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S. HRG. 111–898 

DEPARTMENT OF DEFENSE EFFICIENCIES 

INITIATIVES 

HEARING 

BEFORE THE

COMMITTEE ON ARMED SERVICES 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

SEPTEMBER 28, 2010 

Printed for the use of the Committee on Armed Services 

( 

Available via the World Wide Web: http://www.fdsys.gov/ 

COMMITTEE ON ARMED SERVICES 

CARL LEVIN, Michigan, Chairman 

JOSEPH I. LIEBERMAN, Connecticut 

JACK REED, Rhode Island 

DANIEL K. AKAKA, Hawaii 

BILL NELSON, Florida 

E. BENJAMIN NELSON, Nebraska 

EVAN BAYH, Indiana 

JIM WEBB, Virginia 

CLAIRE McCASKILL, Missouri 

MARK UDALL, Colorado 

KAY R. HAGAN, North Carolina 

MARK BEGICH, Alaska 

ROLAND W. BURRIS, Illinois 

JEFF BINGAMAN, New Mexico 

EDWARD E. KAUFMAN, Delaware 

CARTE P. GOODWIN, West Virginia 

JOHN MCCAIN, Arizona 

JAMES M. INHOFE, Oklahoma 

JEFF SESSIONS, Alabama 

SAXBY CHAMBLISS, Georgia 

LINDSEY GRAHAM, South Carolina 

JOHN THUNE, South Dakota 

ROGER F. WICKER, Mississippi 

GEORGE S. LeMIEUX, Florida 

SCOTT P. BROWN, Massachusetts 

RICHARD BURR, North Carolina 

DAVID VITTER, Louisiana 

SUSAN M. COLLINS, Maine 

MARK KIRK, Illinois 

RICHARD D. DEBOBES, Staff Director 

JOSEPH W. BOWAB, Republican Staff Director 

(II) 

C O N T E N T S 

CHRONOLOGICAL LIST OF WITNESSES 

DEPARTMENT OF DEFENSE EFFICIENCIES INITIATIVES

SEPTEMBER 28, 2010

Page 

Lynn, Hon. William J., Lynn III, Deputy Secretary of Defense .......................... 5 

Carter, Hon. Ashton B., Under Secretary of Defense for Acquisition, Technology, and Logistics ............................................................................................ 12 

Cartwright, Gen. James E., USMC, Vice Chairman of the Joint Chiefs of 

Staff ....................................................................................................................... 16

Appendix A ............................................................................................................... 86 

Appendix B ............................................................................................................... 92 

Appendix C ............................................................................................................... 110 

Appendix D ............................................................................................................... 116 

Appendix E ............................................................................................................... 117 

Appendix F ............................................................................................................... 123 

Appendix G ............................................................................................................... 139 

(III) 

(1) 

DEPARTMENT OF DEFENSE EFFICIENCIES 

INITIATIVES 

TUESDAY, SEPTEMBER 28, 2010 

U.S. SENATE, COMMITTEE ON ARMED SERVICES, Washington, DC. 

The committee met, pursuant to notice, at 10:03 a.m., in room 

SD–G50, Dirksen Senate Office Building, Senator Carl Levin 

(chairman) presiding. 

Committee members present: Senators Levin, Lieberman, Reed, 

E. Benjamin Nelson, Webb, McCaskill, Udall, Hagan, Begich, Goodwin, McCain, Thune, LeMieux, Brown, and Collins. 

Committee staff member present: Richard D. DeBobes, staff director. 

Majority staff members present: Joseph M. Bryan, professional 

staff member; Richard W. Fieldhouse, professional staff member; 

Creighton Greene, professional staff member; Peter K. Levine, general counsel; Jason W. Maroney, counsel; Roy F. Phillips, professional staff member; John H. Quirk V, professional staff member; 

Robie I. Samanta Roy, professional staff member; and William K. 

Sutey, professional staff member. 

Minority staff members present: Joseph W. Bowab, Republican 

staff director; Adam J. Barker, professional staff member; Michael 

V. Kostiw, professional staff member; David M. Morriss, minority 

counsel; Lucian L. Niemeyer, professional staff member; Diana G. 

Tabler, professional staff member; and Dana W. White, professional staff member. 

Staff assistants present: Jennifer R. Knowles, Christine G. Lang, 

and Brian F. Sebold. 

Committee members’ assistants present: Christopher Griffin, assistant to Senator Lieberman; Carolyn A. Chuhta, assistant to Senator Reed; Alicia Brown, assistant to Senator Bill Nelson; Ann 

Premer, assistant to Senator Ben Nelson; Juliet M. Beyler and Gordon I. Peterson, assistants to Senator Webb; Tressa Guenov, assistant to Senator McCaskill; Jennifer Barrett, assistant to Senator 

Udall; Roger Pena, assistant to Senator Hagan; Lindsay 

Kavanaugh, assistant to Senator Begich; Amanda Fox, assistant to 

Senator Burris; Anthony J. Lazarski, assistant to Senator Inhofe; 

Lenwood Landrum and Sandra Luff, assistants to Senator Sessions; Clyde A. Taylor IV, assistant to Senator Chambliss; Andy 

Olson, assistant to Senator Graham; Jason Van Beek, assistant to 

Senator Thune; Brian Walsh, assistant to Senator LeMieux; 

Charles Prosch, assistant to Senator Brown; and Ryan Kaldahl, assistant to Senator Collins. 

2 

OPENING STATEMENT OF SENATOR CARL LEVIN, CHAIRMAN 

Chairman LEVIN. Good morning, everybody. The committee 

meets today to hear testimony about the efficiencies initiatives announced by the Secretary of Defense in his May 8, 2010, speech at 

the Eisenhower Library and his August 9, 2010, speech at the Pentagon. 

We’re pleased today to have Deputy Secretary of Defense, Bill 

Lynn; Under Secretary of Defense for Acquisition, Technology, and 

Logistics, Ashton Carter; and the Vice Chairman of the Joint 

Chiefs of Staff, General James Cartwright, to address this important issue. 

We thank you all for being here this morning. 

On May 8, the Secretary stated that, ‘‘The Defense Department 

must take a hard look at every aspect of how it is organized, 

staffed, and operated; indeed, every aspect of how it does business. 

In each instance,’’ he said, ‘‘we must ask, first, is this respectful of 

the American taxpayer at a time of economic and fiscal duress, 

and, second, is this activity or arrangement the best use of limited 

dollars, given the pressing needs to take care of our people, win the 

wars we are in, and invest in the capabilities necessary to deal 

with the most likely and lethal future threats?’’ 

I share the Secretary’s objectives of reducing ‘‘duplication, overhead, and excess in the defense enterprise, and instilling a culture 

of savings and restraint across the Department of Defense (DOD).’’ 

On August 9, the Secretary followed up by announcing a series 

of specific cost-cutting measures, including a reduction in funding 

for service support contracts by 10 percent per year for 3 years; a 

freeze on the number of Office of the Secretary of Defense (OSD), 

Defense agency, and combatant command positions; a freeze on the 

number of general officer, flag officer, and Senior Executive Service 

(SES) positions; a review and reduction of the number of reports, 

studies, and advisory boards; new limits on SES positions and support contractors for DOD intelligence functions; and the elimination or consolidation of several Defense commands and agencies, 

including the Assistant Secretary of Defense for Network and Information Integration, the Business Transformation Agency (BTA), 

and the Joint Forces Command (JFCOM). 

I agree with the Secretary on the rapidly expanding force of service contractors who support the Department. Too often in the past, 

we’ve constrained the number of DOD employees, without placing 

any limits on the number of service contractors. As a result, we 

have more than doubled our spending on service contractors over 

the last decade, while the size of the DOD civilian workforce has 

been largely unchanged. Rather than saving money, we have lost 

badly needed talent, expertise, and institutional knowledge in the 

government, and given contractors more responsibility for the performance of critical government functions than is appropriate. 

I believe that the acquisition efficiency initiatives, announced by 

Secretary Carter, are consistent with the objectives of the Weapons 

Systems Acquisition Reform Act and other recent acquisition legislation initiated by this committee. Although I have concerns about 

some of the details, I am particularly pleased by Secretary Carter’s 

emphasis on open-systems architectures, fixed-price incentive contracts, increased focus on affordability and program schedule, and 

3 

improved management of contracts for services. I hope that he will 

place an equal emphasis on implementation of the Weapons System Acquisition Reform Act’s requirement for developmental testing and systems engineering. 

At the same time, I believe that the Secretary’s initiatives deserve close scrutiny from our committee. The Secretary has a legitimate objective of eliminating or consolidating repetitive and overlapping organizations within the Department, and his determination to cut costs and produce efficiencies is commendable. But, it 

appears that there was inadequate analysis and inadequate openness in the procedure which preceded his August announcement. 

For example, we need to be sure that the personnel restrictions 

announced by the Secretary do not undermine our ongoing efforts 

to rebuild the Department’s acquisition workforce. Study after 

study, and hearing after hearing, has shown that our acquisition 

programs cost billions of dollars more than they should; in significant part, because our acquisition workforce was dramatically cut 

in the 1990s and no longer has the capacity to perform its essential 

functions. 

As the Acquisition Advisory Committee reported 4 years ago, our 

failure to fund an adequate number of acquisition professionals has 

been, ‘‘penny wise and pound foolish, as it seriously undermines 

the pursuit of good value for the expenditure of public resources.’’ 

Similarly, we need a detailed accounting of the functions performed by the organizations that the Secretary proposes to consolidate or eliminate. For those functions that will no longer be performed, we need to understand why they are no longer needed. For 

those functions that are still needed, we need to understand who 

will perform them. We need to understand what resources will be 

transferred, what resources will be eliminated, and what real savings are likely. 

I am disappointed that, more than 6 weeks after the Secretary’s 

announcement of these measures, we have received only the roughest and most general information about the Department’s plans. I 

fully understand the frustration of the Senators from Virginia, for 

instance, and others, about their inability to obtain a more complete rationale and a plan for the Pentagon’s proposed actions. The 

Secretary’s intent to reduce duplication, overhead, and excess in 

DOD is commendable, but his actions should be supported by an 

open process, which includes detailed analysis and full consideration of opposing views. 

We again thank our witnesses for their presence here this morning. We look forward to their testimony. 

I call upon Senator McCain. 

STATEMENT OF SENATOR JOHN MCCAIN 

Senator MCCAIN. Thank you, Mr. Chairman. 

Thank our distinguished witnesses for joining us this morning 

and for their service to our Nation. 

As we know, in August, Secretary Gates announced a series of 

initiatives intended to reduce excess overhead costs and to improve 

the efficiency of DOD. As a part of this initiative, Secretary Gates 

also tasked Dr. Carter to improve the Department’s buying power, 

through the way it acquires critical goods and services, in order to 

4 

stop runaway cost growth and program delays. We look forward to 

hearing from Dr. Carter about the initial progress he’s making 

within DOD and with the defense industry partners in this critical 

area. 

I think that both these initiatives are coming at an important 

time. We have to find ways to operate government more efficiently 

and at a lower cost to taxpayers. Secretary Gates understands the 

tough economic and fiscal situation facing our Nation. I strongly 

support his efforts in doing everything possible to make every taxpayer dollar count. 

I want to emphasize that the intent of this effort is not to reduce 

the Department’s top line, but to find savings over the Future 

Years Defense Program, to invest in critical force structure and 

modernization priorities. We obviously cannot afford to shortchange 

our military, and we must maintain commitments to a Defense 

budget that supports the full range of our national security commitments. 

This committee has consistently supported the Department’s efforts to reduce their massive overhead costs in order to be able to 

direct more resources to our fighting forces and weapons modernization. Eight initiatives are clearly aimed at addressing the exploding growth in service support contracts and overhead personnel. I look forward to getting more information on these proposals in the next few months in order to fully understand the 

scope of the anticipated savings and the impact on the missions 

and operations of our forces. 

One proposal the Secretary’s recommended is the elimination of 

JFCOM. I strongly support that proposal. 

On the issue of elimination of BTA, I’d be interested, Secretary 

Carter and maybe Secretary Lynn, will we ever have an audit of 

DOD? That, I think, would be one major step forward. 

The Secretary also challenged the Services to find more than 

$100 billion in overhead savings over the next 5 years. Obviously, 

we want to make sure that those reductions don’t impact long-term 

readiness over time. 

I support the Secretary’s decision to address the personnel 

growth in OSD, defense agencies, and combatant commands, and 

to freeze, at 2010 levels, the number of civilian senior executives, 

general and flag officer and political positions. DOD management 

deserves a rigorous review to ensure it has the proper mix of civilian and military personnel, with the right ranks and the right positions. 

May I also say, I support the Secretary’s decision to eliminate 

the second engine for the Joint Strike Fighter. But, on the subject 

of the Joint Strike Fighter, I would point out, to the witnesses and 

my colleagues, that the Joint Strike Fighter is another example of 

the terrible cost overruns associated with weapons procurement 

and the reasons why we, not only need to make a $100 billion in 

savings, but we need to fundamentally reform our acquisition system. I believe—correct me if I’m wrong, Mr. Lynn—that the Joint 

Strike Fighter now costs, approximately, more than its original estimates. Is that correct? We can’t continue down that path. It’s just 

not affordable and the American people deserve better. 

5 

But, getting back to the subject at hand, I look forward to hearing from the witnesses. I know every member of this committee 

looks forward to working with you to try to bring about these proposed changes that I think are a bold initiative by the Secretary 

of Defense. 

Thank you, Mr. Chairman. 

Chairman LEVIN. Thank you very much, Senator McCain. 

Secretary Lynn. 

STATEMENT OF HON. WILLIAM J. LYNN III, DEPUTY 

SECRETARY OF DEFENSE 

Mr. LYNN. Thank you very much, Mr. Chairman, distinguished 

members of the committee. Thank you for the opportunity to appear before you to discuss the Department’s efficiency efforts. 

If it’s acceptable to the committee, I’d like to put the full statement in the record and summarize it here, briefly, in an oral statement. 

Chairman LEVIN. Thank you. 

Mr. LYNN. During a speech in May of this year at the Eisenhower Library, Secretary Gates outlined how, in order to maintain 

and modernize America’s key military capabilities at a time of war 

and fiscal pressure, DOD would need to fundamentally change the 

way it does business. 

The reason is this: To sustain the current military force structure, which we must do, given the security challenges this country 

faces, requires the equivalent of real budget growth of 2 to 3 percent. The overall Defense budget is projected to rise, in real terms, 

by about 1 percent, based on DOD’s inflation assumptions. The Department cannot, and should not, ask Congress or the American 

taxpayers for more increases, in any year, unless we have done everything possible to make the dollars we already have count for 

more. Bridging that gap requires culling the Department’s massive 

overhead costs and structures—‘‘the tail’’—and directing them to 

our fighting forces and modernization accounts—‘‘the tooth.’’ 

This is not an effort, as Senator McCain indicated, to reduce the 

Defense budget. This is about shifting resources and priorities 

within the existing top line. That requires reducing the Department’s overhead costs by targeting unnecessary excess and duplication in the Defense enterprise. 

This effort is not just about the budget; it is also about operational agility. We need to ensure that the Department is operating 

as efficiently and effectively as possible. 

The Secretary directed us to take a hard look at how the Department is organized, staffed, and operated; how we can flatten and 

streamline the organization; reduce executive and flag-officer billets and the staff apparatus that supports them; shed overlapping 

commands and organizations; and reduce the role and the costs of 

support contractors. 

Since the Secretary’s speech in May, DOD embarked on a fourtrack approach toward a more efficient, effective, and cost-conscious way of doing business. Let me briefly touch on tracks one 

to three, and then spend a little bit more time on track four. 

On track one, the Secretary directed that the Military Services 

find more than $100 billion in overhead savings over the next 5 

6 

years. The Services will be able to keep any of those savings that 

they generate, to invest in higher priority warfighting and modernization needs. This effort is now underway, and we’ve begun to 

review the Services’ submissions. The fiscal year 2012 budget will 

reflect the results when it is submitted to Congress in February 

2011. 

On track two, the Department is seeking ideas, suggestions, and 

proposals regarding efficiencies from outside the normal channels. 

We have solicited input from experts, from think tanks, from industry, and from the Department’s external boards. We also established a DOD suggestion program to solicit our own employees’ 

ideas. The Department is willing to consider any reasonable suggestion to reduce our overhead. 

On track three, the Department is conducting a broad review of 

how it is organized and operated to inform President Obama’s 2012 

budget process. This track three review focuses on affecting longterm systemic improvements in several key areas of DOD operations. Dr. Carter will address these in more detail in his opening 

statement. 

With regard to track four, the Secretary announced, on August 

9th, specific areas where the Department can take action now to 

reduce inefficiencies and overhead. These steps are intended to 

jumpstart the reform process ahead of and separate from the normal programming and budget submission process. In particular, 

they represent the Secretary’s lead efforts to reduce headquarters 

and support bureaucracies, military and civilian alike, that have 

swelled to cumbersome proportions, grown over-reliant on contractors, and become accustomed to operating with little consideration 

of costs. 

Though all of these efforts will result in measurable savings, an 

equally important purpose is to instill a culture of cost-consciousness and restraint in the Department; a culture that sets priorities, 

makes real tradeoffs, and separates unrestrained appetites from 

genuine requirements. 

There are eight major initiatives in track four that reduce support contractors, headquarters personnel, senior executives, and 

flag and general officers. Track four also includes efforts to reduce 

boards and commissions and redundant intelligence organizations. 

Finally, they involve several organizational disestablishments. 

The last decade has seen a significant growth of new offices and 

organizations, including two new combatant commands and five 

new Defense agencies. The Secretary concluded that JFCOM, the 

Assistant Secretary of Defense for Networks and Information Integration, the Joint Staff’s J–6 directorate, and the Defense BTA no 

longer effectively satisfy the purpose for which they were created. 

Some missions and tasks that each perform remain vital but can 

be managed effectively elsewhere. Other functions that each perform are either already performed elsewhere or are no longer relevant to the operation of the department. 

We are mindful that the recommended actions will have economic consequences for displaced employees, their families, and 

their local communities. The Department is committed to work 

with the affected communities and will devote significant attention 

to the challenges employees will face during this transition. We 

7 

have asked Dr. Clifford Stanley, the Under Secretary for Personnel 

and Readiness, to take direct responsibility for this aspect of the 

Department’s planning in order to ensure we take the steps necessary to help impacted employees with appropriate assistance and 

support. 

In closing, Mr. Chairman, I understand that some of these reforms may be controversial and unwelcome to some people, both inside and outside the Department. No doubt many of these changes 

will be stressful, even wrenching, for the organization and employees involved. But, I would ask the members of this committee, and 

Congress as a whole, to consider this reform agenda in terms of our 

responsibilities, as leaders, to set priorities and move resources 

from where they are needed least to where they belong: America’s 

fighting forces, its investment in future capabilities, and, most importantly, the needs of our men and women in uniform. That is 

what Secretary Gates and President Obama are proposing, and we 

urge your strong support. 

Thank you for the opportunity to discuss this initiative with you 

today. 

[The prepared statement of Mr. Lynn follows:] 

PREPARED STATEMENT BY HON. WILLIAM J. LYNN III 

Mr. Chairman and distinguished members of the committee, thank you for the opportunity to appear before you to discuss the Department’s efficiency efforts. 

During his speech in May of this year at the Eisenhower library, Secretary Gates 

outlined how in order to maintain and modernize America’s key military capabilities 

at a time of war and fiscal pressure, the Department of Defense (DOD) would need 

to fundamentally change the way it does business. 

The reason is this: To sustain the current military force structure—which the Secretary believes we must do given the security challenges this country faces—requires the equivalent of real budget growth of 2 to 3 percent. The overall defense 

budget, however, is projected to rise in real terms by about 1 percent, based on DOD 

inflation assumptions. The Department cannot, and should not, ask Congress for 

more increases each year unless we have done everything possible to make the dollars we already have count for more. 

Bridging that gap requires culling the department’s massive overhead costs and 

structures, the ‘‘tail,’’ and directing them to our fighting forces and modernization 

accounts, the ‘‘tooth.’’ This is not an effort to reduce the Defense budget. This is 

about shifting resources and priorities within the existing top line. That requires reducing the department’s overhead costs by targeting unnecessary excess and duplication in the defense enterprise. 

This effort is not just about the budget, it is also about operational agility. The 

Secretary wants to ensure that the Department is operating as efficiently and effectively as possible. He has directed us to take a hard look at how the Department 

is organized, staffed, and operated; how we can flatten and streamline the organization; reduce executive or flag-officer billets and the staff apparatus under them; 

shed overlapping commands and organizations; and reduce the role and costs of contractors. 

Since the Secretary’s speech in May, DOD has embarked on a four-track approach 

towards a more efficient, effective, and cost-conscious way of doing business. I will 

briefly touch on our activities in Tracks 1–3 and then go into more depth about 

Track 4. 

Track 1: The Secretary directed that the military services find more than $100 

billion in overhead savings over the next 5 years. The Services will be able to keep 

any of the savings they generate to invest in higher priority warfighting and modernization needs. This effort is underway and we have already begun to review the 

service submissions. The fiscal year 2012 budget will reflect the results when it is 

submitted in February. 

Track 2: The Department is also seeking ideas, suggestions and proposals regarding efficiencies from outside normal channels. We have solicited input from experts, 

from think tanks, industry, and the department’s external boards. We have also esVerDate Aug 31 2005 10:34 Apr 20, 2011 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6621 Y:\BORAWSKI\DOCS\65072.TXT JUNE PsN: JUNEB
8 

tablished a DOD suggestion program to solicit our employees’ ideas. The Department is willing to consider any reasonable suggestion to reduce our overhead. 

Track 3: The Department is also conducting a broad review of how it is organized 

and operated to inform President’s 2012 budget process. This ‘‘Track 3’’ review focuses on affecting long-term systemic improvements in several key areas of DOD operations. Through this review the Department seeks to adjust processes, regulations, and systems that add needless layers of bureaucracy and serve as roadblocks 

to efficient operations. As a first step, Under Secretary of Defense for Acquisition, 

Technology, and Logistics, Dr. Ash Carter recently unveiled his acquisition initiatives, which includes 23 significant changes to the way the Department contracts 

for goods and services. Dr. Carter will address these in more detail in his opening 

statement. 

