 Checking to see if this is on we are gathered here today to celebrate the wisdom of the Scottish electorate Actually, that's not why we're here, but some of us are pretty happy with the outcome. So And I want to express that The world is a better place this morning as a result of that I want to make a couple of administrative announcements to start the program this morning if you're watching on the web You should be able to download the slides that are going to be shown here today You won't be able to see them on the website But you should be able to download them they're on the same page there if you're in the room here Would you please silence your cell phones and anything else that might make some noise or interfere? It's my privilege now to welcome to introduce our guest speaker this morning to welcome my boss the CEO and president of CSIS Dr. John. Henry John Morning every good morning everybody. Welcome miss. I look around this looks like a kind of a 12-step recovery program for government officials You know, I was just you know, I look on I think probably half but half of you I think are still there which I hope you have leaf slips that's permission that you got here So but but when the boss says he's going to give a major policy Address on acquisition policy and acquisition reform you want to hear it and you want to be here and I want to say thanks to Frank Kendall for giving us a chance to bring this to the policy community in Washington. It is a very important issue. We Like it or not, and I I don't like it. We're probably going to have to live in the sequester environment I think it's gonna hurt America really do. I think it's gonna hurt our defenses But it just doesn't seem that our political leaders Either understand it or have the will to do something about it So it means that we and I'm putting myself in your place today As people that are working these issues every day. We have to do something about it. Which means we have to get As much purchasing power out of our investment as possible Because it's word. We just are going to be living in this environment. We're confused Politicians can't see with clarity the world. We're living in and I'd say it's turned dangerous this last six months but because of where we are and because of the this political climate a Serious steward of public good Frank Kendall is saying we've got to do better. We've got to do better as a as a department and So he's been working and I know he's been working personally on 3.0 I teased him on the way over he's been editing it on the way I heard from his escort officer So it's now three point one two six is what this is I mean this thing is moving and we have to hear him this morning So we can at least hear it where it is right now But I think it's reflecting the fact that is deep personal commitment to find the right formula So that we know all of us and we're all in this together I mean the fifth service that makes it possible to defend this country is the private sector that helps us put Weapon systems we need to put in the hands of our troops You're every bit as much a part of winning this the Cold War as we're the people in uniform And you're going to be part of the solution to defend this country going forward because you are partners you carry a responsibility And I think Frank is the person that's now shaping the outline for that And we're very grateful that he's in the job at this time. We're grateful that he's willing to lead at this time So with your applause, would you please welcome Frank Kendall to get this program start? Now good morning, thanks for coming out. There's nothing more exciting than acquisition reform, right? What I'd like to do today is start off by talking a little bit about 2.0 and what happened to 2.0 And then I'll go into 3.0 and spend most of my time on that. I'm going to try to get through Hopefully tersely all the different things because there's a lot there and then I'll save some time for questions I want to begin though by thanking some of the members of my team, and I must thank CSIS of course for hosting this morning On my team my deputy Alan Estevez My right-hand man did my partner in crime here He's he comes first followed by the AT&L of AT&L Katrina McFarland assistant director for acquisition Al Schaefer acting assistant secretary for research and engineering and Paul Peters acting assistant secretary for logistics and material readiness I want to particularly thank my line managers in the services Heidi Shoe assistant secretary of the army bill the plant assistant secretary of the Air Force and Sean Stackley assistant secretary of the Navy There are the people actually execute the things that are in whatever issue or a version of acquisition reform or acquisition improvement We do there are a number of other people. I want to mention Dick Jimman and Shae Assad kind of a team that does contracting pricing For us very very much a part of this John Conger my installations person Andy Weber who does nuclear bio and chemical programs Tom warehouse who does operational energy Nancy Spurl does my administration for acquisition Codetailer who does human resources a key part of all of this and Andrew Hunter who does rapid acquisition Phil Anton who's my chief analyst and does a lot of the things that you've seen in the acquisition performance reports It's a big team and it's a lot bigger than the people that I mentioned Would you join me in thanking all those people and their colleagues? As I look around the room I see some faces of people I should have mentioned so I didn't mean to leave anybody out But it is a great team and I'm very proud to be part of it. Okay. Let me out the slide on 2.0, please I'm gonna just spend a minute on this but Better buying power is about continuous improvement is about an evolutionary change And it isn't about throwing out one set of ideas and completely replacing them with another set It's about finding ways to move forward in areas where you can make the most difference and continuously Examining your progress to identify those areas and to understand the influence of the things that you are doing to see if They're the right things need to be modified or needs to be a different focus So 2.0 is not dead 2.0 is alive and well and this chart tells you where some of those things are the code up There is that if it's green it means we have done it it has been institutionalized It is part of what we do that is no longer on the better buying power list per se But that doesn't mean we're not doing it. We put out two versions of the annual report on acquisition performance We're going to continue to do that We're going to expand on the body of data and analysis that's in there and continue to use that to guide what we do We've also assigned senior managers for acquisition of services. They're in place So that one's complete a number of others are well underway or just continuing activities And you see some that are in black that are not mentioned specifically in 3.0, but they are continuing I'm sorry, the black ones are the ones who are continuing in 3.0 and are getting continued specific emphasis The blue ones are in 3.0 also, but they were some change with some modifications So there's an enormous amount of continuity between 2.0 and 3.0 So if your favorite one is not seem to be as visible under 3.0 We're still doing it even though it may not be emphasized may not be on the list I know for example that LPTA is still of concern though It's probably certainly acceptable as a means of contracting is still of concern to a lot of people policy on that isn't changed It is not getting a lot of emphasis under 3.0, but where those concerns will continue to work them So that's that's the short version on 2.0. Let me move on to 3.0 now There's a lot on this chart as John kind of indicated earlier on I'm going to try and plead peel back the onion a little bit for you Starting with sort of the bumper stickers at the top in the bottom Achieving dominant capabilities through technical excellence and innovation Okay, the thrust of this version of better buying power is about that the thrust last time Was about critical thinking and tools to help our people make better decisions as they did business deals plan and executed programs Contracted for and acquired services and oversaw that work It was about decision-making and better tools and critical thinking and professionalism The earliest version of better buying power the one dr. Carter and I did was largely about best practices So there's been an evolution over these three and this one brings us back to our products to the capabilities that we're giving to the war fighters So it is focused on those dominant capabilities And the importance of technical excellence and innovation to acquiring them Now this goes hand-in-hand with what the Secretary of Defense and the Deputy Secretary of Defense and I and others have been saying For some time now is that our technological superiority is at risk. It is eroding because we're not making the investments We should be making John mentioned sequestration the threat of sequestration even the cuts to the level We've already taken them post problems for us in terms of maintaining technological superiority That's one of the things behind this thrust and this Version of better buying power towards that end of the spectrum towards the products that we're providing and how well we're doing it Providing the right kinds of products The other bottom the other bumper sticker up here is at the bottom of the chart and it's continued strengthening our culture of cost consciousness professionalism and technical excellence and Those summarize if you will the three editions of better buying power The first one is focused at large part on cost consciousness and things we could do to control cost The second one added professionalism to the list because the professionalism of our people is the most important factor in terms of