Panel II Of A Hearing Of The Airland Subcommittee Of The Senate Armed Services Committee - Army Modernization And Management Of The Future Combat Systems Program In Review Of The Defense Authorization Request For FY 2010 And The Future Years Defense Progr

Statement

Panel II Of A Hearing Of The Airland Subcommittee Of The Senate Armed Services Committee - Army Modernization And Management Of The Future Combat Systems Program In Review Of The Defense Authorization Request For FY 2010 And The Future Years Defense Program

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SEN. LIEBERMAN: As I indicated, David Ahern is the director of portfolio systems acquisition in the Office of the Undersecretary of Defense for Acquisition, Technology and Logistics. Paul Francis is the managing director, acquisition and sourcing management at the Government Accountability Office. We thank both of you for being here.

And Mr. Ahern, I would now welcome your testimony.

MR. AHERN: Good afternoon, Chairman Lieberman, Senator Thune, distinguished members of the committee. Thank you for the opportunity to appear before you to discuss Army modernization and the management of the Future Combat System program as you review the FY '10 budget.

I'll be brief in order to move quickly to the panel's questions.

SEN. LIEBERMAN: Good.

MR. AHERN: In FY '10 FCS will remain the Army's largest research and development investment; however, we plan to transition from the FCS brigade combat team acquisition program to establish at least four acquisition programs that will leverage the FCS investment to date and deliver realistically defined, cost-effective and timely capability to modernize the Army's ground forces.

These new integrated Army modernization programs will include as a minimum planned early infantry BCT acquisition, follow-on BCT modernization, ground combat vehicle modernization, and incremental ground tactical network capability. The importance of meeting the Army's modernization needs and the magnitude of the investment dictate that we get these acquisitions right, and we must do it expeditiously.

By way of background, we established the FCS BCT in 2003. The Army contracted with Boeing and SAIC to develop a system of systems design. While the system of systems umbrella for the FCS BCT acquisition provided a unique opportunity to optimize capabilities, the complexity involved in applying the system of systems approach offered many challenges for the acquisition community. The FCS investment did, however, provide us with a far better understanding of potential for integrated capability with insights for early application of this integrated capability across the combat brigades.

In addition, the technology coming from the FCS investment is a game changer for the Army modernization effort in platforms such as unmanned ground and air systems and sensors such as active protection and unattended ground sensors, in vehicles with hybrid electric power trains and lightweight armor, and in the network, with integrated battle command, sensor fusion, and enhanced situational awareness.

All these will transition the Army modernization acquisition as we move forward. A key transition relative to knowledge-based acquisition was a decision in 2006 to capitalize on early increments of FCS capability for delivery to the current force. We termed those "spinouts." We will continue this incremental acquisition philosophy as we transition to multiple Army modernization acquisitions in 2010.

Relative to our reporting requirements on FCS, while the Army recently completed the FCS system of systems preliminary design review, decisions leading up to the FY '10 president's budget have already addressed the issues identified for the DAB milestone review; however, in satisfaction of FY '07 and '09 authorization act provisions we will provide a report that reflects the department's FCS decision to the congressional defense committees.

Regarding the committee's interest in future contracting relationships, in the short term the FCS contract will be restructured to continue the integration and development efforts in network, spinouts and BCT modernization until the new acquisitions are established. Changes in the FCS contract will address our concerns regarding fee structure that give the government little leverage to promote cost efficiency. As acquisition plans for the future programs mature we'll use contracting strategies that include competition, fee structures to incentivize performance and fixed-price contracts when appropriate, all leading to better control of contract costs.

We have learned much from the FCS acquisition program. Our acquisition and program management lessons learned are consistent with those learned from other department acquisition programs. As we move forward with the new modernization program we will seek to match requirements to mature technologies, to estimate program costs more realistically, to seek budget stability for the program to initiate, staff government acquisition teams adequately, and provide disciplined and effective oversight.

In closing, the department's FY '10 budget will facilitate a timely, in-stride transition from the previous plan to acquire 15 FCS brigade combat teams to multiple major modernization programs to deliver much-needed sensor, networking and vehicle capability to the Army. We will leverage the FCS development efforts to date to deliver that capability.

We are grateful for the continued support of Congress, which has been critical to ensuring our soldiers are the best trained and best equipped in the world.

