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[H.A.S.C. No. 109104]

ISSUES RELATING TO DEFENSE

ACQUISITION REFORM

HEARING
BEFORE THE

COMMITTEE ON ARMED SERVICES

HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION

HEARING HELD
MARCH 29, 2006

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON

32970

2007

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 5121800; DC area (202) 5121800
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HOUSE COMMITTEE ON ARMED SERVICES

ONE HUNDRED NINTH CONGRESS
DUNCAN HUNTER, California, Chairman
CURT WELDON, Pennsylvania
IKE SKELTON, Missouri
JOEL HEFLEY, Colorado
JOHN SPRATT, South Carolina
JIM SAXTON, New Jersey
SOLOMON P. ORTIZ, Texas
JOHN M. MCHUGH, New York
LANE EVANS, Illinois
TERRY EVERETT, Alabama
GENE TAYLOR, Mississippi
ROSCOE G. BARTLETT, Maryland
NEIL ABERCROMBIE, Hawaii
HOWARD P. BUCK MCKEON, California
MARTY MEEHAN, Massachusetts
MAC THORNBERRY, Texas
SILVESTRE REYES, Texas
JOHN N. HOSTETTLER, Indiana
VIC SNYDER, Arkansas
WALTER B. JONES, North Carolina
ADAM SMITH, Washington
JIM RYUN, Kansas
LORETTA SANCHEZ, California
JIM GIBBONS, Nevada
MIKE MCINTYRE, North Carolina
ELLEN O. TAUSCHER, California
ROBIN HAYES, North Carolina
ROBERT A. BRADY, Pennsylvania
KEN CALVERT, California
ROBERT ANDREWS, New Jersey
ROB SIMMONS, Connecticut
SUSAN A. DAVIS, California
JO ANN DAVIS, Virginia
JAMES R. LANGEVIN, Rhode Island
W. TODD AKIN, Missouri
STEVE ISRAEL, New York
J. RANDY FORBES, Virginia
RICK LARSEN, Washington
JEFF MILLER, Florida
JIM COOPER, Tennessee
JOE WILSON, South Carolina
JIM MARSHALL, Georgia
FRANK A. LOBIONDO, New Jersey
JEB BRADLEY, New Hampshire
KENDRICK B. MEEK, Florida
MICHAEL TURNER, Ohio
MADELEINE Z. BORDALLO, Guam
JOHN KLINE, Minnesota
TIM RYAN, Ohio
CANDICE S. MILLER, Michigan
MARK E. UDALL, Colorado
MIKE ROGERS, Alabama
G.K. BUTTERFIELD, North Carolina
TRENT FRANKS, Arizona
CYNTHIA MCKINNEY, Georgia
DAN BOREN, Oklahoma
BILL SHUSTER, Pennsylvania
THELMA DRAKE, Virginia
JOE SCHWARZ, Michigan
CATHY MCMORRIS, Washington
MICHAEL CONAWAY, Texas
GEOFF DAVIS, Kentucky
ROBERT L. SIMMONS, Staff Director
JEFF GREEN, Counsel
ANDREW HUNTER, Professional Staff Member
HEATHER MESSERA, Staff Assistant

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CONTENTS
CHRONOLOGICAL LIST OF HEARINGS
2006
Page

HEARING:
Wednesday, March 29, 2006, Issues Relating to Defense Acquisition Reform ...
APPENDIX:
Wednesday, March 29, 2006 ...................................................................................

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29

WEDNESDAY, MARCH 29, 2006

ISSUES RELATING TO DEFENSE ACQUISITION REFORM
STATEMENTS PRESENTED BY MEMBERS OF CONGRESS
Hefley, Hon. Joel, a Representative from Colorado, Committee on Armed
Services .................................................................................................................
Skelton, Hon. Ike, a Representative from Missouri, Ranking Member, Committee on Armed Services ....................................................................................

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WITNESSES
Chao, Pierre A., Senior Fellow and Director of Defense-Industrial Initiatives,
International Security Program, Center for Strategic and International
Studies ..................................................................................................................
Hermann, Hon. Robert J., Task Force Co-Chair, Defense Science Board Summer Study on Transformation .............................................................................
Kadish, Lt. Gen. Ronald T., Chairman, Defense Acquisition Performance Review Project, U.S. Air Force (Ret.) ......................................................................
Little, Terry R., Acquisition Advisor to the Director, Missile Defense Agency ..

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APPENDIX
PREPARED STATEMENTS:
Chao, Pierre A. .................................................................................................
Hermann, Robert J. ..........................................................................................
Hunter, Hon. Duncan .......................................................................................
Kadish, Lt. Gen. Ronald T. ..............................................................................
Little, Terry R. ..................................................................................................
Skelton, Hon. Ike ..............................................................................................
DOCUMENTS SUBMITTED FOR THE RECORD:
[There were no Documents submitted.]
QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD:
[There were no Questions submitted.]

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ISSUES RELATING TO DEFENSE ACQUISITION REFORM

HOUSE OF REPRESENTATIVES,
COMMITTEE ON ARMED SERVICES,
Washington, DC, Wednesday, March 29, 2006.
The committee met, pursuant to call, at 10:06 a.m., in room
2118, Rayburn House Office Building, Hon. Joel Hefley presiding.
OPENING STATEMENT OF HON. JOEL HEFLEY, A REPRESENTATIVE FROM COLORADO, COMMITTEE ON ARMED SERVICES

Mr. HEFLEY. The meeting will come to order.

Today the committee meets to continue its oversight of the defense acquisition system. Over the past several years, this committee has made major strides in the area of acquisition reform. Some
of our most recent initiatives include rapid acquisition authority to
field equipment needed to prevent combat fatalities; a statutory requirement for the Department of Defense to comply with its own
policies, regulations and directives; and the revision of the NunnMcCurdy amendment, one of the most powerful tools in the oversight arsenal.
These reforms, however, arent enough. Year after year, we face
the same problems: rapid cost growth, an unconstrained requirements process which delays fielding of new systems, and assurances from the Department of Defense that these problems will be
corrected.
To the credit of the Department, they have commissioned numerous studies to identify the most pressing issues and to identify
areas requiring reform. Today, our witnesses will review the results of these studies and share their findings with us.
Next Wednesday, the committee will reconvene with senior leaders from the Departments acquisition, requirements and financial
management communities to discuss their plans for implementation of the numerous reform recommendations.
But, first, we have a unique opportunity to hear from the leading
experts in the field of acquisition reform. Their perspectives on
these ongoing challenges will be invaluable to the committee, as we
continue our efforts to overcome these acquisition challenges.
Our first three witnesses served as the key members of major acquisition reform studies and will provide a brief synopsis of their
findings.
First we will hear from Lieutenant General Ronald Kadish,
United States Air Force, retired, for an overview of the recently
completed Defense Acquisition Performance Assessment Panel commissioned in June 2005 by Deputy Secretary of Defense Gordon
England.
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General Kadish will be followed by former Assistant Secretary of
the Air Force Dr. Robert Hermann, who recently served as task
force co-chair for a Defense Science Board Summer Study on
Transformation.
Our third witness, Pierre Chao, recently served as principal author of the Center for Strategic and International Studies Beyond
Goldwater-Nichols report, and is senior fellow and director of The
Defense Industrial Initiatives Group (DIIG), with the International
Security Program.
Finally, we are fortunate to have a representative of the current
acquisition system and one of the most experienced program managers in the entire Department of Defense. Terry Little, currently
Acquisition Adviser to the Missile Defense Agency, offers a unique
perspective as the voice of the current defense acquisition system.
I should note that Mr. Little is here today not to discuss his current position, but rather to speak about some of his previous successes in the acquisition system as program manager of the Joint
Direct Attack Munition and Small Diameter Bomb. His testimony
will offer a perspective as to how aggressive program management
testing and risk control are able to keep a program on cost and on
schedule all within the current acquisition system.
Gentleman, we are pleased that you are here today, and we look
forward to your testimony.
Let me recognize first, though, the committees ranking Democrat, Mr. Skelton, for any remarks that he would like to make.
[The prepared statement of Mr. Hunter can be found in the Appendix on page 33.]
STATEMENT OF HON. IKE SKELTON, A REPRESENTATIVE
FROM MISSOURI, RANKING MEMBER, COMMITTEE ON
ARMED SERVICES

Mr. SKELTON. Thanks so much, Mr. Chairman.