The Secretary’s Track 4 initiatives, announced on August 9, address specific areas 

where the Department can take action now to reduce inefficiencies and overhead. 

These steps are intended to jump start the reform process ahead of and separate 

from the normal programming and budget submission process. In particular, they 

represent the Secretary’s lead effort to reduce headquarters and support bureaucracies, military and civilian alike that have swelled to cumbersome proportions, 

grown over-reliant on contractors, and become accustomed to operating with little 

consideration of costs. Though all these efforts will result in measurable savings, an 

equally important purpose is to instill a culture of cost-consciousness and restraint 

in the Department—a culture that sets priorities, makes real trade-offs, and separates unrestrained appetites from genuine requirements. 

To see these Track 4 initiatives through from his announcement to action and to 

produce measurable results in the near-term, the Secretary established a task force 

chaired by his Chief of Staff. This task force has chartered study groups from within 

the department which are developing action plans aligned to the Secretary’s guidance. The Task Force is overseeing the implementation of these plans and their 

eventual transition to the appropriate department leadership. Secretary Gates will 

personally approve all action plans later this fall to ensure that his vision is translated into concrete results. 

I will briefly recap the Secretary’s guidance in each of these eight areas and then 

outline the reasons for his decision, as well as the general approach the Department 

is taking to execute it. 

Contractors: The Secretary directed funding for service support contractors be reduced by 10 percent per year for 3 years. There have been significant efforts to 

outsource non-core tasks to contractors over the last several decades. However, since 

2001 the availability of resources from supplemental appropriations, coupled with 

the urgency of supporting combat operations, resulted in dramatic increases in the 

number of contractors working for the Department, who have risen from 26 percent 

of the DOD workforce in 2000 to 39 percent today. The sheer number of contractors 

is not the only problem. Many of these recently outsourced service support and advisory contractors are actually carrying out functions that should be performed by 

government employees. The Secretary intends to reverse this trend. The task force 

is establishing a baseline for these contractors and will develop specific targets for 

reductions. 

Civilian Personnel: The Secretary’s initiative froze the number of OSD, Defense 

Agency, and combatant command positions and directed a zero-based review of each 

organization. The growth in the size and expense of the Office of the Secretary of 

Defense, the defense agencies, and the combatant commands since 2001 provides a 

ripe area for review and subsequent realignment. The zero-based review of organizational missions, funding, and staffing is intended to ensure that each organization 

is aligned to the Department’s priorities, and to allow reductions or realignment of 

personnel and resources as appropriate. We are in the midst of gathering data and 

reviewing initial organizational self-assessments. As we consolidate the data, and 

conduct our own analysis, the Secretary expects to receive a series of recommendations aimed at flattening the Department’s headquarters and staff structures, resulting in efficiencies and savings that can be applied to higher priorities. The effort 

to seek efficiencies in our civilian staff will not undercut the ongoing process of adding contracting officers, system engineers, and weapons testers in our acquisition 

system. 

Senior Positions: Secretary Gates froze the number of senior civilian executives, 

general and flag officers, and presidentially appointed and Senate-confirmed officials. After a senior-level review, he intends to reduce the numbers of these positions. Since September 2001, the number of general and flag officers has increased 

by more than 100, while senior civilian leaders have increased by more than 300. 

This ‘‘brass creep’’—where higher ranking personnel now perform tasks that could 

be more appropriately and efficiently performed by lower ranking personnel—is asVerDate Aug 31 2005 10:34 Apr 20, 2011 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6621 Y:\BORAWSKI\DOCS\65072.TXT JUNE PsN: JUNEB
9 

sociated with increased layers of bureaucracy and proliferation of new staff. The effort in this area is intended to assist in the transition to fewer organizations and 

into flatter and more responsive and agile structures. We have two senior study 

groups reviewing the distribution of senior positions across the Department and expect, at a minimum, to substantially trim the growth that has occurred since 2001. 

Economies of Scale: To take advantage of the Department’s economies of scale, the 

Secretary directed that key areas of the Department consider consolidation of duplicative or redundant infrastructure and processes to reduce costs and increase capabilities. We are pursuing several key initiatives, particularly concerning the consolidation of information technology infrastructure, that appear to offer significant savings. 

Oversight Reports and Studies: The Secretary directed a freeze on the overall 

number of DOD-required oversight reports and immediately cut the fiscal year 2010 

funding for advisory studies by 25 percent. A team is conducting an aggressive review of the value of all internal and external oversight reports with the goal of reducing their volume and the burden they place on Department staff. This team is 

currently reviewing an initial set of more than 1,000 internal oversight reports and 

studies, weighing the oversight value against the manpower it takes to produce 

them, and will make initial recommendations within weeks. We are also examining 

several hundred recurring reports required by Congress in the annual spending bills 

to better understand the cost of production and the value they provide to you and 

other defense decision-makers. As part of this evaluation, we look forward to engaging this and other committees on ways to seek efficiencies as we meet your oversight 

needs. 

Boards and Commissions: A team is also working to review about 60 defense advisory boards and commissions, along with a large number of advisory subcommittees, 

to assess the value of their advice and to recommend disestablishment, streamlining 

and restructuring of those that are not providing the highest impact to senior decisionmakers. Remaining boards and commissions are expected to see their funding 

for studies reduced by 25 percent. Within the Secretary’s authority, those boards 

and commissions that are assessed to provide little value to the Department will 

be disestablished. If our analysis indicates that any board or commission established 

in statute is no longer needed or should be restructured, we expect to engage your 

committee and others in dialogue about options for statutory changes to help implement desired efficiency gains while ensuring Congressional oversight responsibilities 

are met. 

Intelligence Organizations: The Secretary reduced intelligence advisory and assistance contract funding by 10 percent and froze the number of senior executive 

positions in defense intelligence organizations. He also directed a zero-based review 

of the department’s intelligence missions, organizations, relationships, and contracts 

by 1 November. There has been a proliferation of new intelligence organizations and 

operations since 2001, primarily based upon the demands of fighting two wars and 

combating terrorism. Because much of this growth was not centrally directed or coordinated, there is a high probability of redundancy and overlap with intelligence 

organizations that can be reduced or eliminated. This offers the opportunity to redirect the savings to other, more important intelligence efforts. In addition, this effort 

is being conducted in close collaboration with the DNI who is pursuing a similar 

review across the Intelligence Community. We expect that the fruits of the zerobased review and subsequent realignment will be a flatter and more responsive intelligence structure that better supports both national priorities and operational 

forces. 

Organizational Disestablishments: The last decade has seen a significant growth 

of new offices and organizations including two new combatant commands and five 

new defense agencies. Therefore, in addition to flattening and trimming structure, 

the Secretary directed the Department to consider the outright elimination of organizations that either perform duplicative functions or have outlived their original 

purpose. 

We reviewed a variety of information regarding combatant commands, defense 

agencies, and the OSD staff, including missions, staffing levels, and other data. 

However, the Secretary was particularly interested in organizations that had outlived the original argument for their existence, whose missions had changed or no 

longer existed, or had a mission or conducted activities that duplicated other organizations. 

We spent considerable time reviewing the input of his most senior advisors, including the Chairman and Vice Chairman of the Joint Staff, myself, and others. 

Over 30 meetings were held with senior leaders, in both small forums and large, 

to help understand the contributions that these organizations provided to national 

10 

security and the risks and pitfalls that might be associated with any decision to disestablish an existing organization. 

The Secretary concluded that Joint Forces Command (JFCOM), the Assistant Secretary of Defense for Networks and Information Integration (NII), Joint Staff J–6 

Directorate, and the Defense Business Transformation Agency (BTA) no longer effectively satisfy the purpose for which they were created. Some missions and tasks 

that each perform remain vital, but can be managed effectively elsewhere. Other 

functions that each perform are either already performed elsewhere, or are no 

longer relevant for the Department. 

Therefore, after several months of review, the Secretary made the decisions announced on August 9 to disestablish the NII, J–6, and BTA, and also to recommend 

to the President that he approve the disestablishment of JFCOM. 

NII was created in 2003 when the Office of Communications, Command, Control 

and Intelligence split off its intelligence functions due to the increasing need for intelligence in the post-September 11 world. At the time, there were questions about 

the necessity of creating a separate organization within OSD to handle the remaining Communications, Command, and Control functions, such as the replication of responsibilities and processes. 

The speed at which information technology is changing is outstripping the DOD’s 

ability to adapt to the changes. The modern U.S. military is increasingly dependent 

on its ability to get the right information to the right person at the right time, while 

preventing critical information from getting into the wrong hands. The Department 

continues to expand its technology solutions to support both goals. But, at the same 

time, the Department is hindered by its internal bureaucracy—primarily the duplication of processes by multiple organizations—which limits our ability to be as agile 

as we would like in this crucial area. 

Many of the functions performed by NII are also provided by other organizations 

within the Department. For example, NII performs: 

• Information assurance functions that are similar to those provided 

through U.S. Cyber Command (CYBERCOM), the Joint Staff, JFCOM and 

the Defense Information Systems Agency (DISA); 

• Resourcing functions that are similar to those provided through the 

Under Secretary of Defense for Comptroller; 

• Acquisition oversight for command and control are similar to those provided through the Under Secretary of Defense for Acquisition, Technology, 

and Logistics; 

• CIO functions that are similar to those provided through CYBERCOM, 

STRATCOM, the Joint Staff, JFCOM and DISA, and; 

• Command and Control (C2) functions that are similar to those provided 

through CYBERCOM, STRATCOM, the Joint Staff, JFCOM, and DISA. 

These redundancies represent more than a waste of resources—they also increase 

the potential for confusing or even conflicting policies and plans. Based on these observations, the analysis indicates that removing these functions from NII and J–6 

and then consolidating them within other organizations will likely increase overall 

effectiveness and save money. 

A specific consideration for allocating these functions among existing DOD organizations is the value of representing the user and provider perspectives within the 

same organization. The goal is to support evolving operational needs and thwart 

equally adaptive threats. These goals are best served by an organization that is simultaneously responsible for setting policy, implementing plans, performing C2 and 

directly supporting users. 

There are multiple ways that key responsibilities can be reallocated. The Task 

Force working group is developing options to determine the best allocation strategy 

to achieve the goals of meeting operational needs, improving security, and being 

prudent fiscal managers. 

The BTA was created in 2006 to assist in business transformation activities, to 

integrate and improve the Department’s business processes to include numerous Enterprise Resource Planning (ERP) implementations. The Agency encompassed the 

Financial Management Modernization Program and Business Management Modernization Programs that had previously existed in the Under Secretary of Defense 

for Comptroller and Under Secretary of Defense for Acquisition, Technology, and Logistics respectively. When established, BTA was envisioned to centralize business 

transformation and system modernization efforts into a unified and focused organization. 

In 2008, Congress, through the National Defense Authorization Act, instituted the 

position of Deputy Chief Management Officer (DCMO) to assist the Deputy Secretary of Defense, acting as the Chief Management Officer, to organize the business 

11 

operations of DOD. The mission of the Office of the DCMO duplicates many of the 

BTA functions. Specifically, the DCMO has the principal responsibility for invigorating and improving business operations in DOD in order to enhance support to 

the warfighter and provide better financial accountability. Therefore, rather than 

lead in the development of better business practices, BTA’s prime focus has essentially devolved to being the caretaker and manager for several relatively small business systems, and providing direct support to the DCMO for various policy issues. 

This narrower function does not justify continuing BTA as a stand-alone defense 

agency. 

Accordingly, Secretary Gates approved disestablishment of BTA and directed that 

its remaining functions be reviewed and transferred to other organizations in DOD 

as appropriate. 

The Secretary has recommended that the President approve the disestablishment 

of U.S. Joint Forces Command (JFCOM). This recommendation is based on a review 

of the missions assigned to JFCOM in the Unified Command Plan and the determination that these missions can be accomplished effectively and more efficiently, 

elsewhere within the Department. 

JFCOM was formally established in 1999 as the successor to the U.S. Atlantic 

Command. The central mission of JFCOM was to infuse and, to some degree, compel 

jointness into everything the military does, especially training, doctrine development 

and the provision of forces for operations. It was understood at the time that the 

creation of JFCOM would result in the addition of a new organizational layer in 

how the Department managed military forces. But, the imperative to encourage and 

advance the principle of jointness among our military was judged to outweigh the 

costs associated with the extra bureaucracy. Over the years, JFCOM has had success in advancing this goal. However, it has also grown dramatically in size, budget, 

and personnel. In 2000, its first full year of operation, JFCOM employed approximately 2,100 military and civilian personnel and had an annual operating budget 

of approximately $300 million. 

Today, JFCOM employs more than 3,000 military and civilian personnel in addition to approximately 3,000 direct support contractors and has an annual operating 

budget of nearly $1 billion. However, unlike many DOD organizations that have 

grown since 2001 due to new missions or the need to support operations in Iraq and 

Afghanistan, JFCOM has continued to grow without any significant expansion of 

mission or responsibilities. 

More fundamentally, the principal purpose for the creation of JFCOM in 1999— 

to force a reluctant service-centric military culture to embrace joint operations and 

doctrine—has largely been achieved. Jointness is a cultural and behavioral principle 

that is evolutionary and not easily measured; however, there is little debate that 

today the United States military has doctrinally, operationally and culturally embraced jointness as a matter of practice and necessity. As with similar matters of 

cultural behavior, jointness remains a policy objective that requires continued development, vigilance and emphasis by civilian and military leadership. But I am also 

firmly convinced that our military institutions have now reached a point where 

there is no risk of reverting back to the pre-Goldwater-Nichols Act period, where 

the military services sometimes planned, trained, fought and bought as if the other 

services did not exist. The evidence of this achievement is manifested on today’s battlefields, in military schools, and among the ranks of current and next generation 

military leaders who have grown up in and inherently accept this new joint world. 

Accordingly, we believe that we can no longer justify the expense and overhead 

associated with maintaining a separate four-star combatant command for this purpose. 

Finally, I am mindful that the recommended actions will have economic consequences for displaced employees, their families and local communities. The Department is committed to work with the affected communities and will devote significant attention to the challenges employees will face during this transition. We 

have asked Dr. Clifford Stanley, the Under Secretary for Personnel and Readiness, 

to take direct responsibility for this aspect of the Department’s planning in order 

to ensure we take the steps necessary to help impacted employees with appropriate 

assistance and support. 

In closing, Mr. Chairman, I understand that some of these reforms may be controversial and unwelcome to some people both inside and outside the department. 

No doubt many of these changes will be stressful, if not wrenching for the organizations and employees affected. But I would ask the members of this committee, and 

Congress as the whole, to consider this reform agenda in terms of our responsibilities as leaders to set priorities and move resources from where they are needed 

least to where they belong: America’s fighting forces, investment in future capabilities and, most importantly, the needs of our men and women in uniform. That is 

12 

what the Secretary and the President are proposing, and we urge your strong support. 

Thank you for the opportunity to discuss this initiative with you today. I look forward to your questions. 

Chairman LEVIN. Thank you very much, Secretary Lynn. 

Secretary Carter. 

STATEMENT OF HON. ASHTON B. CARTER, UNDER SECRETARY 

OF DEFENSE FOR ACQUISITION, TECHNOLOGY, AND LOGISTICS 

Dr. CARTER. Thank you, Mr. Chairman, Senator McCain, distinguished members of the committee. I, too, am grateful for the opportunity to testify before you today. 

On the piece of the initiative that Secretary Gates and Deputy 

Secretary Lynn have charged me with organizing, which concerns 

the $400 billion, of the $700 billion Defense budget, which is contracted out for goods and services. The other $300 billion is spent 

‘‘within the walls,’’ if you like, of DOD, on the salaries, benefits, 

and so forth, of those, uniformed and civilian, who work for the Department, and the buildings and facilities within which they work. 

The other $400 billion is contracted out roughly equally between 

goods and services. 

We estimate that, by targeting efficiencies in the way that these 

goods and services are acquired, we can make a significant contribution to the overall $100 billion goal that Secretary Gates and 

Deputy Secretary Lynn have laid down for us over next 5 years. 

To put it bluntly, we can’t support our troops with the capabilities they need unless we do so. Our challenge is to sustain a military at war, take care of our troops and their families, and invest 

in new capabilities, all in an era when Defense budgets will not be 

growing as rapidly as they were in the years following September 

11, 2001. 

Last year, we identified savings in the Defense budget by canceling unneeded programs, and we’ll need to do more of that. But, 

now we must also find savings within programs and activities we 

do need and do want. The Department must achieve what economists call ‘‘productivity growth,’’ and what I’ve called ‘‘learning to 

do more, without more,’’ delivering the program the Department 

needs, and the warfighter needs, for the amount of money we’re 

going to get. 

If you think about a computer, you buy a computer every year; 

computer gets a little bit better and a little bit cheaper. Why is it 

that, on the contrary, as Senator McCain’s already noted, we come 

before you every year with exactly the same product, and it costs 

even more? That’s not productivity growth. We need productivity 

growth in the defense sector. 

In late June, we laid out a mandate, to the Defense Acquisition 

Workforce and the defense industry, describing how the Department can achieve this better buying power in contracted activities. 

On September 14, a few weeks ago, after several months of intensive work within the Department, with our program managers, program executive officers, systems command commanders, senior logisticians, and so forth, and also with our partners in industry, 

who accomplish this work and perform it for us, and outside exVerDate Aug 31 2005 10:34 Apr 20, 2011 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6602 Y:\BORAWSKI\DOCS\65072.TXT JUNE PsN: JUNEB
13 

perts, I issued specific guidance on how to implement that mandate. 

I’d like to submit the guidance from the June 28 mandate as 

well, and all the material that accompanies them, for the record, 

and just supplement it briefly. 

We are now moving vigorously into implementation mode, and 

taking each of those 23 items that were in the guidance, and making them happen. Let me, if I may, just summarize the high points 

of those points of guidance, in five categories, with specific examples, so you’ll have some idea of what we’re trying to get at. 

First, as we begin new programs, such as the Ohio class 

SSBN(X) replacement, the joint family of systems for long-range 

strike, the Army’s Ground Combat Vehicle, and even the new presidential helicopter, which we’ll be embarking on, we need to establish—and we will establish—affordability requirements that have 

the same force as high-priority performance requirements. We will 

also insist that our acquisition professionals and suppliers plan according to what programs should cost, not according to self-fulfilling historical estimates of what they will cost, as if nothing can 

be changed in how we do business. 

We are already using this method to drive down costs in the 

Joint Strike Fighter program, the Department’s largest and the 

backbone of tactical airpower for the United States and many other 

countries. But, we have a long way to go, as Senator McCain has 

already noted; and I think my reaction, and Secretary Gates’s and 

Secretary Lynn’s, was the same as his to the revised cost estimates 

of last spring, which is, ‘‘No, we’re not going to pay that. We should 

pay something that is less than that. We should manage to a better 

result.’’ 

Second, to incentivize productivity and innovation in industry, 

we will strengthen the connection between profit and performance 

in our business practices. Among other things, we’re exploring 

ways, through contracting and financing vehicles and a pilot preferred-supplier program, to reward contractors who control their 

costs and demonstrate exemplary performance. 

Third, we will remove obstacles to effective competition. Last 

year, the Pentagon awarded $55 billion in contracts that were supposed to be competitive but for which only one bid was received, 

usually from an incumbent. Yet, simple changes in how we structure evaluations and work with industry have shown to reduce by 

50 percent the incidence of single bids by incumbents. 

Additionally, we will promote real competition, for it is the single 

most powerful tool that the Department has to drive productivity 

growth. We must stop deluding ourselves with the idea that directed buys from two designated suppliers represents real competition. We’re already cutting down on directed buys, with the Navy’s 

Littoral Combat Ship (LCS), where we have set in place real competition that will save more than 1 billion in the next 5 years 

alone—and we can demonstrate that—with additional savings expected over the entire life of the LCS program. Competition is not 

always available, but the evidence is clear that the government is 

not availing itself of all possible competitive situations. 

Fourth, we will move to more aggressively manage the over $200 

billion we spend annually on services, such as information techVerDate Aug 31 2005 10:34 Apr 20, 2011 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 Y:\BORAWSKI\DOCS\65072.TXT JUNE PsN: JUNEB
14 

nology, knowledge-based services, facilities upkeep, weapons system maintenance, and transportation. When most people think of 

the Defense budget, they think of ships and planes, but more than 

50 percent of our contract spending is actually for services. You 

may find this hard to believe, but our practices for buying services 

are even less effective than for buying weapons systems. 

Fifth, we’re taking steps to reduce—— 

Chairman LEVIN. By the way, I don’t have any difficulty believing that at all. I just want you to know that. [Laughter.] 

Senator MCCASKILL. Yes. I think that’s a ‘‘duh.’’ 

Dr. CARTER. I’m certain you don’t. I did, at first, but I’m getting 

used to it. 

Fifth, we’re taking steps to reduce unproductive processes and 

bureaucracy by reducing the number of OSD-level reviews to those 

necessary to support major investment decisions or to uncover and 

respond to significant program execution issues, eliminating low 

value-added statutory processes. 

I hasten to say, Mr. Chairman, at this point, I’m not referring 

to provisions of the Weapons System Acquisition Reform Act, that 

we understand the intent of that, and appreciate that intent, and 

are executing to that intent, including developmental test and evaluation and systems engineering. 

The kind of thing I have in mind is this. I sit in the Pentagon 

on a Saturday afternoon reading reports to you that are this thick, 

that are, in an embarrassing number of circumstances, late to 

need, and am convinced that I’m the only human being that has 

ever read it, and ever will. The reason I’m reading it is that I have 

to sign it, and I’m afraid of embarrassing myself. I sign an equal 

number of letters to you in which we say, ‘‘You asked for it in May, 

and it’s now June, and we’re still working on the report.’’ 

This has nothing to do with intent. It has to do with the execution and the paperwork burden that we’ve imposed upon ourselves. 

