Subcommittee meets today to receive testimony from under secretary of defense for acquisition and sustainment, ellen lord, concerning supply chain integrity for the department of defense in the United States. Since our her initial confirman as the undersecretary of defense, secretary lord has overseen significant acquisition reform at the department of defense, and a chill well talk about some of that today. As the u. S. National armaments director she has traveled to see the u. S. , throughout the u. S. And to see our allies and partners with regard to the development and Manufacturing Activities around the world, and, unfortunately, has seen firsthand just how reliant the u. S. Defense Industrial Base chain has become come to class relates to china. With the rise of china and Great Power Competition of the global covid19 pandemic, the vulnerabilities and gaps in our supply chains particularly as relates to National Security have taken on a new urgency. What you think Ranking Member kaine for his interest in this topic as well. Both of us recognize how important the defense Industrial Base is to our Nation Security and our nations economy, and we are pleased to have this timely hearing. Secretary lord has been upon the voice in sonic alarm on this important issue and i like to personally thank her for being here today. In july of 2017 the president issued an executive order on the u. S. Manufacturing and defense Industrial Base that focuses on resilient supply chains that are essential to the economic strength and National Security of our nation, and also the importance of jobs as it relates to key components in manufacturing, and the defense Industrial Base. And muchneeded change to our broader National Security and strategic interests. That National Security document from the department of defense notes quote, every year competitors such as china steel us intellectual property valued at hundreds of billions of dollars. Members of this committee certainly agree that so much technological change has happened in this digital age, highly technical weapon systems as well as Consumer Electronics like laptops and cell phones increasingly have a role in war fighting and are increasingly reliant on chinese supply chains. And one area of supply chain integrity thats important to me and i think the rest of the country is our supply of Strategic Critical Minerals and metals that go into many of our modern Day Electronics and our modernday weapons and this years senate path and daa id like to highlight sections 809 and 810 which Work Together to ensure the Defense Industrial is states have secure sources of rigidity and Critical Minerals by the year 2020, 2030. I appreciate the bipartisan support for this goal and i appreciate secretary lords work with me and others on the key issue. As a matter of fact just last night the president issued an executive order entitled addressing the threat to the domestic supply chain for reliance on Critical Minerals from foreign adversaries and i like to submit this for the record with my Opening Statement without objection. The key issue on this is that we know where reliance on china. In many cases we, the United States of america have these Critical Minerals for example in the great state of alaska and we actually mind them and process them in ways with much much higher Environmental Standards and the chinese. So if thats the case, and mining and processing create good jobs, why wouldnt we do it here as opposed to over there . And i think people are starting to recognize that and madam secretary, i look forward to discussing this executive order and the broader topic of the strategic criminal Critical Minerals in our hearing today. And like to conclude by commending the secretary with regard to addressing some of the significant defense Industrial Base challenges, particularly as our country and the world goes through this pandemic and i want to thank senator kane for his interest in this topic. I believe this is an area of bipartisan interest and we want to hear from you madam secretary on what you think the congress can be doing and what you should be continuing to do addressing this issue which is, has been highlighted even more with the rise of china, our reliance and the covid19 pandemic so without further comment i like to turn the hearing over to senator kane for his opening comments thank you mister chair and im glad to be able to be here together with my colleagues in person virtually for this important hearing about readiness and supply chain integrity. I welcome our distinguished witness and i want to thank secretary lord for her constructive conversation this week working together to prepare for this hearing but also to just generally discussed the many challenges the dod faces today you are all aware of the roles that are defense Industrial Base plays in supporting National Security and in strengthening , contributing to the economic strength of the nation and many of the hearings of the readiness subcommittee at least in full or in part deal with that topic. The health of our Industrial Base is the ability to support National Security is under many severe challenges under normal times but now the challenges are escalating so i hope today we can discuss those challenges including the Global Economic downturn resulting from the covid19 pandemic. The way that pandemic itself affects the operations of the , of our supply chain. So lots of trusted suppliers and manufacturers in Key Technology areas referenced by the chair including microelectronics, Rare Earth Minerals, advanced materials, Cyber Security threats to our companies result in the loss of valuable intellectual property in National Security secrets and finally adversarial capital sometimes sponsored by foreign nations that find their way into our supply chain ticking to gain control ofemerging and innovative hightech systems. I also want secretary lord to know that were all concerned about an article that the Washington Post ran recently which raised questions about how the department of defense has used funds provided to it under the cares at and i actually think its an issue thats directly related to the topic of todays supply chain integrity and i hope the secretary may address some of the important issues raised in the article so that we can all not only on the committee but the American Public have confidence that the department is being a careful steward of taxpayer dollars including those provided in the cares at. We all want to help address the problems and we will discuss problems today in our manufacturing and Industrial Base but hopefully this is also a hearing more about solutions than it is about problems. We will assess the challenges but also will be interested in hearing what the dod is doing to address them so thanks for calling the hearing and i think our witness for her service and for being here today to testify. Thank you senator kane and madam secretary im going to have you issue yourOpening Statements. Please try to keep it to five minutes. We will submit for the record and longer written statement. Im going to apologize in advance. I have a short hearing i need to be at another committee at 9 30 if you see me stepping out youll be in good hands with senator kane. Ill be back quickly but the floor is yours and thank you for being here. Thank you. Chairman sullivan, Ranking Member kane and distinguished members of the readiness and management support subcommittee, thank you for the opportunity to testify today on the defense Industrial Base. The office of the under secretary for acquisition and sustainment has released the most substantial change to Acquisition Policy in the last several decades. Called the adaptive acquisition framework for aas. It approved the acquiring of war fighting capability and allows dod to better partner with industry. That aaf replaces the onesizefitsall approach used in the past and it includes six practical acquisition pathways, each tailored to the unique characteristics of the capabilities being acquired and in fact we do have a trifold that is a good description of this which weve made available to you for yourreference. Last december we released our Small Business strategy, reducing smallbusiness barriers to become art of the Defense Industrialbase. And to educate Small Business on Cyber Security readiness. Again, we have provided for you what we call our welcome mat as a guide for business, howto work with dod with a number of hyperlinks. So for reference, in terms of Small Business 24. 