[Senate Hearing 110-819]
[From the U.S. Government Publishing Office]
S. Hrg. 110-819
ADDRESSING COST GROWTH OF MAJOR DEPARTMENT OF DEFENSE WEAPONS SYSTEMS
=======================================================================
HEARING
before the
FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT
INFORMATION, FEDERAL SERVICES, AND
INTERNATIONAL SECURITY SUBCOMMITTEE
of the
COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 25, 2008
__________
Available via http://www.gpoaccess.gov/congress/index.html
Printed for the use of the Committee on Homeland Security
and Governmental Affairs
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii TED STEVENS, Alaska
THOMAS R. CARPER, Delaware GEORGE V. VOINOVICH, Ohio
MARK L. PRYOR, Arkansas NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana TOM COBURN, Oklahoma
BARACK OBAMA, Illinois PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri JOHN WARNER, Virginia
JON TESTER, Montana JOHN E. SUNUNU, New Hampshire
Michael L. Alexander, Staff Director
Brandon L. Milhorn, Minority Staff Director and Chief Counsel
Trina Driessnack Tyrer, Chief Clerk
FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, FEDERAL SERVICES,
AND INTERNATIONAL SECURITY SUBCOMMITTEE
THOMAS R. CARPER, Delaware, Chairman
CARL LEVIN, Michigan TOM COBURN, Oklahoma
DANIEL K. AKAKA, Hawaii TED STEVENS, Alaska
BARACK OBAMA, Illinois GEORGE V. VOINOVICH, Ohio
CLAIRE McCASKILL, Missouri PETE V. DOMENICI, New Mexico
JON TESTER, Montana JOHN E. SUNUNU, New Hampshire
John Kilvington, Staff Director
Katy French, Minority Staff Director
Monisha Smith, Chief Clerk
C O N T E N T S
------
Opening statement:
Page
Senator Carper............................................... 1
Senator Coburn............................................... 4
WITNESSES
Thursday, September 25, 2008
Hon. James I. Finley, Deputy Under Secretary of Defense for
Acquisition and Technology, U.S. Department of Defense......... 6
Michael J. Sullivan, Director, Acquisition and Sourcing
Management, U.S. Government Accountability Office.............. 18
Steven L. Schooner, Co-Director, Government Procurement Law
Program, The George Washington University...................... 20
Clark A. Murdock, Ph.D., Senior Adviser, International Security
Program, Center for Strategic and International Studies........ 22
Alphabetical List of Witnesses
Finley, Hon. James I.:
Testimony.................................................... 6
Prepared statement........................................... 35
Murdock, Clark A.:
Testimony.................................................... 22
Prepared statement........................................... 79
Schooner, Steven L.:
Testimony.................................................... 20
Prepared statement........................................... 64
Sullivan, Michael J.:
Testimony.................................................... 18
Prepared statement........................................... 47
APPENDIX
Chart referred to by Senator Carper.............................. 53
Questions and Responses for the Record from:
Mr. Finley................................................... 86
Mr. Sullivan................................................. 111
ADDRESSING COST GROWTH OF MAJOR
DEPARTMENT OF DEFENSE WEAPONS
SYSTEMS
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THURSDAY, SEPTEMBER 25, 2008
U.S. Senate,
Subcommittee on Federal Financial Management,
Government Information, Federal Service,
and International Security,
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:32 p.m., in
room SD-342, Dirksen Senate Office Building, Hon. Thomas R.
Carper, Chairman of the Subcommittee, presiding.
Present: Senators Carper and Coburn.
OPENING STATEMENT OF SENATOR CARPER
Senator Carper. The Subcommittee will come to order. Dr.
Coburn, how are you?
Senator Coburn. I am fine. Glad to be with you.
Senator Carper. Good. I am glad to be with you. I just
checked in with the cloakroom to see if we are going to have
any votes during your testimony, Dr. Finley, or the testimony
of the second panel. It looks like we will not.
Senator Coburn. I would advise the Chairman that I am going
to be on the floor at about 3:50 p.m., so I will be leaving.
Senator Carper. Fair enough. But we are looking forward to
this hearing. We appreciate the willingness of our Subcommittee
to address the cost growth of major Department of Defense
weapons systems. Currently, the financial strain on our country
and our government is daunting, and government must watch every
dollar that we spend and stretch those dollars that we do
collect from taxpayers.
That challenge has gotten even tougher and the road steeper
with the President's proposed bailout that we are chewing on
literally as we speak.
More and more families every day lose their homes as a
result of foreclosures, and their neighbors face devaluation of
homes in their neighborhoods. More Americans are losing their
jobs as unemployment rates are at their highest level in some 5
years. I do not know what the unemployment rate is like in your
State, but we are up to almost 5 percent, which for Delaware is
very high.
The cost of food and gas has skyrocketed over the last year
or so, making it harder for Americans to fill up their tank and
fill up their stomachs at the same time. And just last week,
some of our Nation's oldest financial institutions folded,
warning of a potential stock market crash and threatening the
security of retirement investments for millions of Americans.
Given the times that we live in, every dollar that the
government, our government, spends inefficiently is a dollar
that is not spent to help the American taxpayer deal with these
financial strains in their lives.
This Subcommittee tries to examine every aspect, but a lot
of the aspects of the Federal Government to better ensure that
our spending is working for Americans and not against them.
This means that we need to look to see if the Department of
Defense--where some of the most costly items in the Federal
budget reside--is also spending taxpayer dollars efficiently.
Some of us may remember that at this time last year we
actually looked at a very small part of the Defense budget, and
we investigated whether or not we were achieving strategic
airlift, our ability to move troops and cargo over long
distances by air in a cost-effective way, and at the time we
held a hearing to decide whether efforts to modernize our
largest airlifter, the C-5 Galaxy, remained a cost-effective
way to meet our strategic airlift needs. And we learned that
there were ways to reduce the cost of modernizing our C-5
fleet. And I am happy to say that Under Secretary of Defense
John Young, whom I think Dr. Finley reports to and serves with,
was a key player in helping to enact those cost reductions and
provide more cost-effective airlift. It turns out we can
modernize two or three C-5Bs for roughly the cost of buying one
brand-new C-17, and each C-5B carries about twice as much as a
C-17. C-17s are great planes, but when you have C-5s that you
can modernize for that kind of cost, we decided it would be
cost-effective to do that.
But one year later, we are here to apply the process of
identifying and enacting cost reductions on a broader scale.
This hearing will examine the cost growth of some of the
Department's largest weapons systems and some of the problems
the Department has had with delivering these systems on time
and under budget. And this hearing could not have come any
sooner.
Last April, the Government Accountability Office released
its annual assessment of the DOD's major acquisition program
and revealed that the cost overruns on the Department's 95
largest acquisition programs have now amounted to some $295
billion over their original program estimates, putting the sum
total of these acquisition costs at $1.6 trillion. And as we
can see on the chart to our left.\1\
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\1\ The chart appears in the Appendix on page 53.
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In 2000, 75 programs were picked by GAO, I guess, as major
defense acquisition programs; next year, 91; next year--what
does that say?--95 in a cost overrun situation. The dollars
were most interesting. There was not a great growth in the
number of programs over that 7-year period, although there is
some significant growth. But the thing that really caught my
eye is the amount that these programs that are over budget had
grown from $42 billion in 2000 to some $295 billion in 2007.
I am not good enough in math on my feet, but if we were to
run that out for another 10 or 20 years, that would really be
startling. But it has caught my eye, and it sure did Dr.
Coburn's as well.
During a Senate Armed Services Committee hearing on this
same topic, the Chairman, our friend Carl Levin, outlined what
the Department of Defense could have bought with that same $295
billion, and I want to take it just a little bit further and
ask what the Federal Government, not just the Department of
Defense, but what the Federal Government could have done with
that money.
And right behind Dr. Coburn, we can get an idea. We could
pay for the Iraq war through the spring of next year worth $85
billion, and we would still have plenty left over. We could fix
all the levees in New Orleans for $10 billion. We could go on
to create the Apollo program to help our auto companies kick
our addiction to foreign oil. We could pay for the SCHIP
program for 5 years. We would still have money left over to
provide universal preschool for the next 10 years, expand our
Army divisions for the next 10 years by two divisions, and that
is about 40,000 troops, I believe; and then meet our nationwide
demand for passenger rail corridors, another $60 billion. And
that would add up to $295 billion. That is a lot of stuff that
we could do. I think for the most part really good stuff. And
we cannot do it because we do not have the money. As it turns
out, we do not have this $295 billion either, but we are going
to turn around to borrow it from other countries around the
world.
Some young students were in the other day, and they asked
me about printing money. They said, ``When the Government runs
out of money, do you just print it?'' I said, ``No. We borrow
it.'' We borrow it from people around the world. And the
unfortunate thing about that is that sometimes it puts us at
their mercy, especially on foreign policy issues. When you are
borrowing a lot of money from a country like China, the
question is: Do we do the same thing in our foreign policy that
otherwise we would do if we did not owe them all that money? It
reduces our options.
Let me say that, clearly, we could have tackled a bunch of
major problems with this money that our country faced, but we
do not have these funds. And I wish DOD had used these funds to
buy the silver bullet that would help us to secure Iraq, defeat
al Qaeda, the Taliban operating in Afghanistan and along the
borders with Afghanistan, but we do not.
However, that is for another hearing altogether, and maybe
we will have a chance to consider those issues then. But we are
not here to look at what we might have spent this money on,
what we could have spent this money on. We are here to look at
flaws in the defense acquisition system which has led to our
collective wallets being about $295 billion lighter.
When the Senate Armed Services Committee looked at this
back in June, Chairman Levin and the GAO identified four
factors that they believe were most important in leading to
this situation: First, unrealistic cost and schedule estimates;
second, unrealistic performance expectations; third, advancing
the program with immature technologies; and, fourth, changing
program requirements during development.
The goal of this hearing is to further investigate how
these four factors produced the situation we are in today,
which I believe is untenable, and our witnesses are going to
help us address these factors and how we can plug the holes in
the inefficient acquisition process.
I am delighted to be here with Dr. Coburn.
OPENING STATEMENT OF SENATOR COBURN
Senator Coburn. Well, first of all, let me thank all of our
witnesses for being here and to relay on behalf of the Chairman
and myself that we do appreciate your public service. We
understand oftentimes you are unappreciated, and so we plan on
having a fairly frank discussion today with you about what we
see as a commentary to what Senator Carper mentioned.
