[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
[H.A.S.C. No. 114-83]
ACQUISITION REFORM: STARTING PROGRAMS WELL
__________
COMMITTEE ON ARMED SERVICES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
FEBRUARY 3, 2016
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
______
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COMMITTEE ON ARMED SERVICES
One Hundred Fourteenth Congress
WILLIAM M. ``MAC'' THORNBERRY, Texas, Chairman
WALTER B. JONES, North Carolina ADAM SMITH, Washington
J. RANDY FORBES, Virginia LORETTA SANCHEZ, California
JEFF MILLER, Florida ROBERT A. BRADY, Pennsylvania
JOE WILSON, South Carolina SUSAN A. DAVIS, California
FRANK A. LoBIONDO, New Jersey JAMES R. LANGEVIN, Rhode Island
ROB BISHOP, Utah RICK LARSEN, Washington
MICHAEL R. TURNER, Ohio JIM COOPER, Tennessee
JOHN KLINE, Minnesota MADELEINE Z. BORDALLO, Guam
MIKE ROGERS, Alabama JOE COURTNEY, Connecticut
TRENT FRANKS, Arizona NIKI TSONGAS, Massachusetts
BILL SHUSTER, Pennsylvania JOHN GARAMENDI, California
K. MICHAEL CONAWAY, Texas HENRY C. ``HANK'' JOHNSON, Jr.,
DOUG LAMBORN, Colorado Georgia
ROBERT J. WITTMAN, Virginia JACKIE SPEIER, California
DUNCAN HUNTER, California JOAQUIN CASTRO, Texas
JOHN FLEMING, Louisiana TAMMY DUCKWORTH, Illinois
MIKE COFFMAN, Colorado SCOTT H. PETERS, California
CHRISTOPHER P. GIBSON, New York MARC A. VEASEY, Texas
VICKY HARTZLER, Missouri TULSI GABBARD, Hawaii
JOSEPH J. HECK, Nevada TIMOTHY J. WALZ, Minnesota
AUSTIN SCOTT, Georgia BETO O'ROURKE, Texas
MO BROOKS, Alabama DONALD NORCROSS, New Jersey
RICHARD B. NUGENT, Florida RUBEN GALLEGO, Arizona
PAUL COOK, California MARK TAKAI, Hawaii
JIM BRIDENSTINE, Oklahoma GWEN GRAHAM, Florida
BRAD R. WENSTRUP, Ohio BRAD ASHFORD, Nebraska
JACKIE WALORSKI, Indiana SETH MOULTON, Massachusetts
BRADLEY BYRNE, Alabama PETE AGUILAR, California
SAM GRAVES, Missouri
RYAN K. ZINKE, Montana
ELISE M. STEFANIK, New York
MARTHA McSALLY, Arizona
STEPHEN KNIGHT, California
THOMAS MacARTHUR, New Jersey
STEVE RUSSELL, Oklahoma
Robert L. Simmons II, Staff Director
Robert Daigle, Professional Staff Member
Doug Bush, Professional Staff Member
Abigail Gage, Clerk
C O N T E N T S
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Page
STATEMENTS PRESENTED BY MEMBERS OF CONGRESS
Davis, Hon. Susan A., a Representative from California, Committee
on Armed Services.............................................. 2
Thornberry, Hon. William M. ``Mac,'' a Representative from Texas,
Chairman, Committee on Armed Services.......................... 1
WITNESSES
Fox, Christine, Former Director of Cost Assessment and Program
Evaluation in the Office of the Secretary of Defense........... 2
Hale, Robert, Former United States Under Secretary of Defense
(Comptroller).................................................. 4
Winnefeld, ADM James A., Jr., USN (Ret.), Former Vice Chairman,
Joint Chiefs of Staff.......................................... 7
APPENDIX
Prepared Statements:
Fox, Christine............................................... 35
Hale, Robert................................................. 46
Winnefeld, ADM James A., Jr. (biography and disclosure only). 59
Documents Submitted for the Record:
[There were no Documents submitted.]
Witness Responses to Questions Asked During the Hearing:
[There were no Questions submitted during the hearing.]
Questions Submitted by Members Post Hearing:
Mr. Coffman.................................................. 66
Mr. Rogers................................................... 65
Mr. Thornberry............................................... 65
ACQUISITION REFORM: STARTING PROGRAMS WELL
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House of Representatives,
Committee on Armed Services,
Washington, DC, Wednesday, February 3, 2016.
The committee met, pursuant to call, at 10:03 a.m., in room
2118, Rayburn House Office Building, Hon. William M. ``Mac''
Thornberry (chairman of the committee) presiding.
OPENING STATEMENT OF HON. WILLIAM M. ``MAC'' THORNBERRY, A
REPRESENTATIVE FROM TEXAS, CHAIRMAN, COMMITTEE ON ARMED
SERVICES
The Chairman. The committee will come to order. The
committee meets today to continue to examine the defense
acquisition system to improve its agility so that we can get
needed capability into the hands of the warfighter faster.
Critical to getting our troops what they need is starting
programs well, which is the title of today's hearing. Too often
programs start the acquisition process in an unstable position,
beginning with significant technical and programmatic risks.
And, unfortunately, this leads to delays, cost overruns,
performance shortfalls, and, as we have seen all too often,
cancelation of programs. Many argue that the stovepipe
requirements, budgeting, and acquisition processes contribute
to this problem and that better aligning these three could
shorten, simplify, and improve our acquisition system.
Also it is important to make hard decisions early about
achievable requirements that balance affordability, capability,
and speed to force. Starting programs well was the focus of a
lot of the reforms we made in last year's NDAA [National
Defense Authorization Act]. But getting the early steps right
is critical to further improvements. This morning, we are
privileged to have three witnesses who have had considerable
experience in the course of this process. And since all of them
have been here to testify before, I appreciate their courage in
coming back to testify now that they have moved on to other
pursuits. Ms. Fox, Mr. Hale, and Admiral Winnefeld have been
very involved in the cost estimation, budgeting, and
requirements process. And so we look forward to their insights
about further steps that we can work with the Department [of
Defense] on to improve--further improve--this acquisition
process.
In the absence of the ranking member, I am pleased to yield
to the gentlelady from California, Mrs. Davis, who is taking
his place today.
STATEMENT OF HON. SUSAN A. DAVIS, A REPRESENTATIVE FROM
CALIFORNIA, COMMITTEE ON ARMED SERVICES
Mrs. Davis. Thank you very much, Mr. Chairman.
And thank you to all of you. As the chairman stated, I
think our witnesses today are very well-suited to address us on
those issues, having served in the Pentagon, having been
through, I guess, the highs and lows on a number of
acquisitions. And we certainly wish that you will share with us
as forthright and honestly as you can what goes well and
sometimes what doesn't go so well. What are those lessons
learned? It is important for us to really take a close look at
that and be sure that we are doing everything that is the most
efficient and the most agile in terms of acquisition but, at
the same time, encouraging people to innovate and even to take
risks where that is appropriate. Sometimes the whole concept of
being free to fail is something that often is not discussed as
well as I think it should. And we know that there are certain
areas in which that is more possible and others in which it
certainly is not.
I think we also want to get your thoughts on the impact of
Congress, where we are constantly changing the acquisition
system. We know that each year a portion of the NDAA, known as
title VIII, includes dozens and sometimes hundreds of pages of
new law. In last year's bill, for example, both this committee
and our Senate counterparts added around 75 multifaceted and
detailed new acquisition laws. So while this annual effort to
fix the acquisition system is well intended, there is certainly
a chance that these constant changes in the law could be making
it more difficult for DOD [Department of Defense] to make good
decisions on programs.
We welcome your input today and look forward to what you
have to say. Thank you very much for being here.
Thank you, Mr. Chairman.
The Chairman. Thank you. The committee is pleased to
welcome Ms. Christine Fox, who formerly was Director of Cost
Assessment and Program Evaluation in the Office of the
Secretary of Defense, is currently affiliated with Johns
Hopkins Applied Physics Laboratory; Mr. Robert Hale, formerly
the Comptroller at the Department of Defense, currently
affiliated with Booz Allen; and Admiral Sandy Winnefeld, former
Vice Chairman of the Joint Chiefs of Staff, who is currently
teaching at the Sam Nunn School and also associated with the
Kennedy School up at Harvard.
Again, thank you all for being here.
Without objection, your full written statement will be made
part of the record. And now you will be recognized for any
comments you would like to make.
Ms. Fox.
STATEMENT OF CHRISTINE FOX, FORMER DIRECTOR OF COST ASSESSMENT
AND PROGRAM EVALUATION IN THE OFFICE OF THE SECRETARY OF
DEFENSE
Ms. Fox. Thank you, Chairman Thornberry, Representative
Davis, and distinguished members of this committee.
First, I appreciate all of the work you have done and
continue to do on acquisition reform. And I appreciate the
opportunity to speak with you today on this important topic.
During my tenure in the Department of Defense, my colleagues
and I spent considerable energy to improve the affordability
and feasibility of the major defense acquisition programs. In
my current position at the Johns Hopkins University Applied
Physics Lab, I have the pleasure of working closely with
scientists and engineers who are innovating with technologies
that will enhance our Nation's security.
My full statement has been submitted for the record. I
would like now to summarize briefly its major recommendations.
First, I would emphasize the importance of continuing to
require independent cost estimates for major programs. When I
became CAPE [Cost Assessment and Program Evaluation] Director
in November of 2009, many weapons programs were in the red for
both cost and schedule, some of which eventually breached Nunn-
McCurdy thresholds. The reasons are varied and unique to each
program. But a common factor was a strong want and need for the
program, coupled with institutional incentive to be overly
optimistic. In short, they thought: This time will be
different. But these optimistic assumptions rarely became
reality.
The Weapon Systems Acquisition Reform Act of 2009 changed
all that by forcing the Department to have an independent cost
estimate developed by CAPE for all major program milestones and
its certifications for programs experiencing cost overruns. No
longer could the Department base program decisions just on the
projections of a program's most ardent advocates. Sustaining
the progress of recent years will be all the more important as
the Department implements the acquisition reform provisions of
the fiscal year 2016 NDAA, which moves milestone decision
authority to the military departments.
One recommendation I can offer this committee is to amend
the law to ensure that CAPE continues to provide independent
cost estimates for all programs for which they currently have
responsibility, regardless of where the milestone decision
authority resides. Another key factor in starting programs well
is getting the requirements right. My colleague, Admiral Sandy
Winnefeld, when he was the Vice Chairman of the Joint Chiefs of
Staff, took significant steps to ensure that CAPE and AT&L
[Acquisition, Technology, and Logistics] had a voice as
requirements were debated at the Joint Requirements Oversight
Council. For example, technology maturity is now as much a part
of the requirements discussion early in a program's life cycle
as is cost and schedule realism. This important collaboration
really should continue.
With respect to the acquisition workforce, while much
progress has been made, I am still concerned that too often
program managers are incentivized to get their program to the
next milestone, regardless of whether it should go forward. No
one wants to throw up bureaucratic roadblocks and unnecessary
delays, but program managers must have the experience and
confidence and encouragement to stand up and tell hard truths
when needed, that it is not ready to go to the next milestone,
or maybe it is never going to be ready or even we don't need it
anymore.
In all, process improvements led by AT&L and the Joint
Staff are allowing us to design and field programs more
efficiently and effectively. But it still takes time. In the
fiscal year 2016 NDAA, the Congress has made important changes
to facilitate rapid prototyping and fielding of new
capabilities. We must also consider ways to develop DOD unique
technologies and keep them at the ready, on the shelf for the
day when the Nation has an immediate need and/or when the
budget environment changes, as it certainly will--I hope.
In addition to working with industry to prepare for these
transitions, the promise of advances in manufacturing would
give us the ability in the future to take a technology from
design to production on demand in the future. We must continue
to pursue these types of initiatives.