2 percent or 75. 4 billion in 2019 went to Small Business in terms of dod spent. Further, subcontracting was 38. 6 percent in 2019 or 62. 3 billion. In other words, there is significant slowdown major defense crime to Small Businesses. Additional efforts to strengthen our us Industrial Base include the Cyber Security model certification or cmc program. The interim role published two days ago implements the cmm c framework which establishes Cyber Security as fundamental to dod acquisition and secures the dod supply chain. Dod also released its first policy on intellectual property to support effective approaches and customized strategies for acquiring and licensing it and technical data rights really dod canal better support the entire lifecycle of the program. Upon congresss passing of the cares act, we worked closely with executive and legislative branches stakeholders to balance the needs of both medical and defense Industrial Base affected by covid. Were thankful to congress for providing the authorities and resources that enable the interagency to invest in the us production of critical medical resources and protect key defense capabilities from the consequences of covid. Dod has supported production of essential medical items and investments in capacity expansion for the medical industry following initial investments, the department in coordination with the department of health and Human Services or hhs and the federal Emergency Management agency or fema leveraged defense production act dpa title iii funds to mitigate adverse impact. Dod continued to provide vital contracting support to expand Domestic Production of medical resources leveraging hhs funding that congress had provided for the purpose. Of the nearly 658 million dod has invested in expanding medical resources and capacity, 213 million from dpa title iii funds, 427. 5 million comes from hhs cares act funding and 17. 6 million comes from the healthcare and enhancement act. Dod has obligated 6. 5 7 billion for the federal covid19 effort just over 62 percent of these obligations have gone to Small Businesses , 4. 70 billion. Over 75 percent of the dod Small Business spending has beenobligated in the medical category. Including drugs and biologicals, surgical instruments, equipment and supplies, hospital and surgical clothing, related to specialpurpose items and other Product Service code items. Congress appropriated 1 billion in cares act funding for dod to be executed under the dpatitle iii program. Dod has invested 213 million for health and medical resources such as and 95 masks, respirators and injection technology. 687 million of cares act funding is dedicated to saving part of the defense Industrial Base either by covid19 health or financial impact. Weve targeted regions severely affected to sustain vital domestic Industrial Base capabilities and for local job creation. The expenditures have protected us workers and insured that our Industrial Base provides covid. Dpa title iii cares act efforts mostly target supply chains in aircraft, shipbuilding, soldier systems, microelectronics, rare earth elements and investment projects, and projects and services for these fragile stressors simulate the sub tears and Small Businesses that report programs critical to National Security area economic and National Security are tightly interrelated and our Industrial Base is the nexus of the two. In conclusion i look forward to doing the work of congress to ensure that resiliency and security of the defense Industrial Base. Congressional support we will focus on ride child areas such as microelectronics and rare earth elements. But it will require a multipronged approach utilizing investment, legislation and policy solutions. A Us Rare Earth Minerals strategy should with the necessary congressional authorizations and appropriations consist of National Stockpiles of certain rare earth elements, reestablishing Rare Earth Mineral processing in the us implementing new incentives and removing disincentives and r d around new forms of clean, Rare Earth Mineral processes and substitutes. We will need your help. At the same time we will continue to support the department and the nations response to covid19. I appreciate the opportunity to speak and look forward to answering your questions. We will begin a fiveminute round of questions and alternate between parties and have a number your participating virtually and in person. Secretary lord, a Washington Post article i referred to in my opening comments when it came out suggested that the dod was using funds and the suggestion in the article that was the funds were either being used improperly or in ways that werent really poor to the reason that congress appropriated monies to the dod. You have testified in your opening comments about how those dollars were used and why. Let me ask a set of simple questions about the number one, in using those dollars as the dod carefully examined the purposes and restrictions in those dollars and attempted to use them completely in accord with guidance in the cares act . Yes. Have you over the course of time today as the dod kept both houses of congress informed about how the cares act dollars were being used. Absolutely and in fact what i would like to do is enter into the record timeline of dpa spending. All of the numerous calls and briefings that we have done as well as hearings. Without objection that will be entered into the record and if i can try to summarize quickly your testimony , the idea is these cares act dollars been used to deal in the dod and within our supply chain with the Health Effects of coronavirus so that we can continue to do the work thats needed but also to shore up economic damage that is being visited upon some of the key actors in the supply chain so that we wont see an erosion of the supply chainthat would hurt our National Defense , is that basically your testimony. Yes, very well said. I know the dod issued a statement that mentioned many of these things and i was a little bit surprised that that statement was not really reflected in aWashington Post story. How that material been provided to the Washington Post for the story was written . It had and the Washington Post had two different journalists who had been conversing back and forth with my Public Affairs individuals and whats interesting is there was a very lengthy interview with Stacy Cummings who is here with me today who has directed our joint Acquisition Task force and none of that was included in the article and thats why we very quickly the next day put out a Public Statement reflecting all of the conversations we had had. Thank you for addressing this. We hope it to the American Public to use dollars correctly and to be transparent about how theyre being used and im glad you were able to address this and other members may have additional questions. I want to focus on an item you and i talked about and that you raise, both you and the chairman raised in your Opening Statements. Covid has made us look at a lot of split supply chain issues in different ways and asked whether there are elements of supply chains that we need to bring back onshore to bring and deal with moments like were living in right now. Often we attempt to accomplish that goal through by american provisions and those by american policies have been a fairlystandard feature of discussions every year and the committee as we do the National Defense authorizing act. Would you support policies under which the dod would work to procure more goods and services from American Companies if the answers to that is yes and im sure it is, describe the process that you use at the dod to determine how and when we should bring more of our supply chain onshore . Security and resiliency of our defense base is one of my key missions and in fact, as senator sullivan mentioned in september 2018, we had published the response to the executive order looking at the defense Industrial Base and that has remained the foundational document that we have used. The process is we use a whole series of criteria called out in the 13 806 report and we convene what we call the Industrial Base