getting good results and then technical excellence the centerpiece of getting dominant capabilities to the battlefield which characterizes 3.0 so those three things are all about who we are and what we do and they're central to the whole Concept of better buying power and what the department tries to do in AT&L Now if you go back one more layer on the chart, there are a number of major categories here These are essentially unchanged from better buying power 2.0. These are the areas of focus writ large affordable programs Dominant capabilities while controlling life cycle cost incentivizing productivity incentivizing innovation In eliminating unproductive processes and bureaucracy promoting effective competition improving tradecraft and acquisition of services and improving professionalism within our total acquisition workforce But those are the main areas we continue to focus on there There's been some minor changes in the wording of some of these But they're essentially the same as the ones that we had last time with some slight shifts and emphasis So let me now walk you through this quickly and talk to you a little bit about each of these Under the first category continue to set in force of affordability caps We've been doing this for about four years now. We've been reasonably successful Almost all of our programs have stayed within their caps We have two or three that are just marginally above them and we have to go address those And we have a couple that have a few percent increase then we have to go address those as well This is provided some discipline for our acquisition process. It's very important. We continue this it's very important We enforce the caps we are putting in place I just saw an analysis by a former colleague Dave McNichol at IDA And the analysis was of the implications of tight budgets for program performance And as we've done a lot of correlations Phil Anton and his team have done a lot of correlations Of different things to how they affect the acquisition outcomes in particular costs and scheduled problems One of the things we did not think to look at was budget climate and we should have looked at it because in tight budget climate people's behavior changes and that's what's behind all of our results Dave McNichol's work shows very clearly That in tight budget times we take risk industry takes risk in their bidding because there are a few of things to go after People who do budgets and do programs take risk because they try to cram more in and they force people like program managers and acquisition leaders and others To cut corners and make assumptions that turn out not to be true And that's how you end up with overruns and schedule slips. It's a very strong correlation You may have noticed that we're in a tight budget time right now So it makes it incredibly important for us to continue to Set and enforce meaningful affordability caps, but also to make sure we have realistic program plans as we go forward The next major category is the dominant capabilities while controlling lifecycle cost Some of the items in this first one is an example of that that are in better buying power Our core items if you will they are central to what we're trying to do And they would probably be and I expect will be in any of any version of better buying power And this is one of them the idea of should cost the idea that our managers are responsible for understanding their cost structure Examining it finding opportunities to reduce costs setting targets for themselves and going after those targets trying to achieve them We've implemented this very well across the department over the last four years We're continuing to emphasize it All of our program managers all of our people who manage money have an obligation to do this And it's a big part of changing who the how we think about money It's not our duty to spend the money to get it out the door It's our duty to control our costs and save money wherever we can and get more value for the taxpayer So that's a core item under better buying power building stronger partnerships Between acquisition requirements and adding in this version intelligence communities We have to be better responding to threats. We have to understand the threats We have to incorporate that knowledge into our programs and then make adjustments And that requires a stronger partnership with the intelligence community We don't just get a threat document at the beginning of a program. We have a continuing relationship We need to make some more progress. We have some good things in place there, but we need to do more The next one is carries that theme forward anticipate and plan for responsive and emerging threats I have had the occurrence many years ago of a program manager who came in and said that We shouldn't cancel his program because he had met his requirement His requirement being the threat that existed at the time we started the started the program But over time the threat had changed it improved its capability to where his his system that he was developing would no longer be effective He seemed to think for some reason that because he had met his initial requirement We should still bow ahead and produce and put in the field as his product We did not okay. You have to be aware of respond to threats You have to plan for them you have to think about them ahead of time And anticipate what our adversaries may do we do have active Potential adversaries out there now who are designing things to defeat us And who are paying attention to what we're doing and thinking ahead about what they need to do to counter our emerging systems There are also emerging threats that may not be fielded yet, but we know they're coming We have evidence that they're coming. It's a little different than a responsive threat We have to take both of these into account as we plan our programs Institutionalized stronger DOD level long-range R&D planning. This is something the deputy has asked me to do deputy secretary work We have done some strategic planning if you will for our research and development Investments largely focused on specific technology areas that we think are strategic and we've identified This is going to take it a step further. This is modeled after after something that was done in the 70s It was a combined industry and government activity at the time We've asked Steve Welby who was our lead system engineer to lead this It'll be overseen by myself Katrina, Hal Schaefer, and Arthur Prabhakar from DARPA and a few other people But it's modeled after that earlier activity and it will be designed to set out The next few years of high priority R&D to get us to a position where we'll have technologies We can take into game changing systems Uh, if you look back to the the study that I referred to that was done in the 70s A lot of the capability we have today came out of that study Things like smart weapons smart seekers some of our networking technologies and other things Things that have dominated how allowed us to dominate in the battlefield for quite a long time now The idea is to get to the next generation of those things find out what they are do it in a coherent way Then focus our resources on programs that are going to change the game If we if we don't do that the concern I had about technology superiority is going to become even even greater Uh the next broad category incentivizing productivity Uh aligning profitability more tightly with our department goals. This is not this is another core Uh item under 3.0 under better buying power in general We we as the last report we put out shows we do a reasonably good job of aligning Our our the industry's opportunity to make a profit with the results that we expect We don't always get it perfectly and I think in general we can do better And one thing we can do better is to provide greater incentives to innovation We can provide incentives obviously to to performance, you know cost and schedule performance and meeting existing requirements I want to go beyond that so this will be a continued area of Of emphasis again the one that would be under any version of better buying power Same as true with the next one increasing appropriate use appropriate contract types We're modifying this one kind of as we go as we learn and this is an area where our analysis has shown us That incentive type contracts formulae incentives we call them where possibilities for Cost increases or or savings are shared between industry and the government are very effective at getting results You can set those arrangements up a wide variety of ways But these seem to be the best forms of contracting for many of the things we do That's true and and instantly it's true of cost plus incentive and fixed price incentive And actually there is a stronger correlation To using the incentives and our results than the risk of whether it's a cost plus or a fixed price contract So we're going to continue to emphasize that that's a slight shift as we've gone through 1.0 the 2.0 to 3.0 And as we've learned from from the actual data about what works and what doesn't Expand the superior supplier incentive program across dod the navy rolled out its pilot program A few months ago, and we're instituting that and the other services this year That this going into the next physical year The idea here is to let industry know how it's doing how it's doing relative to its competitors and its peers in the industrial base I think will benefit from this. I think industry will benefit from this I think it's important to shareholders to know how their companies are doing I think it's important for boards to know I think it's important for managers to know Then you can react I had after we published the navy published its list I had a ceo come into me and say that because we had published a list and one of his business units Was in the bottom third of the three, you know segments He had to go explain to his board why he was in the bottom