 Okay folks, well I can tell that everybody here grew up in the Midwest, nobody here is intimidated by the threat of snow, welcome, you all come up, we've got lots of seats so please do find a place to sit down and we're going to have an interesting moment, we promise we'll let people out by four o'clock, they tell us that's going to be kind of when the town panics and closes down. Thank you all for coming, we're delighted to have you here, this is a very important session which is part of the, trying to fill out the intellectual story around the defense budget and the QDR that's been released and we're going to talk about a dimension that normally doesn't get a lot of attention and that's the industrial base. Honestly, I think the most important decision we made to win the Cold War was a decision that we made 40 years before the start of the Cold War and that was when we decided as a nation that we were going to be building military aircraft in the private sector, not in arsenals. Prior to that time we'd been largely building, equipping and providing the kit for military forces in an arsenal based system and we all know, I mean arsenals have an appropriate role but when you're looking to really harness the creativity and energy that comes really with the profit seeking sector, we did that, we made this brilliant decision I think, when we harnessed the energy of the free enterprise system to national security and we did that 40 years before the Cold War. Now, we didn't win the Cold War because we put a larger military force in the field. We had to put a military force in the field that would offset the superior quantities in the Warsaw Pact with superior quality and that came with having these partners in the private sector that gave us that and helped us design it. So, it's in every sense of the world, it's the fifth service or sixth, if we count the Coast Guard, which I want to count, the sixth service that actually made it possible for us to win the Cold War and every day makes us possible for us to succeed in the battlefield. Now, the problem is we treat this sixth service as the neglected stepson of a family and give it the least amount of attention when we're making resource decisions in the department and I will plead guilty. That certainly was what I did when I was a comp-troller. Of course, that was before I became a virgin, you know. And when I was the deputy secretary, we did not pay any systematic attention to the role that the private sector played as an indispensable partner and I learned painfully about two-thirds of the way through my time when I was the deputy that we had at that time an industrial base that was in crisis and we needed to spend some time about it. I rather think we're coming to that point again and we're going to have to spend some energy and time thinking about this. Now, we're fortunate to have Brett with us this morning. He, you know, he chose this over staying at home with sick children. Now, I'm not sure which means is the worst problem that he's working with, but we're glad that he did choose to come with us and it is going to share some of his thoughts and then we've got a worthy panel. I mean, it looks like an old Dutch master's print with a bunch of grumpy white guys sitting around one side of a table, doesn't it? But I have a feeling it'll be better and actually these are the best intellects that we have that can bring to bear cross-cutting perspectives on a shared problem. So it's going to be an exciting morning. We're glad you're here. Brett, let's get started with you. Unless, David, do you have anything that you want to say, Administrator? Let's just get started, Brett. You start the way. But thanks. Let's welcome Brett Lambert to be with us. Thanks very much. It is a nice introduction. It's the best one I've had in a few months. Usually they say, who's that guy in the back row when I get introduced? But I wanted to start by saying just a couple of overall general things that I'm new to the building. And I was reminded by a friend of mine who took a job at a big foundation some time ago when a lot of you in this room know that individual. But he was told by the foundation director that in his new position he would never again get a sincere compliment or a bad meal. And what I've learned is that I'm a little bit worried about introductions because I get nice compliments, but I can't accept the meal anymore. So anyway, I left the dollar back by the table and these guys saw me for the coffee. But I want to thank Dr. Hammeray not just for his time this morning, but over the years being a true mentor to me and I think most of the people up here at this table, I've really valued and hopefully the building will benefit from your willingness, sir, to in essence, mentor and share your experiences and insight. And I know I'm not the only one here. I'm looking around the room and I can see about half of you have benefited from his generosity. And David, it's an impressive room. So I appreciate everyone who came out. My grandfather used to say that the value of a man was when the local farmers met for coffee and you weren't there, they would still say nice things about you. And I assure you, we say nice things about you when we're having coffee. That said, as a Midwesterner that you took under