committee within dod that is comprised of both the ast reps, im sorry. Our ams reps as well as our Service Acquisition executives as well as agency representatives. And we hear from the totality of this group where they have fragility in their supply chain. We rack and stack on a weekly basis during covid. Now its biweekly. Where those issues are so we have a one and list of both companies, basically categorized under industry segments as well as regions that we believe needs investment in order to keep those businesses going. So thats an iterative process and thats how we have determined what we invested in in terms of dpa title three dollars in the defense Industrial Base and that guides us moving forward. My time is expired, i may come back in the second round but ill call on senator ernst. Thank you secretary lord for joining us today. I have a company and in my state of iowa, wellman dynamics. They are a key part of the defense Industrial Base and they make components for rotary wing aircraft for the military including the ch 53 and others. This company was described but not named on page 47 of the report fulfilling president trumps executive order on thedefense Industrial Base as a fragile supplier. This was before covid and many Many Companies in the Aerospace Industry are very much hurting right now. Due to the diminisheddemand for civilian aircraft. So what is the dod doing to make sure that critical parts of the aerospace flood base in iowa or anywhere else in america are able to continue through the crisis and are there for our military . So were doing a number of things. First of all our Industrial Policy Team i consider the help desk for industry and this welcome mat that we provided you a copy of has Critical Links for how to speak with them. During covid we actually upped our interaction with industry, listening to what the issues were and pushing what we thought were solutions. We did this through three times a week calls using our Industrial Association partners to do that. We preauntran12a held quarterly meetings where i brought 15 or so leaders from dod to meet with 15 or so ceos representing just millions of companies but we had three Industry Associations that webasically worked with. During covid we expanded that to 15 and that way we were able to work with industry. We specifically have held Small Business webinars and calls as well. Those continue area and so its really communication that it comes down to. If there are specific companies that haveissues , i thcompanies that haveissues , i asked them to reach out to the services who are their customers but also to industrial policy and anf and join these Industrial Base counsel, i think i misspoke earlier. The industrial ace council meeting, we discussed those very issues. Thats very helpful secretary and im thankful that dod is working with specific plans and paths forward there. Outside of the dod , what has congress do we need to do to ensure that the defense Industrial Base especially as we look at the Aerospace Sector cansurvive through the pandemic . I think supporting a lot of the moves we have made within anf, for instance we have increased the amount of progress payments from 80 to 90 percent for Large Companies and medium companies. 90 to 95 percent for small companies. We have preawarded some contracts. We basically provided liquidity. In addition what we need is an extension of section 3610 of the cares at in order to give us the authorization to be able to take care of onetime costs but just as importantly we need the appropriation to have the money to do that. So what these are our onetime costs when employees were out for covid to relay out plan floors so where we were meeting cdc guidelines for social distancing and so forth. Unless we get an appropriation, what is going to happen is that will come out of Program Funding that will impact not only readiness but modernization. Thats an excellent answer secretary and i think its up to us as members of this subcommittee and committee to communicate that to other members in congress that there are specific items and pieces of legislation that we need to continue from the cares at moving forward. It is still not businessas usual. So you know, i would just encourage other members on the committee to continue that dialogue with others, just how important this is. What are dod has received through the cares act and other provisions has been a very very small sliver of what we have allocated for general support programs across the United States area it is very important that we not slide backwards in our support to the men and women in uniform so thank you very much secretary for being here with us today. Thank you. Senator shaheen. Thank you mister chairman and secretary lord thank you very much for being here today, for your testimony and taking time to talk with me yesterday. Ireally appreciated that. One of the issues we talked about was the continued challenges with the kp 46. The refueling tanker. I relayed to you the fact that in new hampshire, our 157 airrefueling wing was supposed to receive another kc 46 aircraft on friday. We just learned that that delivery was canceled due to electrical problems with the aircraft area now, ive spoken to the whole number of officials from boeing, from our military leadership most recently as last week with general and of those whos the head of air mobility command. All of whom have assured me we had good conversations between dod and boeing and that the problem is being worked out. Where not going to continue to see these challenges and yet another aircraft has not been delivered as another problem. So how do we fix this . Because it is an ongoing challenge thats affecting our ability, our National Security longterm if we dont get these reviewer refueling tankers up and running. The kc 46 has been an extremely problematical program. I speak with lee and caress of the ceo of the defense side of boeing on a regular basis. One issue is frankly the technical solution. That was the original design, its now being redesigned but also, we have had a myriad of manufacturing issues with fraud and other issues so we have both an Engineering Design issue as well as a manufacturing problem. Excuse me for interrupting, can you explain what that is . Foreign object debris so in other words when you are manufacturingand aircraft , we want it to be very clean because we only want going in that aircraft what should be in that aircraft and you dont want any pieces, other parts of the aircraft going in certain sections and so forth so that could potentially lead to operational issues and we have very very stringent requirements for that area i fundamentally think that the root cause of this is the contract type that was awarded for this. This is why with our new adaptive acquisition framework we are getting many, many different pathways to our acquisition professionals and we are teaching them how to use this in a very different way. In the past we typically sort of locked down acquisition professionals for two or three weeks and lectured to them on Acquisition Policy where it is obviously a fascinating topic. Its not particularly useful to be lectured on it. So we have changed over the last three years how were doing things at the Defense Acquisition University and we are bringing an actual practitioners and talking about realtime problems they have had with their program and explaining how they are using the authority that congress has given us and that we have translated into policy and instructions to give them the flexibility to really tailor theirprogram to what they need. Were also giving newer Program Managers these forums to be able to ask questions and learn from others. So were doing podcasts. We actually have a license from ted talks so were doing ted sbu, where trying to be more contemporary and how were teaching ouracquisition workforce to movethat what i call the speed of relevance. That sounds positive. Its exciting tohear that. I guess the question still is though how do we get this contract back on track so that we are actually getting the planes that we need and avoid these kinds of continuing issues that seem to crop up whenever any plane is delivered. At this point with kc 46 it will take very careful senior dodattention. Secretary esper and i have spoken to the ceo