committee will come together come to order today's hearing is a committee's tense hearing this congress on waste fraud and abuse in the federal government the subject of today's hearing is weapons acquisitions programs at the department of defense this hearing was suggested by ranking member tom davis and i commend him for his bipartisan leadership on this important issue we are holding this hearing for a simple reason weapons programs  the defense department are one of the biggest sources of wasteful spending in the federal budget the department of defense will spend hundreds of billions of dollars over the next five years buying weapons systems and needed for our armed forces and no one questions the need to give our troops the best possible equipment but the american taxpayers are footing the bill for these weapons programs and no one seems to be looking out for their interests billions of dollars have been squandered due to waste and mismanagement at the defense department according to a recent report from the government accountability office cost overruns and major weapons acquisitions programs now reach nearly three hundred billion dollars at the same time delivery schedules are slipping j i was says that the delays of two years or more are the norm for weapons systems the contractors and senior defense officials say that some cost increases and delays are inevitable given the complexity building new weapons systems i accept that but that doesn't explain the persistent level of waste and mismanagement the g a o identifies in two thousand and one report found pervasive problems in a weapon systems acquisition including poor planning inadequate requirements unrealistic cost estimates and the use of high risk acquisition strategies today seven years after that report was written g a o says nothing has changed there seems to be absolutely no accountability to the taxpayer despite reports after report documenting  mismanagement in weapons acquisition nothing seems to improve the contractors keep getting richer senior pentagon officials keep receiving lucrative job offers and the taxpayer keeps getting stuck with the check in preparation for this hearing my staff examined in detail one of the weapons acquisition programs identified in the g a o report the marine corps expeditionary you and you agreed to it we're grateful for that you and i and the subcommittee chairman and the ranking member signed joint invitation letters to witnesses asking them to be prepared to testify about broad trends incentives and challenges present advances and current acquisition system for major weapons programs the briefing method memorandum to witnesses and to members discuss only department wide problems and issues not any specific weapon system so we were disappointed to learn late last evening about the decision to release a that project at the last minute does a disservice to our members and witnesses needlessly inject a gotcha element into what should be a discussion of good government it was an unexpected and frankly an unnecessary departure from the wholly cooperated in bipartisan approach leading up to this hearing had we had the opportunity to review the analysis we might have been in a position to agree it added a constructive case study around which to build today's discussion but we weren't given that opportunity under the required report request has made some good points in which we will take into consideration and i won't at this point pursue the matter but i think at some point in the committee hearing we will ninety six the goal was to build a new state of the art amphibious tank for use by the marines but the program has been so badly mismanaged that the defense department now says they have decided to start the project over again  from square one the story of the acquisition is an embarrassment six years ago defense department auditors call the project a paper geremi management does not have a handle on reality they pointed out elementary flaws in the marine corps acquisition acquisition strategy such as the failure to set a realistic schedule the reliance on an expensive test fix test approach and the lack of anyone with overall responsibility for integrating the various components of the project but when a second set of auditors looked at the program four years later they told us they saw no improvement they found disarray uncoordinated design decisions reliability issues and general lack of planning and status monitoring a keen milestone for the e f t occurred in two thousand and six when the vehicle was subject to a battery of tests called an operational assessment the f the sales miserably the prototype vehicles experienced over six hundred breakdowns and could operate for only four hours before requiring extensive maintenance we've obtained a copy of the report on the operational assessed assessment the list of problems it describes is nearly endless the vehicles weighed too much in the water they could reach cruising speeds only if the marines on board left their equipment behind on land the gun turret bent and broke from the stress of cross country movement there was poor crew visibility during water operations and the drivers vision was periodically washed out by water spray the ammunition feed jammed in crews were unable to adenike and then a five vehicle targets the vehicles were so no easy that the marines onboard had to wear both earplugs and ear muffs and could not respond to voice commands the contract with general dynamics to develop the prototype these cost the taxpayer one point two billion dollars but now this investment is going to be scrapped asked year the marine corps announced that the e f these perform so poorly that the entire system development and demonstration process would have to be redone this means additional cost to the taxpayer of nearly one billion dollars or more and at least three more years of delay while the project and this is only one project we've singled out has been a fiasco for the taxpayer there has been at least one beneficiary general dynamics the prime contractor the contract for building and testing the prototype was a cost plus contracts so the company got paid even though the vehicle flunked its tests incredibly general dynamics even received over sixty million dollars for its work on the boat on the verge of work on the development contract what's more the marine  corps says the general dynamics will now get the new contract for seven hundred million dollars to eight hundred million dollars to build another prototype well the stand signal it says is unmistakable no matter how bad a job you do there will be no accountability as we will learn today the e f v experience appears to be the rule not the exception the g a o report that will be the focus of our hearing today looked at seventy two weapons programs now under way at the department not every program was as bad as the e f the project but not a single one had followed the best practices recommended by both g a o and the department of defense we need to find a new and better way to procure weapons for our military everyone on this committee wants our military to have the equipment it needs to protect our nation but we simply cannot afford to continue to waste hundreds of billions of dollars poorly planned and mismanaged weapons programs and i hope our witnesses today will be able to help us understand what has gone wrong in these chronic and costly problems plaguing major weapon system programs at the department of defense this is critical oversight that transcends party to the challenges we'll discuss today have been faced in some form or another by virtually every administration since the earliest days of our republic the recent report by the g a o on seventy two large scale acquisitions once again found most programs outcomes optimal apparently that's understated auditor shorthand for incredibly bad in the aggregate the systems analyzed exceeded original budget targets by two hundred ninety five billion dollars and were twenty one months behind schedule the committee expensive stansell time and effort probing allegations of malfeasance and wrongdoing by contractors in iraq and elsewhere this g a o report reminds us there are far larger problems on the other side of the ledger far from the war zone where program managers continually fail to follow established best practices to measure the technical maturity and feasibility of these complex project which the committee continues to probe extensively we welcome similarly sustained attention to deeply ingrained abuses in inefficiencies and weapon system programs already budget to cost many hundreds of billions of dollars as i've said the problems cited by  systematic failures to refine requirements acquire