    [Senate Hearing 115-296]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 115-296

                DEPARTMENT OF DEFENSE ACQUISITION REFORM EFFORTS

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

                                     HEARING

                                   BEFORE THE

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                           THURSDAY, DECEMBER 7, 2017

                                   __________

             Printed for the use of the Committee on Armed Services

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                          COMMITTEE ON ARMED SERVICES

      JOHN McCAIN, Arizona, Chairman	JACK REED, Rhode Island
    JAMES M. INHOFE, Oklahoma		BILL NELSON, Florida
    ROGER F. WICKER, Mississippi		CLAIRE McCASKILL, Missouri
    DEB FISCHER, Nebraska			JEANNE SHAHEEN, New Hampshire
    TOM COTTON, Arkansas			KIRSTEN E. GILLIBRAND, New York
    MIKE ROUNDS, South Dakota		RICHARD BLUMENTHAL, Connecticut
    JONI ERNST, Iowa			JOE DONNELLY, Indiana
    THOM TILLIS, North Carolina		MAZIE K. HIRONO, Hawaii
    DAN SULLIVAN, Alaska			TIM KAINE, Virginia
    DAVID PERDUE, Georgia			ANGUS S. KING, JR., Maine
    TED CRUZ, Texas				MARTIN HEINRICH, New Mexico
    LINDSEY GRAHAM, South Carolina		ELIZABETH WARREN, Massachusetts
    BEN SASSE, Nebraska			GARY C. PETERS, Michigan
    LUTHER STRANGE, Alabama

                 Christian D. Brose, Staff Director
                 Elizabeth L. King, Minority Staff Director

                                      (ii)

                                 C O N T E N T S

    _________________________________________________________________

                           Thursday, December 7, 2017

                                                                       Page

    Department of Defense Acquisition Reform Efforts.................     1

    Lord, Honorable Ellen M., Under Secretary of Defense for              4
      Acquisition, Technology, and Logistics.
    Esper, Honorable Mark T., Secretary of the Army..................    10
    Geurts, Honorable James F., Assistant Secretary of the Navy for      13
      Research, Development, and Acquisition.
    Wilson, Honorable Heather A., Secretary of the Air Force.........    16

    Questions for the Record.........................................    44

                                     (iii)

                DEPARTMENT OF DEFENSE ACQUISITION REFORM EFFORTS

                                  ----------

                           THURSDAY, DECEMBER 7, 2017

                                            U.S. Senate
                                    Committee on Armed Services
                                                        Washington, DC.
        The committee met, pursuant to notice, at 10:00 a.m. in
    Room SD-G50, Dirksen Senate Office Building, Senator John
    McCain (chairman) presiding.
        Present: Senators McCain, Inhofe, Wicker, Fischer, Rounds,
    Ernst, Tillis, Sullivan, Perdue, Reed, McCaskill, Shaheen,
    Gillibrand, Blumenthal, Donnelly, Kaine, King, Heinrich, and
    Warren.

           OPENING STATEMENT OF SENATOR JOHN McCAIN, CHAIRMAN

        Chairman McCain. The Senate Armed Services Committee meets
    today to receive testimony on the Department of Defense
    acquisition reform efforts.
        We welcome our witnesses, Ellen Lord, Under Secretary of
    Defense for Acquisition, Technology, and Logistics; Mark Esper,
    Secretary of the Army; Heather Wilson, Secretary of the Air
    Force; and James Geurts, Assistant Secretary of the Navy for
    Research, Development, and Acquisition.
        Acquisition reform is one of the most important and
    frustrating topics this committee addresses. For years, we have
    been warned that America is losing its technological advantage.
    I hope you all have seen the work by RAND on this topic.
        That is why the Department of Defense needs acquisition
    reform, not just for efficiency or to save money. Simply put,
    we will not be able to address the threats facing this Nation
    with the system of organized irresponsibility that the defense
    acquisition enterprise has become.
        I want the witnesses to pay attention here, okay?
        We are still dealing with a trillion-dollar F-35 program
    that continues to operate in dysfunction. The Air Force still
    subsidizes ULA [United Launch Alliance] for space launch with
    cost-plus-fixed-fee contracts. The Army has sunk nearly $6.5
    billion into Win-T, a network that doesn't work. And the Navy's
    LCS [Littoral Combat Ship] program is delayed. The costs are
    now $6 billion and rising, and many of the key capabilities
    remain unproven.
        That is why this committee enacted the most sweeping
    acquisition reforms in a generation through the last two
    National Defense Authorization Acts [NDAA]. And yet, despite
    that legislation, and in the face of our eroding military
    advantage, the Department has been unable or unwilling to
    change.
        While the previous administration offered some rhetoric
    about reform, this committee was disappointed that we saw no
    meaningful action. Though I remain deeply concerned about the
    state of our acquisition system, I am encouraged by the early
    signs from your team. It appears that you are beginning to make
    progress.
        Let me remind you of our expectations.
        First, the Office of the Secretary of Defense [OSD] needs
    to let the services manage their programs. Congress has
    returned significant authority to the services, but we will be
    watching closely to make sure that you do business differently
    and use that authority wisely.
        Second, while we have empowered the services, that doesn't
    mean you can go and do whatever you like. The services must let
    OSD set strategy and policy, and do real oversight. That means
    being transparent, providing data to and following the guidance
    set by OSD.
        Again, we will be watching. This committee takes its own
    oversight role seriously, and we will rely on you to keep us
    informed so that we can do our job.
        Third, the system must move faster. Time is of the essence.
    The work of groups like DIUx [Defense Innovation Unit
    Experimental], the Strategic Capabilities Office [SCO], and the
    Rapid Capabilities Office [RCO] should become standard
    practice, not workarounds to the regular system. We need these
    innovations for major defense acquisition programs, not just
    science and technology efforts.
        Fourth, you need to be willing to take more risk and be
    willing to fail when you try new things. We recognize that
    Congress can make that difficult. Keep us informed of your
    plans so that we can work together, so that we are not
    surprised when things do not go exactly as planned. We would
    rather have a small failure that teaches us something early in
    the acquisition process than deal with a multibillion-dollar
    program that becomes ``too big to fail.''
        Fifth, invest in the acquisition workforce and empower them
    to succeed. Too often, we hear that acquisition personnel are
    unfamiliar with or nervous about new authorities.
        Finally, reform your organizations and business practices
    to simplify and move faster. The major changes we have
    instituted through legislation are intended to give you the
    opportunity to make more detailed changes in your
    organizations. This is an opportunity to update your
    organizational structures and internal processes accordingly.
        And along those lines, I would much rather that you try and
    fail than do nothing, okay? And if you keep in contact with us
    and tell us what you are trying to do and what you are doing,
    we will be patient for about 5 minutes.
        [Laughter.]
        Chairman McCain. And finally, reform your organizations and
    business practices to simplify and move faster. The major
    changes we have instituted through legislation are intended to
    give you the opportunity to make more detailed changes in your
    organizations. This is an opportunity to update your
    organizational structures and internal processes accordingly.
        Now, if you have reforms and you want to try them, come see
    us, come talk to us, and we will be glad to cooperate with you.
    And do not be afraid to fail, because the only way that we will
    succeed is to take the risk of a failure.
        Congress has provided you with all the tools you require.
    We expect you, as part of a new administration, to use these
    tools, unlike your predecessors. As you do so, you will have a
    willing partner in this committee. Do not hesitate to pick up
    the phone or come over and see any members of this committee.
        We have given our subcommittee chairs a great deal of
    latitude and a great deal of authority as we go through the
    decision-making process. Do not hesitate to call any of them,
    with the exception of Senator Reed.
        Senator Reed. That is right.
        Chairman McCain. Finally, we will be glad to hear your
    requirements and how we can help you do your business better
    and in a more efficient fashion. We expect you, as part of the
    new administration, as I said, you will have a willing partner
    in this committee.
        Look, we had a briefing from the RAND study that I think my
    friend Jack Reed would agree is one of the more disturbing
    briefings that we have had in the years that I have been a
    member of this committee. The gap is closing. There is no doubt
    about it.
        So we will be expecting a lot of you, but we are not going
    to succeed unless we have a partnership here, okay?
        Thank you.
        Jack?

                     STATEMENT OF SENATOR JACK REED

        Senator Reed. Thank you, Mr. Chairman. Thank you for
    holding this very important hearing, as you have pointed out in
    your opening remarks.
        I want to thank the witnesses also for appearing here
    today. We look forward to your testimony.
        We have a shared goal, to ensure that our military forces
    are equipped with the best systems and technology that the
    Department of Defense [DOD] builds and buys, and that those
    systems are the most effective and efficient ways possible to
    protect the Nation and protect, particularly, the men and women
    in our Armed Forces.
        We also have a shared goal that the Pentagon should be able
    to access the most innovative people and technologies available
    from the best small companies, defense industry, labs, and
    universities.
        Also, we owe it to the taxpayers to ensure that we are
    buying things at reasonable prices and within reasonable
    budgets. This hearing will give us a chance to learn how the
    Department is also working to make those shared goals a
    reality.
        In my view, the services should play a very important role
    in the research and acquisition programs that provide advanced
    systems and capabilities to our combatant commanders.
        Under Chairman McCain's leadership, Congress has
    strengthened the services' role in the planning, requirements,
    and program review processes that strongly shape whether our
    acquisition programs succeed or fail. These new
    responsibilities are in addition to the role the services have
    always played in the development of their plans and budgets,
    ensuring that programs are appropriately prioritized and
    funded, especially in difficult budgetary environments.
        Finally, the services play a critical part in nurturing the
    careers of the military and civilian personnel who work in
    acquisition requirements and budget fields. Too often, we
    forget about those individuals and the necessity to maintain,
    enhance, and prolong their effective careers within the
    Department of Defense.
        Building on the successes of the Weapon Systems Acquisition
    Reform Act and the Pentagon's Better Buying Power initiatives,
    and making use particularly of the new reforms in the recent
    National Defense Authorization Acts, again, led by Chairman
    McCain, we are seeing some improvements in acquisition
    processes and outcomes today and are well-positioned to make
    more improvements. But we must do much, much, much better. And
    that is why you are here today.
        I look forward to seeing how the services plan to use their
    authorities and live up to their responsibilities to support
    successful acquisition efforts. I also welcome a discussion of
    further changes that can be made to strengthen their role, as
    appropriate, with the hopes of continuing to improve
    acquisition outcomes and provide the best value and the best
    military capabilities for the Nation.
        Thanks again to the witnesses and the chairman, and I look
    forward to the testimony.
        Thank you, Mr. Chairman.
        Chairman McCain. I would like to say how much I appreciate
    the partnership that I have with Senator Reed despite his
    educational----
        Senator Reed. Deficiencies.
        Chairman McCain.--lacking. But we are partners, and the
    fact that the defense bill was passed through this committee
    without a single dissenting vote I think is ample testimony to
    the bipartisanship that characterizes our conduct of this
    committee, and I am very proud to have Senator Reed as a
    partner.
        So we will begin with the Honorable Ellen Lord, Under
    Secretary of Defense for Acquisition, Technology, and
    Logistics.
        Secretary Lord?

       STATEMENT OF HONORABLE ELLEN M. LORD, UNDER SECRETARY OF
           DEFENSE FOR ACQUISITION, TECHNOLOGY, AND LOGISTICS

        Ms. Lord. Chairman McCain, Ranking Member Reed,
    distinguished----
        Chairman McCain. By the way, could I just mention one
    thing? Depending on what happens here, there is going to be an
    event at 11:45 on the floor of the Senate, and we may have to
    recess until that event is completed.
        Go ahead, please. Thank you.
        Ms. Lord. Thank you for the opportunity to testify today on
    defense acquisition and reform efforts. I am pleased to be
    joined by Secretary Esper, Secretary Wilson, and Assistant
    Secretary Geurts.
        After having spent 33 years in industry, I have come to my
    current position during a unique period in time, one which
    provides a great opportunity to make a positive change.
        First, the National Defense Authorization Acts for fiscal
    years 2016 and 2017 have provided the direction and the tools
    for the Department to advance the capabilities required to
    restore our overmatch, speed the rate at which we field these
    advanced capabilities, and improve the overall affordability of
    our fighting forces' weapon systems.
        Secondly, Secretary Mattis has placed a priority on
    implementing these provisions alongside other Department-wide
    reforms and practices required to improve the lethality and the
    readiness of our military. Using an industry analogy, I believe
    that the OSD should function as a corporate office, very lean,
    enabling the services as businesses to execute programs they
    are responsible for.
        AT&L [Acquisition, Technology, and Logistics] should be
    pushing the majority of the Department's work back to the
    services and focusing on prototyping and experimentation,
    developing architectures and standards, interpreting law into
    policy and procedures, and simplifying acquisition processes to
    quickly and cost-effectively provide material and services to
    the warfighter.
        Stating it plainly, AT&L needs to be the strategic body,
    with focus across the board driving affordability and
    accountability, reducing timelines, and equipping the services
    to execute their programs.
        Given the fact that the DOD, on average, awards daily 1,800
    contracts and 36,000 delivery and task orders, every process
    improvement we make has the potential to produce significant
    results.
        Having reviewed data measuring, the typical lead time
    following validation of a warfighter requirement until the
    award of the resulting major weapon systems contract, I have
    concluded that we have the ability to reduce this procurement
    lead time by as much as 50 percent. Some of the ways in which
    we plan to do this are incentivizing contractors to submit
    responsive proposals in 60 days or less, and implementing
    electronic Department-wide acquisition streamlining tools.
        Furthermore, Congress gave us the ability to conduct 10
    pilot programs, permitting the reduction of cost and pricing
    data for Foreign Military Sales [FMS]. Key to our success would
    be to have the same flexibility for our U.S. procurements. If
    we were granted the statutory authority on sole-source
    procurements, it would allow us to use our judgment to reduce
    the cost and pricing data we would require when we have cost
    transparency with the companies with which we do business.
        In my testimony, I stated that we have initiated six pilot
    programs that push the limits of our contracting agility. This
    is in order to demonstrate our ability to responsibly reduce
    this procurement lead time.
        Chairman McCain. Tell us a couple of those programs.
        Ms. Lord. C-130J retrofit kits and the Japanese Global
    Hawk, so one United States, one Foreign Military Sale.
        Our goal is to get these pilot procurements done within 210
    days from the issuance of the request for proposal.
        Chairman McCain. Two hundred and ten days?
        Ms. Lord. Two hundred and ten days is the interim goal. We
    would like, eventually, to get to 180 days. We have the process
    to work down. We are going to work with you and your team to
    demonstrate how we do it.
        And we are going to you come back to you as we need
    additional authorities, if needed. But we believe it is really
    interpreting the authorities we have now, making sure you agree
    with them, and having us move forward.
        So we are also pre-positioning production contracts to
    include options for yet-to-be-developed FMS requirements. In
    other words, in the initial contracts, we have the language, so
    we can almost fill in the blank for FMS sales. Again, pre-
    thinking this is going to reduce the timeline and allow us to
    be very, very responsive to international customers.
        Chairman McCain. So you do not need a 100-page RFP [Request
    for Proposal] for a pistol?
        Ms. Lord. Absolutely correct.
        On the Joint Strike Fighter [JSF] program, we are
    determined to reduce the cost of production and sustainment. We
    have initiated an extensive JSF cost deep dive, led jointly by
    my office, ATL, and CAPE [Cost Assessment and Program
    Evaluation].
        The purpose of this cost review is to understand in detail
    at Lockheed Martin, Northrop Grumman, Rolls-Royce, and BAE, as
    well as their primary subcontractors, and there are 100 of them
    in total, what JSF costs, why it costs what it costs, and, most
    importantly, what we can do to improve cost performance at the
    prime contractor and up and down the supply chain.
        This will be a completely transparent process with the
    companies involved. The knowledge gained will inform our
    product contract negotiations and all our sustainment efforts
    on a go-forward basis, and will promote more effective and
    timely contract negotiations.
        Just yesterday, the fiscal year Defense Acquisition
    Workforce award ceremony was held. Deputy Secretary Shanahan
    and I recognized the outstanding accomplishments of 27 top DOD
    acquisition professionals out of a workforce of 165,000.
        A few of their accomplishments include: implementing a
    cutting-edge approach to cybersecurity, testing for aircraft
    weapon systems, accelerating the testing for defensive systems
    on AC-130J aircraft by 2 years, getting 3,000 Tactical Combat
    Casualty Care units to medics and special forces operators,
    improving cybersecurity for medical facilities, and reducing
    biological agent decontamination time by 50 percent to
    accelerate the return of equipment back to the fight.
        Out of the 17 individual awards across requirements and
    acquisition-critical functions, the United States Special
    Operations Command [SOCOM] received four. Our challenge is to
    take these pilots, these silos of excellence, and scale them to
    the big Army, the big Navy, the big Air Force. We are also----
        Chairman McCain. And how many F-18s are operational and
    ready to fly?
        Ms. Lord. Not enough. I will defer to my colleague, Mr.
    Geurts, on that one.
        Chairman McCain. Okay.
        Ms. Lord. All right.
        Chairman McCain. The numbers I recall are 60 percent are
    not flying.
        Ms. Lord. Operational availability across our air asset is
    an issue. As I talk to each of the service secretaries, it is
    very clear. There is a lot we can do at the beginning of these
    programs to design in the sustainment portion, and we are
    focusing on that. And we will come back and tell you how we are
    working on it.
        Chairman McCain. And let us know who is responsible.
        Ms. Lord. Absolutely. I would look forward to a small
    discussion in your office, and we can talk about the actions we
    are already taking in terms of accountability with individuals.
        Chairman McCain. Thank you.
        Ms. Lord. So we are also working to make use of the new
    rapid hiring flexibilities provided by this committee to bring
    in world-class talent in areas like robotics, lasers,
    artificial intelligence, as well as new contracting specialists
    and test engineers. For example, in 2016, our labs hired nearly
    2,000 new scientists and engineers using the hiring authorities
    Congress provided.
        Reforming and improving the Defense Acquisition System to
    create an agile enterprise is a continuing process requiring
    close partnership across the Department and with Congress. You
    have my total commitment to the success of that partnership.
        I am looking forward to working closely with the committee
    and the professional staffers to further implement the
    initiatives we have already begun. Thank you for your support
    in this significant effort, and I look forward to answering
    your questions.
        [The prepared statement of Ms. Lord follows:]

               Prepared Statement by The Honorable Ellen M. Lord
        Chairman McCain, Ranking Member Reed, distinguished members of the
    Committee, thank you for the opportunity to testify today on defense
    acquisition and reform efforts. I am pleased to be joined today by
    Secretary Esper, Secretary Wilson, and Assistant Secretary Geurts.
        Our Nation's security is underpinned by the quality of the men and
    women who serve in our Armed Forces, and it is our collective
    responsibility--the Department leadership working closely with the
    Congress--to ensure the superiority of the weapon systems that our men
    and women in uniform train and deploy with as they conduct the business
    of our Nation around the world. Too, in the course of developing and
    fielding these weapon systems, it is our responsibility to uphold the
    highest standards of efficiency and effectiveness as we commit the
    resources entrusted to us by the taxpayer.
        Arguably, the weapon systems that the Department delivers to the
    warfighter today are the finest in the world. Inarguably, however, the
    current pace at which we develop advanced capability is being eclipsed
    by those nations that pose the greatest threat to our security,
    seriously eroding our measure of overmatch. Additionally, the
    increasing cost of our major weapon systems has placed at risk our
    ability to acquire and sustain these systems at the level required by
    our fighting forces.
        The National Defense Authorization Acts (NDAA) for fiscal years
    (FY) 2016 and 2017 have provided the direction and the tools for the
    Department to reverse these trends; specifically, to advance the
    capabilities required to restore our overmatch, speed the rate at which
    we field these advanced capabilities, and improve the overall
    affordability of our fighting forces' weapon systems. Secretary Mattis
    has placed priority on implementing these provisions alongside other
    Department-wide reforms and practices required to improve the lethality
    and readiness of our military.
        As reported to Congress in August, 2017, the Department is moving
    forward with restructuring the Office of the Under Secretary of Defense
    (Acquisition, Technology and Logistics) (USD(AT&L)) to form the two new
    Under Secretary offices for (Acquisition and Sustainment (A&S)) and
    (Research and Engineering (R&E)). We are currently conducting the
    detailed planning necessary to ensure that the roles and
    responsibilities of the two Under Secretaries have been clearly
    delineated and that personnel and processes are aligned to ensure that
    the objectives of the reorganization are met.
        As described in detail in the report to Congress, the new USD(R&E)
    will set the technology strategy for the Department, solve our critical
    technical warfighting challenges, retire risk and speed the development
    of our most advanced capabilities through increased prototyping,
    experimentation, and exploitation of technologies made available
    through non-traditional sources. The new USD(A&S) will focus on
    improving the affordability and timely delivery of Defense procurement
    through the life cycle of our weapon systems, serve as principal
    advisor to the Secretary and the Services on acquisition policy and its
    execution, provide a joint, cross-domain view to ensure the integration
    and interoperability of the Department's high end capabilities, and
    guide related investment decisions. Pending the series of Senate
    confirmations for the principals to be assigned to the new
    organization, we are on schedule to stand up USD(R&E) and USD(A&S) on
    February 1, 2018.
        This reorganization, the most significant change to Defense
    Acquisition since the Goldwater-Nichols Act, must be accomplished in-
    stride as we continue to execute the vast array of developmental
    activities, service contracts, and Major Defense Acquisition Programs
    that comprise the $300 billion annual investment portfolio that is
    aligned under the current USD(AT&L) organization. Accordingly, we will
    be deliberate in ensuring clear accountability as we transition from
    the current to the future organization.
        In advance of formally standing up the new organization, the
    Department has commenced implementing processes which support the
    intent of the reorganization within the Department's fiscal year 2019
    budget deliberations. In particular, the Department is shaping its
    modernization strategy in the future years defense program consistent
    with the same objectives Congress envisions for the new USD(R&E). We
    look forward to discussing these modernization initiatives and the
    accompanying prototyping and experimentation efforts that will speed
    their development in conjunction with the submission of the fiscal year
    2019 budget.
        Beyond the reorganization, however, there are significant new
    authorities and tools provided by Congress aimed at improving the way
    we do business, which need to be placed into policy and practice across
    the Department. In total, 139 provisions supporting acquisition reform
    efforts have been enacted across the fiscal year 2016 and fiscal year
    2017 NDAAs. Of these, the Department's implementation is nearly 50
    percent complete. Across the board, the Department is revising the DOD
    5000 Instruction series governing the Defense Acquisition System,
    issuing new instructions for the acquisition of Business Systems and
    services, and initiating Defense Federal Acquisition Regulation System
    cases to codify the new rules, in accordance with governing authorities
    provided by Congress. Commensurate with these changes, the Defense
    Acquisition University is updating its instructional materials to
    ensure the prevailing policies are embedded in the practices of our
    acquisition leaders and program managers. I have placed priority on
    working closely with Service Secretaries and their Acquisition
    Executives to accelerate completing the implementation of these
    provisions to ensure that the Department reaps the benefits they offer
    to Defense Acquisition as soon as possible.
        An important example is the ``Designation of Milestone Decision
    Authority'' provided by section 825 of the Fiscal Year 2016 NDAA, which
    delegates decision-making from OSD to the Services. I have completed my
    review of MDA designation for the current 87 Major Defense Acquisition
    Programs and have issued further delegation such that the Service
    Acquisition Executives hold authority for 73 of these programs. I will
    continue to review these programs and work towards further delegation,
    as appropriate, to meet the objectives of establishing greater
    accountability and improving the timeline and affordability of our most
    critical defense programs. I intend to ensure similar progress on the
    equally important sections 804 and 806 of the same Act, to provide the
    Services the authorities they need to press forward with their rapid
    prototyping and fielding initiatives. I look forward to updating the
    Committee of progress in these areas in the weeks ahead.
        Consistent with this emphasis on placing decision authority for
    major programs in the hands of the leadership that will be accountable
    for their execution, I have placed priority across the Defense
    Acquisition System on reducing the time required to award contracts
    once the requisite funds are authorized and appropriated by Congress.
    Having reviewed data measuring the typical lead time following
    validation of a warfighter requirement until awarding the resulting
    major weapon systems contract, I've concluded that we have the ability
    to reduce this procurement lead time by as much as 50 percent;
    significantly reducing our costs while accelerating our timelines for
    fielding major capability. I have initiated six pilot programs that
    push the limits on our contracting agility to demonstrate our ability
    to responsibly reduce this procurement lead time with the intent of
    implementing the lessons learned from these pilot projects at scale
    across Defense contracting. I look forward to sharing these results and
    further recommendations with Congress as we proceed.
        As well, we are building on the initial success of earlier reform
    initiatives. For example, the Department requested and Congress
    provided authority to conduct a pilot effort to acquire innovative
    commercial items, technologies, and services using other than
    traditional transaction authority. The associated Commercial Solutions
    Opening (CSO) process piloted by the Defense Innovation Unit
    Experimental (DIUx) is a merit-based process that enables the
    Department to rapidly acquire promising innovative commercial
    technologies using non-traditional contracting tools. Since
    implementation, DIUx has awarded 61 such transactions totaling $145
    million, averaging only 78 days from initial contact with the company
    to signing an agreement. More recently, they awarded the Department's
    first two 'other transaction' production contracts which, with a
    combined ceiling over $1 billion, will enable the Services to more
    broadly leverage these new authorities provided by Congress.
        Key to our success, as we implement the broad scope of reform
    initiatives, are the strength of the acquisition work force that will
    employ the new acquisition tools and processes, and the strength of our
    industrial base, which will ultimately develop and produce the
    capabilities needed by our military.
        As the USD(AT&L), one of my top priorities is to improve our
    competitive posture as we seek to attract, train, and retain talented
    leaders uniquely skilled in the complex business of defense
    acquisition. With the help of Congress, the Department has made
    significant progress in rebuilding the acquisition workforce and
    invigorating the science and technology workforce. The Defense
    Acquisition Workforce Development Fund (DAWDF) provided by Congress,
    and related special hiring authorities for the Science and Technology
    Reinvention Laboratories, have been particularly critical to the
    Department's efforts to rebuild its technical workforce, strengthen
    early and mid-career year groups, improve certification and education
    levels, and expand participation in the contribution-based Acquisition
    Demonstration (AcqDemo) personnel management system. I thank the
    Committee for making DAWDF permanent and extending AcqDemo until 2023
    as part of the Fiscal Year 2018 NDAA, and I'm committed to continue
    working with the Committee to ensure the success of the AcqDemo
    initiative with a vision of making AcqDemo permanent in the future.
        The nation's ability to maintain technological superiority and
    prevail in a sustained conflict is predicated on a robust industrial
    base. In July 2017 the President directed the Department, in
    collaboration with other Agencies, to assess and strengthen the
    manufacturing and Defense industrial base. We are working on this
    assessment and will share our policy, legislative, regulatory, and
    investment recommendations to improve the competitiveness of our
    industrial base, reduce risks to its viability, and to improve the
    resiliency of our supply chain after full review by the Administration
    in 2018. Similarly, the Department is assessing reform and expansion of
    authorities of the Committee on Foreign Investment in the United States
    (CFIUS) and Foreign Investment Risk Review Modernization Act
    legislation to protect critical defense technology. We look forward to
    working with Congress on these and related measures necessary to
    protect critical defense technologies placed at risk by foreign
    competition, global business dynamics, and cyber threats.
        At the same time, however, Congress has provided broad authorities
    and tools to expand our sources of supply beyond the traditional
    defense industrial base to leverage the innovation and competitive
    potential offered by commercial technologies and small businesses.
    Though we are yet in the early stages of implementing the range of
    tools provided for this purpose, I am committed to accelerating their
    practice throughout the Department and will keep the Committee apprised
    of our progress with these important initiatives.
        Looking ahead, the Department is carefully reviewing the
    acquisition reform provisions in the Fiscal Year 2018 NDAA that is
    pending signature by the President. Once enacted, I will move out
    quickly with the Services to ensure the effective implementation of
    those provisions affecting the Defense acquisition system. In parallel,
    we are continuing to work across the Department and alongside what is
    commonly referred to as the section 809 panel, to identify further
    opportunities to streamline acquisition regulations. I am meeting
    regularly with the Service leadership and the panel leaders on these
    initiatives and look forward to bringing recommendations forward to
    Congress in 2018 in support of the Fiscal Year 2019 NDAA.
        As USD(AT&L) completes its reorganization, we are reforming the
    Defense Acquisition System to create an agile acquisition enterprise
    that acquires and fields products and services that provide significant
    increases in mission capability and operational support in the most
    cost-efficient, timely manner possible. This reorganization, and the
    associated reform effort, is a continuing process requiring close
    partnership across the Department, and with the Congress, to refine and
    improve the Defense acquisition system.
        You have my total commitment to the success of that partnership.
    Thank you for your support in this significant effort. I look forward
    to answering your questions.

        Chairman McCain. Thank you.
        Secretary Esper?

      STATEMENT OF HONORABLE MARK T. ESPER, SECRETARY OF THE ARMY

        Mr. Esper. Chairman McCain, Ranking Member Reed,
    distinguished members the committee, good morning.
        When I appeared before this committee in mid-November, I
    stated that modernization was a top priority of mine and that
    ensuring the future readiness of the total force in a high-end
    fight would be very difficult without fundamental reform of the
    current acquisition system. In my few weeks as Army Secretary,
    I am even more convinced that this is true and more aware of
    the urgency for us to modernize.
        I am encouraged, though, by the progress that the Army has
    made, consistent with congressional direction, to begin
    overhauling the current system. To be sure, a long road lies
    ahead, and the challenges are great. But Army leadership with
    the support and advice of Congress is fully committed to bold
    reform that promises to provide America's soldiers with the
    weapons and tools they need to fight and win our Nation's wars
    as part of the joint force.
        This committee is well-aware of the growing challenges our
    military faces around the world. Rising near-competitors
    threaten and sometimes challenge America's interests with
    capabilities that often match and, in a few cases, exceed our
    own.
        In short, our failure to modernize as quickly as possible
    will most likely increase risk to the force. This makes reform
    of our Industrial Age acquisition system a strategic
    imperative.
        Together with leaders from the regular Army, Army National
    Guard and Army Reserve, I am approaching this endeavor through
    the priorities I outlined previously.
        First, taking care of our people: our soldiers, civilian
    professionals, and their families.
        Next, readiness: ensure the Army's ability to deploy,
    fight, and win across the entire spectrum of conflict,
    especially the high-end.
        Third, modernization: build greater capability and capacity
    in the longer term to ensure clear overmatch the future.
        Finally, reform: improve the way we do business to free up
    resources, time, money, and manpower that will make the Total
    Army more lethal, capable, and efficient.
        Given these priorities, the Army is currently undertaking
    five acquisition reform efforts designed to promote unity of
    effort, unity of command, efficiency, cost-effectiveness, and
    leader accountability.
        First, a three-star level task force is mapping out a new
    command, Army Futures Command, that will consolidate the
    service's modernization enterprise under one roof.
        Second, the Army is executing eight directives intended to
    improve our capability and material development process by
    refining how we generate requirements; simplifying our
    contracting and sustainment processes; and evaluating our
    progress through metrics to enable our ability to deliver
    capabilities to soldiers faster, among other things. These
    directives leverage authorities contained in the fiscal year
    2016 and fiscal year 2017 NDAAs.
        Third, the Army has stood up eight cross-functional teams
    [CFT] to enable our leadership to efficiently identify and
    manage investments across the Army's six modernization
    priorities. These cross-functional teams are charged with using
    technical experimentation and demonstrations to inform
    prototype development and reduce the requirement process.
        Mindful of past failures, the Army's fourth effort is to
    ensure that technological solutions are mature before we begin
    a program of record. This includes a threat-based strategy that
    has aligned 80 percent of the Army's science and technology
    [S&T] funding requests against our six modernization
    priorities.
        Fifth, we are directly engaging Army senior leadership as
    decision-makers, as directed in the Fiscal Year 2016 NDAA,
    through a reinvigorated Army Requirements Oversight Council
    process.
        Underlying these efforts are the other benefits the Army
    has derived from the recent NDAAs. For example, streamlined
    requirements and processes are being captured in a rewritten
    Army Regulation 70-1 Army Acquisition Policy.
        But there is more that we can and must do. To be effective,
    we must have predictable, stable, and adequate funding to
    restore balance and reduce risk.
        Ultimately, we are accountable to Congress and the American
    people. This is why we will continue to work with you and your
    staffs on the tasks before us. I fully believe you will see
    marked, clear progress in the coming months. You will see much
    more unity of effort, unity of command, efficiency, and
    accountability as we move forward.
        However, the ultimate test we will face is on the future
    battlefield, where we will succeed or fail based on our efforts
    to reform and modernize today.
        Mr. Chairman, I cannot help but be reminded that today is
    the anniversary of December 7th, when we were caught off guard
    at Pearl Harbor. And in a few short years, we reenergized the
    country, industry, the American people to fight and win that
    war. I think we need to take that same sense of urgency to the
    challenges we face today as we did in the 1940s.
        So with that, we understand the stakes. We have begun to
    make progress. And we will not fail. Thank you.
        [The prepared statement of Mr. Esper follows:]

               Prepared Statement by The Honorable Mark T. Esper
        Chairman McCain, Ranking Member Reed, distinguished members of the
    committee--good morning.
        When I appeared before this committee in mid-November, I stated
    that modernization was a top priority of mine, and that ensuring the
    future readiness of the total force against near-peer competitors in a
    high-end fight would be very difficult without fundamental reform of
    the current Acquisition system. In the couple weeks that I have been
    serving as Army Secretary, I am even more convinced that this is true,
    more aware of the pressing reasons why modernization is needed, and
    more encouraged by the progress the Army has made to date--consistent
    with Congressional direction--to begin overhauling the current system.
    A long road lies ahead, for sure, and the challenges are great. But the
    Army leadership, with the support and advice of Congress, is fully
    committed to bold reform that promises to provide America's Soldiers
    with the weapons and tools they need, when they need them, to fight and
    win our Nation's wars.
        This committee is well aware of the growing challenges our military
    faces around the world. Rising near-peer competitors threaten America's
    interests. The forces they are building often match, and in a few cases
    exceed, our own capabilities. And even in the absence of direct
    conflict with such states, we should expect to encounter their weapons
    and systems in the hands of others. In short, our failure to modernize
    as quickly as possible will most likely exacerbate the significant
    risks the Total Army now faces. This makes reform of our industrial-age
    Acquisition system a strategic imperative.
        As such, together with the rest of the Army's leadership--Regular
    Army, Army National Guard, and Army Reserve--I am approaching this
    endeavor through the priorities I outlined previously:

          First and foremost, People--take care of our Soldiers,
    civilian professionals, and their families;
          Readiness--ensure the Army's ability to deploy, fight,
    and win across the entire spectrum of conflict, especially the high
    end;
          Modernization--build greater capacity and capabilities in
    the longer term to ensure clear overmatch in the future;
          Reform--improve the way we do business to free up
    resources that will make the Total Army more lethal, capable, and
    efficient.

        Given these priorities and the strategic imperative we face, the
    Army is currently undertaking five acquisition reform efforts designed
    to promote unity of effort, unity of command, efficiency, cost
    effectiveness, and leader accountability:
        First, a three-star level task force is mapping out a new command--
    Army Futures Command--that will consolidate the service's modernization
    enterprise under one roof. This task force will report directly to the
    Under Secretary and Vice Chief of Staff of the Army on a weekly basis.
    Once this new command is stood up, which is currently targeted for the
    summer of 2018, it will be the most significant organizational change
    to the Army's procurement system since 1973.
        Second, the Army is executing eight directives intended to improve
    our capability and material development process by refining how we
    generate requirements, improving how we educate the acquisition
    enterprise, simplifying our contracting and sustainment processes, and
    evaluating our progress through metrics to enable our ability to
    deliver capabilities to Soldiers faster and more efficiently.
    Specifically, we intend to reduce the requirements development process
    from up to 60 months to 12 months or less. This requires Army
    leadership to be directly involved in making tough choices to divest
    inefficiencies and reinvest in priorities, which we are committed to
    doing. All of these directives will help us to implement the many
    authorities contained in the fiscal year 2016 and fiscal year 2017
    NDAAs.
        Third, and key to our reform efforts, will be the Army's eight
    cross functional teams. These teams have been stood up to enable the
    Army's leadership to efficiently identify and manage investment and
    divestment priorities by assessing them against the Army's key
    modernization priorities:

          Long Range Precision Fires--that will increase our reach
    and ability to acquire targets under adverse conditions.
          Next Generation Combat Vehicles--in manned, unmanned, and
    optionally-manned variants to give our troops unprecedented freedom of
    maneuver in many different environments.
          Future Vertical Lift platforms--attack, lift, and
    reconnaissance airframes that are survivable on the future battlefield.
          An Army Network--hardware, software, and infrastructure
    that can be used in any environment, including places where the
    electromagnetic spectrum is denied or degraded.
          Air and Missile Defense Capabilities--that will protect
    of our forces from air and missile delivered fires, including drones.
          Soldier Lethality--the Army's most important capability,
    which aims to improve their abilities to shoot, move, communicate,
    protect, and sustain.

        Each of these cross functional teams is a flat organization made up
    of subject matter experts from across the requirements, acquisition,
    and technical communities, and led by a hand-picked officer--a
    warfighter--who currently reports directly to the Under Secretary and
    Vice Chief of Staff of the Army. These cross functional teams are
    charged with using technical experimentation and demonstrations, in
    conjunction with industry and commercial sector partners, to inform
    prototype development and reduce the requirement process. These
    prototypes will enable us to learn and make informed resource decisions
    in less time and with fewer resources.
        Mindful of past failures, the Army's fourth effort is to ensure
    that technological solutions are mature before we begin a program of
    record. This includes a threat-based strategy that has aligned eighty
    percent of the Army's $2.4 billion science and technology funding
    profile against our six modernization priorities. Improved science and
    technology governance, and revised transition agreements with material
    developers, will ensure that we are judicious with taxpayer dollars. We
    have completed science and technology reviews that identified programs
    to divest, enabling us to realign $1.1 billion in science and
    technology funding toward the Army priorities mentioned above.
        Fifth, we are directly engaging Army senior leadership as decision
    makers for the first four efforts. The Fiscal Year 2016 NDAA provided
    the Chief of Staff of the Army an enhanced role in the Army
    Requirements Oversight Council. We have combined that with the Army
    Systems Acquisition Review Council to expand that oversight and
    decision-making role to ensure the Chief of Staff of the Army and I
    concur with program developmental decisions.
        Underlying these efforts are the benefits the Army has derived from
    the fiscal year 2016 and fiscal year 2017 NDAAs. Streamlined
    requirements and processes are now captured in a rewritten Army
    Regulation 70-1: Army Acquisition Policy. Simplified Acquisition
    Management Plans are reducing the amount of paperwork needed to manage
    a program and the establishment of a fourth Acquisition Category for
    programs that spend under $185 million in procurement is enabling
    faster decisions.
        These reforms will require predictable, stable, and adequate
    funding to restore balance and reduce risk. The Defense funding levels
    under current law, the Budget Control Act and Continuing Resolutions
    hinder our ability to resource the Total Army over the long term by
    prohibiting the service from starting new procurement programs and
    military construction projects. They also prohibit entering into multi-
    year contracts, increasing production rates, or realigning funds to
    higher priority requirements.
        Ultimately, we are accountable to Congress and the American people.
    I fully believe you will see marked, clear progress in the coming
    months. You will also see the Army's new Futures Command stand up next
    summer. You will begin to see outputs aligned to our six modernization
    priorities within three years or less, barring any major funding
    shortfalls or significant international events. And you will see much
    more unity of effort, efficiency, and accountability in these early
    waypoints, and the ones that will follow later.
        However, the ultimate test we will face will be on the battlefield,
    where Regular Army, Army National Guard, and Army Reserve Soldiers will
    succeed or fail based on our efforts to reform and modernize now. Past
    ways of thinking, organizing, and executing have limited our ability to
    keep pace with technological development and our potential adversaries.
    There is a clear strategic imperative to reform our industrial-age
    acquisition system and modernize as quickly and efficiently as
    possible. We understand the stakes, we have begun to make progress, and
    we will not fail.
        Thank you.

        Chairman McCain. Thank you, Mr. Secretary.
        Secretary Geurts?

    STATEMENT OF HONORABLE JAMES F. GEURTS, ASSISTANT SECRETARY OF
          THE NAVY FOR RESEARCH, DEVELOPMENT, AND ACQUISITION

        Mr. Geurts. Mr. Chairman, Ranking Member Reed, and
    distinguished members of the committee, thank you for the
    opportunity to appear before you today to discuss acquisition
    reform efforts, recommendations for further reform, and
    requests for congressional support to improving acquisition
    outcomes.
        The Department of the Navy has embraced the recent
    acquisition reforms on multiple fronts. We are actively
    pursuing initiatives to capitalize on the new mid-tier
    acquisition authorities provided in fiscal year 2016 and 2017
    NDAAs. We continue to leverage available tools to drive down
    procurement costs and assist the workforce. We have made
    meaningful progress to date, and we will continue to be
    efficient and effective managers of the acquisition reform
    efforts and our resources. Our workforce, in particular, has
    made progress advancing their professional and technical
    talents, thanks to your support.
        Further meaningful acquisition reform must be assisted by
    sufficient and predictable funding. Timely budgets, avoiding
    further C.R.s [continuing resolutions], and amending the Budget
    Control Act [BCA] to increase funding levels would reduce
    market uncertainty and improve our ability to maintain schedule
    and cost across all the Department of Navy acquisition
    programs.
        Sufficient and predictable funding translates into more
    capability delivered more efficiently, which reduces cycle time
    and cost, the goals we all share here together.
        We appreciate the support of this committee providing the
    guidance on acquisition policy and reform. Thank you for the
    opportunity to speak before you today, and I look forward your
    questions.
        [The prepared statement of Mr. Geurts follows:]

              Prepared Statement by The Honorable James F. Geurts
        Mr. Chairman, Ranking Member Reed, and distinguished members of the
    committee, thank you for the opportunity to appear before you today to
    discuss acquisition reform efforts, recommendations for further reform,
    and requests for Congressional support to improving acquisition
    outcomes.
        We in the Department of the Navy (DON) succeed in acquisition when
    we work as part of a team that includes our acquisition workforce, our
    scientists and engineers, our resource professionals, and our men and
    women in uniform who identify what we need, and then test, train, and
    deploy with the resulting systems. That team cannot succeed, however,
    without the full participation of our industry partners and you in the
    Congress. No acquisition process can be successful without a true
    partnership by all stakeholders. And by partnerships I mean shared risk
    resulting in shared benefits. We must all be good stewards of our
    resources for the American taxpayers and leverage every tool at our
    disposal to ensure the continued security of our Nation.
        The DON's priorities focus on people, capabilities, and processes.
    Those priorities are aimed at delivering readiness, lethality, and
    modernization, all with a sense of urgency. Recent laws have offered
    new tools that allow us to streamline how we develop and deliver
    necessary weapon systems, promote a healthy industrial base, and
    strengthen our acquisition workforce.
        The DON has embraced recent acquisition reform efforts on multiple
    fronts. For example, we have developed and implemented a new
    accelerated acquisition policy, which established an Accelerated
    Acquisition Board chaired by the Service Chiefs and our Service
    Acquisition Executive. This policy improves our ability to leverage
    technological innovations by relying on rapid prototyping and fielding
    and hastens our ability to respond to urgent needs. It establishes two
    paths; for priority needs where a suitable material solution has been
    identified, the preferred path is through a Maritime Accelerated
    Capability Office (MACO) program. Current MACO programs include the
    unmanned carrier-based tanker (MQ-25), the Large Displacement Unmanned
    Undersea Vehicle (LDUUV), and the SM-2 Block IIIC active medium range
    missile, which will field initial capability up to three years earlier
    than the previous programs of record. For priority needs where a
    suitable materiel solution is not sufficiently developed, the preferred
    path is through a Rapid Prototyping, Experimentation and Demonstration
    (RPED) project. Current RPED projects include the Navy Laser Family of
    Systems and the Expeditionary Surveillance Towed Array Sensor System.
        The Marine Corps has also established a Rapid Capabilities Office
    (RCO) to exploit emerging technological opportunities for rapid
    prototype development, fielding, and operational assessment that will
    improve the lethality and survivability of Marine units. Projects
    initiated or planned include Ship-to-Shore Maneuver Exploration and
    Experimentation, Tactical Electro-Magnetic Signature Operations and
    Support, Long Range Precision Fires, and Unmanned Swarm Systems.
        All of these represent exciting new efforts that we are pursuing
    with vigor, but that also serve as case studies in action that allow us
    to measure, assess, and refine our approaches to gain even greater
    efficiency and effectiveness over time.
        None of these efforts will result in meaningful and sustainable
    change unless the people who carry them out are properly trained and
    incentivized. To that end, the DON has issued and is implementing an
    Acquisition Workforce Strategic Plan. This plan connects people to the
    product and mission more directly by aligning professional and
    technical excellence with capability needs, while reinforcing
    responsibility and accountability. Our efforts to execute this plan
    have been enhanced by Congressional extension of the Expedited Hiring
    Authority (EHA) that streamlines recruiting selection and hiring
    processes for acquisition professionals, for which we are grateful. We
    also appreciate your support of the Defense Acquisition Workforce
    Development Fund (DAWDF), which allows us to provide the appropriate
    training to our professionals and continue their development.
        The DON also continues to leverage available tools to drive down
    procurement costs, which is imperative as we move towards a 355-ship
    Navy. We continue to refine our requirements, seek to maximize
    competition, capitalize on multi-year and block buy contracts, explore
    cross-program efficiencies, and manage our cost of doing business to
    ensure we obtain as much warfighting capability out of every dollar as
    we can. For large and enduring programs, such as the VIRGINIA Class
    Submarine, the Navy uses these approaches to manage costs and stabilize
    the industrial base, as well as explore proven strategies such as
    making appropriate use of block buys and multiyear procurements as we
    have in the past with various ship types (carriers, subs, etc.) when
    supported by thorough analysis. These kinds of authorities can result
    in substantial savings: we estimate they may be as much as $5.4 billion
    for the Block V Virginia-class Submarines Multi-Year Procurement.
    Additionally, the DON is developing agile policy and procedures aligned
    with commercial best practices to support our defense business systems
    and information technology infrastructure. Lastly an appropriate cloud-
    based infrastructure will maintain a secure cyber posture, support
    flexibility and technology software updates, and reduce total ownership
    costs.
        The DON is actively pursuing initiatives to capitalize on the new
    mid-tier acquisition and acquisition authorities provided in the fiscal
    year (FY) 2016 and 2017 National Defense Authorization Acts (NDAA). In
    the first application of the new authorities the DON intends to develop
    a new increment of capability for the Standard Missile-2 program. In
    addition, the DON continues to leverage important DOD Laboratory
    authorities, executing over 1100 initiatives to make impactful
    improvements in critical technology areas as well as ensure we have the
    technical expertise we will need in the coming years. Taken as a whole,
    these new authorities provide the DON many new and important tools
    which we can tailor to our specific needs. This tailored approach
    retains the required rigor and oversight but relieves us of the
    requirement to make every program and project fit into a traditional
    Major Defense Acquisition Program (MDAP) model, increasing acquisition
    velocity and reducing fielding times. Through the use of these reforms,
    we are beginning to move the needle on our priorities and increase the
    readiness and lethality of our forces. While we have made progress,
    there is the potential for still more. As is described more fully
    below, we would welcome further adjustments to milestone decision
    authorities (MDA), additional expansion of funding mechanisms for rapid
    prototyping and fielding initiatives that will increase our ability to
    operate within a budget cycle, and further provide autonomy in DAWDF
    execution.
        The Fiscal Year 2016 NDAA directed program oversight and MDA be
    returned to the Services to speed decision making, improve efficiency,
    and ensure greater involvement of the Service Chiefs in acquisition
    programs. The DON is currently the milestone decision authority for 40
    Acquisitions Category (ACAT) 1C MDAPs. Since passage of the Fiscal Year
    2016 NDAA, the DON has initiated several new MDAPs, including the
    future Guided Missile Frigate (FFG(X)) and the MQ-25. In addition, the
    DON has gained approval to delegate five of the ten current ACAT-1D
    programs from USD(AT&L) to the Navy. We will continue to work with
    USD(AT&L) to pursue delegation of the remaining programs under its
    oversight, in accordance with Congressional intent. Placing the
    authority and accountability for these programs within the Navy will
    increase program agility, reduce decision timelines, and better align
    accountability and responsibility.
        The DON is also exploring the value of making greater use of rapid
    prototyping. We will work with our fellow Services, the Department and
    the Administration as we consider the utility of current authorities
    and whether or not refinements to these authorities would be helpful.
    And while efforts have been made to better support the acquisition
    workforce, the DON would like greater autonomy in our ability to target
    the areas of greatest need, develop and implement more efficient
    acquisition workforce development programs, reduce administrative
    burdens, and increase the rate of delivery of resources.
        Finally, and most importantly, meaningful acquisition reform will
    remain elusive until we can obtain sufficient, predictable funding. I
    cannot overstate how critical this is to our success. Continuing
    Resolutions (CRs) create tremendous disruption to programs that are
    vital to readiness--postponing vital work, delaying training and
    maintenance until the arrival of full funding, and causing tremendous
    amounts of programmatic and contractual re-work. Additionally, short-
    term fiscal uncertainty drives long-term industrial base concerns,
    which translate into higher prices and reduced flexibility. Timely
    budgets, avoiding further CRs and amending the Budget Control Act to
    increase funding levels would reduce market uncertainty and improve our
    ability to maintain schedule and cost across all DON acquisition
    programs. Resource predictably gives small businesses, second- and
    third-tier suppliers, non-traditional companies, and major suppliers'
    confidence to smartly invest in a skilled workforce, infrastructure
    improvements, and research and development to inform our future
    options. All of this translates into more capability delivered more
    efficiently--which in turn reduces time and cost, the goals all of us
    share.
        We in the DON are appreciative of the interest and efforts this
    Committee has made to improve Defense acquisition policy, our
    processes, and the people who conduct this critical work. The new
    authorities provided in the fiscal year 2016 and fiscal year 2017
    NDAAs, the continued support of acquisition workforce development
    initiatives, and the return of acquisition program oversight to the
    Services have been important steps towards our common goal of improving
    acquisition outcomes for the Department. All of these changes are
    needed for the Navy Marine Corps team to maintain our advantage against
    our adversaries and deliver the capabilities needed for the future. We
    appreciate the opportunity to speak before you here today and look
    forward to your questions on how we might further work together for the
    good of the Navy and Marine Corps team.

        Chairman McCain. Thank you.
        Secretary Wilson, welcome.

    STATEMENT OF HONORABLE HEATHER A. WILSON, SECRETARY OF THE AIR
                                 FORCE

        Ms. Wilson. Mr. Chairman, I would like to put my full
    statement in the record and just summarize a few key points.
        Chairman McCain. Without objection.
        Ms. Wilson. Mr. Chairman, I wanted to thank the committee
    for the authorities that you have given to the services to
    continue to accelerate procurement and to streamline getting
    capability to the warfighter more quickly.
        The Air Force manages 470 acquisition programs, programs of
    record. It is about $158 billion, if you add up what we were
    authorized to spend over a 5-year period.
        There are few things in the legislation that you have given
    us that I want to update you on where we are.
        The first has to do with delegation of authorities back to
    the services, which was very clear guidance in the Fiscal Year
    2016 National Defense Authorization Act. Before that act came
    into being, 19 of 49 of the largest Air Force programs were
    actually managed in decision authority kept at the Office of
    the Secretary of Defense level. So only 39 percent of our
    programs did we have a decision or authority on.
        Chairman McCain. So you see it as an improvement?
        Ms. Wilson. Today, I have 76 percent of those programs.
        And last week, the Under Secretary delegated eight more
    programs to the Air Force to manage. One of those was the GPS
    III follow-on. So last Thursday, Secretary Lord gave us
    authority to move out on that program. And in the last week, we
    have moved forward and approved a strategy and put out the
    request for proposal. Just in that one action, we have saved 3
    months on the timeline to acquire that system.
        So we are taking advantage of those authorities, but we are
    also doing the same in the service by pushing authority down to
    program managers, to the colonels who can run these programs.
    We have not been changing things above them in the past. They
    know what they are doing. Let's support them and let them get
    after their programs.
        The second major change in the defense authorization act
    was prototyping and experimentation. We have been beginning to
    take advantage of those new authorities in a couple of ways.
    The most publicly discussed one is the light attack aircraft
    [OAX].
        You mentioned about the 100-page request for proposal for a
    9mm pistol. I think it was actually more than that. It looked
    like a pretty big stack to me.
        This is the letter of invitation and 4-page set of
    requirements on the light attack aircraft. It was sent on the
    8th of March. In less than 5 months, we had four aircraft on
    the ramp to test at Holloman Air Force Base. And last night, I
    just got the test report.
        So in less than 11 months, with five pages, we have tested
    four aircraft for a potential light attack aircraft for the
    United States and allies.
        Chairman McCain. What conclusion have you reached?
        Ms. Wilson. Senator, I was busy preparing for this hearing
    and did not read the report last night.
        [Laughter.]
        Ms. Wilson. But it is not just the light attack aircraft
    that we are experimenting with. Another very promising one is
    something we call an adaptive engine. It is intended to get an
    increase in thrust of about 10 percent with a 25 percent
    increase in fuel efficiency, and we have two contractors
    working on that.
        It is not a program of record. It is an experiment. But we
    are trying to mature the technology, refine the requirements,
    reduce the timelines to get better engines that are more fuel-
    efficient to the warfighter faster.
        So those prototyping and rapid fielding kinds of
    authorities are, I think, going to pay us big dividends, both
    in the short term and the long term.
        The third thing that your authorities gave us was something
    called the Other Transaction Authority [OTA], and we are taking
    advantage of that in a number of our different program areas.
    It really targets those nontraditional DOD contractors, the
    small, innovative companies that will not do business with the
    Department of Defense under normal circumstances, because we
    are too hard to work with.
        An example, Space and Mission Systems just let $100 million
    contract, an umbrella contract for a consortium of innovative
    companies, to give us space, ground and communication
    capabilities, particularly for our space forces. And that
    consortium is managing things for us under Other Transaction
    Authority contract. It took us 3 months to put that contract
    together.
        Rome Labs is another one that is using Other Transaction
    Authority arrangements that you authorized to put together
    consortiums of companies that are helping us on cyber,
    intelligence, surveillance, and reconnaissance.
        The fourth area that I wanted to highlight for you has to
    do with people and the emphasis of this committee on both
    expedited hiring and the professionalization of our workforce.
    In fiscal year 2016, we used expedited hiring in the Air Force
    to hire 810 people. In fiscal year 2017, we almost doubled that
    up to 1,600.
        In direct hiring, we are even seeing more effort by the Air
    Force to take advantage of the authorities that you have given
    us. In fiscal year 2016, we hired only two people under those
    direct hiring authorities. In fiscal year 2017, it is 266.
        Thank you, also, for the Defense Acquisition Workforce
    Development Fund [DAWDF]. We are using those funds to enable,
    empower, educate, and train exceptional acquisition officials
    to be able to take advantage of the authorities that you have
    given them to do things differently, faster, and with bringing
    more capability.
        There is much more work to be done, but we are beginning to
    make some progress. There are areas where we are, frankly, not
    very good at buying stuff. Software is one real example and is
    an area of continued focus and extra emphasis by the Air Force.
        Not all of this will work. That is why we call them
    experiments. But if we have productive failures, if we fail
    fast and learn from it and continue on in different vectors of
    technology, we have a chance of better meeting the adversary in
    2030. And that is what this is all about.
        Thank you, Mr. Chairman.
        [The prepared statement of Ms. Wilson follows:]

               Prepared Statement by The Honorable Heather Wilson
        Thank you to the Committee for holding this hearing. I appreciate
    your advocacy to improve the defense acquisition system and the
    additional authorities Congress has provided to the Air Force. These
    new authorities help us accelerate the Air Force acquisition process in
    order to support a more lethal force. The Air Force is taking advantage
    of the new authorities, but there is much more work to be done.
        Paramount is the need for budget stability. The most important
    action the Congress could take would be to lift the sequester in its
    current form. As this committee knows all too well, sequester did more
    to damage the Air Force than anything our adversaries have done in the
    past ten years. Continuing Resolutions and the defense budget caps in
    current law jeopardize our ability to successfully execute the National
    Defense Strategy. We trust the Congress under the structure of our
    Constitution to decide spending levels and appropriate.
        The Air Force develops, acquires and sustains everything from
    satellites and aircraft, to information technology and spare parts.
    While, in the past 16 years the United States has controlled the pace
    of conflict, in the future, speed will matter and we may not have
    control over timing. The Air Force must deliver capability from the lab
    bench to the warfighter faster than ever, to prevail against rapidly
    innovating adversaries. Congress has recognized that this requires
    changes to the ways we develop and acquire systems. In accordance with
    the intent of this committee, we are assuming more authorities from the
    Department of Defense and delegating more authority to empowered
    program managers. We are using new techniques to innovate including
    rapid prototyping and experimentation. All of these initiatives require
    a skilled, highly competent acquisition workforce prepared to use the
    authorities you have given to us.
                    delegation of authority to lower levels
        The Fiscal Year 2016 National Defense Authorization Act directed
    that after October 1, 2016, the Milestone Decision Authority for
    programs reaching Milestone A, our first major milestone for an
    acquisition program, reside with the Service's Senior Acquisition
    Executive, unless otherwise designated by the Secretary of Defense.
        The acquisition rules divide acquisition into three categories.
    Acquisition Category I (ACAT I) are the largest programs. ACAT II and
    ACAT III are smaller.
        The Air Force currently manages 470 acquisition programs valued at
    158 billion dollars (fiscal years 2016-23) that are in varying stages
    of research, development and production. Of those, the Air Force has
    milestone decision authority over 39 of 51 Acquisition Category I (ACAT
    I) Major Defense Acquisition Programs and Major Automated Information
    System programs amounting to over 113 billion dollars. This is up from
    19 of 49 programs before the Fiscal Year 2016 Defense Authorization
    Act.
        Some of the newly delegated programs are the B-52 Radar
    Modernization, Protected Tactical Enterprise Service, and the Advanced
    Pilot Trainer. In addition, this past July the Under Secretary of
    Defense for Acquisition, Technology and Logistics (USD(AT&L)) returned
    Milestone Decision Authority to the Air Force for some space programs,
    to include Space Based Infrared System Follow-on, Protected Satellite
    Communications Services-Aggregated, Mid-Term Polar Satellite
    Communications, and Military Global Positioning System User Equipment
    Increment 2. As of 30 November, USD(AT&L) further delegated Defense
    Enterprise Accounting and Management System Increment 1, Family of
    Advanced Beyond Line of Sight Terminal, Global Positioning System III,
    Integrated Strategic Planning and Analysis Network Increments 4 and 5,
    KC-46, Military GPS User Equipment Increment 1, Three-Dimensional
    Expeditionary Long-Range Radar This allows us to reach key decision
    points and field capabilities to the warfighter faster because there
    are fewer levels of review involved in each decision. We will continue
    to work with USD(AT&L) for additional delegations of Milestone Decision
    Authority to the Air Force for other programs which we are well-suited
    to execute.
        While the Office of the Secretary of Defense has delegated
    significant programs to the Air Force, the Air Force has taken steps to
    delegate decision authority for ACAT II programs from the Service
    Acquisition Executive to lower levels, either the Program Executive
    Officer (PEO) in order to shorten the acquisition timeline to field
    needed capabilities. PEOs have also delegated ACAT III programs to O-6
    level Program Directors where appropriate. See Table 1.