And I commend the holding of this hearing today on acquisition
reform.
Acquisition has been an area of focus for both of us over the
years, and now is the time for this committee to provide aggressive
oversight, because our acquisition system has gotten seriously off
track.
Last fall, when we examined the issue, I laid out the problems
as I saw them. They are unchanged today.
Our existing weapons systems are aging rapidly, the cost of buying new weapons is growing astronomically, and in the past 4
years, the cost of the top 5 acquisition programs grew 46 percent.
The budget for procurement grew hardly at all. As a result, we buy
less and what we have keeps getting older.
I believe a handful of mistakes are driving this negative cycle.
First, we are too aggressive in setting our requirements because we
have become fixated on technology over soldiers. Second, we no
longer have the right mix of people in our acquisitions system, and
we have to invest in these professionals to get better results. Third,
we have to repair a process that routinely ignores the time-honored
policies and practices that have led to success in acquisition.

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Now, Mr. Chairman, we took many good steps to fix the process
in our bill last year, and I know we will continue to focus on this
as we put this bill together this year.
Todays witnesses are uniquely qualified to help us find solutions. They have studied them in depth. And the sheer number of
major studies that have been performed in recent years tells us
just how serious a problem we have.
I must note, Mr. Chairman, in particular, that we have with us
today Pierre Chao from the Center for Strategic and International
Studies.
Dr. Chao, I want you to know I hold very little grudge for the
fact that you stole from me my ex-acquisition expert J.J. Gertler.
I dont hold grudges too long, a couple years maybe. But we will
get through it.
I might say, Mr. Chairman, Beyond Goldwater-NicholsI will
review your study with complete objectivity, Mr. Chao.
Thank you so much.
[The prepared statement of Mr. Skelton can be found in the Appendix on page 38.]
Mr. HEFLEY. General Kadish, the floor is yours.
STATEMENT OF LT. GEN. RONALD T. KADISH, CHAIRMAN, DEFENSE ACQUISITION PERFORMANCE REVIEW PROJECT, U.S.
AIR FORCE (RET.)

General KADISH. Thank you, Mr. Chairman.

I am pleased to be here today to talk about the commission that
I chaired. I am here in my capacity as chairman of the Defense Acquisition Performance Assessment Panel, in accordance with the
Federal Advisory Committee Act of 1972, to outline the assessments and the findings of the panel and to provide a perspective
on the issues.
The panels review process was held in an open and transparent
as possible to engage the public while gathering as much input as
practical from all the practitioners and stakeholders in the Department of Defense (DOD) acquisition process.
This initiative was established by then-acting Deputy Secretary
of Defense Gordon England on June 7, 2005, in a memo that he
wrote. And he directed an integrated acquisition assessment to
consider every aspect of acquisition, including requirements, organizational issues, legal foundations, decision methodology, oversight, checks and balancesevery aspect.
The deputy secretary requested that the results be a recommended acquisition structure and process with clear alignment
of responsibility, authority and accountability.
Our findings were reported to the deputy secretary in November
of 2005, and a final report was released in January 2006.
Our conclusions covered a broad scope of recommendations.
We determined that the problems we faced are deeply embedded
in many, many DOD acquisition management systems, not just in
a narrow field called acquisition. Also, a new approach to improvements is needed to adapt to a new security environment that we
face.
We reviewed over 1,500 documents to establish a baseline of previous recommendations. We held open meetings and maintained a

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Web site to solicit comments from the public. We heard from over
a hundred experts and received over 170 hours of briefings. Over
130 government and industry acquisition professionals as well as
organized labor union executives were interviewed.
From all this, we developed over 1,000 observations. Then we
boiled them down to 42 areas, and ended up outlining in our report
the major elements of the acquisition system. And we boiled them
down to organization, workforce, budget, requirements, acquisition
and industry.
History shows numerous studies and reform initiatives have occurred over the years. It still remains, however, plagued by numerous and highly publicized shortfalls in efficiency.
For example, 20 years ago, the presidents Blue Ribbon Commission on Defense, most commonly known as the Packard Commission, ushered in an era of acquisition reform with its findings that
DODs weapons systems take too long and cost too much to
produce.
Two decades later, many believe the weapons systems programs
we have today still cost too much and take too long to field. We
should ask ourselves a key question: Why?
The existing system, however flawed, has produced the most capable, best-equipped and most effective military in the history of
the world. We have met the effectiveness test in the past. Now we
have to adapt to a different security environment as well.
Fundamental structural changes in the acquisition system are
needed to adapt to this security environment. And an effective system requires stability and continuity that can only be achieved
through the integration of all the major processes and elements
upon which it depends.
I would say that incremental change to the acquisition process
as we know it alone usually assumes that the other key processes
are cohesive and stable. In reality, they are disconnected and unstable.
We are convinced that the sheer complexity of the system is a
major impediment and contributes to much of the confusion about
the acquisition system and processes.
Let me explain. There are three fundamental processes that
DOD operates. And if you will allow me, I would like to call these
the Big A acquisition system. This includes the requirements process, the planning, programming and budgeting process, and the acquisition process. I will refer to the acquisition process among those
three alone as Little A because it is embedded in the Big A system.
Simply focusing on improvements to that Little A acquisition
portion instead of the larger acquisition system, the Big A, cannot
and will not substantially improve defense acquisition and performance.
The larger acquisition system was designed and optimized to respond to a security environment dominated by a single strategic
threat: the former Soviet Union. But today, key functions of the Big
A acquisition systemsuch as the requirements development, systems engineering, operational testing and transitioning of science
and technologyare being pursued almost as separate, independent entities, adding to the cost and complexity of the process.

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As I said, the security environment is very different today.
Therefore the processes we need to meet the demands of this environment must have the flexibility and agility to respond in a timely
way. Adapting the acquisition system to the realities of this new
environment cannot be considered independently of the organizations charged with the conduct and the system to recruit, train and
develop and retain its workforce.
Let me characterize this new security environment in maybe a
little bit different way than you have heard in the past, and why
it is important not to view these recommendations of the report or
this whole subject of reform in isolation as a management problem
or an organizational issue.
I would submit that the security environment we face today is
a real challenge for our decision cycles. Where we spent and I spent
much of my career trying to figure out how to turn our decision cycles inside those of our adversary and we have been very successful.
What we see in the processes today, faced with a new security
environment with the Global War on Terror, is that we are in danger of having our adversaries turn inside our decision cycle. And
that in and of itself is very worrisome.
Finally, the industrial environment has changed in fundamental
ways, as well as the security environment. The globalization of industry and the consolidation over the last 15 to 20 years, as well
as our outsourcing policies, affect the policies and strategies and
techniques that we used to use.
This raises many key questions.
Twenty years ago, we had 25 prime contractors plus a subcontractor base that was very robust. And we were producing thousands of units of weapons systems per year. Today, we have six
primes, depending on how you count. We are producing tens of
things a year and we are very vertically integrated in our industry.
So things like how we use competition to get the benefit that we
expect, how can we accomplish our mission with the globalization
of the economy and why dont we have more nontraditional suppliers in our base become key elements of the discussion and worthy
of very big national dialogues.
We believe our process for this project was very disciplined. And
we sought to validate all these requirements and assessments and
recommendations.
Mr. Chairman, I would submit the report of all those recommendations and assessments for your consideration for the
record. I wont go through all of them right now, but would be welcome to have some questions about the wide-ranging capabilities
that we are suggesting in the process, in the interest of time. But
we did propose sweeping changes to dramatically improve the departments ability to stabilize and integrate key elements of the acquisition system.
As I said before, simply focusing on improvements to that Little
A, without looking at budget and requirements, workforce issues,
organizational issues and so forth, cannot and will not substantially improve the acquisition performance. We have been reforming that Little A for years, and we need to do more. But we have
got to look at those systems that interface with that Little A.

