 All right, everybody, we've got there are a few seats left and then we'll bring some more chairs in the back. We'll keep the doors open. Welcome, everybody. I look around the room and I can see I can't afford the billing hours that are in this room right now, so we better get started. This is a pretty rich crowd and hey, Skip, I haven't seen you so long. Welcome, everybody. I'm John Hamry, chair at CSIS. I was in Abu Dhabi when I heard that Mac Thornbury was going to come to give a big announcement. And I thought, well, I better get back. And unfortunately, I got back, but it was three hours ago. So the most important thing for me to do is to get away from the stage quickly, because I'm going to make mistakes if I stay here and try to do it. But I can't resist. I do want to just say a word. I was in Abu Dhabi this last weekend. Two weeks before that, I was in Tokyo at a conference. And two weeks before that in Seoul. And every place I'm hearing the same thing. It is, what the hell are you Americans doing to yourselves? They want America to be a global leader. And they see what we're doing. And they're genuinely anxious. They're genuinely worried what we're doing. And they say, why? Why is this happening? And I give them an explanation about a very deep turmoil within our government about how do we establish priorities when our budgets are out of whack? And this is going to be with us for a while. And when I tell them that, I said, this is going to be a longer term problem. And we're going to have this problem for a while. And they all just feel everybody's sag that we have this. And I said, but don't be mistaken. If we're needed tomorrow, if the Iranians were to do something crazy at the Straits of Hormuz, we'll be there, we'll be there. You don't worry about that. So what we're really have to look at is not today. We've got this remarkable capacity, remarkable military. What are we going to have in 10 years? What are we going to have in 15 years? And that's really the issue that's on the table. That's really what Vice Chairman Thornberry is doing. He's going to be looking at, I think, one of the most important questions. We can't afford to keep doing things the way we've been doing them and stay on the path we're on. We don't have those resources. And yet the world needs us to be just as capable in 10 and 15 years as we are today. How are we going to do that? That's really the challenge in front of us. And that's the challenge. I'm not at all surprised that Chairman McKeon turned to Mack and asked him to head this up. Because he is clearly so highly regarded in this town, having been here, I guess, now 19 years, but having been here for 19 years, going on 20, having had such distinguished service, having touched the department in so many ways, there's no one who is better suited for this challenging time than Mack Thornberry. Would you please welcome him with your applause? We look forward to with you. Well, thank you, John. And I very much appreciate to the chance to be back at CSIS as well as all of the serious, important work that goes on here. I got to say, in all my interactions with CSIS experts over the years, I've certainly benefited tremendously from their guidance and ideas. And I have no doubt that the work that goes on here makes an important difference. And y'all are nice to come and listen to me. But the truth is, we could all sit here and take notes from Dr. Hamry or David Bartow or Pierre Chow or some of the other experts here on this topic. I do have to note, however, that the last time I was at CSIS, it was for a cyber exercise. And I was asked to play the president. And Dr. Hamry has not invited me back since. I think it was deeply disturbing for him as is understandable. Chairman McKeehan and I have been talking about a focus defense reform effort for some time. Among the issues he's asked me to tackle are acquisition reform, organizational bloat, and the security clearance process. Something that House Intelligence Committee Chairman Mike Rogers is equally interested in. Today, I'm just going to focus on the first of those topics. And I have to confess that the first two questions that popped into my mind when Buck asked me to tackle this were, one, is it possible? And two, is it worth the effort? Now, if that comes across as somewhat skeptical, then the reason for that is every few years since I've been in Congress, as you've just heard for nearly 20 years, we've passed some sort of legislation on acquisition reform. Now, maybe some of it was helpful. Maybe some of it contributed to the problem. But if you look at the whole picture, there's things are certainly no better now, and in some ways they're worse than they were 20 years ago. So let me just give you a multiple choice question here. A study was done looking at six problems with DOD acquisition. Schedule slippage, cost growth, lack of qualified personnel, high personnel turnover, inadequate cost estimation, and insufficient training and managing contractors. What year do you think that was done? 1962, 1982, 2002, 2012? Well, I think the answer is it could have been done in any of those years. As a matter of fact, in the last 50 years, we've seen 27 major government studies and more than 300 non-government studies on exactly those issues. But you're right, that was Harvard Business School study in 1962 that was looking at the exact same things. As Frank Kendall mentioned here just a few days ago, defense acquisition has been a significant issue for us since the Revolutionary War. But at the very same time, Dr. Hamery has written about this, one of the key factors in our success in world leadership has been that industry is an indispensable partner with the armed forces in defending the country. And as he wrote, we have harnessed the energy and creative power of the profit motive to national security. So it is a fundamental strength. And yet at the same time, it's a persistent problem. And most all of the studies that have looked at the problem over the last 50 years have said roughly the same