mature technologies and capture production of our not new seven hundred ninety four congress authorized construction of six frigates in order to quote spread the work among the several states equitably as possible and with the greatest political advantage unquote six private shipyards were leased to carry out the ship building the project was soon behind schedule the six keels were not laid until the end of seventeen ninety five seventeen months after construction had been authorized subsequent mismanagement delays and cost overruns resulted in scaling back requirements to three frigates is any of this sound familiar from those frigates to the f twenty two that has been the sad weapons history of weapon systems development throughout our history in the modern era major system acquisition has been on high risk for many years because d o d processes have often prove costly inefficient if not wasteful hundred seven g a o found many weapon systems cost more and do less than anticipated and schedules are often delayed to address these issues and pentagon has convened any number of task forces working groups committees and commissions whose reports have resulted in sequential ways of promised reforms and layers of ambitious initiatives but as cautious g a o auditors often conclude challenges remain perhaps that's because the reforms as well as congressional tends to tame this stubbornly inefficient process the focus too often on symptoms while overlooking the root causes of chronic dysfunction in major system development project this g a o report blames a lack of skilled managers over use of contractor employees and the tendency to gold plate new designs with immature technologies for cost performance and schedule problems but we've known about these issues in varying degrees for decades today we should look beyond the persistent symptoms to the broader deeply ingrained personnel and management practices that can  technical knowledge and sound management decision should drive programs to key benchmarks not internal d o d budget duals or military service rivalry in this discussion it has to be acknowledged these are highly complex large scale inherently risky programs commercial and industrial best practices provide many valuable lessons but offer only limited wisdom about packaging and projecting lethal technology across continents very often this is rocket science not an automobile assembly line and some measure budgetary risk even the occasional failure may be an unavoidable cost of doing this aspect of the nation's business this is a government problem but the major defense contractors can exploit the systems weaknesses well if the pentagon asks for a gold plated flying cadillac that's what contractors will bid on even though both sides of the deal they're going to get much less that will end up costing much more even companies that should know better play the game the boeing corporation is the prime contractor on sixteen of the seventy two major systems in which he found requirements creep schedule delays are significant cost overruns oversight like this one consistent constructive can help mitigate those inherent risks while modernizing and improving major acquisitions at the talking about is immense we currently spend as much on military as every other country in the world combined last year we allocated fifty three percent of all of our discretionary funding to defense five hundred forty nine billion dollars and that doesn't even include  hundred fifteen billion dollars in supplemental funding for the was in iraq in afghanistan as the general accountability office points out we have one point six trillion dollars in total plan commitments for weapons and in two thousand and seven the pentagon exceeded original budget estimates by two hundred  ninety five billion dollars secondly the pentagon stewardship of taxpayer money seems to be getting worse in two thousand the pentagon exceeded cost two billion now it's exceeded by two hundred ninety five billion in two thousand original weapons class grew by six percent this year's it was twenty six percent growth in two thousand our average delays in delivering initial weapons capabilities were sixteen months now it's almost two years so today's hearing certainly asked a question whether we are being responsible to our  taxpayers other words when it comes to developing and buying weapons are we spending american tax dollars wisely on that front the report raises many many important questions why are things getting worse when it comes to cost overruns and delays especially when the underlying problems have been known about for years and years in other words why can't we do better why is the pentagon failed to meet industry except the best practices in any of the seventy two programs surveyed by g a o why do we continually reward contractors who now make up nearly half of the workforce on these weapons programs when they apparently are not delivering on budget and on time is not reasonable to ask that any proposed wesson's weapons system have clear expectations realistic technology and appropriate testing why do we continue to buy before we fly tomorrow subcommittee is going to hold a hearing on the missile defense program which i think exemplifies some of these issues very well that's a decades old program that has already cost taxpayers one hundred twenty two one hundred fifty billion dollars and according to the congressional budget office it may cost another two hundred seventy seven billion dollars over the next twenty years it has been plagued by delays and cost overruns and a lack of realistic testing yet we continue to throw good money after that our core defense budget that is the budget excluding the hundreds of millions of dollars being funding for iraq and afghanistan has grown by an average of eight percent per year over the last eight years as part of the problem here in terms of cost overruns the fact that we currently lack any discipline or any budgetary pressures on our defense budget with these nearly double digit yearly percentage budget increases is there any fiscal discipline being exerted to hold down costs and to make difficult to aid us between what we really need and we can afford versus a system that gives everybody what they want realistic likelihood of employment against the united states for the let's see what the cost benefit analysis is when you compare those weapons systems with the value of other defensive systems that could have been robbing employed or the need to strengthen the core of this country the physical infrastructure of the human national security in the twenty first century must emphasize smart power as much as hard he stated i quote him my men that we had to meet the challenges around the world in the coming decades this country must strengthen other report elements of national power shelly in financially and create the capability to integrate and apply all of the elements of national power to problems and challenges abroad at a time of economic hardship in these myriads of foreign challenges facing us could we find a better way to spend two hundred  disgusted but i'm sad to say that i doubt that anybody was very surprised by it although everyone should have been shocked by this story i want to put in the record a couple of paragraphs from that  story said government issued a scathing review yesterday of dozens of the pentagon's biggest weapon systems saying ships aircraft aircraft and satellites are billions of dollars over budget and years behind schedule the government accountability office found that ninety five major systems have exceeded their original budgets by a total of two hundred ninety five billion bring their total cost one point six trillion and are delivered almost two years late on average unquote  apparently there are no fiscal conservatives at the pentagon apparently they believe that the congress will just keep giving more money no no matter how wasteful or inefficient they become of course the international herald tribune said a few years ago had a major article about the revolving door at the pentagon and the fact that all the defense contractors had hired i think was three hundred retired admirals and generals over the previous  ten years so most of these contracts seem to be sweetheart deals in the first place but it's it's it's really shocking one point six trillion in total cost and two hundred ninety five billion and this was just on the major systems no telling how much has been wasted on the hundreds of smaller contracts the pentagon has two hundred ninety five billion would run the entire government of the state of tennessee our schools our health care roads prisons parks anon anon for the next eleven years conservatives above all should realize