Now, to be sure, we wouldn't accept a rapid prototyping
tech on-the-shelf approach to build, for example, the strategic
nuclear submarine force. For those large programs, we are
pushing out risk and are increasingly following a realistic and
achievable path to procurement.
But what if we are not taking enough risk in our technology
development? In today's world, our potential adversaries are
rapidly fielding new technologies that might require us to push
ourselves in certain select areas. Perhaps we need to knowingly
take risk. This should be a new category of acquisition
programs in which we push the boundaries of our technologies
with full awareness and acceptance of the inherent cost and
scheduled risk.
In my view, this is an acceptable approach only if there is
an agreed upon need, and we are candid in our assessments of
the risk. In closing, the worst outcome in all of these areas
would be for the Department to be allowed to go back to the
days of believing in magic with regard to cost and schedule.
With prudent risks and proper controls on cost estimates and
requirements, the Department's acquisition system will provide
better outcomes for both the warfighter and the taxpayer. Thank
you again for the opportunity to appear before you today.
[The prepared statement of Ms. Fox can be found in the
Appendix on page 35.]
The Chairman. Thank you.
Mr. Hale.
STATEMENT OF ROBERT HALE, FORMER UNITED STATES UNDER SECRETARY
OF DEFENSE (COMPTROLLER)
Mr. Hale. Chairman Thornberry, Mrs. Davis, and all the
members of the committee, I appreciate the chance to be here.
I will talk today about the budgetary aspects of
acquisitions, starting with discussing acquisition unit costs.
But I will focus particularly on the need to control operating
and support costs. It is so important that I believe it should
be the next frontier for acquisition reform.
Before I turn to those topics, I would like briefly to
comment on the effects of budgetary turmoil in the Department
of Defense. Since 2010, DOD and many other agencies have seen
near constant budgetary turmoil: sequester, shutdown,
furloughs, continuing resolutions. We all know the list. And it
is frustrating. It has bad effects on program management in the
Department, takes away time that senior leaders could better
spend on things like acquisition reform. It wastes money. It
damages the morale of DOD employees, especially civilian
employees, who make up a lot of the acquisition workforce. I
would ask everyone on this committee, I would plead with you to
do all you can to get back to a more normal budget process.
Let me turn now to holding down--I will start with--unit
acquisition costs by starting programs well. For many years,
DOD has seen relentless growth in the unit cost of its
programs. It is typical for, as we go from one generation to
the next generation of a weapon, to see growth of a factor of
two or more, even after adjustment for inflation. Some of these
higher acquisition costs led to improvements in capability that
were needed to keep up with potential adversaries. However, the
higher acquisition costs, especially when you combine them with
the operating and support costs I am going to discuss in a
moment, forced the Department to reduce the overall size of its
forces. If we want to avoid further force cuts, then we need
program managers to make hard tradeoffs early in the life of a
weapon, first, to set baseline costs that are consistent with
likely future budgets and then to try to ensure that there
isn't unanticipated growth in costs above those baselines. Both
of those efforts are needed.
In recent years, the Department has made significant and I
think commendable progress in holding down unanticipated cost
growth. That cost growth has slowed. We have seen fewer
violations of the Nunn-McCurdy thresholds. But the Department
also needs to make those hard tradeoffs to get reasonable
baseline costs to start with. That is why I am glad to see that
DOD is establishing what it is terming affordability caps. It
described them in the September 2015 report on the performance
of the acquisition system. These affordability caps cover both
acquisition costs but also sustainment or operating and support
costs. They cover the full life-cycle costs of a weapon system.
According to that September 2015 report, we have seen 29 caps
established for major defense programs, organizations set up in
the services, as well I believe as in CAPE to monitor efforts
to do this. I am hopeful that DOD will use these affordability
caps as a vehicle for continuing to monitor and try to hold
down acquisition cost, so long as we are consistent with
assumptions of what we need to meet the threats.
I have focused so far on DOD's efforts. I would like to
note Congress is also playing a role here, especially in last
year's authorization bill. You made a number of changes, some
of which may help hold down acquisition costs. I note, for
example, involving the service chiefs more in the requirements
process, they at least will have a sense of budget problems.
Let me turn now to operating and support costs, which are
very important to the Department from a budgetary standpoint.
Operating and support costs make up more than half of the total
cost to buy and operate a weapon over its life cycle. They also
make up today almost two-thirds of the total defense budget.
They are so important or controlling them is so important, as I
said, I believe they should be the next frontier for
acquisition reform. In recent years, these operating and
support costs have grown sharply, even as force size has
declined. If you take operating and support costs--and by that,
I mean the dollars in the operation and maintenance
appropriation, military personnel--the adjustment for
inflation, take out wartime or OCO [overseas contingency
operations] costs, they have grown by 20 percent since the year
2000. At the same time, the size of the military force, as
measured by the number of Active Duty personnel, has declined
by 4 percent. So what is causing--and I should say this is a
trend that occurs in all the military departments. And it
didn't just start in 2000, it has been going on for decades.
So what is causing operating and support costs to grow and
what can DOD do about it? Some of the growth in these costs is
not directly related to weapons. It is related to programs or
issues like military compensation and health care. Working with
the Congress, the Department of Defense has had significant
success in slowing the growth in healthcare costs and
compensation costs. More effort is needed. I am pleased to see
that Congress and key Members have indicated they will tackle
military healthcare reform in this session or an upcoming one.
They also need to look at hard issues, like closing unneeded
facilities and continued efficiencies.
A substantial part of that operating and support growth can
be tied directly to weapons. So while DOD has devoted much
attention to controlling and holding down acquisition costs, it
has not yet paid as much attention to holding down operating
and support costs. The new affordability caps, which I
mentioned earlier, include, they call them sustainment costs,
but it is essentially operating and support costs. I very much
hope they provide the Department with a vehicle for working to
control these costs because of their budgetary importance.
Congress can also play an important role in slowing the
growth of operating costs. For example, Congress convenes
hearings. I am amazed I would come here and ask for a hearing,
but I am not in the House, so I wouldn't get away with that. I
think it would be especially important for this committee and
other defense committees to hold hearings on the implementation
and enforcement of these affordability caps with a focus on the
operating and support portions. Congress can also use reporting
requirements to shine a spotlight on operating and support
costs. The Nunn-McCurdy legislation requires reporting on
weapons programs that breach thresholds for unit acquisition
costs. And I know from personal experience, sitting in staff
meetings, these focus the attention of senior leaders. It is
time to consider similar reporting requirements for operating
and support costs.
Mr. Chairman, members of the committee, in sum, program
managers supervising DOD weapons have a lot on their management
plate, especially early in the life cycle of a weapon. But
during that period, they do need to consider tradeoffs between
requirements and costs and pay attention to these affordability
caps if we are to sustain reasonable levels of forces. And they
particularly need to focus, in my view, on operating and
support costs. It should be the next frontier for acquisition
reform. And given its budgetary importance, it is critical that
we conquer this frontier.
Mr. Chairman, that completes my remarks.
[The prepared statement of Mr. Hale can be found in the
Appendix on page 46.]
The Chairman. Thank you, sir.
Admiral.
STATEMENT OF ADM JAMES A. WINNEFELD, JR., USN (RET.), FORMER
VICE CHAIRMAN, JOINT CHIEFS OF STAFF
Admiral Winnefeld. Good morning, Chairman Thornberry and
Mrs. Davis and members of the committee.
Believe it or not, it is good to see you again. And I thank
you for the opportunity for me to be able to contribute my
thoughts on the important topic of acquisition reform. It is
also a pleasure to appear alongside two of my longstanding
former colleagues of whom I think so highly. As we approach
this very important topic, I think we should be mindful of the
fact that acquiring the tools that DOD needs to protect the
American people is not an easy task. We are talking about
conceiving, designing, budgeting, prototyping, building,
testing, adjusting, and evolving the most advanced technology
around and not doing it on the scale of the iPhone.
It isn't easy. And it isn't cheap. And it isn't always
fast. Though some nations do it faster than we do and some do
it for less money, nobody produces a better final product than
the United States. And when some pretty capable people from
both government and industry are trying to do this immensely
complex task in a cost-competitive environment within a chaotic
budget environment with a rapidly evolving threat and quickly
evolving technical landscape, it should come as no surprise
that we sometimes have cost, schedule, and performance
challenges.
That said, there is no question that we can do better. And
we are doing better. But I also applaud the committee for the
attention that you are giving in the interest of good
stewardship of our taxpayer dollars and our readiness to fight.
My participation today really regards the front end, the
requirements process, and, most specifically, the joint
requirements process, where I believe we have made some pretty
solid progress. Specifically, during the 4 years that I was
privileged to serve as vice chairman and oversaw this process,
we did the following: We sped up the joint document process by
dramatically shrinking the size of our documents and by
compressing the time allowed for our stakeholders to review
them. For example, initial capability documents that were once
2- to 300 pages are now limited to 10 pages. What once took 6
months or more to approve in an initial capability document is
now limited to 97 days, which sounds like a lot, but there are
a lot of wickets they have to jump through. We also worked hard
to inculcate the provisions of the 2009 Weapon Systems
Acquisition Reform Act [WSARA], which was a good piece of
legislation, into the requirements process, including bringing
cost, schedule, and technical maturity considerations into
joint requirements deliberations. We actually considered those
as factors. We shrank the Joint Requirements Oversight Council
meetings from an auditorium full of people to a much smaller
group in a much smaller room. And we really leveraged what the
WSARA asked us to do, and that is our outside experts, our AT&L
experts, our comptroller expert, our USD [Under Secretary of
Defense] policy experts, and CAPE and DOT&E [Director,
Operational Test and Evaluation] experts, specifically asking
for their advice in every single meeting.
And I think they would tell you, as Ms. Fox said, that they
felt like they were included in that process. We formalized the
joint emergent operational needs and the joint urgent
operational needs requirements processes and executed them both
with discipline and dispatch, taking only 15 to 31 days for the
whole requirements process to run its course. We worked with
our CAPE partners to speed up the analysis of alternatives
processing, including experimenting with doing the work
ourselves rather than putting it out for contractors to do it.
Whenever it was appropriate, we took a portfolio view rather
than looking at capabilities in stovepipes. And we started
including special access program capabilities into that
process, which was very important. And while ensuring the
COCOMs [combatant commands] knew that they were welcome as
members of the JROC [Joint Requirements Oversight Council], we
also imposed discipline on their integrative priority lists to
ensure they reflected capability requirements, not just
requests for more capacity. During my tenure, not a single
joint requirement group, in fact, working with program offices,
we actually trimmed a few that made sense for the warfighter
and saved money and heartburn in the process. We even
instituted quarterly meetings among the requirements,
acquisition, and budgeting leadership. But because there were
so few issues because we think we were getting that process
under control, we really never had a contentious discussion.
And we were transparent. To my knowledge, we never once have
turned down a request from Congress for a copy of a JROC
document, which I think is important.
I don't want to monopolize the time by talking too much in
detail about the provisions of the 2016 NDAA. There are some
good ideas in there. You have done some good work. There may be
a few that are legislating what is already working, but that is
okay. I would say that we were asked to have the JROC strongly
consider the service chiefs' views on the requirements process.
And I am not sure where that came from, because it is kind of
like the GEICO commercial: If you are at JROC, it is what you
do, is consider the chiefs' views. That is why it exists.
