[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]





                                   

                         [H.A.S.C. No. 113-115]

           DEFENSE REFORM: EMPOWERING SUCCESS IN ACQUISITION

                               __________

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD

                             JULY 10, 2014


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                      COMMITTEE ON ARMED SERVICES
                    One Hundred Thirteenth Congress

            HOWARD P. ``BUCK'' McKEON, California, Chairman

MAC THORNBERRY, Texas                ADAM SMITH, Washington
WALTER B. JONES, North Carolina      LORETTA SANCHEZ, California
J. RANDY FORBES, Virginia            MIKE McINTYRE, North Carolina
JEFF MILLER, Florida                 ROBERT A. BRADY, Pennsylvania
JOE WILSON, South Carolina           SUSAN A. DAVIS, California
FRANK A. LoBIONDO, New Jersey        JAMES R. LANGEVIN, Rhode Island
ROB BISHOP, Utah                     RICK LARSEN, Washington
MICHAEL R. TURNER, Ohio              JIM COOPER, Tennessee
JOHN KLINE, Minnesota                MADELEINE Z. BORDALLO, Guam
MIKE ROGERS, Alabama                 JOE COURTNEY, Connecticut
TRENT FRANKS, Arizona                DAVID LOEBSACK, Iowa
BILL SHUSTER, Pennsylvania           NIKI TSONGAS, Massachusetts
K. MICHAEL CONAWAY, Texas            JOHN GARAMENDI, California
DOUG LAMBORN, Colorado               HENRY C. ``HANK'' JOHNSON, Jr., 
ROBERT J. WITTMAN, Virginia              Georgia
DUNCAN HUNTER, California            COLLEEN W. HANABUSA, Hawaii
JOHN FLEMING, Louisiana              JACKIE SPEIER, California
MIKE COFFMAN, Colorado               RON BARBER, Arizona
E. SCOTT RIGELL, Virginia            ANDRE CARSON, Indiana
CHRISTOPHER P. GIBSON, New York      CAROL SHEA-PORTER, New Hampshire
VICKY HARTZLER, Missouri             DANIEL B. MAFFEI, New York
JOSEPH J. HECK, Nevada               DEREK KILMER, Washington
JON RUNYAN, New Jersey               JOAQUIN CASTRO, Texas
AUSTIN SCOTT, Georgia                TAMMY DUCKWORTH, Illinois
STEVEN M. PALAZZO, Mississippi       SCOTT H. PETERS, California
MO BROOKS, Alabama                   WILLIAM L. ENYART, Illinois
RICHARD B. NUGENT, Florida           PETE P. GALLEGO, Texas
KRISTI L. NOEM, South Dakota         MARC A. VEASEY, Texas
PAUL COOK, California                TULSI GABBARD, Hawaii
JIM BRIDENSTINE, Oklahoma
BRAD R. WENSTRUP, Ohio
JACKIE WALORSKI, Indiana
BRADLEY BYRNE, Alabama

                  Robert L. Simmons II, Staff Director
                Lynn Williams, Professional Staff Member
                        Spencer Johnson, Counsel
                           Aaron Falk, Clerk





















                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2014

                                                                   Page

Hearing:

Thursday, July 10, 2014, Defense Reform: Empowering Success in 
  Acquisition....................................................     1

Appendix:

Thursday, July 10, 2014..........................................    43
                              ----------                              

                        THURSDAY, JULY 10, 2014
           DEFENSE REFORM: EMPOWERING SUCCESS IN ACQUISITION
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

McKeon, Hon. Howard P. ``Buck,'' a Representative from 
  California, Chairman, Committee on Armed Services..............     1
Smith, Hon. Adam, a Representative from Washington, Ranking 
  Member, Committee on Armed Services............................     2

                               WITNESSES

Barna, Stephanie, Acting Assistant Secretary of Defense for 
  Readiness and Force Management, U.S. Department of Defense.....     5
Kendall, Hon. Frank, Under Secretary of Defense for Acquisition, 
  Technology and Logistics, U.S. Department of Defense...........     3

                                APPENDIX

Prepared Statements:

    Barna, Stephanie.............................................    60
    Kendall, Hon. Frank..........................................    50
    McKeon, Hon. Howard P. ``Buck''..............................    47
    Smith, Hon. Adam.............................................    48

Documents Submitted for the Record:

    [There were no Documents submitted.]

Witness Responses to Questions Asked During the Hearing:

    Ms. Bordallo.................................................    75
    Mr. Thornberry...............................................    75

Questions Submitted by Members Post Hearing:

    Mr. Cook.....................................................    86
    Mr. Kilmer...................................................    84
    Mr. Maffei...................................................    84
    Mr. McKeon...................................................    79
    Mr. Shuster..................................................    82
    Ms. Speier...................................................    83
    Mr. Thornberry...............................................    80
    Ms. Tsongas..................................................    82
    Mrs. Walorski................................................    87

 
                        [H.A.S.C. No. 113-115]

           DEFENSE REFORM: EMPOWERING SUCCESS IN ACQUISITION

                              ----------                              

                          House of Representatives,
                               Committee on Armed Services,
                           Washington, DC, Thursday, July 10, 2014.
    The committee met, pursuant to call, at 10:06 a.m., in room 
2118, Rayburn House Office Building, Hon. Howard P. ``Buck'' 
McKeon (chairman of the committee) presiding.

    OPENING STATEMENT OF HON. HOWARD P. ``BUCK'' MCKEON, A 
 REPRESENTATIVE FROM CALIFORNIA, CHAIRMAN, COMMITTEE ON ARMED 
                            SERVICES

    The Chairman. Committee will come to order. Good morning. I 
would like to welcome you and give a warm welcome to our 
witnesses here today. We have the Honorable Frank Kendall, 
Under Secretary of Defense for Acquisition, Technology and 
Logistics, and Ms. Stephanie Barna, Acting Assistant Secretary 
of Defense for Readiness and Force Management.
    I want to thank both of you for your flexibility in 
scheduling this hearing. I know we have gone through several 
iterations of the schedule, and I appreciate you and your staff 
working with us on these changes.
    This is a very important hearing, and your knowledge and 
perspectives are essential to our reform initiative. This is 
the fourth hearing we have scheduled as part of the committee's 
long-term defense reform effort. Thus far, we have reviewed 
past reform efforts, discussed challenges and opportunities, 
and examined case studies that highlight the strengths and 
weaknesses of the acquisition process. We have sought to 
understand the root causes behind why, after decades of various 
reform efforts, many DOD [Department of Defense] acquisition 
programs still run over cost and behind schedule, delivering 
less capability to the warfighter.
    However, today we have heard only from outside experts. 
While we appreciate and value their input, today is our first 
opportunity to discuss these issues with the Department of 
Defense officials and to better understand the Department's 
recent efforts to improve productivity and outcomes related to 
acquisitions.
    A key theme that has emerged from previous hearings is that 
you cannot affect the acquisition system if you don't affect 
the people. We hear it referred to as a need for cultural 
change, professionalism of the workforce, or personal 
accountability. This is why we are grateful to have both 
Secretary Kendall and Ms. Barna here to look at acquisition 
reform holistically and to examine the issues related to the 
recruitment, development, and retention of our military and 
civilian workforce.
    Again, I thank both of you for being here today and look 
forward to your testimony and to the question and answers that 
we will have an opportunity to move this process forward.
    Mr. Smith.
    [The prepared statement of Mr. McKeon can be found in the 
Appendix on page 47.]

STATEMENT OF HON. ADAM SMITH, A REPRESENTATIVE FROM WASHINGTON, 
          RANKING MEMBER, COMMITTEE ON ARMED SERVICES

    Mr. Smith. Thank you, Mr. Chairman. I, too, want to thank 
our witnesses.
    Mr. Kendall, Ms. Barna, thank you for being here. Thank you 
for your work in the Pentagon on these and many other very 
difficult issues.
    I think this is a very, very important hearing. On the 
other hand, people look at acquisition reform and they say, 
yes, we have done that a dozen times. It is the holy grail. And 
I think a certain cynicism gets bred into that. And I hope in 
this hearing we can remove some of that cynicism, because there 
is no question that we can do better, and there is no question 
that whatever efforts have come in the past, we have learned a 
lot of lessons in the last decade. I think there are many ways, 
and I know, Mr. Kendall, you and I have spoken about this, that 
we can clean up and improve the acquisition process.
    And we simply have to. I mean, there has been a number of 
reasons for that, but the two that stand out, over the course 
of the last 13 years we have had a lot of very expensive 
mistakes in the area of acquisition reform. Those costs are 
difficult to bear at any time. But the second big reason why we 
have to get this right is now that our budgets are undeniably 
shrinking, nobody is debating that--well, I guess the proper 
way to put it is we are going to have less money to spend than 
we thought we were going to have. You can debate about what is 
growth and what is not growth. But without question, if you 
went back to 2010 and projected out to what we were going to 
spend over the course of the next 10, 12 years in the 
Department of Defense, it is a lot less now. So we have to be 
smarter, we have to figure that out.
    At the same time, we have arguably started more programs 
than we can afford to finish even if we had the 2010 money. So 
as we make choices going forward we are going to have to be 
much smarter about it.
    And the things that I am most particularly interested in, 
as with all things--great thing about politics, it is very easy 
to describe the problem. If I had a wish, that would be my sole 
responsibility as a Member of Congress, just describe the 
problem, leave the solutions to somebody else. But the 
solutions are going to be the key. The problem I think everyone 
here is very good at describing, too many requirements, too 
many people in charge, the requirements change, they move 
around, we go for too much. We see something on a computer 
screen, we think we can make it work, and we wind up going for 
something that is impossible to achieve. With an ode to the 
movie, I refer to this as the ``sharks with fricking laser 
beams attached to them'' problem. You can envision that, but 
trying to achieve it winds up taking you down, down a very, 
very long rabbit hole.
    But the thing I think I am most interested in is the layers 
of personnel, because I think if there is an overarching 
concern that I hear back from industry is they are very, very 
aggressively regulated. You go out to a place where industry is 
making anything, the F-35, and there are dozens, if not 
hundreds of regulators there watching their every move. So you 
have got a lot of that.
    And then also you have the layers of program managers. I 
heard Senator McCain complain about a program that didn't work 
out, basically going back in to look at it, there were five 
program managers in 18 months. So who was accountable? Answer: 
Nobody. There are so many people who have a say in it, but at 
the end of the day nobody is responsible. How can we better 
empower the workforce and then hold them accountable, for good 
or for ill? If they do the job well, terrific; if they don't, 
we can hold that person accountable. But these multiple layers 
not only lead to the requirements problem, because every one of 
those layers is going to have a slightly different way of 
looking at it, and then it gets changed, rearranged, and makes 
it very, very difficult to stay on track, but then also you 
lack the accountability.
    But I think, more importantly, to put a positive spin on 
this, you rob yourself of the talent and expertise of your 
personnel, because if that personnel knows at the end of the 
day that he or she isn't really in charge, it undermines their 
desire to say, okay, I am going for fix this, I am going to 
make this work.
    So I really want to empower our personnel over at the 
acquisition shop, figure out how to give them greater 
authority, greater responsibility, and work our way around 
that. So despite what we have heard before about acquisition 
reform always being out there, I think some real positive 
changes can be made. Look forward to working with you to do 
that and hearing from you today about how we can get started.
    So thank you, Mr. Chairman. I yield back.
    [The prepared statement of Mr. Smith can be found in the 
Appendix on page 48.]
    The Chairman. Thank you.
    Mr. Secretary.

STATEMENT OF HON. FRANK KENDALL, UNDER SECRETARY OF DEFENSE FOR 
   ACQUISITION, TECHNOLOGY AND LOGISTICS, U.S. DEPARTMENT OF 
                            DEFENSE

    Secretary Kendall. Thank you, Chairman McKeon. I have a 
short opening statement, and Ms. Barna has one also.
    The Chairman. Is your mike on?
    Secretary Kendall. Thank you, Mr. Chairman. I have a short 
opening statement, and Ms. Barna has one also. And then we will 
be delighted to take your questions.
    Chairman McKeon, Ranking Member Smith, committee members, 
thank you for the opportunity to discuss the measures the 
Department of Defense is taking to improve the productivity and 
performance of defense acquisition activities with an emphasis 
on the acquisition workforce.
    I want to begin by expressing my appreciation for the work 
this committee has done in this area. Statutes like the IMPROVE 
Act [Implementing Management for Performance and Related 
Reforms to Obtain Value in Every Acquisition Act of 2010], 
Defense Acquisition Workforce Development Fund authorization, 
and the Weapon Systems Acquisition Reform Act are very 
beneficial to the Department and the Nation. I am also very 
appreciative of the opportunity to work with Congressman 
Thornberry on his ongoing acquisition reform initiatives. 
Frankly, it is extremely refreshing and encouraging to be able 
to work across both sides of the aisle and both sides of the 
Hill on an issue on which we all fully agree, the need to 
improve the effectiveness and productivity of our acquisition 
system.
    My written testimony has more detail, and I ask it be 
admitted to the record.
    The Chairman. Without objection, both of your written 
testimonies will be included in the record. So ordered.
    Secretary Kendall. Thank you, Mr. Chairman.
    I have spent most of my professional life in defense 
acquisition, either on the government side or in industry, a 
period of about 40 years. During that time, I have seen any 
number of attempts to improve defense acquisition. My view is 
that many of the things we have tried have had little 
discernable impact. The evidence, in terms of major program 
costs and schedule slips, shows very little statistical change.
    I am tempted to draw three conclusions from that fact. The 
first is that fixing defense acquisition isn't as easy as a lot 
of people seem to think it is. The second possibility is we 
have not been patient enough or sufficiently tenacious with 
acquisition policies. We don't always leave policies in place 
long enough to find out if they work or not. The frequent 
rotation of leadership, particularly political appointees and 
career military people, makes it hard to sustain initiatives 
long enough to determine if they are succeeding or not.
    The third conclusion I am tempted to draw is that maybe we 
have been focusing too much on the wrong things. Defense 
acquisition is a human endeavor, and my view is that we have 
focused too much on organizational structures, processes, 
compliance with policy, and oversight mechanisms, and not 
enough on providing people with the skills and incentives they 
need to succeed. I think the committee's emphasis today is very 
well chosen, and I am going to echo Congressman Smith's remarks 
in that regard.
    The approach I am taking is the one that Dr. Carter and I 
decided upon 4 years ago when he was under secretary and I was 
his principal deputy. We introduced the first set of what we 
called Better Buying Power initiatives. This is an approach of 
continuous incremental improvement based on pragmatism and 
evidence. I can report to you today that after 4 years, I 
believe we are seeing changes for the better, and I am 
encouraged that organizations like the GAO [Government 
Accountability Office] agree with that conclusion.
    Acquisition of a new cutting-edge weapon system is a 
complex job. It requires getting every one of hundreds of 
decisions right in an environment where the real incentives 
systems are not always aligned with the goal of increased 
efficiency. This is particularly true in the current budgetary 
situation, where there is great uncertainty about future 
budgets and planning is excessively difficult.
    The Better Buying Power approach identifies areas of 
acquisition where the greatest good can be achieved and tries 
to attack those opportunities. As we learn from our experience, 
we periodically make adjustments and bring in new ideas. We 
reject ideas that don't work.
    My approach is, again, a pragmatic, incremental approach 
that spans actions like setting affordability caps to constrain 
program costs, bottoms-up should-cost estimates, and management 
goals to force cost-reduction initiatives, strong contractual 
incentives, creation of competitive pressures wherever 
possible, a new emphasis on the acquisition of contracted 
services, and a focus on the professionalism in the 
Department's acquisition workforce.
    This is hard, detailed work. It takes time, constancy of 
purpose, and tenacity to be effective. But I don't believe 
there is any other way to achieve lasting improvement.
    Embedded in this process of continuous improvement on 
multiple fronts there are some important cultural changes I am 
trying to implement. The academic business literature suggests 
that two things are necessary to effect major change in an 
organization: a period of 4 or 5 years of sustained commitment 
by senior leadership and a crisis. I am trying to supply the 
leadership, and the budget situation is supplying the crisis.
    The first cultural change is to move our workforce from a 
culture that values spending over controlling cost. In 
government, the built-in incentive system is to spend one's 
budget so that funds are not rescinded or reduced in subsequent 
budgets. Many of the Better Buying Power initiatives are 
intended to reverse this situation.
    The other cultural change is to move the government 
workforce away from a check the box, or school solution 
approach to acquisition, to one based on professionalism, sound 
business and technical analysis, and, most of all, critical 
thinking. The vast array of product and service types the 
Department buys makes this a necessity. One-size-fits-all rules 
are not the right answer to our acquisition problems and cannot 
substitute for the effective professional judgments that are 
needed for success in defense acquisition.
    I do believe we are making progress, but I also believe we 
have ample room for additional improvement. And with your 
support I am determined to build upon the progress we have 
made. I look forward to your questions.
    [The prepared statement of Secretary Kendall can be found 
in the Appendix on page 50.]
    The Chairman. Thank you.
    Ms. Barna.