that any gigantic government bureaucracy is always going to ask for more money and always find reasons to justif congress is afraid to cut the defense department for fear of being seen as unpatriotic yet it is a very false and very blind patriotism that allows the pentagon to continually waste mega billions and allows the defense department to spend like there's no tomorrow in a few short years we will not be able to pay all of our veterans pensions and social security and all the things we promised our people it would not bring spending under some type of control perpetual war leads to bigger government and goes very much against traditional conservatives and finally mr chairman i would just like to read something was in the end a column in the worst post yesterday b they wrote this they said quote the g a o report lays bare a festering problem in our nation's military bertram assistance competition barely in the defense industry and is growing weaker by the day it was a different story just two system it is a system that largely forgoes competition delivery and performance and replaces it with a kind of design competition similar to what the soviet union hardly  unquote i think this is a very sad situation that we have at the pentagon and i suppose it will continue but  report as we know that the defense department's ninety five major weapons acquisition program currently regional budgets by nearly three hundred billion  must be rectified particularly in light of competing needs from other military and major nondiscretionary programs in a time time of declining discretionary spending the fact that the d o d is not receiving expected returns on large investment and weapons system has implications for on the d o d where other government agencies and apart and departments are competing for increasing scarcer resources three hundred billion dollars in excess spending on weapon systems is a sizable amount of money that could be put to use for many other competing and worthy projects government wide this is particularly true in an age of declining discretionary spending where every dollar not optimally translates into less money available for other budget priorities both for domestic entitlement and other national security programs mr chairman the g a o report on defense acquisitions a note  services to over promise capabilities and under estimate cost to sale new programs if the current culture remains in place it will circumvent and i believe ultimately undermine in the new systems that are put in place to improve outcomes i'm looking very forward to hearing from eyewitnesses to see if they can make some sense as a response and our responsibility congressman and we want to make sure that we have the weapons and the ability and the equipment necessary to preserve protect and defend this country i am a fiscal conservative of course and i want to make sure there's no waste fraud and office as the deputy undersecretary of defense for acquisition and technology at the department of defense and david paterson the principal deputy undersecretary of defense for controller at the department of defense we want to  welcome all three of you to our hearing today it's a practice of this committee that all witnesses testify under oath so i'd like to ask if you would please stand and raise your right  prepared statements and they will be made for the record and in its entirety would like to ask if you would to try to keep the oral presentation to around five minutes will have a clock that will indicate green while the five minutes ranking member davis other members of the committee it's my pleasure to be here today to discuss our sixth annual assessment of the department's major weapon system acquisition programs my statement today will focus on outcomes for the major acquisition programs what we believe are the reasons for that and potential solutions some of which we believe the department recognizes and is now trying to implement with regard to since we began these assessments in two thousand the number of major weapon system acquisitions has grown by twenty the total investment has doubled cost overruns have increased from twenty seven percent on average to forty percent overall acquisition cost overruns have increased from six percent to twenty six percent and delays in delivering initial capability have increased from sixteen months to twenty one months our analysis of seventy two separate programs revealed a lack of knowledge base decisions three critical junctures has some of the causes for this for example eighty eight percent of these programs started before required technologies to meet weapon system capabilities were ready because technology development cannot be scheduled neither can the cost of these programs be credibly estimated a lack of technology design and manufacturing knowledge at critical junctures in each program accounts for the additional cost in time from original estimates to field a weapons system there are systemic problems that we believe contribute mightily towards these poor outcomes at the strategic level there are simply too many programs chasing available dollars to keep processes in the pentagon that preceded the acquisition process the requirement setting process in the funding process should be responsible for ensuring a balanced investment strategy that matches the war fighters needs with a battle with available funds however they do not work together very well to ensure that this happens the requirements process which validates the need for a new program tends to be stovepipe meaning each of the services may offer different solutions to fill the same capability gap this means that candidate programs in order to compete usually must promise very high sometimes unachievable performance requirements given available resources they must also promise very low cost in order to fit into the department's funding plan because the funding process starts with overly optimistic cost estimates problems with cost and schedule are a fait accompli for most programs each program begins with an unmanageable business case cost and schedule estimates have an optimistic assumptions and a light on data their definition of success is usually to become a program of record with a funding stream attached to it as a result programs begin with cost and schedules that are frankly impossible to forecast to be sure problems resulting from a poor match between program requirements and the resources available will quickly cascade into design changes manufacturing inefficienc quality problems parts shortages and delays to testing that must eventually demonstrate the weapon systems capabilities solutions are available a well balanced well prioritized mix of candidate acquisition programs would alleviate the pressure that each program now faces in winning the competition for funding this means the department must make early hard decisions and must truly move toward a joint process for dal requirements a business case that applies solid systems engineering practices to properly match a program's capability requirements with available resources before a program is approved would allow more predictable cost and schedule estimates at the outset of the program finally rules once a program begins that require program managers who now by the way would be empowered with a business case that was much more reasonable to show evidence that technology design and manufacturing knowledge had been achieved at the right places before moving past critical investment points in a program this would bring accountability to each program as it is executed the department understands all of this and to its credit it has been trying very hard and in the past i'd say twelve a team months very hard to move things in that right direction however the issue is large and complex we have recommended several ways that we believe this process can be improved such as limiting acquisition time frames in embracing evolutionary knowledge base product development processes that would allow earlier fielding of new weapons systems and then incrementally improving them as new technologies become mature however as was stated by this committee earlier the cultural barriers remain high the transitory nature of the positions at the top in the pentagon that can guide change makes this difficult often policy does not translate into practice because of this significant and lasting change can only take place with greater and continued support and advocacy from the department's leadership as well as sustained oversight from this congress i'll conclude with that i look forward to any questions you may have thank you very much mr distinguished members of the committee on oversight and government government reform in the