I also support the strong service chief role in the
milestone decision process. But I would flip it on its ear and
say this is less about giving them something they never had,
and I think this is what you intended, by the way, less about
giving them something they never had than it is holding them
accountable for something that they already have and could do
any time they wanted. And some of them were actually good at
that. I couldn't agree more with the initiatives you have to
enhance rapid prototyping. It is the only way we are going to
keep our competitive edge in a dynamic world. And without
causing more confusion in the process, I think we need to look
deeper into how we can institutionalize rapid prototyping so we
don't end up with a thousand different flowers blooming, and we
have a little bit of control over the process, which I think we
have, but we might be able to do better. I would like to see
some funds specifically set aside for and that perhaps even for
the deputy secretary and the vice chairman to control those
funds, because there are sometimes things that the joint world
needs that the services just don't love enough to make it into
their budget process. But I also would tell you that I think it
would be a mistake to fund something like this with a penalty
for cost overruns. For one thing, we would like to get rid of
cost overruns, which would mean there would be no money for
such a program. And for the other thing, I do believe it could
cause some unintentional bad behaviors if you start penalizing
programs for cost overruns. We want to limit those as much as
we can. But you could have some odious behavior in the process
of trying to do that. Absolutely agree with the legislation's
emphasis on better development of acquisition professionals. I
would ask that we all be cautious about adding more reporting
requirements. We have enough paperwork. And I also think we
need to keep a sharp eye on the testing process. I would like
to make just a couple of final points.
First, I think we could grant more flexibility to the
Department with full visibility to the Congress. That would
help. We need a little more authority I believe for
reprogramming. But, more importantly, I think we could give DOD
some upfront discretionary money for starting programs,
obviously, again, with strict accountability to Congress, that
would dramatically speed time for the initial development of a
system before an appropriation cycle catches up with it. We are
going to have to have that kind of flexibility if we are going
to keep up with countries that don't operate under the same
model we do.
And, finally, back to who I started with, I think we should
be mindful of the fact that it takes a while to see the effects
of change in this business. I think Congress has made some very
good improvements with the WSARA and the NDAA most recently. We
have also made some very good improvements inside DOD with
Better Buying Power and the like. We should take a deep, though
very watchful, breath and let the good work of the past few
years in reforming acquisition take effect. We have made a lot
of progress. Just look at the Virginia-class submarine as an
exemplar. Let's see how the new system works for us.
Once again, I want to thank you for the opportunity to be
here this morning. And I do look forward to your questions.
Thank you, sir.
The Chairman. Thank you.
Admiral, there is a book that suggests that if you are
tackling complex problems, you ought to start with why: Why are
you doing this. What is this about? And both you and Ms. Fox
kind of touched on this. The testimony we have had before this
committee over the last year is that probably never before in
the country's history have we faced so many complex national
security challenges all at the same time. While technology
evolves at an increasingly rapid rate, while key competitors
are making investments to deny us advantages, leading to the
Third Offset and other initiatives at the Department, and,
essentially, that the way the world is and the threats are
moving is faster than our processes internally. So do you share
that concern? Because to me, that is the why--we want to save
money. You know, we also need to get enough stuff to matter,
not just have a handful of items because of cost overruns, but
having the agility to keep up with technological changes and
adversaries that are moving much more rapidly in some cases
than we can is the bottom line of the why, to me, on this
acquisition. I would like, because of the position you have
held, I would like to hear your views.
Admiral Winnefeld. Chairman, I am in violent agreement. I
think you are absolutely spot on in that regard. We are going
to have to be agile and quick without, you know, a haste-makes-
waste phenomenon injecting itself. But we are going to have to
be very agile here. And I think there are two--even though we
are doing better by the way--I think there are two contributors
to why we might not be as agile as we would like to be. One of
them, candidly, is recognizing that change needs to occur in
the way we approach warfighting. If somebody is going to try to
deny us access to their space, we may have to try a new idea in
there. And I think that is very hard for the services to do.
Richard Pascale, who wrote ``Surfing on the Edge of Chaos,''
said equilibrium is the precursor to death. And, in fact, if we
find ourselves in stasis in our operational concepts and we
don't sort of wake up and say, ``You know, we need to change a
few things,'' then it is our own fault for doing that.
And then the second piece is having the mechanisms in place
so that when you do recognize change is needed, that you can
make it happen quickly. And I think the Department is pushing
hard for that. And Congress is pushing us to push hard for
that. And that is the right thing. I just want to make sure we
get a good, stable mechanism in place where we can actually
make that happen in the right way. And there are a lot of--the
Air Force has a terrific Rapid Capabilities Office. There is a
tremendous effort going on up in the Office of the Secretary of
Defense with a little group that works up there. The vice
chairman has a small group who works for him in trying to
rapidly generate SAP [special access program] programs. We
ought to just make sure that we empower those and that we keep
an eye on them and do the best we can to make sure they are
doing the right things.
The Chairman. Mr. Hale, Ms. Fox suggested that maybe we
need a new category of acquisition because maybe we are not
taking enough risks, thinking about experimentation and
prototyping. I think the admiral talked about prototyping too.
Okay. You had to deal with the budget aspects of this. So
what sort of challenges would we face if we thought that that
was a good idea, that we needed to take some more risk in
experimenting with technological--not just new technologies but
their use?
Mr. Hale. Well, I don't think the mechanical problems would
be an issue, Mr. Chairman. I mean, you can authorize and
appropriate funds in the category as you wish. And I don't
assume you have to make major changes in the budget. Moreover,
I suspect that usually programs are pretty inexpensive when
they are starting, that this would not be a large budget issue.
The problem comes when you get to the full development and
especially the procurement, the budget problems. So it seems
like a reasonable thing to me, and I don't see--if there is
agreement in Congress and hopefully also in the Department, I
don't see why there would be budgetary obstacles that couldn't
be surmounted.
The Chairman. I guess my thought was some of the pressures
you have been under were, okay, everybody is under budget
pressure; you see a pot of money, and everybody starts grabbing
for it. So it is not a technical or a mechanical issue. It is
more of a cultural question.
Mr. Hale. And a senior leadership issue. I mean, if a
secretary or a vice chairman and a chairman want these
programs, and they have a rationale for them, they will survive
the budget process. I think innovation is probably doing pretty
well right now under Secretary Carter. I listened to his speech
yesterday. He obviously feels pretty strongly on this issue. So
if the senior leaders want this, I don't see budgetary
obstacles now. Now, the problem is going to come when you get
things out of that you want to buy. And if that increases the
number of those without offsets or if we don't succeed in
things like controlling operating and support costs, then we
are going to have a problem but not just the starting.
Admiral Winnefeld. If I could add very, very briefly. One
of the things that kept me awake at night in that regard was:
Where is the idea out there that I am not hearing about that I
can empower? Because Bob is right, the vice chairman and the
deputy, we can make things happen. It is just: Where is that
thing being suppressed where it isn't getting the voice that it
should have?
The Chairman. Good point.
Ms. Fox, do you see other challenges with a new category of
acquisition to encourage experimentation and prototyping like
you suggested?
Ms. Fox. I do. I think the biggest challenge, honestly, is
this human nature self-incentive to be overly optimistic. And
so I really do believe that if we were to follow my
recommendation, it would be vitally important that the Congress
continue to demand, in this case in particular, those
independent cost estimates. And a good independent cost
estimate, and I think the team at CAPE is excellent, needs to
say: Hey, you know, there is a lot of risk here. But if you
think back to some of our greatest programs, I will just take
quickly GPS [Global Positioning System] as an example. We
started with a program called Transit, but we quickly saw that
we needed to move to something that gave us three-dimensional
position information. Went to GPS, it was actually a high-risk
program. And that program was almost canceled multiple times
because of the risk. I don't think we were straight up at the
beginning about the risk. If we all agreed it was worth it--and
I think it is pretty clear that it was--then perhaps we would
have been able to go forward without the constant risk of
cancelation.
The Chairman. Thank you.
Mrs. Davis.
Mrs. Davis. Thank you, Mr. Chairman.
I want to go back just a second to the changes in the law
and the independent estimates and just to drill down a little
bit further because I think, Admiral Winnefeld, you spoke,
maybe it was Mr. Hale, that talked more about the operation and
support costs, the difficulty in getting those right. What is
missing as we look at those that we need to change or build on?
Ms. Fox. Let me, if I could just, the Weapon Systems
Acquisition Reform Act did require CAPE to stand up an
operating and support cost cost-estimating capability. And that
is in progress. And from the enactment of WSARA, the ultimate
operating and support costs of a program has become a part of
the defense acquisition boards, an explicit part. So the
Congress legislated that we start doing this a while ago. The
Department is responding. But to echo something Admiral
Winnefeld said: Sometimes these things take time. And
developing a good historical basis for how technology equates
to operating and support costs in the fielding, it is going to
take time to build up that technology, I am sorry, that
database so that we understand the implications of technology.
So I think work is in progress, not at all to be confused
with we have solved it. But the mechanisms are in place. The
focus is there, more than it was. Mr. Hale talked about the
affordability costs, caps. I think that is a piece of it. And I
agree that it needs to be a part of how Congress looks at
programs, such that we are looking for that long-term
implication.
Mrs. Davis. When we think of innovation and we are often
thinking about technology, per se. And having fresh eyes on
that is always helpful. I am wondering in this area as well as
perhaps in others, are we really going outside the Pentagon
community, if you will, to bring that in? Even in this area,
where private industry is looking out at it a whole different
way, have we done as much as we can in that area?
Ms. Fox. No, absolutely not. And I think a key to bringing
in those ideas as innovative ideas on how to get O&S [operating
and support] costs down is it is tied back again to
requirements. For a long time, it was performance that drove
requirements. And you end up with a very high-performing jet
engine, for example, but it uses a lot of fuel. So if you now
crank into requirements, as Admiral Winnefeld clearly just
testified he started to do, an eye towards that, then you start
to mobilize industry and commercial ideas for how to
innovatively get high-performance engines with lower fuel
consumption. That has to be a part of our innovation process.
Again, I think it is starting. But, again, much more does
need to be done.
Mr. Hale. May I add just one point? I agree that it is
starting. I also think there is a human nature problem here. If
you are a program manager early in the life cycle of a weapon,
you want to get this system going. The key to that is to keep
the acquisition costs reasonable so that it gets through the
early stages. The operating and support costs are 5 to 10 years
out. They are somebody else's problem. And I don't want to be
meanspirited and suggest they are not thinking long range. But
I do think they tend to focus more on the acquisition. I think
we need pressure from within the Department to pay more
attention. I certainly didn't see the same interest in
operating and support costs as I did, the same concerns about
them as I did in acquisition and maybe something like exception
reporting a la the Nunn-McCurdy requirements. That said, I
would first be quick to acknowledge--and conversations I have
had with Frank Kendall I think bear this out--it is hard to
estimate operating and supports costs early on. You are 10
years out. You have only a general idea of the design of the
weapon. This isn't easy. But I think it is not impossible. And
I think we need to continue to pay attention to it and probably
pay more attention.
Mrs. Davis. All right. Thank you.
And perhaps, again, getting those additional eyes on it, if
that can be built in, to some extent. Sounds like that would
certainly be helpful. Just very quickly, one of the
differences, perhaps, we have had in moving forward is the
difference in classified versus nonclassified acquisition
systems, et cetera. Do we handle them differently? Is that
rapid innovation more cultural with classified systems and less
so? And what could we learn from that? How do we fuse those in
a way that is responsible?
Admiral Winnefeld. I think colloquially the way I would
describe it is that the classified programs have a lot less
hair on them that has to be accounted for, fewer critics that
have visibility into it that can slow a program down. Yet, they
seem to be fairly successful programs most of the time, not
always.
Mrs. Davis. What would do you do?
Admiral Winnefeld. Without getting into specifics, I think
you could, it might make sense maybe to demand or encourage a
study that does compare what are the characteristics of a
classified program acquisition compared to an unclassified? And
what can you bring out that is legal, doable, makes sense in
the unclassified world, and what can't you bring out? Some of
those things you probably couldn't do. But I think it is a
worthwhile effort to examine that. Because we all have this
instinct that the classified programs just work much more
smoothly.
There are fewer people involved, fewer inboxes, you know,
that sort of thing.
Ms. Fox. May I add to that? While I agree that they tend to
be more rapid, right, because there are fewer people involved,
I think the CAPE perspective is that there have been some
fairly impressive failures in that category of development as
well. So it isn't a total panacea. And I just would add that in
the comparison. I think that the CAPE roles of looking at these
systems is still important. And in most cases, but not all,
CAPE did have the opportunity to look at the highly classified
programs in much the same way as it looked at the other
programs. But Admiral Winnefeld is correct in that we don't
have these large meetings where everybody is free to opine on
the value and virtues of the program, which does make it more
rapid.
