The Senate Arms ServicesCommittee Meets today to receive testimony on the acquisition reform efforts. We welcome our witnesses, ellen lord, mark esper, secretary of the army, heather wilson, secretary of the air force, and james gerts, assistant secretary of the navy for ak we ziglaskk acquisition. I hope you all have seen the work by rand on this topic. That is why the department of defense needs acquisition reform, not just for efficiency or to save money. Simply put, we will not be able to address the threats facing this nation with the system of organized irresponsibility that the defense acquisition enterprise has become. We will be watching closely to make sure you do business differently and use that authority wisely. Second, while we have empowered the services, that doesnt mean you can go and do whatever you like. The Services Must let osd set strategy and policy and do real oversight. That means being transparent, providing data to and following the guidance set by osd. Again, we will be watching. This Committee Takes its own oversight role seriously, and we will rely on you to keep us informed so that we can do our job. Third, the system must move faster. Time is of the essence. The work of groups like diux, the Strategic Capabilities Office and the rapid Capabilities Offices should become standard practice, not workarounds to the regular system. And we need these innovations from major defense acquisition programs, not just science and technology efforts. Fourth, you need to be willing to take more risks 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 acquisition process than 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 that acquisition personnel are unfamiliar with or nervous about new authorities. Finally, reform your organizations and Business Practices to simplify and move faster. The major changes we have substitutinstitut instituted through legislation are intended to give you the opportunity to make more detailed changes in your organizations. This is an opportunity to update your organizational structures and internal processes accordingly. Along those lines, 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. [ laughter ]. Finally, reform your organizations and businesses practice to simplify and move faster. The major changes we have institu instituted through legislation are intended to give you the opportunity to make more detailed changes this your organizations. 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. The only way we will succeed is to take the risk of failure. Congress has provided you can all the tools you require. We expect you as part of a new administration to use these tools, unlike your predecessors. As you do so, you will have a willing partner in this committee. Do not hesitate to pick up the phone or come over and see any members of this committee. We have given our subcommittee chairs a great deal of latitude and a great deal of authority as we go through the decisionmaking 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 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. Look, we had a hearing not a hearing, we had a briefing from the rand 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 ive been a member of this committee. The dpap 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. Jack . Thank you, mr. Chairman. Thank you for holding this very important hearing. As you pointed out in your opening remarks, i want to thank the witnesses also for appearing here today. We look forward to your testimony. We have a shared goal to ensure that our military forces are equipped with the best systems and technology that is the defense of defense builds and buys and that those systems are the most effective and efficient ways possible to protect the nation and protect particularly the men and women in our armed forces. We also have a shared goal that the pentagon should be able to access the most innovative people and technologies available. Also, we owe it to the taxpayers to ensure we are buying things at reasonable prices and within reasonable budgets. This hearing will give us a chance to learn how the department is also working to make those shared goals a reality. The services should play a very Important Role in the research and acquisition programs that provided a vance systems and capabilities. Under chairman mccains leadership, we have spretrengthd the processes that strongly shape where we succeed or fail. Developing plans, and budgets, ensuring that programs are properly planned and budgeted. Finally we play a part in nurturing careers of personnel who work in acquisition and budget fields. Building on the successes of the Weapons Systems acquisition reform act and the pentagons better buying power initiatives and making use of the new reforms in the recent National Defense authorization acts led by chairman mccain, we are seeing some improvements in processes and outcomes today and are well positioned to make more improvements. But we must do much, much, much better. Thats why youre here today. I look forward to hearing about your efforts and i also welcome a discussion of changes that can be made to strengthen their role as appropriate with the hopes of continuing to improve acquisition outcomes and provide the best military capabilities in the nation. Thank you, mr. Chairman. 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, i think, is ample testimony to the bipartisanship that characterizes our conduct of this committee, and im very proud to have senator reid as a partner. So well begin with the honorable ellen lord, und undersecretary of defense for Acquisition Technology and logistics. Chairman mccain could i just mention one thing . We may have, depending on what happens here theres going to be an event at 11 45 on the floor of the senate and we may have to recess until that event is completed. Go ahead, please. Thank you for the opportunity to testify today on defense acquisition and reform efforts. Im pleased to be joined by secretary esper, secretary wilson and assistant secretary gertz. After having spent 33 years in industry, ive 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 authorization act for fiscal years 201617 have provided the direction and the tools for the department to advance the capabilities required to restore our overmatch. Speed, the rate at which we field these capabilities and improve the overall affordability of our fighting forces Weapons Systems. Secondly, secretary mattis has placed a priority of implementing these provisions and other reforms and practices required to improve the lethality and the readiness of our military. Using an indan analogy, i belie we should be very lean. At l should be pushing the majority of the departments work back to surfaces and developing architectures and standards, interpreting law and the policies and procedures and simplifying ak wing acquisition policies. At l needs to be the strategic body, with focus across the board driving accountability and affordability, reducing timelines and equipping services to execute their programs. Given the fact that the d. O. D. Average awards daily 1800 contracts and 36,000 delivery, 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 Systems contract, i have concluded that we have the ability to reduce this procurement lead time but as much as 50 . Some of the ways in which we plan to do this are incentivizing contractors to submit responsive proposals in 60 days or less and implementing electronic departmentwide acquisition streamlining tools. Furthermore Congress Gave us the ability to conduct ten pilot programs for Foreign Military sales. Key to our success would be to have the same flexibility for our u. S. Procurements. If we were granted the Statutory Authority on sole source procurement, it would allow us to use our judgment to reduce the cost and pricing data we would require when we have cost transparency with the companies with which we do business. In my testimony, i stated that we have initiated six pilot programs that push the limits of our contracting agility. This is in order to demonstrate our ability to responsibly reduce this procurement lead time. Tell us a couple of those programs. C130 j and the japanese global hawk. Our goal is to get these pilot procurements done within 210 days from the issuance of the request for proposal. 