[Senate Hearing 111-898]
[From the U.S. Government Publishing Office]
S. Hrg. 111-898
DEPARTMENT OF DEFENSE EFFICIENCIES INITIATIVES
=======================================================================
HEARING
before the
COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 28, 2010
__________
Printed for the use of the Committee on Armed Services
Available via the World Wide Web: http://www.fdsys.gov/
__________
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Washington, DC 20402-0001
COMMITTEE ON ARMED SERVICES
CARL LEVIN, Michigan, Chairman
JOSEPH I. LIEBERMAN, Connecticut JOHN McCAIN, Arizona
JACK REED, Rhode Island JAMES M. INHOFE, Oklahoma
DANIEL K. AKAKA, Hawaii JEFF SESSIONS, Alabama
BILL NELSON, Florida SAXBY CHAMBLISS, Georgia
E. BENJAMIN NELSON, Nebraska LINDSEY GRAHAM, South Carolina
EVAN BAYH, Indiana JOHN THUNE, South Dakota
JIM WEBB, Virginia ROGER F. WICKER, Mississippi
CLAIRE McCASKILL, Missouri GEORGE S. LeMIEUX, Florida
MARK UDALL, Colorado SCOTT P. BROWN, Massachusetts
KAY R. HAGAN, North Carolina RICHARD BURR, North Carolina
MARK BEGICH, Alaska DAVID VITTER, Louisiana
ROLAND W. BURRIS, Illinois SUSAN M. COLLINS, Maine
JEFF BINGAMAN, New Mexico MARK KIRK, Illinois
EDWARD E. KAUFMAN, Delaware
CARTE P. GOODWIN, West Virginia
Richard D. DeBobes, Staff Director
Joseph W. Bowab, Republican Staff Director
(ii)
C O N T E N T S
__________
CHRONOLOGICAL LIST OF WITNESSES
Department of Defense Efficiencies Initiatives
september 28, 2010
Page
Lynn, Hon. William J., Lynn III, Deputy Secretary of Defense..... 5
Carter, Hon. Ashton B., Under Secretary of Defense for
Acquisition, Technology, and Logistics......................... 12
Cartwright, Gen. James E., USMC, Vice Chairman of the Joint
Chiefs of Staff................................................ 16
Appendix A....................................................... 86
Appendix B....................................................... 92
Appendix C....................................................... 110
Appendix D....................................................... 116
Appendix E....................................................... 117
Appendix F....................................................... 123
Appendix G....................................................... 139
(iii)
DEPARTMENT OF DEFENSE EFFICIENCIES INITIATIVES
----------
TUESDAY, SEPTEMBER 28, 2010
U.S. Senate,
Committee on Armed Services,
Washington, DC.
The committee met, pursuant to notice, at 10:03 a.m., in
room SD-G50, Dirksen Senate Office Building, Senator Carl Levin
(chairman) presiding.
Committee members present: Senators Levin, Lieberman, Reed,
E. Benjamin Nelson, Webb, McCaskill, Udall, Hagan, Begich,
Goodwin, McCain, Thune, LeMieux, Brown, and Collins.
Committee staff member present: Richard D. DeBobes, staff
director.
Majority staff members present: Joseph M. Bryan,
professional staff member; Richard W. Fieldhouse, professional
staff member; Creighton Greene, professional staff member;
Peter K. Levine, general counsel; Jason W. Maroney, counsel;
Roy F. Phillips, professional staff member; John H. Quirk V,
professional staff member; Robie I. Samanta Roy, professional
staff member; and William K. Sutey, professional staff member.
Minority staff members present: Joseph W. Bowab, Republican
staff director; Adam J. Barker, professional staff member;
Michael V. Kostiw, professional staff member; David M. Morriss,
minority counsel; Lucian L. Niemeyer, professional staff
member; Diana G. Tabler, professional staff member; and Dana W.
White, professional staff member.
Staff assistants present: Jennifer R. Knowles, Christine G.
Lang, and Brian F. Sebold.
Committee members' assistants present: Christopher Griffin,
assistant to Senator Lieberman; Carolyn A. Chuhta, assistant to
Senator Reed; Alicia Brown, assistant to Senator Bill Nelson;
Ann Premer, assistant to Senator Ben Nelson; Juliet M. Beyler
and Gordon I. Peterson, assistants to Senator Webb; Tressa
Guenov, assistant to Senator McCaskill; Jennifer Barrett,
assistant to Senator Udall; Roger Pena, assistant to Senator
Hagan; Lindsay Kavanaugh, assistant to Senator Begich; Amanda
Fox, assistant to Senator Burris; Anthony J. Lazarski,
assistant to Senator Inhofe; Lenwood Landrum and Sandra Luff,
assistants to Senator Sessions; Clyde A. Taylor IV, assistant
to Senator Chambliss; Andy Olson, assistant to Senator Graham;
Jason Van Beek, assistant to Senator Thune; Brian Walsh,
assistant to Senator LeMieux; Charles Prosch, assistant to
Senator Brown; and Ryan Kaldahl, assistant to Senator Collins.
OPENING STATEMENT OF SENATOR CARL LEVIN, CHAIRMAN
Chairman Levin. Good morning, everybody. The committee
meets today to hear testimony about the efficiencies
initiatives announced by the Secretary of Defense in his May 8,
2010, speech at the Eisenhower Library and his August 9, 2010,
speech at the Pentagon.
We're pleased today to have Deputy Secretary of Defense,
Bill Lynn; Under Secretary of Defense for Acquisition,
Technology, and Logistics, Ashton Carter; and the Vice Chairman
of the Joint Chiefs of Staff, General James Cartwright, to
address this important issue.
We thank you all for being here this morning.
On May 8, the Secretary stated that, ``The Defense
Department must take a hard look at every aspect of how it is
organized, staffed, and operated; indeed, every aspect of how
it does business. In each instance,'' he said, ``we must ask,
first, is this respectful of the American taxpayer at a time of
economic and fiscal duress, and, second, is this activity or
arrangement the best use of limited dollars, given the pressing
needs to take care of our people, win the wars we are in, and
invest in the capabilities necessary to deal with the most
likely and lethal future threats?''
I share the Secretary's objectives of reducing
``duplication, overhead, and excess in the defense enterprise,
and instilling a culture of savings and restraint across the
Department of Defense (DOD).''
On August 9, the Secretary followed up by announcing a
series of specific cost-cutting measures, including a reduction
in funding for service support contracts by 10 percent per year
for 3 years; a freeze on the number of Office of the Secretary
of Defense (OSD), Defense agency, and combatant command
positions; a freeze on the number of general officer, flag
officer, and Senior Executive Service (SES) positions; a review
and reduction of the number of reports, studies, and advisory
boards; new limits on SES positions and support contractors for
DOD intelligence functions; and the elimination or
consolidation of several Defense commands and agencies,
including the Assistant Secretary of Defense for Network and
Information Integration, the Business Transformation Agency
(BTA), and the Joint Forces Command (JFCOM).
I agree with the Secretary on the rapidly expanding force
of service contractors who support the Department. Too often in
the past, we've constrained the number of DOD employees,
without placing any limits on the number of service
contractors. As a result, we have more than doubled our
spending on service contractors over the last decade, while the
size of the DOD civilian workforce has been largely unchanged.
Rather than saving money, we have lost badly needed talent,
expertise, and institutional knowledge in the government, and
given contractors more responsibility for the performance of
critical government functions than is appropriate.
I believe that the acquisition efficiency initiatives,
announced by Secretary Carter, are consistent with the
objectives of the Weapons Systems Acquisition Reform Act and
other recent acquisition legislation initiated by this
committee. Although I have concerns about some of the details,
I am particularly pleased by Secretary Carter's emphasis on
open-systems architectures, fixed-price incentive contracts,
increased focus on affordability and program schedule, and
improved management of contracts for services. I hope that he
will place an equal emphasis on implementation of the Weapons
System Acquisition Reform Act's requirement for developmental
testing and systems engineering.
At the same time, I believe that the Secretary's
initiatives deserve close scrutiny from our committee. The
Secretary has a legitimate objective of eliminating or
consolidating repetitive and overlapping organizations within
the Department, and his determination to cut costs and produce
efficiencies is commendable. But, it appears that there was
inadequate analysis and inadequate openness in the procedure
which preceded his August announcement.
For example, we need to be sure that the personnel
restrictions announced by the Secretary do not undermine our
ongoing efforts to rebuild the Department's acquisition
workforce. Study after study, and hearing after hearing, has
shown that our acquisition programs cost billions of dollars
more than they should; in significant part, because our
acquisition workforce was dramatically cut in the 1990s and no
longer has the capacity to perform its essential functions.
As the Acquisition Advisory Committee reported 4 years ago,
our failure to fund an adequate number of acquisition
professionals has been, ``penny wise and pound foolish, as it
seriously undermines the pursuit of good value for the
expenditure of public resources.''
Similarly, we need a detailed accounting of the functions
performed by the organizations that the Secretary proposes to
consolidate or eliminate. For those functions that will no
longer be performed, we need to understand why they are no
longer needed. For those functions that are still needed, we
need to understand who will perform them. We need to understand
what resources will be transferred, what resources will be
eliminated, and what real savings are likely.
I am disappointed that, more than 6 weeks after the
Secretary's announcement of these measures, we have received
only the roughest and most general information about the
Department's plans. I fully understand the frustration of the
Senators from Virginia, for instance, and others, about their
inability to obtain a more complete rationale and a plan for
the Pentagon's proposed actions. The Secretary's intent to
reduce duplication, overhead, and excess in DOD is commendable,
but his actions should be supported by an open process, which
includes detailed analysis and full consideration of opposing
views.
We again thank our witnesses for their presence here this
morning. We look forward to their testimony.
I call upon Senator McCain.
STATEMENT OF SENATOR JOHN McCAIN
Senator McCain. Thank you, Mr. Chairman.
Thank our distinguished witnesses for joining us this
morning and for their service to our Nation.
As we know, in August, Secretary Gates announced a series
of initiatives intended to reduce excess overhead costs and to
improve the efficiency of DOD. As a part of this initiative,
Secretary Gates also tasked Dr. Carter to improve the
Department's buying power, through the way it acquires critical
goods and services, in order to stop runaway cost growth and
program delays. We look forward to hearing from Dr. Carter
about the initial progress he's making within DOD and with the
defense industry partners in this critical area.
I think that both these initiatives are coming at an
important time. We have to find ways to operate government more
efficiently and at a lower cost to taxpayers. Secretary Gates
understands the tough economic and fiscal situation facing our
Nation. I strongly support his efforts in doing everything
possible to make every taxpayer dollar count.
I want to emphasize that the intent of this effort is not
to reduce the Department's top line, but to find savings over
the Future Years Defense Program, to invest in critical force
structure and modernization priorities. We obviously cannot
afford to shortchange our military, and we must maintain
commitments to a Defense budget that supports the full range of
our national security commitments.
This committee has consistently supported the Department's
efforts to reduce their massive overhead costs in order to be
able to direct more resources to our fighting forces and
weapons modernization. Eight initiatives are clearly aimed at
addressing the exploding growth in service support contracts
and overhead personnel. I look forward to getting more
information on these proposals in the next few months in order
to fully understand the scope of the anticipated savings and
the impact on the missions and operations of our forces.
One proposal the Secretary's recommended is the elimination
of JFCOM. I strongly support that proposal.
On the issue of elimination of BTA, I'd be interested,
Secretary Carter and maybe Secretary Lynn, will we ever have an
audit of DOD? That, I think, would be one major step forward.
The Secretary also challenged the Services to find more
than $100 billion in overhead savings over the next 5 years.
Obviously, we want to make sure that those reductions don't
impact long-term readiness over time.
I support the Secretary's decision to address the personnel
growth in OSD, defense agencies, and combatant commands, and to
freeze, at 2010 levels, the number of civilian senior
executives, general and flag officer and political positions.
DOD management deserves a rigorous review to ensure it has the
proper mix of civilian and military personnel, with the right
ranks and the right positions.
May I also say, I support the Secretary's decision to
eliminate the second engine for the Joint Strike Fighter. But,
on the subject of the Joint Strike Fighter, I would point out,
to the witnesses and my colleagues, that the Joint Strike
Fighter is another example of the terrible cost overruns
associated with weapons procurement and the reasons why we, not
only need to make a $100 billion in savings, but we need to
fundamentally reform our acquisition system. I believe--correct
me if I'm wrong, Mr. Lynn--that the Joint Strike Fighter now
costs, approximately, more than its original estimates. Is that
correct? We can't continue down that path. It's just not
affordable and the American people deserve better.
But, getting back to the subject at hand, I look forward to
hearing from the witnesses. I know every member of this
committee looks forward to working with you to try to bring
about these proposed changes that I think are a bold initiative
by the Secretary of Defense.
Thank you, Mr. Chairman.
Chairman Levin. Thank you very much, Senator McCain.
Secretary Lynn.
STATEMENT OF HON. WILLIAM J. LYNN III, DEPUTY SECRETARY OF
DEFENSE
Mr. Lynn. Thank you very much, Mr. Chairman, distinguished
members of the committee. Thank you for the opportunity to
appear before you to discuss the Department's efficiency
efforts.
If it's acceptable to the committee, I'd like to put the
full statement in the record and summarize it here, briefly, in
an oral statement.
Chairman Levin. Thank you.
Mr. Lynn. During a speech in May of this year at the
Eisenhower Library, Secretary Gates outlined how, in order to
maintain and modernize America's key military capabilities at a
time of war and fiscal pressure, DOD would need to
fundamentally change the way it does business.
The reason is this: To sustain the current military force
structure, which we must do, given the security challenges this
country faces, requires the equivalent of real budget growth of
2 to 3 percent. The overall Defense budget is projected to
rise, in real terms, by about 1 percent, based on DOD's
inflation assumptions. The Department cannot, and should not,
ask Congress or the American taxpayers for more increases, in
any year, unless we have done everything possible to make the
dollars we already have count for more. Bridging that gap
requires culling the Department's massive overhead costs and
structures--``the tail''--and directing them to our fighting
forces and modernization accounts--``the tooth.''
This is not an effort, as Senator McCain indicated, to
reduce the Defense budget. This is about shifting resources and
priorities within the existing top line. That requires reducing
the Department's overhead costs by targeting unnecessary excess
and duplication in the Defense enterprise.
This effort is not just about the budget; it is also about
operational agility. We need to ensure that the Department is
operating as efficiently and effectively as possible.
The Secretary directed us to take a hard look at how the
Department is organized, staffed, and operated; how we can
flatten and streamline the organization; reduce executive and
flag-officer billets and the staff apparatus that supports
them; shed overlapping commands and organizations; and reduce
the role and the costs of support contractors.
Since the Secretary's speech in May, DOD embarked on a
four-track approach toward a more efficient, effective, and
cost-conscious way of doing business. Let me briefly touch on
tracks one to three, and then spend a little bit more time on
track four.
On track one, the Secretary directed that the Military
Services find more than $100 billion in overhead savings over
the next 5 years. The Services will be able to keep any of
those savings that they generate, to invest in higher priority
warfighting and modernization needs. This effort is now
underway, and we've begun to review the Services' submissions.
The fiscal year 2012 budget will reflect the results when it is
submitted to Congress in February 2011.
On track two, the Department is seeking ideas, suggestions,
and proposals regarding efficiencies from outside the normal
channels. We have solicited input from experts, from think
tanks, from industry, and from the Department's external
boards. We also established a DOD suggestion program to solicit
our own employees' ideas. The Department is willing to consider
any reasonable suggestion to reduce our overhead.
On track three, the Department is conducting a broad review
of how it is organized and operated to inform President Obama's
2012 budget process. This track three review focuses on
affecting long-term systemic improvements in several key areas
of DOD operations. Dr. Carter will address these in more detail
in his opening statement.
With regard to track four, the Secretary announced, on
August 9th, specific areas where the Department can take action
now to reduce inefficiencies and overhead. These steps are
intended to jumpstart the reform process ahead of and separate
from the normal programming and budget submission process. In
particular, they represent the Secretary's lead efforts to
reduce headquarters and support bureaucracies, military and
civilian alike, that have swelled to cumbersome proportions,
grown over-reliant on contractors, and become accustomed to
operating with little consideration of costs.
Though all of these efforts will result in measurable
savings, an equally important purpose is to instill a culture
of cost-consciousness and restraint in the Department; a
culture that sets priorities, makes real tradeoffs, and
separates unrestrained appetites from genuine requirements.
There are eight major initiatives in track four that reduce
support contractors, headquarters personnel, senior executives,
and flag and general officers. Track four also includes efforts
to reduce boards and commissions and redundant intelligence
organizations.
Finally, they involve several organizational
disestablishments. The last decade has seen a significant
growth of new offices and organizations, including two new
combatant commands and five new Defense agencies. The Secretary
concluded that JFCOM, the Assistant Secretary of Defense for
Networks and Information Integration, the Joint Staff's J-6
directorate, and the Defense BTA no longer effectively satisfy
the purpose for which they were created. Some missions and
tasks that each perform remain vital but can be managed
effectively elsewhere. Other functions that each perform are
either already performed elsewhere or are no longer relevant to
the operation of the department.
We are mindful that the recommended actions will have
economic consequences for displaced employees, their families,
and their local communities. The Department is committed to
work with the affected communities and will devote significant
attention to the challenges employees will face during this
transition. We have asked Dr. Clifford Stanley, the Under
Secretary for Personnel and Readiness, to take direct
responsibility for this aspect of the Department's planning in
order to ensure we take the steps necessary to help impacted
employees with appropriate assistance and support.
In closing, Mr. Chairman, I understand that some of these
reforms may be controversial and unwelcome to some people, both
inside and outside the Department. No doubt many of these
changes will be stressful, even wrenching, for the organization
and employees involved. But, I would ask the members of this
committee, and Congress as a whole, to consider this reform
agenda in terms of our responsibilities, as leaders, to set
priorities and move resources from where they are needed least
to where they belong: America's fighting forces, its investment
in future capabilities, and, most importantly, the needs of our
men and women in uniform. That is what Secretary Gates and
President Obama are proposing, and we urge your strong support.
Thank you for the opportunity to discuss this initiative
with you today.
[The prepared statement of Mr. Lynn follows:]
Prepared Statement by Hon. William J. Lynn III
Mr. Chairman and distinguished members of the committee, thank you
for the opportunity to appear before you to discuss the Department's
efficiency efforts.
During his speech in May of this year at the Eisenhower library,
Secretary Gates outlined how in order to maintain and modernize
America's key military capabilities at a time of war and fiscal
pressure, the Department of Defense (DOD) would need to fundamentally
change the way it does business.
The reason is this: To sustain the current military force
structure--which the Secretary believes we must do given the security
challenges this country faces--requires the equivalent of real budget
growth of 2 to 3 percent. The overall defense budget, however, is
projected to rise in real terms by about 1 percent, based on DOD
inflation assumptions. The Department cannot, and should not, ask
Congress for more increases each year unless we have done everything
possible to make the dollars we already have count for more.
Bridging that gap requires culling the department's massive
overhead costs and structures, the ``tail,'' and directing them to our
fighting forces and modernization accounts, the ``tooth.'' This is not
an effort to reduce the Defense budget. This is about shifting
resources and priorities within the existing top line. That requires
reducing the department's overhead costs by targeting unnecessary
excess and duplication in the defense enterprise.
This effort is not just about the budget, it is also about
operational agility. The Secretary wants to ensure that the Department
is operating as efficiently and effectively as possible. He has
directed us to take a hard look at how the Department is organized,
staffed, and operated; how we can flatten and streamline the
organization; reduce executive or flag-officer billets and the staff
apparatus under them; shed overlapping commands and organizations; and
reduce the role and costs of contractors.
Since the Secretary's speech in May, DOD has embarked on a four-
track approach towards a more efficient, effective, and cost-conscious
way of doing business. I will briefly touch on our activities in Tracks
1-3 and then go into more depth about Track 4.
Track 1: The Secretary directed that the military services find
more than $100 billion in overhead savings over the next 5 years. The
Services will be able to keep any of the savings they generate to
invest in higher priority warfighting and modernization needs. This
effort is underway and we have already begun to review the service
submissions. The fiscal year 2012 budget will reflect the results when
it is submitted in February.
Track 2: The Department is also seeking ideas, suggestions and
proposals regarding efficiencies from outside normal channels. We have
solicited input from experts, from think tanks, industry, and the
department's external boards. We have also established a DOD suggestion
program to solicit our employees' ideas. The Department is willing to
consider any reasonable suggestion to reduce our overhead.
Track 3: The Department is also conducting a broad review of how it
is organized and operated to inform President's 2012 budget process.
This ``Track 3'' review focuses on affecting long-term systemic
improvements in several key areas of DOD operations. Through this
review the Department seeks to adjust processes, regulations, and
systems that add needless layers of bureaucracy and serve as roadblocks
to efficient operations. As a first step, Under Secretary of Defense
for Acquisition, Technology, and Logistics, Dr. Ash Carter recently
unveiled his acquisition initiatives, which includes 23 significant
changes to the way the Department contracts for goods and services. Dr.
Carter will address these in more detail in his opening statement.
The Secretary's Track 4 initiatives, announced on August 9, address
specific areas where the Department can take action now to reduce
inefficiencies and overhead. These steps are intended to jump start the
reform process ahead of and separate from the normal programming and
budget submission process. In particular, they represent the
Secretary's lead effort to reduce headquarters and support
bureaucracies, military and civilian alike that have swelled to
cumbersome proportions, grown over-reliant on contractors, and become
accustomed to operating with little consideration of costs. Though all
these efforts will result in measurable savings, an equally important
purpose is to instill a culture of cost-consciousness and restraint in
the Department--a culture that sets priorities, makes real trade-offs,
and separates unrestrained appetites from genuine requirements.
To see these Track 4 initiatives through from his announcement to
action and to produce measurable results in the near-term, the
Secretary established a task force chaired by his Chief of Staff. This
task force has chartered study groups from within the department which
are developing action plans aligned to the Secretary's guidance. The
Task Force is overseeing the implementation of these plans and their
eventual transition to the appropriate department leadership. Secretary
Gates will personally approve all action plans later this fall to
ensure that his vision is translated into concrete results.
I will briefly recap the Secretary's guidance in each of these
eight areas and then outline the reasons for his decision, as well as
the general approach the Department is taking to execute it.
Contractors: The Secretary directed funding for service support
contractors be reduced by 10 percent per year for 3 years. There have
been significant efforts to outsource non-core tasks to contractors
over the last several decades. However, since 2001 the availability of
resources from supplemental appropriations, coupled with the urgency of
supporting combat operations, resulted in dramatic increases in the
number of contractors working for the Department, who have risen from
26 percent of the DOD workforce in 2000 to 39 percent today. The sheer
number of contractors is not the only problem. Many of these recently
outsourced service support and advisory contractors are actually
carrying out functions that should be performed by government
employees. The Secretary intends to reverse this trend. The task force
is establishing a baseline for these contractors and will develop
specific targets for reductions.
Civilian Personnel: The Secretary's initiative froze the number of
OSD, Defense Agency, and combatant command positions and directed a
zero-based review of each organization. The growth in the size and
expense of the Office of the Secretary of Defense, the defense
agencies, and the combatant commands since 2001 provides a ripe area
for review and subsequent realignment. The zero-based review of
organizational missions, funding, and staffing is intended to ensure
that each organization is aligned to the Department's priorities, and
to allow reductions or realignment of personnel and resources as
appropriate. We are in the midst of gathering data and reviewing
initial organizational self-assessments. As we consolidate the data,
and conduct our own analysis, the Secretary expects to receive a series
of recommendations aimed at flattening the Department's headquarters
and staff structures, resulting in efficiencies and savings that can be
applied to higher priorities. The effort to seek efficiencies in our
civilian staff will not undercut the ongoing process of adding
contracting officers, system engineers, and weapons testers in our
acquisition system.
Senior Positions: Secretary Gates froze the number of senior
civilian executives, general and flag officers, and presidentially
appointed and Senate-confirmed officials. After a senior-level review,
he intends to reduce the numbers of these positions. Since September
2001, the number of general and flag officers has increased by more
than 100, while senior civilian leaders have increased by more than
300. This ``brass creep''--where higher ranking personnel now perform
tasks that could be more appropriately and efficiently performed by
lower ranking personnel--is associated with increased layers of
bureaucracy and proliferation of new staff. The effort in this area is
intended to assist in the transition to fewer organizations and into
flatter and more responsive and agile structures. We have two senior
study groups reviewing the distribution of senior positions across the
Department and expect, at a minimum, to substantially trim the growth
that has occurred since 2001.
Economies of Scale: To take advantage of the Department's economies
of scale, the Secretary directed that key areas of the Department
consider consolidation of duplicative or redundant infrastructure and
processes to reduce costs and increase capabilities. We are pursuing
several key initiatives, particularly concerning the consolidation of
information technology infrastructure, that appear to offer significant
savings.
Oversight Reports and Studies: The Secretary directed a freeze on
the overall number of DOD-required oversight reports and immediately
cut the fiscal year 2010 funding for advisory studies by 25 percent. A
team is conducting an aggressive review of the value of all internal
and external oversight reports with the goal of reducing their volume
and the burden they place on Department staff. This team is currently
reviewing an initial set of more than 1,000 internal oversight reports
and studies, weighing the oversight value against the manpower it takes
to produce them, and will make initial recommendations within weeks. We
are also examining several hundred recurring reports required by
Congress in the annual spending bills to better understand the cost of
production and the value they provide to you and other defense
decision-makers. As part of this evaluation, we look forward to
engaging this and other committees on ways to seek efficiencies as we
meet your oversight needs.
Boards and Commissions: A team is also working to review about 60
defense advisory boards and commissions, along with a large number of
advisory subcommittees, to assess the value of their advice and to
recommend disestablishment, streamlining and restructuring of those
that are not providing the highest impact to senior decisionmakers.
Remaining boards and commissions are expected to see their funding for
studies reduced by 25 percent. Within the Secretary's authority, those
boards and commissions that are assessed to provide little value to the
Department will be disestablished. If our analysis indicates that any
board or commission established in statute is no longer needed or
should be restructured, we expect to engage your committee and others
in dialogue about options for statutory changes to help implement
desired efficiency gains while ensuring Congressional oversight
responsibilities are met.
Intelligence Organizations: The Secretary reduced intelligence
advisory and assistance contract funding by 10 percent and froze the
number of senior executive positions in defense intelligence
organizations. He also directed a zero-based review of the department's
intelligence missions, organizations, relationships, and contracts by 1
November. There has been a proliferation of new intelligence
organizations and operations since 2001, primarily based upon the
demands of fighting two wars and combating terrorism. Because much of
this growth was not centrally directed or coordinated, there is a high
probability of redundancy and overlap with intelligence organizations
that can be reduced or eliminated. This offers the opportunity to
redirect the savings to other, more important intelligence efforts. In
addition, this effort is being conducted in close collaboration with
the DNI who is pursuing a similar review across the Intelligence
Community. We expect that the fruits of the zero-based review and
subsequent realignment will be a flatter and more responsive
intelligence structure that better supports both national priorities
and operational forces.
Organizational Disestablishments: The last decade has seen a
significant growth of new offices and organizations including two new
combatant commands and five new defense agencies. Therefore, in
addition to flattening and trimming structure, the Secretary directed
the Department to consider the outright elimination of organizations
that either perform duplicative functions or have outlived their
original purpose.
We reviewed a variety of information regarding combatant commands,
defense agencies, and the OSD staff, including missions, staffing
levels, and other data. However, the Secretary was particularly
interested in organizations that had outlived the original argument for
their existence, whose missions had changed or no longer existed, or
had a mission or conducted activities that duplicated other
organizations.
We spent considerable time reviewing the input of his most senior
advisors, including the Chairman and Vice Chairman of the Joint Staff,
myself, and others. Over 30 meetings were held with senior leaders, in
both small forums and large, to help understand the contributions that
these organizations provided to national security and the risks and
pitfalls that might be associated with any decision to disestablish an
existing organization.
The Secretary concluded that Joint Forces Command (JFCOM), the
Assistant Secretary of Defense for Networks and Information Integration
(NII), Joint Staff J-6 Directorate, and the Defense Business
Transformation Agency (BTA) no longer effectively satisfy the purpose
for which they were created. Some missions and tasks that each perform
remain vital, but can be managed effectively elsewhere. Other functions
that each perform are either already performed elsewhere, or are no
longer relevant for the Department.
Therefore, after several months of review, the Secretary made the
decisions announced on August 9 to disestablish the NII, J-6, and BTA,
and also to recommend to the President that he approve the
disestablishment of JFCOM.
NII was created in 2003 when the Office of Communications, Command,
Control and Intelligence split off its intelligence functions due to
the increasing need for intelligence in the post-September 11 world. At
the time, there were questions about the necessity of creating a
separate organization within OSD to handle the remaining
Communications, Command, and Control functions, such as the replication
of responsibilities and processes.
The speed at which information technology is changing is
outstripping the DOD's ability to adapt to the changes. The modern U.S.
military is increasingly dependent on its ability to get the right
information to the right person at the right time, while preventing
critical information from getting into the wrong hands. The Department
continues to expand its technology solutions to support both goals.
But, at the same time, the Department is hindered by its internal
bureaucracy--primarily the duplication of processes by multiple
organizations--which limits our ability to be as agile as we would like
in this crucial area.
Many of the functions performed by NII are also provided by other
organizations within the Department. For example, NII performs:
Information assurance functions that are similar to
those provided through U.S. Cyber Command (CYBERCOM), the Joint
Staff, JFCOM and the Defense Information Systems Agency (DISA);
Resourcing functions that are similar to those
provided through the Under Secretary of Defense for
Comptroller;
Acquisition oversight for command and control are
similar to those provided through the Under Secretary of
Defense for Acquisition, Technology, and Logistics;
CIO functions that are similar to those provided
through CYBERCOM, STRATCOM, the Joint Staff, JFCOM and DISA,
and;
Command and Control (C2) functions that are similar to
those provided through CYBERCOM, STRATCOM, the Joint Staff,
JFCOM, and DISA.
These redundancies represent more than a waste of resources--they
also increase the potential for confusing or even conflicting policies
and plans. Based on these observations, the analysis indicates that
removing these functions from NII and J-6 and then consolidating them
within other organizations will likely increase overall effectiveness
and save money.
A specific consideration for allocating these functions among
existing DOD organizations is the value of representing the user and
provider perspectives within the same organization. The goal is to
support evolving operational needs and thwart equally adaptive threats.
These goals are best served by an organization that is simultaneously
responsible for setting policy, implementing plans, performing C2 and
directly supporting users.
There are multiple ways that key responsibilities can be
reallocated. The Task Force working group is developing options to
determine the best allocation strategy to achieve the goals of meeting
operational needs, improving security, and being prudent fiscal
managers.
