[House Hearing, 111 Congress]
[From the U.S. Government Printing Office]
[H.A.S.C. No. 111-134]
ADMINISTRATION PERSPECTIVES ON
MANAGING THE DEFENSE ACQUISITION
SYSTEM AND THE DEFENSE
ACQUISITION WORKFORCE
__________
HEARING
BEFORE THE
PANEL ON DEFENSE ACQUISITION REFORM
OF THE
COMMITTEE ON ARMED SERVICES
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
MARCH 11, 2010
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PANEL ON DEFENSE ACQUISITION REFORM
ROBERT ANDREWS, New Jersey, Chairman
JIM COOPER, Tennessee K. MICHAEL CONAWAY, Texas
BRAD ELLSWORTH, Indiana DUNCAN HUNTER, California
JOE SESTAK, Pennsylvania MIKE COFFMAN, Colorado
Andrew Hunter, Professional Staff Member
John Wason, Professional Staff Member
Megan Howard, Staff Assistant
C O N T E N T S
----------
CHRONOLOGICAL LIST OF HEARINGS
2010
Page
Hearing:
Thursday, March 11, 2010, Administration Perspectives on Managing
the Defense Acquisition System and the Defense Acquisition
Workforce...................................................... 1
Appendix:
Thursday, March 11, 2010......................................... 35
----------
THURSDAY, MARCH 11, 2010
ADMINISTRATION PERSPECTIVES ON MANAGING THE DEFENSE ACQUISITION SYSTEM
AND THE DEFENSE ACQUISITION WORKFORCE
STATEMENTS PRESENTED BY MEMBERS OF CONGRESS
Conaway, Hon. K. Michael, a Representative from Texas, Ranking
Member, Panel on Defense Acquisition Reform.................... 3
Cooper, Hon. Jim, a Representative from Tennessee, Panel on
Defense Acquisition Reform..................................... 1
WITNESSES
Carter, Hon. Ashton B., Under Secretary of Defense for
Acquisition, Technology and Logistics, U.S. Department of
Defense........................................................ 4
Hale, Hon. Robert F., Under Secretary of Defense (Comptroller),
U.S. Department of Defense..................................... 7
McGrath, Elizabeth A., Acting Deputy Chief Management Officer,
U.S. Department of Defense..................................... 9
APPENDIX
Prepared Statements:
Andrews, Hon. Robert, a Representative from New Jersey,
Chairman, Panel on Defense Acquisition Reform.............. 39
Carter, Hon. Ashton B........................................ 44
Conaway, Hon. K. Michael..................................... 42
Hale, Hon. Robert F.......................................... 57
McGrath, Elizabeth A......................................... 64
Documents Submitted for the Record:
[There were no Documents submitted.]
Witness Responses to Questions Asked During the Hearing:
Mr. Andrews.................................................. 81
Mr. Hunter................................................... 81
Questions Submitted by Members Post Hearing:
Mr. Conaway.................................................. 85
ADMINISTRATION PERSPECTIVES ON MANAGING THE DEFENSE ACQUISITION SYSTEM
AND THE DEFENSE ACQUISITION WORKFORCE
----------
House of Representatives,
Committee on Armed Services,
Defense Acquisition Reform Panel,
Washington, DC, Thursday, March 11, 2010.
The panel met, pursuant to call, at 3:02 p.m., in room
2261, Rayburn House Office Building, Hon. Robert Andrews
(chairman of the panel) presiding.
OPENING STATEMENT OF HON. JIM COOPER, A REPRESENTATIVE FROM
TENNESSEE, PANEL ON DEFENSE ACQUISITION REFORM
Mr. Cooper. [Presiding.] The hearing will come to order.
Welcome to the 13th meeting of the Defense Acquisition
Reform Panel.
No, I am not Rob Andrews, nor do I pretend to be. I am
certainly not from New Jersey. But Rob is unavoidably detained
for a few moments, so we will kick off the hearing. And I would
like to read his opening statement on his behalf.
Today the panel approaches the end of its work. Last week
we issued the panel's interim findings and recommendations, and
today we hear from the Administration on their acquisition
reform priorities and their thoughts about the panel's work.
Having received this feedback, as well as feedback from our
previous witnesses and other experts, we intend to deliver a
final report to Chairman Skelton and Ranking Member McKeon at
the end of next week. At that point, the panel's official
mandate will expire. However, the panel's recommendations will
serve as the basis of legislation that will be considered in
the House this year, and we expect, enacted into law.
Today's hearing marks the panel's 13th hearing since we
were appointed by Chairman Skelton and then-Ranking Member John
McHugh in March of last year. In these hearings, the panel has
found that, while the nature of defense acquisition has
substantially changed since the end of the Cold War, the
defense acquisition system has not kept pace.
The system remains structured primarily for the acquisition
of weapon systems at a time when services represent a much
larger share of the Department's acquisitions. And the system
is particularly poorly designed for the acquisition of
information technology, even though we are now in the
Information Age.
Even in the acquisition of weapon systems, the Department's
historical strength, the system continues to generate
development timeframes for the major systems measured in
decades--an approach which has resulted in unacceptable cost
growth, negative effects on industry and, in too many cases, a
failure to meet warfighter needs.
The panel has found that there is little commonality across
defense acquisition systems. The acquisition of weapon systems,
the acquisition of commercial goods and commodities, the
acquisition of services, and the acquisition of information
technology have very diverse features and challenges.
In a few areas, however, the panel has found common issues.
Across all categories of acquisition, significant improvements
can be made in the following: managing the acquisition system;
improving the requirements process; developing and
incentivizing the highest quality acquisition workforce;
reforming financial management; and getting the best from the
industrial base.
The panel began with the question of how well the defense
acquisition system is doing in delivering value to the
warfighter and the taxpayer. For most categories of
acquisition, only anecdotal information exists about instances
where the system either performed well, or poorly. Even where
real performance metrics currently exist, they do not fully
address the question.
The panel continues to believe that real metrics are
needed. The panel has also heard that challenges with the
requirements process are a major factor in poor acquisition
outcomes. The requirements process for the acquisition of
services is almost entirely ad hoc. The process for developing
requirements for the acquisition of weapon systems is overly
cumbersome, lacking in expertise and capacity, and subject to
requirements creep.
There is no doubt that the Department needs an acquisition
workforce that is as capable as its advanced weapon systems. To
achieve this, the Department requires flexibility to
efficiently hire qualified new employees, and to manage its
workforce in a manner that promotes superior performance.
The Department must develop new regulations for the
civilian workforce which include fair, credible, and
transparent methods for hiring and assigning personnel, and for
appraising and rewarding employee performance.
Also underlying the success of the defense acquisition
system is the Department's financial management system. The
panel is concerned that the inability to provide accurate and
timely financial information prevents the Department of Defense
(DOD) from adequately managing its acquisition programs and
from implementing true acquisition reform.
Finally, the panel has heard that the Department can
enhance competition and gain access to more innovative
technology by taking measures to utilize more of the industrial
base, especially small and mid-tier businesses. And in managing
that industrial base, that the Department is best served when
it deals with responsible contractors with strong business
systems.
We look forward to hearing from today's witnesses about
these topics, to get their expert views on how these problems
can be solved.
[The prepared statement of Mr. Andrews can be found in the
Appendix on page 39.]
Mr. Cooper. And I will now turn to my friend, Congressman
Mike Conaway of Texas, for his opening remarks.
STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE FROM
TEXAS, RANKING MEMBER, PANEL ON DEFENSE ACQUISITION REFORM
Mr. Conaway. Thank you, Mr. Chairman.
Ladies and gentlemen, thank you for all of you being here
today. I have a short statement, so we can spend most of our
time listening to what you have got to say about it.
First I want to thank, in absentia, Chairman Andrews for
his leadership, and the other members of this panel for their
commitment to dealing with these important issues. We have had
many early morning meetings and hearings on the subjects
ranging from services and Information Technology (IT)
contracting to auditing, and we have learned a lot.
To our witnesses, thank you for being here. Our panel has
been very fortunate to have some great witnesses in the past.
Some of you are repeat offenders, and we appreciate having you
with us today. We understand and appreciate how busy you are.
The fact that you have made time to be with us today is our
privilege, and we appreciate that.
I would also like to thank Mr. Fisher from the Business
Transformation Agency (BTA) for being here. The BTA has a
critical role, in my view, in what we are discussing today.
And having said that, we realize that there is an awful lot
of hard work to be done across the system. And I reiterate what
the chairman has said, that we want to work with the Department
to get this right. We are not adversaries. We are all in it for
the exact same reason, and that is to get the best value for
the taxpayer and get the warfighters what they need at the time
and when they need it.
So, we appreciate your feedback, and we look forward to
modifying the report as we understand the things that you have
got to say to us about that.
So, with that, Mr. Chairman, I yield back.
[The prepared statement of Mr. Conaway can be found in the
Appendix on page 42.]
Mr. Cooper. Thank you, Mike.
Our witnesses today are unusually distinguished--so
distinguished, they need no introduction, so they will not
receive one. [Laughter.]
We have with us the Honorable Ashton B. Carter, the Under
Secretary of Defense for Acquisition, Technology and Logistics;
the Honorable Robert F. Hale, the Under Secretary of Defense,
the Comptroller; Ms. Elizabeth A. McGrath--I assume you are
honorable, too--acting Deputy Chief Management Officer; Mr.
Shay Assad, acting Deputy Under Secretary of Defense for
Acquisition and Technology; and Mr. Fisher, as Mr. Conaway
mentioned already, from the Office of----
Mr. Conaway. Business Transformation Agency.
Mr. Cooper [continuing]. Business Transformation. Thank
you.
Mr. Carter, you are on.
STATEMENT OF HON. ASHTON B. CARTER, UNDER SECRETARY OF DEFENSE
FOR ACQUISITION, TECHNOLOGY AND LOGISTICS, U.S. DEPARTMENT OF
DEFENSE
Secretary Carter. Thank you. I am grateful for the
opportunity to be in front of you. And I am especially grateful
to all of you who take an interest in the performance of the
acquisition system. It is not what it ought to be, and the
taxpayer and the warfighter deserve better. It is something we
are trying to work on in the Department of Defense.
Secretary Gates has been very involved and is outspoken
about it--President Obama, also. It is not always that a
President of the United States takes an interest in the
accomplishment of the job that I am in, and President Obama
does.
And then, of course, both houses of Congress last year
unanimously--both parties--in the Weapon Systems Acquisition
Reform Act, which this body had a lot to do with.
