Hearing Of The House Armed Services Committee -The Department Of Defense At High Risk: The Chief Management Officer's Recommendations For Acquisition Reform And Related High-Risk Areas

Statement

Hearing Of The House Armed Services Committee The Department Of Defense At High Risk: The Chief Management Officer's Recommendations For Acquisition Reform And Related High-Risk Areas

Witnesses: William Lynn, Deputy Secretary Of Defense; Shay Assad, Acting Deputy Undersecretary Of Defense For Acquisition And Technology; Beth Mcgrath, Assistant Deputy Chief Management Officer

Chaired By: Rep. Ike Skelton

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REP. SKELTON: Good morning, ladies and gentlemen. We welcome you to today's hearing on "The Department of Defense at High Risk: The Recommendations of the Chief Management Office on Acquisition Reform and Related High-Risk Areas."

I should note up front that this hearing is a follow-up to our hearing on March the 12th with GAO about their 2009 high-risk update and helps satisfy the committee's oversight obligations under the Tanner resolution.

Our witness is Deputy Secretary of Defense Bill Lynn, who also has the distinction of being the department's chief management officer, responsibility given to him largely as a result of GAO's recommendations. He has with him Mr. Shay Assad, acting deputy undersecretary of Defense for acquisition and technology, and Beth McGrath, assistant deputy chief management officer. They will assist Secretary Lynn in answering questions.

The focus of today's hearing is narrower than the earlier hearing with GAO. We'll focus today on acquisition reform.

Secretary Lynn, the committee expects that you'll provide us with (full ?) response to the findings and recommendations of the GAO in its 2009 high-risk update for the record.

The committee is committed to addressing all of the department's high-risk area and will remain focused on all of these issues, not just this year but, of course, beyond, until we're able to reduce the risk in these areas to manageable levels.

I should note that as the budget is not yet released, Secretary Lynn will not be addressing budget issues in his testimony today, and we have told the secretary so. And so that will be out of bounds.

The focus on acquisition reform at today's hearing is more than timely. Tomorrow the committee will mark up H.R. 2101, the Weapons Acquisition System Reform Through Enhancing Technical Knowledge and Oversight Act of 2009. Ranking Member McHugh and I, along with our partners, Rob Andrews and Mike Conaway, the leaders of our Panel on Defense Acquisition Reform, introduced the WASTE TKO Act to match the good work of our colleagues in the Senate, Senators -- (inaudible) -- and McCain. We believe our bill will help substantially improve the oversight of acquisition of major weapon systems.

I might point out that the bill we're going to mark up tomorrow deals with major weapon systems, which is only about 20 percent of the Department of Defense acquisition, but it is a significant step in the right direction.

That bill introduces three significant new concepts. Number one, we will require the secretary of Defense to designate an official as the department's principal expert on performance assessment, who will give us unbiased assessments of acquisition reforms.

Number two, we create an intensive care unit for sick programs. Those are programs that are not meeting the standards for system development. We've had critical Nunn-McCurdy breaches, and they will get additional scrutiny.

Number three, we require the department to set up a system to track the cost growth and schedule changes that happened prior to milestone B. It is before milestone B, as we all know, that 75 percent of the program's costs are actually determined.

We'll mark up the legislation in the committee tomorrow with the goal of moving it through the House as a stand-alone measure and completing conference with the Senate before Memorial Day. However, many, and especially our Panel on Defense Acquisition Reform, will continue to work on acquisition reform this year and next and on the 80 percent of acquisition which lies outside the scope of the bill we'll be working on.

We look forward, Secretary Lynn, to your testimony, the full range of acquisition testimony today.

Now let me turn to my good friend, my colleague, the gentleman from New York, John McHugh.

REP. JOHN MCHUGH (R-NY): Thank you very much, Mr. Chairman.

Let me join you in welcoming our distinguished guests.

Mr. Secretary, welcome for your inaugural visit. I hope it sets the stage for many more pleasant appearances before this committee. We wish you all the best in your new duties.

As the chairman noted, today is a follow-up to a hearing we held in March on some of the findings with respect to GAO's assessment of high risk to federal programs. And that is certainly important. But as well as the chairman noted, this is a quite timely opportunity as we will be marking up the acquisition bill that I want to add my words of appreciation to Mr. Andrews and Mr. Conaway and to the panel that they've led in coming up with, I think, a terrific product to deal with this issue.

GAO found a lot of frustration in managing some of these high- risk programs. It seems when a DOD program makes the list, it simply doesn't get removed. We have to ask ourselves, does (either ?) DOD management systems and processes represent an inherently risky undertaking, or perhaps has historically, at least, DOD's management been incapable of addressing the root causes? And the fact is we just can't throw up our hands and accept that the department cannot or will not address these challenges, but rather we have to take action.

Mr. Secretary, I know you understand full well, in large measure that responsibility falls on your shoulders, particularly as the chief management officer. And it's one we share on this committee. It's a responsibility that we hold, along with you, to assume a leadership role in advocating for reforms, particularly for areas deemed at high risk, such as defense acquisition. And, speaking for myself, I pledge we'll stand ready to work with you in achieving those objectives.

Many in this body have argued, not so much in this chamber but in this body, have argued that curtailing the cost of weapons programs through reforms to the acquisition system will generate sufficient revenue to offset what they view as possible and desirable cuts in defense budgets.

I want to be clear. I fully agree that reforms are needed. We have to keep in mind, however, that any cost savings aren't going to materialize overnight. As the chairman noted, along with many of our colleagues on this committee, the introduced legislation on acquisition reform adds our committee voice to the ongoing efforts to reform the defense acquisition process.

It is similar, in many ways, to the bill introduced in the other body by Senators Levin and McCain. Yet our proposal would create a more transparent procurement system with added competition and independent scrutiny. While creating what the chairman rightfully noted was intensive care for programs that have already entered into production, our approach focused heavily on the early stages of development, where, as he noted again very accurately, most of the sins of high-risk programs are created.

This should, in our view, enable the department and military services to save significant money on new starts, thus providing better outcomes over the life of these weapons programs. However, the fewer new acquisition programs created, the fewer opportunities there may be to capitalize on these reforms.

Mr. Chairman, I would ask that my entire statement be entered into the record --

REP. SKELTON: Without objection.

REP. MCHUGH: -- and simply say in conclusion, as I reiterate, although I strongly believe continued reforms of procurement processes and other DOD business processes are essential, I have to break with those that point to waste and mismanagement in DOD as grounds for tightening the defense budget.

Cuts in programs that suffer from cost overruns are warranted when they reform behaviors that led to negative procurement outcome. But employing across-the-board cuts, as some have suggested, is, in my judgment, a blunt instrument that does little to resurrect the Defense Department's business practices.

Secretary Lynn, thank you again for being here, for taking the time to be with us this morning. And we look forward to the discussion ahead and, as I said, working with you.

Thank you, Mr. Chairman. With that, I yield back.

REP. SKELTON: Thank you, Mr. McHugh.

I'll announce again tomorrow that we will be marking up the acquisition bill. And besides special thanks to Mr. Andrews, Mr. Conaway, the two leaders of the panel, additional thanks goes to members of the panel, Mr. Cooper, Mr. Ellsworth, Mr. Sestak, Mr. Hunter, Mr. Coffman, for their work on it. And we hopefully will be able to finish the markup tomorrow and take it up on the floor within the very, very near future.

Secretary Lynn is an old friend of ours. We appreciate your being with us today, and we look forward to your testimony. So please proceed.

MR. LYNN: Thank you very much, Mr. Chairman, Congressman McHugh.

REP. SKELTON: You may want to pull that real close to you.

MR. LYNN: Okay. I'm generally not accused --

REP. SKELTON: There you go.

MR. LYNN: -- of having a low speaking voice.

Thank you very much for the opportunity to provide an overview of the Defense Department's plans for acquisition reform.

As you noted, Mr. Chairman, Mr. McHugh also noted, I'm the chief management officer of the Department and underneath that rubric I have the primary responsibility for insuring the smooth functioning of the Department, and this includes oversights of the weapons acquisition process.

On several occasions, the president has talked about the urgent need for acquisition reform. He has stated that it is an important part of the overall attempt at reforming government practices, gaining efficiency and improving our national security. I know that this committee shares the president's concern about how the Department makes acquisition decisions and is preparing legislation that the chairman mentioned will be marked up tomorrow and this legislation will address those areas that need reform. I and the rest of the Department look forward to working with you as well as your counterparts in the Senate in addressing these longstanding issues.

And I'll ask that my full statement be put in the record but let me make a few points and then turn to your questions.

REP. SKELTON: Without objection.

MR. LYNN: The first step in reforming our acquisition system is to have a firm grasp of the major problems. The problems start with the process where we establish the requirements for new weapons systems. Too often, we establish requirements that are at the far limit of technological boundaries. A related problem is our difficulty in making trade-offs between improved performance on one hand and cost and schedule parameters on the other. In what is often an admirable effort to get the best technology in the hands of the warfighter, we choose to reach for one last performance improvement, but the end result of this so-called requirements creep is that we delay getting any improved system to the war fighter and we pay so much for the capability that we displace other priorities from the budget.

One of the critical reasons for some of our shortcomings in the acquisition process is the lack of critical skills in the acquisition work force. Over the last 10 years, Defense contract obligations have nearly tripled, while our acquisition work force has fallen by more than 10 percent. In the absence of these personnel, we have outsourced too many functions that should be performed inside the Department.

We also rely on over optimistic cost estimates that assume that every step in the development process, it will go as planned. These estimates do not include sufficient provision for unexpected technological, production or other challenges, and in the end it is impossible to attain budget stability if we underestimate the cost of our weapons systems from the start.

Finally, the entire weapons development cycle is too lengthy, as long as two decades from concept development to full production. This means that the Department has to go outside the normal acquisition process for urgent warfighting needs, as was the case with the MRAP to address the IED problems in Iraq.

Every additional process, every additional review that we add to the acquisition cycle in an effort to reform it can undercut itself by lengthening the overall cycle time.