                               Table 1. Summary of Milestone Decision Authority Delegation
    ----------------------------------------------------------------------------------------------------------------
                                                     Number of       Delegated to    Total funding   Average funding
                Fiscal years 2016-23                  programs       lower level     (in then-year)    per program
    ----------------------------------------------------------------------------------------------------------------
    ACAT I......................................              51          39 (AF)           $113 B          $ 2.2 B
    ACAT II.....................................              43         43 (PEO)           $ 19 B           $437 M
    ACAT III....................................             376              274           $ 27 B           $ 70 M
                                                                         (Program
                                                                       Directors)
    ----------------------------------------------------------------------------------------------------------------

                         prototyping and rapid fielding
        The Fiscal Year 2016 National Defense Authorization Act also
    authorized rapid prototyping and rapid fielding. Under this authority
    we are experimenting with innovative and affordable systems before a
    lengthy requirements process or detailed specifications are developed.
    An example of this is the Light Attack Experiment successfully
    conducted this past summer. From a simple letter of invitation from the
    Chief of Staff, to the day we had four aircraft on the ramp to flight
    test was less than 5 months. The results of the testing of the aircraft
    will be delivered to the Chief of Staff and I before the end of
    December--less than 10 months from the time we decided to do the
    experiment.
        Prototyping is a valuable tool for evaluation of design and
    performance to help speed transition from the research phase to
    production. As an example, under this umbrella we are accelerating
    research and development efforts in hypersonics to meet emerging
    threats in contested environments. We are also leveraging innovations
    in advanced manufacturing including 3-D printing.
                               developing people
        Our need for skilled and innovative acquisition professionals to
    execute these numerous initiatives has never been greater. We greatly
    appreciate Congress' continued support of the Defense Acquisition
    Workforce Development Fund and expedited hiring authorities to attract,
    recruit, hire, develop, and retain a high-quality workforce. While
    there is important work to be accomplished on speeding the acquisition
    process and cost effectively delivering capability, our continued focus
    on talented acquisition professionals will be the biggest enabler to
    improving Air Force acquisition overall.
        The acquisition enterprise is currently optimized for industrial-
    age procurement of large weapons systems with extensive requirement
    development, military specifications and resultant long acquisition
    timelines. We must shift to align with modern industry practices in
    order to get cost-effective capabilities from the lab to the warfighter
    faster. We are changing the culture in the Air Force to focus on
    innovation, speed and risk acceptance while meeting cost, schedule and
    performance metrics. But we still have much to do.
        Innovation is part of the heritage of the United States Air Force
    and we must continue to drive innovation to secure our future. We are
    leveraging our partnerships with industry and academia to apply
    commercial best practices, talent, and technology. The Air Force is
    adopting new approaches to ease bureaucracy and rapidly deliver
    technology to warfighters on time and on budget.
        One of our more successful techniques has been to use rapid
    capability offices to accelerate prototyping for rapid fielding. The
    rapid capability office operates under a charter with senior level
    oversight and is compliant with all acquisition rules, but is empowered
    to take full advantage of the opportunities for rapid acquisition with
    a smaller team of highly competent people. A rapid procurement process
    has been developed to extend this streamlined decision-making approach
    to other parts of the Air Force acquisition enterprise.
        There are areas where the Air Force is still struggling to be
    exceptionally good buyers. Software is one. We need to improve the
    development and deployment of software-intensive national security and
    business information technology systems. As we move toward industry
    practices and standards, the line between development, procurement, and
    sustainment for software are blurred. Development cycles of 3-5 years
    or longer do not align with the pace of technological advancement. They
    contribute to failures in software-intensive programs and cause cost
    and schedule overruns. We have initiated pathfinder efforts and are
    working to improve the speed of software development. Likewise, we are
    continuing efforts with Open Mission Systems architecture, and
    initiatives with Defense Digital Services, Air Force Digital Services,
    and Defense Innovation Unit Experimental, in addition to our organic
    development capabilities, to improve software agility, development, and
    performance.
        This shift toward rapid development, experimentation and
    prototyping also requires an understanding that not everything we try
    will work. We need to create an oversight culture within the Department
    and with the Congress that supports experimentation because it allows
    failure. Risk-averse cultures inhibit rapid development and innovation.
    Programs need the ability to experiment first in order to quickly
    identify and develop capabilities that meet warfighter requirements,
    and provide program off-ramps to quickly adapt to technology
    breakthroughs. Failing fast and productive failure that leads to
    finding a better path toward the future is a virtue.
        The Congressional authorities provided to date are producing
    results. The Services have more authority and accountability in the
    execution of major programs. There are several areas we continue to
    explore that could lead to further improvements to the acquisition
    process:

        1.  Current law requires us to establish program cost and fielding
    targets that are approved by the Secretary of Defense or the Deputy
    Secretary of Defense. We are working with our counterparts within the
    Office of the Secretary of Defense to determine where such authority
    would be best located. These targets are already included in annual
    reports and baselines. (Fiscal Year 2017 NDAA, section 807)
        2.  Explore funding flexibility to align with more modern software
    practices.
        3.  We should weigh the value of requiring contractors to select
    one bid protest forum and live with the results, and not be permitted
    to file bid protests at the Court of Federal Claims after losing at the
    Government Accountability Office. It is vital to prevent lost time,
    effort, and delays of needed warfighter capabilities.
        4.  We are exploring ways to streamline our internal processes to
    eliminate duplication of effort wherever possible. We will also be
    looking at statutory requirements which may be imposing duplication of
    effort and look forward to working with the Committee to institute
    process improvements.

        Working with Congress, we can improve our ability to outpace the
    threat, and deliver capabilities to our Airmen to protect our vital
    national interests. Once again, thank you for your continued support.

        Chairman McCain. Thank you, Madam Secretary.
        And I thank the witnesses.
        I would like to point out that it was about 3 years ago
    that we were having a hearing with the service chiefs, and we
    were looking at the fact that the USS Gerald R. Ford had a $2
    billion cost overrun, and I asked the Chief of Naval
    Operations, who is responsible for a $2 billion cost overrun?
    You know what the answer was? He did not know. He did not know.
        I mean, there is such a thing as accountability. And all of
    the things that were just covered by the witnesses here, there
    is no penalty for failure.
        Can you tell me one or two individuals that, because of the
    failure, for example, the $6 billion Future Combat Systems
    [FCS] that never worked, can you tell me an individual or
    individuals that paid a penalty for that failure?
        Ms. Lord. Senator?
        Chairman McCain. Yes?
        Ms. Lord. Senator, I would be more than happy to have a
    meeting in your office and talk about some actions we have
    taken over the past several months to get at that very issue.
        Chairman McCain. What can you illuminate for us as to
    what----
        Ms. Lord. We, as a team, are working very closely together
    to look at functions and individuals in OSD, and in the
    services, the duties they are required to perform, and are
    determining whether or not we have the right people in the
    right slots. And I do not want to talk about individuals here
    in a broad forum----
        Chairman McCain. Okay.
        Ms. Lord.--but would appreciate the opportunity to do that
    behind closed doors with a smaller group.
        Chairman McCain. I thank you, but when I go to a town hall
    meeting and tell my constituents that we blew $6 billion, and
    there has not been anyone fired or replaced or a new way of
    doing things, they are not really very happy.
        So we will be glad to hear what you have done and what you
    plan on doing, but there is no reason why you shouldn't tell
    the American people. That is why we have hearings in the Armed
    Services Committee, okay? So the next time that you come before
    this committee, and you will, I want to know what you have
    done, besides say, ``We do not know who is responsible.'' Okay?
        Ms. Lord. Sir, excuse me. I want to be on record. We hold
    people responsible, and we will talk about that.
        Chairman McCain. All right. You hold people responsible.
    That is our system of government. Who is it that has been
    fired? Any answer? No.
        Mr. Esper. Senator, I am not aware of anyone being fired
    for FCS, to your point. We completely agree.
        Chairman McCain. All right.
        Senator Reed?
        Senator Reed. Thank you very much, Mr. Chairman.
        Following along these lines of accountability, because I
    think that is probably the most critical principle, one of the
    practical difficulties is that these programs sometimes stretch
    over decades. And there are people who change out, retire, who
    are promoted, et cetera.
        So starting with Secretary Lord and going down, any
    thoughts about how we can have this accountability stretch over
    many, many years? And as a subset of those questions, on a
    year-to-year basis, what kind of metrics can we use to make
    sure we are on track and the individuals will be closely
    associated with accountability?
        So, Secretary Lord?
        Ms. Lord. Absolutely.
        First, there is an active discussion going on about when we
    rotate program managers out. It has not always been aligned
    with critical milestones in the program, and that is somewhat
    problematical in terms of discontinuity. So we are looking at
    holding onto program managers through key milestones or key
    events. I think that that is one helpful issue.
        Secondly, in the Department, I will speak for myself here,
    but I know we all talk about this, I, on a monthly basis, roll
    out the 87 major Defense program metrics. So in other words, we
    have 87 ACAT [Acquisition Category] I programs that are
    accountable for about 96 percent of our $1.9 trillion programs
    of record.
        We rack and stack those programs in terms of their
    performance, not only to the contract itself, but to the needs
    of the COCOMS [Combatant Commands] down range, because, for
    instance, you could look at some precision-guided munitions
    programs that look green, if you will, if you look at the
    letter of the contract, however, we know we know we have
    shortages downrange. We know we have COCOMS who are asking for
    more. So we take that market intelligence, if you will, and
    factor it in.
        We look at the metrics. Where are we in terms of cost?
    Where are we in terms of delivery? Where are we in terms of
    quality? We review that, and we roll that all the way up to
    Secretary Mattis.
        Then I spend my time, from an OSD AT&L point of view, on
    those critical joint programs. So right now, an enormous amount
    of my time is focused on F-35.
        Those are some of the ways we are holding people
    accountable. In fact, we have what we call war rooms that we
    have put together. It is very transparent. You all are invited
    to come see. We have the metrics up on the wall.
        In terms of accountability, we have the PEOs [Program
    Executive Officer] and the program manager names. And they come
    and report out to us. We flow that information up.
        So again, I am taking that lens that I had in industry, and
    every month, rolling the numbers up and seeing where we are,
    seeing where we are in delivery time, and where we are in
    quality, and going back and making sure we have action plans
    against those.
        Senator Reed. Thank you.
        Secretary Esper, in the remaining time, a brief comment to
    amplify what Secretary Lord has said?
        Mr. Esper. Yes, sir.
        First of all, I completely agree with what she said with
    regard to aligning the program managers' tenures with the
    critical milestones. And there are other things that we should
    look at doing on the personnel side as well.
        I also want to address briefly what you said about the
    process being so long. Under the concept we are developing with
    Army Futures Command with regard to the cross-functional teams,
    what we envision is, with the unity of effort and unity of
    command, adopting a process that is enabled by the NDAAs where
    we will prototype, test, learn, fail, prototype, test, learn,
    fail.
        We are looking at reducing a requirements development
    process that currently runs about 5 years, 60 months, down to
    12. And so, if you reduce that time frame, clearly, there would
    be one person in charge of that effort, the CFT leader.
        So that gives you one example of how we are trying to
    reduce the timelines to ensure accountability.
        Senator Reed. Secretary Geurts and then Secretary Wilson, I
    apologize. My time is limited.
        Mr. Geurts. Yes, sir. I agree with both Secretary Esper and
    Secretary Lord. Tenures are key.
        The Navy, we have a gate review process where we, myself,
    and the CNO [Chief of Naval Operations] or Commandant, we are
    looking at these programs at milestone, and then we do annual
    reviews. So that is a key point where we can see where the
    program is and then assess that program manager or PEO to see
    if they are delivering, if not, then hold them accountable at
    that point.
        Another key issue Secretary Wilson mentioned, push
    responsibility down. It is hard to hold somebody accountable
    when they do not have the authority to actually make the
    decisions. So pushing that authority down is a key element.
        Finally, and probably most importantly, is workforce
    training and certification, because if we have not done the
    effort to train them, certify them, and make sure they are
    capable, then it is hard to hold them accountable. That is our
    fault, if we have not given them the skills to actually be
    successful.
        Senator Reed. Thank you.
        Secretary Wilson?
        Chairman McCain. Whose fault is it that they are working
    100-hour workweeks? Whose responsibility is that?
        Mr. Geurts. Onboard the ships, sir?
        Chairman McCain. Onboard the ships.
        Mr. Geurts. Sure. That would be on the CNO side, through
    the operational command.
        Chairman McCain. When I asked the question, they said,
    well, we are going to do a study on this. A study as to whether
    our sailors and marines should be working 100-hour workweeks?
    We need a study to figure that out?
        Mr. Geurts. Sir, I am not familiar of the details of that
    plan, if I could take a question for you and get back with the
    exact strategy to get after that question I know you had
    previously.
        Chairman McCain. Thank you.
        I am sorry, Jack.
        Senator Reed. That is quite all right, Mr. Chairman.
        Secretary Wilson, if you have any additional comments, we
    would appreciate it.
        Ms. Wilson. No, sir. I think my colleagues covered it.
        Senator Reed. Thank you very much, and thank you for your
    service, Secretary.
        Thank you.
        Chairman McCain. Senator Rounds?
        Senator Rounds. Thank you, Mr. Chairman.
        Let me begin, Secretary Wilson, you have mentioned the
    light attack aircraft and where we are moving on that. I want
    to compare that with the B-21 Raider program, which is also
    under development at this time, and that program. As you
    mentioned in your prepared statement, there is a movement in
    both the OAX and also in the B-21 Raider program.
        A recently declassified audit from the Pentagon inspector
    general praised the B-21 program's plan for beating cost goals
    and requirements. I think if this trend continues, the B-21
    could one day emerge as a model acquisition program.
        Congress and the taxpayers might wonder if we could
    duplicate all or, in part, a process that has worked well in
    this particular program for subsequent programs. I know that
    the chairman had expressed real reservations as to the approach
    that had been proposed. And I think he has been very interested
    in the development and the movement forward, in terms of
    getting this done on time and on contract.
        Do you see some similarities between that and the light
    attack aircraft possibilities? And can we use the process that
    we have been successful, so far, in developing in the B-21
    plan? Is that something that can migrate to other plans, such
    as light attack aircraft, as well?
        Ms. Wilson. Senator, we are actually using different
    authorities there. We use other transaction authorities or
    simple authorities or experimentation authorities for light
    attack. B-21 is more traditional.
        The thing that is different is, it is being done by
    something we call the Rapid Capabilities Office, which kind of
    has a board of directors of senior people, including myself,
    AT&L, the acquisition authority. And things move very quickly.
        We are actually extending that down and using that charter
    for the Rapid Capabilities Office to extend that construct to
    our other procurements. We are going to give this a try. It is
    a charter for kind of a rapid capabilities process where senior
    leaders will allow a program manager to identify a program they
    want to move quickly on, set some parameters, and, instead of
    having to walk it around the Pentagon to get 20 signatures,
    they come to a board meeting, they make a presentation, they
    get a real hard-wire scrub, and then we move.
        So we are actually modeling that in the Air Force.
        Senator Rounds. Thank you.
        Secretary Lord, there was a discussion that I had with my
    staff in terms of the time frame it takes to get new data or
    new information, new plans put together. And they used as an
    example, when we were talking about it, a cell phone,
    straightforward, off-the-shelf. I can buy it, make a decision
    on it, put it to use in about a week at the most, to the time
    that I can use it.
        Acquisition time for a new piece of software and hardware
    combination today through the Pentagon could take as much as
    2.5 years to acquire. This is basically out of date after a
    year to 1.5 years.
        My question to you, when you are all said and done, using a
    piece of hardware and software combination available today in
    the general public for, perhaps, purchase within a 1-week or 2-
    week period of time, what is your goal for getting the
    acquisition process down from a 2.5-year time period for
    Pentagon acquisition and issue?
        Ms. Lord. Our goal is to look at where we have had
    successes with DIUx, with SCO--in fact, I have asked and asked
    Will Roper to be here with me today, because we think that they
    demonstrated the right kind of behaviors. We are looking at
    what the Rapid Capabilities Offices have done.
        Frankly, as we organize AT&L into A&S [Aquisition &
    Sustainment] and R&E [Research & Engineering], what we are
    doing is basically trying to scale the behaviors, the
    processes, or the lack thereof, that we have seen in these
    different groups. And it is an issue of scaling----
        Senator Rounds. I am going to run out of time, but let me
    just ask one more time. What is the goal, in terms of--is there
    goal for cutting back acquisition times?
        Ms. Lord. Twelve months for major programs.
        Senator Rounds. From 2.5 years to 12 months?
        Ms. Lord. Correct.
        Senator Rounds. Okay.
        Ms. Lord. Now, that is a first step, I just would like to
    be on record as saying.
        Senator Rounds. Okay.
        Next of all, cloud computing is here to stay. Clearly, the
    Pentagon has to be able to make decisions about how they
    acquire capabilities. You currently chair the Cloud Executive
    Steering Group, or the CESG. Does the membership include
    warfighter representation from military services, combatant
    commands, to include Cyber Command, or DISA [Defense
    Information Systems Agency]? Or if not, why not?
        Ms. Lord. We have pulled in all of the services and are
    talking to them. We put out an RFI [Request for Information]
    and have gotten 52 responses. Right now, we are working on how
    we are going to go about that contract. We do not know how we
    are going to structure it yet.
        But absolutely, because what we are looking at is mission
    focus here, not backroom business systems. And it is all about
    getting that computing capability out to the edge. We want our
    warfighting systems to be able to do machine learning, to have
    artificial intelligence. And until we have all of our data in
    just a few places, it is going to be very hard to do that.
        So frankly, sir, everything I do is about lethality and the
    warfighter.
        Senator Rounds. Thank you.
        Thank you, Mr. Chairman.
        Chairman McCain. Senator Shaheen?
        Senator Shaheen. Thank you, Mr. Chairman.
        And thank you all for being here today.
        The Defense Federal Acquisition Regulation Supplement
    [DFARS], as I know all of you know, requires that all DOD
    contractors, including small businesses, comply with a complex
    series of cybersecurity requirements by December 31st of this
    year. Now, I certainly think it is very important for us to
    address the cyber concerns, and have been banging the drum on
    that, particularly with respect to Kaspersky software.
        But I am concerned, as a member the Small Business
    Committee in the Senate, as someone who comes from a small-
    business State, that our small businesses are very important to
    technological innovation. And I have heard from many of them
    that they are very concerned that they cannot comply by this
    deadline, that unlike some of the bigger businesses that work
    with the Department of Defense, they do not have the support to
    comply with these complex regulations by this deadline.
        Can you tell me how concerned any of you are about this,
    and whether there are ways in which we can do more to help
    small businesses comply?
        Ms. Lord. I am very, very interested in this topic. In
    fact, we are concerned about being compliant and worrying about
    risks. We heard back over a year ago that there was great
    concern about the difficulty of implementing these
    requirements, so we went and modified them.
        In order to most effectively and efficiently get out to the
    whole community, especially the small-business community, we
    used a forum that I have set up where, quarterly, I meet with
    all the different components, with three industry associations,
    AIA [Aerospace Industries Association], NDIA [National Defense
    Industrial Association], and PSC [Professional Services
    Council]. They all have small-business components, the
    Professional Services Council, especially.
        In our early October meeting, we talked about this very
    issue, because it was brought up. We said that, clearly, the
    only requirement for this year is to lay out what your plan is.
    That can be a very simple plan, and we can help you with that
    plan. We can give you a template for that plan. And then just
    report your compliance to it.
        So we are trying to reach out very hard through the
    industry associations to get this word out. I think there may
    be some old information out there.
        Any small company that has any issue can come to us, and we
    will help them with that.
        Senator Shaheen. That is really helpful. Are there
    guidelines that we can share with the business community in our
    States to let them know?
        Ms. Lord. Absolutely. I will get that to your office.
    Absolutely.
        Senator Shaheen. That would be very much appreciated.
        Secretary Geurts, the Virginia-class submarine is one of
    the more successful acquisition programs. It is delivered on
    schedule and on budget. Can you talk about what happened in
    that program early on that has allowed it to be so successful,
    and whether there are lessons that we can transfer as we are
    looking at the Columbia-class subs to ensure that they also can
    deliver on time and on budget?
        Mr. Geurts. Yes, Senator.
        I am third day on the job, so I was not around that program
    as it originated in person.
        Senator Shaheen. You should know the answer to this, come
    on.
        [Laughter.]
        Mr. Geurts. Yes, ma'am.
        I would say, looking back on it, though, designing for
    affordability and then holding a stable design were key traits,
    having the right government and industry team working together
    all through all of it. As Secretary Spencer likes to say,
    shared risk, shared benefit, so a very good working
    relationship between the government and industry team.
        As we look at Columbia, we are taking that philosophy and
    taking it to the next level. Quite frankly, using any of the
    common equipment we can across all the submarine fleets, so we
    do not have to reinvent equipment, and then we can get greater
    economic order. And then really focusing early on the design
    for affordability.
        Secretary Lord and I had a review yesterday, I think it
    was. I am very impressed with their thought process, their
    discipline process of really looking at cost in the design
    phase, not trying to make it more affordable after it is
    designed.
        I think those are great principles that we will look to
    continue across the other parts of the Department of the Navy.
        Senator Shaheen. I appreciate that, and I hope that you
    will take the lessons that are learned and make sure that they
    are incorporated into Columbia.
        Mr. Geurts. Absolutely, Senator.
        Senator Shaheen. To go back to small businesses, as I said,
    and I know you all know this, that a lot of the technological
    innovation that we are now adopting in our military come from
    small businesses.
        The SBIR [Small Business Innovation Research] program, the
    STTR [Small Business Technology Transfer] program, have really
    been successful. For SBIR, for every dollar spent through the
    Air Force, $12 was returned. In the Navy, for every dollar, $19
    was returned.
        So these are programs that really work. Can you elaborate
    on what more we can do to encourage the use of small business
    in these programs?
        Ms. Lord. I was just speaking with Raj Shah at DIUx a
    couple of days ago about how we can take the success they have
    had at DIUx, because they have let over 60 contracts using
    their Other Transaction Authority to work with small businesses
    who might not have worked with the Department of Defense
    otherwise.
        I asked him that exact same question. He told me that there
    are some constraints on some of the SBIR money that doesn't
    allow it to flow. I do not have the specifics here, but I would
    love to come back to you. This answers the question of what
    else can this committee do to help move along toward
    incorporating commercial technology and so forth.
        I think this is one of the few cases I have seen so far
    where another authority or taking away some kind of legislation
    right now might help us, but I would love to come back and give
    you specific examples.
        Chairman McCain. Tell us what you need.
        Ms. Lord. I will.
        Senator Shaheen. Yes. Also, if the Small Business Committee
    also needs to do anything, please, we can move on that as well.
        Ms. Lord. Very, very timely. I appreciate it.
        Mr. Esper. Senator, I would add to your point that small
    business tends to be an engine of innovation. That is something
    that we have to preserve.
        The Army works hard to meet and exceed its annual goals for
    business, and we do. I think the key thing is, we talked
    already about the complexity of regulations, something we are
    working hard to deregulate, to delayer, I would say security
    clearances are a big challenge for businesses.
        Senator Shaheen. Absolutely.
        Mr. Esper. We now have over a yearlong process.
        Complexity, the other thing I would mention--this is
    preaching to the choir. I mean, clearly with C.R.s and the
    uneven funding, if you are a small mom-and-pop shop out there,
    and I am referring to my industry experience, it is hard for
    them to survive in an uncertain budgetary environment. We risk
    losing those folks who may, over time, decide that they are
    going to get out of the defense business and go elsewhere.
        So that is a big threat to our supply chains.
        Senator Shaheen. Thank you.
        Chairman McCain. How would you characterize your
    relationship with Silicon Valley?
        Mr. Esper. Senator, I think from the Army prospective, it
    is a growing one. I think it is something we need to develop,
    particularly when we talk about IT [information technology]
    systems. I think as Senator Rounds pointed out, I think it is a
    very particular challenge, given the fact that the technology
    changes so quickly, and now the innovation is happening mostly,
    if not entirely, in the commercial sector.
        So I think it is a relationship we have to continue to
    build with Silicon Valley and then, broadly, with the
    commercial sector, and make DOD acquisition more friendly to
    the commercial sector.
        Chairman McCain. The relationship between the CIA [Central
    Intelligence Agency] and this outfit and DOD is not nearly as
    progressive.
        Ms. Lord. I agree with that. CIA has done some great work,
    for instance, migrating to the cloud.
        To answer your question from my prospective, I am
    leveraging the Defense Innovation Board [DIB] pretty
    significantly, and that is how I am tying into Silicon Valley.
    I have worked on the subject of software, where I think the
    most opportunity lies for the Department, both from a
    contracting point of view as well as developing commercial
    techniques.
        So I speak routinely with the Defense Innovation Board
    about how to do things differently and particularly Eric
    Schmidt I speak a bit with. I was just on the phone with him on
    Monday afternoon, asking him specifically what I can do
    differently to solve some specific issues. And that is helpful.
        We also are using our DIUx arm out there to set up
    roundtables for me to meet with a variety of software
    companies, because that is where I am focused right now.
        Chairman McCain. How long has DIUx been in business?
        Ms. Lord. For 2 or 3 years, perhaps. I am going to have to
    get back to you on the specifics on that. I am not smart enough
    to know that right now.
        Chairman McCain. That is not a lot of progress.
        Ms. Lord. I want to build on it.
        Chairman McCain. Senator Ernst?
        Senator Ernst. Thank you, Mr. Chair.
        Thanks to all of you for joining us today.
        We had a great forum this last weekend, the Reagan National
    Defense Forum.
        Secretary Lord, I am glad you were there.
        Secretary Esper and I sat together on a wonderful,
    wonderful panel. I think everybody was engaged at one point or
    another through those discussions.
        It was very helpful to see so many people that agreed on
    some of the challenges that we have, including the C.R.s, as
    was just mentioned, sequester, our budgeting issues here in
    Congress.
        Secretary Lord, from this past weekend, you had mentioned
    the need to redirect our investments to meet the demands of a
    shifting world. I agree with that as well, and we do need to
    invest in innovation to keep our competitive edge over near-
    peer adversaries, like China and Russia. That is a topic that
    Secretary Esper and I were engaged in on our panel.
        Can you talk about some of the emerging capabilities the
    Department of Defense should be investing in, to ensure that we
    are keeping that technological edge? How do we balance those
    investments, then, with the need that we have to improve our
    readiness?
        Ms. Lord. What we are trying to do is strike that balance.
    We were talking about operational availability of aircraft
    earlier. We obviously need the readiness.
        What we are doing is trying to take a very federated system
    of labs that we have right now right now, between the services,
    FFRDCs [Federally Funded Research and Development Centers],
    OSD, and so forth, and align them in terms of modernization.
        What do I mean by that? Instead of working on maybe
    hundreds of projects, we are trying to identify specific
    technology domains that we agree, across the Department, are
    critical to really reach the overmatch capability we want to
    have.
        So specifically, what does that mean? Hardened
    microelectronics, absolutely; hypersonics; then the whole cyber
    area. Everybody defines cyber a little bit differently, but I
    am talking about offensive and defensive cyber. Those are three
    areas where we are committed, and we are looking at aligning
    our investments to make sure we make a step function change in
    our capability.
        Senator Ernst. Okay, I appreciate that.
        Chairman McCain. Do you have a strategy for cyber?
        Ms. Lord. What we are doing right now is working on the
    elements of that, and we would love to come back and talk to
    you about that in more depth.
        As you know, we just stood up Cyber Command we have a whole
    series of efforts.
        Senator Ernst. Yes.
        Chairman McCain. We would be very interested, since we have
    been fooling around with this issue without a strategy for
    years.
        Ms. Lord. Understood.
        Senator Ernst. Yes, the Chairman and Senator Rounds have
    been very passionate about making sure that we are nesting our
    capabilities together and understanding who is responsible and
    in what domain. So very, very important.
        And, Secretary Lord, as well, I have heard just recent
    reports that this Distributed Common Ground System, or DCGS-
    SOF, the software that aggregates intelligence data for our
    special operators, is problematic. It is ineffective, is what I
    have heard from some of those operators.
        I also understand there are a number of commercial
    solutions that may be better and immediately available, and in
    some cases, they are already in use.
        At what point does the Department then decide to simply cut
    its losses and move away from a program that they feel is
    ineffective?
        Ms. Lord. I do not want to comment too specifically about
    DCGS, because when I was at Textron, we did have one of those
    contracts. But I will vector over to an Air Force program to
    answer the same type of question.
        We feel strongly when the environmental conditions and our
    adversaries have changed rapidly, and we no longer believe that
    programs that we are pursuing can achieve the lethality that we
    wish, then we will talk about potentially terminating programs.
        In fact, General Holmes and I were just here talking to
    HAC-D [House Appropriations Committee-Defense] last week about
    JSTARS's [Joint Surveillance Target Attack Radar System] recap.
    That is a perfect example of where, given the contested
    environments in which we are fighting, we are thinking that
    perhaps there might be better ways to get sensors to work
    closer to the adversary.
        So that is an example of where we came up and said, we are
    strongly considering and want you to understand this is our
    thought process. We want you to be thought partners with us,
    and these are all the reasons.
        It was a secret hearing, so I cannot get into too many
    details. But that is an example of where we are looking at the
    current state of events, our current capability, a current
    program, and what we now know about other ways to achieve the
    end objectives we were trying to initially address.
        Senator Ernst. Okay, so multiple factors involved in that
    decision-making process, dollars, capabilities, overmatch.
        Ms. Lord. Absolutely, and it is one that is not taken
    lightly. All of the different equities within the building are
    considered before we come and take the time of Congress to say
    this is a serious concern of ours.
        Senator Ernst. Okay, thank you very much.
        Chairman McCain. How long have we been spending money on
    JSTARS?
        Ms. Lord. Several years.
        Chairman McCain. Several years.
        Ms. Lord. For the recap.
        Senator Ernst. Thank you, Mr. Chair.
        Chairman McCain. Do you have an idea of how much we have
    spent?
        Ms. Lord. I do not have it here today, but I certainly
    could get that. Yes, we do know.
        Chairman McCain. In the billions?
        Ms. Lord. On the recap, I do not believe it is in the
    billions, but I shouldn't speak without the data in front of
    me. We will get back to you.
        Chairman McCain. Senator Warren?
        Senator Warren?
        Senator Warren. Thank you, Mr. Chairman.
        Thank you to our witnesses for being here today on this
    important topic.
        I previously asked each one of you if you would make
    research a priority in your work. You have all said yes, so I
    am going to start with a really simple question. Are you still
    committed to prioritizing basic and applied research? Will this
    commitment be reflected in the fiscal year 2019 budget? I am
    willing to take really short answers, like yes.
        Secretary Lord?
        Ms. Lord. Yes.
        Senator Warren. We've got this.
        Secretary Esper?
        Mr. Esper. Yes, Senator.
        Mr. Geurts. Yes, Senator.
        Ms. Wilson. Yes.
        Senator Warren. Good.
        So I have another question. In an effort to emphasize the
    importance of R&D [Research and Development], and in
    recognition of the span of responsibilities at AT&L, that they
    were so big, that, last year, this committee directed that the
    position that Ms. Lord now holds be split into two separate
    positions, one that focused on research and engineering, and
    the other that focused on acquisition and sustainment. And I
    know you are all working hard to try to implement that.
        I think having a senior leader focused on future technology
    is incredibly important. I support that. But one of the real
    problems in our system right now is that we struggle to convert
    promising new technologies in the lab into the field, and the
    gap from the lab to the field is sometimes known as the Valley
    of Death. I am worried that splitting oversight of R&D from
    acquisition is going to make this problem even worse.
        So let me start with you, Ms. Lord. After the split, how
    will the Department ensure that our research and development
    program stays closely linked with the Department's acquisition
    requirements, and that promising technologies are actually
    nurtured and incorporated into our programs of record?
        Ms. Lord. This is something we are working on right now. In
    fact, I have had conversations, and I am meeting with staffers
    next week to go over what our preliminary plans look like, to
    have them be thought partners with us.
        But, quite simply, what we are trying to do is push the
    risk into the research and engineering side with a lot of
    prototyping and experimentation, so that there are many, many
    iterations in order to understand the capabilities of new
    systems and the cost of new systems before pushing them over to
    the A&S side.
        Senator Warren. So you are just saying, get it further
    along while it is still in the research bucket?
        Ms. Lord. That is one piece of it. A second piece of it is,
    we are working on streamlined acquisition processes, where you
    basically have a flow chart, and you use the simplest
    methodology possible to get things on contract, so that we are
    not held up in this do-loop of you want to do something, but
    you cannot get it on contract.
        Senator Warren. Right.
        Ms. Lord. And these Other Transaction Authorities are
    particularly germane here, because they have helped us.
        Thirdly, we are going to have some common resources between
    R&E and A&S, so it is not as if we have people that are either
    100 percent R&E or 100 percent A&S. We will have a lot of
    those, but we are going to have some shared resources that span
    that gap that allow one group to understand what the other
    group is doing. This cannot be personality-dependent. It needs
    to be sustainable, as we all move on.
        So we are going to actually be prototyping and
    experimenting over 2 years to make sure we get that right. The
    construct I have right now, and I will be coming back to brief
    all of you on this, is we are going to do a 2-year, 8-quarter,
    transition. We have a model for what we are going to do. And we
    are going to tell everyone what that is, and we will begin
    moving toward that model.
        But we are not being rigid about it. We are experimenting
    and seeing what works.
        We are also making sure we get a lot of brains around the
    table to talk about all the what ifs.
        Senator Warren. Good. I really appreciate it. I appreciate
    the thought you are putting into this. We do not want to lose
    at that space.
        Secretary Esper, would you like to add to that? We are low
    on time.
        Mr. Esper. Yes, Senator. You ask a very good question.
        I would just say, briefly, that the Army has begun a
    process of realigning its S&T investments toward our six
    priority areas. So for fiscal year 2019 to 2023, we have
    already realigned over $1.13 billion toward S&T along our
    priorities.
        The way we are also doing that is, as the cross-functional
    teams are stood up, and they are responsible for their specific
    capability areas, with S&T now aligned to that specific
    capability area, we are actually issued a directive that would
    require standardized written agreements about what is expected
    to be delivered from the S&T community to hand off to the
    actual CFT leader to begin the acquisition process.
        Senator Warren. Okay.
        Mr. Esper. We are trying to do exactly what I think you
    were saying.
        Senator Warren. I am out of time, so I am going to ask the
    other two of you to answer this in questions for the record, so
    we can get it in writing.
        But I just want to say, we have to get better at this.
    Anything that has a name of the ``Valley of Death'' is not
    good, in terms of acquisition of new, cutting-edge technology.
    We can do all the terrific research in the world, but if we
    cannot translate that into something that helps our
    warfighters, then we have failed at our essential mission.
        Senator King. Except for the Clemson football stadium. That
    is known as the Valley of Death.
        [Laughter.]
        Senator Warren. Not to me.
        All right, thank you.
        Chairman McCain. What does Maine have to do with that?
        Senator Reed. What does Maine have to do with anything?
        Chairman McCain. Senator Perdue?
        Senator Perdue. Thank you, Mr. Chair. Let's bring this back
    to this topic here.
        First of all, thank you. I am so encouraged to hear the
    conversation today. I heard the word ``crisis'' mentioned
    twice. I have heard ``sense of urgency'' mentioned several
    times. As an ex-business guy and seeing this crisis, I am
    terribly encouraged by what you all are doing.
        I have met you, and we have had private conversation.
    Secretary Wilson, yesterday, was so gracious with her time,
    talking about a major Air Force base and major piece of
    technology.
        I want to talk about something a little different.
        Secretary Esper, you mentioned first in your opening
    comment, in 1941, we built up not in years, in months,
    literally. We had things coming off the production lines
    literally in months, because we broke through everything,
    because we considered it a crisis. But in 1949, just 3 years
    after we demilitarized after World War II, we were right back
    in the same position. That war was a little different.
        But today, we find ourselves--I do not have time for
    describing the crisis. But after 30 years of disinvestment and
    only one major recap, and after 16 years of active combat, I
    believe we have a crisis. The global situation is more
    dangerous than it has ever been. We have a debt crisis here. We
    have a near-rival that is now going to be a full rival that is
    actually spending more money than we are in real terms,
    adjusted for purchasing power parity.
        General Mattis says that there are three phases to solve
    this problem, and you have each spoken about it in different
    ways. There is a 3-year term of readiness. We have to get
    readiness recovered. There is a 15- to 25-year plan for new
    technology and recap, and the full bloom of U.S. innovation and
    technology, with regard to providing for national security.
        At the same time, China is coming online. It is not going
    to take 15 years before a lot of their new technology is
    hitting. They have leapfrogged major areas of restrictions.
    They are bringing product online much cheaper than we do, much
    quicker than we do, and with far less restriction and
    government intervention.
        I am worried about the shoulder season from year 3 to year
    12. And I would like, I think, Secretary Lord, if you will
    start with this, I am really concerned about how we find quick,
    low-cost solutions for the battlefield.
        I would like the combatant commander representatives of
    Army, Navy, and Air Force to comment on this as well, because I
    am very concerned that we have our eyes out here. We are
    looking at where the money is needed, and yet these high-cost
    solutions, flying F-35s into battlespace where an A-29 might be
    okay--I am not saying we are doing that, but those types of
    examples.
        JSTARS, you mentioned JSTARS just a minute ago, great long-
    term capability. We have a dying platform right now.
    Technology, the battlespaces are changing. That interim period,
    that is a perfect example of where I do not, personally, see
    the Air Force, or anybody else, really, moving toward that
    interim solution in a way that gives me comfort with a low-
    cost, current technology platform that is better than what we
    have, more cost-effective than what we have, but doesn't get in
    the way and take money away from long-term development.
        Would you address that?
        Ms. Lord. Two-part answer to the question.
        One, I would really like to come back and in a different
    setting, in a classified setting----
        Senator Perdue. That is fair.
        Ms. Lord.--talk to you about some of the programs going on.
        Senator Perdue. I look forward to that.
        Ms. Lord. But secondly, what you are talking about is
    exactly what DIUx, SCO, and the Rapid Capabilities Office are
    doing. We should come back and tell you about some of those
    successes.
        What we have to figure out how to do is scale that, and
    right now, we have not scaled it.
        Probably the best meeting I go to in the Pentagon is
    something called the Warfighter Senior Integration Group where
    we sit down every 2 weeks, and we have on VTC Afghanistan every
    2 weeks, and then the other 2 weeks, Iraq. And we talk to the
    warfighter about what is going on today and what they need in
    terms of rapid capabilities.
        This is what has spun out an enormous amount of counter-UAS
    [unmanned aircraft system] equipment, and that has been fast.
    JIDO [Joint Improvised-Threat Defeat Organization] has come up
    with that.
        So we can do this, but we do it on a small scale. That is
    what this reorg is all about, in my mind. It is getting away
    from the 5000 process, other than very complex areas where we
    might need some of that. But just use the little bit of process
    we need to get stuff out the door.
        Senator Perdue. So, Secretary Esper, would you comment?
        I am out of time. I would love to hear from all of you, but
    I would love to have all of you respond to that question after
    the hearing.
        Mr. Esper. Yes, sir, because it is a great question. I
    would just connect a couple dots from the historical example.
        Senator Perdue. Please.
        Mr. Esper. The key here is changing culture.
        Chairman McCain. Witnesses will be allowed to respond.
        Senator Perdue. Thank you.
        Mr. Esper. Senator, the key is changing culture. At the end
    of the day, we have to change the culture. That is what came
    out of the 2011 Decker-Wagner acquisition reform report. That
    is the most crucial element.
        The way the Army is getting at this is standing up the Army
    Futures Command to do just that. Take an approach that says,
    let's not make the perfect the enemy of the better. Let's
    prototype, demonstrate, learn. Let's fail early. Let's fail
    cheaply. And let's go with the 80 percent solution. Get
    something fielded.
        The view is, if we can stand up the organization to command
    quickly, get that unity of effort and unity of command, get
    some early wins under our belt, we can start changing the
    culture, so that we are ready, position, posture to begin
    looking simultaneously at those mid- and far-term threats that
    you described.
        Chairman McCain. And how long have we been fooling around
    with Future Combat Systems?
        Mr. Esper. Thank goodness, it is in our rearview mirror
    now, Mr. Chairman.
        Mr. Geurts. Senator, in the Navy, we are taking an approach
    with an agile acquisition office. And that whole acquisition
    process, which I co-chair--there is a board. I co-chair with
    the CNO or the Commandant. And that is really looking at that
    sweet spot of something that we know that is out there that we
    can either accelerate up quickly to give us a bridge, or there
    is a problem that we need a solution for. We cannot for wait
    for business as usual.
        We are seeing about a 3-year acceleration for the projects
    we are getting through those programs, unmanned aerial refueler
    on the carriers, one of them, total array on some of the high-
    speed vessels we are doing.
        Again, we should have a menu of options. Some need to be
    rapid, exactly what we have today, buy as sold commercially,
    get them in the field tonight, like I used to do at SOCOM. Some
    need to be build-to-carrier, very deliberate. You want to make
    sure you get it right, because it is going to be around for 40
    years. And then there is a sweet spot. Quite frankly, your
    committee's authorities and 804 and some of these rapid
    prototyping abbreviated acquisitions really gets at that sweet
    spot. That is what we have been missing.
        And so you have given us the authorities. We now have to go
    implement those. I think all of us are in the emerging stages
    of that, and I think in the next 2 or 3 years, that is really
    going to get at that shoulder thing that, yes, we cannot wait
    for 15 years for something that is going to happen 5 years from
    now.
        Ms. Wilson. Senator, for the Air Force, we look 5 to 15
    years. And you are right, the technical risk in the shoulder
    season is something that all of us are worried about along all
    of our programs, particularly those that are new ways of doing
    business. And I know you and I have a scheduled classified
    session to go through some of those that are a high priority
    for you.
        Senator Perdue. Thank you, all.
        Mr. Chairman, thank you for your courtesy. And to the
    ranking member, thank you.
        I would think it would be very important if we could have
    this similar conversation and follow-up meeting in a classified
    environment at your discretion. Thank you.
        Chairman McCain. I think it is something we ought to
    pursue.
        Senator Donnelly?
        Senator Donnelly. Thank you, Mr. Chairman.
        Thank you to the witnesses.
        Secretary Wilson, I want to thank you and your staff for a
    unique level of prompt and clear communication since your
    confirmation. We have been able to work together on some
    important issues to improve the readiness of our forces and the
    lives our airmen and their families.
        One of the challenges will be the readiness of the A-10
    fleet. If the Air Force intends to maintain the current A-10
    fleet for the foreseeable future, I am concerned about the
    shortfall in funding for new wings. One-third of the A-10
    fleet, more than 100 aircraft, still need new wings, and the
    Air Force will be forced to ground some of these next year
    because their current wings have reached the end of their
    service life.
        I understand the many, many challenges the Air Force is up
    against right now, but this, obviously, has a very real impact.
        What do you see as the Air Force's options on this issue,
    taking into account budgetary challenges, readiness
    requirements, and our timelines?
        Ms. Wilson. Senator, thank you for the question.
        The defense authorization bill that the Senate passed and
    the House passed, and the House Appropriations mark, add money
    into the Air Force budget to retool and open a line for wings.
    It was not in our budget. I know the Senate Appropriations
    Committee is working on that now.
        If that comes through, we will execute that and get that
    line started back up so that we can re-wing. I think the amount
    would be the tooling and the first four or five sets of wings
    for the A-10.
        You are right. We are always managing how we move to new
    platforms. At the same time, we try to maintain capability and
    cover missions with existing fantastic platforms. And I happen
    to be kind of a fan of the A-10 myself.
        Senator Donnelly. Thank you.
        Secretary Lord, I appreciate the hard work you are putting
    into getting our acquisition systems running more efficiently.
    It is really important to get it right, as you well know. We
    have discussed hypersonic systems in the past. I would like to
    revisit that today.
        Conventional Prompt Strike, or CPS, is Defense's most
    advanced hypersonic development effort. Testifying to this
    committee earlier this year, STRATCOM [Strategic Command]
    Commander General Hyten advocated for fielding a CPS capability
    by the mid-2020s.
        I believe the Navy has a vital role to play in fielding
    CPS. Do you see that as a priority for the Department? And if
    so, why?
        Ms. Lord. Yes, I see it as a priority. In fact, there are
    two key programs going on right now, one at DARPA [Defense
    Advanced Research Projects Agency] and one within OSD that are
    moving along. So I would be more than happy to come and have
    the technical lead brief you on those.
        Senator Donnelly. I was going to say, if you could provide
    us with an update on where you are with this effort?
        Ms. Wilson. Yes. Senator, can I just add one thing to that?
        Senator Donnelly. Sure, absolutely.
        Ms. Wilson. On hypersonics, there are two demonstrators
    where the Air Force, and I believe the Navy as well, are
    working with DARPA. And it is a prototyping experimentation
    effort. We are using the authorities that you all gave us for
    experimentation and testing. So we did not wait for extensive
    requirements kind of things. We are moving forward on an
    experiment for hypersonics, and it was through the authorities
    you gave us.
        Senator Donnelly. Thank you.
        Secretary Geurts, I want to ask you about the role our
    Defense labs play in the acquisition process. I have spent a
    lot of time at the Crane Navy lab in Indiana. I have been
    struck by how integrated they are in not only innovating new
    capabilities to meet Navy requirements, but testing and
    evaluating and verifying systems developed for the Navy by
    private industry throughout the acquisition process.
        I would love to get your view of Defense labs as a vital
    player in the acquisition system.
        Mr. Geurts. Yes, Senator. I think, in coming to the Navy, I
    am really impressed with their warfare centers and their labs
    and how well they are tied. I think having an organic
    capability, especially as we have this rise of commercial
    technology and commercial products, that organic capability to
    take them, test them quickly, perhaps integrate them in a
    different way than would be done commercially, is a critical
    piece for us.
        Back from my SOCOM days, Navy Dahlgren does all the
    software for our gunships. That is all written organically.
    That gave us great flexibility in the Special Operations
    Command to change requirements on the battlefields.
        So I think it is an absolutely critical piece. I think it
    is a key in us getting through the Valley of Death, because
    they can help mature an immature commercial product from a
    small business, work with them, and then get it so it is in a
    fieldable or close to fieldable condition for us to then put
    into the field.
        Senator Donnelly. Thank you.
        Thank you, Mr. Chairman.
        Chairman McCain. Senator Tillis?
        Senator Tillis. Thank you, Mr. Chairman. Mr. Chairman, you
    know anytime we have a committee talk about acquisition, I have
    to bring out my favorite prop and remind everybody of the
    actual pages.
        Almost 700 pages, 10 years to define a handgun, next-
    generation handgun. I just found out with the update, good news
    is we have down selected. We have a manufacturer. Ten years
    from now, all the Army units will actually have this gun, 20
    years after it was conceived by the Air Force.
        First off, I thank you all for your service. Welcome.
        [Laughter.]
        Senator Tillis. But we know there is no logical basis for
    something like this, for something as straightforward as a
    handgun, a 20-year process from concept to full deployment
    within the Army. I do not even know what it means for the whole
    of DOD, but within the Army.
        So Senator McCain in his opening comments said, with the
    exception of Senator Reed, he would like for you to talk with
    all of us. I think that is what he said.
        But in all seriousness, as somebody who has worked in
    procurement, as somebody who has worked in strategic sourcing
    and acquisition, if I were going into an organization to be
    retained to fix their acquisition process, I would probably be
    firing quite a few people.
        Now, we operate a little bit differently here because you
    have constraints that are placed on you by Congress, so we
    probably need to shine a mirror on us and fix some of the
    constraints. But shine light on that. Come to people like me
    and others who are passionate about this issue.
        The chair has empowered the subcommittees to look at this.
    Get us on a fast track for providing you with relief, and get
    on a fast track for removing some of the constraints that you
    have placed on yourself.
        I would just like you to respond to that in the remaining
    time.
        Mr. Esper. Senator, if I may, since the handgun was an Army
    system, let me give you some good news. The handgun was
    actually fielded last week at my old unit, the 101st Airborne
    Division. That fielding has begun.
        I would note, since I saw him yesterday, that your
    colleague, Senator Tom Cotton, actually qualified on the weapon
    and was very pleased with it. The troops been very happy with
    what we fielded.
        I would also note, because it is important to what you are
    saying, after the years of going through that extended process,
    the Chief of Staff of the Army, General Milley, took to heart
    what Congress said, used the legislation that was contained in
    the NDAA--we had stood up about 20 months ago or so, the
    reinvigorated Army Requirements Oversight Council.
        So he took that case what you are talking about, refined
    the requirements process. Eighteen months later, we got to the
    point that we were delivering weapons.
        We have managed to turn a bad news story, I think, into a
    good news story. I think that type of process, leveraging the
    authorities we got from Congress, is the basis for which the
    Army is heading with regard to Futures Command and all the
    changes we plan on making to improve the acquisition process
    and make sure that we do not see that again.
        Mr. Geurts. Sir, from the Navy's perspective, you guys have
    been very helpful. We have been doing some piloting of reducing
    the number of critical performance parameters. You gave us
    authority to try one where we only had two critical performance
    parameters. That simplified the solicitation. Then we can work
    with industry. Again, getting to Secretary Wilson a much
    shorter requirement, it gave us a much broader look. That saved
    years from us going through the normal, traditional piece.
        So the authorities you give us, again, help us try and
    drive that change, because, ultimately, we have to get the
    workforce training and get the culture shifted from what has
    been to what needs to be.
        Senator Tillis. As Secretaries Wilson and Lord respond, we
    have to keep in mind about the cumulative cost of this. We have
    to take a look at, when you have to participate in a
    procurement for 10 years how much cost you are building into
    the industrial base that we ultimately pay for. So I also want
    to make sure that I am getting a commitment from you all to
    come up with specific actions that we need to take to
    accelerate the process.
        Secretary Wilson?
        Then we will finish with Secretary Lord.
        Ms. Wilson. Senator, I think you were out of the room when
    I did my opening statement, and I need to get a red ribbon, but
    this is the letter of invitation, and there is a four-page
    document for the light attack experiment. It fits nicely in a
    very slim briefcase.
        Senator Tillis. You get a blue ribbon for that one.
        Ms. Wilson. I will put the blue ribbon on this for and
    provide you a copy. But the final report, we tested four
    aircraft, and a final report arrived last night with me, so it
    is less than 11 months from a letter of invitation to the final
    report on testing, and we will make a step from there.
        "What else can Congress do to be helpful?'' You often ask
    that. I do have some suggestions for you, but maybe I will just
    provide those in answers to questions.
        Senator Tillis. Thank you.
        Ms. Lord. We are coming up with methodologies to step
    through a flow chart to arrive at the simplest and quickest
    compliant contracting methodology for different procurements. I
    think part of the issue with this gun you are referring to is
    we applied a one-size-fits-all, bring it on mentality. We are
    trying to learn from our Rapid Capabilities Offices, from DIUx,
    from SCO, who have taken the authorities that Congress has
    provided and applied them appropriately to speed things up,
    therefore, have them be more cost-effective, and thereby
    allowing smaller companies that couldn't afford to go through
    this multiyear process to participate.
        So what we are trying to do is scale all of those
    activities, but we have to educate our acquisition workforce to
    be able to do that, and that is a huge issue. So I am taking a
    fundamental relook at how the Defense Acquisition University
    operates, and we are looking at more 1-, 2-day sessions where
    we teach people skillsets that they use the next day.
        But we have to give people the tools, and then we have to
    train them. I am very optimistic that we can do that.
        Chairman McCain. What makes you so optimistic?
        Ms. Lord. Because I think we have a lot of smart people
    that are looking for leadership and----
        Chairman McCain. You didn't have smart people before?
        Ms. Lord. I do not think the focus was on cost-effective,
    quick solutions. I do not think people had the intestinal
    fortitude to come up here and say what needed to be changed. I
    think we have an environment now where we have a huge number of
    people that are all aligned on the same objective, and we are
    all very comfortable having a conversation saying, this is
    working, and this perhaps has an unintended consequence.
        I see a lot of momentum between the building and between
    the Hill to work together to achieve our shared goals.
        Chairman McCain. I certainly hope you are correct.
        Senator King?
        Mr. Esper. Mr. Chairman, if I can add just one quick thing
    to Mr. Tillis' question, you asked about things that the
    Congress could do.
        I would tell you, in the case of the handgun, through that
    18-month process, we have prototyped, tested, demonstrated,
    used soldiers, selected the handgun, and we had a protest. I
    think to the degree that Congress can act on getting rid of
    frivolous protests, at least what the Army considered a
    frivolous one, would be very helpful, because all it does is
    add time, cost, and, of course, delays giving the soldier what
    he or she needs to be successful.
        Chairman McCain. Senator King?
        Senator King. Perhaps the handgun example can remind me of
    my father's advice that even the worst person can serve as a
    bad example. So maybe we can learn from that.
        Mr. Geurts, a couple preliminary observations. First,
    somebody at the Pentagon has a sense of humor to send you here
    on your third day. It will only get better from here, I can
    assure you.
        Mr. Chairman, this is a very important hearing, and I want
    to thank you for calling it.
        Secondly, to the entire panel, this is one of the better,
    or I would say best hearings I have seen on this subject in 5
    years. You are clearly focused on this problem.
        Secretary Wilson, what you told us about the light attack
    aircraft and the process is incredibly encouraging. I hope that
    you will be able to continue along those lines.
        Secretary Lord, Freud said, ``Anatomy is destiny.''
    Napoleon said, ``War is history.'' My modest contribution to
    that is, ``Structure is policy.''
        I would like it if you could supply to this committee your
    organizational chart of the acquisition process. I am
    interested in seeing how many committees there are, how many
    approvals, what the levels are, because I do think, I am not
    being facetious, I do think the structure largely determines
    the outcome. If you have a complex, cumbersome structure, you
    are going to have a cumbersome outcome.
        Somebody said the ideal committee is made up of three
    people, two of whom are absent. And so if you could share with
    me your thoughts on this.
        Ms. Lord. No, I agree with you, structure is policy. And so
    what we are doing is putting together flowcharts that allow
    contracting officers to pick the simplest route to get to
    placing a contract and delivering the materials or services.
    That means you need to understand what you are buying and how
    to tailor the process. That is what we have our contracting
    people doing right now, using real-life examples of how we have
    done this. So that is what I will bring you, what that flow
    chart is.
        Senator King. I would really appreciate that.
        I think I heard in one of your testimonies, perhaps yours,
    that you are making an effort to keep people in these
    positions, at least though milestones. I mean one of the
    problems we have identified is acquisitions people come and go,
    and it creates a herky-jerky process.
        Ms. Lord. We are trying to be much more thoughtful about
    critical program junctures and aligning people being reassigned
    with that.
        Now moving forward, that takes a lot of coordination. I
    think we are all committed to do that. I will say that we all
    spend a lot of time in one another's offices, and I know I meet
    with the service acquisition executives on a weekly basis, so
    we are committed to doing this.
        Senator King. This is sort of technical government
    organization, but I hope you can really focus on this issue of
    how long people stay in a particular office, because if they
    keep turning over, that has been identified in prior hearings
    as a significant problem.
        Ms. Lord. We are committed.
        Senator King. The other piece is off-the-shelf technology.
        Mr. Geurts, I commend to you the P-8, which is the new
    naval anti-submarine aircraft, which I went out to see them
    building them. It is an off-the-shelf Boeing 737 with
    electronics inside.
        Somebody should be congratulated for not having to invent a
    new airplane.
        By the way, at that factory, Boeing produces one 737 a day,
    which is an amazing technological feat, in my mind. But the P-
    8, it seems to me, is an example of how we can do this without
    redesigning everything from the ground up.
        Are you familiar with that program?
        Mr. Geurts. Yes, Senator, I am getting more familiar in the
    new job here. But, certainly, my background as a special ops
    guy is to leverage whatever is there and put it to use as
    quickly as possible.
        I think back to this idea that we will have to build new.
    That will take some time. We will have to fight with what we
    have tonight. A lot of what we can do in the interim is
    leverage what we have in new and creative ways, leverage what
    is in the commercial market in new and creative ways, leverage
    what each of us are doing in the services. So the Navy is
    leveraging the Air Force's work in JASSM [Joint Air-to-Surface
    Standoff Missile] to create a new capability quickly, so we do
    not have to reinvent a whole new cruise missile.
        So this focus on every dollar counts, every day counts, we
    are in a war tonight, and we need to think that way in
    everything we are doing, whether that is organizational design,
    acquisition requirements, operational tests, all of that has to
    play together. I think as you are seeing here, we are all
    committed to doing that for the Nation.
        Senator King. I have seen that today, and it is reassuring.
        Two quick points, and you do not need to respond. But
    reducing lead times is almost as important as price. I mean, we
    cannot maintain our qualitative edge if it just takes too long
    to get the weapon into the field.
        Finally, to reiterate what everyone has said today, we want
    to be partners. To the extent you can tell us what could be
    changed in terms of regulation, in terms of congressional
    requirements, please do so. Everyone at this desk is committed
    to helping you to succeed, because when you succeed, our
    country succeeds.
        Thank you very much for all the work you are doing.
        Senator Reed. Mr. Chairman, I have to respond to a
    rhetorical question I raised about the importance of Maine.
        It is important because it sent us some of the most
    impressive Senators in our history: Margaret Chase Smith,
    Edmund Muskie, George Mitchell, Olympia Snowe, Susan Collins,
    and Angus King.
        For the record, please note that. Thank you.
        [Laughter.]
        Chairman McCain. Senator McCaskill?
        Senator McCaskill. Thank you.
        I would like to take a moment, personally, just to thank my
    fellow, my military fellow, Lieutenant Colonel Sean Foster.
    This is his last hearing. He is an Army JAG officer. He has
    been incredibly helpful to my office. I am very appreciative of
    the military for providing us fellows. Sean was particularly
    terrific.
        He is leaving to go to the Army Legislative Liaison office,
    so all of us will get to know him better.
        But I wanted to briefly recognize his great work in my
    office over the last 2 years. I am going to miss Sean a lot.
        How many of you have read the November 2017 DOD I.G.
    [Inspector General] top 10 management challenges that was
    issued in November? Everybody read it? No? Who has read it?
        Ms. Lord. I glanced over it, I must admit. It was in my
    read-ahead package.
        Mr. Geurts. Yes, ma'am. I read it yesterday.
        Senator McCaskill. Okay.
        Secretary Esper, have you read it?
        Mr. Esper. No, ma'am.
        Senator McCaskill. How about you, Secretary Wilson?
        Ms. Wilson. No.
        Senator McCaskill. Okay. I am going to ask this question
    almost every time any of you come up here. I am going to ask
    you if you have read I.G. reports.
        Nothing is more irritating to me than when the really hard
    work of GAO [Government Accountability Office] and the I.G.s
    identify problems, and really make your jobs easier in terms of
    where you should focus, and nobody consumes the product. It is
    really important, I think, that all of you consume this
    product, because they identified 10 challenges of management.
    That is what your jobs are, management.
        I am going to focus on a couple of those today, but I
    certainly would advise all of you to take this report
    seriously.
        Sustainment problems, the market leveraging for spare
    parts, they identify in this report that for the H-60
    helicopter used by the services and SOCOM, that they have
    purchased 2.9 million spare parts for the H-60, DOD has, using
    2,000 separate contracts awarded to 590 different contractors
    over a 12-month period for almost $400 million. Often, these
    parts were purchased for different prices, the same part.
        This is the kind of stuff that just makes you want to tear
    your hair out, as somebody who is a former auditor.
        What roadblocks you can you identify, Secretary Lord, that
    would keep you from fixing something ridiculous like that? I
    mean, 2,000 separate contracts to 590 different contractors for
    spare parts for the same helicopter?
        Ms. Lord. Since August, I have been doing a lot of data
    dives to understand the body of work in the acquisition
    workforce, and this is the type of thing I keep coming across.
    What I find are a couple trends relative to sustainment.
        One, early on in programs, people are not thinking about
    designing for sustainability. They are not thinking about
    setting up the right contract vehicles. It is often rather
    reactionary for different parts. So as we develop these
    systems, we need a holistic contracting strategy because
    contracting is a strategy itself.
        Senator McCaskill. I mean, I just think, when something
    comes online, you should begin the process of identifying a
    handful of contractors, because you want the consistency, and
    if somebody falls off, you have others, and to get the best
    deal and leverage the best deal for that helicopter.
        Ms. Lord. Right.
        Senator McCaskill. I mean, I cannot tell you how many time
    I have sat in this committee and pointed out inefficiencies
    between the services for things that they are all using.
        Ms. Lord. That is where AT&L comes into play. We talk about
    delegating programs back. That is absolutely what we want to
    do.
        Where AT&L can be very helpful, and A&S moving forward, is
    taking that horizontal look across the services for similar
    programs that leverage the same bill of materials and do the
    types of buys you are talking around about.
        Senator McCaskill. I do not have much time left. For the
    record, I am going to ask you about reporting contractor past
    performance. It is another really irritating thing for me, that
    we have bad contractors and we keep doing business with them
    with no consequence whatsoever. We never remove them from the
    list.
        But that the last thing I really want touch on is supply-
    chain management risks. In this report, I was really concerned
    about the identified risk of an adversary infiltrating the
    supply chain and sabotaging, maliciously introducing an
    unwanted function or otherwise compromising the design or
    integrity.
        They specifically point out the Missile Defense Agency as
    it relates to the Ground-Based Midcourse Defense system. That
    is, obviously, of grave concern.
        I am out of time, but what I would like for each one of you
    to do is to speak to me, especially Secretary Lord, what are
    you doing to secure the supply chain in terms of the integrity
    being compromised?
        I do not need to explain to any of you what the dire
    consequences of that could be in today's world.
        Ms. Lord. I would be happy to do that. In fact, I just had
    an early morning meeting with General Ashley from DIA [Defense
    Intelligence Agency] about that very topic in my office this
    morning.
        Senator McCaskill. I will ask about all of these 10
    management areas. But I would recommend, the next time you
    come, check and see if an I.G. report or a GAO report has been
    issued in last 30 days, because I guarantee I am going to ask
    you about it.
        And I will tell you, I am following up.
        You would not believe this, Senator McCain, but when I was
    with Secretary Wilson at the Air Force base in Missouri, which
    was terrific that she visited, she told me that she was trying
    to hire trainers for the Joint Strike Fighter, and they sent
    over somebody to get approved for hiring at OPM [Office of
    Personnel Management], and guess what OPM told them? They did
    not have enough experience flying the Joint Strike Fighter.
        So obviously, the job requirements that are imposed upon
    you by OPM sometimes are ridiculous, beyond the pale. Clearly,
    nobody at OPM knew that nobody had flown a Joint Strike Fighter
    yet.
        Has that been resolved? I am working on it from my end. I
    just wanted you to know.
        Ms. Wilson. Thank you for your help on this one. We can
    surely continue to use the help.
        Senator McCaskill. Did you get it approved, finally?
        Ms. Wilson. That particular one has been approved, but my
    average time to hire a civilian is about 180 days.
        Senator McCaskill. Totally ridiculous.
        Ms. Wilson. It is a major issue.
        Senator McCaskill. Thank you, Mr. Chair.
        Ms. Wilson. Senator, we have a task force looking at all
    the requirements to hire people, how we can streamline those,
    both regulatory and legislative fixes, so that we can get good
    people on board.
        Chairman McCain. I want to apologize to Senator Blumenthal,
    because, obviously, there is an event on the floor of the
    Senate, which I know he is very interested in and so----
        Senator Blumenthal. If I may, Mr. Chairman?
        Chairman McCain. Please.
        Senator Blumenthal. I will submit my questions for the
    record, and I hope we will get prompt responses focusing on,
    among other issues, on the Huey replacement program.
        Thank you, Mr. Chairman.
        Chairman McCain. I thank the witnesses. This has been very
    helpful.
        And again, I hope the message is, from this committee to
    you, that we want to work with you. We also have our
    responsibilities, and we will try to carry those out as well.
        So I think this hearing has been very helpful, including
    the recent one we just had. And I thank the witnesses for their
    willingness to help.
        This crowded hearing will adjourn.
        [Whereupon, at 11:47 a.m., the committee adjourned.]