third and what he was going to do to improve I thought this is terrific. This is exactly what I wanted to see because of this We're going to continue to do that We're going to do it by service and not at the dod level a lot of the business units that were evaluating or that were We're assessing Exist more in line with service needs. So it's probably the right level and we're going to do it by the major p and l centers In the in the contractors, which I think is the entity where people have profit and loss Responsibility and can control their performance best now. They'll give insight to more senior people in the companies It'll give us insight and I think it'll provide a strong incentive industry We are of course looking for benefits that we can provide and we're working with the companies In particular that are at the top tier of those three tiers to find ways to to to have a Benefit for being at the top as well as you know the concern about where you are if you're at the bottom Increase the effective use of performance based logistics. This is a carryover from 2.0 We make some progress on this. We've gotten out some good guidance. I think to our workforce We're getting good training out. However, we're not improving our performance in this area as much as I'd like to see We're not doing more pbl type contracting I think that's in large part because of the difficult year we had in 13 Between synchronization and furloughs and everything else the workload and our contracting people in particular was was pretty pretty excessive But it's a harder way to do a contract It takes a little bit more work than some of the other more straightforward ways But it gets results and we need to do more of it. So we're going to continue to emphasize pbl Remove the barriers to commercial technology utilization This is a new item And it's an item where we have our own work to do and we're going to work out work with industry on this To find ways to do this. We think there are a lot of opportunities there This is one of the items on 3.0 where we're going to put a team together We're going to work with industry and we're going to go develop specific things to implement this this broad goal Technology, of course in a number of commercial areas moves much more quickly than military areas We want to take advantage of that. We want to find a way to bring innovators who are in the commercial world Give them a reason to be involved with the government and do business with the government So we're going to try to improve our performance there and we're open to ideas on that while i'm on that subject Another key thing on the chart overall that I should have mentioned is that this is a draft I'm I'm briefing it today. We're going to be around talking to a lot of people about this But this isn't the final version of 3.0. There's not going to be a 3.1 point Whatever it was that john said 3.1 point 2 6 there will be another Final version of 3.0. This is the same process we used for the earlier versions Basically, we put it out. We get feedback from stakeholders on the hill and think tanks and industry particularly in industry And then we modify it and then we develop implementing instructions So in about the january time frame will have gone through that process We'll put out the final version with implementing instructions. So i'm introducing it today It's the start of that comment and Dialogue that we need to have as we finalize this and we forgot exactly what we're going to do on some of these areas So we're very open ideas To modify this or to help us go in the right direction as we implement it Uh, the next one is improve the return on investment in dod laboratories The about 30 billion dollars a year give or take goes through our dod laboratories. That's a lot It's not all r&d money per se and some of it's from work for others Uh, but it's a pretty significant amount of cash flow and we need to get as much of a return on that as possible This is not a new subject a lot of uh previous studies have looked at this But I think it's worth our while to go take a look again and see if we can improve the productivity and efficiency of our dod laboratories There are a significant part of what we do in the r&d world The next bullet is similar It's on irat internal research and development that companies do and in contracted r&d that we that we that we provide the funding for and do in a contract The government pays for both of these uh bodies of research What I mean by contract that r&d in this case in particular is six one through six four parts of the budget Uh stuff before we get into full-scale development of an actual product Or or that's different from the upgrade of an existing product It's the earlier stage research if you will both the s&t research and then The the the more advanced concepts research that follows after that before you go into a um d program We got to look hard at this work. I've I've we've done some things on irat in particular already under earlier versions of versions of better buying power Uh, we we've improved our ability to communicate with industry. We have a better understanding of what industry is doing They have better access to what the government is doing with our funded r&d and our in-house r&d Uh, we want to go a step further with this and start looking at what we're actually getting out of this Both of these uh plots of money The first one irat is about four to four and a half billion dollars a year And serat is somewhere in the neighborhood of 10 billion dollars a year You know, that's a significant amount of money. Our total r&d budget right now is running about 60 billion So you can see that we're talking about a fairly significant fraction here Uh, the next one is incentivized innovation in industry and government It begins with one on prototyping and experimentation When when budgets are tight There's an opportunity to do things that are not full-scale development not really preparing products Uh for production, which is very expensive But to build prototypes and to do operational experimentation with those prototypes It's very hard in the current budget climate I can tell you to get those sorts of things funded because they're not Decentarily you're definitely going to lead to a product or capability in the hands of the warfighter But there's a lot you get out of this you move technology forward for a relatively small amount of money You advance technology you advance the state of the art in the direction you want to go by a significant amount You reduce lead time by several years perhaps to having that technology in an actual product You help your industrial base. You keep your design teams alive So if you're not doing full-scale development, you're at least giving them a chance to build something and be creative And hone those skill sets on a on a product level basis And you position yourself in case something happens. It changes the situation if the threat increases If funds are more funds are available, then you can move much more quickly into an actual product So there are a lot of good reasons to do prototyping and experimentation. The problem is finding the money to do it I'm going to be proposing some of these in the budget process this fall and we'll see how it goes I was able to get some things funded last year I think secretary work and the secretary of defense secretary hagel are both very much in line with my thinking on this But there's going to be something we won't do if we do these prototypes and do this experimentation And that's going to be the difficult discussion. We're going to have to have as we get into our process emphasize technology insertion and refresh in program planning We do this to a degree already. We can be better at it This is closely tied to the next item about modular open systems The f-35 for example has is on its second refresh cycle now. I can envision the third one easily Be forward high rate full rate production The technology in certain areas electronics in particular is moving much more quickly than the length of time takes us to develop a major weapon system And we need to be planning for that and being able to be able to insert those technologies in which leads me to the next Item which is open systems architectures Again, this was in 2.0. This is not new. We have put out some better guidance on this I think for our workforce We're going to be looking very carefully at our product designs to ensure that as much as we can As much as it's economically viable we designed for open systems. That's particularly true for Software as well as for hardware I was an industry for a long time I understand how industry works and thinks and how I understand how attractive it is To retain control of a product once you've filled it So you can do the upgrades and make sure that you're involved with them But that doesn't get us the competition that we need here So we need to work with industry to make sure we have open systems That are actually effective and can actually be used to upgrade programs as technology matures And to do it as much as possible in a competitive environment Increase the return on small business innovation research. This is a good program. It's been very successful We've done a lot there the The the problem I want to address here is the transition of small business innovative research funded projects into products Into fielded developed actual products. I think we can do better there And we may be able to expand that program. I don't know if we can but I'm sure that we can do a better job of doing transition Provide technical draft technical requirements to industry early and involve industry and Funded concept definition. This is the earlier stages of product development And it gives us a chance to interact with industry I I really encourage our people to work with industry and get industry's ideas Obviously industry has their own interests in mind in many cases when they