  STATEMENT OF STEPHANIE BARNA, ACTING ASSISTANT SECRETARY OF 
DEFENSE FOR READINESS AND FORCE MANAGEMENT, U.S. DEPARTMENT OF 
                            DEFENSE

    Ms. Barna. Chairman McKeon and Ranking Member Smith, 
distinguished members of the committee, good morning. I 
appreciate the opportunity to be with you here today, together 
with Under Secretary Kendall, to discuss empowering success in 
defense acquisition, with a focus on the Department of Defense 
acquisition workforce. As the Acting Assistant Secretary of 
Defense for Readiness and Force Management, I report directly 
to the Under Secretary of Defense for Personnel and Readiness 
and serve as her principal advisor on all matters relating to 
military and civilian personnel policy, readiness of the force, 
and total force planning and requirements.
    The defense acquisition workforce is responsible for 
equipping and sustaining the world's most capable, powerful, 
and respected military force. The Office of the Under Secretary 
of Defense for Personnel and Readiness shares Under Secretary 
Kendall's view that, at its core, defense acquisition is a 
human endeavor, that the development and management of a highly 
skilled professional acquisition workforce, both military and 
civilian, is inextricably linked with the success of our 
acquisition program.
    Congress has vested broad functions and duties in Secretary 
Kendall with respect to his leadership of the acquisition 
workforce, but it is the Under Secretary of Defense for 
Personal and Readiness who is responsible for the civilian and 
military personnel policies and guidelines, the human resources 
tools that facilitate Secretary Kendall's efforts.
    In 2009, with the help and support of Congress, DOD 
embarked on a comprehensive and ultimately very successful 
initiative to recapitalize its acquisition workforce. In 5 
years, we have added almost 20,000 new civilian employees to 
our acquisition cadre, which presently totals 135,000 civilian 
personnel, or about 90 percent of our acquisition workforce 
writ large.
    The military component of our acquisition workforce also 
increased during this period, from approximately 14,500 members 
in fiscal year 2009 to slightly more than 16,000 in the second 
quarter of fiscal year 2014. The military comprises about 10 
percent of our acquisition workforce.
    Today our civilian employees and military members together 
comprise an acquisition workforce that is 151,000 members 
strong. And although the program management of major defense 
weapon programs is what first may come to mind when thinking 
about what the acquisition workforce does, the requirements 
brought to bear on this community are legion. They are 
significantly more diverse. They encompass at least 14 
different career fields, including contracting for both goods 
and services, engineering, information technology, lifecycle 
logistics, testing and evaluation, auditing, to name but a few.
    The fiscal challenges, shifting operational requirements, 
the current budget instability deriving from sequestration, 
years of pay freezes, furloughs, military end strength 
reductions, and the requirement for commensurate reductions in 
our civilian workforce, more than a decade of conflict, 
inevitably all of these things have affected the acquisition 
workforce as they have the Department's workforce as a whole.
    If one believes, as I know Secretary Kendall does and as I 
do, that our people, civilian and military, are the strength of 
our Department and its components, it is then of paramount 
importance to our national security that we continue to focus 
on improving the professionalism of the acquisition workforce.
    Personnel and Readiness views the Office of the Under 
Secretary of Defense for Acquisition, Logistics and Technology 
as both our partner in this endeavor and as a valued customer 
of our services. In this vein, we will first continue to work 
very closely with the acquisition community to promote 
awareness of the variety of human resources tools at its 
disposal. These are the tools essential to recruit, assess, 
educate, train, develop, incentivize, and hold accountable 
those persons serving in acquisition positions.
    Second, the personnel community will do all in its power to 
enable ready access to these tools to ensure that the 
acquisition functional community can leverage the special human 
resource authorities and flexibilities that Congress has 
authorized us to employ.
    And finally, should new tools or new policies or processes 
be required to meet the challenges, we will work side by side 
with the acquisition community to develop and tailor these new 
tools to their unique needs. In short, the acquisition and 
personnel communities are working together and will continue to 
work together to ensure that the Department of Defense 
maintains a highly qualified and professional acquisition 
workforce.
    Mr. Chairman, this concludes my statement. I thank you and 
the members of this committee for your interest in and 
commitment to the professionalism of the defense acquisition 
workforce, and I look forward to taking your questions. Thank 
you.
    [The prepared statement of Ms. Barna can be found in the 
Appendix on page 60.]
    The Chairman. Thank you very much.
    In one of his last acts as Deputy Secretary of Defense, Ash 
Carter signed a memo that put in place a DOD instruction 
designed to streamline the acquisition process. As I understand 
it, this new instruction was intended to, and I quote, ``create 
an acquisition policy environment that will achieve greater 
efficiency and productivity in defense spending and effectively 
implement the Department's Better Buying Power initiatives.''
    Secretary Kendall, how is this effort being implemented in 
the Department? What sort of results should we expect? What 
obstacles are in your way as you work with Congress, industry, 
and other stakeholders to improve the acquisition process?
    Secretary Kendall. Mr. Chairman, I think that the directive 
you are referring to applies to the rapid acquisition process 
used for urgent needs for combat operations, primarily, but 
also where there is an imminent threat. And essentially what 
Dr. Carter was doing was establishing more formally within the 
Department something we have been doing for some time.
    There is a body called the Warfighter Senior Integration 
Group that I now chair, that Dr. Carter used to chair, which 
basically brings together the key leadership of the Department 
across the Department to essentially meet on roughly a monthly 
basis now and make quick decisions about our programs that are 
urgently needed for operations in theater. It has been very 
successful. We have been doing this for several years. So we 
institutionalized it with that directive. We are trying to 
institutionalize this so we don't lose that capability going 
forward. As we wind down operations in Afghanistan, we need to 
be able within the Department to do that sort of thing without 
having to recreate it from whole cloth. So we are continuing 
that.
    I don't know that we need any assistance from the Congress 
at this time with doing that. I think we have the tools 
generally that we need. But let me take it for the record, see 
if there is anything else that we need that would help us with 
that.
    [The information referred to was not available at the time 
of printing.]
    The Chairman. Thank you.
    Ms. Barna, I know that you are new to the job, and it is 
important that you are here with us today. We appreciate it.
    What recommendations do you have for the committee on how 
we strengthen the acquisition workforce? And, in your view, are 
there military or civilian personnel policies that are 
obstacles to what the Secretary is trying to achieve?
    Ms. Barna. Sir, I have no recommendations at the present 
time. Certainly, there are obstacles in many regards. But we 
believe that those are obstacles that we can work through at 
the Department level. And, again, I believe that the 
partnership that we have with the Acquisition Corps to examine 
those obstacles and to address them together is probably the 
most fruitful way to move forward.
    The Chairman. Thank you.
    You know, I was mentioning a little bit before the meeting, 
before we started, to Secretary Kendall that while I am sure 
none of us here in Congress now had any problems that we have 
created, but maybe others have. But I think that over the years 
we pass a bill every year, and I am sure we have 
unintentionally put together some regulations or we have 
written laws that then the regulations were written to comply 
with those laws that have made your jobs harder. And I think 
probably in going forward in the bills that you all do in 
future years, that probably would be something that we should 
keep at the foremost, is if we require a report, is somebody 
going to read it? In all well-intentioned things, are we 
looking at the end of the road? Is this going to make things 
better or harder? And start with ourselves here in Congress.
    I know you are working in the Department to try to do these 
things. And this is something that we are working on together, 
and it has been done and tried before, and it is a huge job. 
But if we look at it as not a project that we are just going to 
finish in a year or two and then it is all good and from then 
on we will always do everything just perfectly, I think if we 
look at it more as in this cultural change, that we change our 
culture here in the committee also, that we try to keep this 
kind of relationship going, that as an ongoing thing every year 
we look at ways that we can improve the process.
    Because I don't know that you ever quite achieve 
perfection, but if we can be constantly moving toward that, 
that would be the ultimate, I think, that we could come up with 
in this project. And I am hopeful that that will be the end 
result of these hearings and the process we work together, that 
we create the culture that every year we are going to strive to 
do things a little bit better and eliminate obstacles and 
things that are put in your way.
    Mr. Smith.
    Mr. Smith. Thank you, Mr. Chairman.
    Just sort of two areas of questions. One, one of the things 
that we really focus on is how can we make quicker decisions. 
The process drags out, and you can pick your favorite program 
and walk through the number of years that it has taken and all 
the different decision points and everything that is involved 
in it that has really dragged out the process. I mean, just the 
length of that creates cost. But also the more time you have to 
look at something, the more likely you are to add something, 
subtract something, then add it again and subtract it again and 
complicate it.
    I am struck by the fact the people who are building the 
newest carrier, the Ford, accused of cost overrun, they said, 
look, if we were building the same ship that we bid on, we 
would be right on budget. And I have had people confirm that. 
That may be slightly off. But basically everything that has 
changed since they took that contract is what has driven the 
cost up by $2 billion.
    Just to give you one example, and I am curious why we can't 
do this differently, and that is the Expeditionary Fighting 
Vehicle [EFV]. Now, we know the first part of that story, 
classic tale of too many requirements. That is my sharks and 
laser beams thing, in reality. But the second part of the story 
is once that program was killed, the Marine Corps has gone out 
and identified amphibious vehicles that are made now, I think 
it was, like, four of them by four different companies, they 
have tested them and they have said any one of these is good 
enough for where we want to go.
    Now, in a better universe--these four things have been 
made, they exist--the Marine Corps could go out there and say, 
okay, we have tested them. I want that one. All right? And we 
are done. They buy how much ever they buy and they move 
forward.
    That is not going to happen, because you got to send out an 
RFP [request for proposal], and inevitably in that RFP they are 
going to go, we like that one, but what if you put this on it?
    And I guess I will just ask a wide-open-ended question. 
Isn't there some way that we can get to the point where we can 
buy more off the shelf, more directly, empower people to say--
and, look, I admit a couple things. Number one, it might not be 
perfect. There might be something that you might say that down 
the line, well, I wish we would have had that. But that is true 
no matter what you do, and at least this would save money.
    Second, there is a risk, if you put that type of power, of 
conflict of interest, of somebody favoring one client over 
another for one reason or not. But if that happens, we have 
accountability measures, first of all. Second of all, it 
happens anyway. I mean, I hate to keep citing this example for 
obvious parochial reasons, but people tried to bribe 
procurement officials on the tanker deal back in 2004. And they 
went to jail. Okay. And that is the way it should be.
    Then we come back along and say, well, we have to people-
proof the system so that nobody can ever be bribed again. Well, 
good luck with that. Meanwhile, you just dragged it all out and 
made it more difficult.
    So why can't we just tell the Marine Corps, okay, you are 
in charge. There are the four vehicles, pick the one you want, 
and let's buy it?
    Secretary Kendall. That is a great question. My familiarity 
with the EFV goes back to about 1993, I think, when I saw the 
demonstration of the prototype at Pax River, the planing 
armored vehicle that was the first version. You are right, we 
were ambitious, overly ambitious in our requirements. Budgetary 
situations changed. I think the Marine Corps rightly recognized 
it could not afford that vehicle. And we went into a 
requirements generation cycle, analysis cycle, and that basic 
requirement just resurfaced, as what the Marines desire. We had 
already determined that was unaffordable. I think the 
Commandant made exactly the right decision when he decided to 
change the acquisition strategy and go with essentially an off-
the-shelf solution, as you alluded. So I think we are headed in 
the right general direction here.
    Let me comment on the process of source selection. I often 
marvel at the differences between the government acting as a 
purchaser and private industry. In private industry, you are 
spending your own money; if you screw it up, you screw it up. 
There is no appeal by the people who didn't win, say, hey, you 
weren't fair to me. There is no such metric that is applied.
    But when we are spending public money, we are spending the 
taxpayers' money, there is a high standard of fairness to those 
who can bid and there is a high policy interest in having 
competition, which leads to us doing an RFP and so on.
    So we are working our way through that one now. But 
basically I think we have got the right overall approach. I am 
aware of the risk that we would put a bunch of requirements in 
that would bring it back more in the direction of a traditional 
system, and we don't want to do.
    Mr. Smith. What is the prediction? Okay, so those vehicles 
are out there. When are we going to buy one? You know, how many 
years is it going to be before, with the process in place, 
before we actually have that vehicle for the Marine Corps?
    Secretary Kendall. I don't recall the schedule. I will get 
you that for the record.
    [The information referred to was not available at the time 
of printing.]
    Secretary Kendall. It is going to take us a lot to go 
through the source selection process. Obviously, there is a 
time associated with just getting the RFPs out, doing the 
evaluation, picking the winner. We think that people can 
generally deliver prototypes to us very quickly because these 
are vehicles that are reasonably mature with whatever 
modifications we end up asking for.
    For one thing, we are going to have to put our own 
communication suites on these vehicles. That is a necessity. We 
have to do that. Then there are questions about the armaments 
and so on, and perhaps other modifications.
    I share your concerns, though, about going in the wrong 
direction of using requirements to stretch out and increase the 
costs for a very small marginal return on this program. So we 
will be looking at that very closely.
    Mr. Smith. The second area I want to explore, if we could--
and I will use the SpaceX, United Launch area as an example--
is, one, the value of competition; and, two, the value of 
expanding the number of potential contractors out there. That 
one of the problems is, particularly with technology and 
services--and I think my staff gave me, it is, like, 52 percent 
of what we acquire now is services as opposed to actual 
hardware--there are a lot of smaller companies that could be 
very good at that, but they look at the Pentagon bureaucracy 
and go ``yee-ah'' and walk away. It is hard to move people 
forward.
    Now, in the case of the United Launch Alliance [ULA], we 
have had very expensive launch vehicles for a very long time. 
And I understand the argument. The argument has been made to me 
that competition would be bad here because we can't afford the 
infrastructures for two people to make these things. I am 
reluctant to agree with that argument.
    And yet we have got this 10-year contract. We don't seem to 
be as encouraging of competition in this area as I would think 
we should be, without skipping into the details. You know, we 
have given United Launch Alliance, and I have heard arguments, 
a 10-year, 5-year contract, is it 80 vehicles, I don't know.
    But at any rate, they have gotten a pretty substantial 
amount when there is a competitor on the horizon there that 
could potentially give us the competition that would drive down 
price. And it does not seem to be being well received at the 
Pentagon.
    Now, it could be they have looked at it and said, we don't 
think you are going to be able to make what we need. I don't 
know. Seems like they can. But it also seems like there is an 
incumbent bias there that is robbing us in some instances of 
the innovation of the sort of new companies and new 
technologies.
    If you could comment both specifically and broadly on that.
    Secretary Kendall. Sure. Well, first of all, I completely 
agree with you about competition. Competition is the single 
most effective thing we can do to drive cost down.
    Mr. Smith. Right.
    Secretary Kendall. And my personal motivation on the--and I 
think the Air Force's as well--on the ELV [Expendable Launch 
Vehicle] situation has been to try to get competition as 
quickly and as much as we can. So we work through the manifest 
of launches. Let me give you a little bit of background here. 
And the decision to go with a certain number what we call 
cores, rocket engines basically, for the existing incumbent was 
based on their ability and no one else's ability to do those 
launches. That was the original decision criteria.
    So everything we thought we could compete we put into the 
competition category. It was 14 of those at the time. Since 
then, because of a combination of budget changes and increased 
lifetime of some of our satellites, some of those launches have 
slipped. We still are going to compete them, we are just going 
to compete them later than we had originally intended.
    We have also, once we went on contract with ULA for a 
certain number of cores, we basically were in a position of 
having to fulfill our side of that contract. So one launch, I 
think, is moved into the ULA basket because of that, because of 
a cancellation.
    But we are committed to competition here. And there is no, 
I think, desire by anybody to keep new entrants out. That said, 
we are also very concerned about mission assurance. We have had 
a very large number of successful launches, and it is very 
expensive to dump a satellite, a billion-dollar satellite in 
the ocean.
    Mr. Smith. And have it not work.
    Secretary Kendall. So we want to have reasonable assurance 
that new entrants are going to have the capability to deliver 
with high reliability. So we are going through that process. We 
have been aggressive about bringing--SpaceX is the one that is 
currently going through the process--about bringing SpaceX in.
    When I did the decision memorandum on this over a year or 
so ago, I guess, the guidance I put out was let's go ahead and 
let people compete if they are on the path to certification. 
Let them put a bid in----
    Mr. Smith. Right. This is the problem. It is a long-term 
thing. They are saying, we are going to be ready to compete, 
but now 10 years you have locked us out. So 3 years from now we 
are ready to compete.
    Secretary Kendall. Locked them out is not really the 
intent. The intent is to do launches with ULA that only ULA can 
do, with the exception I mentioned because of changes in the 
manifest and changes in the schedule, which is on the margins.
    So I share your commitment to competition. That is what we 
are trying to do. And I believe we have moved in that direction 
as aggressively, pretty much, as we could.
    Mr. Smith. And one last--this is really more of a comment 
than a question--on the subject of competition. And this is 
stated or asked out of my respect for Doug Roach. On the 
competition issue we up here took a whole lot of grief on the 
second engine. Is there anybody over at the Pentagon now F-35-
wise who is wishing they had a second engine?
    Secretary Kendall. I don't think so. The problem we have 
right now, we have had two or three issues with the engines 
come out of the development program, is the type of thing we 
would have likely encountered with any engine in development. 
Secretary Gates years ago made a decision that we could not 
afford the development costs and the capitalization costs 
associated with a second engine. It was based on the economic 
analysis at the time. I think it was the right decision at the 
time. It doesn't really benefit us to look back in hindsight.
    I am a huge advocate for competition. But unfortunately for 
the Department, in any number of areas--you mentioned carrier 
earlier--we can't have competition because we simply can't 
afford it. There is an upfront cost associated with it. So one 
of the things I have tried to do is where we can't have direct 
competition is at least create the threat of loss of business 
in some way so that there is a competitive environment, so some 
of the competitive pressures are there.
    Interestingly, in the ELV case we were able just with the 
threat of future new entrants to substantially drive down the 
price we were paying for that core contract, that multiyear 
contract that we just talked about, that block buy. So it is 
successful. Competition works. It is just that we can't always 
afford it.
    Mr. Smith. Understood. Actually, a lot of us up here took a 
lot of grief. We have mentioned a lot of things that Congress 
does wrong. I think a lot of times Congress also puts pressure 
on the Pentagon in a good way. Whenever people say, well, the 