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As I have listened in panel meetings and studied this problem
over many months now and lived in this environment for over 25
years, I am convinced that we could do better to face our new security environment.
Our collective challenge, then, will be to overcome the myriad of
interests, conflicting policies and incentives and inherent conflicts
so that we can exploit technology to support our warfighters and
turn inside our adversaries decision cycles as much as practical.
Otherwise, we will have another effort in a few years addressing
the same issues that we face today.
However, we must ensure that in our efforts to improve the system we do not somehow degrade our existing capabilities and not
provide our warfighters with the systems and technologies we need
to continue to dominate the battlefield.
Thank you for listening, Mr. Chairman. And I will end it there.
[The prepared statement of General Kadish can be found in the
Appendix on page 41.]
Mr. HEFLEY. Thank you, General.
Mr. Hermann.
STATEMENT OF HON. ROBERT J. HERMANN, TASK FORCE COCHAIR, DEFENSE SCIENCE BOARD SUMMER STUDY ON
TRANSFORMATION

Mr. HERMANN. Yes, good morning. I want to thank you for inviting me to testify on this subject. It is a complex issue, and I welcome the opportunity to convey some of what I think I have
learned over the past decades.
You have, I believe, provided a full statement that I would like
to have accepted for the record.
Mr. HEFLEY. All full statements will be put in the record, without objection.
Mr. HERMANN. Let me just talk to a few points and leave some
time for questioning.
I became formally engaged with this subject in 1993 when Dr.
Perry, who was then the deputy secretary of defense, asked me to
chair a Defense Science Board on acquisition reform. In the next
six years, I chaired many task forces on that subject, and since that
time, have worked and studied this problem as an avocation, as it
turns out, until now.
I would say that the best articulation of what I believe needs to
be done does, in fact, reside in the summer study that we produced
on Transformation: A Progress Report.
In addition to studying it from the point of view of a defense adviser, I am obliged to say there are other things that form what
I think about the subject. I spent 16 years, 11 of which as a chief
technical officer, for a major public corporation in the manufacturing sector. I served as a manager in a government agency. I have
served in the Office of the Secretary of Defense. I was the service
acquisition executive for the Air Force before we called it that. And
I served 2 years as a special assistant to Commander in Chief European Command (CINCEUR), Supreme Allied Commander Europe
(SACEUR) at the time, and so believe I have some familiarity with
the command issues. And from that, I have drawn whatever lessons that I would like to convey today.

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This subject is complicated enough that it is possible to
miscommunicate from time to time, because each of us comes with
different background and different use of language. And so I think
the opportunity to miscommunicate is very, very large.
I am going to try to convert to a communications style which
says that I have some propositions that I want to put forward and
then they do not end up being the complete description of everything that should be done, but they are the salient propositions
that I would offer to you.
First of all, acquisition, as General Kadish has said, is not just
about buying things. From my perspective, the role of the Department of Defense is to create, deploy and employ armed forces to defend and support the political interests of the country. The things
it must require or put in place are joint, allied and coalition military forces. The end product of the enterprise is effective forces,
fielded forces, for today and for the future.
And so, the notion that we just buy thingsit turns out we have
to figure out what is the value of what we buy. You must relate
back to the mission. You must buy things for value. And in order
to understand value, you have to understand alternative uses of
the money.
There are many observers and commenters on what is wrong
with DOD. And each will have their version. My summary is as follows.
The first and most important is the Department does not have
a plan for what it is trying to achieve in outcome terms. It makes
no attempt to measure how well it is achieving its objective. And
it has no system for understanding the true cost of any of its activities. This fragmented decision-making leads to overly optimistic
cost and schedule estimates and results in destabilized program
execution.
The DOD requirements process is very destructive. I might note
that in the private sector and in a large public corporation we
never used the word requirement. There isnt anything that is a
requirement.
For a long time I noticed that the Comanche was certainly required. I know there was a requirement for it because the Bible
told me so. However, it was canceled, so it must not have been required. So the notion that things are required is in itself destructive. It separates the question of what is needed from the cost of
fulfilling that need.
The requirement is usually fixed by a committee of people that
have neither mission responsibility or financial accountability. This
requirement is passed, in recent years, as unbreakable guidance to
a procurement process that has no right or confidence to make
trades between performance specified by the requirement and the
cost and schedule implications of implementing the requirement.
Requirements should inform the judgment of accountable objectives but should not dictate performance outcomes.
Next, the Combatant Commanders have the ultimate mission responsibilities of the Department. As you stand at the secretarys
position and say, What is my mission? I accomplish my missions
through the Combatant Commanders, but they are not effectively

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permitted to participate in the makeup of the forces that are needed for the future missions of their command.
Although there are operational plans for tomorrow, there are no
guiding plans for evolving the future force for that mission responsibility. The Combatant Commands do not have adequate technical
support to manage the very technically rich system that is their
force or to contribute to the evolution of that force for the future.
The Department spends a great deal of resources under the
name of logistics, but does not have a quality logistics system.
Management of this area is fractionated. The costs are huge and
the effectiveness of the system is mediocre.
Finally, the way the Department implemented Goldwater-Nichols
to move the leadership of the armed services from the armed service Title X organize, equip and train rolethis removed an important source of military competence from the process and placed
undue dependence on the destructive requirements process.
This was not required by the law, and no legislative action is
needed to fix the problem. And I believe the Department is on the
way toward fixing this problem.
In putting forth propositions that I would recommend to address
these issues, I extracted part of the DSB reports that I have been
chair, co-chair or participant in.
And I would say that the most important recommendation is that
the DOD should have a business plan. They have a strategy, and
they have a budget, but they do not have a business plan.
In the sense of a businessman, it means that I have to describe
not only to my shareholdersin this case, me, the citizenI have
to describe to the people who are working in this enterprise what
is it we are trying to accomplish and how are we going to get
there? With what resources and by what schedule are we going to
achieve what capabilities for this department?
Such a plan does not exist. So there are recommendations as to
how to go about it.
And since this is a complicated recommendationI know that
from practiceI would start first by noting that it is important
that the responsibilities, authorities and accountability within the
Department be sorted out correctly.
There is a role for the armed services. And to achieve this objective, no change to Title X is required because the armed services
should still be the primary source, along with the Defense agencies,
of all the assets necessary to operate the Department.
There is a role for the Combatant Commands because they are
the users. They are the place where the forces come into being and
only there. We only have forces as a complete system under the
command of combatants; the units that are provided by the armed
services are not a complete force.
There is a role for the Chairman and the Joint Staff. There is
a role for the Secretary and his staff, the Office of the Secretary
of Defense. And we have outlined those in the report.
One of the key recommendations is that the secretary should, in
his own management process, account for every dollar and resource
allocatedshould account for them under the mission heading of
the Combantant Commander (COCOM) mission. That is, if there is
a dollar given of mine, the taxpayer, to the secretary, he should be

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obliged to explain why it is that that relates to some mission that
he has.
And therefore we have put a matrix together in which the program and budget formulation must be allocated or accounted for
along the lines of the mission, so to give the Combatant Commander visibility of the resources of the Department that are being
used in support of his mission today and in the future and visibility
to the problems of the Department.
Because unless that is the case, the combatant commanders will
not have any clout in Washington. It is about the money. And it
is much more about the money than it is the mission, because the
mission is not actually represented at the table very often, either
here or in the counsels of the Department.
So anyhow, it is a heavy change in process, but it requires no
change in the actual identification of resources, no change in Title
X, no change in submission of resources to the Congress, but it actually has to do with the internal discipline associating the resources we put to the Department to the missions that we accept
for the Department.
The increase in the ability of the Combatant Commanders derives from that recommendation in our report. And also, in order
to support a more complete role, they need technical support.
We also describe a way in which to fix the Goldwater-Nichols
change in the departmental process to include in the acquisition
process the secretary of the armed service, the chief of staff of the
armed service and his staff.
I think all of us have, in one way or another, tried to address
the logistics problem. Our particular form of addressing the logistics problem is to say that there should be a Logistics Command.
We currently have a Transportation Command and we have a Defense Logistic Agency and we have service logistics commands.
And our recommendation is that we pull those together into a
single organized entity in which there is a commander of Logistics
Command, which is basically the integration of Transportation
Command (TRANSCOM) in with Defense Logistics Agency (DLA),
and then dual-hatting the service logistics commands to provide
support that is service-peculiar to them, et cetera. And so we have
some description as to how that ought to be.
I think there is, perhaps, more than one right way to handle the
logistics problem. But our version, I believe, is a very plausible outcome and will add discipline to the game and improve the efficiency
of the Department.
Mr. Chairman, there are many other issues that are important
to this process. One left that I dont plan to address is how to address the problems of the Department that are truly multi-departmental. That is, most of the serious problems facing this department actually involve the execution of coordinated missions by
many of the departments of the executive branch. And we are poorly served by the current process.
Operational concept development is required to lead much of
this. The people to mention. Managing the technological industrial
base. The role of competition in the process, because that has been
discussed in many ways. Balancing fairness, whatever that means,