thing. And as I mentioned, there's been a number of legislative attempts with unsatisfactory results. So the lesson I learned for that is that we have to go deeper. We have to not just treat the symptoms but deal with the root causes of the problem that have made it so difficult for us to solve these problems over the last 50 years. Well, I remember we're talking about a lot of money here. Last year, the Department of Defense let contracts for $360 billion. That is 10% of the entire federal budget and more than 50% of DOD's obligations. And yet as GAO testified in our hearing a couple of weeks ago, if you compare 2008 to 2012 and look at cost estimations, just in those four years, we got 7% worse on developmental cost, 13% worse on total acquisition cost, and the average delay in initial operating capability went from 22 months to 27 months. So just looking at the last four years, we've gotten worse in all these categories. But of course, it's not just the acquisition of weapons and equipment. The Pentagon spends more on service contracts than it does on weapons. And there it's even harder to know if the taxpayers are getting good value. What we do know is that if you look at the last five years, contract spending is down 10%. But bid protests are up 45%. There's hardly a contract awarded these days that there's not a protest on. So what's the effect of these trends? Well, we waste a lot of money and effort. We have more tail and less tooth, more overhead, and less fighting capability than we should have for the money we spend. Let me just give you another quick historical test. Who said this and when? As long as we operate a system where the checkers outnumber the doers, the doers are condemned to spend their time doing paperwork for the checkers. Again, it could have been at any or all of the defense manufacturing facilities I've visited in the last two or five years. But in fact, that's Admiral Rickover, quoted by Deputy Secretary Packard in a letter to OMB director, George Shultz, in 1970. We're at the point where it's estimated that about a third of procurement dollars are going to overhead right now. And the rest of the story is it's not just waste. We are not as agile and responsive as we need to be in a dangerous world. And so we face this festering problem of getting good value for the taxpayers in a timely way in a larger context of two essential facts. One of those facts is the world is not getting any safer or any less complex. When he retired a couple of months ago, Deputy CIA Director Morales said that he didn't remember a time in his 33 years in the CIA when we had so many front burner national security issues. And I won't go on about it, but just a brief list of cyber, proliferation, terrorism, Syria, Russia, China, Iran, North Korea, keeping alliances together makes the point. Things are not getting any easier. I think the second essential fact is that we're gonna face tight defense budgets as far as the eye can see. Truth is we've dug ourselves a deep hole of debt. Now we all hope the economy improves. We need to reform entitlement programs, which is where most of the spending is. We need to find a way to get our fiscal house in order without the across the board cuts that sequestration would impose. We need more stability in funding because the disruptions caused by the uncertainty that we face are undermining every attempt to improve the system and are costing us dearly. But the point I wanna make is if all that stuff is solved in the way I want it to, I know of no scenario that envisions a return to large defense budget increases short of some sort of catastrophic event that none of us wanna see. So even in the best case scenario, we've gotta face a dangerous, complicated world with limited resources. And that means we have to get more defense for the dollar. That's the reason Chairman McKean has asked me to spearhead this effort on these three interrelated topics, focusing first on how the Pentagon buys goods and services. Let me be clear, our purpose is not to cut defense or not to make it easier to cut defense. The purpose is to get more defense, more value out of the dollars we spend. One very encouraging thing is that I think this is completely bipartisan and bicameral. Adam Smith, the ranking member on the House Armed Services as well as Senator Levin and Senator Inhofe are just as interested in this as we are on our side. And that is I think an essential place to start. I'm also very encouraged with a lot of what Frank Kendall had to say here just 10 days ago. And I guarantee we will be more than happy to sit down and go through with him line by line federal regulations to thin them out and to simplify them. Of course, along the way, we can't just focus on big DoD. We've also got to work with the services up and down the chain of command. You're not gonna do this without full participation of the industry partners that Dr. Hamery talked about. But I think we're at a point where everybody agrees this is the time we have to act. So for our approach, we started on October 29th with a hearing that looked back at the last 25 years of acquisition reform efforts. We had three excellent witnesses that gave us their insights. We're gonna continue with conversations with people across government and outside of government. And again, so far, there's been nothing but eagerness to help. I expect we're gonna have working groups across organizations in the coming months. And obviously, we're gonna have hearings directly on this topic. But in addition to that, this topic is gonna shape all the rest of the hearings we have. Whether it's about shipbuilding or airplanes or how to best meet the needs of our service people who are deployed and the contract support there, these questions are gonna influence all the hearings we have in the coming years. Now, we're not looking at this as, okay, we're gonna take two years to study it and come out with a 2000-page bill to solve all the problems of the world. We're gonna look to make progress along the way as we go and also have