Good morning. This morning consider the no, maam nomination of shanahan. We thank you for your willingness to serve our nation at an important time. We welcome your family and flends. This is our fredition. It is important they ree information of so in order the dper i to exercise responsibilities. Will you ensure your staff complies with deadlines established for questions for the records and haegs. I will. Will where you vid if respopts to amg thank tex pent me yes. Do you agree to pro vietd documents including electronic form of kplun case in a timely manner when requested or to consult with a committee for any good faith, delay or di nile . Yes. Have you assumed any duties or taken any a that would appear to presume the kout out ops outcome . No. I will submit my Opening Statement for the record. I with see how upset other member of the committee are missing that. Maybe with a little luck senator reed will do the same. Its yourly kick, that i would ask them to submit the state. Since her form is now president i would ask a list of 995 no, maam naegss. Motion carries. Welcome mr. Shanahan. You have deprived Opening Statements of senator reid and myself. Thank you. I to recognize you to introduce mr. Shanahan. Thank you chairman mccain. Im proud to introduce Patrick Shanahan to serve as Secretary Department of defense. I too want to welcome his family. He is here. Im sure he will make an appropriate enter there is the max and dream liner. They have Cutting Edge Technology keeping them aaide hoft global competition. Its been about are problems kwoub mr. Shanahan has driven reforms in talent management, affordability, technology and supply chain. He has had an impressive career last serving as sen your Vice President as supply clang operations. P ip misses them on time and on budget. Mr. Shanahan, he has served as as commercial aeirplane detail. He is also fearless. He understands what our country is up against when it comes and it wont phase game him. He also knows the department of defense has served adds general manager as the boeing Missile Defense system and aavailableable in dv so he has has bonn he understands the department. D. O. T. Is the largest with almost 3 Million People and the largest in the world. He has management. I am confident he will be an effective leader. I will excuse myself. Thank the committee for this opportunity to introduce mr. Shanahan. Thank you. We fully understand you have other duties in the senate. Thank you for taking the time to introduce mr. Shanahan. Thank you senator for your kind words, thoughtful int introducti introduction. My thoughts and families go out to the seven si sailors killed on the u. S. S. Fi strks ztime. I am greatful to the president that nominates the position of deputy secretary of defense. I would like to knowledge. Me here today shlgs this are. I. I also want to rock cog noise and and nor my parents. I am theest of boy i can remember service before self. My father was an army veteran who served in vietnam. He taught his boys to love their country and value its freedoms. My father served in Law Enforcement for over 25 years. He taught us to treat people fairly, respect law and order and the importance of protecting the community. My father cofounded a food bank in 1982 that is ongoing. To date itdistributed 200 pounds of food to the needy. He showed us that good ideas can scale to make a big difference. At age 52 my father was afflicted with parkinsons. He battled that savage disease for 17 years before passing and i never once heard him complain. My father modeled for us what it means to have grit. That is, the ability to maintain an indomabinable spirit and persevere no matter what the challenge. Hed say, patrick, dont screw this up. My mother joanne could not be here. She is here in spirit. My mother always supported me unconditionally. She taught my brothers and i to support others unconditionally. What i appreciate most about her is she taught me to truly believe in myself and that i could do anything i set my mind to. She taught my brothers and i that its not the size of your muscles that matter, its the size of your heart. She taught me to be a better parent. Thats a gift i can never repay. Her words for me today were, youll do fine. Im here to earn your support. I aspire to join a strong and capable d. O. D. Team. I aspire to help them dominate and win. I aspire to usher in a new age of effectiveness in the department. I believe i was prepared myself to contribute as deputy secretary of defense. I bring over three decades of leadership honed at americas largest manufacturing exporter. Ive experienced converting technological innovation into operational capability. I bring with me a formula for leadership that has a record of delivering affordable high performing Business Systems and operations under adverse conditions. Leadership casts a long shadow and strong leadership can create teams that achieve ambitious change at scale. I believe my skill set strongly complements that of secretary mattis. Hes a master strategist with deep military and Foreign Policy experience. As his chief operating officer, i bring strong execution skills with a background in Technology Development and business management. Areas this committee in particular has identified for reforms. If confirmed, i will work tirelessly with congress and the department to deliver on our commitments to our men and women in uniform and their families, to defend the nation and to be relentless stewards of the taxpayers money. I appreciate the time youve afforded me today to answer questions. Thank you, mr. Shanahan. In your questions that were submitted to you, one of the questions was about providing the ukrainians with lethal defense weaponry with which to defend themselves. Inexplicably you responded by saying youd have to look at the issue. Its not satisfactory, mr. Shanahan. Would you wish to abridge or amend your statement concerning go ahead. I support equipping the ukrainians. You support . Yes. Providing lethal defensive weaponry to ukraine . Yes. All right. Good. Im glad toe he hear that. But i have to tell