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with enterprise results. And then allied and coalition force development.
I thank you for listening to me.
[The prepared statement of Mr. Hermann can be found in the
Appendix on page 58.]
Mr. HEFLEY. Thank you, Mr. Hermann.
Mr. Chao.
STATEMENT OF PIERRE A. CHAO, SENIOR FELLOW AND DIRECTOR OF DEFENSE-INDUSTRIAL INITIATIVES, INTERNATIONAL SECURITY PROGRAM, CENTER FOR STRATEGIC
AND INTERNATIONAL STUDIES

Mr. CHAO. Mr. Chairman, thank you for inviting me to testify before this committee.
Mr. Skelton, thank you for giving us J.J. Gertler. He has been
a great addition to CSIS. I am hoping your grudges dont extend
beyond my opening statement.
Mr. Chairman, first, let me commend you for holding a hearing
on this topic. It is extremely important and very complex.
It has been clear that after 15 years of post-Cold War adjustment, reform and transformation that the military side of the Pentagon has made great strides in adapting to the new environment
of the 21st century. It fights more jointly. It has altered doctrine,
training, and changed its organizational structures.
However, the business processes of the Pentagon have been
much, much harder to transform, as you know, and today probably
represent, in my opinion, the strategic weak link in the chain.
This is particularly evident in the arena of acquisition reform.
And by acquisition, I use General Kadishs definition of Big A acquisition that also encompasses the requirements processes, the
Little A acquisition processes and the budget processes of the Pentagon.
There has been certainly no lack of tryingactually, no lack of
trying over the last 200 years. What is amazing is when you read
the congressional record following the Civil War, the First World
War, Second World War, the same questions are being raised. If
you were the committee chairman in 1867 looking back at Civil
War, you might be talking about cannons and wagons, but you
would still be asking the same question.
And there has certainly been no lack of trying in the last year.
We have had four major analytical studiesthe CSIS study, Defense Science Board DAPA panel and the QDRwhich have all
looked at the acquisition reform issues.
I was privileged enough to have worked, actually, on all four efforts. And although my comments will focus mostly on GoldwaterNichols study, I would like to share my thoughts on some of the
cross-cutting themes that emerged.
If I may start with the Goldwater-Nichols study, a copy of which
I have here and I would like to introduce into the record formally,
when you look at the Goldwater-Nichols, one of the key things of
our study was to identify any negative unintended consequences of
those 1986 reforms and see where the fundamental landscape has
changed and that is causing problems today.

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[The Goldwater-Nichols study is retained in the committee files
and can be viewed upon request.]
Clearly, when Goldwater-Nichols was passed, there was certainly
a lot of controversy in the acquisition world then, just as there is
today. We all still remember the lurid examples of the $600 toilet
seats and the $427 hammers that filled the press. There was huge
pressure to ensure that similar mistakes were not repeated.
And so when a solution was created in 1986, the supreme objective of the reforms process was to fix the mechanical processes of
buying things. Some have said it wasnt actually acquisition reform; it was really procurement reform.
Congress reflected this by creating a new position, the Under
Secretary for acquisition, which is now the Under Secretary for Acquisition, Technology and Logistics (AT&L). And one of the unintended consequences, however, of this legislation was the devaluing
of the previous position of the Director for Defense, Research and
Engineering, the DDR&E.
In fact, since the end of the Second World War, the DDR&E was
the third most important position in the civilian hierarchy at the
Pentagon. It sent the signal that technology was of strategic importance to the Pentagon and to the nation, and it ensured that there
was a strong institutional champion.
And the Goldwater-Nichols reforms have changed the role of the
Pentagons number-three person from being focused on what to
buy, and instead made them focused on how to buy types of issues.
Dr. Hamre has used the phrase, It shifted the focus from marksmanship to gunsmithing.
Today, the acquisition system inside DOD is a bewildering complex of processes and procedures. Clarity of action in many ways
is missing.
Clearly, personalities of the people holding that AT&L position
can shift and change. I must point out that the current AT&L person, Ken Krieg, has been trying to focus quite a bit on the whatto-buy issues, but the institutional pressures that drag him back to
focus on how-to-buy issues are there on a day-to-day basis.
Another problem identified with the DODs current acquisition
systems: the fractured accountability that was created by the original Goldwater-Nichols reform legislation. It created a fault line inside the Department. It divided the acquisition system into a differentiated process that insulated it from the procedures that established requirements in budget.
Our study has found that this fault line between the acquisition
process on the one hand and the requirements and budgetary process on the other is one of the primary contributors to lack of institutional accountability in our system today.
The study concluded in many ways that the primary problems
are institutional and that institutional change was required, and it
recommended a few key things.
The first one was creating a clear advocacy for supply versus demand. Today, the service vice chiefs, in many ways the representatives of the suppliers inside the Pentagon, comprise the Joint Requirements Oversight Council, the JROC.
CSIS study team believes that this needs to be changed and that
the JROC needs to be populated by the demand-oriented institu-

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tions inside the Pentagon; in this case, represented by the Combatant Commanders, the users of the system.
It also advocates adding on to the JROC those who represent the
longer-term views within the Pentagon, which would include the
Under Secretary for AT&L, the Under Secretary for Policy and Program Analysis and Evaluation (PA&E) to provide the analytical engine, as well, behind the JROC.
Second, the study recommended returning the military service
chiefs to the chain of command for acquisition. You have heard
from the other two major studies; that theme has been echoed. It
solves another institutional faultline that was placed. It creates,
once again, a central belly button that can be pushed by the taxpayer and by yourselves for accountability in the acquisition systems. The service chiefs need to be held accountable for the whole
supply function, and they need the authority to carry this out.
Third, focus the Under Secretary of AT&L on the marksmanship
aspects of the job, the strategic element, rather than the
gunsmithing, or the day-to-day management of programs.
And the fourth area that we focused on in our study has to do
with the rapid acquisition process. Because one lesson that has
been learned and relearned by this nation since the Revolutionary
War is that the acquisition system is designed and optimized for
peace. And each time it hits wartime, the wheels fall off the cart.
What makes this situation even harder is the fact that the Nation is in a dual-mode today. We have half our system focused on
being in a wartime mode, where time is critical, technologies must
be off the shelf, testing, in many ways, is less relevant because you
are doing it in the field today, and agility, innovation and experimentation and risk-taking are absolutely critical.
Meanwhile, the other half of our system is focused on longerterm potential near-peer competitors 20 years out, where the traditional acquisitions system actually works fine. The central focus is
cost and performance. We can afford to move more slowly, deliberately, and where efficiency is critical. One size simply does not
fit all, and it argues that we may need very distinct and different
tracks for the acquirers to work on.
I must commend your efforts, actually, in the fiscal year 2005
budget process and authorization act to create the rapid acquisition
tools for the Department. But our study would argue that the current rapid acquisition system should be expanded beyond where
you have taken it, establishing preset waivers to particular laws
and processes be made more permanent and pots of money being
made available. Because it turns out that the budget process in
some ways is becoming the choke point in the rapid acquisition system.
So in conclusion, Mr. Chairman and members of the committee,
I again applaud you for holding this hearing. Acquisition reform
will need some congressional champions if it is to move forward
meaningfully. I can only hope that this is the beginning of a long
and fruitful dialogue, and I know that I and my colleagues at the
Center for Strategic and International Studies (CSIS) are prepared
to support you in any way as you tackle this critical issue.
[The prepared statement of Mr. Chao can be found in the Appendix on page 50.]

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Mr. HEFLEY. Thank you, Mr. Chao.
Mr. Little.
STATEMENT OF TERRY R. LITTLE, ACQUISITION ADVISOR TO
THE DIRECTOR, MISSILE DEFENSE AGENCY

Mr. LITTLE. Thank you, Mr. Chairman.