The BTA was created in 2006 to assist in business transformation
activities, to integrate and improve the Department's business
processes to include numerous Enterprise Resource Planning (ERP)
implementations. The Agency encompassed the Financial Management
Modernization Program and Business Management Modernization Programs
that had previously existed in the Under Secretary of Defense for
Comptroller and Under Secretary of Defense for Acquisition, Technology,
and Logistics respectively. When established, BTA was envisioned to
centralize business transformation and system modernization efforts
into a unified and focused organization.
In 2008, Congress, through the National Defense Authorization Act,
instituted the position of Deputy Chief Management Officer (DCMO) to
assist the Deputy Secretary of Defense, acting as the Chief Management
Officer, to organize the business operations of DOD. The mission of the
Office of the DCMO duplicates many of the BTA functions. Specifically,
the DCMO has the principal responsibility for invigorating and
improving business operations in DOD in order to enhance support to the
warfighter and provide better financial accountability. Therefore,
rather than lead in the development of better business practices, BTA's
prime focus has essentially devolved to being the caretaker and manager
for several relatively small business systems, and providing direct
support to the DCMO for various policy issues. This narrower function
does not justify continuing BTA as a stand-alone defense agency.
Accordingly, Secretary Gates approved disestablishment of BTA and
directed that its remaining functions be reviewed and transferred to
other organizations in DOD as appropriate.
The Secretary has recommended that the President approve the
disestablishment of U.S. Joint Forces Command (JFCOM). This
recommendation is based on a review of the missions assigned to JFCOM
in the Unified Command Plan and the determination that these missions
can be accomplished effectively and more efficiently, elsewhere within
the Department.
JFCOM was formally established in 1999 as the successor to the U.S.
Atlantic Command. The central mission of JFCOM was to infuse and, to
some degree, compel jointness into everything the military does,
especially training, doctrine development and the provision of forces
for operations. It was understood at the time that the creation of
JFCOM would result in the addition of a new organizational layer in how
the Department managed military forces. But, the imperative to
encourage and advance the principle of jointness among our military was
judged to outweigh the costs associated with the extra bureaucracy.
Over the years, JFCOM has had success in advancing this goal. However,
it has also grown dramatically in size, budget, and personnel. In 2000,
its first full year of operation, JFCOM employed approximately 2,100
military and civilian personnel and had an annual operating budget of
approximately $300 million.
Today, JFCOM employs more than 3,000 military and civilian
personnel in addition to approximately 3,000 direct support contractors
and has an annual operating budget of nearly $1 billion. However,
unlike many DOD organizations that have grown since 2001 due to new
missions or the need to support operations in Iraq and Afghanistan,
JFCOM has continued to grow without any significant expansion of
mission or responsibilities.
More fundamentally, the principal purpose for the creation of JFCOM
in 1999--to force a reluctant service-centric military culture to
embrace joint operations and doctrine--has largely been achieved.
Jointness is a cultural and behavioral principle that is evolutionary
and not easily measured; however, there is little debate that today the
United States military has doctrinally, operationally and culturally
embraced jointness as a matter of practice and necessity. As with
similar matters of cultural behavior, jointness remains a policy
objective that requires continued development, vigilance and emphasis
by civilian and military leadership. But I am also firmly convinced
that our military institutions have now reached a point where there is
no risk of reverting back to the pre-Goldwater-Nichols Act period,
where the military services sometimes planned, trained, fought and
bought as if the other services did not exist. The evidence of this
achievement is manifested on today's battlefields, in military schools,
and among the ranks of current and next generation military leaders who
have grown up in and inherently accept this new joint world.
Accordingly, we believe that we can no longer justify the expense
and overhead associated with maintaining a separate four-star combatant
command for this purpose.
Finally, I am mindful that the recommended actions will have
economic consequences for displaced employees, their families and local
communities. The Department is committed to work with the affected
communities and will devote significant attention to the challenges
employees will face during this transition. We have asked Dr. Clifford
Stanley, the Under Secretary for Personnel and Readiness, to take
direct responsibility for this aspect of the Department's planning in
order to ensure we take the steps necessary to help impacted employees
with appropriate assistance and support.
In closing, Mr. Chairman, I understand that some of these reforms
may be controversial and unwelcome to some people both inside and
outside the department. No doubt many of these changes will be
stressful, if not wrenching for the organizations and employees
affected. But I would ask the members of this committee, and Congress
as the whole, to consider this reform agenda in terms of our
responsibilities as leaders to set priorities and move resources from
where they are needed least to where they belong: America's fighting
forces, investment in future capabilities and, most importantly, the
needs of our men and women in uniform. That is what the Secretary and
the President are proposing, and we urge your strong support.
Thank you for the opportunity to discuss this initiative with you
today. I look forward to your questions.
Chairman Levin. Thank you very much, Secretary Lynn.
Secretary Carter.
STATEMENT OF HON. ASHTON B. CARTER, UNDER SECRETARY OF DEFENSE
FOR ACQUISITION, TECHNOLOGY, AND LOGISTICS
Dr. Carter. Thank you, Mr. Chairman, Senator McCain,
distinguished members of the committee. I, too, am grateful for
the opportunity to testify before you today.
On the piece of the initiative that Secretary Gates and
Deputy Secretary Lynn have charged me with organizing, which
concerns the $400 billion, of the $700 billion Defense budget,
which is contracted out for goods and services. The other $300
billion is spent ``within the walls,'' if you like, of DOD, on
the salaries, benefits, and so forth, of those, uniformed and
civilian, who work for the Department, and the buildings and
facilities within which they work. The other $400 billion is
contracted out roughly equally between goods and services.
We estimate that, by targeting efficiencies in the way that
these goods and services are acquired, we can make a
significant contribution to the overall $100 billion goal that
Secretary Gates and Deputy Secretary Lynn have laid down for us
over next 5 years.
To put it bluntly, we can't support our troops with the
capabilities they need unless we do so. Our challenge is to
sustain a military at war, take care of our troops and their
families, and invest in new capabilities, all in an era when
Defense budgets will not be growing as rapidly as they were in
the years following September 11, 2001.
Last year, we identified savings in the Defense budget by
canceling unneeded programs, and we'll need to do more of that.
But, now we must also find savings within programs and
activities we do need and do want. The Department must achieve
what economists call ``productivity growth,'' and what I've
called ``learning to do more, without more,'' delivering the
program the Department needs, and the warfighter needs, for the
amount of money we're going to get.
If you think about a computer, you buy a computer every
year; computer gets a little bit better and a little bit
cheaper. Why is it that, on the contrary, as Senator McCain's
already noted, we come before you every year with exactly the
same product, and it costs even more? That's not productivity
growth. We need productivity growth in the defense sector.
In late June, we laid out a mandate, to the Defense
Acquisition Workforce and the defense industry, describing how
the Department can achieve this better buying power in
contracted activities. On September 14, a few weeks ago, after
several months of intensive work within the Department, with
our program managers, program executive officers, systems
command commanders, senior logisticians, and so forth, and also
with our partners in industry, who accomplish this work and
perform it for us, and outside experts, I issued specific
guidance on how to implement that mandate.
I'd like to submit the guidance from the June 28 mandate as
well, and all the material that accompanies them, for the
record, and just supplement it briefly.
We are now moving vigorously into implementation mode, and
taking each of those 23 items that were in the guidance, and
making them happen. Let me, if I may, just summarize the high
points of those points of guidance, in five categories, with
specific examples, so you'll have some idea of what we're
trying to get at.
First, as we begin new programs, such as the Ohio class
SSBN(X) replacement, the joint family of systems for long-range
strike, the Army's Ground Combat Vehicle, and even the new
presidential helicopter, which we'll be embarking on, we need
to establish--and we will establish--affordability requirements
that have the same force as high-priority performance
requirements. We will also insist that our acquisition
professionals and suppliers plan according to what programs
should cost, not according to self-fulfilling historical
estimates of what they will cost, as if nothing can be changed
in how we do business.
We are already using this method to drive down costs in the
Joint Strike Fighter program, the Department's largest and the
backbone of tactical airpower for the United States and many
other countries. But, we have a long way to go, as Senator
McCain has already noted; and I think my reaction, and
Secretary Gates's and Secretary Lynn's, was the same as his to
the revised cost estimates of last spring, which is, ``No,
we're not going to pay that. We should pay something that is
less than that. We should manage to a better result.''
Second, to incentivize productivity and innovation in
industry, we will strengthen the connection between profit and
performance in our business practices. Among other things,
we're exploring ways, through contracting and financing
vehicles and a pilot preferred-supplier program, to reward
contractors who control their costs and demonstrate exemplary
performance.
Third, we will remove obstacles to effective competition.
Last year, the Pentagon awarded $55 billion in contracts that
were supposed to be competitive but for which only one bid was
received, usually from an incumbent. Yet, simple changes in how
we structure evaluations and work with industry have shown to
reduce by 50 percent the incidence of single bids by
incumbents.
Additionally, we will promote real competition, for it is
the single most powerful tool that the Department has to drive
productivity growth. We must stop deluding ourselves with the
idea that directed buys from two designated suppliers
represents real competition. We're already cutting down on
directed buys, with the Navy's Littoral Combat Ship (LCS),
where we have set in place real competition that will save more
than 1 billion in the next 5 years alone--and we can
demonstrate that--with additional savings expected over the
entire life of the LCS program. Competition is not always
available, but the evidence is clear that the government is not
availing itself of all possible competitive situations.
Fourth, we will move to more aggressively manage the over
$200 billion we spend annually on services, such as information
technology, knowledge-based services, facilities upkeep,
weapons system maintenance, and transportation. When most
people think of the Defense budget, they think of ships and
planes, but more than 50 percent of our contract spending is
actually for services. You may find this hard to believe, but
our practices for buying services are even less effective than
for buying weapons systems.
Fifth, we're taking steps to reduce----
Chairman Levin. By the way, I don't have any difficulty
believing that at all. I just want you to know that.
[Laughter.]
Senator McCaskill. Yes. I think that's a ``duh.''
Dr. Carter. I'm certain you don't. I did, at first, but I'm
getting used to it.
Fifth, we're taking steps to reduce unproductive processes
and bureaucracy by reducing the number of OSD-level reviews to
those necessary to support major investment decisions or to
uncover and respond to significant program execution issues,
eliminating low value-added statutory processes.
I hasten to say, Mr. Chairman, at this point, I'm not
referring to provisions of the Weapons System Acquisition
Reform Act, that we understand the intent of that, and
appreciate that intent, and are executing to that intent,
including developmental test and evaluation and systems
engineering.
The kind of thing I have in mind is this. I sit in the
Pentagon on a Saturday afternoon reading reports to you that
are this thick, that are, in an embarrassing number of
circumstances, late to need, and am convinced that I'm the only
human being that has ever read it, and ever will. The reason
I'm reading it is that I have to sign it, and I'm afraid of
embarrassing myself. I sign an equal number of letters to you
in which we say, ``You asked for it in May, and it's now June,
and we're still working on the report.''
This has nothing to do with intent. It has to do with the
execution and the paperwork burden that we've imposed upon
ourselves. That's just a piece of it. It's not just in
responding to your inquiries, which we need to do; it's our own
internal paperwork and, very importantly, it is the paperwork
burden that we impose upon industry, in which we have them do
something, and, of course, then we end up paying for it. It
becomes an allowable cost, and we charge. These are the kinds
of things we're talking about. Not changing the intent of any
of that reporting, but trying to change the volume and the
responsiveness of it, Mr. Chairman. So, I wanted to, because
you had mentioned that, comment on that.
Let me just conclude by saying that we recognize that
changing our business practices will take time and require the
continued close involvement of our industry partners, who have
made major contributions to this effort and whose technical
vitality and financial vitality is in the national interest. We
also need your support for the success of this endeavor.
Why do we think we can succeed? Several reasons. First of
all, we have very reasonable reduction targets here. Next,
we're focused on specific savings--not on abstractions, but on
very specific things that we can do and that have been shown to
work. Third, I think it's fair to say that, after an era of
double-digit year-on-year budget growth, there's fat that has
crept in and that we can identify and get out. The fourth is
that President Obama, Secretary Gates, Deputy Secretary Lynn,
this committee, Congress as a whole, and the American taxpayers
are all expecting it, want it, need it.
The last thing I'd say is, to those who doubt or who
hesitate, they need to consider the alternative to the careful
management into this new era, and that would be broken or
canceled programs, budget turbulence, uncertainty for industry,
erosion of taxpayer confidence that they're getting value for
their dollar, and, especially, lost capability for the
warfighter in a dangerous world. So, not only can, I think, we
succeed in this endeavor, but we really have to.
Thank you.
[The prepared statement of Dr. Carter follows:]
Prepared Statement by Dr. Ashton B. Carter
Mr. Chairman, Senator McCain, distinguished members of the
committee:
Thank you for the opportunity to testify today. It is a pleasure to
join Deputy Secretary Lynn and General Cartwright to discuss Secretary
Gates' Efficiency Initiative, and my role in it.
obtaining greater efficiency and productivity in defense spending
As part of his broad initiative to improve the American taxpayer's
return on his investment in national defense, Secretary Gates has
tasked me to improve the Department's buying power in the way we
acquire critical goods and services. Together, goods and services
comprise $400 billion of the $700 billion in annual defense spending.
We estimate that by targeting efficiencies in both of these areas, we
can make a significant contribution towards achieving the $100 billion
redirection of defense budget dollars from unproductive to productive
purposes sought by Secretary Gates and Deputy Secretary Lynn over the
next 5 years. The Department can meet this goal only if we
fundamentally change the way we do business.
To put it bluntly, we cannot support our troops with the
capabilities they need unless we do so. Our challenge is to sustain a
military at war, take care of our troops and their families, and invest
in new capabilities--all in an era when defense budgets will not be
growing as rapidly as they were in the years following September 11.
Last year, we identified savings in the defense budget by cancelling
unneeded programs. Now we must find savings within programs and
activities we do need. The Department must achieve what economists call
productivity growth: we must learn to do more without more.
On June 28, I laid out a mandate to the defense acquisition
workforce and the defense industry describing how the Department would
try to achieve better buying power. On September 14--after months of
work with the Department's senior acquisition professionals, industry
leaders, and outside experts--I issued specific Guidance on how to
implement that mandate. I would like to submit both the June 28 mandate
and September 14 Guidance--and the charts which accompany them--for the
record. [See Appendixes A and B)
september 14 guidance
The September 14 Guidance contains 23 principal actions to improve
efficiency organized in 5 major areas. Let me highlight just a few of
the actions we are taking in each of the five areas:
First, as we begin new programs such as the Ohio-class SSBN(X)
replacement, the joint Family of Systems for long-range strike, the
Army's Ground Combat Vehicle (GCV), and even a new Presidential
Helicopter, we will establish affordability requirements that have the
same force as high-priority performance requirements. We will also
insist that our acquisition professionals and suppliers plan according
to what programs should cost, not according to self-fulfilling
historical estimates of what they will cost, as if nothing can be
changed in how we do business. We are already using this method to
drive down costs in the Joint Strike Fighter (JSF) program, the
Department's largest and the backbone of tactical air power for the
United States and many other countries. Secretary Gates has said that
monies saved this way would be retained by the Service that achieved
the efficiency; in this case, the Air Force, Navy, and Marine Corps
could reallocate JSF funds to buy other urgent capabilities.
Second, to incentivize productivity and innovation in industry, we
will strengthen the connection between profit and performance in our
business practices. Among other things, we are exploring ways--through
contracting and financing vehicles and a pilot ``Preferred Supplier
Program''--to reward contractors who control their costs and
demonstrate exemplary performance.
Third, we will remove obstacles to effective competition. Last
year, the Pentagon awarded $55 billion in contracts that were supposed
to be competitive but for which only one bid was received, usually from
an incumbent contractor. Yet simple changes in how we structure
evaluations and work with industry have been shown to reduce by 50
percent the incidence of single bids by incumbents.
Additionally, we will promote real competition, for it is the
single most powerful tool to the Department to drive productivity. We
must stop deluding ourselves with the idea that ``directed buys'' from
two designated suppliers represents real competition. We are already
cutting down on directed buys with the Navy's Littoral Combat Ship
(LCS), where we have set in place real competition that will save more
than $1 billion in the next 5 years alone, with additional savings
expected over the life of the LCS program. Competition is not always
available, but the evidence is clear that the government is not
availing itself of all possible competitive situations.
Fourth, we will more aggressively manage the over $200 billion we
spend annually on services such as information technology and
knowledge-based services, facilities upkeep, weapons system
maintenance, and transportation. When most people think of the defense
budget, they think of ships and planes. But more than 50 percent of our
contract spending is for services. Believe it or not, our practices for
buying such services are even less effective than for buying weapons
systems.
Fifth, we are taking steps to reduce unproductive processes and
bureaucracy by reducing the number of Office of the Secretary of
Defense-level reviews to those necessary to support major investment
decisions or to uncover and respond to significant program execution
issues, eliminating low-value-added statutory processes; and reducing
the volume and cost of both internal and congressional reports as
appropriate.
conclusion
Changing our business practices will take time and require the
continued close involvement of our industry partners. We also need your
support, which is essential to the success of this endeavor. However,
we have every reason to believe that the efficiencies we seek can be
realized. We have established reasonable reduction targets. We are
focused on specific savings. We can identify the excess after an era of
double-digit budget growth. President Obama, Secretary Gates, Congress,
and American taxpayers expect it. The alternative is unacceptable:
broken or cancelled programs, budget turbulence, uncertainty for
industry, erosion of taxpayer confidence, and especially lost
capability for the warfighter in a dangerous world. We can succeed and
we must.
Thank you and I look forward to answering your questions.
Chairman Levin. Thank you very much, Secretary Carter.
General Cartwright.
STATEMENT OF GEN. JAMES E. CARTWRIGHT, USMC, VICE CHAIRMAN OF
THE JOINT CHIEFS OF STAFF
General Cartwright. Chairman Levin, Senator McCain, and
distinguished members of the committee, thank you for the
opportunity to discuss the DOD efficiency initiatives.
A few points, in context:
We remain a Nation at war. Troops are deployed around the
world, many engaged in combat. We are committed to ensuring
these troops are properly supported.
Second, DOD is a bureaucracy that has not fully adapted its
processes and constructs to the Information Age. We must be
able to adapt with increased speed in order to ensure we remain
and sustain our competitive advantage. In the era of rapidly
evolving threats, our success depends on our ability to adapt
quickly.
Third, DOD is cognizant of the Nation's financial
situation. We do not expect budgets to grow at the rate that
they grew over the last decade. When developing grand strategy,
it is the first duty of the strategist to appreciate the
financial position of his or her nation. We demonstrated this
appreciation during last year's weapon system portfolio changes
and earlier this year in the process to release our strategic
reviews.
The Secretary's efficiency initiatives are aimed at seeking
the same effect in our organizations. These initiatives are not
a cut, but, rather, a shift of resources from overhead to the
warfighter, increasing the tooth-to-tail ratio.
Regarding the disestablishment of JFCOM, JFCOM helped to
accomplish the primary goal for which it was established: to
drive jointness through the military. We must continue along
the positive vectors regarding joint activities, as directed in
Goldwater-Nichols Act. We must also improve initiatives to
strengthen efforts in the interagency and combined arenas.
It is our goal to reduce unintended redundancies and
layering to more clearly align operational responsibilities
with service, train, and equip functions in order to reduce
inefficiencies as forces are presented to combatant commands.
At all the COCOMs we must consolidate functions, where
appropriate and, where functions are retained, move towards a
construct of combined, joint, interagency task force
organizations or centers. The combined and interagency aspects
are critical components to establishing baseline capacity and
surge expectations required for functions and capabilities this
Nation presents.
As the cyber domain continues to grow in importance, the
Department will look to ensure lines of authority and
responsibility are clear and adaptable. We focused cyber
operations in Cyber Command. We will align policy and oversight
activities in strengthening the DOD chief information officer.
Finally, we must align cyber requirements and cyber acquisition
to maximize support to operational activities.
Given the expanding role and criticality of information and
the networks that hold and transmit that information, we need
to manage systems in the cyber domain as we do weapons systems.
To ensure our success, IT systems must have the proper
architecture and capability to ensure adaptability and
innovation. Further, our architecture should enable
collaboration throughout joint, interagency, coalition, and
commercial partnerships. The free flow of information among
these players is integral to a superior architecture. The
Department's information systems must extend to the tactical
edge and must work when others do not.
I look forward to answering your questions.
Thank you.
[The prepared statement of General Cartwright follows:]
Prepared Statement by Gen. James E. Cartwright, USMC
Chairman Levin, Senator McCain and distinguished members of the
committee, thank you for the opportunity to discuss the Department of
Defense (DOD) efficiency initiatives.
British military strategist J.F.C. Fuller wrote, ``The first duty
of the grand strategist is to appreciate the commercial and financial
position of his country.'' Sustained economic power is at the root of
sustainable military power. This understanding drives the efficiency
initiatives. The decisions should not be viewed as stand-alone
activities, but rather, as the next steps in an evolutionary process to
change the way the Pentagon does business.
America remains a Nation at war. We have soldiers, sailors, airmen,
marines, and coastguardsman deployed around the world, many engaged in
combat. We have transitioned from combat operations in Iraq, but our
effort in Afghanistan has intensified. Further, demographic, cultural
and geopolitical realities require us to prepare for a future where our
forces may be engaged in persistent conflict. The leadership of this
Department is committed to ensuring the force is sufficient and well
equipped. Efficiency initiatives are aimed at increasing our ``tooth to
tail'' ratio.
The nature of conflict in the 21st century continues to evolve and
threats span the spectrum of conflict. The intentions of those who wish
to harm us are enabled by the power of information technology (IT). We
must be able to adapt our strategy, weapon systems, and organizations
to a construct that recognizes, mitigates, and defends against these
new vulnerabilities of the information age. With this accelerated pace,
we must develop a strategic and organizational construct agile enough
to stay competitive.
Given the Nation's economic situation, we recognize budgets will
not grow at the rate they have since September 11. DOD requires modest
real budget growth of 2-3 percent annually to maintain and equip a
nation at war, but projected budgets for fiscal years 2010-2015 only
project 1 percent growth, based on DOD inflation assumptions.
Additionally, there is risk the projected 1 percent real growth may not
be realized. To help ensure sufficient resources for our highest
priorities, we must seek efficiency within current budgets. We owe it
to the warfighters, and the taxpayers, to adapt our strategy, weapons
and organizations to effectively conduct 21st century warfare, and to
conduct those operations efficiently.
The work conducted as part of the strategic reviews we released
last year includes examples where we made these types of changes. In
the Quadrennial Defense Review we shifted priority to concentrate
efforts on the wars we are currently in. In the National Space Policy,
we wrote of initiatives to increase partnerships with other nations in
order to ensure space systems remained affordable. We cancelled weapon
system programs that were chronically over budget, and redirected
others to better align with evolving threats.
After making these adjustments in our strategy and weapons, we
sought ways to streamline our organizational structure. Secretary Lynn
described our general approach. Three specific initiatives are; the
rebuilding and strengthening of the DOD Chief Information Officer
(CIO), the consolidation of IT for common use and better cyber defense,
and the disestablishment of Joint Forces Command (JFCOM).
Our national dependence on IT for almost every aspect of our lives
has accelerated, and DOD is no exception to this trend; DOD has
witnessed a similarly rapid growth in the number of offices in the
Department tasked to manage IT. Multiple organizations on multiple
staffs at multiple layers of our hierarchy exist to oversee IT. The
result is a complex web of authorities and responsibilities that is
unclear and difficult to navigate. Combatant commanders simply do not
understand what organization they need to visit in order to get work
executed. The need to clarify organizational roles and responsibilities
for IT has become obvious. With the establishment of Cyber Command
earlier this year, the Department focused operational responsibility
for this domain in one organization, compliant with legal requirements.
With the operational aspects of cyber defense assigned to Cyber
Command, we then needed to assign the policy and oversight
responsibilities for that capability. To eliminate duplication across
organizations, the operational functions of the Office of the Assistant
Secretary of Defense for Networks and Information Integration, the J-6
Directorate on the Joint Staff, and portions of JFCOM will shift to
Cyber Command; the CIO-related functions of these organizations will be
transferred into a strengthened CIO. Acquisition functions will be
realigned consistent with the final report of the Information
Technology Acquisition Reform Task Force.
The recommended disestablishment of U.S. JFCOM by the Secretary of
Defense also recognizes our changing times. When JFCOM was stood up in
1999, its central mission was to drive jointness into everything the
military does. It was understood that the creation of JFCOM for this
purpose would result in the addition of an organization layer. At that
time, it was judged that the imperative to advance jointness was
greater than the costs associated with establishing a new command.
Jointness is difficult to measure, but the goal of embracing joint
operations and doctrine has reached a point where a four-star
headquarters for joint advocacy is no longer required. We have embraced
jointness as a matter of necessity. Evidence of this progression is
manifested on the battlefield and in our military schools. We have
reached critical mass, where our military accepts ``joint'' as the
preferred method of war.
We must continue along the positive joint vectors and activities
directed by Goldwater-Nichols. In addition, we must establish or
improve on our processes and structures in the combined and interagency
arenas. We fight as part of coalitions and alliances, and our level of
success in these operations is enhanced by the degree we are
synchronized with our international partners. The nature of today's
conflict also requires better integration through the interagency
process. Strengthening capabilities and capacities through the ``whole
of our government'' is increasingly important to our success.
However, we must avoid unintended redundancies and layering that
can result from these efforts. Decisionmaking in today's environments
requires speed. Battlefields change too quickly. Our staffs and
structures need to be flatter and faster. Redundancies and layering
within our system is an impediment to success.
Finally, disestablishing JFCOM will allow us to better align
operational responsibilities with service train and equip functions in
order to reduce inefficiencies as forces are presented to combatant
commanders. JFCOM succeeded in helping push the services to jointness.
But that vision has largely been achieved and we believe we can no
longer justify the expense and overhead associated with maintaining a
separate four-star combatant command for that purpose.
The changes I have discussed in this statement have the unanimous
support of the Joint Chiefs of Staff. They are needed to further our
goal of creating a more effective and efficient DOD. There are two
major beneficiaries of these changes. The first are the warfighters,
who will be better postured with the resources they need to fight and
win. The second is the taxpayer, who will not only have a more
effective military for 21st century security, but will also witness an
increased value in their defense dollar.
Chairman Levin. Thank you very much, General Cartwright.
Here's the time situation this morning. We have two votes,
probably, beginning at 11:30. Many of us, perhaps most of us,
are going to be going then to Arlington for Senator Stevens'
funeral, I think the buses leave at 12:15. We want everybody to
have some time here this morning, so we're going to have to
have a short first round. But, then I will come back, and
whoever else can come back, after the second vote, assuming
that there is one. So, there is likely to be a gap here
somewhere around 11:40 and 12:15.
We're also going to have a vote, off the floor, on a number
of matters that are pending before the committee. That will be
at the end of the first vote. Okay? So, I hope everybody will
help out on having that off-the-floor vote at the end of the
first vote this morning in the Senate.
Let's have a short first round, here for questioning, so
that everybody will have at least some opportunity, including
all those who will be going to the funeral. We'll have a 5-
minute round to start, if there's not enough time for
everybody, then perhaps we can yield to each other to
accommodate that goal.
Let me start with Secretary Lynn. Too often, in the past,
we've constrained the number of DOD employees, without placing
any limitation on the number of service contractors. We have
not been told what categories of contract services are covered
by the Secretary's directive. Am I correct in understanding
that critical functions, like weapons systems maintenance,
healthcare services, and logistics support to our troops, will
not be affected by the planned reduction in contract services?
When can we expect to see a clear definition of what categories
of contract services are covered by the planned reduction, and
what categories of services are excluded?
Mr. Lynn. Mr. Chairman, your assumption is correct. The
reduction in service support contractors would not affect
critical warfighting capabilities, like weapons maintenance.
The general definition of a support service contractor would be
someone who provides staff augmentation to government
employees. I realize you're looking for something more precise,
and we're endeavoring to provide that, and we have a task force
working on that over the course of the fall. Sometime late this
fall or early next year, we should have that.
Chairman Levin. Is that task force in place now?
Mr. Lynn. Yes.
Chairman Levin. Would you tell us who's on that task force?
Mr. Lynn. The overall task force is chaired by Robert
Rangel, the Secretary's chief of staff. There's a subgroup.
I'll have to get, for the record, who chairs the subgroup.
Chairman Levin. If you'd let us know, that would be
helpful.
[The information referred to follows:]
Please refer to the attachment ``ETF Task Force Organization.''
[Deleted.]
Chairman Levin. In the past, we've found that proposed cuts
to contract services are nearly impossible to enforce, because
expenditures for service contracting are invisible in the
Department's budget. For this reason, section 806 of the
National Defense Authorization Act (NDAA) for Fiscal Year 2008
required that budget justification documents clearly and
separately identify the amounts requested in each budget
account for procurement of services. The Department has not yet
complied with that requirement.
When are you going to comply with that requirement,
Secretary Lynn?
Mr. Lynn. Part of the effort I mentioned would be to comply
with that requirement. I would add--I think your implication is
right--we are regretting that the Department hadn't complied
earlier. It would make the task that we're undertaking easier
if we had better data, and we're endeavoring to develop that.
Chairman Levin. So, when will the Department comply with
that statutory requirement? Are you going to comply for the
2012 budget request?
Mr. Lynn. We are trying. I can't commit at this point that
we will have all the data to be able to do it, but we're going
to do our very best.
Chairman Levin. Well, it's a couple years overdue now so
that's not satisfactory. I'm just wondering if you can give us
a better handle on that--if necessary, month by month. I mean,
I don't want to burden you with unnecessary requirements, but
this is something in law, and it is essential that there be
compliance on this. So, would you let us know by the end of
October--let's just try report number one--whether or not the
budget for 2012 will be complying with that requirement? Let us
know by the end of October.
Mr. Lynn. Yes, I'll do that, Mr. Chairman.
[The information referred to follows:]
Representatives from AT&L, P&R, and Comptroller met with
professional staff on October 29, 2010; December 16, 2010; and March 3,
2011, to discuss the National Defense Authorization Act for Fiscal Year
2010, section 803, contract services inventory reporting requirement.
Staff indicated that the intent of the language was to have better
visibility into contract services from a total workforce standpoint.
The Department explained the progress the Services have made to date as
well as challenges with inventory and tracking.
The material provided by the Department is included at the end of
this hearing. [See Appendix C].
Chairman Levin. If not, why not?
On the JFCOM issue, was there an analysis of that issue
before the decision was made relative to JFCOM? If so,
precisely who was involved in that analysis?
