional statement for the record to 
submit, as well as a corrected version of a statement that was 
submitted already.
    I therefore ask unanimous consent that the hearing record 
be reopened, that the written statement of Professor Michael W. 
Lewis be submitted for the record, that the corrected version 
of Professor Hina Shamsi's statement be submitted for the 
record, and that, thereafter, the hearing record be reclosed. 
Without objection, so ordered.
    With respect to today's hearing, I ask unanimous consent 
that only the chairman and ranking member of the subcommittee 
be allowed to make opening statements. Without objection, so 
ordered.
    I ask unanimous consent that the hearing record be kept 
open for 5 business days so that all members of the 
subcommittee be allowed to submit a written statement for the 
record. Without objection, so ordered.
    So again, good morning to our panelists that are here and 
other folks that have come by. Today, the subcommittee is 
exercising one of its fundamental responsibilities, which is 
the oversight of Defense Department spending. Specifically, we 
will be examining the acquisition of major weapon systems.
    The United States has the most advanced military force in 
the world. Our men and women in uniform operate the most 
sophisticated, highly developed, and technologically superior 
array of weapon systems this world has ever seen. This 
subcommittee recently held hearings on one of the newest 
additions to the military's toolbox, the unmanned aerial 
vehicle. New and improved weapon systems can help our military 
to be more effective and efficient, while keeping our troops 
out of harm's way to the greatest extent possible.
    However, fielding such a force has been difficult and 
costly, as seen by the numerous reports of cost overruns, 
schedule delays, and performance failures that have plagued our 
acquisitions programs for years and years. Numerous efforts to 
reform the acquisition system have been undertaken, including 
the Weapon Systems Acquisitions Reform Act of 2009, which is 
now law, and the IMPROVE Acquisitions Act of 2010, which passed 
the House in late April and is currently being considered by 
the Senate.
    In addition, the Defense Department has made its own 
changes to its acquisition policy, and there have been 
countless recommendations made for improving acquisitions by 
various commissions, think tanks, and non-governmental 
organizations. Still, as we will hear today, problems do 
persist.
    On April 29, 2008, the subcommittee held a joint hearing 
with the full Oversight and Government Reform Committee that 
focused on the cost overruns and scheduling delays that 
persisted throughout the Department of Defense's acquisition 
system. The centerpiece for that hearing was the Government 
Accountability Office's 2008 Assessment of Selected Weapon 
Programs. At that time, the Government Accountability Office 
found that the Department of Defense's largest weapon programs 
had exceeded their original costs by $295 billion, and their 
2009 report showed little improvement.
    I do have to note, as an aside to this remark, that I also 
saw in GAO's report that there was no such assessment for 
performance of DOD's portfolio. It had been precluded because 
the Department of Defense did not issue timely or complete 
selected acquisition reports on its major defense acquisition 
programs, and I would like, during the course of remarks for 
somebody to address why that wasn't done and why we are left 
without that valuable information, if you would.
    In these tough economic times, when Americans are out of 
work and families are struggling to make ends meet, we have to 
redouble our efforts to ensure that every precaution is in 
place to avoid wasting taxpayer money.
    Contrary to the longstanding recommendations of GAO, the 
Department has still not fully implemented a knowledge-based 
approach of its weapons acquisitions program. It boils down to 
the need for the Department to take some common-sense steps in 
its processes, such as testing prototypes to ensure that they 
meet all program requirements before starting production, 
confirming that manufacturing processes are repeatable, 
sustainable, and capable of consistently producing quality 
products, and making every effort to keep program requirements 
from changing in ways that cause increased costs and schedule 
delays.
    Now, that seems a no-brainer. It seems to be a best 
practice. And the question that I have that I think GAO asked 
at the very end of its report: Why do you need laws to do 
things that are best practices? Why do you need to continue to 
be whipped with new procedures to get these things done that 
ought to be done by common sense by anybody that has ever run a 
small business or a household? So if somebody will address 
that, it would be helpful.
    GAO found that none of the 42 programs assessed have 
attained or are on track to attain all the required amounts of 
knowledge at the critical phases in the acquisition system.
    As an example, one of these programs, which Secretary of 
Defense Robert Gates designated as the Department's highest 
priority acquisition in 2007, is the Mine Resistant Ambush 
Protected Vehicle [MRAP], and its new lighter and more agile 
MRAP All Terrain Vehicle [M-ATV]. The cost of this critical 
program grew by 161 percent from 2007 to 2009, due in large 
part to problems that were discovered during testing that was 
initiated after production began.
    Nevertheless, according to GAO, the new M-ATV program still 
has concurrent production and testing schedules that are likely 
to require post-production fixes and result in cost growth and 
scheduling delays. In fact, all 6,644 vehicles are scheduled to 
be delivered by the time developmental tests are scheduled to 
be completed. While I understand that the military has deemed 
this an urgent requirement, and that may be somewhat of an 
exception and we can talk about that, but I question whether 
all of the programs that are moving forward that have not met 
those requirements on time fall into that category, and I 
question why we are making the same costly mistakes over and 
over again.
    On May 8th, Secretary Gates directed every component within 
the Department ``To take a hard, unsparing look at how they 
operate,'' with the goal of finding real, long-term cost 
savings in the defense budget. I applaud Secretary Gates for 
taking this important step. Congress also has to do more in 
that effort. The IMPROVE Act that was recently passed by the 
House makes critical changes to help bring down the cost of our 
defense programs and save taxpayer money. I hope that the 
Senate will act on this legislation soon.
    I never miss an opportunity to report that there are some 
249 bills that have passed the House that are sitting over in 
the other body, waiting for them to do something. This would be 
an important one for them to take action on.
    As Secretary Gates noted, ``given America's difficult 
economic circumstances and parlous fiscal condition, military 
spending on things large and small can and should expect 
closer, harsher scrutiny.'' That scrutiny continues today.
    [The prepared statement of Hon. John F. Tierney follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    Mr. Tierney. Mr. Flake.
    Mr. Flake. Thank you, Mr. Chairman. Thanks for holding this 
hearing. I appreciate the witnesses coming forward.
    Members of Congress and taxpayers alike have long been 
concerned about reports of cost overruns, billions of Federal 
dollars going to cost overruns associated with defense spending 
and weapon systems. Congress can and should exercise its 
oversight responsibilities when it comes to spending, 
particularly when it comes to defense spending.
    Whether it is relatively small defense earmarks that allow 
Members of Congress to give a no-bid contract to a private 
company or multi-billion dollar defense weapon systems being 
handled by the Pentagon, defense spending remains difficult to 
rein in. It is one area that I have been concerned about, and I 
know it makes your job more difficult to deal with the 
congressional earmarks that come as well, and I would like to 
hear some of what you have to say about that process.
    It appears that we have an ally in the Pentagon. As the 
chairman mentioned, Secretary Gates said military spending on 
things large and small can expect closer, harsher scrutiny. 
That is what this hearing is all about and I am glad to be a 
part of that tougher, harsher scrutiny, and I look forward to 
the testimony. Thanks.
    Mr. Tierney. Thank you.
    Now we will receive testimony from the witness panel before 
us today. I will introduce all of them before we start.
    Mr. Michael J. Sullivan serves as the Director for 
Acquisition and Sourcing Management at the U.S. Government 
Accountability Office. His team is responsible for examining 
the effectiveness of agency acquisition and procurement 
practices in meeting their mission performance objectives and 
requirements. He also manages a body of work designed to help 
the Department of Defense apply best commercial practices to 
better develop advanced weapon systems, and he holds both a 
B.A. and an MPA from Indiana University.
    Mr. John Roth is the Deputy Comptroller for Program/Budget 
in the Office of the Under Secretary of Defense. He has been in 
the Senior Executive Service since 1990 and is currently 
responsible for the budget review and analysis of all Defense 
programs. Mr. Roth is also an honorary professor at the Defense 
Systems Management College. He received his B.A. from the 
University of Virginia and earned an MPA from George Washington 
University. Mr. Roth has also completed a number of prestigious 
programs in executive excellence, national security leadership, 
and senior management.
    Dr. Nancy Spruill is the Director of Acquisition Resources 
and Analysis for the Under Secretary of Defense for 
Acquisition, Technology, and Logistics. In this capacity, she 
is responsible for all aspects of AT&L's participation in 
planning, programming, budgeting, and execution of Defense 
Acquisition systems, and the congressional process. She serves 
as the Executive Secretary to the Defense Acquisition Board and 
is responsible for the timely and accurate submission to 
Congress of selected acquisition reports and unit cost reports 
for major defense acquisition programs.
    She is a certified acquisition professional and has 
received several distinguished honors and awards, including 
Department of Defense Medal for Distinguished Civilian Service. 
She holds a B.S. in Mathematics from the University of 
Maryland, as well as an M.A. and a Ph.D. from George Washington 
University.
    So I want to thank all of you again for coming here to 
testify today and sharing your substantial expertise. It is, as 
you know, the policy of this committee to swear you in before 
you testify, so I ask you to please stand and raise your right 
hands. If there is anyone who is also going to be responding to 
the questions, I would ask that you also have them stand, as 
well.
    [Witnesses sworn.]
    Mr. Tierney. The record will please reflect all the 
witnesses answered in the affirmative.
    And, with that, we would be pleased, Mr. Sullivan, if you 
would please give us your remarks in around 5 minutes or so, 
and the lights will indicate when your time is up. You are 
familiar with those? Thank you.

STATEMENTS OF MIKE SULLIVAN, DIRECTOR, ACQUISITION AND SOURCING 
 MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; JOHN ROTH, 
  DEPUTY COMPTROLLER FOR PROGRAM/BUDGET, OFFICE OF THE UNDER 
 SECRETARY OF DEFENSE--COMPTROLLER; AND NANCY SPRUILL, PH.D., 
  DIRECTOR, ACQUISITION RESOURCES AND ANALYSIS, OFFICE OF THE 
  UNDER SECRETARY OF DEFENSE FOR ACQUISITION, TECHNOLOGY AND 
                           LOGISTICS

                   STATEMENT OF MIKE SULLIVAN

    Mr. Sullivan. Thank you, Mr. Chairman, Ranking Member 
Flake, members of the subcommittee. I am pleased to be here 
today to discuss the department's management of its major 
weapon systems acquisition program. My statement today is based 
on the report we did on March 31st of this year that assessed 
the portfolio of major weapon systems acquisitions over at the 
department, and it includes observations about DOD's effort to 
manage its portfolio, the knowledge attained at key junctures 
of a subset of 42 weapon systems programs that we drilled down 
into, and the department's implementation of recent acquisition 
reforms.