I come at this from a bit of a different perspective than these
other three gentlemen, in that I have no study that I have done,
no formal study.
What I have done is have had 25 years managing major acquisition programs. Most of that has been with the Air Force, but I have
had the opportunity as an interested observer to look at large programs in the other services. And I have drawn some conclusions
from that that I would like to share with the committee, recognizing that these represent my opinion and not reflective of either the
Missile Defense Agency or the Department of Defense.
From inside the process, I would have to say that I believe that
Goldwater-Nichols, as it pertains to acquisition, is fundamentally
sound. What is not sound is the Departments implementation of
it. And I want to be more specific.
Oversight and review, a necessary function, but what has happened is, it has created a massive bureaucracy of highly focused
stovepipe people insisting that they get their way with the program. And the end result is something that not only is not helpful
to the success of the program, but in a general way tends to undermine program execution by giving the program manager too many
masters that he has to satisfy.
There is a lot of talk about the requirements process and who
should set requirements. I believe that the current approach is reasonable and that the JROC is reflective of a check and balance in
that you have very seasoned people, plus the vice chairman, who
represents the Combatant Commanders.
The trouble with the requirements process, though, is not who
sets the requirements, it is how they are set and when they were
set. We set them too early, before we know enough to really set
them. We are too specific. We dont leave trade space. And we create a situation where the program is doomed to fail or at least to
disappoint.
And that is troublesome to me because over my 25 years, one of
the things I have observed is most requirements are made up. They
are made up by users who get inputs from both government people
and contractors about things that are possible, and they use those
as a basis for setting their requirement as to what they want.
So, to me, it is kind of a very troubling thing, that we are too
specific and too early.
A lot of talk about the budget and budget stability. The services
do that to themselves, in my estimation, by having more programs
than they can afford and by sanctioning, at least implicitly, underestimates to cost and underestimates to what is going to be required to actually execute the program.
And so, what ends up happening is, when an important program
runs into cost trouble, the departments look to other programs to
solve that. And so to fix one, you break others. But that is a departmental execution problem, in my estimation.

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So how do you get better results? I have a bit of a prescription
which is oversimplified, but I am going to give it anyway.
One is, if you want better results, two things need to happen: set
more realistic expectations at the start and get better program
managers. I want to talk about each of those.
When a program starts, there are enormous pressures to be optimistic: optimistic about performance, optimistic about cost, optimistic about schedule. We are in a military culture. And when we are
in a military culture and we have a problem, we dont call it a
problem, we call it a challenge. And a challenge is meant to be
overcome.
So when the typical program manager gets pressures to add requirements or understate costs or understate the schedule, the typical answer is, Yes, sir, we can do that, we can do that, because
we want to please.
So if you go back and look at the history of the disappointing programs, you will find that in most cases the seeds for that disappointment were sown very early when the expectation for the
program was set.
Now, how do you resist if you are a program manager? The way
you resist is you develop a conviction, number one, and, number
two, an expectation that you are going to be accountable personally
for the outcome. So if I overpromise, I am going to be there to be
in front of someone explaining why when the chickens come home
to roost.
Most program managers dont have an expectation of continuity.
Their expectation is they will be with the program a couple of
years, somebody else will replace them. And so, it is easy in that
kind of a situation to set expectations because someone else will
have to deal with the problem when those expectations turn out to
not be realized.
I mentioned better program managers. What do I mean by that?
As I look around at the managers of the major acquisition programs across the services, I would say that about 20 percent of
them are starsreal stars. About 60 percent are okay, meaning
they are unlikely to make huge mistakes, but if the program gets
in real trouble, they are probably not going to be able to pull it out.
And about 20 percent I would characterize as incompetent.
Now, how does that happen? We dont do a very good job developing, training, picking, mentoring, coaching and keeping program
managers. We need to do a much better job.
In my estimation, the program manager should be as well prepared to manage a major acquisition program as a pilot is to fly
an aircraft. And that means more training; more selection, not just
looking at resumes; and putting people to the test where they have
to produce results and outcomes and seeing how they fare.
Defense Systems Management College has done some studies of
program managers of successful programs, and they have concluded that the most important factor in a programs success is
who the program manager is and, more precisely, his basic approach to the job. Many program managers see the job as one of
dealing with technical complexity, making decisions, being an advocate for the money.

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The successful program managers understand it is not about
management; it is about leadership, it is about dealing with
change, it is about confronting issues, it is about recognizing that
you have to develop alliances, it is about creating confidence on
those who are following you as well as those to whom you report.
We dont take that approach when we select program managers.
There is another factor that really relates to some of the things
that I think were brought up. There is a prevalence in our acquisition workforce of what I want to call a cost-plus mentality. Now,
let me explain that.
In the 1980s, we had a bad bout with fixed-price development
contracts. And it produced some really bad stories. So we made the
transition where virtually all of the development contracts are costreimbursive. And what does that produce? The first thing that it
produces, and in fact encourages, is a lack of discipline and, in particular, a lack of discipline in planning.
Just because something is cost-reimbursable, that is not a license
to make it up as you go along. But in fact what happens, as a practical matter, is we have lost the art of doing detailed planning and
the discipline of executing to a plan. And by we, I am talking
about not just the government program offices but also the contractors to whom we give these cost-reimbursable contracts.
Second, we have tolerated and continue to tolerate inefficiencies.
Our government program management teams are way, way, way
too large. They generate needless work, in my estimation. And they
cause the contractor to hire additional people that really dont contribute to the end product.
And the third thing is, it has encouraged us to undertake highrisk ventures. I believe, as some of the other studies have shown,
we need to be looking more precisely at spiral development, moving
a step at a time, with low-or moderate-risk activities, with parallel
efforts to develop the technology outside the main-line development
program and, as the those technologies mature, to be able to fold
them in.
So what I have is much more predictability about what performance I can get, what it is going to cost and how long it is going
to take.
Finally, I want to say that I think the GAO has done a good
thing with setting up the notion of knowledge points. They have
not gone far enough, however, in that they have only focused on
technology readiness. I think they should be focused, as well, on
engineering or on manufacturing readiness.
We have a lot of technologies today that we can get enchanted
because of what they promise in the way of performance, but if we
cant manufacture those affordably and repeatably, we are going to
have a major problem. And I dont think we give near enough credence to that.
So my view is we dont need fundamental structural changes.
What we do need is different implementation, different attitude,
and overall a different way of buying what we buy that is really
reflective of a cultural change as opposed to an institutional
change.
Thank you, Mr. Chairman, for the opportunity to give my remarks.

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[The prepared statement of Mr. Little can be found in the Appendix on page 71.]
Mr. HEFLEY. Thank you very much, all of you.
I am going to defer my questions.
Mr. Skelton.
Mr. SKELTON. Mr. Little, thank you.
And thank each of you gentlemen for your excellent testimony.
Mr. Little, it is good to hear your positive comments about getting the Goldwater-Nichols acquisition piece right.
My question of you is: How can we as a committee help the Department of Defense get it on the right path? In other words, if you
had a magic wand and this committee would do what your magic
wand said, how would we help them get it right?
Mr. LITTLE. I would offer a couple of thoughts.
I said I think the Goldwater-Nichols is fundamentally sound.
One thing that is not sound is the Defense Acquisition Workforce
Improvement Act. It has too many holes to allow for waivers and
deviations. I believe that should be strengthened substantially.
That would be one step.
Second step would be to take the AT&L office out of the acquisition program oversight business and put that down at the service
level with a limited staff and essentially have that staff be comprised of people who werent functional experts but who were seasoned program managers who could help the program succeed.
What I dont need are functional experts telling me at the headquarters level how the contract needs to be, how the finances need
to be, how the technical needs to be. I get enough of that help at
my own level. What I need is someone who has been there and
done that who can help me with the balance, with how do I balance
all of these things.
We dont have that today. In fact, on the military side, when we
have seasoned program managers, people who have actually had
some successes, amazingly enough we move them out of that position so that they no longer have access to people like me and others
coming up. And I would do something about that. I dont know
what that something is.
I mentioned the program manager tenure. In my simple mind, if
we want accountability, we need to put a program manager in
place with an expectation that he is going to live with the results
that he has promised.
And what I would say to that is: Five years, you die, you get
fired or you retire. Those are the only ways that you get out. If you
get promoted, we will figure out how to deal with that.
You know, the fact that the Joint Strike Fighter (JSF) has had
who knows how many program managers in its time, I think, in
a significant way is at the root of why that program has had and
will continue to have so many issues associated with it.
So that would be my magic wand, sir.
Mr. HEFLEY. Mr. Kline.
Mr. KLINE. Thank you, Mr. Chairman.
Thank you, gentlemen, for being here and for years and years
and years of very hard work trying to solve a problem which many
of us, looking at it for over these many years, think is unsolvable.

