 Hello everybody. Thank you all for coming. We're delighted to have you all here. I know about a third of everybody in the room. It looks like a 12-step program for recovering defense guys. Thank you for coming. I'm John Hamry, the president here at CSIS. This is the start of a new series, but before I do that, let me say, when we have outside groups that come, we basically have a little safety brief here at the very beginning. So I just want to do that. Andrew Hunter here, he is the responsible safety officer. So if anything happens, you follow him. The exits are right back here behind us. The emergency stair is off in that corner. Nothing's going to happen. But back in that corner, we're going to go out here. We'll go across the street to the Beacon Hotel and I'll pay for the drinks. But pay attention to Andrew if we have to do something. So this is the start of a series. And let me just take a minute. Forgive me, this is going to be just slightly longer than it should be, but just to say what this is about. We want to spend some time this summer and fall looking at issues that don't normally get covered in the policy debates in Washington. And it's the government that's the plumbing, how government works, and how right now it ain't working. There's a policy backdrop to it that needs to be addressed. And so that's what we want to deal with during this series. Now the topic today, this session, is about a problem that's been with us for a while. We've got the right people here to talk with you about it. It's been with us for a while and that's this question of, you know, we want an industrial base that has all of the energy and dynamism of the private sector. The American industrial base is going global, but American security policies are fairly parochial. You know, it's a very interesting problem that we have to wrestle with. And now I say Stan Sims, who heads up DSS this year, stands the great reformer in my mind, but he still has a legal framework he has to operate within and a policy framework for the S to operate inside of. And so we're going to talk about that. Bill Lynn, we've worked together for probably 30 years. Bill now heads FinMechanica DRS, but before that he was the Deputy Secretary of Defense and wrestled with a lot of these problems. So Bill's not here speaking about FinMechanica. He's here speaking as a defense intellectual who's worked these problems for a very long time. By the way, he's got a slide presentation. It's quite good. I've had a chance to see it. And let's let him get through the slide presentation because then he'll be part of the panel afterwards. You can ask questions of him at that stage. But we'll just let him get through that. Let me just mention some of the other topics that we're going to cover in this series. The second one is going to be, you know, are we getting value out of our research and development budget? I'll just have to say, we put a hell of a lot of money into R&D and its funding institutions not getting research and development. We don't have a very healthy balance between what we want done in laboratories versus what we want done in the private sector. I mean, this is a big issue we have to wrestle with. And I'll just tell you, industry is getting pretty turned off on putting its own money at risk. When it enters into something, it thinks it hears what the government wants. It brings something forward and then the government says, well, we're going to cancel that project. You know, well, tell me who's going to spend the next $500 million developing a UCAS. If at the last minute it gets shot in the head because it just didn't have a policy grounding. I mean, we got a lot of issues here on R&D. We're going to talk about the competition for capital. I never understood this when I was in government that what it means to be the business of being a defense business as opposed to the government relations of being a defense business. You know, these are private entities. They have to compete for capital in global markets. They are valued by global investors. And we don't understand this dynamic in the Defense Department. So all of a sudden you get a company that's scrambling to hold onto its credit status, the weighted average cost of capital changes, and we don't know anything about that in government. You know, what does that? So we want to spend some time talking about that. We're going to talk about sequestration. Everybody's talking about sequestration. But, I mean, the problem about sequestration, you know, and we figured out a workaround this year. You know, but you all do long-term planning. The government does long-term planning. How do you do long-term planning when you don't know with certainty what next year's going to be? This is a nightmare. So we're going to talk about that. We're going to talk about the public and private parts of the industrial base. You know, we've got fairly rigid arbitrary rules left over from the past on what work goes into depots, what work goes to the private sector. We better be rethinking this. We've got far too much at stake to have it wasted in old arbitrary rules. So anyway, these are the topics we're going to get into. Our focus is to try to lift these topics up so that they're part of the policy debate for the next president. We're not trying to change policy right now. These topics aren't deeply understood and mature enough to turn them into policy directions. But that's what we're aiming for. So I think it's going to be a very important series and I want to say thanks to our friends from UTC that are making it possible for us to bring this to all of you. And I want to now turn to Bill, and I'm not going to waste any more time of your time, but I do want to say I've worked with Bill a very long time. It was when I first went to the Armed Services Committee back in 1984. He was on the staff for Senator Ted Kennedy. And it led me to... We've just worked in and around each other for 30 years. I think without question he's the finest intellect that combines the substance of government and the politics of governing. And I've always admired it. I thought because he gives you insights into things that are deeper. And you're going to see that today. His presentation is superb. So could I ask you with your applause to please welcome Bill then? Thanks very much, John. Thank you for that kind introduction. As John said, we've been working together for 30 years. John wasn't always in this remarkable location. He's Bill here for CSIS. When I first knew John when he was on the Armed Services Committee, he was in this little cubby and this warren of offices in the Senate Armed Services Committee. And I used to have to go down there every week to beg him not to cut the F-18 engines that were very important to Senator Kennedy. And usually he didn't. But so what I wanted to do is, in a dozen or so slides, just walk through how I see the changes coming in the defense industry. I'm going to posit a juncture, a change point in industry that we're going into what you might call a fourth phase of the industrial base era in terms of the industry supporting the Department of Defense. And let me figure out how to work the slides. How am I going to do that? Is it now? What would move a slide? Oh, I just speak and now I like this. Just to set things in context, this is a slide I think many of you have seen. I think it started this back in P&E in the 90s. It's a historical look at the defense budget since just after World War II. And it's in constant dollars so that you can look across the decades. And what you see here is we're at the fifth inflection point since World War II. It's the fifth time that the budget has taken a significant drop. The first one is not on the charts after World War II. Indeed, the first three came after conflicts. World War II, Korea, then Vietnam. The fourth one was a little bit different, actually a little bit more like today. People think it started because of the end of the Cold War. That's actually not true. The decline that started after the Reagan buildup was actually driven by deficit reduction. It was the Graham Rudman law, the first sequestration actually, that started the decline in the Reagan years and then that was accelerated by the end of the Cold War into the early 1990s. We're at a similar point today in that it's both the end of the conflicts in Iraq and Afghanistan is those of wound down and the attention to deficits that have driven defense spending down. A couple of other points to make on that chart that helps set the industrial base. One is, the question you should be asking is have we hit bottom? I think the likely answer to that is yes. I say that because of the politics. In the early 90s, when John and I first went into the Pentagon, there was a drumbeat to move money from defense to other national priorities. It was called the peace dividend back then. You heard it from President Bush, the first President Bush, from all of the Democratic presidential candidates in 92. Throughout Congress there was this drive so you didn't know where the bottom was in those early 90s. Today you're not seeing that debate. You're not seeing from the Democratic side of the aisle a drive to move money out of defense. You're not seeing the Tea Party isn't trying to drive money out of defense. Obviously we've got constraints on how high we can go, particularly driven by those same groups, but they're not looking to take defense resources down below the sequester level. So the sequester is generally viewed as all bad. Certainly in terms of the impact, as John said, on the stability of planning, it's awful in terms of how you do budgeting, it's awful, but it also seems to serve as a floor for defense spending. So in that sense it's, I think, offering some stability, but that stability is at a point that's about 