    We made two observations this year on the department's 
overall portfolio management. First, priorities were clearly 
examined for this year's budget and reset. In fiscal year 2010, 
the Secretary of Defense proposed canceling or curtailing 
programs with projected total costs of at least $126 billion 
that he characterized as too costly or no longer relevant. 
Congress supported several of the recommended terminations.
    Second, the portfolio did grow to 102 programs in 2009, a 
new increase of five since December 2007, the last time we had 
selected acquisition reports to do that analysis. And the 
additional programs added about $72 billion that entered the 
portfolio. Thirteen programs, including the Future Combat 
Systems, left the portfolio. Those programs took a total cost 
of about $179 billion with them out of the portfolio, including 
over $47 billion in cost growth.
    As you stated, Mr. Chairman, we weren't able to place a 
value on the overall portfolio or determine its cost growth 
this year due to the lack of selected acquisition reports 
available from the department. I think a lot of that had to do 
with the changeover in administration, but I will let the 
department explain that, I guess. We plan to do that analysis 
again this year and the selected acquisition reports are back 
in place, so we do have those.
    Some observations from our assessment of knowledge on the 
42 programs that we drilled down into and looked at. At the 
program level, there is still kind of a mixed picture. While 
program knowledge is increasing, and we have found that for the 
last couple of years now, none of the 42 programs we assessed 
have attained all of the requisite amounts of knowledge that 
are needed at key junctures in the program to keep risk in 
place.
    Our analysis allows us to make the following observations. 
First, the newer programs in the portfolio are beginning with 
higher levels of technology maturity, and this is a very good 
sign. But they are not yet benefiting from a lot of the early 
systems engineering reviews that, for example, the legislation 
that just passed will bring in and what the department has 
brought in in their own policies. We haven't seen that taking 
place yet. We hope to see improvement as that does come in, get 
a better match between capabilities that are needed and the 
resources available.
    Second, programs that have held critical design reviews, 
which is more or less the second juncture in a program where 
you need to reduce risk for systems integration, in recent 
years, those programs have reported higher levels of design 
knowledge, usually in the way of releasable design engineering 
drawings. However, few are using prototypes to ensure design 
stability, and, again, that was a facet of the acquisition 
reform legislation we hope would pick-up.
    Third, most programs still rely on after-the-fact metrics 
to get manufacturing processes and control before they go to 
production. That is something that we think should be done with 
statistical process control and other ways. They should be able 
to get those processes in control much sooner than they do.
    Fourth, most programs continue to change key system 
requirements after program start. The department has put a lot 
of policy in place, and the acquisition reform legislation 
addresses this too, and we would like to see that improve in 
the future. Many programs continue to struggle with software 
development; it is a huge issue on these complex weapon systems 
and they continue to have problems. And we have found that many 
program offices that manage these weapon systems rely on non-
government personnel more than they used to, and that reliance 
seems to be increasing. That is something we want to keep our 
eye on.
    Now I would like to make some observations about how DOD is 
implementing the reforms. As you know, it is still relatively 
early, just under a year since they went into effect. Both 
DOD's December 2008 acquisition policy revisions and the Weapon 
Systems Acquisition Reform Act of 2009 require programs to 
invest more time and resources in the front-end of the 
acquisition process, when programs are just beginning or 
actually even before they begin. And they are doing this to 
refine concepts through early systems engineering, developing 
technologies so that they are more mature, and building more 
prototypes of both systems and subsystems before system 
development actually starts.
    We made two observations concerning how well the department 
is implementing the reforms. First, the department is 
incorporating acquisition reforms into the newer acquisition 
programs. In fact, 8 of the 10 programs that were new in our 
2010 assessment, that had not yet entered system development, 
which is the milestone B, which is really where an acquisition 
program begins, reported that they either have or have plans to 
hold the very important early system engineering reviews prior 
to the milestone B decision. This is consistent with both DOD's 
policy and the reform legislation.
    Second, the department has established the new position of 
the Director of Cost Assessment and Program Evaluation, and 
this group is already up and running and has already weighed in 
on a number of programs, some new programs in order to get more 
realistic cost estimates and other programs that have been in 
trouble, including the Joint Strike Fighter program, which just 
went through a drastic kind of budget scrub; and I think that 
this new position, the CAPE did a pretty nice job in defining 
the risks on that program. And I believe that we are seeing 
signs of that new position resulting in more reasonable cost 
estimates.
    To conclude, I would kind of like to echo what the chairman 
was talking about. I would just like to offer a few thoughts 
about other factors that should be considered so that we make 
the most of today's opportunity for meaningful change, 
especially when we have the leadership we have in the 
department right now that seems to, as Congressman Flake said, 
is stepping up and trying to make some good decisions.
    First, poor outcomes on these programs delays cost growth, 
reduced quantities, have been persistent for decades, and 
everybody has known about it. If we think of these processes as 
merely broken, then some of the targeted repairs that we have 
in this reform legislation should fix them. I think the 
challenge is greater than that, and if we understand the 
current inefficiencies--right now they are kind of accepted as 
a cost of doing business--then the challenge for getting better 
outcomes is greater. It really becomes much more leadership 
oriented than anything else. Seen in this light, it will take 
considerable and sustained leadership and effort to change the 
incentives and inertia that reinforce this status quo, and I 
think the Congress has a role in that as well.
    Second, while actions taken and proposed by the department 
and Congress are constructive and will serve to improve 
acquisition outcomes, one has to ask the question why 
extraordinary actions are needed to force practices that should 
occur normally? I think just as the chairman stated. Clearly, 
more independence, methodological rigor that we are now 
beginning to get from the CAPE, and better information about 
risk areas like technology will make estimates more realistic. 
On the other hand, realism is compromised as competition for 
funding within the Pentagon encourages programs to make 
themselves appear affordable. Reform must recognize and 
counteract these pressures as well.
    Finally, if reform is to succeed, then programs that 
present realistic strategies and resource estimates must 
succeed in winning approval and funding over those that present 
potential capabilities for unrealistic costs, and this will 
take a firm cooperative effort between the department and the 
Congress.
    Mr. Chairman, this completes my statement. I would be happy 
to respond to any questions.
    [The prepared statement of Mr. Sullivan follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    Mr. Tierney. Well, thank you, Mr. Sullivan. I want to again 
congratulate you and your team for the work on that and how 
helpful it is to all of us.
    Mr. Sullivan. Thank you.
    Mr. Tierney. Mr. Roth, unfortunately, he used your 5 
minutes as well, so we are going to skip over you. No, I am 
only kidding. [Laughter.]
    We do want to hear from you as well, so we would appreciate 
your comments now.

                     STATEMENT OF JOHN ROTH

    Mr. Roth. Thank you, Mr. Chairman. Chairman Tierney, 
Ranking Member Flake, members of the committee, thank you for 
this opportunity to participate in this hearing and for your 
continued support of America's armed forces.
    I am here today representing the Office of the Comptroller 
and the annual budget process in the Department of Defense. The 
budgets we develop for congressional consideration each year 
include the amounts requested for these acquisition programs. 
As a result, our office has in fact considerable interest in 
acquisition reform, which is the subject of today's hearing.
    We are currently executing the fiscal year 2010 budget. We 
are working with Congress on our fiscal year 2011 budget 
request, and we have begun internally working already on the 
budget for fiscal year 2012. So it is clearly an overlapping 
and complex process that we are trying to manage as best we 
can.
    As we proceed, we have been directed by Secretary Gates, 
``to take an unsparing look at how the department operates.'' 
In his recent speech, the Secretary explained ``the goal is to 
cut out overhead costs and to transfer those savings to force 
structure and modernization within the program budget. In other 
words, to convert sufficient `tail' to `tooth' to provide the 
equivalent of roughly 2 to 3 percent real growth, resources 
needed to sustain our combat power at a time of war and to make 
investments to prepare for an uncertain future.''
    This policy builds on the progress that has already been 
made over the past couple years, including the initiatives with 
a significant impact on Defense spending.
    First, it builds on the department's progress in 
acquisition reform, which we will discuss this morning, 
including the creation of the Office of Cost Assessment and 
Program Evaluation, as well as in the implementation of the 
Defense Acquisition Workforce Development Fund. Through March 
31st of this year, almost half of the amount appropriated for 
this working capital fund, nearly $400 million, has been 
obligated, and over 3,000 new Workforce Development Fund 
employees have been brought on board. This is a critical first 
step in strengthening the in-house acquisition work force. 
Hiring projections for the remainder of fiscal year 2010 are on 
track to meet the department's targets. The fiscal year 2011 
budget builds on this by including another $218 million for the 
Workforce Development Fund.
    Acquisition work force development is a part of a much 
larger effort to reduce the department's reliance on 
contractors by in-sourcing what is considered to be essential 
government work. The goal is to reduce contractors from the 
recent high of 39 percent of DOD's work force back to 26 
percent, the level that existed before 2001.
    Second, in addition to the department's progress in 
acquisition reform, the budget request for fiscal year 2011 
takes account of the savings generated by canceling programs 
that were deemed to be underperforming or over budget. The 
Secretary has clearly demonstrated his commitment to making 
difficult choices on acquisition programs, including an 
unprecedented number of program cancellations in the fiscal 
year 2010 budget, as well as the 2011 budget.
    Amongst them were the VH-71 Presidential helicopter, the F-
22 aircraft, and the Army's Future Combat Systems ground 
vehicle program. These further cancellations recommended for 
2011 included the alternate engine for the F-35 aircraft, 
additional acquisitions of C-17 aircraft, the Next Generation 
Cruiser, the new Navy Intelligence Aircraft, and the Defense 
Integrated Military Human Resources Systems, so-called DIMHRS, 
which simply failed to live up to expectations.
