[Congressional Record (Bound Edition), Volume 160 (2014), Part 5]
[Senate]
[Pages 6771-6772]
[From the U.S. Government Publishing Office, www.gpo.gov]




                       DEFENSE ACQUISITION REFORM

  Mr. McCAIN. Madam President, as consideration of the National Defense 
Authorization Act for fiscal year 2015 proceeds in earnest, and with 
the recent release and annual assessments of the Department of Defense 
major procurement programs by the Government Accountability Office and 
the Pentagon's Director of Operational Testing and Evaluation, we are, 
once again, reminded of the DOD's chronic inability to rein in costs 
associated with its largest and most expensive weapon and information 
technology systems.
  This is, of course, a problem the DOD--the Department of Defense--has 
struggled with for years. During every one of these years, I brought 
this problem to the attention of the American people, both in the 
Senate Armed Services Committee and here on the floor of the Senate.
  So I need not go over again the frustrating litany of costly 
procurement failures at the Department of Defense. At this point we are 
all aware of the future combat system, the Army's ``transformational'' 
vehicle and communications modernization program, in which the military 
and the U.S. Army wasted almost $20 billion developing 18 vehicles and 
drones, only one of which actually went into production. In other 
words, they blew $19 billion. As had been done on other programs, on 
the Future Combat Systems, the Army held a ``paper competition'' to 
select contractors far in advance of fielding any actual prototypes. 
But it awarded control to two separate companies and let them, not the 
government, hold their own internal competitions to determine who would 
test and build the vehicles and systems--encumbering the program with a 
dizzying array of conflicts of interest and preferred-supplier 
preferences that chipped away at the program from the inside out.
  As for the Air Force, its Expeditionary Combat Support System--the 
ECSS program--wasted over 1 billion taxpayer dollars attempting to 
procure and integrate a ``commercial off-the-shelf'' logistics IT 
system. That effort resulted in no usable capability for the Air Force, 
and taxpayers were forced to pay an additional $8 million in severance 
costs to the company that failed in its mission. The Marine Corps, in 
turn, spent 15 years and $3 billion on its Expeditionary Fighting 
Vehicle before canceling the program in 2012--another $3 billion down 
the drain.
  While there are so many other failures, we shouldn't forget the VH-71 
program--the presidential helicopter program--with which the Navy 
attempted to procure a new presidential helicopter. Before that 
program's cancellation in 2009, taxpayers were forced to pay $3.2 
billion and got exactly zero helicopters.
  Our ``joint service'' programs have also faced profound difficulties. 
Even though the Department of Defense has not completed development 
testing on the F-35 Joint Strike Fighter, that program is already well 
into production, exposing it to the risk of costly retrofits late in 
production.
  While today the Joint Strike Fighter Program is on a more stable path 
to succeed, during a recent Airland Subcommittee hearing on tactical 
aircraft programs, I asked the head of the program, Lt. Gen. Chris 
Bogdan, what lessons the DOD learned from that program's costly 
failures. By the way, it is the most expensive weapons system ever--a 
$1 trillion weapons system. He identified three lessons: the danger of 
overly optimistic initial cost estimates, the importance of reliable 
technological risk estimates, and the complexity and costs of building 
next-generation planes while still testing them.
  That is, of course, a post mortem that we are all very familiar with, 
including on some of the failed acquisition programs to which I just 
alluded. For that reason, Congress enacted the Weapon Systems 
Acquisition Reform Act of 2009. That law instituted reforms to make 
sure that new major weapons procurement programs start off right, with 
accurate initial cost estimates, reliable technological risk 
assessments, and only reasonable ``concurrency,'' and stable 
operational requirements.
  While the Government Accountability Office found this law had a 
``significant influence'' on requirements, cost, schedule, testing, and 
reliability for the acquisition of new major weapons systems, there is 
still much to do, especially on the so-called ``legacy'' systems 
already well into the development pipeline. According to the Government 
Accountability Office, the cost of the Pentagon's major weapons 
systems--that is 80 systems in total--have swollen to nearly one-half 
trillion dollars over their initial price tags and have average 
schedule delays of more than 2 years.