provide us with things But that doesn't mean they're bad ideas They can be very good ideas and we need to be open and have that dialogue and get industry more engaged The study that I mentioned that was done in the 70s was led by don hicks one of my former bosses in the bank The integration group for that study But when he led it he was an industry he wasn't in government It was before he came into government and at that time we could very easily just reach out grab smart people from industry Put them on a panel together with government people and go do a study like that We're not allowed to do that anymore. The rules today don't don't permit that But we can still find ways within the rules to have dialogue with industry One of the ways to do that is let them know in this case This initiative is early as possible. What our requirements are so we get feedback from them on that If they think our requirements are unreasonable for some reason we need to know that we need to understand it If they think that they could be even more Effective we could have more stringent requirements or better performance requirements and that they can support that We need to know that too And then industry needs to know so they can make their own investments in terms of trying to fulfill our requirements and positioning themselves The funded concept definition piece is about Taking some money low not not very much money and some time early on in parallel with our analysis of alternatives activities To ask industry to do some early design trade-offs and trade studies do some operational analysis This allows us to get inputs from industry in a in a structured way Stundering the competitive environment industry has to be willing to share with us things that we can then use to put into requirements But if your your concept is the one that looks most attractive to us And we use that as a basis for our requirements and that puts you in a very good position So there's an attractive reason for industry to do this with We'll open up our our aperture To the all the all the good work Ideas all the smart people that are out there thinking about how to solve our problems for us All the all the knowledge about the exact requirements and all of technology do not reside in government We need to tap in industry more effectively than we have been Provide clear best value definitions so industry can propose and do the can choose wisely We're doing this already. We've done it on a little a pilot basis essentially, but we're doing it more and more broadly The idea here is that we need to give industry a reason to bid higher performance to us if they think it would be attractive to us in the product The reason meaning that you'll get selected in the source election process The way we've been doing this for a very long time now is we put out requirements that have an objective level and a threshold level An objective level is what we'd sort of like to have if it were possible and we could afford it The threshold level is what we really want to have That's sort of our minimum that we want to have in the product Industry bids to the threshold levels and nobody expects otherwise Because that's generally going to be cheaper and unless there's some way to get credit for being above that level There's no reason to bid above that level The idea here is we will tell industry What it's Performance will pay another let's just say 10 percent if you get us to the higher low performance Or we'll pay another 30 percent if you get us to the higher low performance Now you still have to be below our overall affordability cap Bid something that's better than the minimum That they're going to have a better chance of winning and getting the contract was at the end of the day That's what it's about from the industry side is do you get the contract or not? For there's an incentive To achieve those levels and give us a better value product Okay, the next major category unproductive processes in bureaucracy. This will always be a better buying power also It's a constant struggle. It never goes away We've made some progress there, but I think there's more to be done We want to continue to emphasize the chain of command a lot of bureaucracy that is is imposed on us And imposed within the services as well as from OSD Comes from other people who are not in the chain of command who are stakeholders of some type Who want to have make sure their interest is protected? That's that's valid. That's a reasonable thing for them to want to do But it also imposes a big burden in many cases on the chain of command itself So we want strong relationship with the requirements people in particular And we want to work with them as we go forward and through the life cycle of our products But we we want our chain of command to be empowered to do the job It's been given to do and that is a large part of what removing the burden That they face is what this is all about And we're doing our best to do this in OSD Again, though, it's a continuous struggle We have an initiative with industry that Katrina McFarland is leading To look at some of the burdens that we're placing on on our contractors through the way we do business That's well underway. It was part of what we were doing under 2.0 And we'll wrap up in the next few months. So we continue to look at that level as well We're trying to reduce cycle time Well, ensuring sound investments. That means we don't want to take excessive risk I want to look for ways to actually get cycle time down without creating excessive risk I have been asked by Some of the people on the operational side of the house about why the acquisition system takes too long It isn't the oversight of the acquisition system that's slowing down our programs The decisions get made they generally get made on time Even though there's a burdensome staffing process to go through to get that what slows down our programs is not getting the work done Not fulfilling the requirements not not getting the design finished not getting the test done not actually building the product on time That's where we got to focus if we're going to reduce cycle times Streamline documentation though will continue to do that I have a general principle that documents should have utility Not just be something that we inspect and then gets thrown away after you've met my inspection requirements They should be a a plan that we get into osd to review for a service program Should be the actual plan that will be implemented and used as a management document by the program office That's the goal. We're still striving for. I don't think we're there yet. We're going to continue to emphasize that The next one is another core item competition Create and maintain competitive environments as a continuation from 2.0 Competition is our best way of course to reduce prices, but we can't always have competition We're a low volume specialty product buyer for the most part and we generally cannot afford competition in production We can't afford competition leading up to a decision to enter emd Occasionally we can carry competition through emd and very rarely can we have competition in production Which means we got to find other ways to do it and that's what this initiative tends to focus is not It's the idea of creating a competitive environment giving people the reason to worry about losing their business And and emphasize that performance is what's going to help you keep your business better performance So that's the idea behind that it again. It's a core value. We're just going to continue to hammer on that You can do a lot of course at subsystem and component levels You can do a lot in the services contracting area, which i'm going to talk about in Environment existence out there Improve our technology search and outreach in global markets This one gets at the need to do not be so Close We have a lot of very capable partners in the world a lot of other countries who do good work And we're looking for opportunities to co-develop and do sharing of the burden of Developing a new product and and and then better scales economic scale production once we get into production And so we're looking at a broader at technologies. I mentioned earlier. We're looking at commercial technologies This expands that even further and talks about global opportunities Acquisition of services Because we spend as much money on services as we do on products. This is also going to remain a core part of better buying power It's also something that we still have a lot of work to do on We've put some things in place to manage our services acquisition We're doing better But i'm convinced and alan who's got the lead on this for me is convinced that there's more money to be saved here More productivity gains to be made more efficiency to be found A piece of that is this first bullet, which is about small businesses This is one of the best areas for small businesses to get involved in the department They bring a lot to the table. They're often leaner have lower overheads Are hungry and can provide us with services much more effectively and efficiently than the large businesses can Key to that is market research the item in the first bullet understanding what's out there understanding what's available Again, we've made progress, but there's more that we can do Strengthening contract management outside the normal acquisition chain. We focus enormously in this town on our products the major programs in particular There are products obviously at lower tiers that are important to us. There's an enormous amount of money there But in this case, we're talking about services contracting and people who buy support for installations, for example People who buy maintenance services people who buy It services there are a number of areas in which people are spending money And we need to focus on best practices in each of those areas and improve our capabilities there Um Improving requirements definition