    Last, the Secretary's guidance to DOD budgeteers follow 
several years of significant progress in financial management, 
especially in the areas of financial information and audit 
readiness. Several of our defense agencies now maintain 
auditable statements. Two large trust funds managed by DOD have 
either qualified or unqualified opinions. In particular, the 
Marine Corps has asserted audit readiness for their Fiscal Year 
2010 Statement of Budgetary Resources, and an audit is 
currently underway. The dollar value of those elements of 
defense currently either auditable or under audit is greater 
than 10 of the current CFO agencies, though there is still much 
more to accomplish.
    The department has introduced a change of emphasis that 
reinforces the fact that a financial audit is really an 
enterprise initiative. We are now concentrating on the kinds of 
budgetary information DOD managers use everyday, specifically 
budget information and existence and completeness of assets. A 
stronger, better controlled business environment will produce 
both improved quality and more transparent financial 
information. We appreciate the support of the Congress to this 
new approach and we have pledged to keep you apprised of our 
progress through semiannual reports on financial improvement 
and audit readiness.
    Mr. Chairman, this concludes my statement, and I am open to 
any questions you have.
    [The prepared statement of Mr. Roth follows:]

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    Mr. Tierney. Thank you, Mr. Roth.
    Dr. Spruill.

               STATEMENT OF NANCY SPRUILL, PH.D.

    Dr. Spruill. Thank you. Can you hear me? Thank you.
    Chairman Tierney, Ranking Member Flake, and other 
distinguished members of this subcommittee, I am honored to be 
here today. Thank you for the nice summary of my history. I 
would like to add two things. First, I am proud to be a third 
generation Federal employee. My grandfather worked at the 
Bureau of Engraving and Printing, and my father spent his 
career at the Federal Reserve. And I am glad to follow in those 
footsteps.
    Also, an additional thing that I do for AT&L is that I 
provide authoritative data and analysis in support of the 
oversight of the acquisition programs.
    I am pleased to come and talk today about defense 
acquisitions and discuss the broad trends, incentives, and 
challenges present in the Defense Department's current 
acquisition system for major weapons programs.
    For the past several years, the department has been making 
changes to improve the acquisition process, changes such as 
putting increased emphasis on the front end of the process. 
That means starting programs right, making and using material 
development decisions at program initiation, conducting 
preliminary design reviews before milestone B, budgeting to 
independent cost estimates, requiring competitive prototyping, 
implementing configuration steering boards, establishing 
program management agreements, and completing independent 
program reviews. We have made support to the war fighter our 
highest priority, and we are increasing and improving the 
acquisition work force.
    The department has initiated many improvements to the 
Defense Acquisition System since the enactment of the Weapon 
Systems Acquisition Reform Act of 2009 [WSARA] in the areas of 
system engineering, development tests and evaluation, 
technology maturity, and cost estimation with the goal of 
reestablishing a culture of acquisition excellence in the 
Department of Defense. The department is committed to making 
tradeoffs among cost, schedule, and performance to 
significantly reduce cost growth in major defense acquisition 
programs.
    The procedural and organizational changes required by WSARA 
complemented and reinforced many of the department's recent 
policy changes, as Mr. Sullivan mentioned. The department 
strongly supports and is aggressively implementing the WSARA 
requirements and will continue to seek additional ways to 
improve the effectiveness of our weapon systems process.
    As you mentioned, another important piece of the 
legislation is the IMPROVE Acquisition Act currently under 
debate. We look forward to working with Congress as they 
finalize the provisions of this act and we have several issues 
we would like to discuss.
    We are committed to addressing the issues outlined in the 
IMPROVE legislation, as well as WSARA, so that improvements in 
acquisition systems serve and support the Nation's war fighters 
and reduce cost growth in defense acquisition programs.
    Finally, I wanted to mention improving the acquisition work 
force. Good people are the essential elements of any successful 
acquisition reform strategy. We are on track to meet the growth 
targets for rebuilding the civilian acquisition work force in 
2010 and beyond, and we are focusing on more than numbers; we 
are focusing on quality. We are pleased that we are attracting 
talented people to help us address the important issues we face 
every day. We look forward to working with Congress as we 
develop an acquisition system that develops value to the 
taxpayer and is responsive to the 21st century operating 
environment.
    Thank you for the opportunity to appear before you today. I 
will do my best to answer any question that you may have for 
me. Thank you.
    [The prepared statement of Dr. Spruill follows:]

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    Mr. Tierney. Thank you. That is all we can ask.
    Dr. Spruill. Pardon?
    Mr. Tierney. Doing your best to answer the questions.
    I thank all of you for your testimony on that; it makes me 
think somewhat, in listening to Mr. Roth and Dr. Spruill, that 
maybe it is our patience of getting to where we want to go a 
little bit quicker that drives some of our concern. It is good 
to hear that a lot of the recommendations made formally by the 
Government Accountability Office and by Congress in its 
legislation is being implemented.
    I guess the question is, as I started at the outset, why 
were those things not done to begin with, which is probably an 
unfair question to ask you. It wasn't on your watch and it 
seems that you are addressing them. Are we moving as quickly as 
we can be moving I guess would be the next question. Are we 
really progressing? Why are there still programs that are 
moving forward with immature technology? Why are there still 
programs that aren't getting the knowledge base that they need 
early enough in the system program?
    Dr. Spruill. I will try to answer that. As you know, there 
are now 102 major defense acquisition programs at all different 
phases of their life. After talking with Congress and staffers, 
we have focused on programs that are at the beginning. We 
personally just do not have the capability to address all 102 
at once. The thinking was if I get the programs up front, then 
they will be on the right track as they go down.
    As you know, WSARA required us to look at meeting the 
milestone B certification requirements for any programs that 
were between milestone B and milestone C. We have started down 
that path. It is a difficult path in the sense that the older a 
program is, the harder it is to find the information to talk 
about the structure of the program.
    Mr. Tierney. I guess that would have been why it would have 
been helpful to have the information and giving us an 
assessment of where we were on those. Is that something you are 
moving toward doing as well?
    Dr. Spruill. Yes, we are. As you know, right now we are 
working to implement the WSARA. We have stood up new offices. 
They have some responsibilities, cost estimating, performance 
assessment.
    So we have started moving through the makeup 
certifications, as we call them. The long pull in attempting to 
getting them done is the cost estimates, and you all expanded 
in WSARA the responsibility and the scope of the CAPE folks, 
and we have started to beef up those staffs, as Mr. Roth 
mentioned, but there are still a lot of programs that need cost 
estimates as they are moving through the process today, so 
doing additional ones has been difficult, especially a while 
ago, when they didn't have the staff.
    But we are moving toward doing those makeup certifications 
and we hope to complete them. We have not completed them within 
the 1-year, but we hope to complete them as soon as possible 
thereafter. But the cost estimates are the hardest thing to 
move us through that process.
    Mr. Tierney. Thank you.
    Mr. Sullivan, if I ask you to assess Dr. Spruill's 
performance so far in terms of going to the early programs, the 
programs that are beginning, and it is not unreasonable to 
start there, how are we doing with those? Are 100 percent of 
those getting the sort of knowledge-based assessments that they 
need early on?
    Mr. Sullivan. The critical indicator that we look at to see 
if a program is developing a good business case that will 
result in a good cost estimate is the technologies, as you 
know, and we are pleased to report, in the last 2 years, we 
have seen increased knowledge about the technologies, more 
mature technologies as the things that are required for the 
business case than in the past.
    In fact, last year the department, I think 100 percent of 
the new starts were at what we call a technology readiness 
level 6, which is a reasonable technology maturity. We would 
like to see it at 7. We disagree with them on that. But that is 
unprecedented, really, that they have had that kind of thing.
    I think one of the reasons for that was congressional 
action and the department itself changing policies a couple of 
years prior to this reform, where they beefed up the 
certification process for looking at technology maturity. Now, 
I believe DDR&E must assess all of the technologies going into 
a weapon system.
    But it is also more than that. I think the rest of it is 
kind of time will tell, because technologies are the critical 
thing. But then, of course, to make a good business case, to 
really have a good match, you have to understand your 
requirements.
    So this preliminary design review that the legislation 
pushes up to before milestone B, if the department takes that 
seriously, that will be another way to get a better cost 
estimate. And a number of other things that we would like to 
see the department start doing, we see indications that the 
department is working hard to try to implement those things.
    So we are optimistic right now given the 2-year trend of 
technology maturity and what we seem to see as a good faith 
effort to try to implement some of these reforms. But time will 
tell.
    Mr. Tierney. Thank you.
    Mr. Flake.
    Mr. Flake. Mr. Sullivan, you talk about knowledge-based 
acquisition process. Can you explain in plain English what that 
means?
    Mr. Sullivan. Yes. We get that a lot, which means we 
probably should make it simpler. For years, GAO has looked at 
weapon systems, and we have drilled down into them and reported 
on problems with weapon systems, usually after the fact. And 
Congress sent us a clear message that they would like to get 
information sooner.
    So beginning about 10 years ago, we started our best 
practices work in order to try to change the way that we audit 
and look at things and try to get more proactive, and what we 
found out was we found a pretty good methodology at world-class 
commercial firms, where there were three kind of junctures that 
they would invest money if they could eliminate risk enough to 
make the next move forward.
    The first was when they would start a development program 
and establish what we call the business case, which is a match 
between what it is you are trying to build and the resources 
you have available.
    The knowledge-based aspect of that is the technologies, for 
the most part. For example, we went to Caterpillar and asked 
them how they built the mining truck that had some fairly 
exotic requirements in terms of what environment it would 
operate in, how many subsystems it would have on it, what kind 
of grades it would have to go up and down. Thirteen different 
mines wanted this mining truck and it was a 300 ton bed that 
they were making. It was unprecedented.
    And we talked to them about how they had to make trades 
early to establish a business case that, No. 1, they would be 
able to deliver in 3 years, so they could make the market; No. 
2, have the capabilities that their customers wanted. They went 
through painstaking process--and this is just one example; we 
went to a lot of places and got this--and eliminated a lot of 
requirements along the way. Most of their customers wanted a 
single engine to propel this big mining truck, and their 
engineers said we can't do that, we can't promise to deliver 
this on time and for the cost, the price that we have to have 
to make money. We have invention on this. We can't do it. So 
they eliminated that and kept their business case.