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I think, Mr. Hermann, you mentioned or someone mentioned Secretary Perry and the study that he had asked for. And you go back
to Secretary Perry going back to probably when he was DDR&E,
and we were talking about fixing the acquisition system.
All of you have said that it is a system that has been broken for
many years. General, you talked about language 20 years ago and
you are looking at it again. It is the same language.
And so, I am kind of wringing my hands, and have been, as have
undersecretaries of defense for acquisition, year after year after
year. We cant seem to fix it.
And I am struck by a couple of things. I think that there is a
model out there that many of us have looked at for a long time.
If you put things under a cloak, like the skunk works, and you get
a project that comes out ahead of time and under budget, I know
that you have all looked at that process. And I am wondering if
somebody has a comment as to why that worked relatively well, if
you are willing to share that with us.
And then, just a couple of more comments on my part, and then
I would like to throw a question out for all of you.
We in this committee, in this Congress, gave the Secretary of Defense this rapid acquisition authority, which was supposed to bypass the Federal acquisition regulations and allow the Combatant
Commanders to recognize something that they needed to save lives
in the theater and allow the secretary to bypass the process and
buy what we needed to save those lives.
And yet, I know that we on this committee are frustrated, week
after week, when we see that things arent getting fielded as rapidly as we think we should.
The chairman of this committee has held hearings trying to get
at the bottom of why that has happened, because we streamlined
the process as well as we think it could possibly be done. We just
waived everything and said, Mr. Secretary, go buy it if you need
it.
And yet, we hear, when we talk to folks who are trying to field
equipment, Well, we are verifying the requirement, or We
havent finished the testing, or We have only done developmental
testing and not operational testing, or something. We seem to get
immediately mired back into a system that has been with us not
for years but for decades.
Mr. Little, you talked about needing to change the culture. We
dont have that wand to change the culture. So we are looking for
something. What could we do that would allow that culture to be
changed?
So a couple of questions. The rapid acquisition authority, what
do you know about it, and why do you think it gets hung up and
we cant get the things we need into theater as rapidly as we would
like them to get in there?
And then, many of you talked about the requirements process
being broken. We have had some suggestions. Again, if you could
wave a wand on the requirements process, I would be interested
in what you have to say.
Thank you.

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General KADISH. I would like to take a crack at answering the
question on the requirements. I think it is one of the most important issues that we face.
And one of the things that we could do, and it is recommended
in our report in the Defense Acquisition, Performance Assesment
(DAPA) commission, is to value time. We call it time-certain development, where schedule counts in the process.
What you find in the requirements development and testing activities is that they are willing to trade time for something better.
And unless and until we make time equal to those performance
variables, we will get the same behavior you described.
So schedule is important, especially in this security environment.
That is why I mentioned earlier about turning inside our adversaries decision cycles.
So as we talk about how fast it goes, how far it goes, how lethal
it is, we should also specify when we want it. And then that generates more evolutionary approaches to testing and development
activities.
So I would strongly recommend that we look at time equal to or
better than the performance required out of the weapons systems.
Mr. KLINE. Thank you, Mr. Chairman. I apparently preambled
too long. I see my time has expired.
I would be interested in any written responses that you may
have on those three issues that I covered.
Thank you, Mr. Chairman.
Mr. HEFLEY. Mr. Snyder.
Dr. SNYDER. Thank you, Mr. Chairman.
We appreciate you gentlemen being here.
This is incredibly complex and confusing, I think, for a lot of us
and for a lot of Americans. But we know how vital it is.
And what I want to do is I have two specific questions I want
to ask you about, maybe as a test of how a good acquisitions system ought to deal with challenges.
Number one is, probably the number-one priority in this committee for the last three years has been armorpersonal protection for
our troops. And we have been assured multiple timesand the
chairman has worked on it and the ranking member has worked
on itabout, yes, we are moving in the direction we want to be in
terms of personal protection for body armor and protection for vehicles.
I learned yesterdayand the fact that General Schoomaker said
that in June of 2005 that we were on track to have the number
of enhanced small-arms protective inserts, the small arms protective insert (SAPI) plates; we are on track to do that in fiscal year
2007.
The requirement had been set by the Army to buy 40,000 sets
a month. And it is my understanding, in the last couple weeks, the
Army has let it be known that they are only going to be 20 sets
a month.
And I am not sure why that is but there were suppliers out there
of these composite materials, six competitors, that had ramped up
in anticipation of 40,000 sets a month.
And you need competitors because this a changing technology. I
mean, you dont want a material that will just stop the first bullet;

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you want it to be able to stop subsequent bullets after it has been
hit and shattered and already had velocity to it.
Now, the situation is, the Army is saying, We are going to cut
back from six suppliersthat is my understandingto three suppliers. And the ones that are going to be retained are the ones
that the Army has dealt with, not necessarily the ones that have
the best technology for stopping a bullet.
Now, we talk about our business community out there, our suppliershow should this system work?
I dont expect any of you to have any personal knowledge about
enhanced SAPI plates and where that contract is and all that. But
here is, then, probably the number-one priority for the Congress,
and we have had industry ramp up, and now it is my understanding they are getting some information that, Oh, you are not going
to be making money at this after all because we are going to cut
the requirement in half and we dont need but six of you; we are
only going to use three of you.
Now, how should this system work?
Mr. CHAO. In some ways, we have also been looking at defense
industrial base issues at CSIS. And one of the biggest issues that
you come across, particularly when you are trying to get at a nexus
of acquisition reform and defense industrial issues, as you know, it
gets to be an extremely complex issue, and it is very hard to peel
out what is relevant versus what is not.
One of the biggest things that we have done in terms of trying
to think through those issues is look at where an industry is or
where a technology is in its maturity cycle.
So to your point, in areas where there is lots of changing technology, you have lots of competitors, that you let competition reign
as much as possible, the taxpayer gets as much of the benefits as
possible. In areas where the technologies are more mature, in some
cases the one-size-fits-all solution of competition is probably a bad
place to be, and trying to force competition and mature technologies may not be the right area.
Dr. SNYDER. This seems like an area where we benefit from having an increased number of suppliers. And certainly if we are going
to cut back, it ought to be cut back on who has the best technology
at the time.
Mr. CHAO. And it is always that tradeoff between the cost of having the suppliers initially versus the savings that you get from
competition.
General KADISH. May I make a comment about
Dr. SNYDER. I want to get my second question, if I can, and
maybe you can comment on both of them.
My second question is: We have had this horrendous situation in
the last few months with our former colleague Mr. Cunningham
who pled guilty to felonious conduct that he and everyone in this
institution, every American, thinks should never have occurred.
My question is: He was able to, by his own words, accept bribes
to get contracts through the Congress that the Pentagon funded
that they didnt want. They didnt want this stuff. And the only
way it was done is because somebody out there was able to hire
a zealous advocate on the behalf of those contracts.