Mr. Lynn. The Secretary made his decision on JFCOM based on
a series of meetings, probably as many as 30 meetings that he
had with his senior military advisors, the chiefs, the
combatant commanders, particularly the ones that are incoming
and outgoing for JFCOM, as well as the senior members of OSD.
During those meetings, the central military rationales--there
are four, and I'd ask General Cartwright to go into a little
more detail--that are in the Unified Command Plan for the
JFCOM. At the end of those meetings, the conclusion was that
those purposes no longer--in some cases, particularly the joint
manning, was redundant with what the Joint Staff was already
doing, in terms of joint doctrine, joint training are still
important functions, but they no longer justified a four-star
military command with a $1 billion budget.
Chairman Levin. Would you provide the committee any
analyses which were completed or done or presented to the
Secretary relative to that issue, for the record?
Mr. Lynn. We'll provide whatever we have for the record.
[The information referred to follows:]
The material provided is included at the end of this hearing. [See
Appendix D].
Chairman Levin. Okay. Finally, on just that issue--my
time's up--has the President approved that yet, those changes
in the Unified Command Plan?
Mr. Lynn. The Secretary has forwarded his recommendation to
that effect to the President. The President has not yet made a
decision.
Chairman Levin. Thank you so much.
Senator McCain.
Senator McCain. Thank you, Mr. Chairman.
I thank the witnesses.
Secretary Carter, you've been around for quite a while now.
Don't you think one of the fundamental problems that we're
facing here is the consolidation of defense industries, which
has really led to a virtual lack of competition? In the 1990s,
I think we're all aware that the defense industries were
encouraged to consolidate. So, now we have very little, if any,
competition. If there's any competition, it's between two; and
most of them, there is none. Do you agree with me that that's a
fundamental problem here?
Dr. Carter. It is a fundamental constraint on our ability
to get competition. That's why we have to work extra hard to
make sure we get real competition. So, there are several things
you can do in that circumstance. We do have competition among
the big houses. It's important that we continue to encourage
new entrants in the defense field, particularly smaller
companies that might grow into bigger companies. They offer
vitality and technical health, as well as new forms of
competition. That's to include small business. It's important
that we look at creative ways of getting competition.
I mentioned the LCS acquisition strategy, as the Navy
altered it 6 months ago or so, as an example of that. That was
a situation where we had exactly what you're pointing to, which
is two shipbuilders who were showing the signs of--suggesting,
in bids, an expectation that they would continue to be in
business, no matter what. So, we said, ``Well, no, that's not
working for us, so we're going to down-select. Somebody's going
to lose and somebody's going to win.'' The bids that came in
after that announcement were quite different from the bids that
came in before. That's----
Senator McCain. Why don't you supply that for the record
for us? Would you?
Dr. Carter. I'd be happy to do that.
[The information referred to follows:]
In summer 2009, the Navy received proposals for the Fiscal Year
2010 LCS from Lockheed Martin/Marinette Marine/Bollinger and General
Dynamics Bath Iron Works/Austal USA Industry teams. These proposals did
not reflect competitive pricing and well exceeded the Congressional
Cost Cap. At that time, Navy revised the acquisition strategy for the
LCS program with the objective of making the program affordable by way
of increased competition. The revised strategy down selects to a single
team for a block buy of up to 10 ships (2 per year from fiscal year
2010 through fiscal year 2014), requires submission of a technical data
package to support a competitive solicitation of a second source in
fiscal year 2012, and requires delivery of 5 combat systems for the
second source.
For the LCS Fiscal Year 2010 solicitation, the Navy received Final
Proposal Revisions (FPRs), valid for 90 days, on September 15, 2010.
The Navy is taking the time necessary to carefully review and analyze
the competing proposals. The Navy is proceeding with the LCS source
selection diligently, thoroughly, and consistently with its source-
selection plan and applicable law and regulations. The Navy intends to
make a contract award as expeditiously as practicable, consistent with
its source selection plan, but in any event prior to the expiration of
the FPRs.
The Department understands there is keen public interest in this
competition, but the duty to protect the integrity of the source-
selection process, as well as the confidentiality of the information
submitted by the offerors, significantly limits ability to provide
additional details about the ongoing competitive procurement. In
particular, the Department is subject to criminal penalties of the
Procurement Integrity Act (41 U.S.C. Sec. 423) for disclosure of
proposal prices or other source selection information during this
ongoing competitive source selection process.
Senator McCain. I think that's really one of the biggest
problems, here. I'm glad we're going to fixed-price incentive
contracts. But, if there's only one major defense corporation
competing--I don't know the answer, but I really do believe
that that's a fundamental problem.
Speaking of reports, there's a myriad of reports that are
required by Congress every year. It grows every year. Every
time we do the authorization bill and somebody wants an
amendment approved, we say, ``Well, why don't we ask for a
study and a report.'' You've seen that game played. So have
you, Bill.
Why don't you give us a list of the reports that are
unnecessary and, you think, unneeded and duplicative, and maybe
we could act, next year, and eliminate a lot of those. You
could spend your Saturday afternoon watching Naval Academy
football, instead of----[Laughter.]
----sitting in your office. Because we all know that there
are stacks and stacks of them. But, maybe it'd be good to get
an assessment from you of the reports that we think are
unneeded. I think we'd agree with a lot of them. We don't read
those reports, either. Dirty little secret. Sometimes we get
briefed on them, if they're very important, but the vast
majority of them are stored somewhere. I don't even know where.
Mr. Lynn, isn't the biggest cost escalation to DOD today in
healthcare?
Mr. Lynn. Yes, sir. I don't know whether it's the biggest,
in terms of percentage increase, but that is the largest
account that is growing at a substantial pace.
Senator McCain. Do you have any ideas on that issue?
Mr. Lynn. We are reviewing that. As part of the fiscal year
2012 budget, I think we will be proposing to Congress some
ideas about how to restrain healthcare costs.
Senator McCain. But, there's no doubt that it is growing in
dramatic fashion.
Mr. Lynn. There is no doubt.
Senator McCain. In double-digit inflation.
Mr. Lynn. In some years.
Senator McCain. Recently.
Mr. Lynn. Yes.
Senator McCain. The other thing that might be helpful to
this committee, after asking for a report, maybe you could do a
little study for us, or just compile statistics, on the so-
called ``tooth-to-tail ratio'' over the last, say, 20, 25
years. I think what we're going to find is a dramatic growth in
both civilian personnel, Pentagon and other places, and I think
we're also going to see a dramatic growth in staffing and the
tooth-to-tail ratio becoming less and less optimum, to say the
least. Would you agree that that's pretty much the case,
General Cartwright?
General Cartwright. Yes, I do, Senator. We have several
staffs that have grown and the impact on the force is, it ages
the force. It consolidates a lot of our leadership activities
in headquarters, away from the battlefield. It tends to be
layered, and that's what we're after.
Senator McCain. Well, I think it would be helpful to us,
and maybe motivate some kind of action, if you showed us how
dramatic that growth has been, as opposed to the actual number
of warfighters on the battlefield or in the ocean or in the
air.
I thank you, Mr. Chairman.
[The information referred to follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Levin. Thank you, Senator McCain.
Senator Lieberman.
Senator Lieberman. Thanks, Mr. Chairman.
Thanks, to the three of you, for being here today. Thanks,
to Secretary Gates, for initiating this series of moves, which
I support. The fact is that we're asking more of our military
than we have in quite a while, with a combination of being
involved in the war against Islamist extremism, managing our
relations with a rising and more assertive China, and then a
host of other problems. The fact is that we're already facing a
squeeze, where we're not giving the military all that they
need. Therefore, part of the answer here is to eliminate the
waste. So, bottom line, I appreciate very much what Secretary
Gates and all of you are doing here.
I want to focus in on JFCOM, because I do have questions
about that. I'm not stating my opposition to the proposal here,
but I really want to ask, is it good for our national security?
Have we reached a point where it's really time to put up the
``mission accomplished'' sign on jointness in our military?
Does it really save enough money to justify what will be lost
by closing the command?
To me, those are important questions, and I don't have the
answers yet. I do want to admit that I may be biased, here, but
I'm still going to keep my mind open, because I was involved,
in the late 1990s, with former Senator Dan Coats--perhaps
future Senator Dan Coats--in the legislation to create this
JFCOM. We were responding to a report by what was then called
the National Defense Panel (NDP), which was a kind of Team B
outside group to review the Quadrennial Defense Review of 1997.
The NDP was an impressive group. Phil Odeen was the chairman.
It had people on it like Rich Armitage, Admiral Jeremiah, Bob
Kimmitt, Andy Krepinevich, General Bob RisCassi. They
recommended the creation of the JFCOM to drive jointness
through our military, which had not been done, even though
Goldwater-Nichols enforced in law. Ultimately, Secretary Cohen,
in response to a lot of back and forth--General Hugh Shelton
was then the Chairman of the Joint Chiefs--put this JFCOM into
place.
So my question really is--and I must say, with respect,
that to me, there's a little bit of, oh, confusion about what
the argument here is, because, Secretary Lynn, in your
testimony, I think you did say the principal purpose for the
creation of JFCOM in 1999, to force a reluctant service-centric
military culture to embrace joint operations and doctrine, has
largely been achieved. On the other hand, you did say today, I
think in response to Chairman Levin, essentially, it hasn't
been achieved, but it no longer justifies a four-star command.
So, my question really--I mean, three questions, and I'll
ask them open-ended--one is, have we really--if--I don't
believe we've accomplished the mission of guaranteeing
jointness in our military, which is fighting jointly. I wonder,
if you're going to disband this command, where else are you
going to do it? Or do you think we have achieved it, thus far?
Second, does it really save enough money to justify the closing
of the command?
Secretary Lynn, do you want to start?
Mr. Lynn. Sure. I wouldn't say it as strongly as you did,
in terms of ``mission accomplished.'' There's danger in that
statement. I think we have made substantial progress----
Senator Lieberman. I think former Presidents are aware of
that, for sure, yes.
Mr. Lynn. Yes. We have made substantial progress in
internalizing jointness into the combatant commands and how
they operate. I think we operate fundamentally differently than
we did in the 1991 Gulf War, which was, in many ways, the
trigger for the recommendation--the panel that----
Senator Lieberman. Right.
Mr. Lynn.--you suggest. I think we operate, in the
conflicts we're in, fundamentally differently than we did then.
I think the Services operate fundamentally differently, in a
much more joint way. It was our conclusion that we have made
sufficient progress that it will not be reversed and that we
can use the Joint Staff, subordinate organizations, to continue
that--on command and control and other important elements--to
continue that progress. But, it doesn't, as I said, justify a
billion-dollar command. We do think we can make substantial
savings off of that billion dollars by eliminating some of the
functions, such as the joint manning role that it plays, which
largely duplicates the role of the Joint Staff.
Senator Lieberman. My time is up; I don't want to go
beyond. But, do we have a cost figure, at this point, about how
much you think closing the JFCOM will save?
Mr. Lynn. We are working through that. We think we will be
able to save a substantial portion of that billion dollars.
But, that's part of the process now, is to determine which
elements, which centers, and so on----
Senator Lieberman. Right.
Mr. Lynn.--of the JFCOM we want to keep, and where we want
to keep them, and which things would go away--the headquarters,
the joint manning functions--and then to net that through and
get the savings figure.
Senator Lieberman. Okay. Then, obviously, I'd raise the
question about, if there are some parts of the command you are
going to keep, because you feel they're still necessary, where
will they be? Will something be lost if they're disbanded? The
``whole is greater than the sum of the parts'' quality to the
command that exists now. But, I look forward to those answers
on another day.
Thank you.
Mr. Lynn. Okay.
Chairman Levin. Thank you very much, Senator Lieberman.
Senator Thune.
Senator Thune. Thank you, Mr. Chairman.
Gentlemen, thank you for your service.
This question is for the entire panel, and it has to do
with something that Secretary Gates stated in his May 8, 2010,
speech at the Eisenhower Library. He said, ``The fact that we
are a nation at war calls for sustaining the current military
force structure.'' The goal of this efficiencies initiative is
to, and I quote again, ``cut our overhead costs and to transfer
those savings to force structure and modernization within the
program budget.''
On August 9, 2010, Secretary Gates stated that, ``The task
before us is to significantly reduce the Department's excess
overhead costs and apply the savings to force structure and
modernization.''
Yet, over the summer, there have been rumors that the B-1
bomber fleet, which has been a near-constant presence above
Afghanistan throughout the war, might be proposed to be
retired, in pursuit of the $2 billion in savings the Air Force
is required to find under this initiative.
General Petraeus, in front of this committee just a few
months ago, spoke very highly of the B-1's presence and
performance in Afghanistan. I guess I'm perplexed by rumors
such as these, the proposed retirement of the B-1 fleet to
obtain the required savings, in light of Secretary Gates's
emphasis on sustaining and modernizing our force structure.
So, my question is, wouldn't cutting force structure to
find savings under this efficiencies initiative be in direct
contradiction of Secretary Gates' initiative to cut overhead
costs and transfer those savings to force structure and
modernization?
Mr. Lynn. Secretary Gates has asked us to do two things as
we go through that. One is to make a determined effort to
reduce overhead, transfer those resources to the warfighting
accounts. Those are the quotes that you indicated. He's also
asked us to take a scrub of the warfighting accounts
themselves--and that's a substantial part of what Secretary
Carter is doing--and to see if we can gain better
effectiveness, better efficiency, better productivity from
those forces.
What the result will be of that, I wouldn't prejudge that
at this point. But, we're looking across the board, both at the
forces themselves as well as that overhead-to-warfighting
transfer.
Senator Thune. So, what you're saying, however, is that the
Department is not looking only at bureaucratic redundancies and
overhead, but is looking at reducing force structure in order
to provide the----
Mr. Lynn. We are looking at how to make the forces we have
the most effective they can be to accomplish the mission.
Senator Thune. Let me ask you one other question with
regard to a September 20, 2010, Air Force Times article where
Air Force Chief of Staff, General Schwartz, said that the 2005
Base Realignment and Closure (BRAC) initiative, to consolidate
26 installations into 12 joint bases, is a failure that's not
produced the cost savings the Department had expected. In fact,
the Government Accountability Office (GAO) stated, ``It was
unclear whether joint basing will result in actual savings.''
There was an Air War College study stating that joint basing
is, ``actually costing the Department of Defense more money
than if the 26 bases and posts had remained separate.''
What is your reaction to that criticism about the 2005 BRAC
joint basing initiative ending up costing money rather than
saving money?
Mr. Lynn. I'm aware of what General Schwartz said and the
GAO reports. I think we have to take them seriously and
reexamine the path that we're on, and, either review and see if
we think that data is wrong and the savings are there, or
rethink our course of action.
Senator Thune. Does the current effort authorized by
Secretary Gates include the consideration of overseas bases?
Mr. Lynn. Yes.
Senator Thune. Have there been any recommendations made
about base closures or consolidations since the Secretary's
August-9th-of-this-year announcement?
Mr. Lynn. There have been no recommendations to that
effect, but be--we're in the midst--in terms of the overseas
bases, there's a Global Force Posture Review going on, at this
point, looking at, what are the purposes for those overseas
forces, how best to accomplish those purposes, and then what we
think the basing structure would be to support that. That's a
study that's ongoing right now.
Senator Thune. Okay. I think my time's expired.
Thank you, Mr. Chairman.
Chairman Levin. Thank you, Senator Thune.
Senator Reed.
Senator Reed. Thank you very much, Mr. Chairman.
Thank you, gentlemen.
Just to get a kind of an overview about how you're going to
approach these savings, it seems to be and this is very
simplistic--resources that have to be committed, through
contract and elsewhere, to Afghanistan, Iraq, and other
contingency operations; then there's programs that sort of help
both the long-term defense plan and these operations; and then
there's a long-term defense plan.
So, Secretary Lynn, as you approach this problem, is there
any sort of thought going into how you deal with these
different types of resources? I mean, hopefully, the
supplemental funds and the Iraq-Afghan funds will diminish over
time. How do you factor in these different aspects?
Mr. Lynn. We will continue to propose a overseas
contingency account for those operations in Afghanistan and
whatever remains in Iraq. As you say, I think, over time, you
could expect to see those, conditions permitting, decrease.
Most of what we've been talking about today, in the $100
billion in the base budget, and we're talking about, just to be
clear, not reducing that base budget by $100 billion, but
finding $100 billion in the overhead accounts that we can shift
to the warfighting accounts so that we could have 3-percent
growth in the warfighting accounts, which is what we think we
need to sustain those capabilities, but with only an overall
top line of 1 percent. That's a significant challenge, but
that's what we're trying to do.
Senator Reed. So, besides just the value of efficiency and
productivity gains, this is also about freeing up resources and
continuing operations overseas and support the fighting forces.
Is that fair?
Mr. Lynn. Absolutely.
Senator Reed. Mr.----
General Cartwright. Can I just----
Senator Reed. General Cartwright?
General Cartwright.--just add, quickly, that part of what
we'd like to be able to do is, the OCO accounts have, in fact,
sustained capabilities that we have found necessary in this
conflict, that we want to retain as part of our core
capability. So, this will create room for those capabilities to
move into the budget.
Senator Reed. Right. But, you've also identified
capabilities, which are very specific and unique, which you are
also planning to phase out, I presume.
General Cartwright. That is the case. Or, that is what the
analysis is looking for.
Senator Reed. Right.
Secretary Carter, you point out that services and growth in
service contracts are probably more difficult and larger than
we all expected. I think usually the poster child for this
problem is a big weapons platform. It's very expensive, et
cetera, and the contract--there's only two contractors, it's
not fully competitive. But, what I sense, too, is that these
service contracts are just proliferating. Sometimes,
contractors are writing the contracts for the services. Can you
talk about how you attempt to deal with this issue of service
contracts?
Dr. Carter. Yes. A few of the main points, Senator. First
thing is that the different categories are a little different.
So, there's maintenance activities; there are information
technology (IT) services, category of their own; there's
advisory and assistance services, or knowledge-based services,
which is principally the matter that Secretary Lynn was
speaking of earlier. These are augmentation of the government
staff that provide expertise that we, at the moment, don't have
within our own walls, and so, have to contract for externally.
They play an essential role. Nothing wrong with that; we just
want to make sure we get them efficiently and that we're also
working to strengthen the talent that we have within the
government, and not excessively rely upon people outside.
In all of those areas, unlike ships or planes, our ships
and planes are bought by people who buy ships and planes for a
living; they're very good at it. Most of our services are
bought by people as an ancillary duty. They're, in a sense,
amateurs. They're trying to get something else done and they're
issuing contracts for services in order to help them. That's
not their principal preoccupation. So, it's not surprising that
their tradecraft isn't as good as it would be if that's all
they did.
We're trying to help them get better. How do you get
better? Well, it's things like really try to shape the
requirements. Be clear about what you want. Don't just drift
into asking more and more, and being more and more reliant. Ask
yourself why, 5 years ago, three people sufficed, and now five
people are doing exactly the same thing. Recompete
periodically, even though that's a nuisance, in some ways, for
somebody who's trying to get other things done.
We're trying to help our services' acquirers to do better,
without burdening them with a lot of administrative structure,
but assist them to be good amateur buyers. Market research is
another part of that. So, there's a lot that goes into this,
depends, a little bit, sector by sector. But, I just tell you,
the low-hanging fruit really is there. There's a lot of money.
There has been a very, very high rate of growth over the last
decade, in services. They've grown faster than everything else.
Knowledge-based services, within them, have grown even faster
than the rest of services. So, there's a lot we can do.
Then, of course, contingency contracting is a whole other
area where we're really trying to improve. We know we didn't do
that well in Iraq. We're trying to do better in Afghanistan.
So, across the board we have work to do.
Senator Reed. My time's expired, but just a final comment
or question, you might agree or disagree. It seems that,
wittingly or unwittingly, we created a system that it's much
harder to hire a full-time DOD employee than it is to write a
contract worth 10 or 20 times more, over the relative period of
time. Human nature take the path of least resistance. Is that
your observation, too?
Dr. Carter. It absolutely is. As part of the Acquisition
Workforce Initiative, which this committee had a lot to do with
getting underway, we're trying to make it easier for our buying
commands to hire, within the walls of government, the kinds of
people we need. These aren't oversight bureaucrats. These are
people at the point of execution: systems engineers, cost
analyses, pricers, contracting officers, and so forth, the
people who actually execute. It's a struggle. The economic
circumstances are helping us in that regard, as they help
recruiting elsewhere in our Department. But, we need to make it
easier to bring people in, if we want good people within the
walls.
Chairman Levin. Thank you, Senator Reed.
Senator LeMieux.
Senator LeMieux. Thank you, Mr. Chairman.
Thank you all for your service. Thank you for being here
today.
As someone who's new to the Senate, one of the things that
initially struck me when I first came here was the size of DOD
and the number of combatant commands and the number of four-
star officers. I just want to go over this to make sure that I
have my information correct. But, as I count it, we have 10
combatant commands, as well as this new cyber subunified
command, which I think is under Strategic Command. We have, as
I understand it, 40 four-star officers in the U.S. military, as
well as 717,000 civilian employees in DOD. I think these are
staggering numbers for the average American, to hear the size
of this organization. Make no mistake that we all want to
support the military and want the military to be as effective
as possible, but we also want the military to be efficient.
Having heard what you've said, Secretary Carter, about
outsourcing and the cost increases in services on the
outsourcing side, what are we doing to look internally--beyond
the recent proposals that have come up about JFCOM, what are we
doing internally to look to see: Are we using our resources in
the best way possible? Are we top heavy in DOD, with our 40
four-star officers? What can we do to make things more
efficient and more effective?
Dr. Carter. If I may, I think Secretary Lynn and General
Cartwright are in a better position than I to give you an
answer to that question.
Senator LeMieux. Okay.
Mr. Lynn. Senator, I think most of the numbers you gave are
accurate. The Secretary directed that starting with the flag
and general officers--there's been an addition, over the last
10 years, of about 100 flag officers--he has asked for a review
of that growth, with a target of reducing it by half that.
Similarly, there's been a growth of about 300 civilian senior
executives. He has the same aim there, to review that growth;
again, with a target of a reduction of about 150. We've been
talking about the growth in support contractors.
He's directed that over the next 3 years, the target be a
10-percent reduction in those support contractors. As I
indicated to Chairman Levin, those are defined generally as
people who are providing staff augmentation, as opposed to
weapons testers or depot maintenance or more direct warfighting
functions.
The Secretary's directed that we look at all--you didn't
mention the various board and commissions, but we have, I
think, 65 of them. It seems like a lot. We're reviewing those
to see if we can't reduce. He's directed a 25-percent reduction
in their funding, immediately.
Senator McCain mentioned the studies, some of which we
generate internally, which we're looking to reduce on our own--
some of which come from Congress. There are certainly good
reasons for some of them, but, as Senator McCain indicated,
it's probably an appropriate time to review. I think we produce
about 600 annual reports. I think there are 1,000 people, more
or less, involved in producing those reports. So, there's some
potential for reduction there.
So, Secretary Gates, I think, has exactly the same reaction
you did, is that it's important to support the military. We're
in the midst of a fight in Afghanistan, we don't want to take
away from that, but we think we can add to it by reducing our
overhead accounts and putting those resources into the
warfighting accounts.
Senator LeMieux. General Cartwright, do you have any
comment on that?
General Cartwright. Just, quickly, sir. The review of the
structure of the ranks, et cetera, is not only at the top,
though; we're looking all the way through. So, every command
that we're looking at every combatant command, every JTF, do we
have the right level of responsibility? Many times, we have it
there because a counterpart happens to be a four-star or
something like that. That's not really a good reason for it.
So, we're trying to understand how to get it back down to where
we want so this grade-creep can be stopped, but actually pushed
back to where it is appropriate and where we have the right
balance for span of control and responsibilities associated
with that individual.
Senator LeMieux. What incentives do we give to DOD
employees to find savings? Is there anything in their
performance review? Is there anything that's tied to their
compensation, if they're able to buy a ship cheaper or find a
saving in a service contract? Are we rewarding them for that
kind of good behavior?
General Cartwright. There is a substantial effort, in this
activity that we've undertaken, called ``a culture of
savings.'' That's where we will nest the ideas of, how do we
start to incentivize, not only the individual, but the
institution to self-correct?--which is a difficult activity,
but it'll go to those types of things. How are you evaluated?
Is this something that's important to the command? Does it
actually get to keep the resources so it's incentivized to do
it? Have we put the right incentives in? In the discussion we
had earlier, where you have contractors, then you have Guard/
Reserve, then you have civilians, then you have uniformed
military, Active Duty. Can you put in place a structure that
says--each one of those costs escalate. Can I say to you, ``You
need flexibility to move around''? Sometimes a contractor is a
response to needing something right now, to avoid the long
period, or at least to cover the long period, to hire a
civilian. Can we put in place the incentives to drive us, then,
to getting that civilian, not forgetting about it and leaving a
contractor in the position?
Senator LeMieux. My time is up, but I just wanted to
commend you for what you're undertaking. I think it's vitally
important. We're going to have this challenge, throughout
government, and I hope that the other agencies of government
undertake the same methodology that you are. It's not easy to
do, but it needs to be done, because our financial situation in
this country is not going to allow us to keep spending more
than we take in. I thank you, and appreciate you for the good
work you're doing.
Thank you, Mr. Chairman.
Chairman Levin. Thank you, Senator LeMieux.
Senator Ben Nelson.
Senator Ben Nelson. Thank you, Mr. Chairman.
Let me add my appreciation for the work that you're doing
to economize and to create a more effective budgeting process
for DOD. As you do that, the questions are going to continue to
come up. Are you cutting in the right places? Cutting it the
right way? Are you leaving in place the best kind of military
that we need? And/or are you improving it? So, the questions
are there, and they'll continue to be raised.
Senator Lieberman referred to jointness as a critical
element of what you're doing, and certainly maintaining
jointness, as opposed to reducing jointness, by dealing with
the Joint Command. I hope that, as we develop the process,
here, to bring together the elements of the military so that we
eliminate stovepiping and the protectionism of one branch of
the government and its programs from the incursion by another
branch of the military, that we'll be able to maintain that
jointness. Obviously, it's not easy. Wasn't easy, some time
ago, or we wouldn't have created the command to deal with it. I
hope that it's now systemic in the thinking within DOD, as well
as in the branches of the military, to think in terms of
jointness and reduction of stovepipe.
Senator Levin and others have asked that this analysis that
you're working be provided to us, in a detailed analysis. Do we
have a timeframe to expect what your analysis will be--in other
words, what your methodology is to reduce unnecessary
expenditures, to eliminate some of the fat that, perhaps, has
developed with double-digit increases in the budgeting--do we
have a timeframe where we might expect that?
Mr. Lynn. As I indicated at the outset, there are four
tracks in this effort. The first track, which is focused on the
$100 billion savings, the savings themselves and the analysis
that supports them will be part of the fiscal year 2012 Defense
budget submission to Congress in February. The track-two effort
is outside efforts, including the one General Cartwright
referred to, in terms of just civilian employees. We'll be,
certainly, reporting those as they come available. Track three
is focused on particular practices within the Department.
Secretary Carter testified to some of those, just a few moments
ago, and he put out a memo on the changes that we're making in
the acquisition system, earlier this month. If we haven't
already, we're happy to provide that to the committee, and
finally, in track four, we have a series of taskforces that are
working on implementation plans. As they develop, we'll provide
those to the committee.
Senator Ben Nelson. All right, thank you.
One particular area where I've been very pleased to see the
level of coordination between the Navy and the Air Force is the
Global Hawk program. The progress in joint training and
coordinated operation here in this program hint at the
opportunities that are there to eliminate redundancy and
improve mission effectiveness.
Now, I am going to go to one specific area where I hope
that we can continue that kind of cooperation and that kind of
a joint effort, and that is on unmanned aerial vehicles. I've
already spoken to both General Casey and General Schwartz.
They've acknowledged that they have to do better to try to
coordinate their efforts. We don't need two separate programs
with any unnecessary duplication that might come from that.
Since both the Army and the Air Force plan to spend more than
$7 billion on similar aircraft, it raises a red flag. It's not
that the red flag can't be taken away--overcome--but, the red
flag is there, and I hope that we'll direct the attention
necessary, because that's a very specific area where I think
redundancy is very likely to be encountered.
I wonder if you have any comments, General Cartwright.
General Cartwright. There are places where we like
commonality, and we look for commonality rather than
redundancy--in our unmanned aerial vehicle systems, the ground
control networks, the space side of the equation, and making
sure that they are common, to the best extent possible.
In the unmanned aerial vehicles, what we have is a
different mindset for procurement. I'd turn to Dr. Carter on
some of this. But, the key is a common vehicle with different
payloads; and using that, and being able to adapt those
payloads as the fight changes well inside of normal acquisition
practices--has been our advantage in that area. We seek to
capitalize on that, as we move forward, not only in the
unmanned aerial vehicle systems, but also in others.
Ash?
Dr. Carter. I think General Cartwright has it just right.
The only thing I'd add is, on the specific matter of Global
Hawk--and I indicated this in the document issued 2 weeks ago--
that is a program whose cost has been growing; and, I think
unnecessarily so. So, that is one where we are intent on
restoring what I referred to earlier as ``productivity
growth.'' I have very good cooperation from those who are
performing the work, who recognize that the cost has been
growing. This is an important program to us. We can't allow
ourselves to manage it in a way where it becomes unaffordable.
So, it just happens that that is a program of--that is a focus
of my attention--managerial attention, at the moment, for just
the reason I indicated earlier, when I expressed our dismay at
coming to you with exactly the same thing every year, and
asking for more money for it. So, Global Hawk is one we need to
do some work on, important as it is.
Senator Ben Nelson. Do you agree that there is a
commonality developing between the Air Force and the Army with
respect to that?
Dr. Carter. I do agree. I think General Cartwright's
exactly right. The rearward communications, the processing and
exploitation systems, commonality there; some of the handling
systems in the field, making them common; and then having a
suite of mission payloads from which any service or any user
can draw, these are the key ingredients of a sort of mix-and-
match strategy towards UAVs. We see that our in the field in
Afghanistan, the way we actually use the unmanned systems.
Senator Ben Nelson. Okay. Thank you all.
Thank you, Mr. Chairman.
Chairman Levin. Thank you very much, Senator Nelson.
Senator Brown, I believe, is next.
Senator Brown. Thank you, Mr. Chairman.
First of all, thank you for trying to give us the best
value for our dollars. I think that every agency in the Federal
Government should do a top-to-bottom review and try to
streamline, consolidate, and offer those savings. Being
somebody who's in the military, I'm keenly concerned and aware
of that fact, that we need to maximize our dollars, in this day
and age, because of what's happening federally.
That being said I find it curious that you have to come up
with a budget, yet the Federal Government isn't even doing a
budget. You know Congress, we don't have budgets ourselves, but
we're asking you and other agencies to come up with a budget.