Admiral Winnefeld. And to Ms. Fox's point on failures, I
mean, one of the reasons sometimes those programs are
classified--it is not the only reason--is because they are so
advanced. And anything that is really advanced is going to be a
big challenge. So there have been challenges in those things.
But there is just less bureaucracy associated with those
programs.
Mrs. Davis. Thank you.
Thank you, Mr. Chair.
The Chairman. Mr. Conaway.
Mr. Conaway. Thank you, Mr. Chairman.
Mr. Hale, while not directly related to acquisitions per
se, all of that evaluation data comes from the books and
records of the Department of Defense. And I would be remiss if
I didn't ask you your thoughts on auditing the Department of
Defense, in particular the work that would have to get done to
audit the rollup of DOD writ large, as opposed to the
individual pieces that are going on, and then visit with us a
little bit about your perspective on transitioning to new
leadership next year and the risks to maintaining the pace and
the momentum that is currently I perceive to be going on with
respect to the audit role.
Mr. Hale. So I never escape audit, is that the----
Mr. Conaway. That is exactly right. No good deed goes
unpunished.
Mr. Hale. So I remain fully convinced that largely for
public confidence reasons, it is very important for the
Department of Defense to achieve auditable financial
statements. I am not involved in it day to day, but I believe
they are making progress. I am particularly pleased that they
have auditors now involved in three of the services, and I
think are close on the Marines for at least portions of their
budget statement. And I think it is very important that we get
outside auditors involved. The Department will make progress
and learn more. You asked about the rollup. I don't think--I
long ago learned that this is an esoteric area where I always
need help. And I don't have it anymore. But I don't think the
rollup problem would be as much of a problem with the
Department of Defense because they are carving up the pieces in
a way that doesn't overlap. It will be a major problem for the
government as a whole if DOD does get close to an audit, and
you want to turn to a full audit of the government. Because
there are a lot of exchanges of money that will have to be
sorted out.
Let me come to your last question, which I think is
critical. There are several things Congress can do to help in
the audit area. One is to continue constructive hearings. And I
give this committee and particularly you, Mr. Conaway, a
special credit for the hearings and attention to the issue.
Also be patient. I wish DOD had started 15 years ago at this,
but they didn't, at least not in the same way they have done in
the last few. It is going to take a number of years to actually
get there. There are significant problems. The biggest thing
that worries me, though, and where you can help is the
transition, as you mentioned, to the new group of senior
leaders. We need to have a situation that prevailed during my
tenure there when the Secretary of Defense and the deputy cared
about this, when it was important, obviously, to the
comptroller, to the new Under Secretary of Management, and to
the service leaderships because they have a lot of the action
now. We definitely need the new crop of political appointees to
understand this is important. It would be easier for your
Senate colleagues to do this because they will need to confirm
them. But you can definitely, in my view, play a role by
expressing your interest in letters and meetings and perhaps
asking questions at hearings once these people get confirmed.
So we need at least one more administration and probably a
couple to actually get through all of this. And we need to make
sure that it remains a high priority. And you can play a role
there.
Mr. Conaway. Thank you.
Admiral, could you talk to us how, at your level, the Joint
Chiefs, how that, coming from the top with respect to getting
the audit done is communicated to lower levels of the
organization? How did that work while you were there?
Admiral Winnefeld. I think the chiefs are supportive, very
much so, of the audit requirement, the need to be able to
audit. Most of that is done by, candidly, the civilian
comptroller side of the service secretariats and that sort of
thing. So I don't know that the chiefs have their hands on that
machinery. But my sense is that they support the need to do
that. And not only because of a public accountability issue
where we have to really be able to show the books, but it
helped them manage their own world. I would point to the Navy,
not because I am a former Navy guy, but their former vice
chief, Admiral Ferguson, he would hold contractor court where
he would bring in folks and really rake them over the coals to
make sure that we were getting the right bang for the buck out
of those contracts. And that is the sort of thing that will
benefit from having much cleaner visibility into how the money
is being spent. They are supportive of it, but they don't
really have their hands in it.
Mr. Conaway. But without that support, though, those
civilian folks won't react the way that they ought to. Well,
thank you all for your longstanding service to our country.
And I yield back. Thank you.
The Chairman. Mr. Larsen.
Mr. Larsen. Thank you, Mr. Chairman.
I am going to start with a rhetorical question--it is one
of those to make a point. And this is not a criticism of the
contractors or of the Navy or of DOD generally. But Next-Gen
Jammer is finally--we are moving forward on that. But that
thing has been Next-Gen so long, I am wondering if it should be
called Now-Gen or Previous-Gen Jammer. And the point is this
isn't even a large submarine or aircraft carrier. This is a
smaller pod to put on a platform. And it still took and is
still taking a long time to get to the point where we can
deploy it. But we are getting there. And it is great. So I want
to be clear about that. But the point I want to make is that,
big or small, it seems that the acquisition process takes a
long time. And so for you, Ms. Fox, looking at MDAPs [major
defense acquisition programs], is the MDAP problem a platform
problem? Is it a program problem? Are there certain things in
MDAPs that drive budget and timelines over set budgets and
timelines? Are there things in MDAPs that actually get done on
time and on budget?
Ms. Fox. Thank you. On an example like Next-Gen Jammer,
where I completely understand your observations and
frustrations, it is a capability we needed. But when it was
started, it was not realistic on the technological risks. And
so we are getting through it. And we are going to have a
capable jammer. And we need it. But some of the advanced
electronics and the need to miniaturize them and the threat
advances that have happened during the course of that program,
all of which combined to make it take longer than we wanted. So
I think that the MDAP program, again, it all starts well when
we all have shared expectations of both need and risk. And that
gets to time and cost and the technological risk. And that is
what I think we have worked hard to improve. But in places like
the Next-Gen Jammer, we did not cancel that program. We have
worked through those problems. But that is the big thing. MDAPs
tends to last for a very long time. So it is really important,
in my opinion, that we go through the process to get to a
system that we want to last for a very long time that is
sustainable affordably and upgradeable. Those are all aspects
of MDAP that need to be considered and that do take the time.
But I think we can avoid our disappointments if we are more
realistic at the beginning.
Mr. Larsen. It seems to me that the problem is part of what
makes MDAP sustainable is us. It may not be affordable, but we
sustain it. That is, we end up rewarding it being over budget
and not meeting the schedule by keeping it going because we
need it. So there is no incentive on the front end to get it as
right as we need it if we continue it despite what happens
later.
Ms. Fox. You know, I think that, my opinion, the Nunn-
McCurdy process has actually done a lot to push on that
problem. I can tell you right now, so from a CAPE perspective,
we didn't hate Nunn-McCurdy. We thought they forced a process
of looking at things critically. Of course, CAPE had a big role
in Nunn-McCurdys. And I think we try hard to play that role.
But I can tell you, the services hate Nunn-McCurdys. I mean,
they will do anything they can now to get a program started
such that they don't Nunn-McCurdy because of the challenges of
starting over, right, the assumption of cancelation. And that
has made a big difference. So, again, I think there are things
now in place that help us with the very problems that you are
targeting that we need to continue to push on but that over
time are making a difference. And I, at least, certainly saw
that in my time. When I got there, we had a lot of Nunn-
McCurdys to work through. It took a lot of time. It forced us
to scrutinize these programs in new ways. There are not very
many now. People don't like them. It is good. They shouldn't.
Mr. Larsen. That gets to my question about whether or not
you can build affordability as a goal. That is more than
rhetorical.
Ms. Fox. Well, it requires you to be willing, throughout
the entire process, to trade requirements for affordability as
you develop the program. And that is exactly the collaboration
that Admiral Winnefeld talked about, that I referred to, and
that I think is going on with these affordability caps and must
continue.
Mr. Larsen. All right. I think I heard you use Nunn-McCurdy
as a verb. So I guess we have advanced a long way if it is now
a verb.
The Chairman. Mr. Wilson.
Mr. Wilson. Thank you, Mr. Chairman.
And thank all of you for being here today. I appreciate the
strong commitment of Chairman Mac Thornberry on acquisition
reform and his persistence. As chairman of the Emerging Threats
and Capabilities Subcommittee, my greatest concern has been and
will be getting the newest and most effective technology to the
warfighter to protect against cyberattacks. Do you believe that
our current construct allows for this? And how do you believe
rapid acquisition might play a role in achieving this goal? And
also does this promote public-private cooperation?
Admiral Winnefeld. I would say that we, sir, we have built
into the requirements process the, essentially, cybersecurity
of programs, that they be resistant to that. I worry less about
the program itself than I worry about the people who are
building it and their networks candidly. I think we are making
some progress in that regard to hold our cleared defense
contractors accountable for the security of their networks so
that we don't lose our technology to a potential adversary. But
we are very mindful of the need for--and not just Internet
cybersecurity, I mean, the overall security of the electronics
in that platform, which could be potentially quite vulnerable.
So we are paying attention to that. I presume that is
continuing on after I have left. But it is a valid concern. It
is a singular vulnerability that we have--it is a new
vulnerability that we have to watch for.
Mr. Wilson. And I appreciate the efforts of Secretary Ash
Carter to visit Silicon Valley, to meet with leaders of IT
[information technology] as to what can be done to facilitate,
again, the most effective and up-to-date capabilities. And for
each of you, could you give us an example of the best practice
that the Department of Defense acquisition community should be
following to improve how they start programs? And can you name
a program where they--have actually been used in practice?
Beginning with Ms. Fox.
Ms. Fox. I believe that, as I have said, the best practice
is honest realism. And I think that the, I am going to say this
probably with some trepidation, I think the process we have
attempted to use to start the new bomber really worked hard at
looking hard at requirements, need, and affordability. It was
to my, in my experience, in my time, the first one to have an
affordability cap written into the direction from then
Secretary Gates to the Secretary of the Air Force. It
explicitly directed this tradeoff throughout the course of the
program between requirements and costs. So I think there were
some efforts taken there that have the potential to have
started that program well. We will see as it goes forward.
Mr. Wilson. Thank you.
Mr. Hale. So I will stay on my soapbox and say I think the
best practice needs to continue to look for better ways to
control the growth in operating and support costs, not that the
Department hasn't done anything, they definitely have. And the
affordability caps provide a forum for that debate. I can't
tell you a program where this has worked well. I am not close
enough to it now. I can tell you one where I think it is
important and that would be the Bradley fighting vehicle
replacement. As the Army develops this, they will buy it in,
hopefully, very large numbers. And so it will have some
substantial effects on operating and support costs. So I think
that is one way they definitely need to pay close attention to
the affordability cap in the operating and support costs
portion of it.
Admiral Winnefeld. So there are probably a number of best
practices to talk about. In regards to the ability to field
things quickly when the warfighter needs them, we have
instituted the JEONS and JUONS process. The JUONS is a joint
urgent operational needs statement. I will give you a couple of
examples of that. During the Ebola epidemic, Transportation
Command submitted a joint urgent operational needs requirement
in October of 2014. That was validated as a requirement by the
JROC in October of 2014. And it was delivered in March of 2015.
And that gave us the capability to transport Ebola patients
safely on DOD aircraft. Another example of that would be a full
motion video dissemination system that was submitted by CENTCOM
[Central Command] in December of 2014. It was validated in
January of 2015, within that 30-day window I talked about. And
its initial operational capability was May of last year. And
they have three systems up and running as of September of last
year. So that is the urgent side.
The middle ground, which is really sort of challenging for
us, is the joint emergent operational needs statement, which if
something is, you don't have to have it tomorrow to protect a
warfighter in something that is ongoing, but this is an
imminent conflict where we really need to get something moving
quickly. And we have responded to a Central Command request for
real-time ID [identification] capability that was validated in
November of 2014. And its initial operating capability will be
this June, within this 2-year period. So I think what we are
doing is we are working hard to unveil best practices as we
find them and to try to accelerate things when the warfighter
really needs it.