To address the problems that I've just outlined, the Department is undertaking a far reaching set of reforms, a set of reforms that I think is consistent with the direction of the bill that you have before you in your mark-up and similar to the Levin-McCain Bill in the Senate.

Our initiatives start with people, it's our most important resource. In order for the acquisition system to function effectively, it must be supported by an appropriately sized cadre of acquisition professionals with the right skills and the right training to successfully perform their jobs. In the budget that we will submit tomorrow, we will propose increasing the number of acquisition personnel by 20,000 positions over the fiscal year 2010 to 2015 future year Defense program. This will include over 9,000 contracting cost estimating pricing as well as contract oversight positions at the Defense Contract Audit Agency and the Defense Contract Management Agency.

These new positions will ensure that DOD knows what it is buying and gets what it pays for. The remaining 11,000 new hires will come from the conversion of existing contractor positions to federal civilian positions. These are positions in systems engineering, in program management, in logistics and in business management.

Second, we would propose several steps to put greater discipline into the front end of the acquisition process. Each major program will be subject to a mandatory process entry point, the material development decision milestone prior to milestone A. This will ensure programs are based on approved requirements and a rigorous assessment of alternatives. The objective will be to balance performance needs with schedule and cost limitations. To reduce technical risk, our standard practice will be to conduct a preliminary design review before milestone B. In addition, independent reviews must certify the maturity of program technologies and we will use competitive prototypes whenever possible and cost effective.

While we ensure oversight, we must not overburden the process with reviews. The lead time to design a delivery capability is already too long. As a result, we will be mindful to not overburden ourselves with more checkers than those being checked.

A third improvement we would propose to make is in the area of cost estimating. To strengthen our cost analysis capability, we plan to expand the size and the capabilities of the Department's independent cost arm, the Cost Analysis Improvement Group or CAIG. To reduce the risk of cost overruns, we will establish a preference for funding acquisition program to the CAIG's estimate of the president's budget request and to include those estimates in the future year Defense program.

There is one important caveat however. We should avoid separating the cost estimating function that's inherent in the CAIG from the overall program analysis and evaluation organization. PA&E performs a wide variety of planning and programming functions that require accurate cost estimates. These include the Quadrennial Defense Review, program assessments, spit up analysis and as well as weapons systems cost estimates. All of these functions requires a strong cost analysis team, and that cost analysis team should be integrated inside PA&E.

A fourth proposal would be to strengthen the execution phase of our weapon development process. First, we plan to explore greater use of fixed price development contracts. In the past, we have defaulted to the use of cost type contracts for development programs and there are risks inherent in using fixed priced contract vehicles for development programs that involve cutting edge or exotic technologies. But if we succeed in reducing the technological risk of many programs through the strengthened front end process that I just described, we should be able to make greater use of fixed price contracts in development programs. This should make cost estimates more predictable, and cost overruns less frequent.

Second, to address the issue of requirements creep, we will continue to use configuration steering wards to provide a mechanism to preclude destabilizing requirements from being introduced mid-way through a weapons development process. And further to match requirements with technology that is mature.

Third, to align profitability with performance, we have several initiatives. Most contract fee structures -- for example, incentive fees -- will be tied to contractor performance. We will restrict the use of reward fee contracts to those situations where more objective measures do not exist.

We will also examine the use of un-priced contractual actions whenever possible -- excuse me -- we will eliminate the use of un- priced contractual actions whenever possible, and we will ensure the use of multiyear contracts as limited to instance when real and substantial savings will be accrued to the taxpayer.

Let me sum up by saying DOD acquisition reform is extraordinarily complex and challenging. We're mindful of the fact that since the end of World War II there've been nearly 130 studies of acquisition reform. Many very smart people have tried and have met with only limited success.

In this regard, we need to keep in mind the importance of not making the system worse in our efforts to achieve reform. But with these lessons in mind, we will move forward and continue to improve our acquisition workforce, our procurement and acquisition processes. We're confident that the results we achieve on behalf of the warfighters and the taxpayers will be well worth the effort.

This committee and the Senate have both formulated legislation aimed at improving our acquisition system. We agree with the strategic direction of both bills and we wish to work with the Congress to ensure that we get the best-designed initiatives that can be effectively implemented.

As the DOD chief management officer, I'm committed to improving the department's business operation. And there is no doubt in my mind that significant improvement is achievable in this area.

I look forward to working with you and happy to take any of your questions.

REP. SKELTON: Thank you so very, very much. It's good to have you back before us.

I assume that Mr. Assad and Ms. McGrath will be available for questions --

MR. LYNN: When they get that tough. Yes, sir.

REP. SKELTON: When they get that tough, okay.

Secretary Lynn, it sticks out all over your testimony about the need for good personnel in the acquisition field.

Would you care to expand on that? How do you get them and how do you keep them? This is, I think, the polestar of any solid reform -- getting the good people to follow the law that we passed and to do it properly.

MR. LYNN: You're absolutely right, Mr. Chairman. The foundation of any acquisition reform effort is to improve -- expand the workforce to improve their quality through enhanced training and better standards.

We are proposing, as I said in my testimony, 20,000 additional acquisition workforce personnel. Frankly, we're correcting a process where I think we over steered in the 1990s and subsequently, we took too many people out of the acquisition workforce.

I think that was actually an area -- an example where an acquisition reform effort went awry. That was intended as a reform effort, but I think it, as I say, over steered. We're trying to get back to the centerline with these additional 20,000 people.

We are gearing up our human resource process to be able to hire them. We will be both hiring new personnel and we will be looking to replace some positions that are now outsourced to government contractors.

REP. SKELTON: In the House bill that we plan to markup tomorrow, we focus on the early stages of acquisition, as well as on programs that have demonstrated poor performance.

I'd appreciate your thoughts on whether this focus is correct or if we should be pursuing a different path.

MR. LYNN: I think your focus on the frontend is absolutely right. And I would point out three areas that I think are in your bill -- but let me emphasize them.

One, I think, at the frontend, we need to make as much use of competitive prototyping as we are able to. We're not able to do it in every instance. You can't competitively prototype aircraft carriers, for example, but you can do it for subsystems of the bigger systems and so on. That competitive prototyping will lead to more mature technologies and a better understanding of our ability to meet the requirements.

Second, we need better cost estimating. Too often our cost estimates are success oriented. They assume everything will go right. There's no malice in this, but very seldom in these kinds of complex endeavors does everything go right. So we need to price in the kinds of risks that we expect so that we have the best cost estimate.

And then finally, we need to make sure that we're in the frontend putting in technologies that are mature. Towards that end, we're proposing to do technology readiness assessments at each stage of the process so we ensure that we have technologies at the appropriate readiness level before we introduce it into a weapons system.

REP. SKELTON: Thank you.

Mr. McHugh.

REP. MCHUGH: Thank you very much, Mr. Chairman.

Mr. Secretary, you mentioned in your testimony about how complex and challenging this acquisition reform effort is and that's certainly true.

You also stated -- I should say referenced -- the Cost Analysis Improvement Group. The chairman of that group reports to the director of Program Analysis and Evaluation. There's also an official responsible for systems engineering and development tests and evaluation, the director of Systems and Software Engineer who reports to the undersecretary of Acquisition Technology and Logistics.

It sounds as though I'm going to make a joke here. I'm not and I'm not suggesting any of those positions are unimportant, but I'd like to refer to the House bill and the Senate bill.

We have some proposals in both of those to account for authorities and the execution and the responsibilities under those positions. In the Senate bill, that is proscribed pretty tightly, it may create an independent office and name and direct where those authorities shall go. On the House side we allow the secretary of Defense to assign the functions versus establishing -- assign these functions versus establishing the independent directorate.

If you want to choose the Senate or House approach over the other, I'd be happy to hear that. But without trying to put you in too difficult a position, I'd be interested if you could speak to the advantages and disadvantages of doing it one way versus the other -- providing the secretary with the authorities to assign those functions versus mandating/"fiating" an outside independent source.

MR. LYNN: Well, with accepting your admonition without expressing a direct preference for one bill or the other -- and we do support the direction of both bills, by the way. We think both bills move in the right direction and we're discussing here just how best to do it. So I want to make that clear.

With regard to those organization changes, I think as a general rule, the secretary would like as much flexibility as the Congress is prepared to give him to achieve the objectives that the Congress lays out in these bills.

With regard specifically to the question of the CAIG and where it should be placed, I believe -- as I indicated in my testimony -- that because of the diverse duties of the CAIG that extend beyond just weapons systems costing, it is better placed in the overall Program Analysis and Evaluation Office. In that way it still has the independence. It does not report to the acquisition side of the House. It's independent of that and it reports in a line through PA&E directly to the secretary. But I think keeping it inside the larger whole of PA&E will strengthen the cost analysis in areas other than weapons systems.

REP. MCHUGH: I should note: If you want to pick the House bill over the Senate bill, you're free to. I just didn't want to be the one to pose the direct question.

MR. LYNN: Yeah. I occasionally testify before the Senate as well.

REP. MCHUGH: I've heard rumors to that effect.

Looking at the data, it's interesting that programs that experience the Nunn-McCurdy breach it appears are rarely, if ever, canceled. I suspect there's a variety of reasons for that. By the time you get to that point, there's a lot invested. But it would suggest -- at least on the face -- that those programs at the Nunn- McCurdy breach milestone or touchstone are really deemed a higher priority than other DOD objectives. Since you've got to restructure after a breach, you've got to spend money and those dollars have to come out of usually other programs.

I'm just curious: To what extent does DOD or do you envision DOD allowing and involving the senior leadership to consider impacts on those other programs when a Nunn-McCurdy breach happens? Or when a program is reconfigured to go forward and as a result, has new investments placed in it, how do you consider the tradeoffs prior to that? Do you have any thoughts on what might happen in those circumstances in the future?

MR. LYNN: Yes, sir, Mr. McHugh.

I'll make a couple of points. I think you're right. Cancellations are infrequent, even with Nunn-McCurdy breaches. It does take a substantial amount to be able to go through with that. That said, we just did -- we're proposing the cancelation of VH-71A that did just suffer a substantial Nunn-McCurdy breach. So there's one example in the other direction.