We have enumerated powers in the Constitution, and a lot of
the problems that we are facing today financially have to do
with the fact that the Congress got outside of those and did
not manage them and did not oversight them and did not regulate
them. And so we see problems. However, the subject we are going
to be talking about is very specifically enumerated within the
Constitution, and that is the defense of this country. And when
we look and see what has happened in procurement, this is not a
new problem.
As a matter of fact, if you go back to the first ships
George Washington ordered, they had a significant problem with
cost overrun and delay. They started with six ships and went to
two. So this is a pretty longstanding problem. But I think it
has very good relevance that we have never addressed the real
issues.
One of the things that I hope that we will cover--and I
know Dr. Finley has, and I know GAO has--is there are
tremendous incentives to underestimate the cost so you can get
a program started. And, some unique contracting can take care
of that. If you underestimate the cost, you pay for it. There
is a penalty to the contractor who underestimates the cost.
That will stop some of that. That is not hard to do. That is
done in business all the time.
Second is research and development, having the contract and
having the cost overrun ought to be borne by the developer of
it, which would, therefore, reflect in the higher up-front cost
estimate rather than a low-cost estimate knowing that they are
going to get remunerated for it.
Sometimes we hear, well, it is the shrinkage in the number
of contractors that has increased the cost. But we had these
same problems 30 years ago, and we had three times as many
contractors. So what we are talking about is not anything that
is really new.
Sometimes we hear the fact that, well--and we know, I
recognize this is a problem, the acquisition force and the
retirement dates and the decrease versus what we would like to
see, except we had a full-fledged acquisition force during the
Cold War, and we had the same problem.
So some of the reasons that we put forward for why we are
having a problem today, they do not pass the muster of history.
They do not answer the question. The real problem is
underestimate, lack of contractor accountability in cost
sharing and risk sharing, and then the real major problem is
called ``requirement creep.''
And so when you combine lack of proper incentives to get
the right prices combined with requirement creep, you are going
to have a disaster. And the Defense Department, unfortunately,
is not the only Department in the Federal Government that has
that problem. But if we do not get a hold of it, the problems
that we are facing in the future are going to be horrendous.
The latest estimate on Medicare and Medicaid is $100
trillion unfunded liability. I do not see a way out of this
unless we really markedly change things.
So I look forward to our testimony. I believe a lot of what
GAO has reported is right. But the answers on what the problems
are, the answers in addressing those markedly having an
increase in the realistic cost when we start a program rather
than kidding ourselves so we can get it started and have it
within our budget, hoping the money is on the come and that we
will catch up with it, is really fooling ourselves. And in the
long run, it fools the Defense Department, because you end up
getting less of what you wanted and not as effective a
component as what you wanted, and so I look forward to the
testimony of Dr. Finley, as well as our other witnesses, and I
hope that we can together, Senator Carper and I can bring to
bear some common-sense solutions to this in the next defense
appropriations, defense authorization bill so that we start
changing the incentives.
With that, I thank you, Mr. Chairman.
Senator Carper. You bet. Thank you.
Jim Finley is the Deputy Under Secretary of Defense at the
Department of Defense. He is responsible for advising--I almost
said ``advertising,'' but he is responsible for advising the
Secretary of Defense and the Under Secretary of Defense for
Acquisition, Technology, and Logistics on matters relating to
acquisition and the integration and protection of technology.
Prior to joining the Department of Defense in his current
position, Dr. Finley spent over 30 years in the private sector
and held a variety of operational management positions with
General Electric, with Singer, United Technologies, and General
Dynamics.
And we are delighted that you--in addition to doing all
those things, you managed to take out time in your life to
serve our country, and you have been in this job for what, a
couple years?
Mr. Finley. Thirty-one months.
Senator Carper. Thirty-one, OK. And does it seem like 31
years?
Mr. Finley. No, sir. Every day seems awesome.
Senator Carper. Oh, that is great. Well, we are glad you
are doing it, and we are delighted that you are here today.
Your entire statement will be made part of the record, and
we would ask that you summarize as you see appropriate. Thanks
for joining us.
TESTIMONY OF HON. JAMES I. FINLEY,\1\ DEPUTY UNDER SECRETARY OF
DEFENSE FOR ACQUISITION AND TECHNOLOGY, U.S. DEPARTMENT OF
DEFENSE
Mr. Finley. Thank you. Let me start off by, first of all,
saying that I completely agree with your opening remarks and
the focus of keeping our eyes very sharp on the taxpayers'
dollars, serving our country and our national security. It is
the highest on our radar screen.
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\1\ The prepared statement of Mr. Finley appears in the Appendix on
page 35.
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Chairman Carper, Senator Coburn, and distinguished
members--who will hopefully yet appear.
Senator Carper. Some are coming.
Mr. Finley. Thank you for the opportunity to appear before
you today to discuss the Department's policies and practices in
the acquisition and technology of major acquisition systems. I
will also discuss the GAO report entitled ``Defense
Acquisitions, Assessments of Selected Weapon Programs.'' I am
fully committed to acquisition excellence and the restoration
of the confidence in our leadership for our acquisition system.
The history of acquisition reform for the Department of
Defense covers more than 60 years and over 128 studies on
waste, fraud, and abuse. At the time of my confirmation
hearing, February 2006, the consensus seemed to be that the DOD
acquisition process was broken.
After my first 90 days in office where I listened,
discussed, and reflected on the leadership perspectives of
Congress, industry, and DOD military and civilian personnel, my
opinion was that the acquisition process was not broken. We
quickly moved to recruit and fill key positions. We eliminated
a layer of management to tighten communication. We aligned the
organization for better accountability and improved efficiency
and effectiveness.
My perspectives and actions coming from industry with over
30 years of experience in aerospace and defense have been
shaped utilizing that experience to help hold together the
acquisition workforce and leverage existing and new acquisition
reform and transformation initiatives. We have added oversight
discipline into the process to ensure that the basic blocking
and tackling in executing the acquisition process is being
done. We have gained insight to help scale and tailor processes
where and when needed, to implement changes with a sense of
urgency that streamline and simplify the processes.
We established three overarching goals: One, to reduce our
cycle times; two, to increase competition; and, three, to
broaden communications--up, down, and across the DOD and with
Congress, industry, academia, and our coalition partners. We
developed a 3-year plan, established our vision and strategy,
and implemented goals and initiatives with a sense of urgency.
Today, we are 31 months into implementing that plan.
We are striving for acquisition excellence with a vision
that starts with leadership and ends with predictable
performance. Our strategy reshapes the enterprise to accelerate
lasting change. We deployed a broad set of objectives by using
short- and long-term initiatives. Those objectives include
enabling decisionmaking for balancing the program and portfolio
trade space with the convergence of affordability, schedule,
and performance needs; getting programs started right with
improved up-front planning and utilization of risk management,
competitive prototyping, technology and manufacturing readiness
metrics, early integration and tests; collectively providing a
basis for cost realism prior to major acquisition decisions.
Improving process efficiency with a focus on tailored,
agile, open, and transparent communications; checks and
balances that utilize Lean Six Sigma methodology, objective
incentive fee criteria, systems engineering across the
acquisition landscape, and conducting preliminary design
reviews prior to milestone B.
Providing program stability with program management tenure,
organizational empowerment, stable funding, integrated master
schedules, and Configuration Steering Boards.
These objectives and initiatives are also applied to Nunn-
McCurdy breaches. More examples are provided in the semiannual
Section 804 congressional report in accordance with the John
Warner National Defense Authorization Act for Fiscal Year 2007.
A comprehensive analysis of the GAO report ``Assessments of
Selected Weapons Systems'' has been initiated. Of the $295
billion of cost growth identified in the report between 2000
and 2007, $202 billion--approximately two-thirds of the $295
billion--was incurred before 2004; $93 billion was incurred
from 2004 to 2007, with a pipeline of about $1.5 trillion,
representing an approximate 3-percent growth per year for those
2 years utilizing year 2008 base year dollars. We are still
analyzing that 3 percent. We do not consider it to be a crisis,
but need to better understand the uncontrollable elements of
rising medical costs, rising material costs--i.e., specialty
metals--rising fuel costs, and requirements changes.
Another perspective is the definition of the baseline of
the GAO report of $295 billion cost growth. Between 2000 and
2006, we added 48 programs and removed 30 major defense
acquisition programs. That mix change represents a content-to-
content difference and is not fully understood and is still
being analyzed. For example, the quantity of ships, aircraft,
vehicles all changed during the GAO report time frame. The DDG
51 ship baseline went from 23 to 62 ships. The JSF quantities
were cut by 409 aircraft, reduced the total quantity to 680.
The future combat systems increased their quantities for
brigade combat teams. The Virginia class submarine shifted from
a two-per-year procurement to a one-per-year procurement at two
naval shipyards and experienced increased shipyard labor and
material costs.
Our review of the GAO data reflects the changes, some but
not all, as characterized here for these four programs
contributed $147 billion, 50 percent of the $295 billion. The
GAO data in this regard continues to be reviewed with the GAO
to better understand the root causes of the cost growth and
where to focus attention and take action.
Our perspectives of the five conclusions from the GAO
report have been summarized in our written testimony. We
continue to work with the GAO to better understand their data,
methodologies, and conclusions associated with the assessments
of selected weapons systems.
In summary, measurable progress for acquisition excellence
has been accomplished on a broad front of initiatives. We have
traction. We will continue to improve. Much work remains to be
done. A plan for that work has been established. It goes beyond
this Administration.
Chairman Carper, Senator Coburn, and distinguished members
of the Subcommittee, thank you for the support of our troops. I
will be pleased to address any questions you may have.
Senator Carper. Thanks, Dr. Finley. Let me just lead it
off. And thanks very much for your testimony.
The Department's weapons system acquisition process has, I
think, been on the GAO's high-risk list--I want to say about 18
years, since 1990. And since that time, the Department has made
what GAO has called ``well-conceived changes to its acquisition
policies.'' But as we have seen from the graphs up here
earlier, the outcomes still are not improving, or at least not
the way we would like for them to.
In your own view, why are the acquisition programs immune
to the kind of improvement that we both seek? And what are the
factors that make them so susceptible to cost growth, to
delivery delays, and to poor performance?
Mr. Finley. Well, I think there is a lot of agreement
between the GAO and DOD on some of the issues that are driving
these, as you summarized on the chart. Technology maturity has
been a definite problem, and----
Senator Carper. Talk about that a little bit, if you would.
Mr. Finley. OK. The technology maturity is now defined to
be a Level 6 before we go forward with an ACAT I major defense
acquisition program. At a Milestone B decision, you are to have
demonstrated a Level 6 of technology maturity. Some programs in
previous decisions have not achieved a Level 6 and yet have
gone forward with a Milestone B decision.