    So the business case is the knowledge of technologies. If a 
company feels good about the technologies they have and the 
resources they have to be able to start a program, they make 
that decision.
    And then just very briefly, there are two other knowledge 
points. One is at the point where you want to have a prototype 
that shows that the design is capable and will perform. We call 
that the design knowledge point. And usually you want to retire 
the technology risk, then the design risk before you would make 
the next leap into understanding how to scale up and 
manufacture it at a very high production rate. And then that is 
where you want processes and control, so you want knowledge of 
your processes at that point.
    Mr. Flake. Thanks for clarifying.
    Mr. Roth, the IMPROVE Act, according to CBO, is slated to 
cost about $250 million to implement. How long will it take to 
recoup the additional cost by implementing the IMPROVE Act do 
you estimate, or do you think that we ever will?
    Mr. Roth. Just the cost of implementation alone?
    Mr. Flake. Yes. Yes.
    Mr. Roth. To be honest with you, I haven't seen a good cost 
estimate of what it takes in terms of just implementing it.
    Mr. Flake. That is a number that the CBO gave us.
    Mr. Roth. Yes. I would have to get back on it. I hadn't 
seen the CBO number. It would appear to me I think we have the 
infrastructure in place probably to implement much of what I 
saw in the IMPROVE Act, but, that said, I would have to go 
back.
    Do you have any better feel for that?
    Dr. Spruill. No. I am not aware of the number.
    Mr. Flake. OK, Dr. Spruill, I mentioned before one of the 
things that has concerned me and makes your job, I am sure, a 
lot more difficult, is when Members of Congress will move in 
with their own priorities. We saw in the defense bill last year 
about 1,000 earmarks that Members of Congress will say, ``I 
want.'' We have to fill out a certification form that says this 
earmark is to go to this company.
    Now, despite that, we hear from the Department of Defense 
that it is their policy to have fair and open competition for 
each of these programs. How does that jibe when a Member of 
Congress will say I want it to go to this company at this 
address; yet there is free and open competition? Now, we have 
asked procurement over at DOD to kind of reconcile this, and 
there seems to be an uncanny alignment between those who are 
supposed to get the earmark and those who actually do in the 
end. How do you have a process of fair and open competition 
within that framework?
    Dr. Spruill. I am not an expert on earmarks. All of those 
come through DDR&E. I focus more on the major weapons programs. 
What I believe is if an earmark is in law, it will go to the 
organization it was earmarked for. I think that they are 
working very hard with Congress to make improvements in how we 
handle that. But I would have to answer that one for the 
record; I do not know enough in-depth to give you a good 
answer.
    Mr. Flake. OK. If you could for the record, I would 
appreciate that.
    Dr. Spruill. Be happy to.
    Mr. Flake. Thank you, Mr. Chairman.
    Mr. Tierney. Thank you.
    Mr. Welch, you are recognized for 5 minutes.
    Mr. Welch. Thank you very much, Mr. Chairman.
    Thank you. One of the questions I have is how much of the 
challenge we face is a result of acquisition system failures 
versus political failures. And the reason I ask that is that it 
does seem that Congress at least pays lip service to the notion 
of trying to have a streamlined acquisition process, but 
repeatedly comes up with a new ``reform'' after yet the latest 
example of a massive cost overrun.
    So it leads me to ask the question how much of the problem 
is really political in nature. The weapon systems that we 
develop are oftentimes the initiative of private industry that 
see an opportunity to fill what they define as a need, as 
opposed to our battlefield commanders generating a real world 
battlefield need definition. Obviously, a weapon system gets a 
constituency because it is a jobs program, and eventually the 
debate about yes or no on proceeding comes down to jobs, as 
opposed to how it fits into a strategic defense framework.
    So you have been through this, have been through panels 
like this before, and what my question is expressing is some 
skepticism that we can come up with an acquisition mechanism 
that will, independent of political reform, be successful. And 
I will start with you, Mr. Sullivan, to just comment on that, 
if you would.
    Mr. Sullivan. Well, I think what I would say is when we 
look at the major weapon system acquisition programs, normally 
these are started by the department because they are filling 
either a structural threat, a strategic threat that is out 
there like our fighter aircraft, for example, or any other, the 
cargo aircraft tankers, things like that, or more specific 
threats like MRAP, which came directly as an urgent need from 
the field.
    So I don't think there is necessarily a lot of big P 
politics involved with that. What happens is there are three 
major processes: there is the requirement setting process; the 
funding process, what they call the PPBE; and then the 
acquisition system that is supposed to take the results of that 
and execute a program. They don't necessarily do a good job of 
talking to each other, and I think within the department itself 
there is an awful lot of resource shifting and shuffling around 
that goes on on weapon systems programs.
    But if you take an F-22 program, for example, that 
performed, cost and schedule-wise, very poorly, I don't think 
you could necessarily say that was a political problem. It was 
a problem with people inside the building not being able to get 
those three major processes and the processor owners not 
necessarily being held accountable for what the others were 
doing.
    Mr. Welch. Thank you.
    Mr. Roth.
    Mr. Roth. I would echo some of the same thoughts. The years 
I have been in this business, one of the things that would help 
in terms of precluding, let's say, some of the cost growth we 
have in acquisition programs is more stability in the programs, 
and that means both from a requirement standpoint, from a 
funding standpoint; that once you decide a path you go down, 
that the various stovepipes in the building, whether they be 
financial, acquisition, technical, whatever, get behind the 
program.
    Too often in the past we have had too few dollars chasing 
too many programs. We start too many programs, then ultimately 
we have to make suboptimal decisions in terms of necking down 
the many programs to the dollars that are available. So then 
you end up stretching programs and you are doing all other 
kinds of things that are suboptimal. So from the best I have 
seen in past studies and all, one of the key elements is to try 
to introduce greater stability in all the various and sundry 
programs.
    Mr. Welch. Dr. Spruill.
    Dr. Spruill. I would say that many of the initiatives, and 
maybe this gets to the chairman's point, that Congress has 
identified for us to do as we go through different milestones 
is either something we were doing already or something we 
should have been doing. In many cases, for example, when the 
2366 A & B certifications came up, when we sat down and really 
looked at them, we said, we are doing these today, but pulling 
them all together and viewing them as one thing that we need to 
check before we move into the milestone was actually a helpful 
initiative from Congress. So I think that some of the political 
help we get is very helpful.
    One of the things that John says about stability is an 
issue for the acquisition community. However, on the other 
side, if we would keep to the cost estimates we had when 
programs started, I believe it would be easier to keep that 
stability down the line.
    So I think there is kind of both sides of it. I think there 
may be some political aspects, but I think a lot of what 
Congress and we, back and forth, and I will say back and forth 
with GAO, are making improvements to the system that need to be 
made.
    Mr. Sullivan. I would just summarize that by saying it is a 
matter of accountability and leadership, is what it really 
boils down to, and when you see a leader taking charge of 
things, things can happen that don't happen often.
    Mr. Welch. Thank you very much.
    Mr. Tierney. Thank you, Mr. Welch.
    Mr. Luetkemeyer, you are recognized for 5 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Just kind of walk me through the process here a little bit; 
I am kind of new to what we are doing here. With regards to the 
cost for changes, what percentage of the increase in cost to 
the programs is due to changing requirements or new 
technologies that are developed as you go through the process, 
versus what it was initially when an item was bid? Or is there 
a process in place that leaves a lot of that open and just sort 
of ballparks it?
    Mr. Sullivan. I think the best way to measure that, if you 
are looking for cost growth as a result of requirements, 
changes, or design problems, you would look at the programs are 
broken into development, cost, and procurement costs, so 
usually those kind of problems, if you have immature 
technologies and problems with design and problems with ramping 
up to production, it will come out in what are kind of the 
nonrecurring costs of the development of the weapon system.
    For example, when we looked at this 2 years ago, we broke 
out development costs, and there was a 42 percent growth in 
development costs. That is not in this year's written 
statement, but to give you an idea. I think you could look at 
that 42 percent growth as resulting from poor estimating or 
immature technologies or changing requirements and things like 
that.
    Mr. Luetkemeyer. On the information here, back in 2008, 63 
percent of the programs had change requirements once the system 
development began. I mean, I can understand to a certain point 
the need for being able to be flexible and improve the product 
or service, or whatever we are purchasing, based on new 
requirements, new technologies, but I am just kind of curious. 
Can you give me a figure of the total increase in cost that we 
had that was due to the changes that were like that, versus 
just poor estimating up front? Have you got that information?
    Mr. Sullivan. We can't break it out that way. We just know 
that when you have a major change in requirements in the middle 
of a development program, it is clearly going to perturbate 
everything you are doing in terms of design and manufacturing. 
So we can't give you a specific number, but it is a major 
contributor, probably the major contributor in cost growth 
during development.
    Mr. Luetkemeyer. What is the financial incentive for the 
manufacturer or the awardee of the contract to get the figure 
right up front? How much of this underbidding goes on, and then 
whenever it comes time to produce the prototype or produce 
another stage, all sudden it is, oops, we forgot this, oops, we 
forgot that; and whenever a change comes along they double or 
triple in order to recoup their moneys? Is there a financial 
incentive there for them, or I guess a deterrent for them not 
to do that?
    Mr. Sullivan. I think what happens is, first of all, these 
weapon systems are very complex. There is no market for these 
weapon systems, so there is an incredible amount of risk that 
the government asks the contractor to take on. Therefore, they 
tend to use what they refer to as cost reimbursable or time and 
material kind of contracts with a profit attached to that, 
which is fine.
    I mean, you wouldn't expect a contractor to take on all 
that risk by themselves with a fixed price contract, but the 
problem comes in--and I think the legislation addresses an 
awful lot of this--they begin the programs before they have a 
good understanding of the requirements. Usually the preliminary 
design reviews and all those systems engineering reviews that 
the department is putting into place now, gives the department, 
the customer a much better feel for a much better cost 
estimate. They have lacked that in the past and it leaves you 
susceptible to low-balling and all those other things. Nobody 
really knows how much it costs. There is not a lot of knowledge 
about that. That is our take on it.