With regard to the overall -- really, the opportunity costs, I think, is what you're talking about -- is that considered when you're looking at putting additional resources towards a system that's overrun? We do look at that as part of the certification process. I'd say we probably pay even more attention to it as part of the overall strategic review and the program and budget reviews.

As you put those together you very much look at the opportunity costs of proceeding with a now more expensive system at the expense of some other programs that will have to suffer within the constrained budget.

REP. MCHUGH: Thank you very much, Mr. Secretary.

Mr. Chairman, I'll yield back.

REP. SKELTON: Thank you.

Mr. Ortiz.

REP. SOLOMON ORTIZ (D-TX): Thank you, Mr. Chairman.

You know, Congress has set forth criteria and oversight mechanisms intended to ensure discipline in the acquisition process. Yet, despite these reforms, major Defense acquisition programs are consistently over-schedule and over-budget. How much of the cost growth in the programs is due to inaccurate costs estimations and poor planning up front? And how much is due to mismanagement or waste after the programs have been initiated?

And maybe you can respond to that, because I have seen -- I've been here 27 years, I've seen helicopters that were supposed to be built that never flew. I could go on and on, but maybe you could give us an estimate as to how much the cost has gone up or increased because of poor planning up front, and how much is due to mismanagement? And maybe you can enlighten us a little bit, Mr. Secretary.

MR. LYNN: Let me try and help with that.

I think the two biggest reasons for cost overruns and schedule delays are the acceptance of too much risk at the outset, is I think the largest reason. I think we take too much technological risk at the outset. We have a tendency to reach for the exotic technology that looks like the highest performant (sic). It's appealing on a PowerPoint slide.

Unfortunately, we don't -- we need the engineering and the technological maturity to make it happen and we don't always have that. And I think that drives that -- getting into programs that don't have sufficient technological maturity, taking risks in that area, are the biggest driver.

The second biggest driver, I would say, is the success-oriented cost estimation, that we don't get the cost estimate right at the beginning because we haven't taken account of all of the things that might happen along the path of the development process. I think those two reasons drive the biggest proportion of that -- those cost overruns you're referencing.

REP. ORTIZ: When you mentioned about maybe hiring 20,000 new people to help you. How are you going to go about knowing exactly what type of skills do you need? I mean, to hire 20,000 people is a pretty good size number of people. Do you have something planned as to how you're going to hire these people and what specific skills you need?

MR. LYNN: Yes, yes, we do. We think we need program managers. We need cost estimate -- estimators. We need software engineers. We need systems engineers. And we do have a plan, at least at a general level, as to what types of people, in what organizations, and in what year we would try and hire them.

REP. ORTIZ: -- (inaudible) --

MR. LYNN: I'm happy to provide that for the record.

REP. ORTIZ: Yes, sir. In my opinion, I think that we contracted out a lot of (positions ?). And we did not have a discipline as to -- or the (alliance ?) that they had towards the contractor or the Defense Department. This is only my estimate. I think that when you contract out too much, you lose that chain of command.

And, maybe I'm wrong, but this is what I have seen throughout the years. And we're talking about something (happens where we're ?) short 20,000 people. Something went wrong, Mr. Chairman, somewhere.

I think -- go ahead, sir.

MR. LYNN: Well, I was going to agree with you, Mr. Ortiz.

I think we "oversteered" in the 1990s and we saw outsourcing of government functions as a good in and of itself. And I think what we need to do -- in some cases, outsourcing is, indeed, the right way to go. There are some functions that are far more appropriately or more efficiently done by a contractor workforce.

But, there are other functions that are inherently governmental or that need to be performed, for other reasons, by government personnel. And you need to make an assessment up-front, of which functions you think should be performed by government personnel and which should be performed by contractor, before you undertake the outsourcing efforts, and we think that wasn't done.

REP. ORTIZ: (Off mike.) -- (inaudible) -- sometimes I feel that we need to contract out when it makes sense. But, I don't think we need to lose those employees that should be truly committed to the Defense Department.

Thank you, Mr. Chairman.

REP. SKELTON: In the process of having fewer contractors, and bringing that back in the house to people that work for the Department of Defense, will you have a significant personnel challenge to bring on-board highly trained, capable people? It's not going to happen over night, is it?

MR. LYNN: It's definitely not going to happen over night, Mr. Chairman. And it is a significant challenge for our human resources organizations. We are trying to gear them up this spring and summer with the anticipation and the hope that Congress will approve these proposals so we'll be ready to act on them at the beginning of the fiscal year.

But, let me acknowledge, up front, that we have front-loaded these increases. And it's an aggressive proposal. We think it's a needed proposal, but it is aggressive. And, for the reasons that Mr. Ortiz indicated, we need to be aggressive here, but we are mindful that this is going to be a difficult organizational challenge, to bring all these people on and to properly train them and get them in the right places.

REP. SKELTON: Thank you.

Mr. Bartlett.

REP. ROSCOE BARTLETT (R-MD): Thank you.

In a recent hearing we asked the witnesses to kind of help us quantify the reasons for overrun and schedule delay. And we asked them to quantify three different categories that could account for the overrun. One was the requirement creep; a second was intentional underbidding, so you looked competitive; and the third was being overly optimistic, which you have commented on at some extent.

This group of four generally felt that requirement creep was the largest of these three, that the second was being overly optimistic, and the underbidding had a meaningful percentage but not as high as the other two.

The requirement creep is understandable. If a program takes decades in its development, if we, in fact, fielded what was originally bid, it would be obsolete when it was fielded, would it not? And so the requirement creep is very understanding. As time goes on, and new technology develops, there is a desire to make this as good as it can be because we're not going to have a new one for 30 to 50 years. That's how long these major platforms last out there.

How do we get around this? The presidential helicopter is a good example of it -- way over budget. I think that (there'd been ?) enormous requirement creep here, more and more requirements piled on as the program went on. And how do we get around this? Can we have an open architecture so that we can, in fact, bid what was originally bid, and know that we can upgrade it so it's not going to be obsolete when it gets in the field?

MR. LYNN: Yes, I think we can, Mr. Bartlett. That was one of the reasons I was indicating that, as we look at acquisition reform, we need to be careful that we don't add so many reviews and checks in an effort to reform the process that we lengthen it further and get into the cycle that you just described.

We do need to try and shorten the development cycle. The length of the cycle itself is part of the reason for requirement creep. I think where you're headed -- and it's not a new idea but it's an important one, to make sure we institutionalize -- is so-called "spiral development," that you develop the initial capability in a more constrained time frame. You look at additional capabilities on a second and third spiral when those technologies are sufficiently mature to be introduced.

I think that walks the line between getting needed capability to the warfighter and making changes that technology allows you at the appropriate time.

REP. BARTLETT: Don't you think that the MRAP development showed us that we might be able to do things quicker? We went from a blank piece of paper to something in the field in a remarkably short period of time. Do (we ?) really have to take as long as we take for these systems development?

MR. LYNN: Clearly, not. And the MRAP is an example of that. Although the startling thing about the MRAP is it largely circumvented all of the acquisition processes.

REP. BARTLETT: Does that tell us something about the acquisition processes -- that we were successful when we circumvented them?

MR. LYNN: Circumvented," actually I should correct myself. We shortened them significantly. You know, it helps to have the secretary of Defense as the program manager. That tends to drive people's attention. And you can't do that for every program. But, I agree with you, I think it does indicate that we can do things faster.

REP. BARTLETT: Thank you.

I think these two things are key to any successful improvement. One, is making sure we avoid the creep in requirements. And we can do that if we have a really short cycle, because then we know what we field is not going to be obsolete. What we field many times is not what we bid on. And the costs will be higher to include any new technology.

So it's kind of unfair to say that these -- we had really poor management. I think putting in new technologies is good management, don't you, so that the warfighter has the best available?

MR. LYNN: That's absolutely the case, Mr. Bartlett. I just think we need to balance between the admirable desire to get the best technology to the warfighter, and the schedule -- that you indicated at the start of your remarks, as well as the cost. And you need to balance those three.

And I think on programs that have gone awry, you will almost inevitably find that the balance wasn't maintained.

REP. BARTLETT: Well, we seem to be slow learners. I've been here 17 years now, and it really hasn't changed. Let's hope that it changes now. Thank you, sir.

REP. SKELTON: The chair recognizes Mr. Taylor.

REP. GENE TAYLOR (D-MS): Mr. Secretary, thank you for being with us. And I'll start by saying I agree with almost everything you've said. The devil is in the details, so let's start with the electromagnetic launch in the next generation of carriers. One of the things that I've discovered over the years, starting with the LCS program and others, is that by handing off the baton every year within the program, everyone leaves saying, everything was fine on my watch. When I left, that program was on track, and passes the baton, when I left, that program was on track. And we wake up at about the 90 percentile with a ship where the main reduction gear was cut back, no one even caught it until it was in the ship, you've got to cut the ship open to pull it out, $220 million ship becomes a $500 million ship 18 months late, and they're bragging on it. They shouldn't be bragging on it.

I tell you this because I would hope one of the things you're going to change is accountability, that someone becomes responsible for a program like (EMALS ?), that you name someone who says, you're going to take this from content through prototype. And once that prototype is approved, you're going to take one other person because that's going to be about another three and a half years. So you're going to take this from prototype until the ship is delivered by the Navy, and your whole career rests on that. If you fail, you're fired. If you succeed, you get promoted. Because we've seen it with the LCS, we've seen it with so many other programs, unless someone pays attention to this electromagnetic launch, we could wake up with a $7 billion helicopter carrier that was supposed to be an aircraft carrier.

I'm hearing you say all the right things, but what are you doing as far as accountability where somebody's career rests on that program, that $7 billion program being delivered on time and on budget?

MR. LYNN: I agree with you, Mr. Taylor, that accountability is a critical element of this. I think lengthening the tours for acquisition personnel is part of that. There's a trade-off to be made on the military personnel side where there's part of the leadership dynamics of the military is going through a number of different types of positions so that we build those leaders. That's intentioned with the need to maintain someone in a relatively long period of time in an acquisition position, so you don't want to disadvantage those people but you want to gain what you just said is the length of time in the seats so that they are seeing at least a stage through to completion. And we're trying to balance that.