subcommittee on national security and foreign affairs i am pleased to come before you today to address the broad trends incentives and challenges present in the defense department's current system for major weapons programs i will also discuss a report recently issued by the g a o in title defense acquisitions assessments of selected weapons programs i am fully committed to acquisition excellence and the restoration of the confidence in our leadership for our acquisition system thank you for the opportunity to appear here today the history of acquisition reform for the department of defense covers more than sixty years the most recent studies of the defen defense acquisition performance assessment data center of strategic international studies c s i s and the defense science board be served to assist my preparation for confirmation as a deputy undersecretary of defense for acquisition and technology by the united states senate in february of two thousand my perspective coming from industry was over thirty years of experience in aerospace and defense have been shaped utilizing that experience along with the acquisition process to deal five thousand two was broken once confirmed we quickly moved to recruit and fill key positions of civilian executives that had significant industry and military experience and a staff and the conference after my first ninety days in office i listened discussed and reflected on the leadership perspectives of congress industry and d o d military and civilian personnel my opinion was that the acquisition process was not broken we needed to add discipline into the process and sure that the basic blocking and tackling and executing acquisition process was being done correctly we also needed to properly scale and tailor processes where and when needed to implement changes as streamlined and simplified processes to reduce cycle times to increase competition and to broaden communications up down and across with congress industry academia our coalition partners and with india we developed a three year plan established our vision and strategy and implemented goals and initiatives with a sense of urgency today we are twenty six months  implementing that plan we are striving for acquisition excellence with a broad set of objectives by using short and long term initiatives these objectives include one enabling decision making for balancing the program and portfolio  environments to the incentive and cost plus award incentive structures to motivate and encourage industry performance our goal is to utilize objective criteria to measure contract performance for incentive structures are being implemented for mature technology stable design or mature production processes critical junctures of a program which are essential for achieving plan costs kegel and performance outcomes and quote that statement is not understood the deal d o report opening statement talks about the average tenure to data program managers has been less than half of what called for by deal the policy and the deal the policy is twenty four months the actual average tenure of program managers today across all services is twenty three point eight months with an expected tenure of forty two months average amount of time so i was called to my summary we look forward to working with the g a o to better understand our data methodology and conclusions associated with the assessments of selected weapon systems in summary measurable progress for acquisition excellence has been accomplished on a broad front of initiatives we have traction we will continue to improve much work remains to be done other concerns arising from the government accountability office a recent report on this issue first let me make it very clear that we appreciate the mutually beneficial relationship that the office of the undersecretary of defense comptroller shares with the g a o as we strive to ensure that the american taxpayer is well served we also appreciate congress is frustrated with what is quite literally one of the oldest problems and govern government and to ranking member davis is point it was george washington i believe who first complained about the ineffective response to his request for cannon castings and we've been trying to improve the process for acquiring weapons ever since in more than one hundred thirty acquisitions studies reviews and evaluations that have been conducted over the past two decades most if not all of them found that the key elements in successful programs are program stability and funding predictability instability drives cost growth schedule slippage is and in some cases failure of the weapon system to perform as anticipated several initiatives have been co sponsored by the undersecretary of defense for acquisition technology and logistics and the department to address this problem but from a calm for xp respective the most notable is the capital funding pilot program under the capital funding concept the department guarantees a certain level of funding over a fixed period of time from milestone be beginning of system development a demonstration to initial operating capability of the program funding is held at a guaranteed level by avoiding up and down adjustments until the project is delivered when industry and program managers  know that the annual program funding will be provided at a predictable level and that other aspects of the program such as unfunded performance or requirements changes are not allowed there is an increasing probability that the program will be delivered on schedule and within budget to qualify for capital funding a program must have a well understood funding profile from milestone b two initial operating capability will not be used as a bill payer by the services or the department it will provide by annual reports to congress on cost schedule and performance progress will have a technology readiness level of at least six that milestone be it will be time definite finally capital funding programs will be cancelled if they fail to meet established costs will and performance objectives three reviews in a row the capital funding concept is being formalized in three pilot programs the combat search and rescue helicopter program by the air force as soon as that program is a program of record the joint high speed sea lift vessel managed by both the army and the navy and the general funds enterprise business system managed by the army because these systems are within the department's current authorities they can be implemented in the near term finally i would offer that this administration has made solid financial management a serious and successful priority with sound financial management successful acquisition program management is far less likely in two thousand and one critics predicted that the department would be unable to turn around its complex financial management operations today the department is poised to achieve a clean audit opinion in two thousand and nine on more than two thirds of the two point four trillion dollars of assets and liabilities and extraordinary achievement we're on track to eliminate the remaining eighteen of the original hundred sixteen managers internal control weaknesses and we are lowering cost and increasing productivity and saving the taxpayer billions of dollars the defense finance that accounting service alone has increased productivity by fifty two percent saving three hundred seventeen million dollars since two thousand and one audits conducted by the defense contract audit agency on f y two thousand and seven contracts not only save the department two point four billion dollars but armed investigators with information that recovered an additional two hundred twenty five million dollars these are only a few areas where we have made progress since two thousand and one whether it's sound financial management or providing the american taxpayer with the most effective weapon system acquisition process the department of defense is absolutely committed to the wise and efficient environment and incentives as well as improved process is there anything we in congress can do to help change that environment over promise capabilities and underestimate the cost of these programs significantly probably the bigger problem is between the department and the stovepipes that they have to deal with meaning the acquisition communities the various acquisition communities within the pentagon there's an oversight mechanism that these gentlemen obviously have to take care of the services all have different solutions that they want to provide in terms of capabilities and there's other acquisition agencies in the department as well contracts reimbursing the firm for its best efforts rather than result the defense department would be better