One of the critical things we found this is another carrier over that we're continuing One of the critical things we found to having a successful Services contract and getting good value for your money is that you write the requirements well This enables people to bid well and enables people to understand what you really need And it'll enable us to get a better business deal where the product and the performance we want is well defined So that's one area of continued focus under services Uh, the next item is new. It's about improving effectiveness and productivity of contracted engineering and technical services That's consistent with the theme of this version of better buying power and it's focusing us on What we do in cedar contracts, for example We're hiring technical expertise for bringing people in to help us and do services of this nature for the government We spend a fair amount of money here and I think we can be more productive in how The return we're getting on that as well. We're looking for ideas on that Okay, the last major category is improving professionalism Uh, I I I do not maintain that we have an unprofessional workforce. We have a very professional workforce. I'm very proud of it Uh, we have terrific people. They went through a nightmare year in 13 Uh, and they came through it with a great deal of resilience. It's a great team But every single member of that team including myself can improve his professionalism So we're going to continue the harp on that and continue to find ways to to make that happen Part of that is establishing higher standards for our key leadership positions. That's well underway We're going to have that in place by the end of the next year or so We're establishing stronger professional qualification requirements for all our specialties in acquisition And that's well underway also And the key leadership positions, uh, day brown, who's my chief tester, uh, development testing evaluation lead As instituted a certification board if you will for our top leadership positions in the testing area for that career field It's a pilot. We're looking at whether we're going to do that for some of the other career fields as well and it's about building the The culture of professionalism and the idea that and it's true that all of these professions are that they are very specialized bodies of work with a great deal of knowledge and experiences required to do them well Strengthen our organic engineering capabilities. I think our organic engineering capabilities in some cases We can't be good customers if we don't have the right technical capabilities in-house So we're going to look at ways to do that. That's another area where we could use some help Part of that may be more exchanges with industry for our technical people More careful management of the career fields of technical people and certainly emphasizing the importance of technical people to our success Ensure the do do leadership for development programs is technically qualified to manage r&d activities This is a bit of a shift. Uh, there's a some people have the idea Which I think is not correct That if you're a good manager and a good leader, you can run anything. I don't believe that that is true I would not take a group of trial lawyers who were doing litigation and ask someone Who was a good manager and a good leader but not a lawyer to supervise that group of people as they did their work I would not ask A person who was not a physician or surgeon to supervise a group of doctors who were surgeons As they did their work and doing their work And I would not ask someone who is not an engineer to run a development program Where the fundamental job you're doing is engineering I just think that that's a recipe for for failure And I have seen some examples of that you need to understand what you're doing if you're going to supervise it effectively And so I'm pushing us towards a stronger line. Some of the services are pretty good shape on this Others are not and I think we need to emphasize this as we go through our selection of people for some of our key jobs So that'll be a big part of that and I think that the services need to really recognize The criticality of those kinds of professionals those kinds of Qualified leaders and managers for their development programs, which is where we tend to get in trouble in our programs Consistent with that and kind of as a corollary to that as the next item improve our leader's ability to understand and mitigate technical risk This this one came out of an experience of my last few years where I have seen a lot of people come in With and talk about risk and what I my perception is that what they are doing is not managing risk They're watching it. They've identified it. They see it. They know that if certain things go right things will be better And they'll be less of it. So they're watching it. They understand you understand to that level They're not managing it managing it is about doing things To change the nature of that risk and reduce it earlier than it would be otherwise It's about things like carrying backups. It's about carrying two sources It's about any number of things you can do early testing and key things how you structure your program There are a lot of things that we should be doing to We're going to look at that hard and try to make sure our people can do a good job of that It's a critical part of what we do the product development cycle is essentially a risk management process You begin by defining requirements what you think are achievable You understand the risk of getting to those requirements. You identify risk mitigation activities You need to do before you commit to design for production You do those so you have those things accomplished early Then you commit to a development program Which is all about getting out the risk of building the product finalizing the design and then you test again You're reducing risk. So it's all about risk management. We need to be we need to be very expert at that at that skill The next bullet Is one that I put in because of my long-term concern for the health of the DOD in our nation And it's to it's to increase our level of support for science technology engineering and math education A lot of the defense industrial base is involved in this and I really mostly on a voluntary basis And I really applaud what they're doing We're going to try to do as much as we can from the DOD perspective You know our economic well-being our economic competitiveness and our military competitiveness and our technological superiority All depend upon the science technology engineering and math Bases that we have to build the products that we need So we're going to it's long term. It's not an immediate return But in terms of things that are going to be different 5 10 15 20 30 40 years down the road We have got the strength of uh This part of what we do as a society frankly Okay, that's that's the list. I think I've left myself a little bit of time. I hope for questions. So, thank you Mr. Secretary, let me uh first Apologize to our web audience We had a cutout of the web feed and it should be back up now But I want to make sure you know that the entire video will be Hosted online afterwards. So anybody who didn't catch it the first time we'll get to come watch it again. Great We have three ways you can ask questions One is is in fact, we'll do our normal system of you raise your hand Mr. Kendall will recognize you somebody will bring you a microphone you stand up Identify yourself in your affiliation and you can ask your question The second is we have cards. This is particularly useful if you don't want him to know who's asking the question And and we already have a number of these so I'm actually gonna I'm gonna pass these up to you and you can start looking at them The third is if you're watching on the web, you can email your questions to deburto dber t e a u At csis.org and actually a number of these have already come in From the web. So those are the three ways in which you can get it I'll leave it up to you to determine when to go back and forth between the the paper and the audience. Okay I see a couple hands. Let me do kind of one-on-one than the other First one is you want to push affordability, but you want some big bets on technology for offsets How do these two goals fit together? I want the big bets cost too much With two little guaranteed benefit Um You have to reconcile these competing requirements, right affordability is about We don't establish affordability goals till we enter engineering manufacturing development We do we do targets earlier than that To influence the requirements trade-offs that happened earlier and then as we get to milestone b the commitment to emd We then put a cap in place, which is basically the cap. Okay. It's not it's not a target or goal It's the cap. That's what you have to design to the tip to have to stay under That allows us to keep our programs within Within the reach of our within our grasp the The the analysis behind this is long-term capital planning analysis You look out the lifecycle of the product 30 years roughly And you look at your expected future budgets and you analyze Whether or not this will fit in your portfolio given all the other things you have to do And from that you can derive the production cap and you can derive the support ability cap So they're not cost estimates. They're caps based on future budgets They're they're very different from cost estimates once you have the cap Then you have to ensure that your cost estimate for the actual product You want to buy is under that cap and you have to design to that. So it's a design constraint So that that's really Implemented more as we get into product development The there are two kinds of beds. We're talking and we are talking about technology offsets basically There there are early-stage Technology maturation and experimentation some of the prototyping I talk