Department of Defense has said that they don't want this, who 
is Congress to say otherwise? And it is like, okay, why don't 
we shut us down and let the Department of Defense do whatever 
they want to do? We are supposed to exercise oversight. And 
every once in a while we are right. So we are going to keep 
exercising that oversight.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Mr. Thornberry.
    Mr. Thornberry. Thank you, Mr. Chairman.
    Thank you both for being here. And in all the conversations 
one has on this topic, I think the thing on which there is 
universal agreement is that people are the key. And recruiting, 
keeping good people, giving them the authority to do their job, 
and then having the accountability for that is the most 
important part of this. And obviously your two organizations 
working together is a key part of that. And finding a way to 
get to yes, rather than finding excuses on why things can't be 
done, I think is critical. And if laws get in the way, we want 
to hear that.
    Mr. Kendall, I appreciate all of the work that we have been 
able to start together. The one comment I would make from your 
written testimony is, I am really glad you all are working on a 
legislative initiative. I hope we can exchange ideas as we go 
along rather than wait till the budget comes up next year, 
which may be too late for our process. I mean, we don't have to 
have all the t's crossed and the i's dotted, but through the 
fall and so forth, as we come up with ideas, we want to run 
them past you, and I hope that works both ways.
    Secretary Kendall. Absolutely, Congressman Thornberry. I 
think Andrew Hunter, who is leading this effort for me, he is a 
former committee staff member, and I think he is in 
conversations with your staff and the committee staff on this 
routinely. And we are going to continue that. I think it is, as 
I mentioned earlier, the cooperation I think is terrific, and 
very happy to work with the committee on this.
    Mr. Thornberry. Well, I appreciate that.
    Ms. Barna, as I said, everybody agrees people are the key. 
If you are in industry, there are tools that they have to use, 
like bonuses and so forth, to encourage behavior and 
decisionmaking that they want to see. You talked about this a 
little bit, or some, in your written testimony. But if you are 
a civilian program manager today in the Department of Defense, 
what are the tools that the supervisor or the system has to 
encourage or to reward good performance?
    Ms. Barna. Sir, the system has a plethora of tools that we 
can use. And when I look at the statistics, the acquisition 
community is using them well and using them often. In the case 
of someone who already is employed, we have relocation bonuses 
that will allow someone to move to a new location if they 
wished and serve in a new duty position. We have retention 
bonuses.
    And, again, the acquisition community uses these frequently 
with--and again, I will put in a pitch for the continuation of 
the Defense Acquisition Workforce Development Fund [DAWDF]--has 
been able to use those because of their commitment and your 
commitment to funding the DAWDF.
    Another tool that we see frequently is the student loan 
repayment program. Under that program, a program manager can be 
paid a student loan repayment of up to $10,000 per year, up to 
$60,000 over the life of the employee. That accounts for about 
40 percent of the incentives that the acquisition workforce is 
paying in the last year, 40 percent.
    And then there are the more intangible sort of rewards that 
come from working in an important mission, contributing to the 
national security, working with people who are like-minded, the 
ability to serve in unique and interesting places and to do 
unique and interesting work.
    Mr. Thornberry. I agree with you on the intangible. Of 
course, the sooner you can see the fruits of your labor come to 
be, there is more reward there.
    But just one question. On the student loan repayment, is 
that a judgment call that the supervisor makes about whether 
someone is doing a good enough job to get that? Or is it more 
of an automatic thing?
    Ms. Barna. It is actually a judgment call. It is used very 
frequently. Again, we have a number of graduates coming out of 
schools with great amounts of debt. And so this is also an 
incentive to recruit.
    Mr. Thornberry. What percentage of the acquisition 
workforce hired in the last 10 years would you say gets the 
student loan repayment?
    Ms. Barna. I will have to take that for the record, sir, 
and come with the accurate amount.
    [The information referred to can be found in the Appendix 
on page 75.]
    Ms. Barna. But right now, 40 percent of the incentives that 
are paid in the corps involve student loan repayment. It is 
very effective.
    Mr. Thornberry. Well, I would be interested in following up 
with your office for some more statistics so that I can at 
least understand how often some of these tools are used and on 
whom and in what circumstances.
    Ms. Barna. I am happy to provide that information, sir.
    Mr. Thornberry. I appreciate it.
    Thank you, Chairman.
    The Chairman. Thank you.
    Mr. Kilmer.
    Mr. Kilmer. Thank you, Mr. Chairman.
    Thank you both for being here.
    My first question is to Secretary Kendall. Before we get 
acquisition professionals to make smart decisions, we need to 
provide them with the means to execute acquisition programs, 
and under Better Buying Power 2.0 advocated for the achievement 
of affordable programs and implementation of a system of 
investment planning.
    With that in mind, I am interested in understanding your 
thoughts on how the Department will plan to fully support the 
Ohio Replacement Program and the SCN [Shipbuilding and 
Conversion, Navy] budget as a whole. This committee offered the 
National Strategic Deterrence Fund as a solution. I am sure you 
know the most recent 30-year shipbuilding plan says the Navy 
cannot afford to do it all.
    In the spirit of acquisition reform, I was hoping you could 
speak a bit about how we can best protect the investment in our 
undersea nuclear deterrent and in other shipbuilding programs.
    Secretary Kendall. We have an affordability issue as we 
enter the 2020s in general. The Ohio replacement is a big part 
of that. It is not the only piece of it. The strategic 
deterrent across the board, the bomber, ICBM [intercontintental 
ballistic missile], and the SSBN [ballistic missile submarine] 
all need to be replaced in about the same timeframe.
    That is not the only place in the budget where we have a 
problem like this. What we have been trying to do under Better 
Buying Power is discipline our programmers and service 
leadership really to look long term at the lifecycle of their 
products that they are trying to buy so that we avoid starting 
things that we can't afford in the future.
    We have had reasonable success with that. But that doesn't 
get us out of the problem of all those things that we need to 
buy out in the 2020-ish timeframe. I don't know how we are 
going to solve that problem, but we are going to have to solve 
it somehow if we are going to have the force structure that we 
need.
    Mr. Kilmer. I also want to ask a bit about the subject that 
Mr. Smith mentioned of commercial kind of off-the-shelf 
solutions. There was a feature story in Government Executive 
this week called ``Daring Deal.'' And the focus was on how the 
IC [Intelligence Community] is leveraging a leading commercial 
cloud provider, in this case it was Amazon, to build a 
community cloud for the Intelligence Community based on the 
utility model.
    We also know the Navy is already utilizing commercial cloud 
to move level 1 and 2 workloads to a commercial solution. 
Civilian agencies, like HHS [Health and Human Services], are 
even moving sensitive but unclassified workloads to commercial 
cloud. But up to this point the Defense Department has been 
lagging in that category, particularly for levels 3 through 5 
data.
    Could you talk to the committee about how the DOD as part 
of the overall defense acquisition reform effort is going to 
better leverage commercial cloud technologies, both in the 
short and the long term? And also can you speak to the 
Pentagon's plan to use commercial service providers to build a 
community cloud for classified data?
    Secretary Kendall. I am going to have to take that for the 
record.
    [The information referred to was not available at the time 
of printing.]
    Secretary Kendall. But in our major what I would call IT 
[information technology] infrastructure projects, and I am 
thinking right now of the Navy's Next-Generation, for example, 
we are using essentially commercial products. Now, whether we 
are using a commercial cloud which merges defense data with 
nondefense data in a storage facility, for example, which is 
really what we are talking about I think here, I don't know the 
answer to that question or how much that solution implemented 
that.
    We do have, obviously, privacy issues, we have security 
issues that we have to ensure are enforced. So if a commercial 
cloud can meet those requirements and there are economic 
advantages to it, I don't think I would have any objection to 
going that way. But I am going to have to take for the record 
where we are in terms of exploring that and implementing it.
    Mr. Kilmer. With the time I have permitting, Secretary 
Barna, professional education is obviously an important aspect 
of preparing our acquisition workforce, both in terms of their 
ability to develop realistic requirements and buy what we need.
    I think one of the values of the Better Buying Power 
initiative is that it asks acquisition professionals to think. 
To what extent does the Defense Acquisition University use case 
studies to educate its students on best practices and lesson 
learned and the rationale behind the curriculum? And how are we 
empowering our acquisition professionals to make good 
decisions?
    Secretary Kendall. Congressman, if I could take that one. 
We do use case studies extensively at the Defense Acquisition 
University, and I have encouraged the new president to use them 
more. My business school training kind of, I didn't go to 
Harvard, but I kind of follow the Harvard model. I think case 
studies are a great learning tool. They do help people with 
critical thinking. They teach principles at the same time. But 
they force people to confront problems and address them. And we 
have no shortage of case studies historically at the Defense 
Department that we can use to help our learning process.
    Mr. Kilmer. Thank you.
    Thank you. I yield back.
    The Chairman. Thank you.
    Mr. Forbes.
    Mr. Forbes. Thank you, Mr. Chairman. Thank you for holding 
this hearing. I also want to thank Mr. Thornberry for his work 
in this area, and it is an important area for us to get right.
    And thank both of you for your service to our country and 
for being here today.
    For as long as I have been in Congress, whenever I go to 
any facility anywhere, the base commander is always telling me 
the same thing. They say that oftentimes when they have a need, 
it is the small or medium-sized businesses that can go from 
idea to deployment utilization the quickest. But they get so 
frustrated with the acquisition process that they just walk 
away and they don't do it, and they use the bigger companies.
    When I talk to the smaller or medium-sized companies, what 
they are enormously frustrated with is if they see a need that 
is out there and they make investment in that need, they feel 
like when they come up with that idea that everybody recognizes 
is very important and novel, that they have no way of really 
protecting the idea for themselves because it is taken away 
from them and given to a larger company. And I hear this over 
and over again.
    If I could put an ink pen in both of your hands and say, 
write for the chairman the number one thing we could do as a 
committee to help on either one of those problems, what would 
you tell us we could do?
    Secretary Kendall. I am not sure what procedural things we 
could change that would help small businesses in the way that 
you describe, in terms of barriers to entry because of 
government rules and regulations. And by the way, I share your 
views on small businesses. They are incredibly important 
contributors to the Department. And we have worked extensively 
over the last few years to try to increase their involvement 
with the Department.
    And the Federal Government, overall, for the first time, I 
think, ever, met its small business goals last year in terms of 
percentage of business going to small businesses. Defense 
Department didn't quite meet its, but I think we are on track 
to do better this year. I am very hopeful about our performance 
there. So we have reached out to small business a great deal.
    There are barriers to entry because doing business with the 
government is a little bit different. We have a lot of things 
in place to kind of educate and inform small businesses about 
what it takes and how to get into government business. I meet 
on about a monthly basis with all of our small business 
leaders, and this is one of the subjects that we routinely 
discuss.
    The protection of intellectual property. I do hear from 
small businesses concerns and fears, often, particularly 
startups for new technologies, that if they share their ideas 
with big firms, that the big firms will steal their ideas. We 
need to protect that intellectual property. They need to 
establish those rights and then need to protect them. And the 
government is very happy work with them to do that.
    Also, the other thing I hear mostly from small businesses 
is that they are brought into a proposal, to strengthen a 
proposal, with a major firm, and then when the business is 
actually awarded they don't get the business. That is another 
issue that we are working.
    I want to make the comment finally on this topic that the 
single best thing that Congress can do for us in terms of small 
businesses is to stabilize the budget. The uncertainty we have 
right now about how much budget we are going to have and the 
cuts we are going to take potentially under sequestration I 
think are going to fall disproportionately on small businesses, 
because they are going to hit our service contractors, which is 
where a lot of small businesses are, it is going to hit a lot 
of our smaller suppliers very hard.
    So I would urge you and I would urge the entire Congress to 
get the specter of sequestration off of our backs, because----
    Mr. Forbes. Could I ask you one more thing, just because my 
time is running out. But I appreciate that. What specifically 
could we do or should we do to leverage modeling and simulation 
in the early stages of acquisition to ensure mission or 
operational relevance for new capabilities and continued 
mission operational relevance of existing capabilities?
    Secretary Kendall. I think that is an area where we need to 
do some building. I was out of the Defense Department for about 
15 years and came back 4 years ago, and I was struck by how 
much our capability to do modeling and simulation to support 
decisionmaking about programs and so on had atrophied. We have 
been working on the margins to restore that. I think we need do 
more there.
    I have an initiative with the Defense Advanced Research 
Projects Agency that I was briefed on yesterday, and they 
highlighted that. It is one of the critical needs they have, to 
help us sort out our requirements and determine what really 
makes sense from an operational requirements perspective.
    So I share your concern. I think we need to do more there. 
It is just, again, in the environment that we are in it is 
incredibly difficult to add resources to any specific area 
because we are taking so much away from so many areas.
    Mr. Forbes. We would love to work with you on that and try 
to help it.
    And, Mr. Chairman, thank you. And I yield back the balance 
of my time.
    The Chairman. Thank you.
    Ms. Speier.
    Ms. Speier. Mr. Chairman, thank you.
    And thank you both for being here today.
    Secretary Kendall, I think you said all the right things in 
your opening statement. I believe that you are committed to 
Better Buying Power and that we have got to change the culture 
from spending whatever is in the budget for fear that you are 
going to lose it the next year. I think that is a phenomenon 
that we have really got to address throughout government.
    But I am deeply troubled by the fact that 25 years ago we 
were complaining about $600 toilet seats and $8,500 coffee 
urns, and the truth of the matter is, we are still dealing with 
those same issues today. And I want to focus on spare parts in 
particular. And the Inspector General report that was just 
released this week looking exclusively at Bell Helicopters and 
the sole-source commercial contract for spare parts.
    This particular part that they take note of should cost 
about $409, and we paid about $3,500 per part for this, and we 
bought 116 of them, costing us $367,000. The report suggests 
that because it is a sole-source contract that, in fact, the 
analysts are not relying on the kind of data they should be 
relying on in order to determine whether or not it is a fair 
price or not. And so we continue to have the same problems.
    And I want to know what you think you are going to do to 
change an Inspector General report so we don't get another one 
like this.
    Secretary Kendall. This is an ongoing and difficult problem 
to address. Let me explain why. It is a question partly of 
capacity. We buy hundreds of thousands of parts, and the 
workforce that does that has to go establish that they have a 
reasonable price for those parts. And the workforce has a 
limited size. They only have so much capacity. My director of 
pricing has worked very hard with this community and DLA, 
Defense Logistics Agency, which does a lot of this, has worked 
very hard, Admiral Harnitchek there has worked very hard on 
this.
    The standard that we have for a lot of these parts is one 
that applies to commercial parts, or what we call commercial 
``of a type'' parts. We have an ongoing dialogue with industry 
on this. Because our policy right now is fairly flexible, it 
says that the government can rely on commercially established 
prices for commercial products or commercial ``of a type'' 
products, but if there is a question about that price, then we 
can ask for anything up to certified cost and pricing data, 
which is a very high requirement for people to meet and which 
commercial companies normally are not in a position to provide. 
So that puts a burden on industry.
    And we talked earlier about barriers to commercial 
companies trying to get into the DOD and sell things to us. And 
I have had companies, large companies who do a lot of 
commercial aerospace work, for example, say they will walk away 
from DOD business if they are forced to put certified cost and 
pricing data on all their commercial products. It is just too 
big a burden for them, and the business isn't worth it to them.
    So it cuts both ways here. What happens, unfortunately----
    Ms. Speier. So tell us how to fix it.
    Secretary Kendall. What we have to do I think is, first of 
all, increase our capacity. We have to use auditing tools. We 
have to do sampling to try to catch as much of the fraud, if 
you will. I think what you describe is basically fraud. Someone 
who is charging us 10 times what something costs is not doing--
--
    Ms. Speier. Okay. But here is the problem. It is fraud, and 
we will continue to do business with Bell Helicopter, and they 
will continue to rip us off. Correct?
    Secretary Kendall. What we have to do is hold them 
accountable for the thing you just described, and they can pay 
the penalty that is appropriate for that.
    There will be audits based on--I just got the report--but 
based on the report that I have, we will be auditing an awful 
lot of what they do to us to see how widespread this is. And if 
it is an isolated case, that is one thing. But if it is 
systemic, that is a much bigger deal.
    Ms. Speier. Will you then report back to us?
    Secretary Kendall. Absolutely.
    [The information referred to was not available at the time 
of printing.]
    Ms. Speier. All right. Let me ask you about the F-35 
engine. Do you believe, based on what you have learned so far, 
that it stemmed from an isolated incident or was it a systemic 
engine flaw?
    Secretary Kendall. I don't want to get ahead of the safety 
evaluation process. I have gotten some reports on where we are 
on that. We have inspected all of the existing engines that are 
in service. We have not found, as far as I know, anything that 
suggests the type of problem that we think caused this failure.
    So we are examining the actual engine that did fail, the 
parts of it that we have, to try to determine what caused the 
failure. We really want to get at the root cause of this to 
determine exactly what caused it. I, as a political appointee, 
don't want to get involved in or influence the safety process 
that the safety professionals and the airworthiness 
professionals need to conduct.
    So we will get to the bottom of this. We will do the right 
things technically to get to the bottom of this, and then we 
will take the right action. But safety of flight is a primary 
consideration here, and that is what is going to govern us. So 
I don't want to get ahead of that process.
    From what I know now, I will go this far, there is a 
growing body of evidence that this may have been an individual 
situation, not a systemic one. But we don't know that for 
certain at this point in time. And until we do have real good 
technical answers on this, I don't want to get ahead of the 
process.
    Ms. Speier. Thank you. My time is up.
    The Chairman. Thank you.
    Mr. Wilson.
    Mr. Wilson. Thank you, Mr. Chairman.
    I want to thank you and Vice Chairman Mac Thornberry for 
your leadership on these issues as we work to improve the 
system.
    And both Secretaries, thank you all for being here today. I 
note that you are concerned and want to make changes.
    And I appreciate Ms. Speier's questions, and join with her 
expressing concern. And I just am so hopeful that changes can 
be made. I am particularly concerned about the Department of 
Defense, how they acquire information, IT, technology systems. 
The concern is that we waste money on systems like the Air 
Force's Expeditionary Combat Support System that was canceled 
after $1.2 billion was invested and nothing was produced. But 
we also have competing IT systems within the services that do 
not speak to one another. And this causes waste.
    In the most recent example, the DOD destroyed $1.2 billion 
in ammunition because DOD's inventory systems cannot share data 
effectively. That is $2.4 billion in waste. How can we analyze 
both of these examples to avoid waste in the future?
    Secretary Kendall. Congressman, I am familiar with the 
first issue, dealing with the Air Force. I am not familiar with 