20-25% lower than the peak of the Cold War, although it's also about 25% higher than the peacetime Cold War average. So it's not at a particularly low point historically of defense spending, although it's not an apples-to-apples comparison looking back because the cost of personnel today is considerably higher than the cost of personnel in the 80s and certainly then in the 70s and the 60s when you had a conscription-based force. So the spending, as I say, I think it's beginning to stabilize, although because of the debate over the sequester, the President's budget level versus the BCA level, that floor hasn't produced the stability and planning that you'd like to see. With that, let me turn to kind of just a brief historical reflection on the industry. If you can go to the next chart, who's ever got the magic of the charts. Did I do it? Oh, okay. Great. The first phase of U.S., the defense industrial base, lasted actually about 150 years from the origins of the Republic through the beginning of World War II. And it wasn't really an industrial base at all. It was government arsenals and shipyards, very low technology, relatively small. We would ramp up during wars. And then just as we did with the Army, we would demobilize after conflicts. World War II changed that. It changed it because of the scale of the conflict and it changed it because of the technology required to fight a modern war. And so it was at that point we developed the first really permanent defense industrial base structure that you... And that structure looked... held through World War II. We developed it very quickly during the three or four years of World War II. And then the structure that came out of that, which was basically an industry-led, conglomerate-focused system. Most of the defense industrial base was essentially defense divisions of large companies. It started with the auto industry, General Motors Ford shifted production during World War II, and then they kept the defense division. And then later, General Electric, IBM, ITT, all of the major industrial powers in the United States developed a significant defense capacity. We also had, at that time, kind of the pure defense companies, Lockheed, Martin Marietta, Raytheon, were there at that time, but they were not as dominant as they are today. They were just... They were sort of in the mid-to-upper tier. And this structure held for almost 50 years, from World War II to the end of the Cold War, until the 1990s. And in 1993, then Deputy Secretary of Defense Bill Perry had the famous Last Supper. He called industry together, and basically it was like that first day of law schools, kind of looked to the left of you, looked to the right of you, the end of the year. One of those guys is going to be gone. And that was... And he basically said that's what needs to happen. We do not have the capacity or we don't have the resources anymore to support this industrial base. And he asked for a consolidation, and he got it. We went from this structure. I realize you can't read all of those companies in the small print. That's okay, they're all gone. Those were all the smaller companies that aggregated into the five major U.S. companies that we see still today. And two things are happening there. One is the conglomerates are exiting. IBM, four General Motors, they all exited the defense industry. They sold their defense divisions. And secondly, the mid-tier consolidated into these five companies so that we had really a defense specialist. So the industry now and still does look like this, with the exception of Boeing, with their commercial aerospace, and significantly our sponsor here today, United Technologies, is probably the only kind of throwback in terms of a major U.S. company that has a significant defense industry, but it's not the dominant part of their industrial capacity. All of the others heavily, heavily defense, 60, 70, 80, 90 percent of their revenue comes from the defense side. And that's the structure that we've had for the past 20 years. My thesis is there are now pressures that are starting to bring about change in that structure. One of those pressures is the decline in influence of the defense industry itself. I'm representing it here as the percentage of the economy. It's fallen from half the economy in World War II. Obviously that was a brief period in time, but it was double digits, 10, 12 percent, for much of the 50s and the 60s. Even in the Reagan year, it was six. And now we're on our way, we're at three and a half, and we're on our way under three, and that's almost inevitable in that just the math is such that I think there's very little prospect that the defense budget is going to grow as fast as the economy. So if it doesn't, this number is going to continue to get smaller. You see it also, I kind of have words up there, kind of how does the industry stack up? With this cash on its balance sheet, Apple could buy half the industry today, just with cash on hand. They don't have to borrow anything. In terms of market cap, it's worth more than the biggest guys combined in market capitalization. These aren't all perfect measures of capacity, but it suggests that the defense industry is not as powerful relative to the economy as it once was. Similarly and importantly, it's also not as big an R&D, and this I think is really an important point. This is the top 20 industrial R&D spending industrial spenders in the world, and defense isn't on the list, but actually if you added Boeing, Lockheed, Northrop, Raytheon, and L3 together, they wouldn't be on the list either. So we are not spending the same for defense R&D as we were. I think that reflects, it's partly the shrinkage of the industry, but it also reflects what's in that red box there. There's been a change in the way we developed defense technology over the past decade, decade and a half. We've moved, in my mind, from a net exporter of technology to a net importer. When you look at the 70s, 80s, 90s, you think of GPS, the internet itself, these are things that were developed inside the defense R&D world, and then as for defense purposes, high performance computing would be another one, and then the value of that, the technology was actually exported for commercial purposes. More and more you're seeing the reverse and the necessity for the reverse. Autonomous operations, 3D printing, information technology writ large, those are all things where the commercial industrial base is stronger than the defense industrial base, and in many ways, I think the key to maintaining our future technology edge is to be able to import those technologies into our defense industrial base and operationalize them for our military. I think this is being recognized by the leadership of defense. I think Ash Carter's trip out to Silicon Valley was signaling, seeing this kind of dynamic, so I don't want to say this isn't being seen, but I think it's an important dynamic, this commercialization of defense technology, the importance of it. Another factor in the changing of the industrial base is where defense is spending its money. The 90s changed, I think, how companies operated financially and had a big impact on defense. If you look where cash goes now, it's not going into capital expenses in R&D, it's going back to the shareholders. When I first did this chart, you can see it was going up to 60%, 70%, 80% was going back to shareholders in terms of dividends and buybacks. In 2013, it was 80%, and I just saw the numbers that Lauren Thompson had the numbers for 2014, it was 102%. It's literally taking cash off the balance sheet and giving it back to you. The dynamic here, this has been a very successful strategy in terms of driving stock prices. Defense company stock prices are historic highs. I would argue that over the long run, you have to wonder, though, how this strategy is going to play out over a half a decade and a decade in terms of, you know, are we going to have the technology to keep refreshing the military if we do go down this path in terms of spending, which leads me to this chart. I first started doing charts in the Pentagon, so you always do a chart like this. You have the ridiculous idea, and then on the right, you have the answer. So, you know, of course, I don't think we should have a static structure. We should restrict access to coverage. You know, the question in my mind is the three on the right-hand side of that chart is I think, and I'll go in the last couple of charts, lay this out in a little more detail. I think we're going to see greater consolidation. I think we have to. I think, as I've said, we're going to focus on commercial technology, and then finally, I'm going to talk a little bit about the globalization of the industrial base. Let me start with consolidation. This is, I think this is data from CSIS. It shows, particularly in the Air Force and the Navy, the trend away from competition. We have less and less competition for major, it's partly the shrinkage in the industrial base, although importantly it's also we have fewer and fewer programs, and this is particularly true in the platform area. And I think right now if you look at our naval industrial base, I think 4% of our tonnage is now competed. The rest of it is either sole source or it's allocated between a couple of yards. We do not compete, and clearly we're moving in terms of a manned aircraft, we're moving in the same direction. You've got Boeing building the F-18, but at some point that's going to be phased out, then you'll only have the F-35, at least in terms of the U.S. industrial base. I think this trend on competition is something we're going to have to deal with. I mentioned that the importance of commercial technology, this chart shows as well it's being reflected in how DoD is buying. More and more of what DoD is buying is coming from the