    Dr. Spruill. Could I answer both the previous one, or try 
to answer? I do not know the statistic on how much is due to 
requirements. I do know that over the last few years the JROC, 
the folks who set the requirements, have made it very clear to 
the program manager if you find that the requirements are 
driving your cost up, please come back to us and let's have a 
discussion on whether the requirement makes sense or if it 
could be adjusted. So the department is very aware of the 
requirements' contribution and has taken initiative to fix it.
    On the technology side, one of the reasons that we need to 
improve the acquisition work force along the lines of systems 
engineering and testers is exactly what you say. We should not 
be letting a contract for an amount of money that is way 
underbid; we should have the technical knowledge in the 
department to say, no, that doesn't make sense, that bid is not 
a good bid. So we are trying to deal with both of those issues.
    Mr. Luetkemeyer. OK.
    Thank you, Mr. Chairman.
    Mr. Tierney. Thank you. Good questions.
    Mr. Driehaus.
    Mr. Driehaus. Thank you very much, Mr. Chairman. I would 
just like to pick up.
    Mr. Sullivan mentioned a bit earlier the example of a 
single engine and the need for competition in procurement. I 
would like to followup a little bit on that conversation around 
competition.
    I would ask unanimous consent, Mr. Chairman, to enter two 
documents in the record. The first is a memorandum from the 
Office of the Under Secretary of Defense for Acquisition, 
Technologies, and Logistics, dated September 4, 2009. The 
document states that competition is the cornerstone of our 
acquisition process and the benefits are well established.
    The second document, Mr. Chairman, is a slide show that is 
used to train those in the procurement career field from the 
Department of Defense itself around competition and weapons 
acquisitions.
    Mr. Tierney. Is there any objection?
    [No response.]
    Mr. Tierney. Without objection, so ordered.
    [The information referred to follows:]

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    Mr. Driehaus. Thank you very much, Mr. Chairman.
    This issue of competition and procurement is one that 
obviously Congress is in the midst of, and it seems that we are 
in the midst of on a regular basis. As you know, Congress has 
long established its preference for procurement of goods and 
services through competition. The Congressional Research 
Service cites that the Federal Government has supported 
procurement through competition since 1781.
    Just over 200 years later, Congress passed the Competition 
in Contracting Act of 1984. And since 1996 nine bills have been 
signed into law by the President that requires the design and 
development of a primary and secondary propulsion system. The 
Weapon Systems Acquisition Act of 2009 stresses the use of 
competition for major defense acquisition programs. This you 
all know.
    I am particularly interested, as we talk about competition, 
in propulsion systems and the F-35, and I, after going through 
the testimony and looking at some of the criteria that have 
been established for competition and contracting by the 
Department of Defense, it is my understanding that there are 
seven criteria that would allow the Secretary of Defense to 
waive competition for significant contracts, such as propulsion 
systems. Those are: single source for goods or services, 
unusual and compelling circumstances, maintenance of the 
industry base, requirements of international agreements, 
statutory authorization or acquisition of brand name items for 
resale, national security, and necessary in the public 
interest.
    As we look at competition, especially in propulsion 
systems, and we look specifically at the significant investment 
Congress has already made in the propulsion system, the 
competitive engine program for the Joint Strike Fighter, help 
me better understand how the opposition of the Secretary to the 
continuation of this program aligns with the Department of 
Defense's own criteria for waiving such competition and 
procurement.
    Mr. Sullivan, if you would like to start.
    Mr. Sullivan. I don't know if I can help you understand all 
of that, but I think the department has made clear that they 
believe that they have very low risk in a single point of 
failure on the engine that they have in place now, and I 
believe the Secretary believes that the remaining investment 
costs that would be needed short-term to make sure that the 
alternate engine program could be competitive are prohibitive 
in this budget environment.
    Mr. Driehaus. Just to followup on that, did we not learn 
this lesson in the F-15 and the F-16, that in fact having the 
competitive engine does in fact drive down cost over the long-
term and ensures stability over the long-term in a propulsion 
system?
    Mr. Sullivan. Yes, I think on that situation, where they 
infused competition into a single source. There are studies 
that show that they did get quite a bit of benefit out of that 
not only in terms of reducing the life cycle costs of the 
engine, but also with contractor responsiveness, reliability 
rates, and things like that.
    Mr. Driehaus. Mr. Roth, could you comment on the seven 
waiver criteria?
    Mr. Roth. Well, I think the issue, as Mr. Sullivan alluded 
to, is really the opportunity cost of additional investment in 
an alternate engine versus the potential savings or the 
potential payback that one might get for it. I think it is 
important to note where we are in this program. We arrived here 
to where we are today through a competitive contracting 
process, so the team that is in place today was one that 
essentially won that competition and has moved forward.
    The estimates that we have, as best as we can tell, that in 
order to pursue an alternate engine in this particular budget 
climate, we would have to invest at least $2\1/2\ billion to $3 
billion in this engine; the second engine needs to be developed 
as well; and the payback, as best as we can tell, is somewhat 
argumentative in terms of whether we would ever get that money 
back.
    And our fear is that you are not really going to end up 
with true competition, but you are essentially going to end up 
with two single source engines, because the users of the 
airplanes have made it fairly clear that the kind of logistics 
complexities that would be introduced by having to manage two 
engines is not something they are particularly interested in.
    So, for those reasons, and given the opportunity costs of 
trying to invest another $2\1/2\ billion, $3 billion in an 
engine in this particular budgetary climate, the leadership has 
made a decision that it wasn't worth the cost.
    Mr. Driehaus. Well, as you know, Mr. Roth, CRS has disputed 
whether or not there was in fact true competition in the 
process. And we have learned that the competitive engine is 
actually reducing cost. As a matter of fact, the competitor has 
come out with a fixed price bid over time, which would drive 
down cost for the engine over time. We have made billions of 
dollars in investments in this competitive engine to date. It 
is now leading to procurement competition that is significantly 
driving down costs over the long-term through fixed pricing, 
which is unheard of in propulsion systems.
    So I find it difficult to stomach the department's 
understanding of what the long-term costs might be, or what 
their projection of what the long-term costs might be, when in 
fact we have before us the opportunity to engage in a 
competition where we have fixed pricing, which is 
unprecedented.
    Mr. Roth. Well, we will have to take a look in terms of 
whether the so-called fixing will hold up to analysis and 
scrutiny. Again, what we do know is it is going to take more 
money to invest in another engine. What we are not sure of is 
whether the savings will ever materialize. So that is our 
concern.
    Mr. Tierney. Thank you.
    Mr. Sullivan, did you want to respond to the competition?
    Mr. Sullivan. I think that you may be correct. I don't 
think that there was a competition on the Joint Strike Fighter 
for the engine. I think the competition was at the prime 
contractor level, and GE happened to be a part of that team. 
But they never competed the engine.
    Mr. Roth. That is true. I won't dispute that. I meant the 
program in general. Absolutely. I agree.
    Mr. Driehaus. Thank you.
    Mr. Tierney. Thank you, Mr. Driehaus.
    Thank the panel on that.
    Mr. Foster, you are recognized for 5 minutes.
    Mr. Foster. Thank you.
    I was wondering if you think that, as a general principle, 
it would be a good idea to carry alternatives farther into the 
project cycle, so that when you get to the final design review, 
if you say, oh boy, we are facing a real cost growth here, if 
we had to repeat the analysis of alternatives, we would have 
gone down another path. If you make the investment so that 
other path is still viable later than the project design cycle 
than we currently do, if there is a merit do that or whether 
you would end up wasting more R&D money. If you have any 
reaction to that?
    Mr. Sullivan. Yes. In fact, I think the legislation drives 
at that a little bit. They have competitive prototyping now 
before milestone B at the subsystem level and, in fact, the 
department itself has expressed an interest in trying to 
compete prototypes all the way up to a critical design review 
for the exact reason that you point out. The problem with that 
is that it could get very costly depending upon the size and 
the complexity of the weapon system.
    But going back to this knowledge-based process that we talk 
about, if you do incremental kind of development, much like the 
F-16, where you do block upgrades, it becomes much more 
palatable to do that, and then usually you will have some 
competitive viable alternatives. You don't get held hostage as 
easily.
    Dr. Spruill. We agree. We think that competitive 
prototyping makes sense. Obviously, as Mr. Sullivan said 
earlier, you have to do a business case. In some cases you are 
probably not going to do competitive prototyping of an aircraft 
carrier, but of subsystems and smaller weapons, it probably 
makes sense. And carrying them through longer than we had 
previously, it is a policy change, which we think is the right 
way to go.
    Mr. Foster. Any comments, Mr. Roth? No? OK.
    Are there any countries that get this right? I mean, people 
talk fondly about the Israelis as having a lean, mean military. 
Does every country that you know of have fiascos?
    Dr. Spruill. I don't know. That is a good question. I just 
don't know.
    Mr. Sullivan. That is a good question, and I hear similar 
horror stories, but I don't know if there are any that do it 
really well.
    Mr. Foster. OK. In terms of lessons learned, if you find 
that you have gone down what, in retrospect, seems like the 
wrong path, and that you wish you could back up to the analysis 
of alternatives and use it with correct data, what turns out to 
be correct data, do you ever do retrospective analysis of 
alternatives to try to figure out how you could have done the 
analysis of alternatives in such a way that you would have 
gotten the right answer?
    Dr. Spruill. I am not aware of that. I know that for 
weapons that have not made it through the process, for example, 
the Presidential helicopter, we spent a lot of time figuring 
out where the problems were. We were aware of them. I don't 
know that we went back to the AOA, but we surely laid out where 
we had gone down the wrong path so that next time, when we try 
to do it, we won't have that same problem.
    Mr. Foster. Well, I was referring not to the specifics of a 
case, but the design of the AOA process; whether you could 
actually go back and say, OK, here is why the AOA was 
structured wrong. Or in some cases you simply won't have 
technical information and then you are dead. But there are 
other times when you say, look, we didn't ask the right 
question perhaps because of the design of the AOA process. I 
was wondering if there is a systematic effort to improve that 
or just lessons learned applied to the AOA process.
    Mr. Sullivan. If I could, we did a report on that not too 
long ago, looking at how well the AOA process was operating for 
the department, and we found a lot of problems with it. Most of 
it had to do with not choosing enough alternatives. A lot of 
times, there may be a bias to the AOA if a certain service is 
looking at it.