a bit of humility, understanding that not all the answers to this are gonna come through legislation. Some of what we need to do in Congress is to change our oversight, the questions we ask, and to help encourage some changes in culture in the Pentagon and in the services. For example, one suggestion that's already been made is y'all oughta have a hearing on a acquisition program that's done well. And pat them on the back, don't just call up the people who are in trouble, reward the people who have done a good job. And obviously, we need y'all's help, your input to make this work, not just about substantively what needs to happen, but what sort of process will help us reach the best results. So let me get back to my two questions. Is it possible and is it worth it? I think there's a lot of understandable skepticism that goes with 50 years of frustration. There are some people who argue that basically there's only a few things that you can try. You can centralize or decentralize. You can have greater flexibility or more rigid mandates. You can emphasize the government or emphasize the contractors. There's only certain limited options. We've tried them all and it's not gonna get any better than this. Well, I don't buy that. I think it is important, as we did in our first hearing, to acknowledge that what we've done so far has not worked out so well. And to try to learn the lessons that that teaches us. But I also think we're not gonna make things better by piling on new mandates, new oversight offices, new micro-management. That's not the direction we need to go. And the rest of the story is if an automaker can take a car from concept to customer in less than 24 months, if a computer company can change manufacturing requirements in a day, if Boeing can take a commercial airliner and develop and field it in less than five years, then surely to goodness, we can do better than we're doing now for the men and women who risk their lives to serve our country around the globe. As with most things, I think the key factor comes down to people. One thing is that we're making it harder and harder for people who know what they're doing to serve in the system. And that's a problem. We also have to hone in on the reasons that good people who are in the system act rationally, but their decisions are not good for getting the best value for the taxpayers. And so it seems to me incentives in the system are incredibly important. We've got to ask what does the system encourage someone to do? The simplest example is it encourages you to spend all the money before the end of the year or else you'll get less of it next year. But here's another example that was pointed out to us. If you're a simple example from our homes, if you've got to replace the pipe, do you pick copper or plastic? If you've got a system that will always reward you from taking the least expensive item for the acquisition at the beginning during acquisition, you know what the answer is gonna be. But are we looking enough at the maintenance costs, the repairs that have to be done, the lifetime costs of the decisions that we have to make? And isn't that what the taxpayers are ultimately gonna be on the hook for? Let me give you another example that was brought to our attention. The system today would rather pay a billion dollars for something and allow the contractor to have a 5% profit than pay half as much and allow the contractor to have a 20% profit. Now, how can that be good for the taxpayers or for getting the most value for our money? So things have to change. And we may well have before us a unique opportunity to change some of these built-in incentives. A set of circumstances today that not only give us a better chance but also demand from us a better response dealing with those root causes than at any time we've had in the past 50 years. And let me just suggest some of the reasons that give us this opportunity. One is the defense industrial base has consolidated. 25 years ago there were 50 major defense contractors. Today there's six. Secondly, DOD is becoming a less influential buyer in the market generally, but also more and more companies are focusing on other customers other than DOD. And the harder and more expensive it is to do business with DOD, the fewer that companies that will do so. Third, commercial technology is often in the lead on innovation and obviously we have to take advantage of that. Fourth, we have better data than we have ever had before so we have more insight into what's happening in the system and that's giving us new opportunities to get down at a deeper level. Fifth, other countries are not sitting still. Sixth, Iraq and Afghanistan have proven what acquisition can mean in saving lives and yet we had to set up a separate acquisition system for the things we wanted the most to get around the current system because it couldn't get them there fast enough. And I would add a last factor and that is I think DOD is in transition, partly because of tighter budgets, partly because of the wind down in Afghanistan, the changes happening around the world, things are in flux. And so if you put these things together, this is the time. Not only is it possible, I would suggest it's a necessity that we take advantage of it. So finally, is it worth the effort? Well, our goal is to help the Pentagon be a smarter buyer of goods and services and help get top quality weapons and equipment and services contributing to our security quicker. And the difference to our security that comes from getting more defense for the dollar and having a more agile, responsive system is just enormous. In his book, reviewing the history of warfare since 1500, Max Boot writes, innovation has been speeding up. That means that keeping up with the pace of change is getting harder than ever and the risk of getting left behind or rising. Today there is no room for error. And I gotta say that very point was made over and over again this past weekend out at the Reagan Library at the Reagan Defense Conference where we heard about the pace of