That’s just a piece of it. It’s not just in responding to your inquiries, which we need to do; it’s our own internal paperwork and, very 

importantly, it is the paperwork burden that we impose upon industry, in which we have them do something, and, of course, then 

we end up paying for it. It becomes an allowable cost, and we 

charge. These are the kinds of things we’re talking about. Not 

changing the intent of any of that reporting, but trying to change 

the volume and the responsiveness of it, Mr. Chairman. So, I wanted to, because you had mentioned that, comment on that. 

Let me just conclude by saying that we recognize that changing 

our business practices will take time and require the continued 

close involvement of our industry partners, who have made major 

contributions to this effort and whose technical vitality and financial vitality is in the national interest. We also need your support 

for the success of this endeavor. 

Why do we think we can succeed? Several reasons. First of all, 

we have very reasonable reduction targets here. Next, we’re focused on specific savings—not on abstractions, but on very specific 

things that we can do and that have been shown to work. Third, 

I think it’s fair to say that, after an era of double-digit year-on-year 

budget growth, there’s fat that has crept in and that we can identify and get out. The fourth is that President Obama, Secretary 

15 

Gates, Deputy Secretary Lynn, this committee, Congress as a 

whole, and the American taxpayers are all expecting it, want it, 

need it. 

The last thing I’d say is, to those who doubt or who hesitate, they 

need to consider the alternative to the careful management into 

this new era, and that would be broken or canceled programs, 

budget turbulence, uncertainty for industry, erosion of taxpayer 

confidence that they’re getting value for their dollar, and, especially, lost capability for the warfighter in a dangerous world. So, 

not only can, I think, we succeed in this endeavor, but we really 

have to. 

Thank you. 

[The prepared statement of Dr. Carter follows:] 

PREPARED STATEMENT BY DR. ASHTON B. CARTER

Mr. Chairman, Senator McCain, distinguished members of the committee: 

Thank you for the opportunity to testify today. It is a pleasure to join Deputy Secretary Lynn and General Cartwright to discuss Secretary Gates’ Efficiency Initiative, and my role in it. 

OBTAINING GREATER EFFICIENCY AND PRODUCTIVITY IN DEFENSE SPENDING

As part of his broad initiative to improve the American taxpayer’s return on his 

investment in national defense, Secretary Gates has tasked me to improve the Department’s buying power in the way we acquire critical goods and services. Together, goods and services comprise $400 billion of the $700 billion in annual defense spending. We estimate that by targeting efficiencies in both of these areas, we 

can make a significant contribution towards achieving the $100 billion redirection 

of defense budget dollars from unproductive to productive purposes sought by Secretary Gates and Deputy Secretary Lynn over the next 5 years. The Department can 

meet this goal only if we fundamentally change the way we do business. 

To put it bluntly, we cannot support our troops with the capabilities they need 

unless we do so. Our challenge is to sustain a military at war, take care of our 

troops and their families, and invest in new capabilities—all in an era when defense 

budgets will not be growing as rapidly as they were in the years following September 11. Last year, we identified savings in the defense budget by cancelling 

unneeded programs. Now we must find savings within programs and activities we 

do need. The Department must achieve what economists call productivity growth: 

we must learn to do more without more. 

On June 28, I laid out a mandate to the defense acquisition workforce and the 

defense industry describing how the Department would try to achieve better buying 

power. On September 14—after months of work with the Department’s senior acquisition professionals, industry leaders, and outside experts—I issued specific Guidance on how to implement that mandate. I would like to submit both the June 28 

mandate and September 14 Guidance—and the charts which accompany them—for 

the record. [See Appendixes A and B} 

SEPTEMBER 14 GUIDANCE

The September 14 Guidance contains 23 principal actions to improve efficiency organized in 5 major areas. Let me highlight just a few of the actions we are taking 

in each of the five areas: 

First, as we begin new programs such as the Ohio-class SSBN(X) replacement, the 

joint Family of Systems for long-range strike, the Army’s Ground Combat Vehicle 

(GCV), and even a new Presidential Helicopter, we will establish affordability requirements that have the same force as high-priority performance requirements. We 

will also insist that our acquisition professionals and suppliers plan according to 

what programs should cost, not according to self-fulfilling historical estimates of 

what they will cost, as if nothing can be changed in how we do business. We are 

already using this method to drive down costs in the Joint Strike Fighter (JSF) program, the Department’s largest and the backbone of tactical air power for the 

United States and many other countries. Secretary Gates has said that monies 

saved this way would be retained by the Service that achieved the efficiency; in this 

case, the Air Force, Navy, and Marine Corps could reallocate JSF funds to buy other 

urgent capabilities. 

16 

Second, to incentivize productivity and innovation in industry, we will strengthen 

the connection between profit and performance in our business practices. Among 

other things, we are exploring ways—through contracting and financing vehicles 

and a pilot ‘‘Preferred Supplier Program’’—to reward contractors who control their 

costs and demonstrate exemplary performance. 

Third, we will remove obstacles to effective competition. Last year, the Pentagon awarded $55 billion in contracts that were supposed to be competitive but for which 

only one bid was received, usually from an incumbent contractor. Yet simple 

changes in how we structure evaluations and work with industry have been shown 

to reduce by 50 percent the incidence of single bids by incumbents. 

Additionally, we will promote real competition, for it is the single most powerful 

tool to the Department to drive productivity. We must stop deluding ourselves with 

the idea that ‘‘directed buys’’ from two designated suppliers represents real competition. We are already cutting down on directed buys with the Navy’s Littoral Combat 

Ship (LCS), where we have set in place real competition that will save more than 

$1 billion in the next 5 years alone, with additional savings expected over the life 

of the LCS program. Competition is not always available, but the evidence is clear 

that the government is not availing itself of all possible competitive situations. 

Fourth, we will more aggressively manage the over $200 billion we spend annually on services such as information technology and knowledge-based services, facilities upkeep, weapons system maintenance, and transportation. When most people 

think of the defense budget, they think of ships and planes. But more than 50 percent of our contract spending is for services. Believe it or not, our practices for buying such services are even less effective than for buying weapons systems. 

Fifth, we are taking steps to reduce unproductive processes and bureaucracy by 

reducing the number of Office of the Secretary of Defense-level reviews to those necessary to support major investment decisions or to uncover and respond to significant program execution issues, eliminating low-value-added statutory processes; and 

reducing the volume and cost of both internal and congressional reports as appropriate. 

CONCLUSION

Changing our business practices will take time and require the continued close 

involvement of our industry partners. We also need your support, which is essential 

to the success of this endeavor. However, we have every reason to believe that the 

efficiencies we seek can be realized. We have established reasonable reduction targets. We are focused on specific savings. We can identify the excess after an era of 

double-digit budget growth. President Obama, Secretary Gates, Congress, and 

American taxpayers expect it. The alternative is unacceptable: broken or cancelled 

programs, budget turbulence, uncertainty for industry, erosion of taxpayer confidence, and especially lost capability for the warfighter in a dangerous world. We 

can succeed and we must. 

Thank you and I look forward to answering your questions. 

Chairman LEVIN. Thank you very much, Secretary Carter. 

General Cartwright. 

STATEMENT OF GEN. JAMES E. CARTWRIGHT, USMC, VICE 

CHAIRMAN OF THE JOINT CHIEFS OF STAFF 

General CARTWRIGHT. Chairman Levin, Senator McCain, and distinguished members of the committee, thank you for the opportunity to discuss the DOD efficiency initiatives. 

A few points, in context: 

We remain a Nation at war. Troops are deployed around the 

world, many engaged in combat. We are committed to ensuring 

these troops are properly supported. 

Second, DOD is a bureaucracy that has not fully adapted its 

processes and constructs to the Information Age. We must be able 

to adapt with increased speed in order to ensure we remain and 

sustain our competitive advantage. In the era of rapidly evolving 

threats, our success depends on our ability to adapt quickly. 

Third, DOD is cognizant of the Nation’s financial situation. We 

do not expect budgets to grow at the rate that they grew over the 

17 

last decade. When developing grand strategy, it is the first duty of 

the strategist to appreciate the financial position of his or her nation. We demonstrated this appreciation during last year’s weapon 

system portfolio changes and earlier this year in the process to release our strategic reviews. 

The Secretary’s efficiency initiatives are aimed at seeking the 

same effect in our organizations. These initiatives are not a cut, 

but, rather, a shift of resources from overhead to the warfighter, 

increasing the tooth-to-tail ratio. 

Regarding the disestablishment of JFCOM, JFCOM helped to accomplish the primary goal for which it was established: to drive 

jointness through the military. We must continue along the positive 

vectors regarding joint activities, as directed in Goldwater-Nichols 

Act. We must also improve initiatives to strengthen efforts in the 

interagency and combined arenas. 

It is our goal to reduce unintended redundancies and layering to 

more clearly align operational responsibilities with service, train, 

and equip functions in order to reduce inefficiencies as forces are 

presented to combatant commands. At all the COCOMs we must 

consolidate functions, where appropriate and, where functions are 

retained, move towards a construct of combined, joint, interagency 

task force organizations or centers. The combined and interagency 

aspects are critical components to establishing baseline capacity 

and surge expectations required for functions and capabilities this 

Nation presents. 

As the cyber domain continues to grow in importance, the Department will look to ensure lines of authority and responsibility 

are clear and adaptable. We focused cyber operations in Cyber 

Command. We will align policy and oversight activities in strengthening the DOD chief information officer. Finally, we must align 

cyber requirements and cyber acquisition to maximize support to 

operational activities. 

Given the expanding role and criticality of information and the 

networks that hold and transmit that information, we need to manage systems in the cyber domain as we do weapons systems. To ensure our success, IT systems must have the proper architecture and 

capability to ensure adaptability and innovation. Further, our architecture should enable collaboration throughout joint, interagency, coalition, and commercial partnerships. The free flow of information among these players is integral to a superior architecture. The Department’s information systems must extend to the 

tactical edge and must work when others do not. 

I look forward to answering your questions. 

Thank you. 

[The prepared statement of General Cartwright follows:] 

PREPARED STATEMENT BY GEN. JAMES E. CARTWRIGHT, USMC 

Chairman Levin, Senator McCain and distinguished members of the committee, 

thank you for the opportunity to discuss the Department of Defense (DOD) efficiency initiatives. 

British military strategist J.F.C. Fuller wrote, ‘‘The first duty of the grand strategist is to appreciate the commercial and financial position of his country.’’ Sustained 

economic power is at the root of sustainable military power. This understanding 

drives the efficiency initiatives. The decisions should not be viewed as stand-alone 

activities, but rather, as the next steps in an evolutionary process to change the way 

the Pentagon does business. 

18 

America remains a Nation at war. We have soldiers, sailors, airmen, marines, and 

coastguardsman deployed around the world, many engaged in combat. We have 

transitioned from combat operations in Iraq, but our effort in Afghanistan has intensified. Further, demographic, cultural and geopolitical realities require us to prepare for a future where our forces may be engaged in persistent conflict. The leadership of this Department is committed to ensuring the force is sufficient and well 

equipped. Efficiency initiatives are aimed at increasing our ‘‘tooth to tail’’ ratio. 

The nature of conflict in the 21st century continues to evolve and threats span 

the spectrum of conflict. The intentions of those who wish to harm us are enabled 

by the power of information technology (IT). We must be able to adapt our strategy, 

weapon systems, and organizations to a construct that recognizes, mitigates, and defends against these new vulnerabilities of the information age. With this accelerated 

pace, we must develop a strategic and organizational construct agile enough to stay 

competitive. 

Given the Nation’s economic situation, we recognize budgets will not grow at the 

rate they have since September 11. DOD requires modest real budget growth of 2– 

3 percent annually to maintain and equip a nation at war, but projected budgets 

for fiscal years 2010–2015 only project 1 percent growth, based on DOD inflation 

assumptions. Additionally, there is risk the projected 1 percent real growth may not 

be realized. To help ensure sufficient resources for our highest priorities, we must 

seek efficiency within current budgets. We owe it to the warfighters, and the taxpayers, to adapt our strategy, weapons and organizations to effectively conduct 21st 

century warfare, and to conduct those operations efficiently. 

The work conducted as part of the strategic reviews we released last year includes 

examples where we made these types of changes. In the Quadrennial Defense Review we shifted priority to concentrate efforts on the wars we are currently in. In 

the National Space Policy, we wrote of initiatives to increase partnerships with 

other nations in order to ensure space systems remained affordable. We cancelled 

weapon system programs that were chronically over budget, and redirected others 

to better align with evolving threats. 

After making these adjustments in our strategy and weapons, we sought ways to 

streamline our organizational structure. Secretary Lynn described our general approach. Three specific initiatives are; the rebuilding and strengthening of the DOD 

Chief Information Officer (CIO), the consolidation of IT for common use and better 

cyber defense, and the disestablishment of Joint Forces Command (JFCOM). 

Our national dependence on IT for almost every aspect of our lives has accelerated, and DOD is no exception to this trend; DOD has witnessed a similarly rapid 

growth in the number of offices in the Department tasked to manage IT. Multiple 

organizations on multiple staffs at multiple layers of our hierarchy exist to oversee 

IT. The result is a complex web of authorities and responsibilities that is unclear 

and difficult to navigate. Combatant commanders simply do not understand what 

organization they need to visit in order to get work executed. The need to clarify 

organizational roles and responsibilities for IT has become obvious. With the establishment of Cyber Command earlier this year, the Department focused operational 

responsibility for this domain in one organization, compliant with legal requirements. 

With the operational aspects of cyber defense assigned to Cyber Command, we 

then needed to assign the policy and oversight responsibilities for that capability. 

To eliminate duplication across organizations, the operational functions of the Office 

of the Assistant Secretary of Defense for Networks and Information Integration, the 

J–6 Directorate on the Joint Staff, and portions of JFCOM will shift to Cyber Command; the CIO-related functions of these organizations will be transferred into a 

strengthened CIO. Acquisition functions will be realigned consistent with the final 

report of the Information Technology Acquisition Reform Task Force. 

The recommended disestablishment of U.S. JFCOM by the Secretary of Defense 

also recognizes our changing times. When JFCOM was stood up in 1999, its central 

mission was to drive jointness into everything the military does. It was understood 

that the creation of JFCOM for this purpose would result in the addition of an organization layer. At that time, it was judged that the imperative to advance jointness 

was greater than the costs associated with establishing a new command. Jointness 

is difficult to measure, but the goal of embracing joint operations and doctrine has 

reached a point where a four-star headquarters for joint advocacy is no longer required. We have embraced jointness as a matter of necessity. Evidence of this progression is manifested on the battlefield and in our military schools. We have 

reached critical mass, where our military accepts ‘‘joint’’ as the preferred method of 

war. 

We must continue along the positive joint vectors and activities directed by Goldwater-Nichols. In addition, we must establish or improve on our processes and 

19 

structures in the combined and interagency arenas. We fight as part of coalitions 

and alliances, and our level of success in these operations is enhanced by the degree 

we are synchronized with our international partners. The nature of today’s conflict 

also requires better integration through the interagency process. Strengthening capabilities and capacities through the ‘‘whole of our government’’ is increasingly important to our success. 

However, we must avoid unintended redundancies and layering that can result 

from these efforts. Decisionmaking in today’s environments requires speed. Battlefields change too quickly. Our staffs and structures need to be flatter and faster. 

Redundancies and layering within our system is an impediment to success. 

Finally, disestablishing JFCOM will allow us to better align operational responsibilities with service train and equip functions in order to reduce inefficiencies as 

forces are presented to combatant commanders. JFCOM succeeded in helping push 

the services to jointness. But that vision has largely been achieved and we believe 

we can no longer justify the expense and overhead associated with maintaining a 

separate four-star combatant command for that purpose. 

The changes I have discussed in this statement have the unanimous support of 

the Joint Chiefs of Staff. They are needed to further our goal of creating a more 

effective and efficient DOD. There are two major beneficiaries of these changes. The 

first are the warfighters, who will be better postured with the resources they need 

to fight and win. The second is the taxpayer, who will not only have a more effective 

military for 21st century security, but will also witness an increased value in their 

defense dollar. 

Chairman LEVIN. Thank you very much, General Cartwright. 

Here’s the time situation this morning. We have two votes, probably, beginning at 11:30. Many of us, perhaps most of us, are going 

to be going then to Arlington for Senator Stevens’ funeral, I think 

the buses leave at 12:15. We want everybody to have some time 

here this morning, so we’re going to have to have a short first 

round. But, then I will come back, and whoever else can come back, 

after the second vote, assuming that there is one. So, there is likely 

to be a gap here somewhere around 11:40 and 12:15. 

We’re also going to have a vote, off the floor, on a number of matters that are pending before the committee. That will be at the end 

of the first vote. Okay? So, I hope everybody will help out on having that off-the-floor vote at the end of the first vote this morning 

in the Senate. 

Let’s have a short first round, here for questioning, so that everybody will have at least some opportunity, including all those who 

will be going to the funeral. We’ll have a 5-minute round to start, 

if there’s not enough time for everybody, then perhaps we can yield 

to each other to accommodate that goal. 

Let me start with Secretary Lynn. Too often, in the past, we’ve 

constrained the number of DOD employees, without placing any 

limitation on the number of service contractors. We have not been 

told what categories of contract services are covered by the Secretary’s directive. Am I correct in understanding that critical functions, like weapons systems maintenance, healthcare services, and 

logistics support to our troops, will not be affected by the planned 

reduction in contract services? When can we expect to see a clear 

definition of what categories of contract services are covered by the 

planned reduction, and what categories of services are excluded? 

Mr. LYNN. Mr. Chairman, your assumption is correct. The reduction in service support contractors would not affect critical 

warfighting capabilities, like weapons maintenance. The general 

definition of a support service contractor would be someone who 

provides staff augmentation to government employees. I realize 

you’re looking for something more precise, and we’re endeavoring 

20 

to provide that, and we have a task force working on that over the 

course of the fall. Sometime late this fall or early next year, we 

should have that. 

Chairman LEVIN. Is that task force in place now? 

Mr. LYNN. Yes. 

Chairman LEVIN. Would you tell us who’s on that task force? 

Mr. LYNN. The overall task force is chaired by Robert Rangel, the 

Secretary’s chief of staff. There’s a subgroup. I’ll have to get, for the 

record, who chairs the subgroup. 

Chairman LEVIN. If you’d let us know, that would be helpful. 

[The information referred to follows:] 

Please refer to the attachment ‘‘ETF Task Force Organization.’’ 

[Deleted.] 

Chairman LEVIN. In the past, we’ve found that proposed cuts to 

contract services are nearly impossible to enforce, because expenditures for service contracting are invisible in the Department’s 

budget. For this reason, section 806 of the National Defense Authorization Act (NDAA) for Fiscal Year 2008 required that budget 

justification documents clearly and separately identify the amounts 

requested in each budget account for procurement of services. The 

Department has not yet complied with that requirement. 

When are you going to comply with that requirement, Secretary 

Lynn? 

Mr. LYNN. Part of the effort I mentioned would be to comply with 

that requirement. I would add—I think your implication is right— 

we are regretting that the Department hadn’t complied earlier. It 

would make the task that we’re undertaking easier if we had better 

data, and we’re endeavoring to develop that. 

Chairman LEVIN. So, when will the Department comply with 

that statutory requirement? Are you going to comply for the 2012 

budget request? 

Mr. LYNN. We are trying. I can’t commit at this point that we 

will have all the data to be able to do it, but we’re going to do our 

very best. 

Chairman LEVIN. Well, it’s a couple years overdue now so that’s 

not satisfactory. I’m just wondering if you can give us a better handle on that—if necessary, month by month. I mean, I don’t want 

to burden you with unnecessary requirements, but this is something in law, and it is essential that there be compliance on this. 

So, would you let us know by the end of October—let’s just try report number one—whether or not the budget for 2012 will be complying with that requirement? Let us know by the end of October. 

Mr. LYNN. Yes, I’ll do that, Mr. Chairman. 

[The information referred to follows:] 

Representatives from AT&L, P&R, and Comptroller met with professional staff on 

October 29, 2010; December 16, 2010; and March 3, 2011, to discuss the National 

Defense Authorization Act for Fiscal Year 2010, section 803, contract services inventory reporting requirement. Staff indicated that the intent of the language was to 

have better visibility into contract services from a total workforce standpoint. The 

Department explained the progress the Services have made to date as well as challenges with inventory and tracking. 

The material provided by the Department is included at the end of this hearing. 

[See Appendix C]. 

Chairman LEVIN. If not, why not? 

21 

On the JFCOM issue, was there an analysis of that issue before 

the decision was made relative to JFCOM? If so, precisely who was 

involved in that analysis? 

Mr. LYNN. The Secretary made his decision on JFCOM based on 

a series of meetings, probably as many as 30 meetings that he had 

with his senior military advisors, the chiefs, the combatant commanders, particularly the ones that are incoming and outgoing for 

JFCOM, as well as the senior members of OSD. During those meetings, the central military rationales—there are four, and I’d ask 

General Cartwright to go into a little more detail—that are in the 

Unified Command Plan for the JFCOM. At the end of those meetings, the conclusion was that those purposes no longer—in some 

cases, particularly the joint manning, was redundant with what the 

Joint Staff was already doing, in terms of joint doctrine, joint training are still important functions, but they no longer justified a fourstar military command with a $1 billion budget. 

Chairman LEVIN. Would you provide the committee any analyses 

which were completed or done or presented to the Secretary relative to that issue, for the record? 

Mr. LYNN. We’ll provide whatever we have for the record. 

[The information referred to follows:] 

The material provided is included at the end of this hearing. [See Appendix D]. 

Chairman LEVIN. Okay. Finally, on just that issue—my time’s 

up—has the President approved that yet, those changes in the Unified Command Plan? 

Mr. LYNN. The Secretary has forwarded his recommendation to 

that effect to the President. The President has not yet made a decision. 

Chairman LEVIN. Thank you so much. 

Senator McCain. 

Senator MCCAIN. Thank you, Mr. Chairman. 

I thank the witnesses. 

Secretary Carter, you’ve been around for quite a while now. Don’t 

you think one of the fundamental problems that we’re facing here 

is the consolidation of defense industries, which has really led to 

a virtual lack of competition? In the 1990s, I think we’re all aware 

that the defense industries were encouraged to consolidate. So, now 

we have very little, if any, competition. If there’s any competition, 

it’s between two; and most of them, there is none. Do you agree 

with me that that’s a fundamental problem here? 