of boeing as well as i said leeann correct but dave consummate as well and we will do that on a frequent basis. I talked with Service Acquisition executive will row for about it but i have efforts that i follow closely on our major defense Acquisition Programs three and i believe you have to manage by the data and i follow on a monthly basis what cost, timing as well as actual functionality of these key programs looks like and if were not adding the mark soto speak , we reengage. Thank you. Thank you senator shaheen and i share yourconcerns on the kc 46. Its a huge problematic issue. The air force has delayed and delayed with regard to its decision on where to base the kc 46. I think in this Committee Thanks by the way that should be an ill in alaska but thats a different topic but the broader topic of kc 46 delays i think is a really important one so i appreciate you raising that. Madam secretary i want to dive into this issue of strategic criticalminerals. The Us Geological survey, an interagency study recently and then just as i mentioned last night the new executive order from the president on this topic highlights some of the Major Concerns that i think all of us have and im just going to highlight some of the language from the executive order. 31 of the 35 Critical Minerals that we have for the defense Industrial Base the United States imports more than half of its annual consumption and the United States has no Domestic Production for 14 of these Critical Minerals. The dependence that we have on one country, the peoples republic of china for these Critical Minerals is particularly concerning. The United States now imports 80 percent of its Rare Earth Minerals from china with portions of the remainder indirectly sourced from china through other countries. In the 1980s the United States reduce more of these elements than any other country in the world and by the way, we still have them in my state. Okay melton is an example china used aggressive economic practices to strategically flood the Global Market for rare earth elements and displace its competitors. Since gaining this advantage every time another supplier the United States or somewhere else in the world looks like theyre going to be able to start mining and producing , the chinese flood the market. To destroy their competition. Its outrageous and as the president last night highlights its a real vulnerability that we have. You may see china doesnt even hide it. In 2010 in a dispute with japan, they just cut off any rare earth elements and have threatened to do it to us. So can you talk about this dependence on Critical Minerals and how it affects the integrity of our defense Industrial Base and what are we doing about it either just us or hopefully with our allies to deter china from these type of actions because as ive been saying its not a matter of if but when theyre going to do this to us and as you know many of our critical Weapons Systems like the f 35 have in normas amounts of these minerals in them and we are very very vulnerable to our biggest strategic adversary in the world who has no qualms about playing hardball. This is clearly an area of risk. It was called out in the 13 806 report. You have a number of tools we can use at dod including dpa title iii investments to help reassure this capability to build both the capacity and throughput. We have made a few awards for instance on neodymium iron boron thats needed for magnets. We have one award there and i have about six others here. There are a few more coming out in the next couple of days but we need to build the capacity andcapability to at least process if not mine as well. We have some other tools that reach out into the interagency, looking at adversaries who are disrupting our supply chain in a variety of ways. So we work closely with commerce on standards and so forth but i would say what we could do today is begin the mining processing number one. Number two we can think about stockpiling some more of these. I actually have spots ability for the dod stockpile. We work through the Defense Logistics Agency on that and i think as you know, 50 usb 98 was amended in 79, building on what was created in 1939 area we annually put out a report on whats in the stockpile. We look at fragility andweve targeted rare earth. We also are looking at cleaning substitutes for some of these so reassuring, stockpiling and looking at substitutes. But we need the authorities to move forward with these. In some cases and we certainly need appropriations when senator ernst asked me earlier what can congress do to support the fragility of the day, one of the things i didnt have a chance to get to was talking about ongoing authorities and appropriations for dpa title iii. We actually have worked through omb and have submitted to congress and hoped to see another appropriation cod. Under the care and we actually had submitted 5 billion or another dpa title iii appropriation because our industrial Business Council has a very long list of critical fragility that we are trying to address, rare earth rfp one. Thank you, i think were going to begin a second round of questioning. Senator came. I still have a lot of questions and now im into this topic me raise one and i wonder if theres opportunities we should explore, ill give you an example area many layoffs are occurring globally. In the Aviation Industry because travel isdown and then thats leading both airlines but also manufacturers. To do layoffs. Rollsroyce has a big presence in virginia so we think of role start but rollsroyce is really an Engine Company and they are highend marine and aviation engines. Theres a facility in virginia called crosspoint in Prince George county which has about280 workers announced they were shutting down. Crosspoint, very sophisticated manufacturing facility that makes components to highend Civil Aviation jet engines. Theyre closing down because the demand for purchase of these aircraft is on the civil side is going to be reduced in coming years. But it is a workforce that has some transferable work skills and im wondering for example on the aviation side of our acquisitions in dod, are we thinking about when we see boeing contemplating layoffs or others contemplating layoffs on the civil side, are there things we could do say for example with existing aviation platform contexts to dialogue with those suppliers where, could we speed up production, if we could transform a workforce at doing Civil Aviation components over the military side, we may be able to advance our procurement of some military assets by taking advantage of and productively using this workforce thats stranded right now so im wondering if youre contemplating that. Absolutely, weve been working as you mentioned, rollsroyce and i was with tom bell working with him on f 35issues. I will tell you both pratt and whitney and rollsroyce have looked to the defense side of the house if you will and they have been able to catch up on some issues and we are looking at pushing forward. I mentioned that we have done Industry Association calls pulling in many different industry representatives over the last few months with a much greater frequency than previously. We talk about these very issues, how we can take the drastic slowdown on the commercial side and leverage that on the defense side. We have actually worked with each of the military services to have early awards of some contracts to again both help with liquidity at the companies as well as retaining the workforce because you know these skills are not generated overnight and quite often on the defense side, we need clearances to work on some of the products and if we have a situation where the dual use Type Companies if you will serve as both commercial and defense aviation, if they lose a significant portion of their commercial business they are there overhead rates are going to go up significantly as well and the defense cost is going to go up so we are trying to create as large a base as we can and actively working with each of those companies. Thank you for that secretary lloyd area one final question, one comment about your point with respect to 3610. I share your view on that point and i think this is now a little bit of a cross government . Theres all sorts of funding in our appropriations act that could be for grants through the nih