Thank you for this opportunity to testify on the department's plans to continue to equipment them for today's wars and tomorrow's challenges. I look forward to answering any questions you may have.

SEN. LIEBERMAN: Thanks, Mr. Ahern. We look forward to the questions.

Mr. Francis?

MR. FRANCIS: Thank you, Mr. Chairman, Mr. Thune. I appreciate your inviting me to participate in the discussion of Army modernization in a post-FCS context.

I'll say a few words about I think what are the positive aspects of FCS that are worth emulating as we go forward and then talk about some of the difficulties with the program that I think we can learn from.

So starting with the positive aspects, I think the Army really did break with tradition in thinking through FCS and came up with a holistic view of what it thought the future force ought to look like. It was able to translate that into a context and an architecture for a family of systems that it would field as an integrated force, and I think this is a much better approach than developing individual systems and trying to integrate them after the fact.

I also think the Army was innovative in its managerial approach. It wanted to break down its stovepiped organizations and cut across organizational lines to field an integrated force. And I think it was very candid about what its abilities were to manage that and contract it with the lead system integrator to try to fill in some of its own shortfalls. So I think that was a courageous approach on the Army's part.

We do have some concerns with the lead system integrator, but I do think the approach the Army used in that approach did give it I think unprecedented insight into subcontractor selection and gave it more competition at the subcontractor level. I think that was a good idea.

We heard testimony from the first panel about the network. I think it was discerning on the Army's part to observe that it needed to deliberately develop an information network rather than wait for after the fact and try to cobble it together with systems that had already been developed.

And I think the final thing I would say from a positive standpoint on FCS is the decision to spin out or harvest technologies and give them to the current forces was a really good idea, and I think maybe even better when the Army developed the evaluation task force to vet these technologies before they went into the field. So again, a good idea worth continuing as we go forward.

I think in terms of some problematic aspects with FCS, I think the first thing I would say is I believe that the program -- and we've reported on this -- was not really executable within realistic resource bounds. The technology, the software, the network, the requirements, the cost were all on a grand scale and we knew very little about them when we got started.

I think, for example, the manned ground vehicles were being developed and their performance and their survivability depended on a network at the same time we were inventing the network, so that concurrent development was I think a bit too much for a single program.

FCS I think was moving too fast. Originally it was going to be a five-and-a-half-year program, eventually stretched out to 10, but still faster than any single revolutionary program had proceeded before. And on FCS we were looking at 14 to 18 programs in one.

And I think if the program did continue on its existing path, it would have put you in a difficult position because I think at least three years of production funds would have been requested before we had a really meaningful demonstration of FCS capabilities. So it was on a really fast pace.

I think the takeaway from that is these risks were knowable and I think understood at the beginning but accepted. So I think going forward we have to be very careful about accepting those kinds of risks. These were not unexpected discoveries that occurred along the way, and I would make that distinction.

I think from an oversight standpoint the challenges were too great. The scope of the program was such that the visibility over costs, changes and schedule changes were not visible; they were very hard to discern. And I think the scope of the program was such that it overwhelmed some of our key oversight mechanisms; selected acquisition reports, the earned value management system, and even our budget requests, I think, weren't a good fit for a program of the size of FCS.

The Army's close relationship with the lead system integrator, while it had some advantages, we saw some long-term oversight concerns with that in that we thought there was a risk that over time the Army would find it difficult to distance itself from the lead system integrator and in fact the program itself.

And we looked to the Office of the Secretary of Defense to provide that oversight. In the early years OSD didn't provide that oversight and basically allowed the Army to proceed with the program as planned, so it proceeded through the start point with significant immature technologies that were significantly I think far afield of OSD's own policies. OSD had independent cost estimates that were much higher than the Army's yet they let the Army's estimate prevail. And I think even though costs and schedules doubled over these years, there were no Nunn-McCurdy breaches reported on the program.

Now, we've seen an improvement in OSD's oversight in the last two years and maybe Dave Ahern here has a large part in that, so we've seen that encouraged, but, again, OSD oversight early, really important.

So going forward I think we'll see the Army with at least three efforts -- spinouts in some form, a network program, and manned ground vehicles -- and I think each of these will require some different types of management approaches. But they need to share some common principles and that is they need to be anchored in knowledge and they must adhere to the DOD's current acquisition policy.