Dr. CARTER. It is a fundamental constraint on our ability to get 

competition. That’s why we have to work extra hard to make sure 

we get real competition. So, there are several things you can do in 

that circumstance. We do have competition among the big houses. 

It’s important that we continue to encourage new entrants in the 

defense field, particularly smaller companies that might grow into 

bigger companies. They offer vitality and technical health, as well 

as new forms of competition. That’s to include small business. It’s 

important that we look at creative ways of getting competition. 

I mentioned the LCS acquisition strategy, as the Navy altered it 

6 months ago or so, as an example of that. That was a situation 

where we had exactly what you’re pointing to, which is two shipbuilders who were showing the signs of—suggesting, in bids, an exVerDate Aug 31 2005 10:34 Apr 20, 2011 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6602 Y:\BORAWSKI\DOCS\65072.TXT JUNE PsN: JUNEB
22 

pectation that they would continue to be in business, no matter 

what. So, we said, ‘‘Well, no, that’s not working for us, so we’re 

going to down-select. Somebody’s going to lose and somebody’s 

going to win.’’ The bids that came in after that announcement were 

quite different from the bids that came in before. That’s—— 

Senator MCCAIN. Why don’t you supply that for the record for 

us? Would you? 

Dr. CARTER. I’d be happy to do that. 

[The information referred to follows:] 

In summer 2009, the Navy received proposals for the Fiscal Year 2010 LCS from 

Lockheed Martin/Marinette Marine/Bollinger and General Dynamics Bath Iron 

Works/Austal USA Industry teams. These proposals did not reflect competitive pricing and well exceeded the Congressional Cost Cap. At that time, Navy revised the 

acquisition strategy for the LCS program with the objective of making the program 

affordable by way of increased competition. The revised strategy down selects to a 

single team for a block buy of up to 10 ships (2 per year from fiscal year 2010 

through fiscal year 2014), requires submission of a technical data package to support a competitive solicitation of a second source in fiscal year 2012, and requires 

delivery of 5 combat systems for the second source. 

For the LCS Fiscal Year 2010 solicitation, the Navy received Final Proposal Revisions (FPRs), valid for 90 days, on September 15, 2010. The Navy is taking the time 

necessary to carefully review and analyze the competing proposals. The Navy is proceeding with the LCS source selection diligently, thoroughly, and consistently with 

its source-selection plan and applicable law and regulations. The Navy intends to 

make a contract award as expeditiously as practicable, consistent with its source selection plan, but in any event prior to the expiration of the FPRs. 

The Department understands there is keen public interest in this competition, but 

the duty to protect the integrity of the source-selection process, as well as the confidentiality of the information submitted by the offerors, significantly limits ability 

to provide additional details about the ongoing competitive procurement. In particular, the Department is subject to criminal penalties of the Procurement Integrity 

Act (41 U.S.C. § 423) for disclosure of proposal prices or other source selection information during this ongoing competitive source selection process. 

Senator MCCAIN. I think that’s really one of the biggest problems, here. I’m glad we’re going to fixed-price incentive contracts. 

But, if there’s only one major defense corporation competing—I 

don’t know the answer, but I really do believe that that’s a fundamental problem. 

Speaking of reports, there’s a myriad of reports that are required 

by Congress every year. It grows every year. Every time we do the 

authorization bill and somebody wants an amendment approved, 

we say, ‘‘Well, why don’t we ask for a study and a report.’’ You’ve 

seen that game played. So have you, Bill. 

Why don’t you give us a list of the reports that are unnecessary 

and, you think, unneeded and duplicative, and maybe we could act, 

next year, and eliminate a lot of those. You could spend your Saturday afternoon watching Naval Academy football, instead of—— 

[Laughter.] 

——sitting in your office. Because we all know that there are 

stacks and stacks of them. But, maybe it’d be good to get an assessment from you of the reports that we think are unneeded. I think 

we’d agree with a lot of them. We don’t read those reports, either. 

Dirty little secret. Sometimes we get briefed on them, if they’re 

very important, but the vast majority of them are stored somewhere. I don’t even know where. 

Mr. Lynn, isn’t the biggest cost escalation to DOD today in 

healthcare? 

23 

Mr. LYNN. Yes, sir. I don’t know whether it’s the biggest, in 

terms of percentage increase, but that is the largest account that 

is growing at a substantial pace. 

Senator MCCAIN. Do you have any ideas on that issue? 

Mr. LYNN. We are reviewing that. As part of the fiscal year 2012 

budget, I think we will be proposing to Congress some ideas about 

how to restrain healthcare costs. 

Senator MCCAIN. But, there’s no doubt that it is growing in dramatic fashion. 

Mr. LYNN. There is no doubt. 

Senator MCCAIN. In double-digit inflation. 

Mr. LYNN. In some years. 

Senator MCCAIN. Recently. 

Mr. LYNN. Yes. 

Senator MCCAIN. The other thing that might be helpful to this 

committee, after asking for a report, maybe you could do a little 

study for us, or just compile statistics, on the so-called ‘‘tooth-totail ratio’’ over the last, say, 20, 25 years. I think what we’re going 

to find is a dramatic growth in both civilian personnel, Pentagon 

and other places, and I think we’re also going to see a dramatic 

growth in staffing and the tooth-to-tail ratio becoming less and less 

optimum, to say the least. Would you agree that that’s pretty much 

the case, General Cartwright? 

General CARTWRIGHT. Yes, I do, Senator. We have several staffs 

that have grown and the impact on the force is, it ages the force. 

It consolidates a lot of our leadership activities in headquarters, 

away from the battlefield. It tends to be layered, and that’s what 

we’re after. 

Senator MCCAIN. Well, I think it would be helpful to us, and 

maybe motivate some kind of action, if you showed us how dramatic that growth has been, as opposed to the actual number of 

warfighters on the battlefield or in the ocean or in the air. 

I thank you, Mr. Chairman. 

[The information referred to follows:] 

24 


928ful55.eps
25 

Chairman LEVIN. Thank you, Senator McCain. 

Senator Lieberman. 

Senator LIEBERMAN. Thanks, Mr. Chairman. 

Thanks, to the three of you, for being here today. Thanks, to Secretary Gates, for initiating this series of moves, which I support. 

The fact is that we’re asking more of our military than we have in 

quite a while, with a combination of being involved in the war 

against Islamist extremism, managing our relations with a rising 

and more assertive China, and then a host of other problems. The 

fact is that we’re already facing a squeeze, where we’re not giving 

the military all that they need. Therefore, part of the answer here 

is to eliminate the waste. So, bottom line, I appreciate very much 

what Secretary Gates and all of you are doing here. 

I want to focus in on JFCOM, because I do have questions about 

that. I’m not stating my opposition to the proposal here, but I really want to ask, is it good for our national security? Have we 

reached a point where it’s really time to put up the ‘‘mission accomplished’’ sign on jointness in our military? Does it really save 

enough money to justify what will be lost by closing the command? 

To me, those are important questions, and I don’t have the answers yet. I do want to admit that I may be biased, here, but I’m 


928ful56.eps
26 

still going to keep my mind open, because I was involved, in the 

late 1990s, with former Senator Dan Coats—perhaps future Senator Dan Coats—in the legislation to create this JFCOM. We were 

responding to a report by what was then called the National Defense Panel (NDP), which was a kind of Team B outside group to 

review the Quadrennial Defense Review of 1997. The NDP was an 

impressive group. Phil Odeen was the chairman. It had people on 

it like Rich Armitage, Admiral Jeremiah, Bob Kimmitt, Andy 

Krepinevich, General Bob RisCassi. They recommended the creation of the JFCOM to drive jointness through our military, which 

had not been done, even though Goldwater-Nichols enforced in law. 

Ultimately, Secretary Cohen, in response to a lot of back and 

forth—General Hugh Shelton was then the Chairman of the Joint 

Chiefs—put this JFCOM into place. 

So my question really is—and I must say, with respect, that to 

me, there’s a little bit of, oh, confusion about what the argument 

here is, because, Secretary Lynn, in your testimony, I think you did 

say the principal purpose for the creation of JFCOM in 1999, to 

force a reluctant service-centric military culture to embrace joint 

operations and doctrine, has largely been achieved. On the other 

hand, you did say today, I think in response to Chairman Levin, 

essentially, it hasn’t been achieved, but it no longer justifies a fourstar command. 

So, my question really—I mean, three questions, and I’ll ask 

them open-ended—one is, have we really—if—I don’t believe we’ve 

accomplished the mission of guaranteeing jointness in our military, 

which is fighting jointly. I wonder, if you’re going to disband this 

command, where else are you going to do it? Or do you think we 

have achieved it, thus far? Second, does it really save enough 

money to justify the closing of the command? 

Secretary Lynn, do you want to start? 

Mr. LYNN. Sure. I wouldn’t say it as strongly as you did, in terms 

of ‘‘mission accomplished.’’ There’s danger in that statement. I 

think we have made substantial progress—— 

Senator LIEBERMAN. I think former Presidents are aware of that, 

for sure, yes. 

Mr. LYNN. Yes. We have made substantial progress in internalizing jointness into the combatant commands and how they operate. I think we operate fundamentally differently than we did in 

the 1991 Gulf War, which was, in many ways, the trigger for the 

recommendation—the panel that—— 

Senator LIEBERMAN. Right. 

Mr. LYNN.—you suggest. I think we operate, in the conflicts 

we’re in, fundamentally differently than we did then. I think the 

Services operate fundamentally differently, in a much more joint 

way. It was our conclusion that we have made sufficient progress 

that it will not be reversed and that we can use the Joint Staff, 

subordinate organizations, to continue that—on command and control and other important elements—to continue that progress. But, 

it doesn’t, as I said, justify a billion-dollar command. We do think 

we can make substantial savings off of that billion dollars by eliminating some of the functions, such as the joint manning role that 

it plays, which largely duplicates the role of the Joint Staff. 

27 

Senator LIEBERMAN. My time is up; I don’t want to go beyond. 

But, do we have a cost figure, at this point, about how much you 

think closing the JFCOM will save? 

Mr. LYNN. We are working through that. We think we will be 

able to save a substantial portion of that billion dollars. But, that’s 

part of the process now, is to determine which elements, which centers, and so on—— 

Senator LIEBERMAN. Right. 

Mr. LYNN.—of the JFCOM we want to keep, and where we want 

to keep them, and which things would go away—the headquarters, 

the joint manning functions—and then to net that through and get 

the savings figure. 

Senator LIEBERMAN. Okay. Then, obviously, I’d raise the question 

about, if there are some parts of the command you are going to 

keep, because you feel they’re still necessary, where will they be? 

Will something be lost if they’re disbanded? The ‘‘whole is greater 

than the sum of the parts’’ quality to the command that exists now. 

But, I look forward to those answers on another day. 

Thank you. 

Mr. LYNN. Okay. 

Chairman LEVIN. Thank you very much, Senator Lieberman. 

Senator Thune. 

Senator THUNE. Thank you, Mr. Chairman. 

Gentlemen, thank you for your service. 

This question is for the entire panel, and it has to do with something that Secretary Gates stated in his May 8, 2010, speech at the 

Eisenhower Library. He said, ‘‘The fact that we are a nation at war 

calls for sustaining the current military force structure.’’ The goal 

of this efficiencies initiative is to, and I quote again, ‘‘cut our overhead costs and to transfer those savings to force structure and 

modernization within the program budget.’’ 

On August 9, 2010, Secretary Gates stated that, ‘‘The task before 

us is to significantly reduce the Department’s excess overhead costs 

and apply the savings to force structure and modernization.’’ 

Yet, over the summer, there have been rumors that the B–1 

bomber fleet, which has been a near-constant presence above Afghanistan throughout the war, might be proposed to be retired, in 

pursuit of the $2 billion in savings the Air Force is required to find 

under this initiative. 

General Petraeus, in front of this committee just a few months 

ago, spoke very highly of the B–1’s presence and performance in Afghanistan. I guess I’m perplexed by rumors such as these, the proposed retirement of the B–1 fleet to obtain the required savings, in 

light of Secretary Gates’s emphasis on sustaining and modernizing 

our force structure. 

So, my question is, wouldn’t cutting force structure to find savings under this efficiencies initiative be in direct contradiction of 

Secretary Gates’ initiative to cut overhead costs and transfer those 

savings to force structure and modernization? 

Mr. LYNN. Secretary Gates has asked us to do two things as we 

go through that. One is to make a determined effort to reduce overhead, transfer those resources to the warfighting accounts. Those 

are the quotes that you indicated. He’s also asked us to take a 

scrub of the warfighting accounts themselves—and that’s a subVerDate Aug 31 2005 10:34 Apr 20, 2011 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6602 Y:\BORAWSKI\DOCS\65072.TXT JUNE PsN: JUNEB
28 

stantial part of what Secretary Carter is doing—and to see if we 

can gain better effectiveness, better efficiency, better productivity 

from those forces. 

What the result will be of that, I wouldn’t prejudge that at this 

point. But, we’re looking across the board, both at the forces themselves as well as that overhead-to-warfighting transfer. 

Senator THUNE. So, what you’re saying, however, is that the Department is not looking only at bureaucratic redundancies and 

overhead, but is looking at reducing force structure in order to provide the—— 

Mr. LYNN. We are looking at how to make the forces we have the 

most effective they can be to accomplish the mission. 

Senator THUNE. Let me ask you one other question with regard 

to a September 20, 2010, Air Force Times article where Air Force 

Chief of Staff, General Schwartz, said that the 2005 Base Realignment and Closure (BRAC) initiative, to consolidate 26 installations 

into 12 joint bases, is a failure that’s not produced the cost savings 

the Department had expected. In fact, the Government Accountability Office (GAO) stated, ‘‘It was unclear whether joint basing 

will result in actual savings.’’ There was an Air War College study 

stating that joint basing is, ‘‘actually costing the Department of Defense more money than if the 26 bases and posts had remained 

separate.’’ 

What is your reaction to that criticism about the 2005 BRAC 

joint basing initiative ending up costing money rather than saving 

money? 

Mr. LYNN. I’m aware of what General Schwartz said and the 

GAO reports. I think we have to take them seriously and reexamine the path that we’re on, and, either review and see if we think 

that data is wrong and the savings are there, or rethink our course 

of action. 

Senator THUNE. Does the current effort authorized by Secretary 

Gates include the consideration of overseas bases? 

Mr. LYNN. Yes. 

Senator THUNE. Have there been any recommendations made 

about base closures or consolidations since the Secretary’s August9th-of-this-year announcement? 

Mr. LYNN. There have been no recommendations to that effect, 

but be—we’re in the midst—in terms of the overseas bases, there’s 

a Global Force Posture Review going on, at this point, looking at, 

what are the purposes for those overseas forces, how best to accomplish those purposes, and then what we think the basing structure 

would be to support that. That’s a study that’s ongoing right now. 

Senator THUNE. Okay. I think my time’s expired. 

Thank you, Mr. Chairman. 

Chairman LEVIN. Thank you, Senator Thune. 

Senator Reed. 

Senator REED. Thank you very much, Mr. Chairman. 

Thank you, gentlemen. 

Just to get a kind of an overview about how you’re going to approach these savings, it seems to be and this is very simplistic— 

resources that have to be committed, through contract and elsewhere, to Afghanistan, Iraq, and other contingency operations; then 

29 

there’s programs that sort of help both the long-term defense plan 

and these operations; and then there’s a long-term defense plan. 

So, Secretary Lynn, as you approach this problem, is there any 

sort of thought going into how you deal with these different types 

of resources? I mean, hopefully, the supplemental funds and the 

Iraq-Afghan funds will diminish over time. How do you factor in 

these different aspects? 

Mr. LYNN. We will continue to propose a overseas contingency account for those operations in Afghanistan and whatever remains in 

Iraq. As you say, I think, over time, you could expect to see those, 

conditions permitting, decrease. Most of what we’ve been talking 

about today, in the $100 billion in the base budget, and we’re talking about, just to be clear, not reducing that base budget by $100 

billion, but finding $100 billion in the overhead accounts that we 

can shift to the warfighting accounts so that we could have 3-percent growth in the warfighting accounts, which is what we think 

we need to sustain those capabilities, but with only an overall top 

line of 1 percent. That’s a significant challenge, but that’s what 

we’re trying to do. 

Senator REED. So, besides just the value of efficiency and productivity gains, this is also about freeing up resources and continuing 

operations overseas and support the fighting forces. Is that fair? 

Mr. LYNN. Absolutely. 

Senator REED. Mr.—— 

General CARTWRIGHT. Can I just—— 

Senator REED. General Cartwright? 

General CARTWRIGHT.—just add, quickly, that part of what we’d 

like to be able to do is, the OCO accounts have, in fact, sustained 

capabilities that we have found necessary in this conflict, that we 

want to retain as part of our core capability. So, this will create 

room for those capabilities to move into the budget. 

Senator REED. Right. But, you’ve also identified capabilities, 

which are very specific and unique, which you are also planning to 

phase out, I presume. 

General CARTWRIGHT. That is the case. Or, that is what the analysis is looking for. 

Senator REED. Right. 

Secretary Carter, you point out that services and growth in service contracts are probably more difficult and larger than we all expected. I think usually the poster child for this problem is a big 

weapons platform. It’s very expensive, et cetera, and the contract— 

there’s only two contractors, it’s not fully competitive. But, what I 

sense, too, is that these service contracts are just proliferating. 

Sometimes, contractors are writing the contracts for the services. 

Can you talk about how you attempt to deal with this issue of service contracts? 

Dr. CARTER. Yes. A few of the main points, Senator. First thing 

is that the different categories are a little different. So, there’s 

maintenance activities; there are information technology (IT) services, category of their own; there’s advisory and assistance services, 

or knowledge-based services, which is principally the matter that 

Secretary Lynn was speaking of earlier. These are augmentation of 

the government staff that provide expertise that we, at the moment, don’t have within our own walls, and so, have to contract for 

30 

externally. They play an essential role. Nothing wrong with that; 

we just want to make sure we get them efficiently and that we’re 

also working to strengthen the talent that we have within the government, and not excessively rely upon people outside. 

In all of those areas, unlike ships or planes, our ships and planes 

are bought by people who buy ships and planes for a living; they’re 

very good at it. Most of our services are bought by people as an ancillary duty. They’re, in a sense, amateurs. They’re trying to get 

something else done and they’re issuing contracts for services in 

order to help them. That’s not their principal preoccupation. So, it’s 

not surprising that their tradecraft isn’t as good as it would be if 

that’s all they did. 

We’re trying to help them get better. How do you get better? 

Well, it’s things like really try to shape the requirements. Be clear 

about what you want. Don’t just drift into asking more and more, 

and being more and more reliant. Ask yourself why, 5 years ago, 

three people sufficed, and now five people are doing exactly the 

same thing. Recompete periodically, even though that’s a nuisance, 

in some ways, for somebody who’s trying to get other things done. 

We’re trying to help our services’ acquirers to do better, without 

burdening them with a lot of administrative structure, but assist 

them to be good amateur buyers. Market research is another part 

of that. So, there’s a lot that goes into this, depends, a little bit, 

sector by sector. But, I just tell you, the low-hanging fruit really 

is there. There’s a lot of money. There has been a very, very high 

rate of growth over the last decade, in services. They’ve grown faster than everything else. Knowledge-based services, within them, 

have grown even faster than the rest of services. So, there’s a lot 

we can do. 

Then, of course, contingency contracting is a whole other area 

where we’re really trying to improve. We know we didn’t do that 

well in Iraq. We’re trying to do better in Afghanistan. 

So, across the board we have work to do. 

Senator REED. My time’s expired, but just a final comment or 

question, you might agree or disagree. It seems that, wittingly or 

unwittingly, we created a system that it’s much harder to hire a 

full-time DOD employee than it is to write a contract worth 10 or 

20 times more, over the relative period of time. Human nature take 

the path of least resistance. Is that your observation, too? 

Dr. CARTER. It absolutely is. As part of the Acquisition Workforce 

Initiative, which this committee had a lot to do with getting underway, we’re trying to make it easier for our buying commands to 

hire, within the walls of government, the kinds of people we need. 

These aren’t oversight bureaucrats. These are people at the point 

of execution: systems engineers, cost analyses, pricers, contracting 

officers, and so forth, the people who actually execute. It’s a struggle. The economic circumstances are helping us in that regard, as 

they help recruiting elsewhere in our Department. But, we need to 

make it easier to bring people in, if we want good people within 

the walls. 

Chairman LEVIN. Thank you, Senator Reed. 

Senator LeMieux. 

Senator LEMIEUX. Thank you, Mr. Chairman. 

Thank you all for your service. Thank you for being here today. 

31 

As someone who’s new to the Senate, one of the things that initially struck me when I first came here was the size of DOD and 

the number of combatant commands and the number of four-star 

officers. I just want to go over this to make sure that I have my 

information correct. But, as I count it, we have 10 combatant commands, as well as this new cyber subunified command, which I 

think is under Strategic Command. We have, as I understand it, 

40 four-star officers in the U.S. military, as well as 717,000 civilian 

employees in DOD. I think these are staggering numbers for the 

average American, to hear the size of this organization. Make no 

mistake that we all want to support the military and want the 

military to be as effective as possible, but we also want the military 

to be efficient. 

Having heard what you’ve said, Secretary Carter, about 

outsourcing and the cost increases in services on the outsourcing 

side, what are we doing to look internally—beyond the recent proposals that have come up about JFCOM, what are we doing internally to look to see: Are we using our resources in the best way 

possible? Are we top heavy in DOD, with our 40 four-star officers? 

What can we do to make things more efficient and more effective? 

Dr. CARTER. If I may, I think Secretary Lynn and General Cartwright are in a better position than I to give you an answer to that 

question. 

Senator LEMIEUX. Okay. 

Mr. LYNN. Senator, I think most of the numbers you gave are accurate. The Secretary directed that starting with the flag and general officers—there’s been an addition, over the last 10 years, of 

about 100 flag officers—he has asked for a review of that growth, 

with a target of reducing it by half that. Similarly, there’s been a 

growth of about 300 civilian senior executives. He has the same 

aim there, to review that growth; again, with a target of a reduction of about 150. We’ve been talking about the growth in support 

contractors. 