the ammunition issue. Let me address IT in general, because the 
phrase ``IT'' is incredibly broad. It applies, actually, to a 
large number of the things that we do. It applies to the 
infrastructure that we buy that supports our networks, the 
clouds that were referred to earlier, this data storage 
capability, the communications capability and the processing 
capability, which is largely commercial products that we buy. 
It also applies to the business systems, which is what the 
system that you talked about earlier was, the ECSS system, 
Expeditionary Combat Support System, for the Air Force. So 
there what we do is we acquire largely commercial products that 
are used for commercial-like processes, paying personnel, 
logistics support, and so on. And we adopt them to the 
military's needs, to meet the military's requirements. So there 
is a lot of work done to do that. And then we field them 
basically while we are still operating the legacy system that 
we have to make sure that they are running before we shut off 
the system we already have. We have to do changes as we go in 
process. Then to the national security IT systems, the battle 
command and control systems, and then there are the embedded IT 
that we buy that is in all of our weapons systems. So IT covers 
a huge amount of ground.
    Let me focus on what I think is the heart of your question, 
which is the business systems and the networks that they run 
on. Okay. I have recently brought those business systems more 
under my control. And I am working closely with the new CIO 
[Chief Information Officer], Terry Halvorsen, on the 
infrastructure, which he is more responsible for. I think we 
can do a lot better in this area. One of the things we have to 
do is build up a greater body, again coming back to people, we 
need professionals in this area. Business systems are somewhat 
unique. IT infrastructure is somewhat unique. And we need 
people who really understand these areas technically, both in 
terms of how they work, but also how to acquire them and how to 
transition them. We also need to do a better job across the 
Department of homogenizing our requirements. And the CIO is 
well into this with what we call the JIE, Joint Information 
Environment effort, which was started a couple of years ago 
now, which is doing things like consolidating databases in 
Europe, for example. And there is a roadmap for how we are 
going to get there.
    So we are tackling this problem. We would like to make a 
larger investment in this area so that we can move faster in 
this area, but it is very difficult to do that in the current 
climate.
    Mr. Wilson. So, clearly, you are looking at the Air Force 
problem and learning from that and making changes. And I will 
be getting information to you relative to the ammunition.
    Another issue, of course, is the traditional one. This one 
is the intelligence system, the Distributed Common Ground 
System. And there is a concern among the military of an 
inability for this system to work, when in fact if you were to 
go and acquire a commercial, off-the-shelf system, it would 
work. And in fact, the FBI [Federal Bureau of Investigation], 
CIA [Central Intelligence Agency], DEA [Drug Enforcement 
Administration], NSA [National Security Agency] have been using 
commercial systems as opposed to what DOD is pursuing. Are you 
looking into this?
    Secretary Kendall. Yeah, I am familiar with that case. It 
is an Army program that I have seen in the field. I have 
actually seen both the commercial system and the Army system in 
the field being used in an operational command. The two systems 
bring different virtues to the table, basically. You are 
referring to Palantir is the commercial system. Palantir is 
very good at some things, it is a more intuitive system. And a 
lot of our operators who are not essentially career 
intelligence people like it because of its intuitiveness and 
easiest to work with.
    DCGS-A [Distributed Common Ground Systems-Army] on the 
other hand brings an awful lot of other capabilities that our 
intelligence analysts need. And I believe the Army is working 
to bring the Palantir-like technology into DCGS-A.
    Mr. Wilson. As I conclude, I, in my military service, 
worked with SenGuard, and it was just a disaster when I could 
use my cell phone. And so I was at the National Training Center 
at Fort Irwin, and gosh, please look into commercial, off-the-
shelf systems. Thank you.
    Secretary Kendall. We are moving very much in that 
direction for tactical radios. We are doing commercial 
acquisition for tactical radios now.
    The Chairman. Thank you. Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman.
    First, Secretary Kendall, can you give us examples of the 
flip side of the acquisition problem? That is, the Department 
of Defense having to buy things that you no longer want to buy? 
And what would be on that list?
    Secretary Kendall. Well, there were a number of things 
that, unfortunately, this committee did not approve that we 
sent up. A lot of cost-saving measures that--I know BRAC [Base 
Closure and Realignment] is very unpopular, but that is one of 
the things we tried to do. We tried to do some things with 
compensation that we really need to do. Compensation cost 
growth is excessive for us.
    We did some efficiency things with Navy cruisers that we 
think were a very smart management approach to how we manage 
that part of the force structure. Take them out of service, 
take the people out for a while, do the modernization, then 
bring them back in. We think that was a wise thing to do. The 
F-18 E, F, G models of the F-18, unfortunately, that production 
line is going to come to an end at some point. We are not going 
to keep buying those airplanes forever. And when we did our 
priorities, even though the Navy has asserted that there is a 
need for additional, we need an awful lot of things we can't 
afford right now. So that is another example. And I probably 
could give you some more for the record if I went back and took 
a look at it.
    Mr. Larsen. I thought you might have examples.
    I think it is sort of the flip side of this argument as 
well. There are changes that we ought to make in how we buy 
things. There are also changes in what we ought to be buying 
and what we ought not to be buying. And maybe we can look at 
that.
    I want to underscore Mr. Kilmer's comments about commercial 
cloud services and really hope that you will look hard at 
whether the Department itself has the kind of skills, 
abilities, knowledge, to either create, recreate, or if you are 
going to end up with a similar kind of situation that Mr. Smith 
has brought up about the--I understand the laser sharks, I 
wasn't here for that comment, but I can certainly understand 
it--that is the Department doing something and just keep adding 
and adding and adding on top of something that is already 
easily available that you can use without too many changes, and 
pretty soon you have something that is wholly unworkable.
    Finally, this isn't an indictment of the acquisition 
workforce, and I don't mean it this way, but before 
sequestration, before pay freezes, before budget uncertainty, 
we had acquisition problems. So those aren't necessarily--those 
are important that you have to deal with, but I don't see that 
as necessarily--they may be part of the solution set, but it is 
not the solution, because we were having those issues in the 
2000s, when there was certainly no budget uncertainty in the 
Department of Defense. There was in fact way too much money 
being spent, and there was no discipline in how it was being 
spent. Little discipline in how it was being spent, I should 
say. Certainly, again, there was a lot of certainty. There 
weren't pay freezes, and we didn't have sequestration.
    So, given that context, what would you say about the 
workforce itself? If you could be more objective in terms of 
taking out some of those issues, what would be specific to what 
we can do about the workforce itself?
    Secretary Kendall. I think flexibility in managing the 
workforce is important to us. Ms. Barna mentioned some of the 
tools that we have that we are using. The AcqDemo [Army 
Acquisition Demonstration Project] personnel management system 
basically is a good tool that we would like to expand on and 
appreciate the increased authorization of that. But we would 
like to have it permanently available to us. We would like to 
expand it. A lot of what we need to do with our force is 
cultural, and it is chain of command management throughout the 
structure. It is not just in the acquisition side of the house 
where I am, but also the services and their personnel 
management practices. We need to make it clearer how important 
acquisition people are to us, how valued they are. We need to 
reward them for what they do, acknowledge its importance. We 
need to reinforce the criticality of those jobs and set high 
standards for those people that are well recognized and 
appreciated. We want people to aspire to take leadership 
positions in acquisition and to feel that they have 
accomplished something when they get to one of those positions.
    We are looking at our own qualification requirements, and 
we are strengthening them. We have a system that is statutory 
that I don't think needs to be modified particularly but that I 
think has become somewhat inflated over time. It has become 
sort of a check-the-box thing to get to a certain level of 
acquisition certification. And we want to move beyond that. We 
want that to be meaningful. So we are doing a number of things 
in that area. We are trying to recognize professionally people 
who are top performers so we hold those people up and what they 
have done as the standards of what we expect of people. So 
there are a lot of things that are just leadership things that 
we can do that I think are kind of foremost there. And that, 
again, takes time. You have to build that over time.
    Now, there is a lot, obviously, in this area that I think 
we are doing already. I just think we can do more. And the 
things you mentioned, I take your point that we had acquisition 
problems far before we had pay freezes and furloughs and 
sequestration and so on. That is true. But those things are 
compounding our problem with recruiting and retention. We are 
using DAWDF very effectively. That is one of the tools that we 
have. We have an awful lot of our workforce that is going to be 
retiring in the next few years. And we really need to build up 
the middle of the workforce, in particular, its expertise. So 
we need help doing that.
    Mr. Larsen. That is fair.
    Thank you, Mr. Chairman.
    Mr. Thornberry [presiding]. Mr. Wittman.
    Mr. Wittman. Thank you, Mr. Chairman.
    Secretary Kendall, Ms. Barna, thanks for joining us today.
    Secretary Kendall, if you look at what Congress has done in 
the past about major defense acquisition programs, the focus 
has been on research and development and production.
    Secretary Kendall. Yes.
    Mr. Wittman. But if you look at the costs associated with 
the lifecycle of those programs, 70 percent is in sustainment. 
Can you tell me, are sustainment costs looked at upfront in the 
development of major acquisition programs? And if not, what can 
be done to reform the programs so we look at those lifecycle 
costs and so we truly get to the best value when we are making 
decisions about these major acquisition programs?
    Secretary Kendall. That is a great point. We focus, partly 
because it is so visible, and because they tend to be rather 
dramatic sometimes, on overruns in development, which is the 
riskiest part of all of our programs. On the average, our 
systems overrun by about 30 percent in development, and only 
overrun by about 10 percent in production because that is 
easier to forget. And the 30 percent number is driven by a few 
outliers that are very dramatic cases that we focus on. But 
development is only 10 percent of the lifecycle costs of most 
of our programs. As you say, half of the cost is in 
sustainment, it is in paying to keep it in service and do all 
the logistics. When we establish affordability caps on 
programs, what I am doing is establishing a cap for production 
and a cap for sustainment. So the sustainment considerations 
are forced into the design process early. We are also 
requiring--we have been doing this for a couple of years now--
reliability growth curves. So that as programs come through 
development, they demonstrate the reliability that we need for 
them when they are fielded. And we don't trade those things 
away trying to keep schedule or to keep performance high, other 
metrics. So there is a strong focus on sustainment. It is also 
an area of service contracting that we are focusing on, 
particularly maintenance and use of techniques, like 
performance-based logistics, as a tool to try to drive out 
costs. We are trying to implement that more broadly, and we are 
also looking for other best practices to use in sustainment.
    Mr. Wittman. Looking also at what Congress has done over 
the past 25 years in another realm, and that is changing the 
laws as it relates to acquisition, much of that churn results 
in different legal frameworks that both folks within the 
acquisition community and the contracting community look at and 
then respond accordingly. That also changes the dynamic about 
how decisions are being made. Is there something that Congress 
can do, not to complicate that by another law, but to simplify 
that, to make things more determinable by both acquisition 
professionals, the acquisition community, and by contractors to 
where we get away from this churn and this act-react sort of 
dynamic that we find ourselves in?
    Secretary Kendall. Absolutely. I share your observation. 
That is what my team, led by Andrew Hunter, is working on with 
Congressman Thornberry and his people, to try to address 
exactly that issue. When I rewrote DOD 5002, the document that 
governs the acquisition process, there is a section in there 
which is essentially tables of compliance requirements, almost 
all statutory. And it struck me, as I looked at page after page 
after page of very dense requirements, the kind of nightmare 
world in which our programs managers have to live. Now, many of 
those statutes that have created what has led to those tables 
were very well intended and had a good solid purpose behind 
them. What we need to do, though, is simplify and rationalize 
that body of law so it is more coherent, so it is logical, so 
it is consistent. And that is a fundamental task that we are 
working on right now.
    Mr. Wittman. Another element of what we look at within 
acquisition, and that is consistency in decisionmaking. And 
that is about people, and making sure, too, that we have the 
same people in place through the decisionmaking process of a 
program. Can you tell me how do you better align tenure with 
individuals, both in the civilian side but also in the uniform 
side to make sure that there is consistency there? Because we 
have seen in the past--we don't have to reinvent the wheel--we 
have seen in the past where we have had successful programs 
there has been continuity in individuals, in decisionmaking 
there where we aren't back and forth with one person that has 
gone down one track, and then a new person is in, they have to 
relearn or go down a different track, and then we have this 
uncertainty or back and forth. How do you address that with 
tenured individuals, both in the civilian side and in the 
uniform side, through the lifecycle of the program?
    Secretary Kendall. Another great point. We have looked at 
the data on tenure and tried to correlate it to program 
results. And we don't see a high correlation. But I believe 
intuitively that it matters. I believe more strongly that the 
quality of the leadership matters a great deal. The change that 
I have made that I think is important is that what I am asking 
our program managers to do, our product services to do, is to 
assign program managers a few months before a major decision 
starting a phase so that they are there and they have basically 
ownership of that decision. But they stay in place after that 
decision for the next few years so they are responsible for 
executing the program that they said was executable. So that 
they are held accountable for the performance, not just getting 
the decision. Because there is a tendency in our system to look 
at getting to milestone approval or getting the contract 
awarded as success. That is not success. Success is delivering 
the product on cost and schedule and time and to meet the 
performance requirements. And I want our program managers held 
accountable for that.
    The other thing I have done is, I have been doing this for 
4 years now, I put the names of the chain of command in each 
acquisition decision memorandum. The service acquisition 
executive, of course, I assign them. The program executive 
officer and the program manager. So there is a permanent record 
of who came in and said this is an executable program that we 
can go do. And I want that on the record so that that is there 
forever. So those steps I think will help hold people 
accountable and will help us measure as part of that overall 
cultural change. What do we really want to hold people 
responsible for? What is success? And what are the incentives 
to people in terms of how they do their jobs?
    Mr. Wittman. Thank you, Mr. Chairman.
    Mr. Thornberry. Thank you.
    Ms. Duckworth.
    Ms. Duckworth. Thank you, Mr. Chairman.
    Mr. Secretary, I, too, agree that small businesses are a 
real engine for the economy and can really help with 
innovation. I appreciate your comments on some of the things 
that we can do here in Congress to help small businesses. But I 
have to tell you that I have small businesses in my district 
that are still struggling. I have one business that does 
advanced hearing protection, Etymotic Research, and they have 
been waiting over 2 years, almost 3 years now, simply for an 
NSN [National Stock Number] number. And they keep being told 
that they are just weeks away from getting an NSN number, even 
though they have potential military units that are interested 
in testing out their product. And because they don't have the 
resources of a large corporation, they just keep going through 
the grind. And that I think is what wears down these small 
businesses who don't have the capacity. So if there is 
something we can do to work on that, that would be very 
helpful.
    Secretary Kendall. If you give me the information, we will 
look into it and see what we can do for that specific case. But 
I think, in general, we will take a look at the backlog for 
that area and see if there is anything that we can do about 
that.
    Ms. Duckworth. That would be great. I think that NSN 
number, there is a real backlog there for businesses trying to 
get those numbers.
    Secretary Kendall. I think it gets to the issue I talked 
about earlier, which was the capacity right now in the 
workforce. But we will take it on and see what we can do to be 
more efficient.
    Ms. Duckworth. Great. Thank you.
    I also would like to talk with you about the office for 
Cost Assessment and Program Evaluation, the CAPE. I think that 
it is doing a great job in terms of taking an increasingly 
forward position assessing acquisition programs and level of 
costs and looking at scheduled risk in the programs. Is there 
any way of leveraging the CAPE analysis so that it can be used 
to build risk mitigation into programs? Because they don't 
generally take public stands on programs, nor do they offer 
feedback to industry. And I just think that their programmatic 
assessments, if it were available to industry, could really 
help industry understand the analysis and to address the risks 
and concerns earlier in the programs before issues arise. Is 
this something that could be done?
    Secretary Kendall. CAPE does independent cost analysis 
primarily. It looks at the realism of the costs and the service 
projections. And I rely on them very heavily for that. The cost 
estimates that have been coming from the services, it is a 
little bit surprising to me, given my experience years ago, are 
generally very consistent with CAPE's today. There are only a 
few percent differences in most cases. That analysis is very 
valuable to us. CAPE has a huge cost database they use as--a 
historical database they use as a basis for that. Some of that 
information is proprietary, I believe, so we would have a hard 
time sharing that.
    On the risk of execution, I rely more heavily on my own 
system engineering office and developmental test office to look 
at those issues, and my research and engineering assistant 
secretary to look at the technical risks of the programs.
    We try to communicate with the services certainly. I think 
communication goes through the industry about where we see the 
risk and where we see adjustments needed in programs because of 
that. I recently added a year of testing, essentially, to one 
of the programs that came before me recently because I thought 
there was too much concurrency in the program. I am not sure--
you make a good point in terms of getting lessons learned out 
to the broader community. Let me take that one, and I will 
think about what we can do to do more of that. I think, 
communication--we talk about case studies at DAU [Defense 
Acquisition University]. That is one vehicle we have. But I 
think, in general, we can put out more on why we are doing what 
we are doing and what is leading to it.
    The PARC organization that works for me, the Program 
Assessment Root Cause analysis organization, does do analysis 
of Nunn-McCurdys. And as part of my annual report in the 
performance of the acquisition system provide data on their 
assessments and where they are seeing root cause issues. So 
that is one vehicle that we have. I might be able to add 
additional data from CAPE to that volume as well. That would be 
one way to do it. Let me take that on and see what I can do, 
because it is an interesting idea.
    Ms. Duckworth. Great. Thank you. My final question is back 
to the F-35. I know you can't talk about--I absolutely 
understand the process, the safety review that has to happen 
with the engines. But can you address a little bit the issue 
with reports that the F-35 is now actually damaging runways? 
Certain types of runways that are not especially reinforced? 
And which would then reduce its capacity to be forward deployed 
on certain surface areas. Which really takes away one of the 
advantages of the design of the aircraft.
    Secretary Kendall. Yeah. I think the issue you are 
referring to, I believe it is, let me take it for the record to 
give you a good answer, but what I think you are referring to 
is the heating that comes from the STOVL [Short Take-Off/
Vertical Landing] variant when the nozzles are oriented down, 
so the exhaust goes down onto the runway. That was a concern 
originally on carrier decks. And we discovered that we could 
handle that. That was all right for us. But I am not sure how 
much of a problem it is for normal tarmac, for normal runways 