So, I would hope that, at some point, we would start to lead by
example.
We have a tremendous amount of equipment--Guard and
Reserve, Active-Duty equipment now--in Iraq, in particular. We
have yards filled with it, just sitting there. Has there been
any thought, in an effort to create jobs and to basically get
our equipment up and running and ready for the next battle, to
move forward some of the expenditures that were going to be
used for that sort of thing, maybe, down the road and bring it
forward, to actually get that--those things happening right
now--creating jobs, upgrading our equipment, getting everything
back into the system, and then, ultimately, understanding and
reevaluating where we need to go from there? Because we may not
need some of the--some of the equipment that is slated, down
the road, if we just take care of the stuff we have. So, I'll
just throw it out there for whomever.
Mr. Lynn. I'd ask General Cartwright to comment. But, we
have a major reset program, ongoing, taking the equipment,
right now, out of Iraq, and refurbishing that equipment, where
appropriate, and bringing it back for units in the United
States. That's going through the depots, and that's going on as
we speak.
General Cartwright. I would just add, there's a juggling
act that goes on with some of this equipment that's forward-
staged as we reposture towards Afghanistan. Some of this
equipment is positioned and actually being repaired and
upgraded, coming out of Iraq, out there in theater, so that it
can be moved directly across to Afghanistan. So, that's one
class of equipment.
There's another class of equipment that we need to get back
to the United States so that Guard units and Active-Duty units
actually have something to train on and that we can get it.
There's a third aspect here, which is the throughput
capacity of our depots and our commercial activities that work
this. We're trying to maximize that activity and keep it as
efficient, both in cost and effectiveness, as we can.
Then there's the last category, which is that equipment, I
think, some of which to you are speaking is, we're probably not
going to use this equipment. It's probably coming back, and
it's actually out of date in its mods, and we probably are
going to replace it with the next generation. So can we take
some of that equipment, train people, like Iraqis, to maintain
it, and then provide it to them, as a case, so that we'd get
the most bang for the buck and we keep them on an American-type
system?
So, those classes, we try to balance against. The highest
priority is making sure that anything we need in Afghanistan
that happens to be located in Iraq, we get there as quickly as
possible. Keep the depots moving quickly so that we can train
and equip the forces that are in combat. Then we start to work
to the lesser categories.
Senator Brown. Just to pick off what Senator McCain was
saying, the whole idea of competition within--dealing with
people that are providing equipment for us, in the armed
services or any other agency. Secretary Lynn, do you believe
that competition is a good thing? If so, what are we doing to
promote or send a message to us so we can do our thing to help
promote competition? Do we get a better product? Do we get a
better price? It seems like the Federal Government's the only
place where we don't.
Mr. Lynn. We think competition is an important tool to get
better prices and to get better equipment for the same or lower
prices. It doesn't work in every case. You have to make sure
that you've structured the competition correctly so that it's
not an allocation, so you're not maintaining both contractors
indefinitely. You need to ensure that you're not overinvesting
upfront. But, in cases where you can avoid those pitfalls, it
is a strong tool.
Dr. Carter mentioned the LCS. We've restructured the buy to
have much greater competition, and we're finding results from
that.
Senator Brown. Thank you. One final question. When work
done by private contractors is absorbed by DOD personnel and
labeled ``inherently governmental,'' does it end up costing the
taxpayers more money, because the Federal employees cost
significantly more, when you take into account retirement and
health benefits? Is that an accurate statement? Does it cost
more?
Mr. Lynn. You're asking, do Federal employees cost more
than private?
Senator Brown. Yes.
Mr. Lynn. As a general statement, I don't think that's
accurate, no.
Senator Brown. Great. All right.
Thank you, Mr. Chairman.
Chairman Levin. Thank you, Senator Brown.
Senator Webb.
Senator Webb. Thank you, Mr. Chairman.
Before I begin my actual statement, I'd like to point out
that a number of community leaders and constituents from
Virginia are here today. Congressman Bob Scott was here, I'm
not sure if he's still here thank you for coming--Mayor
Johnson, from the City of Suffolk, and senior staff
representing Governor McDonald.
We are all united in our concern about the process that has
been used with respect to JFCOM. I would ask unanimous consent
that statements submitted by Senator Mark Warner, Governor
McDonald, and Mayor Johnson be entered into the record at the
end of my turn here today.
Chairman Levin. They will be so entered.
Senator Webb. Thank you, Mr. Chairman.
[The information referred to follows:]
Prepared statements submitted by Senator Mark Warner, Governor
McDonald, and Mayor Johnson are included at the end of this hearing.
[See Appendixes E, F, and G].
Senator Webb. I've served 5 years in the Pentagon. I
support, as a general principle, the DOD efforts to bring
efficiencies into the process over there. I'm particularly
interested in seeing what you can come up with, with respect to
grade-creep, which has been significant since my years in the
Pentagon, in the 1980s.
I've worked on this issue since I've been in the Senate.
Probably the most dramatic impact was when Senator McCaskill
and I worked together to create the Wartime Contracting
Commission in order to correct systemic deficiencies in that
process.
But, any proposal relating to major changes affecting
unified combatant commands should be guided by a clear process,
a sound analytical basis, in compliance with applicable laws,
in a way that everybody can understand it. This is not a
parochial issue. It's an issue that's going to become more
important to everyone on this committee as Secretary Gates and
others follow through on their stated intention to consolidate
other military bases and installations.
The present lack of transparency and consultation,
particularly with our delegation, stands in stark contrast to
how these decisions traditionally are made. We heard, today,
that the Pentagon spent several months reviewing proposals,
including holding more than 30 meetings. We did not have
access. We didn't have an opportunity to provide input. In
fact, on August 9, Secretary Lynn, you called me 15 minutes
before this decision was publicly announced. That's not the way
to conduct a review that has enormous implications to our
defense and also to community interests. I believe, in another
sport, it's called ``stiff-arming.''
We need to know the analytical matrix that was used to
compare all the commands and the agencies if we're able to
evaluate a major proposed organizational disestablishment of
one. We need to know if the Department has conducted
comparative analysis of other major commands.
This same lack of responsiveness has marked the
Department's approach to many other requests for information
from our delegation. Seven weeks ago, we began making multiple
requests, seeking answers to a variety of important decisions.
To this point, we've been stonewalled.
Seven weeks ago, the same week of the JFCOM announcement, I
asked for data on the size of major DOD and military department
staffs. I think that's a relevant question, particularly all
the exchange we've had here, in terms of tooth-to-tail ratios
and this sort of thing. I haven't gotten an answer. I haven't
gotten an answer on how big the OSD staff is. When I was in the
Pentagon, I think that would take maybe an hour. We're still
waiting.
The Department has failed to answer even the most basic
questions that have come from this delegation with respect to a
cost-benefit analysis that shows what savings would be gained
by closing JFCOM, and how they would outweigh the elimination
of the missions that JFCOM currently performs. We have no real
information, at this point, that allows us to quantify the
possible effects of this proposal in such areas as fiscal and
local economic implications.
The Commonwealth has been a strong supporter--I think
everybody knows that--of the military and of its families,
particularly this area in the Commonwealth of Virginia. Every
day, officials in our communities interact on a multitude of
decisions to coordinate actions relating to military
facilities. This affects business planning. It affects
community planning. It affects real estate values down there.
People are perplexed as to why the process guiding this
proposal is being conducted in such complete contrast with the
Department's traditional approach. So, this has led many to
conclude that there is no comprehensive analysis that would
support this recommendation to close JFCOM. It leads to the
question, actually, in a larger scale, of how serious DOD
really is about lasting reform on a broader scale.
We need to get our questions answered. We deserve to have a
full understanding of the Department's analysis and
implications. We need facts.
Today I filed an amendment to the NDAA that would require
the Secretary of Defense to provide detailed analysis and other
assessments that we have requested before the President would
close or align any unified combatant command, not simply JFCOM.
Senator Warner is a lead cosponsor. I hope my other colleagues
will think about this and consider supporting the amendment.
I'm also renewing my call to President Obama to withhold any
final action on this recommendation until we have that sort of
information.
I know my time is up, but let me say one thing, Secretary
Lynn. You once were a staffer on this committee. Is that
correct?
Mr. Lynn. Yes, sir.
Senator Webb. Okay. You worked for Senator Kennedy, as I
recall.
Mr. Lynn. That's correct.
Senator Webb. On your way back to the Pentagon today, I
would just like you to think about what staff member Lynn would
have said to Senator Kennedy, in terms of advice, if Senator
Kennedy had been stiffed with a 15-minute phone call, when an
announcement of this magnitude was made, and then not provided
information for a 7-week period when he tried to gain
information. I think I know what the answer to that would have
been.
Thank you, Mr. Chairman.
Chairman Levin. Thank you very much, Senator Webb.
I think we probably ought to give Secretary Lynn an
opportunity, if he wants, to comment. He either can do that now
or we can do that later. The vote has started, but, I think, if
you want to take an opportunity now to comment--if you wish.
You may not wish to do so, but----
Mr. Lynn. No, I would like to comment.
Secretary Webb, I--Senator Webb--well, former Secretary
Webb--I appreciate that you do not feel that we have shared as
much information as you would like, although I think the core
issue here is, I think, a disagreement over the recommendation.
This was not a business-case analysis, as some have described
it. This was a military decision. The Secretary consulted with
his closest military advisors on the rationale for the JFCOM.
There are four central purposes in the Unified Command Plan
having to do with joint manning, joint training, joint
doctrine, joint experimentation.
On the joint manning area, the conclusion is that it was
duplicative. It was not a value-added function, that that
function was better performed here in the Joint Staff, and that
the JFCOM should be taken out of that. On the joint training/
joint doctrine, those are purposes that continue and that we
need to maintain our progress in that, but that we have made
sufficient progress in that area that we no longer need the
billion-dollar expense and the continued leadership of a four-
star military command in that area.
I know we disagree on that, but that is the central
rationale.
We will then review implementing that decision. That will
determine how much of the billion dollars we might be able to
save and how much will need to be continued in order to
maintain the joint training/joint doctrine centers and
facilities, some of which would continue to stay in the Norfolk
area.
Senator Webb. If I may, Mr. Chairman.
Just as an immediate reaction, there are no decisions of
this magnitude that are military decisions. Not in the United
States. There are military recommendations to the Secretary of
Defense, who then makes a recommendation to the President.
Those are essentially civilian decisions.
I appreciate the distinction that you're making, but it
doesn't answer the questions that I have. What I would really
appreciate from you, the reason I stopped was, I know that we
have to go for a vote, and I wanted other people to be able to
have their questions. But, I really would ask that your
Department be more forthcoming when we were requesting
information so that we can evaluate this. It's not simply
whether we disagree. We deserve to make our own evaluation,
based on information that we can be provided only by you.
Mr. Lynn. I appreciate your request, Senator. We met with
some of the members of the Virginia delegation, this morning,
to try and start that, including the Governor. We've talked
about setting up a meeting with yourself, with the Governor,
other members of the Virginia delegation, with Secretary Gates,
directly, to discuss that. We are establishing a channel in
order that information, that the delegation feels is crucial to
be considered, be considered by the task force that's reviewing
the implementation of the Secretary's recommendation.
Senator Webb. Well, Mr. Secretary, I'm asking for basic
data. Data you could provide in 1 day. I'm glad to be able to
have the meetings, but it doesn't seem to me that it would take
7 weeks for you to tell me how many people are on the OSD
staff.
Mr. Lynn. I will get you the number on the OSD staff.
[The information referred to follows:]
Please refer to the attached correspondence to Senator Webb, dated
November 17, 2010.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Webb. We have a series of questions that are data-
oriented, that literally could be answered in 1 day, and in 7
weeks we haven't gotten any answers.
Mr. Lynn. I'll look into those, though the OSD question, I
wasn't aware of, but we'll look into those questions and get
you the data as soon as we can.
[The information referred to follows:]
Please refer to the previous response to Senator Webb, dated
November 17, 2010.
Senator Webb. Thank you.
Thank you, Mr. Chairman.
Chairman Levin. The data will come, not just to Senator
Webb, but the committee as well?
Senator Webb. Yes.
Mr. Lynn. Of course.
Chairman Levin. We all, obviously, have an interest in
this. I think his frustration reflects the kind of frustration
that many of us would have about a lack of process and
analysis. I made reference to that in my opening statement. I
don't know whether, Senator Webb, you were here or not. But, I
do feel that--on the process and the analysis issue, that
there's really a feeling, at least some of us have, and I
surely do, that it was not adequate here. Putting aside for a
moment what that data would show, there is an absence, here, of
an analysis that's been forthcoming, not just to Senator Webb,
but, I think, generally, publicly on this matter. That
material, it would seem to me, should have been available prior
to the decision, not just after the decision.
That represents my own views. I think it also represents--
I'm here, guessing a bit--the views of many members of the
committee, who, if put in the same position as the Virginia
delegation, would react in the same way.
What we're going to do is recess now. We're going to have
two votes. This probably inconveniences our panel. I don't know
if you were notified in advance--talking about process--of the
fact that this would likely happen. If not, I apologize. But,
if you were notified, that's the situation we're now in. We
will probably get back here in about 25 minutes.
Thank you. [Recess.]
Okay, we're going to begin this.
Senator McCaskill is supposed to be here in just a few
minutes.
Secretary Lynn, I know that you are going to the funeral,
and so, when you need to leave, just wave your hand and leave.
Mr. Lynn. About 10 minutes, I would think.
Chairman Levin. Okay, that'd be fine.
Let me start, then, while we're waiting for Senator
McCaskill.
Dr. Carter, you made reference, I believe, to the test-and-
evaluation issue, that the Acquisition Reform Act was so
determined to reestablish that position. I think you've already
indicated that a robust developmental test-and-evaluation
capability is important, and that's not going to be disturbed.
Is that correct?
Dr. Carter. That's correct.
Chairman Levin. Okay. Now, one of the Defense organizations
that the Secretary plans to eliminate is the Assistant
Secretary of Defense for Networks and Information Integration.
ASDNII, I guess it's called. The Department has indicated that
the functions currently performed by ASDNII will be transferred
to the Defense Information Services Agency, Cyber Command, and
other appropriate agencies.
Secretary Lynn, if the Department delegates the oversight-
and-management roles that it currently performs to lower-level
agencies and commands, isn't there a risk that either of these
agencies will be responsible for overseeing themselves or that
there will be no oversight? In other words, how will the OSD
staff conduct oversight of command-and-control efforts, cyber
security efforts, and other critical IT functions, without the
resources of the ASDNII?
Mr. Lynn. Couple of things there, Mr. Chairman. One, is, we
will retain the chief information officer, and that individual
will be a direct-report to the Secretary of Defense. So, in
terms of the level, you will still have that direct-report that
the NII has now. We think that, with the steps that we're
taking, we're going to give that CIO greater resources. We're
going to pull in the resources from the Joint Staff's J-6
directorate, from DISA, as you indicated, and potentially some
functions from other areas, to unify the IT oversight in the
Department. We think we'll end up with a stronger CIO.
Chairman Levin. Okay.
Dr. Carter, the Secretary's established a task force on a
reports, studies, boards, and commissions study group that is
analyzing ways in which the number of advisory studies can be
reduced to a more efficient level, to recommended which boards
and committees provide insufficient value. I think a number of
you made reference to that part of the decision of Secretary
Gates. What I'm concerned about are the rumors that the
Military Services' Science and Technology Advisory Groups could
be targeted for those cuts.
What is your view of the contribution of the Military
Services' Science and Technology Advisory Groups in making
recommendations to the Department's future investments in
critical technology areas?
Dr. Carter. I know those boards are under review in the
Efficiencies Initiative. As the staff member responsible for
the day-to-day shepherding of the Defense Science Board, I've
provided that information to the group that Mr. Rangel has
looking at the advisory boards. We've provided them with all of
our data on the Defense Science Board, and they're looking at
that and also the Service Science Boards.
Chairman Levin. Secretary Lynn, one of the defense
components that the Secretary plans to eliminate is the BTA.
Now, earlier this year, the Department's Deputy Chief
Management Officer (DCMO) told the committee that the BTA plays
a crucial role in the business-process reform that is needed to
reduce waste and inefficiency in the Department's operations.
Over the years, the military departments and the defense
agencies have proved incapable of modernizing their own
business systems.
The GAO recently reported that the Department's largest
modernization programs are running billions of dollars over
budget and as much as 6 years late, and BTA was assigned to
provide needed leadership, expertise, and assistance in that
effort.
Now, the implications, then, of the elimination of the BTA
are that the efforts to improve business systems and processes
is going to revert to those who have proven incapable of
managing that in the past. Or is some other entity going to
provide the leadership, the expertise, and the assistance for
which the BTA is currently responsible?
Mr. Lynn. The BTA was created prior to the creation, by
Congress, of the DCMO, and the functions of the two overlap
fairly substantially. So, as we went through looking to
delayer, per the Secretary's direction, the conclusion was that
we could eliminate the agency, move the oversight functions,
that you've described, to the DCMO and save a layer and
probably reduce some of the staff resources, due to the
duplication. But, there will still be that oversight function,
at the OSD-level, on business processes, but it will be in the
DCMO office.
Chairman Levin. Now, what's the status of the Defense
Agencies Initiative? They made some progress in improving the
financial and business systems of the Defense agencies--is that
initiative something that you're familiar with, offhand? That
doesn't ring a bell with you?
Mr. Lynn. Well, you referred, at the outset, to the audit.
So, the underlying effort to get a clean audit opinion is the
modernization of the financial systems themselves, that's what
that refers to.
Chairman Levin. Your answer, then, is that you're going to
save a layer, but that the responsibility is clear----
Mr. Lynn. Yes.
Chairman Levin.--for where that responsibility's going to
lie.
Is the 2012 budget, when you submit it, likely to reflect
the areas in which the efficiencies have been made; or, decided
upon, as well as the areas in which the funding is proposed to
be added? Are you going to identify those two things in your
budget request?
Mr. Lynn. We're working towards that end. I think you're
really talking about track one and the hundred billion dollars.
We are looking to do--there's a lot of churn as you build a
budget, so it's not as straightforward as you might think, but
we are working to establish a baseline and to understand where
the shift occur when they move from overhead to warfighting
accounts, and we'll present that in the fiscal year 2012
budget.
Chairman Levin. They're going to be identified?
Mr. Lynn. We're going to do the best we can to--as I said,
when you build a budget, there are a lot of changes,
independent of this, so disentangling those changes from these
policy changes is a data challenge. But we think this is an
important initiative, and we're cognizant of the need to
present data to Congress to support it.
Chairman Levin. If it's not done in that way, with the
budget submission, would it be done in some other way, like
kind of a wrap-up, ``We set out to do, and this is what we did
do, and this is what we expect the savings to be''? Will there
be some kind of a summary when the decisions are finally made?
Mr. Lynn. Yes. I think we will present something with the
fiscal year 2012 budget. It may be just as you described or it
may be something else, but I think, when we present the fiscal
year 2012 budget, we will present our conclusions on this $100
billion initiative.
Chairman Levin. General, you could answer this. Does the
Department expect to retain the Joint Improvised Explosive
Device Defeat Organization for the long-term? JIEDDO?
General Cartwright. I think, Senator, we'll retain it, to
the extent and for the amount of time and in a character that
is supportive of what we think we need in the field. Whether
that becomes a standing organization, independent of the
conflict we're in, I think that that would be something that we
would take a very serious look at. But, there are elements of
JIEDDO--command-and-control activities, intelligence
activities, et cetera--and we have already gone through several
relooks to make sure that we need each of those pieces to
conduct the function we think is essential today.
Chairman Levin. Now, there's a number of other rapid
response programs and organizations, in addition to that one.
Is there opportunities that you see for cost efficiencies
through consolidation of those kind of rapid response
organizations?
General Cartwright. I think--and I'll turn this over to Ash
Carter here, because he has a big hand in this, but from my
perspective, as the warfighter part of the discussion that
we've had today about JFCOM is about those things that are
actually crosscutting, that no one service represents the
entire Department's position, things like ISR, things like some
of these other agencies. the crosscutting activities have had a
significant impact in our ability to do what we're doing in the
field, to do it in a way that is coherent so that we don't have
four different solutions for the same problem. To the extent
that they can continue to do that, that is some of what JFCOM
has been able to do for us. So, we have built these
organizations, these so-called ``horizontal activities,'' to
cover down on those types of things that we, today, call
``joint,'' but, in reality, are also standards and being able
to work in the interagency and to work with allies. They have
done it in a way that has been very effective and very
efficient. So, to the extent they continue to do that and are
evaluated as being such, we'll try to retain them.
Ash?
Chairman Levin. Okay.
Now, Senator McCaskill's here.
Secretary Lynn, we kept him as long as we could, but he has
to go to the funeral.
Senator McCaskill. That's fine.
Chairman Levin. I think you understand that. Your--your
paths crossed as you were coming----
Senator McCaskill. Yes, I understand.
Chairman Levin.--and he was leaving. Okay.
Senator McCaskill. As I was sprinting to get here.
Chairman Levin. We know you were, and we were aware of the
fact you were coming.
Secretary Carter, you want to add a quick answer to that
before I call on Senator McCaskill?
Dr. Carter. Just one note. It is exactly as General
Cartwright said. However, in this field, which is the rapid
response, the ongoing fight, we're looking for efficiencies,
but the principal objective in looking at all of these
organizations that have sprung up over the last 8 years or so
to provide rapid and responsive support to the warfighter, is
effectiveness. We're still not there, where we should be, in
terms of being able, rapidly, and agilely respond to the needs
of the warfighter in the acquisition system and the logistic
system. This is something that General Cartwright and I work on
together every day.
So, efficiency is one thing and obviously, is a very
important objective. But, the other thing is truly being
responsive, and that's what JIEDDO was created to do, various
taskforces and so forth, and we're still looking, I would say,
for the right managerial mechanism to support the ongoing
fight. A lot of it's done now by the personal attention of
General Cartwright, myself, and many others at the top.
Chairman Levin. Thank you.
Senator McCaskill.
Senator McCaskill. Thank you. Thank you, Mr. Chairman, and
I really appreciate your indulgence in allowing me to hustle
back here so I could have some time to ask some questions.
Secretary Carter, as a former auditor, I feel your pain at
the number of reports that have been developed and that no one
reads. It is very common, when you have to make a hard
decision, that it's easier to do a report. Most of the time,
the call for studies and reports that comes from this place is
in lieu of making a hard decision.
Just to give one example--and I think one example where
General Cartwright and I disagreed was on Joint Requirements
Oversight Council (JROC). I think we have figured out that,
over the years, JROC has not always done what it should do, in
terms of being a check on acquisition, that it had--when we
looked into it, I was hard-pressed to find an example where the
various branches were not, ``Okay, I'll give you this if you
give me that.''
So, in an effort to deal with that, I offered two
amendments, on the NDAA, that would deal with the problem of
the JROC being a giant back-scratching organization, as opposed
to an organization that was really holding branches
accountable, in terms of the acquisition process.
One of those amendments went through. The amendment that
went through was allowing the COCOMs to have some input into
the process. The other amendment, that didn't go through was
the amendment that would have given you, Secretary Carter, the
ability to have some kind of check and balance over the JROC.
Now, General Cartwright didn't like that. General Cartwright,
once I passed that in the NDAA, said, ``Why don't we do a study
and look at it?''
I think that's the kind of decision that actually magnifies
the problem. I think the right call was to have somebody
overseeing this, or have some kind of input into it. I thought
the Under Secretary of Defense for Acquisition was the right
person.
So, let me ask the question, General Cartwright, how is the
study going? What assurances can you give me that the JROC has
evolved beyond, ``Give me what I want and I'll give you what
you want''?
General Cartwright. Well, the scratch-my-back analogy, I
think, is probably a mischaracterization, but we can disagree
about that. But, the study basically came out and gave us
information, which we have introduced back to Congress now,
that does a couple of things. One, it puts the vice chairman in
a decision position, similar to a service acquisition chief.
So, in other words, I'm accountable for those decisions. Two,
it brings other members in and allows us to bring the COCOMs
in, in an authoritative way, rather than to just sit at the
table and give us an opinion, along with key OSD principals
that are necessary, that represent resourcing and acquisition.
Three, it brings a very authoritative role in, of the test
community, to say, in the JROC, that what you're saying is, in
fact, one, testable, that can verify that it--that you're going
to get the performance you want or the metrics that you want;
and, two, that they are then a part of the activity
continuously, all the way through, into the milestone decision
process that the acquisition community runs.
We want common or similar representation so that the
decisions that are made that represent what the customer says
they want, not what someone else may want to give them, are in
all of the forums now, all the way through acquisition and
resourcing.
So, you have a common group of people that can be held
accountable for those decisions from birth to death.
Senator McCaskill. Well, you may have been right and I may
have been wrong. I definitely am wrong with some frequency.
But, I want to know, ongoing--what we couldn't find is a place
where JROC really did what it was supposed to do. We couldn't
find a place where JROC stopped anything. I mean, the idea here
is that you're supposed to catch things that aren't going to
work, that are going to be too expensive, that you're going to
figure out why, that you're going to make sure the
requirements--and so much of this, probably 90 percent of it,
is requirements, and that's why the COCOMs are so important.
Let me move on to another subject: contracting. Wartime
contracting has been stovepiped, mostly because it can be. The
lack of competition is, frankly, a huge part of the problem.
We're not talking about, now--I certainly agreed with Senator
McCain, that some of the problem is a lack of competition among
Defense contractors for the big stuff. But, there really isn't
an excuse for a lot of the services' contracts. We're not
talking about a lot of capitalization costs, for a lot of these
service contracts. But, once again, what you see is a lack of
competition, without a good excuse as to why there's a lack of
competition. That, Secretary Carter, is where I think there is
real, real money. I just urge you to bring to us, in this
effort, how, not only you're looking at contracting in a macro
sense, but how you are drilling down on contracting in wartime
as it relates, especially, to logistics and troop support.
I'm a conservative person when it comes to estimating
numbers, because of my auditing background. I think it's very
conservative to say that we've had $100 billion go up in smoke
in Iraq, from bad contracting, that it's not as if there
weren't competing people who could have been brought in; it
just was easier not to. So, I urge you to keep us posted on how
you're integrating that kind of contracting into the
contracting reforms.
Finally, Mr. Chairman, if I have your indulgence to go over
just for----
Chairman Levin. No. No.
Senator McCaskill.--one more thing.
Chairman Levin. You can take your time, here, because this
is your second round now, and----
Senator McCaskill. Okay.
Chairman Levin.--there's no other----
Senator McCaskill. Okay, great.
Chairman Levin.--no one else here's waiting on their
questions.
Senator McCaskill. Okay, great.
The audits. I tried to count up how many auditors you all
have working in the defense sector, whether it's through IGs or
whether it's through DCAA or whether it's through GAO. I quit
counting at about 30,000. Thirty-thousand people are tasked
with some auditing function within DOD, and sometimes with a
little hangover into the Department of State, depending on
that.
Now, you're getting plenty of reports, without all the
reports we're asking you for, that will give you
accountability. The question is: Who's consuming them and
whether or not you all have a strategy on consuming audits and
following up on audits? I would ask you, Secretary Carter, to
address that. Are you comfortable and confident that the
millions upon millions of dollars of audit work that is ongoing
is actually being embraced by the Department?
Dr. Carter. I'd like to address that and also your first
two points, if I may.
Chairman Levin. Let me interrupt you, Secretary Carter, if
I can.
Senator McCaskill, can you close? Because I'm going to have
to leave.
Senator McCaskill. I absolutely can.
Chairman Levin. Thank you.
Thank you both.
Senator McCaskill. That's a scary thing for these guys,
though. I promise I won't keep you here all afternoon.
Chairman Levin. Yes. [Laughter.]
Senator McCaskill. You know I'm capable of it, Secretary
Carter, but I will not. I really only have this auditing area
to finish up with, and then I will let you go.
Chairman Levin. Thank you.
Thank you both.
Senator McCaskill [presiding]. Thank you, Mr. Chairman.
Dr. Carter. With respect to audits, two comments. The first
is that I want to make clear that the auditing function,
particularly DCAA, does not report to me; it reports to
Secretary Hale. So, I don't want to presume to speak for him at
all about that particular function.
The part I can speak to is at the earlier stage, and
particularly in contingency contracting. You are right,
contingency contracting in Iraq, in the early years, did not
have the tradecraft and the controls that were appropriate.
We've recognized that. One of the first things Secretary Gates
said to me, when he hired me in this job, was that he wanted to
make sure we learned the lessons of Iraq and applied them in
Afghanistan. We're really trying to do that.
I would like to get our contracting system, in Afghanistan,
to a point where we don't need to--we'll still need to be
audited, but where we'll pass an audit easily. That means
having contracting officers in adequate numbers to do the work
right. It means having contracting officer representatives
there to make sure the work is done on each contract. That
means reducing the use of cash, and all of these things. Now--
and we have been assiduously working down that list--which is,
I think, exactly the same list that you are working down--in
Afghanistan, and made considerable progress in each of those
areas. We're not where I think we should be, yet.
Senator McCaskill. Let me acknowledge that progress. You
have made progress.
Dr. Carter. Thank you. I think we have. But, again, we're
not there yet. As contracting officers, for example, I think,
we have about an 86- or 87-percent fill rate now. It should be
100 percent. It's better than 43 percent or something, which it
was, a year and a half or 2 years ago. So, all along the chain
that culminates in an audit, which you hope simply ratifies the
fact that you've done a good job for the warfighter, you've
been effective, but also, for the taxpayer, you've been
efficient--and all through that chain, I think we do need to
improve.
The other thing I'd like to absolutely agree with you on,
Senator, is the value to be had from improving how we manage
services. It's just an area where we have not paid a lot of
attention, where, as I said earlier, a lot of the people who
are managing those activities are doing it on a--at the margins
of the real function that they're trying to accomplish; it's an
enabler for what they do. So, they don't have all the
tradecraft that somebody who was, full-time, acquiring services
would have.
I think great savings can be had there, across the
Services' spend. It's essential that we look there, because
that's half the money. That's half the money--$200 billion a
year. So, even if we can just get a few percentage points of
improvement every year, that's exactly what Secretary Gates
wants, because that's money that we don't have to come to the
taxpayer for, that we can then take and reallocate, as he
wants, to the warfighting capabilities.
Senator McCaskill. Well, I hope that you get Senator McCain
the list. I hope we can reduce the number of reports that
you're sending to us, and that all of us get in the habit of
reading audit reports.
I would love to see you embrace--and I know that some of
this is not in your portfolio, some of it is in Secretary
Hale's portfolio, some of it, frankly, is other places--but,
those 30,000 auditors, I don't think their work has been taken
seriously. I don't think, right now, if I made Secretary Gates
come up here and do a drawing of where the auditors were and
what they were auditing on and where the reports went, I'm
willing to bet that you all haven't spent a lot of time even
looking at that issue.