Mr. Wilson. Thank you very much.
The Chairman. Ms. Bordallo.
Ms. Bordallo. Thank you very much, Mr. Chairman.
I guess my question will be to former Deputy Secretary
Hale. I look forward to seeing progress in fielding the Long
Range Strike Bomber, the capability that we certainly need. So
as we look forward in the acquisition process, can you speak to
how we can apply lessons learned to keep what will be a long-
term program in check, time and costwise?
Mr. Hale. I think I am going to defer to the former Deputy
Secretary, Ms. Fox.
Ms. Bordallo. Ms. Fox.
Ms. Fox. Thank you. I agree completely about the importance
of the new bomber. And as I referred to a minute ago, the
initial start of that program specifically suggested that the
Department needs to debate throughout the course of the program
affordability and requirements to make sure the Department gets
the capability it needs but that it stays affordable, such that
the Department can buy it in sufficient numbers. So we have
both capability and quantity. And I think that the most
important thing is that dialogue continue. I think that the
2016 NDAA has things in there that will enhance the dialogue
or, you know, Admiral Winnefeld pointed out that opportunity
already existed. And I completely agree with that. But I think
the legislation pushes more for that kind of collaborative
dialogue throughout the course of the program.
But the Joint Staff, the military department, and OSD
[Office of the Secretary of Defense], and industry needs to
constantly be talking about these tradeoffs as it goes forward
such that we get a bomber, a timely bomber, that is also
capable and is affordable enough to buy in numbers.
Ms. Bordallo. I don't know if you mentioned the time, but I
also asked for costwise.
Ms. Fox. So there is actually an affordability cap on the
bomber, or at least there was when I was there. I can't say
that I am current anymore, but there was a cost cap on that,
and that is directly related to the time to field.
So I believe that the intent is there for time, cost,
requirement tradeoffs to go through the process. I think that
the thing that the Congress can look for is, is that dialogue
happening, and if any of those requirements are changing, why,
and is there a justified need, so that, again, it is all about
keeping eyes open so that we know what we are getting into.
And there was an attempt at the beginning of that program
to put that kind of eyes-open tradeoffs into the process.
Ms. Bordallo. Thank you very much.
And I yield back, Mr. Chairman.
The Chairman. Mr. Wittman.
Mr. Wittman. Thank you, Mr. Chairman.
I would like to thank our panelists for joining us. You all
had mentioned affordability. I want to ask a question in that
realm. It seems like where affordability goals have been used,
they have been successful. I have a question, though, or a
direction in how they are being utilized.
Are they being used across all acquisition programs? Are
they being used early in a program's life? Are they managed by
someone at a senior level, at a deputy level, who has oversight
over all the aspects of the program, requirements, budgeting,
program management, acquisition?
So I guess my question is this, is how often does DOD use
affordability constraints or goals in the management of a
process, and should those affordability goals be inserted at
Milestone A, so they can have an effect early on in the
process? I would like to get your perspective on that.
Mr. Hale. Well, I think right now there is--according to
the September 2015 report again, I don't have up-to-date
information. They said there were 29 caps. They said it was
about 29--or 70 percent, I should say, of the MDAP programs
have them. I think most of them are put in place as you get
near Milestone B, and because I think you have a better sense
then of a weapon that you can cost out. Some of them precede
Milestone B.
They didn't get a lot of attention in the September 2015
report. There was one page describing them, but they are also,
I think, relatively new, and so I think, as I said, I believe
this is an area where Congress can--should continue to ask
questions of the DOD witnesses that come before them as to how
well they are doing in both implementing and enforcing them.
And as you heard me say several times, I would pay particular
attention to the operating and support cost portions of those
caps, since I think they are newer, harder to do, and probably
don't get quite as much attention as the acquisition side. Is
there anything you want to add to that?
Ms. Fox. If I may, I would like to add. So I do think
Secretary Hale said that they are new, so I think we need to
give it time. The bomber example is one that is a little
further along. However, I would want to go back to emphasize,
in my view, the importance of the conversation about
affordability goals early and throughout because if you stick
strictly to the affordability caps, you may be trading
capability throughout that makes the program less valuable when
it is ultimately fielded.
This gets back to the risk discussion that we had earlier.
Sometimes I worry that in the interest of--you know, the
pendulum swings right, so we were taking nothing but risk and
had terrible red cost and schedule situations. But we don't
want it to go so far back the other way that we squeeze all the
risk out, and therefore, we have got affordability caps, but we
don't end up with programs that actually advance capabilities.
So it is a conversation. Congress has to be part of the
conversation, in my view, transparent but eyes open.
Mr. Wittman. Yeah. And let me ask you this. You know, the
whole idea of affordability, I think, has to include the
concept of value, and if you do that, it has to start in the
program writing process to make sure there is continuity there,
to the process where you get to a proposal, to the process
where you get to program managers, and there is a stovepiping
of that that happens right now.
So along the way, affordability might get mentioned or
value might get mentioned, but it doesn't continue through the
process. That is why, I think the question--Admiral Winnefeld,
I would love to have your perspective there since you served at
that level. How important is it for senior decision makers at
the deputy secretary level to look at the continuity of this,
to make sure that if we are going to use affordability as a
part of that, that value transfers from stovepipe to stovepipe,
from requirements to proposal writing to program management to
acquisition?
Admiral Winnefeld. First of all, it is about communication.
It is about inclusion, making sure you have got the right
people in the right meetings. I do think that the--if the value
is represented by whether the requirement is being achieved, or
you know, the distance between threshold and objective or
however you want to characterize it, I think that does get
carried through the process. And in fact, as the JROC, we would
not just sort of hand off a requirement and wash our hands and,
you know, somebody else's problem. We would get frequent
briefs. For example, I got a brief every 6 months on the F-35
that was very detailed on the status of that program in front
of the entire JROC and the advisors.
And so we would be able to assess whether the value was
being retained as the program marks through its various, you
know, progress. It is an important goal you are stating that we
need to make sure we don't lose sight of that as you are
focused now on manufacturability and cost and O&S and that sort
of thing. But I think we are okay there. It is just something
that senior leadership, as you point out, needs to keep an eye
on.
Mr. Wittman. Very good.
Thank you, Mr. Chairman. I yield back.
The Chairman. Mr. Scott.
Mr. Scott. Thank you, Mr. Chairman.
Ma'am, gentlemen, thank you for being here.
Admiral Winnefeld, I had the opportunity to watch my
Bulldogs whip up on the Yellow Jackets this year. I don't know
if you made it to the game or not, but it is usually a pretty
good one. I couldn't help it. But I know you have been
affiliated with Georgia Tech for a long time, and I hope to see
you there in short order.
And I just wonder, as I listen to things and look at the
way things happen in Washington, if the fear of failure
sometimes isn't stronger than the desire to succeed. And when
we get into things at the Pentagon, it seems that the getting
something that is good enough ends up with so much criticism
that we strive for something that in some cases isn't
attainable when we spend a lot of money getting nowhere.
I look back at the purchase of the F-22 and what happened
there, and I think right now we would be very happy to have
more F-22s. But I have watched the one program that I have had
the most experience with has been the JSTARS [Joint
Surveillance Target Attack Radar System]. It was something that
was--we were looking at the recapitalization of this when I got
here. It certainly seems that we are starting to move forward
with this, and the recap long term is estimated to save $11
billion in operating sustainment over 20 years, and when we
look--we have waited too long now. We know we are going to have
a capability gap with that intelligence platform.
Is there enough emphasis on the making sure that those
major acquisition programs stay on schedule, I guess, is my
primary question.
Ms. Fox. So, again, I do believe that the schedule part of
the Nunn-McCurdy legislation puts a point on it, for sure. I
also think schedule and costs are so intertwined that the cost
overrun aspects of it are so tied to schedules, that that is a
concern. But I take your point, and I just have to harken to
Secretary Hale's point about the budget pressures, which I know
this committee also wrestles with.
When you have this kind of budget pressure and uncertainty,
the Department responds by what we call slips and slides, slip-
and-slide programs, which stretches schedules, stretches and
adds cost, and it is what the program does in response to
wanting--to being over-programmed but having genuine needs.
JSTARS is a good example, I think.
So this budget environment is very difficult, frankly, for
maintaining cost and schedule. And the Department is slipping
and sliding. I think that there is a lot of oversight to try to
prevent that as much as possible every year through program
review, but I can tell you from personal experience, every year
in program review, we slip and slide things, and every time you
do that, you add cost and schedule.
Budget predictability is critical, and adequate budget to
support the operations that were--that the Department needs to
do, the size of the force that goes with that, and then
modernization, it is all part of the package.
Admiral Winnefeld. I just want to underscore that. And I do
so in full recognition that this committee has actually tried
very, very hard to get that stability into the budget that Mr.
Hale talked about, both under Chairman McKeon and under
Chairman Thornberry, so please keep that going.
But it would break your heart to sit in on some of these
what we call DMAGs, Deputy's Management Action Groups, and look
at the trades that are having to be made with these literally
budget line items from year to year that are shifting around
constantly because of the churn in the budget. Not having, you
know, first of all, three-quarters of a years' worth of time to
work because the NDAA doesn't get passed or the appropriations
thing doesn't get passed until the end of year, and then only
having 2 years of predictability, it just introduces incredible
turbulence and churn into these programs. And we literally sit
there at the table and you're moving numbers around, and you
can just see the breakage about to happen in these programs. It
is underestimated impact.
Mr. Scott. So I would just point out that--and you know
this, that, you know, the acquisition cost of the first unit is
a lot different than what it takes to produce the second one,
and I just wonder if some of the accounting that gets done at
GAO [Government Accountability Office] and other areas, if
their pricing technology is a variable cost instead of as a
fixed cost because once it has been sunk into this, the new
weapons system, it is gone. Thank you.
Thank you for being here, and I hope to see you in Georgia.
Admiral Winnefeld. Go Jackets.
The Chairman. Admiral, there is--I think all of you have
expressed some support for affordability caps or goals. One of
the concerns that I have heard is that, okay, if you start out
with this affordability goal, then the military is going to
dial back the requirements to fit within the affordability
goal. And so what is your view about that concern, not really
saying what they need but just trying to try to calibrate what
they can get?
Admiral Winnefeld. It is a good question, and I would say
at the front end of that process, the WSARA asked us to
consider cost when we were formulating requirements. It didn't
say you have to put a cost cap on. It didn't say, you know,
that should be the principal and only variable when you are
considering a requirement. It just said consider it.
And I think that we have taken a mature approach to that,
looked at it as I think the spirit of Congress intended, and
that is: Look, don't give us a gold-plated requirement that is
just going to be unrealistic from the start, that is going to--
doomed to failure either from a cost perspective because of the
technical risk or what have you, and I think--I don't have any
examples at the tip of fingers. It has been too long since I
have been there.
But I do recall several times when we said, you know, we
have just got to be really careful here. This technology is
tight, and you know, we are going to have to maybe dial either
back the timeline or the actual requirement. So--but I don't
know that it ever really had a major impact on what a
warfighter was looking for.
And then there is the whole process of threshold and
objective that builds in a little bit of flexibility there for
what--you know, a stretch goal for the requirement, you know,
to try to achieve that by trying to hop across that threshold
and get there successfully. The thing I worry about with
program managers, who are paid to spend every last dollar
getting as far as they can from the threshold to the objective,
there is a knee in the curve there somewhere, and we ought to
reward those folks when they come back and say, you know, I
could spend 90 percent of this money just getting another 2
percent towards the objective, maybe reward them when they take
a better approach than that.
The Chairman. Yeah. And I want to--go ahead, sir.
Mr. Hale. There are two sides to this coin, and we need
innovation for sure, and I think Secretary Carter made that
clear yesterday and is getting emphasis, but we also, when we
develop something innovative, need to have balanced the cost
versus the requirements in a way that we can buy a reasonable
number of them and pay to operate them.