    Mr. Foster. Someone has some specific product that he has 
in mind.
    Mr. Sullivan. Yes. That was one problem, perhaps not 
looking at a full universe of alternatives. And another key 
problem was that they would do them too late. Oftentimes, we 
found cases where AOAs were done after the program had started.
    Dr. Spruill. However, I would say, as a result of WSARA, we 
have refocused on AOAs. They have now been given to the Cost 
Assessment and Program Evaluation folks, the CAPE folks, to 
work on. So I think we are taking the AOA much more seriously. 
I don't know about a feedback mechanism yet. I know we do try 
to have Defense Acquisition University look at programs, for 
example, that are canceled or that had problems, but I don't 
know if it feeds back to the AOA process. But I think that is 
probably a good idea.
    Mr. Foster. Thank you.
    Yield back.
    Mr. Tierney. Thank you.
    Mr. Murphy, you are recognized for 5 minutes.
    Mr. Murphy. Thank you very much, Mr. Chairman.
    Thank you to the panel for being here today. I wanted to 
talk briefly with you for a moment about one of the most common 
and increasing ways to cut costs on acquisition, and that is 
foreign sourcing of parts. The numbers of waivers to the Buy 
American law have grown, to my mind, a very disturbing pace. 
From 2007 to 2008, the number of waivers to Buy America 
increased by 450 percent in just 1 year. The numbers for 2009 
are due to come out very shortly and, unfortunately, I expect 
that there will be a similar jump.
    Obviously, the foreign sourcing of parts for weapon systems 
is an easy and quick way to cut cost, but it adds tremendous 
cost to the overall amount of money that the U.S. Government 
has to throw in to compensate for the jobs that are lost.
    So I guess my first question is when we are analyzing 
reasons for cost overruns, when we are analyzing the full cost 
of weapons programs, how does the amount of foreign sourcing of 
parts for a particular product come into play, and is it 
something that DOD looks at when evaluating the overall long-
term cost?
    I can imagine clear reasons why it would lead to lower 
costs; it is often cheaper to buy parts overseas than it is to 
buy parts in the United States, but there are reasons why it 
could be a factor in cost overruns. As you create a much more 
diffuse and decentralized sourcing system for a particular 
product to DOD, it is much harder to track where the overruns 
may come from.
    So I wanted to ask Mr. Roth and Dr. Spruill how do we 
factor in the increasing degree of foreign sourcing when we are 
evaluating the potential cost of a system.
    Mr. Roth. Mr. Congressman, the short answer is I am not 
aware where it is. I don't work at that level. We would have to 
get back to you on that. I don't know to what extent it works 
into the cost estimates.
    I defer to you if you have a better idea.
    Dr. Spruill. I would say that the tradeoff should be made 
that it is cost-effective for the program. I am not aware of 
any of the root cause analyses that are looking at the cost 
growth. I am not aware of this being raised as one of the 
potential sources of cost growth.
    I just saw a report come through and I will have to get you 
more details, it may be the Buy American report that is due to 
you, but it talked about, yes, we make the tradeoffs, but often 
we get, in return, something from the country and they look at 
the overall economic effect.
    So I would have to get back to you on that. It is an issue 
that is raised. I am not aware of it being identified in, for 
example, the Nunn-McCurdy cost growth analysis. And we now have 
an organization, the Parker Organization, that looks at root 
cause analysis. I am not aware of that as being identified as a 
source of cost growth, but we can ask.
    Mr. Murphy. In the award process today, is there any 
ability to factor in the amount of supply sources coming from 
domestic sources versus foreign sources in the award process? 
Or does it work inversely in that to the extent that more 
foreign sourcing can lead to lower price, the existing award 
process effectively creates an incentive for more foreign 
sourcing? Is there any ability to give a bonus in the award 
process to companies that agree to do more domestic sourcing?
    Dr. Spruill. I don't know. I would have to get back to you 
on that. I just don't have the facts. I am sorry.
    Mr. Murphy. Mr. Roth.
    Mr. Roth. [No audible response.]
    Mr. Murphy. Well, I would appreciate your getting back to 
me on this subject. I think a 1-year jump in waivers to the Buy 
America provisions of 450 percent is something that should 
concern every Member of Congress, especially as we seek to grow 
jobs here in the United States.
    We are spending more and more of our taxpayer dollars 
within the Department of Defense budget overseas. I think that 
there is a very strong argument that can lead to the increased 
cost of acquisition for many of these products as you create a 
source network that is much harder to track from DOD's 
perspective. And I would hope that we could have a conversation 
about this issue going forward and we can talk about the 
reasons and the causes for an increasing amount of work being 
done overseas and the extent to which that is part of the 
problem that we are seeing within the overall acquisition 
costs.
    With that, I would yield back.
    Mr. Tierney. Thank you, Mr. Murphy.
    I ask unanimous consent that all Members be given 5 days to 
submit additional questions for the record.
    You may choose, Mr. Murphy, to do just that. I think that 
is a good line of questioning, along with that in the industry 
base aspects of that.
    Any objection?
    [No response.]
    Mr. Tierney. No objection.
    We are not letting you off the hook. Those are written 
questions that are coming, but we do have a couple more 
questions. We will do another round for those that are 
interested in that.
    Mr. Sullivan, I notice one of the comments that the 
Government Accountability Office has previously made, and you 
mention again in this report, is the Department of Defense 
should work to balance its weapons systems portfolio with 
available funding.
    So my question to Mr. Roth is what do you determine is 
available funding, just whatever gets appropriated?
    Mr. Roth. No. We clearly, in any given fiscal year, we 
operate within well defined fiscal controls. First and 
foremost, as we build the budgets, we work with whatever the 
current administration is to build a budget within the fiscal 
controls they have, general fiscal controls.
    Mr. Tierney. Who sets the fiscal controls?
    Mr. Roth. Well, it is worked collaboratively with the 
Office of Management and Budget, and ultimately the Office of 
Management and Budget, at the behest of the White House, sets 
those fiscal controls. Then, as you well know, the budgets come 
to the Congress and it goes through the appropriations process.
    Mr. Tierney. I make the point because I am parroting a 
little bit of what Secretary Gates said just the other day. 
This Defense budget in this country has doubled in the last 
decade. Things like 11 aircraft carrier units out there. The 
next country in competition with us has one. That is $11 
billion a year to build those.
    My real wondering is who determines that is available? Or 
do we just keep building as long as we can get Congress to 
think it is a jobs program and keep appropriating, as Mr. Welch 
said? And going back to Mr. Sullivan's comment about 
leadership, somebody has to step forward, and I think Secretary 
Gates has been stepping forward.
    It is incumbent on Congress to kick in as well and start 
saying we have a defense system that is so much larger than all 
of our allies and protagonists combined. At some point, what 
are the other needs of the country on that?
    And I don't think it comes to your level on that, but it 
does come in to Congress and the Executive Office trying to 
decide what it is we are doing here in terms of that, and then 
looking at those programs that have some of the deficiencies 
you talked about here today and weeding out the ones that 
aren't really relevant in today's fighting systems and needs on 
that, and moving forward and getting rid of those that just 
aren't working and being done right. So your testimony on that 
has been helpful.
    How do you assess affordability of a new program, Mr. Roth 
or Dr. Spruill, whichever? That is another thing they were 
talking about. You assess the affordability. We know that is a 
little bit above your pay grade and we have responsibility to 
do that with the White House, but how do you assess 
capabilities in the context of the overall Department of 
Defense spending?
    Mr. Roth. Well, as you may be aware, we actually go through 
a very systemic structured process, as Mr. Sullivan alluded, 
the planning, programming, budgeting, and evaluation, the so-
called PPBE process, where we, first of all, set up the 
strategic plan and we take a look in terms of what are the 
threats out there, what are the requirements out there. What do 
you need to resource?
    Then we go into an extensive programming and budgeting 
process where we try to balance off the needs between the 
various and sundry mission areas that we have, and we look at 
where you can manage risk and where you don't want to take 
additional risk, and those types of things. So, for better or 
worse, it is a fairly long, comprehensive, convoluted in many 
ways, process where you take a look and say, OK, what are my 
needs in a tactical air community? What are my needs in the 
ship building area? And within those fiscal controls you try to 
get as balanced a program as you possibly can.
    Mr. Tierney. Well, exclusive of GAO's good work here, does 
the department itself have a system where somebody raises the 
red flag at some point and says what GAO has said well before 
they have said it: look, we have a program that is way over 
schedule, way over budget; they are not following the protocols 
that we have set up in our own systems, they are certainly not 
following the laws that Congress passed; and let's start 
weeding these things out? It seems like we are waiting all the 
time for GAO to come out with a report and then reacting, but I 
hope that is not the case.
    Mr. Roth. No, I think Dr. Spruill can answer. We have a 
very well documented acquisition process as well, but in terms 
of resources, again, frankly, there is competition virtually 
every day of the week, so to speak, for resources, so those 
programs that are underperforming, those programs that aren't 
meeting a need frankly are at risk against those programs that 
demonstrate they are.
    Mr. Tierney. Well, I wonder, I guess, because I don't see 
the decisions being made, I see the budget doubling. So it 
seems to me that they are all competing with each other and 
they are all at risk, so what do we do? We throw a little more 
money and we keep them all going. I hope that is changing. I 
think the Secretary has indicated that he has a mind to change. 
But if we don't, where does this thing go, a trillion dollars a 
couple of years from now?
    Dr. Spruill. Could I jump in on affordability?
    Mr. Tierney. Yes, sure.
    Dr. Spruill. Because I really think it is important. I 
think that, at least from the acquisition perspective, we try 
to do two things. But when programs start at system 
development, when they are coming to their milestone B, the 
certifications that Congress has laid out for us, we must say 
that it is affordable, OK? So we look at the entire program.
    And what we did last year, AT&L, along with the comptroller 
and the CAPE folks, when we got to the program budget review, 
when we were developing the President's budget, we looked at 
all the programs that had come through the process and were 
new. We looked at were they funded as the service committed. 
The service must commit to fund when they go through milestone 
B. Were they still funded like that in the program? If not, why 
not? And if not, were there changes that need to be made?