Senator Carper. Who allows that to happen? And whose job is
it to ensure that it does not happen?
Mr. Finley. Well, I think it is a collective
responsibility. OSD--in my case, I am OSD in A&T. We are to
provide the oversight to make sure that does not happen; or if
it does, we need some assurances as to how these technology
maturity issues would be mitigated in a timeline that would not
be detrimental to the critical path of the program.
Senator Carper. So you have, on the one hand, your program
managers for a particular weapons system pushing hard to try to
get something done, built, through the pipeline. And at the
other--it is almost like having your car, you have an
accelerator and you have a brake.
Mr. Finley. Right.
Senator Carper. And you have to be able to use both of
them. Somebody has got to be pushing on the brake.
Mr. Finley. I think many programs that were coming forward
were of a PowerPoint design, paper design, and trusting without
verification was being done.
Senator Carper. Without prototypes. Is that correct?
Mr. Finley. Without prototypes. The initiatives of Mr.
Young to enforce competitive prototyping not only helps provide
us a cost realism base, but also it promotes competition early
on in the timeline.
Part of our objectives are to cut our timelines by 50
percent. Right now we are taking upwards of 10 years plus to
field weapons systems. We believe we can cut that timeline in
half.
Senator Carper. Any idea why DOD stopped this process of
prototyping?
Mr. Finley. I do not have an insight on that. I think part
of the dilemma that DOD experienced as well as industry was we
lost systems engineering capability on both sides of the
equation. And we have been working very actively to bring
system engineering back into the fold as a key decisionmaker at
the table.
Senator Carper. A concern that I have, it sounds like the
Department of Defense and you and John Young and Gordon England
are trying to get us back in terms of acquisition on these
weapons systems, back using common sense, using better business
judgment. And I have this concern we are going to have a change
in administration in about 3 or 4 months, and I do not know if
you want to sign on for another tour or you want to go spend
time with your grandchildren or other things. But if we do have
a new team that comes in, my concern is that some of the
reasonable changes, solid changes that are being adopted may
not stick. And, Dr. Coburn, I think part of our challenge is if
we stick around here for a while longer--I think we have a
couple more years left on our no-cut contracts. But I think
part of our job is to make sure that the reforms that they have
begun, some of the smart practices they are going back to, that
the next Administration adheres to those as well and builds on
them. And I know GAO is going to be here to help us to ensure
that happens.
Mr. Finley. I feel very good--excuse me, if I may, I
personally feel very good about where we are at. When I came
into office, I had a very long timeline to get confirmed even
though I had numbers of years of experience and had all the
security credentials. But, nonetheless, once I got confirmed,
when I came in I had six direct reports, and four of my six
direct reports were not here. And people advised me, ``You are
in deep trouble.'' I told people, ``I am in great shape.''
Because what we did was we recruited people to fill those
positions that had three ingredients and three criteria that we
established: One, we wanted industry experience; two, we wanted
them to have military experience, preferably with MDAP
programs, and the scar tissue to prove it; and, three, we
wanted them to have the passion to serve their country.
I am very pleased to inform the Subcommittee that we have
filled these positions, and we have had these people in these
positions now for some years. So they are career SESs at the
senior level, and this we are talking about now is within OSD.
And as we build our rapport within OSD and AT&L, going outside
the AT&L organization into the Comptroller organization, the
P&E organization, the Joint Staff organization, and now getting
into the component organizations, we start to build traction
and respect, and we have to work this as a team very
collaboratively. It is a contact sport.
But these are expert people. They know the business, and we
are now also bringing together, pushing this down into the
organization to empower people to make decisions. So I believe,
if I were to leave today, I personally believe the organization
of Acquisition and Technology is in very strong shape and would
support Mr. Young and has supported Mr. Young, as well as Mr.
Krieg before Mr. Young, in an excellent fashion. I believe we
are on the right path. I think there is at least one other
additional element on the areas of factors that are giving us
cost growth, and that is funding stability. And funding
stability--when I came to be confirmed by the U.S. Senate,
certainly technology maturity and requirements creep were right
there on the radar screen, and we are in complete agreement on
those issues, and I believe today we have those issues
corralled. And I believe we have them shackled, and I believe
we have ways as a matter of discipline to hold people's feet to
the fire to make the hard decisions and say no if they are not
ready.
But beyond that, funding stability became a very visible
issue, and if I looked at PB08 and the 90-some programs that
are MDAP category, all but one of those programs had funding
changed from the PB09 submission. Of the Nunn-McCurdys that
were done in 2007 and submitted as part of the PB08, if you
will, five of those six Nunn-McCurdys had just been certified
by the AT&L; all had their funding changed as part of the
President's budget approval.
So we have got to get a handle on funding stability as part
of this equation to get better acquisition excellence, or we
will be struggling with it--and it is not just the Congress,
sir. Our own OSD Comptroller will play with funding. Our
planners and programmers will play with funding to pay
unexpected bills. We simply have to get into a better process
working together to get more stability in the funding program.
Senator Carper. We saw that on the C-5 modernization and
working with John Young. If we ended up ramping up production
of the C-5Ms, we would go from one to three to five, seven,
nine--somewhere up around nine is the sweet spot in terms of
aircraft to retrofit every year. But then if we drop back down
to three or two and back up to seven, the inefficiencies are
there, unfortunately, and the costs are just driven up very
high. That is, I guess, part of our challenge, and as we are
not appropriators----
Senator Coburn. We just need to become appropriators, too.
Senator Carper. Dr. Coburn says we need to become the
appropriators, too. Actually, I was thinking about that today.
Let me turn it over to Dr. Coburn. I have some more
questions, and maybe we will have a second round here in a
minute.
Senator Coburn. Dr. Finley, it is your contention that you
have the systems in place that, without you and the two or
three people below you, this program change, this culture
change that has been instituted in the last 31 months will
continue? That is your contention?
Mr. Finley. It is a start, yes. But we did not start 31
months----
Senator Coburn. That is a different answer than what I--
will it continue?
Mr. Finley. Yes, I believe it will. But we did not start 31
months ago. What we did was we built, I believe, on a lot of
good work that was done back in the QDR time frame, certainly
before I arrived, and there were a lot of good ideas, and there
were a lot of good initiatives going on before I arrived. We
simply picked up a lot of those good ideas, and we joined each
other at the hip, and we started moving them together, forward.
We will continue to have good ideas, I believe. We will
continue to become more innovative in our approach to business,
things like the Configuration Steering Board, which is now
going to become law. We certainly appreciate Congress' acting
on that, and John Young, Mr. Young, brought that forward, in
particular to help stabilize some of the funding requirement
changes as well as some of the stability changes for the
programs.
So we should never stop looking for new ideas to cut the
cost and reduce the schedule and find smarter ways to do
business.
Senator Coburn. Let me just query you for a minute because
I am not educated in a lot of these areas and do not have the
practical experience or the knowledge. Explain to me why when
we contract for a new weapons system that we do not place more
of the risk on the contractor.
Mr. Finley. Well, I think----
Senator Coburn. I mean, if you are contractor, it is a
slam-dunk. You are going to make money. Now, I do not know any
other business in this country that has a slam-dunk no matter
what they do or what the performance is, they are going to make
money. So what I do not understand is why we have not
transferred some of the risks for new technology based on the
guaranteed reward that is going to be there to these individual
contractors. Can you teach me or educate me so I can have a
better understanding of that?
Mr. Finley. Certainly. Prior to the environment that we are
in today with cost-plus contracting, we were in fixed-price
contracting, and the pendulum was, let's say, way over here on
the left. And as companies were eating the risk and swallowing
the cost, that pendulum started to swing over to the far right
to cost-plus award fee and cost-plus incentive fee kinds of
contracts.
We have changed the award fee criteria so it is not a slam-
dunk, and we have also advocated and have started to put into
regulation with the 5000 change that you will now go more
toward what we call fixed-price incentive contracts and push
the profit that companies can make more to the right of their
timelines as opposed to spread closer to the left, which is
where it has traditionally been that we have discovered, and by
doing that, we share that risk--industry shares more of that
risk, if you will, than the government than before. And by
fixed-price, it starts to definitize what has to be delivered
and what the expectations, what the requirements are in terms
of the deliverables.
The dynamic in contracting is changing dramatically, and
that is very recent.
Senator Coburn. Are you seeing that transmitted into a
decrease in underestimation of costs?
Mr. Finley. I would say it is premature----
Senator Coburn. A decrease in the frequency of
underestimation of costs.
Mr. Finley. I would say it is premature. The programs where
we are going to see fixed-price incentives are new starts or
our program restructures out of Nunn-McCurdy breaches, if you
will, because we are applying all these techniques both to
programs that are in the pipeline as well as new starts. But
programs like Tanker, programs like JLTV, programs like JAGM,
Joint Advanced Missile program--all these programs are carrying
fixed-price incentive types of contracting vehicles with them.
Senator Coburn. Did not the--I am trying to think which
iteration of the Tanker contract. The one that was recently
challenged, did it not have a significant component, about 18
percent, of cost-plus contracting in it?
Mr. Finley. I am not familiar with all those details.
Senator Coburn. Well, I may be in error. It may have been 8
percent or 9 percent. But here is the question for you. Here
you have something that the Air Force has been trying to buy
for 15 years, and then we let a contract, and 8 or 10 percent
of it still cost-plus. I cannot fit that with any modem of
common sense that the Air Force does not know what it wants in
the way of a tanker in terms of requirements. Why there would
still be a component of cost-plus rather than a pure fixed-
price-plus-incentive contract, I do not understand that. And so
I am trying to get a hold, if we are going to have an impact to
try to help you do what you need to get more defense for this
country for the same amount of money, it would seem to me we
have to figure those kind of--we have to answer those
questions.
Mr. Finley. I agree.
Senator Coburn. OK. Thank you. I will withhold any
additional questions. Thank you, Mr. Chairman.
Senator Carper. Dr. Finley, when you reported aboard to
your present position, were confirmed and moved into your job,
how long had that post been vacant? Any idea?
Mr. Finley. I think it was 3\1/2\ years.
Senator Carper. That is part of the problem. Why was it
vacant for so long?
Mr. Finley. I am not familiar with all the details, but I
believe there was some gridlock for the appointees in
Acquisition due to the Druyun situation with the Air Force,
which had a number of people in the Pentagon, like Mr. Wynn was
Acting AT&L, he could not move. As a result, the AT&L back-ups
for him could not come in. And then that waterfall just went
downhill, and the pipeline just got backed up.