  I will repeat that for the benefit of the Pentagon, my colleagues 
here in the Senate, and the American people. The Government 
Accountability Office says the cost of the Pentagon's major weapons 
systems, of which there are 80 in total, have swollen to nearly one-
half trillion dollars--that is T, trillion dollars--over their initial 
price tags--their initial cost estimates--and have average schedule 
delays of more than 2 years. That is not acceptable. That is not 
acceptable to the American people, it should not be acceptable to 
Members of Congress, and it sure as heck shouldn't be acceptable to the 
people who are responsible for these cost overruns. That is the 
Pentagon and that is these manufacturers.
  Against this backdrop, I will briefly discuss two critical aspects of 
how the Department of Defense procures major systems--real competition 
and accountability. In my view, it is no coincidence that the period of 
remarkably poor performance among our largest weapons procurement 
programs has coincided with a dramatic contraction in the industrial 
base, due, in large part, to consolidation among the Nation's top-tier 
contractors. For this reason the Department of Defense must structure 
into its strategies to acquire major systems true competition--not like 
fake competition--as we saw in the Future Combat System or as 
proponents for an alternate engine for the Joint Strike Fighter once 
advocated. According to the Government Accountability Office, in fiscal 
year 2013, only 57 percent--I repeat, 57 percent--of the $300 billion 
the Department of Defense obligated for contracts and orders was 
actually competed. In other words, only in a little over half of the 
$300 billion--roughly $150 billion--in contracts and orders was there 
actually any competition. Unacceptable. Competition should be driven 
through the subsystems level, and it should be reflected in approaches 
that foster innovation and small business participation throughout a 
system's entire lifecycle.
  Especially within the Navy's ``shipbuilding and conversion'' account 
and the Air Force's ``missile procurement'' account, costs associated 
with the Ohio-class replacement submarine and the Evolved Expendable 
Launch Vehicle--that is our space effort--those programs respectively, 
will severely pressurize other procurement priorities within these same 
aspects of Pentagon spending.
  So within these particular areas, harnessing competitive forces to 
drive down costs and keep them down will be enormously important. There 
can, however, be no doubt that during a year of declining budgets and, 
therefore, fewer opportunities to support an already diminished 
industrial base, this will be extraordinarily difficult. So we should 
be embracing competition--even the prospect of it--wherever and however 
we find it.
  In the Littoral Combat Ship Program, the Navy's strategy to bring 
competition into the construction of the follow-on ships' seaframes 
successfully drove down those costs after the cost to complete 
construction of the lead ships' seaframes exploded--the costs exploded. 
While doing so resulted in a dual-award block-buy contract, which I 
thought, and continue to think, was ill-advised, and serious problems 
persist with the Littoral Combat Ship's mission modules--in other 
words, the ship's ability to carry out its assigned missions--there can 
be no doubt that competition was just what the program needed.
  After having found in 2012 that competition for the Evolved 
Expendable Launch Vehicle, i.e., our space program, could lower costs 
for the government, the Government Accountability

[[Page 6772]]

Office reiterated the importance of competition generally in a report 
released today, stating that, ``[c]ompetition is the cornerstone of a 
sound acquisition process.''
  Remember those words by the Government Accountability Office, as I go 
on: Competition is the cornerstone of a sound acquisition process.
  It is exactly for this reason I have been concerned with what I have 
seen in the Evolved Expendable Launch Vehicle, a critical national 
security space launch program. In the absence of competition and amidst 
a highly suspect effort to minimize internal Pentagon and congressional 
oversight of the program, which I corrected just a couple of years ago, 
the costs of this program have exploded. There are higher inflation 
costs for this program than any other program in the entire program. 
Only after that program critically breached cost thresholds under 
Federal law--the so-called Nunn-McCurdy--in other words, after the 
inflation of the costs were so high Federal law threatened its 
existence--did the Department of Defense finally recognize the value--
indeed, the need--for competition.
  Yet despite a directive by the Under Secretary of Defense for 
Acquisition, Technology, and Logistics to the Air Force to 
``aggressively'' introduce competition into the program, and just weeks 
before the Air Force knew--the Air Force knew--that a prospective new 
entrant to the program would qualify as a bidder, the Air Force awarded 
a 3-year sole-source block-buy contract to the incumbent contractor. 
Just weeks before they knew there would be competition, they allowed 
and awarded a program to the one bidder, sole source, at a huge cost. 