or funds to university or gave out an award where the money was supposed to be spent a certain time. Section 3610 contractswere supposed to be done by a certain time with outside contractors. Covid has changed the timing and ability of folks to act in a timely fashion and its my Hope Congress will recognize that and continue to allow flexibility and use of funds even pass the time that may have been the allotted time for the agreedupon time because covid has gequests from local governments and research institutions. I think second 3610 issue and fits in that category so i share your view that we should try to deflect that but heres the last question i wanted to ask last years and the aa require the department to compile plans to affect extreme weather on our base so these are called military, installation resilience plan. Weve yet to receive any plans for the department or any of the services. Can you tell me what the status of those required resilience plans is and when can congressexpect to see them . I know my Sustainment Team works on those very issues under the installations group. I do not know the exact date and status of that but ill take that one for the record and certainly get back to you. Thank you mister chair. Senator shaheen. One of the things that assistant secretary gillis is about to receive is a letter from secretary rams and me that raises concerns that we have about the logistics agencies significant reduction in their obligation of authority. Its something you and i discussed yesterday and i understand their working Capital Funds have been constructed dramatically and thats led to that issue but im particularly concerned about what this means for the troop support clothing and textile supply chain. Its a particularly fragile aspect of our defense Industrial Base and further constriction of dlas authority and the ability to award those contracts is really have is having a Significant Impact can you that and can you also talk about what youre thinking in terms of how we address those companies that are really being affected so that we dont have a significant loss of that aspect of our Industrial Base . Two different points there. One, the way the Defense Logistics Agency works is they are working Capital Funds so they have a certain amount of money that they can go and spend and obligated before they spend. If they do not liquidate the inventory they have on hand, it holds on the money and therefore you cant continue the cycle. During covid, the disbursement of a lot of these goods did not happen as quickly as there was a slowdown in the entire system area so we got a lot of feedback about where are the orders . Weve been working on that with companies. If particular companies have problems, again our dpa title iii can help as well as 3610 for the onetime cost they have. We have in fact begun reassuring quite a bit in terms of clothing and so forth and we are working on that through our Industrial Base counsel but what we think in terms of the demand signal if you will for liquidating the inventory, we are seeing it start to pick up and we think in october time frame we will begin to seesome more of those obligations. But frankly, pure supply and demand. Its encouraging to hear that we think october may see aresurgence. Can i, i related issues that and it sort of goes back to the issues that senator kane was raising at the Washington Post has raised. As we look at the awards, there have been significant award from the doa to contract for medical downs to address ppe shortfalls and its my understanding that some of those contracts have been to companies that have little experience with producing kind of equipment. The standards have not always been up to par and it created some real challenges. And i understand that the awards were made using lowest price technically is acceptable contracting procedures. Maybe you can confirm that or not and if thats the case, if it is resulted in subpar products, should we think about whether as were looking at companies that are doing new products to address our domestic supply needs that maybe the lowest price technically is acceptable contract isnt the best way to do that that we got to be looking at best value contracting but can you the challenges with that . In terms of the downs when we set up the joint Acquisition Task force there was a number of orders and a series of purchases thatwere put in place. We came on board and used our expertise to look at the available supply and at the demand signal and particularly for these gowns we worked with dla very recently to have two Industry Days and reached out to many, many Small Businesses. Often through Industry Associations again to make sure they got all of the information and that we explained to them exactly what the process is and then we went through a very rigorous process and just recently awarded some of those. But what i will do is make sure that we get back to your office specifically with the specific companies and issues and the process we use. I know this was raised to us early on and we spent an enormous amount of time making sure we had free and open competition and that very stringent criteria were met and adhered to. I appreciate if you can let us know what you found out. Mister chairman, one more question. Can you tell me what the status is of our efforts with turkish suppliers and when theyre going to be removed from the f 35 supply chain. So as you know, because of the f 400 purchase, we had multiple facetoface meetings with the turks and a lot of correspondence. I was involved in these things at 400 and at 35 were mutually incompatible. We said that there were some boundary conditions if the turks took delivery. We would then remove the supply chain. We estimated it would be about six or 700 million in nonrecurring engineering to begin to that. We did actually begin the work prior to announcing that we were withdrawing from turkey. When the s 400 was delivered to turkey we then very overtly began the work. Prior to that we werequietly doing some things. What we found was that although we balanced out the majority of contracts, there were a number of them for the Center Fuselage from some of the f1 35 engine parts, bladed rotors for instance where these very large complicated parts and if we terminated the contract by december 2020, we would incur almost 1 billion and affect the production ofthe f 35. So we made a decision on a number of parts that it was smarter in terms of taxpayer dollars and war fighter residents to let those contracts play out in turkey so that we wouldnt have these huge termination liability costs so we have a few of the products that will go until 2022 but we have detailed information we can get you on this. I know that senator langford and i have talked about this multiple times and secretary esper actually has had the same conversation. I want to assure you we are balancing what the cost is to remove the supply chain from turkey and what impact it would have on war fighter readiness not only us but our International Partners but we are well on our way and the bulk of hours will be out by the end of the year. Does that mean were not concerned about that compromising technological technology of the f 35 and being able to have that shared with russia and other adversaries . We have worked very very closely with turkey on any sensitive information. And at this point, we are confident with where we are. Can you explain a little bit more that means . Perhaps in a different setting we can talk about that. Mister chairman i think that would be a good topicfor another hearing , perhaps in a classified setting. I agree. I do senator and i hope the pentagon longerterm Lessons Learned on this is making sure we dont have to go through this again with allies and turkey is an important ally but we cant be reliant on an ally that all of a sudden starts to be very focused on cooperation with one of our biggest treaty adversaries though i think its an important lesson or the pentagon writ large going forward. I want to turn back to the issue of Strategic Critical Minerals and madam secretary, you talk about the authorities and funding, you know, the one issue that i think is a good example and i want to get youropinion on it , in the early 1970s after the First Arab Oil Embargo the United States under us