or concrete runways. Let me take that one on and see how much 
of an issue it is there. I don't know the answer to your 
question.
    Ms. Duckworth. There was a recent report that came out said 
that unless it was a specially reinforced tarmac or runway, 
that it would not be useful.
    Secretary Kendall. I think there may be some operational 
limitations on how we can use the STOVL variant on standard 
runway surfaces. Let me check on that one.
    [The information referred to was not available at the time 
of printing.]
    Ms. Duckworth. Thank you.
    Thank you, Mr. Chairman.
    Mr. Thornberry. Thank you.
    Mr. Hunter.
    Mr. Hunter. Thank you, Mr. Chairman.
    Mr. Secretary, first question is about an icebreaker. I 
chair the Coast Guard and Maritime Subcommittee on the 
Transportation Committee. We are talking about icebreakers, 
which we don't have one. In the Coast Guard, we talk about a 
whole-of-government approach, we talk about the Arctic, the 
Antarctic, and they have no answer. Because of the way the CBO 
[Congressional Budget Office] scores a lease, it is a billion 
dollars scored upfront, and frankly, I don't think the Coast 
Guard or Homeland Security is capable of going through the 
acquisition process because it is just newer. They haven't been 
around as long as the Navy and the DOD. I think it is going to 
be, have to be a DOD effort. I am just curious what your take 
is on getting an American icebreaker, which we don't have right 
now.
    Secretary Kendall. I have not looked at that. I would be 
happy to take it for the record and try to get you an answer.
    [The information referred to was not available at the time 
of printing.]
    Mr. Hunter. Okay. I am just curious. Thank you. Because a 
lot of the problems with it are technical, the way it is 
scored. And there needs to be a whole-of-government approach as 
opposed to the Coast Guard's entire budget would be the 
icebreaker, literally.
    Secretary Kendall. We run into that sort of issue fairly 
often, where CBO scoring rules or OMB [Office of Management and 
Budget] scoring rules make it difficult for us to do things 
which look like good business from just a business perspective. 
I think that is one of the things on that list apparently. Let 
me take a look at it and see if I can get anything back to you.
    Mr. Hunter. Thank you.
    Next thing, I guess it is kind of the same question. When 
it comes to commercial-off-the-shelf products and DOD still 
requiring the business to disclose its cost accounting of how 
they come up with what they are selling to you for when it is a 
commercial product that they have to compete on the open 
market. You talk about competition, the competition is there in 
the open market. That is what brings the cost down. DOD is not 
going to drive the cost down further than the market does. So 
let's talk specifically, if you don't mind, about the ITEP, the 
Improved Turbine Engine Program, something like that, where it 
is a commercial product, but it seems really hard to get it 
going because there is only one or two companies that have it 
right now, that have a good improved engine program going. But 
they are not being bought right now because DOD wants to 
compete it. And the problem is there aren't any other companies 
that do it. Does that make sense? There is two questions there 
in one.
    Secretary Kendall. Yeah. If there is an off-the-shelf 
product that meets our requirements. We would have to assess--
normally what we do is we would do an analysis of the business 
environment.
    Mr. Hunter. Let's just say you have a kid--a kid--a young 
person, let's say, in their late 20s that doesn't have any 
industry experience, that is out of school, got their master's 
in business, and you try to make them replicate what really 
smart folks that work for a really big company do to assess 
what their cost is and find out if you are getting a good deal. 
It is really hard to do. In fact, it is impossible to do. And 
it is turning off the folks that would be supplying you with 
good stuff that is done competitively and cheaply because of 
the open market.
    Secretary Kendall. That is the issue we talked about 
earlier. What cuts against that is things like the Bell 
Helicopter issue that was brought up earlier where we had paid 
multiple times the price we should have paid for a product. And 
it is the $600 hammer issue, right. So when one of those 
occurs, it is a very public event. The Department is chastised 
for it. And so we are asked, because of that, to go impose 
tighter controls on the costs and prices we are paying. When 
something is truly commercial, purely a commercial product, and 
it is out there in the market and it is widely sold to a lot of 
people, then that competitive market is efficient at setting 
the price. Where we get into trouble is things that are kind of 
on the margins, where there may be a modified commercial 
product, or where, even though it may be sold through a GSA 
[General Services Administration] catalog, it is really unique 
to say--we had an incident a couple years with an Apache 
helicopter oil drip pan, where we were paying an excessive 
amount; as it turned out, it made it onto 60 Minutes. So 
somebody should have realized that that was not really a 
commercial product and asked a few more questions about what 
the basis was for the price to go get at that. We didn't until 
we were embarrassed by that fact, just as we are probably going 
to be embarrassed by what Bell has done and some of their 
pricing. So we have got to strike the right balance between 
relying on what are asserted to be commercial prices and doing 
due diligence to make sure we are getting a fair and reasonable 
price. That is what we are trying to strike, is the right 
balance there.
    Mr. Hunter. Okay. It is going to be hard to ask free 
companies. I guess if they want to do business with you, they 
are going to have to disclose their stuff. I guess they just 
won't do business with you.
    Secretary Kendall. It depends on their products. If their 
products do have a well-established commercial basis, we should 
be fine. If there is none----
    Mr. Hunter. If it is a new product of which that company is 
the very first one to innovate and create it, then you don't 
have any cost basis to go against. Let me ask one last 
question.
    Secretary Kendall. Then what we need is some way to 
determine it is a fair and reasonable price. It doesn't have to 
be fully certified cost and pricing data. But we need some way 
to have a reasonable assurance that it is a fair price. That is 
what we have. That is the criteria.
    Mr. Hunter. Thank you.
    My time is up. I yield back.
    Mr. Thornberry. Ms. Bordallo.
    Ms. Bordallo. Thank you very much, Mr. Chairman.
    Secretary Kendall and Secretary Barna, thank you for being 
with us this morning. Thank you for your service. This 
committee has been a strong supporter of the inventory of 
contract services because it is integral to the implementation 
of a robust total force management policy, which depends in 
large part on the Department's capability to more intelligently 
manage its acquisition of services.
    GAO determined that to improve the Department's capability 
there needed to be a dedicated office resourced to develop and 
implement a common inventory system and associated business 
processes among the military components and defense agencies 
for contract services management specifically modeled after the 
Army's system, as this committee has long recommended.
    Now, earlier this year, GAO reported that the Department 
approved plans to establish a dedicated office within Personnel 
and Readiness to support these implementation efforts. But I 
understand the office's roles and responsibilities and how it 
will be staffed have not been fully determined. So my question, 
Secretary Kendall, when will this office be up and running?
    Secretary Kendall. Congresswoman, I ask my colleague to 
answer that one. That falls under her area.
    Ms. Bordallo. Secretary Barna.
    Ms. Barna. Yes, ma'am. We are working on the staffing and 
the structure of the office as we speak. I think our next 
meeting on the issue is this coming Tuesday. This is certainly 
a matter about which we have great interest, and we understand 
the committee's interest and the GAO's interest.
    We are working on the enterprise contractor manpower 
requirements assessment, which I believe is the data tool to 
which you are referring. It is the data tool that will actually 
fuel and feed the inventory of contracted services. So we are 
very aware of the interest. We are very aware of the laws and 
regulations that have been passed in this regard, and we have 
been moving out to implement it.
    Ms. Bordallo. Madam Secretary, we have been discussing this 
for some time. Do you have a final date on when it will be 
fully implemented?
    Ms. Barna. I don't have a final date. We do have the money 
in next year's budget to actually bring on board in P&R 
[Personnel and Readiness] the six personnel slots. And adding 
personnel slots to the Department at this particular time is a 
very difficult, challenging thing. But we do have the money and 
the personnel authorizations effective in fiscal year 2015.
    Ms. Bordallo. So you don't have an approximate timeframe 
or----
    Ms. Barna. I do not yet, I am sorry. I can go back and take 
a look at exactly where we are and provide you some additional 
information. But I don't have an exact timeframe.
    [The information referred to can be found in the Appendix 
on page 75.]
    Ms. Bordallo. Thank you. Thank you very much.
    I yield back, Mr. Chair.
    Mr. Thornberry. I appreciate the gentlelady bringing this 
up. It has been in the works for a long time.
    Mr. Bridenstine.
    Mr. Bridenstine. Thank you, Mr. Chairman.
    Mr. Kendall, I wanted to ask you about the way we go about 
purchasing satellite communications, specifically commercial 
satellite communications [COMSATCOM], which we have been 
purchasing in mass volumes for about 13 years now as things in 
the world have required us to do. We currently still buy 
COMSATCOM on the spot market, 1-year contracts, very 
inefficient, very expensive. Of course, this committee in the 
2014 NDAA [National Defense Authorization Act] required your 
office to put forth a strategy to get to multiyear procurement 
to make things more efficient. Can you share with us where you 
are on that and how things are going?
    Secretary Kendall. I tasked my Assistant Secretary for 
Acquisition, Katrina McFarland, to work with the CIO on this 
issue. And it came to my attention originally because of one of 
our business board advisory board studies. So I think we are 
very close to having a proposal. I have not been briefed to the 
final product yet. I am told they are ready to brief me. So, 
hopefully within the next few weeks, we should have a position 
on this that we can talk to you about.
    Mr. Bridenstine. One of the challenges that I have heard is 
we are purchasing COMSATCOM with OCO [Overseas Contingency 
Operations] dollars, which are year to year. So it makes it 
impossible really to do multiyear procurement when you don't 
know next year what the OCO money is going to look like.
    Secretary Kendall. That is largely to support, obviously, 
the wars in Afghanistan.
    Mr. Bridenstine. Right.
    Secretary Kendall. And I think it is an appropriate use of 
OCO to do that.
    The issue I think we have run into in part is one that came 
up earlier, which was how we score. If we cut a multiyear 
business deal, how is that scored? Which is unfortunate, 
because I think our process and our bureaucracy is getting in 
the way of us trying to do the smart thing from a business 
perspective, and we shouldn't allow that to happen.
    Mr. Bridenstine. I agree with you that this is appropriate 
for support for the wars in Iraq and Afghanistan. The question 
is we know that there is going to be a demand for commercial 
satellite communications, you know, 5 years from now, 10 years 
from now, in this region of the world. We know there is a 
baseline. Can we define that and can we count on you to come up 
with a definition of what that is?
    Secretary Kendall. That is what I am trying to get out of 
the work that has been going on. We have a certain baseline 
that we buy to. We have some organic capability, obviously. And 
then, of course, the spot market, as you mentioned, is 
expensive. So we can forecast our needs with some confidence, 
we ought to be able to acquire some capability with a better 
business deal than the ones we are currently cutting. There 
might be some much smaller but still residual need to use the 
spot market occasionally, but I would like to reduce the amount 
that we are relying on that. I think we are in agreement on the 
goal here. It is just a question of how we get there.
    Mr. Bridenstine. If we do come up with that baseline, can 
we move it out of OCO funding and move it into some kind of 
programmatic funding?
    Secretary Kendall. I don't know the answer to that. Let me 
take that one for the record.
    [The information referred to was not available at the time 
of printing.]
    Mr. Bridenstine. Okay.
    Secretary Kendall. I don't have an answer for you right 
now.
    Mr. Bridenstine. Okay. Great. I appreciate you doing that. 
Some other questions. I wanted to talk to you about some of the 
interoperability issues. As somebody who has spent a lot of 
time in these parts of the world and relied on satellite 
communications, when we purchase commercial satellite 
communications from the commercial sector and then we have 
MILSATCOM [military satellite communications] for the military 
sector, and they use different bandwidths, they use different 
waveforms, some are secure, some are insecure, encryption, 
anti-jam, all the different types of things that go into each 
system, now we have some devices that are usable with some 
satellites and other devices that are not usable with the same 
satellites. We have a real interoperability issue, which goes 
to my point, which is it seems to me we have to get to a 
place--right now we have DISA [Defense Information Systems 
Agency] purchasing COMSATCOM and we have got SMC [Space and 
Missile Systems Center] purchasing MILSATCOM. We have to get to 
a place where we have one agency responsible so that we can 
have this interoperability so we can actually maximize our 
efforts, maximize the ability of our warfighters to be 
effective. Can you address that? Is that an issue you guys have 
been looking at?
    Secretary Kendall. Yeah, we have. It is kind of a shared 
responsibility between myself and the CIO. What we have done in 
the past is gone out and tried to put every possible waveform 
onto some of our radars. The JTRS [Joint Tactical Radio System] 
program, which you are probably familiar with, was an example 
of trying to spec every single waveform on every radio. I am 
exaggerating slightly, but not too much. And we had to back 
away from that for cost reasons. So then we got to, okay, what 
do different people at different levels really need, and what 
is the best way to provide it? So I think we made progress in 
that area, but I think we also probably have a lot more work 
do.
    Mr. Bridenstine. Okay. One last question. I know I am out 
of time, Mr. Chairman, so we will just do this one for the 
record. But when it comes to hosted payloads for our 
satellites, we can leverage the commercial satellite industry 
in a major way when it comes to efficiencies, the efficiencies 
of the bus, the efficiencies of the truss structure, the 
launch, the ground support mechanisms. All these things the 
commercial satellite industry currently uses, we could leverage 
that to reduce the cost and increase the capacity for our 
warfighters in the satellite area. So if you could respond, 
your thoughts on that for the record, that would be great.
    Secretary Kendall. Very briefly, I agree with you. We do 
that to a degree now, but I think we can do it more. And as we 
need higher resilience because of threat developments in the 
space control, I think we are going to want to diversify our 
assets in space more than they are today. And that is one way 
to do that.
    Mr. Bridenstine. Roger that. Sir, I yield back.
    Mr. Thornberry. Thank you.
    Mr. Johnson.
    Mr. Johnson. Thank you.
    Mr. Kendall, a key tenet of acquisition reform should be 
the use of competition to drive down costs and increase 
customer service, which will create best value for the 
taxpayer. A heavy focus of acquisition reform should be placed 
on the way DOD buys its major weapon systems. Yet DOD's fourth 
largest acquisition program, the space launch program, is a 
sole-source program. It appears that the Air Force has 
completely ignored your directives to introduce meaningful 
competition aggressively. And it appears that the Air Force has 
deferred meaningful competition for many years in the future by 
protecting its sole-source arrangement with the incumbent 
provider of space launch services. The current sole-source 
arrangement for launch services is a cost-plus arrangement, 
which has resulted in payments to the sole-source incumbent of 
in excess of $6 billion. This means that the taxpayers pay 
ULA's operating costs plus profits for its infrastructure and 
business operating expenses. Why was this program sole-sourced 
in the beginning? What factors justify continuing it as a sole 
source? Why are we doing it on a cost-plus basis, as opposed to 
a fixed-price basis?
    Secretary Kendall. Congressman, first of all, I completely 
agree with you on competition. It is a basic tenet. And we are 
trying to have as much of it as possible, including the launch 
business. We are moving towards a more competitive environment 
as quickly as we can there. The situation with regard to ULA 
was originated several years ago. It is before my time. So I 
don't know the reasons for the specific arrangements that were 
made several years ago. I think basically the conclusion that 
was reached was that there was inadequate business to sustain 
two providers and that the more efficient thing to do was to 
merge them and have one. In hindsight, one can obviously 
question that.
    Mr. Johnson. I mean, does that factor exist currently?
    Secretary Kendall. Up to a point. Because we are reliant on 
ULA for certain launches. There is no competitor yet. And it 
will be some time before we have a competitor for some of those 
launches. SpaceX is coming along. There are other potential 
competitors coming along that need to go through the 
certification process. Our intent is to get them into 
competition as quickly as possible. We are going to be very 
soon releasing an RFP for our first competitive bids for 
launch. That is a fiscal year 2015 acquisition.
    Mr. Johnson. Now UAL does not--is not a sole-source 
provider of launch services for NASA [National Aeronautics and 
Space Administration], is it?
    Secretary Kendall. I don't honestly know the answer to that 
question. I don't believe so. I think they use others that the 
U.S. military may not be able to use.
    Mr. Johnson. So NASA uses other launch providers. What 
about in the commercial sector? We have got all of these 
commercial satellites orbiting the Earth. Are they sole-sourced 
to UAL or are there competitors that handle those launches?
    Secretary Kendall. I think it is a mix. I don't know that 
ULA does any of the launches or not, frankly.
    Mr. Johnson. What would cause the DOD to not be able to 
utilize the services of other launch providers, who appear to 
be doing a great job, just as good as UAL, in launching for 
NASA and all of the other commercial vendors?
    Secretary Kendall. There are two reasons that initially 
come to mind. One is security. Foreign providers of launch can 
be a security issue for us because many of our payloads are 
highly classified.
    Mr. Johnson. Well, now, currently, is it not a fact that we 
are using Russian rockets under the UAL sole-source agreement 
to launch DOD payloads?
    Secretary Kendall. Yes. A Russian rocket engine is 
integrated into our Atlas launch vehicles. But basically, they 
provide us with that product and then we integrate it. And the 
Russians have no access to our payloads whatsoever. The other 
consideration I wanted to mention was mission assurance. We 
have had 70 successful launches, roughly, with ULA. And getting 
these multibillion dollar payloads successfully into orbit 
instead of into the ocean is a very important consideration for 
us. So those are the two things that impact on our decision.
    Mr. Johnson. And the cost-plus contract as opposed to the 
fixed-price.
    Secretary Kendall. The cost-plus for the services piece of 
it is because of the difficulty in predicting those costs 
because of changes to the manifest and so on.
    Mr. Johnson. I yield back.
    Mr. Thornberry. Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman.
    Mr. Kendall, I wanted to follow up on the subject area that 
Mr. Bridenstine visited with you a few minutes ago, and that is 
this commercial satellite opportunities. As you are aware, I 
chair the Strategic Forces Subcommittee, and one of my concerns 
has been the inadequate number of satellite resources that we 
have. And I have had the chance to visit with the acquisition 
folks from the Navy, the Air Force, and the Army, and it always 
comes down to a scoring issue. Everybody recognizes, as you 
said a little while ago, it is good business to figure out a 
way to do these multiyear leases, and to do, as Mr. Bridenstine 
suggested, and that is that we piggyback on some of these 
commercial satellites for narrow opportunities or needs that we 
have. I do know, in March of 2013, you all announced a 90-day 
study on acquisition that might have addressed this. Do you 
know what came of that?
    Secretary Kendall. I am sorry, sir. Which study was that?
    Mr. Rogers. It was a 90-day study to address the 
acquisition of commercial satellites in March of 2013. And I 
didn't----
    Secretary Kendall. That is the study I think that I asked 
Ms. McFarland and Teri Takai to conduct, which I mentioned 
earlier is I believe finished at this point essentially, and 
just hasn't been briefed to me yet.
    Mr. Rogers. Okay. Good. Well, what I would like to know is, 
aside from that study, you know, who is in charge of trying to 
address this? I think you recognized the need here, and that 
there is a smarter way to deal with it. And I ask this for this 
reason: You know, we have already done this in military housing 
very successfully. But it took statutory involvement. So I 
guess my question is, are you to the point to where you 
recognize that it needs to be done and whether or not we need 
to address CBO scoring statutorily, or what?
    Secretary Kendall. Great question. Let me take it for the 
record. I don't have the answer for you yet. But I do think 
there is a better way to do business. And we need to see what 
the obstacles are to doing that and see what we can do to 
remove them. So let me get back to you on that one for the 
record.
    [The information referred to was not available at the time 