We have to have realistic cost estimates that are informed by independent estimates that we need to budget to most realistic costs. And I think that we have to have programs that are transparent and accountable for oversight. I think we have to realize that a unique contractual arrangement or a bold managerial approach are not a substitute for knowledge or sound systems engineering.

So I would say in conclusion I think there's no question that the Army needs to be well equipped. I don't think there's any debate about that. I think the Army needs to be innovative about its approach but needs to be pragmatic and knowledge-based when it comes to individual systems.

And I would ask a broader question. If we accept the Army's vision of the future and how it wants to equip, I think we can all point out things that could be done differently than FCS. But I think a real challenging question is: How would we do that differently today? And I think the burden there is a lot more would have to be done prior to the acquisition phase. And the question becomes, do we have the people, the organizations, the facilitates, the transition mechanisms and so forth in place to do that kind of work up front, and I don't know that there's a good answer for that.

So I'll conclude with that and be available for any questions.

SEN. LIEBERMAN: Thanks, Mr. Francis. That was very interesting testimony.

You know, I guess the beginning -- look, we're at a point where significant changes are being made in the Future Combat System program. Now, one explanation of that is that it is totally the result of budgetary constraints, but I would take it that neither of you would agree with that. Am I right? It's not totally because of budget pressure.

MR. AHERN: No, sir, I would not agree with that. No, sir, I don't think that that was the issue at all.

SEN. LIEBERMAN: So -- right, Mr. Francis?

MR. FRANCIS: Yes, Mr. Chairman. There was the -- Congress had mandated that go/no-go decision in 2009 and I don't think FCS was going to measure up to that.

SEN. LIEBERMAN: Yeah. So this leads us to the conclusion that if it wasn't just the shortage of money that something was wrong with the program, at least as it was going forward, and now the secretary's come in and the president with restructuring of it.

And Mr. Francis gave us some negatives. You know, it's an interesting question -- I made notes on your positives and negatives from the FCS experience -- whether the negatives were inherent and unavoidable in the positives or whether they were avoidable.

In other words, if you have, on the positive side, a holistic program that's a breakthrough where you have an innovative managerial approach, were the shortcomings that you then see about the program not being executable within resources available, oversight challenges too great, et cetera, were those inevitable or where they really -- was it possible to achieve the positives here without incurring the negatives?

MR. FRANCIS: I think it was, Mr. Chairman.

If we kind of look at where the program is now, after I think an extraordinary effort to develop the requirements, the software, the technologies and so forth, the program's at the point where the Army could now start a manned ground vehicle program based on a solid basis of technology where it knows what it can and can't do.

So I think if you took an approach like this -- and we have to be careful of scale; I agree we have to be thinking in terms of system of systems, but there are different sizes and perhaps that was a bit too large to manage -- but I think if you took that managerial approach and took a system of systems perspective and pushed very hard in the pre-acquisition phases, then I think when you came up for a decision on whether to start an acquisition program you would then allow the requirements to be tempered by what you can do technically, be technically realistic.

So I think the start point was really the problem here.

SEN. LIEBERMAN: Okay.

Mr. Ahern, let me ask you to respond to some of Mr. Francis's comments just in terms of lessons learned and where we go from here.

He made an interesting, I thought significant statement that at different times OSD actually had higher cost estimates for the FCS system than the Army did but essentially let the Army go ahead. I think I've heard it correctly. How do you respond to that?

MR. AHERN: Yes, sir, that's what Mr. Francis said.

I was not aware of that. There are always program office estimates and OSD or CAIG estimates. Typically we look -- try to reconcile the differences between them, get the right cost estimate going forward. I would have to go back in history and ask a question about that specifically. I don't have that.

SEN. LIEBERMAN: Okay, good enough.

Why did that happen do you think? Why did OSD yield to the Army?

MR. FRANCIS: Well, I -- Mr. Chairman, I don't think there's a requirement that the OSD estimate be adhered to, but I think the big difference was over software and the OSD estimate forecast a much larger software effort than the Army had programmed.

Now, I'm not sure why they deferred to the Army, but I do know that was the main difference between the two estimates.

SEN. LIEBERMAN: Yeah.

How about, Mr. Ahern, the conclusion that Mr. Francis presented that the Army had in some senses or cases too close a relationship with the lead systems integrator?