leadership with all our allies at the ocd and others set up the International Energyagency. And key elements of the iea is a strategic stockpiling of petroleum not only in the United Statesbut all our oecd allies do that in coordination with the International Energy agency. And obviously that took an act of congress to set up the Strategic Petroleumreserve. But i think that most people would recognize it that a bipartisan success over decades. How does that Strategic Petroleum reserve differ from the National Defense stockpile and should the National Defense stockpile be expanded to take on a role similar to the Strategic Petroleum reserve, would you need you mentioned authorities for funding, is there a pathway to make that happen and let me just mention that would course provide security but also market certainty. I mentioned earlier whenever theres a minor processing facility not just in the United States but around the world that looks like its going to make progress on the supply of Strategic Critical Minerals the chinese actually aggressively worked to shut that down by flooding internationalmarkets. So this is an important issue for National Securityeconomic security , whats your thought on that and how could we implement Something Like that. Or are we already doing it . You have the authorities with the National Defense to talk about. It is clearly known that these Rare Earth Minerals are very important for many applications. Often we in the department of defense have the power to convene as the ability to invest some money to start on an effort that we think is critical for National Security area i would assert were doing the same thing formicroelectronics right now. So we are on a trajectory to increase our National Defense stockpile relative to Rare Earth Minerals reedit the silverlining of covid has been that i think most americans now understand the importance of having domestic supplies area we could certainly especially under the auspices of the eo that just came out yesterday work with the interagency because there is already a lot of work going on to look at expanding the National Defense stockpile to include more rare earth and look at that as a national resource. How do we make that happen and can you do that . Do you need congress . Would it be better to have congress do that west denmark obviously Congress Played a huge role in the setting up of theStrategic Petroleum reserve. We need to get on this and the Energy Sector is a great analogy for Strategic Critical Minerals. What youneed from us . I would like to look into that to give you specifics to see what authorities. It would obviously take some authority some appropriation to do that but i would like to take back on and get back to you within a month with i think we could give you a fairly detailed plan on that. Let me turn to the issue and i appreciate your raising it in your Opening Statement as it relates to the Defense Industrial in Small Businesses so my state economy, were always looking to diversify our economy. We need to do that more in alaska and we certainly have Natural Resources like oil and gas and minerals but diversifying our economy is a bit important and in the last couple of years weve had a few Small Businesses that have had contracts for example with the department of the navy. I wont mention the company but one, a very sophisticated machine and contract with the navy but at one point Navy Contracting officers told this company if you want to keep the relationship going and you have opportunities you might want to think about moving your Manufacturing Base to the lower 48. So i heard about this, made a phone call to the secretary of navy saying youve got to bekidding me. Youve got to be kidding me, what the hell . Thats not how we are working to diversify Small Businesses in america, particularly in alaska. So what are we doing to encourage not just the places that have a lot of contractors you know like in the lower 48 near the big basis and the big contractors but in more frontier oriented states like mine. What are we doing to help those kind of businesses and my goodness, i certainly hope you can send through the chain of command of the pentagon that kind of activity by the contracting officer is completely inappropriate. What are we doing to help Small Businesses in states like mine plug into the Industrial Base and opportunities that affords the work youre doing. First of all i agree its totally inappropriate. Thats the first time ive heard of this but what were doing is underneath industrial policy and acquisition sustainment we have a Small Business office. Amy murray runs that. She is highly talented and highly motivated and she again is reaching out through Industry Association to work with Small Businesses, connect them with the right groups inside of the od as well as the other Government Agencies and organizations that can support them. So first of all, what i would ask is again for you to pass along these welcome mats if you will to your constituents so thatthey know how to reach out to us. But we are conducting webinars on a very frequent basis. We are talking with the services so if we hear about capabilities, we can then match those capabilities with others. From a topdown point of view with money we have been authorizing appropriated from congress for dba title three or anything else, we are putting enormous pressure on the price to be transparent with the flow down of those funds to the subject companies to make sure they benefit. And is it one of your goals to kind of spread the wealth . Obviously im not calling out my Ranking Member but places like virginia, given their big Industrial Base here in the navy and everything, theres probably a lot of opportunities to spread the wealth to parts of america that my state has more veterans per capita than these countries so were very patriotic, we love our military but to have opportunities in places that maybe dont come in front of mind to the pentagon like in alaska to spread the wealth for opportunities, is that part of your goal . Absolutely, we support geographic diversity like all diversity so ill commit to you by the end of the year one of our Industrial Policy Teams will visit the state of alaska and meet with your Small Businesses. In particular, i am focused on the endo Pacific Region which presents unique challenges. Our services cant operate in smaller more distributed formations across a large and geopolitically complex region and perhaps with limited communications. It is clear that endo pay calm, indo pacific and the military services will have to rethink the way they sustain a war fighters theater. Not only would critical food, fuel and Maintenance Equipment be stalled or potentially have to travel greater distances if they can be served locally but higher headquarters might not receive the visibility of supply levels and efficiencies that are logistics enterprise has brought grown accustomed to operating in the last several years. Secretary lord, from your perspective what are the Biggest Challenges to ensuring that the supply chain can respond to the needs of distributed war fighters in the endo Pacific Region . Senator, this is a key area of focus for the department. In fact, every monday Senior Leadership military and civilian get together for a National Defense strategy implementation meeting. One of the topics we are focusing on here in the near term are contested logistics for that very reason. Forced employment, this becomes much more of a challenge so i would say the number one issue is planning to understand what we will do and then too, can medications and were looking at art distribution network, at our supply network to make sure that we are there in the time of need so we obviously have war fighting plans and we have very detailed logistical plans to go along with that and just as we are sending aircraft carriers out with little notice and perhaps surprising sum we are sending aircraft places, surprising others we have a lot of work going on in logistics that we dont talk about but to be there for the very reason you state, to support the war fighter wherever they might be. Are there any particular procedures or programs we should be considering to address these challenges . I will tell you that is a very, very important question and offer. I would like to