technological change getting faster and faster and the difficulty in catching up once you get behind. British military writer Little Heart wrote in 1944 that military history is filled with the record of military improvements that have been resisted. Between the development of new weapons or new tactics and their adoption, there's often been a time lag, sometimes of generations. And that time lag has often decided the fate of nations. Now I'm not gonna tell you that I think the fate of our nation is dependent upon the success of this project. But I really do believe that a lot is at stake and that we have to do better and that we have to overcome 50 years of frustration and that we can only do that with your help, with all of us working together towards this common goal. Thank you. So ladies and gentlemen, and Congressman Scornberry, thank you very much for that conversation there. Here's how we're gonna proceed for the remainder of our hour, if you will. We'll engage in a short and brief conversation up here. I have a couple of questions that I'm gonna pick up on based on your comments this morning. And then we'll open the microphone for questions from the floor. So be thinking about the questions that you wanna ask and when the time comes, we'll ask you to raise your hand and do our usual procedure of wait for the microphone, identify yourself and move forward. Let me start out though, Congressman, with a couple of thoughts about your very useful description of both why you're doing what you're doing and what you hope to do. There's a lot on the worthy effort piece, if you will. And I think you made the case very strongly for why it's important or even critical, as you say. It's a little bit harder though to talk about the possibilities, not necessarily the possibilities of undertaking the effort, but the possibilities of actually achieving results. How are you gonna measure your success here, if you will? Are you gonna measure it based upon what you can contribute even to next year's bill or to the FY16 bill? Or is there a broader set of perspectives that you wanna use as measures of success? Well, we have not set a particular timeframe, although we're thinking roughly about two years. And as I mentioned, if we can identify things to do in next year's defense authorization bill, we're gonna snatch that up. But at the same time, we're gonna continue these conversations, working groups, et cetera, with an idea for next year's bill. But again, I think it's really important, you don't hear this that often from people in Congress, that legislation's not gonna solve all this. So for example, I had a conversation last week with one of the service chiefs about career progression for program managers. And so part of it is, I think these conversations we're gonna have, and hoping to influence what's rewarded, what's not the culture within the institutions. Now, what's your ultimate measure of success? I hope some of the figures that I recited look better in five years' time. I don't know that there's one that will tell us the whole answer. And I think it's okay if we don't solve all the problems in the world, we have to do better. What you described was a process where this is not a stovepipe effort by the committee, but really not only within the armed service committee itself, but reaching across the aisle and over to the Senate side as well. That's a bit encouraging because just pick your example of promotions of individuals. We've learned, I think, the hard way that no matter what the power of an acquisition dynamic is, it's not enough to force a change to the overall personnel management system and the promotion process. There's a whole set of rules and regulations in place there that fundamentally don't reward people for staying in place for too long. And yet that's antithetical to the idea of program management structure that would have stability and continuity and management sticking around to see the results of their own decisions. By putting it at the committee level, perhaps you were able to bridge some of these non-acquisition related pieces. Is that part of your game plan? Just think about this for a second. If you're in charge as a program manager for a highly complex weapon system and you're on the job for 18 months or two years, by the time you've figured out what your job is, you're gone. And just to give you another example, in the subcommittee I chaired, Jim Langevin and I make a habit with nearly every hearing when you have the services come and testify before us of asking them about cyber careers because it's a little different than a traditional military career. And if we're gonna get and keep the best people we need for cyber work, then we have to adjust the career path accordingly. I think the same thing needs to happen here. We need to get and keep the best and they need to be rewarded accordingly. Some suggestions are that you could just increase their salary right away even if they're on the military side, even if their ultimate promotion opportunities are more limited. I don't know, we need to talk with the personnel people about what we can do and what we can work with the services to do to have the kind of quality people. They gotta be trained. But then like again, the question is, what does the system reward them for doing? Because that will overcome any legislation that we can pass. So if you're gonna tackle the question of acquisition reform from a broader perspective beyond just the level of acquisition itself, pick up one thing on incentives and promotion prospects for managers inside the system, there's another aspect to have it too and that is the question of, what are you doing this for? Answering the for what question? That's kind of a requirements issue, but it's also a, what's your long-term strategy and force structure? Do you see your efforts integrating that with the committee's broader review of strategy of force structure of answering the question, why do we have this military? Well, I think some of those questions will inevitably come