[ inaudible conversations ] Armed ServicesCommittee Meets today to receive testimony on the Department Reform effort. We welcome our witnesses ellen lord under secretary of defense for technology. Mark es per. Secretary of the army. Heather wilson secretary of the air force. And james gerts assistant secretary of the navy for research and development. Acquisition reform is wup of the most important frustrating topics we address. For years, we have been warned that america is losing its technology advantage. I hope you have seen the work on this topic. That is why the department of defense needs acquisition reform. Not just for efficiency or save money. Simply put, we will not be able to address threats facing this nation with the system of organized irresponsibility that the defense acquisition enterprise has become. I want the witnesses to Pay Attention here. Okay . Were still dealing with a trillion dollar f 35 program that continues to operate in dysfunction. The air force still sub dizs for space launch with cost plus fixed fee contracts. The army sunk nearly 6. 5 billion into nt. Net work that doesnt work. In the navy lcs program is delayed. The cost are now 6 billion and rising. And many of the key capabilities remain unproven. Thats why the committee enacted the most sweeping reform in a generation through the last two National Defense authorizization act. And yet despite that legislation, and in the face of our eroding military advantage, the department has been unable or unwilling to change. While the Previous Administration offered rhetoric about reform, this committee was disappointed we saw no meaningful action. I remain deeply concerned about the state of our acquisition system. Im encouraged by the signs from your team. It appears you are beginning to make progress. Let me remind you of the expectation. First the office of the secretary defense needs to let the Services Manage their programs. Congress has returned significant authority to the service. But rewill be watching closely to make sure that you do business differently. And use that authority wisely. Second. We have empowered the services that doesnt mean you can go do whatever you like. The Services Must led osd set strategy and policy and do real over sight. That means being transparent. Providing data to and following the guidelines set. Again we will be watching. This Committee Takes its own over sight role seriously and we will rely on you to keep us informed so we can do our job. Third, a system must move faster. Time is of the essence. A work of groups like diux the strategic capable office and the Rapid Capability Offices should become standard practice. Not work around to the regular system. And we need the innovations for major defense acquisition programs. Not just science and technology effort. Fourths, you need to be willing to take more risk. And be willing to fail when you try new things. We recognize that congress can make that difficult. Keep us informed of your plans so that we can Work Together. So that were not surprised when things dont go exactly as planned. We would rather have a small failure that teaches us something early in the process, and deal with a multibillion Dollar Program that becomes quote too big to fail. Fifth. Invest in the acquisition work force and empower them to succeed. Too often we hear personnel are unfamiliar with or nervous about new authority. And finally reform your organizations and Business Practices to simplify and move faster. Major changes we have instituted through legislation are intended to give you the opportunity to make more detailed changes in your organization. This is an opportunity to update your organizational structure. And internal processes accordingly. And along the lines, i dont if you fail, i would much rather you try and fail than do nothing. Okay . And if you keep in contact with us and tell us what youre trying to do and what youre doing, we will be patient for about five minutes. And finally, finally, reform your organizations and businesses practices to simplify and move faster. The major changes we have instituted through legislation are attended to give you the opportunity to make more detailed changes in your organization. This is an opportunity to fail. This is an opportunity to update your organizational structures and internal processes accordingly. Now you have reforms and you want to try them. Come and see us. Come and talk to us. Well be glad to cooperate with you. And dont be afraid to fail. Because the only way that we will succeed is to take the risk of failure. Congress provided you with all the tools you require. We expect you as part of a new administration to use the tools. Unlike your predecessor. As you do so, you will have a willing partner this this committee. Do not hesitate to pick up the phone or come over and see any member of the committee. We have given our subcommittee chairs a great deal of latitude and a great deal of authority. As we go through the Decision Making process. Do not hesitate to call any of them with the exception of senator reed. Thats right. Finally, i believe and ill be glad we will be glad to hear your requirements and how we can help you do your business better and in a more efficient fashion. We expect you as part of the new administration as i said youll have a willing partner in this committee. We had a hearing not hearing we had a briefing from the ran study that i think my friend jack reed would agree. Is one of the more disturbing briefings that we have had in the years that i have been a member of the committee. The gap is closing. Theres no doubt about it. So well be expecting a lot of you. But were not going to succeed unless we have a partnership here. Okay . Thank you. Thank you, mr. Chairman. Thank you for holding this very important hearing. I