Well, you all know DCAA and you know GAO and you know the
IGs, but the public doesn't realize that most of the IGs in the
active military aren't really IGs. They don't report to the
public; they report to the commander. So, their reports, while
you all get the benefit of it, we never know whether or not
you're paying any attention to what the IGs are saying within
the Active Forces, because we don't ever get to see the
reports.
Let me close with an example of how, if you would spend
more time and energy being deferential to the auditing
community within DOD, I think that we would get higher quality,
in terms of some of the work that's being done and the people
who are attracted to the work. That's essential.
I have written, now, three letters to the President about
the Special Inspector General over Afghanistan. We now have had
an independent review of his work, by a team of auditors, a
peer review. They have said that it is woefully lacking.
Probably the whipped cream and the cherry on this particular
situation is that--here's somebody who's supposed to be the
eyes and ears looking at contracting in a major way in
Afghanistan, and he hires someone on a no-bid contract for
$95,000 for 2 months' work.
Now, first of all, how do you decide that somebody's worth
45 grand a month of public money? How do you decide that's the
one? There's no process there. Now, this is the Special
Inspector General for Afghan Reconstruction, hiring somebody
for $95,000, for 2 months' work. You wonder why the public
thinks we've lost our minds. That is not being accountable, the
person he hired formerly was the DOD IG with a lot of
blemishes. I mean, we're not even talking about somebody that
is--doesn't come with his own baggage. The Special Inspector
General over Afghanistan should be fired, today. When you have
an independent council of auditors saying that the Special
Inspector General in Afghanistan--that their law enforcement
authority should be removed from them because they don't have
the right control processes in place, this is a problem.
Now, I know you are not in a position to remove the Special
Inspector General. But, now, over a period beginning in March
2009, we have tried to point out to the administration that
this Special Inspector General in Afghanistan is not up to the
job.
After what happened in Iraq, I just would like you,
Secretary Carter, to go back to the Pentagon and say, ``You
know, there are some people over there that aren't going to
give up until we have a change in leadership in the Special
Inspector General in Afghanistan.'' Because I know the kind of
respect the President has for Secretary Gates. I have a sense,
if Secretary Gates weighed in on this, that maybe we'd get some
action. I just think it is enough to make the top of my head
blow off.
So, I'm happy to give either one of you an opportunity to
respond to what I've said. I'm kind of venting in this public
place, because I want to and because I can, and because it's
wrong that--we have real work to do, in terms of oversight of
contracting in Afghanistan. We don't have time, frankly, to be
dealing with someone who hasn't shown that they're up to the
job.
I would like to propose that we have one special inspector
general over all contingencies, and would like your responses
to that proposal. So, we would roll into one office that would
be permanent, a special inspector general to deal with any
contingency operations that the military was actively involved
in, so that you would have continuity, in terms of the
expertise on contingency contracting; you'd have continuity, in
terms of lessons learned; you would have continuity, in terms
of a staff that felt committed to that particular activity, as
opposed to, ``How long are we going to be around, and do I need
to hitch my star to another moving target?''
Do you think that would be something that would be welcome,
in terms of your job responsibilities, Secretary Carter: one
special inspector general for all contingencies?
Dr. Carter. I hear you loud and clear--and I'll take that
back to the Department for consideration, the idea of one
overall.
Senator McCaskill. We have really good people that learned
a lot in Iraq, and then we're trying to recreate this same kind
of office in Afghanistan, and it seems to me that we're missing
opportunities here. Certainly, the Lessons Learned document,
from Iraq, that was done by the special inspector general,
should be required reading, frankly, for any commander. I hope
it is. I hope that everyone's reading it. I think--Greg
Mortenson's books, I think, are very important for the
commanders in Afghanistan. But, that Lessons Learned booklet
from Iraq, that was put together by Bowen's shop, I think it's
very important reading for everyone there.
I do want to acknowledge the progress that's been made. I
will look forward to continuing to interact with you about
JROC, General Cartwright. I want to believe that everyone there
is capable of very independent decisions and saying no to their
dear friends and their colleagues, that they--I mean, I just
think that environment is a difficult environment to say no to
one another. If you are confident that we've made progress on
that, I'll look forward to visiting with you about that, and
would be happy to acknowledge that the step I wanted to take
was a step too far.
General Cartwright. I think we should continue that
dialogue. We certainly owe--not only to you, but to the
American people--the ability to make sure that we understand
the implications of that which we ask for, from the institution
and from the government writ large, to carry on these
conflicts. Oftentimes, though, it is not a pure business
decision. Sometimes we react and we throw whatever we have in
order to protect lives. But, those are usually in the minority.
On the auditors, I think you have the right attributes.
What I don't have, in my own knowledge kit-bag right now, is
the span of control. But, how do we, in fact, ensure that those
lessons and that continuity is moved from one place to the
next, and that we don't have 6 months or whatever spin-up time
to learn the job, out in the field, and that we have the sizing
construct to be able to manage this span of control? I'll take
that back with me, and we will keep up our dialogue.
Senator McCaskill. That's great, General.
Overall, I want to say, I'm very supportive of what
Secretary Gates is trying to do. There is a lot of efficiencies
that can be gained, but it's going to take a kind of focus and
concentration, and a not-giving-up, because this isn't going to
be easy. There's going to be all kinds of things, including a
bunch of folks that sit up here, that are going to try to throw
out roadblocks, depending on what it is that you're trying to
shrink or make more efficient.
But, I, for one, am a big admirer of the process that
Secretary Gates is undergoing, here. I think it's absolutely
essential. I think that we can have and maintain the finest
military in the world, and still be much more efficient with
taxpayer dollars in the process.
I look forward to being helpful in any way I can. I thank
you both for waiting until I got back, so I had an opportunity
to visit with you.
The hearing is adjourned.
[Questions for the record with answers supplied follow:]
Questions Submitted by Senator Carl Levin
test and evaluation
1. Senator Levin. Mr. Lynn, Dr. Carter, and General Cartwright, how
will the Department of Defense (DOD) ensure that its developmental test
and evaluation enterprise has the necessary resources to ensure that it
does its job effectively, as required by Weapon Systems Acquisition
Reform Act (WSARA)?
Mr. Lynn, Dr. Carter, and General Cartwright. Acquisition,
Technology, and Logistics (AT&L) is actively engaged in developing a
path forward to implement Secretary Gates' efficiency initiatives. In
particular, we are driving the acquisition community toward greater
efficiency and productivity in defense spending. We believe these
initiatives are consistent with the objectives of the WSARA of 2009. We
are resourcing a robust developmental test and evaluation capability
for the Department and we will ensure the initiatives are in full
compliance with title 10 U.S.C. 139d, enacted by section 102 of WSARA.
We will continue to review our manpower and budget allocations to
achieve a prudent balance across the critical missions within AT&L, to
include Developmental Testing and Evaluation.
dod laboratories
2. Senator Levin. Dr. Carter, the realistic use of the scientific
and technology expertise in the Department's laboratories, such as, the
Army's Tank and Automotive Research, Development and Engineering Center
in Michigan, the Naval Undersea Warfare Center in Rhode Island, the Air
Force Research Laboratory in New Mexico, and the Army's Aviation and
Missile Research, Development and Engineering Center in Alabama, can
help develop more mature technologies, reducing the cost of major
weapon systems. As you are aware, this committee has provided the
Department over the years with a number of authorities to provide the
labs with flexibilities needed to hire the best and brightest
scientists and engineers. What is the Department's view on the role of
the defense laboratories to improve the acquisition process and make
the acquisition of weapon systems more efficient?
Dr. Carter. The role of the DOD labs is to contribute to basic
science, develop and apply technologies to warfighting challenges, and
reduce the technical risk of integrating these technologies into weapon
systems. Our defense laboratories perform these functions with
excellence including prize winning contributions to science, unique
prototyping facilities, and systems integration/engineering skills that
contribute to successful and more efficient, mature acquisition
programs. As a testament to their commitment to the acquisition
community, most of our scientists and engineers are certified as
acquisition professionals through Defense Acquisition University's
rigorous education programs. The Department will continue to look to
the labs to tackle the toughest technical problems and to build success
and efficiency into programs early in their life-cycle.
3. Senator Levin. Dr. Carter, is the Department contemplating any
specific efficiency actions, as part of the broader acquisition
efficiency initiatives, to strengthen and improve the DOD laboratories?
Dr. Carter. The strength and diversity of our DOD lab system has
always been at the heart of our success in acquisition. Most recently,
we have identified and are validating the first group of core technical
competencies (e.g., energetics, armor, electronic warfare and low
observable/counter-low observable technologies) of the DOD labs to
focus its investments against competencies that must be maintained to
ensure the DOD possesses the technology necessary to execute its
missions. By focusing investment earlier in the process the labs will
contribute to reducing the cost of developing new weapons systems.
Taken together and with the continued support of Congress, these steps
will achieve efficiencies that will strengthen and improve the DOD lab
capabilities.
industry independent research and development and industrial base
health
4. Senator Levin. Dr. Carter, one of the objectives in your
September 14th memo was to reinvigorate industry's independent research
and development (IRAD) and protect the defense technology base. Despite
significant increases in the Department's budget over the last decade,
there are significant issues facing the health of certain critical
industrial base sectors such as solid rocket motors, microelectronics,
and rare earth metals. Can you provide any additional specifics on how
you plan to go about reinvigorating industry's IRAD program and
ensuring that these investments are directed in a way that will provide
the greatest benefit to the Department and to the national defense?
Dr. Carter. The DOD reimburses industry for its IRAD efforts using
rates negotiated by the Department's contract offices. IRAD enables
industry's understanding of its own concepts and capabilities to
maximize the productivity of research and development investment. In
most cases, from a technical perspective, a firm will have a better
idea than the Department where the next dollar of R&D spending at that
particular company will be most likely to yield a meaningful
breakthrough. On the other hand, the Department best understands where
innovation would most contribute to warfighters' needs or to meeting
other requirements. Open communication between industry and the
Department should guide industry's prioritization of IRAD. My sense is
this communication between Industry and DOD on specific IRAD
investments is not as strong as it could be as a result of changes made
during the 1990s to the law governing IRAD processes.
As part of the Efficiency Initiative, the Defense Contract Audit
Agency is undertaking a more comprehensive data collection on IRAD
expenditures, and the Department will work with industry to find ways
to leverage the Department's IRAD investments. This includes adopting
improved processes to communicate with industry about both priority
investment areas and the results of IRAD spending. The Director of
Defense Research and Engineering (DDR&E) is pursuing the implementation
steps identified in the September 14 memo. In the near term, DDR&E has
contacted nine of the largest performers of DOD IRAD for discussions
and will engage with the National Defense Industrial Association for
the larger industry perspective. My goal over the next year is to
launch one or more pilot projects that would reinvigorate innovation
through better use of IRAD investments, and I will examine all possible
approaches allowed by the existing law.
Parallel to the IRAD effort, the Department monitors the industrial
base, including specific areas of concern like solid rocket motors,
microelectronics, and rare earth elements. The Department is
coordinating a sustainment plan for the solid rocket motors industry. A
DDR&E-sponsored study is collecting data on domestic and foreign
microelectronics suppliers and on defense and commercial demand. The
study will also recommend a strategy for the future. The Office of
Industrial Policy also prepared a study of rare earth elements supply
and demand.
5. Senator Levin. Dr. Carter, are you concerned about gaps and
shortcomings in the industrial base--and if so, how do you plan to go
about identifying and addressing problem areas?
Dr. Carter. While the Department routinely monitors potential
issues in the defense industrial base, we must improve on meeting our
responsibility to suppliers by executing stable, well-structured
programs with optimized acquisition strategies that will help sustain
essential industrial capabilities.
My office periodically conducts industrial assessments to evaluate
and address changes in key system, subsystem, component, and/or
material providers that supply multiple programs, and affect
competition, innovation, and product availability. DOD Components also
conduct their own assessments when: (1) there is an indication that
industrial or technological capabilities associated with an industrial
sector, subsector, or commodity important to a single Component could
be lost; or (2) it is necessary to provide industrial capabilities
information to help make specific programmatic decisions.
Of particular concern to me are potential gaps and shortcomings in
defense-unique and niche product areas where there is low peacetime
demand, industrial capabilities are limited, and there is very little
competition at the subsystem/component level. Accordingly, we must use
many single/sole source suppliers--suppliers for which there may be
minimal innovation incentive. Ultimately, these defense-unique industry
segments may have an insufficient business case to justify continuing
in the market. We have identified many products that cause us concern.
Examples include armament and military-unique forgings and castings;
metallic and composite armor materials; thermal batteries; solid rocket
motors; inertial measurement units; GPS receivers; seekers; fuzes; and
warheads. To address these types of issues, the Department is adopting
a more integrated approach to identify these single-point failures/
concerns earlier in the acquisition process, and establishing more
comprehensive (and, when appropriate, interagency) approaches to
addressing industrial base issues.
______
Questions Submitted by Senator Joseph I. Lieberman
service support contractors
6. Senator Lieberman. Mr. Lynn and Dr. Carter, I'd like to ask
about your efforts to reduce the Department's reliance on services
contracts. On the one hand, you've announced your intent to reduce
funding for service support contractors by 10 percent in each of the
next 3 years. On the other hand, you've announced a civilian workforce
freeze for parts of DOD, including the Office of the Secretary of
Defense (OSD). I am wondering if we can gain some of the same
efficiencies by careful human resource planning that determines, for
each function, what is in the best interest of the government. Congress
has enacted provisions requiring DOD to implement insourcing guidelines
and to review its inventory of service contracts. The purpose of these
reviews should not be to make arbitrary decisions, but to make a
determination of whether work has been in the wrong hands, for example,
has inherently governmental work been contracted out?
Mr. Lynn and Dr. Carter. We agree that the purpose of these reviews
is to determine the most effective allocation of human capital--
government and contract personnel alike. Our goal is to improve both
the effectiveness of the Department and to find savings by eliminating
low-priority functions. Toward that end and consistent with statutory
requirements, all DOD Components are reviewing contracted services and
considering whether government or private sector personnel are the best
means for providing those personnel. We are finding some cases where
contractors are providing services that would more effectively be
provided by government personnel. For DOD organizations where the
Secretary has directed us to limit organizational growth, in-sourcing
efforts are being evaluated in terms of mission priorities and, where
appropriate, exceptions for in-sourcing related to growth may be
submitted.
7. Senator Lieberman. Mr. Lynn and Dr. Carter, how does this type
of human resource planning square with your efficiency review?
Mr. Lynn and Dr. Carter. The considerations and planning described
above are integral to our efficiency review.
8. Senator Lieberman. Mr. Lynn and Dr. Carter, if under the
insourcing review DOD determines that a function would more
appropriately be performed by Federal employees, or that DOD could
achieve savings by insourcing, how does a workforce freeze make sense?
Mr. Lynn and Dr. Carter. Note that we are implementing a personnel
cap, not a hiring freeze. We are trying to control the growth in the
size of our workforce. We are allowing some in-sourcing where there is
a compelling case for it. In order to effectively optimize the size of
our workforce, we must be extremely judicious about creating additional
billets for any reason. Consistent with statutory requirements, all DOD
components are reviewing contracted services and providing
consideration for in-sourcing those services. While some organizations
indicated that they have no contracted services that are appropriate
for in-sourcing, no DOD organizations are outright exempted from in-
sourcing. For DOD organizations where the Secretary has directed us to
limit organizational growth, in-sourcing efforts are being evaluated in
terms of mission priorities and, where appropriate, exceptions for in-
sourcing related growth may be submitted.
______
Questions Submitted by Senator Mark Begich
readiness
9. Senator Begich. Mr. Lynn, Dr. Carter, and General Cartwright, I
support the objective of the initiative, but am concerned the attempt
to realize near-term cost savings will come at the expense of the
readiness of the current force. Under the initiative, military services
can keep what they save, and reinvest those dollars in high priority
warfighting needs. However, the Services already make hard choices
between the current force, evolving requirements, and the future force.
In past budgets we've seen underfunding of base operation and
sustainment, depot maintenance, training accounts, and other day-to-day
requirements to free up dollars for other investments. Over the years,
the investment shortfalls negatively impact readiness by leading to
dilapidated infrastructure beyond repair and deferred maintenance of
current equipment. What specific guidance was given to the military
services with respect to the initiative to prevent detrimental impacts
to overall readiness of the current force?
Mr. Lynn, Dr. Carter, and General Cartwright. It was precisely
these concerns that prompted the Secretary to aggressively shift
resources toward uses that would protect current and future military
capabilities. In June, we issued guidance to the military departments
explaining that the purpose of this effort was to improve the
effectiveness and efficiency of our business operations so that we can
increase funding available for our mission functions. Specifically,
this guidance instructed the military departments to take resources
from areas like headquarters, administrative functions, support
activities, and other overhead and reinvest them in areas like
personnel in units, force structure, readiness, procurement, and RDT&E.
10. Senator Begich. Mr. Lynn, Dr. Carter, and General Cartwright,
how will OSD ensure the military Services redirect investments to high
priority warfighting needs?
Mr. Lynn, Dr. Carter, and General Cartwright. As stated above, the
guidance to the military departments was very clear. In addition, the
Department's efficiencies are being carefully reviewed to ensure that
this guidance was followed.
military construction
11. Senator Begich. Mr. Lynn, Dr. Carter, and General Cartwright,
the Services have been authorized to consider consolidation of excess
bases and other facilities where appropriate. What guidance was given
the Services by OSD to promote an objective and legitimate process in
determining excess infrastructure?
Mr. Lynn, Dr. Carter, and General Cartwright. In June, we issued
guidance to the Military Departments explaining that the purpose of
this effort was to improve the effectiveness and efficiency of our
business operations so that we can increase funding available for our
mission functions. Significant proposals like consolidating bases and
facilities are vetted through the Deputy's Senior Advisory Working
Group as a means of ensuring that these decisions are both objective
and well-considered.
12. Senator Begich. Mr. Lynn, Dr. Carter, and General Cartwright,
cost savings have not always been realized when anticipated in previous
Base Realignment and Closure (BRAC) rounds, and sometimes not at all,
so why would the Department assume cost estimates associated with
infrastructure initiatives would be realistic? What has changed?
Mr. Lynn, Dr. Carter, and General Cartwright. Accurately estimating
the cost of infrastructure savings has proven to be difficult, however
reclaiming savings is a part, but not the sole driver of this
initiative. The goal is to streamline our process and eliminate
needless bureaucratic layers. In specific examples, getting rid of a
headquarters or an overhead layer also means that the infrastructure
that supported it is no longer necessary.
13. Senator Begich. Mr. Lynn, Dr. Carter, and General Cartwright,
as part of the initiative, DOD is conducting a global force review to
determine the necessity of current overseas infrastructure and future
investment in overseas installations. Please describe the review more
thoroughly. When will the review be complete and available for
Congress?
Mr. Lynn, Dr. Carter, and General Cartwright. We are still
evaluating these options. We expect to be able to provide more
information on these reviews and the considerations that underlie them
as part of the President's budget for 2012.
cost estimate
14. Senator Begich. Mr. Lynn, Dr. Carter, and General Cartwright,
DOD has provided information to Congress which states ``every new
initiative will be accompanied by a cost estimate,'' yet it is my
understanding no cost estimate is available for the Joint Forces
Command (JFCOM) closure or any other Secretary of Defense initiative.
When can Congress expect the cost estimates? Additionally, will new
initiatives outlined in the President's budget submission for 2012 be
accompanied by a cost estimate and clear articulation of where those
dollars are being reinvested?
Mr. Lynn, Dr. Carter, and General Cartwright. We are still
evaluating the alternatives and resource implications of the
Secretary's initiatives. We will provide you more information on cost
savings as these analyses are completed. New initiatives that are
outlined in the 2012 budget will be accompanied by cost estimates and
we will be able to show where we reinvested those savings.
15. Senator Begich. Mr. Lynn, Dr. Carter, and General Cartwright,
as part of the efficiencies initiative, DOD has determined to reduce
allocations for fulfilling congressional reporting requirements. How
will DOD continue to meet its obligation and direction of Congress in
required reports?
Mr. Lynn, Dr. Carter, and General Cartwright. DOD will work with
Congress to determine which of the 1,200 to 1,400 congressional reports
that DOD produces each year provide valued information, where there are
opportunities to consolidate reports, and whether there are reports
that we agree are in our collective best interest to eliminate.
spending
16. Senator Begich. Dr. Carter, is the Department conducting a
review of over budget, behind schedule acquisition programs, such as
the Medium Extended Air Defense System (MEADS) as part of the
efficiency initiative?
Dr. Carter. The Department is constantly reviewing programs as part
of the normal acquisition oversight process. These reviews seek to
mitigate the effects of schedule delays and cost growth, to prevent
requirements creep, and to address technology risk or research and
design challenges. The MEADS program is under review to address its
specific challenges, but this review is not part of the Secretary's
efficiency initiative.
17. Senator Begich. Dr. Carter, what actions will DOD take to
curtail continued spending on programs that are not delivering?
Dr. Carter. The Department is willing to make the tough decision to
cancel programs that are not delivering, or that have too many cost,
schedule, and performance challenges. These cancellations demonstrate
the Department's commitment to keeping industry accountable and to
maintaining requirements realism for our acquisition programs.
Program cancellation is not the only tool we use when faced with
various challenges. While there is no ``silver bullet'' approach to fix
a program, the Quadrennial Defense Review (QDR) identified
``maintaining budget stability through demanding cost, schedule, and
performance realism while holding industry and ourselves accountable''
as critical to ensuring better outcomes in our acquisition programs. To
foster this stability, the Department is implementing greater use of
fixed-price, competitively awarded contracts; forming Configuration
Steering Boards to prevent requirements creep; and initiating
independent peer review processes to ensure consistency of approach,
quality of contracting, and information sharing across military
departments and acquisition programs. Furthermore, we are enhancing
budget stability and realism through improving life-cycle management
and sustainment policy procedures with attention toward accurately
estimating long-term ownership costs.
______
Questions Submitted by Senator John McCain
industry dialogue
18. Senator McCain. Dr. Carter, as part of Secretary Gates'
efficiencies initiatives, you met with defense industry officials in
June. The high-level session was part of an effort to reverse a trend
of the past few years that had left the DOD/industry relationship in a
condition you have described as ``not healthy.'' Can you elaborate on
this description? Specifically, what part of the relationship is not
healthy?
Dr. Carter. Overall, the Department has a strong and productive
relationship with the defense industry, with both sides supporting the
warfighter and contributing to national security. However, some
specific aspects of the relationship could be improved, notably
increasing the communication between these two essential elements of
American defense. The meeting in June was part of a Department
initiative to revive a series of regular meetings between our senior
leadership and the CEOs of major defense suppliers. These high-level
meetings can facilitate smooth communication of priorities and help
both sides get ahead of developing issues. Having a regular forum
improves on the previous system of ad hoc contacts, which in recent
years has tended to be too reactive or has made otherwise normal
discourse appear like crisis management. The renewed series of meetings
is already yielding dividends in terms of mutual understanding,
including more aligned goals in the execution of the Department's
ongoing Efficiency Initiative.
19. Senator McCain. Dr. Carter, there have been reports that
Secretary Gates is asking for the cooperation of defense industry to
reduce costs in order to fight off potentially significant cuts to
defense spending as part of future budget deficit reduction measures
implemented by the White House. As the Wall Street Journal reported on
August 3, 2010, ``Secretary Gates delivered a terse message: Start
delivering cost savings, or the government will do it for you.'' How
will you monitor industry's performance in order to inform future
budget discussions?
Dr. Carter. The quest to increase efficiency in defense acquisition
need not breed a hostile relationship between the Department and the
defense industry. Industry has its own competitive incentives to drive
down costs on defense contracts, motivated by its own good business
decisions. These incentives are especially strong in an era when the
defense budget is going to shift to relatively slow real growth from
the quite rapid real growth trajectory of the past decade. But I have
also reminded industry leaders on several occasions of our shared
interest in cost savings--not by threatening them with punitive
policies but rather by pointing out the reality that cost overruns and
continued inefficiency will lead to broken programs and capability
shortfalls for warfighters.
As part of the ongoing Efficiency Initiative, the Department is
doing two things to strengthen industry's cost-saving efforts. First,
we are looking for ways to remove those burdensome rules that lead
contractors to increase costs while adding little value. Many of these
burdens built up unintentionally in an era when rising budgets made it
easier to resolve program difficulties by appealing for more resources
than by streamlining processes or rationalizing facilities. Second, we
are crafting acquisition rules and guidelines to let contractors and
the military departments share the benefits of cost reduction, giving
both buyers and sellers a direct interest in finding savings.
The Department monitors contractor performance through several
mechanisms. Acquisition programs go through a series of reviews during
which the Department's leadership tracks actual program performance,
compares performance to expectations determined earlier in the program,
and, if necessary, makes course corrections. The Efficiency Initiative
is creating streamlined templates for these reviews that focus on
meeting affordability targets that explicitly incorporate projected
savings from cost-saving reforms. In addition, we have reinstated the
series of regular, high-level meetings between defense industry and
Department leaders, and we are soliciting cost-saving ideas from
industry--backed by real data--that we can incorporate into our
continuing efficiency efforts. These various mechanisms should yield
helpful data-based inputs to future budget discussions.
20. Senator McCain. Dr. Carter, what benchmarks or metrics have you
established to track the response and performance of the defense
industry?
Dr. Carter. The Department does not have a simple set of metrics to
track the response and performance of the defense industry as a whole.
The Office of Industrial Policy monitors the health and capability of
the defense industrial base, using a variety of measures suited to the
different sectors of the industry. For example, Industrial Policy looks
at the number of competitors in each sector, the financial health of
important companies, new investments and depreciation of physical
capital, research and development expenditure, and many other metrics.
To the extent possible, Industrial Policy tracks all levels of the
supply chain, although the complexity of the defense industry reduces
real-time visibility into the lower tiers, especially relative to
visibility at the prime contractor level.
The Department also uses databases like the Contractor Performance
Assessment Reporting System (CPARS), which includes a rating system for
contractors' performance in their previous interactions with the
Department. CPARS data contribute to source selection for future
contracts. As part of the Efficiency Initiative, the Department is also
developing a set of systematic metrics that we will use to choose
participants in the new Department-wide pilot Superior Suppliers
Innovation Program, but we have not yet finalized the selection
process.
saving analysis
21. Senator McCain. Mr. Lynn, obviously, what is proposed by
Secretary Gates is aggressive and ambitious. What analysis, if any, has
been conducted to determine how much would likely be netted in savings
on an annual basis as a result of the eight initiatives?
Mr. Lynn. The Department is still evaluating the implementation
mechanisms and resource implications. These initiatives were never
about just saving money. The idea was to increase the effectiveness of
the Department with the goal of increasing our military capabilities
now and in the future. Redirecting resources, in the form of savings,
from low-valued to higher-valued uses is an important means toward that
end.
22. Senator McCain. Mr. Lynn, how do you intend to track and
validate the projected savings that have been achieved? For example,
what baseline should we adopt for the total current cost of support
contractors that will be reduced by 10 percent over the next 3 years?
Mr. Lynn. Savings are being tracked internally. For service support
contractors, the baseline will be set by 2010 service support contract
funding. We are surveying our component organizations to determine the
actual level of this funding.
23. Senator McCain. Mr. Lynn, what is the projected savings
achieved by the elimination of the Business Transformation Agency (BTA)
JFCOM?
Mr. Lynn. The exact savings from the disestablishment of JFCOM,
BTA, and NII are still being determined. We expect to have cost
estimates available on or before the President's budget request is
delivered to Congress.
potential for hollow force
24. Senator McCain. Mr. Lynn, aside from the eight initiatives in
Track 4, Secretary Gates has asked the military departments to find
$100 billion over the next 5 years. As you know from past years, the
tendencies of the military departments when faced with similar
directives have been to cut budgets for support activities such as base
operations, facility maintenance, training, and equipment purchases.
All of these actions have the effect of degrading readiness over time
and contributing to a hollow force. Do you plan to assess the budget
submissions of each of the Services to approve the sources of the
savings or will the Services be given the flexibility to assume risk in
certain mission areas?
Mr. Lynn. Yes, every savings proposal is undergoing an assessment
and analysis by OSD as part of the process to build the fiscal year
2012 budget. Maintaining readiness continues to be a top priority and
no proposal will be accepted that undermines readiness. To the
contrary, the goal is to achieve efficiencies in support functions so
that we can strengthen the funding for readiness efforts.
25. Senator McCain. Mr. Lynn, what guidance have you given the
military departments to concentrate their efforts on improving
efficiencies as opposed to cutting essential operations and maintenance
accounts?
Mr. Lynn. In June, we issued guidance to the military departments
explaining that the purpose of this effort was to improve the
effectiveness and efficiency of our business operations so that we can
increase funding available for our mission functions. Specifically,
this guidance instructed the military departments to take resources
from areas like headquarters, administrative functions, support
activities, and other overhead and reinvest them in areas like
personnel in units, force structure, readiness, procurement, and RDT&E.
26. Senator McCain. General Cartwright, both the Army and the
Marine Corps have indicated that there will need to be continuous
investments in the resetting of combat forces well beyond the end of
the war in Afghanistan. In past years, these reset costs have been
covered in supplemental appropriations requests to provide our combat
forces with the equipment and training needed to restore readiness.
With the shift to a reliance on base budgets, coupled with the effort
to find efficiencies in the current budget, do you expect the Army and
the Marine Corps will be able to budget for all the costs of reset in
future years?
General Cartwright. In recent budget requests, the Department has
included funding for long-term reconstitution. Long-term reconstitution
is the reset of capability and equipment that is not needed immediately
to get a unit ready for deployment, but which needs to be done at some
point in the future, to ensure the unit's full operational readiness.
This reconstitution is expected to take place over several years.
The purpose of the efficiencies initiative is not to reduce the
Department's top line budget, but to significantly reduce excess
overhead costs and apply the savings to force structure and
modernization. The efficiencies initiative will not impact the
Department's ability to reset combat forces. In fact, the reset of
combat forces is exactly the type of warfighting capability that the
efficiencies initiative will bolster using savings garnered from
overhead efficiencies.
27. Senator McCain. General Cartwright, regarding the projected
growth in the DOD budget adjusted for inflation, you mentioned in your
opening statement that ``there is risk the projected 1 percent real
growth may not be realized.'' Can you elaborate on this concern?