    So I think we are stepping down the affordability road. And 
it is clear from what the Secretary said ``the budget will not 
continue to grow, so we must make sure that we live within our 
means, and that means some programs will not get started; some 
programs, as demands change, will have to be terminated.''
    Mr. Tierney. The indulgence of Mr. Flake for 1 second.
    I think that is right as a statement, but then I look back 
at what the Secretary did. He basically made his 
recommendations with respect to the Army's Combat Systems 
Program; and that was smart, it was about $87 billion on that. 
But all of a sudden we look up and there is the portfolio 
growing again. They are going to reintroduce it under new 
names, new size programs. So here we go again as the $47 
billion cost growth on this.
    Mr. Sullivan, do you have any comment?
    Mr. Sullivan. In fact, that is a good point, because one of 
the things we are concerned with right now, and, in fact, we 
testified at the Armed Services Committee on this, is that new 
Brigade Combat Team, the initial increment, after all this 
acquisition reform and everything else, it looks like the Army 
has made a decision to commit to producing that increment 
before all the testing is complete. So that gave us great 
pause, and we testified to that. That was not a good signal to 
us.
    Mr. Tierney. And I would hope, Dr. Spruill, it would give 
you great pause. I expect to find the F-22 back at this pace. I 
mean, if the decision is made, $87 billion, you should be 
hopping all over that when it starts coming up as little 
animals along the way for a little bit of money but the same 
darned thing over again, without the right procedures in place, 
on top of that.
    Dr. Spruill. Yes, sir. The Army does have a need for the 
capability, so we are trying to address it. We are trying to 
address it in an affordable way. I will have to go back and 
look at more detail, but it was clear that the FCS program was 
not started out under the recommendations or the policies that 
GAO recommends.
    But we still have to meet the need, so there will be 
additional dollars spent in that area. Hopefully not anywhere 
near what we were talking about in FCS.
    Mr. Tierney. Well, is there any exercise when you look at 
the budget having doubled in the last several years, this 
defense budget, you say, well, if that is a need and we 
determine that we are going to kill the program, then bring it 
back to life, where else in the Department of Defense are we 
going to free up the money to do that? What else ought to die?
    Dr. Spruill. And that is what the Secretary has challenged 
us to do as we develop the budget.
    Mr. Tierney. It would be real nice if the challenge was you 
don't get the money for the new thing until we see something 
else fall off the table.
    Dr. Spruill. And that may be the case. And I don't know 
what will fall off the table between now and the next budget 
that comes over.
    Mr. Tierney. Hopefully, it will fall off before we start 
spending the next amount of money for something else.
    Mr. Flake.
    Mr. Flake. Just a statement to echo what has been said 
here. I mean, we are talking about rules and regulations to 
implement the process in acquisition, but it is new weapon 
systems or the failure to get rid of old ones that we are 
talking on the margins here, with all due respect. So it is not 
just this Defense Secretary who made these noises; the last one 
did as well.
    Mr. Tierney. Same guy.
    Mr. Flake. We heard the same things.
    Mr. Tierney. It was the same Secretary. I was just teasing 
him on that.
    Mr. Flake. No, no, I am just saying the one before him 
under the previous administration. We heard from Secretary 
Rumsfeld some of these same noises, but yet we have seen a 
doubling in the last couple of years. And that fault does not 
lie at your feet, obviously; we have to make some decisions 
here. But what the chairman said, when we decide we are going 
to kill these systems, we need to make sure that they remain 
so.
    Mr. Tierney. Mr. Driehaus.
    Mr. Driehaus. Thank you, Mr. Chairman.
    I would just like to followup on this issue of competition, 
because one of the challenges that is faced by, I think, Armed 
Services and this committee, quite frankly, is access to 
information. Just yesterday there was an article in the paper 
about the Department of Defense not giving access to certain 
documentation and estimates that are being made at the 
Department for Members of Congress to review. It is estimated 
that the alternative engine by the Department of Defense will 
need another $2.9 billion. What we are getting from the 
contractor is far, far less in terms of the estimate.
    It is difficult for us to make decisions in terms of 
authorization and appropriation when we know that the 
department isn't following its own guidelines in terms of 
waiving competition standards; when we know there hasn't been 
competition for major propulsion systems; and now we are being 
told by the department that engaging in competition will cost 
us a tremendous amount of money, yet we don't have the 
documentation to show that. And we are supposed to just take at 
face value the department's assertion that we should put 
competition aside in major weapons acquisition when we know 
that is not the policy of the department overall.
    So this is an ongoing challenge, I believe, for us to do 
our job in terms of oversight when it comes to cost of weapon 
systems if access to information is held up by the department 
itself. And, Mr. Roth and whoever else, I would like you to 
comment on that.
    Mr. Roth. I am not familiar with the specific request for 
information; I would have to look into it. I would argue if we 
have a case, we should make our case, and I don't have any 
basic fundamental problem with that. But in terms of your 
specific request for information, if I can, let's get back to 
you, because I am not familiar with it.
    Dr. Spruill. And I am not aware of it either. In fact, I 
thought we were sharing everything that Congress had asked us 
on the Joint Strike Fighter. So I would have to go back and 
ask.
    Mr. Sullivan. The information that we received on that 
issue, it was difficult to get information I think mainly 
because the department took a position that was no longer part 
of the budget, so they didn't have the numbers for that; they 
had excluded it.
    But we worked with the Program Office a little bit. And the 
other thing is the Joint Strike Fighter program just went 
through a major shakeup, so all of the buys, the annual 
production buys and how they are going to buy the engines and 
everything, changed quite a bit. So that was real shaky data as 
well.
    We eventually got what we thought we needed, but it was 
hard to get it.
    Mr. Driehaus. Can you speak a little bit, Mr. Sullivan, 
about your own assessment of the Joint Strike Fighter and the 
competitive engine over time and what you see as we move 
forward in terms of the various scenarios that you have laid 
out in terms of cost savings over time?
    Mr. Sullivan. Well, we have done studies for other 
committees. The House Armed Services asked us to look at that 
and we can't say with any authority at all. We don't forecast 
the future.
    But what we did do was make some assumptions based on 
historical data, which was, I think you referred to earlier the 
F-15, F-16 when they infused competition into that. And given 
those assumptions, if we looked at what happened historically 
on that, we found that it was possible to achieve enough 
savings through the life cycle to get a return on the 
investment for the competitive engine.
    Mr. Driehaus. And those savings occur because of the 
competition. And if there is a failure of the single engine, 
then obviously there is tremendous cost associated if you don't 
have that competitive engine.
    Mr. Sullivan. The savings that we assumed were as a result 
of having competition, yes.
    Mr. Driehaus. Thank you, Mr. Chairman.
    Mr. Tierney. Thank you.
    Mr. Murphy.
    Mr. Murphy. Thank you, Mr. Chairman.
    I would just quickly note that for those of us that support 
the current policy, the administration's policy on the single 
source engine, we note that some of the costs are very hard to 
estimate at this time. To have two single source engines with 
all of the end-use cost to the operators is hard to evaluate at 
this time, but I think has real consequences for the ongoing 
defense budget.
    My question is just back to my line of questioning on the 
true cost of acquisition. A quick one to Mr. Sullivan. My 
contention is obviously that when we look at the cost of 
purchasing a weapons system or a product for the Defense 
Department that has a heavy emphasis on foreign sourcing versus 
domestic sourcing, that there is a cost to that is outside of 
the defense budget, that the additional cost to the government 
of unemployment benefits, the lost revenue that comes with 
foreign jobs rather than domestic jobs, that the true cost of 
acquisition, when you are looking at a product that is made in 
majority overseas, is not seen within the confines of the 
defense budget.
    So just a question, Mr. Sullivan. Has GAO ever undertaken 
an estimate of the overall holistic costs to the government of 
the increased foreign sourcing within DOD's budget?
    Mr. Sullivan. Congressman, I just don't even know the 
answer to that, but I can definitely take that back and get 
back to you on that, see if we do have anything along those 
lines.
    Mr. Murphy. To the extent that it has not been done, it 
seems like an analysis that is long overdue, and I would 
appreciate a further conversation on that.
    Thank you, Mr. Chairman.
    Mr. Tierney. Thank you, Mr. Murphy.
    Mr. Sullivan, one of the recommendations that you made 
going forward, observations that you made was that it might 
make sense to set some limits on a reasonable length of time 
for developing a system. How would that happen? How would that 
be done?
    Mr. Sullivan. Well, we don't press this hard because it 
would be taken as somewhat arbitrary, but what we found when we 
did a lot of work in the commercial work and at some world 
class technology firms is that they enforce a schedule and they 
do it for a couple of reasons: No. 1, it limits the amount of 
time that people have to change requirements and things like 
that; No. 2, it gets products to market quicker, before the 
world changes; it gives people a piece of time that is more 
manageable.
    And in terms of the department, we think that it would be 
good to operate within what the Department calls its Future 
Years Defense Plan, which is typically a 5 to 6 year plan, and 
fully fund the development of weapon systems in that plan.
    You were talking earlier about why there is no control. A 
lot of times when programs are 10, 12 years long, the Future 
Years Defense Plan plans the first 5 or 6 years of them and 
then things start happening outside of those years. So that 
would be a constraining mechanism too.
    Mr. Tierney. What happens, last year we moved to get rid of 
part of the intercontinental ballistic missile, the Missile 
Defense Program. It was $188 million. Not a big item by terms 
of the defense budget, but an item that the Missile Defense 
Agency [MDA] didn't want, so they wanted to see it cut. The 
Secretary wanted to see it cut; the White House wanted to see 
it cut. Everybody wanted to see it cut. And the argument in 
return for that was we have all this money invested, so some of 
it survived on that.
    So my question was really how do you avoid that? Are you 
going to say, if a program is done in 5 years or it gets cut, 
at the end of 5 years aren't we going to hear back from 
everybody, look at all the money you put in for 5 years; how 
can you just end this thing?
    Mr. Sullivan. It is a good question. That is why we move 
slowly with those kind of things. But if you keep the 
requirements in line with what is doable in a 5-year increment, 
which is what world class firms do----
    Mr. Tierney. Stop it at that stage where it doesn't meet 
the requirement.