you, mr. Shanahan, our job is advise and consent. We are equal branches of government. Your response to that question was, frankly, very disappointing to me. You have been associated for the last i dont know how many years with one of the five corporations that provide 90 of the defensive weaponry to defend this nation. And your answer was, well, id have to look at the issue. Thats not good enough, mr. Shanahan. Im glad to hear youve changed your opinion from what was submitted. But its still disturbing to me. Its still disturbing to me after all these years that you would say that you would have to look at the issue. Have you not been aware of the issue . Have you not been aware of the actions of the Senate Armed Services committee . Have you not been aware of the thousands of people that have been killed by Vladimir Putin . Have you missed all that in your duties at one of the major defense corporations in this country . No, chairman. Im aware of that. Well, ive got to tell you its very disturbing. One, im disturbed that were now having an executive from one of the five major corporations that has corralled 90 of our Defense Budgets and on one of the major issues that this committee has had hearings about, has had markups about, has had reported out our bill, and you want to find out more information. Not a good beginning. Not a good beginning. Do not do that again, mr. Shanahan, or i will not take your name up for a vote before this committee. Am i perfectly clear . Very clear. Senator reid . Thank you very much, mr. Chairman. Mr. Shanahan, one of the issues youre going to face is generically termed the third offset. Bob work, who you are succeeding has done a remarkable job, i think, and hes been the leader for this effort. Its essentially trying to co t counter technologically and otherwise our adversaries, their capabilities and leap ahead with new technologies. In trying to deal with that, the congress reestablished a position under secretary of as he was for research and engineering. But as deputy secretary, youre going to play a Critical Role in supporting the new or revised under secretary. But also reaching out to the whole community, the intelligence committee, the industrial community, tech knn logic technologic community. If confirmed, i will spend time with a group that has done the third offset work. And i have not received the classified briefings on the work that they have done. The effort i would undertake is to make sure we have a clear path to being able to operationalize the capability. When i look at the strategy exercise that well be conducting to put together the fy 19 budget, it will be critical that well have an assessment of how much funding needs to be applied against the third offset. I believe the restructuring of r and e will give us the concentrated skill set so we can have a more informed recommendation. Thank you very much. I presume also because of your significant experience in private industry, you already have some ideas of companies that are not currently involved but could be major contributors to this effort, some of this software and technology companies. Is that accurate . That is correct. I think to chairman mccains point, we need to broaden our Industrial Base. Its important that we develop other capabilities and companies as well. Thank you. One of the other changes that we made in last years ndaa was creating an under secretary for acquisition and also a chief management officer. In many respects youre really the chief management officer. How will you work with the chief management officer . Do you have any ideas with respect to that issue . I do. The chief management officer, as i see it, has responsibility for helping to streamline business operations. So as the deputy, its all of operations for the department. Thats how i see my responsibility. A subset of that is the business operations. But ill work hand in glove with the chief management officer. The real intent and i have experience in this area is how do we quickly capture efficiency and the opportunities by standardizing and sharing many of these services, if you will, across the department. Very good. One of the areas that is complicated, troubling daily we seem to be falling behind is the whole concept of information operations. Its ironic that the country that created madison avenue is now sort of trying to catch up with in terms in influencing individuals through media. The department of defense has a role in this. First question is at a consumption level i would think the secretary of defense is going to be very much involved in this, but do you see a role that you will play in terms of trying to coordinate all the different aspects just within d. O. D. And then again reaching out to other agencies . Sir, i do. I think the deputy and the chief operating officer role really needs to ensure that we have the right structure so that were effective in interfacing with these other organizations and that we have the proper architecture so that the systems are cost effective, the proper architectures so we can upgrade them easily and evolve as technology changes. Very good. Again, thank you, mr. Shanahan. I think youre bringing significant experience to a very challenging job. Thank you very much. Thank you, mr. Chairman. Thank you, mr. Chairman. Mr. Shanahan, i appreciated your comments in our meetings about the Nuclear Deterrent. Being a weapons system that we use every single day, this fact is often over looked but every day we have missilers in Launch Control centers and we have submarines that are on alert. Secreta do you agree with that statement . I do. In general, do you support the modernization of our nuclear weapons, the associated delivery vehicles, command and control architecture and the supporting infrastructure . I do. General salva, the vice chair of the joint chiefs of staff has testified that the joint staff puts our Nuclear Deterrent as the number one priority for modernization and recapitalization and that is based on the fact, in his words, that we have squeezed about all the life we can out of the systems we currently