Senator Carper. I see. So your position that you filled a
couple of years ago, 31 months ago, that position was vacant
for about 3 years. When you got onboard, confirmed, and moved
into your post, out of your six direct reports, four positions
were vacant?
Mr. Finley. Yes, sir.
Senator Carper. That helps explain some of this, doesn't
it?
Senator Coburn. Yes. That would be our fault.
Mr. Finley. You did have acting SESs in those positions,
but they were acting, and they were excellent people. But I
could have certainly promoted those to be permanent, acting
directors, if you will. I elected to take the road less
traveled perhaps, and I wanted an experienced senior military,
senior industry experience that could really build this team
for the long run. And we have excellent people up and down and
throughout the organization.
Senator Carper. And your six direct reports, those are
folks that stay, even if you decide to go off----
Mr. Finley. I have two politicals that report to me: One is
in industrial policy and the other one is in small business
programs. Both of those organizations report to me. They will
be exiting on or about January 20, as far as I know. And we
have great back-ups for them as well.
Senator Carper. Well, obviously, the next Administration
and the next Congress needs to do a better job of addressing
this.
Mr. Finley. It is a big issue, sir. It is something I
believe Secretary Gates is addressing way up front, much
earlier, I am told, than previous Administrations, even the
current Administration. And we are very proactive, and very
open and transparent about what we believe ought to be
addressed. And we are building our cases for the people that
come in and relieve us, if you will.
Senator Carper. In the Navy, we used to have turnover. We
would be overseas for 6 months, home for 8 months, overseas for
6 months, and home for 8 months. And whenever we would go
overseas, the squadron that we were leaving would have a
turnover document that they would turn over to us and basically
explain what their jobs were and to help us come up to speed.
I presume you have a similar kind of turnover, but if it
had been 3 years since your predecessor left, it is pretty hard
to have much of a constructive turnover.
Mr. Finley. Well, we have accomplished a lot. I believe we
are back at full stride. I believe that there is a transition
team that has been stood up in the Pentagon, for Secretary
Gates, and it is in full swing.
Senator Carper. I think one of the things we will get into
with our next panel is the number of acquisition personnel that
we actually have, whether the slots are filled or not, but the
number that we have and whether or not we give them enough
clouts, four-star generals, or three stars or two stars, do we
have people for whom there is a good pipeline to grow to have a
career? And do we give them enough oomph to do their jobs? Any
thoughts on that? I think others will discuss that.
Mr. Finley. Yes, the acquisition workforce is very high on
my radar screen as well. The legislation last year, initiative
852, did authorize but not appropriate, but we are taking it as
if it were appropriated, and we have agreement with the OSD
Comptroller and the principals of DOD and how we are going to
do this. But it essentially is about $1.3 billion over the FDIP
to reinvigorate the acquisition workforce. That is about 12, 13
different functions that are called acquisition.
Now, one of the holes that has come up, as you look at the
personnel situation, and as you have addressed, very
eloquently, both you, Mr. Chairman, and Senator Coburn, is
requirements. And what do the requirements people get in
acquisition? So we have also set up training modules and
training capabilities and requirements. I think by law by
September 30, the requirements people must have certifications
to these acquisition levels of capability, or they will not be
allowed to provide requirements for the programs of record, if
you will, that they are making.
So we are also very encouraged by this. This has been a
major collaboration between the military and the civilian
workforce at the Joint Staff level and all the services as well
as OSD, and the P&R people of OSD as well. So we see very
positive traction. Here, again, this is something that I do not
think will be solved overnight, but the acquisition workforce,
as people would normally think about the acquisition workforce,
has been relatively flat for the past several years, but the
workload on this workforce has doubled or tripled.
Senator Carper. OK. Now, I am going to follow this up by
just sharing with you a quote, I think it is a direct quote
from GAO in the report that they presented to us. But it goes
something like this: ``The unrealistic cost estimates for major
weapons systems are developed in an environment where DOD
commits to more programs than available resources can support,
which promotes unhealthy competition among programs for
funding. This competition creates strong incentives for program
officials to establish requirements that make their particular
weapons system stand out from others, with less consideration
given to the resources that will be needed to develop them.''
Now, you have already answered this in part. I want to ask
you just to reiterate it and then add anything that you want.
But that is a pretty serious problem, I think you will agree.
Share with us again what are we doing in the Department of
Defense, in the Office of the Secretary of Defense, in your
shop, what are we doing to address this serious problem with
DOD's acquisition culture? You have addressed it some. Restate
some of what you have done if you want.
Mr. Finley. Well, I think cost realism is a real issue. I
do not think there has been enough competition. I do not think
competition has caused people to buy in. I think it is more
perhaps, if I have it right, if I was correct with Senator
Coburn, you may bid unrealistically to get the program of
record approved and through the decision gates to move forward.
As we sometimes say, once you have the coffee cups, the mugs,
and the T-shirt, you are good to go. In 2\1/2\ or 3 years, it
may be predictable that you will have a Nunn-McCurdy.
So the effort is to start with--the initiative of 852 is to
start building more of our core competencies that we have lost
in DOD over the years of attrition and restructuring and
outsourcing to bring these core competencies that include price
estimating and cost estimating back into the mainstream of OSD
for oversight, but also to the services so that they have these
inherent capabilities.
Senator Coburn. Just a little rebuttal. When you had those
core capabilities, you had the same kind of cost overruns. So
how does that answer the question?
Mr. Finley. Well, it is a start. Coming from industry and
the years of fixed-price, more fixed-price development if you
will, than cost-plus, the leadership I was groomed under and
the management training I received was to perform. And if we
had problems, we came and we worked them, and we went eyeball
to eyeball, to resolve those differences quickly and not let
them drag out.
Again, there is no silver bullet, but getting the functions
back in the right place is part of getting the right people in
the right place.
I think the aspects of empowering the workforce,
recognizing the workforce, fundamentally comes down to a lot of
discipline issues and leadership issues. And we have got to get
that back to where it was, with accountability.
So, again, there is no one piece that is going to do this
all by itself. It will take time to get back to where we were,
and I am not sure if where we were was acceptable to you, Dr.
Coburn. But I would say from my experience of where we were in
industry, in excellence and performance, the channels I came up
through, is where I am trying to help steer this for the
future.
Senator Coburn. Yes, and I am not meaning to demand that. I
am just looking back at history of what we have seen from the
1930s, the 1940s, the 1970s, when we had these varying levels
of competency and staffing and everything else.
Mr. Finley. Yes, sir.
Senator Coburn. This is the same problem. When we had cost-
plus, fixed-price, we had the same problem. To me it goes back
to the two major problems: One is requirement creep, which
somebody has to get a hold of so that if you are going to have
a requirement creep, it does not happen until you do the first
MOD; and the second is underestimation of costs when you begin
it so you can get a program started. And the transparency in
that aspect of it, with a penalty--and, really, the Pentagon is
complicit in this because they want the program, so they have
an incentive to have it come in under cost knowing that it is
unrealistic. And so what happens, the American taxpayer gets a
program that is supposed to cost this, and we all know it is
never going to come close to costing that, and that is just the
way we do business.
We have to break that cycle because, quite frankly, in the
years to come the Defense Department spending as a percentage
of the total budget is going to be less. Our interest costs are
going to be 27 percent this year. Now, think about that. And in
10 years, they are going to be 40 percent. Some of it is going
to come out of the Pentagon.
So we need to be about making sure--and I applaud your
service and your leadership. My hope is--and I think, Senator
Carper, I can speak for both of us--that the leadership that
you have put in will be followed by similar leadership that
will continue to penetrate accountability, responsibility,
integrity, and performance. And that is my worry. And we did
not even talk--I have got several other questions which I will
submit for the record, but, of the people who are the worst in
terms of purchasing IT, it is the Pentagon. This Subcommittee
has followed all IT problems throughout. GAO has been helping
us with it. But, by far--and you have the worst IT in the
country, and the rest of the country is way ahead of you on IT.
And yet the cost overruns, the programs that are in trouble in
IT, it is the same problem.
So our hope is and our appreciation is--we know people are
trying, are working. There has got to be something we have not
got, and I think the two things are underestimation in the
original and requirement creep. And unless we do something to
change those things, we are going to keep getting the same
results.
Mr. Finley. Another major shift in response to those two
areas, one of the observations we made when we came onboard was
so much was being done with these programs--and these programs
are obviously much bigger and much more complicated, to a large
extent, than we have had in the history of the DOD. But the
acquisition strategies in these procurements were what we would
characterize as ``big bang.'' You would have expectations on
requirements that were unachievable, to a large extent. But
trust me, no problem, we will get there.
What we have done is we have gone--again, what we have done
before--this is nothing new to this--is go back to a more
incremental strategy that you develop a little, you test a lot,
and you deliver a capability to the field. And you increment
this with a strategy that provides the warfighter something
they can use in the security of the country, and at the same
time we do not--we can then estimate costs more realistically,
and we have a better handle on our requirements.
In parallel with that, in our S&T world, we can be
incubating newer technologies and newer activities as on ramps
to come into these programs when and if ready. But they will be
done in an incremental block fashion.
Now, there are several programs of record--F-18, F-16--that
have practiced this in spades since their inception, and they
do get very favorable write-ups. Of all the programs written up
in the most recent GAO report, 10 of the programs, in fact, did
return money. All these ACAT I programs, MDAPs did not overrun.
Senator Coburn. And what were those, again, tell me? Just
give me some examples.
Mr. Finley. The Growler program, F-18G, did underrun its
budget--on schedule, below budget, meeting performance.
Senator Coburn. What else?
Mr. Finley. I will take it for the record. I have it
somewhere in my notes here.
Senator Coburn. That is OK. I would love to see that.
Because our tendency, when we are doing Federal financial
management oversight, our tendency is to always look at the
negative. It is great to hear about the positive and to figure
out what happened there and why and how do we duplicate it. So
I would very much appreciate it.
I am going to offer the rest of my questions for the record
so we can move on.
Senator Carper. One last quick question if I could, Dr.
Finley, before you leave us. The hearing that John Young came
before at Armed Services and testified in early June, I think
Chairman Levin asked him for the Department's position on a
proposal by Senator Levin, a proposal to create an independent
office that would review cost estimates on all major defense
acquisition programs and would develop its own independent cost
estimates. And at the time, back in early June at the hearing,
Mr. Young said that the Department, your Department, did not
have a position on this proposal. And I am just asking, do you
all have a position now?
Mr. Finley. I think there is a DOD position on this. I do
not have it in front of me.
Senator Carper. Would you submit that for the record for
us, please?