General Cartwright. The nation's economic situation, combined with
historical budget trends, will likely squeeze Federal spending, to
include defense. Without 2 to 3 percent real annual growth, it will be
difficult to maintain force structure and modernization efforts. The
efficiencies initiative will address overhead cost growth and redirect
the savings to high priority warfighting capabilities. This effort will
ensure we use Defense dollars to their maximum potential and close the
gap toward what is needed for warfighting requirements.
base closures
28. Senator McCain. Mr. Lynn, one of Secretary Gates' announcements
specifically sent shivers through every military community in the
country--the authorization to each of the military departments to
consider consolidation or closure of excess bases and other facilities
where appropriate. The Secretary mentioned ``legal constraints on DOD's
ability to close installations.'' The only statute currently in place
regarding base closure is a requirement for a notification to Congress
by the Department of the intent to close a base, along with a
justification followed by a wait period of 60 calendar days. In
response to requests by previous administrations, Congress specifically
authorized a process involving an independent commission to make
decisions in five previous rounds of BRAC. Would the Department prefer
to select bases for closure without the involvement of an independent
commission?
Mr. Lynn. In furtherance of his responsibility to ensure that DOD
operates efficiently and effectively in the performance of its
missions, the Secretary has asked the Secretaries of the military
departments to ``consider consolidation or closure of excess bases and
other facilities where appropriate.'' The Department recognizes the
value of a BRAC Commission process for ensuring transparency and
objectivity when considering closure and consolidation actions. In the
absence of BRAC authorities, however, it is prudent for the Department
to continue pursuing efficiencies within its statutory limits because
of the potential financial and operational benefits that could accrue
from such an effort. As you indicated, the Secretary of Defense has the
authority to close and realign military installations outside of the
BRAC Commission process, provided the action does not trigger the
thresholds established in section 2687 or, if it does, the Department
follows the procedures set forth in that statute, which are far more
extensive than a simple congressional notification. If the Secretaries
of the military departments identify any actions that could involve the
closure or realignment of a military installation, those actions will
only be undertaken in accordance with law.
29. Senator McCain. Mr. Lynn, we have many major reviews and
initiatives underway with significant bills including moving marines
from Okinawa to Guam, tour normalization in Korea, and the final number
of forces in Europe. Regarding base closures, are you also encouraging
the consideration of closing bases overseas? If so, will these
considerations undergo any operational analysis or assessment to
measure impact on global commitments?
Mr. Lynn. The Department encourages efficiencies across the
Services, and supports cost-saving measures regardless of location. The
Army's consolidation of functions in Germany (at Wiesbaden) is an
example of a cost-saving measure overseas. This action will produce
efficiencies and allow the return of two sites to the host nation. As
is the case for all closure/realignment actions, overseas initiatives
undergo analyses to identify associated risks/impacts, to include
impact on operational requirements and an assessment of applicable
global commitments.
30. Senator McCain. Mr. Lynn, will these assessments of potential
cuts in globally arrayed forward deployed forces be accompanied by an
estimate of expected savings?
Mr. Lynn. Yes, but note that these decisions will not be made on
the basis of savings alone. The Department will consider all of the
resource implications pertaining to changes in forward deployed forces.
doing more without more
31. Senator McCain. Dr. Carter, it seems like a common request we
always make of our men and women in the military is to keep on ``doing
more without more.'' To the personnel in the field, they see cuts to
manning and service contracts and the directive to do it themselves, so
that someone higher up the chain can claim an achievement of
efficiency. What is the Department doing to ensure that military
personnel are not saddled with these additional tasks?
Dr. Carter. The goal of the Secretary of Defense efficiency effort
is to move overhead resources to where we need it most--to the field.
We believe these initiatives will benefit our combat forces in two
significant ways. First, they will make the Department flatter and more
effective by eliminating needless layers of bureaucracy. Second, where
removing bureaucratic layers and the functions generate savings, they
will be refocused toward current forces and the development of future
capabilities.
32. Senator McCain. Dr. Carter, what do you expect will be the
impact of these efficiencies to our combat forces?
Dr. Carter. These initiatives should benefit our combat forces in
two ways. First, many of these initiatives are geared to make the
Department flatter and more effective by eliminating needless layers of
bureaucracy. Second, where removing these layers and the functions that
go with them have generated savings, those savings are being refocused
toward current forces and the development of future capabilities.
33. Senator McCain. Dr. Carter, the most recent QDR was supposed to
take a hard look at requirements and challenges over the next 20 years
and to set forth a series of priorities to meet those challenges. Yet,
it seems like there has been little analysis in the effort to reduce
requirements or at least reevaluate roles and missions efficiently meet
those requirements. In the directive given to the military departments
to find $100 billion in efficiencies, how much flexibility do they have
to engage in an assessment of relative roles and missions?
Dr. Carter. The Track 1 effort that you are referring to was not
intended to prompt a comprehensive roles and missions review for the
military departments. Rather, it is an effort to improve the
effectiveness and efficiency of our business operations to provide
funding available for our mission functions.
34. Senator McCain. Dr. Carter, where does the pursuit of
efficiencies end and the assessment of roles and missions begin?
Dr. Carter. Organizational assessments are a significant part of
our efficiency initiatives and scrutinizing roles and missions are a
fundamental component of these assessments. In particular,
recommendations to disestablish JFCOM, BTA and NII are rooted in a
detailed assessment of the value of their discrete roles and missions
and the best means to continue providing those roles and missions that
are highly valued.
fixed-price contracting
35. Senator McCain. Dr. Carter, there appears to be some concern or
confusion surrounding what you intend on fixed-price contracting.
Please describe this initiative in more detail.
Dr. Carter. While I recognize that one size does not fit all, there
are times when the use of Fixed-Price Incentive Firm Target (FPIF)
contracts is not only appropriate but desirable. FPIF contracts
establish an appropriate balance or sharing of reward and risk between
the government and industry. This type of contract structure is
generally appropriate in early production efforts and in single-source
production where improvement in price on a year-to-year basis can be
rewarded.
As I have stated previously, a good starting point in an FPIF
contract is a 50/50 share line and a ceiling of 120 percent. Again, one
size does not fit all and, in specific instances, the share line may
need to be adjusted to address more uncertainty in cost. The issue of
cost uncertainty may exist in programs that are early in production and
in those instances, the issue of cost risk needs to be discussed and
fully understood by both sides prior to establishing the share line.
Based on historical experience, the 120 percent ceiling is
generally appropriate for establishing the government's liability in an
overrun of the target cost. As I noted in my September 14 memorandum to
the DOD acquisition professionals, a higher proposed ceiling requires
explanation to the relevant head of the contracting authority and a
lower ceiling would suggest that a firm fixed-price contract may be in
order.
36. Senator McCain. Dr. Carter, what has your response been to
industry criticism that your approach would require contractors to take
on too much risk and could ultimately hamper the fielding of
technologically advanced capability?
Dr. Carter. AT&L is interested in balancing risk and reward between
the government and industry. We want to move away from imposing fixed-
price contracts on programs where significant innovation and unknown
costs can be anticipated--specifically, programs that are developing
technologically advanced capability where the risk of successful
performance is significant. Generally, we want to avoid Cost Plus Award
Fee contracts because they contain subjective measures of award fee
that are not clearly tied to cost control and solid results. We suggest
the use of FPIF Target as a preferred choice where appropriate because
in many circumstances it does achieve an appropriate balance of risk
and reward for both the government and industry.
An FPIF contract structure would be considered appropriate early in
production or in single-source production where year-on-year price
improvement can be rewarded. There may well be other occasions where
conditions can be created that will support the use of an FPIF
contract. Ultimately, the benefit of an FPIF contract is that it shares
the costs of overruns and rewards underruns in a given transaction. It
incentivizes both industry and the government to perform well.
The share line of 50/50 that we have suggested for an FPIF is a
recognition that the government and the contractor have a common view
of the likely outcome of the contract's execution cost. If that view is
not shared, there needs to be discussion of the factors that support a
different share line. Also, the 120 percent ceiling starting point
recognizes the historical experience in DOD with regard to program
overruns.
targeting affordability and driving productivity
37. Senator McCain. Dr. Carter, I appreciate your intent to
``mandate affordability as a requirement'' and ``drive productivity
through `should cost' management.'' Setting an affordability target
early; requiring that tradeoffs be made between engineering elements,
time, and cost a lot earlier than we've done to date; and having that
analysis guide how the program will be managed throughout its
lifecycle, reflects many of the concepts that we identified as
important in the WSARA of 2009. I am, however, concerned about the
Department's ability to do the kind of engineering tradeoff analysis
and cost-estimating needed to make those initiatives work. I'm
particularly concerned about whether the Services, which would
presumably cover smaller programs in this regard, have the requisite
capability. Having sufficient relevant cost- and engineering-related
capability is, needless to say, vital to ensuring that those
affordability and productivity initiatives will work as intended. Do
you agree that, currently, the relevant cost- and engineering-related
capabilities within the Department are insufficient to support your
affordability and productivity proposals now, and if so, how do you
intend to address those capability gaps?
Dr. Carter. The Department has cost and engineering capabilities
within the existing acquisition workforce to perform a range of
analytical trade studies critical to facilitating affordability
decisions. However, the Department recognizes that the size and
composition of this existing cost and engineering workforce must be
expanded to be able to apply those core capabilities to meet the more
detailed affordability analysis needs of all acquisition programs and
to more fully enhance those capabilities in support of Major Defense
Acquisition Programs.
The Department is committed to revitalizing cost-related
capabilities and reversing a decade-long decline in the organic
workforce. To get best value for taxpayers, DOD will enhance the cost-
estimating and pricing capability to improve program estimates and
ensure we price contracts appropriately. As reported in our April 2010
report to Congress ``The Defense Acquisition Workforce Improvement
Strategy fiscal year 2010,'' to improve quality, the Department is
expanding and improving training programs in this area. We have created
a separate cost-estimating career path within the Business career
field, and now require 7 instead of 4 years of experience to achieve
Level III certification. Currently, the Department has more than 900
cost-estimating positions in the DOD acquisition workforce supporting a
diverse set of technical and program activities. The cost analysis
capability at the program office level is supported and guided by
existing cost analysis organizations within each Component acquisition
product division and organizations at the Component headquarters level
that provide independent cost analyses to support Component Acquisition
Executive decisions. In the Office of the Secretary of Defense, the
Cost Assessment and Program Evaluation organization provides an
additional level of capability to provide estimates to inform
Department-level decisions on acquisition programs and their
affordability.
In terms of engineering-related capabilities within the acquisition
workforce, the Department currently has 38,000 positions in the
``Systems Planning Research Development Engineering (SPRDE)'' technical
workforce. The SPRDE workforce represents the Department's core
capabilities for executing the range of engineering trade-off studies
including life cycle cost modeling in all phases of the acquisition
process. These trade studies and modeling activities are critical to
making informed choices that impact system affordability.
38. Senator McCain. Dr. Carter, how long do you think it will be
before DOD and, in particular, the military departments will have the
relevant cost- and engineering-related capability needed to make those
initiatives work?
Dr. Carter. For cost-related capability: The Department has the
capability to make these initiatives work and is already seeing
examples to increase our confidence. The Department has been working
closely with the military departments on several MDAPs, with good
results from carefully thinking through requirements, costs and
engineering trade-offs. As Secretary Gates has said, ``There is no
silver bullet'' for changing how the Department conducts business, and
it will take time to fully implement these ideas across the Department
and inculcate these practices in all acquisition programs.
For engineering-related capability: As part of the Organization and
Capability Assessment efforts mandated by WSARA of 2009, the Department
is currently working with the military departments and agencies to
assess the current capability of the workforce members providing
engineering-related expertise. The Department possesses the
capabilities needed at the present time by using government personnel
with augmentation from systems engineering-focused Federally-Funded
Research and Development Centers and other contractor personnel. The
transition to an indigenous organization of government technical
personnel is in progress and is anticipated to take several years.
business transformation and protecting core competencies
39. Senator McCain. Dr. Carter, for a while now, I have called on
the DOD to achieve audit-ready financial statements. In my view, that
is vital to ensuring that taxpayer dollars are not being wasted,
stolen, or otherwise abused. But, that can only be achieved by getting
robust ``transaction-level'' accountability--through ``end-to-end''
business systems developed under a single, broad business enterprise
architecture plan. Much of the technical expertise that has supported
that effort has resided within the Office of Business Transformation
Agency (BTA). Now that the BTA will be dismantled under the savings and
efficiencies initiative, how will those skill sets be preserved and
cultivated and where will they go?
Dr. Carter. When the BTA was established in 2006, it was entrusted
with the mission of reforming and modernizing the Department's business
practices. In 2008, Congress created a Chief Management Officer (CMO)
and Deputy Chief Management Officer (DCMO) to improve business
operations from the highest levels of the Department. The Secretary
determined this arrangement is duplicative and that it is time to close
the BTA and consolidate some of its functions within the Office of the
DCMO and other organizations.
The DCMO is working with the Department's senior leadership to
ensure BTA's critical skillsets and functions are retained. While it is
premature to say specifically what the results of this effort will be,
statutorily required key drivers of our business transformation
efforts, such as the Business Enterprise Architecture, will continue to
be key management priorities. The Department is committed to
accomplishing the Secretary's vision of reducing overhead costs by
eliminating excess and duplication while still ensuring every taxpayer
dollar is well spent.
40. Senator McCain. Dr. Carter, what about other competencies
related to, for example, how the Department buys major systems--in
particular, those that actually enable savings and efficiency and are,
as such, worthy of increased investment?
Dr. Carter. The purpose of the efficiency initiative is to redirect
the Department's limited resources from unproductive to productive
purposes. A natural result of this process will be increased investment
in areas where the Department identifies more productive uses for our
limited resources. The Department will identify those areas for
increased investment by pursuing the five following goals: (1) Target
Affordability and Control Cost Growth; (2) Incentivize Productivity and
Innovation in Industry; (3) Promote Real Competition; (4) Improve
Tradecraft in Services Acquisition; and (5) Reduce Non-Productive
Processes and Bureaucracy. In parallel with these efficiency
initiatives the Department is continuing to build its acquisition
workforce, both in size and in capability.
41. Senator McCain. Dr. Carter, in those areas, the better we
perform in those areas, the more money will be saved for the taxpayer.
Are they subject to being cut under the initiative?
Dr. Carter. The Department will not cut the core competencies that
are saving the Department money; doing so would be inconsistent with
the goals of the Secretary's efficiency initiative.
42. Senator McCain. Dr. Carter, when will we get auditable
financial statements?
Dr. Carter. We recognize that Congress places a high priority on
the Department's audit readiness and that the National Defense
Authorization Act for Fiscal Year 2010 requires DOD to have fully
auditable financial statements by 2017. Achieving auditability is not
an easy task for the Department. However, the current approach put in
place by the Under Secretary of Defense (Comptroller) is sound.
The Department is focusing first on improving the quality,
accuracy, and reliability of the financial and asset information that
we use every day to manage the Department with clear near- and mid-term
goals. This approach lays the foundation for achieving auditability in
the most cost effective way, while simultaneously improving the daily
management of our financial enterprise. The Department has also created
a strong governance framework to manage its audit readiness efforts and
dedicated the necessary resources to the effort to achieve success.
Achieving auditability is dependent on a number of factors--such as
the successful implementation of many defense business systems,
including Enterprise Resource Planning Systems. With the successful
implementation of these systems, additional resources devoted to
financial improvement, and a well developed Financial Improvement and
Audit Readiness Plan, the Department should achieve significant
progress toward audit readiness by 2017.
insourcing
43. Senator McCain. Dr. Carter, Secretary Gates stated on August 9,
2010, his intent to discontinue the conversion of contracted work to
in-house work, also known as insourcing. The reason that he cited for
reversing course was that he wasn't seeing expected savings from
insourcing those jobs. Please elaborate on the lack of expected savings
from insourcing. Specifically, what has been the end result of 2 years
of growing the civilian personnel manning without assessing the long-
term impact in terms of benefits.
Dr. Carter. In April 2009, the Secretary announced that he wanted
to find $900 million in savings through insourcing a specific segment
of contracted services. These positions were insourced and the $900
million goal was reached, but these positions were only about 1 percent
of all contracted services. While we were insourcing this small segment
of services, we were also spending a lot more on providing most other
services. The net increase turned out to be more than $5 billion from
fiscal year 2009 to fiscal year 2010. While insourcing remains an
appropriate course of action in cases where contracted functions would
be more effectively performed by government personnel, we must focus on
reducing our total growth. For DOD organizations where the Secretary
has directed us to limit organizational growth, in-sourcing efforts are
being evaluated in terms of mission priorities and, where appropriate,
exceptions for in-sourcing may be submitted.
44. Senator McCain. Dr. Carter, despite Secretary Gates' statement,
I understand that, in actuality, the Department is not reversing its
insourcing initiative. While there will be a billet freeze on DOD
components (other than the military departments), insourcing within the
military departments will not only continue but it will continue at its
original pace. Is this correct? Can you clarify Secretary Gates'
current plan on insourcing?
Dr. Carter. All DOD components are reviewing contracted services
and providing consideration for in-sourcing those services. There are
DOD organizations at which no contracted services have been identified
as appropriate for in-sourcing but no DOD organizations are outright
exempted from in-sourcing. For DOD organizations where the Secretary
has directed to limit organizational growth, in-sourcing efforts are
being evaluated in terms of mission priorities and, where appropriate,
exceptions for in-sourcing related growth may be submitted.
45. Senator McCain. Dr. Carter, in those cases where you do a cost
analysis to determine whether insourcing would be more cost-effective
than outsourcing, problems exist with the quality of these analyses
(e.g., bad or old data, assumptions, et cetera). As the Department
continues its in-sourcing initiative, to what extent will those
business cases be done openly and transparently--to ensure their
fidelity?
Dr. Carter. When cost effectiveness is the determining factor for
in-sourcing contracted services, such as those services determined to
be not inherently governmental, not closely associated with inherently
governmental, or not otherwise exempted from private sector performance
(i.e., to mitigate risk, ensure continuity of operations, build
internal capacity, maintain control and oversight of operations, meet
readiness needs, etc.) cost analyses are required to be done in
accordance with the business rules set forth in Directive Type
Memorandum (DTM) 09-077.
This DTM establishes business rules for use in estimating and
comparing the full costs of military and DOD civilian manpower and
contract support. The full costs of manpower include current and
deferred compensation costs paid in cash and in-kind as well as non-
compensation costs. The DTM mandates that DOD components shall use the
business rules to estimate the full costs of the defense workforce in
support of strategic planning, defense acquisition, and force structure
decisions, as well as when performing an economic analysis in support
of workforce decisions. This includes, but is not limited to,
determining the workforce mix of new or expanding mission requirements
that are not inherently governmental or exempt from private-sector
performance. The DOD Components shall also use the business rules to
decide whether to use DOD civilians to perform functions that are
currently being performed by contractors but could be performed by DOD
civilians. All DOD Components must adhere to these rules which are
publicly available via the DOD's issuances website. Additionally, the
cost factors the DTM requires for consideration are all in the public
domain.
Individual cost analyses in support of in-sourcing actions are not
made publicly available by the Department due to concerns over the
inclusion/release of private sector propriety pricing information and
business sensitive information. Furthermore, public release of cost
analyses could put at risk the integrity and fidelity of future
procurements and the ability of affected private sector interests to be
competitive. Firms affected by individual in-sourcing decisions may
request a cost analysis through Freedom of Information Act (FOIA)
channels. Requests will be reviewed and adjudicated in accordance with
all standard FOIA regulations and Department practices.
46. Senator McCain. Dr. Carter, what, if anything, are you doing to
ensure that openness and transparency across the military departments,
in particular?
Dr. Carter. Our acquisition workforce strategic plan, available to
the public online, at https://acc.dau.mil/acquisitionworkforce, details
our workforce strategies, key measures, and initiatives. DOD provided
this plan, which includes appendices for each of the Military
Departments, to Congress in April 2010. Openness and transparency are
also achieved by sharing and reviewing progress at the defense
acquisition workforce senior steering board that I chair and is
composed of senior acquisition component and functional leaders.
47. Senator McCain. Dr. Carter, what, if anything, are you doing to
ensure that your proposal on insourcing is being implemented properly
and consistently among all the military departments?
Dr. Carter. When it comes to my efforts to rebuild the capacity and
capability of the Defense Acquisition Workforce, in part through
insourcing contracted services, I have supplemented Deputy Secretary
Lynn's and other Department-wide policies implementing statutory
workforce shaping with guidance directly geared to the acquisition
community and its leaders. To date, our monitoring of growth resulting
from insourcing within the acquisition workforce, consistent with our
human capital planning efforts, is strengthening our in-house
engineering and program management capability. This growth is
consistent with our broader strategies to strengthen key in-house
acquisition workforce capability.
adjusting progress payments to incentivize performance
48. Senator McCain. Dr. Carter, as you of course know, from a
financing perspective, how the DOD customarily pays its bills (that is,
upfront, regularly and often before the contractor performs) tends to
overwhelmingly favor industry. So, without any benefit to the taxpayer,
the DOD tends to provide industry with a high cash flow return on
invested capital. I'm intrigued about what you intend to do to change
that. Please explain what you intend to do more fully.
Dr. Carter. There will be short- and longer-term aspects to this
initiative to insure we are being fair to industry while protecting the
interests of the taxpayer.
The current Federal Acquisition Regulations states that when
Government financing is provided, Performance Based Payments (PBPs) are
the preferred method on fixed price contracts. PBPs provide financing
up to a maximum of 90 percent of the contract price which provides
considerably better cash flow to the contractor than customary progress
payments which, for large businesses, provide 80 percent of the
contract cost. The financial value of this better cash flow is
measurable. Based on Department data, it does not appear that the
Government has been receiving adequate consideration when PBPs are
used.
My September 14th memorandum entitled ``Better Buying Power:
Guidance for Obtaining Greater Efficiency and Productivity in Defense
Spending'' stated that the Department will negotiate prices on the
basis of customary progress payments and then consider an arrangement
that provides better cash flow to the contractor and negotiate adequate
consideration. The Department is developing a tool (cash flow model)
that will be made available and mandated for use by all contracting
officers when the Government provides PBPs in lieu of customary
progress payments. This tool will also be adapted for use in other
situations in which improved cash flow might be provided to the
contractor. Since industry and the Government have a different view of
the time-value of money, a win-win solution (Lower Price for Better
Cash Flow) can be identified. This use of the tool will allow both
sides to benefit fairly from the improved cash flow.
Longer term, the Department is examining the structured approach
(Weighted Guidelines) used to develop Government profit objectives on
contracts. The impact of contract financing will be a part of this
review to ensure the benefits of cash flow are adequately addressed in
the profit policy. Changes to profit policy require changes to
associated regulations and public input and comment, which will take
longer to implement.
49. Senator McCain. Dr. Carter, do you have even a rough sense of
how much taxpayers could benefit from this particular initiative?
Dr. Carter. Based on data collected in the Department's profit
reporting system, a conservative estimate of savings would be
approximately hundreds of millions per year based on the value of
contracts using Performance Based Payments as the method of contract
financing.
eliminating low value added statutory processes
50. Senator McCain. Dr. Carter, among the internal processes that
you have identified as providing little value are certain Nunn-McCurdy
reviews--in particular ``full'' reviews of programs that have grown in
cost only because of changes in how many units we want to buy. I
understand that, in those cases, you want some relief. We have,
however, come far in changing Nunn-McCurdy from just a ``paper tiger''
into a tool that can help keep program costs from growing excessively.
Also, bear in mind, that all too many times, we have had to cut how
much we intend to buy in a program precisely because that program has
been poorly managed or because it's otherwise poorly performed. Rarely
do so-called ``technical'' breaches (a term that has no meaning in any
DOD Instruction or other authority, by the way) occur in a vacuum. So,
I would strongly suggest caution here. Regarding Nunn-McCurdy, please
explain exactly what you identify to be the problem here and what you
have in mind to have the process changed.
Dr. Carter. I fully support the Nunn-McCurdy process, to include
the recent improvements that were made by the WSARA of 2009. The
Department takes each of these breaches very seriously, and we conduct
the prescribed review according to the provisions of the statute.
However, each review is costly to perform and should be avoided when
the critical breach is caused primarily by a change in quantity that
was made in response to changes in threat or other fielding
requirements and not the result of poor performance or mismanagement.
For example, the Army Acquisition Objective for the Guided Multiple
Launch Rocket System and, more recently, the Excalibur projectile
program were both reduced by more than 70 percent due to an approved
change in force requirements. Due to a learning curve and the
amortization of development costs, significant quantity reductions
frequently result in critical Nunn-McCurdy breaches.
My proposed revision to section 2433a of title 10, U.S.C., would
reduce the statutory requirements for critical Nunn-McCurdy breaches
caused primarily by quantity changes (as long as the quantity change
was not made as a result of an increase in unit cost). In our proposal,
the root cause of the cost growth would need to be validated by the
WSARA-created office of Program Assessment & Root Cause Analysis. Since
the statutory requirements of a Nunn-McCurdy critical breach under
section 2433a are extensive, this section would reduce the requirements
for quantity-related critical breaches. That is, for the review, only a
root cause analysis would be conducted to substantiate the causal
effects of the quantity change, followed by a written statement from me
that it is in the best interests of the Government to continue the
acquisition program notwithstanding the increase in unit cost.
51. Senator McCain. Dr. Carter, similar to your proposal on Nunn-
McCurdy, I am concerned about your interest in relieving the Department
from doing so-called ``look-back'' milestone certifications for
programs that are already in the development and production pipeline.
As you of course know, this committee's interest here arose from high-
profile examples of big weapons acquisition weapons being ``put on
rails'' almost right after they started. That resulted in billions of
dollars of the taxpayers' money invested without, for example,
alternatives ever having been analyzed, critical technologies having
matured, design drawings having been reviewed, et cetera. So, we made
these milestone elements that needed to be certified to and, for
programs already in the pipeline, required the DOD to go back and make
sure these things were done. I believe that what this committee did
here was a move in the right direction. So, just as with Nunn-McCurdy,
I would similarly caution care here in changing the current requirement
dramatically. Please explain what exactly the problem is and how
Congress can help you address it.
Dr. Carter. The Department requests the repeal of requirements to
perform retroactive certifications. The process of applying the
certification criteria retroactively to programs that had already
received Milestone (MS) A or MS B approval prior to enactment of WSARA
provides, at best, marginal utility as a forensic tool and, at worst,
is a non-productive use of the Department's limited funding and
personnel resources. Personnel resources available across the
enterprise were inadequate to review all of the 50-plus programs
(identified for retroactive certification) against the appropriate
certification criteria within the time allotted by WSARA. As one
example of the burden, both the 2366a and 2366b certification criteria
require an independent cost estimate (ICE) to be performed. Even if the
Department's cost estimation personnel had been wholly dedicated to
just that task--forsaking all work on programs that are currently
approaching Milestone events or that have experienced unit cost
breaches--the Director of Cost Assessment and Program Evaluation could
not have completed the necessary 50-plus ICEs with the current number
of personnel within the allotted timeframe. The Department's resources
are best employed toward focusing on the appropriate certification
activities for programs currently approaching a Milestone decision
event, rather than attempting to apply those certification criteria to
programs already well-past those events. The lack of a real benefit
proportionate with the personnel and resource costs of doing
retroactive certifications is even more evident in the case of those
programs that had already entered the Production and Deployment phase.
52. Senator McCain. Dr. Carter, you also assert that organizational
changes that Congress mandated within your organization (that is, at
Acquisitions, Technology and Logistics) may require a relook or an
adjustment. In the WSARA of 2009, we required certain organizational
changes where, with the benefit of analysis done by or for the DOD, we
found that some functional areas within your organization that are
vital to effective program management and oversight had atrophied. In
those areas (like developmental testing, systems engineering, and cost-
estimating), we concluded that additional investment would likely
result in greater savings. Now, however, you say that you need
``flexibility'' to resource your organization. Please describe exactly
what the problem is here and specifically what you propose in this
area. Exactly how does your proposal here derogate from organizational
changes that Congress (and this committee) required?
Dr. Carter. In support of continuing to implement WSARA and
continuing to stand up the responsible offices, AT&L has requested that
the remaining WSARA resources be exempted from the Secretary's
authorization freeze, to adequately staff the Systems Engineering,
Developmental Test & Evaluation and Performance Assessment & Root Cause
Analysis offices.
AT&L needs to implement WSARA while also finding ``efficiencies''
in our workforce by putting the right people in the right positions,
which may require resource flexibility to fill the desired acquisition
billets.
technological readiness level reviews
53. Senator McCain. Dr. Carter, I understand that among the OSD-
level reviews, you would like to change at reviews for ``technological
readiness levels'' (TRL). As you of course know, these reviews are
vital to informing the Department's investment decisions on programs
early in the defense acquisition system and to managing those programs
effectively. For those same reasons, this committee has been pushing
the Department to review engineering and integration risk similarly.
But, you would like to eliminate the OSD's review of those kinds of
risk from its TRL review. If that's done, at what point would the
Department independently vet engineering and integration risk so as to
inform its investment decisions on major systems?
Dr. Carter. The DDR&E has cognizance over both research and systems
engineering. In response to my concerns about how the Technology
Readiness Level review and certification process has grown well beyond
our original intent, his research staff is currently finalizing a new
approach for evaluating technologies and associated risks to inform
both program managers and the Defense Acquisition Board decisions. On
the other hand, I look to the engineering staff to assess independently
the engineering and integration risks associated with systems and
systems of systems. They support this effort by conducting Program
Support Reviews prior to milestones to assess the adequacy of the
planning and execution of technical and management activities, which
include engineering and integration efforts. Results are presented to
the Overarching Integrated Product Team, and a risk assessment is
presented at my Defense Acquisition Board meetings. These engineers
also maintain continuous engagement with programs to monitor progress
and technical risk mitigation activities.
service support contracts
54. Senator McCain. Mr. Lynn, Secretary Gates has stated many times
that health care costs are unsustainable within the Department's budget
and will impinge on readiness if unconstrained. The President's budget
requested over $16 billion for care purchased from civilian providers
through large health care contracts, an increase of approximately $1.5
billion from the previous year. In March 2008, the Department announced
a new acquisition program for DOD purchased care, known as the Third
Generation of Contracts (T-3). This program was designed to encourage
competition, improve contractor performance, weed out fraud and abuse,
and achieve cost savings. 18 months later, only one of three contracts
has been signed; two others remain in dispute or discussion as a result
of flaws in the acquisition process. As a result, in addition to not
achieving anticipated savings in the new contracts, billions have been
expended by the Department in extension of the existing contracts,
which is never advantageous to the taxpayer. Several weeks ago we were
informed that the Department is now beginning to design yet another
version of these contracts, known as T-4, before the previous version
has even been awarded. These are some of the largest service support
contracts in DOD. Is any effort underway to examine the acquisition
system that has resulted in obvious ``inefficiency'' in proceeding with
this program?