He’s directed that over the next 3 years, the target be a 10-percent reduction in those support contractors. As I indicated to Chairman Levin, those are defined generally as people who are providing 

staff augmentation, as opposed to weapons testers or depot maintenance or more direct warfighting functions. 

The Secretary’s directed that we look at all—you didn’t mention 

the various board and commissions, but we have, I think, 65 of 

them. It seems like a lot. We’re reviewing those to see if we can’t 

reduce. He’s directed a 25-percent reduction in their funding, immediately. 

Senator McCain mentioned the studies, some of which we generate internally, which we’re looking to reduce on our own—some 

of which come from Congress. There are certainly good reasons for 

some of them, but, as Senator McCain indicated, it’s probably an 

appropriate time to review. I think we produce about 600 annual 

reports. I think there are 1,000 people, more or less, involved in 

producing those reports. So, there’s some potential for reduction 

there. 

So, Secretary Gates, I think, has exactly the same reaction you 

did, is that it’s important to support the military. We’re in the 

midst of a fight in Afghanistan, we don’t want to take away from 

32 

that, but we think we can add to it by reducing our overhead accounts and putting those resources into the warfighting accounts. 

Senator LEMIEUX. General Cartwright, do you have any comment on that? 

General CARTWRIGHT. Just, quickly, sir. The review of the structure of the ranks, et cetera, is not only at the top, though; we’re 

looking all the way through. So, every command that we’re looking 

at every combatant command, every JTF, do we have the right 

level of responsibility? Many times, we have it there because a 

counterpart happens to be a four-star or something like that. 

That’s not really a good reason for it. So, we’re trying to understand how to get it back down to where we want so this gradecreep can be stopped, but actually pushed back to where it is appropriate and where we have the right balance for span of control 

and responsibilities associated with that individual. 

Senator LEMIEUX. What incentives do we give to DOD employees 

to find savings? Is there anything in their performance review? Is 

there anything that’s tied to their compensation, if they’re able to 

buy a ship cheaper or find a saving in a service contract? Are we 

rewarding them for that kind of good behavior? 

General CARTWRIGHT. There is a substantial effort, in this activity that we’ve undertaken, called ‘‘a culture of savings.’’ That’s 

where we will nest the ideas of, how do we start to incentivize, not 

only the individual, but the institution to self-correct?—which is a 

difficult activity, but it’ll go to those types of things. How are you 

evaluated? Is this something that’s important to the command? 

Does it actually get to keep the resources so it’s incentivized to do 

it? Have we put the right incentives in? In the discussion we had 

earlier, where you have contractors, then you have Guard/Reserve, 

then you have civilians, then you have uniformed military, Active 

Duty. Can you put in place a structure that says—each one of 

those costs escalate. Can I say to you, ‘‘You need flexibility to move 

around’’? Sometimes a contractor is a response to needing something right now, to avoid the long period, or at least to cover the 

long period, to hire a civilian. Can we put in place the incentives 

to drive us, then, to getting that civilian, not forgetting about it 

and leaving a contractor in the position? 

Senator LEMIEUX. My time is up, but I just wanted to commend 

you for what you’re undertaking. I think it’s vitally important. 

We’re going to have this challenge, throughout government, and I 

hope that the other agencies of government undertake the same 

methodology that you are. It’s not easy to do, but it needs to be 

done, because our financial situation in this country is not going 

to allow us to keep spending more than we take in. I thank you, 

and appreciate you for the good work you’re doing. 

Thank you, Mr. Chairman. 

Chairman LEVIN. Thank you, Senator LeMieux. 

Senator Ben Nelson. 

Senator BEN NELSON. Thank you, Mr. Chairman. 

Let me add my appreciation for the work that you’re doing to 

economize and to create a more effective budgeting process for 

DOD. As you do that, the questions are going to continue to come 

up. Are you cutting in the right places? Cutting it the right way? 

Are you leaving in place the best kind of military that we need? 

33 

And/or are you improving it? So, the questions are there, and 

they’ll continue to be raised. 

Senator Lieberman referred to jointness as a critical element of 

what you’re doing, and certainly maintaining jointness, as opposed 

to reducing jointness, by dealing with the Joint Command. I hope 

that, as we develop the process, here, to bring together the elements of the military so that we eliminate stovepiping and the protectionism of one branch of the government and its programs from 

the incursion by another branch of the military, that we’ll be able 

to maintain that jointness. Obviously, it’s not easy. Wasn’t easy, 

some time ago, or we wouldn’t have created the command to deal 

with it. I hope that it’s now systemic in the thinking within DOD, 

as well as in the branches of the military, to think in terms of 

jointness and reduction of stovepipe. 

Senator Levin and others have asked that this analysis that 

you’re working be provided to us, in a detailed analysis. Do we 

have a timeframe to expect what your analysis will be—in other 

words, what your methodology is to reduce unnecessary expenditures, to eliminate some of the fat that, perhaps, has developed 

with double-digit increases in the budgeting—do we have a timeframe where we might expect that? 

Mr. LYNN. As I indicated at the outset, there are four tracks in 

this effort. The first track, which is focused on the $100 billion savings, the savings themselves and the analysis that supports them 

will be part of the fiscal year 2012 Defense budget submission to 

Congress in February. The track-two effort is outside efforts, including the one General Cartwright referred to, in terms of just civilian employees. We’ll be, certainly, reporting those as they come 

available. Track three is focused on particular practices within the 

Department. Secretary Carter testified to some of those, just a few 

moments ago, and he put out a memo on the changes that we’re 

making in the acquisition system, earlier this month. If we haven’t 

already, we’re happy to provide that to the committee, and finally, 

in track four, we have a series of taskforces that are working on 

implementation plans. As they develop, we’ll provide those to the 

committee. 

Senator BEN NELSON. All right, thank you. 

One particular area where I’ve been very pleased to see the level 

of coordination between the Navy and the Air Force is the Global 

Hawk program. The progress in joint training and coordinated operation here in this program hint at the opportunities that are 

there to eliminate redundancy and improve mission effectiveness. 

Now, I am going to go to one specific area where I hope that we 

can continue that kind of cooperation and that kind of a joint effort, 

and that is on unmanned aerial vehicles. I’ve already spoken to 

both General Casey and General Schwartz. They’ve acknowledged 

that they have to do better to try to coordinate their efforts. We 

don’t need two separate programs with any unnecessary duplication that might come from that. Since both the Army and the Air 

Force plan to spend more than $7 billion on similar aircraft, it 

raises a red flag. It’s not that the red flag can’t be taken away— 

overcome—but, the red flag is there, and I hope that we’ll direct 

the attention necessary, because that’s a very specific area where 

I think redundancy is very likely to be encountered. 

34 

I wonder if you have any comments, General Cartwright. 

General CARTWRIGHT. There are places where we like commonality, and we look for commonality rather than redundancy— 

in our unmanned aerial vehicle systems, the ground control networks, the space side of the equation, and making sure that they 

are common, to the best extent possible. 

In the unmanned aerial vehicles, what we have is a different 

mindset for procurement. I’d turn to Dr. Carter on some of this. 

But, the key is a common vehicle with different payloads; and 

using that, and being able to adapt those payloads as the fight 

changes well inside of normal acquisition practices—has been our 

advantage in that area. We seek to capitalize on that, as we move 

forward, not only in the unmanned aerial vehicle systems, but also 

in others. 

Ash? 

Dr. CARTER. I think General Cartwright has it just right. The 

only thing I’d add is, on the specific matter of Global Hawk—and 

I indicated this in the document issued 2 weeks ago—that is a program whose cost has been growing; and, I think unnecessarily so. 

So, that is one where we are intent on restoring what I referred 

to earlier as ‘‘productivity growth.’’ I have very good cooperation 

from those who are performing the work, who recognize that the 

cost has been growing. This is an important program to us. We 

can’t allow ourselves to manage it in a way where it becomes 

unaffordable. So, it just happens that that is a program of—that 

is a focus of my attention—managerial attention, at the moment, 

for just the reason I indicated earlier, when I expressed our dismay 

at coming to you with exactly the same thing every year, and asking for more money for it. So, Global Hawk is one we need to do 

some work on, important as it is. 

Senator BEN NELSON. Do you agree that there is a commonality 

developing between the Air Force and the Army with respect to 

that? 

Dr. CARTER. I do agree. I think General Cartwright’s exactly 

right. The rearward communications, the processing and exploitation systems, commonality there; some of the handling systems 

in the field, making them common; and then having a suite of mission payloads from which any service or any user can draw, these 

are the key ingredients of a sort of mix-and-match strategy towards 

UAVs. We see that our in the field in Afghanistan, the way we actually use the unmanned systems. 

Senator BEN NELSON. Okay. Thank you all. 

Thank you, Mr. Chairman. 

Chairman LEVIN. Thank you very much, Senator Nelson. 

Senator Brown, I believe, is next. 

Senator BROWN. Thank you, Mr. Chairman. 

First of all, thank you for trying to give us the best value for our 

dollars. I think that every agency in the Federal Government 

should do a top-to-bottom review and try to streamline, consolidate, 

and offer those savings. Being somebody who’s in the military, I’m 

keenly concerned and aware of that fact, that we need to maximize 

our dollars, in this day and age, because of what’s happening federally. 

35 

That being said I find it curious that you have to come up with 

a budget, yet the Federal Government isn’t even doing a budget. 

You know Congress, we don’t have budgets ourselves, but we’re 

asking you and other agencies to come up with a budget. So, I 

would hope that, at some point, we would start to lead by example. 

We have a tremendous amount of equipment—Guard and Reserve, Active-Duty equipment now—in Iraq, in particular. We have 

yards filled with it, just sitting there. Has there been any thought, 

in an effort to create jobs and to basically get our equipment up 

and running and ready for the next battle, to move forward some 

of the expenditures that were going to be used for that sort of 

thing, maybe, down the road and bring it forward, to actually get 

that—those things happening right now—creating jobs, upgrading 

our equipment, getting everything back into the system, and then, 

ultimately, understanding and reevaluating where we need to go 

from there? Because we may not need some of the—some of the 

equipment that is slated, down the road, if we just take care of the 

stuff we have. So, I’ll just throw it out there for whomever. 

Mr. LYNN. I’d ask General Cartwright to comment. But, we have 

a major reset program, ongoing, taking the equipment, right now, 

out of Iraq, and refurbishing that equipment, where appropriate, 

and bringing it back for units in the United States. That’s going 

through the depots, and that’s going on as we speak. 

General CARTWRIGHT. I would just add, there’s a juggling act 

that goes on with some of this equipment that’s forward-staged as 

we reposture towards Afghanistan. Some of this equipment is positioned and actually being repaired and upgraded, coming out of 

Iraq, out there in theater, so that it can be moved directly across 

to Afghanistan. So, that’s one class of equipment. 

There’s another class of equipment that we need to get back to 

the United States so that Guard units and Active-Duty units actually have something to train on and that we can get it. 

There’s a third aspect here, which is the throughput capacity of 

our depots and our commercial activities that work this. We’re trying to maximize that activity and keep it as efficient, both in cost 

and effectiveness, as we can. 

Then there’s the last category, which is that equipment, I think, 

some of which to you are speaking is, we’re probably not going to 

use this equipment. It’s probably coming back, and it’s actually out 

of date in its mods, and we probably are going to replace it with 

the next generation. So can we take some of that equipment, train 

people, like Iraqis, to maintain it, and then provide it to them, as 

a case, so that we’d get the most bang for the buck and we keep 

them on an American-type system? 

So, those classes, we try to balance against. The highest priority 

is making sure that anything we need in Afghanistan that happens 

to be located in Iraq, we get there as quickly as possible. Keep the 

depots moving quickly so that we can train and equip the forces 

that are in combat. Then we start to work to the lesser categories. 

Senator BROWN. Just to pick off what Senator McCain was saying, the whole idea of competition within—dealing with people that 

are providing equipment for us, in the armed services or any other 

agency. Secretary Lynn, do you believe that competition is a good 

thing? If so, what are we doing to promote or send a message to 

36 

us so we can do our thing to help promote competition? Do we get 

a better product? Do we get a better price? It seems like the Federal Government’s the only place where we don’t. 

Mr. LYNN. We think competition is an important tool to get better prices and to get better equipment for the same or lower prices. 

It doesn’t work in every case. You have to make sure that you’ve 

structured the competition correctly so that it’s not an allocation, 

so you’re not maintaining both contractors indefinitely. You need to 

ensure that you’re not overinvesting upfront. But, in cases where 

you can avoid those pitfalls, it is a strong tool. 

Dr. Carter mentioned the LCS. We’ve restructured the buy to 

have much greater competition, and we’re finding results from 

that. 

Senator BROWN. Thank you. One final question. When work done 

by private contractors is absorbed by DOD personnel and labeled 

‘‘inherently governmental,’’ does it end up costing the taxpayers 

more money, because the Federal employees cost significantly 

more, when you take into account retirement and health benefits? 

Is that an accurate statement? Does it cost more? 

Mr. LYNN. You’re asking, do Federal employees cost more than 

private? 

Senator BROWN. Yes. 

Mr. LYNN. As a general statement, I don’t think that’s accurate, 

no. 

Senator BROWN. Great. All right. 

Thank you, Mr. Chairman. 

Chairman LEVIN. Thank you, Senator Brown. 

Senator Webb. 

Senator WEBB. Thank you, Mr. Chairman. 

Before I begin my actual statement, I’d like to point out that a 

number of community leaders and constituents from Virginia are 

here today. Congressman Bob Scott was here, I’m not sure if he’s 

still here thank you for coming—Mayor Johnson, from the City of 

Suffolk, and senior staff representing Governor McDonald. 

We are all united in our concern about the process that has been 

used with respect to JFCOM. I would ask unanimous consent that 

statements submitted by Senator Mark Warner, Governor McDonald, and Mayor Johnson be entered into the record at the end of 

my turn here today. 

Chairman LEVIN. They will be so entered. 

Senator WEBB. Thank you, Mr. Chairman. 

[The information referred to follows:] 

Prepared statements submitted by Senator Mark Warner, Governor McDonald, 

and Mayor Johnson are included at the end of this hearing. [See Appendixes E, F, 

and G]. 

Senator WEBB. I’ve served 5 years in the Pentagon. I support, as 

a general principle, the DOD efforts to bring efficiencies into the 

process over there. I’m particularly interested in seeing what you 

can come up with, with respect to grade-creep, which has been significant since my years in the Pentagon, in the 1980s. 

I’ve worked on this issue since I’ve been in the Senate. Probably 

the most dramatic impact was when Senator McCaskill and I 

worked together to create the Wartime Contracting Commission in 

order to correct systemic deficiencies in that process. 

37 

But, any proposal relating to major changes affecting unified 

combatant commands should be guided by a clear process, a sound 

analytical basis, in compliance with applicable laws, in a way that 

everybody can understand it. This is not a parochial issue. It’s an 

issue that’s going to become more important to everyone on this 

committee as Secretary Gates and others follow through on their 

stated intention to consolidate other military bases and installations. 

The present lack of transparency and consultation, particularly 

with our delegation, stands in stark contrast to how these decisions 

traditionally are made. We heard, today, that the Pentagon spent 

several months reviewing proposals, including holding more than 

30 meetings. We did not have access. We didn’t have an opportunity to provide input. In fact, on August 9, Secretary Lynn, you 

called me 15 minutes before this decision was publicly announced. 

That’s not the way to conduct a review that has enormous implications to our defense and also to community interests. I believe, in 

another sport, it’s called ‘‘stiff-arming.’’ 

We need to know the analytical matrix that was used to compare 

all the commands and the agencies if we’re able to evaluate a 

major proposed organizational disestablishment of one. We need to 

know if the Department has conducted comparative analysis of 

other major commands. 

This same lack of responsiveness has marked the Department’s 

approach to many other requests for information from our delegation. Seven weeks ago, we began making multiple requests, seeking 

answers to a variety of important decisions. To this point, we’ve 

been stonewalled. 

Seven weeks ago, the same week of the JFCOM announcement, 

I asked for data on the size of major DOD and military department 

staffs. I think that’s a relevant question, particularly all the exchange we’ve had here, in terms of tooth-to-tail ratios and this sort 

of thing. I haven’t gotten an answer. I haven’t gotten an answer 

on how big the OSD staff is. When I was in the Pentagon, I think 

that would take maybe an hour. We’re still waiting. 

The Department has failed to answer even the most basic questions that have come from this delegation with respect to a costbenefit analysis that shows what savings would be gained by closing JFCOM, and how they would outweigh the elimination of the 

missions that JFCOM currently performs. We have no real information, at this point, that allows us to quantify the possible effects 

of this proposal in such areas as fiscal and local economic implications. 

The Commonwealth has been a strong supporter—I think everybody knows that—of the military and of its families, particularly 

this area in the Commonwealth of Virginia. Every day, officials in 

our communities interact on a multitude of decisions to coordinate 

actions relating to military facilities. This affects business planning. It affects community planning. It affects real estate values 

down there. People are perplexed as to why the process guiding 

this proposal is being conducted in such complete contrast with the 

Department’s traditional approach. So, this has led many to conclude that there is no comprehensive analysis that would support 

this recommendation to close JFCOM. It leads to the question, acVerDate Aug 31 2005 10:34 Apr 20, 2011 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6602 Y:\BORAWSKI\DOCS\65072.TXT JUNE PsN: JUNEB
38 

tually, in a larger scale, of how serious DOD really is about lasting 

reform on a broader scale. 

We need to get our questions answered. We deserve to have a 

full understanding of the Department’s analysis and implications. 

We need facts. 

Today I filed an amendment to the NDAA that would require the 

Secretary of Defense to provide detailed analysis and other assessments that we have requested before the President would close or 

align any unified combatant command, not simply JFCOM. Senator 

Warner is a lead cosponsor. I hope my other colleagues will think 

about this and consider supporting the amendment. I’m also renewing my call to President Obama to withhold any final action on this 

recommendation until we have that sort of information. 

I know my time is up, but let me say one thing, Secretary Lynn. 

You once were a staffer on this committee. Is that correct? 

Mr. LYNN. Yes, sir. 

Senator WEBB. Okay. You worked for Senator Kennedy, as I recall. 

Mr. LYNN. That’s correct. 

Senator WEBB. On your way back to the Pentagon today, I would 

just like you to think about what staff member Lynn would have 

said to Senator Kennedy, in terms of advice, if Senator Kennedy 

had been stiffed with a 15-minute phone call, when an announcement of this magnitude was made, and then not provided information for a 7-week period when he tried to gain information. I think 

I know what the answer to that would have been. 

Thank you, Mr. Chairman. 

Chairman LEVIN. Thank you very much, Senator Webb. 

I think we probably ought to give Secretary Lynn an opportunity, 

if he wants, to comment. He either can do that now or we can do 

that later. The vote has started, but, I think, if you want to take 

an opportunity now to comment—if you wish. You may not wish to 

do so, but—— 

Mr. LYNN. No, I would like to comment. 

Secretary Webb, I—Senator Webb—well, former Secretary 

Webb—I appreciate that you do not feel that we have shared as 

much information as you would like, although I think the core 

issue here is, I think, a disagreement over the recommendation. 

This was not a business-case analysis, as some have described it. 

This was a military decision. The Secretary consulted with his closest military advisors on the rationale for the JFCOM. There are 

four central purposes in the Unified Command Plan having to do 

with joint manning, joint training, joint doctrine, joint experimentation. 

On the joint manning area, the conclusion is that it was duplicative. It was not a value-added function, that that function was better performed here in the Joint Staff, and that the JFCOM should 

be taken out of that. On the joint training/joint doctrine, those are 

purposes that continue and that we need to maintain our progress 

in that, but that we have made sufficient progress in that area that 

we no longer need the billion-dollar expense and the continued 

leadership of a four-star military command in that area. 

I know we disagree on that, but that is the central rationale. 

39 

We will then review implementing that decision. That will determine how much of the billion dollars we might be able to save and 

how much will need to be continued in order to maintain the joint 

training/joint doctrine centers and facilities, some of which would 

continue to stay in the Norfolk area. 

Senator WEBB. If I may, Mr. Chairman. 

Just as an immediate reaction, there are no decisions of this 

magnitude that are military decisions. Not in the United States. 

There are military recommendations to the Secretary of Defense, 

who then makes a recommendation to the President. Those are essentially civilian decisions. 

I appreciate the distinction that you’re making, but it doesn’t answer the questions that I have. What I would really appreciate 

from you, the reason I stopped was, I know that we have to go for 

a vote, and I wanted other people to be able to have their questions. But, I really would ask that your Department be more forthcoming when we were requesting information so that we can evaluate this. It’s not simply whether we disagree. We deserve to make 

our own evaluation, based on information that we can be provided 

only by you. 

Mr. LYNN. I appreciate your request, Senator. We met with some 

of the members of the Virginia delegation, this morning, to try and 

start that, including the Governor. We’ve talked about setting up 

a meeting with yourself, with the Governor, other members of the 

Virginia delegation, with Secretary Gates, directly, to discuss that. 

We are establishing a channel in order that information, that the 

delegation feels is crucial to be considered, be considered by the 

task force that’s reviewing the implementation of the Secretary’s 

recommendation. 

Senator WEBB. Well, Mr. Secretary, I’m asking for basic data. 

Data you could provide in 1 day. I’m glad to be able to have the 

meetings, but it doesn’t seem to me that it would take 7 weeks for 

you to tell me how many people are on the OSD staff. 

Mr. LYNN. I will get you the number on the OSD staff. 

[The information referred to follows:] 

Please refer to the attached correspondence to Senator Webb, dated November 17, 

2010. 

40 


928ful57.eps
41 


928ful55.eps
42 

Senator WEBB. We have a series of questions that are data-oriented, that literally could be answered in 1 day, and in 7 weeks 

we haven’t gotten any answers. 

Mr. LYNN. I’ll look into those, though the OSD question, I wasn’t 

aware of, but we’ll look into those questions and get you the data 

as soon as we can. 

[The information referred to follows:] 

Please refer to the previous response to Senator Webb, dated November 17, 2010. 

Senator WEBB. Thank you. 

Thank you, Mr. Chairman. 