So I think the affordability caps don't need to stifle
innovation, much of which occurs before they are set. I hope
that they will help the Department make tradeoffs so that it
gets reasonable numbers of these weapons and not the B-2 sort
of situation where we bought, what, 21 of them, and I hope we
don't do that with this bomber.
The Chairman. Yeah, yeah, me, too.
Mr. Hale, message received on operation and support costs.
Do you think it is feasible to have some sort of cost goals or
caps for pure services that the Department contracts for, which
is an increasing part, as you well know, of the Department's
budget?
Mr. Hale. So that is a good question and not one I thought
about a lot. I think it is worth thinking about. It probably
would have--I mean, for some cases and services, we do fixed-
price contracts if we have one, but many of them are not, and
it probably deserves some more thought.
And maybe perhaps I could ask Dr. Fox here if she has some
thoughts on that one since I don't have anything really good to
say.
Ms. Fox. It is not doctor, but that is okay. Thank you for
the compliment.
So, okay, service costs, yes. You know, it all gets down to
the number of efficiency reviews that the Department has done.
And I saw Secretary Carter's speech yesterday, apparently
continues to do, and service costs are a key part of that.
So there are two really hard things about this, if I could.
One is you really need to understand what we need these people
to do. So if you want to take out service costs, we want to
make sure that we are understanding that we might have to take
out things that they are doing and look at the products, the
services they provide. And then the other side, which is really
far from that, is management because a lot of them are maybe
not doing critical things, right. There may be we have just let
the services grow.
So you have this very hard detailed work that is required
to trade off--to look hard at have we grown, because things
grow, and so you need to push that down, which we always need
to do, and then you get to a point, and in some areas of
services in DOD, I believe that there are points where you have
gone too far, and then you start to see people in uniform
performing services that it would be far better and cheaper to
have contractors perform.
So what does it all come down to? A lot of hard detailed
work. You have to peel it all back, ask: What are they doing?
Is it managed well? It is constant. You have got to be vigilant
about it. I certainly think, for the three secretaries I had
the privilege to work for, they pounded on me and us to do
that, and it is constantly needed, and so keep pounding is my
best answer. Sorry.
Mr. Hale. With a moment to think, let me add a thought, and
that is, some significant contracts occur in the support of
weapons systems. And I think if we find ways to shine a bit
more of a spotlight on O&S cost, which I think is starting to
happen, but continue that, we will accomplish some of the goal
of trading off contracts for services as well as other aspects
of operating and support costs, but it is a good question, Mr.
Chairman.
The Chairman. Ms. Fox, you mentioned at one point earlier
today about the incentives of the program managers to do
certain things. One of the conclusions that I think most of us
have reached, as we have looked at acquisition, is that is
really crucial. You know, we can pass whatever laws we want to,
but it is the incentives for the decision makers that really
control the outcome.
Do you have any other thoughts or guidance for us on
incentives that may not be operating in the way that leads to--
that lead to the results we want?
Ms. Fox. So it is--I agree with you completely. I think the
incentives have moved with the emphasis on starting programs
well, but there still are an enormous number of incentives in
the system that start from how people are assigned to how long
they are assigned to how they are promoted and rewarded that
are all about the momentum of the process.
So, for example, one of the aspects of the acquisition
process--so you get a program manager who is trying to get to
that next milestone, that is their incentive or they're
incentivized to do that, and they find a better way. A
contractor comes along with some new idea, or there is some new
innovation. Their incentive is not to say, ``Oops, wait, stop,
let's do that,'' because what they are looking at are all the
things they have to do to get it right back to where it is
right now in the process.
So the things that this committee is doing, the things that
I think Secretary Kendall is trying hard to do in streamlining
the acquisition process, those are all necessary parts to
incentivize people to do smart things along the way. And right
now those incentives aren't there because it just feels like
they are pushing a boulder up the hill, and they don't want to
lose ground.
The Chairman. Well, I think back to keep pounding away,
that is one of the areas where we do need to understand what it
is like to be doing that day to day and try to improve.
Mrs. Davis.
Mrs. Davis. Thank you, Mr. Chairman.
Just quickly, I think as you were speaking, Ms. Fox, you
know, sometimes we know what people do, but asking why we are
asking them to do it is different. And sometimes that is a
little harder to incorporate.
We have a better budget right now in terms of predictions.
I mean, there is a little bit more predictability in the
budget. I hope that is correct. And I am wondering, is there a
way of tracking, if you will, how people are performing, how we
are doing as a result of that, and being able to go back so
that future Congresses will see the difference? And I am--you
know, really some metrics that get a handle on the impact, the
consequences of doing things in a more predictable fashion. Is
this a good time to look at that? What would those metrics look
like?
Ms. Fox. So absolutely this is a good time to look at that,
and my answer is not restricted to this time. This is a
historical view, and one of CAPE's roles is to collect that
data over time, and they do that well, and they should be
continued to do that well and be required to do that because
without historical data, you can't do the very important thing
that you just suggested.
I will refer you, if I could, to a study done by Dave
Nichols, who used to be the cost director in PA&E [Program
Analysis and Evaluation] formerly and is now at the Institute
for Defense Analyses, and he did exactly the study you are
suggesting where he tried to correlate the performance of
programs to different acquisition reform initiatives, and
interestingly, in a nutshell, he found that not much
correlation there but a very strong correlation to precipitous
budget drops.
Whenever the budget dropped or became very uncertain, the
Department went into that slips and slides method that I
referred to earlier, and that is when the costs started to
grow. So he did that long-term view that reinforces exactly the
question that you are asking, and I do hope that we are
starting a new period of predictability such that we can
recover that and get back to performance predictions and
achieving the best that we can.
Admiral Winnefeld. You know, it might be interesting
sometime, and I hope I don't put my former DOD colleagues on
the spot on this, but to just have them bring maybe one slide
over from one of those decision briefs that we have, to show
you the kind of puts and takes that they are looking at with
budget uncertainty. And, well, you know, we have option A,
option B, option C, option D, and what all those little options
do to crunch the program, and you know, if you have to save X
amount of money, what it really does.
That might be sort of maybe for a small group, maybe for
the chairman and ranking member and some staffers to just kind
of walk through that process and see what people are going
through.
Mr. Hale. So I would just add, we have some predictability
for 2017, and I am thankful for that. Although I think the
issue of OCO will arise and may affect that. 2018, we are
potentially back in the soup, and there needs to be a broad
budget deal in a new administration that looks beyond just
discretionary spending but also at entitlements and probably
revenues as well, and a device to get rid of this meat-ax
sequester that was put in place by the Budget Control Act, and
I hope that happens. It hasn't been debated much so far, but I
hope that it does get debated and that it happens in a new
administration.
The Chairman. For what it is worth, I hope it happens, too,
and I hope that----
Mr. Hale. Be open--too.
The Chairman [continuing]. The stability we thought we were
achieving last year is the stability that we do achieve this
year, regardless of the increased operational costs, which, you
know, are a fact, given the way the world is moving.
So, Mr. Veasey, you have a question? You are good.
Mr. Lamborn.
Mr. Lamborn. Thank you, Mr. Chairman, and thanks for having
this important hearing, and thank you all for your
contributions.
Former Admiral Winnefeld, I want to ask you in particular,
and by the way, thank you for your distinguished service, and
it was good to get to know you when you came to Colorado
Springs. As the chairman's designee heading the JROC, how do
you feel the current service-led acquisition system serves
national requirements, including nuclear forces, NC3 [nuclear
command, control, and communication], space, and missile
defense, are these capabilities service priorities?
Admiral Winnefeld. I think they are becoming more and more
a service priority. I think we are on a good trajectory there.
We were not several years ago, and--but I think the senior
leadership within the services, particularly the Air Force and
the Navy, who are most concerned with the particular programs
you are talking about, have really stepped up recently. They
have had some encouragement from a number of forums, the--Frank
Kendall, the head of AT&L, and I co-chaired a forum on the
command and control system, nuclear command and control system,
that brought all the stakeholders together in a very
cooperative fashion and tried to stitch things together there.
I think that Deputy Secretary Fox, when she was in power,
and also Deputy Secretary Work put a lot of emphasis on that,
and I personally put a lot of emphasis on this, and the service
secretaries and chiefs have responded very well. They knew that
this needed to happen. I think we are on a much better
trajectory, I will tell you, than we were a couple of years ago
in the nuclear command and control arena.
Mr. Lamborn. Excellent. That is great to hear. And kind of
a followup, can you explain why strategic missile warning, ITW/
AA [integrated tactical warning/attack assessment], is
important? Should this capability be considered a part of NC3
as opposed to a space system, which it currently is?
Admiral Winnefeld. First of all, it is important because it
links the sensors that would detect a missile launch or other
thermal event to the people who need that information, the
command and control leadership, so it is a very, very important
system. I am not convinced that it belongs in a nuclear command
and control system. It is a space system, just like GPS is a
space system.
People who are space savvy both on the technical side and
the operational side probably ought to be the ones running it,
and in some cases, those platforms ride on other platforms as
well. I don't think there is any harm in leaving it where it
is, and I think you have actually got maybe right now really
good ownership of the space piece.
We have got a very good trajectory also on the space
executive agent inside DOD, the Secretary of the Air Force, so
I would tend to not want to tamper with that, but it is
something that we have got to pay very close attention to
because, you know, I always say the most vital national
security interest of the United States is the survival of the
Nation, and being able to detect somebody who is threatening
that with a missile launch is absolutely critical, so we've got
to make sure we pay close attention to it.
Mr. Lamborn. Okay. Well, thank you. And as another
followup, have you seen the Air Force apply appropriate
priority to its modernization?
Admiral Winnefeld. This falls back into your first question
where they are on a better trajectory, I think, than they were
several years ago. They have stepped up to the plate. They
realize that. I haven't been in for 6 months to look at where
it actually fell out in this year's budget, so I can't make an
assessment there, but I have sensed, as I was leaving, that
they were strongly committed to that program, so it would be
interesting to see what pops out in the budget. I lost
visibility over that 6 months ago.
Mr. Lamborn. Okay. Now, what would you tell Air Force
senior leadership if someone were to suggest that, well, we can
trade 1 or 2 minutes' worth of missile warning time in exchange
for saving some budget resources, which we can apply elsewhere,
what kind of tradeoff would you consider that?
Admiral Winnefeld. The only tradeoff I would consider is to
get one or two more minutes of warning time in that regard. We
need everything we can get there. Again, the critical element
of the defense of this Nation from the most catastrophic attack
you can have, and I wouldn't want to trade any time. Obviously,
if somebody said, ``Well, it is going to cost you a trillion
dollars unless you accept this 1 minute,'' you know, there is--
every man has his price, I suppose, but I really would be
reluctant to consider any decrease in the amount of warning
time we give the President in relation to an attack on this
country.
Mr. Lamborn. Okay. And Mr. Hale, Ms. Fox, in the short time
we have left, do you have any observations on our dialogue?
Mr. Hale. I don't have anything to add.
Ms. Fox. I would just add that I completely agree with
Admiral Winnefeld. These are critically important areas. I
think that the Department is focusing on them more and needs to
continue to do that, and resources are going to be required to
modernize these important areas in the future, and it is going
to continue to be a stress on the budget, more so.
Mr. Lamborn. Okay.
Thank you, Mr. Chairman. I yield back.
The Chairman. Mr. Veasey.
Mr. Veasey. I did have one question that I wanted to ask
the panel. As far as acquisition reform is concerned, and
someone may have already asked this, so if they have, please
forgive that. But if there was one area of reform that you
could pick and you can only pick one, like where would it be?
And it could be a policy or a technique or anything that would
just maybe be the beginning of something really good as far as
acquisition reform is concerned.
Ms. Fox. I would think about how to add back risk into the
equation of acquisition programs with eyes open, making sure
that we completely understand the cost and schedule
implications of that risk, but I--that is the one aspect of
reform that I think we haven't focused enough on since we have
done so much good and important work on swinging us back to
predictable programs. I think now we need to worry just a
little bit about whether we have become too risk-averse.