        [Questions for the record with answers supplied follow:]

           Questions Submitted by Senators John McCain and Jack Reed
                               rapid prototyping
        1. Senators McCain and Reed. Secretaries Lord, Esper, Geurts, and
    Wilson, in fiscal year 2016 and 2017, statutory authority was given for
    the use of alternative approaches to rapid prototyping and rapid
    fielding.
        What has been the Department and Services approach to implementing
    these alternative approaches?
        Secretary Lord. My team is working on a memorandum, ``Policy for
    Middle Tier of Acquisition for Rapid Prototyping and Rapid Fielding
    Programs,'' that establishes interim Department policy and assigns
    Component responsibilities for the implementation of middle tier of
    acquisition programs. This will facilitate initial execution of these
    authorities while allowing for data/lessons learned to be compiled and
    further refined for incorporation into issuance of a formal DOD
    instruction.
        Secretary Esper. The Army's approach has been to direct its program
    managers to identify efforts that would be suitable candidates for use
    of the new ``mid-tier'' acquisition authorities and to leverage them to
    rapidly prototype and field capabilities that address combatant
    commander needs against near-peer adversaries. For such projects, our
    intent is to utilize a streamlined and coordinated requirements,
    budget, and acquisition process to expedite approval, operational
    assessment and delivery. We have already successfully used the mid-tier
    acquisition approach through the Army Rapid Capabilities Office, which
    rapidly prototyped and delivered an electronic warfare capability for
    the European theater.
        Secretary Geurts. The Department of the Navy (DON) has refined its
    policy with regard to accelerating acquisition to ensure the full
    extent of acquisition approaches are available to our acquisition
    teams. The new governance policy was developed to take maximum
    advantage of recent acquisition reforms aimed at rapid prototyping,
    rapid fielding and acquisition agility at large. As a component of this
    accelerated acquisition policy and process, I co-chair the Accelerated
    Acquisition Board of Directors (AABoD) alongside the Chief of Naval
    Operations (CNO) and Commandant of the Marine Corps (CMC) to establish
    Rapid Prototyping, Experimentation and Demonstration (RPED) projects,
    and Maritime Accelerated Capability Office (MACO) programs. The policy
    takes maximum advantage of recent acquisition reforms for rapid
    prototyping, rapid fielding and acquisition agility at large to
    streamline and more rapidly deliver capability to the fleet.
        Secretary Wilson. The Air Force has started implementing these
    alternative approaches, and to that end, I recently signed out the
    Rapid Procurement of Air Force Capabilities Charter which aims to
    streamline procurement and prototyping of certain Air Force
    capabilities. To do this, the charter applies the governance structure
    and key principles established for the Rapid Capabilities Office,
    allowing us to inculcate a culture of agility and innovation across the
    Acquisition Enterprise and the Air Force. Additionally, we are working
    to implement open system approaches into our programs. This approach is
    a key enabler to inject new technology into subsystem or component
    levels. The Air Force is a strong proponent of using prototyping as one
    method to infuse agility into the acquisition process and will continue
    to look for opportunities to use these authorities.

        2. Senators McCain and Reed. What have been the challenges or
    impediments for the acquisition community, if any, to implementing
    these approaches?
        Secretary Lord. Emerging needs are unknown during the two-year
    planning and programming budget cycle and therefore not programmed in
    the Department's budget requests. As a result, the Department is in the
    position only to request funds for known requirements. If dedicated
    funding for the new prototyping authorities is not appropriated, then
    the Department must prioritize middle tier of acquisition programs
    alongside other competing priorities for allocation of available funds.
    To enable the Department to efficiently and effectively react to
    emerging threats and take advantage of innovative technologies, I
    recommend that Rapid Prototyping Funds, or other flexible funding
    accounts, be appropriated at both the Department and Service levels.
        Secretary Esper. One challenge is the timeline allotted to complete
    rapid prototyping and fielding efforts. For these mid-tier acquisition
    projects, it would benefit the Army to have the option to continue the
    equipping phase beyond five years. While a rapid project may deliver
    the initial operational capability to the first unit equipped very
    quickly, and certainly within the five-year limit, the ability to
    continue fielding to additional units beyond five years would enable a
    multi-year approach to resourcing and incremental capability upgrades.
        Secretary Geurts. Although the authorities are present and aimed at
    speed, the current budget process limits innovation and agility. We
    still lack the flexible funding constructs and associated
    appropriations that will allow new technologies, engineering
    innovations and, in some circumstances, game changing capabilities to
    be introduced to the Fleet as fast as possible. We cannot afford to
    wait two years--our typical budget cycle time--to address our
    adversaries' new capabilities, nor should we wait two years to
    introduce our latest innovations.
        Secretary Wilson. The Air Force has experienced challenges in
    funding, processes and training. While we appreciate the authorities
    the Congress has provided for rapid prototyping and rapid fielding, the
    limiting factors are often not the authority to execute, but rather
    clearly defined implementation guidance, a source of funds, and
    workforce training. The Air Force does not have a dedicated source of
    funds for rapid prototyping, so potential prototyping opportunities
    must still compete for funding against other pressing Air Force
    priorities. We continue to work towards a balance of rapid prototyping
    efforts and traditional acquisition programs to ensure the right mix of
    rapid and revolutionary capabilities. Additionally, the Air Force is
    waiting for Department guidance on implementation of these authorities
    and we continue to work with the OSD policy team in writing the
    instructions. In the interim, the Rapid Procurement of Air Force
    Capabilities Charter will provide the strategic guidance for our rapid
    prototyping efforts. Finally, the Air Force needs to continue educating
    our workforce on the new authorities, and how and when to use them
    appropriately.

        3. Senators McCain and Reed. Can you highlight a few examples of
    programs that are taking advantage of the alternative approaches?
        Secretary Lord. We're working with the Navy on the pilot effort to
    use these authorities to accelerate Standard Missile (SM)-2 Block IIIC
    development through rapid prototyping. This effort will deliver an
    initial fielding capability 3 years ahead of the program's planned
    Initial Operational Capability (IOC).
        Secretary Esper. Yes. Consistent with the intent of these
    approaches, the Army rapidly assessed commercially available Active
    Protection Systems (APS) candidates in fiscal year 2017 and is now
    actively exploring the feasibility of equipping Abrams, Bradley, and
    Stryker vehicle platforms with APS variants as an interim solution for
    the European theater. Another example is the Army Rapid Capabilities
    Office Electronic Warfare project, which used a rapid fielding approach
    in fiscal year 2017 to provide an integrated electronic support and
    attack capability for the European theater.
        Secretary Geurts. In accordance with the DON's new Accelerated
    Acquisition governance policy we designated our first MACO Program (MQ-
    25) as a Key Performance Parameter (KPP) Reduction Pilot Program.
    Having just two KPPs allows the Department to better manage cost,
    schedule, and performance by focusing on MQ-25's most important
    capabilities--Carrier Suitability and Aerial Refueling. Additional
    prototyping efforts in the Accelerated Acquisition process include:

          Unmanned Undersea Vehicles (UUV) Family of Systems which
    provides long-endurance and off-board systems for Intelligence
    Preparation of the Operational Environment.
          Navy Laser Family of Systems (NL FoS) which demonstrates
    High Energy Laser (HEL) capabilities in Naval surface combatants.
          Expeditionary Surveillance Towed Array Sensor System
    (SURTASS-E) which prototypes and explores a ``roll-on, roll-off'',
    modular, passive SURTASS capability.
          Standard Missile (SM) Family of Systems which provides
    new increments of capability and increased range and lethality
    leveraging SM investments and accelerated through rapid prototyping and
    rapid fielding.
          Ship-to-Shore Maneuver, unmanned swarm systems, long
    range precision fires and electronic attack prototyping of new
    operational concepts for Naval amphibious warfare.

        Secretary Wilson. One program that is taking advantage of these
    authorities is the Next Generation Command and Control Digitally Aided
    Close Air Support (DACAS) Platform software. The effort is a $1
    million, six-month project under Defense Innovation Unit Experimental
    (DIUx) to create a modular, core software architecture and Joint
    Terminal Attack Controller software apps. Another example is the Micro
    Weather Sensor. This project is designed to assist Air Force Special
    Operations weather teams by collecting critical weather information in
    inhospitable environments. Having successfully developed and tested the
    sensor, the program is planning to execute $1.7 million of fiscal year
    2018 procurement funding to acquire 100 sensors to meet the current
    requirement.

        4. Senators McCain and Reed. In your opinion, have there been any
    successful efforts to date or programs you would consider models?
        Secretary Lord. Successful efforts specifically associated with
    utilization of rapid prototyping/rapid fielding authorities granted via
    fiscal year 2016 and fiscal year 2017 legislation have not yet be
    aggregated; however, in 2017, the Department established a Rapid
    Prototyping Program which co-funded eight prototyping projects with the
    Services. Each of these projects will rapidly develop prototypes and
    deliver new capabilities to the warfighter over the next three years,
    and are summarized as follows:

          1.  Electronic Warfare (EW)--U.S. Army. This project will
    accelerate EW prototyping to allow dominant maneuver in EW denied
    environments for the tactical soldier in the field. Technologies
    include offensive radio operations pods; Raven Claw software
    enhancements; electronic support and attack capabilities; radio
    frequency mitigation filters; and artificial intelligence and machine
    learning algorithms. This capability will support a USAREUR operational
    needs statement.
          2.  Position, Navigation & Timing (PNT) / Project TITAN--U.S.
    Army. This project will enable U.S. Army platforms to continue
    operations in global positioning system (GPS)-challenged environments,
    providing an anti-jam antenna for the Defense Advanced GPS Receiver
    (DAGR). Enhanced PNT prototypes will be evaluated for the Abrams,
    Stryker, Bradley, and Paladin systems. This capability will support a
    USAREUR operational needs statement.
          3.  Passive Wide-Area Detection of Small Unmanned Aerial Systems
    (sUAS)--U.S. Navy. This project will accelerate a counter-UAS
    capability for naval land and shipboard systems to automatically
    detect, track, and classify targets, and to provide threat alerts.
    Prototypes will consist of wide-area, 360-degree electro-optical (EO)
    and infrared (IR) imaging systems, wide-area acoustic sensors, and
    high-speed, low-light EO and IR inspection of targets.
          4.  Ship to Shore Maneuver Exploration and Experimentation
    (S2ME2)--U.S. Navy / U.S. Marine Corps. This project will extend the
    reach and increases the capability of the individual Marine by
    prototyping a suite of unmanned assets that enable approaches to
    amphibious fire support and underwater survey. Prototypes will enable
    the Marine Corps Forces to plan, execute, and monitor battlefield
    conditions and deceive the enemy as to maneuvers, strength of the
    forces and intentions for deployment.
          5.  High Power Microwave (HPM) for Air Base Air Defense--U.S. Air
    Force. This project will advance two HPM prototypes capable of
    defeating enemy UAS's and missiles. A counter-UAS prototype will
    integrate an Air Force developed counter-electronic system into a
    mobile unit to counter swarms of UAS's. The counter-missile (CM)
    prototype will evaluate U.S. Navy HPM technology for use on a
    transportable system capable of defeating multiple missiles in a
    relevant operational environment.
          6.  Open Mission Systems Contribution for Next-Generation
    Architectures (OCNA)--U.S. Air Force. The Air Force will prototype a
    platform architecture that combines an on-board data communication bus
    with advanced broad-band multi-element antennas and shared processors
    to enable use of non-proprietary standard interfaces. This prototype
    will expand the open mission systems (OMS) open messaging standard to
    capitalize on the capabilities of PlatformNxt, the Air Force's next-
    generation avionics architecture.
          7.  Army Navy/Transportable Radar Surveillance and Control Mode 2
    (AN/TPY-2) Adjunct Sensor--Missile Defense Agency. The Missile Defense
    Agency will develop and provide a prototype adjunct sensor to be
    integrated with fielded forward-based mode AN/TPY-2 radars. This sensor
    with X-band dish capability will provide an extended field of regard
    and low elevation angle tracking. The capability will expand the TPY-
    2's performance against hypersonic glide vehicles.
          8.  Mission Rehearsal Trainer (MRT)--Joint Staff/J8. This project
    will prototype a distributed learning / training system to enhance the
    intelligence collection capabilities of a specific Combatant Command.
    Project details are classified.

        The process being utilized to develop the above prototypes
    represents a successful template the Department will use to allocate
    funds to support rapid prototyping projects. These projects emerged
    from requirements from the military Services, Missile Defense Agency,
    and the Joint Staff and include such diverse capabilities as enhanced
    electronic warfare, counter unmanned aerial systems, and high-power
    microwave based air defense prototypes. All of these projects are
    intended to reduce overall cost and deliver capability to the
    warfighter more rapidly, in some cases by several years.
        Secretary Esper. While we are still in the early stages of
    incorporating these new authorities into Army business processes, I
    would consider both the Active Protection Systems project and Army
    Rapid Capabilities Office Electronic Warfare project good initial
    models. Both leveraged current and emerging technologies to deliver
    quick solutions to address urgent capability gaps. These projects are
    also following a phased approach that continuously improves capability
    and applies operator feedback to inform and reduce risk for enduring
    programs of record.
        Secretary Geurts. While we believe that projects and programs
    designated for accelerated acquisition will be successful in the timely
    delivery of critical warfighter capability, it is early in their
    respective execution.
        Secretary Wilson. We are currently evaluating our prototyping
    efforts and organizational structures, training, and funding that
    support them so that we can establish model efforts. We will continue
    monitoring the progress of ongoing and future efforts and evaluate what
    lessons can be applied.

        5. Senators McCain and Reed. In your opinion, what additional steps
    are needed to advance these approaches?
        Secretary Lord. Appropriating dollars in prototyping accounts will
    allow the Department to address some of the emergent warfighter needs
    to include fielding proven technologies of new or upgraded systems with
    minimal development in 6 months and complete fielding within 5 years
        In addition to funding prototyping and production, it's also
    important to fund experimentation that facilitates prototype
    utilization in realistic settings by operational users. This maximizes
    the value of the prototyping efforts, and provides the real-world
    experience that lets the Services define more detailed requirements.
    These requirements enable transition to a current or new weapon system
    program. Experimentation sometimes requires operations and maintenance
    (O&M) and other types of RDT&E.
        Secretary Esper. The Army must continue to institutionalize these
    alternative approaches, which are critical to our efforts to defeat
    emerging threats and keep pace with technological change. While I am
    encouraged by the results thus far, we must expand the application of
    these approaches as part of our larger effort to reshape and improve
    the agility, synchronization, and responsiveness of the Army
    acquisition enterprise. With regard to ``mid-tier'' acquisition for
    rapid prototyping and rapid fielding addressed in section 804 of the
    Fiscal Year 2016 NDAA, we are hampered by the requirement within this
    language to complete fielding within five years as opposed to achieving
    Initial Operational Capability and block or unit set fielding within
    five years, which is more consistent with our multi-year resourcing
    process.
        Secretary Geurts. The DON will work with the Congress to seek
    support for flexible funding constructs and associated appropriations,
    alongside an agreed-to framework of governance and oversight that will
    ensure the effective and efficient use of such funds for their intended
    purpose. In addition, we are ramping up training efforts for our
    acquisition workforce. We are developing course work and other lines of
    effort with our Defense Acquisition Workforce Development Fund with
    specific concentration on the new acquisition authorities and how these
    can be applied to speed capability to the Fleet through rapid
    prototyping and rapid fielding.
        Secretary Wilson. Clear implementation guidance, as well as a
    dedicated source of Air Force funds for rapid prototyping would
    facilitate a streamlined process for quickly identifying and executing
    the highest priority prototyping efforts. Additionally, we need to
    train our workforce. Program managers are reluctant to try non-standard
    acquisition approaches due to fear of failure. We need to encourage
    prototyping strategies to be inserted into programs from the beginning.
    These efforts will require more cross-functional teaming to ensure they
    are provided a well-planned pathway to success.
                        streamlined acquisition process
        Senators McCain and Reed. Secretaries Lord, Esper, Geurts, and
    Wilson, in recent years there has been an increased emphasis on
    adopting more streamlined acquisition management processes with a goal
    of reducing the administrative documentation and reporting burden on
    acquisition programs.

        6. Senators McCain and Reed. In your opinion, has DOD and the
    Services been successful in achieving this goal?
        Secretary Lord. The Department's leadership at every level is
    firmly committed to streamlining our acquisition management processes.
    While I believe many of our reform efforts to date have put us on the
    path to achieving that goal, there's clearly more to do. Consequently,
    we will continue to identify and eliminate burdensome administrative
    and reporting requirements. This is not a short term goal, but a long
    term commitment to improve the efficiency of our acquisition system.
    Additionally, we will scale practices used by the Strategic
    Capabilities Office (SCO), Defense Innovation Unit--Experimental
    (DIUx), Rapid Capabilities Office (RCO), Joint Improvised-Threat Defeat
    Organization (JIDO), Joint Rapid Acquisition Cell (JRAC), etc. to
    account for a greater percentage of our procurements.
        Secretary Esper. The Army, empowered by Congress, has begun its
    efforts to streamline acquisition with several of the most important
    reform initiatives in progress. The Army has embraced the authorities
    provided by Congress in the fiscal year 2016 and fiscal year 2017
    National Defense Authorization Acts and has taken action to
    reinvigorate the Army Requirements Oversight Council; consolidate Army
    staff elements; establish the Army Rapid Capabilities Office; and
    establish the Office of Process Innovation and Integration.
        The Army is executing eight acquisition reform directives that will
    streamline acquisition processes and increase the Army's ability to
    quickly provide capabilities to Soldiers. These reforms will not be
    accomplished overnight and there will be challenges; however, I am
    convinced that we are reshaping and streamlining the Army acquisition
    management process to improve the agility, synchronization, and
    responsiveness of our Army's acquisition enterprise. I expect you will
    see marked, clear progress in the coming months.
        Secretary Geurts. I agree that acquisition documentation is overly
    burdensome, and that we need to find a better balance between oversight
    and transparency and the need to move more expeditiously. I note that
    programs that have been delegated to the Services for oversight still
    require many program documents which by statute must be approved at the
    OSD level. The DON appreciates your efforts to reform and eliminate
    some of these burdensome requirements, and will continue to work with
    you and your staff to identify requirements that can be eliminated or
    minimized where there is little to no value added by the requirement.
        Secretary Wilson. We still have a lot of work to do, although we
    have had some successes. For example, I have directed a review of all
    Air Force directive publications with the goal of reducing the number
    ensuring they provide current, clear and concise guidance. Within
    acquisition, I have ensured approvals are delegated to the lowest
    appropriate levels, reducing the administrative burden for approvals
    and freeing up the workforce to manage their programs.

        7. Senators McCain and Reed. What specific steps is the Department
    and Services taking to help achieve this goal?
        Secretary Lord. Recent changes to our principal acquisition
    procedures have given decision makers in every acquisition category
    broad authority to tailor acquisition documentation and other
    regulatory requirements that are not required by statute. Tailoring in
    this context can include the elimination of the document where not
    required for the program under review and/or combining several
    documents where it is logical to do so. In addition, decision makers
    have the authority to tailor the acquisition approach consistent with
    specific program requirements and, consequently, reduce oversight and
    the associated reporting burden. We have also developed more focused
    procedures tailored to the unique requirements of services acquisitions
    and defense business systems. The associated documentation and
    reporting requirements are uniquely designed for the needs of those
    programs. As I mentioned in my testimony, we are initiating action
    intended to streamline our contracting procedures with the long term
    goal of awarding a contract in 6 months from the issuance of the
    Request For Proposals. Now, we need to memorialize successful tailoring
    practices in the form of case studies and teach our Acquisition
    Workforce through these real examples at the Defense Acquisition
    University (DAU).
        Secretary Esper. Four of the Army acquisition reform directives
    specifically address streamlining the acquisition management process to
    reduce administrative documentation and reporting burdens on
    acquisition programs. These reforms will; (1) streamline and
    synchronize acquisition planning and processes; (2) streamline the
    development and approval of capability requirements to reduce the time
    it takes from concept development to an approved capability
    requirements document; (3) streamline test and evaluation and minimize
    redundant testing; and (4) streamline the contracting process to reduce
    the time it takes to develop and award a contract.
        In addition, the Army established eight cross functional teams
    (CFTs) to enable the Army's leadership to efficiently identify and
    manage investment and divestment priorities by assessing them against
    the Army's key modernization priorities. These CFTs are charged with
    using technical experimentation and demonstrations, in conjunction with
    industry and commercial sector partners, to inform prototype
    development and reduce the requirements process. These prototypes will
    enable us to learn and make informed resource decisions in less time
    with fewer resources.
        Finally, the Assistant Secretary of the Army (Acquisition,
    Logistics and Technology) recently introduced several initiatives to
    streamline the acquisition process and adapt the acquisition culture
    across the enterprise to empower program managers and promote smart
    decision making. The intent is to promote awareness of the acquisition
    flexibilities contained in recent Defense authorization acts to help
    ensure the Army acquisition community is postured to take full
    advantage of new authorities in areas such as ``middle tier''
    acquisition and rapid prototyping and fielding of innovative system
    components and technologies, commercial items procurement, and other
    transactions authority.
        Secretary Geurts. DON has recently refined its policy with regard
    to accelerating acquisition, to include our responses to urgent needs.
    The new governance policy was developed to take maximum advantage of
    recent acquisition reforms aimed at rapid prototyping, rapid fielding
    and acquisition agility at large, to include the use of Rapid
    Acquisition Authority when warranted. For our Defense Business Systems
    (DBS), many of the regulatory requirements and documentation
    requirements in the DODI 5000.02 have been eliminated in the 5000.75
    because they are not applicable to DBSs. In addition, I have directed a
    review of all documentation required for all the different ACAT level
    programs to identify and eliminate documents which do not add value.
        Secretary Wilson. To achieve the goal of reducing administrative
    documentation and reporting, the Air Force continues to review and
    revise acquisition guidance to eliminate duplication. Policy has been
    updated to allow for additional decision authority delegation and to
    encourage a culture of ``information vs. documentation'' based decision
    making. Additionally, we are finalizing Air Force guidance amplifying
    current DOD policy for Defense Business Systems that streamlines
    oversight by aligning the acquisition, functional, and information
    technology compliance communities. We have implemented a Rapid
    Procurement of Air Force Capabilities Charter to streamline reviews and
    documentation for critical programs.

        8. Senators McCain and Reed. In your opinion, what additional steps
    are needed?
        Secretary Lord. We are finding more opportunities to tailor our
    policies and reduce administrative burden as we implement the
    acquisition reform provisions in the fiscal year 2016, 2017, and 2018
    NDAAs. I believe than an ongoing conversation with Congress is
    necessary to discuss what is working and what is not. I would like to
    hold a hearing highlighting excellent examples of programs where
    creative solutions were applied in a compliant manner. If we held
    hearings showing the art of the possible and the value of critical
    thinking, then we have the opportunity to motivate the Acquisition
    Workforce.
        I am also meeting regularly with the Advisory Panel on Streamlining
    and Codifying Acquisition Regulations (the section 809 panel) to
    discuss the recommendations they are making to Congress to streamline
    the acquisition process and to identify ways to update and modernize
    how the Department acquires systems while also reducing cumbersome
    procedures and statutory reporting requirements that no longer add
    significant value. Their final report's Volume 1 includes some 74
    specific recommendations in the areas of Commercial Buying, Contract
    Compliance and Audit, Defense Business Systems, Earned Value
    Management, Services Contracting, Small Business, Statutory Offices and
    Designated Officials, and Statutory Reporting Requirements. I look
    forward to continued discussions with the Panel on these and the next
    two volumes of recommendations.
        Secretary Esper. The Army must successfully implement its ambitious
    slate of reforms to streamline acquisition processes and increase
    efficiency, cost effectiveness, and leader accountability while
    reducing administrative burdens. These reforms are underway and are
    expected to be implemented by the end of fiscal year 2018. We continue
    to seek flexibility in funding under Continuing Resolution and
    reprogramming authority once a funding bill has been enacted. The Army
    also believes greater flexibility in a Continuing Resolution that would
    allow the Services to execute programs at the lowest committee mark
    even under a Continuing Resolution would be beneficial.
        In addition to these reforms, the congressionally chartered section
    809 panel is reviewing defense acquisition regulations to streamline
    and improve the defense acquisition process. The panel will recommend
    statutory reforms to simplify the acquisition system. The delegation of
    authority to the Service Acquisition Executive, coupled with internal
    Army reform efforts and relief from unnecessarily burdensome
    acquisition regulations identified by the section 809 panel will
    provide the additional steps needed to implement an agile and
    accountable defense acquisition system. Steps in Continuing Resolution
    reform would allow the Services to move forward on programs at the
    lowest committee mark instead of waiting for the final bill.
        Secretary Geurts. While OSD has delegated authorities for most
    Navy/USMC programs back to the DON, there are several statutes and OSD
    policies which require DON to gain OSD approval in spite of these
    delegated authorities, thus greatly reducing the positive impacts of
    the delegation of these programs back to the Services. The DON will
    continue to work with the appropriate offices within OSD to identify
    additional opportunities to delegate authority currently retained by
    OSD to the Military Departments (MILDEPs).
        Secretary Wilson. The steps taken to date represent a significant
    culture change from risk aversion to risk management at all levels of
    governance. This culture change will enable speed but needs time to
    become standard practice.

        9. Senators McCain and Reed. Given the other ongoing changes in the
    acquisition structure, such as shift of acquisition authority to the
    services, what challenges to you see in providing oversight of an
    acquisition program without placing an unnecessary burden on the
    acquisition workforce managing the program?
        Secretary Lord. My statutory responsibilities as Under Secretary of
    Defense for Acquisition and Sustainment will include (among others) the
    responsibility to serve as the chief acquisition and sustainment
    officer of the Department and to be principal advisor to the Secretary
    on acquisition and sustainment. Consequently, I will have an enduring
    need for information about the status of our ongoing investments so I
    can assess progress, identify issues, and assist the program if needed.
    Access to program information will be a continuing requirement which I
    believe we can satisfy without burdening the services. I am using a
    monthly scorecard to follow MDAP cost, schedule and performance and
    will manage by exception. In order to increase the capability of the
    entire Acquisition Workforce, I am undertaking a reorganization of DAU
    and a total revamping of the curriculum. Only by attracting, developing
    and training a skilled workforce, will we truly make an enduring
    difference in program execution.
        Secretary Esper. The major challenge is to provide oversight for
    the breadth and depth of programs already managed by the Army
    Acquisition Executive in addition to the Major Defense Acquisition
    Programs delegated from the Office of the Secretary of Defense. To
    mitigate these challenges the Army must improve acquisition oversight
    through centralized planning, decentralized execution, and improved
    performance metrics. To achieve this the Army is driving down Milestone
    Development Decisions (MDD) and Milestone Decision Authority (MDA) to
    Program Executive Officers (PEOs) for Acquisition Category (ACAT) II
    and III programs. PEO's with Milestone Decision Authority will be
    authorized to further delegate select ACAT IV programs down to O6/GS-15
    Project Managers. We will align the duty assignments of PEOs and PM
    with the milestones established for their programs to ensure a clean
    handover of the program at critical points, and so that clear measures
    of effectiveness--cost, schedule, and performance--can be assessed. The
    Army has also initiated ACAT IV programs within our acquisition system.
    We have defined an ACAT IV program that includes efforts with mature
    technologies, limited complexities and lower risk that also have
    funding below $100 million for Research Development, Test and
    Evaluation and/or $400 million Procurement.
        The delegation of this execution authority will improve
    accountability by empowering the PEOs and PMs. It will allow the Army
    Acquisition Executive to focus on higher risk ACAT I programs while
    maintaining the mechanisms required to oversee the remaining programs.
    For instances, the MDAs will conduct an annual program review of all
    non-ACAT I programs and provide a concise report of the results of the
    reviews no later than the end of the fiscal year. Additionally, PEOs
    will ensure that the Army Acquisition Program Master List (AAPML) is
    updated quarterly, and will report all performance metrics required by
    Army Directive 2017-35, (Acquisition Reform Initiative #8) no later
    than the end of each fiscal quarter.
        Secretary Geurts. With the ongoing changes in the acquisition
    structure, it is critical that the MILDEPs have sufficient numbers of
    trained acquisition professionals to provide the requisite oversight in
    light of the Services' increased authority and responsibility.
    Continued support for the Defense Acquisition Workforce Development
    Fund (DAWDF) will be a key enabler for the Services to maintain
    effective oversight.
        Secretary Wilson. We have made strides in reducing bureaucracy. We
    continue to monitor activities to balance providing sufficient and
    timely information to senior leaders on our delegated programs against
    the burden of generating the information. The key is to find the right
    balance of speed and risk acceptance versus risk aversion.

        10. Senators McCain and Reed. What additional steps, including
    legislation, do you feel are needed from Congress?
        Secretary Lord. The Fiscal Year 2018 NDAA HASC report directed the
    Department to conduct a review of acquisition statutes to identify
    process requirements in acquisition statutes that hinder agile
    acquisitions; to identify obsolete statute; and to recommend related
    statutory changes that should be considered to simplify or improve the
    agility of the defense acquisition system. As of today, there are 34
    candidates for acquisition related legislative changes that are in
    review within the Department. These potential legislative changes span
    topics of delegation of various waiver and approval authorities,
    monetary thresholds, written determinations and approvals, information
    technology acquisition, and numerous other topics to include potential
    expansion of exceptions related to the Competition in Contracting Act.
        Additionally, the Department currently has several authorities
    related to supply chain risk management considerations, based upon
    foreign ownership control and influence, in order to ensure secure
    procurements. Section 806 of the Fiscal Year 2011 NDAA provides the
    Department with authority to exclude a source on the basis that it
    presents significant supply chain risk to a National Security System,
    and the Department is requesting that this authority be extended by
    five years, from 30 September 2018 to 30 September 2023. In accordance
    with section 807 of the Fiscal Year 2018 NDAA, the Department is
    ensuring utilization of this authority and implementing processes for
    enhancing scrutiny of acquisition decisions in order to improve the
    integration of supply chain risk management into the overall
    acquisition decision cycle. Also, as part of this effort, the
    Department is collaborating with related activities underway in the
    Office of Management and Budget, Office of the Director of National
    Intelligence, the Department of Homeland Security, and the General
    Services Administration to inform processes and determine additional
    authorities that may be needed, such as provision of more streamlined
    authorities for National Security Systems and expansion of authorities
    to cover other than national security systems.
        Review and collaboration with your staffs will be key to ensuring
    we jointly champion implementation of changes with the goal of securely
    acquiring and fielding products that provide significant increases in
    mission capability and operational support in the most cost effective
    and schedule efficient manner as possible. I look forward to reviewing
    these with staffers as soon as possible.
        Secretary Esper. Many of the reforms required to streamline
    acquisition management processes are now internal to the Army, and we
    appreciate Congressional action in the Fiscal Year 2018 National
    Defense Authorization Act (NDAA) to further streamline acquisition
    process. The Army could benefit further from; (1) a capabilities based
    versus program specific Program Element (PE) lines. Under this concept,
    the Army would be able to realign funding within a portfolio (with
    notification to Congress) should the need arise to accelerate or slow
    and effort without the need for an Above Threshold Reprogramming; (2)
    an additional increase in the ceiling of the Simplified Acquisition
    Threshold from $250,000 to $500,000 to provide greater agility and
    streamlining for these small purchases and allow us to keep pace with
    the threat and enabling a less bureaucratic and lengthy process in
    getting to expedited contract awards; (3) protection of Technology
    Maturation Program Element in Research and Development (R&D) so that
    programs would have a balanced approach between requirements pull and
    innovative technology driven; (4) continuing resolution (CR) reform.
        Secretary Geurts. By statute, several major defense acquisition
    program (MDAP) documents and other requirements still require approval
    or action within the OSD, even for MDAPs for which the Service
    Acquisition Executive (SAE) is the Milestone Decision Authority (MDA).
    Congress can further reduce the administrative documentation and
    reporting burden on acquisition programs by assigning authority for
    these requirements to the MILDEPs when the SAE is the MDA. Examples
    include:

          Program cost, fielding, and performance goals under 10
    U.S.C. Sec.  2448a (must be established by the Secretary of Defense,
    delegable only to the Deputy Secretary of Defense);
          Independent cost estimates (ICEs) under 10 U.S.C. Sec.
    2334 (must be either conducted or approved by DCAPE);
          Analysis of Alternative study guidance under 10 U.S.C.
    Sec.  2366a (must be developed by DCAPE).

        In addition, amending 10 U.S.C. Sec.  2306b(i)(3) to allow the
    Secretaries of the MILDEPs (delegable to the SAEs) to make the required
    certifications and determinations for multiyear contracts would reduce
    administrative burden for programs that are authorized by law to
    utilize such multiyear contracts.
        Secretary Wilson. The Air Force appreciates the authorities
    provided by Congress and requests continued efforts to ensure
    authorities and decisions that still reside outside the Air Force are
    delegated to the Service or appropriate level to align with
    Congressional intent.
        Current law (section 807 of the Fiscal Year 2017 NDAA) requires the
    Services to establish program cost and fielding targets and those cost
    and fielding targets must be approved by the Secretary of Defense or
    the Deputy Secretary of Defense, even for programs delegated to the
    Services. We believe that making the approval authority for these
    targets at the Milestone Decision Authority level would be more
    consistent with the direction Congress has been taking with delegation
    of other acquisition authorities. We would recommend that the law be
    changed to allow the Milestone Decision Authority be the approver of
    those targets.
                           non-traditional companies
        Senators McCain and Reed. Secretaries Lord, Esper, Geurts, and
    Wilson, the Department of Defense has a history of investing in
    innovative technologies, allowing the United States to maintain
    superiority on the battlefield and beyond. Now that commercial science
    and tech firms--"non-traditional companies"--are on the leading edge of
    innovation, DOD relies on them for new products and ideas. However,
    many non-traditional companies find the cost of doing business with DOD
    to be expensive, slow, and cumbersome. As a result, they are often
    reluctant to modify their products for DOD's use or give up trying to
    navigate DOD's complex acquisition process.

        11. Senators McCain and Reed. What do you consider to be the
    biggest obstacle to attracting non-traditional companies to modify
    their products for DOD use?
        Secretary Lord. The biggest obstacle is overcoming the perception
    that DOD does not have the flexibility or the ability to contract with
    non-traditional companies using scalable, commercial-like acquisition
    practices. DOD can contract, or enter in other forms of agreements with
    these companies using commercial procedures consistent with Other
    Transaction Authorities (OTAs), and the commercial item acquisition
    methods in the Federal Acquisition Regulations (FAR) Part 12. Although
    their use has not been widespread in the Department, the military
    services and defense agencies began using OTAs in the 1990s. The
    challenge is to expand awareness of the available flexibilities and
    developments in statute, policy and regulations to the broader
    acquisition community to enable procurement of the innovative products
    and services that meet the rapidly evolving warfighter needs. The
    Department is taking steps to expand their usage by establishing
    centers of excellence including the Defense Innovation Unit
    Experimental (DIUx) as supported by Army Contracting Command--New
    Jersey, and Defense Advanced Research Projects Agency (DARPA), host OTA
    training events, and broaden acquisition and contracting workforce
    awareness of these techniques and best practices. We will ramp up our
    efforts to work with Industry Associations (AIA, NDIA, PSC, etc.) as
    well as government agencies like the SBA to reach out to small
    businesses. Additionally, we are leveraging our Defense Innovation
    Board members to connect with Silicon Valley software and artificial
    intelligence companies to establish working relationships that will
    allow us to connect with an entirely different base.
        Secretary Esper. The federal acquisition process is encumbered with
    stifling regulations and processes that make it difficult for non-
    traditional companies to participate, and make the acquisition process
    untimely and sometimes even costly. In particular, we would support
    change to make the current process more inviting and easy to navigate,
    and decreasing barriers such as rigid requirements standards.
        Secretary Geurts. Non-traditional suppliers to the DOD often cite
    factors such as (1) heavy legal requirements/regulations, (2) onerous
    cost accounting standards, (3) unpredictable contracting timelines, (4)
    slow contracting timelines, and (5) fear of loss of intellectual
    property as disincentives to working with the DOD. I would agree that
    these factors, as well as the lack of training of government
    acquisition professionals on how to incentivize and contract with non-
    traditional suppliers and lack of open interfaces and architectures are
    obstacles.
        Secretary Wilson. The feedback we have received from industry
    points to misperceptions and concerns about certified cost and
    accounting requirements the Department levies to meet the Truth in
    Negotiations Act and intellectual property requirements under the
    Federal Acquisition Regulation. These drive up the cost of doing
    business and increases the risks for these companies. Industry also
    does not want to risk giving away their Intellectual Property or to
    spend the money to get an ``approved and certified'' system when what
    they have works for every other facet of their business. From a small
    business perspective, entering into a contract with the DOD is a big
    challenge. Allowing the acquisition process to attract innovative and
    non-traditional businesses is key.

        12. Senators McCain and Reed. What steps are the services and OSD
    taking to address concerns raised by non-traditional companies,
    specifically as they relate to (1) simplifying the acquisition process,
    (2) protecting intellectual property rights, (3) decreasing contracting
    timelines, (4) reducing contract terms and conditions, and (5) training
    the contracting workforce? How are you measuring your progress?
        Secretary Lord. Using OTAs, DOD has dramatically simplified the
    research and development acquisition process using best business
    practices, negotiated flexible intellectual property rights, decreased
    contracting timelines, and dramatically reduced contract terms and
    conditions. We are making progress using commercial-like practices and
    utilizing commercial solutions (products and services) to meet the
    Department's mission needs. Building on the success of the Commercial
    Solutions Opening (CSO) process conceived in the office of the Under
    Secretary of Defense for Acquisition, Technology, and Logistics and
    piloted by DIUx to award OTAs, the Department is working to implement
    section 879 of the National Defense Authorization Act for fiscal year
    2017, Public Law 114-328 (fiscal year 2017 NDAA) pilot authority to
    acquire innovative commercial items, technologies, and services using
    the CSO process to award FAR based contracts or OTAs. The CSO process
    is a merit-based source selection strategy, similar to broad agency
    announcements (BAAs), enabling the DOD to acquire promising innovative
    commercial technologies in response to problem statements, rather than
    conducting a traditional competition for specific solutions. With the
    express authority in the National Defense Authorization Act for fiscal
    year 2018, Public Law 115-91 (Fiscal Year 2018 NDAA), DOD expects that
    OTA usage will be expanded into DOD's Small Business Innovative
    Research (SBIR) programs along with other non-traditional companies.
    DOD recently hired an OTA expert as the Learning Director at Defense
    Acquisition University to develop training programs and host innovative
    acquisition workshops for all of the Department. DOD began tracking the
    use of OTAs in Federal Procurement Data Systems (FPDS) information in
    fiscal year 2013. The Department has experienced a steady growth in
    actions and obligations associated with non-traditional companies. With
    the statutory changes provided by Congress, this trends is expected to
    grow significantly. We have pilot projects to measure how quickly we
    can get on contract and look forward to measuring progress using a
    series of metrics.
        Secretary Esper. The Fiscal Year 2018 NDAA continues a trend from
    the previous two NDAAs by encouraging the procurement of commercial
    items. By using commercial procedures to purchase supplies and
    services, we can attract more non-traditional defense contractors, and
    allow the rapid acquisition and delivery of capabilities to our
    Warfighters. An emphasis on commercial contracting will simplify
    acquisitions, protect intellectual property rights, decrease
    contracting timelines, and reduce contract terms and conditions. DOD
    training requirements for contracting professionals are well
    established. The Defense Acquisition Workforce Improvement Act (DAWIA)
    requires personnel to become certified through contracting specific
    training.
        In support of the NDAA reforms, the Army has taken steps to
    implement eight key Acquisition Reform Initiatives. The Army is in the
    process of streamlining the contracting process to reduce the time it
    takes to develop and award a contract and establishing metrics to
    improve efficiency and effectiveness.
        Secretary Geurts. The DON is exploring the increased use of Other
    Transactional Authorities (OTAs) to combat these concerns and offer a
    great deal of flexibility in working with non-traditional and
    traditional suppliers. We are taking steps to increase our knowledge
    and develop an expertise in contracting using OTAs. In addition,
    through the Office of Naval Research, DON has effectively used Broad
    Agency Announcements for research topics to encourage small and large
    companies to share and develop their ideas and new or improved
    technologies. For small businesses, the DON uses the Small Business
    Innovation Research (SBIR) and Small Business Technology Transfer
    (STTR) program to encourage small businesses to share and develop their
    new or improved technologies. To encourage small business participation
    in our programs, the DON has assigned each Deputy Program Manager the
    responsibility to be the small business advocate for all things
    associated with the program. The DON regularly promotes increased
    participation by nontraditional small and large companies through DON
    outreach efforts conducted jointly with our Office of Small Business
    Programs to hear different perspectives and ideas. Finally, we are
    exploring new collaboration models such as SOFWERX, to enable earlier
    and more robust sharing of our capability gaps to enable earlier
    identification of potential existing commercial solutions from non-
    traditional suppliers to solve DON capability gaps.
        Secretary Wilson. The Air Force is making greater use of Other
    Transaction Authorities that allow more flexibility in negotiating
    intellectual property with companies. Additionally, our Small Business
    Innovative Research (SBIR)/ Small Business Technology Transfer (STTR)
    Program allows for a more streamlined process for small businesses to
    enter into a SBIR/STTR contract. The SBIR/STTR program has started
    working with innovative programs such as Technology Accelerators to
    align solicitation guidelines to best meet the rapid pace of an
    Accelerator and speed up contracting actions. Another benefit of SBIR/
    STTR is that all companies awarded a contract from a SBIR/STTR topic
    retain intellectual property rights. The Defense Acquisition University
    offers Other Transaction Authority training courses to acquisition and
    contracting personnel. The Air Force is reviewing its initial skills
    training course to incorporate Other Transaction Authorities.

        13. Senators McCain and Reed. Congress has taken action to address
    some of the concerns raised by non-traditional companies in the fiscal
    years 2016 and 2017 National Defense Authorization Acts, for example by
    allowing greater use of Other Transaction Authority and eliminating or
    reducing the burden of some contract terms and conditions . What
    additional authorities, if any, do you need from the Congress to
    address concerns raised by non-traditional companies?
        Secretary Lord. At this time we do not anticipate needing any
    additional authorities to address concerns raised by non-traditional
    companies. The Department appreciates the flexibilities provided by
    Congress in the fiscal year 2016 and 2017 NDAAs, as well as the
    recently passed Fiscal Year 2018 NDAA. The Department continues its
    efforts to increase awareness and encourage use of OT authorities by
    the acquisition workforce through additional training and OTA
    delegations. We are implementing these provisions via Defense Federal
    Acquisition Regulation Supplement Cases, Defense Procurement and
    Acquisition Policy Memoranda, or updates to the OT Guide, with the
    intent of increasing awareness and access to non-traditional
    contractors. However; we would like to reserve the ability to revisit
    this topic with your staffs and discuss additional authorities needed
    as we identify areas of opportunity. As stated in responses to other
    questions, our ability to establish streamlined, effective training
    methodologies using a new approach at DAU is critical to enabling a
    sustained capability within our Acquisition Workforce to facilitate a
    simple, fast and flexible acquisition system.
        Secretary Esper. DOD is implementing legislative reforms in fiscal
    years 2016, 2017 and 2018 NDAA. As we work towards instituting these
    reforms, we will identify the need for future legislative reforms and
    work with Congress to develop legislative solutions. One example is
    improving commercial buying policies to be more consistent with
    commercial practices in order to attract the best and the brightest
    non-traditional companies to the government market place. Achieving the
    definition of commercial items and challenging operational testing with
    commercial items also could add many of the implementation steps are in
    the early stages, therefore, it is too early to determine whether
    additional Congressional authorities are warranted.
        Secretary Geurts. The DON greatly appreciates the additional
    acquisition flexibility provided with the expansion of our ability to
    use OTAs to reach firms, products and ideas that we have not been able
    to reach with the more traditional acquisition authorities for research
    projects, prototypes and limited production. No additional authorities
    are requested at this time. Continued support for the Defense
    Acquisition Workforce Development Fund will be critical so that we can
    properly train our acquisition workforce on best practices to leverage
    these new authorities to reach a broader set of solution providers.
        Secretary Wilson. The Air Force appreciates the Congressional
    support of expanding the use of Other Transaction Authorities and
    minimizing the burden on small business entry into the Department of
    Defense. The Air Force would like to see authorization for Direct to
    Phase II Small Business Innovative Research / Small Business Technology
    Transfer contracts. It was not re-authorized in the Fiscal Year 2018
    NDAA and lapsed as of 1 October 2017. The reauthorization of Direct to
    Phase II would give non-traditional companies a streamlined option to
    do business with the DOD.
                             major weapons systems
        14. Senators McCain and Reed. Secretaries Lord, Esper, Geurts, and
    Wilson, when DOD awards major weapon system development contracts that
    establish cost, schedule and performance goals that are informed by
    mature technologies and early systems engineering analysis--an approach
    that reflects best practices used by many leading commercial
    companies--those goals are more realistic and program success is much
    more likely. While DOD has made progress in this area over the past
    decade, many programs continue to experience cost, schedule, and
    performance problems.

        In your opinion, what are the root-causes of major weapon system
    program problems, and what additional changes, if any, do you think DOD
    needs to make to address them?
        Secretary Lord. The Department conducts a detailed root cause
    analysis (RCA) on all programs that breach critical Nunn-McCurdy (N-M)
    thresholds. While these kinds of breaches are uncommon, the forensic
    analysis embodied in the root cause analyses illustrate how poor
    planning and/or execution leads to these poor outcomes. An analysis of
    all the critical N-M breaches from 2010 to 2018 revealed a number of
    cross-program trends. Among those are the development of unrealistic
    baseline estimates for cost and schedule and poor performance by
    government and contractor personnel responsible for program management.
    The most recent N-M breach on the Advanced Arresting Gear (AAG) program
    is an example of both these causes. The RCA concluded that the program
    failed to understand the technical maturity of the program at its
    inception and to plan properly. Additionally, program management and
    leadership failed to recognize these latent problems early and execute
    fixes early on. These causes are further demonstrated by the Next
    Generation Operational Control System (OCX) program where an
    unrealistic externally dictated schedule was established without
    reference to program content. Unrealistic schedules and cost estimates
    have been seen on a number of other N-M RCAs such as the F-35, the
    Assembled Chemical Weapons Alternatives (ACWA) program, and the Global
    Hawk. For this reason, the Department has been driving the requirement
    to understand and track throughout development the basic framing
    assumptions that programs baseline cost and schedule estimates are
    based on. Understanding cost, schedule and performance risk is greatly
    facilitated by prototyping and experimentation prior to program
    kickoff. We are striving to introduce more prototyping and
    experimentation through the new R&E construct. Additionally, I believe
    that flexibility with requirements is key as programs progress in order
    to facilitate streamlined, cost effective and schedule efficient
    execution. As discovery occurs over the course of a program and
    shortfalls are identified, non-materiel effective and suitable
    compensatory measures may be identified, such as updates to tactics,
    techniques and procedures. Speed of decision is critical during program
    execution, as every additional day represents more tax payer dollars
    spent and delayed fielding of critical capabilities to our nation's
    forces. As such, authority to approve such requirements changes needs
    to be delegated to the lowest possible level.
        In terms of personnel performance, I am taking major steps to
    improve program management and the acquisition workforce. These steps
    include making sure we have the right people in the right positions, as
    well as ensuring they have the right education and training for the
    duties they will be expected to perform. Additionally, the Defense
    Acquisition University curriculum is being reconsidered in regard to
    content and delivery.
        Secretary Esper. A root cause for major weapon system program
    problems within the Army starts with requirements that take too long to
    establish, are often too ambitious, and frequently change throughout
    the process.
        Secretary Geurts. Poorly defined requirements, a lack of proper
    change control, and non-flexible architectures and processes are the
    root-causes of major weapon system program problems. Our focus is on
    stable, well-defined and understood requirements prior to weapons
    systems production while also building flexibility into our systems and
    processes that allow for accelerated system delivery and adaptability
    in the integration of new requirements within appropriate cost.
        Secretary Wilson. The Air Force believes there are a few root
    causes of problems--technical challenges, requirement stability, and
    stable budgets. Technical challenges during system development often
    cause delays and cost growth. We can alleviate these by pursuing more
    prototyping and experimentation to identify the achievable capabilities
    and technical requirements in the timeframe the warfighter needs them.
    In addition, ensuring requirement stability curbs program cost growth
    and schedule delays. For example, the Air Force has experienced
    challenges with software development-intensive programs. We have
    started Pathfinder efforts to relook at how we initiate these programs.
    The Air Force also experiences challenges ensuring stable and timely
    program budgets. We identify the budgets programs need to execute the
    acquisition strategy. However, the instability of funding amounts and
    timeliness are challenges all programs face. We need stable, timely
    budgets to execute the plans and programs to deliver the warfighter
    capability.

        15. Senators McCain and Reed. Given the shift in acquisition
    authority from OSD to the military services, do you anticipate any
    challenges with ensuring programs begin with well informed and
    realistic goals?
        Secretary Lord. I do not. The shift in authority to the Services is
    balanced by the requirements of section 807 of the Fiscal Year 2017
    NDAA which requires the Secretary to establish cost, schedule and
    performance goals prior to beginning Major Defense Acquisition Programs
    to ensure the Service programs are affordable and will deliver when
    needed. We are currently working through section 807 requirements on
    the Army Lower Tier Air and Missile Defense Sensor (LTAMDS) program.
        Secretary Esper. I believe that the shift in acquisition authority
    coupled with the establishment of Cross Functional Teams and a
    reinvigorated Army Requirements Oversight Council posture us to
    establish well-informed and realistic goals. With renewed emphasis on
    aligning resources, requirements, and acquisition, and emphasis on
    Senior Leader engagement, the real business of developing and fielding
    capabilities quickly and efficiently can be addressed in real time with
    all of the key participants.
        Secretary Geurts. The delegated authority allows DON to manage the
    performance of programs designated as Acquisition Category 1C and IB.
    There are, however, numerous additional milestones and phase documents
    still requiring OSD approval. Examples include:

          Program cost, fielding, and performance goals under 10
    U.S.C. Sec.  2448a (must be established by the Secretary of Defense,
    delegable only to the Deputy Secretary of Defense);
          Independent cost estimates (ICEs) under 10 U.S.C. Sec.
    2334 (must be either conducted or approved by DCAPE);
          Analysis of Alternative study guidance under 10 U.S.C.
    Sec.  2366a (must be developed by DCAPE).

        The DON will continue to ensure appropriate analysis and rigor is
    taken when developing program capability, cost, and schedules, and will
    continue to work with the experts across the DOD and industry for
    review, validation and best practices.
        Secretary Wilson. The Air Force has put an emphasis on ensuring
    realistic technical requirements and cost goals that will result in the
    timely delivery of affordable capability within the appropriate level
    of risk. We will continue that emphasis for all of the Air Force
    acquisition programs. Additionally, Congress put in place requirements
    for both the Service Secretary and Chief of Staff to concur with the
    cost, schedule, technical feasibility, and performance trade-offs for
    our Major Defense Acquisition Programs. These reviews ensure leadership
    receives adequate information before program initiation.

        16. Senators McCain and Reed. Given your prior experiences, what do
    you believe are the keys to a successful product development program,
    and to what extent do you believe those keys are resident within the
    DOD acquisition environment? Please explain.
        Secretary Lord. Based on my industry experience, we need to
    establish a proper program baseline and identify realistic cost,
    schedule, and performance metrics. Then we put people with the
    appropriate skill sets, training and leadership capability in key roles
    and hold them accountable. As I did in industry, we look at the numbers
    every month to see where we are and establish action plans where we are
    not meeting targets. I believe the keys to success depend on
    attracting, developing and retaining motivated people in the
    acquisition workforce. I will also be retooling the Defense Acquisition
    University so that the workforce has the proper training and resources
    to be successful.
        Secretary Esper. I believe keys to a successful product development
    program are stable, realistic requirements, predictable and stable
    funding and sufficiently mature technologies prior to integration,
    test, production and fielding. We absolutely have the capabilities to
    successfully execute product development within the Department of
    Defense.
        Secretary Geurts. Successful programs have well defined
    requirements, built in open standards and flexible architectures. They
    have the right government and industry team for the particular program,
    who are both empowered and held accountable, with access to rapid
    decision making processes.
        I believe there are many examples of these programs in the DON
    including the Virginia-class Submarine Program and the P-8 Program. My
    focus will be to continue to ensure we focus on these factors for
    success as we execute our existing portfolio or programs and design
    MDAPs in the future. I believe putting program responsibility back into
    the hands of the Services to execute will greatly enhance the ability
    of more programs to be successful in the future as it enables the key
    tenets of accountability, rapid decision making, and empowered teams.
        Secretary Wilson. The keys to successful product development:
    understand the feasibility of capabilities given the required timeframe
    and available resources; continue to emphasize technical maturation and
    risk reduction activities; and aggressive use of tools such as
    prototyping and experimentation before pursuing the full development of
    a system.
                                     lptas
        17. Senators McCain and Reed. Secretaries Lord, Esper, Geurts, and
    Wilson, section 832 of the Fiscal Year 2018 NDAA prohibits the use of
    the low-cost, technically acceptable (LPTA) source selection approach
    for DOD's engineering and manufacturing development contracts for
    MDAP's.

        In your opinion, is there any situation that you would feel
    warrants a LPTA source selection approach for DOD's engineering and
    manufacturing development contracts?
        Secretary Lord. No. The Lowest Priced Technically Acceptable (LPTA)
    source selection process is the appropriate source selection process to
    use when the products and services are well-defined, commercial, or
    non-complex; there is minimal risk of unsuccessful contract
    performance; price has a dominant role in source selection; and there
    is no value, need or interest to pay for higher performance. These are
    not characteristics of engineering and manufacturing development (EMD)
    contracts for Major Defense Acquisition Programs (MDAP); therefore, I
    do not believe there are any situations that would warrant an LPTA
    source selection approach for DOD's EMD contracts.
        Secretary Esper. Current Army and DOD Source Selection procedure
    guidance specify that LPTA should only be used when there are well-
    defined requirements, the risk of unsuccessful contract performance is
    minimal, price is a significant factor in the source selection, and
    there is neither value nor willingness to pay more for higher
    performance. Since requirements for engineering and manufacturing
    development phase contracts are typically not as well defined as
    requirements for subsequent program phases, use of an LPTA contract
    would generally be inappropriate.
        Secretary Geurts. The Lowest Price Technically Acceptable (LPTA)
    method is a tool in the Best Value Continuum, and when used in
    appropriate circumstances and combined with effective competition and
    proper contract type, can provide a best value solution. The first
    prerequisite to use of LPTA is a firm understanding of what constitutes
    ``technically acceptable.''
        Secretary Wilson. Every acquisition program is different and must
    be evaluated on the specific program details. In general, the LPTA
    source selection approach is not appropriate for Engineering and
    Manufacturing Development contracts for Major Defense Acquisition
    Programs.