commercial sector. Now this is heavily a lot of this is IT spending, but it's also I would argue that a lot of this is also the future. It's where the technology is it's where we have to go. And then finally globalization. I think that as we've shrunk here, as the industry has shrunk here in order to maintain at least some competition we're going to have to embrace more fully the idea of a global industrial base. And I would argue we've actually already done that in the industrial base itself if you talk to the Lockheeds or the Raytheons of the world they will tell you that their supply chain is already global. They rely on a global supply chain to a much greater, and it's a relatively rapid shift in the last, you know, 10, well probably 20 years it's gone from a heavily US-sourced supply chain to very much a global supply chain. People will say well you can't do that though at the prime at the program level and I'd offer a counter example which is the automobile industry. Say 30, 40 years ago the automobile industry was very parochial. It was really almost in the 1970s early 80s it was almost unpatriotic to drive a German or a Japanese car. If you were a politician you certainly didn't do it. You had to be built in Detroit. Well what's changed is what's happened is the auto industry is globalized. So the US is selling all of its products overseas overseas manufacturers are not only selling here but they're building here. And that's really important somewhere on that slide it says the largest the largest car that was exported from the United States in the last couple of years is BMW an American built car. So it's the nameplate has become less important. The jobs remain important so that's kind of my answer to the politics. People say what about the politics of this? The politicians care about the jobs. They care less about the nameplate. If you're going to build cars here in the United States they're going to get political support. They don't build it. They won't. I think the defense industry a couple of decades behind can move down this same kind of path where the nameplate becomes much less important. The jobs you still you still end up and we're not alone. Every country will do this. They will look for national support in terms of jobs for their industry but they will care less about who owns it. Let me just close with okay I've argued that now we're moving into this fourth industrial base area so what does that look like? I mean the first one as I said was kind of shipyards and arsenals not really an industrial base at all. The second one was this conglomerate base structure. The third is the one we're sitting in today defense specialists a few of them with a smaller mid tier. I think we're moving into a more fluid situation where platforms are I think you're going to see consolidation at the platform level. You already see it with aircraft carriers to a degree with submarines I think it's moving that way as well with things like manned aircraft. You will still though see competition in that middle tier with electronics, sensors information technology there's still and that of course an increasing part of the content. So I think you're still going to see a lot of competition a lot of players in that middle tier but the key I think is going to be how do we have less of a barrier between that bottom tier commercial businesses and the middle tier. How does the Defense Department how does the military get access to those commercial technologies? Is it those commercial companies entering the market? That's kind of the conventional solution is we need to reduce barriers let them in, let the Google's Microsoft's in. I'm not sure you know one Google and Microsoft aren't that interested in the defense market but I think it could be more alliances or defense companies reaching out and finding ways to acquire that technology partner with companies I think there's more I don't have crystal ball here but I think there's more ways than just inviting those companies in as pure competitors I think there's more hybrid approaches and I'll close with this I think the key point is we need to manage this transition to this fourth industrial base era and the record is good here the managing from the first to the second through World War II was brilliant. I mean we won the war because of how well we managed that industrial base transition I think the transition Bill Perry and others led in the you know going from the conglomerate to the specialist era I mean witness the technological superiority the American military today shows the success of that that again was managed extremely well I think the challenge for us is we need to do as well as our predecessors did 20 years ago and we don't have that much time if you look at the pace of this the first era was 150 years the second era was 50 I'm saying this third year is something like 20 or 30 so we need I think to have a pretty strong attention and active management of this transition and with that let me turn next we're going to go to the panel thank you alright quick transition well thank you Bill it was very enlightening and I have to say easily the best audition to be assume the position of director of the defense industrial initiatives group that I've ever seen I'm a little nervous I'm sad to inform you the job is taken and the stock options aren't as good but I'm really hoping that John Hermory agrees with me that the job is taken so we'll keep it that way at least for the time being and I think that presentation really in a lot of ways this is the kickoff session as John mentioned for a series on next generation dialogue of industry and defense and that presentation really captures why we need to have this series because there is dramatic change happening in the world in the global economy but with significant implications for defense industry and that really drives that change effectively is going to drive all of the discussions that we're hoping to have in this series and of course there's one that secretary Carter kicked off in Silicon Valley about what does it mean for innovation and we're going to get to that in our May session where we talk about R&D as Dr. Hermory mentioned today's discussion is really focused on what does this change mean for what I'm going to frame up for purposes of discussion today as the culture of national security on the government side how does the government approach the issues of technology control and foreign investment of significant concern and have been for decades given that this major shift is underway in industry and around the world with significant implications you'll find some of you may have gathered as you came in through the door these note cards and or there may be some on the table we're going to ask folks if they would prefer to write down a question to gather up so you can give a question to the panel I'll also we can recognize folks from the floor if they come up with one late and haven't thought of it ahead of time so we're not trying to limit folks to just the cards but the cards will be I think a helpful way when you think of something to get it down and maybe there are some who are shy or who would prefer to use that approach so you'll have if you don't have a card you can raise a hand and we'll have folks who can and you want to write something down who can bring it around so when I talk about the culture first of all I'm going to kind of try and frame the discussion then I'm going to introduce the panelists obviously Bill needs no introduction and has already been introduced I'll introduce Stan and Chris but let me just frame the discussion first and then I'll kind of recognize them and we'll kick it off for the purpose of this discussion I talked about the culture of national security and what I really am talking about is this variety of processes controlled by different agencies different government actors but all of which end up tying into technology controls and control of foreign investment into the defense industry and industry generally but of interest to us defense industry so I'm talking about the SIFIAS process related to that the NISPOM and natural interest determination national interest determinations export controls both arms controls and technology controls generally and the technology security and foreign disclosure process and those all come into play when you're looking at a global value chain for defense products where there's foreign direct investment into that value chain where there's exporting and importing of technology in that value chain and ultimately you have to deal with I'm sure folks in industry would agree quite a number of government masters who have different interests, different orientations different cultures of their own but one thing I want to point out about all of these processes is they all began in the Cold War. They all grew out of security issues associated with the struggle of the Cold War. They have their origin in that time frame and that's when the basic structure on the basic mindset or culture of all of them was established and as Bill has so ably pointed out the economy has radically shifted the security picture which he didn't discuss so much you'll know the security situation and the nature of the global security environment has radically changed over that time and the question then is can our national security culture associated with these processes adjust likewise? Can it keep up? Can it keep up in terms of the way that it is contemplated and the way that it is sort of mentally constructed and then of course can it even keep up with the pace at which change is occurring and the situations are occurring? So with that sort of framing of the question which may or may not be a great framing and we'll find out from our panelists if I've gotten it wrong let me introduce