With regard to EMALS, it's critical to the next aircraft carrier, we need to get --

REP. TAYLOR: So while I've got you, who is that person going to be? Who is going to be responsible to see to it that EMALS works? Because if it doesn't work, it's my understanding that Secretary Stackley has said we are going with EMALS, we're not even going to have a fall-back plan on (steam ?). Again, I respect his opinion, but since that is the plan and there is no fall-back, this has to work or we have a $7 billion aircraft carrier that's only good for launching helicopters. So again, we won't really know until about 2013. And by that time, we are really way down that line towards a $7 billion helicopter carrier. So who are you going to name in the near future to be responsible for this program? How are you going to empower them to get the job done?

MR. LYNN: Mr. Taylor, I'm going to have to get back to you for the record on the EMALS program. The OSC staff is working with the Navy staff on that program as we speak. And we'll come back to you with what our plan is to ensure that --

REP. TAYLOR: Well, let's take it down to a simpler program. Who in your organization can tell me what the LCS-1 version should cost, what we should be allocating for next year's budget? Who in your program can tell me what LCS-2 should cost? Again, I appreciate everything you've said, and I'm not disagreeing with what you've said. But I've got to believe in your core competency that you have right now that someone in that organization ought to know what that ship should cost. And what I'm afraid -- just to reinforce your point, I'm not so sure there's anyone in your organization who knows what one linear foot of quarter-inch steel what it costs to weld that. And I would welcome you telling me that I'm wrong.

The other thing that I don't see that I would hope you would make as one of your challenges, I think you have a lot of people in the acquisition force who can look at a spec and say, yeah, if they welded it the way they were supposed to, those are the materials that are in there. What I don't see is anyone in your force who can say, and you know what? You could have done this better, you could have done this faster, you could have done this cheaper. And I would hope that you would also make that part of what you're trying to accomplish. Because quite honestly, we're dealing with a couple of shipyards. They're my friends, but they want the most money for the ship. We as a nation have got to be getting the most ship for the money. And that does put us at opposite points of view. But for the sake of the taxpayers, we're the ones that have to prevail.

MR. LYNN: I think that's right, Mr. Taylor. It's one of the reasons our proposal to pull more personnel back into the acquisition workforce is to make sure we have the right expertise, the right engineering talents to understand those trades and to be able to judge what the contractors are doing and make our own analysis of where we stand rather than just rely on outside estimates.

REP. TAYLOR: Would you get back to me on the LCS-1 and 2, please, for the record?

MR. LYNN: Yes, sir.

REP. TAYLOR: Thank you.

REP. SKELTON: The chair recognizes Mr. Conaway from Texas.

REP. MICHAEL CONAWAY (R-TX): Thank you, Mr. Chairman, and welcome, Mr. Secretary, to the new team.

I want to go down two different lines of questioning. One gets back to the personnel plan that you've got in place. It's a multi- year plan -- (inaudible) -- to a multi-year acquisition of a weapons system. And I want to make sure that you're not overly optimistic as to being able to fulfill that plan.

Can you also visit with us a little bit about your analysis of the cost differential between the current system we have in place versus this new system that you're talking about where you've pulled all these contractors in, put them on the federal payroll for a career? How does that look like with respect to the, you know, long- term employee benefits that they will accrue and those obligations that will come to us? Where is the differential? How much more money are we going to spend on this new plan, new system that you're proposing versus the way we've been going?

Along with that, and it may be a part of that cost analysis, have you built into the system certain new advantages with respect to this new workforce that will be more directly controlled by DOD, that if you are not able to hire against that schedule that you've laid out until 2015, that that's not going to happen? In other words, same kind of risk analysis on this employee plan that you'd have on a major weapons system, that if you don't meet those milestones, you don't have those people in place, you know, what impact will that have to the system that you're going to put forward?

And then we'll talk a little bit about the preference to the (CAG ?) estimates in your budgeting process.

So if you'd talk a little bit about the overall hiring thing. We had some testimony or some conversations with some folks at (Raytheon ?) and others, that the contractor side is shorthanded in this arena as well. It's a graying workforce. It's a group of folks that are reaching the end of their careers. So you, as DOD, are now going to be in direct competition with the private sector who need those similar type of skills to be able to maneuver this complex acquisition scheme that we currently have in place. So tell us a little bit more about this new employee plan that you've got.

MR. LYNN: Sure. It is, as I said, we are pushing to front-load this process to get people on as quickly as possible. I don't think we've gone beyond the bounds, but we are going to get people on absolutely as quickly as we can.

In terms of the costs, we think actually the costs for bringing them into the government will be somewhat cheaper than having them in the contractor workforce. That goes into the, talking with Mr. Ortiz, the question of where do you use government personnel, where do you use contractor personnel? In general, it is more cost effective to use contractor personnel if the need is episodic. If you need them for a couple of years and then you don't need them for several years, you can bring in contractor expertise rather than hiring full-time personnel with the benefits and the pensions and so on that you indicated.

These personnel are not like that. We see these as long-term, full-time government employees that will be part of the weapons acquisition process over the long haul. And those kinds of cases, it's generally cheaper to have them on the government payroll. You're not paying a profit to a contractor and so on. And that's the type we have, so we think that this will be cheaper.

REP. CONAWAY: I don't know -- is it Shay -- do you want to add anything?

MR. ASSAD: Yes, sir. We plan on bringing onboard in '10 4,100 people. There will be 1,585 contracting and contract oversight professionals, 2,500 or so will be program management, systems engineers, logistics professionals, business management professionals, mostly from contractor conversion. There's no doubt -- the secretary is absolutely right -- there's no doubt that, over the long term, the cost of contractors is higher than what it would cost us to --

REP. CONAWAY: I understand that is intuitively the case, but have you put pencil to paper to show that?

MR. ASSAD: Yes, we have.

REP. CONAWAY: And so you're expecting to be able to convert existing contractor personnel who make more money in the private sector to the public sector because, one, you're going to say those contracts go away, so if they're out of work, they don't have any choice. So you're going to bring them on for less money than they'll make --

MR. ASSAD: No. Actually, what we're converting is not the contractor themselves. We're converting the position.

REP. CONAWAY: Well, I understand that.

MR. ASSAD: We will actually compete the position wherever the most talented --

REP. CONAWAY: Where are those people going to come from?

MR. ASSAD: Well, some of them may in fact come from the contracted community.

Others will come from the private sector.

REP. CONAWAY: All right. Well, I just want to make sure that we're not overly optimistic in this deal because this is important stuff. And I agree with you bringing these folks back, but I also want you to do it with eyes wide open knowing that if you're overaggressive, you're overoptimistic with what you can do that there may be some impacts down the road as well.

You mentioned in your testimony that you're going to have a preference to the CAIG estimates. Help us understand that and will that include a formalized process of saying -- of reconciling the differences for what the independent estimate is for a particular program versus what the program manager and the contractors are coming up with. Will that difference be reconciled so that the decision maker can make a rational decision as to what your preference is going to be?

MR. LYNN: Yes. The decision maker, which in most cases will be the undersecretary for acquisition technology and logistics will have both estimates, will be able to understand what the differences are between both estimates, have some flexibility. But as I said, we're going to put in a preference that all things being equal we should go to the CAIG estimate. And the thinking is that over time you will have the overall program better funded and there'll be less churn and less disruption in the Weapons Acquisition Program if you get those cost estimates right up front.

REP. CONAWAY: Right. Thank you, Mr. Chairman. I look forward to working with you, Mr. Secretary.

MR. LYNN: Thank you.

REP. ORTIZ: The chair recognizes Mr. Andrews.

REP. ROBERT ANDREWS (D-NJ): Thank you, Mr. Chairman.

Mr. Secretary, thank you and your team for your help. I appreciate your testimony and the input you've had on the legislation in which we're working. I realize why this is such high quality, because I read your biography, saw you attended the finest law school in the United States of America, Cornell Law School, which you may also guess is my alma mater as well from that comment.

I appreciate your observations about our emphasis on Pre Milestone B, and I wanted to ask you another question which flows from a panel we had last week. And that was the discussion about how to deal with requirement creep. Now this is not in the bill that we're considering tomorrow but it's a question we're interested in as we go down the road.

The first idea from that panel was that we need to institutionalize the process of listening to combatant commanders and others in the field at the very outset of the requirements process. Do you agree with that general direction?

MR. LYNN: Yes.

REP. ANDREWS: And we would welcome your suggestions in writing at a later time about how we might flesh that out. And then the second consensus of that panel was that we are confusing the way we presently operate this, a requirement with an aspiration. That we label things as requirements that really are things to which we would aspire in a perfect world, but we're doing a pretty poor job of sorting out what we really need from what we'd like to have. And an enormous amount of money is spent on that what we'd like to have category. A, do you agree with that assessment; and B, if you do, what kind of changes do you think we might make to solve that problem?

MR. LYNN: I think that's an important point, Mr. Andrews. Requirements creep is what gets the attention and I mentioned it, and that's where we change the requirements as we go along if something better comes and that's certainly part of the problem and we've got some proposals -- configuration steering boards and the spiral development I talked about with Mr. Bartlett -- that would help you address that.

But you're talking in some ways about a different but related problem --

REP. ANDREWS: Yes.

MR. LYNN: -- which is the desire at the start to reach for requirements that don't match the technology, where you have requirements and it looks nice on the PowerPoint slide and it would be great if we could do it. But, you know, PowerPoint is not engineering and we don't have the technology at a sufficient level of maturity, and it turns out to bring that technology to that level of maturity costs far more and takes far longer than we ever imagined.

REP. ANDREWS: And may offer only marginal improvement in the goal that we're trying to achieve. It may, in fact, exceed the goal we're trying to achieve.

MR. LYNN: And I think that's right. And we need to rebias the system away from the 99 percent solution more towards the 80 percent solution that can be achieved in a definable period of time. I think that's frankly what happened with MRAP. I mean, MRAP wasn't perfect, but it was more than good enough to meet the IED threat.