        18. Senators McCain and Reed. In the past, programs have stated
    that they are not using an LPTA source selection approach but the
    intent of the approach was to select the lowest cost, technically
    acceptable bidder, what steps will you take ensure that the approach
    taken by programs follows the intent of section 832?
        Secretary Lord. The Milestone Decision Authority for each MDAP
    approves an Acquisition Strategy that describes the source selection
    strategy for the EMD contract. The Department also conducts multi-
    functional senior-level peer reviews of solicitations for contracts
    over $1 billion. Contracts less than $1 billion are reviewed by senior
    acquisition leaders at each component. We will continue to leverage
    these tools to ensure that MDAP source selections are consistent with
    section 832.
        Secretary Esper. There are appropriate levels of review and
    approvals to monitor use of LPTA. The Army seeks best value in all
    procurements that ensure we secure the best price, the items meet
    technical standards and safeguard taxpayer dollars.
        Secretary Geurts. The intent of section 832 is regularly shared in
    senior acquisition forums such as the Naval Contracting Council. The
    statutory prohibition will be implemented by the DOD in the Defense
    Federal Acquisition Regulation Supplement.
        Secretary Wilson. The Air Force will use the procedures established
    in the Defense Federal Acquisition Regulation Supplement as section 832
    is implemented.

        19. Senators McCain and Reed. In your opinion, what do you see as
    the challenges in enforcing this provision?
        Secretary Lord. In 2010, the GAO reported challenges the Department
    faced when using best value tradeoff procedures and recommended
    developing training elements such as case studies. The Department
    concurred and implemented the recommendation in August 2012. The DOD
    Source Selection Procedures were issued in March 2011 and expanded in
    April 2016 to provide additional guidance in making sound award
    decisions. No further recommendations were made by GAO in its 2014
    follow-up study or its 2017 report; however, we will also ensure that a
    module addressing section 832 is included in applicable Defense
    Acquisition University courses. I am confident that the processes
    described above are adequate to ensure compliance with section 832.
        Secretary Esper. Army and DOD guidance aligns with the provision in
    section 832 of the Fiscal Year 2018 NDAA regarding the use of LPTA. We
    will continue to scrutinize all program decisions including the
    contracting approach to identify and mitigate any emerging challenges
    with enforcing this provision.
        Secretary Geurts. As LPTA contracts were previously often contract
    ``vehicles of choice'' by many buying organizations, ensuring they have
    the proper training and mindset will be required. In addition, training
    the requiring organizations to be able to clearly articulate what is of
    value will be critical to ensuring we are selecting the right offeror
    for the requirement.
        Secretary Wilson. Once the requirements of this provision are
    implemented for the Department of Defense we do not anticipate
    significant challenges enforcing this guidance.
                            osd(at&l) reorganization
        20. Senators McCain and Reed. Secretaries Lord, Esper, Geurts, and
    Wilson, the Fiscal Year 2016 National Defense Authorization Act
    significantly enhanced the role of the service chiefs in acquisitions,
    giving the chiefs input into decisions regarding balancing resources
    and priorities (such as tradeoffs between the cost, schedule, and
    performance of major weapon systems), and the management of career
    paths in acquisition for military personnel. \1\
    ---------------------------------------------------------------------------
        \1\ Section 802 of the Fiscal Year 2016 NDAA, amending 10 USC
    2547(a).
    ---------------------------------------------------------------------------
        The Fiscal Year 2016 NDAA also requires the JROC to ``seek, and
    strongly consider, the views of the Chiefs of Staff of the armed
    forces'' and for the chiefs to advise the decision authority for
    Milestones A and B on cost, schedule, technical feasibility, and
    performance trade-offs.
        Given their other responsibilities, is this asking too much of the
    Service Chiefs?
        Secretary Lord. From my perspective, the goal is not to make the
    Service Chiefs and non-acquisition senior officers into experts in
    acquisition, but rather to ensure they have the opportunity to provide
    their warfighting perspective and recommendations before and during
    program execution. Their input on priorities and trade-offs facilitates
    more informed acquisition decisions and improved program outcomes. I
    value their input and perspective.
        Secretary Esper. No, I do not believe that this is asking too much
    of the Service Chiefs. The Chief of Staff of the Army has embraced his
    enhanced role in acquisitions while capably discharging his important
    title 10 responsibilities. I'm confident that the Chief of Staff of the
    Army is fully capable of executing his authorities.
        Secretary Geurts. The Service Chiefs provide a valuable perspective
    as we develop and procure systems for the warfighter. The DON has
    refined our gate review process to ensure the alignment of the new role
    of the Services Chiefs as part of the acquisition process, and have
    also established a new Accelerated Acquisition Board of Directors
    (AABoD), composed of the CNO, CMC and myself, to designate selected
    warfighting needs and priorities to be accelerated and increase the
    speed to capability. The involvement of the Service Chiefs is critical
    to this effort to streamline the development and approval of top level
    requirements designed to support a more flexible, agile and cost
    effective path to solution development and fielding.
        Secretary Wilson. The inclusion of the Service Chiefs is critical
    to ensuring we are integrating and balancing requirements, technical
    feasibility and affordability in acquisition.

        21. Senators McCain and Reed. Do you believe that three should be
    an increased focus on acquisition in senior officer training, to
    instill a greater understanding of acquisition among senior officers?
        Secretary Lord. From my perspective, the goal is not to make the
    Service Chiefs and non-acquisition senior officers into experts in
    acquisition, but rather to ensure they have the opportunity to provide
    their warfighting perspective and recommendations before and during
    program execution. Their input on priorities and trade-offs facilitates
    more informed acquisition decisions and improved program outcomes. I
    value their input and perspective.
        Secretary Esper. Increased understanding of the acquisition process
    helps ensure better acquisition outcomes across the force. We will
    continue to build upon the progress made to date in training that
    encompasses the basics of the acquisition process but also includes a
    focus on writing clear, concise and executable requirements. Current
    senior officer training leads to a better understanding of the value
    that acquisition expertise brings to bear on the process and a greater
    synchronization of our total Army efforts to equip the force.
        Secretary Geurts. In order to grow the acquisition skills in our
    requirements offices, we must provide general acquisition training at
    every level of Officer training to ensure we are developing well
    rounded Officers that are positioned to have a solid understanding of
    the acquisition process as they progress through the ranks. My staff
    has been working very closely with the Service Chiefs to ensure
    increased communication and training.
        Secretary Wilson. Yes, I believe that senior officers need to have
    a better appreciation and understanding of how the Air Force acquires
    systems. An understanding of acquisition assists in more informed
    decisions by those officers serving in crucial areas such as
    requirements, development, budgeting and financial management.

        22. Senators McCain and Reed. Secretaries Lord, Esper, Geurts, and
    Wilson, the Fiscal Year 2016 NDAA shifted significant acquisition
    authority to the services. For example, generally, the service
    acquisition executive will be the milestone decision authority for
    major defense acquisition program. \2\
    ---------------------------------------------------------------------------
        \2\ Section 825. Under certain circumstances, the Secretary of
    Defense may designate an alternate milestone decision authority,
    including for joint programs. See 10 USC 2430.
    ---------------------------------------------------------------------------
        Do the services have the necessary expertise and personnel to
    execute these new responsibilities?
        Secretary Lord. I believe the Services, for the most part, have the
    necessary expertise and personnel. The Services have always acted as
    the Milestone Decision Authority (MDA) for those programs where
    USD(AT&L) was not designated as the MDA. Even in cases where USD(AT&L)
    was the MDA, the Service Acquisition Executives reviewed the programs
    prior to the OSD review. The same expertise and personnel will be
    resident in the Services for delegated programs. In addition, even
    where the USD(AT&L) was the MDA, the Services still executed the
    programs so no additional preparation on their part should be required.
    The measure of success should be whether needed capabilities are
    delivered on time, in militarily meaningful quantities, at an
    affordable cost. Progress towards these goals needs to be measured on a
    monthly basis. I plan to significantly revamp the Defense Acquisition
    University, add many short courses, focusing on utilizing the
    authorities provided by Congress. Acquisition professionals will have
    the opportunity to review case studies that show how these authorities
    have been successfully implemented to simplify and speed up
    acquisition.
        Secretary Esper. In the Army, we have a skilled cadre of
    Acquisition Workforce professionals who are trained, educated,
    experienced and certified in the acquisition process within one or more
    of the Department's 14 specific acquisition career fields. Depending on
    the mission, I am confident that there are extremely qualified and
    experienced acquisition professionals and teams ready to execute these
    responsibilities. That said, I understand from recent conversations
    with my Army Acquisition Executive that he has a plan for ensuring
    greater technical competencies both within the general acquisition
    workforce but in the leadership as well. This includes the requirements
    development community. I will work closely with Dr. Jette and, as
    necessary, officials within the office of the Assistant Secretary of
    the Army (M&RA) to ensure the Army acquisition workforce has the skills
    and capabilities to develop and acquire the best equipment, services
    and technologies available today and in the future. This includes
    properly balancing the necessary skills and resolving the constraints
    on developing inherently governmental technical talent.
        Secretary Geurts. Yes. The Navy's acquisition workforce has the
    necessary expertise and personnel trained to execute these new
    responsibilities. The Navy was the Milestone Decision Authority (MDA)
    for 29 of our ACAT I programs, and now is the MDA for 37 of our 39 ACAT
    I programs.
        Secretary Wilson. Today, the Air Force has the expertise and
    personnel necessary to execute the increased responsibilities for
    acquisition authority. I will monitor the workload and skill sets
    needed to exercise these increased authorities.

        23. Senators McCain and Reed. What steps does your service need to
    take to be fully prepared to execute these duties?
        Secretary Lord. I believe the Services, for the most part, have the
    necessary expertise and personnel. The Services have always acted as
    the Milestone Decision Authority (MDA) for those programs where
    USD(AT&L) was not designated as the MDA. Even in cases where USD(AT&L)
    was the MDA, the Service Acquisition Executives reviewed the programs
    prior to the OSD review. The same expertise and personnel will be
    resident in the Services for delegated programs. In addition, even
    where the USD(AT&L) was the MDA, the Services still executed the
    programs so no additional preparation on their part should be required.
    The measure of success should be whether needed capabilities are
    delivered on time, in militarily meaningful quantities, at an
    affordable cost. Progress towards these goals needs to be measured on a
    monthly basis. I plan to significantly revamp the Defense Acquisition
    University, add many short courses, focusing on utilizing the
    authorities provided by Congress. Acquisition professionals will have
    the opportunity to review case studies that show how these authorities
    have been successfully implemented to simplify and speed up
    acquisition.
        Secretary Esper. My understanding is that the steps are already in
    place. The Army Acquisition Workforce Human Capital Strategic Plan
    focuses on five major goals: Workforce Planning; Professional
    Development; Leader Development; Employee Engagement; and
    Communications and Collaboration. Readiness is the Army's number one
    priority, and this plan, which is executed by the Army Director,
    Acquisition Career Management (DACM) Office, ensures our Army
    acquisition professionals remain ready to provide the equipment and
    services for our Soldiers to win across multiple spectrums, conditions
    and geographies now and in the future.
        Secretary Geurts. To properly execute our new responsibilities, it
    will be necessary to maintain a robust acquisition workforce that can
    provide to effective oversight without undue burden on programs. The
    Navy will continue to utilize and leverage the Defense Acquisition
    University and other acquisition training and continuous learning to
    maintain and grow our acquisition professionals.
        Secretary Wilson. We already have the processes in place needed by
    the Air Force Service Acquisition Executive to make milestone decisions
    for programs at the Air Force level.

        24. Senators McCain and Reed. How will your service manage these
    programs differently than OSD in order to deliver better outcomes?
        Secretary Lord. I believe the Services, for the most part, have the
    necessary expertise and personnel. The Services have always acted as
    the Milestone Decision Authority (MDA) for those programs where
    USD(AT&L) was not designated as the MDA. Even in cases where USD(AT&L)
    was the MDA, the Service Acquisition Executives reviewed the programs
    prior to the OSD review. The same expertise and personnel will be
    resident in the Services for delegated programs. In addition, even
    where the USD(AT&L) was the MDA, the Services still executed the
    programs so no additional preparation on their part should be required.
    The measure of success should be whether needed capabilities are
    delivered on time, in militarily meaningful quantities, at an
    affordable cost. Progress towards these goals needs to be measured on a
    monthly basis. I plan to significantly revamp the Defense Acquisition
    University, add many short courses, focusing on utilizing the
    authorities provided by Congress. Acquisition professionals will have
    the opportunity to review case studies that show how these authorities
    have been successfully implemented to simplify and speed up
    acquisition.
        Secretary Esper. The delegation of milestone decision authority
    will help the Army improve both accountability and efficiency in
    acquisition. First, control of the decision making process allows the
    Army to be accountable for its decisions. With the authority and
    manpower, the Army can take meaningful steps to ensuring its program
    managers' tenures are aligned with the critical milestones, and ensure
    that those program managers and the Army will be answerable for their
    decisions.
        We intend to expand on this concept, and drive down the decision
    authority to the program offices where able. Centralized planning and
    decentralized execution will help drive agile initiatives as the
    program offices will be able to operate without unnecessary
    bureaucratic interference delaying programs, changing requirements, or
    driving up cost. Through our ongoing Army Acquisition reform efforts
    and developing organizational concepts, we intend to reduce the
    requirement development process from nearly five years down to one. It
    will also insure that our warfighters are in involved from the earliest
    stages of acquisition and partnering in the decisions.
        Secretary Geurts. The Navy takes the new responsibilities enacted
    in the Fiscal Year 2016 NDAA very seriously. We have worked with USD-
    ATL to delegate eight of our 10 ACAT 1D programs to the Navy for
    management, and will continue to work with ATL to identify additional
    opportunities for streamlining under the new authorities. The Navy
    already utilizes the gate review process to manage and review programs
    annually. I intend to provide a monthly snapshot of our acquisition
    programs to the Secretary, CNO and CMC. I also intend to conduct
    regular portfolio reviews with each of the Program Executive Offices
    (PEO) to ensure programs are on track and risks are identified with
    mitigation plans in place. While delegating milestone decision
    authority to the Navy means that the PEO and program offices most
    familiar with the issues are the organizations resolving them, I note
    that programs that have been delegated to the Services for oversight
    are still subject to certain program documentation being approved at
    the OSD level. The Navy will reach out to the appropriate offices
    within OSD for subject matter expertise as required.
        Secretary Wilson. The Air Force will not specifically manage the
    programs differently than OSD. With processes already in place to work
    towards major program decisions, we anticipate more timely decisions
    from the Service Acquisition Executive with the reduction of
    bureaucracy. The Air Force will continue to keep a streamlined decision
    process in place to prevent needless delay.

        25. Senators McCain and Reed. How should we measure the success of
    the services in executing acquisitions?
        Secretary Lord. I believe the Services, for the most part, have the
    necessary expertise and personnel. The Services have always acted as
    the Milestone Decision Authority (MDA) for those programs where
    USD(AT&L) was not designated as the MDA. Even in cases where USD(AT&L)
    was the MDA, the Service Acquisition Executives reviewed the programs
    prior to the OSD review. The same expertise and personnel will be
    resident in the Services for delegated programs. In addition, even
    where the USD(AT&L) was the MDA, the Services still executed the
    programs so no additional preparation on their part should be required.
    The measure of success should be whether needed capabilities are
    delivered on time, in militarily meaningful quantities, at an
    affordable cost. Progress towards these goals needs to be measured on a
    monthly basis. I plan to significantly revamp the Defense Acquisition
    University, add many short courses, focusing on utilizing the
    authorities provided by Congress. Acquisition professionals will have
    the opportunity to review case studies that show how these authorities
    have been successfully implemented to simplify and speed up
    acquisition.
        Secretary Esper. A measure of success should be whether we fielded
    the equipment necessary within specified resourcing allocations to
    achieve a sustained overmatch against our adversaries in time to meet
    the need. We should specifically measure acquisition programs against
    their approved Acquisition Program Baselines (APB) and should also use
    metrics to assess our success in achieving stability in resourcing and
    requirements.
        Secretary Geurts. The success of the Services in executing
    acquisitions should be measured by their ability to affordably deliver
    capable capacity to the warfighter in a timely manner, on cost and on
    schedule.
        Secretary Wilson. The Air Force should measure success through the
    on-time, on-budget delivery of capabilities the warfighter needs. We
    have in place today measures that track our performance in these areas
    and we will continue to track our performance going forward.

        26. Senators McCain and Reed. What should be the benchmark for
    determining if this assignment of authority to the services was
    successful? Or for determining that the services have not lived up to
    expectations and acquisition authority should be assigned to OSD?
        Secretary Lord. I believe the Services, for the most part, have the
    necessary expertise and personnel. The Services have always acted as
    the Milestone Decision Authority (MDA) for those programs where
    USD(AT&L) was not designated as the MDA. Even in cases where USD(AT&L)
    was the MDA, the Service Acquisition Executives reviewed the programs
    prior to the OSD review. The same expertise and personnel will be
    resident in the Services for delegated programs. In addition, even
    where the USD(AT&L) was the MDA, the Services still executed the
    programs so no additional preparation on their part should be required.
    The measure of success should be whether needed capabilities are
    delivered on time, in militarily meaningful quantities, at an
    affordable cost. Progress towards these goals needs to be measured on a
    monthly basis. I plan to significantly revamp the Defense Acquisition
    University, add many short courses, focusing on utilizing the
    authorities provided by Congress. Acquisition professionals will have
    the opportunity to review case studies that show how these authorities
    have been successfully implemented to simplify and speed up
    acquisition.
        Secretary Esper. The execution of acquisition programs against
    their approved APBs should be the benchmark we use to measure the
    success of delegation of Milestone Decision Authority to the services.
        Secretary Geurts.The Services ability to affordably deliver the
    required capability to the Fleet in a timely manner on cost and
    schedule should be the benchmark. The Navy will still work closely with
    the OSD AT&L staff during program execution and will transparently
    inform the Hill on program progress for any program within the Navy's
    portfolio.
        Secretary Wilson. The Air Force should be reaching milestone
    decisions more expeditiously than before. The benchmark for determining
    if this assignment authority is successful will be the delivery of
    warfighter capability on time and within budget.

                  general acquisition reform and improvements
        27. Senators McCain and Reed. Senators McCain and Reed. Secretaries
    Lord, Esper, Geurts, and Wilson, we are hearing about numerous efforts
    to reform acquisition. Some of the services have publicly embarked on
    acquisition reform initiatives. OSD is working on reform efforts. The
    Administration has talked about such reform and issued an executive
    order that affects acquisition regulations. The 809 Panel--which this
    body established to put forward recommendations--will be issuing a
    report in January. Such a fragmented approach risks competing efforts
    and conflicting approaches, potentially leading to little meaningful
    progress. Who is coordinating, overseeing, and ultimately managing
    these disparate efforts to ensure unity of effort?
        Secretary Lord. The Department recognizes that, as the attached
    chart shows, there are multiple and in some cases overlapping efforts
    ongoing, all with the goal to improve acquisition agility and
    innovation; improve acquisition outcomes; and reduce regulations. I am
    responsible for overseeing these efforts as the USD(AT&L); once the
    reorganization is in effect the USD(A&S) and the USD(R&E) will share
    that responsibility and will coordinate with each other and the
    Services. With regard to ongoing efforts:

        a.  With regard to the section 809 panel, while that panel was
    established as an independent panel I meet with them regularly. Their
    final report's Volume 1 includes some 74 specific recommendations in
    the areas of Commercial Buying, Contract Compliance and Audit, Defense
    Business Systems, Earned Value Management, Services Contracting, Small
    Business, Statutory Offices and Designated Officials, and Statutory
    Reporting Requirements. I look forward to continued discussions with
    the Panel on these and the next two volumes of their recommendations.
    When they publish their final volume, I will provide my recommendations
    to you.
        b.  DCMO is leading the Department-wide Regulatory Reform Task
    Force, but my Defense Procurement and Acquisition Policy staff leads
    the acquisition-specific DFARS subgroup.
        c.  OSD and the Services are participating in the Acquisition
    Statute Review as called for in the fiscal year 2018 HASC committee
    report. That review is well underway. I will identify opportunities to
    modify statute that will help us streamline the acquisition process
    while still achieving the statutory intent. Among the 35 proposals
    under review include statutory revisions intended to delegate approval
    and waiver authority to a lower level than currently provided;
    elimination of certain written determinations and approvals; and other
    changes to streamline IT acquisition and generally allow for approval
    authorities closer to the level of execution. I will approve the
    recommendations included in the report which we will transmit to the
    HASC and SASC.
        d.  I anticipate USD(R&E) will coordinate with me on their Review
    of Barriers to Innovation in R&E Activities.
        e.  I will soon issue two key policies, the first a revision to
    DODI 5000.02 which provides overarching policy on the operation of the
    acquisition system and second, a separate policy document uniquely
    tailored for Middle Tier acquisition programs.
        f.  The Independent Advisory Panel on Tech Data Rights was
    established pursuant to the Federal Advisory Commissions Act. When they
    publish their final report, the Department will transmit it to the
    Defense committees and I will include my recommendations at that time.

        Secretary Esper. The Office of Assistant Secretary of the Army for
    Acquisition, Technology, and Logistics (OASAALT) has served as the
    Army's lead for implementing the acquisition reforms Congress has
    enacted. The Army also is participating in the Department of Defense's
    implementation efforts and has representation in most if not all fora
    for those endeavors. We are also attempting to pilot key efforts that
    will provide feedback on our lessons learned to the Office of the
    Secretary of Defense.
        Secretary Geurts. ASN (RD&A) oversees and manages all DON
    acquisition reform initiatives in close coordination with USD (AT&L) in
    order to ensure unity of effort within the DON and among the DON and
    other DOD components.
        Secretary Wilson. Within the Air Force acquisition enterprise, we
    have a Chief Process Officer and a team coordinating, overseeing, and
    managing these efforts. This team tracks progress against acquisition
    reform efforts. Additionally, we have created an Acquisition Process
    Model, which gives program managers a tool for mapping their processes
    to align with the most recent guidance and policies.

        28. Senators McCain and Reed. Senators McCain and Reed. Secretaries
    Lord, Esper, Geurts, and Wilson, a number of analysts have raised
    concerns that there is not enough coordination between requirements,
    budget, and acquisition execution. Do you believe this to be true? If
    so, what are your thoughts on how to address any lack of coordination?
        Secretary Lord. I do not believe there is a lack of coordination
    between the Department's three business cycles. Rather, there is a
    natural tension engendered by competing demands for scarce resources
    and the need to address shifting priorities to meet immediate threats.
    The key is for open communication between the stakeholders so that the
    Department can optimize resources to meet short- and long-term needs. I
    believe that there is good teamwork among DOD senior leadership that
    enables better communication and collaboration than in the past.
        Secretary Esper. Yes, the Army has taken several steps to improve
    coordination between its requirements, acquisition, and budget
    processes, and is currently implementing additional reforms to further
    integrate and strengthen these processes. The Fiscal Year 2016 NDAA
    (section 808) directed the Army to report on the links between
    requirements, acquisition, and budget processes. The then Acting
    Secretary and the Chief of Staff took some immediate actions as a
    result of this study to improve the Army's ability to evaluate and
    reform our acquisition process. Some of the actions include; (1)
    reinvigorating the Army Requirements Oversight Council; (2)
    consolidating staff elements; (3) establishing the Army Rapid
    Capabilities Office; and (4) forming the Office of Process Innovation
    and Integration to provide further support for Army Acquisition reform.
        The Office of Process Innovation and Integration has followed these
    initial reforms with a total of nine new initiatives that will increase
    the Army's ability to more quickly provide capabilities to Soldiers
    while being fiscally responsible. The most pertinent reform is the
    establishment of Army Modernization Task Force to explore all options
    to establish unity of command and unity of effort that consolidates
    Army's modernization process under one roof. These initiatives will
    adhere to the following overarching principles to improve the Army's
    processes: use of (1) early engagement and collaboration, (2)
    centralized planning and decentralized execution, (3) cost- and
    resourced-informed decisions, and (4) consistent metrics to evaluate
    success. This ensures that those developing the requirements have
    insightful realistic advice on technologies essential to operational
    concepts, that realistic costing is applied to concepts for more
    informed trades, and that those involved in the specific acquisition
    process understand their programs from the underlying operational
    concepts, technologies, costs, and trades to contracting and execution.
        Secretary Geurts. No, I do not believe there is a lack of
    coordination between the requirements, budget and acquisition
    processes. The Navy ensures close coordination through the Gate Review
    process which enables the CNO and CMC to directly participate in the
    requirements and acquisition process and work with me to balance the
    necessary trades among cost, schedule and technical maturity to meet
    the Fleet needs. As the SAE, I participate with the CNO's requirements
    officials on the Corporate Review Board which is responsible for
    oversight of the Navy budget.
        In addition, I am initiating monthly portfolio reviews that will
    bring together the acquisition, programming, and requirements officials
    to discuss coordination, support, execution and delivery of the right
    capability and capacity for the DON's warfighting requirements.
        Secretary Wilson. The Air Force has made a concerted effort to
    improve the coordination between requirements, budget, and acquisition
    execution. We believe we have in place today the processes in all of
    these areas that bring these key players together to help make programs
    successful. There is always room for improvement and we need to
    continue to look at ways to ensure we have in place the appropriate
    checks and balances.

        29. Senators McCain and Reed. Senators McCain and Reed. Secretaries
    Lord, Esper, Geurts, and Wilson, CBO and GAO have regularly reported
    that DOD starts more acquisition programs than it can afford to
    complete. As a 2016 CBO report stated ``Several areas of DOD's budget
    have frequently turned out to cost more than originally planned or to
    increase more rapidly than expected. Those areas include the following:
    costs to develop and purchase weapon systems . . . [and] operation and
    maintenance costs.'' \3\ How do you guard against starting more
    programs than you can afford? How do you ensure that the cost estimates
    are realistic?
    ---------------------------------------------------------------------------
        \3\ Congressional Budget Office, Long-Term Implications of the 2016
    Future Years Defense Programs, January 2016, p. 3, https://www.cbo.gov/
    sites/default/files/114th-congress-2015-2016/reports/51050-2016--
    FYDP.pdf. See also U.S. Government Accountability Office, Defense
    Acquisitions: Assessments of Selected Weapon Programs, GA0-15-342SP,
    March 12, 2015 (reissued April 9, 2015), p. 5, http://www.gao.gov/
    assets/670/668986.pdf, which states ``the majority of programs actually
    experienced a cost increase over the past year, and more than half of
    the 78 programs in the portfolio reported cost increases not related to
    quantity changes, which we refer to as a loss in buying power.''
    ---------------------------------------------------------------------------
        Secretary Lord. Current policy requires the Milestone Decision
    Authority (MDA) to assess affordability and establish corresponding
    acquisition and sustainment constraints which are to be monitored
    throughout the program's lifecycle. This was reinforced in the Fiscal
    Year 2017 NDAA which codified establishing program cost, fielding, and
    performance goals before funds are obligated for technology
    development, systems development, or production of an MDAP. The
    Department is in the process of establishing the mechanisms to
    implement specific requirements of the statute, starting with near term
    new Army and Air Force programs.
        To ensure cost estimates are realistic, I rely on the Department's
    cost estimating community, particularly CAPE and the Service Cost
    Agencies to produce estimates based on historic data that consider
    prior contractor performance, historic program performance, and risk,
    plus the associated costs if those risks are realized. These cost
    estimates represent the best judgement and assumptions available at a
    point in time. Rather than being inviolable, costs estimates can and
    should change as we respond to changes in technology, threats, budget
    priorities, and other factors to ensure we're being responsive to
    evolving needs. I meet weekly, one-on-one, with the Cost Assessment and
    Program Evaluation (CAPE) Director to ensure adequate communication.
        Secretary Esper. The Army must fully fund programs to the cost
    position in the Future Year Defense Plan (FYDP) at Milestone (MS) A, B,
    and C Decision Reviews and Full-Rate Production (FRP) Decisions or Full
    Deployment Decision (FDD) reviews. The Army identifies specific offsets
    to address any funding shortfalls that may exist in the current FYDP.
    In order to ensure cost estimates are realistic, the Army has
    implemented formal cost estimation measures for Major Defense
    Acquisition Programs (MDAPs) and Special Interest programs across the
    HQDA level that convene at the Request for Proposal (RFP) Releases and
    each of the Milestone Decision Reviews (MS A, MS B, MS C, and FRP) to
    reconcile the Program Office Estimate (POE) and the Army independent
    estimate into a single Army estimate through a Cost Review Board (CRB).
    The reconciled position is a complete life-cycle cost from inception to
    disposal and becomes the Army Cost Position (ACP). The ACP is compared
    to program funding to determine program affordability and ensure full
    funding of the program. If the program cannot be fully funded to the
    ACP, it is adjusted by adding additional resources, program re-phasing,
    or de-scoping. ACAT II and III programs are delegated to the Program
    Executive Offices (PEOs), which are responsible for conducting reviews
    at their respective levels. In addition, Headquarters Department of the
    Army conducts annual reviews of ACAT II programs. To further improve
    cost estimation, the Army validates early course of actions for Initial
    Capabilities Document (ICD) estimates and develops independent cost
    estimates for Army Acquisition Executive (AAE) selected non-Major
    Defense Acquisition Programs (MDAP). Finally, the Army conducts
    Operational Sustainment Reviews (OSRs), which are initiated five years
    after the Initial Operational Capability (IOC) is declared and
    continues through the life cycle of the system. These engagements
    provide Army leaders with consistent and accurate information to make
    informed resource decisions.
        Secretary Geurts. Our program wholeness efforts as part of our
    budgeting process, combined with Gate Reviews, Configuration Steering
    Boards, and program Sufficiency reviews are geared to provide the
    leadership with the information about programs Cost, Schedule, and
    Technical challenges, and to inform on program affordability.
        Stability is key to controlling costs across our acquisition
    programs. We accomplish this by: setting firm requirements; stabilizing
    designs; taking an incremental approach to technology development (via
    prototyping and experimentation, as appropriate) to decrease technical
    risk prior to approving major defense acquisition programs; employing
    acquisition strategies that maximize multi-year procurements, block buy
    contracts, and economic order quantity and cross program common
    equipment buys when applicable; obtaining stable budgets; and
    increasing competition at all levels of procurements whenever possible.
    Competition produces both technological and cost benefits to the Navy
    and is a critical enabler of performance.
        Secretary Wilson. The Air Force has an established process to
    determine an acquisition program's long term affordability. The process
    looks beyond the Future Years Defense Program and estimates costs to
    acquire as well as cost to sustain the programs. This process ensures
    the Air Force has a long term view and funding strategy before starting
    new programs.
        To ensure cost estimates are realistic, cost estimators have been
    incorporated into the early phases of the acquisition process and they
    constantly update their cost estimation models with the latest program
    execution costs to keep the affordability process informed.

        30. Senators McCain and Reed. Senators McCain and Reed. Secretaries
    Lord, Esper, Geurts, and Wilson, senior leaders frequently state the
    DOD needs to take more risks and be willing to fail. How will you
    create a culture that is accepting of risk and failure while ensure
    that such risks and failures are small, managed, and generate useful
    information? Do you have examples of good failures in your
    organizations?
        Secretary Lord. The stand-up of the new USD(R&E) organization will
    be the first true sign of culture change within the DOD. This
    organization will be designed to take risk and be forward leaning in
    providing capability to our Warfighters. Technology developers are
    motivated to take risk and to explore the art of the possible, while
    acquisition managers are motivated to minimize risk and to pursue
    stable, well-understood capabilities to minimize overall acquisition
    program risk. I believe that aligning incentives so as to motivate
    program managers to review technology options to improve performance
    and reduce cost, and to motivate technologists to harden, demonstrate,
    and de-risk emerging technologies, would significantly aid technology
    transition.
        An example of a past failure that increase our knowledge base, a
    few years ago, we invested in a prototyping effort to provide a low
    cost orbital launch vehicle to address urgent warfighter needs for
    imagery augmentation. As we got into the project, we found out we
    underestimated technical risk associated with software limitations,
    which in turn increased program schedule and resulted in hardware re-
    designs. We eventually terminated the program, but residual assets,
    including engines, test data and a preliminary technical data package
    were transitioned to our missile and space programs to ensure we
    captured this innovation for use in future programs.
        In addressing culture change, our goal is to ensure our design,
    development, and early production teams work more closely with the
    Intel, sustainment and test community, as well as the Warfighter, to
    identify and monitor risks early in the development process before
    transitioning technologies into Programs of Record. In parallel, we are
    working to increase the use of other transactional authority that
    employs simpler and more rapid contracting mechanisms that make it
    easier for non-traditional sources of innovation to work with the
    Department of Defense. We are also seeking to attract, train, and
    retain talented leaders uniquely skilled in the complex business of
    defense acquisition, bringing aboard innovative thinkers who understand
    the art of risk taking in both science and technology and acquisition
    programs as well as technical leaders in critical technology areas
    essential to our National Defense.
        USD(A&S) will ensure that an acquisition ecosystem is developed
    that enables a culture of innovation, critical thinking and
    ``creative'' compliance. This integrated, flexible and adaptable
    acquisition ecosystem will be enabled by clearly articulated
    authorities, policy improvement, data and tools. We are striving to
    scale innovation.
        Secretary Esper. Creating a culture that is accepting of risk and
    failure can be accomplished by prototyping new capabilities early,
    soliciting Soldier input and reducing the requirements timeline.
    Leaders must also communicate this philosophy to Program Managers and
    Program Executives Officers. This ensures issues are identified before
    large costs and lengthy development times are incurred, allowing us to
    fail small and early. One example of ensuring risks are small, managed
    and generate useful information is the Trophy Active Protection System
    effort for the Abrams tank. Utilizing the Buy-Try-Decide model has
    allowed the Army to take prudent risk by procuring the Trophy System,
    validating vendor performance claims and addressing integration issues,
    based on Soldier feedback, in less than 18 months. In addition to
    providing immediate capability for Soldiers, this method will also
    inform future efforts for all ground and air Active Protection Systems
    going forward.
        Secretary Geurts. Maintaining our edge is critical and more
    challenging due to current strategic environment and the availability
    of leading edge commercial technology. Our ability to maintain Fleet
    capabilities and technological advancements requires us to identify,
    understand and take appropriate, well-informed, and calculated risks.
    Delegation of Milestone Decision Authority to the Services will enable
    better risk management by focusing and streamlining the Department's
    oversight of programs and encourage faster decision making in response
    to market forces and industry operational needs. Through rapid
    prototyping and more agile acquisition, we will learn and advance more
    quickly, allowing early failures at relatively low cost of time and
    resources. Recent examples of designated rapid prototyping include
    Expeditionary Surveillance Towed Array Sensor System, and Navy Laser
    Family of Systems. We are also expanding the use of innovative
    approaches such as Prize Challenges, which have proven to enable
    outside the box thinking and development of ambitious, novel solutions
    to difficult technical and operation problems. These price challenges
    attract a wide array of non-traditional and creative thinkers, and
    build an ecosystem of risk tolerant organizations. We continue to
    explore opportunities to adapt and leverage commercial best practices,
    as appropriate.
        Secretary Wilson. In order to create a culture that accepts risk
    and failure, we need to experiment, try something, learn from it, and
    call it a ``productive failure''. We need to celebrate ``productive
    failure'' and the individuals responsible. To date, we do not have an
    example of what I would categorize as a productive failure. We
    anticipate as we continue to delegate authorities and stress this
    culture shift with our people that examples will become readily
    available.

        31. Senators McCain and Reed. Secretaries Lord, Esper, Geurts, and
    Wilson, please provide a few specific items that you are willing to be
    held accountable for over the course of the next calendar year. For
    each item, please establish a specific goal for success that you wish
    to be measured against and when would be an appropriate time during the
    calendar year to evaluate performance against that metric.
        Secretary Lord. I am committed to organizing and staffing A&S to
    make it easy to do business with the government while being great
    stewards of taxpayers' dollars. I am also committed to drive excellence
    with respect to program sustainment by increasing availability and
    responsiveness while lowering cost. I will lead efforts to increase the
    National Security Innovation base. I believe that an interim report on
    progress is appropriate in the mid-June timeframe with a final report
    no later than January 15, 2019.
        Secretary Esper. While I am responsible for the execution of all
    Army programs, I will be focusing my efforts on standing up and fine
    tuning the Army Futures Command. Given that this command promises to
    fundamentally transform the Army modernization process, this is the
    most significant action that my performance should be evaluated
    against. Our intent is to achieve Initial Operating Capability by July
    2018. An evaluation of our progress in the early autumn of this
    calendar year would be appropriate.
        Secretary Geurts. In the first few months on the job, I've met with
    the Navy and Marine Corps Systems Commands and the Program Executive
    Offices to reinforce the lines of accountability and to establish my
    four specific focus areas of: lethal capacity for the Naval forces;
    increasing agility; driving affordability; and building the workforce
    for the future. I am developing a strategic plan to lay out my vision
    and focus areas throughout the organization which will include specific
    goals, objectives, and measures of performance.
        In January we completed a DON Acquisition Workforce Summit to
    identify key activities, actions, and measures of performance for the
    next year to ensure we are recruiting, selecting, developing, and
    retaining the talent needed for the future. In February I will complete
    a comprehensive review of MDA levels for all DON programs. The results
    of this review will be used to adjust MDA authority to the appropriate
    level to provide effective oversight of Navy programs. Beginning in
    April I intend to institute monthly comprehensive portfolio reviews of
    all DON programs and provide monthly updates to the Secretary, CNO and
    CMC. These are but a few of the numerous actions underway to accelerate
    the DON Acquisition Enterprise.
        While I welcome a review of these activities and the resultant
    impact on the DON Acquisition Enterprise at any time, a review this
    summer would be a reasonable time to assess the initial impacts of
    these initiatives and our recommendations where Congress could provide
    additional help to reduce bureaucratic burden and increase efficiency
    and effectiveness.
        Secretary Wilson. I am working with the Assistant Secretary of the
    Air Force (Acquisition, Technology & Logistics) to establish a set of
    initiatives to measure the successes and challenges within the
    acquisition enterprise. We have implemented the Rapid Procurement of
    Air Force Capabilities Charter, with a goal of using it for at least
    one program in fiscal year 2018. In an effort to reduce the number of
    steps in the acquisition process, we are planning to transition to the
    Joint Business Clearance Pilot Program. This pilot program is for small
    acquisitions to implement across applicable Program Executive Offices
    to streamline business clearance by combining Milestone Decision
    Authority and Clearance Approval Authority review and approval into a
    single step.

                      other transaction authorities (otas)
        32. Senators McCain and Reed. Secretaries Lord, Esper, Geurts, and
    Wilson, this committee believes that Other Transaction Authorities are
    an important tool to speed experimentation, prototyping, and
    acquisition. The DOD and services still underutilize this authority
    despite additional flexibilities being provided in recent years.
        How will you ensure that OTAs are used as a matter of standard
    practice while guarding against their misuse?
        Secretary Lord. There are opportunities to employ OTAs more broadly
    across the Department to spur innovation and attract companies with
    leading-edge technologies and business practices that enable us to
    explore innovative technology rapidly. Because OTAs are formed under
    the authorities that do not require standard terms found in Federal
    Acquisition Regulation (FAR)-based procurement contracts, DOD
    practitioners must have the requisite training and experience to guard
    against their misuse. Obtaining senior leadership support and
    establishing robust training programs to promote judicious use of OTAs
    with senior level acquisition personnel negotiating the terms and
    conditions of the agreements is the next step. Centers of Excellence in
    the use of OTAs are emerging in the Department to include the Defense
    Innovation Unit Experimental (DIUx) as supported by Army Contracting
    Command--New Jersey and the Defense Advance Research Projects Agency
    (DARPA). Leveraging this expertise and sharing their best practices are
    an important first step toward adopting the innovative contracting and
    agreement changes to promote increased flexibility and speed in the
    acquisition process. We will establish training modules at the Defense
    Acquisition University (DAU) to ensure that we memorialize our OTA
    learnings and train acquisition professionals using actual examples.
        Secretary Esper. The Army utilizes the standard practices outlined
    in the 17 January 2017 OSDOTA Guide which outlines the processes and
    procedures for executing OTAs. Use of OTAs is now widely considered in
    developing the contracting approach for Army weapon systems programs.
        Secretary Geurts. The DON has delegated authority to utilize OTA to
    our major acquisition commands (i.e. NAVSEA, NAVAIR, SPAWAR,
    MARCORSYSCOM, and ONR) for projects under $50 million. We look forward
    to implementing the even greater flexibilities included in the Fiscal
    Year 2018 NDAA. I will ensure that DON acquisition personnel are
    familiar with the appropriate potential uses for OTA under 10 U.S.C.
    Sec. Sec.  2371 and 2371b and that highly trained contracting and
    acquisition personnel are assigned to DON OTA projects. The DON will
    leverage DOD's OTA Centers of Excellence to enhance OTA competency
    throughout the Department. As we expand the use of OTA, we must assign
    our best people the task of learning from those with OTA experience in
    order to make the most of this exceptional authority while
    simultaneously protecting the Government's legitimate interests.
        Secretary Wilson. The Air Force has used and continues to use OTAs
    for research and prototyping as appropriate. We employ OTAs within
    established DOD processes to ensure they are used properly. As new
    efforts come forward, we are challenging our acquisition professionals
    to ensure they are considering OTA use.

        33. Senators McCain and Reed. Do you have examples where OTAs have
    been used in a way you would like to see replicated?
        Secretary Lord. A recent example of a streamlined program
    solicitation that resulted in the award of an OTA for prototype was
    DARPA's Robotic Servicing of Geosynchronous Satellites (RSGS) public-
    private partnership program.
        Secretary Esper. Other OTAs that are either in process or we
    envision executing support the Lower Tier Air and Missile Defense
    System (e.g., accelerated the program's Milestone A from 1QFY19 to
    2QFY18, the Expedited Active Protection System effort for Bradley and
    Stryker, the Next Generation Weapon Systems (will allow for weapon
    fielding acceleration by five years), Long Range Precision Fires, and
    the planned Maneuver Short-Range Air Defense program (ASD(A)).
        Secretary Geurts. The DON's recent and current OTA efforts leverage
    the U.S. Army's OTA experts in Picatinny working through DIUx and a
    number of industry consortia for command and control, cyber, vertical
    lift and ordnance. Some examples include use of the Army's DOD Ordnance
    Technology Consortium for prototypes and demonstrations for the
    Electromagnetic Rail Gun, the Hypervelocity Projectile, high energy
    lasers, and radio frequency weapons technology. Our special operations
    forces, explosive ordnance disposal community, C4I professionals, and
    unmanned underwater vehicle designers are all currently using OTA for
    advances in unmanned and counter unmanned systems, human systems and
    talent management, and leading edge software development techniques
    from Silicon Valley. We have and we will continue to collect the
    lessons learned from these initial experiences, in order to expand the
    use of OTAs as we integrate them into our routine way of doing business
    and as the workforce becomes more comfortable with the tool.
        Secretary Wilson. We have multiple examples where OTAs have been
    used and that we would like to see replicated. One of these highly
    successful examples is the Light Attack Experiment, a live-fly event
    held in August 2017. Use of the OTA allowed the Air Force to move
    quickly, with the Light Attack Experiment taking place within 5 months
    of the Invitation to Participate being released to industry. Being able
    to move rapidly is critical to ensuring the Air Force can efficiently
    and effectively execute our experimentation campaigns. These campaigns
    are not acquisition programs, and they allow the Air Force to explore
    the art of the possible and quickly assess utility for the warfighter.
        A second example is the Command, Control, Communications,
    Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR) OTA
    consortium managed by the Air Force Research Laboratory (AFRL). AFRL's
    Information Directorate in Rome, New York has an OTA with the System of
    Systems Security Consortium (SOSSEC) to develop C4ISR Information
    System prototypes, which will provide ``plug-n-play'' technologies via
    modern open systems architectures to provide rapid adaptation and
    integration of new capabilities. The agreement allows AFRL to quickly
    and efficiently reach the 70+ member companies of SOSSEC while
    leveraging SOSSEC as a single point intermediary, reducing overhead and
    facilitating project execution.
        The Air Force currently has four OTAs with industry for rocket
    propulsion systems, all of which require shared cost investment between
    the government and industry. These investments initiate the transition
    away from the RD-180 by investing in critical Rocket Propulsion System
    technologies. These Rocket Propulsion Systems were proposed by industry
    for commercial launch systems that can be enhanced to meet more
    stressing National Security Space requirements. The Air Force intends
    to release an RFP later this summer for Launch Service Agreements to
    complete the development of the replacement launch systems continuing
    the shared industry/government investment approach.
        Finally, the Air Force has established a Space Enterprise
    Consortium using an OTA for prototyping activities to attract new space
    and non-traditional mission partners.
                          software acquisition reform
        34. Senators McCain and Reed. Secretaries Lord, Esper, Geurts, and
    Wilson, the committee continues to be concerned about the way the DOD
    and services acquire software and software intensive systems. What
    specific changes are you making to the way you manage software? Which
    programs do you intend to make changes to? How will you ensure that new
    software intensive programs do not fall victim to the same problems
    that plague current programs?
        Secretary Lord. I recognize that large-scale software development
    and sustainment are key acquisition challenges that the Department must
    confront across all of our programs--including information and weapon
    systems in all warfare domains. DOD is already challenged to deliver
    software on time and within budget. The demand for software-reliant
    capability will only continue to rise and the inherent challenge of
    large-scale development is further compounded as the DOD must maintain
    operational advantage in an environment of constant change (e.g.,
    evolving threats; disruptive technological change).
        To address the challenge, the Department is modernizing our
    practices, workforce, competencies and training to enable more rapid
    delivery of reliable and secure software across the enterprise--in all
    Warfare domains and application types. DOD needs to consider how
    modern, commercial best practices and robust software development and
    test environments can help avoid big bang integration and late,
    expensive defect discovery at the end of a prolonged development
    cycles--and help validate requirements and deliver value sooner.
        However; we are in the early phases of adopting agile software
    development practices to deliver software capabilities more rapidly and
    in smaller increments in order to address the rapidity of change
    affecting our software intensive systems. We need to scale our efforts
    and are developing a plan to do so. I hiring a Special Assistant for
    Software Development and Acquisition onboard, reporting directly to me,
    to organize and implement this process. Several programs are already
    utilizing a variety of agile development tools and quality metrics
    (such as velocity, sprint burn down charts, and release burn up charts)
    such as, Integrated Personnel & Pay System--Army (IPPS-A), Distributed
    Common Ground System--Navy Increment 2 (DCGS-N Inc 2), Global Command &
    Control System--Joint Enterprise (GCCS-JE) (DISA), Air & Space
    Operations Center--Weapon System (AOC-WS) (USAF), Next Generation
    Operational Control System (OCX) (USAF), Key Management Infrastructure
    (KMI) (NSA). These programs are also instituting governance forums to
    emphasize user involvement in early experimentation/observation efforts
    and allow user feedback to shape capability development, with less
    emphasis on perfecting requirements or upfront planning ahead of the
    actual development activity.
        Our efforts are not yet mature enough to have settled on final best
    practices, but we have already revised formal policy guidelines.
        The newly enacted sections 873 and 874 of the NDAA require that DOD
    select a number of programs to pilot agile development methods. These
    programs will be monitored to inform further development of best
    practices guidebooks, Defense Acquisition University training
    materials, and policy guidelines. It is important that we consider and
    assess the best approach for bringing essential reliability and
    cybersecurity skills into the engineering and design process early
    enough to avoid costly redesign and late defect discovery--and enable
    rapid delivery of secure, reliable software. Updating current policy
    will be an iterative effort as we continue to gain experience in agile
    development. A major change is forthcoming to the Department's formal
    acquisition policy that will institutionalize several improvements
    suggested via legislation over the past two years and implement
    transition of milestone decision authority to the lowest appropriate
    level. This will reduce decision delays and streamline alignment of
    resources with schedules to reflect end-user capability needs and
    timelines.
        People are the biggest enabler of program success, whether software
    or hardware or system of systems integration. To modernize Software
    Engineering (SWE) competency and practice, we need to attract, train
    and retain a capable workforce. We must incorporate modern software
    engineering skills, technology and development practices such as scaled
    Agile, build/test/release automation environments, continuous
    integration and tool chains, and DevOps. To increase use of these
    solutions, the Department must realign its processes for identifying,
    training and managing software competencies to keep pace with these
    advances. The Defense Acquisition University has begun to deliver
    continuous learning resources in the area of Agile software development
    for our acquisition workforce to enroll as part of their professional
    development. In the Fiscal Year 2018 NDAA, section 891 will provide a
    deeper Defense Acquisition University in residence training program to
    prepare the staffs of the Agile or Iterative Development Method pilots.
    As DAU constructs this workforce development program, they are expected
    to involve instructors and content from non-government entities to
    highlight the commercial best practices and well as lessons learned
    from DOD programs.''
        Secretary Esper. Virtually every warfighter and enterprise system
    in the Army today requires complex software that must be developed or
    acquired, updated, integrated, and maintained, in quick succession, to
    support the end user. Recognizing the criticality of software to
    maintain overmatch, the Army is establishing greater unity of effort in
    the governance, development, and sustainment of software. We are
    working to enable a more defensible network by improving the
    integration of software assurance and acquisition life cycle
    activities. Our software assurance activities will allow us to identify
    and fix cyber and software quality holes before software is put in the
    hands of our Soldiers. We are also driving Army-wide efficiencies in
    the software life cycle to improve readiness, while reducing cost,
    risk, and complexity. A key component of these efforts is optimizing
    Army software development and sustainment oversight and policy for both
    the operational and administrative elements of the Army. Our
    sustainment considerations will include Commercial-Off-The-Shelf
    product selection criteria, including license maintenance costs, and
    the appropriateness of acquiring rights for selected software code. On
    the tactical side, we are implementing a plan to update Mission Command
    software to a single standard baseline across 400 Army, Army Reserve,
    and Army National Guard units. This initiative will reduce system
    complexity; improve interoperability; simplify network initialization,
    software patching, and sustainment; and facilitate a smoother
    transition to the next baseline as part of the Army's Common Operating
    Environment.
        Secretary Geurts. Information technology is changing faster than
    our processes and policies can keep pace. The DON is not an IT company
    so we do not want to duplicate IT sector efforts, but rather we want to
    be a faster follower of industry and leverage their investment in the
    IT sector. Our efforts are focused on buying IT as a service,
    essentially ``leasing'' commercially available products and
    infrastructure, and maximizing the use of enterprise license
    agreements. When we buy IT the same way it is sold and used in the
    commercial sector, the DON is able to take advantage of industry best
    practices, maximize efficiencies and receive all the patches and
    updates the vendors provide.
        The acquisition of Defense Business Systems (DBSs) will pave the
    way for this new business model. OSD has recently issued the DODI
    5000.75 to provide guidance for software dependent DBSs, and the DON is
    developing our own policy and implementation guidance for these
    systems. We will buy commercial-off-the-shelf (COTS) products that
    satisfy the majority of our requirements, modify our business processes
    to adopt the commercial product to the maximum extent possible, and
    only configure the products where needed to meet our unique Naval
    requirements. This process minimizes or eliminates costly custom
    development and shifts our resources from capital investment to
    operations and maintenance. We are also increasingly looking to acquire
    necessary hardware and/or infrastructure as a service, to include cloud
    services.
        The Fleet's portfolio of software intensive weapons systems such as
    the AEGIS Weapon System, AN/SQQ-89(V) Surface Ship ASW Combat System,
    and the Submarine Warfare Federated Tactical Systems have been
    modernized using open architecture code bases; leveraging, to the
    maximum extent practical, the investment of the commercial IT sector in
    delivering effective warfighter capability. We are shifting to more
    Agile development so capability can be deployed more rapidly to pace
    the threat, technology can be inserted more frequently, and the overall
    system can be kept more current and secure. This shift to an Agile
    software development approach is occurring in weapon system development
    programs for the Aegis Weapons System and the Air and Missile Defense
    Radar Program (SPY-6). Within the Aegis Weapon System program, Agile
    software principles and the use of a common source library of have
    enabled engineering for maximum proliferation across baselines through
    In-Stride deliveries.
        Secretary Wilson. To manage software differently, the Air Force has
    developed implementation across the acquisition enterprise and must
    continue oversight of software across our weapon systems. To manage
    software differently, the Air Force is embracing modern software
    development practices such as Agile DevOps for many programs across the
    acquisition enterprise. We have initiated pathfinder efforts and are
    working to improve the speed of software development. Likewise, we are
    continuing efforts with Open Mission Systems architecture, and
    initiatives with Defense Digital Services, Air Force Digital Services,
    and Defense Innovation Unit Experimental, in addition to improving our
    organic software development capabilities.
        For example, the Air Force initiated AOC Pathfinder to test a new
    software development methodology to meet warfighter needs. AOC
    Pathfinder more closely aligns software development to commercial
    practices. To date, the AOC Pathfinder has delivered 3 applications to
    Air Force Central Command. These 3 apps iterate daily and push 10-20
    new features to end users each week. We are delivering apps faster than
    originally planned, and significantly faster than AOC Increment 10.2
    Program of Record.
        Reforming software acquisition is a top priority for the Air Force.
    We must train our workforce appropriately and have dedicated subject
    matter expertise, just as we do for other science-related fields.

        35. Senators McCain and Reed. Secretaries Lord, Esper, Geurts, and
    Wilson, as the Department and Services seek to change their acquisition
    systems, particularly in the context of software intensive systems, in
    what ways do you need to change your approach to testing? What changes
    do you intend to make to developmental test processes and
    organizations? How can you better collaborate with the Director of
    Operational Test and Evaluation to speed time to deployment while
    making sure that deployed capabilities are safe and fit for purpose?
        Secretary Lord. Software is an integral part of all Department
    capabilities, to include weapon systems, information enablers and
    business systems. The Department needs to modernize our practices,
    workforce competencies and training to enable more rapid delivery of
    reliable and secure software across the enterprise. DOD needs to
    consider how modern, commercial best practices and robust software
    development can help avoid late big bang integration and defect
    discovery. The Department also needs to move towards earlier, more
    frequent test engagements, which are focused on working capabilities,
    using short cycle, incremental, testable software builds. This allows
    developers to conduct multiple test and integration events and field
    intermediate products to gain user acceptance and feedback to improve
    future builds or increments. Cybersecurity T&E must be integrated with
    these efforts, and the Department is working to provide acquisition
    programs with approaches to integrate earlier cybersecurity testing and
    industry software testing best practices.
        Testing is a critical component of software development and can be
    a time-consuming aspect of software delivery. The Department's testing
    communities need to evolve their testing policies, procedures and
    approaches to accelerate software fielding cycles. Automation and
    artificial intelligence are areas the Department needs to invest in and
    leverage highly efficient industry best practice, improved adoption of
    automation, artificial intelligence, and higher fidelity integration
    labs. The Department's testing community needs to collaborate with
    industry to identify new ways of addressing software testing
    requirements and adopt best practices for agile development and DevOps
    development which leverage performance and cybersecurity test data from
    early in development through sustainment. For example, in fiscal year
    2017, the current OSD level DT&E organization supported 22 Cyber Table
    Top Exercises with programs that averaged identified 15 High or Very
    High system vulnerability risks per event. Cybersecurity risk will
    continue to challenge the Department as it moves to more COTS based
    software and cloud-based environments. Mission-Based Cybersecurity Risk
    Assessments must become the norm across the system development life
    cycle for the Department.
        I will work with the Undersecretary of Defense for Research and
    Engineering and the Director of Operational Test and Evaluation
    community to include the operational test community's equities of
    suitability, effectiveness, and cybersecurity are considered early in
    both the design and the developmental test process to ensure efficient
    testing is done. My ultimate goal is to acquire safe, combat-capable
    systems for the Warfighter at the speed of relevance.
        Secretary Esper. Although the current Army approach is effective,
    we are considering new ways to better execute our test and evaluation
    mission. As part of the Army's Reform, the Test and Evaluation
    Enterprise is examining and proposing legislative changes, as well as
    making changes to regulations, policies, and infrastructure to put them
    in line with a culture shift towards rapid and agile acquisition. A few
    improvements being considered are: (1) contract language that includes
    the requirement to show evidence of software analysis, safe design,
    implementation, coding, and low-level testing to ensure software
    safety; (2) shifting senior management assessments to the left by
    conducting program assessments at each software drop along the
    acquisition cycle to ensure program performance is demonstrated and
    validated prior to operational events; and (3) the Army Test and
    Evaluation Command (ATEC) will be directly engaged in the reform
    process, placing emphasis on tailoring test strategies to consider
    critical program requirements.
        At the conclusion of the Army Acquisition Reform effort, I put
    several directives in place to improve the acquisition process as a
    whole and for testing specifically. The establishment of Cross
    Functional Teams (CFT) will streamline the development and approval of
    capability requirements thus streamlining the test and evaluation
    planning and execution processes. We are further streamlining and
    minimizing test and evaluation processes through standardizing test
    language, metrics, data dictionaries, and data methods. We are also
    bringing cybersecurity to the forefront of our test operations by
    requiring the test community to provide results of cyber and cyber
    electromagnetic tests at various milestones in the acquisition process
    to ensure program security prior to progressing into an operational
    test.
        Successfully coordinating with DOT&E early to reach an agreement on
    the appropriate levels of testing and acceptable levels of risk for
    specific programs, will expedite the Test and Evaluation input to
    acquisition program decisions and the resulting fielding decisions.
        Secretary Geurts. The traditional snapshot-in-time testing of DOD
    systems is not applicable for IT systems and software given cyber
    vulnerabilities and threats can change daily. Our testing should focus
    more on process and less on the status of the system at a specific
    point of time. Testing should evaluate and validate risk management
    framework (RMF) processes and disciplined cyber hygiene processes. A
    product which passes a cyber `test' today provides no assurance that it
    will defend against a threat tomorrow; however, a program with a solid
    RMF process should have adequate discipline to identify risk and defend
    against threats throughout the lifecycle. Certification, compliance and
    authority to operate a system on the network are of equal concern to
    testing. We need faster processes to get our systems approved to
    operate, and the RMF process should also facilitate this. The CIO is
    critical in this area as well on working reciprocity agreements. Within
    the DON, we are reorganizing our CIO organization to streamline
    processes and reduce bureaucracy.
        Testing of commercial IT products (hardware, software and services)
    which have already received commercial certification should not require
    the same level of testing as something developed from scratch or
    significantly customized. Doing so is redundant and costly. Acquiring
    hardware, software, and the cloud as they are developed, sold and
    certified, often as a service, allows us to be a fast follower of
    industry and pace technology. Additionally, products that have been
    previously certified and are considered cyber safe should not require
    lengthy retesting and recertifying when they migrate from a data center
    to the cloud. We need to leverage more reciprocity with industry and
    other government agencies and trust the vetting which has already been
    done. I intend to require the Navy team to ensure redundant testing is
    not performed.
        This can differ for shore-based business systems and tactical
    afloat systems. Tactical IT systems often need a product developed or
    software customized, so an agile software development process should be
    used. Agile development requires continuous planning, continuous
    testing, continuous integration, and continuous fielding. Agile
    developmental efforts should develop a little, test a little and field
    a little. If the testing construct is not equally agile, the benefits
    of the agile process are negated. I will work with our Navy test
    organizations and DOT&E to streamline where applicable.
        Secretary Wilson. Software intensive systems, especially those
    using agile development approaches, present unique challenges to test
    and evaluation. The Air Force is currently evaluating, with a few pilot
    programs, the impacts of agile development to traditional test and
    evaluation methodologies. We have initially identified the need for
    more automated test tools and processes to provide more rapid feedback.
    Additionally, we've identified a need to address test and evaluation
    throughout a system's lifecycle to continue to support agile
    development in the fielding of updates, patches, and fixes. We will
    also assess the workforce for skills and training required for agile
    software development. Finally, the Air Force works closely with the
    Director of Operational Test and Evaluation and will continue to
    collaborate on the approval of Test and Evaluation Master Plans, data
    sharing, and other areas as needed to speed fielding of capability to
    the warfighter.
                    developmental test and evaluation (dt&e)
        36. Senators McCain and Reed. Secretaries Lord, Esper, Geurts, and
    Wilson, the Congress has demonstrated through legislation such as the
    Weapons Systems Acquisition Reform Act of 2009 and other Public Laws in
    recent years that the Congress places high value on the need for
    conducting thorough Developmental T&E to assist program managers and
    the Department leadership by providing essential information on the
    progress of a program during the acquisition progress. The Congress has
    included legislation requiring high level reviews of the developmental
    test and evaluation for the Departments major acquisition programs. Do
    you agree that thorough DT&E is essential to program progress and the
    ability of the leadership and Congress to have independent information
    derived from the DT&E to measure the progress of programs and assist
    the program manager to find the best design solution during development
    of acquisition programs? How do you use that information at the
    Military Service leadership levels and Office of Secretary of Defense
    level and where within your organizations does the oversight for DT&E
    reside?
        Secretary Lord. Yes, I agree that thorough DT&E is essential and an
    effective way to minimize risk by avoiding discovery of deficiencies
    late in program development and providing valuable information to
    support sound decision making. The goal of DT&E is, put simply, to
    devise, resource and execute plans to discover as many issues as
    possible associated with the most significant risks on programs, and to
    do it as early as possible in these programs when the impacts are far
    less severe/costly and when appropriate corrective actions are feasible
    without major disruption in the programs. Methodical, build-up
    prototype testing and risk management approaches are necessary in
    support of design/technology maturation in order to minimize risks as
    programs progress, and hence increase confidence in successful
    engineering and manufacturing development efforts leading to production
    and fielding of critical capabilities.
        Having said the above, I also believe that combined developmental
    and operational testing, under an integrated test and evaluation (IT&E)
    construct utilizing both developmental and operational test personnel,
    is absolutely key to success. Under this IT&E construct, effective
    communication and collaboration is achieved spanning the developmental
    and operational test agencies, utilizing a framework under which test
    data are collected and shared and deficiencies are jointly
    dispositioned and assessed for potential corrective actions. The result
    is a more efficient means of achieving the goal of fielding effective
    and suitable systems/capabilities to the operational communities as
    rapidly as possible.
        The information provided by DT&E, and IT&E, informs the acquisition
    community at several levels, from the program manager who must make
    informed decisions about when to proceed through critical phases
    between milestones, to acquisition executive who must decide program
    readiness to enter a major milestone and proceed to the next phase. As
    Milestone Decision Authority shifts to the Services, I am returning
    DT&E oversight responsibilities and program progress tracking to the
    Service developmental test organizations. Senior leadership will be
    informed of critical test results via monthly updates on MDAPs reviewed
    by OUSD(A&S) and subsequently submitted to DEPSECDEF and SECDEF.
        Currently, the senior leader responsible for DT&E resides within
    the office of the Assistant Secretary of Defense for Research and
    Engineering in the Under Secretary of Defense for Acquisition,
    Technology, and Logistics. We are in the detailed planning phase of the
    restructuring the offices and functions of AT&L into the two new
    Undersecretaries of Defense for Research and Engineering and
    Acquisition and Sustainment. Subsequent to the statutorily mandated
    reorganization effective February 1, 2018, I will work with the new
    USD(R&E) to implement an organizational structure that ensures a
    developmental test and evaluation office is properly staffed and
    resourced and given sufficient authorities within the Department.
        Secretary Esper. Developmental testing is important to the Army and
    we understand Congressional desire for appropriate Service Department
    oversight. In the office of the Secretary, the Deputy Undersecretary,
    has responsibility to ensure that proper test plans, policy oversight
    and funding will enable a robust and independent testing program for
    Department of the Army. The independent US Army Test and Evaluation
    Command conducts Developmental testing as one of the three formal types
    of T&E, by statute. DT&E verifies that the system's design is
    satisfactory and that all technical specifications and contract
    requirements have been met, and most importantly certifies readiness
    for operational testing.
        Secretary Geurts. Yes. Thorough DT&E, as part of the systems
    engineering process, conducted for acquisition programs, is essential
    to inform program managers, Department leadership and Congress. T&E is
    conducted to gain knowledge to advance systems development, understand
    technical and operating characteristics and performance to support
    acquisition decisions. DT&E provides early learning and identification
    of technical, operational and system deficiencies to ensure that
    appropriate and timely corrective actions can be developed prior to
    system fielding. Test results inform decision makers at critical points
    in a program's development. Within the Navy, each program has a Chief
    Development Tester and a Lead DT&E Activity are assigned to oversee
    developmental test planning, execution, analysis and reporting
    activities. The DON T&E Executive is the senior executive for T&E
    policy, capability and T&E workforce.
        Secretary Wilson. Yes, the Air Force agrees developmental test and
    evaluation is essential in developing combat capabilities and informing
    the warfighter and decision makers, including Congress. The Air Force
    uses developmental test and evaluation results to measure program
    progress, determine overall system maturity, aid in system development,
    identify program risks, and prepare for operational test and
    evaluation. The Air Force includes these results in regular program
    reporting to senior leaders as well as the Office of the Secretary of
    Defense. The Air Force's Director, Test and Evaluation (AF/TE) performs
    developmental test and evaluation oversight. AF/TE works with the Air
    Force Test Center and Air Force program offices to ensure developmental
    test and evaluation is properly resourced and that Air Force test
    ranges are capable of supporting Air Force programs. Individual program
    offices and lead developmental test and evaluation organizations
    provide day-to-day oversight of developmental test and evaluation
    activitiess.