our panelists obviously Bill Lin after next in line we have Stan Simps who's Director of the Defense Security Service he was appointed by the Secretary of Defense as Director of the Defense Security Service December 5th, 2010 and in fact has been a leading voice on the need for change and for evolution and adaptation in government for some time as head of DSS he's a member of the Defense Intelligence Senior Executive Service and a retired military officer and prior to his assignment at DSS he served as Director of Security for the Department of Defense in the Office of the Under Secretary of Defense for Intelligence and he was in that capacity as a senior D.O.D. Security Official responsible for the development of national D.O.D. level security policies encompassing personnel physical, industrial information operations chem bios, special access programs and sensitive compartmented information security so deep expertise and all of these issues and a lot of experience inside this culture that I've been talking about and next to him is Chris Greiner I think at least a national maybe a global law firm but with operations in DC focused on these issues of government regulation of industry and the technology and the national security space he's a widely recognized leader in the field of national security played a key role in the development of the foreign ownership control or influence mitigation arrangements used by the U.S. government today he represents foreign and domestic clients regarding international transactions involving CFIUS and other national security approval issues and he formally was within the Department of Defense I believe in the Office of General Counsel and as I mentioned he's managing partner of Strux Washington office and so what I would like to do because this whole series is designed to be a dialogue hopefully with all of us here today between industry and the Department of Defense and some of these fundamental foundational issues so what I'm going to do is and by the way everyone will get a chance to have their question for Bill so he's been generous enough to agree to stay for the panel and answer questions but I'm going to give the first question here to Stan so that we can get a government perspective into the conversation so Stan I'm interested in how you see these issues that Bill has outlined and how you see the government processes that you directly manage like the NISPOM but others that you're also involved in you have so much experience in all of these processes how you see them responding to what's happening in industry and whether you think they are on track for that is there a lot more work to do give us a feel for what you see happening on the government side to respond to these changes Okay good Thanks Andrew The question but first let me let me thank Dr. Hamery and the center for I guess teeing up this series I'm excited about the series I hope I get an opportunity to give my opinion even though I'm not a lawyer because it is a very relevant I guess topic in today's security environment now you heard Andrew talk about my background at the heart of me I'm an intelligence officer from United States Army who has done a lot of intelligence and security business and I think I'm the first I know I'm the first intelligence officer or intelligence background to be the director of the defense security service so I bring a slightly different perspective to my position so let me I don't know the defense security service first of all is the only pure security agency within the Department of Defense there are a lot of elements in the Department of Defense that does security but we're the only agency in the Department of Defense that focuses on security and so our mission the national industrial security program I always like to tell people that's the basis of where we get our mission and the Secretary of Defense Dr. Carter is the executive agent for that program and then DSS is basically the executor for that so that's where we live and so most of the our industry colleagues see us as a compliance organization that's what they define us as being a compliance organization compliance with the rules and regulations and policies of the government to promote national security and that is our chartered mission but I always like to say how does the employees within DSS, our workforce how do we see our mission what we see our mission really is we enable the industrial base to provide our nation a decisive a decisive advantage over our adversaries we enable industry to provide those things that will give us all of us, you as citizens a decisive advantage over our adversaries while we balance those national security imperatives now for this form you can say foreign investments we basically want to encourage foreign investment for all the reasons that Secretary Lynn talked about that's where we're going I agree totally with this fourth generation we've been seeing it for a while I'm just glad this series is going on because we in DSS have been dealing with this for quite some time so my my thought to you is welcome to the discussion because that's what we've been looking at all the time and then Andrew talk about how are we responding how is the government responding well here's how we're responding I think we are adapting now we're not adapting as fast as most of us would like but we are the bureaucracy of the department and our government is very slow but we have to be patient with it I'll tell you a good friend of mine who's in the other a colleague of mine almost four years ago when I came into DSS I had him speak at a conference for me and he said this defense industrial base has become increasingly more globalized increasingly more commercialized and increasingly more financially complex Brett Lambert I see you there I'm quoting you and he and I work together because he was the manufacturer and industrial based policy person and I was a security guy and I saw our role as mutually supported his role was to make sure the industrial base give us the technology to make us to give us that advantage and my role was to help him security that's how we saw it and when he made that statement almost four years ago immediately I thought what my intelligence security had on there was a lot of risk involved in each one of those globalization commercialization and then the next step started immediately and to figure out how do we manage those risk back to what secretary Linn talked about are we adapting because we see ourselves as a risk management organization so what are we doing I think secretary Carter comments out there in silicon valley at Stanford just a little over a week ago kind of sets the stage he recognizes this globalization commercialization that the defense industrial base is changing as a matter of fact I was writing a note down there as secretary Linn was talking when I first got the DSS we were talking about how do we manage the defense industrial base and very soon thereafter I changed all the slides in the agency and told the workforce no, we're managing a national industrial base well that fourth generation I'm going to change that again because we're managing a global industrial base for security purposes that's how this is evolving and as far as what we're doing DSS is in the epicenter of all of that because of what we do and we are trying to use our our authorities in DSS the flexibility that we have to help enable that policy change so I think we are adapting and I'd like to expand a little bit more but I want to give my colleagues time to change but that's sort of as my stepping out point I'll leave it there alright, thanks Stan Chris you obviously have a perspective on this you work directly with companies that are going through these processes that can be seen largely as compliance processes but obviously have a much larger purpose or at least should and I think they do so I'm interested in how you see the evolution of the national security culture in the transactions that you kind of witness on a day-to-day month-to-month basis which you're assisting clients with well thank you very much really appreciate the opportunity to be here mention the fact that John Hamery built in and Stan Sims have been made extraordinary contributions to the globalization of the national security how the national security community reacts to globalization it's an interesting opportunity interesting time and having been through the process to see where we are today compared to where we were over the past 40 years the Defense Department Energy Department intelligence communities and the regular basically the security establishment have made significant changes to recognize the global defense environment we're on foreign direct investment many years ago it was very rare now it's a common occurrence it's the foci policies the foreign ownership control or influence policies, secure arrangements that DSS has modified and worked with have really been adapted to increase the ability to allow for foreign direct investment through us which were the original foci arrangements are almost unheard of special security agreements are accepted at fact at one point I heard they were fully acceptable arrangements after helping create them it's very nice to hear that there's a standard process rather than an exception proxy agreements are working well and can be acceptable as well to investors so it's a significant change there are about 100 board resolutions 30 security control agreements which are minority investment arrangements about 100 special security agreements and about 30 proxy agreements in place as we speak right now showing the breadth of opportunities for foreign companies to come to the U.S. and participate in the industrial base an important thing that's happened recently frankly due to Bill and Stan for