about which is a relatively small bet But then there are places where you make the major commitment to a new system a new product We want to get all of this right But in the earlier stages you have a chance to learn and make some decisions about what will really work on the future Battlefields and that can be done relatively inexpensively if you set aside the money to do it So that's how that part of the the equation works Um the guaranteed benefit We have no choice We can be complacent and sit and wait We have to make decisions about how to use our resources in some way to stay ahead of the other guys. It's a competition It's become a more intense competition over the last 10 or 15 years. I think So we have no choice. We have to figure out what's going to make sense when we have to do it And in some cases we have to overcome some significant inertia. Uh, I can go on and on about that So we need to work closely with the as I mentioned the requirements community and the intelligence community as we try to figure out what the best way forward is So i'll stop there. Okay, this one right here In the front Thank you, sir. Zach Biggs with james. Um, one of the things you talked about was accessing commercial technology accessing A couple years ago the department was pushing congress to limit commercial of a type Within the confines of acquisition. I think in response to the lcs the presidential helicopter to a couple of areas where there were problems Um, given that that's a tool that does allow for access of commercial technology. Is that being rethought? Is there still a concern about how commercial of a type is being used? And do you think there are other areas that might need to be modified as far as Acquiring commercial technology to make sure that you can get to that technology. It's a good question They're really two different subjects in there, but they're related Um, what i'm trying to do is make it more attractive for commercial companies to do business with us find Avenues by which we can bring commercial technologies in more easily. There are things like Other transaction authorities we could use for example to do that DARPA does that very effectively The the commercial of type issue is about our purchasing practices And when we buy products that are commercial products, uh that are sold in the marketplace Competitively we essentially pay commercial prices and we don't we don't inquire into the cost of those We don't get background data. We certainly don't get certified cost and pricing We basically say that the marketplace has worked and has affected Has gotten as a price if we're a volume buyer, then we try to get discounts, of course Which is what any commercial buyer would do, but we don't make further inquires Then if we if we do a unique military product on a sole source basis, particularly we look at the cost structure Now we have an obligation to protect the taxpayers interest here One of the things we have to do is the government is ensure that We don't pay excessive prices for things and every now and then we do that We make a mistake and we get you know a lot of publicity about it So we have an obligation to do that and it's what the taxpayers expect us to do So for things that are unique to the military We have a lot of things we do with industry to ensure that we look at their cost And in some cases we get certified cost Then there are things that are kind of in between and that's where the commercial of a type comes in It's a product that is Derived from and close to perhaps a commercial product, but it's not exactly the same So then we can do a lot of things we we want to put as little burden on the purchasing process as possible But at the same time you want to make sure we're getting a fair and reasonable price So we ask industry to give us information that will tell us somehow that it's a fair and reasonable price So the the guidance we have to our people right now is essentially that It it leaves open the possibility of asking for certified price data But the preference is for something much less than that something that is adequate to us And so we we're looking at that now. There have been some issues that have come up I'm working with dick and shea saw dick jim and shea sawed on this I want to make sure our policy is as clear as it can be That it balances the goals of making it possible for us to get commercial and commercial like products into the government As efficiently as possible. We don't want to drive away commercial suppliers I mean I mentioned barriers to entry time So we don't want people to be refusing to do business with the government because we've imposed owners or unacceptable requirements on them And at the same time you want to protect the taxpayers interest So we have to find a way to balance those two sometimes competing goals Now I'll mention this just to wrap this up We all buy commercial parts all the time I don't think we heard any of us is as individual consumers How often do you inquire into what it costs to make the product? We don't care about that. We generally do not care about that. We care about what it's worth to us. We care about its value to us And so, you know, if we're buying a car, you know, we don't care But we might care or we might be slightly interested But we think that the commercial marketplace that we're in Is fairly setting the price that car companies are in competition with each other So we don't inquire into the cost and it turns out that the margins getting on most cars anyway are pretty small What about when you buy parts? What do you think the markup is on the parts you buy for your car? I can tell you it's a lot more, okay? And that's how car companies are often really making it those genuine whatever parts, right? As a consumer you sort of just accept that But when I'm buying parts for the u.s. Government with us taxpayer money I don't want to pay factors of three or four for those parts compared to what they cost So that's the problem that we have that's the number. We're not quite like consumers because we have a different responsibility Uh commercial companies who are making those parts Really don't want Right, there's a reason business reason why they do it the business reason why it's structured the way it is But you know, it works in the commercial world pretty well There's a little different requirement for us as buyers for the u.s taxpayers. Okay. All right next one's here What what ideas do you have to change the culture from I need to build it from scratch Versus buying it commercially The problem is that an awful lot of our products are not available commercially other weapon systems are not commercially available for the most part There are a few exceptions The we've done this and we essentially use a commercial model in a couple of cases. I can mention One is a tactical radios. We had a program called jitters that went on for a very long time It was it was cutting edge technology to do software defined radios basically for tactical use And there was a for families of them a lot of you in the room. I know we're familiar with these radios And we realized a couple of years ago that while we've been going through the government Process of developing all this industry had realized what our requirements had been And a number of companies have decided on their own to go ahead and develop products Essentially on their own and then to offer them to us. That's the commercial model The military model is we pay for the r&d We reimburse you as you go for the r&d and then we pay you for the production as you go And you give the product to us the commercial model is do the r&d yourself at your own expense Borrow money You know sell stock do whatever Get capital yourself do the r&d and then put it on the market for people to buy That's not the way we do it and I think it's very rare For most of the things we buy that that would be an appropriate bottle for the military It takes too long to get our products into production and returns to uncertainty There are some exceptions and the radios are one where people saw return and they made investments And they have products that we can now go out and do what is essentially a a source election among products that are already developed Our culture wasn't ready for that When we started to do this there were people who wanted to do all the usual things we do with a normal product We had to say wait a minute. This is not you know We don't need to do two years of developmental testing. It's developed. That's done We do need to do qualification testing to see if it meets our requirements And if it does we're going to accept it and we're going to as long as it's you know competitive The other example I have is in the space launcher where people have made Investments on their own to develop space launch capabilities There are a couple of companies doing this. I'm not going to name some companies But I think it's in everybody's minds a couple of them anyway And that's provided an opportunity for us that created interestingly a competitive environment the thing I talked about in the slide where the government's Normal source reacted very strongly to the arrival or the pending arrival in this case it hadn't arrived yet of competition And we got a substantial reduction in cost And there's a lot of I think very healthy behavior happening out there right now in the space launch area as far as the government's concerned Because of the fact that we're introducing competition. We want to have as much of it as we can as soon as we can because it's going to work for us Okay, next the audience right here Yeah, while we're waiting for the mic. I'm going to give you a couple of anonymous Questions that have come in here Very well Costs Good point the The report has not dealt with support costs so far and we need to get that in there We need to start analyzing that more effectively The caps we're putting on the affordability caps do