        37. Senators McCain and Reed. Secretary Lord, the Congress in
    recent years has passed legislation that included specific duties for a
    strong, well-resourced DT&E oversight organization within your broader
    organization at the OSD level. Do you agree that you need such an
    organization and, if so, where do you believe it should reside in your
    new reorganization plans and how do you intend to address the
    requirements for such an organization that we have included in prior
    legislation such as having direct access to your leadership, having
    authority to review and approve Test and Evaluation Master Plans and
    providing direct input to milestone decisions for major acquisition
    programs?
        Secretary Lord. Yes, I believe in a strong, well-sourced
    Developmental Test and Evaluation (DT&E) because it is important to the
    success of acquisition programs in the Department. A strong DT&E
    organization, via ``hands-on'' engagement, can assist programs in
    devising developmental test plans that enable discovery of as many
    deficiencies as possible associated with the most significant risks on
    programs, and as early as possible when the impacts are far less
    severe/costly, thus enabling programs to take appropriate corrective
    actions without major disruption. Ultimately, insight and active
    participation in programs, vice oversight, is what enables the DT&E
    organization to be most effective with respect to minimizing risks as
    programs progress, and hence increasing confidence in successful
    engineering and manufacturing development efforts leading to production
    and fielding of critical capabilities. Further, a well-resourced DT&E
    organization maintains insight and active assistance efforts on
    programs, establishes policy and direction, and ensures the up to date
    education and continuous learning of the 8,700 plus T&E workforce in
    the Department.
        The final decision of where the senior leader responsible for DT&E
    will reside within the restructured Under Sectary for Research and
    Engineer is in the planning phase. The future roles and functions of
    the DT&E organization will be shaped by prior congressional legislation
    concerning access to leadership, Test and Evaluation Master Plans
    approval authorities, and inputs to milestone decisions for major
    acquisition programs. I, along with the new Under Secretary of Defense
    for Research and Engineering, will review and implement an appropriate
    organizational structure to ensure that developmental test and
    evaluation is properly staffed and resourced and given the right
    authorities in the Department.
        Secretary Wilson. Yes, I agree that we need a strong, well-
    resourced organization providing DT&E oversight at the OSD level. In
    the Air Force, we oversee the execution of developmental and
    operational testing with a single Director of Test and Evaluation who
    is independent of acquisition. OSD and Congress should likewise
    consider a test and evaluation oversight construct that combines
    developmental and operation test oversight into a single office
    independent of the acquisition chain. This combination would promote
    both test and acquisition efficiencies and better align with the vision
    for rapid acquisition outlined in the National Defense Strategy. These
    efficiencies would include streamlined review and approval of Test and
    Evaluation Master Plans; encourage the sharing of data, analyses, and
    reporting; allow quicker identification of duplicative test needs or
    common test gaps; and provide a single, independent test voice to
    Milestone Decision Authorities.

                                   __________
                  Questions Submitted by Senator James Inhofe
                       sustainment costs of new programs
        38. Senator Inhofe. Secretary Lord, Secretary Esper, Secretary
    Wilson and Secretary Geurts, do you think that weapons system
    sustainment is being adequately incorporated into initial acquisition
    planning for new weapons systems to ensure these programs can be
    efficiently and effectively maintained over their life cycles?
        Secretary Lord. While there are many factors contributing the
    current troubling state of materiel readiness, not the least of which
    are budget uncertainty and high optempo, the high cost to sustain our
    weapons systems is a factor that is particularly difficult to address
    once a system is fielded. For example as Naval aviation depot level
    reparable items costs have risen by 2.5 percent above inflation
    annually over the past 20 years, mission capable rates for Naval
    tactical aircraft have declined by 2.5 percent per year on average. The
    Department's greatest leverage over weapons systems Operating and
    Support costs is in the earliest acquisition decisions, including
    initial design and those that precede the decision to down-select to a
    single vendor and commit resources to a particular design. During these
    early decisions typically 80 percent of program controllable O&S costs
    are determined through design decision. Leverage over O&S costs
    declines to under 10 percent by the time a systems enters production.
    Some of these early impactful decisions occur even before we've
    formally established a program of record. While the Department has made
    progress over the past few years emphasizing sustainment planning in
    weapons programs, there is still more that we can do to drive cost out
    of sustainment and improve our prospects to improve readiness in future
    systems.
        It is vitally important to acknowledge, engage, and equip those
    functions upon which Program Managers are critically dependent for
    sustainment direction and support, specifically the requirements and
    resourcing functions. These functions fall under the purview of the
    Service Chiefs, but I see a real opportunity for the OUSD(A&S) to
    advise the Services on practical analyses that can inform development
    of sustainment requirements that will yield improved readiness outcomes
    and lower cost, while not over constraining the design space such that
    capability is sub-optimized. An essential component of maintaining
    sufficient operational availability at affordable costs is leveraging
    data analytics and machine learning. I believe that we have an
    opportunity to leverage industry practices to set up sustainment
    systems that are far more predictive in nature and better rationalize
    the number and physical location of spares.
        Resourcing for appropriate sustainment analysis early in weapons
    system development is also critical to ensuring that systems are best
    postured for effective and efficient sustainment. Incorporating
    sustainment strategy options into an analysis of alternatives may add
    modestly to the cost of the analysis, but such cost is dwarfed by the
    returns in sustainment productivity over a weapon system's life cycle.
    Similarly, investment in supportability analyses in concert with
    technology maturation can yield technologies that are more reliable and
    maintainable when incorporated into system designs, yielding more
    supportable end items. History has shown us that 70 percent of product
    cost is in sustainment. We therefore have a significant opportunity to
    impact lifecycle cost if we improve our sustainment capability.
        Secretary Esper. We currently plan and document weapon system
    sustainment in a Lifecycle Sustainment Plan (LCSP) for each weapon
    system. This is a detailed and collaborative effort between our
    acquisition program offices and the Army Materiel Command with great
    focus on key elements to include reliability, availability,
    maintainability and operations and support costs. In 2016, the Army
    introduced the Operational Sustainment Review (OSR) to examine how well
    each major defense acquisition program's sustainment strategy is
    performing once fielded to Army units. The OSR is a detailed metrics-
    based assessment that looks at all aspects of a weapon systems
    sustainment strategy two years after initial operational capability has
    been declared. Since 2016, we have conducted fourteen reviews and have
    six more scheduled for the rest of 2018. In addition, the Army is
    running a pilot to add a Transition to Sustainment annex to the
    existing Life Cycle Support Plan (LCSP) with a focus on setting the
    conditions early in a program as well as using insight gained from the
    OSRs that will improve the Army's sustainment functions. The Army can
    effectively and efficiently maintain our systems with these processes.
        Secretary Geurts. While sustainment cost projections are considered
    through the phases of product development, the Department could do a
    better job of considering sustainment costs on equal footing with
    procurement costs. The goal of the Department is to produce, support,
    and maintain the required performance and readiness objectives of our
    weapon systems efficiently and effectively. In fiscally constrained
    environments, we have been challenged with achieving this goal with
    lower levels of Total Obligation Authority. Thus, it is important for
    programs to consider and review all potential strategies to optimize
    program planning and costs while providing the required levels of
    future readiness.
        Clearly, one standard solution does not fit all weapons systems
    sustainment scenarios. Program Managers have to consider organic,
    commercial, and hybrid sustainment solutions to meet both program and
    mandated United States Code, Title 10 requirements. DON uses integrated
    product teams and/or cross-functional relationships working groups in
    defining depot maintenance requirements. Additionally, Systems
    Engineering Technical Reviews, Life Cycle Sustainment Plans, and
    milestone reviews ensure programs include realistic considerations for
    industrial depot maintenance solutions to capture support and
    sustainment requirements.
        Secretary Wilson. Yes. Product Support Managers, who are
    accountable to the Program Manager, support the Air Force's acquisition
    programs for planning and executing sustainment strategies that achieve
    operational readiness outcomes at an affordable cost. Throughout the
    acquisition process, the Product Support Manager continuously assesses
    system design to ensure they give adequate consideration to
    reliability, availability, maintainability and sustainment costs. The
    Air Force also places affordability constraints on acquisition
    programs, ensuring that each program's estimated sustainment costs fit
    within future Air Force resource allocations. Finally, the Air Force
    executes Independent Logistics Assessments to validate the sufficiency
    of sustainment planning and identify areas for improvement.

        39. Senator Inhofe. Secretary Lord, Secretary Esper, Secretary
    Wilson and Secretary Geurts, how do we balance the need to consider
    long term costs associated with sustainment of aging weapons systems
    with the need to speed up the acquisition process and get emerging
    technology to warfighters?
        Secretary Lord. Among our options to lower costs to sustain
    currently fielded systems is a greater emphasis on data-driven
    sustainment and condition-based maintenance. Our experience is that
    data driven condition-based maintenance approaches will yield
    conservatively a 5 percent increase in a system's materiel availability
    and an associated 5 percent decrease in the cost of sustainment. In
    concert, these thrust areas will provide DOD with the insight to target
    areas providing the greatest opportunity to reduce sustainment costs
    and the means to quickly address these leverage points. Such efforts
    could be accelerated and the likelihood of cross-Departmental adoption
    increased through an appropriately resourced DOD-level sustainment R&D
    program specifically chartered to improve sustainment productivity.
    Approximately 3 percent of RDT&E is currently used for readiness
    improvement and sustainment R&D.
        Options for improving long-term sustainment for any acquired
    capabilities will vary in large part depending on the degree to which
    the new capability includes dual use commercial technology. Where the
    ratio of commercial technology is small compared to technology
    developed for DOD's unique purpose through DOD funding, improved
    sustainment will depend on the Department investing in data, tools and
    analysts that support design influence and more effective technical
    data procurement. For capabilities largely comprised of commercially
    development technology, the Department's sustainment options are likely
    to vary from disposable end items that are replaced rather than
    repaired to using field service representatives where the warfighting
    concept of operation is supportive or establishing innovative technical
    data provisions and pricing that supports organic sustainment.
        Secretary Esper. The Army conducts comprehensive annual Strategic
    Program Analysis Reviews (SPAR) of future and sustained systems over
    30-year roadmaps. These roadmaps include Science and Technology (S&T)
    insertion opportunities and serve as a guide for senior leaders to
    discuss the point at which emerging technology becomes mature enough to
    consider replacing our aging weapon systems. The end product is a
    coordinated strategy to meet the Army's strategic equipping goals,
    including divestiture of legacy equipment, at an acceptable level of
    risk. This decision process is key to balancing funding for systems in
    a disciplined approach to when the Army initiates a new development or
    procurement, a deliberate transition to sustainment, and a directed
    disposal timeline aligned with fielding new technologies.
        Secretary Geurts. Speed to the fleet of new technology and
    restoring and maintaining readiness of our fielded products are equally
    important. Life cycle costs are considered throughout the development
    and sustainment of a weapon system. There are occasions where speed of
    a capability can temporarily drive a less cost effective sustainment
    solution that are usually tied to Urgent Need Statements from the
    combatant commanders.
        To have an effective balance between legacy system sustainment and
    speed of emerging systems to the warfighter we must think in terms of
    velocity (speed in a given direction) vice simply speed. The
    collaborative work that the DON Product Support Managers and Program
    Managers do at the initiation and throughout each weapons systems
    program provides system sustainment direction for each program
    throughout its life-cycle. Velocity is accomplished by making informed
    risk-based procurement and maintenance decisions at every stage of a
    programs life-cycle.
        Secretary Wilson. The Air Force balances long term sustainment
    costs with the need to speed up the acquisition process by executing an
    integrated life cycle management approach. The Air Force has taken
    several steps to achieve this integration, better aligning at all
    levels the roles and responsibilities for acquisition and sustainment
    of our weapons systems. The Assistant Secretary of the Air Force for
    Acquisition, Technology, and Logistics now has a Deputy Assistant
    Secretary for Logistics and Product Support responsible for ensuring
    that acquisition programs appropriately plan for the long-term
    sustainment of our systems. Also, the 2011 reorganization within Air
    Force Materiel Command reinforced our Program Executive Officers and
    Program Managers are responsible not only for acquiring systems, but
    also for sustaining them. Finally, the Air Force has assigned Product
    Support Managers to its program offices, ensuring that a senior life
    cycle logistician focuses on planning and execution of sustainment
    strategies that achieve operational readiness outcomes at an affordable
    cost. While we balance these long term sustainment costs with the need
    to field emerging technologies, we have not been able to retire weapon
    systems. The Air Force would like the flexibility to make these trades.
                         changing acquisition processes
        40. Senator Inhofe. Secretary Esper, understanding the Army is in
    the process of replacing the M4, how can you ensure the Army will avoid
    another 350 page requirements document and years of wasteful testing?
        Secretary Esper. The lengthy Request for Proposals associated with
    the Modular Handgun System was a Federal Acquisition Regulation-based
    contract which included many clauses that were mandated by statute.
    However, based on language in the fiscal year (FY) 2016 and fiscal year
    2017 National Defense Authorization Acts, Congress has provided us the
    tools that allow us to shift the paradigm. The Army will leverage Other
    Transaction Authorities to further streamline the acquisition process
    and leverage commercial industrial expertise for the technologies
    required to develop the Next Generation Squad Weapon.
        The Army is also is looking at test reform to focus on priorities
    of warfighters, specifically capabilities and limitations of our
    systems in a more cost and schedule effective way.

                                   __________
                  Questions Submitted by Senator Roger Wicker
                    national security technology accelerator
        41. Senator Wicker. Secretary Lord, Congress has expressed strong
    support for the MD5 National Security Technology Accelerator
    Initiative. MD5 accelerates technology development by facilitates
    collaboration between civilian and military personnel, their
    counterparts in academia, and the high-tech industry. The organization
    has launched a number of successful initiatives including Hacking 4
    Defense, the Innovation Boot Camp, and the Marine Corps Adaptive Threat
    Force program. How do you plan to support MD5 in the future?
        Secretary Lord. MD5 has provided real value, both to the Department
    and the broad array of non-traditional partners with whom it interacts,
    through the creation of two programs of record for the US Marine Corps
    and more than 900 new applications, concepts or solutions back to
    problem sponsors throughout DOD. Although I believe the Department
    needs to evaluate MD5 as part of a broader, holistic discussion related
    to program priorities and attendant resources, my office intends to
    advocate for its inclusion in the Department's submission as part of
    the President's Budget for fiscal year 2020 to build upon early success
    stories like Capella Space, which started as a Hacking for Defense team
    at Stanford University in 2015 and has already raised more than $20
    million in private funding as a venture. I will also ensure that funds
    are available to sustain MD5 operations through fiscal year 2018 and
    fiscal year 2019 without disruption, including seeking continuing
    resolution funding for the program, so long as this is consistent with
    the intent of Congress.
                             efficient shipbuilding
        42. Senator Wicker. Secretary Geurts, the President will sign the
    National Defense Authorization Act into law very soon. The NDAA
    includes my legislation--the SHIPS Act--that will make it national
    policy to meet the 355-ship requirement. As part of a naval buildup,
    the Navy needs to accelerate shipbuilding and leverage our hot
    production lines. Is the Navy buying ships in the most efficient manner
    possible? If not, do you need additional authorities from Congress or
    modified authorities?
        Secretary Geurts. The Navy is committed to building ships in the
    most efficient manner possible to meet the 355-ship requirement
    summarized in the 2016 Force Structure Assessment. Our goal is to
    maintain stable production lines throughout the shipbuilding industrial
    base for all core platforms. This ensures a surge capacity throughout
    the industrial base that will allow the Navy to retain the ability to
    surge to meet fleet requirements.
        By balancing long-term efficient acquisition profiles with targeted
    service life extensions and aggressive growth options, the Navy plans
    to stabilize the industrial base and set the foundation for efficiently
    and deliberately growing the force towards its warfighting requirement.
    Of particular importance is the sustainment of the industrial base at a
    level that supports more affordable acquisition, predictable and
    efficient depot level maintenance and modernization, and an
    appropriately sized experienced workforce for more aggressive growth if
    additional resources become available.
        Key to maintaining stable production lines is stable funding
    coupled with contracting strategies that provide a long-term commitment
    to industry. The Navy utilizes contracting tools such as multi-year
    procurements, block buy contracts, and economic order quantity buys,
    when and where it makes sense to do so to provide a stable commitment
    to industry.
               incremental funding authority for amphibious ships
        43. Senator Wicker. Secretary Geurts, the NDAA also contains
    Incremental Funding authority for the Navy to buy either the 30th LPD
    amphibious ship or the first LXR amphibious ship. Incremental Funding
    is a tool to help the Navy to get started on ship production without
    having to budget for the entire ship. Can you commit to me that the
    Navy will take advantage of the incremental funding authority in NDAA?
        Secretary Geurts. The Navy is currently exploring all options with
    regards to the fiscal year 2018 incremental funding of the next LPD or
    the first LXR. The funding will help jump start the LXR program. This
    earlier start will reduce the risk of a loss of learning and will help
    ensure the most efficient use of taxpayer funds.
                   block buy of ford-class aircraft carriers
        44. Senator Wicker. Secretary Geurts, the Senate Armed Services
    Seapower Subcommittee conducted a number of hearings on options to
    build the 355 ship Navy. We held a hearing with former Reagan
    Administration officials--including Secretary Lehman--to learn about
    the 1980s fleet buildup. The Reagan executed a block-buy of aircraft
    carriers. The Navy got carriers faster and saved money through
    leveraging competition in the supplier base. On the current trajectory,
    when will the Navy meet its requirement for 12 aircraft carriers? Could
    a block-buy strategy get us to 12 carriers faster? What are the
    implications for the shipbuilding industrial base? Would a block-buy
    stimulate the industrial base and generate competition and new
    suppliers? Do you see benefits for the rest of the shipbuilding
    program?
        Secretary Geurts. The current legislative requirement is for eleven
    operational aircraft carriers (CVNs). On the current trajectory with
    five-year build centers, the Navy will not meet 12 operational aircraft
    carriers. A multi-ship buy alone will not increase the operational
    aircraft carrier inventory to 12 CVNs any sooner. To achieve a 12-CVN
    force, the frequency of aircraft carrier procurement would have to
    increase to every three to four years in comparison to the current
    five-year build centers.
        Returns from multi-ship buys have consistently shown that volume
    material buys and level loading of the shipbuilder and vendor base is a
    proven practice to reduce cost of shipbuilding programs. Previous
    experience with two ship buys of CVNs (CVN 72 and CVN 73 were procured
    in fiscal year 1983 and CVN 74 and CVN 75 were procured in fiscal year
    1988) demonstrated significant savings. Multi-ship buys enable both the
    Navy and the shipbuilder to take advantage of material procurement
    efficiencies, and the stability it affords industry provides for more
    efficient use of resources and a more favorable market for suppliers to
    enter, thereby encouraging more competition. Component commonality
    between the submarine and CVN industrial base furthers the opportunity
    for stability and savings. Multi-ship buys also minimize fact-of-life
    changes between ships, thus reducing follow-ship drawing and
    construction costs, and affording the shipbuilder the ability to
    optimize production trades management. The shorter time between
    deliveries results in increased design stability, minimizes potential
    obsolescence, and provides greater opportunities for learning.
                      frigate program acquisition strategy
        45. Senator Wicker. Secretary Guerts, the new Frigate will be an
    essential component of the future fleet. The Navy's acquisition
    strategy for the Frigate is commendable. You are going to pick a proven
    design rather than start over with a clean sheet design. This decision
    should accelerate the program significantly. Is there anything else
    that could be done to accelerate this program?
        Secretary Geurts. The Navy is currently on the quickest path to
    procure the Frigate (FFG(X)). To allow adequate time to define FFG(X)
    requirements, thoroughly evaluate design alternatives and mature the
    design, the President's Budget (PB) 2018 submission deferred the first
    year of FFG(X) procurement to fiscal year 2020 with additional Littoral
    Combat Ships (LCS) being procured in fiscal year 2018 and fiscal year
    2019.
        The Navy is using a two-phase acquisition approach to procure
    FFG(X) starting with a Conceptual Design phase from Q2FY2018 until
    Q3FY2019. This will allow Navy and Industry to reduce risk by maturing
    parent FFG(X) designs and identifying cost and capability drivers, to
    incorporate into the Navy's requirements. The Conceptual Design phase
    will be followed by a full and open competition for Detail Design and
    Construction in Q4FY2019 with award to a single shipbuilder in
    Q4FY2020.

                                   __________
                   Questions Submitted by Senator Mike Rounds
                                cesg membership
        46. Senator Rounds. Secretary Lord, at the SASC hearing on Dec 7, I
    asked whether Cloud Executive Steering Group (CESG) membership included
    warfighter representation from the services and combatant commands
    (including cyber command). You responded in the affirmative that ``We
    have pulled in all of services.'' Please provide the Committee the
    names of individuals from the military services and combatant commands
    who are voting members of the CESG and the roles they serve so that the
    Committee can consult with them on their participation.
        Secretary Lord. The CESG, through their action officer
    representatives, has conducted numerous information gathering sessions
    with the Combatant Commands, Services, and agencies, and continues to
    do so on a regular basis. My response was not intended to imply that
    there were additional voting members of the CESG. Per the Deputy
    Secretary of Defense's January 8, 2018 memorandum titled ``Accelerating
    Enterprise Cloud Adoption Update,'' the Deputy Chief Management Officer
    (DCMO) is responsible for execution of the new enterprise cloud
    program. DCMO will chair the CESG going forward. My role will be to
    serve as the acquisition decision authority.
                               bid protest reform
        47. Senator Rounds. Secretary Esper, you stated the Army needs help
    from Congress to protect programs from frivolous bid protests. You said
    the context was the Army's handgun program. What difference do you
    believe the reforms in Sec. 827 of the NDAA 2018 conference report will
    make?
        Secretary Esper. I fully support the pilot program authorized by
    section 827, which will allow the DOD to determine the effectiveness of
    requiring larger contractors to reimburse the Department for costs
    incurred in filing protests denied by the Government Accountability
    Office. I believe this is a good first step in reducing frivolous bid
    protests.

        48. Senator Rounds. Secretary Esper, how will you make use of this
    authority?
        Secretary Esper. The Army will work closely with the DOD to develop
    and implement the pilot program authorized by section 827. Authorizing
    Competition in Contracting Act (CICA) reform would hold contractors
    responsible for frivolous protests and for the Services to be able to
    execute their contracts in a timely manner to avoid schedule delays
    awaiting a decision that typically takes 90 days to occur. The delays,
    pending the results of a bid protest end up shifting program schedules
    to the right, even when protests are usually ultimately resolved in the
    government's favor.

        49. Senator Rounds. Secretary Esper, what additional legislative
    support do you require to address the Army's needs and concerns?
        Secretary Esper. The Army recommends Congress consider legislation
    that would give Competition in Contracting Act (CICA) relief and the
    ability for the Government Accountability Office to implement a ten day
    rule on stays, instead of the traditional 90 days, and a penalty if the
    contractor loses the protest. Penalties can be scaled based upon
    contract value as to not discourage small businesses from filing
    legitimate protests. We would also recommend enacting relief right away
    as opposed to waiting for a pilot program.

                                   __________
                  Questions Submitted by Senator Dan Sullivan
                         blank slate acquisition reform
        50. Senator Sullivan. Ms. Lord, Dr. Esper, Mr. Guerts, and Dr.
    Wilson, what are your best, most radical ideas to improve Department of
    Defense acquisitions? If you could start with a clean slate for
    acquisitions, what would you do?
        Secretary Lord. Fundamental changes are required of the Department
    of Defense's acquisition system if we are to achieve the objectives
    articulated in the National Defense Strategy (NDS). In my view, we
    require a transition from the traditional linear acquisition process to
    an Adaptive Acquisition Ecosystem. This unified framework would enable
    key stakeholders in execution organizations (e.g. R&E, the Services,
    and COCOMs) to use both traditional and innovative acquisition pathways
    based on program need as a standard practice. I intend to organize
    OUSD(A&S) to manage, analyze, and provide data to govern programs,
    executed by components, by linking their products to NDS objectives. We
    will fundamentally change the Defense Acquisition University (DAU) to
    teach through case studies that will highlight real examples of how a
    variety of contract vehicles are appropriately utilized to simplify and
    speed up acquisition. We have goals of reducing acquisition time by 50
    percent with pilot programs currently being executed. We are not only
    focused on domestic procurement, but Foreign Military Sales (FMS) as
    well.
        Secretary Esper. A successful acquisition system is fast and
    responsive to current and emerging needs, and visionary in meeting
    long-term threats, leaping ahead of capabilities of major adversaries.
    It requires centralized planning, decentralized execution, and
    accountability. With these concepts in mind I have three
    recommendations. First, authorize and appropriate ``colorless''
    acquisition funding to provide predictable, stable, and adequate
    defense acquisition funding over a two year cycle. To increase
    effectiveness of this recommendation, reduce current restrictions under
    Continuing Resolutions and amend the Budget Control Act that create
    budget uncertainty hindering the Army's ability to predictably start
    new programs, enter into multi-year contracts, increase production
    rates, or realign funds to higher priority requirements or simply allow
    the Services to execute at the lowest committee mark under a Continuing
    Resolution. Second, allow greater reprogramming thresholds. Higher
    below-threshold reprogramming gives the Army greater authority to move
    cost savings within our funding lines and incentivize delivering
    programs on time and under budget. Third, improve the flexibility of
    the acquisition personnel system to alleviate required wait periods to
    hire former military personnel and accelerate the accession process to
    hire and relocate civilian personnel.
        Ideally we would request the flexibility to execute our programs,
    including the ability to start new programs, enter into multi-year
    contracts, increase production rates or realign funding to higher
    priority requirements, even under Continuing Resolutions.
        Secretary Geurts. I offer the following ideas to improve DOD
    acquisition:

        1.  Significantly reduce or eliminate statutory information
    requirements for MDAPs and major systems acquisition programs, and
    allow DOD to set and refine these requirements in regulatory issuances
    such as DOD Instruction 5000.02 (similar to recent legislation
    pertaining to major automated information system (MAIS) programs). This
    would allow program managers and milestone decision authorities greater
    flexibility in tailoring program information requirements to the needs
    of the particular program.
        2.  Provide for defense budgeting and defense appropriations to be
    made on no shorter than a two-year basis, rather than an annual basis,
    to provide stability in program budgets and mitigate the impact of
    continuing resolutions.
        3.  Expand certain acquisition authorities of the Secretary of
    Defense to the Secretaries of the MILDEPS, in particular:
             Congress has granted the Secretary of Defense, without
    power of delegation, statutory authority to waive any acquisition law
    or regulation to acquire a capability that would not otherwise be
    available to the DOD Components. Congress can grant similar waiver
    authority to the secretaries of the MILDEPs.
             Congress has granted the Secretary of Defense, without
    power of delegation to the Under Secretary of Defense only, statutory
    authority to initiate section 804 (Fiscal Year 2016 NDAA) rapid
    prototyping projects and rapid fielding programs by using on an annual
    basis up to $200 million cumulatively of any funds available to DOD.
    Congress can grant similar funding flexibility for section 804
    initiatives to the secretaries of the MILDEPs.
        I will continually encourage the DON acquisition enterprise to
    identify game-changing ideas to improve DOD acquisition, including
    clean-slate proposals. I will also work with USD (R&E), USD (A&S), and
    the other MILDEPs to develop such ideas.
        Secretary Wilson. If I could start with a clean slate, the Air
    Force would streamline the approval process required to execute an
    acquisition program, so that all decisions are made at the appropriate
    level. Additionally, the Air Force would like additional funding
    flexibility particularly for software development efforts. On software
    development efforts, the line between development, production and
    sustainment is blurred or non-existent. The current appropriation
    categories limit and slow acquisition activities and fielding of
    software-intensive capabilities. The Air Force encourages the
    establishment of a new appropriation for software-intensive systems.
                     multiyear acquisitions and icebreakers
        51. Senator Sullivan. Secretary Lord and Secretary Guerts, does it
    make sense to sign multi-year acquisition contracts to reduce overall
    program costs for shipbuilding?
        Secretary Lord. I fully support the use of multi-year acquisition
    contracts for shipbuilding programs once there is a stable design
    baseline for the program accompanied by realistic estimates of contract
    cost and savings. Multi-year acquisition contracts have proven to
    reduce overall shipbuilding program costs by reducing risk via
    stabilization of the shipbuilders' workforce and the vendor base that
    supports many of our shipbuilding programs, by enabling economic order
    quantities, and by reducing overhead costs related to multiple
    proposals and contract negotiations. Some programs include fragile
    suppliers that might not otherwise be able to remain viable or cost
    effective. Multi-year acquisition contracts can incentivize the
    shipbuilders to establish a procurement plan with their suppliers to
    sustain the industrial base through workload balancing, process
    improvements, or other investments.
        Secretary Geurts. Yes. Multi-year contracts provide stability,
    commitment, and more effective use of funding to the shipbuilding
    industrial base that result in lower costs to the Navy. Multi-year
    contracts enable the Navy and Industry to take advantage of material
    procurement efficiencies and to utilize resources in an efficient
    manner, while also providing industry at the prime and sub-vendor
    levels with the commitment necessary to support investment in their
    facilities and people. The Navy will continue to aggressively pursue
    multi-year procurement contracts whenever feasible and where it makes
    sense to do so.

        52. Senator Sullivan. Secretary Guerts, if we do not procure ice-
    breakers through a multi-year procurement contact, in your personal
    opinion, will it likely result in an inefficient use of valuable U.S.
    tax dollars? Shouldn't any plan for icebreaker procurement include a
    multi-year acquisition plan?
        Secretary Geurts. Since forming an Integrated Program Office in
    2016, the Coast Guard and Navy have been developing an acquisition
    strategy that makes the most efficient use of government resources to
    procure heavy polar icebreakers. Although the statutory requirements in
    10 U.S.C. Sec.  2306b prevent the use of a multi-year procurement
    contract for the lead ship, the Services are jointly exploring cost-
    saving acquisition approaches on follow-on ships, including block buy
    contracts. The Navy and Coast Guard will work with Congress to
    determine whether additional authorities are required.

        53. Senator Sullivan. Secretary Guerts, given the urgent need of
    U.S. icebreaker capacity and capability, combined with an outlook for
    limited procurement, does it make sense to analyze purchasing
    icebreakers from allied and partner nations?
        Secretary Geurts. The U.S. Coast Guard (USCG) has conducted the
    analysis to determine whether there are any in-service, foreign
    icebreakers available for purchase and has determined that there are
    none that meet the USCG's heavy polar icebreaker requirements.
        As a bridging strategy and to maintain the nation's current heavy
    icebreaking capability the USCG has chosen to extend the service life
    of the POLAR STAR (the nation's only operational heavy polar
    icebreaker) until new heavy polar icebreakers are delivered.
                               jaasv acquisition
        54. Senator Sullivan. Secretary Esper, how will recent acquisition
    reforms enable system like the JAASV--which should consider existing
    domestic or foreign platforms--be procured more efficiently and
    expediently? Would you recommend procuring the JAASV as a ``middle
    tier'' program to enable rapid fielding?
        Secretary Esper. In 2012, the Army determined that no short-term or
    long-term operational warfighting requirement exists that supports the
    continued ownership and sustainment of the current Small Unit Support
    Vehicle (SUSV) or a successor (e.g. JAASV). The Army's current
    modernization priorities are designed to drive the allocation of
    limited resources to ensure overmatch with respect to anticipated
    threats and operational requirements. At the same time, I also
    recognize that our Total Force faces unique needs in cold weather,
    austere, and other environments. I remain committed to evaluating how
    those capability requirements align with the Army's modernization and
    sustainment priorities-including identifying the optimal way to procure
    new capabilities within available authorities and funding.
                 combat rescue helicopter acquisition timeline
        55. Senator Sullivan. Secretary Wilson, given the critical
    importance of the personnel recovery mission to the Air Force, what
    steps is the Air Force taking to ensure an on-time delivery of the Ops
    Loss Replacement helicopter (and eventually, the Combat Rescue
    Helicopter) to sustain this sacred mission?
        Secretary Wilson. The Air Force is diligently working to deliver
    the Operational Loss Replacement HH-60Gs. The Air Force is committed to
    Combat Rescue Helicopter. The Air Force structured the contract for
    Combat Rescue Helicopter to incentivize early delivery. If the
    contractor meets the goal, they receive an incentive and we immediately
    start procurement

                                   __________
                  Questions Submitted by Senator David Perdue
             acquisition strategy--are we ignoring the medium term?
        56. Senator Perdue. Secretary Lord, DOD is facing today in terms of
    balancing readiness, modernization, and this time in between where
    we're seeing increasing capability gaps. The last big boost in military
    spending, wasn't to recap, but rather was spent fighting wars. As you
    well know, we're still living on the last legs of the Reagan build-up,
    and all the bills are coming due at once with a major acquisition bow
    wave. At the same time, our adversaries are showing that they can get
    new platforms online a lot faster than we can. Right now, we're dealing
    with the near-term issue of restoring readiness in the immediate future
    of 0-3 years, and we're also focusing on future threats and
    capabilities in the 15-25 year-out window. I'm concerned we're not
    looking to the 3-12 year window, where we're going to see a lot of
    capability gaps--including with our submarine fleet, the JSTARS recap,
    and other programs. Defense expert Mackenzie Eaglen told this committee
    last week that, quote, ``policymakers must avoid a ``barbell''
    investment strategy that deemphasizes the medium-term needs of the
    2020s.'' As I said on Thursday, I worry that's what we're doing now
    with JSTARS. How will acquisition reforms help us bridge the capability
    gaps we're going to have in the next 3-12 years?
        Secretary Lord. While the modernization of the platforms supporting
    the nuclear triad is a long term challenge, we are making investments
    in more robust capabilities for the mid-term. We are ramping up
    production of the F-35; increasing quantities of ground systems such as
    Joint Light Tactical Vehicle, Armored Multi-Purpose Vehicle, Paladin
    Integrated Management, and the M-1 Abrams Tank Modification/Upgrades;
    and going to maximum rates of production across multiple preferred
    munitions. We also have opportunities to address medium term capability
    needs by inserting innovative technologies that enhance our
    capabilities and confound our adversaries; for example, by exploring
    opportunities and new capabilities that sustain and extend DOD's
    military advantage in the Electromagnetic Spectrum. The Department's
    commitment to Modular Open Systems Architecture and standard interfaces
    encourage traditional and non-traditional sources of supply to offer
    subsystem options and more rapid insertion of capabilities into
    platforms. And our investments in advanced design and manufacturing
    tools enable faster and more affordable prototype development, which
    accelerates time to market. The broad reform efforts within the
    Department aimed at improving business operations will generate savings
    that can be applied to more pressing warfighting needs in the 2020's.
    The Department also requires the support of Congress to reduce the
    costs of things we no longer need such as excess infrastructure and,
    where warranted, program cancellations. Most importantly, we need
    repeal of the Budget Control Act caps and substantially higher topline
    to pay for increases in procurement and targeted force structure
    growth.

        57. Senator Perdue. Secretary Lord, will you commit to working with
    me and this committee to look at low-cost, rapid solutions which
    support our first National Defense Strategy, for JSTARS recap and other
    programs so we can be sure that we're taking care of our needs in the
    near, medium, and long term?
        Secretary Lord. I look forward to working with you and the
    committee to look at low cost, rapid solutions to meet our national
    defense needs for the future.
                     jstars--example of rapid acquisition?
        58. Senator Perdue. Secretary Lord, the JSTARS program is a unique
    capability that provides not only valuable ISR--including ground moving
    target indicator, but also battle management and command and control in
    an on-board management suite that allows warfighters on the tactical
    edge of battle to cut through the fog of war, real-time. In fact, Air
    Combat Commander General Holmes testified in March of 2015 that, quote,
    ``The capability to perform this dual mission at the tactical edge
    provides C2 (command and control) mission assurance in a contested
    environment. The USAF is fully committed to the JSTARS mission.'' Since
    1991 when the initial JSTARS concept was proven as a critical, joint,
    combat capability for real time intelligence, battle management and
    command and control which we still use today on the E-8C fleet of
    aircraft. In 1999, the Air Force decided the unique JSTARS capability
    should be recapitalized and developed the initial JSTARS recap for the
    E-10. However, in 2008 and after spending almost $2 billion in research
    and development, the E-10 program was cancelled, with the intent of
    replacing JSTARS with a future, space-based or networked technology.
    The legacy fleet continues to perform and support forces across the
    globe identifying threats on the ground and providing timely
    intelligence analyzed by airmen and soldiers on board to manage the
    battle for ground forces. According to the Congressional Research
    Service, in 2008 the E-10, which was the first attempt at a JSTARS
    recap, was cancelled because quote, ``Some people believed the mission
    could be accomplished by space-based assets, while others, viewed
    unmanned aircraft as most cost effective, while others believed in
    downgrading with role of high-cost platforms in favor of networked,
    distributed collection systems.'' That sounds like the exact same
    strategy the Air Force is considering pursuing again, while the legacy
    fleet continues to support real world missions and is now 9 years
    older, with uncertainty on the what the replacement will be, how much
    the replacement will cost, and when that replacement will be developed,
    tested and fielded if the JSTARS acquisition strategy changes. This
    envisioned future, space-based technological replacement never came to
    fruition, and not until 2015 did the DOD decide to start the current
    JSTARS recap program. And as they looked at how to move forward, they
    had 5 analyses of alternatives telling them that the current JSTARS
    recap plan is the best way to proceed to fulfill this critical
    capability. The current JSTARS recap program is scheduled to announce
    source selection early next year based on the fiscal year 2018
    acquisition strategy. All while the current, aging legacy fleet is
    being sustained for $348 million per year, with growing sustainment
    costs and time in depot to conduct maintenance and modifications. I
    agree that the Air Force needs to plan for and maintain Air
    Superiority, today and in the future, in 2030 and beyond with cost
    effective modernization. However, for JSTARS we need rapid, innovative,
    bridging or interim solutions to cover the gap created by cancelled and
    changing acquisition strategies based on something better in the future
    without a cost or schedule. Right now, we're heading towards a massive
    capability gap. The current JSTARS recap, which could be fielded within
    the next five year Future Years Defense Program (FYDP) based on the
    latest schedule we have seen, is a perfect candidate to use for rapid
    acquisition to field the next planes quicker and reduce the sustainment
    costs of the legacy fleet, which is probably a lower cost solution than
    the proposal I have seen to bridge the gap until the latest and
    greatest can come online in 2030 or even later. We need to close this
    capability gap that I see happening between fiscal year 2019 (when 3
    planes from legacy fleet go offline) and 2030 (an optimistic estimate
    of when the new system will be up and running). We need this capability
    today and in the future with non-traditional concepts. Do you think the
    JSTARS recap is a program that could benefit from a rapid acquisition,
    given the legacy fleet sustainment costs, PDM delays, and long lead
    time for us even getting the technology to provide a new solution?
        Secretary Lord. As the Department moves forward in recapitalizing
    the JSTARS capabilities, I believe there should be opportunities to
    leverage rapid acquisition processes to ensure we continue to provide
    the capabilities provided by JSTARS in all warfighting environments in
    a prudent and expeditious manner.

        59. Senator Perdue. Secretary Lord, General Holmes previously
    testified to Congress that the recap would reduce operation and
    sustainment costs by 27 percent compared to the legacy fleet. Would you
    be open to looking at the JSTARS recap as a rapid acquisition as a way
    to save costs as we work towards a future solution?
        Secretary Lord. Yes, I would be open to looking to leverage rapid
    acquisition processes to save cost as we pursue future solutions to
    provide the battle management command and control and wide area
    surveillance capabilities capable of operating in all warfighting
    environments.

        60. Senator Perdue. Secretary Lord, if JSTARS is not a candidate
    for rapid acquisition, why not?
        Secretary Lord. We will explore opportunities to leverage rapid
    acquisition processes to save both cost and time as the Department
    moves toward future solutions to provide JSTARS capabilities.

        61. Senator Perdue. Secretaries Lord, Esper, Wilson, and Geurts, do
    you agree that the JSTARS should be considered a joint program in terms
    of your oversight policy since the Air Force, Army, Marine Corps and
    Navy all depend on its targeting information to detect and attack
    moving ground targets?
        Secretary Lord. While the JSTARS platform is but one of our many
    warfighting assets that provide vital data to a myriad of joint
    customers, only the Air Force will procure and operate the aircraft.
    This is different from traditional joint programs, such as the F-35
    Lightning II and the Joint Light Tactical Vehicle, where more than one
    service will procure and operate the weapon system. Our traditional
    management approach is appropriate for the JSTARS program.
        Secretary Esper. We have no issues with the Air Force continuing to
    be the executive agent for JSTARS.
        Secretary Geurts. From an acquisition perspective, the Navy does
    not believe that JSTARS should be considered a joint program in terms
    of Navy oversight policy. That being said, the Navy's Intelligence,
    Surveillance and Reconnaissance (ISR), requirements are satisfied by
    the Global Force Management (GFM) process. The Navy agrees that JSTARS
    fills a Combatant Commander (COCOM) requirement.
        Secretary Wilson. The Air Force would defer to Ms. Lord and
    Secretary of Defense, in consultation with Combatant Commanders, on
    this inquiry.

        62. Senator Perdue. Secretaries Esper and Geurts, since the JSTARS
    platform supports your soldiers on the ground, could you tell me if
    you've been consulted about the new approach to the JSTARS recap, and
    how this decision to accept more risk in the interim will impact to our
    soldiers, sailors and marines in theater on the ground?
        Secretary Esper. The Army is aware of the approach to the JSTARS
    recap. The Air Force plans to utilize the RQ-4 Global Hawk Block 40
    GMTI sensors during the JSTARS recap transition to mitigate risk. The
    Air Force has committed to continuous coordination with the Army to
    ensure interoperability and maximize sharing of collected data. The
    Army remains platform-agnostic to how we receive GMTI data.
        Secretary Geurts. Having assumed my position as ASN RD&A in
    December 2017, I have not yet been consulted about JSTARS.

                                isr requirements
        63. Senator Perdue. Secretary Wilson, as a follow up to a RFI
    submitted through the Air Force Liaison Office on November 2nd, could
    you clarify the ISR statistics for me--you have said that today only 5
    percent of ISR requirements are being supported. Of the 5 percent
    supported, what percentage is filled by JSTARS?
        Secretary Wilson. While the JSTARS currently accounts for 1.4
    percent of the total AF ISR contribution and 13 percent of the total
    Ground Moving Target Indicator (GMTI) support provided to combatant
    commanders, it does this in an uncontested environment. In the future,
    near-peer competitors will not allow the joint force unimpeded access
    across the battlespace we enjoy today. The JSTARS cannot survive in
    that contested environment. However, the Air Force will keep the JSTARS
    through the current Future Year Defense Plan, and invest in a family-
    of-systems to support combatant commanders in the highly contested
    environment of the future.

        64. Senator Perdue. Secretary Wilson, could you provide an apples-
    to-apples comparison of percentage of ISR requirements being fulfilled
    by each of the Air Force's ISR platforms? And of what percentage of ISR
    provided is done by each ISR platform?
        Secretary Wilson. Our inventory of ISR assets have different
    capabilities by design. Together with our team of ISR Airmen doing
    analysis, these assets each provide pieces of the puzzle to answer key
    intelligence questions. They are part of a larger Joint Force ISR and
    Intel Community Enterprise. The table lists the platforms and
    contributions to the COCOMs in 2017:

    ----------------------------------------------------------------------------------------------------------------
                         Air Force Asset                          GMTI           FMV         SIGINT        GEOINT
    ----------------------------------------------------------------------------------------------------------------
    E-8C:...................................................         1.4%           N/A           N/A           N/A
    MQ-1/9:.................................................          N/A         13.8%          8.7%           N/A
    RQ-4 Block 30:..........................................          N/A           N/A          0.7%          6.1%
    RQ-4 Block 40:..........................................         1.0%           N/A           N/A           N/A
    RC-135:.................................................          N/A           N/A          0.4%           N/A
    U-2:....................................................          N/A           N/A          1.0%          6.6%
    USAF Total:.............................................         2.4%         13.8%         10.8%         12.7%
    DOD Total:..............................................         5.7%         46.1%         29.2%         20.5%
    ----------------------------------------------------------------------------------------------------------------

        65. Senator Perdue. Secretary Wilson, today 5 percent of ISR
    requests are supported, and in 2030, the supported percentage is
    expected to fall to 1 percent of ISR requirements supported. If so,
    what are the factors driving that reduction in support of ISR request
    from 5 percent to 1 percent?
        Secretary Wilson. The exact percentage of ISR requirements that
    will be satisfied in 2030 is unknown and could vary greatly based on
    assumptions. However, based on the historical trends and an increasing
    demand for ISR, we know combatant commander requirements will continue
    to grow. At the same time service inventories remain constrained at a
    relatively steady state. This increasing quantitative gap is further
    exacerbated by retaining inventory that is challenged by peer adversary
    advancements, reducing our previous qualitative advantage. The Air
    Force supports the National Defense Strategy position to migrate away
    from costly, non-survivable weapons systems and move toward countering
    the gaining influence by potential adversaries. We are building a
    strategy to leverage data from multiple domains to create clear
    advantage for our military.

        66. Senator Perdue. Secretary Wilson, I understand that of the 5
    percent of ISR requirements being supported, I understand that roughly
    80 percent of the GMTI requirements are supported by JSTARS. Is that
    number correct?
        Secretary Wilson. JSTARS provides approximately 13 percent of the
    total GMTI requirements supported by assets through the Global Force
    Management Allocation Process. That equates to about 1 percent of the
    total GMTI requested by combatant commanders.

        67. Senator Perdue. Secretary Wilson, if we know and expect that
    today, what is the plan to address this decrease in support? For
    example, if we only have 11 Block 40 Global Hawks that can provide GMTI
    (which reportedly would take at least 4 to match the JSTARS in area
    covered), and no plans to procure more Block 40 Global Hawks, how are
    we going to meet requirements in the interim?
        Secretary Wilson. JSTARS will continue to operate throughout the
    Future Years Defense Program, as will RQ-4 Global Hawk Block 40, so we
    do not anticipate a drop in support to the joint force in the near
    term.

        68. Senator Perdue. Secretary Wilson, what is a low-cost solution
    to fill the loss in capability between today and 2030 and beyond?
        Secretary Wilson. We believe a networked system of systems approach
    will provide more capability and greater flexibility in the near term
    at a lower lifecycle cost, while also providing more capability to the
    warfighter in a near-peer engagement.

        69. Senator Perdue. Secretary Wilson, what is the feasibility of an
    interim solution to mitigate the forecasted gap and reduction in
    support between now and 2030 and beyond?
        Secretary Wilson. Our work up to now points to a low technical risk
    in achieving a near-term, networked GMTI solution.

        70. Senator Perdue. Secretaries Lord and Wilson, if we know there
    will be a gap in 2030 and beyond, we should work to a rapid acquisition
    solution for JSTARS recap, or use a used plane and existing radar for
    the recap. Wouldn't you agree that supporting 1 percent of our ground
    forces ISR requirements is better than not providing or supporting any
    requirements, especially given what JSTARS is doing in less-contested
    environments (like counter-drug and counterterrorism missions)?
        Secretary Lord. ISR is a critical enabler for our ground forces and
    is in extremely high demand across all operational levels. The demand
    is insatiable so any amount of ISR we can provide is operationally
    valuable. That said, the Department must be prepared to provide
    critical ISR capabilities, such as those provided by the current JSTARS
    platform, in both contested and less (or non)-contested warfighting
    environments. We are committed to doing that in the most cost-effective
    and operationally-relevant manner.
        Secretary Wilson. ISR is a critical enabler for the joint force and
    is in high demand across all spectrums of conflict. The Air Force must
    prepare itself to provide ISR for not only counter drug and
    counterterrorism missions, but also for high-intensity, near-peer
    conflicts. As we move to the future, in line with the National Defense
    Strategy, we will use a combination of existing platforms and sensors
    while investing in new systems for the long term. We will keep current
    E-8C JSATRS operational through the mid-2020s, as we develop and
    transition to an advance battle management system.

                               acquisition speed
        71. Senator Perdue. Secretary Lord, do you think the JSTARS recap
    is a program that could benefit from a rapid acquisition, given the
    legacy fleet sustainment costs, PDM delays, and long lead time for us
    even getting the technology to provide a new solution?
        Secretary Lord. As the Department moves forward in providing the
    next iteration of the Ground Moving Target Indicator (GMTI) and Battle
    Management Command & Control (BMC2) capabilities, I believe there are
    benefits in leveraging rapid acquisition processes to acquire key
    technology solutions for the JSTARS recap program.

        72. Senator Perdue. Secretary Lord, given that JSTARS recap is a
    joint Major Defense Acquisition Program, will this program be managed
    by AT&L or will this Air Force led program which supports the other
    services ground forces or will the management of this program be
    delegated to the Air Force?
        Secretary Lord. The USD(AT&L) is the Milestone Decision Authority
    for the JSTARS recap program, however, I am working closely with the
    Services to look at every program individually to determine if and when
    a given program can be delegated.

               jstars--unique capabilities and demand from cocoms
        73. Senator Perdue. Secretaries Lord, Esper, Wilson, and Geurts, as
    you know, JSTARS is a truly joint platform that provides unparalleled
    Battlefield Management, Command and Control, and Intelligence,
    Surveillance, and Reconnaissance (BMC2ISR) capabilities. Could you
    comment on what makes the JSTARS platform unique across the services
    and the importance of this Joint Force capability to the warfighter on
    the ground?
        Secretary Lord. JSTARS is an important component of a suite of
    airborne-based sensors and platforms that support our warfighting
    requirements. What makes this unique from other capabilities is that
    JSTARS provides airborne Battle Management Command and Control (BMC2)
    using an on-board radar capable of providing ground moving target
    indications (GMTI) of various target sizes and speeds to our
    warfighters in a permissive environment. This target information can
    then be matched to direct attack aircraft, stand-off weapons, and
    ground based attack assets in direct support to the warfighter on the
    ground. This is why it is important the JSTARS replacement be viable in
    future contested environments in order to support the joint warfighter
    anywhere and anytime.
        Secretary Esper. The Army utilizes a wide range of Ground Moving
    Target Indicator (GMTI)/Synthetic Aperture RADAR (SAR) collection
    platforms and sensors to determine patterns of life, perform
    intelligence preparation of the battlefield, define the operational
    environment, and evaluate the threats in support of ground forces. The
    specific platform and sensor tasked depends on the mission, terrain,
    weather, region, and factors such as platform/sensor specifications and
    the Joint Commander's priorities. The Army is platform agnostic as to
    how it receives GMTI data.
        GMTI capability is not unique to JSTARS. There are two other Air
    Force platforms that provide high altitude global GMTI coverage, the U-
    2 and RQ-4B Global Hawk Block 40. The Navy's MQ-4C Triton and the new
    P-8A Poseidon multi-mission aircraft also have this capability. The
    Army's medium altitude Aerial Reconnaissance-Low (ARL), Enhanced Medium
    Altitude Reconnaissance and Surveillance System (EMARSS), and the MQ-1C
    Gray Eagle provide GMTI to Army ground tactical units. While the Army
    does not utilize the JSTARS' BMC2 capabilities, the Air Force utilizes
    this capability to coordinate air assets to support air and ground
    missions.
        Secretary Geurts. I am not aware of anything about JSTARS that
    makes this platform unique although I do note that it provides critical
    capabilities to the Joint Force.
        Secretary Wilson. JSTARS is an important airborne BMC2 platform
    that can effectively integrate on-board battle management command and
    control, robust communications, and wide-area surveillance sensors into
    a single platform. However, the system cannot survive in contested
    environments. It cannot safely get close enough to perform its critical
    mission. We owe it to our warfighters and the American Taxpayer to find
    a better way to provide the capabilities.

        74. Senator Perdue. Secretaries Lord, Esper, Wilson, and Geurts,
    what does JSTARS do that other platforms (specifically AWACS, Global
    Hawk, or RPAs) can't?
        Secretary Lord. JSTARS provides real-time battle management and
    organic wide-area surveillance in support of ground forces on a single
    platform.
        Secretary Esper. JSTARS is a manned platform that provides both
    BMC2 and GMTI data. AWACS is manned but only provides BMC2. The RQ-4
    Global Hawk Block 40 and other Remotely Piloted Aircraft (RPAs), such
    as Predator or Reaper, are unmanned and provide GMTI data.
        Secretary Geurts. I defer to the Air Force regarding JSTARS
    capabilities.
        Secretary Wilson. JSTARS combines robust communication systems, on-
    board battle management, and an organic wide-area surveillance sensor
    onto a single aircraft in support of ground forces.

        75. Senator Perdue. Secretaries Lord, Esper, Wilson, and Geurts,
    Admiral Locklear, the former PACOM Commander, said before Congress in
    2015, ``JSTARS is a critically important capability in the ISR world,
    also in the battle management world, particularly when you operate in
    potentially contested environments where other parts of your command
    and control may be under cyberattack or space attack, having an
    aircraft that's manned that has that ability to have that functionality
    and thinking work is good.'' Would you agree with that assessment?
        Secretary Lord. The ability to operate in contested environments
    requires us to maintain the right mix of cross-domain solutions for
    command and control of our forces.
        Secretary Esper. Yes. The mobility of the JSTARS platform will
    prove valuable, if other parts of the Joint and Satellite Command and
    Control System are under attack. However, the intensity of the
    contested environment will impact JSTARS' ability to operate due to
    vulnerabilities to threat anti-air capabilities.
        Secretary Geurts. I believe this was an honest and accurate
    assessment in 2015. Regarding current ISR requirements, I defer to the
    Joint Staff and the Combatant Commanders the importance of JSTARS.
        Secretary Wilson. The global security environment has changed and
    future wars against near-peer adversaries will be devastating if the
    Air force does not change to focus our readiness and lethality on
    resources for a highly contested environment. The JSTARS cannot survive
    in contested environments. Adversary threat systems have evolved
    denying our ability to access battlespaces from where JSTARS
    communication and sensor capabilities are effective. We believe this
    requires us to carefully consider the right mix of capabilities to
    ensure resiliency and agility of our ISR and command and control forces
    in the future.