210 days. 210 days is the interim goal. We would like eventually to get to 180 days. We have the process to work down. Were going to work with you and your teams to demonstrate how we do it and were going to come back to you as we need additional authorities, if needed. But we believe its really interpreting the authorities we have now, making sure you agree with them and having us move forward. So were also prepositioning production contracts to include options for yet to be developed fms requirements. In other words, in the initial contracts, we have the language so we can almost fill in the blanks for fms sales. Again, prethinking this is going to reduce the timeline and allow us to be responsive to international customers. So you dont need 100page rfp for a pistol . Absolutely correct. On the joint Strike Fighter program, we are determined to reduce the cost of production and sustainment. We have initiated an extensive jsf cost deep dive led jointly by my office, atl and cape. The purpose of this cost review is to understand in detail at lockheed martin, Northrup Drummond and rolls royce as well as their primary subcontractors, 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 goforward basis and will promote more effective and timely contract negotiations. Just yesterday the fy 2017 defense acquisition work force awards ceremony was held. Deputy secretary shanahan and i recognized the outstanding accomplishments of 27 top d. O. D. Acquisition professionals out of a work force of 165,000. A few of their accomplishments include implementing a cutting edge approach to Cyber Security, testing for Weapons Systems, accelerating the testing for defensive systems by two years, getting 3,000 casualty care units to medics and special forces operators, improving Cyber Security for medical facilities and reducing biological 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 functions, the United States special Operations Command received four. Our challenge is to take these pilots, these silos of excellence and scale them to the big army, the big navy and the big air force. How many f18s are operational and ready to fly . Not enough. Ill defer to my colleague mr. Gertz on that one. Okay. The numbers i require are 60 are not flying . Operational availability across our air assets is an issue. As i talk to each of the service secretaries, its very clear theres a lot we can do at the beginning of these programs to design in the sustainment portion and were focusing on that and well come back and tell you how were working on it. And let us know whos 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. So were also working to make use of the new rapid hiring flexibilities provided by this committee to bring in world class talent in areas like robotics, lasers, artificial intelligence, as well as new Contracting Specialists and test engineers. For example in 2016 our labs hired nearly 2,000 new scientists and engineers, using the hiring Authorities Congress provided. Reforming and improving the defense acquisition system to create an agile enterprise is continuing process requiring close partnerships 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 in this significant effort. I look forward to answering your questions. Thank you. Secretary esper. Chairman mccain, Ranking Member reid, distinguished members of the Committee Good morning. When i appeared before this committee in mid november, i stated that modernization was a top priority of mine and ensuring the future readiness of a force in a high end fight would be difficult without reform of the current system. I am even more convinced this is true and more aware of the urgency for us to modernize. Im encouraged by the progress the army has made consistent with congressional direction to been over hauling the current system. To be sure, a long road lies ahead. But Army Leadership with the support and advice of congress is fully committed to bold reform that promises to provide americas soldiers with the weapons and tools they need to fight and win our nations wars as part of the joint force. This committee is well aware of the growing challenges our military faces around the world. Rising near competitors threaten and sometimes challenge americas interests with capabilities that often match and in a few cases kpo s exceed own. In short, our failure to modernize as quickly as possible will most likely increase risk to the force. This makes reform a strategic imperative. Together with leaders from the army, Army National guard and army reserve, im approaching this endeavors through readiness. Ensure the armys ability to deploy, fight and win across the entire spectrum of conflict, especially high end. Third, modernization. Build greater capability and capacity in longterm to ensure clear overmatch in the future. Improve the way we do business to free up time, money and man power to make the total army more lethal, capable and efficient. The army is currentliundy undertaking efforts to for unity of command, efficiency and leader accountability. First, a three star Level Task Force is mapping out a new command, Army Futures Command that will consolidate the Services Modernization enterprises under one roof second, the army is kexecuting directives to refine how we generate requirements, simplifying our contracting and sustainment processes and evaluating our progress through metrics to enable us to deliver capabilities to soldiers faster. These directives leverage authorities contained in the ndaas. Third, the army has stood up eight cross functional teams to enable our leadership to efficiently identify and manage investments across the armys six modernization priorities. These teams are charged with using expermuse ing experimentation to reduce the requirement process. This includes a threat based strategy th strategy. Fifth, we are directly engaging Army Senior Leadership as decisionmakers as directed in the fy 16 ndaa through a i reinvigorated oversight process. Other benefits are streamlined requirements and processes are being captured in a rewritten Army Regulation policy. Theres more that we can and must do. We must have predictable and Stable Funding to restore balance and reduce risk. We will continue to work with you and your staffs on the task before us. I fully believe you will see marked, clear progress in the coming months. You will see much more unity of effort, command, efficiency and accountability as we move forward. However, the ultimate test is on the future battlefield where we will succeed or fail based on our efforts to reform and modernize today. I cannot help but be reminded that today is the anniversary of december 7th, when we were caught off guard at pearl harbor. In a few short years we energized the country and the American Pe