REP. ANDREWS: And I would note it was very much driven by the commanders in the field. This committee, under former chairman Hunter's leadership, with present Chairman Skelton, very much broad in the field people, listened to them, and that drove the requirements process.

Let me ask one final question that pertains back to the bill. Are you satisfied -- do you have any suggestions for us about the amount of discretion that we give the secretary of Defense with respect to assigning the functions among various directorates? Do you think that the flexibility we assign is sufficient?

MR. LYNN: I think that you do need to provide the secretary some discretion. I think it's very hard to legislate an organization -- you need an agile organization to be able to deal with the problems as they come up. I think as I understand the bill, where you ask the secretary to report how he's going to do it is the appropriate balance between discretion and the direction.

REP. ANDREWS: Thank you. And the final thing I would say is that, when hopefully this bill becomes law, we certainly want the secretary to take very seriously the conflict of interest provisions, as I know you do. But we did not want to micromanage those rules either. And I think you'll note that in our bill we have very strong anti-conflict of interest provisions, but we try not to foresee every circumstance and leave to the secretary's discretion in a rulemaking procedure the best way to deal with that. Do you concur with that approach?

MR. LYNN: I think that is the right approach. As we've indicated, we want to move away from this lead systems integrator approach that brought too much of what really is an inherently governmental function, or pushed it out to the private sector. That said, we don't want to go too far in the other direction. We do want to retain the system of having prime contractors and that relies on the fact that there's some discretion among those contractors. And maintaining a script, rules on conflict of interest is important, but you don't want them to be so strict that you can't operate. So again it's a balancing issue, it's a matter of nuance. It's --

REP. ANDREWS: Said like a good Cornell lawyer. We appreciate that.

REP. ORTIZ: The chair recognizes Mr. Coffman.

REP. MIKE COFFMAN (R-CO): Thank you, Mr. Chairman. Just a statement, this is all about what this acquisition, which is the modernization of our Armed Forces. And I know that there is some discussion that we don't have a peer competitor right now so we don't need to modernize. And I would hope that the discussion would be that we don't want a peer competitor, that we do need to modernize.

On the issue of immature technologies, that it seems like oftentimes we're envisioning a threat and so we're trying to leapfrog forward. Is there any way or is it your thinking where we can bifurcate the process in terms of the development of the technologies versus who produces the system?

MR. LYNN: Well, that's exactly what the competitive prototyping proposal that we want to utilize would do, is that you have several contractors develop the technology and then you choose between those competitors. And so those would be separate contracts, yes.

REP. COFFMAN: Very good. On the issue about bringing folks in- house. I think Congressman Conaway had gone in this direction, but I want to stress a concern, and that is it's sometimes difficult to understand the ebb and flow of a work force in terms of what is episodic and what is not. And you use those terms, and it seems like once somebody goes into the federal work force, they're in the federal work force, irrespective of where those work flows go.

And so I really want to caution you on a go-slow approach in terms of doing that, because we may wind up with some problems in terms of efficiencies by virtue of having folks where there is not a consistent-enough workload, and yet we're stuck with them inside the system. I don't think that our current structure is flexible enough to say to somebody who's inside the personnel system that the workload isn't substantial enough, that we're going to lay you off. That simply just doesn't occur in the federal work force.

MR. LYNN: Well, I think you're right in the sense that -- as I indicated, I think we oversteered earlier in pushing too many positions out to the contractor work force. I would agree with your point. Similarly, we don't want to oversteer in the other direction and bring too many positions in and have people in for whom we don't have permanent functions. Because I agree with you, a federal hiring decision is not an absolutely permanent decision, but it's relatively so.

So we want to make sure that we think we have those positions for the long haul and not just meeting a temporary need. Where we're meeting a temporary need, assuming it's not an inherently government function, often an outsourced approach is the better one.

REP. COFFMAN: Mr. Chairman, I yield back the balance of my time.

REP. SKELTON: The lady from Guam, Ms. Bordallo.

DEL. MADELEINE C. BORDALLO (D-GUAM): Thank you very much, Mr. Chairman.

Secretary Lynn, thank you for your testimony and congratulations on your new assignment. I look forward to working with you over the coming new months, especially on Guam-related issue. And to that end I'm wondering what, if any, lessons learned has the Department of Defense taken against this recent government accountability office report on high-risk programs and applied to other major programs like the Guam Buildup?

I understand the GAO report focused on major weapons system programs, but I don't see why such lessons could be applied to major military construction programs.

Similarly we've seen significant cost increases in implementing previous BRAC decisions. What will the Department of Defense do to ensure that these cost increases are mitigated against on Guam and with other similar major realignments?

MR. LYNN: Well, I think you're right that there are certainly parallels between weapon systems costing and frankly any major project funding, and that would include construction. And the solutions are similar. We need, you need to make sure you know what you're buying before you get into it. So you need to have, in weapon systems that means you need technological maturity.

In construction it tends more to mean that you want the percentage of design completion to be very high before you commit resources to construction. And that's certainly the approach we want to take on Guam as well as other BRAC-related.

DEL. BORDALLO: Mr. Secretary, can I say then that we will be on your radar screen?

MR. LYNN: Oh, you already are on my radar screen.

DEL. BORDALLO: Thank you. Thank you, Mr. Chairman.

REP. ORTIZ: Mr. Wittman.

REP. ROB WITTMAN (R-VA): Thank you, Mr. Chairman. I thank the panel members for joining us today. Secretary Lynn, a question. You know, as we look at this process and we see how things have developed, I know we focus on places where it has broken down, but I think there are also, if we dig deeply there, we see also some examples of excellence in the decision-making there.

What do you think are ways that we can pick out those lessons of excellence that have happened in the decision-making process, stand those up and look at ways to maybe reward those or ways to take those models when things have worked extraordinarily well and apply them into the future in the acquisition process?

MR. LYNN: Well, I think that's part of what the Secretary was talking about when he indicated he wanted to make sure that we had the weapons of the recent conflict, or the lessons of the recent conflict resident in our weapons acquisition process. So we've had a remarkable success with the MRAP. And that success I think is a credit to the department, it's a credit to the contractors; it's a credit to the Congress for providing the resources in a timely way.

So we are trying to look at that model and see, you know, what can we -- you can't single out systems quite in that way every time, but what general lessons can we learn and in particular how do we expedite the process in the way it was done with the MRAP?

REP. WITTMAN: I think that's a great point. I also want to look at too, how do we place, or what are your thoughts about how we place incentives in the program to reward good decision-making, especially when we have problems with cost estimates that some of the technological aspects of trying to stand up these systems?

What do you think would be a good system of incentives at each point in the process where we have had problems to place those positive incentives there to lead people towards good decision-making, or to lead them to say, Wait a minute, we've hit a problem with this program where the decision-making ought to stop, or we ought to be forthright in saying this, and we can't do what we're being asked to do within the set of requirements within these set of particular budget guidelines."

To create some incentives there for people to be much more judicious and focused in their decision making: do you have some thoughts or ideas about how we can accomplish that?

MR. LYNN: Yes, sir. I have two thoughts. Let me answer it on two levels. One is process, the other is culture. On the process side, we are attempting to realign the contract process and the fee structure so that it rewards performance to a greater degree than it does today. And so our contractor base is going to be very responsive to how we set up our fee structure, and if we are able to do it in a way that it rewards performance and the kind of performance we want, I think we will see change in that regard and see it quite quickly.

That would be the process side.

Inside the department it's less of a process issue and more of a cultural issue. We've talked about requirements creep. Requirements creep comes from a very natural desire to get the best product out to the war-fighter. And there's absolutely nothing wrong with that. The cultural change, in fact it's all right -- but the cultural change you have to get in the acquisitions workforce is that in some cases getting a technology or going for a technology that's not mature and take additional time and additional funding may not be the best thing for the war-fighter. You may not get anything to them for awhile, and the additional cost may displace other higher-priority things out of the budget.

So we need to get that a little bit broader view inside the acquisition workforce along with the natural and admirable desire to get that best technology to the war-fighter.

REP. WITTMAN: I think those are absolutely necessary. And I also think too your comment on the side of the contractors to provide incentives for them on the performance side, I think that's absolutely critical. What we ought to look at too is making sure that we provide incentives for them along the way that if they see the process not able to get to where everybody believes it ought to be on the requirement side or the cost side, to provide some incentives for them to be able to stand up and say, "Well, wait a minute; things have got to stop; this is not going where we think it ought to go, or it's not going where everybody has pointed out to where it should be going."

If we can also provide some incentives there, I think that also makes the process that engages them to make sure they are making good decisions at every point in the process.

Thank you, Mr. Chairman. I yield the balance of my time.

REP. ORTIZ: The chair recognizes Mr. Ellsworth.

REP. BRAD ELLSWORTH (D-IN): Thank you, Mr. Chair. I thank the witnesses.

Secretary Lynn, we've heard today talk about competition, fixed pricing and someone sole-sourcing. I'd like to concentrate and have an explanation of your thoughts on the joint strike fighter, in particular the engine. If you could walk through for me your thoughts on that? I know that earlier in history we had the great engine war in regards to the F-16 and why that might not be good for the program for the joint strike fighter, why that wouldn't be good for the American taxpayer. If the DOD is truly going to the single-source engine, is that smart thinking in your opinion? And should we not look at a second source for the engine for that joint strike fighter? Could you explore that for me, or clear that?

MR. LYNN: Sure. We have looked at it. We've talked a lot about the CAIG today. The CAIG did a study of the benefits of the alternative engine, and the CAIG came to the conclusion that it didn't pencil out, that it takes a pretty substantial initial development cost to develop that second engine, and then you have to split the production so you don't get quite the learning efficiencies between two lines. You balance those costs against the benefits that you get, and we do think you will get some benefits in terms of pricing down the line.

And you do a calculation and determine the net present value, and the CAIG came to the conclusion that the initial cost outweighed any benefits that you would get down the line.

Similarly, we asked one of the independent federal research centers, the Institute for Defense Analyses, to do a similar analysis, and they came to a similar conclusion.

REP. ELLSWORTH: Are the engines, to your knowledge, pretty similar-acting? Do you know any kind of percentage of how close the engines are between the companies on --

MR. LYNN: I don't know. I mean, obviously they'd have to go into the same airplane, so they obviously have to have the same kind of capability, but I couldn't go beyond that.