MR. AHERN: Yes, sir.

The relationship between Boeing, SAIC and the Army, the Army depended upon Boeing to a great degree going forward. I'm not sure of the characterization as too close a relationship with them. It is a government-contracted, FAR-contracted relationship with them, with the standard clauses and instantiations and structured to it, so I'm not sure where he's referring to.

I do understand initially anyway there may have been a perception -- there was a perception -- that Boeing was undertaking some of what had been government jobs or government -- normal government positions. But of late, at least to my knowledge, it's a standard government and prime relationship between Boeing and the government.

SEN. LIEBERMAN: Do you want to flesh out that conclusion just a bit about why did you conclude that in some cases the Army was too close to the lead systems integrator? In other words, what was the basis of that conclusion?

MR. FRANCIS: A few things, Mr. Chairman. One was the immaturity of the program when it started. So requirements were very soft, technologies weren't well defined, so the lead system integrator was involved in decisions both on what was required as well as what the solution was.

I think a second thing is the level. In this case the lead system integrator, rather than in a traditional prime arrangement where you have, say, a contractor who's developing a platform and integrating subsystems, in this case you had a contractor developing a system of systems where the subcontractors had major platforms.

And the third thing was the lead system integrator was to act as the Army's agent in a lot of these decisions. And initially when the contract was set up the Army was careful and this subcommittee in particular made it emphatic that the lead system integrator was to focus on development. There was a pretty high fee on development and there was an attempt to keep the lead system integrator financially disinterested in production so it could focus on the Army's interests.

Over time that focus was lost and in 2007 the Army decided it would allow the lead system integrator to be the prime for the spinout production and low-rate initial production of FCS core systems, so it did develop a financial interest in production. And given the size of the FCS program and it being almost synonymous with the future Army, we could see that developing naturally -- I'm not saying it was necessarily improper -- but you did then need another layer of oversight to make good decisions about the program, which is where we were looking to OSD.

SEN. LIEBERMAN: And that was not there?

MR. FRANCIS: That was not there.

SEN. LIEBERMAN: Yeah.

You listed the innovation and the managerial approach, which is to say the lead system integrator, as one of the positive takeaways as well, so am I correct in putting these two together and saying that you would go with something like that again with the lead system integrator but provide the greater oversight that was not there this time?

MR. FRANCIS: I guess I wouldn't rule it out. So I would think --

SEN. LIEBERMAN: Yeah. But you don't -- apparently don't favor it really on balance?

MR. FRANCIS: Well, there are a number of risks with it and it hasn't worked out in other programs. The Coast Guard has tried it with the Deepwater project; it was an attempt in missile defense, and I think there's some problems with it on SBInet. So it's unproven. And so if we're going to try it maybe it needs to be tried on a smaller scale.

SEN. LIEBERMAN: Yeah. Okay, thank you very much.

Senator Thune?

SEN. JOHN THUNE (R-SD): Thank you, Mr. Chairman.

The FCS as a system of systems was an enormously complicated development acquire. What steps has the Army taken to increase the capacity of its acquisition work force to develop and buy these complicated systems?

MR. AHERN: The secretary of Defense has articulated to grow the acquisition community over the next couple of years, the FYDP period of I believe it's 20,000 individuals, of which 5,400 are intended to go to the Army. There's a split in that. Two thousand of I believe 10,000 are actually growth in strength, and the other 10,000 in round numbers are transition from contractor to government individuals. And again, the Army will be growing to 5,400 of those.

SEN. THUNE: In recent years the Army's had difficulty both in developing a holistic modernization strategy and in executing particular modernization programs, and I would use -- the Comanche, the Crusader, Armed Reconnaissance Helicopter and of course the FCS are probably -- come to mind as the most notable examples of programs that were canceled or restructured after large investments of time and money.

And you've touched on this, Mr. Francis, in your testimony in response to the questions from the chairman, but just, if you could again, sort of lay out what in your view what are the key principles to improving the force modernization programs?

MR. FRANCIS: Sure.

I think, Mr. Thune, as you look back on those you can identify flaws in what we would call the business case at the start.