Mr. Hale. Well, as I said in my statement, I would try to
build on the framework the Department has to do a better job of
controlling operating and support cost because they are so
important to the budget, two-thirds of the total defense
budget, more than half of the life-cycle cost of weapons. We
have got a framework to do that, and this affordability caps
that the Department has used, I think it needs more attention
and effort to try to control these costs.
Admiral Winnefeld. And while I am in absolute agreement
with what my two colleagues have said, because those are very
important, I would at least potentially open a dialogue with
the Department, including AT&L and the comptroller and CAPE on:
Does it make sense to provide money--discretionary money
upfront to the Department so that they can accelerate
development of programs once the requirement has been
established so you can visualize in rough crude terms that the
requirement hits the street, now we have got a budget for it,
and because of our cycle process--you know, it is 1\1/2\ or 2
years before the thing really gets money. If there were a pool
of money where we could actually accelerate development in that
space, you might actually bring some of these programs forward
significantly in time at relatively low cost, you know, just
not--just eliminating that waiting game for the budget to catch
up to the requirement would probably be something at least to
entertain a dialogue with the Department on.
Ms. Fox. If I could just add to the importance of the
access to money. I do believe that the NDAA includes a rapid
prototyping and fielding fund, if I read it correctly, not
really sure that I appreciate exactly how that will be
implemented, but ideas like that to allow the Department to do
the kinds of things Admiral Winnefeld suggested, I think, are
critically important to increasing our ability to get new ideas
out to the operators.
Admiral Winnefeld. And just to amplify. I think Ms. Fox
would agree with me. We really are talking about two different
things here. One is a pool of money for rapidly experimenting
with new ideas and seeing if they bear fruit and then turning
those into programs.
The other thing is maybe even a stable, fairly vanilla
program that just is running through its life cycle and not
having to wait that year and a half or two to get it started.
It doesn't take much money to get these things going, but if
you are having to wait that year and a half just pro forma
because of our process, then you are losing time.
Mr. Veasey. Thank you, Mr. Chairman.
I yield back my time.
The Chairman. Thank you.
Mr. Brooks, do you have questions?
Mr. Brooks. I do. Acquisition reform is something that we
need as a matter of good government, but I would submit further
that it is very quickly becoming a matter of financial
necessity. I am not sure if you have seen the kind of economic
financial data that we have been seeing in Congress, but it has
taken a dramatic turn for the worst.
By way of background, I was elected in 2010. Since 2010,
one of the things that the Republicans in Congress could at
least point to every single year the deficit got lower--i.e.,
better--still horrible at $439 billion, which was last year's
deficit, but that is a whole lot better than the string of
trillion dollar deficits that we had.
In the first quarter of this fiscal year, revenue has been
up 4 percent, which is a good thing, but spending went up 7
percent. According to the Treasury Department, the first fiscal
year, we had a $36 billion worsening of our deficit situation
compared to the first quarter of the previous fiscal year. By
extrapolation, that would suggest that we are going have a $144
billion deficit worse than what we had in a bad $439 billion
deficit last year. However, the CBO [Congressional Budget
Office] is a little bit more optimistic saying: Well, we think
it will only be $130-something billion worse, putting it
somewhere in the neighborhood of $570 billion.
They are also telling us that while we blew through the $19
trillion debt mark recently, within a decade we are going to
blow through the $30 trillion debt mark, which means that we
are looking at a 10-year average of over a trillion dollars a
year in deficits. That being the case, what is your judgment
that the Pentagon is really serious about streamlining
acquisition efforts through the Federal acquisition
regulations, changing that, or what have you, in order to
maximize the bang for the buck that the taxpayer has to
allocate to national security?
Mr. Hale. Well, my evidence is a little out of date, but I
think they are serious, and I think they have made some
progress in important areas of acquisition reform. To go to
your broader statement, Mr. Brooks. We need a broad budget
discussion in this country, not just the discretionary
spending, not just defense and nondefense discretionary
spending, which make up about 30 percent of our spending, as I
think you know.
We need to get at the other 70 percent, entitlements,
mandatory spending, and interest on the debt, and probably
revenues as well, and as I said earlier, I hope that in the new
administration, we see a broad budget deal that goes beyond. I
might add, Alice Rivlin, who I worked for many years ago and I
have great respect for, working, I think, with Senator Pete
Domenici suggested what Congress ought to do is start
authorizing and appropriating entitlement funds so you don't
just focus on the discretionary spending but that you focus on
closer to 100 percent of what the government spends. I think
that would be a good process reform, but we need substantive
reform and a budget deal.
Mr. Brooks. But you are telling me that you are optimistic
that the Pentagon is in fact going to start becoming better at
streamlining the acquisition process?
Mr. Hale. Well, I think there are measures that suggest
they have already had some success, and again, I invite my
colleagues to comment.
Mr. Brooks. Okay. Any chance that there would be dramatic
success of the kind needed to reflect the worsening financial
condition of the United States of America?
Mr. Hale. I don't know if you would call it dramatic or
not, but I think they have made progress.
Mr. Brooks. Anybody else want to add any insight on that?
If not, I will go to my second question.
Okay. Mr. Fox [sic], a lot of discussion today has focused
on affordability constraints. If affordability goals were
required in Milestone A for all programs, it would force
conversations and coordination early in the acquisition
process.
Mr. Fox, can you please--excuse me, Ms. Fox, misreading my
notes here--can you please speak to the accuracy of cost
estimates early in the process? Is there enough fidelity to
inform affordability goals at Milestone A?
Ms. Fox. I believe that the accuracy of the independent
cost estimates have shown that the ICEs are more right than
wrong over time, and I believe that the more data that they
have, the more accurate that they are. I think that there has
been a tremendous amount of progress in bringing independent
cost estimates to the Milestone A discussion and the
conversation in the Department of tradeoffs between
requirements and costs, so I believe that those changes are in
fact taking place and have been taking place for a few years
now.
I think that it may take time for that to play through so
that it is more visible, but I believe that those changes have
been made and that independent cost estimates are having
impact.
Mr. Brooks. Well, Mr. Hale and Ms. Fox, thank you for your
responses.
And Mr. Chairman, I yield back.
The Chairman. Great.
Thank you all, not only for being here today but for the
many ways that each of you has served the country.
I have one other favor. As we did last year, we are going
to introduce a stand-alone bill on acquisition reform this year
in March, and the idea is that the people who deal with the
acquisition system, have experience and insights, can give us
feedback about how it can be improved before we actually mark
up the defense authorization bill for this year.
So to the extent you are looking for something to do some
Saturday night, if you have some suggestions when we release
that, your feedback to the committee--further feedback to the
committee would be very much appreciated. So, again, thank you
all for being here.
With that, the hearing stands adjourned.
[Whereupon, at 11:40 a.m., the committee was adjourned.]
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A P P E N D I X
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PREPARED STATEMENTS SUBMITTED FOR THE RECORD
February 3, 2016
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[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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QUESTIONS SUBMITTED BY MEMBERS POST HEARING
February 3, 2016
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QUESTIONS SUBMITTED BY MR. THORNBERRY
Mr. Thornberry. Specifically, what are the root causes of operating
and support (O&S) cost growth related to weapons? Does the acquisition
system itself, or any of its processes and features, contribute to O&S
cost growth? If so, how could the acquisition system be changed to
combat the growth of O&S costs?
Mr. Hale. Research suggests that key drivers of O&S costs include
manpower, fuel, and maintenance. These in turn are influenced by
factors including weight, computerization, and special characteristics
such as stealth. Unfortunately, there has only been limited research
into the specific causes of O&S growth. I believe that Congress should
direct DOD to conduct more careful research into this critical topic,
perhaps making use of its FFRDCs to help provide analysis. Congress
should also direct the Department to improve the parametric models used
to project O&S costs. How does the acquisition process affect O&S
costs? The current incentives in the acquisition process lead program
managers (PMs) to focus heavily on acquisition costs, which will be
known during their tenure as PMs. O&S costs will occur well after PMs
leave their jobs and probably after they retire from the military. So
there is limited incentive to focus on them. DOD and Congress need to
consider ways to change these incentives. Congress could direct DOD
senior leaders to certify that an O&S estimate has been prepared and
reviewed at each of the acquisition milestones. Because of uncertainty
regarding early O&S estimates, Congress should leave unchanged the
requirement to report O&S costs in the SARs starting at Milestone B.
This might prompt more attention to O&S. Once the Department has
developed better tools for creating O&S estimates, it may be
appropriate to require reporting of major breaches of O&S estimates in
a manner that is now done for procurement costs under the Nunn-McCurdy
legislation.
______
QUESTIONS SUBMITTED BY MR. ROGERS
Mr. Rogers. (a) Why is a survivable and endurable NC3 system
important for this country? (b) As you know, our NC3 system is a system
of systems composed of over 103 different program elements. These
systems are scattered across the CIO, Navy, Air Force, STRATCOM and
NORTHCOM. Is this a good system for ensuring the successful integration
and operation of a survivable and endurable communications capability
for the nation's senior leaders? (c) Does the Air Force, which owns 70%
of these programs, appropriately prioritize budget resources for NC3
compared to tactical aviation?
Admiral Winnefeld. (a) Our nuclear deterrent is only as effective
as the command and control that enables it to function. Nuclear Command
and Control (NC2) is the exercise of authority and direction, through
established command lines, over nuclear weapon operations by the
President. NC2 is supported by a survivable network of communications
and warning systems that ensure dedicated connectivity from the
President to all nuclear-capable forces. This survivable network of
communications is the Nuclear Command, Control, and Communications
(NC3) System. A survivable, enduring NC3 is a prerequisite for an
effective nuclear deterrent. The fundamental requirements of NC2 are
paramount; it must be assured, timely, secure, survivable, and enduring
in providing the information and communications for the President to
make and communicate critical decisions without being constrained by
limitations in the systems, the people, or the procedures that make up
the systems used by the Nuclear Command and Control System.
(b) The present U.S. NC3 architecture is described in two layers.
The first layer is the day-to-day and crisis architecture, which can
also be described as a ``thick-line.'' This architecture supports
current U.S. national policy in that it responds under all conditions
in both peacetime and war to provide the means to exercise positive
control and direction by the President, the Secretary of Defense, and
Combatant Commanders; provides secure, reliable, immediate, and
continuous access to the President; and provides robust command and
control over nuclear and supporting government operations.
The second layer provides the survivable, secure, and enduring
architecture known as the ``thin-line.'' The thin-line responds to
policy that requires assured, unbroken, redundant, survivable, secure,
and enduring connectivity to and among the President, the Secretary of
Defense, the CJCS, and the designated commanders through all threat
environments to perform all necessary NC2 functions. The thin-line NC3
architecture must be sustained and supported during any modernization
effort to ensure presidential requirements can be met.
(c) The Council on Oversight of the National Leadership Command,
Control and Communications System (CONLC3S) has been instrumental in
bringing together the appropriate stakeholders, including the Air
Force, and working to prioritize NC3 modernization efforts. I believe
we are achieving proper prioritization of NC3 modernization as a result
of the Council's work.
Mr. Rogers. Currently, our efforts to develop left-of-launch and
homeland cruise missile defense are ad hoc depending on specific senior
leader interest. Is this an appropriate set-up for the development of
these capabilities? If not, what would you recommend?
Admiral Winnefeld. Development of left-of-launch and homeland
cruise missile defense capability development is not ``ad-hoc''. The
Deputy Secretary of Defense through his Advanced Capability Deterrence
Panel has specifically chartered an organization supported by the Joint
Staff, Combatant Commands, and Defense Agencies to address left-of-
launch capability development.