REP. ELLSWORTH: Thank you very much. I yield back. Thank you, sir.

REP. ORTIZ: Ms. Fallin from Oklahoma.

REP. MARY FALLIN (R-OK): Thank you, Mr. Chairman, Secretary Lynn, we appreciate you coming today and sharing some of your views with a tremendous amount of acquisitions -- got to get that word right, don't want to use the wrong word -- acquisition that is being done within the Department of Defense. It must be challenging to balance the workforce needs with the acquisition needs of DoD.

What type of systems do you have in place to maintain that acquisition workforce, and how do you have a proper balance to make sure that you're keeping pace with the tremendous amount of needs that you have, to let those contracts, the rules and regulations, the changing needs of Congress and edicts that you have from here?

MR. LYNN: Well, as I indicated, we have a proposal to substantially increase the size of the force. Together with that, we have proposals to increase the training and the other support elements, and we have Shay Assad, who's really the expert in this area, and I'll ask him to provide more detail along the lines of what you ask.

MR. ASSAD: Yes, sir. We actually have within the acquisition technology and logistics an organization reporting directly to the under secretary is a director of Human Resources and Human Capital. He is responsible for having developed the human capital strategy plan, together with acquisition in technology. So we very specifically have a plan about how we want to grow the workforce. It is in fact a five year plan. And we will be able to, we have a very good sense of both the contractor portion of the acquisition workforce -- that is, the contractors that support the acquisition workforce -- as well as what our organic capability is.

And we're really trying to do two things as we go along in this five year period. We are trying to grow our organic capability, and we're changing the mix so that there are less contractors supporting the acquisition workforce but still a substantial number of approximately 40,000. So it's not like the shift that we're making is going to eliminate contractor support for the acquisition community. That's not where we're headed.

But we very much will be attentive on an annual basis to sit down and present to the leadership where we're at in terms of what's the progress we're making on hiring, what changes do we see in the through-put? And we do competency assessments of our workforce. We did a very substantial competency assessment, probably the biggest in the federal government, with the contracting workforce over the last year. Some 18,000 to 19,000 employees participated in that.

And it gives us a good sense of what their capabilities are. And we will measure that, not just in the contracting community but across the entire 127 (thousand) to 147,000 folks to do acquisition so we can have a better sense of what progress we're making in terms of training and their capability, and how do we adjust that to the most important thing which is meeting the needs of the warfighter.

REP. FALLIN: So are there any other factors that you're going to use to determine if you're achieving the results between a balance between the federal employees and the private contractors?

MR. ASSAD: Absolutely. We'll have metrics that will measure on a daily basis, and we will put those up to the chief management officer.

REP. FALLIN: And are you working with any of the higher education institutions, or when it comes to our college graduates coming out to try to encourage them to get into these types of fields to build up that workforce in future years?

MR. ASSAD: The Defense Acquisition University has several partnerships, and very successful partnerships with some organizations, perhaps the Air Force Logistics Command comes to my mind. They have a very good partnership with Macon College in terms of bringing -- the college has actually created a contracting and procurement curriculum, and so graduates will be coming out of that and going right into our intern program. So that's a very good part of our intern program and our strategy as we go forward.

REP. FALLIN: Okay. Thank you very much. Mr. Chairman.

REP. ORTIZ: The chair recognizes Mr. Spratt.

REP. JOHN SPRATT (D-SC): Mr. Secretary, we are fortunate to have you where you are with your experience, your intellect. But I have to sit here and wonder if even you with your intellect can really -- it's a daunting task that lies before you to do the things you described today. I don't think you would diminish that yourself.

But as I listen to some of the solutions you propose, I do have a sense of sort of deja vu. I've heard it said before from the Department that we'll have more fixed price contracting, and then you run into problems of doing highly sophisticated systems that contractors shrink from undertaking on a fixed price basis. More prototypes in competition; we've had that before. Sometimes it worked, sometimes it didn't, but we tended to stray away from it. SHD (ph) cost analysis always comes up, is I think yet to realize its potential.

So I think you have a daunting task, not least of which you should take the procurement force and make it into an expert force.

I'm a little under-whelmed by the sentence you used to describe where you hope to be in five years. I'm not saying this was even consciously designed that way, but says in your testimony: "The five year plan workforce will result in a properly sized, well-trained, capable and ethical workforce."

I'd like to hear you say, "one with an ethos of excellence, one that is rigorous and sharp and analytical and hard-charging and bushy- tailed and all of these things," so that -- you know, you bring to the task the kind of energy that's necessary to take on these large contractors. It is a daunting task for a GS-12 for something like that to deal with the companies they have to deal with. And when the Packard Commission last looked at this, they decided the best way to get good personnel into the procurement system as soon as possible was to go to uniformed military.

How would you go? One verb you didn't use here was "recruit." How would you recruit the best and brightest to come work for the Defense Department on some of the biggest and most challenging of systems that are being built in the country today? What's your pitch? What's your come-on?

MR. LYNN: We're actually having quite a bit of success at this point, maybe partly a bit to the economy in terms of our recruiting efforts. We're recruiting in colleges, universities, graduate schools, as well as Mr. Assad indicated some of the recruiting will come from contractors who are supporting the government at this point. But the economy being where it is, the fact that we're in two conflicts, there's a great deal of patriotism in the country. I think we can offer an attractive position and that this is very, very important work. And in the end that's our pitch.

REP. SPRATT: This being important work, it's very challenging work because in most cases these major systems you're pushing the envelope. If you could just get bright young procurement types to come work for you for five years, that would be a plus I think to the quality of your workforce, if you get the right people to come.

One of the things that we've struggled with over the years, and I think has been true in -- (inaudible) -- as well, is information systems, sitting on top of this huge mountain down there at the Defense Department, how do you know what's happening out in the field? How do you know what's happening at the shop level?

And one of the devices we devised years ago was the selected acquisition report. Are you satisfied today that you've got the kind of management implementation systems you need to really take hold of the system and sit where you sit and run the system from that vantage point?

MR. LYNN: Well, I think the management systems we have are very good, but, no, they're not perfect. It is difficult to get timely information, and it's particularly difficult -- you mentioned the size of the department. The biggest difficulty is the integration of all the information. There's been a lot of talk about auditable statements, and that was actually in the GAO report Chairman Skelton mentioned. The challenge to the Department actually in getting auditable statements is less the information on the financial side of the equation, and it's all the information on the other side, in the logistics area, in the medical area, in all of the various support areas, and integrating those into the financial network. That's the challenge is integrating all that information into a system that provides leadership-level management quality information. That's the biggest challenge the Department has.

REP. SPRATT: I worked in an office where the store was created, not to suggest it's the end-all, but it was at least an effort to finally get all this information together in a manageable form. And I came back here 12 years later and I pulled down a copy of the sorgits (ph) to see what it looked like, and it hadn't changed at all. And it finally occurred to me after that first year on this committee, the reason it hadn't changed is, it really hadn't been used that critically.

And periodically we will have a system come before us that is in bad shape like, remember the AX or the AA (ph) program? A clear situation where a good management accounting system would have told us much, much sooner that there were problems in the system. They had one guy on the plant floor who was the nexus between the plant, the shop and the Defense Department, and this guy's sole experience in procurement was working with prepare work at Japan Air. There's some obvious cases like that where anybody looking ate the management structure would say, "Wait a minute, here's a weak link."

One of the things that I proposed in the past, and I don't know whether, we never got it passed, was that somehow you would sit down before you enter EMD -- engineering, manufacturing, development -- and you write out the specific areas that you'd want to watch. For example, on the AAQ there were certain known vulnerabilities, known problem areas, that you would I think want to watch to see if problems were developing there and needed early intercession.

Have you given any thought to that, to sitting down and saying, We're not going to have the standard template for the SOR (sp), or for some other executive management reporting system, but we're going to have one designed for every major system we've got that goes to the particular things that we think need to be watched and watched carefully and closely?

MR. LYNN: I think some kind of risk assessment, which is I think what you're talking about, is what -- what are the high nails (sp) that might, that are likely to cause us problems, and where are we on each of those? I think that makes sense.

REP. SPRATT: One last question. The first bill filed in this subject area was Levin McCain. The chairman will have a substitute bid, and it was comparing from the two, Levin McCain tends to emphasize multiple systems, multiple oversight, and the chairman would lean more towards having one identifiable accountable individual who would be solely, largely charged with the responsibility of a particular system.

Have you got any wisdom to leave to us about these two approaches, about either of these two bills that we should keep in mind as we mark them up?

MR. LYNN: Not on that particular issue, no.

REP. SPRATT: Thank you, sir.

REP. ORTIZ: The gentleman from New York, Mr. McHugh.

REP. MCHUGH: Thank you, Mr. Chairman.

Mr. Secretary, when you and I last got together about an hour ago we spoke about opportunity costs and unrecruty (ph) breaches and how you make those kinds of judgments. Certainly I believe, and I think the rest of the members of this committee believes, that Congress has to be a part of that, which means transparency and data information is critical as well.

Back in the latter part of April I wrote a letter to all the joint service chiefs and others asking for, as we routinely do, their unfounded requirements list so that as we went forward this committee could have that kind of information and judge and make judgments on trade-offs that come about. As I said, every year of the 17 I've been here we've made that request, and as far as I can recall it's been met.

I have a memo issued on, the date I have on it is April 30. That's the stamped date, so I'm not exactly sure when the secretary of Defense put it out, but you were carbon copied along with the secretaries of the military departments, the chairman of the Joint Chiefs, and under secretary of Defense, the Comptroller. And it causes me some concern.

The secretary of Defense wrote, "I understand" -- this is to the service chiefs, and those to whom I addressed the letter -- "I understand you received the request from Congress to provide your assessment of unfunded military requirements resulting from the fiscal year 2010 president's budget.