Chairman LEVIN. The data will come, not just to Senator Webb, 

but the committee as well? 

Senator WEBB. Yes. 

Mr. LYNN. Of course. 

Chairman LEVIN. We all, obviously, have an interest in this. I 

think his frustration reflects the kind of frustration that many of 

us would have about a lack of process and analysis. I made reference to that in my opening statement. I don’t know whether, Senator Webb, you were here or not. But, I do feel that—on the process 

and the analysis issue, that there’s really a feeling, at least some 

of us have, and I surely do, that it was not adequate here. Putting 


928ful56.eps
43 

aside for a moment what that data would show, there is an absence, here, of an analysis that’s been forthcoming, not just to Senator Webb, but, I think, generally, publicly on this matter. That 

material, it would seem to me, should have been available prior to 

the decision, not just after the decision. 

That represents my own views. I think it also represents—I’m 

here, guessing a bit—the views of many members of the committee, 

who, if put in the same position as the Virginia delegation, would 

react in the same way. 

What we’re going to do is recess now. We’re going to have two 

votes. This probably inconveniences our panel. I don’t know if you 

were notified in advance—talking about process—of the fact that 

this would likely happen. If not, I apologize. But, if you were notified, that’s the situation we’re now in. We will probably get back 

here in about 25 minutes. 

Thank you. [Recess.] 

Okay, we’re going to begin this. 

Senator McCaskill is supposed to be here in just a few minutes. 

Secretary Lynn, I know that you are going to the funeral, and 

so, when you need to leave, just wave your hand and leave. 

Mr. LYNN. About 10 minutes, I would think. 

Chairman LEVIN. Okay, that’d be fine. 

Let me start, then, while we’re waiting for Senator McCaskill. 

Dr. Carter, you made reference, I believe, to the test-and-evaluation issue, that the Acquisition Reform Act was so determined to 

reestablish that position. I think you’ve already indicated that a robust developmental test-and-evaluation capability is important, 

and that’s not going to be disturbed. Is that correct? 

Dr. CARTER. That’s correct. 

Chairman LEVIN. Okay. Now, one of the Defense organizations 

that the Secretary plans to eliminate is the Assistant Secretary of 

Defense for Networks and Information Integration. ASDNII, I 

guess it’s called. The Department has indicated that the functions 

currently performed by ASDNII will be transferred to the Defense 

Information Services Agency, Cyber Command, and other appropriate agencies. 

Secretary Lynn, if the Department delegates the oversight-andmanagement roles that it currently performs to lower-level agencies and commands, isn’t there a risk that either of these agencies 

will be responsible for overseeing themselves or that there will be 

no oversight? In other words, how will the OSD staff conduct oversight of command-and-control efforts, cyber security efforts, and 

other critical IT functions, without the resources of the ASDNII? 

Mr. LYNN. Couple of things there, Mr. Chairman. One, is, we will 

retain the chief information officer, and that individual will be a 

direct-report to the Secretary of Defense. So, in terms of the level, 

you will still have that direct-report that the NII has now. We 

think that, with the steps that we’re taking, we’re going to give 

that CIO greater resources. We’re going to pull in the resources 

from the Joint Staff’s J–6 directorate, from DISA, as you indicated, 

and potentially some functions from other areas, to unify the IT 

oversight in the Department. We think we’ll end up with a stronger 

CIO. 

Chairman LEVIN. Okay. 

44 

Dr. Carter, the Secretary’s established a task force on a reports, 

studies, boards, and commissions study group that is analyzing 

ways in which the number of advisory studies can be reduced to 

a more efficient level, to recommended which boards and committees provide insufficient value. I think a number of you made reference to that part of the decision of Secretary Gates. What I’m 

concerned about are the rumors that the Military Services’ Science 

and Technology Advisory Groups could be targeted for those cuts. 

What is your view of the contribution of the Military Services’ 

Science and Technology Advisory Groups in making recommendations to the Department’s future investments in critical technology 

areas? 

Dr. CARTER. I know those boards are under review in the Efficiencies Initiative. As the staff member responsible for the day-today shepherding of the Defense Science Board, I’ve provided that 

information to the group that Mr. Rangel has looking at the advisory boards. We’ve provided them with all of our data on the Defense Science Board, and they’re looking at that and also the Service Science Boards. 

Chairman LEVIN. Secretary Lynn, one of the defense components 

that the Secretary plans to eliminate is the BTA. Now, earlier this 

year, the Department’s Deputy Chief Management Officer (DCMO) 

told the committee that the BTA plays a crucial role in the business-process reform that is needed to reduce waste and inefficiency 

in the Department’s operations. Over the years, the military departments and the defense agencies have proved incapable of modernizing their own business systems. 

The GAO recently reported that the Department’s largest modernization programs are running billions of dollars over budget and 

as much as 6 years late, and BTA was assigned to provide needed 

leadership, expertise, and assistance in that effort. 

Now, the implications, then, of the elimination of the BTA are 

that the efforts to improve business systems and processes is going 

to revert to those who have proven incapable of managing that in 

the past. Or is some other entity going to provide the leadership, 

the expertise, and the assistance for which the BTA is currently responsible? 

Mr. LYNN. The BTA was created prior to the creation, by Congress, of the DCMO, and the functions of the two overlap fairly 

substantially. So, as we went through looking to delayer, per the 

Secretary’s direction, the conclusion was that we could eliminate 

the agency, move the oversight functions, that you’ve described, to 

the DCMO and save a layer and probably reduce some of the staff 

resources, due to the duplication. But, there will still be that oversight function, at the OSD-level, on business processes, but it will 

be in the DCMO office. 

Chairman LEVIN. Now, what’s the status of the Defense Agencies 

Initiative? They made some progress in improving the financial and 

business systems of the Defense agencies—is that initiative something that you’re familiar with, offhand? That doesn’t ring a bell 

with you? 

Mr. LYNN. Well, you referred, at the outset, to the audit. So, the 

underlying effort to get a clean audit opinion is the modernization 

of the financial systems themselves, that’s what that refers to. 

45 

Chairman LEVIN. Your answer, then, is that you’re going to save 

a layer, but that the responsibility is clear—— 

Mr. LYNN. Yes. 

Chairman LEVIN.—for where that responsibility’s going to lie. 

Is the 2012 budget, when you submit it, likely to reflect the areas 

in which the efficiencies have been made; or, decided upon, as well 

as the areas in which the funding is proposed to be added? Are you 

going to identify those two things in your budget request? 

Mr. LYNN. We’re working towards that end. I think you’re really 

talking about track one and the hundred billion dollars. We are 

looking to do—there’s a lot of churn as you build a budget, so it’s 

not as straightforward as you might think, but we are working to 

establish a baseline and to understand where the shift occur when 

they move from overhead to warfighting accounts, and we’ll present 

that in the fiscal year 2012 budget. 

Chairman LEVIN. They’re going to be identified? 

Mr. LYNN. We’re going to do the best we can to—as I said, when 

you build a budget, there are a lot of changes, independent of this, 

so disentangling those changes from these policy changes is a data 

challenge. But we think this is an important initiative, and we’re 

cognizant of the need to present data to Congress to support it. 

Chairman LEVIN. If it’s not done in that way, with the budget 

submission, would it be done in some other way, like kind of a 

wrap-up, ‘‘We set out to do, and this is what we did do, and this 

is what we expect the savings to be’’? Will there be some kind of 

a summary when the decisions are finally made? 

Mr. LYNN. Yes. I think we will present something with the fiscal 

year 2012 budget. It may be just as you described or it may be 

something else, but I think, when we present the fiscal year 2012 

budget, we will present our conclusions on this $100 billion initiative. 

Chairman LEVIN. General, you could answer this. Does the Department expect to retain the Joint Improvised Explosive Device 

Defeat Organization for the long-term? JIEDDO? 

General CARTWRIGHT. I think, Senator, we’ll retain it, to the extent and for the amount of time and in a character that is supportive of what we think we need in the field. Whether that becomes a standing organization, independent of the conflict we’re in, 

I think that that would be something that we would take a very 

serious look at. But, there are elements of JIEDDO—commandand-control activities, intelligence activities, et cetera—and we 

have already gone through several relooks to make sure that we 

need each of those pieces to conduct the function we think is essential today. 

Chairman LEVIN. Now, there’s a number of other rapid response 

programs and organizations, in addition to that one. Is there opportunities that you see for cost efficiencies through consolidation of 

those kind of rapid response organizations? 

General CARTWRIGHT. I think—and I’ll turn this over to Ash 

Carter here, because he has a big hand in this, but from my perspective, as the warfighter part of the discussion that we’ve had 

today about JFCOM is about those things that are actually crosscutting, that no one service represents the entire Department’s position, things like ISR, things like some of these other agencies. the 

46 

crosscutting activities have had a significant impact in our ability 

to do what we’re doing in the field, to do it in a way that is coherent so that we don’t have four different solutions for the same problem. To the extent that they can continue to do that, that is some 

of what JFCOM has been able to do for us. So, we have built these 

organizations, these so-called ‘‘horizontal activities,’’ to cover down 

on those types of things that we, today, call ‘‘joint,’’ but, in reality, 

are also standards and being able to work in the interagency and 

to work with allies. They have done it in a way that has been very 

effective and very efficient. So, to the extent they continue to do 

that and are evaluated as being such, we’ll try to retain them. 

Ash? 

Chairman LEVIN. Okay. 

Now, Senator McCaskill’s here. 

Secretary Lynn, we kept him as long as we could, but he has to 

go to the funeral. 

Senator MCCASKILL. That’s fine. 

Chairman LEVIN. I think you understand that. Your—your paths 

crossed as you were coming—— 

Senator MCCASKILL. Yes, I understand. 

Chairman LEVIN.—and he was leaving. Okay. 

Senator MCCASKILL. As I was sprinting to get here. 

Chairman LEVIN. We know you were, and we were aware of the 

fact you were coming. 

Secretary Carter, you want to add a quick answer to that before 

I call on Senator McCaskill? 

Dr. CARTER. Just one note. It is exactly as General Cartwright 

said. However, in this field, which is the rapid response, the ongoing fight, we’re looking for efficiencies, but the principal objective 

in looking at all of these organizations that have sprung up over 

the last 8 years or so to provide rapid and responsive support to 

the warfighter, is effectiveness. We’re still not there, where we 

should be, in terms of being able, rapidly, and agilely respond to 

the needs of the warfighter in the acquisition system and the logistic system. This is something that General Cartwright and I work 

on together every day. 

So, efficiency is one thing and obviously, is a very important objective. But, the other thing is truly being responsive, and that’s 

what JIEDDO was created to do, various taskforces and so forth, 

and we’re still looking, I would say, for the right managerial mechanism to support the ongoing fight. A lot of it’s done now by the 

personal attention of General Cartwright, myself, and many others 

at the top. 

Chairman LEVIN. Thank you. 

Senator McCaskill. 

Senator MCCASKILL. Thank you. Thank you, Mr. Chairman, and 

I really appreciate your indulgence in allowing me to hustle back 

here so I could have some time to ask some questions. 

Secretary Carter, as a former auditor, I feel your pain at the 

number of reports that have been developed and that no one reads. 

It is very common, when you have to make a hard decision, that 

it’s easier to do a report. Most of the time, the call for studies and 

reports that comes from this place is in lieu of making a hard decision. 

47 

Just to give one example—and I think one example where General Cartwright and I disagreed was on Joint Requirements Oversight Council (JROC). I think we have figured out that, over the 

years, JROC has not always done what it should do, in terms of 

being a check on acquisition, that it had—when we looked into it, 

I was hard-pressed to find an example where the various branches 

were not, ‘‘Okay, I’ll give you this if you give me that.’’ 

So, in an effort to deal with that, I offered two amendments, on 

the NDAA, that would deal with the problem of the JROC being 

a giant back-scratching organization, as opposed to an organization 

that was really holding branches accountable, in terms of the acquisition process. 

One of those amendments went through. The amendment that 

went through was allowing the COCOMs to have some input into 

the process. The other amendment, that didn’t go through was the 

amendment that would have given you, Secretary Carter, the ability to have some kind of check and balance over the JROC. Now, 

General Cartwright didn’t like that. General Cartwright, once I 

passed that in the NDAA, said, ‘‘Why don’t we do a study and look 

at it?’’ 

I think that’s the kind of decision that actually magnifies the 

problem. I think the right call was to have somebody overseeing 

this, or have some kind of input into it. I thought the Under Secretary of Defense for Acquisition was the right person. 

So, let me ask the question, General Cartwright, how is the 

study going? What assurances can you give me that the JROC has 

evolved beyond, ‘‘Give me what I want and I’ll give you what you 

want’’? 

General CARTWRIGHT. Well, the scratch-my-back analogy, I think, 

is probably a mischaracterization, but we can disagree about that. 

But, the study basically came out and gave us information, which 

we have introduced back to Congress now, that does a couple of 

things. One, it puts the vice chairman in a decision position, similar to a service acquisition chief. So, in other words, I’m accountable for those decisions. Two, it brings other members in and allows us to bring the COCOMs in, in an authoritative way, rather 

than to just sit at the table and give us an opinion, along with key 

OSD principals that are necessary, that represent resourcing and 

acquisition. Three, it brings a very authoritative role in, of the test 

community, to say, in the JROC, that what you’re saying is, in fact, 

one, testable, that can verify that it—that you’re going to get the 

performance you want or the metrics that you want; and, two, that 

they are then a part of the activity continuously, all the way 

through, into the milestone decision process that the acquisition 

community runs. 

We want common or similar representation so that the decisions 

that are made that represent what the customer says they want, 

not what someone else may want to give them, are in all of the forums now, all the way through acquisition and resourcing. 

So, you have a common group of people that can be held accountable for those decisions from birth to death. 

Senator MCCASKILL. Well, you may have been right and I may 

have been wrong. I definitely am wrong with some frequency. But, 

I want to know, ongoing—what we couldn’t find is a place where 

48 

JROC really did what it was supposed to do. We couldn’t find a 

place where JROC stopped anything. I mean, the idea here is that 

you’re supposed to catch things that aren’t going to work, that are 

going to be too expensive, that you’re going to figure out why, that 

you’re going to make sure the requirements—and so much of this, 

probably 90 percent of it, is requirements, and that’s why the 

COCOMs are so important. 

Let me move on to another subject: contracting. Wartime contracting has been stovepiped, mostly because it can be. The lack of 

competition is, frankly, a huge part of the problem. We’re not talking about, now—I certainly agreed with Senator McCain, that some 

of the problem is a lack of competition among Defense contractors 

for the big stuff. But, there really isn’t an excuse for a lot of the 

services’ contracts. We’re not talking about a lot of capitalization 

costs, for a lot of these service contracts. But, once again, what you 

see is a lack of competition, without a good excuse as to why there’s 

a lack of competition. That, Secretary Carter, is where I think 

there is real, real money. I just urge you to bring to us, in this effort, how, not only you’re looking at contracting in a macro sense, 

but how you are drilling down on contracting in wartime as it relates, especially, to logistics and troop support. 

I’m a conservative person when it comes to estimating numbers, 

because of my auditing background. I think it’s very conservative 

to say that we’ve had $100 billion go up in smoke in Iraq, from bad 

contracting, that it’s not as if there weren’t competing people who 

could have been brought in; it just was easier not to. So, I urge you 

to keep us posted on how you’re integrating that kind of contracting into the contracting reforms. 

Finally, Mr. Chairman, if I have your indulgence to go over just 

for—— 

Chairman LEVIN. No. No. 

Senator MCCASKILL.—one more thing. 

Chairman LEVIN. You can take your time, here, because this is 

your second round now, and—— 

Senator MCCASKILL. Okay. 

Chairman LEVIN.—there’s no other—— 

Senator MCCASKILL. Okay, great. 

Chairman LEVIN.—no one else here’s waiting on their questions. 

Senator MCCASKILL. Okay, great. 

The audits. I tried to count up how many auditors you all have 

working in the defense sector, whether it’s through IGs or whether 

it’s through DCAA or whether it’s through GAO. I quit counting at 

about 30,000. Thirty-thousand people are tasked with some auditing function within DOD, and sometimes with a little hangover 

into the Department of State, depending on that. 

Now, you’re getting plenty of reports, without all the reports 

we’re asking you for, that will give you accountability. The question 

is: Who’s consuming them and whether or not you all have a strategy on consuming audits and following up on audits? I would ask 

you, Secretary Carter, to address that. Are you comfortable and 

confident that the millions upon millions of dollars of audit work 

that is ongoing is actually being embraced by the Department? 

Dr. CARTER. I’d like to address that and also your first two 

points, if I may. 

49 

Chairman LEVIN. Let me interrupt you, Secretary Carter, if I 

can. 

Senator McCaskill, can you close? Because I’m going to have to 

leave. 

Senator MCCASKILL. I absolutely can. 

Chairman LEVIN. Thank you. 

Thank you both. 

Senator MCCASKILL. That’s a scary thing for these guys, though. 

I promise I won’t keep you here all afternoon. 

Chairman LEVIN. Yes. [Laughter.] 

Senator MCCASKILL. You know I’m capable of it, Secretary 

Carter, but I will not. I really only have this auditing area to finish 

up with, and then I will let you go. 

Chairman LEVIN. Thank you. 

Thank you both. 

Senator MCCASKILL [presiding]. Thank you, Mr. Chairman. 

Dr. CARTER. With respect to audits, two comments. The first is 

that I want to make clear that the auditing function, particularly 

DCAA, does not report to me; it reports to Secretary Hale. So, I 

don’t want to presume to speak for him at all about that particular 

function. 

The part I can speak to is at the earlier stage, and particularly 

in contingency contracting. You are right, contingency contracting 

in Iraq, in the early years, did not have the tradecraft and the controls that were appropriate. We’ve recognized that. One of the first 

things Secretary Gates said to me, when he hired me in this job, 

was that he wanted to make sure we learned the lessons of Iraq 

and applied them in Afghanistan. We’re really trying to do that. 

I would like to get our contracting system, in Afghanistan, to a 

point where we don’t need to—we’ll still need to be audited, but 

where we’ll pass an audit easily. That means having contracting officers in adequate numbers to do the work right. It means having 

contracting officer representatives there to make sure the work is 

done on each contract. That means reducing the use of cash, and 

all of these things. Now—and we have been assiduously working 

down that list—which is, I think, exactly the same list that you are 

working down—in Afghanistan, and made considerable progress in 

each of those areas. We’re not where I think we should be, yet. 

Senator MCCASKILL. Let me acknowledge that progress. You 

have made progress. 

Dr. CARTER. Thank you. I think we have. But, again, we’re not 

there yet. As contracting officers, for example, I think, we have 

about an 86- or 87-percent fill rate now. It should be 100 percent. 

It’s better than 43 percent or something, which it was, a year and 

a half or 2 years ago. So, all along the chain that culminates in an 

audit, which you hope simply ratifies the fact that you’ve done a 

good job for the warfighter, you’ve been effective, but also, for the 

taxpayer, you’ve been efficient—and all through that chain, I think 

we do need to improve. 

The other thing I’d like to absolutely agree with you on, Senator, 

is the value to be had from improving how we manage services. It’s 

just an area where we have not paid a lot of attention, where, as 

I said earlier, a lot of the people who are managing those activities 

are doing it on a—at the margins of the real function that they’re 

50 

trying to accomplish; it’s an enabler for what they do. So, they 

don’t have all the tradecraft that somebody who was, full-time, acquiring services would have. 

I think great savings can be had there, across the Services’ 

spend. It’s essential that we look there, because that’s half the 

money. That’s half the money—$200 billion a year. So, even if we 

can just get a few percentage points of improvement every year, 

that’s exactly what Secretary Gates wants, because that’s money 

that we don’t have to come to the taxpayer for, that we can then 

take and reallocate, as he wants, to the warfighting capabilities. 

Senator MCCASKILL. Well, I hope that you get Senator McCain 

the list. I hope we can reduce the number of reports that you’re 

sending to us, and that all of us get in the habit of reading audit 

reports. 

I would love to see you embrace—and I know that some of this 

is not in your portfolio, some of it is in Secretary Hale’s portfolio, 

some of it, frankly, is other places—but, those 30,000 auditors, I 

don’t think their work has been taken seriously. I don’t think, right 

now, if I made Secretary Gates come up here and do a drawing of 

where the auditors were and what they were auditing on and 

where the reports went, I’m willing to bet that you all haven’t 

spent a lot of time even looking at that issue. 

Well, you all know DCAA and you know GAO and you know the 

IGs, but the public doesn’t realize that most of the IGs in the active 

military aren’t really IGs. They don’t report to the public; they report to the commander. So, their reports, while you all get the benefit of it, we never know whether or not you’re paying any attention to what the IGs are saying within the Active Forces, because 

we don’t ever get to see the reports. 

Let me close with an example of how, if you would spend more 

time and energy being deferential to the auditing community within DOD, I think that we would get higher quality, in terms of some 

of the work that’s being done and the people who are attracted to 

the work. That’s essential. 

I have written, now, three letters to the President about the Special Inspector General over Afghanistan. We now have had an independent review of his work, by a team of auditors, a peer review. 

They have said that it is woefully lacking. Probably the whipped 

cream and the cherry on this particular situation is that—here’s 

somebody who’s supposed to be the eyes and ears looking at contracting in a major way in Afghanistan, and he hires someone on 

a no-bid contract for $95,000 for 2 months’ work. 

Now, first of all, how do you decide that somebody’s worth 45 

grand a month of public money? How do you decide that’s the one? 

There’s no process there. Now, this is the Special Inspector General 

for Afghan Reconstruction, hiring somebody for $95,000, for 2 

months’ work. You wonder why the public thinks we’ve lost our 

minds. That is not being accountable, the person he hired formerly 

was the DOD IG with a lot of blemishes. I mean, we’re not even 

talking about somebody that is—doesn’t come with his own baggage. The Special Inspector General over Afghanistan should be 

fired, today. When you have an independent council of auditors 

saying that the Special Inspector General in Afghanistan—that 

their law enforcement authority should be removed from them beVerDate Aug 31 2005 10:34 Apr 20, 2011 Jkt 000000 PO 00000 Frm 00054 Fmt 6633 Sfmt 6602 Y:\BORAWSKI\DOCS\65072.TXT JUNE PsN: JUNEB
51 

cause they don’t have the right control processes in place, this is 

a problem. 