I am reminded of your introduction. I have heard the
opposite version of that, Congressman Cooper, which is, I once
heard Brent Scowcroft introducing Henry Kissinger. And he said,
``Now, everyone would say that Henry Kissinger requires no
introduction. But Henry Kissinger requires an introduction.''
[Laughter.]
So, we are the opposite.
I am glad to be here with my colleagues. I think that you
have had the opportunity to introduce them all. I just wanted
to say that Shay Assad works in my office and is really a
superb contributor to the performance of the acquisition
system. I am glad to be here with my colleague, Bob Hale, the
Comptroller. They say the Comptroller's credo is, ``We are not
happy till you are not happy.'' [Laughter.]
And that is the way it feels. That is the way it feels.
I am not going to try to read--I prepared a lengthy
statement containing our thinking about the many topics on
which the panel is focusing. And I do not intend to read that.
I thought I would just touch on a few wave tops, and then we
can have a discussion.
The first thing I wanted to say--and Congressman Hunter and
I have talked about this previously--is, even though a lot of
our focus tends to be on the big ticket items and the multi-
decade programs, in this particular era, an important part of
the acquisition, technology and logistics job has to do with
being responsive to the wars we are in. And that is new.
That is something predecessors of mine back in the Cold War
when we were preparing to fight, but actually not--but not
fighting. So, it was a different kind of job, and I try to be
attentive to that.
There is, first of all, the need to be rapid and responsive
in acquisition to support the warfighter in Iraq, Afghanistan,
or in the war on terror around the world. We now go to war on
at least a one-to-one basis with a contractor for every
soldier. And the management of those contractors is a
responsibility that we have. And that is both a lot of money
and a lot of responsibility and accountability, and that is
important also.
And a third is logistics, which sounds boring to many
people. It is the heart of what has to happen now in
Afghanistan, because we cannot have success until we are in
there. And we cannot get in there until we get set. And it is
about the most austere logistics environment you can possibly
imagine, and so everything is a struggle to get in. And so,
that is a big responsibility.
And then last--and I will be speaking with some of you
separately next week about this--the Secretary asked me and
General Paxton, the Director of Operations for the Joint Staff,
to make a special effort over these critical months at the
counter-improvised explosive device (IED) problem in
Afghanistan, because the IEDs not only are a threat to life and
limb, but if we cannot go outside the fence, then we cannot do
counterinsurgency. So, it frustrates the mission if you cannot
leave your base.
And IEDs dispirit our people and the Afghan people and our
coalition partners, as well. So, for all those reasons--I know
Congressman Hunter has been concerned about this--IEDs are a
big deal.
And I just wanted to open on that note. I know that is not
the focus of the hearing, but it has got to be something that
is always on my mind.
I wanted to say something about the performance of the
acquisition system and acquisition reform in general, and then
touch on the three key insights in the draft report that you
have, which I have read, which are, hey, it is not just about
weapon systems. It is services, too, which is a big idea, and a
very important one, and one that we are listening to and have
under-attended to. So, that is very big.
A second one is IT and the management of IT systems as
against the management of weapons systems. And the last is the
workforce. Those are, it seems to me, three things that I think
you have hit on that are critical, and perhaps have not
received the amount of attention they should have in the past.
Backing up to the acquisition system in general, Secretary
Gates always says about acquisition reform--and I think this is
absolutely right--there is no silver bullet. We do not make one
mistake over and over again. We make lots of different kinds of
mistakes, and there is no one single fix to it.
I have been associated with acquisition reform in one wave
after another throughout my career. And we have changed the
system from time to time. We still are, including some ideas
that you had last year.
But at the end of the day, none of that is going to make
any difference, if we do not have discipline and good people.
And discipline I will say more about. Good people is something
you focused on as a panel.
A good way to divide acquisition reform in your mind is
into the acquisition reform at the beginning of programs, in
the middle of programs and at the end of programs.
The beginning of programs, you know what the principles
are, and you wrote some of them into the Weapon Systems
Acquisition Reform Act last year. Do not kid yourself at the
beginning of a program. Do not buy in cheap. Do an independent
cost estimate. Be sure you know what you are getting into.
Understand what you are doing in the requirements process.
Set them intelligently. Do not change them willy-nilly, and so
forth.
All--and particularly the independent cost estimate
aspect--are things that we have implemented, and are
implementing, in the Department.
As you go into the middle of a program, this is a matter of
excellence in execution. And we are taking your Performance
Assessment and Root Cause Analysis (PARCA) idea, which was in
your previous report, and implementing that as well. That was
essentially not an administrative thing or a bureaucratic
thing. It was the suggestion that we have the capacity to
monitor our programs, so that we detect early enough that
something is off the rails, that we have the opportunity
managerially to address it.
And the Nunn-McCurdy Act--which is in existence, has been
in existence for a long time--is a very healthy thing. It
terrifies everybody, and deterrence is a good thing. But the
reality is that the Nunn-McCurdy bell rings too late, and it
frequently is a false alarm. And so, it is not an ideal
mechanism.
And PARCA gives us--was an opportunity to give us--a tool
and a method which we used to have, and had fallen into
destitution, and we are reviving, to monitor the progress of
programs in their mid-life, and recognize when things did not
look right. And I think that was a great insight on your part,
and one that we are implementing.
Another thing we need to do in the mid-life of programs is
get a better business deal. You were referring to this early,
Congressman. And I am not satisfied that we have gotten good
business deals.
I review contracts, and so forth, that we have. We need to
get a better business deal.
The end of the program--not many people write about
acquisition reform at the end of the program, at the end of
program lives. But that is something that Secretary Gates has
paid a lot of attention to, namely, having the discipline to
stop doing things when we no longer need them, or have enough
of them. That is always a difficult thing to do.
He took a number of steps last year to cancel programs that
either were not performing, or that we had enough of, or for
which the need had passed in history, and he is doing more of
that this year. And that is painful, but that is a necessary
kind of acquisition reform, as well.
With respect to services, I would just say that I look
forward to your insights in that area. That is more than half
the dough. And so, it is important that we pay attention to how
we spend that half of the money, and not just the half of the
money that is in the traditional programs of record.
So, I am grateful that you are focusing on that. And I
would like to focus on that with you.
Ditto, information technology. We are a little further
along in that in the sense that we became aware of the need to
manage IT systems and acquisitions in a different way from
ordinary weapon systems acquisitions a few years ago. But we
are still crawling, not walking or running in that field. And
we are trying to get better.
Workforce--I cannot say enough about that. And Mr. Assad,
among many other things he does, is managing our workforce
improvement effort. But it is not a quantity thing, it is a
quality thing. We are, in our civilian acquisition corps, going
to increase the numbers by 20,000--half by insourcing, half by
hiring. Obviously, the numbers do not matter nearly as much as
the quality of the people.
We are assisted by the state of the economy in our
recruiting in terms of quality. But we have tried to look
carefully at the skill sets we need: there is pricing, there
are contract officers, there are systems engineers, and so
forth, and make sure that we improve the quality of our people,
and not just the quantity.
And that is true in the uniformed services, as well. The
uniformed services also, I think--and they would say this
themselves--have under-attended to the acquisition cadre in all
of the services. They are trying to change that, as well.
What is important is that, if you are a major or a colonel
who has acquisition acumen, and that is your calling, that you
be able to look up your personnel cone and see general officers
who have your area of expertise. And that is a very important
thing to do.
So, I applaud your focus on the workforce. And I look
forward to discussing all of these matters with you, and I
appreciate the opportunity to be with you.
[The prepared statement of Secretary Carter can be found in
the Appendix on page 44.]
Mr. Andrews. [Presiding.] Secretary Carter, thank you.
I want to extend my apologies for being late for the
hearing. Some other pressing business here in the Capitol. I
want to thank my friend, Mr. Cooper, for filling in, and for
agreeing to vacate the chair once I got here. I was a little
worried. [Laughter.]
And I want to add my note of appreciation to the witnesses
for your excellent preparation for today. We look forward to
the dialogue, and I represent--or I acknowledge--Secretary
Hale.
STATEMENT OF HON. ROBERT F. HALE, UNDER SECRETARY OF DEFENSE
(COMPTROLLER), U.S. DEPARTMENT OF DEFENSE
Secretary Hale. Well, thank you. Mr. Chairman, members of
the panel, thank you for the chance to be here, and thank you
for the support you give to the men and women in the military.
We could not succeed without you.
I am going to summarize my prepared statement briefly. I
will focus on the issues you raised about improving financial
information and audit readiness. There are some others I would
be glad to discuss.
First I would like to point out what I believe are the
strengths of defense financial management. Not too many people
mention them, including my colleague here.
Drawing on 30 years of experience and numerous
conversations with commanders, I think I can tell you that,
generally, we are able to provide the resources and the
financial support to meet our national security objectives. And
that is our main mission. And while we need to make some
improvements--and I will talk about one of them today in terms
of audit readiness--we have got to take care not to achieve
those improvements at the cost of meeting that fundamental
mission.
DOD also has effective financial processes in some key
areas--payment processes, our summary reconciliation with
Treasury. And importantly, in my view, we have a sound process
for funds control and distribution, one that has been reviewed
and validated by external auditors. And this process, I think,
provides reassurance to the Congress that we are spending the
money as directed by law.
We have also made some progress toward achieving financial
information improvement and audit readiness. Several DOD
organizations have and are maintaining clean audit opinions,
and several of them have. But frankly, major problems remain.
When I took over as the Chief Financial Officer a little
more than a year ago, I quickly became convinced that we did
not have a common goal or common priorities in the area of
improving financial information and audit readiness. The
services were doing kind of their own thing, and with widely
varying degrees of commitment.
And worse yet, we were investing time and money improving
financial information and seeking audit readiness for data we
simply do not use to manage the Department of Defense.
The best example, in my view, is the valuation of military
weapons. Over the past decade, the Department has devoted a lot
of resources in an unsuccessful effort to identify auditable,
historical costs of all our weapons and modifications. That
information under current rules is required to achieve clean
audit opinions.
Yet, in more than 30 years of working in defense policy and
budget issues, I have never used the historical costs of
defense weapons in analysis--replacement costs, yes, that
frequently, but never historical costs. And I really do not
know anyone else who has, either.
And to a lesser extent, that same indictment I think
applies to much of the valuation information that we are
required to audit on the balance sheet.
So, in my view, DOD needed a new approach. It needed a
coordinated approach. It needed to improve financial
information and audit readiness, and it needed an approach that
focused on the information we actually use to manage.