of printing.]
    Mr. Rogers. Who is in charge of this kind of thing? Is it 
General Polakowski? Is it you? Who is in charge of kind of----
    Secretary Kendall. Shared responsibility between the CIO, 
right now Terry Halvorsen, and myself. We have worked it 
jointly.
    Mr. Rogers. Great. I appreciate that. I know it is very 
complex, but it is also very important that we start dealing 
with this. And the commercial side is getting really frustrated 
with us. And one of the concerns I am seeing from them is they 
are recognizing their real growth and opportunity is in the 
private sector. They are moving away from a focus on the 
Defense Department. We need that partnership. You and I both 
know that we can't do what we do in any realm of the defense 
infrastructure without the private sector's involvement in a 
robust way.
    Last question. You know I have been frustrated with the 
NNSA [National Nuclear Security Administration]. And we have 
this committee that is working on NNSA reform. Can you shed 
some light on what you think we should do with NNSA, since you 
give them billions of dollars a year?
    Secretary Kendall. That is a tough question. We work 
closely with NNSA, have a good cooperative relationship. I 
chair the Nuclear Weapons Council, which met yesterday 
actually, with the director of the NNSA and all the relevant 
DOD people involved. We oversee the nuclear weapons 
modernization program, the LEP [life extension] programs 
primarily. And we try to correlate them so that they are 
aligned with our platform programs. The problem we have had 
over the last few years has been that because of budget cuts 
largely, it has been sort of a moving target, and it has been 
hard to stabilize that program so we could execute it 
effectively. We have also been transferring resources from DOD, 
which started with Secretary Gates several years ago, to NNSA 
to kind of make up some of their budget shortfalls, which 
because of the way it happens is late in the budgeting process 
within the administration is very disruptive of our plans.
    We need a better way to do business. I know that the 
Augustine--Myers--Myers committee is working on that. I met 
with them recently to discuss where they are. And I think they 
are going to be coming forward with some findings soon. I hope 
they come up with something that rationalizes the way we do 
business here, because in my view the current situation is just 
not workable.
    Mr. Rogers. Yeah. I agree. Fortunately, we have a good guy 
that has taken on leadership there, and I have a lot of 
confidence in him.
    But thank you for your presence, and know I am very serious 
about the public-private partnership on satellites and other 
things, and I look forward to hearing back from you on that.
    Thank you, Mr. Chairman, I yield back.
    Mr. Thornberry. Thank you.
    I have to say, Mr. Kendall, you have an amazing array of 
issues on your plate. Mr. Peters.
    Mr. Peters. Thank you, Mr. Chairman.
    And thank you for holding the hearing today. And I just 
wanted to thank the witnesses for being here, and to 
acknowledge that we are in an interesting time for procurement 
with such innovation going on. And it strikes me that the 
foundational law, if I am not mistaken, is from 1990, which 
when I was in a law firm, we were arguing about whether we 
should put personal computers on each desk. So things have 
changed quite a bit, because you now have a personal computer 
in most pockets. And what struck me, too, is in visiting, I 
visited 50 or 60 companies in my district in my first term here 
in Congress, many of them are inventing military technologies, 
communicating from areas where--in two areas where you didn't 
think you could communicate.
    Cybersecurity and unmanned systems are really big in San 
Diego. And the problem you find across--you often come across 
is that the military doesn't even know that this invention that 
they could use exists. So it is not going to be in the 
requirements contracts. And so the challenge I think is--I 
think satellites is one obvious answer. We have dealt with that 
somewhat, a little bit in the NDAA this year. Again, a company 
in my district had the same issue. The challenge is to take 
advantage of what the private sector is doing and the 
innovations that it is creating, and to empower a culture 
within the Department of Defense where people are willing to 
make the changes that are out there.
    And what I will say from my perspective is we would like to 
support a culture and a management where the right kind of 
mistakes are encouraged. And you won't have me ever dragging 
someone in front of a hearing if they have made an honest 
mistake. I think what we should do in Congress is support that 
kind of appropriate risk taking and innovation within the 
Department that will ultimately match the great innovation that 
is happening out in the country and often in my own district.
    Thank you for being here. I look forward to working with 
you on these procurement reforms and hope we can have a 
productive partnership.
    Thank you, Mr. Chairman. I yield back.
    Secretary Kendall. If I may, Mr. Chairman.
    I couldn't agree with you more. And as I look forward over 
the next few years, the next iteration of Better Buying Power 
is going to be innovation and the movement of technology to the 
warfighter. We have been focusing for the last few years on 
business practices, on efficiency and productivity in general, 
and getting better business deals, and executing them 
effectively. I want us to turn toward focusing more on what we 
are providing for the warfighter and how we are getting 
technology into the warfighter's hands. The last time I 
testified before this committee, I talked about my concerns for 
technological superiority. We need to move faster. It has come 
up a few times today. We also need to access technologies that 
we are not accessing today. So the next iteration of Better 
Buying Power, which I am starting to work on now, will be 
focused on and emphasizing that. So I am very in line with your 
thinking about that. Thank you.
    Mr. Thornberry. Let me go back over a few of the things we 
have talked about. But I want to start with Mr. Peters' point, 
because I think it is really important.
    And I am struck, we have had so many conversations about 
satellites and other sorts of technology, that just emphasizes 
basically where we started today, and that is we have to have 
top-quality people trained and experienced to even understand 
the commercial business and the vast pace of change in order to 
make these decisions. And I think that a lot of what we talk 
about comes down to that judgment call. Sometimes it is not 
going to go well. But if you are learning something, you know, 
then maybe that is okay. If you are just trying to minimize the 
risk, then that is kind of where I think so much of the system 
is these days, at least as far as I hear. And I don't know if 
this is an analogous situation or not. I want to go back for a 
second to the Bell issue that Ms. Speier raised. I hadn't heard 
about it before I came in here. But as I read the report, what 
they find is that the contracting officer automatically paid 
what DOD had previously paid for the spare part, and did not do 
the market analysis for how we might get it for a better deal.
    Mr. Kendall, is that your understanding of the bottom line 
of that?
    Secretary Kendall. I have just seen the 1-page summary, but 
that is my understanding of what happened in this instance. As 
a very busy purchasing person is trying to go through things 
and focus his or her attention on all the different parts that 
they are trying to buy, one way to sort through them is to say, 
is there an already well-established price that I think I can 
rely on because somebody in the past determined that was a good 
price? We have to at least sample those to make sure that we 
are not consistently making mistakes there. But the new item, 
such as the one that came up later in the testimony, is the one 
where you want to focus your attention more because you didn't 
have an established price. So when you have--I am not making 
excuses for anything here, by the way.
    Mr. Thornberry. I just want to flesh this out a little bit.
    Secretary Kendall. And to your point about people making 
honest mistakes, I don't know what happened here, I am not 
going to comment on the specific case. But if someone is doing 
their best, working extra hours, overtime, trying to get the 
things that the warfighter needs and makes that kind of a 
mistake, that is understandable. But if the company is trying 
to consistently overcharge us for something, that is not 
acceptable.
    Mr. Thornberry. Absolutely.
    Secretary Kendall. We have to get at that.
    Mr. Thornberry. I think everybody is in complete agreement. 
I guess the point I am making is that we will be buying more 
and more commercial things. And so we need government folks who 
are familiar with not only the technology but the contracting 
practices, how all that works.
    Secretary Kendall. Yeah. What we have established is a body 
of--many times the purchasing people don't have the technical 
expertise to assess whether they can look at the product, they 
can look at the price, and if it is a $10 hammer, that is 
probably reasonable; if it is a $600 hammer, red flags should 
go up all over the place. But some things it is a lot harder 
than that to make an assessment. You have exotic materials 
potentially, you have an unusual design that is difficult to 
manufacture. We have put together teams of technical experts 
that our purchasing people can call on now when they have a 
question, if something raises a flag in their minds about is 
this really reasonable or not, do I have enough data, so they 
can get a better technical assessment about what that product 
should cost to get a determination as to whether it is 
reasonable or not. That can expedite the process, but it also 
gives them somebody to go to who has the right kind of relevant 
expertise to assess that object.
    Mr. Thornberry. And Ms. Barna, just on that topic, 
technical expertise, do you all keep any sort of statistics on 
the people who are hired into the acquisition force and what 
sort of certifications, background, experience they have with 
information technology, for example?
    Ms. Barna. Sir, we don't maintain specific statistics in 
the personnel realm. That may be maintained in the acquisition 
realm with regard to certification of each individual that 
comes onboard.
    Mr. Thornberry. And just so I can understand, so a hiring 
decision is made by somebody to fill a vacancy----
    Ms. Barna. Yes, sir.
    Mr. Thornberry [continuing]. In the acquisition. They have 
got to then come to you to process it through the normal way. 
And I want to get to expedited way in just a second. And so 
your job basically is to go through that normal civil service 
process for a civilian that is--that somebody in either Mr. 
Kendall's shop or one of the services wants to hire to do 
acquisitions.
    Ms. Barna. We make the policy, sir, in P&R. Acquisition has 
servicing, human resources, personnel experts who actually 
would engage in that hiring process. And, of course, that 
process would rely extensively on what is called the crediting 
plan, which is created by the acquisition, the technological 
specialists who know particularly the capability that they are 
looking for from the person they are seeking to fill a 
particular position.
    Mr. Thornberry. Okay. And I realize this will be hard, but 
you all don't really keep statistics on qualifications, 
experience, attributes of people who are brought into the 
system.
    Ms. Barna. Not specifically to----
    Mr. Thornberry. Along that line.
    Ms. Barna. Yes, sir.
    Secretary Kendall. Congressman Thornberry, we are doing 
that for good managers and people who take some of the key 
acquisition positions. I have been looking carefully at that, 
trying to understand whether we are getting the right kind of 
skill sets or not, and how that correlates to results in the 
field. But the hiring process in general is somewhat 
decentralized. I mean people--the immediate supervisor might 
make a selection with or without the support of a board. And 
then it goes to that person's supervisor, I believe, and then 
to the human resources organization for whatever organization 
that is for final check. I think that is the general process we 
follow for hiring at whatever organization is doing the hiring.
    Mr. Thornberry. Let me pursue that for just a second, 
because Ms. Barna, in your testimony, you talk about the hiring 
flexibilities available Department-wide, including expedited 
hiring authority.
    Ms. Barna. Yes, sir.
    Mr. Thornberry. So Mr. Kendall, how often does that help 
you all?
    Secretary Kendall. There are a number of tools that we can 
use. We can use expedited hiring authority for certain 
specialties. I think that there is a statutory provision now 
that gives us some flexibility for scientists and engineers, 
which we are still implementing. We have cases like individual 
program augmentees that we can bring in from industry on a 
temporary basis, highly qualified experts we can bring in. So 
there are a number of tools like that we use as well.
    Ms. Barna. Sir, our statistics show that the acquisition 
corps is using the expedited hiring authority almost 40 percent 
of the time.
    Mr. Thornberry. Okay. Thank you. That is interesting. And 
the other thing you mentioned in your testimony is the 
Acquisition Demonstration project. And you say that you just 
submitted to OPM [Office of Personnel Management] a Federal 
Register notice. Can you explain if they approve that, what 
then will that allow?
    Ms. Barna. That will essentially streamline the process of 
allowing new organizations to join the AcqDemo project as we 
call it. Previously, an individual organization that believed 
that AcqDemo could benefit, the way it was structured and 
operated, had to go through the process with human resources 
assistance of putting together their own Federal Register 
notice that would describe how they were going to compensate 
workers, how they were going to organize their particular pay 
structure, their particular grading structure. That was all 
done by the independent organization and then submitted 
separately to the Federal Register. What we hope to do with 
this common notice is streamline that process with a view to 
allowing organizations to join the AcqDemo project more easily. 
We have taken that tranche of work and done it for them. And as 
long as they are willing to comply with some rather flexible 
but general terms, they can move into the AcqDemo project 
without further delay. And we have identified that under the 
use of this Federal Register notice, we see almost an 
additional 40,000 employees, as many as 39 new organizations 
that will be able to join very quickly.
    Mr. Thornberry. Mr. Kendall, is this demonstration project, 
do you have an opinion on its value at this point? Is that 
something we need to look to expand or----
    Secretary Kendall. All the inputs I have on AcqDemo are 
positive. It is a system that people I think feel very 
positively about. And we have had a few years of experience 
with it right now. So, even though it is sort of on a pilot 
basis, I think we are far enough along to know that it is a 
solution that we are very comfortable with.
    Mr. Thornberry. Ms. Barna, you heard maybe a few minutes 
ago some conversation about tenure in a particular position, 
particularly a program manager and how long he or she stays in 
the job through the course of a program. If you are a civilian, 
under the civil service rules, is there any problem in leaving 
somebody in a program manager position 5 years, 7 years, to 
maintain some continuity of management?
    Ms. Barna. Certainly, sir, from a personnel perspective 
there is not. There is a requirement under the law that at 
least every 5 years there is an evaluation taken, particularly 
of individuals in critical acquisition positions, as to whether 
or not their continued presence in that position is in the best 
interest of the government and the individual. Of course, that 
gives management the opportunity to assess whether it is good 
to continue or whether perhaps another option is better.
    But from the civilian perspective, there is nothing on the 
personnel side. I would defer to Mr. Kendall as to whether 
there is something on the operational side that might weigh in 
favor of either answer.
    Secretary Kendall. In practice, what we find is a couple 
things. One is that civilians who become program managers and 
do it for a period of years and then are ready to move on to 
some other responsibilities, it is often hard to find that next 
position for them. They have groomed themselves to become a 
sensitive program executive officer, but those are all 
essentially military slots, and there are deputies often that 
these people can move into. So a career progression that takes 
someone and has become a program manager.
    Now, I think, frankly, that for an ACAT I [Acquisition 
Category], multibillion dollar program, becoming the program 
manager and staying in it until you retire isn't a bad thing. 
If you are really good at it, that is what I want those people 
do, because I need really good program managers. That is one 
issue.
    The other issue that we encounter in practice is with 
senior executives and civil servants in general who are 
reluctant to move geographically. Our military people, it is 
part of their culture, they move routinely, it is what they do. 
But getting civil servants to move to take a position in 
another location can be a difficulty for us that gets in the 
way of putting talent where we really need it in some cases.
    Mr. Thornberry. But, Ms. Barna, I suspect that it is a very 
different situation with military program managers. Do you all 
monitor career progression for folks who do acquisition work 
and then how their career progresses after that?
    Ms. Barna. Sir, we absolutely do, and we are very 
interested in that. Of course the law requires that they be 
essentially promoted at the same rate as other officers of the 
line, if you will. And our statistics show that, as to the 
grades of lieutenant colonel and colonel, in all of the 
services, with relative consistency over the last 5 years, 
acquisition officers have been promoted at or above the 
averages for their compatriots in other professions.
    Mr. Thornberry. And then the question is, if it is deemed 
advisable to leave a military person in that position for a 
longer period of time than is the normal military rotation, 
what effect would that have on their promotion ability? I think 
it is important to know what is happening now, but as we kind 
of think about the other options, that is something that we 
will certainly want to stay on top of.
    Mr. Kendall, let me just finish up just with a couple 
thoughts that came to mind during the conversation. One is, 
going back actually to something the chairman said at the 
beginning, we pass a law with the best of intentions, and then 
sometimes there is no telling what is going to happen with it.
    So, for example, corrosion is a big deal for a lot of the 
systems. But as I understand it, you can correct me if you know 
differently, we passed some requirement on corrosion, the 
Department's regulations make it apply to everything, including 
software. So now if you are going to go buy software, you have 
got to fill out some piece of paper that it is not going to 
rust.
    Secretary Kendall. I actually am familiar with that. 
Because of a statute, I believe that the person in my office 
who is responsible for corrosion is a direct report to me. I 
have aligned that person and his staff with my system 
engineering office as part of specialty engineering, because 
that is where it really belongs. But I do get monthly reports 
from him.
    And what you said I think may actually be true, that 
because of the way we have implemented this, it is laughable 
that software would have a corrosion requirement. I think I saw 
it, and it may have been in a business system came through. We 
do try to temper our practices with some degree of common 
sense, but occasionally that kind of thing gets by us, I am 
afraid.
    Mr. Thornberry. Well, it is kind of an extreme example of 
things that surely between the two bodies we can figure out to 
put some common sense into it.
    The other thing, this has stuck in my mind, somebody told 
me that a program manager is a lot like a bus driver, except 
every passenger on the bus has a brake and a steering wheel. 
And so the whole focus that we have talked about today is 
getting and keeping top-quality people in these key acquisition 
jobs. But then the next step is they have to have the authority 
to do the job. And if they don't, that obviously makes it very 
difficult to get and keep top-quality people. I mean, it is 
interrelated.
    There is not an easy answer for that. But it does strike me 
as a kind of a vivid metaphor for lots of people can stop it or 
change it, but there is not very many people who are 
responsible for making it happen at the end of the day.
    Secretary Kendall. I agree with you. And I have tried to 
get my staff out of the program management business. And one of 
the Better Buying Power initiatives is to emphasize the chain 
of command, particularly the program manager. I think within 
the services there are some issues as well where a lot of 
people who have interest in the product want to affect how 
events unfold. But we need to have our program managers 
empowered and capable and held accountable. I think we are 
moving more in that direction.
    If I could pick up very briefly on something that came up 
earlier. The promotion rate for acquisition people is 
consistent with the promotion rate for nonacquisition people, 
but that promotion rate is very low, particularly when you go 
from, say, the O-6, the colonel or Navy captain level to one-
star. And I have seen some of our most capable people basically 
forced to retire just at the peak of their performance.
    And I would like to work with you to find some way to keep 
those people around if they want to stick around and help the 
government, because that is an enormous amount of talent going 
out the door. There are a variety of ways we could do this. I 
could talk to you about it separately. But I think it is an 
area in which we could do some good.
    Mr. Thornberry. Good. Well, we need to because of what you 
said before. We have this demographic problem. Lots of people 
are about to retire, and there is a big hole in the middle. And 
so that is even more reason to keep on top-quality people. So 
we will definitely do that.
    You all have been generous with your time. We are past when 
we told you we would let you go. Thank you. It has been very 
helpful. And we look forward to continuing to work together.
    With that, the hearing is adjourned.
    [Whereupon, at 12:09 p.m., the committee was adjourned.]
?