your wings and being from Western Kansas, I still want to try to convince you that South Dakota is part of the East Coast establishment. So just so you know. But thanks for everyone who braved the weather forecast to come out this morning. The good news is that I think this will be the last meeting of your day and then everyone can go home. I plan, I came from the Pentagon, planned to go back to the Pentagon. But I realized as I was going there this morning that I don't have a good understanding of whether we've insourced or outsourced the snow removal. So I'm trying to figure that out before I head back. That's really meant for you, Alan, the insourcing, outsourcing line there. We're trying to get some clarification. But I also want to thank David for setting this up and CSIS. It's a great topic. It's an incredible panel. And I went through the list of those that were scheduled to show up and I have to say I'm very humbled by this. I feel like I'm coming home. My first job in Washington, D.C. was actually in this building. When I was a freshman at Kansas State, I applied for a position or a stint at Georgetown University. But I didn't, we didn't have money. And so I also applied for a stipend and I'm happy to report that both Georgetown and CSIS were more than generous. And so even though my mom didn't know I did it, I arrived here. And so I spent my first internship in Washington under the famous Bill Taylor, Colonel Taylor, and afternoons with Senator Robert Dole when he was on the finance committee. So yes, I'm that old. That's how long ago it will be since I first came here. So I appreciate being back. I've been around CSIS for almost 20 years now in different forms. And it's just a wonderful institution. It's given so much to our nation. And so much of the interaction that we're going to have here today would not be possible without the good offices of CSIS. So I thank Dr. Amri and David for setting this up. Now, I've only been in the department for a few months. So I get a little nervous when I speak publicly because I'm told to stay away from, well, no, it's more self-regulating at this point than it is anything else. But I'm trying to bring to the department a new understanding of the industrial base and the industrial capacity. I'm stepping on a lot of toes, which I did in my previous life in industry. I find the differences that these toes tend to be heavily armed and very dominating in many ways. So that that's one issue. Not to mention that when I accepted the position, I was asked that one of the things we want you to do is think outside the box. Think about industrial policy, about the industrial base. We really need to get a handle on that. And in the first few months, it's taken me some time to realize that my box has five sides and a lid. So this is more complicated than I thought it was going to be. So my transition has been interesting from a personal perspective. As many of you know, in my life in the private sector, I spent a lot of time questioning the skills, the capabilities, and frankly, the intelligence of what the government was doing. I'm happy to report that I spend now more time defending the skills, capabilities, and the intelligence of what we're doing in government. So it's a different dynamic. And I'll get specifically to some other experiences that I've had in the building that I think are actually quite positive, both for industry and the overall security of the country. I was asked today to talk specifically about industrial policy in the context of the QDR. So that's where I'm going to focus and how it was pulled, the threads were pulled through the QDR. And I'll try to, as best I can, to answer specific questions about programs. But I'd like to set more of a tone in the overall context. And I want to start by saying I can't say enough about my contemporaries and new colleagues in the building, and particularly those that really pushed in the QDR for industrial policy to be a high priority. Bottom line is we wouldn't be having this meeting today without the acknowledgement of Secretary Flournoy, my boss, Dr. Carter, the Secretary himself and Deputy Secretary Lynn, that industrial policy and industrial base issues are serious and concerning issues. They all get it. And for those of you that think this is lip service, I can assure you it is not. One of my first taskings when I joined the department was to lead the effort in drafting the industrial policy and industrial base language in the QDR. This is an important distinction as a political appointee. It hasn't happened in some time. It's important to realize this was not being pushed up from me. This was being pushed down to me. And all of those in the room here who have served, understand and recognize the difference of that imperative. The leadership was very serious, very committed to understanding, sometimes at two in the morning, which was a little too serious for my taste, but for getting clarification and insight into what are the issues that we need and the challenges we need to address in the coming years. And I can't say enough about the fact that when I took this position, I was warned about the institutional barriers within the department. I was warned about fiefdoms. All of that melted away. And I can't just, I can't say enough