take back for the record and come back to you in the next couple of weeks because we are actually convening some very critical medians on this topic, literally in the next week or two. Wonderful. I would love to be read in on the follow on to those meetings, please. Very good. Thank you. I note the department understands the risks of the supply chain posed by competitor nations of potential adversaries. I am pleased to hear the department has been taking more offensive steps to shore up our supply chain from Domestic Production of key products and systems as you have mentioned. Reducing International Independence to working with allies and finally partners to mitigate risk to that supply chain. These and other efforts i think display good foresight however, i am concerned about our liberty to deliver sustainment to our troops and appear conflict. Endo Pacific Region poses challenges i believe logistics enterprise needs to prepare to operate in a contested on a global scale. [inaudible] within a contested environment . How does our supply chain need to evolve to meet these challenges . We are developing those plans right now and perhaps in a different setting, classified level we could talk about that more. Thank you. Mr. Chairman, i would love to have that hearing in a classified environment if you would consider it. Yeah, i think thats growing consensus, senator duckworth on his hearing that we will do that. Thanks for weighing in on that. One more quick set of questions and one more senator is trying to jump in and if we get him on time we will do that otherwise we will wrap up at this hearing. We appreciate again madam secretary your hard work on these issues. I want to talk about more directly related to the issues of covid and how we are trying to get through this pandemic and the Important Role that dla and others are plain in this regard. Let me ask two questions. One, i dont know if you have a thought about it but one of the things ive heard back at home with regard to testing is continued challenges with the reagent supply and has there been any focus on new or others taking on more aggressive approach with regard to the Industrial Production of that critical aspect of testing . That is one question. The second, with regard to the possibility that hundreds of millions of vaccines will be needed to be distributive to the u. S. Population in the coming months and next year our government will need a massive coordinated Distribution Plan to get vaccines from Assembly Lines to american citizens and what is dod doing to ensure that they can help distribute vaccines and hopefully we will see those soon that are safe and ready that are likely to be available but logistically we have a big country and what are you doing on that . I think the department of defense could play an Important Role in that regard so testing reagent, vaccine work are my two questions. Testing reagents is an area that we are working with hhs on industry expansion and we are investing pairs act money using all the input from a team that we are sitting with at hhs to prioritize and work with doctor at hhs and then we go and place those orders both for industry expansion as well as assisted acquisition for the production of those. I can take a question for the record here and get back to you with some specifics around that so there is a lot of momentum right now in that area and quite a few awards that are being made. On the second question in terms of distribution. A vaccine, as you know, general is working at operation warp speed that is looking at that distribution and we have many military individuals detailed to that effort so operation warp speed is leveraging art military knowhow and infrastructure and the white house right now is deciding exactly how that Distribution Plan will work but we stand ready to support that. Thank you. I believe senator jones is on the line, senator jones. Thank you, mr. Chairman and i appreciate the opportunity. Thank you for being here. Secretary lord, the chinese, and his that is known as military civil fusion harnesses output of chinas civilian economy for the benefit of defense. Do you have any concerns that the chinese are attempting to infiltrate u. S. Companies throughout the supply chain, both with employees and investors and have we seen instances of that within our defenserelated company . I am absolutely concerned about chinese infiltration at every sector of the u. S. Economy and in fact, we spend a lot of our time dealing with Cyber Security in large part due to china that is why we just rolled out our cmc certification and it is right we look at cyber hardening of our weapon systems all the time and we work very close with the defense Industrial Base to make sure that they understand the threats we partner with an essay and cyber calm and with our Industrial Base to inform them of threats and there is every day a partnership there. I would say there is an extremely close collaboration and we are not only plain defense as we use to hear but plain offense as well and this is only getting more aggressive and we work closely at dod with the interagency with authorities like [inaudible] and others and we are making sure that we neither have technology compromise nor we have individual or human expo trading critical National Security data. Great. Thank you. You have any specific and i really appreciate that answer, by the way. I appreciate all this being done at your level and across the executive branch. If you have any specific recommendations where congress can assist in any of those efforts . Let me get back to you with specifics. I believe there may well be. A lot of this, frankly, is not continuing to engage with these Chinese Companies on sensitive issues but in turn developing Industrial Bases here that makes us not reliant on that back and forth. Theres quite a bit of discussion within the inner agency right now about constraining chinese involvement from everything from investments to specific commodities but again i think one of the areas where we have the most impact on china oddly is re shoring microelectronics and right now my team is working very closely across dod as well as the interagency to come up with a very specific recommendation for some public, private partnership in order to develop the ability here domestically. We here at dod are about only 1 of the overall microelectronics market. However, we have some critical needs and we have the technical acumen, if you will, as well is perhaps the authorities and the appropriations to overcome that Activation Energy and to have some trusted foundries here and then we think we can work with other critical Market Segments such as industrial controls, automotive, medical, to have just industries sustained those facilities. I think, plain offense versus playing defense is the way we need to proceed here. Great. I appreciate that. I agree and we stand ready to help you in that regard. Let me ask you another question. You said in a press conference on september 9 that it might take as long as six months for the defense Industrial Base company to receive aid that was authorized in the cares act. Could you explain why that is taking so long to receive these and what dod is doing to expedite that process . We have a process where we can go out with requests for proposals, get all of the onetime costs in and adjudicate what we can reimburse. The issue is right now, although we have all the authorities we have no appropriations what to do that. If we move forward right now we would be taking dollars directly out of programs which would instantaneously affect readiness and then shortly affect modernization. What we are very much hoping for and what we have submitted documentation for is an appropriation to take care of onetime issues between march 15 and september and the end of september, whatever the period would be for companies but right now we would break program and affect National Security and if we do those reimbursements out of programs. Thank you, secretary lord. I would cement for the record that we us assess the continuing resolution and i know that has a negative impact on the department of defense and our military. I will take that as part of that answer as well that we should not be taking the can down the road. Finally, chairman, thank you. I would like to