        76. Senator Perdue. Secretaries Lord and Wilson, without going to a
    classified level, can you tell us how JSTARS could maintain command and
    control during a cyber or other attack on sensors or satellites?
        Secretary Lord. In order to operate in contested environments,
    JSTARS requires redundant and protected communications paths to
    maintain combat effectiveness.
        Secretary Wilson. The system cannot survive in contested
    environments, where the aircraft cannot safely get close enough to
    perform its critical mission. We expect to operate in contested
    environments in all domains, including both space and cyber domains.
    Our forces will require redundant, agile communication paths to enable
    combat effectiveness. We owe it to our warfighters and the American
    Taxpayer to find a better way to provide these capabilities.

        77. Senator Perdue. Secretaries Esper, Wilson, and Geurts, how and
    why is JSTARS (specifically, its BMC2ISR capabilities) so important to
    the joint and combatant commanders needs?
        Secretary Esper. The combatant commanders' ability to access GMTI
    capability is integral to react to a dynamic and changing operating
    environment. This capability to collect GMTI data deep into enemy
    territory provides collection to support the combatant commanders'
    Priority Intelligence Requirements (PIRs). The Army does not have a
    requirement for BMC2.
        Secretary Geurts. I defer to the Joint Staff and the Combatant
    Commanders the importance of JSTARS.
        Secretary Wilson. Effective BMC2 and ISR capabilities accelerate
    the find, fix, track, and engage kill chain and provide direct support
    to ground units.

        78. Senator Perdue. Secretaries Esper, Wilson, and Geurts, what is
    the demand signal looking like from your Soldiers, Airmen, Marines and
    Sailors through combatant commanders for JSTARS capabilities?
        Secretary Esper. The combatant commands' demand for Aerial
    Intelligence Surveillance and Reconnaissance (AISR) continues to grow.
    The demand for JSTARS GMTI capability is comparable to other AISR
    platforms. Demand currently exceeds capacity.
        Secretary Geurts. Regarding the current and future demand signal
    for JSTARS, I defer to the Joint Staff and the Combatant Commanders.
        Secretary Wilson. JSTARS demand signal consistently exceeds
    capacity.

        79. Senator Perdue. Secretaries Esper, Wilson, and Geurts, could
    they use more JSTARS to help with their missions?
        Secretary Esper. Additional AISR capability and specifically GMTI,
    are always in demand so our current requirements exceed available
    capacity.
        Secretary Geurts. Regarding the current and future demand signal
    for JSTARS, I defer to the Joint Staff and the Combatant Commanders.
        Secretary Wilson. Combatant commanders request the use of the
    capabilities JSTARS brings in multiple theaters and demand currently
    exceeds capacity.

        80. Senator Perdue. Secretaries Esper, Wilson, and Geurts, do you
    expect demand signal to decrease any time in the near future?
        Secretary Esper. No. The Army does not expect the demand signal for
    GMTI to decrease, but rather to increase based upon the anticipated
    threats and the increasing complexity of the operational environment.
        Secretary Geurts. Regarding the current and future demand signal
    for JSTARS, I defer to the Joint Staff and the Combatant Commanders.
        Secretary Wilson. We do not expect to see a reduction in the demand
    signal for JSTARS capabilities in the near future.

        81. Senator Perdue. Secretaries Esper, Wilson, and Geurts, to give
    you some scenarios, without going into a classified level, if we had a
    war with North Korea in the near term, would you need JSTARS?
        Secretary Esper. Yes. Once air superiority is established,
    platforms with GMTI capability are key components in responding to
    combatant commanders' Priority Intelligence Requirements. We need GMTI,
    along with other AISR capability.
        Secretary Geurts. Regarding operational use of JSTARS, I defer to
    the Joint Staff and the Combatant Commanders.
        Secretary Wilson. Yes, JSTARS would benefit the Joint Force as both
    a battle management command and control and intelligence, surveillance,
    and reconnaissance platform. However, the system cannot survive in
    contested environments where the aircraft cannot safely get close
    enough to perform its critical mission. We owe it to our warfighters
    and the American Taxpayer to take a new approach to fulfill the GMTI
    and BMC2 missions. To achieve this evolutionary shift, the Air Force is
    transitioning from a primarily aircraft-centric approach to a net-
    centric approach using sensors across the battlespace linked by agile,
    resilient communications to provide the warfighter persistent
    capabilities in both uncontested and highly-contested environments well
    into the future.

        82. Senator Perdue. Secretaries Esper, Wilson, and Geurts, if we
    had a simultaneous problem in Europe and Korea, or in the Middle East--
    for example Syria or Afghanistan--do we have all the assets today that
    we need to meet those simultaneous requirements, in terms of the JSTARS
    fleet?
        Secretary Esper. No. Requirements exceed current GMTI capacity. The
    Joint Staff reallocates assets to meet priorities.
        Secretary Geurts. Regarding operational use of JSTARS, I defer to
    the Joint Staff and the Combatant Commanders.
        Secretary Wilson. No, the simultaneous requirements for BMC2 and
    GMTI in these conflicts would likely exceed our current capacity.

                  jstars recap change in acquisition strategy
        83. Senator Perdue. Secretaries Lord and Wilson, has a cost
    estimate been conducted on a new JSTARS replacement (ie the ABMS if
    JSTARS recap is cancelled), and how does that compare to the current
    JSTARS recap total program cost?
        Secretary Lord. I have not been briefed on an updated cost
    estimate, however, I will continue to work with the Air Force to
    understand the costs as they evolve to their future system of systems
    approach to providing battle management command and control and wide
    area surveillance to the Joint Force.
        Secretary Wilson. The Air Force realizes the importance of the
    Ground Moving Target Indicator and Battle Management Command & Control
    missions. As we evolve the mission to a system of systems approach, we
    will provide a detailed cost estimate.

        84. Senator Perdue. Secretaries Lord and Wilson, has a cost benefit
    analysis been conducted on a new strategy for JSTARS recap, given that
    JSTARS recap is the number four acquisition priority for the Air Force
    in a fiscally constrained environment?
        Secretary Lord. There has not been an updated cost benefit analysis
    conducted by the Air Force regarding their new strategy for JSTARS
    Recap.
        Secretary Wilson. No, there has not been a cost benefit analysis
    regarding a new strategy for JSTARS Recapitalization.

        85. Senator Perdue. Secretary Wilson, I understand that it would
    take multiple RQ-4 Global Hawk Block 40s to provide the same broad view
    of the battlespace as JSTARS does today with one aircraft. How many
    Global Hawk Block 40s would provide the same coverage as a legacy
    JSTARS for GMTI given the difference in size of the antennas on the E-
    8C and RQ-4 block 40?
        Secretary Wilson. It would take approximately two RQ-4 Block 40s to
    provide the same maximum geographic coverage as a JSTARS system.
    However the long endurance of the RQ-4 Block 40 significantly reduces
    the force structure costs and eliminates the air refueling costs to
    sustain a 24-hour operations. Also, the RQ-4's higher operating
    altitude provides better visibility in complex terrain types. Lastly,
    the remotely piloted aspect of the RQ-4 eliminates risk to aircrew in a
    more contested operations environment.

        86. Senator Perdue. Secretary Wilson, I understand there will be a
    capability gap if the RQ-4 Global Hawk Block 40s provide GMTI in place
    of the E-8Cs, given the sensors and ground-based BMC2 are not currently
    available. Does the Air Force intend to invest in more Block 40s to
    provide an equivalent capacity (comparable coverage) and capability
    (comparable timely analysis and battle management) of GMTI coverage for
    ground forces?
        Secretary Wilson. At this time, the Air Force has no plans to
    invest in additional RQ-4 Global Hawk Block 40s and there is no funding
    allocated for the procurement of additional Block 40s in the future.

        87. Senator Perdue. Secretary Wilson, if not, why not?
        Secretary Wilson. We routinely consider the right mix of ISR
    capabilities and currently we don't believe additional RQ-4 Global Hawk
    Block 40s are required.

        88. Senator Perdue. Secretaries Esper, Geurts, and Wilson, what is
    the risk to the ground forces of no longer having GMTI and BMC2
    available to ground forces with a capability gap and possible
    transition to RQ-4 Global Hawk Block 40s with yet-to-be-developed
    sensors ground based BMC2 capability?
        Secretary Esper. The Army does not foresee a risk, assuming the
    capability gap can be mitigated by other Services' GMTI capabilities.
        Secretary Geurts. Regarding operational use of JSTARS, I defer to
    the Joint Staff and the Combatant Commanders.
        Secretary Wilson. The Air Force budget request in the Fiscal Year
    2019 President's Budget operates the E-8C JSTARS and the RQ-4 Block 40
    Global Hawk, at the same level of support to ground forces, throughout
    the Future Year Defense Plan (2019-2023). This mitigates near-term
    capability gaps while the Air Force develops the future replacement
    systems.

        89. Senator Perdue. Secretaries Esper and Geurts, what are your
    thoughts on a possible JSTARS recap capability gap in the next 3-12
    years in support for your ground forces?
        Secretary Esper. JSTARS recap would be important to the Army to
    continue to receive GMTI data to ground forces from the future JSTARS
    platform.
        Secretary Geurts. I am not aware of a future JSTARS recap
    capability gap.

        90. Senator Perdue. Secretaries Esper and Geurts, what is the risk
    to our ground forces in the next 3-12 years without a JSTARS recap, and
    relying on other ISR assets that are currently overstretched?
        Secretary Esper. Without a JSTARS recap and no other replacement
    for the GMTI capability that JSTARS currently provides, the Joint Force
    will have less GMTI capacity.
        Secretary Geurts. Regarding operational use and demand signal for
    JSTARS, I defer to the Joint Staff and the Combatant Commanders.

        91. Senator Perdue. Secretaries Esper and Geurts, have you
    submitted issue papers or letters of dissent during the POM-19 process
    regarding the JSTARS recap decision?
        Secretary Esper. No. The Air Force provided a bridging strategy to
    utilize the RQ-4 Global Hawk Block 40, which will provide GMTI to
    ground forces. Additionally, the Services can provide other GMTI
    capabilities for Joint Staff allocation.
        Secretary Geurts. To my knowledge, the Navy has not submitted any
    issue papers or letters of dissent during the POM-19 process regarding
    the JSTARS recap decision.

        92. Senator Perdue. Secretaries Lord and Wilson, I understand that
    a competitive range determination was made on November 8, 2017 for the
    radar for the JSTARS recap. However, the Radar Risk Reduction was
    extended through December 20, 2017, and the RRR was not yet complete
    when this decision was made. Why did the Air Force ``down-select'' on a
    radar prior to the completion of a $130 million radar risk reduction
    program? How will this impact the source selection for the JSTARS
    recap?
        Secretary Lord. The details regarding the Air Force's competitive
    range determination are source selection sensitive. Therefore, I have
    not been briefed on the Air Force's rationale or the impacts on their
    source selection timelines.
        Secretary Wilson. The Radar Risk Reduction and competitive range
    determination for source selection activities are independent efforts.
    The competitive range decision was not contingent upon the completion
    of Radar Risk Reduction activities. Any further details regarding the
    acquisition remain source selection sensitive.

                          software acquisition reform
        93. Senator Perdue. Secretary Lord, what specific changes are you
    making to the way you manage software?
        Secretary Lord. The Department believes that software development
    is never complete and must be managed as a continuously improving
    product. This is largely done post initial capability development.
    Industry best practices of smaller incremental improvements that are
    robustly and automatically tested then deployed are being pursued. In
    short, contracting language to incentivize agile software development
    frameworks and secure continuous development and delivery is now being
    considered.
        Several programs, such as the Reserve Component Automation System,
    already utilize a variety of agile development tools and quality
    metrics (such as velocity, sprint burn down charts, and release burn up
    charts). Newer piloting activities, particularly in the area of cyber
    capability development, are also instituting governance forums to
    emphasize user involvement in early experimentation/observation efforts
    and allow user feedback to shape capability development, with less
    emphasis on perfecting requirements or upfront planning ahead of the
    actual development activity. We anticipate that new programs of record
    that stem from these pilots, such as the forthcoming Joint Cyber
    Command and Control, Unified Platform, and Persistent Cyber Training
    Environment, will benefit from these types of governance processes.
        Our efforts are not yet mature enough to have settled on final best
    practices, but we have begun revising policy guidelines. Since
    publishing a new instruction for business systems acquisition in
    February 2017, the Department continues to work through organizational
    and cultural changes, implement the policy and adopt industry best
    practices. OSD established a community of practice approach to policy
    clarification and training. Business systems acquirers in the Services
    and DOD Components work with functional proponents to manage their
    programs. As part of the AT&L reorganization, I am creating a Special
    Assistant for Software that will report to me directly. This office
    will focus on addressing the challenges that the Department has faced
    with implementing and managing major software based programs or complex
    weapon systems, like the Joint Strike Fighter program, that include a
    significant amount of embedded software.
        As you know, newly enacted sections 873 and 874 of the Fiscal Year
    2018 NDAA require that DOD select a number of programs to pilot agile
    development methods. My staff is assessing several high-risk, software-
    intensive candidates to pilot use of tailored acquisition procedures
    and DevOps software methods to meet simplified requirements. Each
    Service has had programs that experienced cost growth, schedule delays,
    or difficulty in delivering operational capability. These programs
    present opportunities to try new and innovative acquisition approaches
    precisely because cost/schedule/performance are already off track. The
    potential benefits from new development methods outweighs concerns
    about deviating from an existing and previously unsuccessful plan. We
    will monitor the selected programs to inform further development of
    best practices guides, Defense Acquisition University training
    materials, and policy changes. It is important that we consider and
    assess the best approach for bringing essential reliability and
    cybersecurity skills into the engineering and design process early
    enough to avoid costly redesign and late defect discovery--and enable
    rapid incremental delivery of secure, reliable software. Updating
    current policy will be an iterative effort as we continue to gain agile
    software development experience. Formal acquisition policy changes are
    forthcoming that will institutionalize several improvements undertaken
    over the past two years via legislation, including transition or
    delegation of milestone decision authority to the lowest appropriate
    level. This will reduce decision delays and streamline alignment of
    resources with schedules to reflect end-user capability needs and
    timelines.
        In addition, we will leverage several years of work piloting Rapid
    Cyber Acquisition processes allowed within existing law and policy to
    assist United States Cyber Command as they comply with the Fiscal Year
    2018 NDAA section 1642 requirement to complete an `` . . . evaluation
    of alternative methods for developing, acquiring, and maintaining
    software-based cyber tools and applications.'' In short, we are
    committed to rapidly modernizing how DOD develops software.

        94. Senator Perdue. Secretary Lord, which programs do you intend to
    make changes to?
        Secretary Lord. I defer to the Service Acquisition Executives to
    confirm changes envisioned for those programs for which I have
    delegated Milestone Decision Authority, in accordance with section 825
    of the Fiscal Year 2016 NDAA. However, I anticipate the Services and
    DOD Components will be making changes to several programs, with OSD
    support as needed.
        In addition, we are changing our approach to some complex, joint
    programs for which I have retained acquisition oversight. We are
    leveraging commercial best practices and lessons learned from early
    work of the Defense Digital Service and the Defense Innovation Unit
    Experimental (DIUx) for programs such as the F-35 Lightning II, Next
    Generation Operational Control System (OCX), and Air & Space Operations
    Center--Weapon System (AOC-WS).
        The F-35 Joint Program Office (JPO) has reassessed the planned
    approach for executing Follow-on Modernization (FoM) and determined
    that we cannot continue as we did in the System Development and
    Demonstration (SDD) phase to apply a slow, rigid ``big bang''
    development approach2 designed and optimized for hardware intensive
    solutions. The F-35 JPO is instead establishing a holistic acquisition
    strategy based on agile practices called Continuous Capability
    Development and Delivery (C2D2). The C2D2 methodology is designed to
    deliver continuous modernization, enhancements, and improvements to the
    entire F-35 Air System, and deliver Block 4 in smaller capability drops
    to the Warfighter on an expedited timeline. This new agile approach to
    capability development will be characterized by capability-based
    engineering, agile/automated test, parallel development and operational
    test, flexible contract strategies, and new Cost Estimating
    Relationships. Additionally, this approach will be facilitated by an
    increased use of open architectures, Government-purpose data rights,
    and the right organic software engineering skill sets to effectively
    manage the process. The result is that capabilities will be
    continuously developed using expedient, tailored, predictable processes
    and will be available to the field in relevant, timely, verified
    releases. The Department must apply a more rapid and iterative process
    to field its software intensive solutions, aligned with enabling
    hardware upgrades, to keep pace with the dynamic threat environment and
    maintain the viability of the Joint and International F-35 fleet over
    its 50+ year lifecycle. The F-35 JPO is now in the process of
    formalizing the C2D2 acquisition strategy.
        Following a Critical Change in 2016, the AOC-WS program continued
    to struggle with a traditional acquisition approach. Even the most
    optimistic schedule projections indicated the program would not field
    capability for several more years. The Air Force re-assessed AOC
    modernization plans in light of DIUx successes with agile development
    of the Tanker Planning Tool (TPT). The Air Force is now pursuing a
    twelve month Pathfinder proof of concept that will deliver a dynamic
    targeting capability and validate the agile methodology. OCX is
    currently implementing modern software development techniques via
    DevOps. This approach, recommended by Defense Digital Services, will
    help produce high quality software for Blocks 1 and 2. Raytheon expects
    to field those major system elements in 2021-2022.
        As a result of sections 873 & 874, of the Fiscal Year 2018 NDAA and
    with the Department's adoption of commercial best practices, the
    Services and Defense Agencies are encouraged to adopt iterative and
    agile approaches more broadly in order to reduce the time needed to
    deliver capabilities. The Defense Innovation Board, the Defense Digital
    Service, DIUx, and the Department as a whole will continue to examine
    high payoff opportunities for streamlining of current policies,
    practices, and processes.

        95. Senator Perdue. Secretary Lord, how will you ensure that new
    software intensive programs do not fall victim to the same problems
    that plague current programs?
        Secretary Lord. The Department is early in the process of adopting
    DevOps and agile software development practices to deliver software
    capabilities more rapidly and in smaller increments. Several programs,
    such as the Reserve Component Automation System, already utilize a
    variety of agile development tools and quality metrics (such as
    velocity, sprint burn down charts, and release burn up charts). Newer
    piloting activities, particularly in the area of cyber capability
    development, are instituting governance forums to emphasize user
    involvement in early experimentation/observation efforts and allow user
    feedback to shape capability development, with less emphasis on
    perfecting all requirements before proceeding to development
    activities. We anticipate that new programs of record that stem from
    these pilots, such as the forthcoming Joint Cyber Command and Control,
    Unified Platform, and Persistent Cyber Training Environment, will
    benefit from these types of governance processes.
        In addition, practitioners will be able to share lessons learned,
    isolate recurring challenges, and identify requests for policy-makers
    to remove bureaucratic roadblocks. OSD will engage with governance
    across portfolios of programs to ensure they are progressing toward
    their objectives.
        We should expect improved outcomes when DOD and industry
    collectively empower a workforce of motivated and properly trained
    program management teams with sufficient insight into the risks,
    opportunities and ultimate rewards of a capability developed, tested,
    and fielded quickly and with end-user participation. To modernize
    software engineering (SWE) competency and practice, we need to start
    with our people. The Department needs to be able to identify and
    characterize its software engineering and acquisition professionals so
    that it can assess and address its SWE workforce gaps (quantity/
    quality) and inform its recruiting efforts. Recent rapid advances in
    SWE skills, technology, and modern software development practices have
    proven highly successful in a competitive marketplace. Examples include
    scaled Agile, build/test/release automation environments, continuous
    integration and tool chains, and DevOps. To increase use of these
    solutions, the Department must realign its processes for identifying,
    training and managing software competencies to keep pace with these
    advances. Initial policy changes and process improvements are already
    underway. These initial steps are part of a crawl, walk, run strategy
    that addresses an increasingly complex and uncertain cyber environment
    and that will transform our software development processes and improve
    our products in the months and years to come.

        96. Senator Perdue. Secretary Lord, as the Department and Services
    seek to change their acquisition systems, particularly in the context
    of software intensive systems, in what ways do you need to change your
    approach to testing?
        Secretary Lord. Software is an integral part of all Department
    capabilities, to include weapon systems, information enablers and
    business systems. The Department needs to modernize our practices,
    workforce competencies and training to enable more rapid delivery of
    reliable and secure software across the enterprise. DOD needs to
    consider how modern, commercial best practices and robust software
    development can help avoid late big bang integration and defect
    discovery. The Department also needs to move towards earlier, more
    frequent test engagements, which are focused on working capabilities,
    using short cycle, incremental, testable software builds. This allows
    developers to conduct multiple test and integration events and field
    intermediate products to gain user acceptance and feedback to improve
    future builds or increments. Cybersecurity T&E must be integrated with
    these efforts, and the Department is working to provide acquisition
    programs with approaches to integrate earlier cybersecurity testing and
    industry software testing best practices.

        97. Senator Perdue. Secretary Lord, what changes do you intend to
    make to developmental test processes and organizations?
        Secretary Lord. Software is an integral part of all Department
    capabilities, to include weapon systems, information enablers and
    business systems. The Department needs to modernize our practices,
    workforce competencies and training to enable more rapid delivery of
    reliable and secure software across the enterprise. DOD needs to
    consider how modern, commercial best practices and robust software
    development can help avoid late big bang integration and defect
    discovery. The Department also needs to move towards earlier, more
    frequent test engagements, which are focused on working capabilities,
    using short cycle, incremental, testable software builds. This allows
    developers to conduct multiple test and integration events and field
    intermediate products to gain user acceptance and feedback to improve
    future builds or increments. Cybersecurity T&E must be integrated with
    these efforts, and the Department is working to provide acquisition
    programs with approaches to integrate earlier cybersecurity testing and
    industry software testing best practices.
        Testing is a critical component of software development and can be
    a time-consuming aspect of software delivery. The Department's testing
    communities need to evolve their testing policies, procedures and
    approaches to accelerate software fielding cycles. Automation and
    artificial intelligence are areas the Department needs to invest in and
    leverage highly efficient industry best practice, improved adoption of
    automation, artificial intelligence, and higher fidelity integration
    labs. The Department's testing community needs to collaborate with
    industry to identify new ways of addressing software testing
    requirements and adopt best practices for agile development and DevOps
    development which leverage performance and cybersecurity test data from
    early in development through sustainment. For example, in fiscal year
    2017, the current OSD level DT&E organization supported 22 Cyber Table
    Top Exercises with programs that averaged identified 15 High or Very
    High system vulnerability risks per event. Cybersecurity risk will
    continue to challenge the Department as it moves to more COTS based
    software and cloud-based environments. Mission-Based Cybersecurity Risk
    Assessments must become the norm across the system development life
    cycle for the Department.
        I will work with the Undersecretary of Defense for Research and
    Engineering and the Director of Operational Test and Evaluation
    community to include the operational test community's equities of
    suitability, effectiveness, and cybersecurity are considered early in
    both the design and the developmental test process to ensure efficient
    testing is done. My ultimate goal is to acquire safe, combat-capable
    systems for the Warfighter at the speed of relevance.

        98. Senator Perdue. Secretary Lord, how can you better collaborate
    with the Director of Operational Test and Evaluation to speed time to
    deployment while making sure that deployed capabilities are safe and
    fit for purpose?
        Secretary Lord. Software is an integral part of all Department
    capabilities, to include weapon systems, information enablers and
    business systems. The Department needs to modernize our practices,
    workforce competencies and training to enable more rapid delivery of
    reliable and secure software across the enterprise. DOD needs to
    consider how modern, commercial best practices and robust software
    development can help avoid late big bang integration and defect
    discovery. The Department also needs to move towards earlier, more
    frequent test engagements, which are focused on working capabilities,
    using short cycle, incremental, testable software builds. This allows
    developers to conduct multiple test and integration events and field
    intermediate products to gain user acceptance and feedback to improve
    future builds or increments. Cybersecurity T&E must be integrated with
    these efforts, and the Department is working to provide acquisition
    programs with approaches to integrate earlier cybersecurity testing and
    industry software testing best practices.
        Testing is a critical component of software development and can be
    a time-consuming aspect of software delivery. The Department's testing
    communities need to evolve their testing policies, procedures and
    approaches to accelerate software fielding cycles. Automation and
    artificial intelligence are areas the Department needs to invest in and
    leverage highly efficient industry best practice, improved adoption of
    automation, artificial intelligence, and higher fidelity integration
    labs. The Department's testing community needs to collaborate with
    industry to identify new ways of addressing software testing
    requirements and adopt best practices for agile development and DevOps
    development which leverage performance and cybersecurity test data from
    early in development through sustainment. For example, in fiscal year
    2017, the current OSD level DT&E organization supported 22 Cyber Table
    Top Exercises with programs that averaged identified 15 High or Very
    High system vulnerability risks per event. Cybersecurity risk will
    continue to challenge the Department as it moves to more COTS based
    software and cloud-based environments. Mission-Based Cybersecurity Risk
    Assessments must become the norm across the system development life
    cycle for the Department.
        I will work with the Undersecretary of Defense for Research and
    Engineering and the Director of Operational Test and Evaluation
    community to include the operational test community's equities of
    suitability, effectiveness, and cybersecurity are considered early in
    both the design and the developmental test process to ensure efficient
    testing is done. My ultimate goal is to acquire safe, combat-capable
    systems for the Warfighter at the speed of relevance.

                                   __________
                    Questions Submitted by Senator Ben Sasse
                                      diux
        99. Senator Sasse. Secretary Lord, what obstacles do you anticipate
    while making DOD's overall acquisition effort function more like DIUx,
    the Strategic Capabilities Office (SCO), and the Rapid Capabilities
    Offices (RCO) in the various services?
        Secretary Lord. We intend to transition from a traditional, linear
    acquisition process to an adaptive acquisition ecosystem. The goal of
    this transition is to allow acquisition professionals to use multiple
    pathways/models for their programs as a standard practice. In some
    cases, that will require the agility demonstrated in the DIUx/SCO/RCO
    models. When successfully prototyped and implemented, the goal would be
    to scale the innovative solution across the adaptive acquisition
    ecosystem. We will need to attract, develop and retain the appropriate
    acquisition work force. A key element for training will be to
    reorganize the Defense Acquisition University (DAU) curriculum to focus
    on the appropriate use of specific contract vehicles by presenting case
    studies that depict actual programs. I envision a much more modular
    approach to developing courses with one to two day modules focusing on
    specific subjects with pertinent examples. We desire to instill a
    culture of ``creative compliance''.

        100. Senator Sasse. Secretary Lord, how will you scale the
    acquisition success you've had with DIUx, SCO, and the RCOs as you
    begin the formal split of Acquisition, Technology, and Logistics (AT&L)
    into Research and Engineering (R&E) and Acquisition and Sustainment
    (A&S) on February 1, 2018?
        Secretary Lord. We intend to transition from a traditional, linear
    acquisition process to an adaptive acquisition ecosystem. The goal of
    this transition is to allow acquisition professionals to use multiple
    pathways/models for their programs as a standard practice. In some
    cases, that will require the agility demonstrated in the DIUx/SCO/RCO
    models. When successfully prototyped and implemented, the goal would be
    to scale the innovative solution across the adaptive acquisition
    ecosystem. We will need to attract, develop and retain the appropriate
    acquisition work force. A key element for training will be to
    reorganize the Defense Acquisition University (DAU) curriculum to focus
    on the appropriate use of specific contract vehicles by presenting case
    studies that depict actual programs. I envision a much more modular
    approach to developing courses with one to two day modules focusing on
    specific subjects with pertinent examples. We desire to instill a
    culture of ``creative compliance''.

        101. Senator Sasse. Secretaries Esper, Geurts, and Wilson, how has
    your service worked with DIUx or other offices to use Other Transaction
    Authority (OTA) to speed up acquisition cycles?
        Secretary Esper. The Defense Innovation Unit Experimental (DIUx)
    provides a mechanism for the Army to connect with small, non-
    traditional businesses in the technology sector, and has assisted the
    Army with contracting and market research to speed up acquisition
    cycles. For example, DIUx supported the Army Cyber Command in the
    procurement of an industry standard end-point platform that increases
    network asset awareness and visibility. The Army has achieved success
    using Other Transaction Authority (OTA) for prototyping and limited
    fielding of defensive cyberspace operations (DCO) capabilities. The
    Army will continue to leverage OTAs and other instruments to keep pace
    with the rate of technological change, as well as enable widespread use
    of evolutionary and streamlined acquisition approaches.
        Secretary Geurts. The DON uses OTAs to accelerate prototyping and
    acquisition, where appropriate, and has engaged with DIUx and other
    offices on multiple occasions.
        DON's recent and current OTA efforts leverage the U.S. Army's OTA
    experts in Picatinny working through DIUx and a number of industry
    consortia for command and control, cyber, vertical lift and ordnance.
    Some examples include use of the Army's DOD Ordnance Technology
    Consortium for prototypes and demonstrations for the Electromagnetic
    Rail Gun, the Hypervelocity Projectile, high energy lasers, and radio
    frequency weapons technology. Our special operations forces, explosive
    ordnance disposal community, C4I professionals, and unmanned underwater
    vehicle designers are all currently using OTA for advances in unmanned
    and counter unmanned systems, human systems and talent management, and
    leading edge software development techniques from Silicon Valley.
        Early collaboration has shown promise in getting the best
    commercial innovators and technology to help develop superior war
    fighting capability. Future efforts include expanding with key Naval
    warfare centers, system centers and laboratories, and continued
    leveraging of existing mechanisms such as Small Business Innovative
    Research.
        Secretary Wilson. We have multiple examples where OTAs have been
    used and would like to see replicated. One of these highly successful
    examples is the Light Attack Experiment, a live-fly event held in
    August 2017. Use of the OTA allowed the Air Force to move quickly, with
    the Light Attack Experiment taking place within 5 months of the
    Invitation to Participate being released to industry. Being able to
    move rapidly is critical to ensuring the Air Force can efficiently and
    effectively execute our experimentation campaigns. These campaigns are
    not acquisition programs, and allow the Air Force to explore the art of
    the possible and quickly assess utility for the warfighter.
        A second example is the Command, Control, Communications,
    Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR) OTA
    consortium managed by the Air Force Research Laboratory (AFRL). AFRL's
    Information Directorate in Rome, New York has an OTA with the System of
    Systems Security Consortium (SOSSEC) to develop C4ISR Information
    System prototypes, which will provide ``plug-n-play'' technologies via
    modern open systems architectures to provide rapid adaptation and
    integration of new capabilities. The agreement allows AFRL to quickly
    and efficiently reach the 70+ member companies of SOSSEC while
    leveraging SOSSEC as a single point intermediary, reducing overhead and
    facilitating project execution.
        The Air Force currently has four OTAs with industry for rocket
    propulsion systems, all of which require shared cost investment between
    the government and industry. These investments initiate the transition
    off the RD-180 by investing in critical Rocket Propulsion System
    technologies. These Rocket Propulsion Systems were proposed by industry
    for commercial launch systems that can be enhanced to meet more
    stressing National Security Space requirements. The Air Force intends
    to release an RFP later this summer for Launch Service Agreements to
    complete the development of the replacement launch systems continuing
    the shared industry/government investment approach.
        Finally, the Air Force established a Space Enterprise Consortium
    using an OTA to utilize for prototyping activities and to attract new
    space and non-traditional mission partners.
                             affordable acquisition
        102. Senator Sasse. Secretary Lord, are any legislative, policy, or
    regulatory changes needed to increase small businesses or non-
    traditional defense contractor involvement in DOD acquisition programs?
        Secretary Lord. As I lead the congressionally directed
    reorganization of DOD's management of Acquisition, Sustainment,
    Research and Engineering; I will identify and implement or recommend
    appropriate legislative, policy, or regulatory changes to increase
    small business or non-traditional defense contractor involvement in DOD
    acquisition programs. In the meantime, I recommend the following six
    legislative changes related to the Small Business Innovation Research
    and Small Business Technology Transfer (SBIR/STTR) programs to
    immediately help DOD increase small business or non-traditional defense
    contractor involvement in DOD acquisition programs.

        1.  Program Permanence for SBIR and STTR--The SBIR and STTR
    programs are proven enablers that allow DOD to engage with small
    business and research institutions to develop technical capabilities
    for many complex problems facing our warfighters today. In addition to
    providing enhanced capabilities for national security, these programs
    are a significant driver of innovation in our Nation-leveraging U.S.
    strengths in entrepreneurship, acceptance of risk, and access to
    technical talent and smart capital to create businesses that are
    shaping the commercial technology landscape. In fact, the section 809
    panel volume 1 report recommended DOD, ``Build on the success of the
    SBIR/STTR and RIF programs.'' Unfortunately, these two critical
    programs, SBIR/STTR, are not permanent and require periodic
    reauthorization by Congress. Making these programs permanent would
    allow for consistency and remove uncertainty over the long-term support
    for this critical driver of innovation for DOD and job growth for the
    country. Permanency also improves the ability for the DOD consumers of
    SBIR/STTR technology solutions to plan for technology integration and
    insertion, and clarifies the program status for contracting officers,
    thus improving the timeliness of awards and development of technical
    solutions.
        2.  Use of Other Transaction Authority (OTA)--Other Transaction
    Authority (10 U.S.C. sections 2371 and 2371b) provides DOD with a
    flexible business tool to enable smarter and more efficient acquisition
    of research projects and prototype systems. Agreements under this
    authority can improve the operation of the SBIR and STTR programs by
    allowing a flexible agreement with the ability to quickly award SBIR/
    STTR efforts and decrease the time between Phase I and Phase II awards.
    In addition to decreasing time to prototype, the use of OTA can reduce
    wait times for small businesses and decrease the level of contracting
    overhead during the Phase II award process. Amending 15 USC 638(e)(3)
    to include OTA in the definition of SBIR/STTR funding agreement will
    greatly enhance the ability of OTAs to contribute to innovation and job
    growth by including them as an option for funding SBIR and STTR
    research.
        3.  Reauthorize the pilot three percent Assistance for
    Administrative, Oversight, and Contract Processing Costs Authority--The
    SBIR/STTR Reauthorization Act of 2011 (Public Law 112-81) authorized
    the head of each federal agency required to conduct an SBIR program to
    use up to 3 percent of such funds for costs relating to administrative,
    oversight, and contract processing activities. This pilot admin
    authority expired on September 30, 2017. Reauthorization of this
    authority will provide necessary resources to administer the programs,
    conduct targeted outreach, enhance fraud waste and abuse efforts, and
    implement efforts to improve program responsiveness. DOD Components
    used this authority to enhance SBIR/STTR outreach and marketing efforts
    and improve the availability of commercialization and transition
    support to small businesses. An effort to use Contracting Focus Centers
    for SBIR/STTR to streamline acquisition processes, reduce time to
    contract award, reduce proposal burdens and standardize the experience
    for submitters has been discontinued due to expiration of this
    authority.
        4.  Reauthorize Phase Flexibility--In today's environment, rapid
    delivery of technical capabilities to the warfighter is critical. Phase
    flexibility, or Direct to Phase II, provides the Department with the
    ability to shorten the development cycle for critical technology
    solutions as appropriate. By using the phase flexibility authority, the
    Air Force was able to quickly develop and field devices for dismounted
    navigation in a GPS denied environment. The potential for a direct to
    Phase 2 award also encourages companies with more mature technologies
    to participate in the program, further enhancing the technical
    solutions available to DOD.
        5.  Authorize DOD to approve waivers--The ability to approve
    waivers for DOD Components and Agencies consistent within the intent of
    the SBIR/STTR programs will improve the ability for DOD to provide
    responsive program execution. DOD and its components need the ability
    to make rapid decisions for the most effective use of SBIR/STTR funding
    in support of technology overmatch. This request is not to change the
    SBA's role but would provide the Secretary of Defense with the
    authority to approve waivers for DOD components and agencies in the
    efficient use of SBIR/STTR funding. Examples of the waiver types are a
    waiver to exceed the time limit to notify a small business of their
    selection for award and a waiver to exceed award amount guidelines by
    more than 50 percent.
        6.  Authorize DOD to conduct pilot programs to improve SBIR and
    STTR processes--DOD needs the ability to experiment with new processes
    and procedures in the use of SBIR/STTR authority to quickly respond to
    emerging threats, technology advances, and market changes. DOD needs
    the ability to create and execute pilot programs to evaluate the
    effectiveness of innovative SBIR and STTR processes to include but not
    be limited to, efforts to decrease time to prototype, methods to work
    with DOD innovation efforts to include SBIR technology in capability
    enhancements, developing methods to work with DIUx and other
    organizations to leverage rapid contracting and rapid prototyping
    initiatives, and contracting process improvements.
                                program managers
        103. Senator Sasse. Secretaries Lord. Esper, Geurts, and Wilson,
    what problems exist with the way program manager personnel rotations
    are currently conducted and how might such rotations be altered to
    increase continuity and efficiency in acquisition programs?
        Secretary Lord. Recent statutory changes require any Program
    Manager for an ACAT I or IA program assigned before Milestone B to be
    assigned at least through Milestone B approval. Any ACAT I or IA
    Program Manager assigned immediately following Milestone B approval is
    required to be assigned until initial operational capability is
    achieved. By policy, program managers outside of these periods will be
    assigned for at least 4 years or until the completion of the phase of
    the program that occurs closest in time to the date on which the person
    has served in the position for 4 years. These changes are recent enough
    to preclude recognition of any trends.
        Based on trends previous to the statutory change, the biggest
    challenge to ensuring adequate tenure length for military program
    managers of major acquisition programs is competing with requirements
    associated with career progression and promotion. In the past, some
    military program managers were rotated from their program manager
    position with notably less than four years of tenure (the previous
    requirement). This was often due to being promoted to general/admiral,
    or to gain other experiences needed to remain competitive for
    promotion. Follow-on job opportunities also led to shorter than optimum
    tenures for some civilian program mangers albeit at a lower rate than
    military counterparts.
        The most effective means to improve continuity and efficiency is to
    more strictly enforce the tenure agreements program managers are
    required to sign before beginning their tour as program manager. The
    Department needs to ensure the agreements conform to the above criteria
    and that they are adhered to. Some have suggested that continuity would
    be improved if only civilians were eligible for the program manager
    position. However, I do not feel there is a need for this limitation
    since each community brings unique skills and knowledge. Personnel with
    these varied skills should be available and selected based on the needs
    of the program.
        A second initiative that may improve continuity and efficiency in
    acquisition programs is for the Services to ensure program managers
    have completed all required training before beginning their program
    manager tour. Often, for various reasons, some resident training is not
    completed before the program manager has started in their position and
    must be completed sometime during their tour. The Department can
    increase consistency and take better advantage of skills and knowledge
    gained in class if all required training was done prior to managing the
    program.
        Secretary Esper. In an effort to promote greater accountability, I
    would aim to ensure the alignment of the duty assignments of PMs with
    the Milestones established for their programs to ensure there is a
    clean handover of the program at critical points, and that clear
    measures of effectiveness--cost, schedule, and performance--can be
    assessed. I would aim to do the same with PEOs and their responsibility
    for the highest priority programs in their portfolio.
        Secretary Geurts. I believe Program Manager (PM) personnel are
    rotated properly in the Navy. We assign PMs and Deputy Program Managers
    (DPMs) using a very selective slating process where both military and
    civilian applicants are considered for each PM and DPM position. We
    closely monitor the performance of the PMs and DPMs and have these
    individuals sign tenure agreements based on the ACAT Level of their
    program. While the personnel have a prescribed tenure, Navy Leadership
    monitors the phase of the program and determines the proper time to
    rotate personnel on a case by case basis as necessary. For example, in
    certain circumstances, Navy Leadership may extend a PM to ensure
    disruptive changes are not made immediately prior to a program
    milestone.
        Secretary Wilson. The Air Force takes the rotation and development
    of its program managers seriously. The Air Force strives to make
    certain its program managers rotate between assignments based on the
    individual's skill-levels and capabilities so they are developed for
    future assignments. We have established processes to approve program
    manager moves earlier than their expected tours are completed. These
    are approved by the Service Acquisition Executive. We continue to
    closely monitor key leadership moves during critical milestones on our
    programs.

                                   __________
                   Questions Submitted by Senator Bill Nelson
                               space acquisition
        104. Senator Nelson. Secretary Wilson, recently the Commander of
    STRATCOM, General Hyten, said this country has lost the ability to ``go
    fast''. He said we now take four years to study a problem before do
    something about it. He also said this is not acceptable when it comes
    to space, because while we can compete right now, in the future, others
    will easily overtake us. I was glad to hear that you had agreed with
    him. So, what institutional changes is the Air Force making when it
    comes to space acquisition?
        Secretary Wilson. I have requested delegation of Acquisition
    Category I programs from AT&L to the Air Force in order to speed
    decision making and avoid multiple levels of bureaucracy. Internally,
    the Air Force delegated Acquisition Category II and Acquisition
    Category III programs to the lowest possible level. We are evaluating
    how we organize our acquisition centers to be more responsive and agile
    to new and changing threats and to work with our operators to make our
    warfighting forces more effective. We are also leveraging developmental
    planning, experimentation, and prototyping to support fielding of
    future Air Force capabilities to support the joint force. Our
    technically advanced Air Force must embrace a willingness to ``fail
    fast'' in order to iterate and harvest lessons as keys to innovation.

        105. Senator Nelson. Secretary Wilson, to what extent does space
    acquisition need to be different than other programs outside of space?
        Secretary Wilson. Every warfighting domain faces unique challenges
    that impact how we develop, acquire, and present our forces. All
    domains need to be responsive to new and changing threats and be able
    to rapidly integrate new capabilities to make our warfighting force
    more effective. This agility must extend through the entire space
    enterprise, to include how we learn about the threat; develop
    solutions; acquire, test, deploy, operate, and evolve new systems; and
    ensure our space mission force is ready to defeat a thinking adversary
    in a complex, multi-domain battlespace.

        106. Senator Nelson. Secretary Wilson, how will you prioritize
    making these changes in regards to the other Air Force missions?
        Secretary Wilson. The action I have taken are for all programs, not
    just for space. The Air Force has requested the delegation of the
    Milestone Decision Authority for Acquisition Category I (ACAT I) Major
    Defense Acquisition Programs from the Under Secretary of Defense for
    Acquisition & Sustainment back to the Air Force. Of the 14 programs
    recently delegated or reverted back to the Air Force, seven fall under
    the space umbrella.
        We will continue to work with the Under Secretary of Defense for
    Acquisition & Sustainment for additional delegations of Milestone
    Decision Authority to the Air Force for other programs, which we are
    well-suited to execute.
        While the Office of the Secretary of Defense has delegated
    significant programs to the Air Force, the Air Force has taken steps to
    delegate decision authority for ACAT II programs from the Service
    Acquisition Executive to lower levels, either the Program Executive
    Officer (PEO) in order to shorten the acquisition timeline to field
    needed capabilities. PEOs have also delegated ACAT III programs to O-6
    level Program Directors where appropriate.

        107. Senator Nelson. Secretary Wilson, what changes need to be made
    to space acquisition that would capitalize on cost savings that have
    been made by commercial space?
        Secretary Wilson. Private sector research and development continues
    to outpace military investments in space. The Air Force is actively
    exploring opportunities to leverage the commercial sector wherever
    possible, including launch, space command and control, and satellite
    communications. One place where change would be helpful is in the use
    of next-generation commercial satellite communication services. The Air
    Force has been using commercial satellite communications for years but
    found legal and policy impediments to taking full advantage of the cost
    savings. A legislative proposal that is working through the approval
    process for fiscal year 2019 would remove hurdles and allow the Air
    Force to take full advantage of the potential reduced costs and
    increased performance capability of commercial systems.
                               cyber acquistition
        108. Senator Nelson. Secretaries Lord, Esper, Geurts, and Wilson,
    Another area we need to be able to move fast in is in acquiring cyber
    capabilities. Can you explain how your services are acquiring cyber
    capabilities in coordination with Cyber Command?
        Secretary Lord. As the Department stands up its Cyber Mission Force
    (CMF) of 133 teams, the Services and U.S. Cyber Command are both
    playing a key role in equipping this force for conducting cyberspace
    operations. Currently, the Services have the lead role for acquiring
    the capabilities for equipping Cyber Protection Teams. Equipping the
    Combat Mission Teams and National Mission Teams is a shared acquisition
    responsibility. To help synchronize the acquisition of cyberspace
    capabilities across the Department, U.S. Cyber Command conducts
    quarterly cyber capability reviews with the Services.
        U.S. Cyber Command's acquisition authorities were recently
    enhanced. As part of the Fiscal Year 2016 NDAA section 807 (Acquisition
    Authority of the Commander of U.S. Cyber Command), the USD(AT&L)
    delegated acquisition authority to Commander, Cyber Command to
    organically manage non-major system acquisitions (i.e., acquisition
    category (ACAT) III or below).
        For larger ACAT programs or acquisitions of foundational
    infrastructure (e.g., the Unified Platform (UP)) or software
    architectures the duration of which is expected to last more than five
    years, U.S. Cyber Command works with the Services to provide validated
    cyberspace operations requirements.
        In response to previous Congressional direction (e.g., NDAA 2016
    section 1645), the Department designated Executive Agents (EAs) for
    critical cyber capabilities. The U.S. Army is the DOD EA for DOD Cyber
    Training Ranges and the acquisition lead for the Persistent Cyber
    Training Environment. The U.S. Air Force is the DOD EA for Joint Cyber
    Command and Control as well as the UP. For the UP, the U.S. Air Force
    is the EA. The stand-up of these EAs and governance boards has helped
    the Department place the appropriate emphasis on delivering these key
    capabilities required to train and equip the Cyber Mission Force.
        One of our most important ongoing acquisition efforts is for the
    Unified Platform, a cyberspace operations capability that will help the
    CMF teams more effectively conduct cyberspace operations. U.S. Cyber
    Command conducted UP operational prototyping in fiscal year 2017 and is
    continuing prototyping in fiscal year 2018 to supplement the longer
    term technology prototyping and development of the U.S. Air Force's UP
    Program Management Office (PMO) and the Services' related acquisition
    PMOs.
        Secretary Esper. The Army recognizes the need to rapidly evolve
    cyber capabilities by quickly injecting technologies in response to new
    and emerging threats. The Army is increasingly synchronized with U. S.
    Cyber Command and the other services through joint programs such as
    unified platform, joint command and control, and the persistent cyber
    training environment. Through Army Cyber Command, the Army's component
    headquarters to the U. S. Cyber Command, the Army remains aligned to US
    Cyber Command requirements and priorities. In fact, the Army was
    designated by Joint Staff as the lead service for a priority US Cyber
    Command Joint Urgent Operational Needs Statement last year. The Army
    continues to rapidly develop that solution and other capabilities based
    on US Cyber Command prioritization. With regard to the Army's portion
    of the Cyber Mission Forces, the Army has made great strides by
    developing requirements, prioritizing resources, and establishing rapid
    acquisition models. The Army's cyber acquisition approach leverages
    rapid requirements development, the use of Other Transaction Authority
    to achieve commercial off the shelf solutions, some limited authorities
    for Army Cyber Command in-house procurements, and a ``DevOps''
    environment to create new capabilities. Through this approach, the Army
    is well-postured to present fully equipped Cyber Mission Forces to US
    Cyber Command according to joint standards.
        Secretary Geurts. The Navy works closely with both US Cyber Command
    (USCC) and the Defense Information Systems Agency (DISA) to acquire
    joint/common cyber tools. As the service components of USCC, Navy Fleet
    Cyber Command (FCC) and Marine Forces Cyberspace Command (MARFORCYBER)
    are the direct links between the Department of the Navy and USCC. FCC
    and MARFORCYBER coordinate requirements and acquisition with the Navy
    and Marine Corps operational staffs (OPNAV and HQMC) and their
    acquisition commands. OPNAV and HQMC also directly coordinate with the
    Joint Staff and USCC on Joint Urgent Operational Needs that trigger
    rapid acquisition efforts. The cyber Subject Matter Experts at FCC,
    MARFORCYBER and PMW 130 assist USCC and DISA with design, analysis, and
    acquisition of cyber tools and systems to meet Naval requirements. An
    example of this is the current system used DOD wide (with metrics and
    reporting to USCC) of the Host Based Security System (HBSS). DISA
    manages the central acquisition of the HBSS system and licenses based
    on USCC and Service requirements and the Navy (via PMW 130) deploys the
    system to all required networks and computers. The Navy acquires other
    cyber capabilities (e.g. SHARKCAGE) that are unique to the Navy for
    cyber intrusion detection. In accordance with the direction given in
    Fiscal Year 2018 NDAA section 1642, USCC is also working closely with
    the Services to evaluate alternative methods and repeatable,
    disciplined processes for increasing the speed of developing,
    acquiring, and maintaining effective cyber tools across the DOD.
        Secretary Wilson. As the Executive Agent for the Unified Platform
    and Joint Cyber Command & Control programs, the Air Force is overseeing
    the standup of program management offices focused on agile software
    development processes. Direction from stakeholder governance bodies,
    which includes representatives from the Air Force, Cyber Command and
    other Department of Defense stakeholders, guides the course for these
    programs. To support maximum warfighter responsiveness for evolving
    requirements, the primary decision body is delegated to the lowest
    practical level (O-6/Civilian equivalent) with stakeholder Senior
    leadership providing oversight and strategic direction. This framework
    allows for close teaming between the operations and acquisition
    communities.

                                   __________
                Questions Submitted by Senator Claire McCaskill
                     contractor performance accountability
        109. Senator McCaskill. DOD IG audits have determined that
    contracting officials do not always use the Contractor Performance
    Assessment Reporting System as required system, and that the system
    itself has ineffective internal control measures that allow incomplete
    evaluations of contractor performance to be submitted.
        Secretary Lord, what is being done to shore up the weaknesses in
    this system to ensure that Federal source selection officials have
    access to timely, accurate, and complete past performance assessment
    information necessary to make informed decisions related to contract
    awards?
        Secretary Lord. The Department is fully committed to improving past
    performance assessment information. The Department addressed and closed
    out all the recommendations in the latest DOD IG audit (DODIG-2017-081)
    issued on May 9, 2017. The Director, Defense Procurement and
    Acquisition Policy issued a memorandum on May 16, 2017, to DOD
    Contracting Organizations and Service Acquisition Executives
    emphasizing the importance of contractor past performance evaluations
    and the quality of written narratives to ensure ratings given are fully
    supported as described in the Federal Acquisition Regulation. In
    addition, they were reminded to assign responsibility and management
    accountability for the completeness of past performance submissions.
        Furthermore, the Department forwarded the DOD IG auditors system
    enhancement recommendations to the General Services Administration
    (GSA), who has management responsibility for the Federal wide mandated
    Contractor Performance Assessment Reporting System (CPARS). GSA
    implemented a system enhancement in August 2017 to require narratives
    for every factor for which there is a rating. An additional enhancement
    was made to provide the FAR ratings definitions as a ``prompt'' to
    facilitate ratings consistent with written narratives. GSA and the
    Department believes these system enhancements will improve the quality
    of past performance information available to our Acquisition Officials.
    The CPARS Guide was also amended to emphasize that ``a supporting
    narrative must be provided for each factor used.''
        Lastly, the Department monitors and posts quarterly compliance
    CPARS Metrics to ensure evaluations are being accomplished in a timely
    manner. The metrics are posted here: https://www.acq.osd.mil/dpap/pdi/
    eb/monthly--contract--distribution--metrics.html. The January 9, 2018,
    metric for the first quarter of fiscal year 2018, shows a DOD
    compliance rate of 83 percent, which far exceeds the average Federal
    Agency compliance rate of 60 percent.

        110. Secretaries Esper, Geurts, and Wilson, what training is being
    done for your contracting officials to ensure they know how to properly
    use this required system, and what are you doing to hold contracting
    officials accountable for their failure to use systems like this? Are
    you ensuring that their use of or failure to use such systems is
    included in their regular evaluation reports?
        Secretary Esper. The Army leverages existing Contractor Performance
    Assessment Reporting System (CPARS) training provided by the CPARS
    Program Manager for those Army contracts that meet reporting
    eligibility requirements. Additionally, many of our Command-level
    contracting activities provide one-on-one training to assessing
    officials (including requiring activity representatives) on the ``how
    to'' workflow process for the use of the CPARS system. The Army also
    takes advantage of Army Logistics University and Defense Acquisition
    University training modules that incorporate limited CPARS instruction.
        The Army's contracting leadership continues to place emphasis on
    monitoring contractor performance of all contracts that meet reporting
    eligibility requirements through CPARS. Contracting Leaders are held
    accountable at the Command-level for ensuring that CPARS accurately
    captures contractor performance.
        There are a number of systems that contracting officials utilize in
    the performance of their duties, CPARS is just one of those systems.
    Metrics and measures are in place to ensure compliance with utilization
    of those systems across the Acquisition community. Depending upon
    mission priorities, leadership includes compliance with set standards
    in individual evaluation assessments which would include utilization of
    the standard reporting systems such as CPARS.
        Secretary Geurts. The DON is committed to ensuring that Navy and
    USMC contracting officials and program offices are using the Contractor
    Performance Assessment Reporting System (CPARS). Contracting officials
    are responsible for registering applicable contracts after award into
    the CPARS and program/requiring office personnel are responsible for
    completing the actual assessments of Contractor performance. DON works
    closely with the Naval Sea Logistics Center Portsmouth, which is
    charged with providing supplier performance and material quality
    support/services across a broad customer base that includes the DON,
    Joint Services, DOD, and Federal and Civilian Agencies. Together, we
    develop and implement CPARS training and guidance that is supportive of
    Navy procedures and processes. Additionally, each Navy buying activity
    has specific CPARS Agency POCs charged with monitoring local CPARS
    compliance.
        Secretary Wilson. The Air Force uses the Contractor Performance
    Assessment Reporting System (CPARS) tool and policies established by
    the Defense Department to train personnel and record evaluations of
    contractor performance. Individuals appointed to CPARS roles must
    complete training specific to their CPARS role(s) within 30 days of
    appointment. This includes contracting officers as well as program
    managers and PEOs.

        111. Senator McCaskill. Secretary Esper, in June 2017 the GAO
    released a report (GAO-17-457) that I asked them to conduct regarding
    the Army's contract operations. One of their key findings was that Army
    leaders regularly did not have the necessary information to properly
    evaluate and improve operations regarding contracts. Another important
    finding was the existence of the ``use it or lose it'' mentality when
    it comes to measuring the efficiency of obligating taxpayer funds.
    Essentially, the most important metric involved was whether or not
    funds were obligated, but not whether they were obligated efficiently
    or whether the best deal was obtained for the taxpayer. One of the key
    recommendations made that go to both of these issues was to develop
    metrics to assess contracting operations in terms of timelines, cost
    savings, and contractor quality--metrics that are not currently part of
    the assessment of the quality of the Army's contracting operations.
    What has the Army done since the publication of this report to try and
    change the ``use it or lose it'' culture mentality of the Army's
    contracting and procurement personnel? What is the Army doing to ensure
    that proper metrics are being put in place so that senior Army leaders
    like yourself and Acquisition Decision Authorities can make informed
    decisions when it comes to overseeing, evaluating, and managing the
    Army's contracting operations?
        Secretary Esper. The Army acquisition community emphasizes
    proactive requirements development and timely funding obligation. Early
    planning requirements review with all stakeholders, and the receipt of
    funding improves contracting execution and counters the ``use it or
    lose it'' culture. The frequent reliance on Continuing Resolutions to
    provide incremental funding to the Army, however has an extremely
    negative impact on contract and budget execution. Continuing
    Resolutions force the Army to postpone projects, the maintenance of
    equipment, and initiatives involving training and recruitment.
    Continuing Resolutions also prevent the Army from reprogramming funding
    to meet emerging needs and prohibit the start of new programs to
    modernize for future threats. For the current fiscal year, it locks the
    Army into previous levels, mandating a level of spending that is
    billions less than the fiscal year 2018 Presidents Budget.
        In September and November 2017, the Acting Secretary of the Army
    issued eight key Acquisition Reform Initiatives, to include evaluating
    the health of Army Contracting through assessment of contracting
    operations. Subsequently, an initial set of metrics have been put in
    place. An integrated product team was formed to identify additional
    strategic metrics that will be value-added, influence strategic
    decisions and support optimal acquisition outcomes.

        112. Senator McCaskill. In October 2016 GAO released a report (GAO-
    17-17) on the need for DOD to improve its efforts to identify and use
    contractor inventories in particular for contracted services. GAO noted
    that the services have not developed the plans to integrate the
    contractor inventories into their total workforce planning, strategic
    budgeting, and decision-making process.
        Secretary Lord, what efforts are you taking at the Departmental
    level to drive better integration of contractor inventories into the
    workforce planning, strategic budgeting, and decision-making process
    for determining the use of service contracts?
        Secretary Lord. As the Department seeks to maximize lethality,
    improve and sustain readiness, grow the force, and increase capability
    and capacity, we must improve the overall management of our Total Force
    of active and reserve military, government civilians, and contracted
    services. The contractor inventories that DOD Components are required
    to compile provide increased visibility into contracted services,
    supporting and informing the Total Force planning and management
    necessary in achieve these objectives. Jointly with the Under Secretary
    of Personnel and Readiness, I signed out annual guidance in September
    2017 directing DOD Component heads to complete reviews of contracted
    services in accordance with the statutory requirements of 10 U.S.C.
    sec. 2330a. These reviews are particularly focused on categories of
    high-risk contracted services providing special studies or analysis
    that is not research and development, information technology services
    and telecommunications services; and contracts providing professional,
    administrative, or management services, especially where they are staff
    augmentation contractual efforts to in-house organic government staff.
    These reviews are designed to: 1) ensure that DOD components are not
    inappropriately leveraging contract support for inherently governmental
    functions or critical work; 2) assess the level or reliance on
    contractor support and capabilities; and 3) facilitate and inform
    workforce mix determinations, force management decisions, risk
    assessments, mission prioritization, and resource allocation. However,
    the inventory and subsequent review process is just one tool/process
    that DOD components have at their disposal. We are also continuously
    improving on and executing Services Requirements Review Boards to
    validate and prioritize contract requirements. As part of the on-going
    reform efforts, the Deputy Secretary of Defense (DEPSECDEF) established
    a Services Contract Reform Team to initiate key reforms and develop new
    capabilities in support of these goals. As a member of the DEPSECDEF's
    Reform Management Group, I am overseeing the Reform Team's efforts as
    they develop / implement new capabilities in requirements
    prioritization, category management, should-cost for contracted
    services and data management to ensure the required integrated cross-
    functional areas appropriately support all the aforementioned processes
    that govern how the Department acquires services and utilizes services
    contracts within the Department to execute its mission.