about the work, the group in the policy shop and Secretary's floor. Just the access they gave us, the interaction we had. It is a true tribute to the policy community. And frankly, the QDR experience has to date been one of, if not the most positive experiences I felt where my organization was able to move the ball forward for the warfighter, the taxpayer and our partners in industry. Again, I just, I can't say enough about the often criticized but too rarely recognized policy organization within the Pentagon. And I think it's also important to put the QDR in a bit of common sense perspective, going back to my Kansas roots. No documents can answer all the questions or all the musings of all the people. If it could, I would suggest that we rebrand it Nostradamus Chronicles and guarantee results in 2020, sell it for $14.95 and try to pay down the debt. It just doesn't happen. It's a tool and an exercise. I'm a climber and over the years I've learned the hard way that it's necessary to exercise before you climb. The exercise doesn't climb the mountain, but you can't climb the mountain without exercise. The QDR is an exercise that informs, that guides and shapes our vision as a department, but it alone doesn't get us to the summit. It's a tool and for the first time in a long time, I personally believe it's not only recognized the reality, but embraced in terms of industrial policy. And again, my thanks go out to those in the department who asked for our input. When I was first hired, Dr. Carter relayed to me a story that Secretary Gates told him when he first assumed the position that the military had gone to war, but the department had not. And he wanted to change that. And I can assure you that this has not been lost on me or anyone in my group. So everything I say today should be viewed through that optic as should the QDR. We are at wars. Plural. My job as I see it is to focus on those areas where from a policy perspective, we make the right decisions for the right reasons that have the greatest positive impact, not just on the war fighters in the field today, but those who will be deployed in the next 18 to 36 months, and the systems and individuals who will be deployed well after I leave this office. This is truly a high wire act where we are attempting to balance immediate requirements while ensuring a sensible long term policy that maintains premier and I emphasize premier military dominance over potential adversaries in the future. This isn't a US government challenge. It's not a DOD challenge. It's a national challenge. And we cannot achieve our objectives without the dedication and support of our industrial partners, despite spending almost $2 billion a day, which is a lot. The department doesn't actually build that many things. We pay others to provide the goods and services for our war fighters. We don't build fighters. We pay someone to design, test, perform quality assurance, assemble, test again, and then support thousands, hundreds of thousands of parts. We count on our partners to make it fly, make it sustainable, and make it perform the missions we expect it to perform. And I use this phrase partner because we in the department again cannot do it alone. An industry cannot do it alone. Both the department and industry, for better or worse, are codependent on one another. We're not going back in most cases to an arsenal system as Dr. Hamre described because we realized it didn't work. We cannot fulfill our responsibilities without our industry partners and they cannot fulfill their fiduciary or frankly their patriotic responsibilities without the department. Even with this recognition as the QDR states, the federal government as a whole, and the Pentagon in particular, needs to do a better job of understanding the true nature of our industrial base. I wish I could stand here today and say that the decades long primary hands off approach to our base could be remedied quickly. Unfortunately, I can't. The problems we face and the solutions we seek will take time to fully recognize and adequately address. As we have in the past, the department will continue to rely on our market forces to shape and sustain our base whenever possible. But that being said, the department must be prepared and must retain the ability to intervene when necessary to create and sustain innovation and essential industrial capabilities and skills that promote our national security. This means that a greater understanding of the industry is needed. The industry as a whole is a complex web of ad hoc teaming agreements, shifting stock symbols and company mergers. Keeping track of this is a job in and of itself. On a side note, before anyone jumps to the conclusion that we're seeking to become some kind of Smithian hand lording over industry, let me assure you that I want on my tombstone and I'm putting as soon as I can figure out where the printing office is in the Pentagon on our wall, what we need is more insight before we offer advice for more oversight. We simply do not have the insight we need today. We need first to know the facts so that any prescriptions to problems identified are not gunslinging, but gunsmithing. And Dr. Henry, I stole that line from you because I was quite taken by it some time ago. So one of the myths that I wanted to