I think in the case of Comanche the requirements -- and I worked on that program back in 1983 when it was called the light helicopter experimental when the original concept was for it to be like the humvee, just a universal airframe that you could equipment to perform different missions. When it exited the requirements process it became the next-generation reconnaissance helicopter tank killer. It was actually more capable in many ways than the Apache. And at that point then the requirements outstripped the technology, so we had to go through a significant technology development effort to get the -- to meet the requirements. By the time the program really got on a sound footing, the threat had changed and I think that's the reason the helicopter was canceled. So, again, I'd look at the business case there.

I think on ARH it was a little bit different scenario in that most of the technologies were mature so the idea was to take different technologies off the shelf and bundle them together in a single airframe. But in that case the Army didn't allow enough time for the integration and presented a program that was going to move really fast. For those of us who were around when the OH-58D was equipped with a mast-mounted sight, we knew how long that integration effort took. So, again, I think the business case for ARH wasn't a technology issue but a schedule issue.

And I think in FCS I think we've seen both. And I think on the one hand why you can be a bit a frustrated with that, I think these are all takeaways. I think really tightening down on what we need to know about requirements and technology and cost and schedule when we launch a new system is somewhere where the Army can get real payoff here and some real help from OSD.

SEN. THUNE: Mr. Ahern, the Office of the Secretary of Defense is charged with overseeing major defense acquisition programs, including FCS, and yet with all that oversight, the recommendation to restructure FCS came very abruptly. And I guess my question is: Should the challenges that were noted by Secretary Gates in his recommendation have been addressed sooner by the office of the secretary?

MR. AHERN: I think that we were, as I noted in my statement, sir, were beginning to move toward the spinouts and focusing on the early spinouts as early as 2007 and 2008 and breaking them out with an entire set of documentation, the capability production document and acquisition strategy, a test and evaluation master plan. So I think we were moving in that direction.

In regards to the networking and the additional BCT modernization the secretary called for, I think we're on top of that and working in that direction. The secretary's work on the manned ground vehicle, his concern that it did not address some of the lessons learned and that perhaps it needed, as Mr. Francis indicated a couple of minutes ago -- look at it again were areas that -- were other areas that he looked at I think is the way for me to say it.

And it wasn't a question of the need and the secretary's been very clear about that. It was whether the Army program was the right program at the time going forward, recognizing lessons learned out of Iraq and the incorporation of some of the other vehicles as the MRAP that had been put into the field.

SEN. THUNE: Mr. Francis, how would you characterize OSD's oversight of FCS?

MR. FRANCIS: Well, Mr. Thune, I think that early on OSD was rather passive about FCS. And the program proceeded in 2003 even though it was I think by any measure of DOD's acquisition policy not ready for a start, yet it did go ahead. And there have been a number of occasions I think where OSD could have stepped in and taken some action. So, for example, after that initial decision in 2003 OSD said in 18 months it was going to have a second milestone decision to kind of clean up the issues that it hadn't covered in the first one, and then never held that milestone decision. So I think early on OSD could have done a lot more. And we talked about cost estimates before.

And I was thinking about the question that you just asked about the secretary of Defense's intervention. I know this committee had a leadership in the acquisition reform legislation that just went through, and I think it's a question that I think a taxpayer would ask or anyone here, which is, with all the processes that were in place at the time and all the policies, why did it take an extraordinary action on the part of the secretary of Defense to kind of right-size the modernization? Why didn't all of the things -- all the standards work?

And I think going forward we have to think in terms of acquisition reform. If we don't stay true to those standards and those reforms and allow programs to go through that, say, don't abide, then we're actually rewarding programs with money that fly in the face of all the hard work on policies.

So I think it's a really good question to ask and something that will provide some I think instruction for going forward.

SEN. THUNE: Mr. Ahern, would you agree that the requirements that FCS was developing toward were unrealistic?

MR. AHERN: No, sir. Holistically, the requirements are working forward. No, sir.

I think in terms of the system of systems, of the networking of the sensors that they intend to have, of the vehicles that they're going to be utilizing, the incorporation of those is valid. And I think that the recently completed preliminary design review -- as I understand and I haven't gotten a full debrief on it -- it indicates that the requirements are stable for the individual capabilities and that as a system of system that they've taken it under configuration management and that it is a valid set of requirements for it going forward.

SEN. THUNE: Mr. Francis, do you agree?