want to thank the witnesses also for appearing here today. We look forward to your testimony of the we have a shared goal to ensure the military forces are equipped with the best systems and technology that the department of defense builds and buys and those systems are the most effective and efficient ways possible to protect the nation and protect particularly the men and women in the armed forces. We have a shared goal that the pent fwon should be able to access the innovative people in technologying available from Small Companies to labs and universities. We owe it to ensure we are buying things at reasonable prices and within reasonable budget. This hearing will give us a chance to learn how the department is working to make the shared goals a reality. The zfss should play an Important Role in the research and acquisition programs that on the chairman leadership. Congress is strengthened the service ts role in the plans, rishlt and Program Review process. That strongly shape whether the program succeed or fail. These new responsibilities are in addition to the role the services have always played. In development of the plans and budgets. Ensuring programs are appropriately prioritized and funded. Especially in difficult budget environments. The Services Play part in nurturing the careers of the military and civilian personnel who work in the fields to often we forget about those individuals and the necessity to main ta and enhance and prolong their careers within the department of defense. Building on the success of the weapons system reform act and the pentagon initiative and making use particularly of the new reforms. In the recent national acts led by chairman mccain. We are seeing some improvements. And are well positioned to make more kbruchlts. Improvements. We must do much better. I welcome a discussion of further change that can be made to strengthen the role as appropriate. With the hope of continuing to improve out comes and provide the best value and the best military in the nation. I would like to say how much i appreciate the partnership that i have with senator reed despite his educational lacking. But we are partners and the fact that the defense bill was passed through this Committee Without a single dissenting vote is ample testimony to the by partisan ship. That characterizes our conduct of the committee and im very proud to have senator reed as a partner. So, well begin with the honorable ellen lord. Under secretary of defense for Acquisition Technology and logistics. Secretary lord. Chairman mckpan, Ranking Member reed. Could i just mention one thing. We may have depending on what happens here, theres a going to be an event at 11 45 of the floor of the senate. We may have to recess until that event is complete. Go ahead, please. Thaurng. Thank you for the opportunity to testify. On defense acquisition and Reform Efforts. Im pleased to be joined by secretary es per. Secretary wilson and assistant secretary gerts. After having spent 33 years in industry, i have come to my current position during a unique period in time. One which provides a great opportunity to make a positive change. First the National Defense authorizization act for fiscal year 2016 and 17. Have provided the direction and the tools for the department to advance the capability required to restore our over match. Speed the rate at which we field the advance capabilities and improve the over all affordability of our fighting forces weapon system. Secondly secretary mattis placed a priority on implementing the provisions alongside other Department Wide reforms. And practices required to improve the readiness of the military. Using an industry anology i believe that the osd should function as a corporate office. Very lean and enabling the services as businesses to execute programs theyre responsible for. Atnl should be pushing the majority of the departments work. Back to the services chlts and focus on prototyping and experimentation. Develops ak techture and standard. Interpreting law into policy and procedure. And simplify acquisition processes to quickly and Cost Effectively provide material and services to the war fighter. Stating it plainly, atnl needs to be the stra teet jij body. With focus across the board driving affordability and accountability. Reducing time lines. And equipping the services to execute their program. Given the fact that the dod average awards daily 1,800 contracts. And 36,000 delivery and task order. Every process improvement we make has the potential to produce significant results. Having reviewed data measuring the typical lead time following validation of a war fighter requirement until the award of the resulting major weapons system contract. I have concluded that we have the ability to reduce the procurement lead time by as much as 50 . Some of the ways in which we plan to do this are incent vising contractors to submit responsive proposals and 60 days or less. And implementing electronic Department Wide acquisition streamlining tools. Further more Congress Gave us the ability to conduct ten pilot programs. Permitting the reduction of cost and placing data for Foreign Military sales. Key to our success would be to have the same flexibility for our u. S. Procurement. If we were granted the Statutory Authority on sole source procurement it would allow to use our judgment to reduce the cost and pricing data we would require when we have cost transparency with the company. With which we do business. In my testimony, i stated we have initiated six pilot programs that push limits of our contracting agility. This is an in order to demonstrate our ability to responsibly reduce this procurement lead time. Tell us couple of the programs. C 130 j. And the japanese global hawk. So one u. S. One Foreign Military sale. Our goal is to get these pilot procurements done within 210 days from the issue of the request for proposal. 