address both production and support costs. So we're we do have that in place We should probably start publishing data pretty soon about those caps and how effective they are We probably need to focus it's in the services side of the house that Alan's working on The maintenance services if you will pbl is all about that So controlling the life cycle costs and one of the things it's it's hard for us to do In general, but particularly hard now that money is so tight Is do the things up front you have to do during the design phase to reduce life legal costs In the f-35 our biggest program and putting we're putting a lot of emphasis now on reliability And it turns out that it was neglected earlier on because people were chasing performance as the fundamental thing They were concerned about the design process In retrospect, of course, it's always true that you should have spent more time on reliability But that's one of the things we should be focusing on so we'll be expanding I think in the report to try to Get into some of those areas Okay, my next one here is you propose increasing in-house technical excellence for dod How is this different from the initiative to bring contractor Back in house or in sourcing It's not about growing the workforce in sourcing was about making the workforce bigger right now I'm trying to protect what I have frankly in the workforce It's about increasing the capability of the people that I have and it's about when I can recruit recruiting people the right skills The right foundation that we can then build on successfully So it's it's not going to be uh in sourcing. I think it's pretty well stopped at this point in time because we're not growing In fact, we're we're trying to hold that around essentially in terms of the size of the acquisition report Let me do one other one here. I'll get you in just a second. Okay From luchin neemire do I need to are you at luchin? Go for it. Go ahead Results is what might come over to congress in the form of budget exhibits that requires pms Then to put some thought into what you're trying to do Is there any effort to try to to get down the p.m. Level to try to start affecting the budget exhibits Going sorry for 16 He's asking if we should be putting our goals into the budget exhibits Uh, I think you're referring partly to should cost goals We don't do that. We don't do it for very good reason The idea should cost our targets. They're they're aspirational And what I about everybody's been concerned about ever since we started doing that Was that as soon as you write down your should cost The comptroller or the congress or somebody will take the money to assume you got the savings Just because you have an idea of how do you might get some savings doesn't mean you will get them We don't hold our people to the standard of you must achieve your should cost You must stay within your budget between the what we call the will cost with the uh for the major program That's the independent cost estimate level usually And the the should cost is a target. It's a management goal that we're setting So We do I think sometimes talk about our successes where people have achieved it because we want people to get credit for what they've done We don't let people realize their savings until they actually get them First example of this was on the f-35 when dr. Carter was still in in the under secretary position We achieved a lower price on a fixed price contract. It was our first fixed priced a lot of f-35 Then we had it then the ice had predicted and we had budgeted to the ice So ash was able to call the services and say, okay, we got the better price It's locked in it's under contract. It's a fixed price contract I'm going to let you reduce your budget to come down to the level that we achieved and take that money and use it for something else And we're going to assume the same learning curve We're going to assume we're on a reasonable learning curve here So you get a tail from that you get some money in the out years to take as well So we we there's a real downside to putting these out in public and putting them out to the congress Now if I could get the comptrollers of the world in the service and in the in do d and People on the hill to not take the money once I put the number on the table Then it would be it would be willing to do it, but I that's not the rule. We're living in i'm afraid Okay, had somebody in the back who I didn't call on earlier. Yeah Thanks, jim has it from the atlantic council Sir you were talking earlier about buying things commercially buying things of a type buying things where You pay somebody to do the r&d for you and And presumably you you own the intellectual property rights. I wanted to ask you about ip rights I noticed in in version one in version two there was an emphasis on On thinking through whether or not the department wants and how much of the technical data rights to to particular weapons systems But I don't see it here. And so I wondered do you feel that this is a nut we've cracked This is a problem. You've you've gotten a good handle on ip rights or is that still ingrained? Now it's still an issue I think it'll always be an issue It's not here, but it's going to sub to none of the modular design piece And it's it's one of the things on the earlier chart in 2.0. We say we're continuing. You know, I just did an emphasis here We're doing better training for our people on intellectual property rights And I think we're doing a better job of working with industry on them You know industry has a right to those intellectual property rights are called rights for reason they belong to industry Industry uses them and I used to do this when I was in industry Industry uses them to establish a better competitive position So we have to understand that that's a tension in the relationship if you will We want to be able to go out and have competition and often breakout components for future competition Once we've gotten them so we need to respect industry's rights We need to cut good business deals with industry that are as much as possible win-win Pay a fair price for that intellectual property when we need it But it's a very very complicated area of the law. It's a very very complicated area of contracting So our what we're going to continue to do is try to train our people Are to make sure they understand this as much as possible and then cut effective business deals that are fair to industry But also get what the government needs That's going to always be an area. I think of some tension. I think just because of the nature of the beast But our policy I think is clear at this point in it. We just got to continue to execute and continue to train our people Next one here is eliminate bureaucracy program officers have grown program offices. I think it says have grown during the war We haven't seen the size of offices come down as budgets have come down How will you streamline these offices? It's a good question. Um It's an it's an area. We ought to take a look at there are headquarters reductions going on Some of the services are applying those I think incorrectly from the intent Which is they're taking if their the requirement was a 20 reduction headquarters The headquarters means headquarters. It doesn't mean organizations that are not operational organizations I have a number of agencies that report to me. There are a number of systems commands. For example in the services those systems commands Are not headquarters. They have a headquarters, but they are not a headquarters And we got to be careful about how we apply that we are looking at that We are looking at the size. I think there's pressure on the workforce in general And I think acquisition is probably going to have to pay some of the price We have to pay there to get within our budgets I just want to protect it as much as I can and I want them to be efficient It's a worthwhile thing to take a harder look at and I look at the contracting and support of our program offices Uh, we need to make sure that that's adequate too The services have very different approaches in some cases and buying commands are very different approaches to how they stamp offices So we we don't necessarily want to impose a one size fits all on everybody Uh, but we probably ought to be paying more attention to that to make sure that people are doing something that's reasonable within their own context Uh email one Protests have become almost reflective and are increasing. This slows progress How to limit it? Uh companies have a right to protest if they have a reasonable reason To think that they were not treated fairly or that something was done improperly in the source election process Then you have the right to protest Normally that you know is a period of a few months to get that resolved The generally we stop the program for that We don't award the contract. We don't continue There are cases where because of the economics or because we're very very competent of our position Where we go ahead and start work anyway and accept the risk associated with that Um, I would never tell anybody, you know, not to protest. I think I know I you shouldn't protest frivolously Tight money leads to that kind of an environment if there aren't many targets and you're betting your company on everyone you're betting on Then you're much more likely to protest and that's that's just a fact of life. I think in the environment we're living in On the ground i'm seeing there's a multi-part question here, but i'll get them all on the ground I'm seeing and hearing bbp simply means less profit That is absolutely not the case. Okay. We've said this from day one. We've been saying it for four years I want to make sure our workforce understands this. This is not about cutting the cost by cutting profit It never has been it never will be it's about cutting cost by cutting cost It's about incentivizing people to cut cost by tying their profit to their performance Our