        113. Senator McCaskill. Secretaries Esper, Geurts, and Wilson, what
    are your plans for using service contract inventories to inform the
    strategic budget and workforce planning and implementation processes?
        Secretary Esper. The inventory of contracted services enables the
    Army to fully understand the composition of its workforce, provides
    better oversight to avoid duplication of effort or shifting of in-house
    reductions to contract, enables the Army to better account for and
    explain its total workforce, and allows for more informed workforce
    staffing and funding decisions.
        Since its implementation in 2005, the Army has learned that gaps
    and discrepancies between the Inventory of Contracts for Services
    (ICS)/Enterprise Contractor Manpower Reporting Application (eCMRA) data
    and our programming/budgeting information systems has limited our
    ability to use the data to inform the strategic budget and workforce
    planning and implementation processes. Beginning in fiscal year 2017
    (FY17), the Army embarked on an initiative to integrate the contracted
    services data and our programming, budgeting, and execution information
    systems. The goal of this initiative is to improve the accuracy and
    auditability of contracted services data throughout the programming,
    budgeting, and execution cycles; increase the accessibility of
    contracted services data to support planning, programming, and
    budgeting decisions; and ensure the most appropriate and cost efficient
    application of military, civilian, and contract sources of labor. Full
    data integration is scheduled to be complete for development of the
    Army Fiscal Year 2021-25 Program Objective Memorandum.
        Secretary Geurts. The DON compiles the annual inventory of
    contracted services per Defense Department guidance and distributes the
    information to the financial and manpower Assistant Secretaries for
    planning purposes. DON uses the Service Requirements Review Board
    (SRRB) process as a means to provide oversight and to validate services
    acquisition requirements. The DON requires that every services
    acquisition requirement valued in excess of $150,000 be reviewed,
    vetted and approved by a SRRB. These SRRBs are chaired by Flag Officers
    or Senior Executives and involve leadership reviews by the requirement
    owner(s) as well as the acquisition and financial communities.
        Secretary Wilson. The Air Force utilizes our service contracts as
    required for mission accomplishment and will ensure compliance with all
    statutory requirements as described below:
        Budget Process: The Air Force will continue to utilize the service
    contract inventory to establish an average contractor work year cost by
    appropriation which is used to calculate contractor full-time
    equivalents as required in 10 U.S.C. Sec.  235.
        Workforce Planning and Implementation Process: All contracted
    services requirements are reviewed by the cognizant manpower office
    which is incorporated into the requirements approval processes across
    the Air Force prior to initiating a service contract. The local level
    decision authorities throughout the Air Force have real-time access to
    the information that is used to build the service contract inventory
    and are able to use this information for their decision making
    processes.

        114. Senator McCaskill. Secretary Wilson, we have discussed the
    need to improve the timeliness and efficiency of civilian hiring within
    the Air Force and that you established a taskforce to identify and
    reform the hiring process including a review of regulatory and
    legislative fixes. Can you please submit more details on the goals and
    efforts of the taskforce and provide a list of existing hiring
    authorities the Air Force is using to recruit new talent and any
    regulatory or legislative barriers to improving the hiring process?
        Secretary Wilson. Civilian hiring is a top priority for the Air
    Force. The ability to hire top-tier talent efficiently and effectively
    is essential to sustaining a ready and lethal force. The Air Force is
    undertaking a multi-pronged approach that will significantly improve
    civilian talent management from recruiting through the entire employee
    life-cycle.
        Four lines of effort include: Resources, Legislation, Policy and
    Process. Within these lines of effort, the Air Force team has
    identified near-term (Quick Wins), mid-term (1-3 years) and long-term
    (3-5 years) goals to reform and accelerate civilian hiring. These goals
    include, but are not limited to: fixing IT infrastructure latency,
    streamlining employee onboarding, increasing workforce planning efforts
    and maximizing usage of direct hiring authorities. In addition, the Air
    Force is pursuing a civilian talent management pilot program that
    incorporates greater flexibilities associated with attracting,
    compensating and retaining top talent. The desired end state of these
    Air Force civilian hiring efforts is to have an agile, flexible Talent
    Management System responsive to warfighter needs.
        Under the National Defense Authorization Act for fiscal years 2016
    and 2017, Congress provided the Department of Defense with numerous new
    Direct/Expedited Hiring Authorities enabling the Air Force to hire
    faster in critical occupations like depot maintenance and cyber. By
    using these authorities, the average time-to-hire is reduced by 40-50
    days. These authorities include:

          Fiscal Year 2016 NDAA, section 1112, Direct-Hire
    Authority (Acquisition-Veterans Technical Experience)
          Fiscal Year 2017 NDAA, section 1106, Direct-Hire
    Authority for Post-Secondary Students and Recent Graduates
          Fiscal Year 2017 NDAA, section 1110, Direct Hire
    Authority for Financial Management Experts in the DOD
          Fiscal Year 2017 NDAA, section 1125, Temporary Direct
    Hire Authority for Domestic Defense Industrial Base Facilities, the
    Major Range and Test Facilities Base, and the Office of the Director of
    Operational Test and Evaluation
          Fiscal Year 2017 NDAA, section 1643. Direct Hiring
    Authority for Cyber Workforce

        A critical barrier to Air Force civilian hiring is the lack of an
    Interchange Agreement that allows managers the ability to effectively
    manage its workforce across Title 10 Defense Civilian Intelligence
    Personnel System (Excepted Service) and Title 5 General Schedule
    employees (Competitive Service) in response to mission needs. The
    Office of Personnel Management rescinded this agreement back in 2010
    and there is currently no legal authority to internally manage this
    part of the hiring process. The Office of Secretary of Defense and
    Intelligence Community's efforts to have this agreement reinstated have
    not been successful. Absence of this agreement presents major obstacles
    to developing and retaining our civilian Airmen in the Intelligence
    career field.
                                   __________
                 Questions Submitted by Senator Jeanne Shaheen
       the small business innovation research (sbir) and small business
                      technology transfer (sttr) programs
        115. Senator Shaheen. Secretary Lord, through the SBIR and STTR
    programs, Congress has provided the participating agencies with
    tremendous statutory flexibility to design their programs to best meet
    their needs. For example, even though the law says a Phase I award is
    typically six months in timeframe and $225,000 to explore the promise
    of an idea, and a Phase II award is typically a maximum timeframe of
    two years and $1.5 million to further develop the idea, an agency has
    full authority to speed up the process. If DOD likes the shorter turn-
    around time of DIUx, the same can be done with the SBIR and STTR
    programs, for all the topics or topics that your program offices deem
    more time-sensitive. Will you make sure to maximize the SBIR and STTR
    programs and their transition into the warfighter as you form the two
    new Under Secretary offices for (Acquisition and Sustainment (A&S)) and
    (Research and Engineering (R&E))?
        Secretary Lord. I am committed to taking the lessons learned from
    programs conducted by DIUx, the Strategic Capabilities Office and the
    Special Operations Command's SOFWERX and applying them to other
    acquisition programs. As we work over the next two years to design and
    implement the new structure I will ensure that we maximize the
    effectiveness of the SBIR and STTR programs to provide innovative
    solutions for our warfighters. The reauthorization of the Assistance
    for Administrative, Oversight, and Contract Processing Costs authority
    (Pilot Admin Authority) will improve our ability to improve program
    execution. Administration of the SBIR and STTR programs requires
    significant effort to improve commercialization, perform outreach
    initiatives to attract participants, streamline and simplify
    contracting and program procedures, implement and continue oversight
    and quality control measures, and perform activities related to the
    oversight and congressional reporting including fraud, waste and abuse
    prevention activities. Dedicated administrative funding will allow DOD
    organizations to more effectively administer the SBIR/STTR programs and
    maximize contributions.

        116. Senator Shaheen. Secretary Lord, as part of the Fiscal Year
    2018 National Defense Authorization Act, Congress enacted a five-year
    pilot program that will help streamline the acquisition of technologies
    developed by non-traditional small businesses through the SBIR and STTR
    programs. Specifically, the provision requires the Secretary of Defense
    to establish this pilot program within 180 days that uses multiple
    award contracts for the purchase of technologies, supplies, or services
    that they developed under the SBIR and STTR programs. Will you commit
    to me that the Department will work with the Senate Committees on Small
    Business and Entrepreneurship and Armed Services to develop and
    implement this pilot program within the 180-day deadline?
        Secretary Lord. Yes, we will implement the pilot program within the
    180 day deadline. The Navy currently supports this approach by using
    Indefinite Delivery/Indefinite Quantity contracts for the purchase of
    technologies developed under the SBIR and STTR programs. I am committed
    to maximizing the effectiveness of all programs that contribute to the
    readiness and technological superiority of our forces. To that end I
    will work with all stakeholders to seek input and develop an effective
    pilot program to award multiple award contract vehicles to covered
    small business concerns for the purchase of technologies, supplies, or
    services that the covered small business concern developed under the
    SBIR or STTR program. I believe this effort has the potential to
    improve the efficiency of transition of SBIR and STTR technologies by
    simplifying the ability for all Services to acquire the innovations
    developed by small businesses under these programs.

        117. Senator Shaheen. Secretary Lord, please highlight recent
    successes of the SBIR/STTR programs in transitioning technologies to
    Phase III.
        Secretary Lord. I will highlight four successes of SBIR/STTR
    technologies transitioning to Phase III, one each from the Army, Navy
    and US Special Operations Command and one example of a cross agency
    transition success.
        The PowerShade, a portable, survivable, and sustainable energy
    source for deployed operations, was developed by PowerFilm Inc. to
    support the US Army. The PowerShade integrates flexible solar panels
    into a fabric structure to provide power from solar energy and reduce
    the heat load on the structures it covers. This provide opportunities
    to reduce fuel consumption at Forward Operating Bases and provide
    tactical level power to deployed forces. The Army SBIR Program
    supported development of technology for applying PowerFilm's flexible
    photovoltaic (PV) material to fabric and fabric structures. The two
    main products coming out of this program were the PowerShade structure
    and the lightweight foldable PV array. The PowerShade structure can
    span most standard military tents and work areas providing solar power
    and shade. The smaller foldable arrays can be carried in a backpack and
    deployed to recharge standard military batteries. Significant follow-on
    investments came from both DOD and private sources to drive continual
    improvement and implementation of these products. PowerFilm has
    received over $20 million in Phase III funding to improve and expand
    the technology into new products and allowed significant expansion of
    their manufacturing capacity. As a result, PowerFilm is a stable
    supplier of advanced portable power technology to DOD and commercial
    markets.
        The Adaptive Diagnostic Electronic Portable Testset (ADEPT) was
    developed by Mikros Systems, Inc. for the Navy as a maintenance
    workstation for AEGIS SPY-1 radar, designed to maintain, diagnose,
    align, repair, and calibrate this complex electronic system while also
    supporting remote predictive analytics and Condition Based Maintenance
    (CBM). A SBIR investment of just under $2.1M has generated over $100
    million in Phase III funding as Mikros has extended ADEPT to cover
    other radar variants and developed a logistics support suite for
    surface combatants. ADEPT continues to expand its footprint into new
    radar and other systems, with a planned enhancement to provide remote
    support to the AEGIS Mk 99 Fire Control System, a collaboration with
    IBM that will provide big data analytics for combat systems CBM data.
    ADEPT will be installed in varied ship classes to help manage a broad
    inventory of Combat System Elements.
        Physical Optics Corporation developed the Advanced Micro Weather
    Sensor (AMWS) for USSOCOM for a SBIR investment of $2.45 million low-
    cost, lightweight, ruggedized, highly integrated sensor gathers and
    describes 18 characteristics of weather, such as wind speed, wind
    direction, precipitation, temperature, humidity and visibility. The
    AMWS replaces a much larger, less capable legacy system that is quickly
    becoming obsolete with a three-pound package less than 200 cubic inches
    in size. The Air Force awarded a $24.5 million Indefinite Delivery/
    Indefinite Quantity contract for the system and has funded $4.8 million
    for development and procurement of the AMWS and Micro Weather Sensor.
        The Creare LLC Directed Heating System for High Speed Manufacturing
    of Thermoplastic Composites, was developed under an Army SBIR and
    received US Air Force funding for transition to the F-35 program. The
    Directed Heating System (DHS) allows the local and efficient heating of
    thermoplastic composites improving tape feed rates by a factor of two
    over current techniques. Creare's laser-based approach received
    approximately $1.5M in Phase III funding to transition this technology
    to the production of the F-35 aircraft. Creare is also working with a
    major fiber placement supplier to adapt the DHS technology to support
    carbon fiber applications in the automotive industry.
                            buy america contracting
        118. Senator Shaheen. Secretary Lord and Secretary Geurts, the
    Committee continues to be concerned about the Department of Defense
    (and Federal Government at large) support for ``Made in the USA''
    contracting opportunities. As qualified American companies--especially
    small businesses--consider participating in the Federal government
    procurement process, all options should be made available to consider
    these domestic manufacturers and employers when competing with
    comparative foreign firms for all federal contracting opportunities.
    The Committee has made clear our belief that price is not the single
    significant contributing factor toward making contracting awards for
    critical DOD contracts--a best value approach that considers past
    performance, quality and preferably domestic manufacturing should be
    incorporated in the procurement decision-making process. What efforts
    are the Department of Defense and service branches taking to ensure
    that domestic small businesses are afforded every opportunity to
    compete openly and fairly with foreign-owned large businesses for
    future contracts?
        Secretary Lord. The Department universally applies the restrictions
    of the Buy American statute (41 U.S.C chapter 83) which restricts the
    purchase of supplies that are not domestically produced end products.
    This law mandates that a preference be given for procuring ``domestic''
    supplies/products, construction materials, and in some instances
    services. On limited cases, the Department considers offers of foreign
    products or components that are exempt from the restrictions of the Buy
    American statute if the origin of the products or components are from a
    Qualifying Country, which has a reciprocal defense procurement
    memorandum of understanding (MOU) or international agreement with the
    United States. Other limited exceptions may be granted to Designated
    Country products or components covered by the World Trade Organization
    Government Procurement Agreement or Free Trade Agreement, if purchasing
    eligible products or components that are valued above the particular
    trade agreement threshold.
        The Department awards a significant percentage of all contracting
    dollars to small businesses. DOD provides small businesses increased
    opportunities when competing with large businesses, foreign and
    domestic. The increased opportunities include small business goals,
    negotiated annually with the Small Business Administration (SBA). DOD
    and Federal Government contract programs authorize contracting officers
    to set aside certain federal contracts for eligible Women-owned small
    businesses, small businesses in HUBZones, Service-Disabled Veteran-
    Owned Businesses, Small Disadvantaged Businesses and the 8(a) Business
    Development Program. Small business set-asides are a powerful tool for
    helping small businesses compete for and win federal contracts. The
    Department and the Federal Government are currently working to increase
    opportunities for Small Businesses participating in multiple award
    contracts.
        Secretary Geurts. Contracting officers located in the US are
    required to consider US small businesses first when making any buy
    valued over the micro-purchase threshold. Small Business Professionals
    have input to this decision for buys valued at or over $10,000.
        Continuous auditing programs such as Procurement Performance
    Management Assessments and Small Business Administration Surveillance
    Reviews are in place to assess how well contracting officers uphold
    these rules. New procurement personnel must take training on how to
    apply the small business preferences; contracting site Small Business
    Professionals supplement this training with updates and on-going
    guidance. On-going engagement with industry allows us to hear their
    concerns and know where to target additional oversight or education
    efforts.
        In addition, the Small Business Innovation Research (SBIR) and
    Small Business Technology Transfer (STTR) Program requires that all
    effort be performed within the USA. One of the unique selling features
    of the SBIR/STTR Program is the ability of the small businesses to
    deliver quality products and services, usually at lower prices, and to
    respond quickly to customer needs. An independent professional study of
    the DON SBIR/STTR Program concluded that Phase II projects conducted
    between 2000 and 2013 resulted in an average of $5.5 million in sales
    per contract, and a total of $14.2 billion in commercial and military
    sales, while creating 200,000 new jobs at an average $70,000 wage.

        119. Senator Shaheen. Secretary Lord and Secretary Geurts, do
    foreign-owned firms benefit from less stringent contracting
    requirements, including small business sub-contracting rules?
        Secretary Lord. The Department universally applies the restrictions
    of the Buy American statute (41 U.S.C chapter 83) which restricts the
    purchase of supplies that are not domestically produced end products.
    This law mandates that a preference be given for procuring ``domestic''
    supplies/products, construction materials, and in some instances
    services. When applying restrictions of the Buy American statute to
    procurement actions, it is typically not the firms country of ownership
    that matters, but rather the country of origin of the materials,
    components, or product which is considered.
        Foreign contractors do not have an advantage, regarding the Federal
    Acquisition Regulation (FAR) requirements for subcontracting plans and
    subcontracting limitations. The FAR requirements for subcontracting
    plans and subcontracting limitations, applies to all contractors,
    including foreign contractors. Contracts, including all subcontracted
    work, performed entirely outside of the United States and its outlying
    areas are exempt from the FAR subcontracting rules.
        Secretary Geurts. No. Foreign-owned firms do not benefit from less
    stringent contracting requirements. Foreign-owned firms must meet all
    of the small business requirements that domestic large firms are
    required to meet. For example, subcontracting plans are required for
    contracts performed in the U.S. by both foreign-owned and large
    domestic firms. Foreign-owned firms are treated as large businesses in
    being excluded from a small business set asides.
        The Buy American Act further limits domestic contracting from
    foreign firms. FAR Part 25 contains the Buy American Act protections.
    While some exceptions do exist based on non-availability of certain
    commodities or items, there would be no difference in solicitation
    requirements based on foreign ownership.
        Under the SBIR/STTR Program the small businesses as well as the
    subcontractors must be U.S. owned and operated unless a specific waiver
    is granted.

        120. Senator Shaheen. Secretary Lord and Secretary Geurts, what
    steps are the Department of Defense and the service branches taking to
    ensure that American-owned small businesses are given every opportunity
    to participate in Federal procurements?
        Secretary Lord. DOD has an excellent track record of providing
    maximum opportunities for American-owned small businesses to sell to
    the Department. In fact, DOD procured over $50 billion of products and
    services annually from small businesses during the past few years. This
    represents over 22 percent of the Department's procurement actions that
    small businesses were eligible to fulfill. Virtually all of the small
    business procurement was with American-owned firms. We will continue
    our practices of complying with small business procurement laws,
    striving to meet our small business procurement goals, and leveraging
    the innovation and cost competitiveness of small businesses. SBA
    regulations require that a small business be ``independently owned and
    operated'' with ``a place of business in the US'' and that it
    ``operates primarily within the US or makes significant contribution to
    the US economy through payment of taxes or use of American products,
    materials or labor.'' We will continue to adhere to the laws provided
    by the Congress that enable American owned small businesses to compete
    successfully for DOD contracts.
        Secretary Geurts. DON is engaged and deeply committed to ensuring
    that all types of small businesses are provided a chance to participate
    in DON contracting opportunities. DON, represented by the Office of
    Small Business Programs (OSBP), participates in small business
    networking and matchmaking events, as well as congressional, Federal,
    state, and local government small business outreach activities,
    conferences, training events, partnerships, and working groups. DON's
    SBIR and STTR Program gives small businesses the opportunity to solve
    tough naval capability and performance challenges by providing
    innovative solutions, cost savings, and schedule efficiencies. DON has
    ten geographically dispersed buying commands, each of which has a Small
    Business Program Director.
        DON participates in two signature outreach events to communicate
    directly with small businesses across the country; The Navy League Sea
    Air Space Expo in April and the DON Gold Coast Procurement Event in
    August. These outreach events are great opportunities for small
    businesses to network and learn how the DON's acquisition process works
    and contracting opportunities within the DON.

        121. Senator Shaheen. Secretary Lord and Secretary Geurts, are
    there areas where the Department believes contracting opportunities for
    domestic manufacturing small businesses can be improved?
        Secretary Lord. Small business manufacturers provide DOD with about
    15 percent of the annual manufacturing needs of the Department. This
    equates to over $15 billion of about $100 billion of annual
    manufacturing procurement. Domestic manufacturing small businesses play
    an important role in providing parts to sustain DOD weapons systems.
    These small business manufacturers all meet the three criteria in
    existing laws: 1) they have a domestic place of business, 2) they
    primarily use domestic labor and materials and 3) they operate
    primarily within the US. In some instances, small business
    manufacturers lack the surge capability or ability to provide the
    continuous volume of supplies needed by DOD, such as for medical
    commodities, food or lumber. Nevertheless, we can improve contracting
    opportunities for domestic manufacturing small businesses through
    several approaches. First, we could use new or existing authorities to
    ease the contracting burden placed upon small businesses. Second, we
    can continue to seed future manufacturing by having a permanent Small
    Business Innovation Research program that enables domestic firms to
    mature their technologies and become future manufacturers. And finally,
    we can continue to encourage DOD's large suppliers to use small
    business manufacturers in their supply chains as subcontractors.
        Secretary Geurts. DON is engaged and deeply committed to ensuring
    that all types of small businesses are provided a chance to participate
    in DON contracting opportunities. DON, represented by the Office of
    Small Business Programs (OSBP), participates in small business
    networking and matchmaking events, as well as congressional, Federal,
    state, and local government small business outreach activities,
    conferences, training events, partnerships, and working groups. DON's
    SBIR and STTR Program gives small businesses the opportunity to solve
    tough naval capability and performance challenges by providing
    innovative solutions, cost savings, and schedule efficiencies. DON has
    ten geographically dispersed buying commands, each of which has a Small
    Business Program Director.
        DON participates in two signature outreach events to communicate
    directly with small businesses across the country; The Navy League Sea
    Air Space Expo in April and the DON Gold Coast Procurement Event in
    August. These outreach events are great opportunities for small
    businesses to network and learn how the DON's acquisition process works
    and contracting opportunities within the DON.

                                   __________
               Questions Submitted by Senator Kirsten Gillibrand
           strengthening manufacturing in the defense industrial base
        122. Senator Gillibrand. Secretary Lord, during your confirmation,
    you agreed that the Manufacturing USA Network is critical to ensuring
    the United States remains a global leader in manufacturing. Part of
    this bipartisan program's mission is to use these public-private
    partnerships to develop and commercialize new defense technologies that
    are critical to our men and women in uniform, like the integrated
    photonics R&D happening at the DOD institute in Rochester, NY. In
    response to my questions, you had committed to placing a high priority
    on investing in the Manufacturing USA institute network. Since you were
    confirmed, what steps have you taken to evaluate what resources are
    required to support the institutes and other industrial base investment
    programs?
        Secretary Lord. The Department is committed to supporting the
    institutes at the agreed upon funding levels. In addition to the
    institute start-up funding under my direction, other DOD organizations
    have seen value in the institutes and are funding projects at the
    Institutes (see chart below).

    ----------------------------------------------------------------------------------------------------------------
                                                              DOD Funding                            DOD-directed
                                                             Commitment on    Committed Industry   Project  Funding
                          Institute                       Start-up Agreement    Cost Share  (in      To-Date  (in
                                                             (in millions)         millions)           millions)
    ----------------------------------------------------------------------------------------------------------------
    America Makes (Additive Manuf.), Est. Aug 2012                     $ 62                $ 58               $19.7
     (Youngstown, OH); satellite in El Paso, TX.........
    Digital Manufacturing and Design Innovation                        $ 82                $106               $13.3
     Institute (DMDII), Est. Feb 2014 (Chicago, IL).....
    LIFT--Lightweight Innovations For Tomorrow, Est. Feb               $ 70                $ 78               $ 0.7
     2014 (Detroit, MI).................................
    AIM Photonics (photonic integrated circuits), Est.                 $110                $502               $  16
     Jul 2015 (Albany and Rochester, NY)................
    NextFlex (Flexible hybrid electronics), Est. Aug                   $ 80                $ 99               $ 5.9
     2015 (San Jose, CA)................................
    Advanced Functional Fabrics of America (AFFOA), Est.               $ 75                $272
     Apr 2016, Cambridge, MA............................
    BioFabUSA (Advanced tissue biofabrication), Est. Dec               $ 80                $214
     2016, Manchester, NH...............................
    Advanced Robotics for Manufacturing (ARM), Est. Jan                $ 80                $174
     2017 (Pittsburgh, PA)..............................
    ----------------------------------------------------------------------------------------------------------------

        The ecosystem within each of the technology spaces associated with
    the institutes consists of stakeholders from Government (local, state,
    and Federal level), academia, and industry (small, medium and large).
    To maintain a nationally relevant institute, all stakeholders must
    remain in a relationship with the institute. DOD is focused on
    implementing a strategy that will enable a continued partnership
    between the Department and the eight DOD-led institutes ensuring that
    they are providing value to the Department. We are planning a study
    that will assist us in developing a sustainable business model for the
    Institutes as they begin to transition from their initial start-up
    funding.
        With respect to other industrial base investment activities, the
    Institutes are part of a portfolio of industrial base investment
    programs. This portfolio includes the Institutes, OSD and Service
    Manufacturing Technology programs, the Defense Production Act Title III
    program, and the Industrial Base Analysis and Sustainment program. As
    part of on-going efforts in support of a number of Executive Orders, we
    are developing a deeper understanding of our industrial base challenges
    and opportunities and evaluating how to better position all of our
    investment programs for greater impact for the national security. These
    efforts will inform DOD decision making on our investment programs as
    we begin to develop our fiscal year 2020 budget later this year.

        123. Senator Gillibrand. Secretary Lord, is the Administration
    working towards establishing new Manufacturing USA Institutes within
    the network, and will there be an investment in the network in the
    upcoming budget requests to expand this work?
        Secretary Lord. The current DOD budget is focused on the eight
    existing DOD Institutes and does not contain funding to establish any
    additional Institutes. The Department works with the Department of
    Commerce's National Institute of Standards and Technology (NIST), the
    Department of Energy, and other Government agencies to support the
    current Manufacturing USA network. Funding for the Manufacturing USA
    network is appropriated in the NIST budget request. Th2at being said,
    the Department is are working to develop contracting scenarios using
    Other Transaction Authorities and other innovative agreement methods
    that enable our acquisition program managers and others to better
    utilize the Institutes for faster innovation and product development.

        124. Senator Gillibrand. Secretary Lord, during your confirmation
    you confirmed your willingness to make greater use of DOD programs like
    financing available to defense suppliers through the Defense Production
    Act (DPA), to strengthen the nation's defense production capacity. In
    the recently passed NDAA, Sec. 1771 created a pilot program to
    accomplish this, by directing DOD to use DPA to scale up production of
    defense technologies by providing incentives like purchasing
    commitments, issuing loans or loan guarantees, and giving funding to
    third party entities to support investments in small- and medium-sized
    manufacturers, including debt and equity investments. Will you commit
    to working with me to implement this pilot?
        Secretary Lord. I will happily work with you and your colleagues to
    advance the needs of the warfighter, and this pilot program has the
    potential to increase the Department's flexibility to incentivize
    suppliers of all sizes.
        While section 1711 does not directly mention the Defense Production
    Act (DPA), it allows the pilot program to utilize ``such other legal
    authorities as the Secretary considers applicable to carrying out the
    pilot program.'' Title III of the DPA authorizes the use of purchases,
    purchase commitments, loans, and loan guarantees to address shortfalls
    facing the defense industrial base, and as such may be an appropriate
    authority to leverage through this program.
        I see purchase commitments, loans, and loan guarantees as
    innovative options for preserving the United States' technological
    advantage. Purchase commitments offer an effective, market-based
    approach to bridge new technology from research and development
    prototypes to scalable production. Loans and loan guarantees provide a
    return-on-investment for the U.S. Government while establishing the
    credit history necessary for new businesses to obtain follow-on loans
    from the commercial sector. Through these market-based solutions, this
    pilot's results have the potential to demonstrate how DOD can
    proactively preserve technology in the United States, rather than
    relying on the more reactive intervention of policy tools like
    Committee on Foreign Investment in the United States reviews.

        125. Senator Gillibrand. Secretary Lord, last year's NDAA created a
    Manufacturing Engineering Education Program (MEEP) to prepare our
    workforce with in-demand skills for advanced manufacturing to
    strengthen the nation's defense industrial readiness. This program
    invests in training at universities and other education institutions
    across the country to help give students the skillsets necessary to
    succeed in the high-tech manufacturing workforce. This year's NDAA
    continued support for MEEP. As MEEP has not yet been fully implemented
    since last year's creation of the program, will you commit to working
    with me to ensure the program is stood up as soon as possible?
        Secretary Lord. I am committed to supporting this program and we
    are already making progress. A Funding Opportunity Announcement (FOA)
    was released on 12 Jan 2018 in support of MEEP. The DOD, through the
    Office of Naval Research (ONR), seeks a broad range of consolidated and
    integrated multidisciplinary programs of education with an emphasis on
    developing multidisciplinary instruction that encompasses the total
    manufacturing engineering enterprise, providing opportunities for
    students to obtain relevant work experience in manufacturing,
    demonstrating faculty and student engagement with industry that is
    directly related to, and supportive of, the education of students in
    manufacturing engineering, and geographical diversity. White Papers for
    this FOA are due in February 2018 with expectation of awarding grants
    the end of June.
        In addition, we have also awarded three projects at Lightweight
    Innovations For Tomorrow (LIFT) and America Makes Manufacturing
    Institutes. The first project is expanding MakerMinded, year-long
    manufacturing/technology high school competition series, to reach seven
    states. The Advanced Curriculum in Additive Design, Engineering and
    Manufacturing Innovation (ACADEMI) Expansion Initiative will target
    design engineers, manufacturing engineers, and material scientists to
    learn skills from an integrated set of additive manufacturing
    disciplines. The third is the creation of a new scalable and replicable
    technical manufacturing curriculum, developed by LIFT.

        126. Senator Gillibrand. Secretary Lord, the Manufacturing
    Extension Partnership (MEP) program within the Department of Commerce
    supports a national network of centers that help the nation's small and
    mid-sized manufacturers better compete by improving their technology,
    accessing skilled workers, and developing additional markets.
    Recognizing the well-established services MEP has developed, which have
    been proven to be successful, I believe that DOD should partner with
    MEP to strengthen the small and mid-sized manufacturers that are
    critical to the defense supply chain. Congress recognized the need for
    such a partnership by directing DOD to utilize MEPs within the
    Department's Manufacturing USA institutes as well as to assist with the
    integration of small and mid-sized manufacturers into DOD's supply
    chains. Will you commit to working with Commerce on making better use
    of MEP within DOD's Manufacturing USA network and other efforts to
    strengthen the defense industrial supply chain?
        Secretary Lord. In May 2015, the Department signed a Memorandum of
    Understanding with the Department of Commerce, the National Institute
    of Standards and Technology, and the Hollings Manufacturing Extension
    Partnership (MEP). This MOU provides the following
          DOD will leverage the assets and resources of the
    national MEP Program to assist the Manufacturing USA Institutes led by
    the DOD as they strive to broadly and deeply enhance their impact on
    small and medium sized U.S. manufacturers.
          NIST MEP will expand its ability to positively impact the
    competitiveness and growth of U.S. manufacturers by developing
    expertise in the focus areas of the DOD-led institutes.
        The Department continues to work and support MEP activities. The
    most recent effort with the Department and the MEPs is the embedding of
    MEP personnel in the Manufacturing USA Institutes. The purpose being is
    to assist in connecting mostly small and medium size companies with the
    Institutes. The MEPs have become very active in the Manufacturing USA
    network and they are also participating in the ongoing review of the
    manufacturing and defense industrial base as directed by Executive
    Order 13806.
                                microelectronics
        127. Senator Gillibrand. Secretary Lord, this committee has taken a
    great interest in ensuring that DOD has access to trusted and reliable
    microelectronics for use in defense systems. I understand that DOD is
    faced with the challenge or maintaining world class semiconductor
    research, design, engineering, and manufacturing capabilities--either
    in-house or in the private sector--at a time when budgets are
    constrained and when commercial microelectronics continues to far
    outstrip military capabilities. How do you plan to ensure that DOD
    maintains access to trusted and assured sources for the
    microelectronics it needs?
        Secretary Lord. The Department, in coordination with interagency
    partners, developed the Microelectronic Innovation for National
    Security and Economic Competitiveness (MINSEC) strategy to address
    current and future microelectronics needs, the threats to assured
    access to a robust industrial base, and continued U.S. leadership. This
    strategy drew from numerous reports, including the Defense Science
    Board, President's Council of Advisors on Science and Technology,
    Defense Innovation Unit Experimental, Semiconductor Industry
    Association, and National Defense Industrial Association. The MINSEC
    strategy is also aligned with the requirement in the Fiscal Year 2017
    National Defense Authorization Act, section 231, which directed a
    strategy to address access to assured microelectronics, including
    investments in science and technology, commercial microelectronics
    capabilities, and changes in policies, financial management, and
    public-private partnerships.
        As part of the larger whole of government MINSEC strategy, the DOD
    is investigating a strategy to resource a DOD MINSEC activity that
    focuses on disruptive research and development, modernization, and DOD
    unique technologies, e.g., strategic radiation-hardening. The DOD
    MINSEC activity would build upon the existing Trusted and Assured
    Microelectronics (T&AM) program, Trusted Access Program Office, the
    Joint Federated Assurance Center, and other related microelectronics
    activities.
        The Office of the Under Secretary of Defense for Acquisition,
    Technology, and Logistics (OUSD(AT&L)) initiated the T&AM program in
    the Fiscal Year 2017 President's Budget to ensure assured
    microelectronics are available to meet the DOD's needs. This program
    provides protections to ensure military unique chips are protected from
    malicious exploit (loss of DOD intellectual property), and from
    malicious tampering during design and manufacturing.

        128. Senator Gillibrand. Secretary Lord, what role does investment
    in domestic semiconductor microelectronics design and manufacturing
    play in that plan?
        Secretary Lord. Over the past decade, microelectronics
    manufacturing has migrated offshore. Although the shift to Asia has
    occurred, the U.S. is still the preferred investment location for
    leading edge fabrication, and today retains a supporting infrastructure
    of research, design, intellectual property rights, and physical plants
    that make the U.S. a viable investment market for the semiconductor
    industry. Aggressive investments and licit and illicit actions by peer
    nations threaten this remaining U.S. leadership. China alone purports
    investment of $150 billion and a strategy to achieve dominance in this
    critical technical area.
        The domestic semiconductor design and manufacturing industrial base
    is an important element of the Microelectronics Innovation for National
    Security and Economic Competitiveness strategy. The Department will
    seek to maintain access to U.S. domestic production of advanced state-
    of-the-art technologies. This includes advanced microelectronics
    design, fabrication, packaging and prototyping, and manufacturing
    capabilities, and the ecosystem of expertise, focused to develop
    innovative capabilities in performance, size, weight, and power for the
    strategic areas mentioned earlier. Further, DOD will seek opportunities
    to mature domestic state-of-the-practice foundries to produce more
    advanced technologies. This will allow more capacity for innovators,
    startups, research institutions, and other low-volume customers, such
    as the Aerospace and Defense community. Applications include autonomous
    and artificial intelligence systems, strategic and tactical high
    performance computing, sensing and processing platforms, and high
    performance weapons and electronic warfare capabilities.

        129. Senator Gillibrand. Secretary Lord, what role do investments
    in research and innovation play in this effort to ensure access to
    trusted microelectronics?
        Secretary Lord. Research and innovation play a central role in the
    strategy to ensure access to trusted microelectronics. Similarly,
    strategic management of the intellectual property resulting from these
    efforts is critical to ensuring return these investments. The Trusted
    and Assured Microelectronics program is investing in technology to
    ensure access to assured microelectronics by increasing the ability of
    the defense industrial base and commercial industry to more easily
    secure, assure, protect, and validate the design and manufacture of
    microelectronics across the domestic supply base for critical DOD and
    national security needs.
        A core element of the DOD Microelectronics Innovation for National
    Security and Economic Competitiveness is disruptive research and
    development in partnership with industry that is captured and protected
    in a robust domestic ecosystem. These investments will allow the DOD
    and the nation to maintain leadership in the next generation of assured
    microelectronics.
        Long-term, a whole of government strategy is needed that includes a
    focus on fostering innovation and reducing the barriers to quickly
    deliver assured microelectronics. Microelectronics is an enabling
    technology that can deliver overmatch capabilities to the DOD and
    commercial industry in the areas of autonomy, artificial intelligence,
    secure communications, financial and big data information processing,
    as well as nuclear and space modernization.

        130. Senator Gillibrand. Secretary Lord, what role will DIUx,
    Service S&T programs, DARPA, ManTech, DMEA, and OSD(MIBP) each play in
    this effort to ensure access to trusted microelectronics?
        Secretary Lord. The DOD Microelectronic Innovation for National
    Security and Economic Competitiveness (MINSEC) activity is currently
    led by the Assistant Secretary of Defense for Research and Engineering
    (ASD(R&E)). This activity and participants in the Trusted & Assured
    Microelectronics (T&AM) program and the Joint Federated Assurance
    Center (JFAC) include the Air Force Research Laboratory, the National
    Security Agency, the Naval Surface Warfare Center Crane, the U.S. Army
    Aviation and Missile Research, Development, and Engineering Center
    (AMRDEC), as well as Defense Microelectronics Initiative (DMEA),
    Defense Advanced Research Projects Agency (DARPA), the Department of
    Energy (DoE), and the Intelligence Community science and technology
    (S&T) organizations.
        The Deputy Assistant Secretary of Defense (MIBP) is a key partner
    in DOD MINSEC when facilitating interactions with the industrial base.
    In accordance with current policy, the DMEA accredits trusted suppliers
    of application-specific integrated circuit (ASIC) services, which are
    predominantly State of the Practice (SOTP), for the design and
    development of custom ASICs for DOD end-use by programs. However the
    scope of DOD's current and future needs extend beyond what is currently
    available through today's accredited suppliers.
        DOD MINSEC investments, through the DARPA Electronics Resurgence
    Initiative, will also spur the disruptive technology required to ensure
    that the U.S. leads the next generation of microelectronics technology
    and that it is assured. Further, the JFAC, T&AM program, DARPA, DMEA,
    and industry have, and are developing, the methods to protect the
    design intent and operability of critical designs, which is needed to
    access State Of The Art (SOTA) foundries in a secure manner. For those
    needs that have no commercial supplier due to process or protection
    requirements, DMEA will continue to serve as a foundry of last resort.

        131. Senator Gillibrand. Secretary Lord, will you use the
    authorities of the Defense Production Act in this effort to ensure
    access to trusted microelectronics?
        Secretary Lord. We are currently using DPA authorities, most
    notably Title III, to ensure access to trusted microelectronics.
        The Department is already using the authorities, most recently in a
    June 2017 Presidential Determination which addressed a variety of
    challenges facing the Space Industrial Base. More specifically, this
    Presidential Determination selected Radiation Hardened Trusted Field
    Programmable Gate Arrays as an area of concern, and since then the
    program has been used to develop a trusted domestic source of this
    capability to minimize or eliminate the potential insertion of
    malicious circuitry in U.S. manufactured semiconductors. Planned
    funding for this project is $14.0 million over the next five years.
        In addition, the President just signed a determination that
    designates trusted advanced photomasks as essential to national
    defense. The trusted advanced photomasks project will assure a chain of
    custody throughout all steps of the design and manufacturing process of
    photomasks from a ``trusted'' merchant supplier. This is critical for
    ensuring the integrity and confidentiality of legacy and state-of-the-
    art integrated circuits used in sensitive U.S. Government systems. This
    sector is becoming increasingly costly and supply chains are
    lengthening, threatening U.S. dominance in this space but also
    reinforcing the essentiality of Government action to mitigate this
    threat. Planned funding for this project is $7.2 million.
        DPA also has authorities that are being utilized to protect the
    domestic microelectronics industrial base, including Title I (Priority
    in Contracts and Orders) and Title VII (General provisions including
    the authority establishing the Committee on Foreign Investment in the
    United States (CFIUS)). DOD recognizes the significance of ensuring
    access to trusted microelectronics and we are using numerous DPA titles
    to advance this essential technology.
                        combat rescue helicopter mission
        132. Senator Gillibrand. Secretary Wilson, the many Air Guard units
    including the 106th Air Rescue Wing in Gabreski, NY accomplish complex
    missions flying Combat Rescue Helicopters. When it comes to acquisition
    of new Combat Rescue Helicopters, though, this is a program in which
    the Air Force has chosen not to field the aircraft in a concurrent and
    proportional manner, putting the Air Guard at risk of never receiving
    the latest helicopters and technology. Our Airmen regularly go out on
    rescue missions, and they should not be forced to use the oldest
    helicopters for years to come. Last month, it was rumored that Air
    Force leadership is considering a shift of the Combat Rescue Helicopter
    mission from Air Combat Command to Air Force Special Operations
    Command--a decision that could result in fewer new rescue helicopters
    reaching the force and disadvantaging Guard units. Has the Air Force
    reached a decision as to whether the Combat Rescue Helicopter mission
    will remain under Air Combat Command or shift to Air Force Special
    Operations Command and if so what is that decision?
        Secretary Wilson. The decision to realign Air Force Rescue from Air
    Combat Command to Air Force Special Operations Command has not been
    made. Both applicable Major Command Commanders continue analysis and
    discussion in determining the most appropriate train and equip command.

        133. Senator Gillibrand. Secretary Wilson, if the Air Force has not
    yet decided whether to move the Combat Rescue Helicopter mission, what
    is the timeline for the decision?
        Secretary Wilson. While analysis remains ongoing, and discussions
    amongst Major Command Commanders continue, there is no established
    timeline in terms of Air Force Rescue Major Command Realignment.

        134. Senator Gillibrand. Secretary Wilson, if the Air Force moves
    the Combat Rescue Helicopter to Air Force Special Operations Command,
    will you ensure that Air Guard units continue to receive new aircraft
    concurrently and proportionately with active units?
        Secretary Wilson. If Air Force Rescue is moved from Air Combat
    Command to Air Force Special Operations Command, analysis will continue
    in order to determine the most capable force needed to meet Combatant
    Command requirements. It should also be noted in terms of delivery of
    future and effective rescue capability to the Air National Guard, that
    ALL Rescue Air National Guard units are scheduled to receive the HH-60G
    Operational Loss Replacement aircraft FIRST. These aircraft will be the
    lowest hour and most advanced HH-60G aircraft in the Air Force
    inventory, and are meant to offset the later delivery of the Combat
    Rescue Helicopter to the Air National Guard. Force laydown and unit
    distribution of the new Combat Rescue Helicopter are yet to be
    determined; however, ANG rescue forces will remain a critical component
    of the AF's capability.

        135. Senator Gillibrand. Secretary Wilson, how does the Air Force
    plan to keep the Senate Armed Services Committee apprised of any
    changes to the Combat Rescue Helicopter mission?
        Secretary Wilson. My Office of Legislative Liaison will advise the
    Senate Armed Service Committee if a decision is made to change the
    Combat Rescue Helicopter mission.
                          air force research lab rome
        136. Senator Gillibrand. Secretary Wilson, one of the good fortunes
    we have in New York is our talented workforce, and the Air Force
    Research Lab in Rome is the perfect example of an installation that has
    benefited from the state's ability to attract and concentrate high-
    skilled workers. Past Air Force leaders have visited Rome and been very
    impressed by the amazing work happening at the lab and its leadership
    on cyber in the Air Force and beyond--which you mentioned during this
    hearing. Will your team work with my staff to schedule a visit for you
    to join me in Rome, NY and see this critical work firsthand?
        Secretary Wilson. I'd be happy to join you for a tour of the AFRL
    Information Directorate's (AFRL/RI) facilities. I will ensure my team
    will work with your office to set up a visit to the Rome, NY facility.

                                   __________
               Questions Submitted by Senator Richard Blumenthal
                            huey replacement program
        137. Senator Blumenthal. Secretary Lord, the UH-1N ``Huey'' average
    fleet age is over 40 years, and continues to operate under national
    security waivers because it is incapable of meeting requirements to
    protect our ICBM fleet and National Capital Region. The Huey
    Replacement program has been discussed in some form since 2001. What is
    your involvement with this program? Why are we now spending an
    additional $400 million in research and development for the Huey
    Replacement program, when we could be fielding helicopters sooner by
    capitalizing on existing production lines?
        Secretary Lord. The Under Secretary of Defense for Acquisition,
    Technology, and Logistics designated the UH-1N Replacement program as
    an Acquisition Category 1C pre-Major Defense Acquisition Program and
    delegated Milestone Decision Authority to the Secretary of the Air
    Force on August 16, 2016. The Air Force provided the following
    information about their acquisition strategy.
        The current acquisition strategy capitalizes on existing production
    lines. Through voluntary information exchanges, all interested vendors
    identified performance shortfalls that necessitated research and
    development funding to meet the Air Force's operational requirements.
    This funding is necessary to integrate non-developmental items, support
    test activities, and deliver the initial four helicopters. Executing
    the current acquisition strategy will result in the quickest fielding
    of a replacement helicopter that meets the requirements.
                         cyber and technology security
        138. Senator Blumenthal. Secretary Lord, I am concerned following
    reports about foreign owned or affiliated products used by the federal
    government, including the Department of Defense, which may pose a risk
    to our national security. What type of national security due diligence
    is performed on products and services before DOD decides to purchase?
        Secretary Lord. The Department has several mechanisms in place to,
    on a case-by-case basis, perform due diligence on products and services
    before purchase. DOD Instruction 5200.44, ``Protection of Mission
    Critical Functions to Achieve Trusted Systems and Networks (TSN),''
    outlines a risk management approach that spans the entire systems'
    lifecycle, including criticality analyses to identify critical
    functions and components; use of all-source intelligence on suppliers
    of critical components; and use of TSN processes, tools and techniques
    to manage risk. We use Program Protection Planning (PPP) activities to
    address the full spectrum of security risks for the critical components
    contained in our weapons systems to assess supply chain vulnerabilities
    and implement mitigations to manage risk to system functionality. Using
    the PPP to inform courses of action, we can apply the vendor-neutral
    Federal Acquisition Regulation and Defense Federal Acquisition
    Regulation Supplement (DFARS).
        Absent suspension or debarment, or country- or vendor-specific
    prohibitions, individual vendors are not precluded from providing
    products or services to the DOD, nor would our cleared defense
    contractors be precluded from using such products or services. However,
    when necessary, there are authorities available to the Department to
    limit or exclude vendors in specific circumstances, and the Department
    is currently working on a number of activities to review and improved
    its capabilities to identify and mitigate these supply chain risks.
        More specifically, section 806 of the Ike Skelton National Defense
    Authorization Act (NDAA) for fiscal year 2011, as amended, has been
    implemented at DFARS Subpart 239.73, ``Requirements for Information
    Relating to Supply Chain Risk.'' The rule enables DOD components to
    exclude a source that fails to meet established qualifications
    standards or fails to receive an acceptable rating for an evaluation
    factor regarding supply chain risk for information technology
    acquisitions, and to withhold consent for a contractor to subcontract
    with a particular source or to direct a contractor to exclude a
    particular source.
        Section 841 of the NDAA for fiscal year 2015, implemented with
    Class Deviation 2015-O0016, ``Prohibition on Providing Funds to the
    Enemy and Authorization for Additional Access to Records,'' provides
    the authority for heads of contracting activities to terminate, void,
    and restrict contracts, grants, and cooperative agreements, with an
    individual or entity that has been identified by the Commander of U.S.
    Africa Command, U.S. Central Command, U.S. European Command, U.S.
    Pacific Command, U.S. Southern Command, or U.S. Transportation Command
    to have provided funds, supplies, or services directly or indirectly to
    a person or entity that is actively opposing U.S. or Coalition forces
    ("the enemy") involved in a contingency operation, or that failed to
    exercise due diligence to prevent such activities. Section 842 of the
    NDAA for fiscal year 2015, implemented with Class Deviation 2015-O0016
    and Class Deviation 2018-O0008, ``Additional Access to Records in the
    United States Central Command,'' authorizes access to contractor and
    subcontractor records, to ensure that funds, supplies, or services
    under a covered contract are not provided directly or indirectly to the
    enemy.
        In the area of space launch, section 50131 of title 51, U.S. Code
    (U.S.C.), requires, with limited exceptions, the Federal Government
    ``shall acquire space transportation services from United States
    commercial providers whenever such services are required in the course
    of its activities.'' 51 U.S.C. 50101 defines ``United States commercial
    provider'' as ``a commercial provider, organized under the laws of the
    United States or of a State, that is--(A) more than 50 percent owned by
    United States nationals; or (B) a subsidiary of a foreign company and
    the Secretary of Transportation . . . . [makes certain findings].''
    Additionally, the National Space Transportation Policy (as revised
    November 21, 2013) requires ``United States Government payloads shall
    be launched on vehicles manufactured in the United States unless an
    exemption is coordinated . . . through an interagency process.'' DOD
    has processes in place to ensure these requirements are met.
        Under circumstances where a foreign company is acquiring a U.S.
    company, DOD uses its participation in the Committee on Foreign
    Investment in the United States (CFIUS) to identify and mitigate the
    national security risks that arise from the transaction. Pursuant to
    section 4565 of title 50, U.S. Code, CFIUS may negotiate, enter into or
    impose, and enforce any agreement or condition with any party to a
    covered transaction to mitigate any threat to the national security of
    the United States that arises as a result of the transaction. These
    mitigation agreements can and do address concerns related to foreign
    control over DOD products and services resulting from CFIUS-reviewed
    transactions.
        In addition, DOD is able to utilize a number of country- or vendor-
    specific authorities:
          A country-specific prohibition is found in section 1296
    of the NDAA for fiscal year 2017, ``Maintenance of Prohibition on
    Procurement by Department of Defense of People's Republic of China-
    Origin Items That Meet the Definitions of Goods and Services Controlled
    as Munitions Items When Moved to the `600 Series' of the Commerce
    Control List,'' amends section 1211 of the NDAA for fiscal year 2006,
    and specifically prohibits Communist Chinese military companies from
    supplying, through a contract or subcontract at any tier supplies or
    services covered by the United States Munitions List or the 600 Series
    of the control list of the Export Administration Regulations, contained
    in Supplement No. 1 to part 774 of subtitle B of title 15 of the Code
    of Federal Regulations to DOD.
          In the area of commercial satellites, 10 U.S.C. 2279
    requires, with a limited exception, that the Secretary of Defense may
    not contract for satellite services with a foreign entity if the
    Secretary reasonably believes a ``covered foreign country'' has an
    ownership interest that may affect satellite operations; or the foreign
    entity plans to or is expected to provide a launch or other satellite
    services under the contract from a covered foreign country. The term
    ``covered foreign country'' includes the People's Republic of China,
    North Korea, and any country that is a state sponsor of terrorism. This
    prohibition can be overcome if the Secretary of Defense determines
    there a national security need to enter into such a contract, and not
    later than seven days before entering into the contract, in
    consultation with the Director of National Intelligence (DNI), submits
    to the congressional defense committees a national security assessment
    with various findings.
          A vendor-specific authority is provided at section
    1634(a) of the Fiscal Year 2018 NDAA, ``Prohibition on the Use of
    Products and Services Developed or Provided by Kaspersky Lab,''
    prohibits any Department, agency, organization or other element of the
    Federal Government from using, whether directly or indirectly or
    through work with or on behalf of another Department, agency or
    organization or element of the Federal Government, any hardware,
    software, or services developed, provided in whole or in part, by
    Kaspersky Lab (or any successor entity, by an entity that controls, or
    is controlled by, or is under common control of Kaspersky Lab; or any
    entity of which Kaspersky Lab has a majority ownership. This
    prohibition takes effect on October 1, 2018.
        Finally, the Department is currently working to review and improved
    its capabilities to identify and mitigate these supply chain risks.
    Moving forward, under the direction of section 807 of the NDAA for
    fiscal year 2018, ``Process for Enhanced Supply Chain Scrutiny,'' we
    are working to enhance our processes to perform national security due
    diligence on products and services before DOD decides to purchase.
        In addition, pursuant to section 1634(b) of the NDAA for fiscal
    year 2018, the Secretary of Defense is required to conduct a review of
    the procedures for removing suspect products or services from the
    information technology networks of the Federal Government in
    consultation with the Secretary of Energy, the Secretary of Homeland
    Security, the Attorney General, the Administrator of the General
    Services Administration, and the DNI. The Secretary of Defense will
    report the results of this review to the appropriate congressional
    committees.

        139. Senator Blumenthal. Secretary Lord, as the global supply chain
    expands, what are the specific considerations for foreign goods? Is
    this sufficient?
        Secretary Lord. DOD's support and sustainment challenge lies in
    continually leveraging evolving global supply chains. This pursuit
    provides both opportunities and challenges. We support warfighters
    within the boundaries of applicable laws, such as the Berry Amendment
    and Buy American Act. Existing authorities rightly bound the DOD supply
    chain to focus on procurement and sustainment activities within our own
    borders, but we also consider allied support and contractor activities
    in these processes. A mature and varied global market affords the
    Department greater access to key technologies, products, and services.
    The traditional risk framework considers the quality and reliability of
    the goods and components we use. A new element of risk now lies in
    ensuring all goods and components are cyber secure. To meet this
    demand, the Department examines and validates the integrity and
    reliability of all critical components, to include foreign items, both
    individually and as part of the higher assembly or subsystem. DOD uses
    a range of policies and guidance to protect our supply chain against
    malicious, defective, and counterfeit parts, whether domestic or
    foreign. These include FAR Part 25, Evaluating Foreign Offers in Supply
    Contracts, DFARS 252.246-7007, Contractor Counterfeit Electronic Part
    Detection and Avoidance System, and DODI 5200.44, Protection of Mission
    Critical Functions to Achieve Trusted System Networks. These processes
    and procedures identify critical program information and components
    that can be expanded to accommodate and sufficiently address the
    expanded use of a global supply chain. In addition, we partner with the
    intelligence community, the CIO, and others to ensure both awareness of
    new and evolving threats and that we are adapting to meet those threats
    to ensure secure acquisition and support processes and products, while
    continuing to leverage available opportunities.

        140. Senator Blumenthal. Secretary Lord, what are you doing to
    ensure our acquisition system has the necessary protective measures in
    place to prevent national security vulnerabilities for DOD acquired
    technology?
        Secretary Lord. The Department engages in a comprehensive approach
    to protect DOD acquired technology by providing explicit policy to the
    acquisition community, employing defense acquisition regulations, and
    providing operational protection. Examples of each of these approaches
    is provided below.
        In 2017, the Department amended the DODI 5000.2, Operation of the
    Defense Acquisition System to add Enclosure 14, Cybersecurity in the
    Defense Acquisition System which identifies the responsibility for
    program managers to identify and mitigate vulnerabilities across the
    scope of their program. This scope includes program information,
    organizations, supply chain, the system being managed, as well as
    networks, and enabling systems.
        In addition to policy guidance, DOD requires the inclusion of the
    Defense Federal Acquisition Regulations Supplement (DFARS) clause
    252.204-7012, ``Safeguarding Covered Defense Information and Cyber
    Incident Reporting,'' in all DOD contracts for other than commercial
    items. The 252.204-7012 clause requires contractors/subcontractors to:

          Safeguard covered defense information that resides on or
    is transiting through a contractors internal information system or
    network;
          Report cyber incidents that affect a covered contractor
    information system or the covered defense information residing therein,
    or that affect the contractor's ability to perform requirements
    designated as operationally critical support;
          Submit malicious software discovered and isolated in
    connection with a reported cyber incident to the DOD Cyber Crime Center
    (DC3);
          If requested, submit media and additional information to
    support damage assessment; and
          Flow down the clause in subcontracts for operationally
    critical support, or for which subcontract performance will involve
    covered defense information.
        In addition to policy and regulatory approaches, DOD provides
    several avenues of operational protection. Some examples of these
    capabilities include:
          The Joint Acquisition Protection and Exploitation Cell
    (JAPEC), established to integrate intelligence community (IC), law
    enforcement (LE), counterintelligence (CI) and acquisition community
    data, analysis, processes, and tools in order to mitigate losses of
    unclassified controlled technical information (CTI), and address
    compromises. The JAPEC is co-led with USD(I), and prioritizes critical
    acquisition programs and technologies to focus efforts.
          The Joint Federated Assurance Center (JFAC), established
    to federate DOD tools and expertise to better support program needs for
    software and hardware assurance evaluations and guidance.
          The Committee on Foreign Investment in the United States
    (CFIUS), employed by the Department to support foreign investment,
    consistent with the protection of national security. As one measure,
    CFIUS can apply risk mitigation tools if a mitigation agreement is
    required to support a proposed transaction. DOD supports the
    modernization of CFIUS by supporting the Foreign Investment Risk Review
    Modernization Act of 2017 (FIRRMA).
          Other risk mitigation tools are available through the
    National Industrial Security Program, administered by the Defense
    Security Service (DSS). DSS employs Foreign Ownership, Control, or
    Influence (FOCI) mitigation techniques to allow foreign investment
    consistent with the national security interest of the United States.

        Finally, USD(AT&L) is leading a cross functional team to provide a
    comprehensive approach to maintain DOD's technology advantage. This
    team is developing and implementing a strategic framework and lines of
    effort to counter adversaries licit and illicit technology exploitation
    strategies. This comprehensive approach will leverage the above
    initiatives, and many other DOD activities and stakeholders.

        141. Senator Blumenthal. Secretary Lord, what other authorities do
    you need to execute secure purchases?
        Secretary Lord. The DOD currently has available several authorities
    to ensure secure purchases for the Department. These authorities relate
    to supply chain risk management considerations based upon foreign
    ownership control and influence. Section 806 of the Fiscal Year 2011
    NDAA provides DOD with authority to exclude a source on the basis it
    presents significant supply chain risk to a National Security System.
    In accordance with section 807 of the Fiscal Year 2018 NDAA, the
    Department is moving to ensure utilization of this authority, and other
    processes that focus on secure purchases.
        As part of this effort, the Department is collaborating with the
    related activities underway in the Office of Management and Budget,
    Office of the Director of National Intelligence, the Department of
    Homeland Security, and the General Services Administration to inform
    processes and determine additional authorities that may be needed. One
    area of consideration is how to provide streamline authorities in place
    for National Security Systems. Another area of consideration is the
    expansion of 806 authority to cover than national security systems.
                       fair pay: responsible contractors
        142. Senator Blumenthal. Secretaries Lord, Esper, Geurts, and
    Wilson, what processes do you have in place to ensure contracts are
    awarded to responsible companies who play by the rules, treat workers
    fairly, & uphold existing labor laws?
        Secretary Lord. In general, the Department of Defense coordinates
    with the Department of Labor (DOL) to administer and enforce
    contractors' compliance with most labor laws, as DOL has oversight and
    responsibility for remedying labor violations under these laws. This
    coordination helps to ensure contracts are awarded to responsible
    companies who play by the rules and treat workers fairly. Before
    awarding a contract, contracting officers review information regarding
    the responsibility of prospective contractors, including the offeror's
    ability to perform the prospective contract successfully and has a
    record of integrity and business ethics. The source selection
    evaluation process reviews offerors proposals and considers past
    performance information of the offerors. Contracts are only awarded to
    responsive and responsible offerors. Contracting officers must make an
    affirmative responsibility determination before award, and it could
    affect the Government's determination of the prospective contractor's
    responsibility. After contract award, a wage violation for a specific
    contract action is frequently referred to the contracting officer, who
    in turn would generally coordinate with DOL to pursue corrective
    actions through administrative procedures, litigation, and/or criminal
    prosecution as appropriate.
        Secretary Esper. For all acquisitions, Army acquisition officials
    ensure a responsibility determination occurs to validate contractor
    fitness or exclusion for doing business with the government. This
    validation signifies that the Government has judged the contractor to
    have the means and ability to perform the contract. We assess areas
    such as contractor financial resources, past performance record,
    operational controls and the eligibility of the contractor to receive
    an award under applicable laws and regulations.
        Secretary Geurts. FAR Part 9 sets forth the policies, standards and
    procedures for agencies to determine whether prospective contractors
    and subcontractors are responsible entities eligible for contract
    award. A responsibility determination includes factors such as whether
    such entities have a satisfactory record of integrity and business
    ethics and a satisfactory performance record, and takes into account
    labor law compliance as set forth below. In determining responsibility,
    DON contracting officers review information in the Federal Awardee
    Performance and Integrity Information System (FAPIIS), and consider any
    other past performance information about the offeror. This assessment
    includes a review of information in the System for Award Management to
    ensure that agencies do not solicit offers from or award contracts to
    entities that have been suspended or debarred from receiving government
    contracts.
        As part of determining responsibility, DON officials also access
    FAPIIS to review and consider contract performance assessments entered
    by contracting officers in CPARS. These assessments might explain how a
    violation of labor laws negatively affected contract work performance,
    product or service quality, and/or employee safety. Pursuant to FAR
    Part 15, source selection officials may also use such past performance
    information in evaluating offeror bids and proposals. Department of
    Labor (DOL) regulations and the FAR provide contracting agencies like
    DON with other remedies and enforcement tools to address labor law
    compliance under the federal prevailing wage laws. DON enforces the
    Construction Wage Rate Requirements statute by performing regular
    compliance checks and investigations. The DOD FAR Supplement and
    specific DON guidance on these construction requirements assist efforts
    to ensure compliance with prevailing wage laws and provide DoN
    contracting officers with information to be used in determining a
    contractor's responsibility.
        Secretary Wilson. The Air Force follows the Federal Acquisition
    Regulation (FAR) Part 9 and Defense Acquisition Regulations Supplement
    (DFARS) Part 209 which address contractor responsibility, suspension
    and debarment. In addition, the Air Force uses the procedures
    established in FAR--Part 22 and DFARS--Part 222 for Application of
    Labor Laws to Government Acquisitions.
                            combat rescue helicopter
        143. Senator Blumenthal. Secretary Wilson, in October, I led a
    bipartisan letter to you and General Goldfein expressing concern about
    any change in the current acquisition plan, as has been rumored. My
    letter requested an update on the CRH program, as well as your
    commitment to keeping us informed of any potential changes. I
    appreciated your interim response last month that noted you would look
    into it. Please provide an update on maintaining the program of record
    and lead of the mission.
        Secretary Wilson. The Air Force is fully committed to the program
    of record of 112 aircraft. We will keep you informed of any changes.