Shortly after I was sworn in, I began consultations
regarding a new approach. I outlined that in a memo issued in
August of last year. And that new approach focuses on improving
the quality, accuracy, and reliability of the information we
actually use to manage.
Budgetary information is key there--we manage the
Department based on budgets--and existence and completeness,
which is audit term for verifying that we know how many assets
we have and where they are. That is of great concern to the
warfighter.
Now that we have a new approach, the next and by far most
difficult step is implementation. We will offer a detailed
implementation plan to Congress in a May report that was
required in last year's law, the 2010 National Defense
Authorization Act (NDAA). I am not prepared to provide details
yet; we are still coordinating with the services, although
getting close. But I can tell you what the plan covers.
It provides long-term milestones, and also interim
milestones, so we can demonstrate progress. And it focuses,
again, on the information that we actually use to manage the
department.
It specifies a governance structure, with a panel that I
chair, but also, regular interaction with our senior leaders.
And it identifies specific resources, by service, by year--
something we have not done in the past--to focus on financial
improvement and audit readiness (FIAR).
The plan's concept has been approved by the Department's
Chief Management Officer, Deputy Secretary Lynn. I briefed him
a couple of times. And he will get a briefing--he is scheduled
to get a briefing--on the details of the plan in about two
weeks.
To keep the Congress up to date, we will provide a
semiannual report on FIAR, as we call it--financial improvement
and audit readiness--as required by the National Defense
Authorization Act.
Now, while we have a plan, I am not naive enough to think
formidable challenges do not remain. Our business environment
does not always meet auditor standards. We tend to exchange
information among a lot of services in ways that makes it, if
not impossible, at least very difficult, to audit. Our systems
are old, and they handle or exchange information in ways that
do not pass audit standards.
And I might add, we are in the process of replacing almost
all of those systems right now with enterprise resource
planning systems. And while they offer substantial potential
for improvement in financial management, they offer potential
for disruption during the implementation period. And so, I
think we need to watch those carefully, both in terms of
managing the IT aspects and what they do to financial
information while we are putting them into place.
And finally, DOD's enormous size and geographical
distribution greatly complicates this task. We just cannot
afford to hire an army of accountants, and too many people were
spread around too much. Think of trying to do audits in
Afghanistan or Iraq. It just would not work.
Despite these obstacles, the Department is committed to
improving the information we used to manage and achieving audit
readiness. I am personally committed to this effort as part of
my overall commitment to providing financial services and
budgetary information that we need to meet our national
security objectives. And with your help and support, I intend
to make progress.
That concludes my statement. And when Ms. McGrath has
finished, I would be glad to entertain any questions.
[The prepared statement of Secretary Hale can be found in
the Appendix on page 57.]
Mr. Andrews. Thank you, Mr. Secretary.
Ms. McGrath, welcome. Congratulations. I understand that
you have been nominated to be made permanent in your position.
Is that correct?
STATEMENT OF ELIZABETH A. MCGRATH, ACTING DEPUTY CHIEF
MANAGEMENT OFFICER, U.S. DEPARTMENT OF DEFENSE
Ms. McGrath. Yes, that is correct. Thank you.
Mr. Andrews. Does that require a Senate confirmation?
Ms. McGrath. Yes, it does.
Mr. Andrews. Well, if you figure out how the Senate works,
will you let us know? [Laughter.]
Because we have some questions about that.
Welcome. We are glad to have you with us today.
Secretary Hale. On advice of counsel, Ms. McGrath, don't
answer that.
Ms. McGrath. Don't answer it. [Laughter.]
I will take it for the record. I think that was a--thank
you very much.
Mr. Chairman, members of the panel, thank you for the
opportunity to testify before you today and discuss the
Department's commitment to and progress in the use of
performance management to help achieve our strategic goals.
Strategic performance management is about identifying what
matters, measuring it, and then managing it to improve
effectiveness, efficiency, and overall performance. A lot of
your recommendations and what has been discussed already has
touched upon the importance of those areas. So, certainly,
performance management within the overall business space is
something that we are both paying attention to and committed
to.
The Department has always worked to improve the efficiency
and effectiveness of all of its business operations, especially
today. Our business directly supports our combat operations in
Afghanistan and Iraq in increasingly intricate ways. We provide
critical services to the men and women in uniform and their
families at home to help ensure that our Nation is ready to
respond to new threats in an increasingly complex operational
environment.
Additionally, with increasing demands on the federal
budget, and a greater demand for government transparency, and
the overall pace of change in the business environment,
execution of our business must become more agile and
responsive, and provide enhanced financial stewardship for the
American people.
A key component in achieving results is the execution of a
meaningful and robust strategic performance management system.
Having read your panel's interim findings and recommendations,
the Department shares the panel's important view that
performance measures will help us achieve the goals, not only
in acquisition, but throughout the Department's business
mission area.
We are committed to driving the use of the performance
measures throughout the Department and, supported by the
efforts of the Office of Management and Budget, to extend
performance management improvements throughout the federal
government.
In July 2009, the Department released a strategic
management plan, created by the 2008 National Defense
Authorization Act. It was the first step in the Department's--
it was a first step for the Department to integrate goals and
measures throughout the business mission area.
This strategy, which is aligned to the Quadrennial Defense
Review (QDR), set the strategic direction across the
Department's business lines, and outlined five cross-
functional, enterprise-wide priorities: the first thing,
supporting the overall volunteer force; the second, supporting
contingency business operations; the third, reform DOD
acquisition and support processes; the fourth, enhance civilian
workforce; and finally, but certainly not last, strengthen DOD
financial management.
These priorities are cascaded into the performance budget
of the Department, so they are not just stand-alone. They are
tied to both the QDR and the overall DOD budget.
These priorities encompass the most pressing business
challenges currently facing the Department, and they include
specific outcomes, goals, measures, and key initiatives that
are critical for success. They also served as the basis for the
development of the Department's high priority performance
goals, which were included in the 2011 Federal budget.
Acquisition, Technology, and Logistics (AT&L) goals and
measures span the breadth of DOD acquisition, ranging from
insourcing acquisition functions and the growth of the
acquisition workforce, to both lowering cycle times and
breaches for major defense acquisition programs. It also
includes increasing the Department's use of renewable energy.
Your panel's goals for faster and more effective
acquisition of information technology systems will also serve
to help us achieve those performance goals as more modern,
agile systems can certainly enable greater efficiency,
transparency, and effectiveness.
In closing, I want to emphasize that the Department is
committed to the continued use of active performance management
to help achieve our strategic goals. I appreciate the work of
this panel, and I look forward to your questions.
[The prepared statement of Ms. McGrath can be found in the
Appendix on page 64.]
Mr. Andrews. Well, Ms. McGrath, thank you very much.
I also want to thank Mr. Assad and Mr. Fisher for being
with us today.
Mr. Assad, welcome back to the panel. I think this is your
third interaction with us, and you keep coming back. We are
surprised. We are happy that you do.
Neither of these gentlemen is going to offer a statement
today, but each is available as a resource for our questions.
That is my understanding.
Thank you for the testimony.
I wanted to begin, Secretary Carter, with you. In your
statement you agree, happily, with our conclusion that good
metrics are needed to measure performance. And we have
attempted to provide some guidance as to how we would generate
those metrics, and who would generate them and how to use them.
Are there any suggestions you have for us as to where you
think we could add to our work? Or are there metric
identification ideas we have that you think are inappropriate?
In other words, how can we reach this common goal of
generating fair, precise, and relevant metrics to measure
performance?
Secretary Carter. I think that, chairman, the ideas that
you have, some of which are reflected in my statement, for
monitoring the performance on services contracts is probably
the area where we have given it the least thought and have the
least in the way of tradecraft.
I gave some indications in the statement of where we are
trying to improve our management of services. Basically, this
is an oversimplification, but the problems are different on two
sides of the services fence. One side is the contracted
logistics support, which tends to be fairly--in terms of the
personnel involved--fairly straightforward. The other is the
contracting for specialized services, engineering services.
In the former category, it is easier to measure
contribution per dollar than it is in the latter category. We
are trying to get better at measuring performance in the former
category, and develop metrics in the latter category, which,
however, recognize the inherently intangible nature of
engineering talent, and so forth, that we depend on, that we
have to contract for, because--this gets back to our
acquisition workforce--we are not able to retain intramurally
all of the skill sets that we need. We depend upon the external
contractors for a lot of that.
There are in my statement a number of steps that we are
taking to shape our acquisition of services programs, including
severely curtailing the use of new time-and-materials
contracts, limiting service contract periods of performance to
three to five years, ensuring and requiring organizations
dedicate sufficient resources to performance oversight, and
demanding competition for task orders in definite delivery and
in definite quantity contracts. So, these are a number of the
steps that we are taking.
One other thing I will mention, Mr. Chairman, if I may, on
the services side which is very important for contingency
contracting, is the provision not just of contracting officers,
but contracting officer representatives (COR). These are the
people who do not write the contracts, but who ensure the
contractor's delivery of the services promised on the contract.
And that has been a big issue for us in contingency
contracting.
And one of the innovations that has been made that will be
very constructive in the last couple of years in the Department
is the training of deploying units, so that they have embedded
in them people who have the training to be CORs. That is not
necessarily a full-time job, but it is needed unit by unit.
Mr. Andrews. I certainly think that our recent experience--
some negative, some positive--would certainly fortify the
wisdom of that idea.
Secretary Hale, the senior Republican on the panel, my
friend, Mr. Conaway, has championed for a long time the need
for comprehensive financial audits of the Department. And I
completely subscribe to his idea. I think it is a credible
argument that we could save in the neighborhood of $130 billion
over the next five years, if we made some pretty modest
improvements.
Do you think--and honestly, there is not pride of
authorship here. That is why our report is called an interim
report.
Do you have any suggestions as to how we could improve our
approach to the financial audits that we require?
Secretary Hale. Yes. As I indicated in my testimony and my
oral statement, I think we need to focus on improving
information. That is the key. The audit is a verification tool.
The benefits come from improving the information.
We ought to do it in the areas where we actually use the
information to manage. And again, the parts that we have picked
that fit that criteria are budgetary information, because that
is what we use to manage the Department of Defense, and also
this existence and completeness, knowing where our assets are
and how many we have of them.
If we focus there, I think we have got a business case for
going forward in terms of spending money to improve the
information.
Mr. Andrews. Isn't the way that you gain information
through doing the audits? Isn't that one of the purposes of
having the audits?
Secretary Hale. Well, they tell you where you have
problems. That is true. But, I mean, the information comes in
through the systems in the field.