Mr. Finley. Certainly. I would be happy to.
Senator Carper. OK. Well, I think we will excuse you at
this point in time. Thank you very much for joining us.
Mr. Finley. Thank you so much.
Senator Carper. And thank you for your stewardship. Thanks
for putting together a good team around you. And if on January
20th, you decide to head out into the sunset, we wish you fair
winds and following sea, as we say in the Navy.
Mr. Finley. Thank you. We appreciate your service as well,
Senator Coburn as well. We appreciate your support to our
troops. This is an ongoing efforts. Everybody is committed. In
my opinion, it does come down to leadership. We need strong
leadership, and you need checks and balances, and you need
informed oversight to kick those cans in the right place. I
think we are making progress.
Senator Carper. OK. I hope you are right. I think you are
right. Thank you so much.
Mr. Finley. Thank you.
Senator Carper. Welcome, panelists. I am going to take just
a moment and provide a brief introduction for each of you, if I
could.
Mike Sullivan served as Governor of Wyoming when I was
first elected Governor of Delaware. You looked different then.
You have a lot more hair now. Actually, Mike Sullivan was a
Governor of Wyoming, but it was another Mike Sullivan. And I am
sure there are a bunch of you out there. This Mike Sullivan
serves as Director of Acquisition and Sourcing Management at
the Government Accountability Office where he has worked for 23
years. Most recently, he directed GAO's Annual Assessment of
Major Weapons Systems Programs, which is the subject of our
hearing today, and we are grateful to you for being here.
Steve Schooner is an associate professor of law and co-
director of the Government Procurement Law Program at The
George Washington University. Before joining the law school
faculty in 1998, Professor Schooner was the Associate
Administrator for Procurement Law and Legislation at the Office
of Federal Procurement Policy in the Office of Management and
Budget and served for--how many years in the military? Twenty
good years?
Mr. Schooner. Twenty good years.
Senator Carper. Twenty good years in our armed forces.
Thank you for that service.
And Clark Murdock--this is the second hearing we have had
literally in a week where one of our witnesses' names was
Murdock. The other fellow, we had to call him ``Dr. Murdock.''
He is the fellow who is the head of the census.
Clark Murdock is the Senior Adviser to the International
Security Program at the Center for Strategic and International
Studies, specializing in strategic planning, defense policy,
and national security affairs. He currently directs the four-
phase study on the Defense Department's reform ``Beyond
Goldwater-Nichols: U.S. Government and Defense Reform for a New
Strategic Era.'' Mr. Murdock has served in many roles in the
defense world, including as a Senior Policy Adviser to House
Armed Services Committee Chairman Les Aspin, with whom I was
privileged to serve. This Clark Murdock looks familiar to me. I
know that our paths have crossed before, and I very much
enjoyed serving with Les Aspin. We thank you for joining us
today and for your willingness to testify.
Gentlemen, I have been asked by my staff to remind you that
we would ask you to try to keep pretty close to 5 minutes. I am
not one who will gavel you down at 5 minutes, but try your best
to keep close to 5 minutes, and then we will get into some
questions. Thank you.
Mr. Sullivan, why don't you lead us off?
TESTIMONY OF MICHAEL J. SULLIVAN,\1\ DIRECTOR, ACQUISITION AND
SOURCING MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Sullivan. Thank you, Chairman Carper. I am pleased to
be here to discuss the Department of Defense's management of
its major weapon system acquisitions. My statement today will
focus on current acquisition program outcomes, the reasons for
them, and potential solutions, some of which the Department is
now trying to implement, as you heard from Dr. Finley earlier.
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\1\ The prepared statement of Mr. Sullivan appears in the Appendix
on page 47.
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With regard to outcomes, the Department is not receiving
expected returns on its investment. As the table to my far left
indicates, which mirrors some of the----
The most important number on that table is the $295
billion, probably.\2\
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\2\ The chart referred to appears in the Appendix on page 53.
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Senator Carper. All right.
Mr. Sullivan. Since we began our annual assessments in
2000, which is one of the columns on that table, the number of
major acquisition programs has grown by 20, from the 75 to the
95. Total investment by the Department in those programs has
doubled to $1.6 trillion. Development cost overruns have
increased from 27 percent in 2000 to 40 percent in the programs
in the 2007 portfolio. And delays in deliveries have increased
from 16 months to 21 months. All told, this represents the
total cost growth that you allude to on your pie chart up there
of close to $300 billion and results in degraded buying power
for not only just the Department but, as you point out, for the
Nation as a whole.
There are systemic problems that contribute mightily toward
these poor outcomes, and we break them into strategic and
programmatic. At the strategic level, there simply are too many
programs chasing available dollars in the Department's
acquisition budget. As the other graphic up here to my left
indicates--and I think this gets at some of the questions that
Dr. Finley was fielding--the Department's organizations and
processes that identify needs--in other words, candidates to
become programs--funding, and the acquiring of the weapons
systems, which together these three processes and their leaders
more or less make up the Department's overall acquisition team,
are fragmented and broken. Leadership at these levels is not
necessarily answerable to each other, and, therefore, there is
little accountability for the poor outcomes.
The requirements process, which is led by the Vice Chief of
Staff, tends to be stovepiped. Each of the services may offer
different new acquisition programs, sometimes to fill the same
capability gap, creating an overwhelming number of candidate
programs that must promise very high, sometimes unachievable
performance, with very low, often unachievable cost estimates
in order to fit into the Department's budget. The funding
process, led by the Comptroller, accepts these overly
optimistic cost estimates as inputs, which is not a sound basis
for allocating resources and ensuring program stability.
Finally, the acquisition process, led by the Under
Secretary for Acquisitions, initiates these programs, signs
cost-reimbursable contracts with sole sources, and begins
expensive product development with little or no evidence that
technologies, designs, or manufacturing capabilities will be
able to build the weapons system in question.
At the program level, the programs begin with an
unmanageable business case, cost, and schedule estimates heavy
on optimistic assumptions, light on data. As a result, true
costs and schedules are usually not known for years on these
programs until assumptions give way to empirical evidence and
significant sums of money have been consumed.
To be sure, problems resulting from a poor business case at
the outset will quickly cascade into design changes,
manufacturing inefficiencies, quality problems, and delayed
deliveries. Solutions are available, and we have made
recommendations. A well-balanced, well-prioritized mix of
candidate acquisition programs would alleviate the pressure
each program now faces in winning the competition for funding
in the Department. This means the Department must become more
unified. Each of the three organizations that we have on our
chart are critical to acquisitions and must integrate and must
make early hard decisions together concerning needed
capabilities and limited resources. That is something that does
not exist today. There is an awful lot of segmentation between
these three critical organizations.
If the Department's leadership can get priorities right,
limit the number of programs to start, and establish sound
business cases which are executable, program managers that are
responsible for those programs will be empowered to control
program execution and then can be held accountable for their
outcomes.
The Department understands all this, and Dr. Finley talked
to some of that today. It has many initiatives underway now,
which I would be happy to go into in the Q&A. Some of them are
in response to our recommendations, and some are in response to
passed legislation that has been designed to address these
problems. However, we have seen initiatives like this before
that go back almost all the way to Dr. Coburn's example of
General Washington needing the ships. The most recent Packard
Commission in the 1980s is probably a good basis where a lot of
this stuff has been said before, the answers are out there, but
they just for some reason have not ever been implemented
properly.
Too often in the Department, well-meaning policy just does
not translate into practice. Cultural barriers, the transitory
nature of the positions at the top, and the stovepiped nature
of acquisitions make culture change and improvement very
difficult. Therefore, we will maintain a healthy skepticism
until we see some results from these initiatives.
In conclusion, Mr. Chairman, let me say that significant
and lasting change in this acquisition process and in the
requirements process and in the funding process can only take
place with improved cooperation across the Department and the
military services, continuing support and advocacy from a
unified departmental leadership, and perhaps most importantly,
sustained oversight from this Subcommittee and others in the
Congress.
I look forward to your questions on these and other ways to
solve some of these problems.
Senator Carper. Mr. Sullivan, thank you very much. Thanks
for your good work and for being with us today.
Next we will hear from Steve Schooner. Mr. Schooner? Is it
Dr. Schooner? It is, isn't it?
Mr. Schooner. Steve Schooner is fine, but professor is OK,
not doctor.
Senator Carper. Professor Schooner, take it away.
TESTIMONY OF STEVEN L. SCHOONER,\1\ CO-DIRECTOR, GOVERNMENT
PROCUREMENT LAW PROGRAM, THE GEORGE WASHINGTON UNIVERSITY
Mr. Schooner. Chairman Carper and Ranking Member Coburn, I
appreciate the opportunity to discuss these issues with you
today, and I will try to briefly offer some explanations in
context and recommend that DOD could achieve better results by
more aggressively employing incentives than disincentives and
making a significant investment in the acquisition workforce,
all of which you have apparently already heard at this point.
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\1\ The prepared statement of Mr. Schooner appears in the Appendix
on page 64.
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Major systems are, by definition, challenging, complicated,
and inherently risky. We have fundamental pathologies, we have
absence of market forces on the buyer, an unwieldy
appropriations cycle, a diffusion of responsibility, and all of
this makes accountability maddeningly difficult. And that is
why it is, frankly, overly optimistic to expect any institution
to consistently and quickly advance the state of the art and
employ significant untested technological applications while
still meeting firm budgets and schedules. None of that means
that we are not going to get superb weapons systems and we do
not get value for money. And I do not mean diminish the
importance of costs or schedule, but it is important to keep in
mind that costs and schedule are not the only metrics.
The relationships that we have seen discussed today
typically proceed on the unstated assumption, by both parties,
that the problems will be worked out during contractual
performance. The parties do not resolve the ``unknown
unknowns.'' They do not aggressively reduce programmatic risk.
The government simply chooses a course of action, it selects a
partner, and the parties know they will out the problems later.
Contractors sign these contracts because they know that the
likelihood of catastrophic failure is particularly low for
large-scale and important programs.
But just because DOD either will not or cannot pay for the
necessary research and development needed for the systems to
mature does not mean that the contractors have any meaningful
choice other than to propose immature technologies and commit
to long-term delivery schedules, knowing that the government's
needs are rapidly evolving. The contractors enter these
programs willing to invest and lose money on their bid and
proposal costs, in their research and development, and
typically in initial production--all hoping someday they are
going to recoup that investment during full-scale production
or, increasingly, foreign military sales.
But because the government also lacks the patience to
mandate demonstration and validation, we rarely see functional
prototypes, and we almost never see competitive prototypes
anymore. We would need a dramatic cultural change to generate
the necessary funds and patience to complete R&D before
production.