spell today is the notion that the defense industry is this some monolithic sector of the economy whose key players are made up of a few individual companies. It's not true. The goods and services of the warfighter depends on reach far deeper into the overall economy. There are unique items that only the Department of Defense procures. But even there, we must recognize that they are dependent upon a complex and integrated supply chain of product suppliers. When the supply chain is constrained at the second third or even fourth, fourth level tiers, the ability of the primes to support our troops in battle is jeopardized. I realize that the effort we're undertaking is complex. But we believe it's necessary. Many of the defense industry's jobs that require the most perishable skills reside with the smaller non prime suppliers. Their survival is dependent on factors largely out of their control. They're small, highly specialized companies dependent on the primes and their unique requirements to fund the continued existence. The cascading effect to the sub primes is one of the primary reasons why we better need to understand truly understand the structure of this industry and the situations that sub tiers face. This will help us understand potential impacts for programmatic decisions that we make. It will allow us to understand critical lower tier providers that they we ensure that they have the capacity to respond to these immediate needs to get systems to the battlefield that the continued supply of critical sub components to our base will not be jeopardized and to ensure that the critical skilled jobs and I want to emphasize that skilled jobs are not lost to this nation. I'd like to cover one other area that I have long believed is far too overlooked to the health of the defense industrial base. And that's the financial community. And I thank Byron for his years of wisdom for making getting me smart on this. You know, from small technology startups, which seek venture capital funding and pursue new products to debt markets that provide the capital support as programs mature and evolve. The department must simply ensure that we don't take the access to capital for granted. And we must work to form a more transparent view of our requirements and long term investment plans in that vein. We recently conducted a roundtable for Dr Carter with Wall Street analysts to give them more transparency, more vision, more understanding into what the department was planning. There are no shortage of other issues that our office has been engaged from the Defense Production Act to conflicts of interest to rare earth minerals to bio defense to export controls export promotions, solid rocket motors, next generation bombers ship. So that's what our folks here. We did this morning, worked on those issues. The bottom line is I firmly believe we simply need an industrial policy more holistic approach. And it will be led by three goals. Getting our office in front of issues instead of chasing them, striving to adopt rules of reason in all things related to industrial policy, and re establishing a true partnership with industry and the financial community. Finally, I want to make clear that we should not confuse support for the private sector is advocacy. The department the department's renewed engagement with industry doesn't mean that as the QDR says, we will support sunset industries or prop up poor business models. As Secretary Gates has clearly demonstrated with his past two budget submittals, he is clearly prepared to terminate programs that are not needed in the current threat environment, or simply not performing. I'd like to conclude on a personal note. And although it may sound somewhat hokey to those who haven't had the opportunity to be in public service. In the in the short time I've been in the building, I've learned that industrial policy, my office in particular, and particularly my bosses is not an academic exercise. It's not a nine to five job is my wife and children have learned. If we want to maintain a competitive industry in an increasingly res resource constrained environment, then industry and government must work together to outline the requirements for future programs to stick to those requirements, and to keep the skill jobs necessary to bring those programs to fruition. The bottom line is, I wouldn't come to work every day if I didn't firmly believe that industry in the department have at this moment in time with this leadership team, an opportunity to get in front of many of these key issues before they become problems. And I hope my office has a small role to play in that endeavor. We must open and keep open, honest, transparent, clearly understandable lines of communication. And I believe that those threads and that that vision is pulled through the QDR, and it's a good start for that climb. I appreciate CSIS hosting this event. I think it's very important and I particularly appreciate everyone coming out. Hopefully the cars the plow won't go by your cars before you leave leave today. Thank you very much. We'll we'll take a few questions. If Brad, if you want to take a few questions from the podium before we move on to the panel, just a couple to give people the opportunity to get questions in before we move on to the additional