I mean, we certainly learn more about them by doing it. And
indeed, we have a process that, gradually, you move toward a
surging of audit readiness. And there is a series of reviews
that go on, as actually required by the National Defense
Authorization Act of some years ago, which stopped us from just
going to audits right away, because they felt we were wasting
money, but rather, required a series of reviews. And those are
very helpful in telling us where the problems are.
But we need to focus them on the information we use to
manage. And unfortunately, some of what we have to audit is
information we simply do not use to manage.
Mr. Andrews. Understood.
Ms. McGrath, on page three of your statement, you say it is
the Department's view that, ``when measures are appropriate and
well defined, progress is made, and people can be held
accountable for performance.''
You go on to say, the Department shares our panel's
``important view that performance measures will help DOD
achieve its goals in not only the acquisition arena, but
throughout the Department's Business Mission Area. We are
committed to driving the use of performance measures throughout
the Department'' and support the efforts by the Office of
Management and Budget (OMB) to extend performance management
and improvement throughout the federal government.
We have placed PARCA in an important role in that
evaluation in our report.
Do you think that is the right decision? Do you think it
belongs somewhere else? What would you recommend to us?
Ms. McGrath. With regard to the--I think the important
piece is the collection of the information. Are we collecting
the right measures for the right things? And each of these
acquisition opportunities, be it services, information
technology, or major defense acquisition programs, have
different performance measures that have meaning for each of
the different acquisition types.
To me, getting those right is the most important thing, and
the transparency and visibility of the information to those who
make the decisions. I think that we have a structure within the
Department right now, where in the Office of the Deputy Chief
Management Officer, we collect the information from across the
business lines to enable the transparency.
So, be it in PARCA, or be it in another organization----
Mr. Andrews. So, is it correct--I think I hear you saying
that the quality of what is collected is more important than
the collector, than who collects it.
Ms. McGrath. Yes.
Mr. Andrews. Okay. Thank you.
I want to yield to my friend, Mr. Conaway.
Mr. Conaway. Mr. Chairman, with the indulgence of the
chairman, I would like to yield to my colleague from
California.
Mr. Andrews. Of course.
Mr. Hunter is recognized.
Mr. Hunter. Thank the ranking member from Texas.
And Mr. Chairman, thank you for your indulgence.
Dr. Carter, good to see you again. I look forward to next
week's talk about IEDs and intelligence, surveillance, and
reconnaissance (ISR), and all of that fun stuff.
On page 10 of your testimony, you were talking about the
industrial base, and how you want to help the industrial base.
So, my question more specifically is about the M-16 and the M-
4, and the ability of the Secretary of Defense to expand the
small arms industrial base to more than the three names that
are on it.
There are 3 names right now that are included in the small
arms industrial base that, if it turns out that we need a new
M-4, M-16, or a new carbine for the military, right now, if as
is, it would be bid out to these three players, one of which
makes the .50-cal machine gun, the ``Ma Deuce.'' They are not
going to be competing in it.
One is a foreign-owned company. Hopefully, they will not
get to compete in it. And one is an American company.
The Nation's largest small arms manufacturer is not even on
this list. Secretary Gates, though, has the ability to expand
the list.
And I find it strange. I was talking to General Phillips
yesterday. This is the only place that we can find where you
actually list companies that are allowed to compete for
something, where you say we are going to choose one of these
companies out of four or five, and we are going to let that one
company compete--I guess with itself is what it is going to
look like now, if it is not expanded upon--if we do have to
have a new carbine.
So, that is my question. If you are going to encourage
Secretary Gates, or if the Army has encouraged you, to allow
more American industry into this competition, if we do have to
have a bid-off from multiple American small arms companies.
That is my question.
Secretary Carter. Very good.
I do not have a complete answer for you. That is one of the
areas of the industrial base that we are studying, and where I
have the same concern you do. And I guess you have discussed it
with General Bill Phillips. Also, that we have a set of
procedures that goes back some decades, if not centuries.
So, that is one of the sectors, along with some others. Our
stealth aircraft sector, space, solid rocket motors, protected
communications, where we have in their various ways an
industrial base concern.
And I will promise you, Congressman, when we are done
reviewing that, I will discuss it with you. I have the same
concerns you do, I just do not have the answer for you right
now on that aspect of the industrial base.
One of the problems that we have--if I could just raise a
general question, or a general issue occasioned by your
question is--I have found that we do not have very good
information on the industrial base that supports us. And that
is another kind of--you are talking about information about the
financial system, PARCA, which is basically, what is the health
of our programs on an ongoing basis. Another one is, we do not
have, believe it or not, very good information about our
industrial base. And that is another thing that we are looking
to improve.
So, I will get back to you on this. I know exactly the
issue you are talking about. I just do not have an answer to it
right now.
[The information referred to can be found in the Appendix
on page 81.]
Mr. Hunter. Thank you, Dr. Carter, the gentleman from Texas
and Mr. Chairman for your indulgence. Appreciate it.
Mr. Andrews. Thank you very much, Mr. Hunter.
The chair recognizes the gentleman from Tennessee, the
former chairman of the panel, Mr. Cooper. [Laughter.]
Mr. Cooper. There was no coup attempt. There is a Cooper
attempt going on right now.
Any of the panelists are welcome to answer the following
questions.
Was there anything in the interim report that we left out
that we should have included? Errors of omission are harder to
find sometimes than errors of commission. But I am about to ask
you, what should we have left out that we, in fact, included?
Secretary Hale. Well, I will start with two thoughts for
you. I do not know if it is commission or omission, but it is a
theme I have struck before, that I would like to see you, or
just to focus on, audit efforts on the information we actually
use. I think I have probably hit that point to death, so I do
not need to go over it again.
You brought up a point that I think we need to think about,
that I would urge you to understand how we use, and that is
financial thresholds, at which point we review the financial
situation in an acquisition project. We do set thresholds for
both procurement and research, development, test, and
evaluation (RDT&E).
They are not slavish thresholds. If you do not meet them,
in terms of a certain percentage of your money obligated, it
does not mean you lose that money. You probably will get a
phone call and asked what is going on in your program. And you
may be asked to provide a briefing or other information.
We do find some programs go more slowly than others. Some
need additional funds, and we do try to move them around to get
the most out of the national security dollars that you make
available to us.
But I would urge you to acknowledge, these are not
automatic at all. They are triggers for reviews. And those are
two points I would keep in mind.
Mr. Cooper. Any other takers? Ash?
Secretary Carter. I have a concern about the PARCA passages
in the draft report, which is just this, and only this, but it
is important. I share the objective entirely--and you called it
to our attention last year, and we are. I could not agree more,
and it is a good opportunity for us to improve our ability to
track programs on a program-by-program basis.
That said, I would hope we can avoid a situation where that
develops into not a management tool, but another hurdle for the
system. I know that is not your intent, or anybody's intent.
But I am always amazed at how many hurdles we already have in
the system, and how little good they seem to do. And it can
create a system where just getting through the hurdles seems
like victory all by itself for all too many program managers.
And so, it is supposed to be a system that has content and
purpose, and not just a system of milestones. So, if you can
help us to avoid that in connection with PARCA, I would be
grateful.
Mr. Cooper. Are there any acquisition regulations you would
like to see repealed outright? It goes larding on, report after
report, recommendation, statute, rule?
Secretary Carter. May I ask Mr. Assad if he has an answer
to that? Shay, do you?
Mr. Assad. No, I do not believe we are looking for repeal.
We do share your view with regard to the tax withholding. We
share your view on that. We believe that that would be an
effective piece of legislation, to repeal that. That is more of
a hindrance than it is anything else.
But beyond that, I would not recommend the repeal of any
existing legislation.
Secretary Hale. Can I add one more thought? And that is--
and I will ask Shay Assad's help here--I believe there is a
passage toward the end indicating that the Defense Contract
Audit Agency (DCAA) certifies business systems. I think the
fact is, they recommend to our contracting officers that
certification. I think that is right.
Mr. Assad. Yes, sir.
Secretary Hale. And I want to fix that.
Mr. Assad. And it is important, because the distinction is
that the auditor is providing us an audit opinion. And the
contracting officer is ultimately held responsible for deeming
whether that system is adequate or not adequate. So, we do want
to keep that separation.
And we absolutely want independent audit opinions. But we
do not want it to go the point where it is deeming a system is
deficient or not. We want their findings. And we want the
contracting officer, in concert with the auditor, to make a
determination of do they believe it is deficient or not.
Mr. Cooper. I have a feeling my time is expiring.
Mr. Andrews. If I may before--I am sorry.
Ms. McGrath, did you want to comment?
Ms. McGrath. Since we have the opportunity to add.
Mr. Andrews. Please do.
Ms. McGrath. Specifically on the business systems, IT
business systems, there is not a specific recommendation
focused on business process reengineering of those areas in the
National Defense Authorization Act. Section 1072 specifically
does require a look at the business process reengineering, I
think, from a holistic acquisition approach.
I mean, there are many lessons learned out in industry,
that if you do not perform the adequate business process
reengineering up front, very much akin to the requirements
development and tied to, have you locked the requirements, do
you have the right ones. If you do not understand the process
by which you are going to execute, and then the system it will
serve, then you have missed the opportunity.
So, if there is a way to address that within the
recommendations, I think that would be beneficial, specifically
from a business system perspective.
Thank you.
Mr. Andrews. Jim, I certainly do not want to rush you. If
you have other questions, you are welcome to ask them.
I did want to ask Secretary Carter, I agree completely with
your point about not creating another hurdle for PARCA, but
creating a good management tool. We would welcome your specific
suggestions as to how we accomplish that as the report moves
forward,
Because, clearly, we do not want this to be another box
people have to check off that is another annoyance. We want it
to actually be a productivity tool. So, we would welcome your
point.
The chair recognizes Mr. Conaway.
Mr. Conaway. Thank you, Mr. Chairman.
Again, thanks, everybody, for being here.
Secretary Hale, when you say something three or four times,
obviously, you get my attention. The information you use to
manage your business--I hope that is not code for, we are going
to continue to use that as our mantra to not get to a point
where we can audit the financial statements, because there is
not a Chief Executive Officer (CEO) in America who would not
love to have that standard versus the standard of a qualified
opinion.
So, I know it is hard. Probably the hardest effort anywhere
in financial kingdoms is yours, because of the breadth of what
DOD does and spends. And you and I will have some
conversations, as you mentioned earlier today, and I look
forward to that.
I do not know if you had a comment on that. But I hope that
is not something that we will use to say, you know, it doesn't
matter what a historical cost of an M-1 tank is--and I agree.