I'm told the provision of unfunded requirements list to the Congress is a long-standing practice that dates back over a decade. As you are aware, the existing statutory framework provides for members of the Joint Chiefs to make recommendations to Congress," quote, "'after first informing the secretary of Defense,'" end quote. "Accordingly, should you determine there are fiscal year 2010 unfunded requirements that are responsive to the request from Congress, I expect you to inform me of such a determination so we can schedule the opportunity for you to brief me on the details," signed by the secretary of Defense.

Without getting into the possibility of the memo itself having a chilling effect, I want to ask you -- because I assume, as the principal recipient of this, or one of the principal recipients, you had a chance to discuss it -- can you give me and this committee assurances that that is just a method of informing the secretary of Defense? We're not now, for the first time, as far as I know, establishing the requirement that the (UFER ?) list goes through the secretary of Defense for review and perhaps alteration?

MR. LYNN: I think what you read was exactly what the secretary intended. The legislation says that the members of the chiefs are to provide Congress with their personal views when asked, but prior to that, they're to inform the secretary. I think the secretary wants to make sure he is informed prior to the submission of the list. But the advice that the chiefs would give would be their own.

REP. MCHUGH: Thank you very much, Mr. Secretary. I appreciate your providing that assurance.

Mr. Chairman -- I would yield back as soon as the chairman is back. I yield back.

REP. ORTIZ: Mr. Snyder is recognized -- I just came back -- and then Mr. Murphy.

REP. VIC SNYDER (D-AR): I'm sorry, Mr. Secretary, that I wasn't here. The Veterans Committee is having a markup at the same time. So could you please summarize everything that's been said for the last hour and a half so that I can -- (laughter) --

MR. LYNN: Sure.

REP. SNYDER: -- get caught up? I will ask you one repetitive question, if I might -- well, a two-part question. Number one, the bills that are pending before the House and the Senate, how big a piece of the total Pentagon spending will fall under their, for want of a better word, jurisdiction? And second, I would like to hear your comments. I think you had told us about 20 percent or so.

MR. LYNN: Twenty (percent) 25 (percent), I'm told.

REP. SNYDER: So then my follow-up question: What happened to the rest of that?

And then my second question. I did want to hear -- I understand that you were asked about -- you made comments about the differences between the Senate and the House bill; if you have any specificity there or recommendations.

MR. LYNN: Well, the focus of the bills is on the acquisition side. That would be 20 (percent) or 25 percent. Equally important is the services side, and we're paying attention and trying to improve the oversight there as well. The personnel systems themselves, which are quite a large part, don't have the same kinds of issues as we find in the acquisition and the services side. So that is not within the realm of what we're addressing.

With regard to the two bills, I mean, I think we find there are -- we like the direction of both bills, the focus on the front end, the focus on bringing more expertise into government, the effort to assign responsibility and accountability in the department for the acquisition functions. We think those are all to the good.

We have specific comments, and I'm happy to provide more for the record. For example, we feel that the CAIG, which is the independent cost arm of the Pentagon, should remain part of PA&E. That's, I think, the direction the House bill has. The Senate would make it a stand-alone. We think the limitations of making it a stand-alone office are that you have it doing only weapon systems costing when there are other cost estimation functions that are important as well; costing the alternative courses of action and our strategic review, the Quadrennial Defense Review, and our program assessments and our budget bill are also very important.

And we want to make sure the expertise the CAIG has, which is the best in the building -- probably the best in the government -- we want to make sure it goes to that broad array of responsibilities and not to narrow it down. And I'm happy to provide other comments for the record.

REP. SNYDER: And I assume that -- assuming these versions will pass or some variant of them will pass the Senate and the House, that you all will be involved in the discussions that lead to a final conference.

MR. LYNN: We'd certainly be available for that.

REP. SNYDER: Sure. Thank you, Mr. Chairman.

REP. TAYLOR: The chair thanks the gentleman.

The chair now recognizes the gentleman from Texas, Mr. Conaway, for five minutes.

REP. MICHAEL CONAWAY (R-TX): I won't take five.

Mr. Secretary, you mentioned the problem with lengthy times of development and the fact that, as an example, not to speak to it individually, but the F-22 '86 to '06. Talk to me about your thoughts about how we should either, in some way, legislate a shorter time frame or have some sort of ability to discipline ourselves on the length of time we allow for something to exist before we make hard decisions. Can you talk to us about what your thoughts are?

MR. LYNN: I would be hesitant to legislate that. I think what you want to do, along the lines of what we've been talking about, is set guidelines. There may be reasons to exceed those guidelines in certain instances, but what you want to do is try and pull them back into the closer time frame so that you get more mature technology; you don't spend excess time; you don't delay the delivery to the war fighter. But putting that -- I think it's too difficult to foresee all of the different circumstances to put it in as hard a shell as legislation.

REP. CONAWAY: Thank you, Mr. Chairman. I yield back.

REP. TAYLOR: The chair thanks the gentleman.

The chair now recognizes the gentlewoman from California, Ms. Davis, for five minutes.

REP. SUSAN DAVIS (D-CA): Thank you. Thank you, Mr. Chairman.

And Secretary, welcome. We're glad you're here to think about these next moves that we're going to make in this area, which are very important.

I wanted to ask about two areas. One is competition, because we know that it's been cited on a number of occasions, GAO in their recent report, that that's an issue. We have major contractors, not so many of them, who are bidding on the major systems. We also have subcontractors. And there are many concerns out there that the bundling of contracts hurts the competition among some of our small businesses.

Could you comment on that and whether you think that there should be greater recognition of that in the bill, if you think that there's language that should speak to competition in a stronger way, I think?

And the other issue really is with the performance that you mentioned, past performance, and whether or not there should be a better repository of past performance so that we can check on the track record of businesses as those contracts are being decided.

Do you see that in this particular legislation? Or I know that my colleague, Mr. Andrews, who's been so involved in this, is looking at, you know, down the line, that we need to have some kind of depository like that so that we really can check on past performance. And in many ways it is the subcontractors in that regard, not necessarily the primes.

MR. LYNN: Let me take your questions in reverse order.

With regard to past performance, there is a data base that we use that's part of the contracting process that measures past performance on relevant programs. So that already exists. I'm not -- Mr. Assad's an expert on that, so I'll ask him in a second if he has anything in addition.

On the competition, we do think more competition is a useful tool in terms of managing the acquisition process. And towards that end, we're proposing to make greater use of competitive prototyping to try and bring competition to bear at the front end of the process so we have the technologies that we're going to put into the weapon system more fully developed, and we have the competitive impulse to deliver the best product at the best price.

With regard to your bundling comment, we think that -- I mentioned that we want to move away from the lead systems integrator concept, and one of the reasons is we think we've bundled too much up into that that needs to be done at a lower level. And I think that would address some of the concerns that you mentioned with regard --

REP. DAVIS: Do you think that the bill needs to spell out less bundling of contracts? How would you do that without it being (terribly ?) prescriptive?

MR. LYNN: I don't have a proposal as to how to do that in legislation. As I say, we're already -- the secretary's proposal on Future Combat System comes directly from that impulse to move away from the bundling. And that was probably the best example of a lead systems integrator contract. So we're moving in that direction. I don't have a legislative proposal to increase the speed.

And did you want more detail on the past performance data base?

REP. DAVIS: Yes, please, and for subcontractors.

MR. ASSAD: Yes. In terms of subcontracts, ma'am, as part of our strategic sourcing initiatives, we are, in fact -- one of the fundamental underpinnings of our strategic sourcing initiatives is more competition, is less bundling. We're not looking to bundle things together. We're just looking to align behaviors on how we go about doing it, which is, in fact, improving our ability to subcontract, especially with small business.

So I think that we're on track in terms of making sure that the organization fundamentally understands, from a strategic sourcing point of view, that that's where we're heading, which kind of is the overarching vision of how we're buying our goods and services.

With regard to past performance, the system that the deputy secretary referred to is called a Past Performance Information Retrieval System. What we are doing in that regard is we're looking at working with our brothers and sisters in the rest of the federal government because that is a federal government wide system, how do we improve the timeliness of the information and how do we ensure that there is a consistency between incentive and award fees being earned and in fact what's being said about contractors in past performance systems.

So those are two specific areas that we're looking to improve --

REP. DAVIS: Can I, can I --

MR. ASSAD: -- in regard to past performance.

REP. DAVIS: -- ask before time is up, does that include the subs as well, I mean to cover all subs and have --

MR. ASSAD: It does not include, it's primarily a -- (inaudible) -- contractor type of a system but when we do our source selections, we very much get inputs on major subcontractors and their past performance. We do look at that.

REP. DAVIS: Do you see the system being able to encompass all the subs that it works with? That particular system or do we need to respond in some other way?

MR. ASSAD: I don't think that we could, if we got down to all the subs, that would be literally, literally hundreds of millions of pieces of information. But I think we do need to look at our major subcontractors that we identify and perhaps working with the rest of the federal government to see if it's appropriate to include those in.

REP. DAVIS: Thank you, sir. Thank you.

REP. ORTIZ: The Chair recognizes Mr. Murphy.

REP. PATRICK MURPHY (D-PA): Thank you Mr. Chairman. Secretary Lynn, Mr. Assad and Ms. McGrath thank you for your testimony for the past hour and 40 minutes and for your continued service to our country.

I served in Iraq six years ago with the 82nd Airborne Division in Baghdad and there's no doubt that the situation on the ground over there has changed. In fact, when I was there, with the 82nd we had the top of the line equipment, we had the M-4 rifle, most folks had the M-16. Now everybody has the M-4. So technology has changed, the weapons required in the fight have clearly changed. And our philosophy of the Armed Services Committee and the Department of Defense obviously is we don't want a fair fight, we want our troopers to have a technological advantage.

The GAO report states that for the Department of Defense's fiscal year 2007 portfolio of major weapons programs being developed, there's an average of a 21-month delay in delivering initial capabilities to the war fighter. So listening to the testimony today Mr. Secretary, you know, as the conditions in the theater have changed, and one of these delayed programs suddenly becomes badly needed by the troops in the field, what does the Department of Defense need to have the flexibility and agility to rapidly get the weapons systems up to speed and ready for deployment?