a period of time it's taken a long time to get here and so she shows you the processes the national interest determination process and to be a very negative arrangement which kept people out to get access to prescribed information top secret special access restricted data things of that sort had to be by exception and approved by the government agencies involved that process in 95 the standard was compelling evidence that release of such information advances the national security interest 2006 the standard was disclosure of such information should not harm national security interests and now the standard is consistent with the national security interest of the United States significant change to let's make it happen unless it's an exception basically it's a positive attitude which is allowed for foreign companies to come and be involved and participate and this whole began frankly with the idea of bringing foreign investment in for as Bill had mentioned frankly for the investment the competition and the technologies significant opportunities where foreign companies have brought their technologies here been accepted by the system even as we used to call them the troglodyte agencies the iron majors have been basically able to accept these arrangements and it gives the government a chance to use the information and use these capabilities if they want it not saying they have to but there's a significant change about how that has occurred and I think it's on a positive point the early nids I said were usually denied but in many cases now they're accepted as a standard process final significant statement is in February this year that there's a decision memorandum that's come out providing that DSS has the responsibility for working through these problems and working with the agencies to encourage them to get things done quickly and to allow contracts to either contracts to go forward or acquisitions so it's been a very positive impact and once again to the setting the tone to allow that to go forward the other thing about DSS that has provided greater visibility on the oversight process providing transparencies and a partnership with industry very significant changes that have occurred you mentioned compliance but now it's really working helping people get the job done not so much trying to find a problem but to say how can we help you and make things work so the risks of course have changed as well basically security is no longer fences and visitor logs and things of that sort you get involved with supply chain issues cyber security pushing security beyond physical boundaries the folk eye mitigation process are routinely requiring government customers to state when foreign owned companies are using a technology from a parent to allow the government agencies to understand whether there's any risk to the national security a risk to the supply chain and so it's a very an information provider but it's been something which has allowed the government to be more aware of what's going on but allowing the companies to participate as long as they are satisfied the basic rules some of the things we're talking about now about the folk eye rules whether they're appropriately risk based doesn't make sense to employ the same folk eye mitigation arrangements for legacy companies who have been here for a long, long time but one of the things that's important in security is confidence and experience and so that's an important piece that's happened with Finn Mechanica many of the foreign owned companies have come in that the government has gotten to know them and they become good citizens and if you give them a chance to work with that and get comfortable then processes can be made to try to open those doors and make it more workable so making the risk mitigation more fact specific and based upon the experience is an important piece of it the other issues were mentioned with CIFIAS Committee on Foreign Investment changed significantly with Dubai ports 2006 the Foreign Investment and National Security Act changed the way that the foreign investment is viewed it used to be just defense, telecom and now it's gone to just about anything that affects the critical infrastructure transportation, energy, whatever the threats are not localized in the defense industries alone additional to the critical infrastructure problems with software identity identification, aerospace, information technology these are areas that are looked at very carefully and CIFIAS mitigations there's the DOD, FOCAI mitigations that are applied but then under CIFIAS that has its own CIFIAS mitigations which are something which frankly the lawyer created on a whole cloth DOD's process, you know what they are with the CIFIAS mitigations sometimes they can be created by different agencies without much consideration to how the contract and the deals are going to get done but that's an important point to see that there is more review the good news is that deals get done in the CIFIAS area about 50% or more are going through investigations going from a 30-day review to a 45-day investigation however the deals do get done with some mitigation or with some adjustments and some of those reasons to the time is due to staffing not necessarily the complexity it's just basically working it through and having the staff help develop an appropriate review and satisfactory result so with that I will go on to our next question thank you Chris and Bill you gave a masterful presentation but and talking about the change but you're in a unique position as a US CEO of a company that is in fact foreknown and to give us your perspective on whether the government's processes can accommodate the new reality that's emerging and whether you see any major disconnects or potential disruptions from this culture of national security to the emerging industry structure that's coming thanks Andrew I really appreciate your putting this together and bringing Stan, Chris their perspectives to this I think there are kind of two dimensions to your question the normal dimension that you'd think would be the issue would be the process issues that Stan and Chris were talking about I actually think the process is adapting and a lot of it's due to Stan's leadership very well the new realities the broader use of foreign investment in the United States the greater importance being driven by the globalization of the defense industry so I think the processes which as you indicated the outset were developed during the Cold War and had that mindset nevertheless I think they're being updated and Chris kind of went through the evolution of just the standard on NIDS of the whole process that DSS is leading and they are working their way through those issues both at a process level to reflect the new realities and then as Chris indicated company by company as well I think the ability to work with DSS as a partner and to adapt to individual circumstances and to have a mindset that allows companies to do business while protecting security at the same time the mindset that the two aren't contradictory, the two are complementary and that the U.S. is going to be stronger if we work those I think that is actually working quite well I think the challenges and I guess it's somewhat the title of your thing are more cultural I think in it's deeper Chris mentioned the iron majors I think it's you know there's been a challenge in the NID process it's not the process it's the predispositions of people that there must be some sort of evil here that and it's deeper than that in the acquisition process we need to have a broader look I've talked before about the Pentagon in the 90's the Army was focused on getting a new artillery system and it was the crusader before we had any competition they developed the requirements and they developed the requirements in a way that meant that it had to be a new system and indeed there was a foreign built system that would probably satisfy 80 or 90 percent of those requirements and the requirements I would say almost intentionally were developed so as to exclude that so that we did a new system the result was we spent an awful lot of money on the crusader system and we got nothing we now have, we're still upgrading the old paladins and this German gun that we could have bought or adapted off the shelf at a much cheaper price was never really entertained as a possibility I think that wasn't a process problem that was a cultural problem and I think that cultural mindset is what we really need to be changing and I think it's not just global, it's also the commercial side we need to broaden our aperture as to what might be useful in terms of continuing to maintain that technological edge that we have well thank you very much and let me ask one more question it's amazing going very rapidly so after I ask one more question I'll turn to some of the questions from the audience that we've been gathering so stay tuned but Stan to follow up a little bit on this cultural issue which is in the minds of people and so it kind of raises the question of the human capital involved in this system and whether and of course your workforce being a huge part of this but as Bill has mentioned it's diffuse, it's throughout the Pentagon, it's on the acquisition system as well as in the DSS its workforce could you talk a little bit about what it takes to kind of establish the right leadership message to the workforce to communicate it and then to have the workforce that has the right skill set as well as the right mentality to take on this reality that we see. Thanks and that's the perfect question that was the one I wanted to chime in on you heard Secretary Lynn talk about it's mindset in this culture and you heard Chris which did a phenomenal job about talking about these processes that we've changed and it hadn't come overnight