Mr. Lynn. Yes, there is an effort underway to examine the
acquisition system. In early 2010, the Assistant Secretary of Defense
for Health Affairs appointed a Component Acquisition Executive (CAE),
as defined in the DOD 5000 series of directives pertaining to managing
the Defense Acquisition System. Following this action, DOD developed a
variety of improvements and infrastructure of the acquisition process
for the Military Health System. For example,
(a) The CAE hired and appointed an Acquisition Career Manager to
oversee identification and certification of the acquisition workforce,
including conducting a survey to identify the acquisition workforce.
(b) The CAE also hired 9 contract specialist developmental
positions in fiscal year 2010 with plans to hire an additional 22
developmental positions in various acquisition career fields in fiscal
year 2011 and beyond to improve TMA's ability to efficiently execute
timely acquisitions. The CAE is also in the process of identifying and
appointing Program Executive Officers and Program Managers for major
acquisitions. To facilitate this effort, the CAE hired professionals in
program management, systems engineering, and logistics for the CAE
staff to oversee TMA programs and ensure they meet the DOD 5000 series
requirements.
(c) In addition, the CAE is hosting the first ever Industry Day to
provide transparency into TMA information technology acquisitions.
(d) The CAE is aggressively insourcing contract support personnel
to reduce reliance on contractors and is conducting a spend analysis to
identify opportunities for strategic sourcing to reduce duplicative
acquisition requirements and improve the Government's buying power.
At the same time, as part of initiatives announced by the Secretary
of Defense; the Under Secretary of Defense for Acquisition, Technology,
and Logistics; and the Assistant Secretary of Defense for Health
Affairs/TRICARE Management Activity are reviewing various acquisition
initiatives with a goal to reduce expenditures of our managed care
contracts.
55. Senator McCain. Mr. Lynn, why begin design of a new contract,
without the benefit of experience under the proposed improvement?
Mr. Lynn. The Department began the design of a new contract
acquisition process because the acquisition process is lengthy and
requires deliberation in order to obtain the best value for the
Department. We believe that one of the mistakes made in the past was
not addressing future requirements soon enough to allow for full
vetting of requirements and approaches. The Third Generation of TRICARE
Contracts (T-3) current contracts consist of incremental changes from
those under the Next Generation of TRICARE (TNEX).
The Twenty-One Total Technology (T4) group will be determining
appropriate actions during the second year of T-3 delivery and any
potential statutory or regulatory changes that may be sought could be
underway with resolution in the third year of service delivery. This
schedule allows 18 to 24 months to process the follow-on acquisition in
order to have contracts in place by the end of the current contracts.
Contracts option exercises are granted for 1 year. The Department
has a unilateral right to exercise, or not, those options. If the
Department is able to identify efficiencies and cost reduction through
a new approach to the acquisition of health care, it would be
advantageous to the Government to pursue potential additional savings,
even if it results in less than 5 years of delivery under the T-3
contracts.
cost share increases
56. Senator McCain. Mr. Lynn, in view of the comments about the
need to control health care costs, it would come as no surprise to me
if discussions were not already underway within the Department on
specific cost saving proposals. I hope that the Department has learned
from previous mistakes and will consult with Congress, as Secretary
Gates has pledged, before proposing changes in medical benefits. We
also expect the Department to consult with beneficiary organizations as
well prior to proposing changes in the DOD medical program. Can we get
those commitments from you now?
Mr. Lynn. The Department is currently considering specific cost
saving proposals in the DOD and some of those do involve health care
costs. However, these proposals are still being reviewed. At this time,
it would be premature for congressional consultation. At the
appropriate time, we will consult with Congress and discuss these with
beneficiary organizations.
capability portfolio reviews
57. Senator McCain. Dr. Carter, in your guidance memo of 14
September, you indicated that you plan to conduct capability portfolio
reviews similar to the Army's review, which led to the cancellation of
the Non-Line-of-Sight Launch System (NLOS-LS). Will your reviews be
confined to acquisition programs only? Or will you review Services'
contracts as well?
Dr. Carter. We currently only plan to conduct capability portfolio
reviews on acquisition programs. OSD-level assessments of services
contracts that are valued at $1 billion or more have and will continue
to entail three elements: (1) Review and approval of acquisition
strategies to ensure alignment with the Department's architecture for
service contracts; (2) Pre-award peer reviews to ensure new service
contracts are executed in accordance with law and regulation
considering best practices and lessons learned; and (3) Post-award peer
reviews to evaluate whether service contractors are delivering value
and whether the government team is providing effective oversight. As
our management of service contracts matures we will consider whether or
not to conduct portfolio reviews of certain types of service contracts.
58. Senator McCain. Dr. Carter, will those programs reviewed by
your office be limited by dollar threshold (e.g. ACAT Level 1 only), by
special interest items, or by some other criteria?
Dr. Carter. The reviews are intended to identify redundancies in
warfighting portfolios. That is, I want to ensure that decisions on
whether to pursue a specific acquisition program are based on whether a
portfolio of systems and programs taken together provide all or most of
the needed capability. As such, the portfolio reviews will not be
limited by dollar thresholds.
59. Senator McCain. Dr. Carter, when defense-wide/joint
capabilities overlap with Service-specific capabilities, who will
conduct the review, your office or the Service?
Dr. Carter. Generally, my staff will lead those portfolio reviews
at the joint and Department-wide level. However, we expect all
stakeholders to participate.
60. Senator McCain. Dr. Carter, what is your time frame for
completing the first two defense-wide reviews of Ground Moving Target
Indicator (GMTI) systems and Integrated Air and Missile Defense (IAMD)
systems?
Dr. Carter. For both of these studies, the initial phase of the
study has been completed and is in the process of being briefed to
senior leaders to determine if further analysis is required.
61. Senator McCain. Dr. Carter, would you be willing to brief the
committee on the results of these reviews once finalized?
Dr. Carter. The IAMD and GMTI reviews will inform the fiscal year
2012 President's Budget (PB) deliberations. As such, they will not be
completely finalized until the PB is released. Until then, they are
pre-decisional, and we would not plan to brief them; however, I will be
happy to discuss the results after the PB is submitted.
62. Senator McCain. Dr. Carter, what subsequent portfolio reviews
do you plan on conducting?
Dr. Carter. We have not directed additional portfolio reviews at
the Department or joint level at this time. The Component and Agency
Acquisition Executives will be conducting portfolio reviews to inform
individual program milestone decisions and budget decisions.
63. Senator McCain. Dr. Carter, in the same letter, you also
directed the Services to conduct review for smaller programs. On its
own initiative, the Army has already conducted/is conducting numerous
reviews. Have those reviews been sent to you yet?
Dr. Carter. Not yet. My specific direction was to conduct reviews
of ACAT II and III programs to identify and eliminate redundancy and to
provide a report on the results of those reviews, with the first report
due March 1, 2011. My intent in directing these portfolio reviews of
smaller programs was to have the Component and Agency Acquisition
Executives examine their smaller programs and look for opportunities to
shift resources within their own portfolios from redundancy or low-
value added programs to other programs that provide warfighting
capability.
64. Senator McCain. Dr. Carter, what deadline will the Services
have to meet in conducting their own reviews?
Dr. Carter. AT&L has asked for a report on the results of Component
and Agency Acquisition Executive portfolios by March 1, 2011, and
annually thereafter. However, there is not a specific deadline for them
to conduct their reviews.
65. Senator McCain. Dr. Carter, what will the process be for your
review of their work?
Dr. Carter. The Component and Agency Acquisition Executives will
provide reports on the results of their portfolio reviews on March 1,
2011, and annually thereafter. These results will inform both
individual program decisions and budget deliberations.
66. Senator McCain. Dr. Carter, what will happen if you disagree
with a Service's findings/conclusion on their own program?
Dr. Carter. The Services' reviews will inform individual program
decisions and budget deliberations. If the Services and AT&L come to
different conclusions, additional analysis may be performed to resolve
uncertainties. In some cases decisions may be taken through the DAB
process or the budget process that differs from Service-preferred
positions.
______
Questions Submitted by Senator James M. Inhofe
efficiency initiative
67. Senator Inhofe. Mr. Lynn, Dr. Carter, and General Cartwright,
while I support the overall efficiency initiative begun by DOD, I also
have several concerns. First, it appears the $100 billion savings
number was chosen to compensate for a decreasing defense budget,
projected to only be 1 percent real growth. Secretary Gates has said
the military needs about 2 to 3 percent real growth in its
modernization and force structure accounts to maintain the force.
Projected savings are approx $7 billion in fiscal year 2010, $11
billion in fiscal year 2013, $19 billion in fiscal year 2014, $28
billion in fiscal year 2015, and $37 billion in fiscal year 2016. Next
year, each of the Services has a bogie savings of approximately $2
billion. What percentage of internal budget growth will this savings
provide DOD? Is it enough to modernize and sustain our military or will
Congress see more defense cuts along with the cuts that are driving
these savings?
Mr. Lynn, Dr. Carter, and General Cartwright. The Secretary has
been very clear that he does not support any reduction to the Defense
topline. He continues to feel that modest growth in the Defense budget
is absolutely essential to meet the national security challenges of
today. The intent of the current initiatives is to reduce funding for
support efforts, the so-called ``tail'' portion of the Defense budget,
and increase funding for readiness and modernization, the so-called
``tooth'' portion of the Defense budget. As the Department shifts $100
billion into warfighting needs, the Nation will gain a much more
capable Defense force for the foreseeable future.
68. Senator Inhofe. Mr. Lynn, Dr. Carter, and General Cartwright,
what analysis went into selecting the targeted budget savings each year
and the overall $100 billion savings target?
Mr. Lynn, Dr. Carter, and General Cartwright. Secretary Gates
explained that the Department needs 2 to 3 percent real growth in order
to sustain the force. In order to achieve this growth, he realized that
we needed to scrutinize all of our spending and specifically reduce low
priority accounts like overhead. Given that such profound changes in
our spending patterns would require equally profound changes in
behavior, the Secretary and the Chairman settled on $100 billion in
savings as an amount that would both free up a sufficient amount of
resources and force behavioral change.
69. Senator Inhofe. Mr. Lynn, Dr. Carter, and General Cartwright,
what is the analysis that shows these savings are achievable?
Mr. Lynn, Dr. Carter, and General Cartwright. As he considered this
decision, the Secretary received a variety of information concerning
combatant commands, Defense agencies, and the OSD staff, including
missions, staffing levels, and other data. He spent considerable time
discussing alternatives, critically considering the input of his most
senior advisors, including the Chairman and Vice Chairman of the Joint
Staff, the Deputy Secretary of Defense, the outgoing JFCOM Commander,
and others.
70. Senator Inhofe. Mr. Lynn, Dr. Carter, and General Cartwright,
what happens if they cannot or do not achieve their target savings?
Mr. Lynn, Dr. Carter, and General Cartwright. These initiatives are
as much about changing from a culture of spending to a culture of
savings as they are about achieving specific fiscal targets. While I
have no reason to doubt that we will achieve our targets, I can tell
you that the pressure to continue to be vigilant about carefully
allocating resources will continue regardless of this year's outcome.
71. Senator Inhofe. Mr. Lynn, Dr. Carter, and General Cartwright,
what analysis is going into the cuts being proposed by each of the
Services?
Mr. Lynn, Dr. Carter, and General Cartwright. Efforts are currently
underway to assess the Services' excess overhead costs versus
investments in force structure, warfighting capabilities, and
modernization programs. We are reviewing and tracking the service
submissions, and the fiscal year 2012 budget will reflect the results
when it is submitted in February 2011.
72. Senator Inhofe. Mr. Lynn, Dr Carter, and General Cartwright,
this efficiency initiative also reduces the total number of support
contractors by 10 percent for the next 3 years, reduces funding for
congressionally mandated studies by 25 percent, cuts funding for boards
and commissions by 25 percent, reduces intelligence advisory and
assistance contract funding by 10 percent, and cuts some organizations
such as JFCOM. What analysis went into selecting the reduction
percentages I just mentioned?
Mr. Lynn, Dr. Carter, and General Cartwright. The Secretary
embarked upon a four-track approach aimed at making the Department more
efficient and effective. Before taking any action, the Secretary
received various assessments that indicated that efficiencies would be
gained by taking the actions announced in August 2010. These cuts were
enacted to create persistent decreases in the substantial growth in
these areas over the last 9 years.
73. Senator Inhofe. Mr. Lynn, Dr. Carter, and General Cartwright,
did that analysis look at potential impacts of those cuts?
Mr. Lynn, Dr. Carter, and General Cartwright. Yes. We continue to
monitor these effects as we implement the cuts.
74. Senator Inhofe. Mr. Lynn, Dr. Carter, and General Cartwright,
are those hard numbers or will they be based on future assessments,
meaning the numbers could be more or less than the targeted percentage?
Mr. Lynn, Dr. Carter, and General Cartwright. The Department will
continually evaluate the numbers in an effort to further the
Secretary's efficiency goals.
readiness
75. Senator Inhofe. Mr. Lynn, Dr. Carter, and General Cartwright,
during a difficult economy, resources must be focused on our forces,
future capabilities, and our troops. It is critical for DOD and
Congress to work together to increase effectiveness and efficiencies
but with a bottom line of always providing the necessary funds so that
our troops are the best trained and equipped military in the world.
While the savings are internal and not a top line budget cut, people
and things will be cut. What is DOD's plan to coordinate with Congress
on attaining these savings?
Mr. Lynn, Dr. Carter, and General Cartwright. The Department will
provide details on all savings proposals no later than the time when
the fiscal year 2012 President's budget request is submitted.
76. Senator Inhofe. Mr. Lynn, Dr. Carter, and General Cartwright,
when will Congress be informed of the proposed areas that will generate
the savings in fiscal year 2012 and beyond?
Mr. Lynn, Dr. Carter, and General Cartwright. The Department will
provide details on all savings proposals no later than the time when
the fiscal year 2012 President's budget request is submitted.
defense spending, efficiencies, and acquisition reform
77. Senator Inhofe. Mr. Lynn, Dr. Carter, and General Cartwright,
since the end of the Cold War, our military has done much more with
much less. Our troops on the front lines are forced to use equipment
that is well past its service life, in some instances by 30 years. The
equipment problem is compounded by the fact that the pace at which we
are purchasing new equipment has been drastically scaled back. The fact
that Secretary Gates is trying to scrape together $100 billion over the
next 5 years from various accounts across DOD in order to fund
modernization efforts is evidence that current spending will not
sustain our military. Again, while I support this initiative, I firmly
believe that alone it will not provide the funding for modernization
and sustainment of our military.
In addition to Congress and DOD working together to increase
effectiveness and efficiency, Congress must increase overall DOD
funding and streamline the acquisition process with legitimate and
continued reform. Secretary Gates and Admiral Mullen have both talked
about a goal of setting a target for base or core defense spending . .
. the number used has been 4 percent and I agree with them. This level
of spending will guarantee our qualitative and technological
superiority, increase our military's capability to fight across the
full spectrum of warfare, and operate at higher readiness rates with
lower costs.
This increased spending must accompany continued acquisition
reform. We cannot sustain our military when programs are running 8
years behind schedule and 150 percent over budget.
Unfortunately, our answer is to grow our acquisition bureaucracy
and procurement process to provide additional oversight. This result
has often been less accountability due to diffused responsibilities and
a slowing of the entire process. We currently have Program Managers
spending most of their time managing oversight requirements instead of
managing their actual programs. Result is increased costs, delays in
procurement times, cancelled programs, and wasted funds.
Congress and the DOD must reduce the complexity of the process by
removing the multiple layers of oversight and the cumbersome reporting
requirements and regulations.
What would you think about creating a Congressional and Executive
Branch Bipartisan Task Force focused on reforming our Federal
acquisition process . . . a task force targeted at reducing and
streamlining our Federal acquisition regulations, maintaining oversight
but consolidating and reducing reporting requirements, and given the
authority to effect all areas of our acquisition process from bids
through procurement with the goal of cost savings, efficiency, and
timeliness for the production of military hardware?
Mr. Lynn and Dr. Carter. The Department shares your concern
regarding the acquisition process and the challenges we face as we seek
to modernize our forces and weapon systems. As part of the Secretary's
broad initiative to improve the American taxpayer's return on his
investment in national defense, Secretary Gates has tasked us to
improve the Department's buying power and attempt to ``fix'' many of
the areas you bring to light.
To put it bluntly, we cannot support our troops with the
capabilities they need unless we do this. Our challenge is to sustain a
military at war, take care of our troops and their families, and invest
in new capabilities--all in an era when defense budgets will not be
growing as rapidly as they were in the years following September 11.
The Department welcomes the opportunity to work with members of
Congress and staff, and we are appreciative of Congress' generous
support for the Department's modernization programs. At this time,
however, we do not support a congressional and bipartisan Task Force.
We believe we can and are addressing these problems effectively. The
recent WSARA and the measures we are putting in place to strengthen the
acquisition workforce under the Defense Acquisition Workforce
Improvement Act of 1990 need to be given a chance to succeed.
General Cartwright. I agree with the urgent need to improve our
acquisition processes. In fact, the type of reform proposed is being
pursued aggressively on two fronts.
The Joint Staff, in partnership with the military departments and
OSD, is reassessing the Joint Capability Integration System (JCIDS)
process to improve responsiveness and decision support to the Joint
Requirements Oversight Council (JROC), to include affordability-based
conclusions. In order to improve our efficiency, the Chairman also
recommended fiscal year 2011 legislative changes. These changes would
expand the JROC to formally include, by direction of the Chairman, a
combatant commander when matters related to the area of responsibility
or functions of that command will be under consideration by the
Council. This proposal also extends advisory status to select
principals in OSD and to other civilian officials as deemed necessary
by the Secretary of Defense. The Joint Staff will again, as part of the
fiscal year 2012 legislative proposals process, recommend this
legislative action.
Concurrently, OSD is conducting a top-down assessment, directed by
Dr. Ashton Carter, to restore affordability and productivity in defense
spending.
We look forward to working with the oversight committees to
continue to make progress on these critical issues.
strengthening the acquisition workforce
78. Senator Inhofe. Mr. Lynn and Dr. Carter, one critical component
of this initiative is estimating costs. Whether it is ``Should-Cost''
or ``Will-Cost'', DOD needs accurate cost estimates. In conjunction
with the passage of the WSARA of 2009, DOD has been increasing the size
of its acquisition workforce. At the same time, it is also attempting
to increase the skill levels and experience of that work force.
Secretary Carter, you have acknowledged the need to improve the
quantity and quality of the acquisition work force. What is the current
status of our acquisition workforce?
Mr. Lynn and Dr. Carter. Secretary Gates' initiative to strengthen
the acquisition workforce, announced in April 2009, is well underway.
We have completed 7,000 of the planned 20,000 new hires. Targeted
growth and other quality-focused initiatives are strengthening our
engineering, contracting, cost estimating, and other critical skill
capabilities and capacity.
79. Senator Inhofe. Mr. Lynn and Dr. Carter, what is the project
end state growth of the acquisition workforce?
Mr. Lynn and Dr. Carter. The Department continues to pursue the
President's March 2009 direction to ensure the acquisition workforce
has the right capability and capacity. The President's fiscal year 2011
budget request provides for continuing the Secretary of Defense
initiative to grow the acquisition workforce by 20,000 positions by
2015. While DOD force planning and requirements will evolve, the
current estimate of workforce size by 2015 is 155,000.
80. Senator Inhofe. Mr. Lynn and Dr. Carter, what is the impact of
this efficiency initiative on the workload for the existing workforce?
Mr. Lynn and Dr. Carter. Our initiatives to improve buying power
include targeting affordability and cost growth, incentivizing
productivity and innovation in industry, promoting real competition,
improving tradecraft in services acquisition, and reducing non-
productive processes and bureaucracy. While these initiatives will
focus acquisition workforce effort, they are not new and should be part
of our normal expected workload as we accomplish the business of
acquisition. DOD efforts to strengthen the acquisition workforce in
size and quality are key to successful implementation of our
acquisition reform efforts to improve how we buy and our buying power.
81. Senator Inhofe. Mr. Lynn and Dr. Carter, how will another cost
estimate expedite our acquisition process?
Mr. Lynn and Dr. Carter. Our intention is to employ ``should cost
analysis'' [the additional cost estimate we believe you refer to] to
drive productivity improvement into our programs and make the most
efficient use of every taxpayer dollar. We want our program managers to
scrutinize every element of program cost, assessing whether each
element can be reduced relative to the year before, challenging
learning curves, dissecting overheads and indirect costs, and targeting
cost reduction with profit incentive--in short executing to what the
program ``should cost.'' The objective is to more efficiently manage
scarce resources and drive leanness into each program. Should cost
analysis is not specifically designed to expedite the acquisition
process, but the information resulting from the analysis will
facilitate better business arrangements, improved program planning, and
promote more predictable cost, schedule and performance outcomes.
______
Questions Submitted by Senator John Thune
force structure sustainment and modernization
82. Senator Thune. Dr. Carter and General Cartwright, as you know,
Secretary Gates stated in his May 8, 2010, speech at the Eisenhower
Library that ``the fact that we are a nation at war . . . calls for
sustaining the current military force structure'' and that the goal of
this efficiencies initiative is to ``cut our overhead costs and to
transfer those savings to force structure and modernization within the
programmed budget.''
On August 9, 2010, Secretary Gates stated that ``the task before us
is . . . to significantly reduce [the department's] excess overhead
costs and apply the savings to force structure and modernization.'' Yet
over the summer, there have been rumors that the B-1 bomber fleet,
which has been a near constant presence above Afghanistan throughout
the war, might be proposed to be retired in pursuit of the $2 billion
in savings the Air Force is required to find under this initiative.
General Petraeus was before this committee just a few months ago and
spoke very highly of the B-1's presence and performance in Afghanistan.
So I'm perplexed by rumors such as these that propose retirement of the
B-1 fleet to obtain the required savings, in light of Secretary Gates'
emphasis on sustaining and modernizing our force structure.
Cutting force structure to find savings under this efficiencies
initiative contradicts Secretary Gates' directive to cut overhead costs
and transfer those savings to force structure and modernization, does
it not?
Dr. Carter and General Cartwright. The efficiencies initiatives
will not cut force structure. The goal is to reduce excess overhead
costs and apply the savings to operational forces and modernization.
83. Senator Thune. Dr. Carter and General Cartwright, can you
confirm that the Department is looking only at bureaucratic
redundancies and overhead and will not reduce force structure in order
to provide the savings the Department seeks?
Dr. Carter and General Cartwright. The Department is determined to
protect current and future warfighting ability. In pursuit of this
goal, we are considering how to best allocate our scarce resources to
maximize our capabilities. These considerations remain under review and
deliberations.
84. Senator Thune. Dr. Carter and General Cartwright, has Secretary
Gates issued a mandate which directs the Services to look beyond
bureaucratic inefficiencies and redundancies and consider reducing
current force structure as a means to modernize and recapitalize the
current force structure? If so, please provide a copy of that mandate.
Dr. Carter and General Cartwright. The Secretary has not issued
such a mandate.
reducing force structure
85. Senator Thune. Mr. Lynn, Dr. Carter, and General Cartwright,
Secretary Lynn has stated that there is an ongoing ``scrub'' of the
warfighting accounts to ``see if we can gain better effectiveness,
better efficiency, better productivity from those forces.'' What
reductions in force structure do you believe would be required to make
the forces we have the most effective they can be to accomplish the
mission? Please provide specifics.
Mr. Lynn, Dr. Carter, and General Cartwright. This ``scrub'' refers
to the Department's commitment to identify every opportunity to reduce
overhead and associated costs not an attempt to cut force structure.
The Secretary's goal was to effect a real cultural change in how we do
business and gain efficiencies to protect current force structure and
modernization.
86. Senator Thune. Mr. Lynn, Dr. Carter, and General Cartwright,
should we expect another announcement requesting a further reduction in
combat air forces, similar to the 250 fighter aircraft that were
retired this year, with those savings being applied to aircraft
modernization and recapitalization? If so, what aircraft will you seek
to retire?
Mr. Lynn, Dr. Carter, and General Cartwright. The Department is
currently reviewing the fiscal year 2012 budget, and no final decisions
have been made with respect to specific programs. Consistent with
Secretary Gate's efficiencies initiatives, the Department's intent is
to focus on efficiencies that enable movement of resources from
overhead activities to fund capabilities required to fight the current
war and prepare for future conflicts.
87. Senator Thune. Mr. Lynn, Dr. Carter, and General Cartwright,
with regard to the B-1 bomber fleet, do you agree with General
Petraeus, the current commander of our forces in Afghanistan, that the
B-1 bomber aircraft plays ``a very big role'' with regard to providing
close air support for our troops on the ground in Afghanistan, and that
the B-1 is ``a great platform'' and ``a very capable bomber''?
Mr. Lynn and Dr. Carter. Yes, as a team member among multiple
combat assets providing close air support to our troops in Afghanistan,
the B-1 plays a large role and is a capable platform. The B-1 provides
the Joint Force Commander massive conventional firepower coupled with
significant loiter capability perfectly suited for the inconsistent
tempo of today's ongoing operations in Afghanistan. The B-1's
supersonic dash capability allows a single aircraft to perform as a
``roving linebacker'' over large portions of the Area of
Responsibility.
General Cartwright. The B-1 provides the Joint Force Commander
conventional firepower coupled with a loiter capability well suited for
the tempo of today's ongoing operations. The B-1's dash capability
allows a single aircraft to perform as a roving standby asset over
large portions of the area of responsibility (AOR). The Air Force
continues to improve the B-1's conventional capability through ongoing
modernization efforts. For example, the B-1 is the threshold platform
for the Extended Range version of the Joint Air-to-Surface Standoff
Missile (JASSM-ER). When combined with the ongoing Fully Integrated
Data Link (FIDL) modification, these investments will ensure the B-1
remains a leading-edge combat platform.
88. Senator Thune. Mr. Lynn, Dr. Carter, and General Cartwright,
Secretary Gates has said that ``the fact that we are a nation at war .
. . calls for sustaining the current military force structure''. The B-
1 bomber fleet is an example of the kind of current military force
structure fighting the war in Afghanistan that should be sustained
rather than cut, is it not?
Mr. Lynn and Dr. Carter. The B-1 is a critical part of our combined
team of platforms supporting our ground troops in Afghanistan. DOD is
committed to the continuing sustainment and modernization of the B-1
fleet and will continue to work toward completing the modifications we
have outlined in the Future Years Defense Program (FYDP). The Air Force
is currently reviewing the B-1's long-term role as part of the overall
Long-Range Strike force structure, along with Tactical Air force
structure, considering military requirements, modernization and
sustainment costs, and fiscal constraints.
General Cartwright. DOD continues to sustain and modernize the B-1
fleet and we will continue to work towards completing the modifications
programmed in the FYDP. The Air Force is currently reviewing the B-1's
long-term role as part of the overall Long-Range Strike (LRS) force
structure and will provide recommendations to DOD leadership for the
proper balance of bomber assets.
consolidation or closure of excess bases and other facilities
89. Senator Thune. Mr. Lynn and General Cartwright, as part of his
August 9, 2010, announcements, Secretary Gates authorized the military
departments to ``consider consolidation or closure of excess bases and
other facilities where appropriate.'' At the time that you are
answering this question in writing for the record, have there been any
recommendations made about base closures or consolidations since the
Secretary's August 9 announcement? If so, please specify.
Mr. Lynn and General Cartwright. Not to my knowledge.
global force posture review
90. Senator Thune. Mr. Lynn and General Cartwright, Secretary Lynn
referred to an ongoing global force posture review during the hearing.
When was the review authorized?
Mr. Lynn and General Cartwright. The review began as part of the
2010 QDR.
91. Senator Thune. Mr. Lynn and General Cartwright, how long has
the review been in effect?
Mr. Lynn and General Cartwright. This review began as part of the
2010 QDR and is ongoing.
92. Senator Thune. Mr. Lynn and General Cartwright, when will the
review be completed?
Mr. Lynn and General Cartwright. We expect some elements of the
review to be completed in time to inform the fiscal year 2012 budget.
Beyond fiscal year 2012, the Department will continue to conduct
rigorous analysis of global force posture, and consider adjustments of
our approach as the environment warrants.
93. Senator Thune. Mr. Lynn and General Cartwright, who is
conducting this review?
Mr. Lynn and General Cartwright. The review is strategy-driven and
led by the Office of the Under Secretary of Defense for Policy, in
close consultation with other elements of OSD, the Joint Staff, the
combatant commands, and the military departments and Services.
94. Senator Thune. Mr. Lynn and General Cartwright, what has been
learned so far during the review?
Mr. Lynn and General Cartwright. First, forward stationed and
rotationally-deployed U.S. forces continue to be relevant and required.
The long-term presence of U.S. forces abroad reassures allies and
partners of our commitments--we cannot simply ``surge'' trust and
relationships on demand.
Second, our defense posture must balance the need for a permanent
overseas presence with the need for a flexible ability to respond to
contingencies, emerging threats, and global security needs.
Third, we must balance the need for assured access to support
ongoing operations with the risks of introducing fragility into the
lines of communication. We will seek innovative ways to add strategic
depth to our posture network.
Fourth, America's defense posture should provide a stabilizing
influence abroad and be welcomed by the host nation.
Finally, our defense posture will continuously adapt to changes in
the strategic environment. Deliberate, ongoing assessments of national
interests, military requirements and the strategic environment should
guide U.S. global defense posture planning.
95. Senator Thune. Mr. Lynn and General Cartwright, have any
conclusions been drawn during this review?
Mr. Lynn and General Cartwright. First, forward stationed and
rotationally-deployed U.S. forces continue to be relevant and required.
The long-term presence of U.S. forces abroad reassures allies and
partners of our commitments--we cannot simply ``surge'' trust and
relationships on demand.
Second, our defense posture must balance the need for a permanent
overseas presence with the need for a flexible ability to respond to
contingencies, emerging threats, and global security needs.
Third, we must balance the need for assured access to support
ongoing operations with the risks of introducing fragility into the
lines of communication. We will seek innovative ways to add strategic
depth to our posture network.
Fourth, America's defense posture should provide a stabilizing
influence abroad and be welcomed by the host nation.
Finally, our defense posture will continuously adapt to changes in
the strategic environment. Deliberate, ongoing assessments of national
interests, military requirements and the strategic environment should
guide U.S. global defense posture planning.
96. Senator Thune. Mr. Lynn and General Cartwright, what are the
objectives of this review?
Mr. Lynn and General Cartwright. The purpose of the review is to
examine the Department's current approach to global posture and to make
strategic judgments about the need for adjustments. The review is
strategy-driven, and seeks to rationalize global posture planning with
resource constraints in a dynamic geostrategic environment.
97. Senator Thune. Mr. Lynn and General Cartwright, what is the
intent of this review?