MR. FRANCIS: I don't think we know if they're realistic yet. I think the requirements were set before we knew what was technically feasible. So I think there's been a lot of work to rationalize or reconcile the requirements and technologies.

And I would agree on the manned ground vehicles a lot is understood now, but, for example, with the network, the network is quite a revolutionary network. There's nothing like it today. It's mobile; it's ad hoc; it'll handle a huge volume. There are requirements for it that we don't whether it'll meet yet.

So I think a lot of, you know, the feasibility of the requirements are to be determined yet.

SEN. THUNE: Thank you. Thank you, gentlemen, very much for your testimony.

Mr. Chairman, thanks.

SEN. LIEBERMAN: Thanks, Senator Thune.

Just sort of one more wrap-up question and then one on behalf of Senator Inhofe -- bottom line, can we say that we -- or put it another way, that the taxpayers have gotten or will get their money's worth out of what we've invested in the FCS system?

MR. AHERN: Yes, sir. I think that the payoff, what we've learned, the technologies that have been developed, matured in the five-year period of time that the program has been under way that will be implemented initially in the spinouts and then in the generation to follow of the vehicles, there isn't any question in my mind that with the right discipline in the system, the acquisition system -- and that's what I think we've been talking about for the last few minutes -- the discipline that's needed as we go forward with the four or five or separate programs, whether it's the network or the vehicles or the sensors, yes, sir, I am sure that we will achieve that capability.

We're going to be working to modernize the Army for a number of years holistically across it but doing it in a realistic way using the mature technologies to begin the spin-outs in 2011, decision some time next year to move forward in that direction.

And yes, sir, I think with the right approach, the discipline, we will realize the investment that's been made in the Future Combat System as evidenced by the preliminary design review, which, I take it, was quite successful.

SEN. LIEBERMAN: Mr. Francis, how would you answer that?

MR. FRANCIS: Well, Mr. Chairman, I'd say the FCS program has been very productive. And I think what has been accomplished has been phenomenal in terms of understanding the software, the requirements, moving all the technologies, developing the concepts for employment and so forth.

But the question of value I think is a very a good one and I don't know quite how to answer that because I would hypothesize that had we attempted to do this, say, in a pre-acquisition phase with a smaller work force perhaps focusing first on the network to see what we could do there and then allow that work to inform what we could do on the vehicles, it's possible we could have been nearly as productive for a smaller investment.

SEN. LIEBERMAN: For less money.

MR. FRANCIS: I'm hypothesizing there, but I think that's the question.

SEN. LIEBERMAN: Well, I hope we've all learned.

I agree with you, we're going to get a lot out of it. We've already gotten a lot out of it, some of it quite amazing, really, in the technological advances. But clearly -- and hopefully we've learned a lot about how to better manage a program like this. And your word, Mr. Ahern, is a good one -- discipline.

Let me finally on Senator Inhofe's behalf ask you the question -- I think you were here but I gather that he wanted me to ask -- it's a follow-on -- that he has asked Secretary Gates for his comments on the department's plan or recommendation for accommodating existing law on the canon, on the line-of-sight canon but has not yet received a reply.

What is your reply? What is DOD's plan there?

MR. AHERN: Yes, sir. As we're working through, as General Thompson said, working through the language, the precision, to ensure that we get it right, to represent the direction that we have as well as the statutory requirements, we will be communicating with the Congress -- I am confident of that -- in order to get it right.

SEN. LIEBERMAN: Well, one thing I'm confident of is that Senator Inhofe will stay on this until he gets that answer.

MR. AHERN: Yes, sir.

SEN. LIEBERMAN: So the sooner the better. (Laughs.)

MR. AHERN: Yes, sir.

SEN. LIEBERMAN: I thank you both. It's been a very constructive panel and it helps to guide us as we go forward to our markup next week but really, more to the point, guide you and us -- the department and Congress -- about how better to oversee the expenditure of large sums of taxpayer money to achieve the result that we want for our soldiers. Thank you very much.

The record of the hearing will stay open until Thursday at 5:00 p.m. for additional statements or questions, and if you get additional questions we hope that you'll answer them as soon as possible.

Senator Thune, do you want to add anything?

SEN. THUNE: Thanks, Mr. Chairman.

SEN. LIEBERMAN: Thank you both for your service. The hearing is adjourned. (Sounds gavel.)

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