Now, granted, the alternatives to tolerating overrun are
limited and unattractive. You can stop the contracts and
squander the investment made. The government can accept
substandard products, or the contractors can suffer devastating
losses. But none of that will work. The only way we are going
to get better cost control and schedule discipline is to slow
down the process, break the programs down into clearly defined
stages, and then impose discipline ensuring that nothing goes
forward until technological and design issues have been
resolved.
I just briefly wanted to go back to a point that Dr. Coburn
made. The underestimation that you describe is caused in large
part by government policies and practices, and to place all of
the cost risk on contractors for that is simply not feasible in
the current environment. Some of the most spectacular
acquisition debacles we have ever seen in history were fixed-
price research and development contracts.
So when we go forward, I think what we have to look at is
meaningful incentives and disincentives, not just disincentives
but meaningful ones.
Just last week, Minneapolis unveiled the new bridge
replacing the I-35 bridge that collapsed just last year. That
contract successfully employed meaningful incentives, a
$200,000-a-day bonus. By bringing that contract in on time, the
contractor made nearly a $20 million special profit for that.
On a larger scale, DOE employed extremely lucrative
incentives for the clean-up out at the Rocky Flats
Environmental Site in Colorado. There, a project that many
people thought simply could not be done was done for half a
billion dollars under budget. Now, granted, this made a lot of
contractors very wealthy, but you have a very satisfied
government customer.
But in the modern era, even with the revisions to DOD's
profit policies with the weighted guidelines approach, we still
have the problem that many government officials believe that
artificially suppressing contractor profits is a public good.
And as long as we live in a world where profit is evil, market-
based incentives and disincentives will not be the primary way
to ensure that the government gets value for money.
The human capital crisis is something that we could discuss
at length. I am mindful of my time, but let me just mention
three things. We have a legitimate crisis in terms of the
acquisition workforce; we do not have enough quality program
managers, and we are particularly short in terms of systems
integration staff, and the new Defense Science Board study is
very good in that regard.
I just want to close with two brief anecdotes, and I will
try to do it quickly.
First, if we look at the Future Combat System, which is
actually in GAO's report, this originally proceeded under the
OTA, or ``other transactions authority,'' and, frankly, there
is nothing less transparent or less appropriately managed that
we have in our arsenal. I am glad to see that this program came
out of the OTA program, but I encourage Congress to limit OTA
authority to the maximum extent possible.
But I would like to close with an anecdote talking about
the Air Force and the tanker program. The Air Force has been
saying for years that its aging in-flight refueling capacity
was one of its highest priorities. We had an original lease
deal that was ill-conceived, non-competitive, and it was
ultimately derailed. We followed that up with a competition
that failed. And, recently, Defense Secretary Gates conceded
that DOD can no longer complete a competition that would be
viewed as fair and objective in this highly charged
environment.
Looking back, what this saga created was: It cost private
industry and private shareholders staggering sums of money in
proposal costs and legal fees; it generated the dramatic and
destabilizing procurement scandal; it exposed relentless
protectionist pressures that hamper the procurement system; it
diluted public confidence in the procurement system; and at the
end, it achieved nothing in terms of meeting the warfighters'
needs for restoring the Air Force's in-flight refueling
capacity.
So, in closing, let's not forget that the ultimate goal of
major system acquisition is providing the end user with the
tools necessary to perform the individual's or the
organization's role in furthering the agency's congressionally
mandated mission. Obviously, lots of room for improvement
remains.
That concludes my statement, and I look forward to
answering any of your questions.
Senator Carper. Professor Schooner, thank you.
Dr. Coburn said, ``I have got to go. I have just been
paged.'' He is heading over to the floor, but he expressed his
thanks to the panel.
Mr. Murdock, you are recognized. Please proceed. Thanks for
joining us.
TESTIMONY OF CLARK A. MURDOCK, PH.D.,\1\ SENIOR ADVISER,
INTERNATIONAL SECURITY PROGRAM, CENTER FOR STRATEGIC AND
INTERNATIONAL STUDIES
Mr. Murdock. Thank you. I am pleased to be here, sir, and I
commend the Subcommittee and commend GAO for its long record of
substantial analysis of this problem. I will just say a few
words in summary. I have a statement that I have submitted.
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\1\ The prepared statement of Mr. Murdock appears in the Appendix
on page 79.
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The defense acquisition system is incredibly complex,
process centric and risk averse. As the Defense Science Board
(DSB) concluded when it looked into the Darleen Druyun scandal,
it is so complex that her mastery of the system gave her the
ability to abuse it and give her a position of invulnerability.
The system is characterized, as we have been discussing
throughout, by a loss of competency, a lack of accountability.
I think that was really demonstrated when the previous witness,
Dr. Finley, when you asked him why was it that systems were
passing Milestone B authority when they did not have the
mandated Level 6 technological maturity, you asked him who is
responsible for that, and he said, ``Well, it is a collective
responsibility.'' Committees are not responsible. Individuals
are responsible. Program managers are responsible. That is one
of the reasons why I think we have to change the system instead
of continuing to talk about the system.
There is a lack of transparency, and we have all talked
about the dysfunctional incentives system that causes
everyone--we say it is overpromise, we say it is underestimate,
we say it is structural optimism in the system. Really what it
is is everybody lies. The incentive structure is that strong.
You want to get a program started? You say what you have to say
to get it. You want to get a program through Milestone B? You
say what you have to say to get it through Milestone B. You
want to get a requirement validated? You say what you have to
say to get it validated by the Joint Requirements Oversight
Council (JROC). Systems do not fail, yet they continually
underperform.
My package depends upon a couple of large precursor
statements, one of which is addressable, one of which is not.
The first is, I think, the military services get out of the
requirements generation business. Only the combatant commanders
have operational requirements. They are the warfighters. They
are the only ones with the requirements. The services provide
capabilities to meet the combatant commanders' needs. We need
processes--and there has been progress in that direction, but
it is incomplete--processes that increase and enhance the
authority and the influence of the combatant commanders over
the definition of requirements. We have made a number of
proposals on that. It is something we can examine in questions.
The second one is an issue that has been referred to a
number: Budget discipline, too many programs chasing too few
dollars. Secretary Young earlier this year urged in an early
2008 memo that programs should be properly priced and that he
was ready for the resulting budget increases to squeeze
programs out so that we would have a fully funded acquisition
program budget left. Well, good luck with that. We say these
things all the time. We do not do them. There is nothing harder
in Washington to kill than a bad weapons program, as we all
know.
What is the goal here? I think it is a very straightforward
one. As I indicated, it is an acquisition system characterized
by accountability and realism, and by that we mean the
accountability of institutions, decisionmakers, and program
managers based on realism in cost, schedule, and performance
goals, based on realistic assessments of technological
maturity. And I think the way you get there is through much
greater transparency to both the Office of the Secretary of
Sefense (OSD) and to the Congress on how acquisition programs
are managed.
We suggest briefly four things: Restore the service chief's
authority and responsibility for the management and execution
of acquisition programs. We have had civilians in AT&L and
service secretariats managing these systems for the last 20
years. Look at the track record. GAO has documented it. They
cannot do it, and uniformed bodies tend to be much better on
accountability than those in civilian suits. There is a crisis
in the C-17 scandal. Two general officers and one civilian were
involved in it. Two general officers lost their jobs. The
civilian was Darleen Druyun. She went to NASA for an extended
stay.
The second thing, we need to establish four-start systems
commands back in each of the services to build a cadre of
acquisition generals that you need.
We also need an acquisition process that has shorter, more
frequent programs phases that are aligned with the tours of the
program managers, and the program managers held accountable for
the performance during that phase of the acquisition program,
not one big one like Acquisition B, many smaller ones.
And, finally, we need to establish independent assessment
offices in both OSD and the military services that provide
independent estimates, not just of costs, as Senator Levin
suggested, but also of performance and also of technological
maturity that would be available to those who have oversight.
And then we need a Nunn-McCurdy on steroids that really
punishes programs that fail.
Thank you, sir.
Senator Carper. I know both Sam Nunn and Dave McCurdy, the
idea of them being on steroids, I am trying to sit here and
think what that would look like. But I think I understand what
you are saying.
All right. I think I am going to start off by asking Mr.
Sullivan and Professor Schooner just to respond to some of what
Clark Murdock has said here in his testimony.
Mr. Sullivan. Yes, I think one of the points that Mr.
Murdock talked about I think I would agree with is that as you
start to maybe try to take apart some of the basic problems
with organizations and accountability in this, writ large, the
acquisition process, which takes up those three--requirements
and budgeting and acquisition processes as a whole--and, in
fact, Mr. Murdock has done a lot of work in this. There is a
Defense Science Board study that backs up a lot of what he
says, that the services should stick to acquisitions. The
services should get out of the requirements business. The
COCOMs should have a lot more to say about requirements. They
are fighting the wars, they are matrixed, they are joint. They
are not as stovepiped. They can have representatives that bring
prioritized needs forward. The funding process then should--the
idea of an independent office I think is a good idea. It should
be studied. It should be done properly. But right now cost
estimates that come with the requirements that come forward
with candidate programs are unreal. I mean, they basically have
no founding in reality most of the time, and the reason for
that is because the acquisition community and the S&T
community, quite frankly, do not have a good handle on the
technologies that they are asking for to get the capabilities
that they want. They do not have a lot of the design experience
that they need on these. These are revolutionary needs that
they bring forward, things like the F-22 fighter.
So these programs begin with an initial business case that
I do not think anybody in the business inside the Pentagon even
takes seriously. You have to wait 4 or 5 years, usually, and a
lot of money spent and sunk into a program before you start
getting to the reality of things. We are looking at a program
right now, the Joint Strike Fighter, that is about midway
through development, and real costs are beginning to come out
on that.
So I think that is one thing. The services should stick to
proposing solutions. The Under Secretary for AT&L should make
the decision. The Comptroller should accept better cost
estimates based on knowledge. And the COCOMs, who have real
skin in the game in terms of what they need to fight, should be
more involved with the requirements.
Senator Carper. Professor Schooner.
Mr. Schooner. Both Mr. Murdock and GAO have focused on the
issue of accountability, and I think this is a great
opportunity just to look at one slice of the acquisition
workforce crisis. In major programs, leadership is tremendously
important, and there are a lot of people who believe that you
need a visionary or one particularly dynamic individual, and
that is critical to the success of any major program.
But what private industry does is completely different than
the approach the government takes. First of all, they use very
significant monetary incentives, and they also provide key
personnel with stability. Among the uniformed ranks and among a
lot of senior government people, stability is anathema.