because I remember when Secretary Lynn was Deputy Secretary Lynn and I was in the security director and we were sitting in his office and we were talking about the NID process and what do we need to change and actually it was Secretary Carter as the Undersecretary for Acquisition who actually suggested at the time if you recall that we need to change the NID process and put DSS as a central role to it and I was sitting in a room and I said no way do I want to battle all the those component heads out in the Department of Defense because they're going to think we're taking their authority away from them if you recall that discussion well all it took was for me to go down the DSS and take and start trying to execute this and immediately I said you know I should have listened in because we would have maybe been here earlier well it's taken me more than four and a half years to get that NID process and on February this year we actually got a change so that's indicative of what Secretary Lynn said was the process would do change we got to be a little bit patient about it but they do change so let me tell you a little bit about what we're doing the workforce and what it takes when I came to DSS my first address to the workforce is that we're going to change this organization and we're going to change our culture because the nation needs us to do that I talked a lot in those first couple of months about how the industrial base is the organization in which that produces our national security and the government has to manage it and govern it and fund it and that's how we mutually support each other and so it was imperative that our workforce change our culture from a culture of just pure compliance to a culture of support and assist industry in helping us in a national security team environment that's where that partnership with industry program that we have been working on since at least during my tenure and many of my industry colleagues have asked me Stan how are you doing this do you see a marked difference in the culture of your folks how did you do that a lot of people have talked about it but how did you actually execute it and I appreciate the compliments but I tell them, well first of all I didn't send my message to my workforce I took my message to my workforce I had to go out and talk to the folks I had to tell them why it was important I explained to them about many of the things that Secretary Carter Len was talking about this morning to do this business the way we do it and then empirically what did we do well we did it I had to change the culture internally in the organization my foci that foreign ownership control influence branch which one of them one of my chiefs I brought with me today is an example of it so we changed the makeup of the workforce see DSS used to have a lot of security professionals that were dealing with the foci and the CFIAS and the mitigation agreement and what we saw my team and I we needed different caliber people in the workforce so we went on an active recruiting campaign to recruit business folks folks from the business sector we went out and hired young business lawyers right out of the school bar but they needed a job so we brought them into our foci shop right we'll probably keep them for five years before Chris deals them but that's okay because we'll utilize their business knowledge we recruited my chief of my foci operations the individuals that actually build these mitigation agreement between these foreign companies took them off of wall street Nicoletta she came off of wall street I said look I need your understanding about business structures and how to really board resolutions and agreements and the makeup of the company I'll teach you the security skills I need to be able to understand how business work and how they think and then how we can help manage and encourage that foreign investment but if I don't understand the inner workings of how business operates it's gonna be hard for us to do our security management portfolio and so we did change to make up our work we have we have bankers in that organization we have young lawyers we have business majors we have accountants that's what my foci operations and analytical sale is built now and then we teach there's not one security professional in there in other words started out as a security professional they all see themselves that way now but they don't the other thing is this partnership with industry it is not a casual player here it is absolutely not a casual player because I'm reminded just a note that I read last night that actually came from and I hope you don't mind me using it he sent a his April message a proxy company a foci company was all about security all about how we must partner all about how security will provide you a competitive advantage if you will understanding this changing landscape he talked about how we got to do our part and DSS will help you but we've got to step up and do our part and so that's what that's all about that's that culture thing and then the last piece I'll talk about on I think you're right we got to change the culture and the mindset of the folks that's dealing with this and so I've had that discussion with the assistant secretary of the defense for acquisition and when I told Mr. McFarlane was I'm willing to help you but I think we got to change your acquisition professionals those aren't majors out there that were making these decisions and here's what I'm willing to do I'm willing to change it for education security training for the DOD workforce I'm willing to build a course, instruction and we're going to call it industrial security for acquisition professionals and we want to institute that and make it a permanent part of the formal part of their education process for those program managers out there so that they understand the security aspect of their acquisition professional and so that they understand how to work with the establishment how to work with DSS how to, what do we need from the acquisition folks in order to advance our national security so those are just some of the things that we've done so talent acquisition talking to the workforce making sure they understand exactly what we're doing with there has to be a recognition of the environment that we're in that secretary then explain and if you don't recognize that first then we'll never make any changes alright, thanks Dan my next one's going to be an audience question and I'm going to, based on Dr. Hamry's description accurate description of your legislative astuteness Bill, I'm going to direct this to you the question is, at what point do we need to have an adult conversation with congress about the challenges needed to realize a global industrial base to see leadership in this area and I assume by leadership in this area means in the congress there was an article in the Atlantic Monthly maybe two decades ago about congress and it opened by, just to say how things don't change it opened by saying the difference between the Boy Scouts of America and the United States congress is adult leadership so I think we're not going to wait for a change in the dynamic that we're seeing today, we're going to have to deal with that dynamic and it's as I say it seems worse now than it has been in the past but there's always been a very difficult to manage and intentionally so in the way the founders built the institution that said I'm not as pessimistic on the issue I think the leadership actually though I think in terms of moving the department into this fourth industrial base area really has to come from the department and as I say Bob worked with his third offset strategy, Ash Carter with his trip to Silicon Valley, Frank Kendall with better buying power so I think that's recognized and I think they are taking the steps and I think they can bring congress along as I indicated with my auto industry analogy congress is only I think going to be difficult to deal with if it means that somehow all the jobs are moving offshore and that I don't think, I think what happens is the industry globalizes foreign investment comes here US companies develop operations overseas just as I say with the auto industry becomes an integrated whole and what the name plate the shareholder becomes less and less important but the thing that the political base cares about that those jobs increase, the wages increase, the economy gets stronger I think that does happen just as it's happened with the auto and I think if you can bring that story to congress I think it's not a really much of an uphill struggle to develop support it's I think the challenge is to identify the technologies, identify the changes in the structure to manage that but that is I think the challenge for the department more than anything well thanks for that I obviously spent some time around congress myself and I have to just chime in and agree with you in the respect that I started my career in the South Carolina delegation which in the days of Strom Thurman and Fritz Hollings was not known for its friendliness to international business outfits and I also spent time as a staffer in the congressional textile caucus which was not primarily focused on encouraging foreign investment and yet today you have senator Lindsey Graham who was a house member at the time now a leading member of the senate and maybe a presidential candidate but who is very articulate and an advocate for BMW and Fujifilm who happen to have major facilities in South Carolina and really that would have been unimaginable even as late as the mid 90s in South Carolina but it does seem to work today but change in congress is slow as it is maybe even slower sometimes than some of these regulatory processes next question from the audience I'm going to direct this one to you Chris I think and it's really a