Panel II of a Hearing of the Air and Land Forces Subcommittee of the House Armed Services Committee - The Source Selection and Path Forward Regarding the Air Force KC-(X) Program

Statement

REP. RICK LARSEN (D-WA): Thank you, Mr. Chairman.

Secretary Young, thanks for coming today. I want to just clarify some terms. Are you the new source selection authority?

MR. YOUNG: Secretary Gates announced at a press conference that I am the new source selection authority.

REP. LARSEN: Okay.

MR. YOUNG: We would normally not reveal that information. It was a decision he can make.

REP. LARSEN: Okay, okay. And the new Source Selection Advisory Committee, is that the independent team that you talk about? Or is that something separate?

MR. YOUNG: No. That is -- through the normal source selection procedures, people use different acronyms, but we have a source selection evaluation team that evaluates and analyzes in technical detail a proposal. They provide that data with possibly some judgments to a source selection advisory committee who begins to aggregate and evaluate and pass judgment on that data, so that committee can make a recommendation or at least provide relative values to the final source selection authority.

REP. LARSEN: So the independent team that you discuss then is what?

MR. YOUNG: Independent team would be a small team of people who will watch the work of the Source Selection Advisory Committee and ensure that they fairly judge, fairly use and equitably use tools -- if we do an analysis or a model or a review we do it equally between all parties and just make sure all the procedures are followed. And then I hope, given the chance to start from the very beginning, they will have to chance to see whether the process the SSAC's taking and make sure they're clearly -- as I think you heard from the GAO today -- an adequate record to explain the government's action so that we can have a decision supported fully by the record.

REP. LARSEN: Mr. Chairman, I'll just note that the red light is on. I know I haven't been at this for five minutes. If you can take care of my light there.

REP. ABERCROMBIE: (Off mike.)

REP. LARSEN: So I don't use too much of Norm's time.

REP. ABERCROMBIE: I don't know if you can get a consensus on that. Go ahead -- take all the time you want! (Laughter.)

REP. LARSEN: If I could, Mr. Smith from Washington brought up a point about the GAO's findings and whether or not you actually need to just do a better job of documenting the decision, virtually actually changing the RFP.

Can you help me understand -- help the committee understand -- how you will choose to make a decision about is this something you need to change versus we just need to do a better job of documenting a decision?

MR. YOUNG: Well, it's -- that's a process we're going through right now. To the extent we need to change it, it'll be based on the findings the GAO had and then how well those findings are grounded in our requirements document, because we're going to give that the greatest weight. I think in every case, though, we're going to seek to have as robust a record as possible, because of the thoughts I have to anticipate in other protests.

REP. LARSEN: You mentioned a couple times -- used the term that you need to "elevate the cost".

You need to -- as I recall in the original decision, in the original RFP, the cost-price criteria was not the number one criteria. In other words, you weren't necessarily going to decide on the least expensive per unit offer. It was going to be a factor, but that doesn't necessarily define best of value.

But now you are discussing more -- I've heard several times you say, "bounded by costs", "elevating costs". Are you trying to tell us something there? Are you trying to tell us something that cost might be a different -- might have more weight this time around than before?

Yeah. Sure.

MR. YOUNG: I need to talk with you about that in closed session. I can answer that question. I can just tell you that cost was significantly further down the list.

REP. LARSEN: Cost in the --

MR. YOUNG: In the major factors. And I believe, across the board in the Defense Department, I'm being asked by the Congress to make cost a more important factor. This is --

REP. LARSEN: I'll take that as a general comment and we can explore that maybe a little bit later.

And then also with regards to costs: You talked about development and procurement. And it sounds like you feel much more confident in trying to develop development costs and procurement costs for the sake of trying to evaluate a decision. But lifecycle costs, you are still a little less confident about how to develop something that's a little bit more hard and fast. Is that accurate?

MR. YOUNG: I think that is -- well, I don't know. I shouldn't speak for you. There is a --

REP. LARSEN: I am asking objectively. I'm not trying to --

MR. YOUNG: No. There's a greater certainty -- well, for one, the day I make a source selection, if I'm able to award the contract, the development costs I'm going to sign and start paying them tax money. I should know that pretty well. I'm going to have bid prices for the first five lots of airplanes. So those are going to be higher confidence numbers than lifecycle.

That does not relieve me of the burden of doing the best I can to predict lifecycle costs. I just tried to tell you I think I'm going to, under any circumstance, have the most confidence in the development and the production costs and I'm going to do my best to have some level of confidence in the lifecycle costs.

And then I've got to recognize that I can't predict the price of fuel and that the warfighter's going to use this airplane like every other airplane and weapon in a different way, no matter how well I predict it.

REP. LARSEN: And I'll just conclude with this -- the yellow light is on and I'm probably over my time in reality, certainly now with the red light.

But you've mentioned the eight points in the GAO findings -- you have to address those. At a minimum you're looking at the capabilities -- the requirements document and best value. But with regards to fuel costs, that's really fully mentioned and more fully discussed in a mere footnote in the GAO report -- footnote 89 on page 66. We've got all that memorized over here.

However, with fuel costs being what they are today, does that elevate itself out of a footnote for you and into something that's something much more important for you to be looking at?

MR. YOUNG: Well, I disagree with the idea that it wasn't important to start with. We evaluated lifecycle costs.

But I would agree with you that from -- we'll respect even the footnotes and I've already asked the team and we've agreed and made plans that we will -- as a minimum, we evaluate our lifecycle process. And if we think there are changes to be made to give it higher confidence for everyone participating we will do that. I accept that and respect GAO's comment in that regard.

REP. LARSEN: Great. Thank you.

Thank you, Mr. Chairman.

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