Now, I know you are not in a position to remove the Special Inspector General. But, now, over a period beginning in March 2009, 

we have tried to point out to the administration that this Special 

Inspector General in Afghanistan is not up to the job. 

After what happened in Iraq, I just would like you, Secretary 

Carter, to go back to the Pentagon and say, ‘‘You know, there are 

some people over there that aren’t going to give up until we have 

a change in leadership in the Special Inspector General in Afghanistan.’’ Because I know the kind of respect the President has for 

Secretary Gates. I have a sense, if Secretary Gates weighed in on 

this, that maybe we’d get some action. I just think it is enough to 

make the top of my head blow off. 

So, I’m happy to give either one of you an opportunity to respond 

to what I’ve said. I’m kind of venting in this public place, because 

I want to and because I can, and because it’s wrong that—we have 

real work to do, in terms of oversight of contracting in Afghanistan. 

We don’t have time, frankly, to be dealing with someone who hasn’t 

shown that they’re up to the job. 

I would like to propose that we have one special inspector general over all contingencies, and would like your responses to that 

proposal. So, we would roll into one office that would be permanent, a special inspector general to deal with any contingency operations that the military was actively involved in, so that you would 

have continuity, in terms of the expertise on contingency contracting; you’d have continuity, in terms of lessons learned; you 

would have continuity, in terms of a staff that felt committed to 

that particular activity, as opposed to, ‘‘How long are we going to 

be around, and do I need to hitch my star to another moving target?’’ 

Do you think that would be something that would be welcome, 

in terms of your job responsibilities, Secretary Carter: one special 

inspector general for all contingencies? 

Dr. CARTER. I hear you loud and clear—and I’ll take that back 

to the Department for consideration, the idea of one overall. 

Senator MCCASKILL. We have really good people that learned a 

lot in Iraq, and then we’re trying to recreate this same kind of office in Afghanistan, and it seems to me that we’re missing opportunities here. Certainly, the Lessons Learned document, from Iraq, 

that was done by the special inspector general, should be required 

reading, frankly, for any commander. I hope it is. I hope that everyone’s reading it. I think—Greg Mortenson’s books, I think, are 

very important for the commanders in Afghanistan. But, that Lessons Learned booklet from Iraq, that was put together by Bowen’s 

shop, I think it’s very important reading for everyone there. 

I do want to acknowledge the progress that’s been made. I will 

look forward to continuing to interact with you about JROC, General Cartwright. I want to believe that everyone there is capable 

of very independent decisions and saying no to their dear friends 

and their colleagues, that they—I mean, I just think that environment is a difficult environment to say no to one another. If you are 

confident that we’ve made progress on that, I’ll look forward to visVerDate Aug 31 2005 10:34 Apr 20, 2011 Jkt 000000 PO 00000 Frm 00055 Fmt 6633 Sfmt 6602 Y:\BORAWSKI\DOCS\65072.TXT JUNE PsN: JUNEB
52 

iting with you about that, and would be happy to acknowledge that 

the step I wanted to take was a step too far. 

General CARTWRIGHT. I think we should continue that dialogue. 

We certainly owe—not only to you, but to the American people— 

the ability to make sure that we understand the implications of 

that which we ask for, from the institution and from the government writ large, to carry on these conflicts. Oftentimes, though, it 

is not a pure business decision. Sometimes we react and we throw 

whatever we have in order to protect lives. But, those are usually 

in the minority. 

On the auditors, I think you have the right attributes. What I 

don’t have, in my own knowledge kit-bag right now, is the span of 

control. But, how do we, in fact, ensure that those lessons and that 

continuity is moved from one place to the next, and that we don’t 

have 6 months or whatever spin-up time to learn the job, out in 

the field, and that we have the sizing construct to be able to manage this span of control? I’ll take that back with me, and we will 

keep up our dialogue. 

Senator MCCASKILL. That’s great, General. 

Overall, I want to say, I’m very supportive of what Secretary 

Gates is trying to do. There is a lot of efficiencies that can be 

gained, but it’s going to take a kind of focus and concentration, and 

a not-giving-up, because this isn’t going to be easy. There’s going 

to be all kinds of things, including a bunch of folks that sit up here, 

that are going to try to throw out roadblocks, depending on what 

it is that you’re trying to shrink or make more efficient. 

But, I, for one, am a big admirer of the process that Secretary 

Gates is undergoing, here. I think it’s absolutely essential. I think 

that we can have and maintain the finest military in the world, 

and still be much more efficient with taxpayer dollars in the process. 

I look forward to being helpful in any way I can. I thank you 

both for waiting until I got back, so I had an opportunity to visit 

with you. 

The hearing is adjourned. 

[Questions for the record with answers supplied follow:] 

QUESTIONS SUBMITTED BY SENATOR CARL LEVIN

TEST AND EVALUATION

1. Senator LEVIN. Mr. Lynn, Dr. Carter, and General Cartwright, how will the Department of Defense (DOD) ensure that its developmental test and evaluation enterprise has the necessary resources to ensure that it does its job effectively, as required by Weapon Systems Acquisition Reform Act (WSARA)? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. Acquisition, Technology, and 

Logistics (AT&L) is actively engaged in developing a path forward to implement Secretary Gates’ efficiency initiatives. In particular, we are driving the acquisition community toward greater efficiency and productivity in defense spending. We believe 

these initiatives are consistent with the objectives of the WSARA of 2009. We are 

resourcing a robust developmental test and evaluation capability for the Department and we will ensure the initiatives are in full compliance with title 10 U.S.C. 

139d, enacted by section 102 of WSARA. We will continue to review our manpower 

and budget allocations to achieve a prudent balance across the critical missions 

within AT&L, to include Developmental Testing and Evaluation. 

53 

DOD LABORATORIES

2. Senator LEVIN. Dr. Carter, the realistic use of the scientific and technology expertise in the Department’s laboratories, such as, the Army’s Tank and Automotive 

Research, Development and Engineering Center in Michigan, the Naval Undersea 

Warfare Center in Rhode Island, the Air Force Research Laboratory in New Mexico, 

and the Army’s Aviation and Missile Research, Development and Engineering Center in Alabama, can help develop more mature technologies, reducing the cost of 

major weapon systems. As you are aware, this committee has provided the Department over the years with a number of authorities to provide the labs with flexibilities needed to hire the best and brightest scientists and engineers. What is the Department’s view on the role of the defense laboratories to improve the acquisition 

process and make the acquisition of weapon systems more efficient? 

Dr. CARTER. The role of the DOD labs is to contribute to basic science, develop 

and apply technologies to warfighting challenges, and reduce the technical risk of 

integrating these technologies into weapon systems. Our defense laboratories perform these functions with excellence including prize winning contributions to 

science, unique prototyping facilities, and systems integration/engineering skills 

that contribute to successful and more efficient, mature acquisition programs. As a 

testament to their commitment to the acquisition community, most of our scientists 

and engineers are certified as acquisition professionals through Defense Acquisition 

University’s rigorous education programs. The Department will continue to look to 

the labs to tackle the toughest technical problems and to build success and efficiency 

into programs early in their life-cycle. 

3. Senator LEVIN. Dr. Carter, is the Department contemplating any specific efficiency actions, as part of the broader acquisition efficiency initiatives, to strengthen 

and improve the DOD laboratories? 

Dr. CARTER. The strength and diversity of our DOD lab system has always been 

at the heart of our success in acquisition. Most recently, we have identified and are 

validating the first group of core technical competencies (e.g., energetics, armor, 

electronic warfare and low observable/counter-low observable technologies) of the 

DOD labs to focus its investments against competencies that must be maintained 

to ensure the DOD possesses the technology necessary to execute its missions. By 

focusing investment earlier in the process the labs will contribute to reducing the 

cost of developing new weapons systems. Taken together and with the continued 

support of Congress, these steps will achieve efficiencies that will strengthen and 

improve the DOD lab capabilities. 

INDUSTRY INDEPENDENT RESEARCH AND DEVELOPMENT AND INDUSTRIAL BASE HEALTH

4. Senator LEVIN. Dr. Carter, one of the objectives in your September 14th memo 

was to reinvigorate industry’s independent research and development (IRAD) and 

protect the defense technology base. Despite significant increases in the Department’s budget over the last decade, there are significant issues facing the health of 

certain critical industrial base sectors such as solid rocket motors, microelectronics, 

and rare earth metals. Can you provide any additional specifics on how you plan 

to go about reinvigorating industry’s IRAD program and ensuring that these investments are directed in a way that will provide the greatest benefit to the Department 

and to the national defense? 

Dr. CARTER. The DOD reimburses industry for its IRAD efforts using rates negotiated by the Department’s contract offices. IRAD enables industry’s understanding 

of its own concepts and capabilities to maximize the productivity of research and 

development investment. In most cases, from a technical perspective, a firm will 

have a better idea than the Department where the next dollar of R&D spending at 

that particular company will be most likely to yield a meaningful breakthrough. On 

the other hand, the Department best understands where innovation would most contribute to warfighters’ needs or to meeting other requirements. Open communication 

between industry and the Department should guide industry’s prioritization of 

IRAD. My sense is this communication between Industry and DOD on specific IRAD 

investments is not as strong as it could be as a result of changes made during the 

1990s to the law governing IRAD processes. 

As part of the Efficiency Initiative, the Defense Contract Audit Agency is undertaking a more comprehensive data collection on IRAD expenditures, and the Department will work with industry to find ways to leverage the Department’s IRAD investments. This includes adopting improved processes to communicate with industry 

about both priority investment areas and the results of IRAD spending. The Director of Defense Research and Engineering (DDR&E) is pursuing the implementation 

54 

steps identified in the September 14 memo. In the near term, DDR&E has contacted 

nine of the largest performers of DOD IRAD for discussions and will engage with 

the National Defense Industrial Association for the larger industry perspective. My 

goal over the next year is to launch one or more pilot projects that would reinvigorate innovation through better use of IRAD investments, and I will examine all possible approaches allowed by the existing law. 

Parallel to the IRAD effort, the Department monitors the industrial base, including specific areas of concern like solid rocket motors, microelectronics, and rare 

earth elements. The Department is coordinating a sustainment plan for the solid 

rocket motors industry. A DDR&E-sponsored study is collecting data on domestic 

and foreign microelectronics suppliers and on defense and commercial demand. The 

study will also recommend a strategy for the future. The Office of Industrial Policy 

also prepared a study of rare earth elements supply and demand. 

5. Senator LEVIN. Dr. Carter, are you concerned about gaps and shortcomings in 

the industrial base—and if so, how do you plan to go about identifying and addressing problem areas? 

Dr. CARTER. While the Department routinely monitors potential issues in the defense industrial base, we must improve on meeting our responsibility to suppliers 

by executing stable, well-structured programs with optimized acquisition strategies 

that will help sustain essential industrial capabilities. 

My office periodically conducts industrial assessments to evaluate and address 

changes in key system, subsystem, component, and/or material providers that supply multiple programs, and affect competition, innovation, and product availability. 

DOD Components also conduct their own assessments when: (1) there is an indication that industrial or technological capabilities associated with an industrial sector, 

subsector, or commodity important to a single Component could be lost; or (2) it is 

necessary to provide industrial capabilities information to help make specific programmatic decisions. 

Of particular concern to me are potential gaps and shortcomings in defenseunique and niche product areas where there is low peacetime demand, industrial 

capabilities are limited, and there is very little competition at the subsystem/component level. Accordingly, we must use many single/sole source suppliers—suppliers 

for which there may be minimal innovation incentive. Ultimately, these defenseunique industry segments may have an insufficient business case to justify continuing in the market. We have identified many products that cause us concern. Examples include armament and military-unique forgings and castings; metallic and 

composite armor materials; thermal batteries; solid rocket motors; inertial measurement units; GPS receivers; seekers; fuzes; and warheads. To address these types of 

issues, the Department is adopting a more integrated approach to identify these single-point failures/concerns earlier in the acquisition process, and establishing more 

comprehensive (and, when appropriate, interagency) approaches to addressing industrial base issues. 

QUESTIONS SUBMITTED BY SENATOR JOSEPH I. LIEBERMAN

SERVICE SUPPORT CONTRACTORS

6. Senator LIEBERMAN. Mr. Lynn and Dr. Carter, I’d like to ask about your efforts 

to reduce the Department’s reliance on services contracts. On the one hand, you’ve 

announced your intent to reduce funding for service support contractors by 10 percent in each of the next 3 years. On the other hand, you’ve announced a civilian 

workforce freeze for parts of DOD, including the Office of the Secretary of Defense 

(OSD). I am wondering if we can gain some of the same efficiencies by careful 

human resource planning that determines, for each function, what is in the best interest of the government. Congress has enacted provisions requiring DOD to implement insourcing guidelines and to review its inventory of service contracts. The purpose of these reviews should not be to make arbitrary decisions, but to make a determination of whether work has been in the wrong hands, for example, has inherently governmental work been contracted out? 

Mr. LYNN and Dr. CARTER. We agree that the purpose of these reviews is to determine the most effective allocation of human capital—government and contract personnel alike. Our goal is to improve both the effectiveness of the Department and 

to find savings by eliminating low-priority functions. Toward that end and consistent with statutory requirements, all DOD Components are reviewing contracted 

services and considering whether government or private sector personnel are the 

best means for providing those personnel. We are finding some cases where contracVerDate Aug 31 2005 10:34 Apr 20, 2011 Jkt 000000 PO 00000 Frm 00058 Fmt 6633 Sfmt 6621 Y:\BORAWSKI\DOCS\65072.TXT JUNE PsN: JUNEB
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tors are providing services that would more effectively be provided by government 

personnel. For DOD organizations where the Secretary has directed us to limit organizational growth, in-sourcing efforts are being evaluated in terms of mission priorities and, where appropriate, exceptions for in-sourcing related to growth may be 

submitted. 

7. Senator LIEBERMAN. Mr. Lynn and Dr. Carter, how does this type of human 

resource planning square with your efficiency review? 

Mr. LYNN and Dr. CARTER. The considerations and planning described above are 

integral to our efficiency review. 

8. Senator LIEBERMAN. Mr. Lynn and Dr. Carter, if under the insourcing review 

DOD determines that a function would more appropriately be performed by Federal 

employees, or that DOD could achieve savings by insourcing, how does a workforce 

freeze make sense? 

Mr. LYNN and Dr. CARTER. Note that we are implementing a personnel cap, not 

a hiring freeze. We are trying to control the growth in the size of our workforce. 

We are allowing some in-sourcing where there is a compelling case for it. In order 

to effectively optimize the size of our workforce, we must be extremely judicious 

about creating additional billets for any reason. Consistent with statutory requirements, all DOD components are reviewing contracted services and providing consideration for in-sourcing those services. While some organizations indicated that they 

have no contracted services that are appropriate for in-sourcing, no DOD organizations are outright exempted from in-sourcing. For DOD organizations where the Secretary has directed us to limit organizational growth, in-sourcing efforts are being 

evaluated in terms of mission priorities and, where appropriate, exceptions for insourcing related growth may be submitted. 

QUESTIONS SUBMITTED BY SENATOR MARK BEGICH

READINESS

9. Senator BEGICH. Mr. Lynn, Dr. Carter, and General Cartwright, I support the 

objective of the initiative, but am concerned the attempt to realize near-term cost 

savings will come at the expense of the readiness of the current force. Under the 

initiative, military services can keep what they save, and reinvest those dollars in 

high priority warfighting needs. However, the Services already make hard choices 

between the current force, evolving requirements, and the future force. In past 

budgets we’ve seen underfunding of base operation and sustainment, depot maintenance, training accounts, and other day-to-day requirements to free up dollars for 

other investments. Over the years, the investment shortfalls negatively impact readiness by leading to dilapidated infrastructure beyond repair and deferred maintenance of current equipment. What specific guidance was given to the military services with respect to the initiative to prevent detrimental impacts to overall readiness 

of the current force? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. It was precisely these concerns 

that prompted the Secretary to aggressively shift resources toward uses that would 

protect current and future military capabilities. In June, we issued guidance to the 

military departments explaining that the purpose of this effort was to improve the 

effectiveness and efficiency of our business operations so that we can increase funding available for our mission functions. Specifically, this guidance instructed the 

military departments to take resources from areas like headquarters, administrative 

functions, support activities, and other overhead and reinvest them in areas like 

personnel in units, force structure, readiness, procurement, and RDT&E. 

10. Senator BEGICH. Mr. Lynn, Dr. Carter, and General Cartwright, how will OSD 

ensure the military Services redirect investments to high priority warfighting 

needs? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. As stated above, the guidance 

to the military departments was very clear. In addition, the Department’s efficiencies are being carefully reviewed to ensure that this guidance was followed. 

MILITARY CONSTRUCTION

11. Senator BEGICH. Mr. Lynn, Dr. Carter, and General Cartwright, the Services 

have been authorized to consider consolidation of excess bases and other facilities 

56 

where appropriate. What guidance was given the Services by OSD to promote an 

objective and legitimate process in determining excess infrastructure? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. In June, we issued guidance 

to the Military Departments explaining that the purpose of this effort was to improve the effectiveness and efficiency of our business operations so that we can increase funding available for our mission functions. Significant proposals like consolidating bases and facilities are vetted through the Deputy’s Senior Advisory Working 

Group as a means of ensuring that these decisions are both objective and well-considered. 

12. Senator BEGICH. Mr. Lynn, Dr. Carter, and General Cartwright, cost savings 

have not always been realized when anticipated in previous Base Realignment and 

Closure (BRAC) rounds, and sometimes not at all, so why would the Department 

assume cost estimates associated with infrastructure initiatives would be realistic? 

What has changed? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. Accurately estimating the cost 

of infrastructure savings has proven to be difficult, however reclaiming savings is 

a part, but not the sole driver of this initiative. The goal is to streamline our process 

and eliminate needless bureaucratic layers. In specific examples, getting rid of a 

headquarters or an overhead layer also means that the infrastructure that supported it is no longer necessary. 

13. Senator BEGICH. Mr. Lynn, Dr. Carter, and General Cartwright, as part of the 

initiative, DOD is conducting a global force review to determine the necessity of current overseas infrastructure and future investment in overseas installations. Please 

describe the review more thoroughly. When will the review be complete and available for Congress? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. We are still evaluating these 

options. We expect to be able to provide more information on these reviews and the 

considerations that underlie them as part of the President’s budget for 2012. 

COST ESTIMATE

14. Senator BEGICH. Mr. Lynn, Dr. Carter, and General Cartwright, DOD has provided information to Congress which states ‘‘every new initiative will be accompanied by a cost estimate,’’ yet it is my understanding no cost estimate is available 

for the Joint Forces Command (JFCOM) closure or any other Secretary of Defense 

initiative. When can Congress expect the cost estimates? Additionally, will new initiatives outlined in the President’s budget submission for 2012 be accompanied by 

a cost estimate and clear articulation of where those dollars are being reinvested? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. We are still evaluating the alternatives and resource implications of the Secretary’s initiatives. We will provide 

you more information on cost savings as these analyses are completed. New initiatives that are outlined in the 2012 budget will be accompanied by cost estimates 

and we will be able to show where we reinvested those savings. 

15. Senator BEGICH. Mr. Lynn, Dr. Carter, and General Cartwright, as part of the 

efficiencies initiative, DOD has determined to reduce allocations for fulfilling congressional reporting requirements. How will DOD continue to meet its obligation 

and direction of Congress in required reports? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. DOD will work with Congress 

to determine which of the 1,200 to 1,400 congressional reports that DOD produces 

each year provide valued information, where there are opportunities to consolidate 

reports, and whether there are reports that we agree are in our collective best interest to eliminate. 

SPENDING

16. Senator BEGICH. Dr. Carter, is the Department conducting a review of over 

budget, behind schedule acquisition programs, such as the Medium Extended Air 

Defense System (MEADS) as part of the efficiency initiative? 

Dr. CARTER. The Department is constantly reviewing programs as part of the normal acquisition oversight process. These reviews seek to mitigate the effects of 

schedule delays and cost growth, to prevent requirements creep, and to address 

technology risk or research and design challenges. The MEADS program is under 

review to address its specific challenges, but this review is not part of the Secretary’s efficiency initiative. 

57 

17. Senator BEGICH. Dr. Carter, what actions will DOD take to curtail continued 

spending on programs that are not delivering? 

Dr. CARTER. The Department is willing to make the tough decision to cancel programs that are not delivering, or that have too many cost, schedule, and performance challenges. These cancellations demonstrate the Department’s commitment to 

keeping industry accountable and to maintaining requirements realism for our acquisition programs. 

Program cancellation is not the only tool we use when faced with various challenges. While there is no ‘‘silver bullet’’ approach to fix a program, the Quadrennial 

Defense Review (QDR) identified ‘‘maintaining budget stability through demanding 

cost, schedule, and performance realism while holding industry and ourselves accountable’’ as critical to ensuring better outcomes in our acquisition programs. To 

foster this stability, the Department is implementing greater use of fixed-price, competitively awarded contracts; forming Configuration Steering Boards to prevent requirements creep; and initiating independent peer review processes to ensure consistency of approach, quality of contracting, and information sharing across military 

departments and acquisition programs. Furthermore, we are enhancing budget stability and realism through improving life-cycle management and sustainment policy 

procedures with attention toward accurately estimating long-term ownership costs. 

QUESTIONS SUBMITTED BY SENATOR JOHN MCCAIN

INDUSTRY DIALOGUE

18. Senator MCCAIN. Dr. Carter, as part of Secretary Gates’ efficiencies initiatives, you met with defense industry officials in June. The high-level session was 

part of an effort to reverse a trend of the past few years that had left the DOD/ 

industry relationship in a condition you have described as ‘‘not healthy.’’ Can you 

elaborate on this description? Specifically, what part of the relationship is not 

healthy? 