      
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                            A P P E N D I X

                             July 10, 2014

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              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                             July 10, 2014

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  [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
      
  
      
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              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                             July 10, 2014

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

      
            RESPONSE TO QUESTION SUBMITTED BY MR. THORNBERRY

    Ms. Barna. In the last 10 years, there have been more than 230,000 
DOD acquisition workforce employees. During this period, more than 
9,100 student loan repayments were granted to more than 5,000 of these 
employees. By our calculation, approximately 2.2% of all acquisition 
employees benefitted from student loan repayments during the last 10 
years.   [See page 14.]
                                 ______
                                 
             RESPONSE TO QUESTION SUBMITTED BY MS. BORDALLO
    Ms. Barna. The Department's processes for the Inventory of 
Contracted Services (ICS), and subsequent reviews thereof, have shown 
marked improvement since the inception of the requirement in 2008. The 
Department is committed to continued improvement going forward. 
Although instantiations of the Enterprise-wide Contractor Manpower 
Reporting Application (ECMRA) are currently available for use by all 
DOD components, the Department cannot yet advise of the date certain on 
which an office dedicated to ECMRA enhancement will be established. The 
exact information technology requirements associated with this 
capability, the operational and administrative alignment of personnel, 
as well as the specific roles and responsibilities to be undertaken are 
undergoing thorough assessment.   [See page 30.]
?

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


              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                             July 10, 2014

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

      
                   QUESTIONS SUBMITTED BY MR. MCKEON

    Mr. McKeon. With all the oversight mechanisms in place, why does 
the system continue to routinely deliver weapon systems over cost and 
behind schedule? What steps should the Congress, the DOD and industry 
take to improve the DOD acquisition system?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. McKeon. Why do decisionmakers accept cost estimates for weapon 
systems that are inaccurate and do not reflect the actual risks in the 
program?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. McKeon. Historically, the Congress has focused on the R&D and 
production associated with major defense acquisition programs or other 
special interest programs related to national security. Sustainment, 
however, usually accounts for approximately 70 percent of the system's 
total lifecycle cost, yet it typically receives little attention. Are 
the long-term sustainment costs adequately assessed during the 
development and procurement processes? How is this information factored 
into determining the feasibility and appropriateness of initiating a 
new acquisition program?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. McKeon. This committee has long advocated for competition in 
defense acquisitions and we've passed many laws requiring it. Is the 
defense industrial base healthy enough to support competition and if 
not, what can be done to improve it?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. McKeon. How does the 2-year budget cycle effect DOD 
acquisitions and planning? What suggestions do you have for how to 
mitigate some of the challenges of major technology development, 
production, and fielding with the current 2-year budget process?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. McKeon. Previous acquisition reform efforts have put heavy 
focus on reforming the way we buy major weapon systems. What are your 
views on the way we contract for services? Is this an area we should 
consider as we look to try to improve the way the DOD does business?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. McKeon. Do you have any suggested improvements to the 
requirements generation and validation process?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. McKeon. What are the biggest challenges the Department faces in 
improving the professionalism of the acquisition workforce; in 
particular those supporting the acquisition of major weapon systems? 
[QFR #14, for cross-reference.]
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. McKeon. Have there been signs of improvement with the program 
management of major defense acquisition programs? If so, what are the 
most prevalent signs or indicators? If not, why not and what additional 
steps should be taken? [QFR #15, for cross-reference.]
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. McKeon. What steps is the Department taking to better align 
program manager tenure with DOD policy that indicates the tenure should 
be 4 years or through the completion of a development phase for major 
defense programs? [QFR #16, for cross-reference.]
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. McKeon. What are the biggest challenges to aligning program 
manager tenure to the completion of the development phase? [QFR #17, 
for cross-reference.]
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. McKeon. What steps could the Department and military services 
take to help deconflict the requirements for the career track for 
military officers in the acquisition field and their tenure on 
programs? [QFR #18, for cross-reference.]
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. McKeon. What other steps or actions can be done to help keep 
officials in these position for longer periods of times? [QFR #19, for 
cross-reference.]
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. McKeon. What are the biggest challenges the Department faces in 
improving the professionalism of the acquisition workforce; in 
particular those supporting the acquisition of major weapon systems?
    Ms. Barna. This issue does not fall under P&R's purview. We believe 
AT&L is best suited to answer this question and we defer to their 
answer as stated in QFR #14.
    Mr. McKeon. Have there been signs of improvement with the program 
management of major defense acquisition programs? If so, what are the 
most prevalent signs or indicators? If not, why not and what additional 
steps should be taken?
    Ms. Barna. This issue does not fall under P&R's purview. We believe 
AT&L is best suited to answer this question and we defer to their 
answer as stated in QFR #15.
    Mr. McKeon. What steps is the Department taking to better align 
program manager tenure with DOD policy that indicates the tenure should 
be 4 years or through the completion of a development phase for major 
defense programs?
    Ms. Barna. This issue does not fall under P&R's purview. We believe 
AT&L is best suited to answer this question and we defer to their 
answer as stated in QFR #16.
    Mr. McKeon. What are the biggest challenges to aligning program 
manager tenure to the completion of the development phase?
    Ms. Barna. This issue does not fall under P&R's purview. We believe 
AT&L is best suited to answer this question and we defer to their 
answer as stated in QFR #17.
    Mr. McKeon. What steps could the Department and military services 
take to help deconflict the requirements for the career track for 
military officers in the acquisition field and their tenure on 
programs?
    Ms. Barna. This issue does not fall under P&R's purview. We believe 
AT&L is best suited to answer this question and we defer to their 
answer as stated in QFR #18.
    Mr. McKeon. What other steps or actions can be done to help keep 
officials in these position for longer periods of times?
    Ms. Barna. This issue does not fall under P&R's purview. We believe 
AT&L is best suited to answer this question and we defer to their 
answer as stated in QFR #19.
                                 ______
                                 