associate myself with some editor senator shaheens comments about the concern about our downs and we will submit a cfr on that. Thank you, mr. Chairman for allowing me to come. Thank you, senator jones. I think we will wrap up here with just a few comments. Senator shane, would you like to take a few . These comments are more for the committee or testimonies secretary lord made me think of this. One trifold you gave us about acquisition process you have these six tenants at the top and one is empowering appropriate managers and as you described Defense Acquisition University training of programs managers acquisition professionals you said rather than lectured them for two weeks about policy we try to be problem solvers. One of the things, mr. Chair, having been on the committee for a while i dont yet feel like i have confidence in my being up to speed on this is you know, what lessons are we learning from acquisition, failures or successes . Kc 46 from the very beginning and the competition there was all kinds of challenges and someone went to jail with one of the bidders way back when in the competition started and got canceled and gun got rebid and then there was fighting but what lessons have been learned from that and have those lessons been lessons that the air force has learned . Had they shared that more broadly across the dod family . What lessons should we take from that app 35 . Very good idea and lets have a platform that could be used by multiple services and why not allies to because interoperability is a good thing and caution sharing is a good thing and yes, making that platform available and seeking investment from all these allies led to security vulnerabilities and this situation. Its upsetting the turkey will cost us money and pose security risks. Before the class carrier, if you do a new class of carrier do make everything new at once or you do the hall and the propulsion system and that mitigation system and the elevators and arresting air and catapults do you do it all knew or should you do some of it new and then once you have that down then you start to add in and subsequent ships in the class some of the other innovations . Then there is positives. Virginia class subs the co opposition done between electric vote leads to a spirit of competition between the two Companies Even though they are ultimately participating in the same program but that has driven some efficiencies. I dont know how we learned about the value of that with in the navy or is that something the air force and the army understand to . You know, it might be productive for this committee to have a greatest hits and greatest failures of recent Acquisition Programs and try to get the dod to telus eight what lessons have been learned from either good or bad and b are the lessons been shared across all the Service Branches and if so, show us examples of how we have achieved some Forward Motion because of the lessons that have been learned. I dont have, and as we are learning the lessons and applying them and we may be and im not aware of it but that might be something for the committee at some point. I really appreciate that comment. I agree fully with senator kaine and madam secretary i think youre in a good position to help us do that work given your background and both in the private sector and now in this important position. I think that is something we should be taking on because look, our acquisition system is one of the, i think, biggest vulnerabilities we have. Theres a bit of a joke that runs through this committee that we should, that someone once mentioned to me that we should take our acquisition regulatio regulations, stamp them topsecret, even though they are not and put them in front of the Chinese Embassy and hope that the chinese take on our Acquisition Program because and let them learn the bad things we do here because its not helping us. It is hurting us. I think there is a lot of Lessons Learned that we can do but when you can look at an rfp for nextgeneration handgun pistol or nato that is 450 pages you know something is wrong with the acquisitions. I think it would be great to be able to do that and i thank you would be an outstanding point person with the ability to do that, Lessons Learned good and bad and then how do we implement and a lot of that would require changes to the law and in my view getting rid of entire levels of bureaucracy at the pentagon which, you know, causes a lot of these problems, wellintentioned people who are in a system that is not helping our nation act nimbly and quickly as we have to address the challenges of the Great Power Competition. I do want to thank you again. With the issues, as you see here its a very bipartisan the whole issue of supply chain the rise of china, covid and it is outrageous that we are so reliant on the chinese right now and they are calculated attempts to keep supply chains dependent on them and has to stop and i thank you are in a perfect position to do that. I think there are strong bipartisan support and resolve to help the deferment of defense do that and not just secure National Security but help American Workers in this are great jobs. The Mining Sector in my state has an average wage of 100,000 per worker and its a great job. We do it better than anyone else but high Environmental Standards clearly the chinese trash the environment when we mine. We dont. We should bring that home and i think we have a great opportunity so i want to thank you and appreciate my colleagues interest in this and i do think that in short order at a classified setting but with that i want to mention any questions for the record that will be coming your way that we respectfully request you try to get back to the committee with answers within two weeks and the record will be open to that amount of time for additional questions. With that, i want to thank the secretary again for her testimony and service to our nation in this hearing is adjourned. Who will control congress in january . Stay informed on all the competitive congressional races leading up to election day with cspans campaign 2020 coverage. Watch the candidates debate and Election Results on cspan. Watch online at cspan. Org or listen on a free cspan radio app. Cspan, your unfiltered view of politics. Book tv on cspan2 has topped nonfiction books and authors. Saturday at 9 15 p. M. Eastern donald trump junior on his book, liberal privilege. At 11 at her book the virginia dynasty former sec. Lady lynn cheney chronicles the leadership of the first five president s from virginia. George washington, thomas jefferson, James Madison and james monroe. On sunday and 9 00 p. M. Eastern on after words former cia director john brennan speaks about his life and career in his book, undaunted, my fight against americas enemies at home and abroad. He is interviewed by New York Times National Security reporter julian barnes. Watch the tv this weekend on cspan2. The competition is on. Be a part of this years cspans student camera video competition, middle and High School Students be the start of the National Conversation making a fivesix minute documentaries point issues you want the president and congress to address in 2021. Be bold with your documentary, show supporting and opposing points of view and include cspan video. There is 100,000 in total cash prizes, including the grand prize of 5000. Deadlines to cement video is january 20, 2021. Be informed about competition rules, tips and how to get started. Go to our website at student camera. Org. Next, house energy and subcommittee hearing on the develop meant of the safe and effective coronavirus vaccine. Public Health Experts spoke about the fdas approval process ongoing clinical trials, Distribution Plans and Public Confidence in a vaccine. The hearing will now come to order. Today the subcommittee on oversight and investigation is with holding a entitled pathway to a vaccine ensuring a safe and effective vaccine. The purpose of todays hearing is to examine the safety and efficacy and assess ability of prospective covid19 vaccines. This vaccine emergency todays hearing is being held remotely and all members of staff will be participating Via Videoconferencing and is part of our proceedings my proposal will be set on mute for the repose of eliminat
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