But nevertheless, without an unqualified opinion, there will be
that lingering doubt in the taxpayer's mind that you do not
have it right yet.
And so, it is important to get ultimately to the
unqualified opinion.
Secretary Hale. Well, I think what we need to do is look at
whether or not it makes sense to spend what could be hundreds
of millions--maybe billions--to get that kind of information we
do not use. Perhaps we need to revise the audit standards. And
the Chief Financial Officer (CFO) Council is looking at that
issue. I don't know that they have concluded that yet, but I
believe it is something we need to look at.
I do not think you would want me to spend enormous sums to
obtain information that is useful in the private sector, but,
frankly, is not used in the public sector and the Department of
Defense.
Mr. Conaway. Well, again, not to be argumentative, the CEOs
of most of those companies who fought their way through section
404 of the Sarbanes-Oxley Act and spent a lot of money in
relation to what they do to get their internal controls
audited, and all the other kind of your systems done to support
ongoing information, and the ongoing efforts.
But again, I think we both want to get to the same point.
But again, without that final unqualified opinion at some
point, I think the code, the law says now 2017, which I think
is too far down the road, but nevertheless.
Mr. Fisher is here from the Business Transformation Agency.
As I understand that agency, they have responsibility for
business transformation across the Department of Defense, but
precious little authority to do anything, other than just the
persuasion, I guess.
Mr. Fisher, we continue to spend a lot of money on IT
acquisition for new business systems. Maybe Ms. McGrath, you
want to weigh on this one, as well.
Can you give us a sense of how the Department is doing as
they move these business system investments? Are they moving--
does it move the ball toward an unqualified audit, in your
view?
Mr. Fisher. It can. It should. It is questionable right now
whether it is.
Our track record is that we have been on the Government
Accountability Office (GAO) high-risk list now for business
system modernization for quite some time. On the enterprise
resource planning systems that we have been implementing
throughout the decade, we have spent almost $9 billion on those
systems over the last 10 years.
Some of them are in production. Some of them are still in
development. So, our acquisition and delivery of those systems
has been a real problem.
If we can overcome those inherent challenges--and I can
articulate some of them that we have observed over time, and
that my agency is certainly trying to work with the components
on, with military departments. We will, clearly, never achieve
a clean audit opinion unless we can get these systems
implemented.
Just implementing the systems will not get us a clean audit
opinion. But our current systems environment is prohibitive, in
my opinion, to ever getting there, because it is so fragmented,
so disaggregated. And we have so much data exchange in a non-
standard way today, that I do not believe we would ever get
there.
If we can overcome those challenges with these new system
implementations, then that is certainly a path to getting to an
audit readiness standpoint.
Our problems are largely--we look at these as technology
projects. As somebody once told me, these are not technology
projects, they are sociology projects. They are about people.
This is change to people, and people are highly resistant to
change.
We are organized today through our many, many stovepipe
functional organizations, who have spent decades figuring out
how to make their piece of the pie work really well. Well, the
systems that we are implementing, and the kinds of end-to-end
processes that we need to execute to ultimately achieve an
audit opinion, or good information, or however you want to
describe the positive effect, rely on us breaking down those
silos. We need to operate in this end-to-end fashion.
And we have a clash between the way we have always done
things and the way these systems have always been designed to
be used. And that clash hits in these implementation programs.
When we talk about acquisition with our acquisition program
managers (PMs), are faced with that clash.
My optimism turns on, frankly, some legislation that has
come in the last couple of years. The Chief Management Officer
(CMO) legislation I think is critical to this whole thing. We
finally now have an organizational construct within the
military departments, and with Ms. McGrath's office at the
Office of the Secretary of Defense (OSD), that spans the
individual functions.
We need to do that, if we are going to be able to implement
these systems and execute business in an efficient and
effective way. We cannot continue to optimize locally, if we
expect to optimize the end-to-end, which is really the
capability that we are delivering.
So, our ability to effectively use those CMO, Chief
Management Officer positions, again, is one of the things that
I am counting on to be able to drive some of this change, where
we have the end-to-end cooperation.
The other is what Ms. McGrath also mentioned, the
reengineering element that came in the NDAA last year. Change,
again, comes hard. People are used to doing things the way they
do them, and we spend a lot of time with programs arguing
about, no, we are not going to do it that way anymore; here is
a better way. And those tend to be lengthy arguments.
Well, now it is the law that we not only need to have those
arguments, we need to bias ourselves in the direction of
change. And we in the Department now need to use that
legislation as an ongoing lever when we engage with functional
communities that are highly resistant, to say, I understand
that is how you have always done it. You need to trust. You
need to look at these opportunities to do things better
holistically, and then move forward.
So, I think those are a couple of levers that we need to
continue to push, if we are going to be able to achieve the
outcomes you described.
Mr. Conaway. Okay. Thank you.
Ms. McGrath, you have some comments on that?
Ms. McGrath. I would just echo the importance of digging
across functional enterprise look as we implement the
enterprise resource planning (ERP). As you know, they are
designed to be cross-functional. And as David pointed out, we
are historically stovepipe-focused.
And so, this does, say, provide an opportunity for us to
actually look longitudinally across the department. But it does
also--it is a significant change management challenge.
And as we are pursuing the implementation for the ERPs, it
is not just the program manager's responsibility, but it is the
responsibility of the functional requirements, those who run
and operate the business, to enable that cross-functional
implementation.
So, I would echo, the ERPs are more difficult, because we
are asking them to do not only more, but different things
across an entire enterprise, be it the military departments or
the Defense Department.
Mr. Conaway. Well, thank you.
One of our panelists last time made an analogy to bull
riding in a rodeo. That seems odd. But nevertheless, the
scoring system there is the bull gets scored, and the rider
gets scored. Can you--we have got an acquisition system, and
then we have got folks who ride that system.
Should we have evaluations of both? Is there a reason to
have in place an evaluation system that grades both the system
itself, as well as how well we implement it, from an
acquisitions standpoint?
Secretary Carter. I think we grade the system more than we
grade the programs. And one of the nice--the idea of PARCA is
to grade the programs, rather than grade--in other words, you
are grading them on their performance, their performance for
real, like, are they delivering capability on budget, not their
performance in the system.
Because, as I said, you can get through all the hoops,
except you start over here with a tiger, and then it is a mouse
that goes through the last hoop. And that is getting through
the hoops, but it is not delivering the goods.
So, I think that the innovation represented by PARCA, and
the essence of it is to operate at the program level, to give
us the visibility into the health of programs, whether they are
performing--not just in meeting milestones, and so forth, but
performing in their essence.
And that, if I may say so, is the perspective I take on the
information systems problem, as well. At the level below the
discussion we just had, which is excellent, one has to look at
the quality of our program management and who is actually
running this thing.
It frequently happens, as Ms. McGrath said, that the
components who are running it, they are subject matter experts.
They are rarely experts in information technology management.
And this is a kind of dog-bites-man story that repeats itself
on and on and on in IT systems, where the people who are trying
to--who are acquiring the IT system are essentially trying to
automate the system they have, and are not adequately open to
changing their patterns of behavior and response. And you just
see it repeated over and over again.
That is why it is so important to have an ability to not
just oversee, but to give best practices to people who will be
doing it for the first time, because they do it kind of once a
decade. And most of the time, they are worried about--their
focus is on providing health care, let us say, not on health
care IT.
Mr. Conaway. I am sure we will have another round, but
thank you.
Mr. Andrews. Thank you.
The chair recognizes Mr. Ellsworth for five minutes.
Mr. Ellsworth. Thank you, Mr. Chairman.
Dr. Carter, I think it was in your opening statement, when
you talked about something that I have a big interest in. It
was talking about the proper ordering of equipment and storage,
about ordering the right amounts. I know we have to be fair to
our contractors, but in my district alone, we just went through
a long process of destroying VX gas that we stored for many
years at Newport, Indiana. Just got rid of that.
I know that I am trying to help seek funding for the
destruction of armament at Crane Naval Warfare Center in the
millions of dollars.
And so, that was in your comments, right, in your opening
statement?
Secretary Carter. It was----
Mr. Ellsworth. And I was just----
Secretary Carter [continuing]. In a different direction.
Mr. Ellsworth [continuing]. Just curious. And I have often
heard stories, you know, talking to some warfighters who said
they were either--this goes back to Vietnam, actually--but
talking about dumping ammunition over the side of the boat, or
just going out in the ocean and shooting it up, because, if we
do not use it, we are going to lose it, or we are going to the
supply line.
And can you explore a little bit how we are going to do
that, or what your thoughts are on how we could get the right
amount, so we are not seeking millions down the road? Or
billions?
Secretary Carter. Yes. I would just make clear, I was
certainly not suggesting that we buy things that we do not
need, or would not need, or would not need more of later.
I was specifically addressing--I think the passage you are
referring to is in the contingency contracting world. It
frequently happens that in the course of the war, that we can
see an evolving requirement developing for a piece of
equipment. We do not know exactly how many we will need.
Yet the acquisition system wants to not start until it
knows exactly what the objective is--in our terms, the
requirement.
In a war, since you cannot know exactly how many you are
going to need, if you delay, you are depriving the warfighter
of something they need. It is an unnatural act for the
acquisition system to begin acquisition before the requirement
is fully defined.
In normal times, that is a perfectly reasonable expectation
to have. In wartime, it is not always. So, I am frustrated from
time to time by our ability not to anticipate needs.
I will give you a great example, which is the mine
resistant ambush protected all-terrain vehicle (MRAP ATV),
which we began buying last summer. And we have now changed the
requirement several times, because the troops get them, they
like them. The threat changes, we need them. We are going to
Afghanistan, not Iraq, which is mountainous, not flat, so you
need the independent suspension of the MRAP ATV.
And lo and behold, the requirement goes up.
Well, if we had waited till last summer, till we were sure,
finally, for once and for all how many, we still would not be
producing them, which means they would not be falling into the
hands of the troops.
So, sometimes when you are in war, you need to take a
little leap, at least quantitatively. And it just turns out
that we are not set up to do that. And I have to personally
intervene in force. Secretary Hale helps out in that regard,
because the funding system is not prepared to do that either.
And it just goes back to the acquisition system was
designed to prepare for the war. When it comes to conducting
war, we are cumbersome and have to work overtime to get the
result that the taxpayer and the warfighter ought to want in
Afghanistan.
Mr. Ellsworth. I would rather have too much than too
little. But how much too much? I think if we can get better at
estimating, obviously, that would be a great thing.