MR. LYNN: What you're talking about I think, Congressman Murphy, is the balance between performance on one hand and cost and schedule on the other and I think too often the system weights performance too highly and we need to give equal weight to the cost and the schedule and I think you're talking there about the schedule. And we may need to spiral additional performance improvements into a later model. We may need to go with the 80 percent solution that we can get immediately vice going for the 99 percent exotic solution that is, we only have on PowerPoint slides.

So we need to fundamentally change the culture that makes these trade-offs because we are -- it's not an unnatural thing, but there is a logic in the system now that constantly pushes towards those performance improvements and doesn't take sufficient account of the schedule and the cost implications of doing that.

REP. MURPHY: Right, Mr. Secretary, roger that, I hear you and I understand -- you know, we don't want the perfect to be the enemy of the good. I got it. But you know, in earlier testimony it was -- and you know your testimony today was it's difficult to get timely information and audible statements talking about logistics, medical issue you know. And that is a challenge. I think what we would like is what's the solution? What do you propose the solution is? And what do you need from us to empower you because, you know, to go back to Gene Taylor's comment today, I mean, listen, you know there's a different philosophy out there. The contractors, the shipbuilders, whoever it is, you know, they want, you know, the most money for the ship where the Congress and the taxpayers that we represent, they want the most ship for the money or the most, you know, weapons system for the money.

And so that's what our focus needs to be, as your focus is. So is there anything that you could articulate to us today like what do you need, what systems do you need, what do you need from the Armed Services Committee and the Congress of the United States to empower you to get after this?

MR. LYNN: I think the direction we need to go is to make sure that the technologies that we have and we're putting into weapons systems are mature. So we need technology readiness assessments at each stage of the process so that we're not buying into technology that we can't deliver in a timely fashion.

We need competitive prototyping in the developmental phase so that we put the contractors against each other to achieve the best possible product at the best possible price on the schedule. And we need cost estimates that are not just success oriented but that take into account the kinds of risks in terms of development, in terms of production and in terms of technology so that we understand going in what our best estimate is of the cost are so that we don't later on find out that we're going to have to increase by 20 (percent), 50 (percent) or 100 percent the cost and therefore disrupt the entire program and possibly slow it down.

REP. MURPHY: And these are -- and Mr. Secretary, these are metrics that I agree with you and I think you know the technology readiness assessments, the cost estimates that are just not success estimates, these are metrics that are music to my ears and my colleagues' ears. I think, though, when you look at the GAO report when it says though that the Department of Defense, and I quote, "has not designated a senior management official at an appropriate level with the authority to be responsible and accountable for enterprise wide business transformation."

And I know that's business transformation but you know where does the buck stop? And we're looking for people to be on the hook here, both on the Department of Defense side, but also on the contractor's side, and we need to hold folks; feet to the fire because our constituents during this economy are making sure that they're getting their bang for their buck.

MR. LYNN: I'm afraid the person you referred to is me. To assist me in that the Congress has recently created the -- I'm the Chief Management Officer -- they've created the position of Deputy Chief Management Officer. Ms. McGrath here is the senior career civilian in that office and we're developing a slate of potential political appointees to put into that. So that would be one organizational answer.

And then the other answer is the undersecretary for acquisition is the principle individual in terms of oversight of the weapons acquisition process itself.

REP. MURPHY: Well I would say -- I know that my time's up Mr. Chairman, but I would say we need to partner together on -- in a bipartisan way with Democrats, Republicans and you -- to articulate to the American public that we're getting after this and that we're hitting these metrics and that we're articulating those and the success stories and the failures as we move forward.

Thank you so much for your testimony. I appreciate it.

MR. LYNN: Thank you.

REP. MURPHY: Mr. Chairman, I yield back.

REP. ORTIZ: Thank you. I think the gentleman's raised some very, very good points and if we can help through legislation to empower you, anything that we can do. But taxpayer's money is very sacred. And we want to be sure that they get their money's worth and I'll have another question after Mr. Taylor. Mr Taylor from Mississippi.

REP. TAYLOR: Mr. Lynn and the other guests I want to thank you again for sticking around so long. And I'm going to get way down in the weeds but I think it's been a long time, again going back to your testimony and I think you're exactly right that the lead systems integrators did not do our nation any service, they did a great job of looking out for the contractors but not for us and so again I'm in agreement with everything you're saying.

I'm going to bet that anyone who bids on a ship for our nation or large aircraft has a computer assisted design program and they know every frame, every bulkhead, every piece of plating on that ship, every watertight door, every piece of piping, when they bid on it, they know everything that goes in there, they have a pretty good idea what it's going to cost per foot, per pound, whatever, they have a pretty good idea how many linear miles of weld there are, et cetera, et cetera.

What I'm asking you is in your research, do we have that sort of information? Is there anyone -- I know we have some phenomenal research going on with David Taylor and some other labs, but does anyone get down into the weeds and say, you'veve got this many miles of welds, you got this many pounds of aluminum, you've got this many pounds of steel, you're buying this much plate, you're buying this much angle iron, does anyone on our side of the equation in order to get the best price for the citizens, get down into the weeds as far as that pricing?

And I'm going to give you a for instance, and again I appreciate that we have a new administration, you're trying to turn this around, but in the past two years the price of steel has been cut in half. In the past two years the price of aluminum has been cut in half. The past two years the price of titanium is down by a third.

You know, no one on the Navy acquisition side ever walked into my office and said hey, we can get a better deal on ships or airplanes or whatever. It was my local salvage dealer that told me the price of all this stuff was down. Not anybody in the administration, not anybody -- not any of our vendors, and again you know we're automatically growing 8 percent in the budget to finish out the year, I think 10 percent in next year's budget. We're automatically spending more money but who in your department is just getting down in the weeds and trying to get us some savings on basic things like this?

MR. LYNN: Well --

REP. TAYLOR: If that hasn't happened yet, I would hope to hear from you you're going to make that one of your priorities.

MR. LYNN: Well it is a priority and let me answer that in a few ways. The CAIG, the independent cost arm does the kinds of things that you're talking about.

The way they do a cost estimate is they do it by analogy. So they look at the most comparable systems that have been developed. They look at the prices of the inputs. They look at the learning curves that have been involved in putting that kind of system together, and they try and estimate --

REP. TAYLOR: Okay. Do they have a CAD? Do they have a computer-assisted drafting program?

MR. LYNN: No, the CAIG would not, no. But that isn't how -- they do a --

REP. TAYLOR: Someone at David Taylor had that. Again, every mom-and-pop shipyard that is bidding for a project has one. And the question is, why doesn't our nation have one to see if we're getting a decent price?

MR. LYNN: Go ahead, Shay.

MR. ASSAD: Yes, sir. The specifics that you're talking about is what we call, in the world of cost estimating and pricing, table negotiations, knowing the details of what it is that we're buying. Included in the secretary and the deputy secretary's and the department's plan for workforce growth over the next five years is to grow 800 prices. We're going to add 800 prices to the workforce. Included in that 800, about 200 of those folks will be resident in the Defense Contract Management Agency to do the very specific kinds of things that you're talking about. That capability does not exist within the department today.

At one point in time, frankly 20 or 25 years ago, we did have those kinds of capabilities. I know because I was on the other side of the table dealing with very competent, capable government folks. And the fact is we are going to grow that capability. It's going to take us a while, but we're going to get to the point where we're going to be able to answer your questions in very, very specific detail. We're growing an integrated information system within Defense Contract Management Association. All of our business clearances will be resident there. And we will have folks specifically expert in ships, aircraft, missiles, the kinds of products that we're buying so that we can get that information to our contracting officers and our pricers in the field so they can be more effective at the table and get a better deal for the taxpayers.

REP. TAYLOR: Mr. Assad, I'm really pleased to hear you say that. What's the time line that you have in mind for implementing this?

MR. ASSAD: Well, we've got a plan. It's going to take us about five years because these are experienced people. So it's going to take a while to grow. We're going to bring a lot of young folks in, but it's going to take a while to grow that workforce. But the very first emphasis is on growing the integrated capability of DCMA.

REP. TAYLOR: Thank you, Mr. Chairman.

REP. ORTIZ: Thank you. You know, we've been fighting this war, I think we're going on about eight years. It takes about five or six years to develop weapons. This is a different war that we're fighting. We haven't fought a war like this. Do you see the necessity or maybe you are now working on -- on future weapons that we might be able to fight and even an advantage to our warfighters, to our warriors who are fighting this war? Is there something in the pipeline now that, you know --

MR. LYNN: Yes, yes, there is, Mr. Chairman. In the budget that we're going to submit to you tomorrow, there is an emphasis on bringing things forward that are going to help us in the war fight.

We're going to increase the ISR assets, intelligence, surveillance and reconaissance assets available to the warfighter. We're going to increase the unmanned aerial vehicles, the Predators and particularly, the Reapers that have been helping out so much in Afghanistan. We're going to increase the number of special operations forces by 2,500.

Those forces are on the front lines of our effort in Afghanistan. So yes, we are proposing things that are going to be of immediate benefit to the conflict we're in. That's frankly one of the principle themes that the secretary has in the budget that he's constructed for submission to Congress tomorrow.

REP. ORTIZ: And, you know, the reason I ask these questions is because I feel that sometimes we are preparing ourselves to train -- developing weapons to fight a war that we'll never fight. But now we've got this war going on on eight years, and I just pray to God that we will be able to find the right technology and the right equipment to support our warriors.

MR. LYNN: Well, we need the right balance -- I agree with you, Mr. Chairman. We certainly want to make sure and we are steering more towards supporting the immediate war fight. That doesn't mean we want to give up the long term. As I think one of the members of the committee indicated, it's not only whether there will be a near-peer competitor, but we want to dissuade one from emerging. So we need to make sure our development programs are on that track as well.

But frankly, the programs on that track have generally been quite strongly supportive. The warfighter programs, the more immediate needs we felt needed some additional impetus, and that's what we tried to put into this budget.

REP. ORTIZ: Do I hear any further questions? Mr. Secretary, thank you so much to you and your staff for your excellent testimony. And hearing no further questions, this hearing stands adjourned. (Sounds gavel.)

MR. LYNN: Thank you very much, Mr. Chairman.

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