Frequent rotation and diversity of assignments are necessary
for promotion.
Dr. Finley concedes that program managers on average are in
their position for slightly less than 2 years, and that is an
improvement. That is simply not going to get the job done, and
we are nowhere close to really making significant progress on
that.
Senator Carper. Mr. Murdock, one of the things that
Professor Schooner talked about was trying to introduce
incentives, financial incentives, whether you are building a
bridge in Minnesota or whether you are trying to clean up Rocky
Flats in Colorado, to offer incentives for contractors. And I
think back, I mentioned this to Professor Schooner in a
conversation earlier this week that we had. When I was Governor
of Delaware, we basically closed I-95 between the Pennsylvania
line and Wilmington, Delaware. Initially we did it to the
southbound lanes, just closed them, did not move them over to
the northbound lanes, but we just closed them, and provided
incentives for the contractor to get the lanes ``rubble-ized''
and rebuilt and repaved, and offered incentives for doing that.
Then we did the same thing for the northbound lanes. And it
worked. It was ahead of schedule. We were very pleased with the
outcome, provided the incentive payments as well.
But it works in highways. It works on I-95 in northern
Delaware. It works on bridges in Minnesota. It apparently works
out in Colorado at Rocky Flats. Is this idea a good one? Would
it work and is it applicable to these major weapons systems?
Mr. Murdock. There are aspects of it that I think would
work, but I think there are many concepts that come out of the
private sector that depend upon a healthy infrastructure to
operate. I will give several examples--a few examples.
In the private sector, people say best value, and they mean
it; that people will pay for high-end performance if it is
genuine high-end performance. The government is a very dumb
customer. It has a very weak acquisition force. They say best
value. They do not. They mean cheapest. And so you always have
a mismatch right there at the very beginning where a contractor
does not know what kind of incentives to respond to.
My feeling is that I very much believe in making
individuals accountable for different phases of the acquisition
process. That program managers stay there for only 2 years is
shocking. What you do is have shorter acquisition phases, you
overlap the tours of program managers with those phases, and
you make their PARs, their performance reviews, dependent upon
what they inherited at the beginning of the phase and what they
performed at the end of it. The incentives that they will have
and the disincentives they will have, if you poorly perform,
you are not going to get promoted. If you poorly perform, you
are not going to go up the chain.
So my belief is that you have to start with the
individuals, and I believe there should be educational awards,
there should be perhaps cash bonuses for good performance
during that time the way we do with SES'ers. But I would do it
at the individual level first before you start talking the
large kind of incentives.
In the private sector, there are two things that can change
the performance of a company on a dime: One, performance
metrics that are quantifiable and that you can measure; and
two, performance-based compensation. Those two things are
extremely hard in the government.
And so my feeling is that, yes, you can use incentives, but
I would start on a smaller scale before going to a larger
scale.
Senator Carper. Mr. Sullivan.
Mr. Sullivan. Yes, I think my perspective on that is we
have had a good discussion here about the development contracts
that contractors get into and the risk that is assigned to
those development contracts and the length of time they take.
And if you look at a traditional, a current, typical DOD big
acquisition--I will use the F-22; you could use anything else--
you are looking at a program that begins with a cost estimate
that is not grounded in any really firm data. You are looking
at usually a 15-year development program, and you are looking
at having a program manager who is going to be there maybe 2 or
3 years to start it.
So, we have done an awful lot of work in the commercial
world to go out and find best practices for how to develop
products. We have tried to find some very complex products,
low-volume products that would match up with DOD, things like
satellites, and oncology systems, medical devices. And what we
found consistently is that in those best practices, the things
that they have to have before they would start a program
similar to what they do in the Department of Defense is they
would limit it in terms of schedule. So they immediately would
say we are going to build something, we are going to try to hit
the market with cutting-edge technology, but we are going to
limit ourselves to 3 to 5 years to do that. We are going to
have the same person responsible for that program from the
outset to the end. And if we have to call a contractor in to do
this, we are going to do the proper systems engineering and the
requirements analysis that is required to understand exactly
what kind of technologies and technical problems and design
issues and manufacturing issues we are going to have, and we
are going to have that in the first business case that we have;
and then we are going to baseline that cost and schedule.
So they are limiting time frames, they are understanding
their cost estimates before they begin the program, and they
limit the technologies to what is available to them at the
time. So requirement, in essence. Again, we are back to these
three arrows. So the requirements are limited, and they have
evolutionary product development.
Now, the way that they--usually, these companies will have
a revolution within 20 years, which is the same amount of time
it took the F-22 to be the revolutionary fighter over the F-15
and F-16. In fact, if you go back to the F-15 and F-16
acquisitions and look at how they did it, they were kind of
incremental in the way they did that. They had block upgrades
to those aircraft. Those aircraft are still pretty good today.
They hold their own up in the air today. And they were done
pretty good on cost and schedule, too.
The idea of this, the companies that we looked at that were
really pushing technologies and trying to get to market as
quickly as possible, they took on a lot of risk in that product
development. Basically a fixed-price environment for them
because they were going to invest a certain amount of money and
they were going to have to recoup all that money. The
Department can do the same thing, and the defense industry
should be able to do the same thing. What they need to do is
they need to get requirements under control, do them in quick
spurts, and continue to upgrade their products, and they can
move to more fixed-price kind of development contracts.
I think Professor Schooner said that we have tried that, we
have been there, we have done that, and it did not work. But we
mandated development contracts in the 1980s without any of
this, and requirements were just the same. So there was nothing
else really done at that time to try to make that fixed-price
environment work.
Those are the kinds of things that we learned, and what we
brought to this study that we did here is keep requirements
simple, keep your S&T base vibrant, let them take the risks
there, but keep product development pretty much fixed-price and
fixed-schedule and deliver to the warfighter quickly, no bells
and whistles, except the 80-percent solution.
Senator Carper. OK. Thank you.
Let me just ask Professor Schooner and Mr. Murdock,
anything in GAO's report that you especially agreed with or
maybe disagreed with that you would like to just underline?
Mr. Schooner. Well, let me just underline two things
because I think they emphasized both of them. I think they did,
in fact, emphasize the acquisition workforce, which is
tremendously important. And we can sit there and kick that dead
horse as long as we want. But it is going to be a generation
for us to undo what we have done. I think that Dr. Finley
undersold the amount of damage that was done. Congress started
taking apart the DOD workforce in the late 1980s, and we took
an entire half-generation of cuts, and then we have been flat
during this decade. And procurement spending has gone from the
low $200 billion to over $435 billion in this decade alone, and
we do not have the workforce to do it. And even worse, the
workforce we have were not hired to do the work we need them to
do today. So this is a legitimate crisis, and I think that is
really important.
I think that overall the report is really good. The one
thing that I do take issue with is I think in the end, in an
abundance of kindness, GAO suggested there were reasons for
optimism, and I think they were being a little bit kind in that
regard.
Mr. Sullivan. Well, if I could address that this goes back
to how I opened with, we have been here before. And I would
agree with that. But I would say that the Under Secretary of
Defense for Acquisitions now, Mr. Young, and Mr. Finley as his
Deputy, they have--in fact, we have looked at policy revisions
they have made to their acquisition policies, and we have
looked at all these policy memos that Mr. Young has issued over
the past year. And they are really right on what we think would
be best practices. But I agree with Professor Schooner. As I
said, we have been here before.
The problem is sustained leadership, and I think you talked
about that earlier. How do you keep someone in place who has
the leadership capability and the ideas? I mean, how do you
sustain that leadership? How do you hold accountability when
you have got three processes and three process owners that can
say no to each other? These are the critical things that have
to be solved: Who is in charge? Who is going to be held
accountable? And how do you sustain that, given the appointment
process that we have? That is a real problem.
Mr. Schooner. But I think you heard from all of us, I think
GAO is absolutely right, that if you wait until you have mature
technology, then you have a fair chance of controlling costs
and schedule. Without mature technology, it is a pipe dream.
Mr. Sullivan. If you have technologies that are mature
enough to meet the requirements, you are way ahead of the game.
I would agree with that.
Mr. Murdock. And I believe that the way you get there is
through transparency and accountability. The transparency is
why I think it is so important to have an independent
assessment office that gives people assessments of cost, of
performance, and technological maturity, and a schedule that
OSD has, that Congress has, that empower a program manager,
because he or she has them and they cannot be changed through
requirements creep, they should not be changed through program
instability, funding instability and so on. And I think you
have to have transparency to do that because there is a lack of
transparency right now.
I will give one vivid example. If there was ever a source
selection that the Air Force had to get right, it is the KC-135
replacement. Given its baggage, had to get it right. And yet I
am told that when the Air Force outbriefed Boeing on why it did
not win the competition, in that briefing the sections were
left blank on the front of the cover: Who is the source
selection authority, what was the composition of the group of
people who advised the source selection authority, and who was
the composition of the special overarching board, somewhat like
the Configuration Steering Boards that Secretary Young has
called for, who composed those. Before the protest was upheld,
Secretary Young was quoted as saying, ``Well, we created this
board, and Sue Payton, the Assistant Secretary, said it was
very useful and very helpful.'' Total fiasco. The decision of
the GAO was a slam-dunk, the procedural infractions were so
great.
Now, accountability, the standards of accountability have
been established by Secretary Gates with the Chief of Staff of
the Air Force and the Secretary of the Air Force on the nuclear
mission, or with the person who headed up Walter Reed and the
persons in the Army who were not moving fast enough. The whole
Air Force acquisition unit had failed, but it was a broader DOD
failure because there was some kind of overarching committee
with it as well, and satisfaction being expressed by the Under
Secretary, the defense acquisition executive for the process.
These are--not these individuals, because these individuals
are relatively new. Some of them had to wait 3\1/2\ years
before they could get into their job, whether it has been these
individuals that have been running the process since Goldwater-
Nichols and implemented the Packard Commission results. We need
a different process, and we need a different structure to do
it.
Senator Carper. A friend of mine who began and has run a
great nonprofit nationally in this country likes to say--and
his program is designed to help young people to improve their
lot in life and improve their futures. He likes to say,
``Programs do not change people. People change people.'' And a
good program puts a person who needs change in their life with
somebody who can help them change.
I do not want to do a play on words here, but when it comes
to programs and cost overruns, rather than saying that programs
do not change people, we need people who can change programs.
We really need people who can oversee these programs. And the
idea that Dr. Finley's position was vacant for 3 years, the
idea that he walked into his job and four out of his six direct
reports were not around, and he had to go out and hire them--
hopefully--he says he thinks he got good people and they will
be around for a while. But that is just--talking about a system
that is broken or at least a situation that was broken.