Secretary Carter. Well, if I can say so, if we start
ramping up and start producing, and then we get the
requirement, then we will cut off the buy at the appropriate
date. It is those critical months when you could have been
producing something, and you were not, because you are thinking
how many you are actually going to need. It is just those
critical months.
And, you know, in Afghanistan, it is all a matter of
months.
Mr. Ellsworth. Sure.
Mr. Hale, I talked to a gentleman last week back in
Indiana. He was talking about his wife was in purchasing, and
said she came home to the dinner table and said, ``I had to
spend up $150,000 today.''
Does the report--kind of the spend it or lose it syndrome,
which happens a lot, probably happens in these halls and in our
offices, too--but does the report, in your opinion, address
that? I know we have talked about some stuff, and the chairman
and I have talked about that, you know, we can solve some of
this with an incentive to actually save that money and not
spend it up.
Secretary Hale. Well, you do bring it up. I mentioned the
financial thresholds that we used to suggest when we should
look at an acquisition project. I agree, it could create
incentives. It could create the wrong incentives.
And incidentally, there are also a number of limits. I am
not sure whether they apply to acquisition. They certainly do
in the operation and maintenance area. We are not allowed to
spend more than a certain amount in the last quarter. So, there
are some limits.
But, you know, I think we have to depend on the good will
and good intentions of our program managers to be careful in
how they use this. And I think the great majority of them do
that.
I mean, you could say that giving grades causes kids to
cheat. And it probably does sometimes. But for the great
majority, I do not think you want to stop giving grades because
of that. What you want to do is find the occasional ones who
cheat, and take the right steps.
I think our program managers are aware that they are going
to have their financial programs looked at, and I think they
should. But they will get a chance to say why. There may be
good reasons why they are not able to obligate the money. And
in that case, we will move ahead.
Mr. Ellsworth. That is all I have, Mr. Chairman. I yield
back.
Mr. Andrews. Thank you very much.
The chair recognizes Mr. Coffman. We appreciate your
contributions throughout this, but most recently on the foreign
sales industrial base issue, which we try to take into account.
Mr. Coffman. Thank you, Mr. Chairman.
In the export restrictions, I am concerned about the
industrial base. We have a declining industrial base that is
becoming less and less competitive in terms of trying to
maintain it for defense acquisition.
And so, one question I have is--and one issue that has been
raised in the report--is taking a look at those export
restrictions, and reviewing them and seeing if they are
realistic, you know, in today's environment. Because if they
can, in fact, be effectively relaxed, and that our industrial
base then has more of a foreign market, then it will strengthen
the industrial base and make it more competitive for our own
acquisition.
And would any of you like to respond to that?
Secretary Carter. I would, if I may.
That is an area that the Secretary of Defense feels very
strongly about. He has expressed himself publicly in his view
that our export control system is outdated. And he has asked
for--with the Department of State and the Department of
Commerce which also have responsibilities in this--a unified,
what he calls ``clean sheet of paper'' approach.
That review is being done. It is being led by Secretary
Flournoy, the Under Secretary for Policy. And I really think it
is a clean sheet of paper. And I think they are going to be
reporting out in a short while.
So, the Secretary absolutely shares your concern.
Mr. Coffman. Anybody else?
Let me raise another thing concerning our industrial base
and the difficulty in maintaining a competitive environment. If
we take--there are some areas that it seems that the Department
of Defense has to consciously look out after in order to
maintain the industrial base at all.
Shipbuilding is an example. We maintain six shipyards at
this time, and their only customer is the Department of
Defense.
And I think the question is, given the acquisition
requirements of the United States Navy at this time, is it cost
effective to maintain six shipyards? Or should we look at some
sort of Base Realignment and Closure (BRAC)-like process to
bring them down to a more reasonable level that would make it
more cost effective--again, given our acquisition requirements?
Would anybody like to address that? And you can take the
Fifth Amendment. It is a politically sensitive question.
Secretary Carter. I will just say that I know that the Navy
is constantly assessing the shipbuilding industrial base. I
know it has been an interest of Secretary Mabus, naturally
enough, trying to get more efficiency out of the base we have,
and figuring out who is good at what.
It is not a free and open and competitive situation, so
there is a requirement for more government intervention and
management than there is in other aspects of the defense
industrial base. So you are absolutely right.
Mr. Coffman. Anyone else?
Dr. Carter, I think you mentioned that we are now at a one-
to-one ratio, I think, in Afghanistan. And I am not sure if we
are at a one-to-one ratio in Iraq, as well, between U.S.
military personnel and contract personnel.
Secretary Carter. Slightly higher in Iraq.
Mr. Coffman. It is slightly higher in Iraq.
Are you taking into account personnel that are not
necessarily involved in logistical support, but involved in
maybe some kind of advisory support? Or contract security
personnel, are you taking into account those?
Secretary Carter. All sorts of functions.
Mr. Coffman. All those?
Secretary Carter. All contract personnel.
Mr. Coffman. In your estimation, is that the right number?
Or is that number too high in terms of contract support?
Secretary Carter. The alternative to contractors would be
to have the functions now performed by contractors, performed
by uniformed personnel.
There are obviously some advantages to doing that in the
sense that you have all government personnel. You have all
personnel that you vet, you order, you discipline. The
disadvantage is that all studies show that that is more
expensive, and is a distraction from military functions for
military people.
So, we are a long way from World War II, where all of the
kitchen, and all of the laundry, and all that stuff was done by
people in uniform. So, if we were going to reverse that course,
we would need to deal with both the economic and the
organizational consequences of that.
Mr. Coffman. Are there issues that we might reexamine in
that context? I believe in Kuwait there was a situation with a
higher-echelon vehicle maintenance that was done by private
contract, if I recall, that had extraordinary problems. And
that is something that has historically been done by U.S.
military personnel.
Can you comment on that issue?
Secretary Carter. Yes. I think the principal thing that we
learned in Iraq, and are trying to learn the lessons of Iraq
for Afghanistan, with respect to management of contractors, is
having the expertise there to write the contracts so that they
are fair to the taxpayer, and then monitor the contracts to
make sure that they are implemented the way they are supposed
to be.
It is different when you are back here at home, and you
have all the contracting officers and all the contracting
officer representatives you want. Over there, we cannot send
people who are not uniformed people over there. So, we are
chronically short of contracting officers and contracting
officer representatives in theater, just the people who make
the contracting system work, because they are needed there.
We are trying to do a lot more of it back here, do some of
the contract officer work, particularly, back here for
contracts there. But monitoring of contracts can only be done
on the spot. If you are building a building, you are building a
road, there needs to be somebody who goes out to the building
of the road and makes sure it is done the way it should be.
So, we are chronically short of people. And I think that is
the area where we have been most deficient, first in Iraq, now
in Afghanistan.
Mr. Coffman. Thank you, Mr. Chairman. I yield back. I have
an additional question, but I will wait for the second round.
Mr. Andrews. Okay, thank you.
I have two brief questions to kick off the second round.
Secretary Carter, my understanding is, in December the
Secretary of Defense directed you and your colleagues to do a
consolidation of array of information systems study for the
major weapon systems. And I just want to know if you could
bring us up to date on the implementation of that as part of
the Resource Management Decision 700 series.
How are we? What are we up to? When can we expect to see
some yield from that effort?
Secretary Carter. If I can, I would like to get you a
comprehensive answer. If I may, if I can take that one for the
record and get back to you.
[The information referred to can be found in the Appendix
on page 81.]
Mr. Andrews. Sure. No, we would be happy to do that.
Secretary Carter. And Mr. Assad, if I might prevail upon
you. We have made some recommendations in our report--our
interim report--with respect to personnel, the human capital of
the procurement organizations. We have made suggestions about
quantity and training and incentives, and various other issues.
I will ask Mr. Cooper's question. Is there anything in
there you would like to see us add, or delete, that you think
would improve the quality of our recommendations?
Mr. Assad. First of all, Mr. Chairman, I would like to
thank this committee for their unwavering support in improving
the capability of the acquisition workforce. We really
appreciate your support.
Mr. Andrews. We appreciate your service and your good
wisdom. Thank you.
Mr. Assad. There is probably one area, and it goes to how
we move folks around who may be able to take on a position, a
new acquisition position. In other words, that person might be,
in the old vernacular, GS-13. And there is a GS-14 opportunity.
Well, the way the language is written, you might not be
able to use the Acquisition Workforce Development Funds to
actually hire or provide that opportunity to a person who is
already in service, and then replace that person at that lower
level with the funds that normally support him.
So, one of the things that we are asking the committees to
look at is to have that flexibility. The idea was, of course--
and I know why the committee put the language in, or the
Congress put the language in--was because they wanted to
prevent just a shifting of people and, you know, kind of
swapping of the deck chairs.
But there are instances where we need to make sure that
folks who are deserving of opportunities that might be funded
with an acquisition development workforce fund could, in fact,
be used with that. So, that is one area that we would like to
make sure that we have got clarity to do that.
Mr. Andrews. Very well. And I think it is a recurring theme
in our report that prior reports, I think, have been
ineffective or irrelevant, because they have been
proscriptive--prescriptive, rather--where we try to anticipate
future situations and write rules about them.
Our intention is rather different. We want to recruit and
retain the very best people we can--and we believe we have many
of them already--give those men and women the tools to do the
job, give them standards, and then get out of the way.
So, I think that your recommendation is very much in the
spirit of that. And I would issue a blanket invitation to our
witnesses today. If you see provisions that you think are
overly prescriptive and interfere with that spirit, we would
like to hear them. We will not necessarily agree with all of
them, obviously, but we would like to hear them.
I am going to yield to Mr. Conaway for a second round.
Mr. Conaway. Thank you, Mr. Chairman.
Focusing on this issue on IT and services and commodity
purchasing, we talk about setting up standards and metrics to
measure all of that work and to make sure the taxpayer is
getting the best value. And that resides in the PARCA. A, is
that the right place for that function to reside?
B, where should all of that myriad of metrics get decided
at the front end?
You will have to have somebody monitor them after you have
decided what you are going to measure and how you are going to
hold people to things. But that work to be done on the front
end, where in the system does it make the most sense to do
that?
Does the BTA have a role in helping set those standards up?
And is PARCA, in fact, the right agency to then shepherd those
through on an ongoing basis as it works to evaluate the
purchasing of IT services, commodities, the non-weapon system
money that gets set?
Thoughts across the panel on that?
Ms. McGrath. I can start.
Mr. Conaway. Okay.
Ms. McGrath. It sounds like you have a few questions in
there in terms of what should those standard measures be for
those different types of acquisitions? And I think that we are
better at defining some of those today than others.
