[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

                               __________

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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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