served by awarding some of these contracts under fixed price contracts and placing more the risk on the contractor of reasons i think that cost plus contracts are important for these major development programs number one as these companies no matter how well you understand the technologies for these are going to be tremendous risk in moving forward  with with a fixed price in a fixed price kind of environment but in addition to that the low volumes and the lack of a market and aftermarket for products and things like that just makes it much easier for contract if they're going to  expand the twenty or thirty billion dollars it sometimes takes to develop a weapon system they have to have protection to do that so we understand that the critical thing there is that if you're going to take a risky project like that the first thing that you want to know is you need to understand the requirements and you don't want to sign that contract until you've done really proper systems engineering analysis maybe even to the point of prototyping before you would actually  begin a weapons system program and the way that's done today is many of these programs are started before they even do a preliminary design the requirements process comes out with the needed capabilities   without any knowledge about the studies that we've done in the past on some of the big major weapon systems after twenty two or you know the b two bomber long ago those programs began and receive the of how much of your program office workforce is contracted out the response we got back i don't think that we're prepared to say if that's good or bad yet but it's something that seems questionable to where the use of outsourced contractors is growing and it just is a trend that we want to keep an eye on we don't have anything any evidence that that's good or bad bad at this point but  if i could go back to the program manager discussion the brought up the accountability of program managers the report that we did that was another thing we asked in the survey we asked secretary finley had the numbers at the has and those are probably more up to date and more universal than what we had i just want to make it clear that in our report we indicate that our ale and our analysis of that included thirty nine of these programs that gave us the information back on what the tenure was of their program managers and of those thirty nine it was seventeen months but in addition the way that you hold program managers more accountable if you give them a better business case i think what we were talking about early i don't think you can really hold someone accountable for managing risk given the business of of the capabilities that they're going to need to achieve with the funding that they're going to be given and the cost estimates that are based on really not enough data at the time you can hold and not only that but the timeframes of these programs can be tab and let me ask you if you're doing a twenty five billion dollar program or a fifty billion dollars program you manage it on time and under budget what about a bonus system that makes it i think you know i think that's something that would make a lot of sense if you can what do you think on that again only get a bonus if you're in a private sector yes i think i'm on a system does make sense i think that only be cost effective as opposed to these other issues haven't you mr patterson matter of fact when we have civilian employees who are program managers they do get bonuses and and their bonuses commensurate with their success in the program for military program managers it's a little bit more problematic as you might suspect thank you mr davis we're talking in a more general way and g a o gave us a lot of examples but i want to focus on one example that i brought up in my opening statement earlier of of how money just seems to be  used without any accountability without any result the expeditionary fighting vehicle is supposed to be an amphibious tank it was developed to transport marines from ship to shore and then to conduct land based combat operations and this was thought up in two thousand and one the marine corps awarded a contract to general dynamics to design and test the you know what to parrot for large scale production and they thought through a schedule they're supposed to finish this phase of development by two thousand and three and then the marines would have the vehicle available to them by two thousand and six the original budget was seven hundred twelve million dollars  through a series of contract modifications the budget grew to one point two billion dollars and the deadline for completing the system development and demonstration was pushed back to two thousand and six when the marine corps tested the  v in two thousand and six six it broke down three four and a half hours crucial parts for the vehicle including the both flap and the gun sure it had serious structural problems i have a chart that i've got to put up on the  water if marines don't bring their combat and personal equipment with them on the cracks that means that the vehicle could only work as invasion if the marines left behind their battle gear and since those tests failed the program has gone back to square one last year the defense department announced that the f d a would have to go through a second development a demonstration process at an additional cost of the taxpayer nearly a billion dollars more in effect the department said even though we spent one point two billion dollars and six years on the first system development contract we need to start the process all over again and spend another billion dollars to build a note a new prototype vehicle this differently how could this have happened why didn't the contractor deliver what it promised why didn't the defense department manage the program better and why are the hours between breakdowns on this i think the reliability requirement was forty seven hours so when they finally got to a point where they thought they had designed the prototype they had ignored the critical design review that second thing that they got they got the reliability problems they have and they have to start all over well there are plenty of warning signs that the contract was not going to work but nobody seemed to pay attention to those warning signs in two thousand and two the defense department auditors issued a scathing that found of the program was being poorly managed and here's what the two thousand and two report said quote the management does not have a handle on reality particularly with unrealistic schedules end quote and the report also said the project lacked leadership and there seems to be quote no one steering the ship and that the project was a paper dream that everyone except it has only a casual resemblance of reality end quote  finley that was six years ago these warnings were and he didn't two thousand two why why do you think that happened you don't know specifically about this but if there are warnings to be happy to take the question for the record well in two thousand and six they had another audit that was performed and this audit found exactly the same problems that were reported in two thousand to four years it passed hundreds of millions of dollars have been spent but there was no improvement in the contract management here's what the auditors said in their two thousand and six report quote oversight of the program is ineffective and quote unquote the systems engineering process is inadequate in a major shortcoming of the s v program it is a root cause of disarray uncoordinated design decisions reliability issues and the general lack of planning and status monitoring and quote well it appears that everyone who examine balances in this process to prevent this kind of thing from happening what do you think went wrong here why weren't there checks and balances to take these warnings seriously one of the things that  program is they they initially they signed the contract to go to system demonstration and development which is the cost plus contracts ago i had that opens up the funding in december of two thousand they declared the design stable in january of two thousand and one so in one month they had a complete critical design review that the program to continue towards manufacturing engineering manufacturing and development obviously in one month i don't think that they had the proper engineering prototypes they didn't they had not accumulated the knowledge that any program manager in any world class company would have to accumulate before they got more investment dollars in that timeframe you know i really think that probably as a major defense acquisition program it wasn't getting the oversight it probably deserved not that's