    Mr. Sullivan. Yes. The F-16 was built that way, as I 
mentioned earlier. One of the key premises of all of this is 
that you have to separate technology development from product 
development. You can't be trying to invent technologies while 
you have the factory running. In essence, that is what the 
department has been doing for years. F-22 was a technology 
product and they had an entire army to feed in terms of factory 
going and suppliers going. So it is all in the requirement 
setting, I think, is the answer.
    Mr. Tierney. Is there any contemplation going on within the 
department about setting lengths of time, reasonable lengths of 
time on that? Is that something that is discussed?
    Dr. Spruill. It has been discussed more in the IT world 
than in the weapon systems world. However, I think the 
department is very aware of the need, most of the development 
is within a 5 or 6 year period. There are some that are not. It 
would be more that would be set at the beginning of the 
program, but I am not aware of, except in the IT area, talking 
about limiting the time, say, 5 years, 3 years, whatever, 
before you try to lay out a reasonable program. Obviously, once 
you lay out the program, you should stick to the program.
    Mr. Sullivan. Your point is well taken, though, on MDA, 
because MDA, as a Presidential directive back whenever it was 
started, was given its own rules, and it is kind of like a 
technology development program at large.
    Mr. Tierney. It is the most ridiculous concept, spiral 
development.
    Dr. Spruill. I am sorry, I didn't realize you were talking 
specifically about missile defense.
    Mr. Tierney. No, no, we were not. Your answer was fine. But 
I think he makes a good point.
    Is there a plan to deal with the situation on the software 
and all of the additional lines that are always required on 
that? I see it noted by Mr. Sullivan. I think we all recognize 
it as a problem, but I am not sure how we get on top of that, 
or if you have any ideas or the department does on what we are 
going to do about that.
    Dr. Spruill. Well, again, we would look to both the systems 
engineering folks, the new folks that we are bringing in as a 
result of WSARA and the developmental testers, to get a handle 
on it up front. It is a big issue for the independent cost 
estimators. They have developed data bases and they will bring 
in what they think is a best estimate.
    I am not aware of any special emphasis. I know it is an 
important component and becoming a bigger component of most of 
the weapon systems and, therefore, it requires a lot of 
attention, especially from the cost estimators and the 
scheduling folks.
    Mr. Tierney. Thank you.
    Mr. Flake.
    Mr. Flake. [No audible response.]
    Mr. Driehaus.
    Mr. Driehaus. I will take one more shot, Mr. Chairman.
    I want to continue this discussion about the Joint Strike 
Fighter and the competitive engine because it is important. It 
is one of the most expensive systems that we are funding right 
now, and, by Pratt & Whitney's own estimate, the F-135, the 
design and development has gone from $4.8 billion to $7.3 
billion.
    That is without competition. We don't know what it will be 
next year or the year after that, or the potential increases. 
We have a major manufacturer coming in that we have already 
invested billions in for an alternative engine that is now 
coming through with a fixed price, so we know there won't be 
cost increases in the future.
    Yet, the department is aggressively trying to kill the very 
competition that we know has worked in the F-15 and the F-16. 
We have already learned these lessons. By the department's own 
standards, we should be pursuing competition. When you look at 
the waiver requirements, it doesn't meet any of them in terms 
of the justification being made by the department.
    So I am continuing to struggle with this idea that, while 
competition is good almost across the board, we make major 
exceptions, and we make major exceptions when we know the 
weapon systems is already over cost significantly, and we don't 
pursue competition. I need better justification for this from 
those in procurement that understand it.
    So I would love to hear a reasonable explanation other than 
just short-term investment in competitive engine. Yes, it is 
going to cost more in the short-term, because you are investing 
in two engines. But the idea is that over the long term we will 
improve the competition, we will improve the engine, and we 
will reduce costs. Help me understand why this exception is 
being made in this specific case.
    Mr. Roth. Again, in this particular case, I am going to 
have to defer to the contracting community. I hear you. Again, 
it is my understanding of the program that the projected 
savings would only take place if in fact you really had true 
competition throughout the life of the program, and that 
apparently is problematic. That may or may not occur.
    But let me not get into areas that are outside my 
bailiwick. You have raised some legitimate contractual sorts of 
questions. I think the best course is let's get back to you. To 
the extent we haven't provided you some of this information, in 
my humble view, we should. It is, I think, an issue that needs 
to be debated and needs to be sorted out.
    Dr. Spruill. I believe we need to get back to you also. The 
department's argument about the up-front costs being real and 
concern about the savings, but we should share with you those 
numbers, and I don't have them off the top of my head, so we 
will have to get back to you on that.
    Mr. Driehaus. But is it safe to say that given that the 
primary contractor is already well over budget, that, in the 
future, we might expect them to continue to go over budget? I 
mean, isn't that a safe assumption? And that the whole idea of 
cost containment through competition is to disincentivize those 
cost overruns and to provide the competition so that those 
costs are held in check?
    Dr. Spruill. I would not say that we expect them to have 
further cost overruns. The cost estimates that we are 
providing, that we provide for the budget and we are providing 
here for Joint Strike Fighter, are best estimates of the actual 
occurrence, so I would not expect additional cost growth. One 
never knows, obviously, but the estimates we are giving are not 
showing additional cost growth.
    Mr. Driehaus. But, Dr. Spruill, I assume that you would 
admit that this is a significant exception to the policy of the 
Department of Defense through procurement to encourage 
competition in major weapons acquisition?
    Dr. Spruill. It was a special consideration by the 
department to look at the costs and benefits along the business 
case line that Mr. Sullivan talks about, and the decision was 
that it was not cost-effective and, therefore, they are going 
with a single engine.
    Mr. Driehaus. Thank you, Mr. Chairman.
    Mr. Tierney. Thank you.
    Not to jump on your issue on that, but I know two things. 
One, I know we put the cost estimates and didn't think they 
were not going to grow, but we only had $300 billion worth of 
cost overgrowth in the last report GAO did. And if we had 
gotten the information from the department, we would know what 
it was more recently on that.
    Dr. Spruill. Could I say something about that?
    Mr. Tierney. Sure.
    Dr. Spruill. And Mr. Sullivan and I arm-wrestle over this 
periodically. We have 102 programs in our portfolio. Many of 
those programs are older programs that did have cost growth 
since their initial start; however, a lot of them are now 
performing very well. So to take that number and apply it to 
the department's acquisition today may be just a little bit 
overly harsh.
    Mr. Tierney. It might, but I remind you again if we had had 
the information given to GAO that could give us that assessment 
of what it was last year, then we would be able to make that 
kind of measurement on that. So it is not helpful to us to 
judge whether or not there is accuracy on that. I know there 
are good intentions.
    Can you tell me, Mr. Roth or Dr. Spruill, what changed 
between February's budget rollout and now that the Secretary 
decided to make the alternative engine an issue?
    Mr. Roth. I don't think this is a new issue. We made the 
same issue when we submitted the fiscal year 2010 budget as 
well and, frankly, in previously budgets as well. We have not 
funded an alternative engine for the last 5 or 6 years; the 
program has lived on congressional ads over the last 5 or 6 
years. So the decision was made years ago. This is not a new 
position on the part of the department at all.
    Mr. Tierney. Let me wrap up just by asking one question 
about personnel on that. You have recognized it, you seem to be 
working on that. The rise in contractor work shows a hollowing 
out of a capacity for management and oversight which isn't just 
unique to the Department of Defense, it is the Department of 
State, it is the USAID, it is a lot of agencies down the line.
    Do you think we are on a glide path to correct that 
situation? How long do you think it will be before we have the 
inherently governmental functions back in-house so that, when 
we are looking at a contractor who otherwise wouldn't 
necessarily have any incentive to be concerned about some of 
the things that the government, whose money it is, might be 
concerned about? What is the glide path there?
    Dr. Spruill. Well, we have an initiative, as you know, to 
grow the acquisition work force by 20,000 folks. Those are in-
sourcing to the department; they will be government folks.
    Mr. Tierney. By when?
    Dr. Spruill. In the next 5 years, over the fit up period. 
And we have already started that in 10 and have made good 
progress. I will quote a number that is probably wrong, but it 
was about 4, I believe; 4 of the 20 would be in the first 
years. And so we have been going through the jobs, looking at 
them, deciding which ones we can in-source.
    Now, some of that we are in-sourcing comes from taking 
contractors that are doing the job today and no longer doing 
them with contractors; others we are bringing in new people 
because, as you know, over the last 10 years, we cut the 
acquisition work force quite a bit, and we believe we cut it 
too much. So we have an active initiative.
    Now, the department is also doing some in-sourcing beyond 
the acquisition work force, but we are definitely looking to 
bring those inherently governmental functions in, and at a 
reasonable rate. We didn't think we could do 20,000 in a year, 
so it is over a 5-year period.
    Mr. Tierney. Do we have the work force development capacity 
to get those people up to where they need to be on their skills 
and education levels?
    Dr. Spruill. Yes. And we have the Defense Acquisition 
University. We sent over a strategy for human capital 
initiatives and plans for the acquisition work force. I think 
it just came over a couple weeks ago. So we have laid out a 
process. I happen to be the functional leader for the business 
portion of the acquisition work force that is about 7,000 
folks. But we have increased the training requirements and the 
experience requirements for those folks and we are moving 
people into and through that process so that they will be level 
3 certified acquisition professionals.
    Mr. Tierney. Great. Good.
    Well, thank you all very, very much. I appreciate your 
testimony here today and your exchange of ideas. People will be 
submitting questions, I assume, within that 5-day period. If 
you would be kind enough to respond to those when you can as 
well. This is helpful to us and I appreciate both the progress 
that is being made at the Department of Defense and the work of 
the Government Accountability Office.
    I see a number of people from both of those areas sitting 
behind. I want to thank them as well for their good work on 
this. It is good to see people working together in this sense. 
You take what you can learn from GAO and decide on that. Push 
back on them and arm-wrestle with them if you have to to keep 
it in line.
    But the idea is that, with what we have passed in the 
department for new regulations, we have to get a grip on this, 
and we appreciate the guidance and the work. So thank you all 
very much.
    Meeting adjourned.
    [Whereupon, at 11:45 a.m., the subcommittee was adjourned.]
    [Additional information submitted for the hearing record 
follows:]

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