question about the pace of operations and so I think you have a bit of a feel for that from your view from the private sector of how rapidly things move in industry and how they need a quick answer from the government for these transactions which are often time dependent they're based on financial data that ages and can get out of date and companies need answers so the question reads deputy secretary Lynn once I guess previously compared the 80 month month timeline for DOD to acquire a computer system to the 24 months that was to develop and field the iPhone and at least four generations behind as measured by Moore's law from a standard DOD of course that's the acquisition process we're not going to blame the security process for that but the two aren't totally unrelated so how can DOD and government or do you see DOD and government evolving to operate at the speed of business at the speed of cyber information technology business well thank you I think it's interesting because Stan has mentioned using security at the speed of business which is a struggle and with Stan's been working on it for a long time I think the important thing to recognize is that in the past as I said if you look at history some people are concerned about what happens now it does seem like a bit of a stretch to get things done but if you look in the past really some things couldn't get done far longer so it was I think the important thing is the attitude to recognize globalization recognize the opportunities for the investment and the technology improvements I think the government is trying to make that work and so I'm pleased to see after a long period of time just like this NID process this began been working on that since the late middle 80s frankly to get that process resolved to a point where it now is a responsible area that still needs help but I think it's on a move and as Bill was mentioning the timelines are getting closer and the fact that I think there is a desire to make things work even this conversation we're having here shows and by the top leaders and in fact even Brett Lambert was part of that team that helping how do you make these things work how do you get involved and helping companies one of the things I've mentioned to people I had a meeting where all these foreign investors got together and said well the deals that you did were they the deals that you started with and the answer was no because many times you'll get a deal and then you have the lawyers come in and fix it make it happen but the real thing is having a strategy an important thing is having a strategy of where do you want to be understanding the limitations and then trying to work with that before you get into the process and sometimes that can help because if you use the process itself it takes a long time to make things work so that's an important piece of it knowing how the process works pre-cooking it don't expect you know set complex solutions don't say help me how does this work you say here's how we propose something so I think a proactive arrangement is the best way to make those things work Andrew let me just chime on that about that speed of business that's when I talked about this talent acquisition in this business thing that helps us work at the speed of business if you will because you got folks that I don't have to explain a lot of stuff to them we just deal with the issues the other thing is that unbeknownst to many of you all our processes I'm an operational intelligence officer by trade, by growth and I hate bureaucracy and I got a phrase I always use with my with my my workforce process devires purpose it's been around a long time I've had a lot of conversations that talked about that made a lot of sense to me and I'm not saying you don't need process you do but you always got to remember what's the purpose and you always focus on the purpose and so recently I cut a lot of bureaucracy out on how we do our business and I was able to get Undersecretary Vickers to delegate some foci mitigation responsibility to me we had these templates elaborate templates on a company looks like this then you follow this template company does this follow this template and if we in DSS deviated substantially that was the buzz word deviated from those templates we had to go get approval by the undersecretary of the OSD staff and of course you know the unsecretary never seen is the staff that fundled with it forever the undersecretary got it well we were able to just recently I'm talking I think it may have been November was it November February February I finally got him to say look that's operational business and so we've they've delegated that responsibility so now they got standards out there but we in DSS we get the tailor these mitigation agreements to the type of company and what they provide industrial base we get the tailor them and I don't have to go back and get a permission if it makes sense based on what that industry brings to us then we can put together a mitigation agreement that makes sense while managing those national security risks that helps us in operating at the speed of business by the way well thanks thanks for jumping in on that stand that was great the next question this is a new batch I'll try to get to the first batch that I want to make sure we touch on which is the process essentially for supply chain security in this really complex global value chain that's developing that you've talked about where even today's Lockheed Boeing Raytheon and others already have a wide variety of international suppliers even though they're the prime and they're the US face of the product there's quite a bit of of commercial and global technology in their supply chains and that has raised a big concern about supply chain security and do we know what's in our weapons systems and where it's coming from and so actually I'll throw it at Stan this may be best for you as to you know are we able to to handle the security issues associated with the supply chain and that kind of a complex global system thanks for that question I tell you this is getting better and better as more I said here can we extend this one today so we at DSS we think a lot about supply chain management because we understand the more commercialized we get in this if you're going to take advantage of what the commercial sector and the globalization brings to us and we do believe there are a lot of advantages that would come from that it's where we got to go it's the fourth generation but as Secretary Carter said in Silicon Valley here recently it's going to take a partnership and none of these all of these come with some risk management there's risk there and we as a society is going to have to manage that so when you talk about supply chain globalization commercialization then brings the it raises the supply chain management equation very high I mean it raises it a lot well here's how we see it at DSS and I hope my government colleagues see it the same way first of all you got to look at the nature of the supply chain globalized commercialized the government doesn't own we do not own the industry supply chain you do you own it you hire it you pay for it you own it when you get a contract for the government you own it the government doesn't own it so I first have to say what are our industry partners willing to do to manage that supply chain that means you got to take responsibility I think soon will be gone those days where we have the big six contractors they're the integrators they're the primes they get the government contract the DOD contract and then they immediately farm out sub out they may have some visibility on maybe the first or two layers down but beyond that no visibility at all I think if you own the supply chain if you pay it you got to manage it the government cannot control it the government cannot do it so with this the companies that are going to get the business that 3.5% of that GDP that was mentioned earlier are going to be the ones that are going to be aggressive in that and they're going to know what their supply chain is and they're going to be able to deliver products to the United States government those national security products uncompromised they're going to know who's working on those but to a level not every widget but someone has to take a look at what are the important widgets that make these national defense systems work what are the critical aspects of that supply chain and then you got to take some interest in that now I'm not just shooting from the hip we've actually done studies over the last couple years within DSS we took a look at the supply chain we took a look at the acquisition managers and how much they knew about their own supply chain and it was ugly it was not pretty and so we have we can give you examples and examples about how I guess our industrial base is not really managing the supply chain in a risk managed approach if you will so in order to take advantage of globalization commercialization it means you got to have a more aggressive risk management approach that's the way we see it but if you're looking for the United States government to do that I think you're looking in the wrong place industry owns the supply chain thanks well thanks Dan I've got one more question here for the panel and then I'm going to try and discuss some takeaways that we've had from our discussion but the question wanted to address was about looking at now at the export side which is a huge piece of the equation for industry a number of the firms have announced that they have specific targets for increasing exports the export portion of their business and one of the interesting issues so there's a couple of markets in the world obviously where that tends to go the the Arabian Gulf is Persian Gulf is one are some areas where that's the GCC countries