I think for IT, I would distinguish business from non-
business, because they are very different. Command and control
is very different than an ERP. And so, the types of things we
are looking to measure, I think the definition of those, the
different organizations would play a role in defining those.
For example, BTA, Business Transformation Agency, and the
highly qualified experts they have within their organization
who have ERP experience and industry experience, I would say
would be well positioned to define what those are. I would not,
however, ask them to define command and control measures,
because I do not think we would get that right.
So, I think the identification of the need is well
articulated. We would certainly have different organizations
actually define those measures, be it within PARCA or another
organization, the transparency of all of them and the standard
implementation, so that we understand across the Defense
Department, how are we doing in business systems irrespective
of organizational home, if you will.
So I think the definition, and then the proliferation of
those standards, and then the reporting into a central place,
and then the transparency of those, is important.
Mr. Conaway. So what you are saying is, rather than have
one agency like PARCA be responsible for monitoring the
performance against those standards, you would rest that role
with each of the individual agencies? Or in other words,
decentralize that? Is that what your idea is right now?
Ms. McGrath. Sir, there is an aspect of it that would be
decentralized. I think the centralized part is the definitional
piece. So establish what the standards are, ensure that those
who have acquisition oversight, because there are multiple
organizations that have that. I have acquisition oversight
responsibility for some of the business systems, some of these
ERPs that we are talking about.
And so, I would want, as an acquisition authority, to look
at how well are we performing against those standards. And
then, yes, I would feed to sort of a central place within the
Department, so that, again, we understand holistically how we
are performing.
Mr. Conaway. Anybody else have any comments?
Mr. Assad. Sir, I would just like to say that I would like
to kind of jump on the bandwagon with Beth. It is important for
PARCA, I think, to participate as far as program performance is
concerned in establishing standards.
My concern--PARCA happens to be under the acquisition
envelope--is overwhelming PARCA with--you know, they need to be
focused on program performance. And they certainly can
establish, and participate in establishing, the standards by
which program offices set their goals. But if they actually
participate in setting the goals, then they cannot be an
independent and honest broker of evaluating whether or not
those goals were met.
And there will always be a question as to whether or not
the goals that were established--you know, we get the checker
checking himself.
And I do think that PARCA needs to be that independent,
honest broker that provides information to the Under Secretary,
and not necessarily overburden it, especially in the near end
here as we begin to establish it, with other responsibilities.
Secretary Hale. I would just add one thought. You are
talking to the policy arm of the Department of Defense,
especially in the services area. And most of the execution is
by the military departments and the agencies.
We can set the standards, but they are the ones that are
going to have to execute these programs. We do not have, and
should not have the staff or the capability to do that--with
the exception for some of the major defense acquisition
programs where Ash Carter really has a kind of operational
role--but even for most of the weapons programs they are
executed at service level.
Mr. Conaway. Okay. So, I guess what I would ask the panel
is to look at how we have approached that issue within our
report, so that we do not get ourselves in a position where it
looks like we are recommending something that, collectively,
you do not believe operationally works, because that is not
what we are--that is not the intent.
The intent is to put in place measurement systems that
work, and then have that accountability occur within wherever
it needs to occur that makes the most sense. Because I agree,
Mr. Hale, that we do not want to set up a giant, new
bureaucracy within anything, because the idea was to, you know,
not do that. That is done easily and too often, and it really
does not accomplish what we want to.
So, as you look at the recommendations for this and the
role PARCA plays, we would appreciate any thoughts you had on
how we might need to fine-tune our recommendations, so that it
does not mislead the system to go a direction that does not
make sense, because I do not think that does any of us very
well.
So, thank you, Mr. Chairman.
Mr. Andrews. I would associate myself with Mr. Conaway's
remarks. We want to provide a tool, not an impediment. And so,
your practical observations about what will work are very much
welcome.
Mr. Cooper is recognized.
Mr. Cooper. In case anyone is getting sleepy, let us stir
things up a little bit.
So far we have heard a lot of abstract concepts, a lot of
jargon, a lot of acronyms. Probably, the average citizen would
have great difficulty even following the discussion.
Yesterday, the Air and Land Forces Subcommittee heard from
the Army, that even though the FCS--Future Combat Systems--
spin-out failed operational tests last August, they are still
planning on buying two brigades' worth at $285 million a set.
This apparently includes unmanned aerial vehicles (UAVs) that
are designed to operate for 24 hours, but so far can go barely
an hour-and-a-half without breaking down.
It costs $360,000 a unit. Meanwhile, the Raven costs
$17,000 a unit. So you could buy 21 Ravens for every one of
these that they are thinking about buying.
So, I think folks back home worry about things like that,
as well as refrigerators that the Air Force used to be able to
buy for $17,000, when just a year or 2 later--it is a miracle--
they are $32,000.
Should we be upset about these things? Are they budget
dust? Do you all care? You know, should taxpayers care?
Secretary Carter. Absolutely, they should. It is the
taxpayers' money, and it is equipment for the warfighter. So,
the example you gave is one that I am looking at very
carefully, the Army's Early Infantry Brigade Combat Teams
(EIBCTs) and the legacy of the Future Combat Systems program,
and getting what we can get out of that program that is useful.
But I just testified this morning on another program, the
F-35, the Joint Strike Fighter program. And the burden of the
testimony was that that is not where you would want it to be.
And our responsibility collectively is to make it better.
So, I do not know. There is no reason why the citizens
should be able to follow this discussion. They are counting on
us to do right by them. And you give some examples of cases
where we do not do right by them, and there are such examples.
Mr. Cooper. Another question. One of the most disturbing
things this committee found was the fact that the Defense
Contract Audit Agency, at least in a sample of their work, had
almost completely abandoned the principles of accounting.
And I am not an accountant. I defer very much to my
colleague Mr. Conaway's expertise in these matters. But that
was deeply disturbing, and the lady subsequently resigned from
her job. And she led an army of 4,000 or 5,000 of these folks.
You worry about incompetence. You worry about corruption.
And Mr. Hale, when I hear from you that, you know--and
every audit has its limits, and historical information is not
as valuable as future information. And the distinction was made
earlier, well, these are public sector standards, and we just
do not worry about that. And the private sector has different
standards, and it is irrelevant.
You are aware, of course, how critical the GAO is of the
Pentagon's complete failure to be audited. It is by far the
worst of all federal agencies in terms of non-compliance with
management practices that have been in place for a long, long
time.
And I am sure you are a fine man, but I just do not get
from your testimony or from your statements any sense of
urgency or concern. I get a lot of self-satisfaction and a
little bit of arrogance. And I think--maybe I just do not
understand accounting well enough, but my colleague Mr. Conaway
certainly does. And I think we need to get to the bottom of
this.
And just, we are doing fine right now, go away, is not a
good answer.
Secretary Hale. Well, I do not think that is what I said.
But let me first address the Defense Contract Audit Agency,
because you are right, we have got serious problems there. I am
afraid we had a maxim in acquisition--faster, cheaper, better.
We got two out of three with DCAA, but it definitely was not
better.
We have appointed a new director, making a number of
changes, going to move to a more risk-based approach to
auditing. They do about 30,000 audits a year. Nobody can do
that and apply government audit standards. So, we need to make
a number of changes, and are committed to making some
significant ones within the year.
We probably got into this problem with DCAA in a decade. We
will not get out of it in a year, but we need to make progress.
To your broader point, I am sorry if it came across that
way if it did. I do feel a sense of urgency to fix the
information that we use to manage. But I feel a sense of
commitment to the taxpayer not to spend money on things we do
not use to manage. If that came across wrong, I am sorry.
The statements about what financial management does well
are to put in context. I do not want to lose that. I do not
want to have people stop meeting the needs of the warfighter
because they are so concerned that they may do something that
leads to a statement that is not auditable.
We have got to find a balance. And that was the point that
I was trying to make. In terms of the things that we do right,
I want to keep those, and build on the things we do not.
I do feel a sense of urgency. But at this 20th anniversary
of the CFO Act, about the 15th anniversary, I think, of the
Government Management Reform Act, which is the one that
actually required auditable statements--and we are not real
close. And we have had a lot of false starts.
We have had some successes. The Army Corps of Engineers has
fully auditable statements. The United States Marine Corps has
asserted audit readiness for its statement of budgetary
resources. But we have still got a long way to go. We do not
have a coherent approach, as I said in my statement, and we do
not have resources. I think we will, or we do now, but we have
not in the past.
So, if it came across as arrogant, I am sorry. It was not
meant as that. It was meant to say, I want to keep what is good
and build on it.
Secretary Carter. May I comment on that also, on Secretary
Hale's sense of balance there? Because I encounter that also in
the contingency contracting area, where we are trying to be
exigent, and we are operating in unusual places like
Afghanistan, and unusual circumstances--and we are trying to be
good stewards of the taxpayer's dollar, as well. And there has
to be a balance there.
And Secretary Hale has been of huge assistance to me in all
the contingency things we have done, which does have an
enormous sense of urgency. And so, that is an important balance
for us to strike. And he has been an important part of making
sure that we achieve that balance at the same time we do all
the things that we need to do so urgently for the fight in
Afghanistan and Iraq.
Mr. Assad. If I might say something about the men and women
at DCAA, because I am their customer. I represent the 26,000
contracting officers who are out there buying goods and
services.
And we cannot get a good deal for the taxpayers unless we
have an effective and able Defense Contract Audit Agency.
Like the acquisition workforce, the Defense Contract Audit
Agency's workforce, over a number of years, deteriorated in
terms of just the number of folks that they have to do proper
auditing.
That has been recognized in our Acquisition Workforce
Development Fund. We, in fact, have approximately funds for 800
auditors. We have already hired--Mr. Hale has already hired 300
auditors. In addition to that, Mr. Hale has set up an executive
committee to oversee DCAA. I am a member of that committee as
their ultimate customer.
And we are very well aware--you are right, Mr. Cooper--
there were issues at DCAA. But the new director, Pat
Fitzgerald, is focused. We, as an executive committee reporting
to Mr. Hale, are focused on getting those things corrected.
We have got to get a better deal for the taxpayers. And we
will not be able to achieve what Secretary Carter talked about
unless we have an effective and efficient DCAA.
But I want you to know that the vast majority of inputs
that we get from DCAA are quality products. They are documents
and analysis that we can use at the table.
Do they need to be improved? Absolutely. Just as we need to
improve in negotiating deals for the taxpayer.
But your comments are recognized. But I want you to know
that there are a large number of those auditors out there who
are doing a very good job.