Mr. Lynn and General Cartwright. The purpose of the review is to
examine the Department's current approach to global posture and to make
strategic judgments about the need for adjustments. The review is
strategy-driven, and seeks to rationalize global posture planning with
resource constraints in a dynamic geostrategic environment.
98. Senator Thune. Mr. Lynn and General Cartwright, will this
review be used to inform decisions on base closures and consolidations
in the fiscal year 2012 budget?
Mr. Lynn and General Cartwright. Our ongoing review of global
posture assesses the strategic and operational implications of overseas
basing. As such, it helps inform overseas closure and consolidation
choices.
99. Senator Thune. Mr. Lynn and General Cartwright, will you
provide us a copy of the complete review?
Mr. Lynn and General Cartwright. The global posture review is an
ongoing process to position the United States for emerging threats and
opportunities in a dynamic geo-strategic environment. DOD provides an
annual report to Congress on Global Defense Posture. DOD will complete
the next iteration of this report during the first quarter of 2011.
joint basing
100. Senator Thune. General Cartwright, according to a September
20, 2010, Air Force Times article, the Air Force Chief of Staff,
General Schwartz, said that the 2005 BRAC initiative to consolidate 26
installations into 12 joint bases is a failure that has not produced
the cost savings the DOD expected. In fact, the Government
Accountability Office stated ``it was unclear whether joint basing will
result in actual savings,'' and an Air War College study stated that
joint basing is ``actually costing DOD more money than if the 26 bases
and posts had remained separate.'' What is your reaction to this
criticism that the 2005 BRAC joint basing initiative has probably ended
up costing money, rather than saving money?
General Cartwright. The Chairman and I are supportive of the
Department's initiative to streamline installation support at 26 of our
geographically proximate locations into 12 joint bases. The first five
bases obtained full operational capability (FOC) on October 1, 2009,
and we are less than 6 weeks into the final seven joint bases obtaining
FOC. Therefore, it is too early to judge the overall success and
viability of joint bases. Some innovative solutions have been enacted
in support of joint bases. Application of a jointly developed support-
standard could potentially have an impact across all installations. The
Department has also implemented a formalized quality and cost control
reporting mechanism for joint bases that could also have far reaching
effects. As expected and planned, there has been cost growth early in
implementation of these complex mergers. We fully expect lessons to be
learned that will streamline operations and allow joint basing to
realize its potential while also acting as a beta test for innovative
solutions that can be applied to all joint bases.
The 12 joint bases are:
Phase 1 (established 1 Oct 09)
1. Joint Base Andrews-Naval Air Facility Washington (AF Lead)
2. Joint Base McGuire-Dix-Lakehurst (AF Lead)
3. Joint Expeditionary Base Little Creek-Ft Story (Navy Lead)
4. Joint Region Marianas (Navy Lead) = Naval Base Guam, Andersen
AFB
5. Joint Base Myer-Henderson Hall (Army Lead)
Phase 2 (established 1 Oct 10)
6. Joint Base Charleston (AF Lead)
7. Joint Base Elmendorf-Richardson (AF Lead)
8. Joint Base San Antonio (AF Lead) = Lackland AFB, Randolph AFB,
Fort Sam Houston
9. Joint Base Langley-Eustis (AF Lead)
10. Joint Base Anacostia-Bolling (Navy Lead)
11. Joint Base Pearl Harbor-Hickam (Navy Lead)
12. Joint Base Lewis-McChord (Army Lead)
joint unmanned aircraft systems center of excellence
101. Senator Thune. Mr. Lynn, Dr. Carter, and General Cartwright,
with regard to the proposed closure of JFCOM, I'm concerned about the
future of the Joint Unmanned Aircraft Systems Center of Excellence
(JUAS COE), which is owned by JFCOM, and is headquartered at Creech AFB
in Nevada. One of the key issues General Odierno said he wanted to
focus on as the new head of JFCOM was to bring his many years of
experience as a commander in Iraq to bear on the issue of coordinating
intelligence, surveillance, and reconnaissance (ISR) assets and
understanding how to best utilize them in an asymmetric environment.
Can you discuss what the plan is for this JUAS COE?
Mr. Lynn, Dr. Carter, and General Cartwright. The mission of the
JUAS COE is to optimize Joint UAS employment through the development
and integration of UAS common operating standards, capabilities,
concepts, technologies, doctrine, tactics, techniques, procedures, and
training. The JUAS COE publishes the Joint UAS CONOPS, where they
utilize lessons learned from current operations, to form a joint vision
for the operation, integration, and interoperability of UAS. The CONOPs
examine unmanned-manned integration, airspace management, and urban
operations issues. This joint look is critical as we rely more and more
on UAS.
We are reviewing all USJFCOM functions, including the JUAS COE, to
determine whether the continuation of each function is essential. These
and other considerations, will inform the Secretary of Defense's
recommendations and decisions concerning each of these functions.
102. Senator Thune. Mr. Lynn, Dr. Carter, and General Cartwright,
who will own it and where will it be located?
Mr. Lynn, Dr. Carter, and General Cartwright. The integration of
unmanned aircraft systems (UAS) into joint operations has improved and
the need for a separate center of excellence to manage the joint
integration of these systems is yet to be determined. The knowledge and
expertise associated with the UAS operations located at Creech Air
Force Base is being considered to serve as a catalyst to drive the
continued development and improvement of the tactics, techniques, and
procedures associated with this maturing capability.
103. Senator Thune. Mr. Lynn, Dr. Carter, and General Cartwright,
do you believe this is an important initiative in light of our heavy
reliance on this capability in the wars we're fighting?
Mr. Lynn, Dr. Carter, and General Cartwright. The JUAS COE is an
important initiative with the mission to optimize Joint UAS employment
through the development and integration of UAS common operating
standards, capabilities, concepts, technologies, doctrine, tactics,
techniques, procedures, and training. The JUAS COE publishes the Joint
UAS CONOPS, where they utilize lessons learned from current operations,
to form a joint vision for the operation, integration, and
interoperability of UAS. The CONOPs examine unmanned-manned
integration, airspace management, and urban operations issues. This
joint look is critical as we rely more and more on UAS.
We are reviewing all USJFCOM functions, including the JUAS COE, to
determine whether the continuation of each function is essential and
unique. These and other considerations, will inform the Secretary of
Defense's recommendations and decisions concerning each of these
functions.
104. Senator Thune. Mr. Lynn, Dr. Carter, and General Cartwright,
what can be done to ensure that General Odierno will still be able to
focus on this important issue if JFCOM is in fact closed?
Mr. Lynn, Dr. Carter, and General Cartwright. Any decision
concerning the JUAS COE will take into account current and future
operational UAS and ISR capability requirements of joint mission roles
across all Services and combatant commanders.
funding for advisory and assistance contractors in intelligence
105. Senator Thune. Mr. Lynn, Dr. Carter, and General Cartwright,
Secretary Gates in his August 9, 2010, speech said that he was
implementing a 10 percent reduction in funding for advisory and
assistance contractors in intelligence areas and a freeze in the number
of senior executives in the defense intelligence organizations.
Following the attacks of September 11, 2001, we determined that we had
a critical shortfall in intelligence and immediately began building up
this capability. It takes years and in some cases decades to build up
experienced personnel. How will you determine the proper level of
manpower to eliminate while ensuring we won't harm our current
intelligence capability?
Mr. Lynn, Dr. Carter, and General Cartwright. The Department's
efficiency initiatives are designed to protect current and future
capability; saving money and reallocating those savings towards
building capabilities is a means to that end. In that respect, we are
approaching the intelligence review with the same methodology we are
approaching every other part of the Department. We are looking for
unnecessary redundancies and overhead that offer little contribution to
the critical capabilities that you reference. As part of that effort,
we are reviewing and prioritizing the Department's Civilian Senior
Executive requirements, to include our Defense Intelligence Senior
Executive Service and Defense Intelligence Senior Level positions.
While this work is still in process, we are actively involving the
Director of National Intelligence and both the providers of
intelligence capabilities and their end users in an effort to get a
complete understanding of where there are opportunities to shift
resources toward highly valued applications.
106. Senator Thune. Mr. Lynn, Dr. Carter, and General Cartwright,
how much in savings do you expect to gain from this 10 percent
reduction?
Mr. Lynn, Dr. Carter, and General Cartwright. These reductions are
still under review. We expect to provide you more information on these
savings by January.
reducing congressional reports while maintaining oversight
107. Senator Thune. Mr. Lynn, Secretary Gates stated in his August
9, 2010, Pentagon briefing that ``this Department is awash in taskings
for reports and studies. In 1970, the Pentagon produced a total of 37
reports for Congress, a number that topped off at more than 700 reports
in last year's cycle.'' In addition he stated that in order to
accomplish these reports, the Department employs nearly 1,000
contractors with more than 200 of them working full time with a good
number of those reports internally driven, with the remaining being
mandated by Congress. Can you discuss why you think there has been such
an increase in the number of required reports?
Mr. Lynn. There are a number of reasons and I'll just summarize a
few. First, considering that the Department has waged two wars spanning
most of the past decade, and that its operating budget has grown apace,
it is not surprising that Congressional oversight has expanded through
its report assignments. Second, during the annual Authorization and
Appropriation bill processes legislative proposals that need more time
to fully mature into viable statutory provisions are often supplanted
by reporting requirements, so that both Congress and the Department can
gain valuable information to make good proposed law into better and
viable law. Third, and finally, I also believe that the congressional
report process itself produces duplicative reporting requirements and
requests, and that both Congress and the Department would be better
served if, in partnership, we could more often combine similar reports
and provide committees interested in the same information one report
that satisfied all of their oversight requirements, rather than
producing many reports on the same topic from incrementally different
perspectives or data-sets.
108. Senator Thune. Mr. Lynn, Secretary Gates has proposed working
with Congress to meet our needs while at the same time reducing the
number of mandated reports. Can you discuss your thoughts on how to go
about reducing the number of mandated studies?
Mr. Lynn. The congressional reports process is not appropriately
coordinated. For example, many of the requested reports cover similar
issues or are outdated. We would like to have an agreement with
Congress that streamlines reports so as to eliminate duplication and to
ensure that what we do provide continues to have value.
109. Senator Thune. Mr. Lynn, how would you recommend Congress
conduct oversight and see the analysis behind your decisions without
requiring these reports?
Mr. Lynn. The Secretary believes that the intent of eliminating
duplication and overlap in the requested reports should not negatively
impact Congress' oversight responsibilities. More efficient use of the
Department's resources will enhance the quality of the reports and the
underlying analysis used to support decisions.
army-air force unmanned aerial vehicle duplicating
110. Senator Thune. Mr. Lynn, Dr. Carter, and General Cartwright,
the Army's 2011 budget proposal requested over $578 million toward the
acquisition of MQ-1 unmanned aerial vehicles (UAV), as well as their
payload and weaponization. With that money, the Army would buy 26 more
aircraft next year in addition to the 24 purchased this year with 158
total aircraft in the Army inventory by the end of 2015. By comparison,
the Air Force has 144 MQ-1s today. The rationale for these duplicative
purchases is that there is an urgent need for more ISR platforms in the
field. Specifically, the Air Force has been tasked to provide 65 combat
air patrols (CAP) on a daily basis using these types of aircraft. As
part of this efficiency initiative, Secretary Gates has directed each
Service to find savings of $2 billion in next year's budget. What
synergies do you envision could be made between the Army and the Air
Force with regard to unmanned capabilities and where do you think they
can save money and reduce duplication?
Mr. Lynn and Dr. Carter. The Air Force MQ-1B Predator and the Army
MQ-1C Gray Eagle are not duplicative efforts. In fiscal year 2009, the
Air Force ceased procurement of the MQ-1B and has transitioned to
maximum procurement of MQ-9 in order to effectively field 65 orbits of
combined MQ-1B/MQ-9 aircraft. Remaining procurement in the MQ-1
Predator program is for conversion of existing MQ-1 aircraft to the MQ-
1B configuration and to support incremental modification of those
aircraft to include new capabilities such as digital video and
encrypted data links. As the Air Force has transitioned from the MQ-1B
to the more capable MQ-9, the Army plans to meet their ISR capability
needs with the more capable MQ-1C aircraft. The MQ-1C program has
leveraged significant investment in the MQ-1B program to field initial
capability quickly in the form of Quick Reaction Capability (QRC)
deployments as the system completes developmental testing and heads
into full-rate production. The Office of the Secretary of Defense's
Unmanned Aircraft Systems Task Force was directed in 2007 to look for
acquisition efficiency areas between the two systems. The Task Force
found efficiencies and savings in areas of the sensor ball and
communications data links used by both systems. The Army and Air Force
have committed to procurement of a common sensor ball configuration
between MQ-1B and MQ-1C as well as fielding interoperable communication
data links. The Task Force is continuing to look at ground station
architectures with the intent of defining a future architecture that
would allow the military departments to take advantage of the power of
a service-oriented-architecture to achieve increased competition and
efficiency in software development.
General Cartwright. The Army's MQ-1C Gray Eagle and the Air Force's
MQ-1B Predator are different aircraft that complement each other in
meeting extensive ISR demands. Physically, the MQ-1C was built from
lessons learned using the MQ-1B. The MQ-1C is slightly larger and has
improved payload and range performance than its predecessor, the MQ-1B.
Operationally, the MQ-1B provides theater level support, while the MQ-
1C directly supports ground commanders with tactical ISR data, thereby
enabling a full spectrum of support. The Air Force will operate both
the MQ-1B (procurement ended in fiscal year 2009) and the much larger,
more capable, MQ-9 Reaper to meet the required theater-level 65 CAPs by
the fourth quarter fiscal year 2013. Remaining procurement funding in
the MQ-1B Predator program supports modifications such as encrypted
data link.
The Department continues to pursue commonality and full
interoperability where appropriate. The Services are dedicated to
fielding interoperable communication data links and a common (EO/IR)
sensor ball configuration between both the Predator and the Gray Eagle.
The UAS Task Force is also defining a future ground station
architecture that would significantly drive down costs by moving away
from proprietary stand alone ground station architectures.
111. Senator Thune. Mr. Lynn, Dr. Carter, and General Cartwright,
are you seeing this as an opportunity for the two Services to work
together to achieve the goal of 65 CAPs that the Combatant Commander
has requested?
Mr. Lynn and Dr. Carter. The Resource Management Directive 700
signed on December 23, 2009 directed the Air Force to add funds to
procure additional MQ-9 Reaper aircraft and to deploy 65 Combat Air
Patrols (CAP) of MQ-1B Predator and MQ-9 Reaper by 2013 to meet
theater-level requirements. There are currently 44 Air Force CAPs in
place, 30 MQ-1B CAPs and 14 MQ-9 Reaper CAPs supporting theater-level
needs. MQ-9 Reaper aircraft continue to deliver until a total of 65
CAPs of MQ-1/MQ-9 capability are fielded in fourth quarter, fiscal year
2013.
Separately, the Army is delivering organic Intelligence,
Surveillance, and Reconnaissance capability with a variety of systems
including the Raven, Shadow, and Gray Eagle Unmanned Aircraft System at
the brigade level and below. This capability is not duplicative with
higher theater level requirements but reduces the organic ground forces
requirement that is requested at the theater level. Capacity at both
the organic and theater-level provides flexibility and responsiveness
to meet a range of warfighter requirements.
General Cartwright. We are continuously looking at operations to
provide the combatant commander with the right level and type of
capability to prosecute our strategy. The Army's MQ-1C and the Air
Force's MQ-1B are complementary aircraft that support the warfighter at
the tactical and theater level respectively. The 65 CAPs (combined Air
Force MQ-1B/MQ-9 aircraft) support the Combatant Commander at the
theater level. The MQ-1B Predator and MQ-9 Reaper systems are on a path
to reach the 65 CAP goal by the fourth quarter of fiscal year 2013.
insourcing
112. Senator Thune. Mr. Lynn and Dr. Carter, I would like to
discuss for a few moments Secretary Gates' insourcing initiative. Under
this initiative, he directed a 10 percent reduction each year, over the
next 3 years, in funding for support contractors. His goal is to reduce
the number of contractors that are performing functions that are
inherently governmental. Can you describe how big of a problem this is
within the DOD?
Mr. Lynn and Dr. Carter. The Secretary's goal in reducing funding
for service support contractors is to reduce the Department's
overreliance on those types of contractors. Independent of that goal,
functions that are inherently governmental should not be performed by
contractors. While there may be some overlap between these initiatives,
they are largely separate.
113. Senator Thune. Mr. Lynn and Dr. Carter, what savings do you
expect to receive from this initiative and would you agree that we
should stop insourcing jobs that are not inherently governmental?
Mr. Lynn and Dr. Carter. Not necessarily. On a case-by-case basis
DOD components and organizations find that they can perform some
functions more cost effectively using government civilians than through
continued private sector personnel. In other cases, the private sector
may provide the most efficient and effective means of providing valued
functions. The goal is to curb cost growth and redirect spending to
more highly valued uses. We can provide more information on the extent
of these savings by January.
economies of scale and multi-year budget
114. Senator Thune. Mr. Lynn and Dr. Carter, one of the goals that
Secretary Gates outlined was the ability to achieve greater benefits in
cost and efficiency through the use of economies of scale. Although he
used the consolidation of the IT infrastructure as an example, I
believe another example of economies of scale would be the ability to
make multi-year purchases. We recently saw the benefit of this when we
authorized the Navy to purchase F/A-18s as part of a multi-year
contract. I recently proposed an amendment as part of an overall budget
reduction plan, that proposes transitioning the budget process to a
multi-year process versus accomplishing it every year. Creating a
budget every year doesn't seem to be the best way to save money. Multi-
year contracts allow us the opportunity to buy equipment over 2 years
and take advantage of a multi-year buy in purchasing negotiations. What
inefficiencies do you see with maintaining a yearly budget and do you
believe you could obtain more savings from contractors if the DOD
budget transitioned to a multi-year budget?
Mr. Lynn and Dr. Carter. From an acquisition perspective, mature
major weapon system procurements can often benefit from multi-year
purchases and/or multi-year budgets by providing some fiscal stability.
Our concern is that we do not give up flexibility while gaining
stability. Annual budgets with multi-year appropriations work well for
investment programs, but it depends on the acquisition stage of the
major weapon system. Multi-year procurement contracts are best suited
to those programs with consistent requirements, reasonable production
runs, and stable design configurations. Without these attributes, there
is greater risk in not achieving the projected savings associated with
economies of scale or absorbing costs from breaking a multi-year
commitment. Multi-year budgeting does not guarantee certainty in the
procurement process, and there is no guarantee that contractors will
pass on savings to the government. Multi-year budgeting is effective if
it is used with other fiscal tools such as the ability to reprogram
funding within the Department to accommodate dynamic program
requirements and the changing fiscal environment.
______
Questions Submitted by Senator Susan Collins
savings distribution
115. Senator Collins. Mr. Lynn, a key assumption of Secretary
Gates' efficiency initiatives is that the Services will be able to
direct the savings they identify in overhead towards modernization
accounts for additional ships, planes, or other assets. So long as the
Services are actually empowered to reinvest savings from overhead costs
to modernization accounts, many of us that have urged the Department to
increase its investment in building and maintaining a 313-ship Navy or
a larger Air Force might welcome such a proposal. However, as you know,
there have been instances in the past where the Services identified
savings but were unable to translate those savings into increased
procurement. Has the President or the Director of the Office of
Management and Budget assured you or Secretary Gates that the savings
identified by the Services will not be used to reduce the overall
defense budget top-line or be redirected to other priorities?
Mr. Lynn. The President understands and supports the effort.
Secretary Gates explained that the goal is not to reduce the
Department's top line budget and that the Services will be able to keep
the savings they generate to reinvest in higher priority warfighting
needs and modernization programs. The President has called the effort,
``another step forward in the reform efforts.to reduce excess overhead
costs, cut waste, and reform the way the Pentagon does business.'' He
has also affirmed that the funds saved will help us sustain the current
force structure and make needed investments in modernization in a
fiscally responsible way.
116. Senator Collins. Mr. Lynn, in his August 9, 2010, announcement
of the efficiency initiatives, Secretary Gates stated that, ``I believe
that sustaining the current force structure and making needed
investments in modernization will require annual real growth of 2 to 3
percent, which is 1 to 2 percent above current top-line budget
projections.'' This statement suggests that Secretary Gates believes
that a 1 to 2 percent growth in the annual defense budget is a fair and
realistic assumption for the future. Have you received assurances from
the President or the Director of the Office of Management and Budget
that they share Secretary Gates' assumption that a 1 to 2 percent
growth in the DOD budget is a fair and realistic assumption for future
budget projections?
Mr. Lynn. The President has not commented specifically on this
item, although he applauded Secretary Gates on August 9 for undertaking
this critical effort to support our men and women in uniform and
strengthen our national security.
117. Senator Collins. Mr. Lynn, as a part of the Department's
efficiency initiatives, Secretary Gates authorized the military
Services to consider consolidating or closing excess military
facilities as a part of their efforts to find savings in their budgets.
As you know, in many towns and communities, a military installation can
serve as the economic engine for an entire region. The announcement
made by Secretary Gates creates immense uncertainty for the many
businesses in these communities that are struggling in an already
uncertain economic environment. It is the investment by these very
businesses that can create many of the jobs that are needed in our
country. What assurances, if any, can you provide the businessmen and
women looking to expand their businesses in the hundreds of communities
that are home to military installations about the future of those
military installations?
Mr. Lynn. Closure and realignment decisions are difficult and the
Department does not undertake them lightly. While Military Value has
been the primary consideration in each of the five BRAC rounds, the
Department fully considered the impact on local communities and is
keenly aware of the close relationship between military installations
and the surrounding communities. In each round, the Department made
difficult choices based on thorough analyses and subsequent evaluation
by an independent, legislatively mandated commission. In carrying out
any closure or realignment decision, the Department seeks to minimize
the economic impact of the decision to the local community. The Office
of Economic Adjustment, in coordination with other Federal agencies,
assists States and communities to work with affected businesses,
workers, and community stakeholders to understand and respond to the
impacts of these actions.
base closure
118. Senator Collins. Mr. Lynn, Dr. Carter, and General Cartwright,
when budget analysts go searching for defense savings, it usually does
not take long for someone to suggest another BRAC round. In fact,
General Roger Brady, the four-star general who commands our U.S. Air
Forces in Europe, said on September 15, 2010, that we have too many
bases and that we need to consider additional base closures. However,
it seems to me that it is premature to discuss a future BRAC round
until we know if the ongoing 2005 BRAC round resulted in the savings it
promised to deliver. A July 2010 GAO analysis found that DOD's reported
costs for the 2005 Round are not complete because the Army has not
reported all of its BRAC-related costs. In addition, the current $35
billion cost estimate to implement the 2005 BRAC is 50 percent more
than the Department's original cost estimate, and costs could increase
as the BRAC 2005 deadline approaches next September. Given the current
status of the 2005 BRAC round and the economic uncertainty facing many
of our businesses, do you or this administration support another BRAC
round?
Mr. Lynn, Dr. Carter, and General Cartwright. The Secretary has
directed the military Departments to ``consider consolidation or
closure of excess bases and other facilities where appropriate.''
Regarding savings, the GAO estimated in its November 2009 report that
the BRAC 2005 round would produce $3.9 billion in annual recurring
savings beginning in fiscal year 2012. These savings will be used to
support new capabilities and improve operational efficiencies. This is
a significant benefit that comes as a direct result of successfully
implementing the BRAC 2005 recommendations. The Department is not
currently seeking authority for another BRAC round.
119. Senator Collins. Dr. Carter, Secretary Gates has asked the
Services to identify $100 billion in savings over the next 5 years.
Would you estimate the savings that will result over 5 years from the
changes you are seeking strictly within the acquisition community
alone?
Dr. Carter. Last year, we identified savings in the defense budget
by canceling unneeded programs, and we will need to do more of that. We
must also find savings within active programs and in ongoing
activities. The Department must achieve what economists call
``productivity growth'' and what I have called ``learning to do more
without more;'' delivering the programs that both the Department and
warfighter need for the amount of money we are going to get.
The goal of this productivity growth is to redirect defense budget
dollars from unproductive to productive purposes, and we will get there
by laying the policy groundwork to increase the Department's buying
power as I detailed in my September 14 memorandum to acquisition
professionals. Redirecting tens of billions of dollars to productive
purposes is a result of the necessary changes we were making in the way
we do business; we are not implementing broad reforms to simply reach a
fixed dollar target of saving, and doing so would be dishonest to the
process. Even if it were possible, we would be reluctant to project the
total value of resources redirected over the next 5 years in
acquisitions. Right now we are focused on getting the policies right
and implementing true reforms, and billions in savings will be the
natural result.
acquisition workforce
120. Senator Collins. Dr. Carter, the defense acquisition workforce
has experienced an increasing workload resulting from expanded uses of
services contracts, increased procurement requirements from Congress,
and efforts supporting counter-insurgency operations over the last 9
years. In your September 14, 2010, memo to acquisition professionals,
you describe the importance of achieving productivity growth--in your
words: to ``do more without more.'' Given that the acquisition
workforce is already stressed and possibly overworked, are you
confident that there is existing capacity in the acquisition workforce
to follow the 23 points identified in the memo to achieve the intended
savings targets in addition to their current duties and
responsibilities?
Dr. Carter. Yes. In addition, DOD is continuing efforts to
strengthen the acquisition workforce size and quality. This is key to
successful implementation of our acquisition reform efforts to improve
how we buy and our buying power. Also, reducing non-productive
processes and bureaucracy is a key efficiency initiative that will
enable the acquisition workforce to focus critical skills and efforts
on improving acquisition outcomes.
121. Senator Collins. Dr. Carter, one of the targeted areas in your
23-point plan is to mandate ``affordability'' as a requirement. Can you
explain how this requirement will be evaluated in acquisition
decisions?
Dr. Carter. In my September 14 memorandum to acquisition
professionals, I outlined several specific measures directing program
managers to treat affordability as a requirement before granting
milestone authority to proceed with the program. Specifically, at
Milestone A, my Acquisition Decision Memorandum (ADM) approving formal
commencement of the program will contain an affordability target to be
treated by the program manager like a Key Performance Parameter (KPP)
such as speed, power, or data rate--i.e., a design parameter not to be
sacrificed or compromised without my specific authority. At Milestone
B, when a system's detailed design is begun, I will require
presentation of a systems engineering tradeoff analysis showing how
cost varies as the major design parameters and time to complete are
varied. This analysis would allow decisions to be made about how the
system could be made less expensive without loss of important
capability. This analysis would then form the basis of the
``Affordability Requirement'' that would be part of the ADM decision.
These measures will help us control costs while delivering the best
possible capability to the warfighter.
122. Senator Collins. Dr. Carter, in your September 14, 2010, memo,
you indicate that you want to work with Congress to develop special
rules to eliminate some of the detailed Nunn-McCurdy reporting for
critical cost breaches and the associated requirement for a Milestone A
or Milestone B recertification. You identified more than $10 million
and 95,000 hours of overhead labor associated with compliance of Nunn-
McCurdy requirements for programs that had a critical cost growth
breach simply based upon a change of procurement quantity approved by
Congress. What was the impact on the cost, schedule, and capabilities
of the programs that were subjected to a Nunn-McCurdy review simply
because of a change in the procurement quantity?
Dr. Carter. First, let me state that I think there has been a
misunderstanding about the impact on the Department for having to
perform Nunn-McCurdy reviews for programs that have experienced a
critical unit cost growth simply based upon a change of procurement
quantity. The impact has not been the $10 million and 95,000 hours of
overhead labor for those programs alone. Rather, as my September 14
memorandum set forth, this estimate covered all six of the Nunn-McCurdy
reviews that the Department conducted in the spring of 2010. An actual
number for programs that have experienced a critical unit cost growth
because of quantity adjustments is not possible, because the Department
does not closely segregate costs for its overhead functions and it does
not track Nunn-McCurdy review cycles for so-called ``innocent'' or
``administrative'' breaches separate from those breaches where problems
in program execution have triggered the unit cost growth. We comply
irrespective of the fundamental causes. However, in cases where the
unit cost breach can be attributed to changes in quantity, the
fundamental, if not sole, question is whether it is in the best
interests of the Government to continue with the acquisition of the
program notwithstanding the increase in unit cost.
There are also costs imposed by second order impacts stemming from
the Nunn-McCurdy certification process. Regardless of the
circumstances, if the program is certified, the previous Milestone must
be rescinded and repeated, and no funding can be obligated for any
contract without specific prior approval of the Milestone Decision
Authority (MDA). A repeat Milestone requires new cost estimates, new
Milestone certification documentation, preparation reviews, etc. Much
of this is required in separate statutory requirements for those
decision points, but it becomes necessary as a result of the Nunn-
McCurdy review. Repeating these things comes at additional expense to
the taxpayer and, in the case of quantity-driven changes, adds little
value to the process or product if the Department has already answered
the fundamental question about proceeding with the program. The
additional time and effort obtaining MDA approval is burdensome and
distracting to those executing the programs.
123. Senator Collins. Dr. Carter, what changes to policy,
regulation, or statute would be required to implement the special rules
regarding the Nunn-McCurdy process that you describe in your September
14, 2010, memo?
Dr. Carter. I fully support the Nunn-McCurdy process, to include
the recent improvements that were made by the WSARA of 2009. The
Department takes each of these breaches seriously, and we conduct the
prescribed review according to the provisions of the statute. However,
each review is costly to perform and should be avoided when the
critical breach is caused primarily by a change in quantity that was
made in response to changes in threat or other fielding requirements
and not the result of poor performance or mismanagement. For example,
the Army Acquisition Objective for the Guided Multiple Launch Rocket
System and, more recently, the Excalibur projectile program were both
reduced by more than 70 percent due to an approved change in force
requirements. Due to a learning curve and the amortization of
development costs, significant quantity reductions frequently result in
critical Nunn-McCurdy breaches.
My proposed revision to section 2433a of title 10, U.S.C., would
reduce the statutory requirements for critical Nunn-McCurdy breaches
caused primarily by quantity changes (as long as the quantity change
was not made as a result of an increase in unit cost). In our proposal
the root cause of the cost growth would need to be validated by the
WSARA-created office of Program Assessment & Root Cause Analysis. Since
the statutory requirements of a Nunn-McCurdy critical breach under
section 2433a are extensive, this section would reduce the requirements
for quantity-related critical breaches. That is, for the review, only a
root cause analysis would be conducted to substantiate the causal
effects of the quantity change, followed by a written statement from me
that it is in the best interests of the Government to continue the
acquisition program notwithstanding the increase in unit cost.
______
[Appendixes A through G follow:]
APPENDIX A
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
APPENDIX B
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
APPENDIX C
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APPENDIX D
[Deleted.]
APPENDIX E
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APPENDIX F
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
APPENDIX G
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[Whereupon, at 12:58 p.m., the committee adjourned.]