possess. Do you agree with his assessment and the level of urgency and priority this requires . If confirmed, i have not had a review of the priorities of the department. I understand the importance of the Nuclear Deterrent. I will take advice from general sullivan and make sure he gets the proper support. Thank you. When you were in my office, we talked a little bit about technology and innovation. One thing we didnt touch on is the question of risk tolerance. Innovation is inherently risky and not all good ideas pan out, but the current environment seems to be very intolerant of risk. Do you believe the department and the services need to be more tolerant of risk . And how do you think the department can better navigate that tension between effectively using scarce resources and tolerating the amount of risk thats required if were going to have any innovation take place . In my view on risk is that you have to manage risk. So out at the pointy end of the spear we dont want really any risk. I think when it comes to innovation and this is the mindset ive developed working in the commercial world. Innovation is messy. And if you try something and it fails, i think thats we shouldnt be afraid. Organizations that pride themselves on execution tend to be afraid of failure. So im a proponent of failing, failing fast, learning quickly. I think the faster you do that, the more we end up training people. Its not about the technology. Its about our people learning how to develop the technology because they know how the users can apply it. In your response to the committee advance policy questions regarding russias violation of the inf treaty, you state, i understand that the administration is reviewing a number of potential responses as part of its ongoing review of this issue and i will be keenly interested in making sure these are translated into action. So to be clear for the record, do you believe a response is necessary beyond simply expressing concern through diplomatic channels, which has already been done . I do. Do you have any personal thoughts right now on what options would be available to be so some of those responses . I do not. You also noted that russias action in violation of the inf treaty, if its unchecked, would lead to doubt in the stability of current and future arms control agreements and initiatives. Could you elaborate on that statement . Sometimes theres a view thats expressed that holding violators accountable for their behavior risks, deals collapse and that we should therefore suppress any suggestion that a violation has happened. I dont believe you agree with that view, do you . Senator, i think the russians are adversarial. I think through the whole of government we need to deal with their whether we call it aggression or their disruption to our interests, i at this point dont have any specific recommendations. If confirmed, i will spend a significant amount of time dealing with russia. But would you be supportive of developing options to present to the president besides diplomatic or just making statements and then letting it go by . I would be supportive. Thank you. Thank you, mr. Chairman. Mr. Shanahan, youre not making me happy. We expect straightforward answers. You just ducked at basically every question that senator fisher asked you. Im telling you, mr. Shanahan, i believe in the constitution of the United States, which says that the congress of the United States shall provided a vice and consent. Im not going to sit here and watch you duck every question and expect that everything is going to go smoothly. Its not. Thank you, mr. Chairman. Welcome, mr. Shanahan. Mr. Shanahan, you have limited institutional experience in the military, d. O. D. Or the pentagon. In my experience ive seen the deputy secretary heavily involved with running the bureaucra bureaucracy. I just heard you say that you would work closely regarding russia. So if confirmed and if youre tasked with running the inner workings of the pentagon and its more internal and inner agency structures, how will you over come your lack of institutional experience to effectively operate in this environment . Ive worked in environments where we have. I believe that my technical and management background will prepare me to quickly assimilate the knowledge and expertise to properly interface. What would be one of the first things you would do to get yourself to a position where you can hit the ground running should you be confirmed . The first place that i was going hit the ground running was on the restructuring of r and e, the ans organization and then working the chief management officer initiative. I think that will be a good way to begin to understand the inner workings of d. O. D. And then in the second phase of that participating on Nuclear Posture review and the National BallisticMissile Defense review will also allow me to begin to interface with these other organizations and structures. You have a lot of experience in the private sector. The d. O. D. Is an entirely different entity in order of probably complexity and all the people that youll be working with. I assume that should you be confirmed, you will have a list of to dos and people youre going to meet with so you can become quickly appraised of what your responsibilities will be in running sort of the nuts and bolts of the d. O. D. Yes, senator. Cost overruns and scheduled delays on major system acquisition programs have plagued d. O. D. For many decades. This committee under senator mccain and previous chairman have tried to improve the defense acquisition system. You have significant experience with one of our largest defense contractors. Based on your experience and perspectives from the industry side, what would you recommend in order to get better results from our contracting and acquisition processes . You know, there are a number of tools from a contracting standpoints that are important. Fixed price contracts is a very effective tool to drive supplier or contractor performance. Having the right incentive clauses is very important. I also believe, if confirmed, when we work the audit, well come one