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Now, where did our system break down? Where in the Big A is
there to be something? Where is the oversight that says, We dont
want this stuff. We are firing off a red flag. We dont want this
stuff, regardless of what led to it to be inserted in the first place?
I didnt see much of a role in any of your discussion about congressional oversight, but where do the red flares go off that says,
Just because this comes from Congress doesnt mean it is the right
thing to do?
General KADISH. It is a tough question to answer, but I will just
make a mechanical response to youis that, when you have a program and the appropriations and authorizations that come down
and there are specific directions to spend money in certain areas,
there is very little opportunity to change that.
And the only tools that I am aware of is reprogramming, or those
types of efforts that tend to be not very productive, because you
probably dont get the answer you are looking for.
So it is issued as part of the bureaucracy, and the bureaucracy
is designed to make sure you comply with the law. So once it is
there, it is very hard to say, No, we are not going to spend the
money as directed. And it really is a tough problem for program
managers to deal with earmarks and those types of directive activities.
Mr. HERMANN. Can I just say that in the large sense that this
question represents, you must get the incentives correct?
Now, the way in which money is spent on defense is Congress
appropriates it and the executive branch executes it. So there are
a lot of folks in there who have incentives for wanting something
to occur. Some of it has to do with constituency, some of it has to
do with conviction, some of it has to do with institutional representation, but you got to actuallyeverybody is operating in some sort
of incentive and reward-risk domain.
And there is no question, if you are going to do acquisition reform from the departments point of view, you have to account for
the fact that there is an incentive to fund resources across the
whole nation in what is loosely called an earmark, or pork, situation, but that is overcomable.
But what is missing in many cases is the mission of the Department of Defense and the mission of the security of the United
States. And that mission is not present at the table in many places
where bad deals are done. And because the mission is not there,
it permits a lot of things to occur, some noble and some ignoble,
that are not correct.
Thank you.
Mr. HEFLEY. Ms. Davis.
Ms. DAVIS OF CALIFORNIA. Thank you, Mr. Chairman.
And I am going to actually ask the rest of the panelists to try
and follow up on that question, because I think it is an important
one. Obviously, it is one of concern to all of us.
And I wonder if you would incorporate within that, is there
someI think to answer itbut then if you have former DOD officials or former military officers who are acting on behalf of contractors, should there be better reporting requirements for them? Is
that an area that also is a concern?

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And if you can address the first part and then the second, that
would be great.
But I also just wanted to say, Mr. Chairman, I mean, this has
been very dry and difficult, and I think that a lot of members
arent necessarily able to be here. But I think it has been, actually,
very interesting and somewhat, I think, shocking and disconcerting
at the same time.
And so I appreciate the fact that you have been here to discuss
that. And if we have time after the follow up, I am just curious
about some other interplay between your responses.
Thank you.
Mr. CHAO. To follow up, Congresswoman, to your question, I
think one of the issues in allowing the three systemsthe requirements process, the acquisition process and the budget processto
drift apart somewhat in the last 10 or 20 years allows what you
have discussed to come about, because in the absence of a strategic
vision being driven by the requirements process and by the other
processes to tie it together with the acquisition process.
We, in the end, brute-force all these strategic decisions at the
last minute through the budget process, which then gives disproportionate power, I think, to what has been going on.
So the more work that is done in advance at the front end of the
system, I think the more we end up solving. If you look at almost
all the acquisition reform that we have been trying to do and what
part of the system we end up fixing, we keep putting more and
more oversight on the back end of the system to trap things and
to brute-force them back into shape, when if we spent as much energy at the front end in terms of how the requirements are set, the
broader strategic issues that are being raised, frankly, the efforts
that you are making in doing a parallel Quadrennial Defense Review (QDR)-type effort and the types of broader strategic issues are
exactly where the focus ought to be on.
And therefore, when someone comes in with an earmark or something that looks incongruent with that overall strategy, it then becomes easier to put that within context and sit there and say, Boy,
we really dont want this. And, oh, by the way, here is a strategy
that we developed and a business plan that it doesnt fit with,
which makes it easier to say yes or no to those kinds of things.
Shedding sunlight onto the system in terms of reporting is always a good thing, right, that disclosure always helps and is always useful and, frankly, cannot hurt.
Ms. DAVIS OF CALIFORNIA. Is there a limit in terms of the
amount of the contracts that you think is appropriate? There was
a bill at one time to do that, at $10 million, I believe.
Mr. CHAO. I would have to sort of think about it. I would have
to get back to you on where you would set that
Mr. HERMANN. I would argue no. I would argue a firm no, because whoever is going to pass that law or regulation is not smart
enough to know what the right answer is and is very likely to create more problems than was intended to help.
I just dont think that setting an arbitrary specific number is
likely to be helpful, and it will not actually fix the much larger
problems that we have been talking about.
Ms. DAVIS OF CALIFORNIA. Thank you.

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Mr. Little, did you want to comment on
Mr. LITTLE. Well, just a couple of things. You asked about, do we
need stronger, I will call them, integrity rules for former government military officer.
The rules that we have right now are very strong, and they are
enforced rigidly, not just on the government side, but also on the
company side. So I would say, as a result of scandals with Boeing
and whatnot, that that is an area where I think we are as good
as it gets.
With regard to the earmark, I think it would be helpful if we in
the executive side could understand the intent of the earmark. In
other words, is it to get a constituent into the process? That would
be helpful as a kind of a check and balance, and helpful here in
the Congress looking at those earmarks and trying to understand
are those legitimate, reasonable things to be doing or what is up
with this.
Ms. DAVIS OF CALIFORNIA. Okay, thank you.
Thank you, Mr. Chairman.
And I hope that perhaps some of those multi-faceted managers
that you are speaking of that are well-trained could also be helpful
in that as well.
Thank you.
Mr. HEFLEY. Mr. Larsen.
Mr. LARSEN. Thank you, Mr. Chairman.
Gentlemen, thanks for coming. You were supposed to come here
and help us out.
And, General Kadish, just as an example, your testimony says
that we should enhance the stature of the Under Secretary of Defense for AT&L. Mr. Little has told us that we need to decrease the
stature of the Under Secretary of AT&L. And Mr. Chao has told
us keep him where he is, keep the position where it is, just add
more to it.
It is a complex enough issue for us to deal with, defense acquisition reform, which we need to deal with. And you are all smart
folks. And so I am curious, to help me understand where you are
all coming from, how you came to very different conclusions on just
one aspect of acquisition reform.
General KADISH. Well, Congressman, maybe I heard it different
or wasnt paying attention, but I think when you lay those together, they are more similar than they are different in the process.
And we struggle with that in all these types of studies, because
in this particular panel, we had six or eight people that sat around
the table and we argued about things from a point of view. This
is not a scientific effort, and so you will get disconsonant types of
recommendations.
However, I think what is important is that there is general consensusat least what I heard at this tablethat AT&L and the
structure is useful and important. How to make it more useful you
might be able to argue about in the process.
We recommended that the AT&L get the budget authority for a
stabilized account, be a part of the Joint Requirements Oversight
Council (JROC) approach. I think you heard some of the same
things from the other panel members today.

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But you are always going to have dissenters in the process. And
I would just ask you to try to sort through that and look for what
is more common than any specific recommendation.
Mr. CHAO. I think if you, sort of, take a look at the recommendationagain, it is interesting because I was on the Defense Science
Board summer study and it was interesting to see the arguments
evolve over the year.
I think you will find a lot of resonance between what Mr. Little
said and our recommendations, to the extent that we, in the Beyond Goldwater-Nichols studies, thought that AT&L should be focused at that front end of the strategic dialogue far more so than
trying to interfere in his day-to-day actions and trying to bruteforce the solution by hammering him on the head on a daily basis;
lets get the requirements and the initial issue upfront.
And so from that perspective, we have said, Focus on the front
end. Focus at that. Return back to the older role in some ways of
focusing on what to buy rather than how to buy. And so in some
ways, we didnt see it as adding things on, but in some ways taking
things away, getting them out of the day-to-day management focus.
Your question, in some ways, highlights a broader issue, which
is, it is kind of smelling like the early 1980s these days, in terms
of there s a crescendo of activity about acquisition reform. There
are articles, there are scandals, there are lots of reports being written.
What hasnt yet happened that occurred with Goldwater-Nichols
was it all coming together where somebody actually did create a
congressional commission or something that would sit there and
say, Fine, we have had a lot of fine work. Lets figure out which
ones of these recommendations we, as an institution, as a body,
should take forward and move ahead with so that way we can get
into this next generation of reforms.
Mr. LARSEN. Mr. Little.
Mr. LITTLE. If I may make just one comment, I said that I
thought the Goldwater-Nichols was fundamentally sound. One of
the reasons that I say that is the basic principle that the Packard
commission espousedand it is carried through the GoldwaterNicholsis for the program manager to have short, clear lines of
authority.
And one of the problems that we have today is that is all kind
of muddied up by staff and different people want to put their fingers in the process.
And that short, clear, unambiguous line of authority in my estimation is absolutely critical if we want to make headway on improving acquisitions, where I have got a boss I can count on to support me or tell me I have been smoking dope, and he has got a
boss, and you have got an accountability chain.
What is frustrating, it seems to me, is when something goes
wrong. If I were sitting in your seats and I look around to see,
okay, who is going to explain this to me? Who is accountable? Who
is responsible? There is nobody there. There is nobody there. And
I think we have to fix that.
Mr. CHAO. We would actually quibble a little bit. I think a lot
of the people at this table would sit there and really endorse the
Packard commission, because it stands the test of time. We would