there are obviously big customers Asia is another one and one of the things that's interesting about those arrangements is they're looking at their own industrial base and recognizing the global evolution and they're interested in participating in that and being part of the change which raises the issue of offsets and offset requirements and how that plays into the value of exports how does it fit in with this global structure that's evolving Bill would you have anything to say on offsets and maybe give us a feel for does it are offsets sort of an out of date concept in this industry structure that we're talking about are they consistent with it do they raise any specific challenges for the government's approach as I indicated in the US the US is greatly concerned about jobs and retaining the workforce and so is every other country and so whether you call it it's never going to be an outdated concept in the sense that whether you call it offsets you call it some division of work share whatever you want to call it if you're selling overseas you're always going to be dealing with governments and countries who want to have some part of the work that they're spending their national treasure on come home so offsets is kind of the current process but that's always going to be there I think as a company the most challenging part of that is when they're and this gets into the security set is when they're looking not so much for manufacturing manufacturing jobs that's pretty straightforward it's when they're looking for the technology they're looking for the US to transfer the intellectual property the technology that's behind the system that raises security issues it raises competitiveness issues it raises national issues manufacturing is more straightforward it's a dollars jobs issues and you're just dividing the work in a sensible fashion you can usually come to some kind of compromise that's going to satisfy everyone the technology issue I think it puts tends to put the US at a disadvantage I think we properly have more restrictions on the transfer of technology other nations sometimes do not have as many restrictions and they can sometimes leverage that in competitions but that's just I think a fact we have to manage well great I think we may have time to fit in one more question which was submitted on satellites satellites are maybe they are aren't a special case there there are special case in the sense that there's specific legislation associated with technology controls for satellites maybe they aren't a specific case in the sense that the model for the satellite industry may may look very similar to the broader defense industry I think I might have to stick you with this one Stan could you talk a little bit about to the extent to which you see the satellite case as being any different than other systems maybe with the other than the statutory piece or the same well unfortunately I'm not a satellite or tools I don't treat any other technology in this when we as we manage this national security risk any different than any other whether satellite technology or if it's a technology that's on a tank on the battlefield which by the way is more information intensive military systems that we have there technology is technology so unfortunately I can't give you any great thoughts about that all I can tell you is that those people that do that kind of work for our government we deal with them the same way we deal with the other technologies remember we use a tailored approach and I have to my thought to those foreign investors that want to get into this business and those that help us manage it is three things here's our methodology in DSS since we've managed this for the federal government all we need to know is tell us what are you trying to do when it comes to how you're trying to manage what we got here tell us what you want to do make it make sense to us tell us how you're going to oversee or manage the risk that's involved in it and thirdly give us some idea about how you want DSS since we're the organization that goes out and looks at that for it tell us how you want us how you see us overseeing it and if you provide us those three things we're going to work as partners and we don't have to guess about it it's transparent and I know exactly what you're trying to do and we both are collectively managed in the national security risk involved in that I just I just have one thing there are a significant number of satellite companies that have foci issues and they perform very well they are tailored to each one has its own arrangement and it works out so that's a that satellite business is open and able to function with those restrictions that need to be put in place but they work quite well. I think I jump a little more negative view on that one I think the satellite industry of looking back a couple of decades is an example of what not to do we had again 15 or so years ago maybe 20 we had some breaches we had some security breaches and we reacted to those and I would argue we overreacted and in overreacting to those we led to a we contributed to it was not the only cause but we contributed to a serious decline in the US satellite industry so it became very difficult the US satellite industry to compete overseas which is where the market went and so we went from a very large share of the market to a relatively much more modest share of the market now some of that was happening anyway foreign competitors were going to be growing anyway we weren't going to retain what we had but in the way that we reacted to the security challenges we accelerated that decline so in my mind that's an example of if you look over the course of 10 or 20 years that's an example of what not to do. I know you're about to close this out so I do want to get at least one more word in absolutely if it's okay as I started out and said DSS is in a unique position in the federal government that we manage this foci business this foreign ownership control or influence business that impacts our foreign investors we're the single organization there are a few out there that do it but we do it as a full-time job and so my when looking back on this discussion today globalization commercialization where we're going here's my message to those foreign investors out there is that we would like to change our oversight business from one where you all are providing technologies for our national defense and then we're demanding that you safeguard it to a construct the future construct that your foreign investors those in the industrial base out there you take accountability for that much like Secretary Lynn has done in his company and then you ought to be demanding that the United States government supports you in securing that because fundamentally that intellectual property that Secretary Lynn talked about that you are protective of it's our national security it's one in the same they're not different we're actually trying to safeguard and we're trying to protect the same thing your intellectual property it's the jobs it's the economic engine for our society but it's also our national security and if we can work as partners if you want to invest in our market come talk to DSS we will sit down work with us we will tailor how you can invest in this market you make money we want you to make money you provide jobs to our economy but at the same time we want to be good stewards of our collective security so as long as we can strike that balance and that's what Secretary Collett and Carter's message was the Silicon Valley is that we need it but there are risks and he says we can do it through partnership and balancing the national security risks so I guess that would be the message I would leave because the system does work slow but there are there are folks in the government that understands it and we won't wait for wholesale changes we will change where we can so this system works for our greater good thank you well thanks Dan and I'm going to take a little moderator's privilege and just mention a couple of the key takeaways that I got from this panel discussion the first one is that the industry change that Bill outlined in his remarks is real I think we have consensus on that and that it does drive a need for the government to change its approach and that is happening which is good news obviously there's the change will continue so there will be more change needed on both sides second takeaway I had is it's as much about if not more about the people as it is about the processes and it's good to know and it's encouraging that process changes have happened and I salute you Stan for getting that delegation from Secretary Vickers I've had to live in some of those worlds and that's a big thing third is that I heard was a criticality of risk-based approaches both to the supply chain and to the investment issues that that helps that makes a lot of sense and it's key to focusing your effort where it belongs and then the fourth was the importance of transparency both ways transparency for the private sector of what the government's concerns are and how to posture with its transactions and with its applications to satisfy the government's concerns and transparency for industry with the government about how they're handling these issues and the partnership that's there and so with that I want to thank our panelists for a really excellent discussion I enjoyed it hopefully the crowd will recognize that and thank you all for sticking with us for an hour and a half I know those chairs you're in are not that comfortable so I appreciate you staying with us and save the date of May 26 we'll be having that session that Dr. Hammer referred to on research and development and how these changes in industry affect that part of this critical DOD industry partnership so thank you very much