comments. Okay. Seeing only one, Terry Murphy in the back row there. Identify yourself please and your affiliation as you ask your question. I'm Terry Murphy. I'm with MK Technology, and I have the honor to be also second-headed with CSIS. It's really a comment, but to a fellow mid-westerner. And that is, it's not just the Cold War. I think we won WW2 with Countless. I can't begin to tell you how many bombers were put out at Willow Run in about 10 minutes. And the Kaiser Shipbuilding produced ships once a month and everything else just amazing performances when that was was was done. So I would only simply rewind the reel one one more back. So okay. Nice nice job. I appreciate those comments. And that's that's an important thing. It's also important to understand the transition that I think the QDR points out quite effectively. In in in all lines, all manufacturing lines eventually come to an end. We that's just the nature of commerce. We we at one point in time were manufacturing two aircraft per hour out in California. I had 150,000 employees. They're doing great work in World War Two. And and that was because the nation and industry responded to the call. And as we look at forward challenges, different challenges, it doesn't make sense to try to preserve in my mind that historic base, if we're not also addressing or not possibly address the future requirements, the Defense Department, despite our budget, it's a zero sum gain for everything that we spend on programs and platforms that we don't we no longer require to address the threat. Those are resources we are taking away from innovation and from technology. So I certainly understand. I think what we need to do in the department is to better communicate to both industry and, frankly, Capitol Hill where it is we're we're headed and what type of investments we need to make in manufacturing and in technologies. But there's no shortage of stories of the ability for for our government and for the nation to surge in times of need. And they're they're they're true and they're great stories. But my office is focused on thinking more forward about what's the next thing we need to surge on. We've got a couple more up front if you'll wait for the microphone. And we'll just do a couple more of these and then we'll move on to the panel. Thank you, Mr. Lambert. Amy Butler with Aviation Week. I'm just curious. We had Secretary Gates announce a major fee, $614 million against Lockheed Martin, essentially. They're not earning that award fee for poor performance on JSF. Same day, David Altwig at the the MDA had kind of a tirade about lack of quality in the products that MDA is receiving from its contractors. Do you think those issues are issues that are indicative of an industrial base that is atrophied? Are they bad business models on the part of the Pentagon or on the part of the contractors? Is it just poor contracting? Does that have anything to do with this industrial base issue? I'd say no no and no. Next? No, I'm not qualified to talk to that point. That is Dr. Carter has been following this issue closely. What I can say is that the department has been working closely with with the contractor. It's obviously a very important program for us. We think it's going to be successful. We understand what the base required to support the program is and I think we've taken, again, this is way out of my lane and others here may actually Byron might probably know more than I do about this, but I'm encouraged by the interaction between the department and and the contractors. It's a good thing to see that it's been honest and open dialogue and I think all parties are on board with where we need to go. I'm sorry, I didn't mean to focus you on the way I said it, but just a bigger picture, is there an overall quality problem that is making the industrial-based situation worse? Companies aren't earning the award fees for poor quality work or poor performance. That's hitting their bottom line, which is hitting their opportunity available dollars. Sure. Again, I wouldn't be qualified. I mean, I've only had small insights in that and I haven't had enough time to make a judgment. Let's do one last question and then we'll have another question session after the panel has their remarks. August Cole from the Wall Street Journal. Good morning. What's the level of appreciation of a policy problem around a shareholder arsenal developing in the next decade, essentially having companies that are down to one product line on some of the programs like aircraft? Well, I think it's a concern. My office in particular has been asked to address some issues in that regard. Everyone remembers, of course, the famous Last Supper that took place in 1993. In fact, my boss, Dr. Carter, was at that meeting. So I think we're cognizant of that issue and whether it be in shipbuilding or aircraft manufacturing. We understand that and we're trying to get our arms around it. We have not come to any decision about what the policy should be. As I said, right now, we're trying to get more insight than oversight. So I wouldn't expect to see any, I wouldn't expect to see any kind of prescriptions for any potential issues in the near term. All right, thank you. If you'll hold the rest of your questions, we'll now turn to our panel of experts.