Mr. Cooper. Thank you, Mr. Chairman.
Mr. Andrews. Mr. Coffman.
Mr. Coffman. Thank you, Mr. Chairman.
Both parties are raising the issue of reforming the
appropriations process, specifically earmarks. And in terms of
the defense acquisition process, do you have any
recommendations in terms of which earmarks are adverse to the
process in terms of the efficient acquisition of the needs of
our warfighters?
Secretary Carter. I will hazard one comment, which is in
our science and technology base programs. Just because, even as
free and open competition is the principle that guarantees
value and excellence in acquisition, in our science and
technology base it is peer review. And scientific and
technological excellence is the--ought to be--the basis for
selecting projects. And that is an area where it would be
particularly disturbing to see principles other than
technological excellence at work in the selection of projects.
Mr. Coffman. Anybody else?
Secretary Hale. I mean, I think in general, we oppose
earmarks in the Administration. We also understand that, in the
end, if you enact a law, we are going to follow it. And that is
how our system works. So, if you put it in the bill and tell us
to do it, we will execute it.
Mr. Coffman. Okay.
I raised, in the previous round, International Traffic in
Arms Regulations (ITAR) reform. And I want to take a different
tack now on acquisition, and that is that, are there areas that
we contract out now with foreign providers, non-U.S. providers,
that made us over-reliant, that during time of war create a
problem in our supply chain?
And let us take the area of ammunition, of munitions, that
there is a reliance on foreign providers when it comes to
munitions. And is that problematic to the United States to be
so reliant upon foreign providers?
Would anybody like to answer that?
Secretary Carter. I will take a shot at it, but I think,
Shay, if I may ask you also.
It is a requirement that we assess our dependence on
foreign suppliers, and make sure that we are not overly
dependent upon foreign suppliers, and that we do not put at
risk our supply chain. At the same time, there are different
gradations of foreigners.
And another aspiration we have, just for the balancing
sense, is to be able to dip into the global technology base,
because 50 years ago, most technology--advanced technology was
ours. That is no longer the case.
And the most advanced technology was defense technology.
That is no longer always the case, either. So, if we cannot
reach out into the commercial base, which is inherently global,
we will not have the best.
So, we need to make sure we are not overly dependent, but
also that we are availing ourselves of what is out there.
Otherwise, we will become an enclave, which will not be good
for the taxpayer and the warfighter.
And, Shay, on the regulator side, or any other side,
anything to add?
Mr. Assad. Well, I just think the comment that you made
earlier, Mr. Secretary, in terms of what the Director of
Industrial Policy is doing to kind of really expand. We have
not had the kind of insight and capability, Mr. Congressman,
that you are talking about in terms of, did we really
understand our industrial base--not just our domestic
industrial base, the international industrial base--that we
rely upon? And is it appropriate for us to be placing so much
reliance on a particular international partner?
One thing that you can be assured of, that when we--we
obviously make every attempt to, when we issue our
procurements, to live by the standards and the requirements of
only dealing with qualifying countries as it relates to the Buy
America Act.
But there is more work to be done in this area of assessing
the industrial base, and in particular the international
industrial base, because it is a global marketplace that we are
in.
Mr. Coffman. Okay. Let me close with just a comment, a
concern, that the Department of Defense is not looking forward
enough in terms of supply chain issues on the industrial base.
And I think the rare earth metals is a great example of
that, where we seem to be wholly reliant--not wholly reliant--
but I think China has about 95 percent of the market right now.
We are reliant upon them for imports. I think that their demand
will soon catch up with their supply.
We have no mining of rare earth metals in the United States
to use in advanced weapons systems. And I think that we need to
be more cognizant of that--not simply from a mining issue, but
from a refining and other aspects of the supply chain.
Thank you, Mr. Chairman. I yield back.
Mr. Andrews. Thank you very much.
I want to thank our panelists for their excellent
presentations today and their preparation. I want to thank my
colleagues and describe our process from here on out.
Yes, Mr. Conaway?
Mr. Conaway. I just wanted to comment.
Mr. Andrews. Sure.
Our interim report was put on the internet last Friday, and
it is open for public comment from all interested parties, both
inside and outside the government, certainly.
The members of the panel are going to have a business
meeting next week, where we will discuss our views about
modifications to the interim report. I would especially invite
our panelists here today to make any suggestions they have
prior to that time. Early to mid next week would be helpful.
It is our intention, then, to try to proceed the week after
next with a public meeting where the panel will consider
adoption of the report to forward on to the full committee.
So, I would again invite members of the public, as well as,
obviously, the Department, speaking more officially, to give us
recommendations and suggestions, so that the members can take
those recommendations into account when the members meet next
week.
I would be happy to yield to Mr. Conaway.
Mr. Conaway. Well, thank you, Mr. Chairman.
I also want to thank folks for coming today.
I have got a question for the record I would like to
submit. It has to do with a KC-135 contract that recently was
bid between a small company and Boeing. And the small company
lost out, because of the impact of a fee they had to pay to
Boeing. So, I do not expect you to have an answer for it, but
we will submit that for the record, because it has to do with
this idea of an open, fair competition thing that we are
talking about.
And I just want to thank everybody for participating. This
is not the end of the deal. As I said earlier, I think we are
all in this together--ought to act as if we are all in this
together--for the best interest of the warfighter and the
taxpayer. And I look forward to continuing dialogue among all
of you as to how we can get this whole process better than it
is currently being done.
Thank you, Mr. Chairman.
Mr. Andrews. We thank you for your participation.
The hearing is adjourned.
[Whereupon, at 4:42 p.m., the panel was adjourned.]
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A P P E N D I X
March 11, 2010
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PREPARED STATEMENTS SUBMITTED FOR THE RECORD
March 11, 2010
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=======================================================================
WITNESS RESPONSES TO QUESTIONS ASKED DURING
THE HEARING
March 11, 2010
=======================================================================
RESPONSE TO QUESTION SUBMITTED BY MR. ANDREWS
Secretary Carter. The Department directed, via RMD 700, a study to
improve the transparency of budgeting and programming of resources for
Major Defense Acquisition Programs (MDAPs). The initial study effort is
investigating the options to ensure transparency of the data reported
in our Selected Acquisition Reports (SARs) and consistency with
information provided in the President's Budget Request, Future Years
Defense Program, and Budget Justification documentation. Under this
first effort, we are reviewing the merits of and risks associated with
reporting SAR financial data through one authoritative source, such as
the USD (Comptroller) system, along with improvements in data
structures. Decisions made to use either a common, single data source,
or multiple data sources, and the aforementioned structure changes will
be implemented in time for submission of the December 2010 SARs in
early April 2011.
Successes from the SAR transparency study above will serve as the
baseline to further improve the transparency of budgeting and
programming of resources--Research, Development, Test and Evaluation,
Procurement, Military Construction, and Operations and Maintenance--for
MDAPs, including details at the Subprogram level as reported in SARs.
This second study effort, intended to incorporate statutory changes
emanating from the 2009 Weapon System Acquisition Reform Act,
certification of new MDAPs under Sections 2366a and 2366b, and all
current MDAPs that are Section 2366 certified, will include
recommendations for changes to all affected DOD Information Technology
Systems in time to support the FY 2012 PBR. [See page 25.]
______
RESPONSE TO QUESTION SUBMITTED BY MR. HUNTER
Secretary Carter. The Department encourages competition for most of
our acquisitions including small arms weapons. The latest competition
for the M16 rifle was full and open. Two companies entered that
competition--Colt's Manufacturing Company in West Hartford,
Connecticut, and FN Manufacturing in Columbia, South Carolina. The Army
is developing an acquisition strategy for the development of a new
carbine to support our Warfighters. The Army will use full and open
competition of American-based companies for this acquisition. The Army
held an industry day where 10-11 companies participated. The Army plans
to release a draft Request for Proposal (RFP) as soon as the Joint
Staff approves the weapon system's requirements document. The Army does
limit the acquisition of specified small arms spare parts as required
by title 10 USC 2473. This title is a unique statute requiring
procurement of barrels, bolts, and receivers for a select set of small
caliber weapons be restricted to three domestic firms (General Dynamics
Armaments and Technical Products, Colt Manufacturing Company, and FN
Manufacturing), unless an exception is approved by the Secretary of
Defense. The Army is evaluating the need for this statute. Initial Army
findings indicate that this statute is not necessary because the
authority to restrict acquisitions to support the industrial base
reside in the Competition in Contracting Act. [See page 15.]
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=======================================================================
QUESTIONS SUBMITTED BY MEMBERS POST HEARING
March 11, 2010
=======================================================================
QUESTION SUBMITTED BY MR. CONAWAY
Mr. Conaway. Since your confirmation last year you have repeatedly
emphasized your desire to maintain a healthy and competitive defense
industrial base, sentiments that are also emphasized in the 2010 QDR.
I am aware of a contract recently awarded by the Air Force for KC-
135 tanker maintenance in which Boeing Co. was chosen over a small
contractor in Alabama that directly contradicts both your statements
and the policy positions laid out in the 2010 QDR.
Alabama Aircraft Industries Inc. (AAII) has for generations
provided services to the U.S. military through its maintenance of C-
130s, P-3s, and KC-135s. There has been an ongoing dispute between
Boeing and AAII regarding the aforementioned contract to provide KC-135
maintenance. As a small business of about 800 employees, down from its
peak of 1500, AAII is the only company other than Boeing that can
perform this maintenance, and it has been doing so for over 5 decades
with an excellent record of delivering defect-free aircraft.
The KC-135 work is the vital core of AAII's business, without which
the company will be forced to shut its doors, leaving the USAF with
only one source of repair for a vital airplane. Not only would
maintaining multiple maintenance sources reduce costs through the
utilization of existing resources, but it also provides for continued
needed capacity to cover unforeseen changes in demand. Given the
continued KC-X delays, multiple sources are critical to the KC-135
maintenance program and this aircraft's continued service to the war
fighter.
How does USAF decision to eliminate a competitive, small business
square with your position, comments and the 2010 QDR?
Secretary Carter. I appreciate your concern for the health of our
industrial base, and I remain committed to robust participation by
qualified small businesses. Still, sufficient competition and capacity
exists to assure the future of KC-135 operations. Further, the process
of procuring services in a competitive marketplace is governed by
federal laws and regulations, and the KC-135 Programmed Depot
Maintenance competition has been thoroughly reviewed by both the
Government Accountability Office and two Federal Courts. We take great
care to ensure fairness throughout all such competitions, and we will
continue to do so as required by law.
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