I went back in my head trying to think through 2 years ago,
did we have a majority Democrat Congress in place at the time
who was denying the Administration their appointments? And,
actually, 2 years ago we did not. It was a Republican majority
in the Senate and a Republican Administration. So I am not sure
that would have played a role.
I look and I think about all the different positions within
the Executive Branch for which we require Presidential
appointment and Senate confirmation. And I am wondering if--we
talked about requirement creep in programs. I wonder if we have
some kind of creep in terms of Senate confirmation for some of
these positions. We really need it for all of them.
Let me just ask you to think about that last point. Have we
run amok? I remember when I was Governor of Delaware, I was
nominated to be on the Amtrak Board of Directors. I loathed the
process. I had been a naval flight officer for 23 years, a
Congressman and State Treasure and Governor. I was nominated to
serve on the Amtrak Board, and the disclosure process I had to
go through was maybe not outrageous, but it was just so time-
consuming and laborious. Finally, I got confirmed, served for 4
years, enjoyed my service. But, boy, there was a lot to put up
with to get confirmed.
Do you think we require too many Presidential appointments
to be confirmed by the Senate? Is this an issue that is part of
the problem?
Mr. Schooner. I believe Mr. Murdock's testimony
specifically cites to the Defense Science Board study that was
done after the Druyun debacle, and I actually served on that
group when we did it. And one of the things that was discussed
in there at great length--and there is even a terrific chart in
there that shows the level and the extent of the vacancies at
the highest level of the Defense Department--and it is
complicated for a number of reasons. I think the one thing we
have to think about is there are a lot of reasons why these
jobs are simply not attractive to the kind of people you need
to do the jobs.
The Under Secretary position is one where we are
specifically looking for someone with significant business
experience. The pay stinks. Nobody ever brings them down here
to talk about all the good news that they have achieved. They
are inheriting problems. They have got staggering budget
problems. They have a grossly inadequate workforce. And they
are given impossible tasks. The jobs are not attractive. It is
tough to find the right people to do it, and the incentive
structure is totally broken.
Senator Carper. But other than that? Does anybody else want
to comment on this? [Laughter.]
Mr. Sullivan. That is a very interesting question. I think
it is a huge problem. I do not have any particular specific
answers to that. I know that GAO is very much involved this
year, more than ever before, in the transition process. I know
the Congress has reached out with GAO to try to help--we are
looking a lot harder at issues, some of the issues that we are
talking about here today, to bring people up to speed quicker
and maybe grease the skids a little bit more for these
appointments. But to me it is one of the key problems. I do not
know how you--if it is politically possible to take away these
appointments or, to have some politically appointed or part of
the bureaucracy or how you would do it. But it would certainly
help if there were a CEO-type mentality in the Under Secretary
of Defense for AT&L who had the time--as we said before, there
is a transitory nature. People can wait John Young out, quite
frankly. But he has got good ideas. He has got the will to fix
these things. And if he were there for a while and he was able
to sustain that and push that down through the culture--it has
got to be a culture change, and that takes years.
So how do you do that with political appointments? That is
the question of the day, I think.
Mr. Murdock. I do not think there is any question; there
are too many political appointees.
Senator Carper. Did you say there is no question but there
are too many?
Mr. Murdock. There are too many political appointees. And
it is not just confirmable appointees. It is political
appointees that go deep down into the bureaucracy. You are
taking the entire leadership essentially from the Deputy
Assistant Secretary on up and switching them out every 2 years.
Only there are lots of staggered empty spots in that, so that
you will have a place that is empty, filled by an Acting for
10, 11 months; somebody comes in for 2 years, gone; another
gap.
The vetting process that we go through now for somebody to
take a confirmable position is onerous. And it is actually, for
somebody who is a successful career person, humiliating in
terms of the kinds of questions they are being asked. And it is
also very limiting in terms of what happens when you come out
the other end. You take somebody like myself, I am at the end
of my career. I do not have a future. Maybe I will take that
kind of a job. But you know something? I am too old to go
through that. So I am not going to do that. I do not want to go
back into the government now, in part because of the process
that is involved with it.
So you do what you can from the outside during that time,
and you enjoy being a grandfather, and you make your balances.
Senator Carper. As we come to a close here, I again want to
thank each of you for your participation and your preparation
and the input you have provided for us. Each of you have
already spoken to this question I am about to ask, at least
indirectly, but in terms of what--setting aside the Executive
Branch and things that they need to do better or differently--
and we have talked about that a good deal--talk about the
Legislative Branch. And we have talked about it to some extent
in confirming people whose names are submitted to us.
I remember when I was a governor, I served with Tommy
Thompson, Governor Christie Whitman from New Jersey; Mike
Leavitt, Utah; Tom Ridge, Pennsylvania--a lot of governors in
this Administration ended up--former governors ended up being
cabinet secretaries, and what I would say to each of them, when
you nominate good people to be your key direct reports, and you
are having trouble getting them confirmed, let me know and I
will do what I can from the inside to try to move those names.
And most of them took me up on it, and there is just--it is
easy for names to get just hung up for reasons large and small.
Sometimes you have somebody in the Legislative Branch who is
interested in getting a person in a whole different part of the
government confirmed or nominated by the President, and they
will hold up confirmations completely over here in order to get
somebody nominated over here that they are interested in. So it
is not a good situation.
But advice for us in the Congress? One of the other pieces
of advice I think I heard here today was in terms of providing
an appropriate level of funding for weapons systems over
multiple-year periods of time so that we do not have this going
on all the time and it is difficult to come up with any kind of
efficiencies. But that is the kind of thing I am interested in
for us. What advice do you have for just----
Mr. Sullivan. If I could start with the funding levels--
really I would take issue a little bit with what we heard from
Dr. Finley. The trend has been upward. We are probably in the
highest spending trend for development and procurement, the
acquisition budget itself, since the late 1980s. So the money
is there. I think the legislature has funded the Department
fully. And I do not think--the funding instability that the
doctor talked about, I know that I would get a lot of debate on
this and probably a lot of argument. But I think that most of
that is done by the Department itself, I think, because they
come in with such shoddy cost estimates for programs, and they
begin things on such risky levels that the funding instability
builds in the program, about midway through you start figuring
out what you really have there.
I think that the legislature, that Congress' biggest role
is oversight, obviously, and when we do reports like this, this
$300 billion--which, by the way, is really $300 billion. I know
that Dr. Finley said that if you look at the last 5 years it is
3-percent growth per program. Well, if you have 3-percent
growth on a program that takes 15 years, you have 45-percent
growth on the program. These are really real dollars.
So, we have been through some potential answers for this. I
think we have raised some issues concerning how do you run the
shop over there, how do you get accountability out of these
three processes. I think the Congress has to continue oversight
over that, quite frankly, maybe ask for information more often
than when we come up and have to show the $300 billion cost
growth. That is a real portfolio. That is 95 programs that
exist today, and it is $300 billion. And that is an eye-opening
pie chart that you have over there. So, to me, it is oversight.
Mr. Murdock. I would like to respond second on this one.
Actually, I take the province of having worked on the Hill
myself for 5 years but on the authorizing side. And when I
worked for the House Armed Services Committee, Les Aspin was
the Chairman of the House Armed Services Committee, and Sam
Nunn was the Chairman of the Senate Armed Services Committee,
and authorizers ruled. That is not the case anymore.
Appropriators rule today. And that does create a very difficult
problem in terms of actually killing programs. Appropriators do
not do policy oversight. The Congress does not do things like
Goldwater-Nichols. And then when they do do something like
enact all of the reform recommendations out of the 9/11
Commission, they reform everything but Congress during that
time.
So, for me, as a former Congressman who works--I mean a
former staffer who works for a former staffer, John Hamre,
somebody said Admiral Pollack said--and I am sure he was
quoting somebody--``A problem that doesn't have a solution
isn't a problem. It is a fact.'' And that is why very few
people talk to you about congressional reform because it seems
like such an intractable process.
One of the recommendations, for example, of the 9/11
Commission, reduce the number of oversight committees. They
point it was reduced from--what?--66 to 65. This does not help.
So there are a number of things that Congress could do to
strengthen its ability to do oversight, and I believe close
congressional involvement via the transparency of a process
that could be produced through an independent cost and
performance and technology assessment office would give
authorizers who cared the tools to bring more transparency and
responsibility to the Department of Defense because the
Department has clearly demonstrated it cannot do it itself.
Many of the wounds are self-inflicted. But I believe a more
effective congressional role is essential to solving that
problem.
Senator Carper. Professor Schooner, the last word.
Mr. Schooner. Three things, quickly.
Workforce, workforce, workforce. We need some really
creative solutions, and they are going to have to be outside of
the civil service system because it is not going to get done.
Second, overall the profit policy and weighted guidelines
system that DOD has to work with is fundamentally broken, and
we need meaningful incentives and disincentives to do any of
the things that we are talking about.
But we also need, third, real discipline on behalf of the
government. If you want the government to break things into
small pieces and lock down their technology before they go
forward, then you are going to have to actually do something.
And maybe what you say is, ``I will give you program stability,
but the price of that is I am going to hold you to your actual
promises.'' And the one thing that Congress should never forget
is the power of anecdote. And when it is all said and done, all
you have to do is stop a couple of major programs, and you will
get some people's attention.
Senator Carper. All right. Well, gentlemen, before you
close your books and walk away, let me again say thank you. I
am glad that Dr. Coburn and I were here to participate in this
hearing. I am glad our staffs are here. I know we have folks in
the audience and people who may be watching on television. But
this has been, I think--I turned to our staff, and I said to
Wendy Anderson and Harlan Geer, this is such an important
issue. The dollars are so substantial. And at a time when our
Federal budget deficit issue even before this President's $700
billion, if you will, bailout to address our financial
problems, even before that our deficit was running between $400
and $500 billion this year. Our national debt in this 8-year
period of time will have doubled from about $5.5 trillion to
about $11 trillion. And we have got to find a way, all kinds of
ways to begin turning that back.
You have helped provide us with some very good ideas, and I
am encouraged, knowing about Dr. Coburn's tenacity, knowing a
little bit about my own, that we might just take this ball and
run with it.
I want to close by saying the hearing record will be open
for 2 weeks for the submission of some additional questions and
statements, and I would just ask, if you do get those
questions, that you try to respond promptly to them for the
record.
Again, we thank you very much, and with that, this hearing
is adjourned.
[Whereupon, at 4:22 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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