up, but at the same time, I'm really conscious of not trying to do everything in a single bound. So for example, a lots of things are talked about reforms in personnel compensation and retirement and healthcare and so forth. Maybe a very good discussion to have, but that is not something beyond what we've talked about with the program manager and promotion stuff, but in the general reforms, that's not something that we're going to deal with. I think there's lots of very important questions about strategy and particularly the way the world is changing that will influence certainly requirements and what we buy. But what we're focused on here is the value we get for the money we spend on whatever it is, goods or services. Well, let me notch that down a bit from requirements into, Secretary Gates when he was postulating some of his reductions back in 2009, 2010, was arguing for what he referred to as the 70% solution or the 80% solution. You can find him using either of those words. The idea that settle for what you can get now at a more affordable price, at a more reasonable timeline, that meets most of the requirements, if you will. Is that something that you're going to take a look at? Yeah, I think that that will be part of this ongoing process. Again, so at Key Milestones, a lot depends on the questions we ask in Congress. And if we talk about the 70% solution and preventing requirements creep and all of those problems that people have identified, early on in that funding stream, it can make a difference. So again, we can't solve it all from the Hill, but on the other hand, we can make a difference with the questions we ask. And that will apply across all subcommittees and the full committee. As I say, at all of the meetings and hearings we have over the coming year. Let me look at the industry piece a little bit as well. You mentioned that DOD has got fewer companies on which they're more dependent now than say 25 or 50 years ago. You also mentioned that there are a lot of disincentives for companies, particularly companies in the global commercial market, if you will, for doing business with the government, not just the Defense Department, really all of the government. This sets up the possibility that there might be a good idea somewhere that has national security value that isn't invented inside the defense arena. Are you gonna take a look at how do you use innovation that's generated, say, in the global market and bring that in for defense applications and what kind of processes would be in place to do that? Yeah, I'm not sure we would get into specific technologies, but the basic point of how hard it is to do business with the Department of Defense, which is what limits Department of Defense from taking advantage of some of those innovations is absolutely part of what we have to deal with. And it's not just the innovative, it's the smaller companies that have niche products and so forth who are just at the point they say it's hardly worth it. One of my favorite sayings is from a war correspondent named Eric Severide, who went on to a distinguished career, I think, on 60 Minutes, in fact. And he had what he called the Eric Severide Law. The chief cause of problems is solutions. And in many cases, I think what we see, Mr. Kendall, last week and a half ago, talked about all of the statutory and regulatory requirements that program managers have to deal with, and when you array them all, it's quite a daunting list. Every one of those was well-intentioned at the time in which it was put into place, but none of them were looked at necessarily in a comprehensive framework. Is that what you're proposing here is to take a comprehensive view of this? Absolutely, and it's a great point, because so there's a cost overrun over here, what's the reaction? Either the Pentagon or Congress puts a new restriction, a new oversight or something, and then you add those up and it's like barnacles that just feed on themselves over time. So what I hope we can do, working with Mr. Kendall's office, is go through, thin those out, try to simplify and rationalize some of the regulations that apply, and that gets back to what we were just talking about, making it easier for companies to do business with the Department of Defense and reduce the overhead costs. If they're anywhere close to a third of our procurement dollars, just think how much more we get for the money we spend if we can cut that down. Well, I can tell you from personal experience that when some of those statutes are put into place, as a bureaucrat, I would find an opportunity to strengthen the role of my own part of the organization as part of that process, even perhaps at the cost of streamlining elsewhere. Of course, now that I sit in a think tank, I'm much more egalitarian than that. No longer thinking that bureaucratic framework, if you will. Let me turn to our audience. We've got a wealth of talent and expertise here, if you will. And so I'm gonna recognize a couple of, there are some reporters, of course, this is on the record, as you know. So I'll start out actually with Sydney in the middle here. Joshua, the hand up there, Jesse, thank you. Just identify yourself and your affiliation and then give your speech in question. Sydney Friedberg, BreakingDefense.com, and former student of Dr. Bertot's. Is that mean I'm responsible for whatever it is you're about to say? Oh, you were one of my toughest graders, sir, so. I'm making notes right now. And my first interview with Mr. Thornberry was back in 98, I think. You mentioned winnowing the regulations several times, going through them line by line. What I didn't hear as much was legislation. I mean, arguably a huge amount of this problem was created by the Congress, as you said. It's Congress that even set up the personnel system that's now been hardened by regulations, with up and out, I think, are part of the original legislation, the Military Personnel Act. A lot of this oversight's made by Congress. Is a big part of your job gonna be taking large sections of Title X, ripping