industry makes a reasonable profit margin. I've looked at it Look carefully at the data. It's grown a point or so over the years Uh, it hasn't grown disproportionately defense product firms should not expect to be you know high high growth You know googles and facebook's of the world. That's not the business they're in They're somewhere in the range between utilities and kind of standard commercial Manufacturing companies for the most part And they should expect a reasonable return the nice thing you have in the defense industry is that Your customer post is five-year plan for you every year. So you know what he's going to spend pretty much Sequestration makes that a little harder And your customer pays for your rnd That's not a bad business to be in on the point of view of the capital you have to raise and return on that capital It's a it's a good investment. We tend to pay cash flow for people So the rich you know you you can get a good depending on which way to return you look at you can do very well In the defense business your overall margins. I think are reasonable for rnd This is in the report we put out but the programs we analyzed For rnd on major programs margins were about six percent on the average and for production They were about twice that and the the message in there is you ought to get out of rnd You can get into production as fast as you can if there isn't an incentive built into that I don't know what what incentive there is Um It's interesting that people talk about how we don't execute more effectively I don't think we're not executing more effectively because we're not trying the business motive to Execute a development program and get into production is very high You want to get into production as quickly as you can and then you want to get the production rate up as quickly as you can as well So it'd be anyway better buying power is not about reducing profit. It's about using profit effectively It's about giving industry a fair return But getting a good business deal in the process There's a department in vision creating an intellectual property strategy detailing how taxpayer Funded ip should be treated and re and reused um I'd like to have more input on that from the personal email this in i'm not sure exactly, but he had in mind by a strategy I mean we have policies in place We're trying to identify where we need ip and Uh Negotiate that we're we're using the competitive phase when we have more more leverage frankly in negotiation To evaluate the ip position will be in that's a fair thing for us to do on our side So that we get better deals early on because We moved to a sole source environment fairly early in the product lifecycle We need to make those decisions up front A lot of the ip ip we need is more about having competition Later in production or in sustainment And and we just need to manage that carefully Make sure we do a good job Identify the ip don't wait for stuff. We don't need understand what we have We have a lot of ip that comes to us just from buying the product. It automatically belongs to us But others we need to understand what industry's ip position is and then make a decision about what the right thing to do is for us On a case-by-case basis Okay, another hand out there anywhere I still got a couple in my hand i'll do these And david's still bringing a while I'll just do these for a while you can all relax if you want to Okay, this isn't oh wait here. We go Okay, this one david is yours. This is not mine. Okay This is these are your instructions david. You're not listening david. These these are yours Bad editing What is your office doing to address a procurement workforce that is grossly overworked and understaffed Um Our workforce is overworked and understaffed right now We're we're doing a We're the body the burden on our workforce is pretty high I think people need to recognize that out there We also have a young workforce and a lot of people have come in We did go through a period which ended a couple of years ago We did go through a period of significant growth in the workforce We bought a lot of contracting people in we bought a lot of engineering people in Many of them are entry level and they are starting to develop the skill sets We have a demographic issue a lot of our most senior people are leaving So there's this standard demographic of the two two humps if you will And a lot of people are approaching retirement and leaving the workforce and there's a valley Then there are the younger people that we brought in We're aware of the chart out there right now and we're aware that people had to prioritize One of the things we did and Results of some of the feedback we got was we backed off on some of our requirements from earlier versions of better buying power We were asking people to do a recompete for service contracts, for example on a fairly high cycle rate And we just don't have the capacity to do that So we're aware of this The services need to be aware of this because that's where most of the manpower decisions are made And that's the reason I'm going to look at this carefully as we go through the budget process this year Try to make sure we hold the ground Another anonymous does 3.0 address deadlines that were missed by 2.0. We did miss some deadlines We do track them. We have a business senior integration group that meets about every month And its job is to track progress on implementation It's also trying to identify new ideas a lot of things come in That people see around the community where there's a good practice a best practice We're bringing it to the business side so everybody else knows about that All the people that I read the names of at the beginning of the talk are involved in that and quite a few others So we we do try to incorporate those ideas and we don't meet every deadline I believe in setting realistic deadlines and meeting them wherever you can But I also believe in putting a little bit of pressure on people to do a good job and to try to do a little better than they might otherwise So we're not perfect, but I think we're making good progress and have been over the last few years I think uh, we are approaching the time so let me see if I get a really juicy ones, David All right, a juicy one. I'm afraid we took the juicy ones out I'm going to do this one because I think it's important. You mentioned concern about global competitors taking away our U.S. technology advantage Who are those competitors and how realistic is the concern that they can compete with a budget like dods? I would put at the top of the list china followed by russia And it's not that I expect to go to war with either of them But I expect them to sell their equipment to a lot of people. We could possibly go to war I also expect there to be competitions for influence with those countries and military power is one of the things that affect your influence in the world And you don't have to look very far Or very far back in the news to understand that those countries are trying to exert influence over the United States Uh, I would much rather be in the situation that we have enjoyed for the last, you know, 30 odd years of being clearly the dominant military power on the planet I think we live in a great country And I think the world benefits enormously from the fact that we are the dominant military power in terms of stability and peace around the world I would definitely not prefer to be in a situation where that wasn't true I have been looking at investments by china particularly, but also by russia for over four years now When I left the pentagon In 94 after my first several years there Intelligence estimates at the time were that china was Not really much of a problem But it could be a problem 15 years or so down the road. I'm back 15 years later. They were right China is developing weapon systems to give you some examples that include ballistic missiles that target our aircraft carriers Cruise missiles that target our ships in general the target ballistic and cruise missiles that target airfields and logistic nodes They're building a very robust suite of anti satellite capabilities That that threaten every one of our satellites in orbit They're building very good electronic warfare capabilities. They have a very strong doctrine of informationalized war Which includes cyber which they're very aggressive at and they're doing a great deal in electronic warfare They're building a fifth generation fighter to two of them actually to contest the f-35 and the f-22 They're building advanced air to air weapons They are a serious formidable technological competitor And it it bothers me that we are the United States is at this time Sitting here looking at sequestration as our way to manage the budget and cut funding out of defense At the time and we have global responsibilities for national security. They're only increasing. We just committed to operations in Iraq We've got the problem with ukraine and how to manage that with NATO We're still in afghanistan and we're going to be involved. We expect in afghanistan on a smaller scale for some time We're dealing with a lot of real life right now problems and we have emerging threats You look at the behavior of russia russia has been using its energy revenues to invest significantly in modernization of its military It's building capabilities that are Comparable in some ways to the ones I described from china It's also moving to a doctrine which relies more heavily on tactical nuclear weapons, which is worrisome to me So I I I don't think we could be complacent at all. I think we should be quite concerned about our technological superiority And this shouldn't be a new thought to many of you here. I've been talking about this. I've given a lot of testimony about it Secretary hagos talked about it. Secretary panetta talked about it And yet we're sitting here under the threat of sequestration. It makes no sense to me whatsoever Okay, thank you very much