back in the two thousand timeframe is when you that's probably the genesis of when this really started going wrong if i hire contracted to do work for me and they run over budget and and run out over time and then they fail i'd want my money back why can't the government get its money back i think probably you know one of the things that has to happen in this environment that we're were going into it back in the time frame is it possible to get the money back if it's a cost plus contracts or do the contractor say they're taking the they're not taking the risk it's the government that's taking them i don't think i'd say you know that's kind of outside have to talk to some of our lawyers that we have to understand the legalities of that but i don't think it's you know it's very it's not easy to get the money back i know that well the problem i see is a nobody in this process is advocating on behalf of the taxpayers the companies doing fine it has a contract it's structured so that it will get paid no matter what the result even if the result is total failure the responsible officials d o d are not being disciplined in fact they may get lucrative job offers from other defense contractors but the marines who need this equipment have to go without and the taxpayers foot the bill pay out billions of dollars and we get nothing in return that just can't be a system that we ought cases is inadequate but if you have a cost plus contracts the contractor pretty much as long as he's doing the best he  can you can't really go back and say hey we want our money back as long as he's trying to perform as he as he said he was going to and in some of these weapons systems and i've tried to follow this over the years now you're talking about such things that are so complex that even if you have a design once you get into the actual production or a prototype you start finding design flaws that you didn't think were there mean it's not an exact science is it no it isn't and because of that the contractor pretty much has to work with the defense department that the contractor has to work with the defense things we want to talk about i don't think anybody here democrat or republican liberal or conservative doesn't want to make sure that we minimize waste fraud and abuse in the defense department or any other department but the thing that's important to me is that we have the defense capability to defend this country against any enemy domestic or foreign and that means sometimes we have to look at weapon systems that may be new and on the drawing boards that we think are going to be necessary to defend this country and that we let a cost plus contracts for design and engineering and once they get into it we find out that this thing really needs a lot more work and so you have to go back to the drawing board and try to make those corrections and then when you get prototype built you find many times more design problems and changes that have to be made and the contractor and the defense department have to go back to the drawing boards one more time to make sure that those corrections are made i've seen helicopters are supposed to be the best in the world and if we see them crash and i've seen the planes that we've developed that were supposed to be the best in the world and during the test phase and even after the test they found flaws and they were the cause crashes and people were killed and so when you're talking about the items many times you're going to have to make those now one of the things i want to ask is you know we go up and down with the fans and the defense department has to pick and choose which defense programs which which weapon systems that they want to produce do the fluctuations between administrations for instance the amount of money that can be allocated for different funds aren't there and you have to pick and choose and what kind of an impact does that have on design programs for me where any of you you know we've looked at the trend of acquisition funding over the past i would say twenty five years kind of a build up an acquisition funding for for weapons systems for let's say we have a weapons system that we're developing right now that we think is going to be very imperative for the twenty first century to deal with nuclear development by an enemy or a lot of other things and a new administration comes in and says ok we want to cut the defense budget there's too much going on and it has to pick and choose the programs that they want to proceed with is it possible that some of those programs will be short changed and so they have to cut back on research and development and then as time goes by it becomes necessary for that program to be restarted or funded to a higher degree because of the necessity of it that there needs to be changes design changes and they need to be more money because enough money wasn't allocated in the first place if i could just take a minute and i mean i think you just gave a very good description of what happens to a weapon or one knows that you're going to have to deal with a lot of unknowns and contractors you sign a cost plus contracts for a reason because contractors are going to have to deal with a lot of risk just as you explained i think the problem that we have here is that there are two processes the work maybe a two year process between a milestone to a milestone where that's when you get your big money and you start your program that process is really more what you're talking about that's where the need and the available resources  technologies somebody's got to come in and apply some reason to that and say you know can we get that after twenty two fighter to do all of these things by nine hundred ninety six systems engineers have to say no we can't do that let's that we realize on these cost plus contracts with the systems that are extremely important in the opinion of the people department and the administration that we properly fund those even though we know that there may be cost overruns in order to make sure this country is well protected and thank you very much mr chairman thank you mr burton mr attorney general continue on that day because i'm not sure it looks like anybody ever makes a decision that some of these systems not to proceed when you look at ninety two systems and so many of them behind schedule by such large periods of time so many over budget by so many dollars let me ask you mr bateson if any of these systems ever been scaled back or eliminated has ever been a decision where somebody finally says you know what this thing  be about a half a dozen of those joint common missile comes to mind where we determined that the requirement was not sufficient enough to continue the program and the program was terminated that's the most recent example about the f twenty two  one point as vice president cheney it was all for eliminating it it's what two or three decades over do it it's billions of dollars tens of billions of dollars of a budget that was originally designed to go deep in the soviet union doesn't exist anymore is the real problem is made some today and had we canceled it it probably would have been a bad thing but it did take a long time but your point is well taken quite frankly and the fact that we oftentimes live under a circumstance where we live in hope we hope that it will perform the way we intended it to we hope that it will be on budget but the fact is is that the circumstances we find ourselves in oftentimes make that impossible i would like to point out and  comment on the the g a o as reports that have have in fact prompted a great deal of effort on the part of the department of defense back in two thousand and five the g a o provided a report similar to this one that was used extensively in the confirmation hearing for the deputy secretary of defense it then prompted him to ask for a complete review of the defense department acquisition system from bottom to top and those recommendations which we have started to implement has secretary family has expressed are beginning to show progress and promise and things don't happen the thing pretty much has to take five years or less so you have to have requirements that you know are achievable in that timeframe and that way you can upgrade we talk about an evolutionary knowledge based acquisition process that might strike fighter there's overlap right now they're going into production they're in the limited procurement contracts now and they've just begun testing aircraft so that's risky to us  i would like to say that in the past couple of years and in fact the congress with this section eight zero four from the defense authorization act couple of years ago the department to start looking at things and i really to be fair would like to say in the