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actually argue that it was never really fully implemented, and that
is part of the problem. If it was, then we would be right with them.
Mr. HERMANN. I would just say that in my testimony, if you look,
there is a chart on accountability and who ought to be doing what.
I think that the current AT&Ls position is not badly formed.
And I dont have a problem with General Kadishs argument to
have a stabilizing fund and so forth, but I dont think it is the center of the problem.
When Goldwater-Nichols cleaned up the line of command and
put it straight up through the acquisition chain, it took for granted
that the acquisition chain would know what to buy. They do not.
I served in 1964 with McNamara and when Harold Brown was
Director, Defense Research & Engineering (DDR&E). I served with
Harold Brown when he was Secretary and Perry was and so forth.
And in all of those times, the issue was: What is the right thing
to put your money on? Foster in the early 1970s. And the way in
which, as an example, Brown and Perry did it is they actually
forced through their own operational judgment; and, mercifully, it
was good.
What we need to strengthen is the side of the department that
is accountable for the mission and force there to be a coherence
around some planning structurewe call it a business planso
that the incentives to get the mission right are in the hands of
whatever structure you put together.
But I do not think wickering with the structure is going to fix
it without actually changing the incentives process.
Mr. LITTLE. May I offer one brief comment? And that is
Mr. HEFLEY. Go ahead.
Mr. LITTLE [continuing]. There is a lot of focus on changing the
lines on the wiring diagrams as a way of fixing things. For example, putting the Chiefs of Staff and the Chief of Naval Operations
(CNO) somewhere in the acquisition chain.
Let me tell you from personal experience: They may not have a
line, you know, an organizational chart, but the Air Force chief of
staff is personally involved in F22. I think the CNO is fully involved in DD(X); Army with the Future Combat System.
So I am not discomforted that somebody doesnt have a line running to them and saying that somehow puts them out of the process, because they are not out of the process.
Mr. HEFLEY. Mr. Snyder, do you have a follow-up question?
Dr. SNYDER. I wondered if we were going to go around again, Mr.
Hefley.
Mr. HEFLEY. Go ahead if you want to ask a question. We are
going to have a vote here in a few moments, so we are going to
have to kind of hurry. But go ahead.
Dr. SNYDER. Okay. Maybe you want to put the clock on that?
Mr. Hefley is leaving us at the end of this Congress, so it really
does me no good to suck up to him anymore. [Laughter.]
But I will do it anyway. You know, he has been overseeing the
military construction on the authorization side for a number of
years now and has really insisted that, you know, members want
to add on or move up projects in bases in their district or around
the country, but he has insisted that the projects be in the militarys Future Years Defense Plan (FYDP).

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Now, there has been some exception to that, but you have got to
make a real strong case why that is an exception to having it on
the FYDP. That was a control. That is part of that business plan
that I think one of you were talking about.
Going back to the problems with Mr. Cunningham in the Congress, I have written three letters to this committeeJanuary,
February and Marchasking for what I thought was going to be
done anyway, which was: What happened? How was this committee, or was this committee, part of a process that became the subject of felonious conduct?
One of you talked about putting energy at the front end. In my
view, Mr. Hefleys approach is putting energy at the front end. You
do all your looking at this stuff as part of the FYDP, not then coming back later to see what went wrong. Because it is very hard to
figure out what went wrong with something like a project that
never should have been funded, that the Pentagon didnt want.
The specific question I want to ask is, today or yesterday, the per
capita income numbers came outI think for the countrybut for
Arkansas. Arkansas is now 48th. We are only above the two states
that were ravished by the hurricanes, Louisiana and Mississippi.
Our per capita income is a little over $26,000. Connecticut, for
example, at the top, is like $47,000.
And so when my constituents and Arkansans see what seem to
be incredibly lucrative deals going on in a wartime environment,
they feel ripped off as taxpayers.
Now, again, I appreciate everything you all are doing, because
you understand; I dont understand your business. But one of you
talked about the difference between peacetime and wartime.
There is clearly fraud, and if not fraud mismanagement, in what
is going on with these huge contracts as part of the Iraq war effort.
Where does that fit into this Big A acquisition system that you are
talking about?
Where are our safeguards for protecting the taxpayers with the
$25,000 and $30,000 income in Arkansas when people overseas are
just seemingly, through abuse of the taxpayers, making big sums
of money?
Where do you see that aspect of things fitting into the system,
in terms of oversight and being sure that taxpayers are getting the
best bang for their buck?
General KADISH. Let me make a distinction between those types
of procurements and the types that we have been talking about
here to some degree.
Because the operations in wartime have two aspects for it. One
is that the system that we are discussing today, the Little A acquisition system, is fundamentally a peacetime, long-term development of major weapons system type of activities. And a lot of dollars are spent on that action. And the processes we use and our
discussions tend to be focused on that.
The only time we end up practicing and having processes developed in a wartime environment is when there is a war going on.
And two things happen in that environment. One is that our processes are not necessarily adapted to the wartime situation very
quickly. We dont train people to do that. And when we actually get

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into the wartime scenario, time is of the essence, so people tend to
make mistakes in the process.
Dr. SNYDER. General Kadish, but you say we should not have to
wait until a wartime situation to say we may have a worse situation that requires additional fuel or we may have a wartime situation that requires civilian transport planes that we have to contract
with.
I will give you an example, again, from Arkansas. We have got
those, I think, maybe now 10,500 manufactured homes that have
been talked about as part of the FEMA thing.
I talked with James Lee Witt about it. He would never have used
manufactured homes. He would have used small, portable trailers
that you can pull up in your driveway and hook up that everybody
calls little fishing trailers. And you have bigger sizes for families
of four and smaller for a single person.
But they had those contracts ready to go even before there was
any hurricane coming. So you dont have to get to the war or the
hurricane before you have the contracts.
Now, we were in a situation with this management of the Federal Emergency Management Agency (FEMA) where nothing was
done, and we ended up with 10,000 trailers sitting in Hope, Arkansas, that nobody knows what is going to happen with them.
So you cant be saying that we dont prepare for a ramp-up at
a time of war. I mean, we have to look ahead, do we not?
General KADISH. No, I misspoke if I led you to that conclusion.
There are preparations going on in wartime all the time. But there
is an old saying that says that a plan doesnt survive the first shot
in a war.
Dr. SNYDER. I understand that.
General KADISH. And as things develop, we dont necessarily
have trained contracting officers to deal with the real-time situations as much as we should have in the process.
Dr. SNYDER. Well, my time is up, and we have votes.
And the president is now calling thisthe administration is now
calling this the long war, which may be an appropriate time. But
we cannot somehow say we are going to be in a wartime mentality
for 2 or 3 decades or however long this long war is going to be,
which means we are going to have inappropriate oversight of many
of our taxpayer dollars, because the taxpayers arent going to stand
for it. The Congress isnt going to stand for it.
General KADISH. I couldnt agree with you more.
Let me just make one more distinction. The dollars that we tend
to oversight and argue about how to fix are research and development, procurement dollars. The dollars you tend to be talking
about in an Iraq wartime situation are operations and maintenance, as well as a little bit of these types of dollars. We have got
to start looking at the O&M services type of activities, like we do
major weapons systems.
Dr. SNYDER. Thank you, gentlemen.
Thank you, Mr. Chairman.
Mr. HEFLEY. Well, gentlemen, I want to thank you for being with
us this morning. We could spend a lot more time on this and need
to spend a lot more time on this. And I think you have been very
helpful.

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Several of you mentioned, when you started your statement, that
this is a very complex area. And it is a very complex area. But we
need to come to grips with it on both aspects: the one that Mr. Snyder brought up at the last, as well as what we have talked about
most of the day.
So thank you, and we may be calling on you again.
With that, the committee stands adjourned.
[Whereupon, at 11:38 a.m., the committee was adjourned.]

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A P P E N D I X
MARCH 29, 2006

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PREPARED STATEMENTS SUBMITTED FOR THE RECORD

MARCH 29, 2006

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