them out of the book and setting fire to them, or repealing them, I guess, in the life of the language? No, yes, absolutely. Congress has contributed to this problem over the years to a substantial extent. So as we go through the regulations that come from the department, we absolutely go through the statutes and reporting requirements and briefing requirements that Congress imposes as well. And we need to thin it all out, absolutely. Mr. Piat, and then Otto. Hang on, wait for the microphone. My name's Everett Piat. I was the acquisition executive of the Navy during the 80s. We almost finished the 600 ship Navy in short by four. The system can be made to run. It can also be, but it has two modes, effective and disaster. Right now, you can see the effective mode in the P8, very successfully run program, and you see the disaster mode in the LCS, the carrier, and the F-35. Those decisions were all made by people. And I am very refreshed at your comments this morning. You're on the right track. I've been a part of the acquisition system for 30 years and a student for 20. And in the last few years, I've had the opportunity to study it in detail. Your recommendations are very close to the ones that I worked out. I'm currently with the McCain Institute. My job there is acquisition. But where do I sign up? I know it has already been made. And I'm serious, I'm not just saying things when I say we're gonna need y'all's help. Whether it's experience in the past and working in the system, whether it's experience in industry or whatever it is, this cannot be a Congress comes up with the answer sort of thing. This is too complex a problem. And again, what we've gotta do is not come up with an answer that you try to impose on the system. We've gotta understand what it's like down in the system for program managers and the decisions they make. And see what those incentives and the rewards and punishments are. And then we can start to get some of those root causes that are ultimately gonna prevail. And so we need all the help we can get for that. So I appreciate it, thank you. Let me mention piggyback on that a little bit and then we'll get to Otto's question. The question of incentives, of course, often gets written into the way contracts are done, right? Because you'll build incentives into contracts. Unfortunately, one good solution then becomes, well, everybody's gotta do it that way. And so you have to watch out. It seems to me for successful incentives becoming a requirement, a process guarantee. For those of you who are on the web, if you'd like to email us your questions, you can email to skostro at csis.org and we'll get to your questions that way. Joshua, would you bring the microphone to Otto in the third row there? There you go. Otto, Croatia, a C-Power Magazine and several others, 20-some years of covering you folks. I've seen what Congress does to make it worse. One of them was about 10, 15 years ago, you did the attack on the Pentagon shoppers in order to 25% cut in DOD acquisition. That turned a whole lot of the acquisition process, R&D, initial design over to the contractors. Didn't work out particularly well. And as far as expediting procurement, every time anybody suggests speeding up the process, GAO or Congress gets into there and says, no, no, you're going too fast. We need to regulate and slow the whole thing down. And it just, part of this, you've mentioned it, part of your problem, we've discovered the enemy and it is us. So how do you get those contradictory things of if you turn it loose, industry loose, they end up, can somebody end up complicating the process? Or, and how does Congress get out of the way in another bugaboo, GAO? You can't process anything until it's a technology spreading this level six, which means it's obsolete before it ever gets into the fleet. Yeah. Well, the first is, I think you're right, we contribute to the problem. And so the first thing is understand how we contribute to the problem. The beginning of finding solutions is understanding. Secondly, I think it's a really good point, and I don't know if this analogy works or not, but Walmart tolerates a certain percentage of, what do they call it, shrinkage. Because if they absolutely prevented shoplifting from every one of their stores, they'd frisk you coming and going and it's not worth the cost. We're gonna have to be in a point where we are willing to accept some amount of risk that somebody will do something they shouldn't do. But at the same time, we have to have the transparency and accountability that goes with that in order to find it. So not micro management, but the accountability for the decisions that were made. You probably covered, I can't recall the lady's name who works in the Army who came from the private sector at a conference a couple of weeks ago. She said she was astounded at how little decision-making power that the program managers in the services actually have versus outside. And so we've got to empower them and understand that there's some risk that somebody won't make a good decision, but give them more power, but also hold them accountable, which means leaving them there longer. I think that's at least an approach that we need to move toward, which is exactly the opposite of the problems that you described. You know, you mentioned the hearing that the committee held three weeks ago looking back at the last 25 years, which is essentially back to the report of the Packard Commission and the creation of the Undersecretary of Defense for Acquisition. There are those who would argue that those 25 years of Packard Commission reforms have failed and therefore they should be junked, if you will. Others would say they've actually never really even been tried. The basic idea of finding the right person, putting them in charge, giving them clear requirements and the resources they need to do the job, and then setting out the goals and holding them accountable to it. Is that something you can legislate or do you reward that more by, as you pointed out, finding examples of