past eighteen months or so there have been even looking at it from the outside we've seen things happening at the level that indicate that that hard decisions are being made i think the j v you could probably talk about better ny but that is an example where they've asked them to go back and look at the requirements before they begin a program as we say in our statement that there is reason for optimism dwell on what this administration can't change and i'm certainly going to try not to overly dwell on the fact that this administration doesn't seem to have done worse than its predecessors were disappointed it may not have done as much better than we would have that we would have hoped historical you know i mean i grew up in the military during the night vision devices secure radios that were never secure they were theoretically secure but they couldn't stay it environment and we kept buying and building them but i was told they got better they got so good that the governor of pennsylvania objected when we tried to retire them on him because he needed them for homeland defense  line because ultimately it is a great performer and realizing that we can and should have more of them but at the same time we've never made a purchase essentially for the game and even today we're not really a up to the cost of a c seventeen exceeds it on a payload basis can you touch on those two areas and how we got there i really want to know how we got into this trouble we're not going away from it yet how is this congress going to begin thinking about giving instructions to the next administration so that we stop making the same mistake we're making in plain sight let me talk to the seventeen c seventeen continues to perform in fact perform performs as well we have problems that you're well aware of in terms of the c five and reengineering the c five and having it available don't go to the c five i am i'm on record saying that except for special missions we should shut them down is the worst decision of the air force but because it's an ongoing air force decision that i have gotten lost i'd rather not go there i am concerned about these other aircraft including by the way the short field version of the c one c seventeen  that we look and say that's sort of like that cessna one eighty two with a big engine we know it can work we can get a guaranteed contract to deliver it at a fixed price and make sure that it meets that requirement or we don't pay but at the same time we're continue to buy c one thirty s as though it's the only thing that can do a short field message so that that's why i'm limiting you in my limited five minutes and the c seventeen in fact does landed short field carries a lot of stuff carries three times what the c one thirty  carries the fact that the c one thirty is truly a less expensive airplane that the air force believes that it can use that in an effective way in the end for theater missions and has chosen to emphasize the enter theater mission the c seventeen on the other hand has been used in its long range and long range direct delivery capability is a question of the instant mission that they're having to deal with and i think that's where the air force and is going i don't want to put words in the air force's mouth and they're probably better able to tell you why they do things but those are the issues that i believe continue to make the two airplanes marketable to the to the department of defense mr chairman if you could just finish up on the c one thirty j and how we can justify the continued cost increases there because that's sort of the mirror of the first half easy answer i believe and i will get you the precise answer for the record but lucky does come in with a reduced only say that you know you can tell i would love to have a whole hearing on sort of our lift capability and those because i believe those in the long run you and i will be long retired and we will still be paying for a fleet of c and wasn't done on budget and under the contract general dynamics was supposed to build a working prototype by the year two thousand and three it's now two thousand  tax payer money we got a war going on in iraq and we still have conflicts in another nation giving a bonus to a contractor who failed to the up to the contract so you can give it to me in writing and please help me to understand so i can go back to my constituents who pay their taxes and let them know what's happening with their dollars thank you you're welcome i justified i agree with you i would hope so because there's another emergency supplement coming our way and we've got to find out a way to fund it we want to protect our troops  and i'm trying to figure this thing out because to be very frank with you is a bit confusing the question is how do we move to a culture of excellence i think that we are mired in a culture of mediocrity a culture of complacency and a culture of i just don't give a i mean if i listen to everything we've said mrs sullivan you said something that was just very interesting you were talking about items and liberal delivery of items and you said they're always late and i'm not i'm not here knocking anybody ever really not you know that is the chairman of the water of the coast  subcommittee of transportation and this thing i tell you how close my eyes and didn't read a document i'd swear i was going through the water it's the same kinds of problems says you pay you get what you bargained for i mean i could go on and on and it seems to me that and it seems to me that there's some type i think we can back up you just keep backing up backing up back and i'm saying ok ok guys it's going to be all right we just slap to hand we'll correct that for you but what's happening is that we have this time passes on money being spent products not being produced bonuses being given out american people being cheated that's a problem and at the same time our national security and this is probably number one our national security being compromised so i guess what i'm trying to figure out is you know in the deepwater program one of the problems was they didn't have the kind of people this is my opinion in the in the coast guard who had the skill to even put together a contract that made sense as i said to the coast guard i believe that a first year  law student could have done a better job than having for example the person who the contractors deciding when they get bonuses for example but i'm trying to figure out where w the you know the summer sun and and i mean i mean and i'm very serious i mean what kind of things must we do now because a lot of this stuff comes down to reaching for the very best in america and i have this saying i tell my kids as i tell them you know we can we can at some point you've got to me to make another words what i say is that people you know you can jive and play games and act like we do in some successfully and everything's going to be fine but it's sometimes the rubber has got to meet the road the sad part is that sometimes we discover there is no road and i think that's happening more and more in this country there's not just guys i mean i'd like i just say it's the cause but it's almost a mirror image of this and so the question is how do we make sure that we have a kind of people that we need how do we lift up that that that standard of excellence because if we're going to be number one in the world and maintain number one status in the world we've got to be on that level we could just be s what are they going to be late i see my time is what i hope i can get an answer to that question well my answer that question sir is we do not accept mediocrity it does start with the leadership performance and that performance bar is not measured by who is in charge or personality that's measured by process control and what you achieve that process ability you then raise the bar another notch and you raise the my process can be complicated as five thousand has been accused of from time to time the process is so complicated we can't find a way through it and that's where we have to slash cut and simplify the process for better outcomes not compromise quality do not accept mediocrity is a way of doing business and we do as a t result of all the non mccurdy actions that we've had last year and are looking at what we call it and we are able to discern programs that may not be in trouble today but at leading indicators that's where they may be  government really needs to keep in hand and as i stated earlier we're not we have not found any evidence bad effect but we question it we think that the government should try to maintain a more organic workforce and they have now i think it goes to some of the things that mr cummings was talking about in contract things out