                 QUESTIONS SUBMITTED BY MR. THORNBERRY
    Mr. Thornberry. What challenges does the Department face in 
establishing a joint analysis capability to better protect and assess 
loss of controlled unclassified technical information from compromise 
by a determined adversary?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Thornberry. What special authorities are provided to the 
development of the acquisition workforce (hiring, education, retention 
bonuses, etc.)?
    Ms. Barna. In addition to hiring flexibilities available 
Department-wide, the acquisition community has an Expedited Hiring 
Authority (EHA) that allows the Secretary of Defense to recruit and 
appoint qualified persons directly to certain career field positions 
for which there exists a shortage of candidates or for which there is a 
critical need. Use of the authority requires public notice and 
application of veterans' preference, whenever practicable. This 
authority is slated to expire on September 30, 2017.
    The DOD Civilian Acquisition Workforce Personnel Demonstration 
Project (AcqDemo) is an Office of Personnel Management Demonstration 
Project unique to the DOD civilian acquisition workforce, and was 
designed to provide an encouraging environment that both promotes 
employee growth and development, and improves management's ability and 
authority to manage the acquisition workforce effectively. To 
facilitate this environment, AcqDemo managers have been provided 
personnel management flexibilities in hiring and pay setting that allow 
their organizations competitively to seek and attract to Federal 
service highly qualified and talented candidates available within the 
marketplace. Key features of the AcqDemo project include streamlined 
hiring processes, pay bands, a simplified classification system, and a 
contribution-based compensation and appraisal system; these features 
both contribute to workforce development and contribute to the 
retention of talented employees with appropriate pay. In addition, the 
project offers delegated examining authority and modified term 
appointments, which provide organizations greater control over the 
hiring process. AcqDemo employees also have the ability to participate 
in sabbaticals, which offer additional training, education, and 
experience.
    As of January 29, 2014, there were approximately 16,254 employees 
in the DOD AcqDemo project. The Department recently submitted an 
omnibus Federal Register Notice (FRN) amendment to OPM which recommends 
establishment of the parameters for any interested and eligible DOD 
civilian acquisition organization to request approval to participate in 
the project. Once the FRN is published by OPM, populations meeting the 
requisite acquisition workforce criteria may request participation in 
the AcqDemo Project. At the present time, it is anticipated that ten 
additional organizations, representing approximately 9,355 employees, 
will meet eligibility criteria, and will be able to join AcqDemo once 
the FRN is published, raising the total population to more than 46,000 
participants. The AcqDemo Project will continue seeking and promoting 
increased participation to the greatest extent practical.
    Despite extraordinary budget pressures, the Department continues to 
conduct three enterprise-wide development programs, which offer 
development opportunities for entry-, mid-, and senior-level personnel. 
Specifically, acquisition is one of three functional communities 
represented in the Defense Civilian Emerging Leader Program (DCELP); 
DCELP has graduated more than 140 future leaders from the acquisition 
community, and anticipate that an additional 70 will graduate in 2014.
    Like the rest of the Department, the acquisition community 
continues to use student loan repayment incentives, as well as 
recruitment, relocation, and retention (3R) incentives, as needed, to 
attract and retain a high quality workforce.
    Mr. Thornberry. Private industry has tools they can use to hire the 
best talent available and then reward that talent with performance-
based incentives. You mentioned that the defense acquisition system has 
a plethora of tools to encourage or reward good performance, and you 
cited student loan repayments, relocation bonuses, and retention 
bonuses. You also mentioned intangible benefits such as working with 
like-minded people on an important mission, contributing to national 
security, and doing unique and interesting work in unique and 
interesting places. How do these benefits compare to industry 
compensation packages, especially regarding student loan repayments, 
relocation bonuses, and retention bonuses? Are the intangible benefits 
unique to government service, or can industry offer the same intangible 
benefits? Are there other tools you would use, if available, to lure 
and reward high-performing professionals into the acquisition 
workforce?
    Ms. Barna. Student loan repayments, as well as recruitment, 
relocation and retention incentives are tools used to attract and 
retain mission critical talent for the Department. These incentives are 
used only in cases of critical need and management carefully considers 
the individual circumstances of each situation in deciding whether to 
offer such incentives to an individual employee. Of greater importance 
to the Department's ability to attract and reward its workforce is the 
strength of our total rewards programs, including a generous benefits 
package, work-life benefits, the opportunity to pursue personal and 
professional development, ample career opportunities, and a broad 
spectrum of award and recognition programs.
    Although most employers can cite to some set of intangible rewards 
associated with joining their workforces, the Department of Defense is 
truly unique in this regard. Because of its critical mission and the 
often unique aspects of the work to be performed, the Department 
attracts professionals from a broad spectrum of backgrounds, with a 
diversity of experiences and expertise. The Department of Defense 
offers prospective employees an exceptional opportunity to work 
alongside other highly talented professionals in a challenging, 
mission-oriented environment. The Department's combination of monetary 
and intangible rewards, available in the context of the unique 
employment experience it provides and the intrinsic rewards it offers, 
enables it to remain competitive and effective in attracting high-
performing acquisition professionals.
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MS. TSONGAS
    Ms. Tsongas. The ability to rapidly assess needs and field new 
technologies is critical for IT and cyber. Many program managers and 
area experts discuss the need for ``flexibility'' beyond a traditional 
multi-year, sometimes multi-decade, weapon systems acquisition. 
However, when you start drilling down on what ``flexibility'' really 
means, there is not a lot of clarity. Can you describe what flexibility 
in Cyber/IT acquisition means to you and what it looks like? In order 
to do these things, what types of authorities does the DOD need from 
Congress to realize that type of flexibility?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Ms. Tsongas. I am constantly told that DOD needs to provide the 
right incentives for acquisitions personnel, just as you mentioned in 
your opening statement. Unfortunately this has been a common theme for 
many years. Nearly all of the major comprehensive DOD Acquisition 
reviews throughout the years have stated the exact same thing; DOD does 
not provide the right incentives to its acquisition workforce. What 
incentives can Congress or the Defense Department put in place that 
would strengthen the DOD's acquisition system?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Ms. Tsongas. Congress funds most acquisition programs one year at a 
time; however, DOD acquisition is planned for several years out and 
contracts often last for much more than a year. Thus, there are 
situations where we in Congress make decisions that completely disrupt 
the funding profile of a particular program, causing uncertainty for 
the program managers and the contractors. How much does this funding 
uncertainty affect the ability of Program Managers to effectively do 
their jobs? Would you suggest a different method for funding 
acquisition programs, such as multi-year appropriations for major 
programs?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Ms. Tsongas. I am constantly told that DOD needs to provide the 
right incentives for acquisitions personnel, just as you mentioned in 
your opening statement. Unfortunately this has been a common theme for 
many years. Nearly all of the major comprehensive DOD Acquisition 
reviews throughout the years have stated the exact same thing; DOD does 
not provide the right incentives to its acquisition workforce. What 
incentives can Congress or the Defense Department put in place that 
would strengthen the DOD's acquisition system?
    Ms. Barna. The Department has a number of hiring flexibilities and 
incentives in place to assist it in competing for top talent in the 
current job market. However, we are continuously reviewing our 
authorities and programs to ensure that we have the right workforce 
planning and development strategies, and the authorities and 
flexibilities needed to recruit a highly qualified workforce.
    In addition to the hiring flexibilities available Department-wide, 
the acquisition community has an Expedited Hiring Authority for certain 
acquisition positions. This authority allows the Secretary of Defense 
to designate categories of acquisition career fields, in which a 
shortage of candidates exists or for which there is a critical need, 
and to streamline the hiring process for positions in those fields, 
subject to public notice and the principles of veteran's preference. 
The Department may also use recruitment, relocation, and retention 
incentives, as needed, to attract, manage, and retain the civilian 
workforce.
    The Acquisition Demonstration (AcqDemo) Project, which currently 
covers more than 16,000 employees throughout the Department, features 
other simplified hiring, examining, and appointment flexibilities that 
provide participating organizations greater control over the hiring 
process. Under the AcqDemo Project, pay-banding, a simplified 
classification system, and a Contribution-based Compensation and 
Appraisal system also offer greater capability and flexibility, as 
necessary, to select, retain, develop, recognize, and reward employees 
for successful contributions to the acquisition mission.
    The Department greatly appreciates Congress's support in making 
such flexibilities available in support of the acquisition workforce.
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. SHUSTER
    Mr. Shuster. Given the cost of bureaucratic requirements and 
regulations associated with the Department of Defense acquisition 
process, small or emerging businesses in the defense industry struggle 
to compete with the larger corporations who already benefit from the 
established acquisition resources. Does the Department of Defense have 
any current initiatives or policies aimed at reducing the barriers that 
these small or emerging businesses face when competing for a defense 
contract?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Shuster. We've heard multiple times that the ``upfront cost of 
competition'' can, at times, be the reason new competition does not 
surface. When considering the upfront cost of competition does the 
Department of Defense also consider the long-term benefits of 
competition and the incentives to keep costs down? If so, what are the 
determining factors to perform this cost-benefit analysis?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MS. SPEIER
    Ms. Speier. The Department told Congress and the GAO in May that 
using the Enterprise-wide Contractor Manpower Reporting Application 
will improve its inventory and workforce management decisions. Is DOD 
``there yet'' with the promised improvements for services contracts and 
workforce shaping, with a central oversight capability for this 
undertaking? By what date certain are you personally committed to 
having fully funded and in operation a dedicated office resourced to 
develop and implement a common system and associated business processes 
for contract services management, specifically modeled after the Army's 
system?
    Ms. Barna. The Department is steadfastly committed to improving 
visibility into, and accounting for, contracted services across the 
Department. This includes compliance with the information collection 
and review requirements associated with the statutorily-required 
Inventory of Contracted Services (ICS). The Department's processes for 
the ICS, and subsequent reviews thereof, have shown marked improvement 
since the inception of the requirement in 2008. The Department is 
committed to further improvement going forward. Although instantiations 
of the Enterprise-wide Contractor Manpower Reporting Application 
(ECMRA) is currently available for use by all DOD components, the 
Department cannot yet advise of the date certain on which an office 
dedicated to ECMRA enhancement will be established. The exact 
information technology requirements associated with this capability, 
the operational and administrative alignment of personnel, as well as 
the specific roles and responsibilities to be undertaken are undergoing 
thorough assessment, to ensure prudent expenditure of taxpayer dollars 
while providing necessary oversight with respect to the ICS.
    Ms. Speier. In May, GAO also reported that DOD would be collecting 
information on the level of individual organization's use of the 
Reporting Application to compile its inventory for FY2013 which was 
just sent to the Hill. In line with prior commitments to Congress and 
the GAO--do you know what that level of reporting is?
    Ms. Barna. The Department's recently submitted FY13 Inventory of 
Contracted Services (ICS) was retrospective and reported on contracts 
executed/performed during FY13. All DOD Components reported data on 
contracted services as part of this submission. However, Departmental 
guidance to Components that directed the inclusion of the reporting 
requirements in performance work statements and statements of work for 
contractors to use the Enterprise-wide Contractor Manpower Reporting 
Application (ECMRA) to capture direct labor hours and associated costs, 
was signed in November 2012, after FY13 began. Because the guidance for 
inclusion of these contract reporting requirements was directed to be 
on a bilateral and prospective basis, many of the Department's 
contracts were not subjected to the ECMRA reporting requirement during 
FY13. In compiling their respective FY13 ICS submissions, approximately 
half of the Components relied, in part and to varying degrees, on data 
collected directly from contractors via ECMRA in reporting contracted 
services. For those Components that did not rely on data collected from 
ECMRA for the FY13 ICS, it does not mean that they did not submit 
inventory data nor do it mean that ECMRA was not being utilized.
    Ms. Speier. Last year's NDAA lauded the Army taking the lead in 
developing a Standardized Services Contract Approval Form process for 
determining whether to issue a new service contract or exercise a new 
option and directed the Department to model similar processes based on 
what the Army developed. What progress has been made to create a 
contracting checklist and when do you expect it to be used? By what 
date certain are you personally committed to having the Army's contract 
approval checklist adopted and fully implemented Department-wide?
    Ms. Barna. The Department is in the process of reviewing, 
streamlining, and standardizing a process for reporting on service 
contracts. The Department cannot yet advise of the date certain on 
which the form will be fully implemented for use across the Department. 
We are committed to investing the time and effort associated with fully 
coordinating this form, or other commensurate process, and companion 
policy, with stakeholders across the Department, and to implementing 
the form, or process, in a manner wholly consistent with applicable 
statutes, regulations, and DOD policies and procedures.
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. MAFFEI
    Mr. Maffei. This Administration's key defense reform efforts were 
the much-ballyhooed Better Buying Power and Better Buying Power 2.0. 
Headline efforts in BBP 2.0 included ``Employ appropriate contract 
types'' and ``Promote effective competition.'' As you are aware, 
however, the United States Air Force just last year issued an $11 
billion contract for 36 rocket engine cores that did not promote 
competition, effective or otherwise, nor, if rumor is to be believed, 
did it employ an appropriate contract type, as we are now hearing from 
the contractor that the price of the contract may increase.
    Could you explain how the Department reconciles its Better Buying 
Power initiatives with these ongoing activities?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Maffei. A key component of increasing competition, access to 
innovation, and cost controls is the allowance of new entrants to 
compete for defense contracts. However, even small, off-the-shelf 
competitions can require costly qualifications and certifications. 
Furthermore, new requirements can be added to protect incumbents. For 
instance, the Evolved Expendable Launch Vehicle program now requires 
new entrants to meet standards that were not applied to the incumbent 
contractor, something that delays implementation and raises costs.
    How will the Department regulate the qualification and 
certification practice to ensure that incumbents are not provided with 
unfair advantages?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Maffei. Major acquisition reform will follow in the footsteps 
of previous efforts, including Better Buying Power 2.0. A key 
theoretical concept of many of these prior efforts has been the 
continued integration and exploitation of commercial solutions into 
defense acquisitions. I think it's fair to say, however, that practice 
has not always lived up to theory. We have seen multiple instances, 
ranging from information technology to the $70 billion dollar EELV 
program, in which commercial competitors have been excluded from 
contracts or delayed by red tape and bureaucratic indifference. How 
specifically did this happen with the EELV program and how will it be 
corrected moving forward?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Maffei. The U.S. Air Force has claimed that the EELV ``block 
buy'' contract will save the Department $4.4 billion. GAO, however, has 
stated that the Department hasn't been able to properly account for the 
program for years, and this year noted that the overall size of the 
contract ballooned from $34.3 billion to $70 billion. Furthermore, the 
block buy contractor is now hinting that it will have to increase the 
price of the contract if the Atlas V becomes unavailable.
    Given these developments, how much confidence do you have in the 
Air Force's $4.4 billion claim?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. KILMER
    Mr. Kilmer. One of the most critical components of any acquisition, 
especially for cost reimbursement contracts and those for services, is 
oversight. Adequate oversight requires a knowledgeable and experienced 
workforce that has the time to analyze the contract requirements, the 
contractor's performance, and any differences that may occur. Has the 
Department of Defense analyzed the workload of its contract specialists 
and contracting officers and determined that they have a workload that 
allows for adequate oversight? I am particularly concerned with the 
workloads of those 1102s in the Defense Contract Management Agency and 
the Defense Contract Audit Agency. What is the average workload for 
1102s in each of these agencies?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Kilmer. Where is the Department in its effort to implement a 
portfolio management system to ensure adequate requirement definition 
across the various portfolios of services and products? Has a uniform 
chain of command been established throughout the Defense enterprise 
(services and agencies) outlining a coordinated opportunity for the 
department to collect and implement best practices and maximize the use 
of strategic sourcing?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Kilmer. I understand that the Department is currently re-
writing the DODI 5000.02 and believe that such an effort could be 
beneficial to the acquisition of major defense weapons programs and 
major automated information systems. However, this only accounts for 
roughly 40% of the overall DOD budget. What efforts is the Department 
undertaking to address program management challenges for the smaller 
and more diverse set of acquisitions that constitute the other 60% of 
the Department's budget?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Kilmer. To what extent does the curriculum of the Defense 
Acquisition University include realistic problem-sets, real-life case 
studies, court opinions, and other forms of non-simplistic examples for 
its students?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Kilmer. The Department of Defense is correctly working to 
minimize over-classification of requirements and acquisitions where 
necessary. However, a noticeable number of acquisitions are justifiably 
classified. How does the Department educate acquisition professionals 
in the art of conducting classified acquisitions?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Kilmer. One thing this committee is trying to bring to the 
Department's acquisition process is accountability. There are many 
regulations, statutory requirements, and existing contract provisions 
that the Department does not adhere to as strictly as it should. How 
can we ensure accountability inside the Department and how can our 
oversight role aid the Department in that effort?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Kilmer. Procurement of information technology encompasses 
everything from major weapons program all the way to desktop solutions 
and mobile devices. When developing weapons systems there is usually no 
commercial comparison; however, many other information technology 
solutions not only have a commercial solution but are also contracted 
for differently in the private sector than in the Department of 
Defense. Knowing there isn't a one-size-fits-all approach to IT 
procurement, how is the Department approaching these differences in 
order to provide the warfighter with the most secure and 
technologically advanced solution in an efficient manner?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Kilmer. The current DOD Certification and Accreditation of 
software is a fragmented process between DOD Service components and is 
often not standardized for all vendors. This often results in delayed 
and inconsistent certification and accreditation of IT products, as 
much as 18 months to certify a product for deployment as I am told. 
What is the Department doing to streamline this process so there is one 
standard that incorporate a Service's specific needs rather than 
separate processes for each and to standardize the requirements for all 
vendors?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Kilmer. Please comment on the Department's efforts to drive 
more cost savings and agility in DOD's IT spend by transitioning to 
cloud computing services offered by the commercial sector?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Kilmer. What acquisition and procurement policy changes are 
necessary over the next year to enable the broader adoption of ``pay as 
you go'' (OPEX vs. CAPEX) commercial cloud services throughout the DOD?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Kilmer. Why aren't government provided ``cloud'' services such 
as MilCloud being held to the same 3rd Party (3PAO) security evaluation 
processes as commercial Cloud Services Providers (i.e. FedRAMP)? If 
not, then would that make sense? What changes can be made in DOD 
acquisition and procurement processes in the short term to address 
this?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Kilmer. Will the Department of Defense utilize the Strategic 
Nuclear Deterrence Fund to meet Congressional intent or another means 
to ensure stability in the Ohio Replacement Program? If the Department 
will not utilize the Fund, what other mechanism will it use to satisfy 
the concern of the committee?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Kilmer. Under Secretary Kendall, there was a featured story in 
Government Executive this week titled ``Daring Deal'' and the focus was 
on how the IC is leveraging a leading commercial cloud provider--
Amazon--to build a community cloud for the Intelligence Community, 
based on the utility model of cloud (e.g. paying for storage and 
compute based on actual usage).
    Please tell this committee how DOD, as part of the overall defense 
acquisition reform effort, is going to better leverage commercial cloud 
technologies in both the short and long term?
    For example, the Navy is already utilizing commercial cloud 
services to move Level 1 and 2 workloads to Amazon; civilian agencies 
such as HHS are moving sensitive but unclassified workloads (such as 
PHI and PII information to commercial cloud), but the Defense 
Department has been lagging in that category, particularly for Level 3-
5 data (sensitive but unclassified). Longer term, what about Level 6/
classified data--what is the Pentagon's plan to use commercial service 
providers to build a community cloud for that classified data?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mr. Kilmer. The Department relies on the student loan repayment 
program to attract and maintain qualified acquisition professionals. 
What percent of acquisition professionals who apply for student loan 
repayment? What percent of percent of acquisition professionals who 
apply are awarded student loan repayment?
    Ms. Barna. DOD use of the Student Loan Repayment Program (SLRP) as 
an incentive for early career civilian acquisition professionals 
increased significantly starting in 2009 in conjunction with DOD's 
initiative to rebuild its acquisition workforce. From 2006 through 2008 
an average of 425 student loan repayment incentives were approved each 
year. From 2009 through 2013 the use of SLRP incentives increased over 
threefold, to an average of 1,400 each year. While the latter years' 
increase represents approximately 30 percent of early career gains, 
data indicates a shift to use of the incentive from new hires to use as 
a retention incentive for early career acquisition professionals with 
four to six years of service.
    Mr. Kilmer. How did sequestration impact the Department's ability 
to offer monetary incentives such as performance bonuses to acquisition 
professionals throughout the past few years? How is the Department 
going to safeguard this tool going into the next several years of 
sequestration level budget caps?
    Ms. Barna. Budget uncertainty and spending reductions have 
significantly impacted use of monetary incentives. Sequestration and 
other actions to reduce spending resulted in a 52 percent reduction 
from FY12 to FY13 in monetary incentives for DOD civilian acquisition 
professionals. In FY 2012, 74,582 individual cash awards were made 
within the 136,714 civilian acquisition workforce members totaling 
$88,570,906. In FY 2013, 37,598 individual cash awards were made within 
the 135,513 civilian members totaling $42,700,028. Subject to OMB 
limitations and available funding, DOD will continue to use its 
authorities to provide monetary incentives and at the same time explore 
additional ways to reward acquisition professionals.
                                 ______
                                 
                    QUESTIONS SUBMITTED BY MR. COOK
    Mr. Cook. To date, the GAO has been unable to verify the Air 
Force's claim of a $4.4 billion savings on a block buy contract for the 
EELV. GAO also noted an increase of over $35 billion to a total cost of 
$70 billion to the department. In the wake of this cost increase, the 
block buy contractor has indicated the unavailability of the Atlas V 
will cause even further cost increases. How much faith can we put in 
the Air Force's claim of a $4.4 billion savings without independent 
verification, given these externalities?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
                                 ______
                                 
                  QUESTIONS SUBMITTED BY MRS. WALORSKI
    Mrs. Walorski. Previous acquisition reform efforts have put heavy 
focus on reforming the way we buy major weapon systems. What are your 
views on the way we contract for services? Is this an area we should 
consider as we look to try to improve the way the DOD does business? Do 
you see trust and communication between government and industry as a 
concern?
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mrs. Walorski. Congress established the Defense Acquisition 
Workforce Development Fund in order to grow and develop the DOD's 
acquisition workforce. Is enough being done to motivate and incentivize 
high-quality young professionals not only to select acquisition as a 
career field, but also to stay in that field so that the nation 
benefits from their experience 10, 15, or even 20 years down the road? 
[QFR #53, for cross-reference.]
    Secretary Kendall. [The information referred to was not available 
at the time of printing.]
    Mrs. Walorski. Congress established the Defense Acquisition 
Workforce Development Fund in order to grow and develop the DOD's 
acquisition workforce. Is enough being done to motivate and incentivize 
high-quality young professionals not only to select acquisition as a 
career field, but also to stay in that field so that the nation 
benefits from their experience 10, 15, or even 20 years down the road?
    Ms. Barna. This issue does not fall under P&R's purview. We believe 
AT&L is best suited to answer this question and we defer to their 
answer as stated in QFR #53.

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