        144. Senator Blumenthal. Secretary Wilson: Following the Air Force
    posture hearing earlier this year, you sent me a letter noting that you
    ``fully support CRH as it moves towards Initial Operational Capability
    in fiscal year 2021.'' Do you continue to uphold this commitment?
        Secretary Wilson. Yes, the Air Force fully supports the Combat
    Rescue Helicopter program as it moves toward Initial Operational
    Capability.
                              future vertical lift
        145. Senator Blumenthal. Secretary Esper, please provide an update
    on how the Army is progressing in its development of future vertical
    lift platforms. How are you partnering with the other services?
        Secretary Esper. Future Vertical Lift (FVL) is a strategic advance
    in vertical lift capability and remains a high priority for the
    Department of the Army. The FVL program is currently preceded by the
    Joint Multi-Role (JMR) Science and Technology initiative. This
    initiative focuses on an Air Vehicle Demonstrators (AVD) and a Mission
    Systems Architecture Demonstration (MSAD). The AVD will produce two Air
    Vehicle Demonstrators which will inform and influence the FVL program.
    Flight demonstrations are scheduled to take place during fiscal year
    2018 through fiscal year 2019 and the Mission Systems Architecture
    Capstone Demonstration is scheduled to take place during fiscal year
    2018. Both are expected to show significantly improved performance
    capabilities over current rotorcraft. The Future Vertical Lift program
    will provide a family of vertical lift platforms that deliver next
    generation capabilities at the tactical, operational, and strategic
    levels.
        Future Vertical Lift Capability Set 3 (CS3) is an Army led program
    with Joint participation and continues to be the primary joint interest
    for the initial FVL acquisition effort. The U.S. Army, in conjunction
    with the United States Marine Corps, Special Operations Command, the
    Office of the Secretary of Defense, Acquisition and Sustainment, and
    the Joint Staff have chartered five Integrated Product Teams (IPT). The
    five IPTs are the Acquisition IPT (AIPT), Requirements IPT (RIPT), and
    International Engagement IPT (IE IPT), Science and Technology IPT S&T
    IPT), and the Common Systems (IPT), and the Common Systems IPT (CSIPT)
    and members from the aforementioned agencies are represented at each
    IPT. The U.S. Army, the United States Marine Corps, and SOCOM currently
    have an Analysis of Alternatives (AoA) in progress and the results are
    expected 1QFY19. The outcome of the AoA is a major decision point for
    all services involved and will provide options that inform our senior
    leaders. Additionally, the IPTs have initiated draft language for
    Concepts of Operation, Acquisition Strategy, and early development of
    individual service and joint requirements.
                       joint strike fighter program (jsf)
        146. Senator Blumenthal. Secretary Lord and Secretary Wilson, the
    Future Years Defense Program attached to the fiscal year 2018 budget
    shows another delay for the 60 F-35As per year procurement plan. Two
    years ago it was to begin in fiscal year 2018, last year it was pushed
    to fiscal year 2021, and now it has been delayed to an undetermined
    date beyond FYDP projections. At a time when we are focused on cost
    savings, such delay in robust procurement only hampers such savings.
    How are we going to achieve more savings with continued delay to
    ramping up to 60 F-35As per year? Do you agree that production level
    increases will contribute to cost savings?
        Secretary Lord. The Department is committed to ramping F-35
    production to as high a procurement rate as is affordable in order to
    maximize cost savings, but the F-35 procurement must be balanced
    against other competing Department priorities as well as the Services
    ability to support and sustain their fleets. While I agree that an
    increased procurement ramp will help reduce production costs, we must
    also consider the costs of retrofit to the Block 4 hardware
    configuration we need to counter advancing adversaries. In addition to
    those added costs, retrofits also task valuable depot resources and
    remove aircraft from operations for an extended period. In light of
    these considerations I believe the Department's procurement profile is
    appropriate for this budget period.
        Secretary Wilson. The Air Force is committed to ramping F-35
    production to as high a procurement rate as is affordable in in light
    of other F-35 costs. The procurement of the F-35As must be balanced
    against other competing priorities, as well as the Air Force's ability
    to support and sustain its fleet. While I agree that an increased
    procurement ramp will help reduce production costs, we must also
    consider the current and future costs to retrofit current production as
    well as the existing fleet to counter advancing adversaries and
    technology advances. In addition to those added costs, retrofits also
    task valuable depot resources and remove aircraft from operations for
    an extended period. In light of these considerations, I believe the Air
    Force's procurement profile is appropriate for this budget period.

        147. Senator Blumenthal. Secretary Lord and Secretary Wilson,
    please explain the process and progress you have made on the JSF cost
    deep dive review that was mentioned during the hearing. How do these
    efforts build on past initiatives? How do they differ? What success
    have you had? What engagement and focus have you had on the jet's
    engine?
        Secretary Lord. The Joint Strike Fighter (JSF) Deep Dive Cost
    Reduction Initiative is part of a broader F-35 Affordability Strategy
    that focuses on true cost reduction across all three lines of effort--
    Development, Production, and Sustainment. In performing the Deep Dive,
    the cost structures of Lockheed Martin (LM), Northrop Grumman (NG), BAE
    Systems, and Rolls Royce (RR), as well as each of their significant
    subcontractors, will be examined. There are four main objectives of the
    Deep Dive:

        1)  Enable the Government to understand what JSF costs, why it
    costs what it costs, and define every cost reduction opportunity that
    can be realistically implemented;
        2)  Establish a data driven baseline for use in all future
    production negotiations;
        3)  Provide a firm foundation of information and knowledge to
    inform the broader F-35 Affordability Strategy;
        4)  Train a cadre of approximately 25 Government engineers and cost
    analysts who will form an enduring cost analysis capability for JSF.

        The Deep Dive will take advantage of the recently completed
    aircraft hardware qualification testing, the final aircraft Functional/
    Physical Configuration Audits efforts, and leverage the production cost
    experience over the first 10 production buys.
        The Deep Dive is being led by the Director of Defense Pricing, in
    coordination with the Deputy Director for Cost Analysis in the office
    of Cost Analysis and Program Evaluation (CAPE). The Government team
    will work with engineers from A.T. Kearney, who have significant
    experience in cost analysis, commercial manufacturing, and cost
    reduction initiatives.
        A.T. Kearney previously collected similar cost data from the F135
    engine prime contractor, Pratt and Whitney (P&W) as part of a prior
    cost assessment. The previously collected data from P&W will be
    included in this cost baseline. This initiative will collect data from
    RR, which is a sub-contractor to P&W for the F-35B propulsion system.
        The work will be performed in three phases. We have commenced work
    on Phase One of this effort, which will focus on direct labor and
    manufacturing support at LM, NG, and RR, and have made good progress to
    define the scope and depth of the review. We are also working issues
    related to obtaining access to the necessary cost data at the prime
    contractor and each of the major subcontractors. The review will also
    leverage the cost data submitted to CAPE on each of the first 10
    production buys.
        Phase Two of the Deep Dive will focus on continued efforts at LM,
    NG, and RR. In addition, direct labor and manufacturing support at BAE
    will be examined. Deep analyses of a number of key subcontractors will
    take place. Phase Three will primarily focus on the supply chain
    structure, to include a review of the remainder of the key suppliers.
    In addition, indirect labor and overhead structure reviews at LM, NG,
    RR, and BAE will occur. In total, the three phases are expected to take
    approximately a year to complete.
        As cost savings opportunities are identified, they will be
    prioritized and tracked through a detailed Target Assurance Program
    (TAP). The TAP will include a detailed action plan to make each
    potential savings opportunity a reality.
        Secretary Wilson. The Joint Strike Fighter (JSF) Deep Dive Cost
    Reduction Initiative is part of a broader F-35 Affordability Strategy
    that focuses on true cost reduction across all three lines of effort--
    Development, Production, and Sustainment. In performing the Deep Dive,
    the cost structures of Lockheed Martin, Northrop Grumman, BAE, and
    Rolls Royce (F-35B), as well as each of their significant
    subcontractors, will be examined. There are four main objectives of the
    Deep Dive:

        1) Enable the Government to understand what the JSF costs and
    define every cost reduction opportunity that can be realistically
    implemented;
        2) Establish a data driven baseline for use in all future
    production negotiations;
        3) Provide a firm foundation of information and knowledge to inform
    the broader F-35 Affordability Strategy; and
        4) Train a cadre of approximately 25 government engineers and cost
    analysts who will form an enduring cost analysis capability for JSF.

        The Deep Dive will take advantage of the recently completed
    aircraft hardware qualification testing, the final aircraft Functional/
    Physical Configuration Audits efforts, and leverage the production cost
    experience over the first 10 production buys.
        The Deep Dive is being led by the Director of Defense Pricing, in
    coordination with the Deputy Director for Cost Analysis in the office
    of Cost Analysis and Program Evaluation (CAPE). The government team
    will work with engineers from A.T. Kearney, who have significant
    experience in cost analysis, commercial manufacturing, and cost
    reduction initiatives.
        A.T. Kearney previously collected similar cost data from the F135
    engine prime contractor, Pratt & Whitney as part of a prior cost
    assessment. The previously collected data from Pratt & Whitney will be
    included in this cost baseline. This initiative will collect data from
    Rolls Royce, which is a sub-contractor to Pratt & Whitney for the F-35B
    propulsion system.
        The work will be performed in three phases. We have commenced work
    on Phase One of this effort, which will focus on direct labor and
    manufacturing support at Lockheed Martin, Northrop Grumman, and Rolls
    Royce, and have made good progress to define the scope and depth of the
    review. We are also working issues related to obtaining access to the
    necessary cost data at the prime contractor and each of the major
    subcontractors. The review will also leverage the cost data submitted
    to CAPE on each of the first 10 production buys. Phase Two of the Deep
    Dive will focus on continued efforts at Lockheed Martin, Northrop
    Grumman, and Rolls Royce. In addition, direct labor and manufacturing
    support at BAE will be examined. Deep analyses of a number of key
    subcontractors will take place. Phase Three will primarily focus on the
    supply chain structure, to include a review of the remainder of the key
    suppliers. In addition, indirect labor and overhead structure reviews
    at Lockheed Martin, Northrop Grumman, Rolls Royce and BAE will occur.
    In total, the three phases are expected to take approximately a year to
    complete.
        As cost savings opportunities are identified, they will be
    prioritized and tracked through a detailed Target Assurance Program.
    The Target Assurance Program will include a detailed action plan to
    make each potential savings opportunity a reality.

                                   __________
                  Questions Submitted by Senator Mazie Hirono
                 small business r&d and the acquisition process
        148. Senator Hirono. Secretary Lord, the DOD runs a $1 billion
    annual small business innovation research (SBIR) program that has
    successfully invested in high tech businesses and developed advanced
    technologies that are being used by operational forces today. I
    understand that one challenge facing these small businesses is their
    difficulty crossing what is called ``the valley of death''--the stage
    after the small business has done some good R&D work--but before they
    can really sell a product to the Pentagon. What steps are taking to
    address this issue?
        Secretary Lord. Technology transition from developmental programs
    into acquisition programs remains a challenge. Past technology
    transition successes were, in many cases, a result of personalities and
    relationships rather than robust process. Program Managers who knew and
    trusted the technology developer were often willing to take the risk of
    insertion of new technology. We must ensure technology transition is a
    critical focus area as the Department pursues new capability.
        The Department is focused on reducing the risk of the ``valley of
    death'' for small businesses using existing resources and authorities
    including the Commercialization Readiness Program and the Rapid
    Innovation Fund to support the transition of technologies, products,
    and services developed under SBIR and STTR programs. We appreciate the
    support of Congress in granting authority for a pilot program to use
    multiple award contracts in support of more efficient transition of
    SBIR and STTR developed technologies.
        The skills necessary to successfully operate a business and
    transition or commercialize technologies are different from those
    required to develop new technologies, and the Mentor Protege program
    provides a unique opportunity for small businesses to learn these
    skills from more experienced companies serving as mentors. The Mentor
    Protege program provides small businesses an opportunity to learn
    skills such as design for manufacture, business development, and
    business management; skills necessary to successfully grow a business
    and create viable technology transition strategies.
        Passing legislation to make the SBIR, STTR and Mentor Protege
    programs permanent would assist the Department's efforts to support
    innovation and enable consistent funding for small businesses to
    navigate the complex process of transitioning technology to the
    Department for our use. Reauthorization of the Pilot Admin Authority is
    another key enabler to improving the ability to transition or
    commercialize SBIR technologies by providing funding for education and
    outreach for both government program personnel and small businesses. I
    remain committed to identifying further opportunities to work with the
    committee to improve our ability to maximize the contributions of small
    businesses.
                                  test ranges
        149. Senator Hirono. Secretaries Lord, Esper, Geurts, and Wilson,
    the Pacific Missile Range Facility, located on the island of Kauai, is
    a crown jewel amongst our defense facilities. It is an undersea range
    used by our submarines and an above ground range where many of our
    missile defense tests are conducted. It would also be a great place to
    test Directed Energy projects. What role do test ranges play in
    developing systems that will make servicemembers effective in combat?
    Are you concerned about the health of our ranges and their ability to
    meet operational needs? What initiatives are you undertaking to
    strengthen the ranges?
        Secretary Lord. I believe that the Department's test capabilities
    play a critical role in modernizing our defense systems. Major Range
    and Test Facility Base (MRTFB) ranges, such as the Pacific Missile
    Range Facility (PMRF), provide a suite of test infrastructure and
    operationally realistic environments (e.g., realistic threats) through
    the use of modeling and simulation capabilities, hardware-in-the loop
    facilities, installed system test facilities and open air ranges. This
    capability to conduct realistic testing is critical to any
    modernization of our defense systems.
        We work together with the Services to address issues to ensure the
    DOD has the space, infrastructure and capabilities to support the
    development of our current weapons system programs as well as
    modernization and sustainment of older systems. There are some military
    construction projects currently underway and planned for the near
    future that will allay the concerns of some of these issues, and we are
    also continuing to resource projects that will modernize or replace
    existing aging capabilities.
        Secretary Esper. The Army's Test Centers and Ranges plan and
    execute developmental testing, support independent operational testing,
    and provide technical and safety assessments that are instrumental to
    determine equipment effectiveness, suitability, and survivability. The
    information derived from analysis of T&E data is critical to inform
    senior leader decision-makers and improve materiel solutions while
    helping commanders mitigate risk and improve operational readiness.
        I believe the Army Test Centers and Ranges are doing an outstanding
    job meeting the needs of the warfighter; however, I am concerned with
    their overall health and readiness to test future Army equipment. The
    Army is currently undertaking a study to determine efficiencies within
    the Army Test and Evaluation Enterprise to free up funds that can be
    applied to address current readiness issues. We are also working to
    identify investment requirements to ensure the Test Centers and Ranges
    are prepared to test future Army systems.
        Several initiatives are underway in order to both strengthen the
    Army Test Centers and Ranges and to prepare for the future. The RAND
    Corporation is conducting a study to determine the optimum way to fund
    the Army's Test Centers. The Army is conducting a separate but related
    study to examine the appropriate physical, intellectual, and regulatory
    composition and disposition of the test enterprise, as well as methods
    to adequately manage test infrastructure. Under the authorities granted
    in section 233 of NDAA 2017, several Army ranges are executing a pilot
    program that waives certain regulatory restrictions that impact the
    ability to operate in an optimal manner and may initiate a proposal for
    statutory changes. In fiscal year 2018, the Army began to include a
    major military construction project annually to address critical
    facility readiness issues at Army Test Centers. Additionally, the Test
    and Evaluation Executive is in the process of developing a life-cycle
    sustainment strategy for all instrumentation and facilities to better
    forecast the sustainment requirements for existing assets and the
    investment requirements to ensure the Test Centers and Ranges are
    prepared to test future Army acquisition programs.
        Secretary Geurts. Test ranges support the development and testing
    of almost all warfighting systems that are eventually deployed into
    combat, and play a critical role by providing the sea, air and land
    space required to test systems in operationally realistic environments.
    Over the last four years, there have been significant investments to
    modernize the Navy's Test ranges to address aging infrastructure and
    develop new capabilities to address emerging threats, and ensure they
    are sufficiently healthy to support our operational needs. The Navy has
    a number of ongoing initiatives to strengthen the health of our ranges
    to include expansion of Fallon training range, refurbishment of Barking
    Sands Tactical Underwater Training Range (BARSTUR), and procurement of
    advanced threat emitters. In addition, the Navy continues to explore
    opportunities to integrate our open air range capabilities into a Live
    Virtual Constructive training concept.
        Secretary Wilson. Test ranges are critical to providing
    operationally relevant environments in which to develop weapon systems
    and conduct developmental testing, operational testing, tactics
    development and force development evaluation. I am concerned about the
    advancing threat and the need to continuously improve all methods of
    developing combat capability to include test and evaluation ranges and
    workforce. I am also concerned about the condition of facilities on our
    test ranges as I am about Air Force facilities in general. For this
    reason, we made significant investments in the fiscal year (FY) 2017
    President's Budget (PB) to sustain, repair, and modernize test
    facilities. We have made significant investments in air and cyber range
    capabilities in the fiscal year 2017 and fiscal year 2018 PBs,
    including investments in propulsion, hypersonics, sensor threat and
    cyber testing. We are reviewing options for further investing in space
    test range infrastructure.
                                   corrosion
        150. Senator Hirono. Secretaries Esper, Geurts, and Wilson,
    corrosion costs DOD $20 billion/yr. According to Defense Science Board
    estimates, approximately 30 percent of current DOD corrosion costs
    could be avoided through investment in sustainment, design, manufacture
    and other preventative measures. How do each of your services intend to
    address the corrosion issue and work with the DOD Corrosion Policy
    Office to take a life-cycle view to include addressing the problem
    early in acquisition programs?
        Secretary Esper. The $20 billion being addressed here is as
    reported by the DOD Corrosion Policy Office, using Military Department
    information systems, takes into consideration field and sustainment
    maintenance activities funded via the Operation and Maintenance (O&M)
    appropriation accounts. There is a portion of these funds that are
    simply the cost of operation (e.g., cleaning, lubrication, etc.) for
    which the operational and training tempo determines.
        The Army has emphasized the importance of corrosion prevention and
    control in the command maintenance and supply discipline programs. We
    have conducted corrosion prevention and control survey teams to
    identify corrosion issues. We have completed a number of tests or
    demonstrations on equipment covers, conducted a Business Case Analysis,
    and published policy on the use of equipment covers in high corrosion
    severity zones. We are modifying the policy to use best business
    practices for using double galvanizing of select steel substrates and
    transitioning to the use of improved metal rich primers to enhance
    corrosion resistance. We are publishing a corrosion and acquisition
    policy guide that is intended to remind members of the acquisition
    workforce to take a life-cycle approach to corrosion prevention and
    control.
        The Army has designated the Deputy Assistant Secretary of the Army
    for Acquisition Policy and Logistics as the Army's Corrosion Control
    and Prevention Executive (CCPE) in accordance with section 903 of the
    Fiscal Year 2009 National Defense Authorization Act. The CCPE has
    developed and maintains an Army Corrosion Prevention and Control
    Strategic Plan, which is linked to the DOD Corrosion Policy Office
    strategic plan, to govern the Army's corrosion prevention and control
    program. We participate on the DOD Corrosion Prevention and Control
    Integrated Product Team and its associated Working-level Integrated
    Product Teams. Based on the DOD Corrosion Policy Office Impacts of
    Corrosion Reports, the trend for Army equipment and facilities
    expenditure of O&M funding is downward.
        Secretary Geurts. DON maintains an established, Department-wide
    corrosion Cross Functional Team to address corrosion concerns. This
    program comprises the DON Systems Commands working together to address
    both common and platform specific corrosion issues. The program works
    on reducing corrosion through research and development efforts, adding
    corrosion-resistant product designs, training and educating the fleet
    on preventative and corrective corrosion maintenance, and developing
    technically sound and operationally viable maintenance procedures for
    the system life cycle.
        The DON also collaborates with the DOD Corrosion Policy Office
    (CPO) and the other Service Corrosion Control and Prevention Executives
    to coordinate policy and share best practices that lead to cross-
    Service, force multiplier initiatives. The DOD CPO supports these
    initiatives and DON efforts by funding research and development of
    corrosion control products and processes.
        Secretary Wilson. The Air Force is collaborating with the DOD
    Corrosion Policy and Oversight office to increase acquisition program
    emphasis on corrosion prevention and control across the life cycle. In
    particular, new changes in Air Force Service Acquisition Executive
    guidance require program managers to obtain early Air Force Corrosion
    Control and Preventative Executive involvement in their life cycle
    corrosion planning efforts.

        151. Senator Hirono. Secretary Lord, any of the materials and
    processes which determine subsequent corrosion performance are
    specified very early in the design stages. How does AT&L assure that
    programs have effectively addressed corrosion from the very beginning
    and involved corrosion subject matter experts throughout the life of
    that program?
        Secretary Lord. Through a comprehensive program, the DOD Corrosion
    Policy Office has invested in identifying and having more corrosion
    Subject Matter Experts available to Program Managers, along with
    improved and updated standards and specifications for materials and
    processing impacting corrosion. In the past, the DOD Corrosion Policy
    Office has been involved in Defense Acquisition Board reviews but with
    an emphasis on acquisition streamlining; the responsibility for
    implementing the best corrosion practices has been relegated to program
    managers who have been given improved resources in the form of Subject
    Matter Experts, instructions, and various guidebooks such as the
    Program Managers Handbook, the Corrosion Best Practices Handbook, and
    the Corrosion Prevention and Control Planning Guidebook. In addition,
    the detailed annual cost of corrosion study conducted by the DOD
    Corrosion Prevention Office provides visibility as to the impacts of
    corrosion to help ensure that corrosion is considered throughout all
    stages of a program.
                              defense acquisition
        152. Senator Hirono. Since the establishment of the Department of
    Defense in 1947, the procurement process has been studied, enhanced and
    improved over the many decades. Often times there is a pendulum effect
    that moves from tighter controls to looser controls allowing more
    flexibility in the system depending on what was going on at the time
    politically and in industry itself. This includes making the defense
    process more like what is in the ``commercial sector'' and allowing
    more flexibility or less to the acquisition professionals who do this
    work on behalf of the U.S. Government. However, despite all of the
    reviews and reforms which have been instituted over the decades we are
    still in a place where we experience bad results from the acquisition
    system in terms of delivering the needed systems to the warfighter in
    an efficient manner that is on time and within reasonable costs. Some
    of the programs the Chairman mentions regularly which are spread across
    the services come to mind. In your opinion, what are the impediments to
    achieving an acquisition system that delivers on schedule and within
    cost parameters and what must be done to achieve this goal?
        Secretary Lord. As you stated, the procurement process has been
    studied, enhanced and improved over decades. The Department has also
    tried innovative approaches to acquisition as well, some of which have
    worked well and others have not (e.g., Total Package Procurement). I
    would expect that Congress and the Department will need to continue to
    work together and assess acquisition reforms to identify ways to
    improve the process. We owe that to the taxpayers and the warfighters.
    I believe that the on-going acquisition reform efforts, including the
    section 809 panel review, the Regulatory Reform Task Force, our
    Acquisition Statute Review, and an initiative I have on-going to reduce
    the time to get on contract will all contribute to reducing
    impediments. If there is one area I would ask for help in, it's for
    stable funding for our programs. Repeated Continuing Resolutions and
    the threat of Budget Control Act induced sequestration require
    continual adjustments to our acquisition programs which work against
    our ability to deliver systems on time and within cost. We will
    continue to focus on attracting, retaining and developing a high
    performance acquisition work force while upgrading our educational
    programs at the Defense Acquisition University to focus on simpler,
    faster tailored processes. The use of case studies and the
    incorporation of current practitioners will be critical to rapidly
    improving our acquisition capability.
        Secretary Esper. The Army needs an acquisition system that is
    inherently fast, responsive to current and emerging needs, and
    visionary in meeting long-term threats, leaping ahead of capabilities
    of major adversaries. This requires hard choices on which programs and
    initiatives to fund or forego. Programs must establish well-defined and
    realistic requirements to keep programs on schedule and on budget.
        Predictable and stable funding are key to maintaining and
    delivering needed systems to warfighters. We must also ensure our
    programs are structured around mature technology, use open systems
    architecture to allow continuous system improvement, and have the
    mechanisms in place that allow flexibility of resources, both people
    and dollars that can quickly adjust to program changes and
    opportunities. Finally, we must delegate and empower our Program
    Managers to quickly identify opportunities and resolve issues that
    arise throughout the acquisition process.
        Secretary Geurts. Instability in funding and requirements are the
    main impediments to an effective and efficient acquisition system.
    Instability includes uncertainty in budgets and funding or unrealistic
    or changing requirements. Within the DON, stability in acquisition
    programs is accomplished by establishing firm and realistic
    requirements (including close coordination with the Service Chiefs, via
    the DON Gate Review process), stabilizing system designs, and
    incrementally developing technology in order to reduce technical risks
    before defense acquisition programs incorporate new technologies. DOD
    and the DON must maximize competition at all tiers to reduce costs and
    enhance technical innovation. In addition, the appropriate use of
    multiyear procurements, block buys, economic ordering quantities, and
    cross-program procurements of common equipment are important tools for
    reducing costs and increasing the efficiency of the acquisition system.
        Also, an overly prescriptive, burdensome, statutory and regulatory
    environment encumbers Program Managers with additional laws, policies,
    and rules that limit flexibility, increase oversight and slow the
    acquisition system. We will continue to work with Congress to identify
    those laws and policies that should be eliminated or revised to improve
    acquisition outcomes.
        Secretary Wilson. There are several challenges we have within the
    Air Force to deliver capability on time and within budget. These
    challenges include maintaining stable requirements and stable, timely
    budgets. We are taking deliberate actions to ensure we constantly
    monitor and ensure that new requirements or changes to existing
    validated requirements are not the driving factor in the costs or
    schedule growth of programs. To better inform us on the capabilities
    and technical requirements that can be achieved in a warfighters needed
    timeframe, we are focusing more on prototyping and experimentation.
        We also need stability in funding programs to ensure we give
    program managers resources when they are needed to successfully execute
    the plans they put in place. This will require leadership to ensure we
    pursue the right programs at the right time to provide programs the
    resources needed. Establishing and adhering to executable schedules
    will also improve performance.

                                   __________
                 Questions Submitted by Senator Martin Heinrich
                             plutonium capabilities
        153. Senator Heinrich. Secretary Lord, I was particularly concerned
    recently to learn that the NNSA's required Analysis of Alternatives for
    plutonium pit production resulted in only two preferred alternatives,
    including a ``big box'' facility at Los Alamos National Laboratory.
    Such an impractical and costly facility, the CMRR-NF, had previously
    been rejected, and in 2014, the Nuclear Weapons Council explicitly
    directed NNSA to instead pursue a ``modular'' building strategy at LANL
    as defined in sec. 3114 of the National Defense Authorization Act for
    fiscal year 2013. In your role as Chairman of the Nuclear Weapons
    Council, have you received and been briefed on the NNSA's report on the
    recommended alternative endorsed by the Administrator for
    recapitalization of plutonium science and production capabilities of
    the nuclear security enterprise?
        Secretary Lord. Yes. It is my understanding that the Administrator
    of the National Nuclear Security Administration (NNSA) will respond to
    the reporting requirements of subsection (a) of section 3114 of the
    National Defense Authorization Act for fiscal year 2013 by providing
    Congress the October 2017 Final Report of the Plutonium Pit Production
    Analysis of Alternatives (AoA). The NNSA provided copies of the
    Plutonium Pit Production AoA to the Department of Defense in late
    November 2017 and briefed the Nuclear Weapons Council on the AoA on
    December 20, 2017. The AoA identifies two recommended alternatives, and
    it is my understanding that the NNSA is now conducting an Engineering
    Analysis (EA) of the two alternatives, including a ``modular''
    strategy, to inform selection of a single alternative and support
    conceptual design of the needed plutonium pit production capabilities.
    The NWC looks forward to being briefed on the results of the EA no
    later than April 2018.

        154. Senator Heinrich. Secretary Lord, have you also been briefed
    on NNSA's independent Office of Cost Estimating and Program
    Evaluation's review of the report?
        Secretary Lord. Yes. At the same time that the National Nuclear
    Security Administration (NNSA) provided copies of the final Plutonium
    Pit Production Analysis of Alternatives (AoA) to the Department of
    Defense, it also provided copies of the Office of Cost Estimating and
    Program Evaluation's (CEPE) review of the analysis in the AoA. The CEPE
    recommended additional analysis be completed prior to selection of a
    single alternative. It is my understanding that the CEPE
    recommendations are being taken into consideration during the NNSA's
    current Engineering Analysis of the two alternatives identified by the
    AoA. I look forward to reviewing the results by April 2018.

        155. Senator Heinrich. Secretary Lord, do you agree the ``modular''
    building strategy at LANL, as defined in section 3114 of the National
    Defense Authorization Act for fiscal year 2013, should be fully
    analyzed by NNSA as the NWC directed in 2014?
        Secretary Lord. Yes. I fully support analysis of reasonable
    alternatives that will lead to a long-term, reliable, and flexible pit
    production capability that enables the nuclear enterprise to meet the
    Nation's military requirements and policy goals. The longer we delay
    reestablishing a robust pit production capability for the Nation, the
    greater the risk, complexity, and cost we will take on. It is my
    understanding that the National Nuclear Security Administration's
    (NNSA) Office of Cost Estimating and Program Evaluation's (CEPE) review
    of the Plutonium Pit Production Analysis of Alternatives suggests
    further study of both modular and greenfield facilities at Los Alamos
    National Laboratory (LANL). As the NNSA works toward identifying the
    most desirable pit production alternative, I expect the NNSA to brief
    the Nuclear Weapons Council and Congress on the analysis conducted,
    including the option of a modular building strategy at LANL.

        156. Senator Heinrich. Secretary Lord, is it your expectation that
    you will be able to respond to the certification required by subsection
    (b) of sec. 3141 of the National Defense Authorization Act for fiscal
    year 2018 regarding whether the recommended alternative proposed by the
    Administrator meets each of the criteria in paragraphs (1) and (2) of
    that subsection?
        Secretary Lord. Yes. The Nuclear Weapons Council (NWC) will provide
    the certification requested by Congress within the timeline identified
    in subsection (b) of section 3141 of the National Defense Authorization
    Act (NDAA) for fiscal year (FY) 2018 if the National Nuclear Security
    Administration (NNSA) identifies a single alternative in its
    Engineering Analysis (EA) that meets all military requirements for pit
    production. It is my understanding that the Administrator of the NNSA
    will respond to the report requirements of subsection (a) of the NDAA
    for fiscal year 2018 by providing Congress the October 2017 Final
    Report for the Plutonium Pit Production Analysis of Alternatives (AoA).
    That report identifies two preferred alternatives, not a single
    recommended alternative. In December 2017, the Nuclear Weapons Council
    (NWC) was briefed on the AoA and the associated plan for the EA. The
    NWC is keenly interested in the NNSA's plans to resume pit production
    and looks forward to receiving the results of the single alternative
    identified by the EA.
                          directed energy--new program
        157. Senator Heinrich. Secretary Lord, Secretary Esper, Secretary
    Geurts, and Secretary Wilson, section 215 of this year's NDAA
    Conference Agreement establishes a new Department-wide program to
    accelerate the transition of Directed Energy weapon systems within each
    of the military services. Specifically, section 215 authorizes
    additional funding to be used by military services and Department
    agencies specifically for the purposes of prototyping and demonstrating
    high-energy-laser and high-power-microwave weapons systems that are
    beyond the beginning stages of basic and applied research. The NDAA
    also assigns the newly created position of Under Secretary of Defense
    for Research and Engineering to lead and coordinate Directed Energy
    efforts across the Pentagon. Can I get a commitment from each of you to
    utilize this section 215 program next year to help advance and field
    this technology?
        Secretary Lord. I am committed to using section 215 to advance and
    field directed energy capabilities. As directed by the NDAA, the
    USD(R&E) will lead and coordinate Directed Energy efforts across the
    Department. As the USD(A&S), I will ensure the acquisition and
    sustainment communities support the transition and fielding of these
    capabilities.
        Secretary Esper. We are closely tracking the language in the Fiscal
    Year 2018 NDAA authorizing $100 million to be used specifically for the
    purposes of prototyping and conducting demonstrations of high energy
    laser (HEL) and high power microwave weapons systems that are beyond
    the beginning stages of basic and applied research. The Assistant
    Secretary of Defense (ASD) for Research & Engineering (R&E), and the
    position that will become the Under Secretary of Defense (USD) for R&E,
    has been designated as the Senior Official responsible for oversight of
    Directed Energy investments across the Department of Defense. We work
    very closely with ASD R&E, and will continue to do so with USD R&E, to
    leverage these prototyping resources to integrate and demonstrate HEL
    technologies that have matured in Science &Technology in order to
    accelerate the technologies' transition to the Programs of Record.
        Secretary Geurts. Yes. The DON is committed to working with OSD in
    using section 215 to advance this technology. The DON has established
    new accelerated acquisition processes that are intended to take maximum
    advantage of a number of recent acquisition reforms aimed at rapid
    prototyping, rapid fielding, and acquisition agility. These Navy
    processes are implemented under the direction of an AABoD that I co-
    chaired with CNO and CMC. The AABoD has already recognized the
    importance of accelerating Directed Energy (DE) capabilities to the
    fleet by designating the Navy Laser Family of Systems in 2017 as one of
    the first accelerated acquisition effort under the new Navy process.
        Secretary Wilson. Yes. The Air Force is committed to the
    development and transition of Directed Energy technology and will use
    the authorities provided.
               air force research laboratory: contracting delays
        158. Senator Heinrich. Secretary Lord, Secretary Esper, Secretary
    Geurts, and Secretary Wilson, in my role as Ranking Member of the
    Emerging Threats and Capabilities Subcommittee, we held a hearing with
    some of your former lab directors this year and they pointed to the
    slow pace of acquisition and contracting process as a key impediment to
    their ability to work with innovative companies. What steps are you
    taking to help our labs and contracting offices speed up the
    contracting process and what help do you need from us to do this?
        Secretary Lord. While challenges in the acquisitions and
    contracting process continue to exist, the DOD is taking steps to
    streamline both. The DOD established an advisory panel of current and
    former DOD executives to identify opportunities to streamline the
    acquisition process. There are also a number of provisions in the
    Fiscal Year 2018 NDAA that aim to incentivize innovation and to augment
    DOD's collaborations with research groups outside the Department. We
    are in the early stages of implementing these provisions. Much of the
    necessary authorities are in place. The challenge for the Department is
    to balance the need for speed and adaptability in order to innovate for
    the future battlefield and maintain technological dominance while also
    providing adequate oversight and ensuring transparency, best value for
    the Department, and preventing mismanagement. Additionally, we will
    fundamentally change the Defense Acquisition University (DAU) to teach
    through case studies that will highlight real examples of how a variety
    of contract vehicles are appropriately utilized to simplify and speed
    up acquisition. We have goals of reducing acquisition time by 50
    percent with pilot programs currently being executed. We are not only
    focused on domestic procurement, but Foreign Military Sales (FMS) as
    well.
        Secretary Esper. In September and November 2017, the Acting
    Secretary of the Army issued eight key Acquisition Reform Initiatives,
    to include streamlining the contracting process. In support of these
    initiatives, the Army is focused on talent management and streamlining
    burdensome policies and oversight.
        The Army has increased its use of Other Transaction Authority (OTA)
    agreements, which are not governed by the Federal Acquisition
    Regulation (FAR). Recent National Defense Authorization Acts (NDAAs)
    have given the Government greater flexibility in using OTAs for a wide
    range of needs and with a broader group of industry partners.
        The Army has achieved success using OTAs for prototyping and
    limited fielding of defensive cyberspace operations (DCO) capabilities,
    and scientific research and developmental activities. OTAs are a
    mechanism that can be used to execute science and technology efforts
    that we are aligning to the Army's Modernization Priorities which
    include Long Range Precision Fires, Next Generation Combat Vehicle,
    Future Vertical Lift, C3I/Networks, Air and Missile Defense and Soldier
    Lethality. In fiscal year 2017, the Army has spent $1.5 billion on
    OTAs. Programs that the Army has or is planning to use OTAs include,
    but not limited to, Long Range Precision Fires, the Expedited Active
    Protection System effort for Bradley and Stryker, the Lower Tier Air
    and Missile Defense System, and the Next Generation Squad Weapon
    System. The Army will continue to leverage OTAs and other authorities
    to keep pace with the rate of technological change.
        Secretary Geurts. Section 233 of the Fiscal Year 2017 NDAA required
    DOD to initiate a pilot program to ``demonstrate methods for the more
    effective development of technology and management of functions'' at
    science and technology reinvention laboratories. Accordingly, the DON's
    laboratories will continue to identify regulations, restrictions, and
    other policy and guidance that if waived would streamline their
    contracting processes. In the DON's implementation of section 233, the
    DON labs have several pilot areas waived. In addition, the Naval
    Research and Development Establishment created a Rapid Contracting Team
    tasked to identify best practices to support rapid prototyping, provide
    practical feedback and lessons learned, and make advisory
    recommendations to the DON acquisition leadership. We expect to
    implement additional improvements based on this effort. To the extent
    that Federal regulations cannot be waived under DOD authority, we may
    request additional Congressional assistance.
        Secretary Wilson. We are looking across the entire Air Force
    contracting enterprise, including the Air Force Research Laboratory, to
    evaluate ways to improve our contracting processes and timelines. The
    contracting career field faces the challenge of a relatively
    inexperienced workforce as a whole because contracting expertise is
    highly valued by other employers. We greatly appreciate the additional
    hiring and personnel authorities Congress has granted the Department.
    We will continue to use those authorities in an effort to improve
    contracting agility and reduce delays.

        159. Senator Heinrich. Secretary Wilson, I have heard specific
    concerns about the speed of contracting by Air Force Research Lab,
    especially in New Mexico. Could you have your staff look into this and
    get back to us on the situation and how you plan to improve and speed
    up the processes?
        Secretary Wilson. Yes.
                      other transaction authorities (ota)
        160. Senator Heinrich. Secretary Lord, OTAs provide a powerful
    vehicle for encouraging innovation and speeding up the contracting
    process for small businesses. This year's NDAA directs the Secretary of
    Defense to establish a preference for using OTAs in the execution of
    science and technology and prototyping programs. Can you please give
    some examples where OTAs have been used in a way you would like to see
    replicated?
        Secretary Lord. A current example of a streamlined program
    solicitation that resulted in the award of an Other Transaction
    Authorities (OTA) for prototype is Defense Advanced Research Projects
    Agency's (DARPA's) Robotic Servicing of Geosynchronous Satellites
    (RSGS) public-private partnership program. From an earlier perspective,
    an example of a highly streamlined acquisition resulted in the high-
    altitude, high endurance, unmanned aerial vehicle utilized by the Air
    Force is Global Hawk. Defense Innovation Unit Experimental (DIUx) and
    Army Contracting Command--New Jersey (ACC-NJ) have demonstrated that
    the pilot program for the Commercial Solutions Opening (CSO) process
    can be used to attract non-traditional vendors who bring critical
    technology into the Department. The CSO process could serve as an
    example that can be expanded to the other appropriate defense agencies
    and activities to efficiently and effectively procure innovative
    products and services that meet the rapidly evolving needs of the
    Warfighter. We intend to develop a module, based on case studies, at
    the Defense Acquisition University (DAU) in the near future to help
    educate our acquisition workforce.
                  space rapid capabilities office (space rco)
        161. Senator Heinrich. Secretary Wilson, I believe we need a
    greater sense of urgency in space. One of the big changes in the NDAA
    this year was making Space Command the sole authority for organizing,
    training, and equipping all space forces within the Air Force. What
    impact will the centralization of space authority have on building a
    more resilient space architecture--both in terms of acquisition and the
    use of non-traditional launch services?
        Secretary Wilson. I share the committee's sense of urgency with
    regard to space and am taking action to address a variety of issues. I
    will direct a comprehensive review of Air Force acquisition
    organization and authorities, including those of Space and Missile
    Systems Center, in order to increase the speed of acquisition of space
    capabilities. This review will be consistent with the statutory
    authorities and obligations of the President and the Secretary of the
    Air Force.
        If additional legislative changes are necessary, we will work with
    the appropriate elements of the Department, OMB, and the Congress to
    address them. Potential impacts that may arise from changing
    authorities are uncertain at this time with regard to both resilient
    space architectures, acquisition, and the use of non-traditional launch
    services, but we will remain focused on increasing lethality and better
    supporting the warfighter as space becomes an increasingly contested
    and congested environment.

        162. Senator Heinrich. Secretary Wilson, we also re-designated the
    Operationally Responsive Space office as the Space Rapid Capabilities
    Office, which will now report directly to General Raymond at Space
    Command instead of SMC. What role does the Air Force see for the Space
    Rapid Capabilities Office in terms of acquisition, and how should we
    resource that mission?
        Secretary Wilson. The Air Force is currently evaluating how best to
    use the Space Rapid Capabilities Office to improve enterprise agility
    and respond to changing threats. The Space Rapid Capabilities Office is
    one tool, but the entire space enterprise must shift to a rapid-
    acquisition mindset to stay ahead of the threats. The fiscal year 2019
    PB will begin that shift both within the Space RCO and throughout the
    space acquisition enterprise.

                                   __________
                   Questions Submitted by Senator Gary Peters
                            army acquisition culture
        163. Senator Peters. Secretary Esper, last month I asked Dr. Jette,
    the nominee to be Assistant Secretary of the Army for Acquisition,
    Logistics, and Technology, about the impact of what I feel is an
    unhealthy conflict between key communities within the Army acquisition
    process. I'm concerned that too often we wind up with a process that
    creates over-burdensome requirements that are not tailored to soldiers'
    needs, which fosters a testing culture that is too risk-adverse, which
    results in a conservative acquisition process that does not provide the
    equipment soldiers need on time or on budget. What steps have you
    already taken and what action do you plan to take to improve the Army's
    acquisition culture?
        Secretary Esper. The Army must better integrate the efforts of its
    various acquisition communities to ensure that those developing
    requirements have insightful advice on technologies essential to
    operational concepts, and science and technology efforts must inform
    the development of capabilities and fully enable the transition of
    technology. To achieve this end the Army established eight cross
    functional teams (CFTs) to better integrate the requirements, budget,
    science and technology, test and evaluation, and acquisition
    communities, among others
        The Army is also implementing eight policy directives to change the
    acquisition culture and the way we do business. These initiatives will
    increase the Army's ability to more quickly provide capabilities to
    Soldiers, while being fiscally responsible with the taxpayer resources
    Congress allocates. The core policy changes the Army will implement
    focus on (1) streamlining the development and approval of capability
    requirements; (2) improving talent management; (3) improving the
    governance, strategy, and synchronization of science and technology;
    (4) streamlining test and evaluation and minimizing redundant testing;
    (5) aligning sustainment policy to foster cost efficiency and improved
    readiness; (6) streamlining the contracting process; (7) streamlining
    and synchronizing acquisition planning and processes; (8) improving
    cost estimation and resourcing; and (9) establishing metrics to track
    performance and outcomes.
                       acquisition of advanced technology
        164. Senator Peters. Secretaries Lord, Esper, Geurts, and Wilson,
    I'm concerned that when it comes to cutting-edge technology such as
    artificial intelligence, autonomy, and robotics--the capabilities that
    will drive the future of warfare--we are still figuring out how to get
    acquisition right. I know there are attempts at utilizing unique
    authorities Congress has provided, as well as outreach to industry
    through channels like D-I-U-X in key locations across the country. But
    this doesn't mean that harvesting from industry is the only answer.
    There is very important work happening in Department of Defense labs
    and the science and technology community across the Department of
    Defense. I'm concerned that we do not leverage the significant S&T
    investments made by the Department and each of the services, and we do
    not see the results that we could if we made better use of the
    innovation that is already occurring within the S&T community. Please
    explain how we can improve the acquisition of advanced technology such
    as artificial intelligence, autonomy, and robotics working with
    industry and Department of Defense labs.
        Secretary Lord. I firmly believe that the Department should pursue
    opportunities wherever we find them. We must build relationships,
    leverage cutting-edge technologies being developed within our labs,
    academia, industry or allies, and ensure that we develop acquisition
    processes that support our ability to deliver the capabilities we need
    at the costs we can afford. Our acquisition processes must be flexible
    and rapid enough to meet the pace of development for technologies such
    as Artificial Intelligence and autonomy which are driven by commercial
    development/investment as well as deliberate enough to ensure
    affordable/effective long-term major acquisitions such as the next
    generation aircraft carrier.
        I agree with you. The DOD laboratories and engineering/warfighting
    centers are absolutely a major driver for innovation within the
    Department of Defense. They serve as sources of innovation aligned to
    solving military problems and often kick-start industry into moving in
    a direction that benefits the US military. By doing the early risky
    research, we set the stage for industry to take the best ideas from our
    labs and make it into products that meet the Warfighter's needs.
        For those technologies that fall into a rapidly developing tech
    space, such as AI and Machine Learning, the DOD should heavily leverage
    the considerable commercial investments to simultaneously increase
    capability and affordability across a wide variety of Department
    missions. Commercial technology will not meet the military's needs,
    however, in all mission areas. In select missions requiring high levels
    of trust, some technology development will remain inherently
    governmental but still be informed by demonstrated commercial
    capability. Our acquisition policy and processes should support this
    dual path approach. In the specific areas of AI and autonomy, we are in
    the process of developing an overarching strategy for the Department by
    identifying target application areas in which emerging technologies can
    enhance or transform warfighting capabilities and business processes.
    We are doing this in close cooperation with the Services/Agencies and
    the Joint Staff. Additionally, this strategy will recommend S&T and
    transition initiatives that build on current activities within the DOD
    S&T community to assure and extend the nation's competitive advantage
    in these areas. Through efforts such as this, we are improving the
    engagement between the operational and DOD S&T communities, and taking
    steps to ensure that we attract and retain the talent necessary both to
    generate and utilize these emerging technologies.
        Secretary Esper. I believe that advancements and innovation in
    science and engineering are empowered by collaboration among Army and
    other Department of Defense or Federal laboratories, academia and the
    private sector. I support using rapid acquisition authorities to expand
    our outreach efforts to the entrepreneurial community and I believe the
    Army has the tools needed to address this challenge. The Army is
    invested in curating mechanisms that foster collaboration among small
    businesses, universities, and our laboratories, and encourage domestic
    investment in critical technology areas. One example is the Small
    Business Innovation Research (SBIR) program, a network of Army
    laboratory scientists and engineers who provide technical assistance to
    small businesses in a wide range of technology areas. Another example
    is the Army Research Laboratory's new business model, Open Campus,
    which pursues leading-edge basic and applied research in a truly
    collaborative fashion by enabling the continuous flow of people and
    ideas between Army Science and Technology laboratories, academia, and
    the private sector. The Army Open Campus model, along with SBIR and
    DIUx, provides mechanisms to transform and enhance the level of
    technical collaboration among these entities to improve rapid
    acquisition of advanced technologies in rapidly evolving fields such as
    autonomy, robotics, and artificial intelligence.
        Secretary Geurts. The DON has been investing in cutting edge
    science and technology such as artificial intelligence, autonomy, and
    robotics since the 1940s. These investments include basic research
    (6.1), applied research (6.2), and advanced technology development
    (6.3). Discoveries and inventions resulting from these investments have
    had significant impact on military and commercial cutting edge
    technology. The DON takes full advantage of the unique authorities
    provided by Congress such as OTAs. Combined with grants and other
    traditional contracting vehicles, the DON has the tools required to
    invest in cutting edge technology across industry and academia. The DON
    heavily participates in the DOD's Science and Technology Communities of
    Interest, which are inter-Service, separate teams, each focused on
    different technology areas to collaborate and harness ideas across the
    Services. The DON also participates in National Defense Industry
    Association events facilitated or sponsored by OSD. These provide an
    excellent venue for sharing R&D efforts and needs across the DOD and
    our industry partners. The DON routinely leverages DOD Laboratories,
    the DOD Research Enterprise, National Laboratories, and Federally
    Funded Research and Development Centers in the development of cutting
    edge technology.
        Secretary Wilson. I agree that we need to innovate across our
    acquisition lifecycle, and our science and technology (S&T)
    investments. I have directed the development of an S&T 2030 Strategy to
    investigate on what basic and applied research areas we should focus
    and how we might adjust our processes and structure to improve how we
    conduct scientific research and technology development. The effort will
    engage academia, industry, small business, investors and others to
    provide ideas across the technology spectrum including the important
    areas of artificial intelligence, autonomy, and robotics. We have also
    pursued an increased focus on obtaining patents and other intellectual
    property resulting from work performed at the Air Force Research
    Laboratory in an effort to leverage these assets to further support
    advanced technology development. The expertise contained in our Air
    Force Research Laboratory is highly valued and we must continue to
    strengthen and reinforce an integrated, collaborative approach across
    the Services, academia, and industry, while bringing on-board non-
    traditional partners.
                           program manager workforce
        165. Senator Peters. Secretary Esper, Secretary Geurts, and
    Secretary Wilson, the Fiscal Year 2017 NDAA requires the Secretary of
    Defense to establish and implement a program to develop the civilian
    program manager workforce. Recruiting and retaining a knowledgeable,
    stable program manager workforce could have a significant positive
    effect on ensuring the continuity of best practices and improving long-
    term oversight of major defense acquisition programs. What positive
    effects do you think greater continuity in the program manager
    workforce will have on acquisition?
        Secretary Esper. In the Army Acquisition Workforce, there is a
    significant talent management initiative that has been in place for the
    last several years focused on identifying civilian talent and
    cultivating that talent with the right functional and leader
    development activities up front and early. This initiative is based on
    the understanding that to grow an Acquisition Program Manager of the
    future, we need to ensure the right training, development, education
    and experiences are afforded to our acquisition talent so that when we
    centrally select our Program Managers, we have the best and brightest
    impacting the acquisition process. We are already seeing the benefits
    of these efforts for our civilian professionals. We must continue to
    invest in developing and retaining critical acquisition skillsets that
    grow key program management professionals. Continuity is important and
    so is continuing to develop the next group of acquisition professionals
    to ensure a critical pipeline of talent is readily available. These
    efforts will have the lasting benefit of nurturing a community with the
    necessary competencies for today and into the future as professionals
    go through their career cycles.
        Secretary Geurts. Greater continuity in the program manager (PM)
    workforce will improve acquisition outcomes. Military or civilian,
    effective PMs have the right balance of competencies, experience, and
    expertise. Key to growing and sustaining an effective PM workforce is
    professional and technical education and training. The DON uses the
    Defense Acquisition Workforce Development Fund (DAWDF) to address
    specific hiring, training, and retention needs. This fund is critical
    to the Department's efforts to recruit and retain a knowledgeable
    acquisition workforce.
        Individual Systems Commands utilize tuition assistance and student
    loan repayment to retain the best and brightest of the workforce. For
    PMs and Deputy Program Managers, we have a formal slating panel process
    to evaluate candidates for leadership positions. This allows us to
    track and attract talent for our critical jobs at each Systems Command.
    A part of the slating process is providing feedback to each candidate
    so they can understand areas where they need to focus in order to be
    considered for future opportunities. The DON also has a robust SES
    Talent management process which includes slating for key acquisition
    positions.
        Secretary Wilson. The Air Force ensures that the program manager
    workforce has the collective skills and knowledge needed to create
    economic value for the individuals, their employers, and their
    community. Greater continuity within the program manager workforce will
    contribute to the Air Force's efforts to produce leaders who understand
    the requirements, environmental factors, organizations, activities,
    constraints, and motivations impacting a program.

        166. Senator Peters. Secretary Esper, Secretary Geurts, and
    Secretary Wilson, what do you think is an effective tenure requirement
    for program managers?
        Secretary Esper. An effective tenure requirement for Project
    Managers (PMs) would be in concert with the Milestones established for
    their programs. I would aim to ensure Deputy Project Managers (DPMs)
    are also in place for the tenure duration and beyond to ensure
    accountability and transparency. Alignment of PM tenure with milestones
    will help enhance oversight of cost, schedule and performance metrics.
    Additionally, determining an appropriate tenure length by taking into
    account specific program milestones allows the opportunity to
    understand these performance measures of effectiveness and ensures a
    clean transition at appropriate critical points.
        Secretary Geurts. While program managers (PMs) have a prescribed
    tenure, and sign tenure agreements based on their program's ACAT level,
    Navy Leadership monitors the phase of the program and determines the
    proper time to rotate personnel on a case by case basis. In general, a
    PM should remain in their position for approximately four years to
    effectively guide their program, but the DON does consider program
    events and milestones when establishing a PM's tenure.
        Secretary Wilson. Program managers assigned to key leadership
    positions are required to remain in the respective position for the
    tenure period as specified by the Service Acquisition Executive. As
    each individual case is unique and the needs of the Air Force or
    personal situations may change, we have an established process to
    approve movement of program managers before their tenure period is
    complete. We also review and consider extending program managers based
    on programmatic milestones.
                          commercial item procurement
        167. Senator Peters. Secretary Lord, the Fiscal Year 2017 NDAA
    addresses commercial item procurement by establishing a way for the
    Department to purchase commercial items through online e-commerce
    platforms. The hope is that this will result in cost savings and faster
    acquisition of commercial off-the-shelf items. In your view, do you
    think this provision has the potential to realize cost savings?
        Secretary Lord. An e-commerce market place promotes competition,
    which drives down costs. I believe that with the abundant competition
    for commercial off-the-shelf (COTS) items in combination with the e-
    commerce site there is a potential for the Department to attain cost
    savings.
        The Department is supporting the Federal implementation of section
    846 ``Procurement Through Commercial E-Commerce Portals'' which is led
    by the Office of Management and Budget (OMB) and General Services
    Administration (GSA). On January 9, 2018, OMB and GSA hosted the first
    public meeting to initiate ongoing dialogue with industry and
    interested parties in Government throughout the program's
    implementation. The Defense Procurement and Acquisition Policy
    organization representatives attended and will continue to participate
    in the future.

        168. Senator Peters. Secretary Lord, in implementing this
    provision, how important do you believe it is for GSA and OMB to ensure
    transparency in how prices are generated and displayed on these e-
    commerce platforms, especially as certain items may be subject to
    dynamic or variable pricing that could impact commercial item
    expenditures?
        Secretary Lord. Transparency promotes accountability; therefore, I
    believe it is extremely important for the Department and the taxpayers
    to know how commercial off-the-shelf (COTS) items are priced. This
    would include General Services Administration's (GSA's) ability to
    adjust to dynamic or variable pricing to ensure the Department gets the
    best pricing available on every item, every time. Transparency also
    promotes trust and we need the taxpayers to trust we are being good
    stewards of their money. An e-commerce portal will address both
    objectives.
                              services contracting
        169. Senator Peters. Secretary Esper, Secretary Geurts, and
    Secretary Wilson, in order to ensure better oversight of services
    contracts and avoid waste of taxpayer funds, the Fiscal Year 2018 NDAA
    requires each military Department to make services contract data
    available to the Secretary of Defense so that the Department can
    analyze past spending patterns and anticipate future needs. Does your
    Department have the technical capability to fully provide and analyze
    data about services contracts to comply with this requirement, and if
    not, what will you do to ensure that becomes the case?
        Secretary Esper. Yes, the Army has the ability to analyze services
    contract data and provide the results of that analysis to the Secretary
    of Defense. I fully appreciate the importance of examining and
    understanding past spending activities for services to identify trends
    and buying behaviors, and to allow for efficient planning for future
    services requirements. In fact, the Army is currently conducting spend
    analysis as we migrate our service focus to implementation of category
    management initiatives.
        Secretary Geurts. Yes, DON utilizes the Federal Procurement Data
    System-Next Generation (FPDS-NG), the official reporting system for the
    Federal Government, to collect and report data on Contractual Services
    obligations. We also conduct Service Requirements Review Boards for
    every services acquisition requirement valued in excess of $150,000 to
    provide oversight and to validate services acquisition requirements.
    These reviews are chaired by Flag Officers or Senior Executives and
    involve leadership reviews by the requirement owner(s) as well as the
    acquisition and financial communities.
        Secretary Wilson. As part of our acquisition leadership, the
    Department of the Air Force has designated a Program Executive Officer
    for the acquisition of services contracts greater than 100 million
    dollars. This individual also serves as the Senior Services Manager,
    providing strategic governance all for services contracts Air Force
    wide.
        Additionally, the Air Force conducts an annual Services Governance
    Health Assessment to review mission owner requirements and ensure
    organizations are efficient in their buying practices while meeting
    their mission needs.
        The Air Force makes great use of the Federal Procurement Data
    System--Next Generation data tool to help gather contract trend data
    for various services portfolios outlined by DOD. We also supplement the
    data with internal authoritative systems to be able to address specific
    areas. This information is used to make resourcing adjustments, where
    appropriate, to leverage our buying power and identify strategic
    sourcing opportunities for future procurements.

        170. Senator Peters. Secretary Esper, Secretary Geurts, and
    Secretary Wilson, will the data you provide to the Secretary include
    information about the use of bridge contracts in your Department?
        Secretary Esper. Yes, the services contract data the Army provides
    to the Secretary of Defense will include information on the usage of
    bridge contracts. The Army developed the capability to monitor the use
    of bridge contracts through the Virtual Contracting Enterprise system
    in fiscal year 2017.
        Secretary Geurts. Yes, the DON has the capability to obtain
    information about the DON's use of bridge contracts and can make this
    data available to the Secretary of Defense.
        Secretary Wilson. Through the use of the Federal Procurement Data
    System--Next Generation tool, we can identify the majority of the
    bridge contracts each year. There is a need to supplement this data and
    we will work with the Office of the Secretary of Defense to determine
    the appropriate level of fidelity and dollar thresholds required.

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