you lose the organic capability and probably get more mediocre and lose eighty six ok i apologize yours was the only bio i couldn't couldn't get so you sort of came in at the height of nixon's build up six hundred chips was somewhere inside over the right during that period of time was contracting better or less well done than it is here today  from my perspective the things that were taking place in the department that there was an acquisition reform movement that began with the end of the cold war it seemed to me that there was at  overly pick on one thing but the crusader was was ordered designed nearly procured post cold war so that we'd have a big gun that could shoot a long way and weighed not just a ton but more tons than any road can hold true that if we're going to really improve government procurement to get us the right systems the right time with the  minimum and there will always be mistakes when you say i want to see at night i want to fight at night i want to know where the enemy is in the friendlies are and i want to be able to pinpoint them with a smart smart that's not easy to do but if we're going to do that we're going to have to take career professionals like yourself and not these two gentlemen who came from industry but the people who worked on the program and we're going to have to change how they do we're going to have to do another reform is not true i think that the people in one of those programs was a political appointee out of every ten essentially or were career professionals either they were active duty military or they were career professional s because the other side of the aisle sometimes wants to make it seem as though the change in congress or a change in administration really has made any change in your oversight your job and how well it's done can i ask you straight forward the administration per se or the previous administration this congress or the previous congress realistically although we may have failed to improve things did we really have any impact or isn't it essentially what you're complaining about your report part of a culture that has been unwilling or unable to be changed by both previous administrations in this administration previous patterson i'm going to ask you both together you both came from industry you've both been on both sides now of this going forward as part of your legacy to the next administration because you've tried for seven years i'm sure to improve things and i know you can cite things you haven't proved but what is it that this committee the primary committee of government reform and the oversight work we found out that this is a problem that's been around for since the cold war but since world war two what is it you leave us with that should be the beginning of our process of reforming the system so that these career professionals who want to do a good job will do a better job well i think the first thing that i would recommend is that i don't want anybody to get the idea that despite the fact that we have a great relationship with the g a o that i embrace this particular study i don't but what will resume for a moment that if it wasn't this that there are other things that could embrace but what i would say is we should be directed to work together with the government accounting office government accountability office to come up with a mutually agreeable way forward that takes into consideration the pressures and limitations and resources that the department has the kinds of requirements and budgetary and acquisition rules regulations and limitations that we have with the clear the clarity that the government accountability office brings in terms of what the the government and its oversight requirements need in order to achieve the end state of on cost on schedule and performing and that's really what we're all about and i think that also having been the executive director of the defense acquisition performance assessment having had about a over a thousand different observations over one hundred different people coming and talking to us i concluded that because we have a dearth of competent people as a consequence of us reducing the real skill levels during the ninety's we have to replace it with a series of rules and secretary finley has talked to you about the process in which we're starting to implement those kinds of things but something very simple and he he raised this that you build what you bid i know it sounds simple but the fact is is that oftentimes while the ink is drawing on a contract everybody has better ideas and it's and we start  to change what we had originally asked for we got to stop that kind of behavior and those are the kinds of things that i would i would offer and that came out of the data study and i appreciate the  question and we certainly appreciate being here with the government accountability office thank you mr head was one more comment i think you know i was just in thinking through that mr patterson was talking about i we want to be constructive but we can't be constructive unless we get accountability in the system and i talked about the program i'm troubled even more by the complete lack of accountability for the mistakes in that program there were massive screw ups that cost the taxpayers billions of dollars yet dr finlay you seem you are going to get back to us on the record on some of these things i'm looking forward to i understand it you're generally supposed to complete your engineering drawings before you conduct the critical design review mr sullivan and the g a o report you say that a program should complete at least ninety percent of  fact i think the department of defense has policies that agree with that you want your engineers to plan everything out make all their calculations make sure the project will work on paper before you proceed with that mr finn but in the case of the v the defense department didn't do that they didn't wait until the engineering drawings were done in fact they started the critical design review in january two thousand and one that was just one month after the program started  o concluded concluded this was a major problem g a o warn that this did not allow adequate time for testing evaluating the results fixing the problems and we re testing to make sure that the problems are fixed before moving forward dr finley this contradicts what you said in your testimony the department didn't follow the best practices it did not complete the engineering plans before it launched the critical design review jr warned that this would cause major problems and in fact did but i would like to know is who made that decision and you may have to supply that for the record who decided not to follow the standard procedure who decided that you didn't need to complete the engineering plans before proceeding and what accountability has there been for that mistake that decision has resulted in more than a billion dollars in taxpayer funds being wasted as that person to be fired has that official been disciplined and i program work together you need a senior level engineer whose job it is to make sure that all the plans make sense and combine into one coherent system but the defense department didn't do that according to the audit from two thousand  quote there was no overall system engineer architect with the authority and responsibility to ensure products meet their allocated and integration requirements and quote here's what the auditor said quote there seems to be no one steering the ship and quote dr finlay there's also a contract it appears to me to contradict your testimony that the pentagon follows best practices  for this mistake and we'll look forward to getting your answer on that our oversight in jails oversight both show the same thing the same problems happen over and over again one reason that this happens there seems to be a culture of complacency at the defense department when mistakes are made there's no accountability that leads to more mistakes and more wasted spending there seems to be no one looking out for the taxpayer and that's the concern that we have about this system and i know you're not prepared to answer the questions about this particular system at this moment but we would like to have you submit in writing for the record responses to these questions  members may we want to ask additional questions for the record and we'd like to ask the three of you to be prepared to respond in writing to further questions and we'll hold the record open for such requests i thank you for your participation at this hearing i think it's i think it's been a good one to get to the point where maybe we can change direction then in another ten years mr sullivan you will come back here and say it's pretty much the same now as it