210 days . 210 days is the interim goal. We would like empbtly to get to 180 days. We have the process to work down. Well work with you and your team to demonstrate how we do it. Well come back to you as we need additional authority. If needed. But we believe its really interpreting the authorities we have now making sure you agree with them. And having us move forward. Were also prepositioning production contracts to include options nor yet to be developed fms requirements. In other words in the initial contracts we have the language so we can almost fill in the blank for sales. Again, prethinking this is going to reduce the time line and allow us to be very responsive to international customers. You dont need 100 page rfp for a pistol . Correct. On the joint fighter program. We are determined to produce the cost of production and sustainment. We have initiated an extensive jsf cost deep dive led jointly by my office. And the purpose of the cost review is understand in detail at lock heed martin. Rolls royce. And bae. As well as the primary subcontractors and there are a hundred of them in total. What jsf costs. Why it costs what it costs. And most importantly, what we can do to improve cost performance at the prime contractor. And up and down the supply chain. This will be a completely transparent process with the companies involved. The knowledge gained will inform our product contract negotiations. And all of our sustainment efforts. On a go forward basis. And will promote more effective and timely contract negotiations. Just yesterday, the fy 2017 defense acquisition work force Award Ceremony was held. Deputy secretary shanahan and i recognize the out standing accomplishments of 27 top dod acquisition professionals. Out of a work force of 165,000. A few of their accomplishments include implementing a cunning edge approach to cybersecurity. At the timesing for aircraft weapon systems. Accelerating the testing for defensive systems. On ac 130 j aircraft. By two years. Getting 3,000 Tactical Combat care units to medics and special forces operators. Improving cybersecurity for medical facilities. And reducing buy logical agent decontamination time by 50 . To accelerate the return of equipment back to the fight. Out of the 17 individual awards, across requirements and acquisition critical if you thinks the United States special Operation Command received four. Our challenge is to take these pilots, these silos of excellence and scale them to the big army. The big navy the big air force. Were also. How many f 18s are operational and ready fo fly . Not enough. Ill defer to my colleague. On that one. Okay. The numbers i recall are 60 . Are not flying. Operational availability across our air asset is an issue. As i talk to each Service Secretary its very clear. Theres a lot we can do at the beginning of the programs. To design in the sustainment portion. And were foxing on that. Well come back and tell you. Let us know who is responsible. Absolutely. I would look forward to a small discussion in your office. And we can talk about the actions were already taking in terms of accountability. With individuals. Thank you. Were also working to make use of the new rapid hiring flexibility provided by the committee to bring in world class talent in areas like robotic. Laser. Artificial intelligence. As well as new contracting specialist and test engineers. For example, in 2016 our labs hired nearly 2,000 new scientists and engineers. Using the hiring Authority Congress provided. Reforming and improving the defense acquisition system to create an agile enterprise is a continuing process. Requiring Close Partnership across the department and with congress. You have my total commitment to the success of that partnership. Im looking forward to working closely with the committee. And the professional staffers to further implement the initiatives we have already begun. Thank you for your support and the significant effort. And i look forward to answering your questions. Thank you. Chairman mccain, Ranking Member reed. Good morning. When i a peered in midnovember i stated that had modernization was a top priority. Of mine. And ensuring the future readiness of the force in a high end fight would be difficult without fundamental reform of the current system. In my few weeks as Army Secretary i am more convinced this is true. And aware of the urgency for us to modernize. Im encouraged by the progress the army has made consistent with congressional drekt direction to begin over hauling the current system. To be sure a long road lies ahead. Army leadership with the support and advice of congress is fully committed to bold reform that promises to provide american soldiers with the weapons and tools they need to fight and win the nations wars. This committee is well aware of the growing challenges the military faces. Arntd the world. Rising near competitors threaten and sometimes challenge americas interest with capabilities that often match and in the few cases exceed our own. In short the failure to modernize as quickly as possible will increase risk to the force. This makes reform of the Industrial Age system a strategic impairtive. Together with leaders from the regular army. Army National Guard and army reserve im approaching this endeavor through the priorities i out lined previously. First taking care of the people. Our soldiers and their families. Next, readiness. Ensure the army ability to deploy, fight and win. Especially the high end. Third, modernization. Build greater capability and capacity. Finally reform. Improve to free up resources. Time money and manpower. To make the total army more lethal. Capable and efficient. Given the priorities the army is under taking five acquisition Refo