success and making them visible? But Congress has quite a role to play in terms of highlighting and illuminating success as well as failure. Yeah, I think it takes both. There's an Eisenhower quote that's something like the right system doesn't guarantee success, but the wrong system guarantees failure. And I kind of think that applies here. So if we have all these barnacles of legislation and regulation that have built up over time, then good people trying to make the right decisions are hamstrung and can't do it. So if you get rid of all those barnacles, does that guarantee you get the right decisions? Not necessarily, but then you try to focus on the incentives and encourage people to make decisions that result in the best value for the taxpayers. I think that's our chance. And again, you may not get a perfect system, of course, but you can have a lot better one than we have now. One of the examples, and I'll get to another question from the audience here. It's been over 30 years now since Senator Nunn and Congressman McCurdy joined their names to the Nunn-McCurdy requirements as part of the acquisition process. The basic idea is that if there's too much cost growth in a system, it either has to be canceled or the Secretary of Defense has to re-baseline it and then certify that in fact, this time we're not gonna overrun the cost. The idea they had was it would lead to more program kills, that poorly performing programs would have Pied referred to as disasters here, at least in terms of cost, schedule, and performance would be canceled. The reality is not very many have been canceled in that regard. Is this partly the problem of Congress as well? And how do you change the incentive structure in Congress for at least tolerating or signing up to cancellation or termination of programs that need to be terminated? And I don't underestimate the problem, but I agree that what we tend to do is stretch things out, make it more expensive rather than making difficult decisions. And a lot of that responsibility does rest with us, although I would certainly push back on anybody that suggests that Congress's job is to automatically go along with whatever cancellations the Pentagon proposes and there's lots of examples about in the past of where that hasn't worked out. But I think it does get back again to the questions we ask at Key Milestones along the program's path. And we need to do a better job of watching watching for cost growth, but also understanding why it happens. And that gets back to the requirements creep and the other things that people talk about. You have of course your own incentive structure as a member of Congress, which both at the committee level and at the member level. Got a question here on the third row, Joshua. Raise your hand again, sir. There you go. Neil Cosby, I'm a consultant with DARPA program. This whole process, activation process is a very expensive proposition for the services, particularly the uniform officer corps. For example, a few years ago, the Army had 6,000 PS officers tied up in the acquisition corps. Why not contract the whole thing out? Well, I think you're spending taxpayer dollars, so there has to be some federal oversight of how those dollars are spent. Do we need to have the number of federal people that we have? I'm not sure, as the Rickover quote kind of indicates, what I hear when I go to places is how many people the contractors have to put on the payroll just to meet the needs of all of the checkers and the oversight people, and then it just gets to be this escalating overhead burden that weighs down the system. So I guess my initial thought, and again, we need y'all's help on this, is that fewer people, more empowered to make decisions, and a system that can hold them accountable for the decisions they make, is a better model to move for, rather than outsourcing out the whole thing. Let me add, if I could, Congressman, a couple of observations on particularly the value of uniform military, career military officers as acquisition and procurement personnel. I think there's two big pluses, if you will, and then we need to be careful that we preserve those advantages in some other way if they weren't done that way. One is you actually want a bridge between the operators and the acquisition community, the operators being the uniform military, they're gonna actually use the equipment and the services at the back end. And at least the practice has been that active duty officers will tend to have that operational focus a little better than anything you can write in the scope of work of a contract, because you have to write in flexibility that's very difficult to put into place. The second though is you need to have somebody who's in the room with the general when they're making the decision says, sir, there's reasons why you can't quite do it that way. And the contractors are typically not gonna be in the room when you do that. And so there's some value in having active duty military. They need, however, not to be treated as second class citizens, because if they're treated as second class citizens, then they're not gonna be part of that process along the way. I think we have another question right next to you there. Thank you very much, Robbie Harris, a former Naval person. Congressman, you mentioned several times in your remarks this morning, empowering program managers, helping program managers to become better at what they do. I would encourage you not to focus too narrowly on program managers, but also to look equally hard at requirements folks in the Pentagon. Okay, I think it's a very fair point. And that's one of the reasons in this process we're trying not to look too narrowly at just the regulations for the small A acquisition, but look at requirements and budgeting and how that whole system comes together to operate. So I appreciate the point. Sir, I have a couple of questions from the web that I'll read you, if you will. Although in these cases, I'm actually not clear to me that I'm gonna identify who asked them. To what extent