Execution of homeland cruise missile defense operations are clearly
the responsibility of the Commander of U.S. Northern Command (NORTHCOM)
and the North American Aerospace Defense Command (NORAD). These
requirements are derived from the national strategic direction, which
result in operational and contingency plans developed by the Combatant
Commands. A limited capability with clear chain of command, exists
today, with capabilities provided by the services. NORAD-NORTHCOM is
also directly involved in identification and development of additional
service capabilities needed to meet future threats.
Mr. Rogers. (a) How satisfied are you with the current division of
responsibility between DOE and DOD for the modernization of the nuclear
deterrent? Is this system serving the nation well? (b) How often did
one or the other departments make a commitment in the Nuclear Weapons
Council that it did not perform on later?
Admiral Winnefeld. DOD and DOE/National Nuclear Security
Administration (NNSA) both face challenges in modernizing the
platforms, warheads, and the supporting infrastructure over the next
two decades to sustain the Triad and ensure the U.S. nuclear deterrent
remains safe, secure, and effective. Regardless of the division of
responsibilities, the biggest challenge to-date and into the future for
both Departments is large required investments over many programs under
constrained budgets. Regarding the DOE/NNSA warhead modernization, I
believe management improvements may be possible under different
governance structures but I also believe DOD and DOE/NNSA can
effectively manage this under the current structure through the Nuclear
Weapons Council (NWC). To do so, increased and continued transparency
and collaboration regarding DOE/NNSA budgets and priorities is required
to best serve the nation. While I do not recall a specific instance of
either Department not delivering on a commitment within the NWC, budget
pressures and changes in program scope or priorities caused re-
evaluation of the overall NWC modernization plan and adjustments to
warhead modernization programs.
______
QUESTIONS SUBMITTED BY MR. COFFMAN
Mr. Coffman. The panel highlighted the importance of independent
cost estimates. Please identify when and how DOD first looks at program
affordability. What are your thoughts on looking at affordability
earlier in the acquisition process?
Ms. Fox. My experience in the Department convinced me that
affordability was usually considered at every point in the acquisition
process. Affordability is always a factor in the Analysis of
Alternatives (AOAs) and is often a key area of assessment at Milestone
A, as well as all subsequent milestones. I understand the Services are
now begitming to establish affordability goals early on to enable
stronger leadership communication to the program manager of what is and
what is not acceptable from a program-cost perspective.
While it is great that the Services are beginning to establish
their own affordability goals, I would like to add my concern about a
risk to affordability assessments and the quality of AOAs for the
future. I point to the recently released report to the Congress from
the Chief of Staff of the Army regarding acquisition authorities (ref.
b). In that report, the Army writes:
``. . . , giving the respective Service full oversight of their
analysis of alternatives associated with their programs would also go
further toward aligning decision authority with the responsible party.
The Service, as the decision-making authority, should have the
responsibility for deciding what analysis needs to be done and when
that analysis is adequate to inform their decision-making.''
CAPE's oversight of AOAs ensures that the Services examine a
reasonable range of alternatives, include quality affordability
analysis, adhere to good analytic processes, and develop measures of
effectiveness and performance that sufficiently articulate the benefits
and risks accrued from the alternatives. I know of cases where the
Service analysis was not adequate to inform decision making, so I worry
about excluding CAPE oversight.
I must add that what is ``affordable'' today may change over the
course of a program's life due to many external factors such as: the
evolution of the threat, defense budgets, and competing funding demands
from both the inside and outside any one program's portfolio. And, as
we discussed during my and my colleagues' testimony, operating and
support costs are a critical element of that affordability equation. We
are just beginning to develop the tools, databases, and methodologies
to improve our estimating capabilities for these ownership costs. We
need to recognize the uncertainty in these early estimates, and ensure
we account for that uncertainty when making decisions. The Department's
ability to measure a program's cost, in particular its ownership costs,
will improve over time as the system's components and overall
reliability become directly measurable, instead of analytically
estimated, and understanding of the system's sustainment approach
grows.
To be most effective, affordability goals should be established
early; have a defined, logical basis agreed to by stakeholders; be
documented and transparent to oversight organizations; and be
continuously measured against the latest cost estimates. And these
goals must also be continually re-evaluated in light of the overall
national security environment.
Mr. Coffman. The panel highlighted the importance of maintaining
CAPE oversight of the independent cost estimate (ICE) process. What can
Congress due to empower a robust, independent cost estimate process?
Ms. Fox. There are two important ways Congress can strengthen the
independent cost estimate process. First, Congress should clarify the
Office of Cost Assessment and Program Evaluation (CAPE) role as the
lead for all Acquisition Category (ACAT) I ICEs, regardless of who has
Milestone Decision Authority (MDA). As I stated in my testimony, I
believe recent changes from the 2015 National Defense Authorization Act
(NDAA) have created uncertainty in the Title 10 language regarding
CAPE's specific role for ACAT I programs when the Milestone Decision
Authority is not the Under Secretary of Defense for Acquisition,
Technology and Logistics (USD(AT&L)), which is becoming increasingly
more common.
Today, for the majority of the ACAT I programs for which USD(AT&L)
is not the MDA, CAPE delegates, and closely monitors, the ICE
development to the Service cost centers. Additionally, CAPE reports on
these Service cost center ICEs in its annual report to Congress. As the
Service Acquisition Executives (SAEs) assume the role of MDA on an
increasing number of ACAT I programs, I fear there will be a strong
push to limit CAPE's authority for development and/or oversight of the
ICEs and for setting the relevant estimating policies and procedures. I
need only point to the recently released report to the Congress from
the Chief of Staff of the Army regarding acquisition authorities (ref.
b). In that report, the Army writes:
``The responsible Service should also have responsibility for cost
estimation supported by the validation of a third party and reported
where appropriate to Congress. As the Services are responsible for
making tradeoffs, they should also have control over the methodologies,
assumptions, and level of rigor necessary to make decisions.''
In my view, this is a slippery slope. The cost group within CAPE
was created years ago to ensure consistent application of rigorous
costing methodologies and to document clearly articulated program
assumptions as a basis for cost estimates. CAPE has since further
improved the cost-estimating process through a deliberate collection of
historical cost and schedule data that add further rigor. We cannot
afford to lose ground here.
I believe the reform changes that began with the Weapon System
Acquisition Reform Act in 2009 gave CAPE exactly the right authorities
to ensure rigorous cost-estimating processes continue. CAPE's authority
to review Service efforts and, if necessary, take back the
responsibility of producing the ICE ensures that the Services properly
collect data and perform quality cost analyses. In turn, this oversight
ensures programmatic decisions are informed by the best estimates of
cost. I fear the loss of CAPE's authority will quickly erode the
overall cost community's ability to collect necessary data and
information and to establish and govern cost estimating policies and
procedures within the Services.
The second way Congress can strengthen the independent cost
estimating process is to provide CAPE, and, by extension, the entire
DOD cost community, with the authority to establish the data collection
requirements necessary to develop sound estimates. Today the
acquisition community largely holds the authority for which data are
collected and when, and we often find data are collected without a
strategic perspective. We want a holistic and long-term view that
understands the benefits of a comprehensive data collection process.
The lack of authority to collect the data the cost community
requires for independent cost analyses will impede the ability of the
cost community to produce the high quality ICEs that the Department and
Congress rely so heavily upon to inform resource allocation and
decision making. Acquisition streamlining in the 1990s led to the
wholesale removal of cost data collection on contracts that--to this
day--negatively affects the quality of cost estimates produced by the
DOD cost community. Even today, virtually no cost data is collected on
ACAT II and III programs due to the acquisition community's cultural
reluctance to do so.
Providing CAPE with the authority to define and ensure
implementation of the cost and related data collection processes, and
to make available these important resources to the broader cost
community within the Department, will continue to improve cost
estimates Department-wide and significantly improve decision-making. I
should add further that CAPE has been working to modernize the
collection process and reduce the cost burden of collecting data from
defense contractors.
There is also a fear that CAPE will overreach on this data
collection authority, especially when it comes to commercial items. As
I learned as the Director of CAPE, if a commercial item's price is
regulated through a competitive marketplace, CAPE has little need, or
even interest, in collecting detailed cost data on the item. It is only
when items are not actually commercial and are not subject to normal
commercial market price regulating mechanisms that the government has a
right to know the cost of those systems. It is on these systems that
CAPE must have the authority to set policies for the collection of cost
data.
Mr. Coffman. Please discuss the DOD Comptroller's role in
affordability discussions and cost-schedule-performance trade space
discussions. When in program development does the DOD Comptroller first
participate in affordability discussions? How is the Comptroller
involved during Milestone Decision Authority decisions for MS A, B, and
C?
Mr. Hale. During my tenure as Comptroller, I was regularly involved
in senior meetings (chaired by the Deputy Secretary) that assessed
acquisition budget proposals. Affordability was often discussed,
especially as it related to the five-year budget plan. The discussions
almost always focused on acquisition costs, rarely on O&S costs. As
Comptroller I was rarely involved personally in the milestone decision
meetings for weapons. However, my senior staff attended these meetings
and, along with CAPE analysts, raised affordability issues as
appropriate (again focusing almost always on acquisition costs). My
senior staff provided me feedback on key results from the meetings.
Mr. Coffman. Sustainment costs are still a significant portion of
program costs. Efforts to consider total life cycle costs are still
challenging. What can be done to be sure we understand the total costs
for a program and the impact on budget beyond the FYDP?
Mr. Hale. Sustainment costs make up more than half of the life
cycle costs of a typical weapon. But DOD still pays relatively little
attention to these costs during the design of new weapons. I would
suggest two approaches as first steps toward increasing the attention
paid to sustainment costs. First, I believe that Congress should direct
DOD to conduct more careful research into this critical topic, perhaps
making use of its FFRDCs to help provide analysis. Among other topics,
this research seek a better understanding of what drives O&S costs.
Congress should also direct the Department to improve the parametric
models used to project O&S costs. DOD has better models for predicting
acquisition costs early in the life of a weapon compared to those
available to forecast O&S. Second, DOD and Congress need to consider
ways to change the incentives in the acquisition process. Currently
those incentives cause program managers to focus almost entirely on
acquisition costs, because these costs will be apparent during their
tenure as the manager. To help change incentives, Congress could direct
DOD senior leaders to certify that an O&S estimate has been prepared
and reviewed at each of the acquisition milestones, starting at
Milestone A. Because of the uncertainty regarding early estimates,
Congress should leave not change the current requirement that O&S costs
be reported in the SARs starting at Milestone B. This certification
will hopefully lead to more attention to O&S. Once the Department has
developed better tools for O&S estimates, it may be appropriate to
require reporting of major breaches of O&S estimates in a manner that
is now done for procurement costs under the Nunn-McCurdy legislation.
Mr. Coffman. How do we both lock in requirements to have stable
estimates and funding, yet also have flexibility to adapt to new
innovations and new threats?
Admiral Winnefeld. Stability is most important for major weapons
systems, including large ``platforms.'' Agility should be largely found
in flexible ``payloads,'' whether they are organic capabilities or
weapons. Thus, the Department should continue its efforts to do rapid
prototyping for payloads, while ensuring a predictable and stable
requirements and acquisition path for major platforms. As such, it is
possible to lock in requirements early provided that the system that is
ultimately derived from this initial requirement set is sufficiently
agile to accommodate both new innovations and new threats. That means
weapon system platforms in the future must be designed around adaptable
``plug-and-play'' architectures that will allow integration of future
payloads and modernization of platform components relatively easily and
at a reasonable cost. There also must be suitable funding agility
available to the requirements sponsor to enable systems to evolve to
counter new threats, mitigate technology obsolescence, and achieve
advantage from emerging technology opportunities. Additionally, having
discretionary money up front for the Department to begin to advance a
new requirement in parallel with the budget cycle would help avoid
early obsolescence issues.
As an important aside, recently JCIDS incorporated procedures for
Critical Intelligence Parameters (CIP) of threat-sensitive Key
Performance Parameters. This integration of intelligence support to
acquisition in the requirements community facilitates risk assessments
and mitigation of requirements determinations to be responsive to
emerging threats.
[all]