The Air Force did so in a way that exposed only those launches 
designated for competition to the greatest risk of delay or 
cancellation. Then, just a few weeks ago, in connection with its budget 
request for fiscal year 2015, the Air Force proposed to cut the number 
of launches designated for competition in half. They gut the number of 
launches designated for competition to half, in part to satisfy the Air 
Force's existing obligation to the incumbent contractor under the sole-
source block-buy contract.
  Why the Air Force made all those decisions in that program, which so 
desperately needs competition, is unclear. But the evidence of 
incumbency favoritism I have seen to date was strong enough for me to 
refer the matter to the Department of Defense Inspector General for 
investigation. That favoritism apparently extended to the DOD's failure 
to ensure that the incumbent contractor's efforts to import rocket 
engines from Russia--we are importing rocket engines for our space 
launch program from Russia in a noncompetitive contract--did not run 
afoul of the President's Executive order sanctioning certain Russian 
persons in connection with Russia's activities in eastern Ukraine. It 
took a prospective bidder--not the Pentagon, but a prospective bidder; 
that is, a possible competitor--to file a lawsuit in Federal court to 
ensure compliance with the President's Executive order. We all look 
forward to the inspector general's findings.
  In addition to the EELV, I will also be monitoring the Army's 
modernization program to build nearly 3,000 armored personnel carriers. 
This program too appears to lack any meaningful competition, having 
obtained a waiver to skip over building working prototypes and thereby 
ignoring the acquisition best practice of fly before you buy.
  Way back many years ago when Ronald Reagan became President of the 
United States, our then-Secretary of Defense Cap Weinberger said: Fly 
before you buy. Fly before you buy.
  It is clear. I do not think anybody builds anything in America today 
if they do not test it out before they purchase it en bloc or produce 
it en bloc. Yet the Pentagon continues to ignore the fundamental 
principle of fly before you buy.
  There is also clearly more that needs to be done to ensure 
accountability in how the Department of Defense procures major weapons 
and information technology systems. Ensuring accountability means 
having in place the right acquisition managers when large procurement 
programs start instead of bringing them in years after those programs 
have foundered. Those managers must see and be willing to enforce 
affordability as an operational requirement and know how to effectively 
incentivize their industry partners to control costs.
  Also, within a system that better aligns their tenure with key 
management decisions on their programs, those managers--trained to be 
as competent and skillful a buyer as their industry counterparts are 
sellers--need to be empowered to make those decisions in their best 
professional judgment, and they need to do so within an overall system 
that holds them accountable if they are wrong and rewards them if they 
are successful.
  Regrettably, that is not our defense acquisition system. In our 
system, instead of accountability, a systemic misalignment of 
incentives reigns--incentives that assign a premium to overly 
optimistic initial cost estimates and technological risk assessments. 
In our system, what is all-important is getting activity ``under 
contract,'' ``keeping the money flowing,'' and maintaining budgets. Our 
system allows the Department of Defense to start programs that are 
poorly conceived or inherently unexecutable with the aim of getting 
them ``on rails''--into the development pipeline--and, if possible, 
simultaneously into production.
  At that point, given the extent to which they have been engineered so 
that their economic benefits are distributed among key States and 
congressional districts, those programs become notoriously difficult to 
terminate or meaningfully change. Why? Because our system keeps them 
alive, often at an exorbitant cost and, in the worst cases, without 
ever providing meaningful combat capability.
  My friends, it is called the military-industrial-congressional 
complex. Dwight David Eisenhower, in his last major speech, warned us 
of the military-industrial complex. It is now the military-industrial-
congressional complex. It is a politically engineered, ill-defined, 
massive ``transformational'' procurement program, with an unlimited 
tolerance for excessive concurrency, largely funded on a cost-
reimbursable basis, with the prime contractor allowed to maximize 
profit without necessarily delivering needed capability to our service 
men and women on budget or on time.
  To say that such a system is unsustainable is charitable. It is a 
system that, if allowed to continue unabated, will have us bestow on 
our children and theirs de facto unilateral disarmament for which they 
will have no say and from which our Nation will have no recourse.
  Rather than wallow in discouragement, however, we must let that 
odious proposition motivate us to reform the current system with 
meaningful change, in particular to the Pentagon's culture of 
inefficiency that has eluded us for a generation.
  One thing is clear: Today we have a choice. Tomorrow we will not.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. NELSON. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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