is it a valid assumption still that contractor profit can be used to motivate good performance of the acquisition system? You mentioned the example, if you will, of the billion dollar cost, but only 5% profit versus the half a billion dollar cost versus 20% profit, because it's easier to explain low profit than it is to explain how much something could cost. But can you extend that thought, if you will, to can we use profit as a motivation? Is that something that is politically acceptable as well as academically acceptable? Well, I do think we can put in the incentive to make a profit and not have arbitrary sorts of ideas on what is fair and right as that goes, because that certainly contributes. If you get reimbursed for your overhead costs what you're incentive to increase the overhead because you get that money back. So, I was interested in Frank Kendall's comments 10 days ago where he talked about his study looking at firm fixed price contracts and cost plus contracts and that there didn't seem to be the kind of difference that one would expect. I think all of that are avenues that we need to understand better. But, back to Dr. Hamry's point, our history is that we have used the profit motive to help make sure that we have the best partnership, the best equipment, the most agile responsive system to the changing world environment. And it is that profit. I have no doubt the contractors will adjust to whatever system we set up, however many contractors are left. What we need to have is the system that encourages them to get the best value. And if that means they make a bigger profit than somebody wants them to make, that's the way it works. And there's a Wall Street side to this as well, obviously the financial community. And in the days past, defense companies were often a little bit different, if you will, than the rest of the publicly traded firms. Increasingly though, the financial market looks at a defense company just the same as it. You don't get any bonus points for patriotism or for serving the needs of the military. You gotta essentially meet the same requirements as any other company in terms of return on investment and benefits to capital. How do we take that into account? Because in many cases that's a short-term focus, a very narrow focus, if you will, on shareholder equity. A lot of value in that, but it doesn't necessarily have the needs of the nation from a military point of view as part of that process. It's a fair point. Although I'm struck by the number of people who point out that we don't really punish contractors who don't do a good job as far as future contracts go. And so one of the things that I think we at least ask about is if you do a good job, how does that enhance the ability for you to get more jobs? And if you don't do a good job, what effect does that have on your ability for future contracts? So that gets a little bit more back to whether the company is gonna be successful or not, rather than companies that just play the game. And one example given to me is intentionally underbid the acquisition costs knowing that you're gonna end up with all the maintenance costs and that that's gonna be even bigger over the next few years than the acquisition. But you intentionally do that. So I think those are some of the things we need to understand better. Well, you and I would certainly in our own lives reward contractors that we hired who did a good job for us by giving them more work and not reward those who did a bad job. On the other hand, we're not responsible when we, for instance, buy services from a plumber or go purchase kitchen appliances. We're not responsible for maintaining the network of plumbers that are gonna be around or the network of appliance providers that are gonna be around. So there's a bigger trade-off that comes in there. And again, we're not gonna solve all the problems of the world, but the whole industrial-based issue here at home is something that I think we need to be thinking about. Again, it was talked about several times this weekend out at the Reagan Defense Conference. Might not, we want to have some federal, some DOD programs designed with the purpose of maintaining an industrial base as that base shrinks. And I do think that's something we have to look at. You mentioned some data in your prepared remarks today about the performance of the system recently, 13% increase in costs and so on. About five years ago now, four and a half years ago, Congress passed the Weapons System Acquisition Reform Act. A remarkable piece of legislation created a whole new set of requirements in DOD to do a better job of identifying costs and budgeting for them, created a new office of program assessment and root cause analysis to look at some of these things. Has it taken this long for those kinds of reforms to take root or maybe the numbers that you cited show that it didn't go far enough or what conclusion is used off of that? And we've already gotten differences of opinion about that. Some people say it is making a positive difference. Other people say best laid hopes. It's not making that big a difference. And, you know, the hard part for any of this is proving what it would have been like without that. But even if it is making a positive difference and even if we have not fully realized the full extent of that positive difference, things are still getting worse. So it's not enough. I mean, I think to me that's a bottom line. Well, Congressman, the one thing I think you could be certain of is that the problems that you've been asked to work on here and that you volunteered this morning and laid out your plan are not gonna fix themselves. They're gonna be around for a while. You're gonna get the opportunity to work on them for the full two years of your effort, if you will. We wanna thank you very much for coming here this morning and sharing your thoughts with us, entertaining the questions and comments. We'll do everything we can to help make you successful going forward. Thank you very much. We appreciate it. We appreciate it.