Dr. CARTER. Overall, the Department has a strong and productive relationship 

with the defense industry, with both sides supporting the warfighter and contributing to national security. However, some specific aspects of the relationship could 

be improved, notably increasing the communication between these two essential elements of American defense. The meeting in June was part of a Department initiative to revive a series of regular meetings between our senior leadership and the 

CEOs of major defense suppliers. These high-level meetings can facilitate smooth 

communication of priorities and help both sides get ahead of developing issues. Having a regular forum improves on the previous system of ad hoc contacts, which in 

recent years has tended to be too reactive or has made otherwise normal discourse 

appear like crisis management. The renewed series of meetings is already yielding 

dividends in terms of mutual understanding, including more aligned goals in the 

execution of the Department’s ongoing Efficiency Initiative. 

19. Senator MCCAIN. Dr. Carter, there have been reports that Secretary Gates is 

asking for the cooperation of defense industry to reduce costs in order to fight off 

potentially significant cuts to defense spending as part of future budget deficit reduction measures implemented by the White House. As the Wall Street Journal reported on August 3, 2010, ‘‘Secretary Gates delivered a terse message: Start delivering cost savings, or the government will do it for you.’’ How will you monitor industry’s performance in order to inform future budget discussions? 

Dr. CARTER. The quest to increase efficiency in defense acquisition need not breed 

a hostile relationship between the Department and the defense industry. Industry 

has its own competitive incentives to drive down costs on defense contracts, motivated by its own good business decisions. These incentives are especially strong in 

an era when the defense budget is going to shift to relatively slow real growth from 

the quite rapid real growth trajectory of the past decade. But I have also reminded 

industry leaders on several occasions of our shared interest in cost savings—not by 

threatening them with punitive policies but rather by pointing out the reality that 

cost overruns and continued inefficiency will lead to broken programs and capability 

shortfalls for warfighters. 

As part of the ongoing Efficiency Initiative, the Department is doing two things 

to strengthen industry’s cost-saving efforts. First, we are looking for ways to remove 

those burdensome rules that lead contractors to increase costs while adding little 

value. Many of these burdens built up unintentionally in an era when rising budgets 

made it easier to resolve program difficulties by appealing for more resources than 

by streamlining processes or rationalizing facilities. Second, we are crafting acquisiVerDate Aug 31 2005 10:34 Apr 20, 2011 Jkt 000000 PO 00000 Frm 00061 Fmt 6633 Sfmt 6621 Y:\BORAWSKI\DOCS\65072.TXT JUNE PsN: JUNEB
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tion rules and guidelines to let contractors and the military departments share the 

benefits of cost reduction, giving both buyers and sellers a direct interest in finding 

savings. 

The Department monitors contractor performance through several mechanisms. 

Acquisition programs go through a series of reviews during which the Department’s 

leadership tracks actual program performance, compares performance to expectations determined earlier in the program, and, if necessary, makes course corrections. 

The Efficiency Initiative is creating streamlined templates for these reviews that 

focus on meeting affordability targets that explicitly incorporate projected savings 

from cost-saving reforms. In addition, we have reinstated the series of regular, highlevel meetings between defense industry and Department leaders, and we are soliciting cost-saving ideas from industry—backed by real data—that we can incorporate 

into our continuing efficiency efforts. These various mechanisms should yield helpful 

data-based inputs to future budget discussions. 

20. Senator MCCAIN. Dr. Carter, what benchmarks or metrics have you established to track the response and performance of the defense industry? 

Dr. CARTER. The Department does not have a simple set of metrics to track the 

response and performance of the defense industry as a whole. The Office of Industrial Policy monitors the health and capability of the defense industrial base, using 

a variety of measures suited to the different sectors of the industry. For example, 

Industrial Policy looks at the number of competitors in each sector, the financial 

health of important companies, new investments and depreciation of physical capital, research and development expenditure, and many other metrics. To the extent 

possible, Industrial Policy tracks all levels of the supply chain, although the complexity of the defense industry reduces real-time visibility into the lower tiers, especially relative to visibility at the prime contractor level. 

The Department also uses databases like the Contractor Performance Assessment 

Reporting System (CPARS), which includes a rating system for contractors’ performance in their previous interactions with the Department. CPARS data contribute to 

source selection for future contracts. As part of the Efficiency Initiative, the Department is also developing a set of systematic metrics that we will use to choose participants in the new Department-wide pilot Superior Suppliers Innovation Program, 

but we have not yet finalized the selection process. 

SAVING ANALYSIS

21. Senator MCCAIN. Mr. Lynn, obviously, what is proposed by Secretary Gates 

is aggressive and ambitious. What analysis, if any, has been conducted to determine 

how much would likely be netted in savings on an annual basis as a result of the 

eight initiatives? 

Mr. LYNN. The Department is still evaluating the implementation mechanisms 

and resource implications. These initiatives were never about just saving money. 

The idea was to increase the effectiveness of the Department with the goal of increasing our military capabilities now and in the future. Redirecting resources, in 

the form of savings, from low-valued to higher-valued uses is an important means 

toward that end. 

22. Senator MCCAIN. Mr. Lynn, how do you intend to track and validate the projected savings that have been achieved? For example, what baseline should we 

adopt for the total current cost of support contractors that will be reduced by 10 

percent over the next 3 years? 

Mr. LYNN. Savings are being tracked internally. For service support contractors, 

the baseline will be set by 2010 service support contract funding. We are surveying 

our component organizations to determine the actual level of this funding. 

23. Senator MCCAIN. Mr. Lynn, what is the projected savings achieved by the 

elimination of the Business Transformation Agency (BTA) JFCOM? 

Mr. LYNN. The exact savings from the disestablishment of JFCOM, BTA, and NII 

are still being determined. We expect to have cost estimates available on or before 

the President’s budget request is delivered to Congress. 

POTENTIAL FOR HOLLOW FORCE

24. Senator MCCAIN. Mr. Lynn, aside from the eight initiatives in Track 4, Secretary Gates has asked the military departments to find $100 billion over the next 

5 years. As you know from past years, the tendencies of the military departments 

59 

when faced with similar directives have been to cut budgets for support activities 

such as base operations, facility maintenance, training, and equipment purchases. 

All of these actions have the effect of degrading readiness over time and contributing to a hollow force. Do you plan to assess the budget submissions of each of the 

Services to approve the sources of the savings or will the Services be given the flexibility to assume risk in certain mission areas? 

Mr. LYNN. Yes, every savings proposal is undergoing an assessment and analysis 

by OSD as part of the process to build the fiscal year 2012 budget. Maintaining 

readiness continues to be a top priority and no proposal will be accepted that undermines readiness. To the contrary, the goal is to achieve efficiencies in support functions so that we can strengthen the funding for readiness efforts. 

25. Senator MCCAIN. Mr. Lynn, what guidance have you given the military departments to concentrate their efforts on improving efficiencies as opposed to cutting 

essential operations and maintenance accounts? 

Mr. LYNN. In June, we issued guidance to the military departments explaining 

that the purpose of this effort was to improve the effectiveness and efficiency of our 

business operations so that we can increase funding available for our mission functions. Specifically, this guidance instructed the military departments to take resources from areas like headquarters, administrative functions, support activities, 

and other overhead and reinvest them in areas like personnel in units, force structure, readiness, procurement, and RDT&E. 

26. Senator MCCAIN. General Cartwright, both the Army and the Marine Corps 

have indicated that there will need to be continuous investments in the resetting 

of combat forces well beyond the end of the war in Afghanistan. In past years, these 

reset costs have been covered in supplemental appropriations requests to provide 

our combat forces with the equipment and training needed to restore readiness. 

With the shift to a reliance on base budgets, coupled with the effort to find efficiencies in the current budget, do you expect the Army and the Marine Corps will 

be able to budget for all the costs of reset in future years? 

General CARTWRIGHT. In recent budget requests, the Department has included 

funding for long-term reconstitution. Long-term reconstitution is the reset of capability and equipment that is not needed immediately to get a unit ready for deployment, but which needs to be done at some point in the future, to ensure the unit’s 

full operational readiness. This reconstitution is expected to take place over several 

years. 

The purpose of the efficiencies initiative is not to reduce the Department’s top line 

budget, but to significantly reduce excess overhead costs and apply the savings to 

force structure and modernization. The efficiencies initiative will not impact the Department’s ability to reset combat forces. In fact, the reset of combat forces is exactly the type of warfighting capability that the efficiencies initiative will bolster 

using savings garnered from overhead efficiencies. 

27. Senator MCCAIN. General Cartwright, regarding the projected growth in the 

DOD budget adjusted for inflation, you mentioned in your opening statement that 

‘‘there is risk the projected 1 percent real growth may not be realized.’’ Can you 

elaborate on this concern? 

General CARTWRIGHT. The nation’s economic situation, combined with historical 

budget trends, will likely squeeze Federal spending, to include defense. Without 2 

to 3 percent real annual growth, it will be difficult to maintain force structure and 

modernization efforts. The efficiencies initiative will address overhead cost growth 

and redirect the savings to high priority warfighting capabilities. This effort will ensure we use Defense dollars to their maximum potential and close the gap toward 

what is needed for warfighting requirements. 

BASE CLOSURES

28. Senator MCCAIN. Mr. Lynn, one of Secretary Gates’ announcements specifically sent shivers through every military community in the country—the authorization to each of the military departments to consider consolidation or closure of excess bases and other facilities where appropriate. The Secretary mentioned ‘‘legal 

constraints on DOD’s ability to close installations.’’ The only statute currently in 

place regarding base closure is a requirement for a notification to Congress by the 

Department of the intent to close a base, along with a justification followed by a 

wait period of 60 calendar days. In response to requests by previous administrations, Congress specifically authorized a process involving an independent commission to make decisions in five previous rounds of BRAC. Would the Department preVerDate Aug 31 2005 10:34 Apr 20, 2011 Jkt 000000 PO 00000 Frm 00063 Fmt 6633 Sfmt 6621 Y:\BORAWSKI\DOCS\65072.TXT JUNE PsN: JUNEB
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fer to select bases for closure without the involvement of an independent commission? 

Mr. LYNN. In furtherance of his responsibility to ensure that DOD operates efficiently and effectively in the performance of its missions, the Secretary has asked 

the Secretaries of the military departments to ‘‘consider consolidation or closure of 

excess bases and other facilities where appropriate.’’ The Department recognizes the 

value of a BRAC Commission process for ensuring transparency and objectivity 

when considering closure and consolidation actions. In the absence of BRAC authorities, however, it is prudent for the Department to continue pursuing efficiencies 

within its statutory limits because of the potential financial and operational benefits 

that could accrue from such an effort. As you indicated, the Secretary of Defense 

has the authority to close and realign military installations outside of the BRAC 

Commission process, provided the action does not trigger the thresholds established 

in section 2687 or, if it does, the Department follows the procedures set forth in that 

statute, which are far more extensive than a simple congressional notification. If the 

Secretaries of the military departments identify any actions that could involve the 

closure or realignment of a military installation, those actions will only be undertaken in accordance with law. 

29. Senator MCCAIN. Mr. Lynn, we have many major reviews and initiatives underway with significant bills including moving marines from Okinawa to Guam, tour 

normalization in Korea, and the final number of forces in Europe. Regarding base 

closures, are you also encouraging the consideration of closing bases overseas? If so, 

will these considerations undergo any operational analysis or assessment to measure impact on global commitments? 

Mr. LYNN. The Department encourages efficiencies across the Services, and supports cost-saving measures regardless of location. The Army’s consolidation of functions in Germany (at Wiesbaden) is an example of a cost-saving measure overseas. 

This action will produce efficiencies and allow the return of two sites to the host 

nation. As is the case for all closure/realignment actions, overseas initiatives undergo analyses to identify associated risks/impacts, to include impact on operational requirements and an assessment of applicable global commitments. 

30. Senator MCCAIN. Mr. Lynn, will these assessments of potential cuts in globally arrayed forward deployed forces be accompanied by an estimate of expected savings? 

Mr. LYNN. Yes, but note that these decisions will not be made on the basis of savings alone. The Department will consider all of the resource implications pertaining 

to changes in forward deployed forces. 

DOING MORE WITHOUT MORE

31. Senator MCCAIN. Dr. Carter, it seems like a common request we always make 

of our men and women in the military is to keep on ‘‘doing more without more.’’ 

To the personnel in the field, they see cuts to manning and service contracts and 

the directive to do it themselves, so that someone higher up the chain can claim 

an achievement of efficiency. What is the Department doing to ensure that military 

personnel are not saddled with these additional tasks? 

Dr. CARTER. The goal of the Secretary of Defense efficiency effort is to move overhead resources to where we need it most—to the field. We believe these initiatives 

will benefit our combat forces in two significant ways. First, they will make the Department flatter and more effective by eliminating needless layers of bureaucracy. 

Second, where removing bureaucratic layers and the functions generate savings, 

they will be refocused toward current forces and the development of future capabilities. 

32. Senator MCCAIN. Dr. Carter, what do you expect will be the impact of these 

efficiencies to our combat forces? 

Dr. CARTER. These initiatives should benefit our combat forces in two ways. First, 

many of these initiatives are geared to make the Department flatter and more effective by eliminating needless layers of bureaucracy. Second, where removing these 

layers and the functions that go with them have generated savings, those savings 

are being refocused toward current forces and the development of future capabilities. 

33. Senator MCCAIN. Dr. Carter, the most recent QDR was supposed to take a 

hard look at requirements and challenges over the next 20 years and to set forth 

61 

a series of priorities to meet those challenges. Yet, it seems like there has been little 

analysis in the effort to reduce requirements or at least reevaluate roles and missions efficiently meet those requirements. In the directive given to the military departments to find $100 billion in efficiencies, how much flexibility do they have to 

engage in an assessment of relative roles and missions? 

Dr. CARTER. The Track 1 effort that you are referring to was not intended to 

prompt a comprehensive roles and missions review for the military departments. 

Rather, it is an effort to improve the effectiveness and efficiency of our business operations to provide funding available for our mission functions. 

34. Senator MCCAIN. Dr. Carter, where does the pursuit of efficiencies end and 

the assessment of roles and missions begin? 

Dr. CARTER. Organizational assessments are a significant part of our efficiency 

initiatives and scrutinizing roles and missions are a fundamental component of 

these assessments. In particular, recommendations to disestablish JFCOM, BTA 

and NII are rooted in a detailed assessment of the value of their discrete roles and 

missions and the best means to continue providing those roles and missions that 

are highly valued. 

FIXED-PRICE CONTRACTING

35. Senator MCCAIN. Dr. Carter, there appears to be some concern or confusion 

surrounding what you intend on fixed-price contracting. Please describe this initiative in more detail. 

Dr. CARTER. While I recognize that one size does not fit all, there are times when 

the use of Fixed-Price Incentive Firm Target (FPIF) contracts is not only appropriate but desirable. FPIF contracts establish an appropriate balance or sharing of 

reward and risk between the government and industry. This type of contract structure is generally appropriate in early production efforts and in single-source production where improvement in price on a year-to-year basis can be rewarded. 

As I have stated previously, a good starting point in an FPIF contract is a 50/ 

50 share line and a ceiling of 120 percent. Again, one size does not fit all and, in 

specific instances, the share line may need to be adjusted to address more uncertainty in cost. The issue of cost uncertainty may exist in programs that are early 

in production and in those instances, the issue of cost risk needs to be discussed 

and fully understood by both sides prior to establishing the share line. 

Based on historical experience, the 120 percent ceiling is generally appropriate for 

establishing the government’s liability in an overrun of the target cost. As I noted 

in my September 14 memorandum to the DOD acquisition professionals, a higher 

proposed ceiling requires explanation to the relevant head of the contracting authority and a lower ceiling would suggest that a firm fixed-price contract may be in 

order. 

36. Senator MCCAIN. Dr. Carter, what has your response been to industry criticism that your approach would require contractors to take on too much risk and 

could ultimately hamper the fielding of technologically advanced capability? 

Dr. CARTER. AT&L is interested in balancing risk and reward between the government and industry. We want to move away from imposing fixed-price contracts on 

programs where significant innovation and unknown costs can be anticipated—specifically, programs that are developing technologically advanced capability where 

the risk of successful performance is significant. Generally, we want to avoid Cost 

Plus Award Fee contracts because they contain subjective measures of award fee 

that are not clearly tied to cost control and solid results. We suggest the use of FPIF 

Target as a preferred choice where appropriate because in many circumstances it 

does achieve an appropriate balance of risk and reward for both the government and 

industry. 

An FPIF contract structure would be considered appropriate early in production 

or in single-source production where year-on-year price improvement can be rewarded. There may well be other occasions where conditions can be created that will 

support the use of an FPIF contract. Ultimately, the benefit of an FPIF contract is 

that it shares the costs of overruns and rewards underruns in a given transaction. 

It incentivizes both industry and the government to perform well. 

The share line of 50/50 that we have suggested for an FPIF is a recognition that 

the government and the contractor have a common view of the likely outcome of the 

contract’s execution cost. If that view is not shared, there needs to be discussion of 

the factors that support a different share line. Also, the 120 percent ceiling starting 

point recognizes the historical experience in DOD with regard to program overruns. 

62 

TARGETING AFFORDABILITY AND DRIVING PRODUCTIVITY

37. Senator MCCAIN. Dr. Carter, I appreciate your intent to ‘‘mandate affordability as a requirement’’ and ‘‘drive productivity through ‘should cost’ management.’’ Setting an affordability target early; requiring that tradeoffs be made between engineering elements, time, and cost a lot earlier than we’ve done to date; 

and having that analysis guide how the program will be managed throughout its 

lifecycle, reflects many of the concepts that we identified as important in the 

WSARA of 2009. I am, however, concerned about the Department’s ability to do the 

kind of engineering tradeoff analysis and cost-estimating needed to make those initiatives work. I’m particularly concerned about whether the Services, which would 

presumably cover smaller programs in this regard, have the requisite capability. 

Having sufficient relevant cost- and engineering-related capability is, needless to 

say, vital to ensuring that those affordability and productivity initiatives will work 

as intended. Do you agree that, currently, the relevant cost- and engineering-related 

capabilities within the Department are insufficient to support your affordability and 

productivity proposals now, and if so, how do you intend to address those capability 

gaps? 

Dr. CARTER. The Department has cost and engineering capabilities within the existing acquisition workforce to perform a range of analytical trade studies critical 

to facilitating affordability decisions. However, the Department recognizes that the 

size and composition of this existing cost and engineering workforce must be expanded to be able to apply those core capabilities to meet the more detailed affordability analysis needs of all acquisition programs and to more fully enhance those 

capabilities in support of Major Defense Acquisition Programs. 

The Department is committed to revitalizing cost-related capabilities and reversing a decade-long decline in the organic workforce. To get best value for taxpayers, 

DOD will enhance the cost-estimating and pricing capability to improve program estimates and ensure we price contracts appropriately. As reported in our April 2010 

report to Congress ‘‘The Defense Acquisition Workforce Improvement Strategy fiscal 

year 2010,’’ to improve quality, the Department is expanding and improving training 

programs in this area. We have created a separate cost-estimating career path within the Business career field, and now require 7 instead of 4 years of experience to 

achieve Level III certification. Currently, the Department has more than 900 costestimating positions in the DOD acquisition workforce supporting a diverse set of 

technical and program activities. The cost analysis capability at the program office 

level is supported and guided by existing cost analysis organizations within each 

Component acquisition product division and organizations at the Component headquarters level that provide independent cost analyses to support Component Acquisition Executive decisions. In the Office of the Secretary of Defense, the Cost Assessment and Program Evaluation organization provides an additional level of capability 

to provide estimates to inform Department-level decisions on acquisition programs 

and their affordability. 

In terms of engineering-related capabilities within the acquisition workforce, the 

Department currently has 38,000 positions in the ‘‘Systems Planning Research Development Engineering (SPRDE)’’ technical workforce. The SPRDE workforce represents the Department’s core capabilities for executing the range of engineering 

trade-off studies including life cycle cost modeling in all phases of the acquisition 

process. These trade studies and modeling activities are critical to making informed 

choices that impact system affordability. 

38. Senator MCCAIN. Dr. Carter, how long do you think it will be before DOD and, 

in particular, the military departments will have the relevant cost- and engineeringrelated capability needed to make those initiatives work? 

Dr. CARTER. For cost-related capability: The Department has the capability to 

make these initiatives work and is already seeing examples to increase our confidence. The Department has been working closely with the military departments 

on several MDAPs, with good results from carefully thinking through requirements, 

costs and engineering trade-offs. As Secretary Gates has said, ‘‘There is no silver 

bullet’’ for changing how the Department conducts business, and it will take time 

to fully implement these ideas across the Department and inculcate these practices 

in all acquisition programs. 

For engineering-related capability: As part of the Organization and Capability Assessment efforts mandated by WSARA of 2009, the Department is currently working 

with the military departments and agencies to assess the current capability of the 

workforce members providing engineering-related expertise. The Department possesses the capabilities needed at the present time by using government personnel 

with augmentation from systems engineering-focused Federally-Funded Research 

63 

and Development Centers and other contractor personnel. The transition to an indigenous organization of government technical personnel is in progress and is anticipated to take several years. 

BUSINESS TRANSFORMATION AND PROTECTING CORE COMPETENCIES

39. Senator MCCAIN. Dr. Carter, for a while now, I have called on the DOD to 

achieve audit-ready financial statements. In my view, that is vital to ensuring that 

taxpayer dollars are not being wasted, stolen, or otherwise abused. But, that can 

only be achieved by getting robust ‘‘transaction-level’’ accountability—through ‘‘endto-end’’ business systems developed under a single, broad business enterprise architecture plan. Much of the technical expertise that has supported that effort has resided within the Office of Business Transformation Agency (BTA). Now that the 

BTA will be dismantled under the savings and efficiencies initiative, how will those 

skill sets be preserved and cultivated and where will they go? 

Dr. CARTER. When the BTA was established in 2006, it was entrusted with the 

mission of reforming and modernizing the Department’s business practices. In 2008, 

Congress created a Chief Management Officer (CMO) and Deputy Chief Management Officer (DCMO) to improve business operations from the highest levels of the 

Department. The Secretary determined this arrangement is duplicative and that it 

is time to close the BTA and consolidate some of its functions within the Office of 

the DCMO and other organizations. 

The DCMO is working with the Department’s senior leadership to ensure BTA’s 

critical skillsets and functions are retained. While it is premature to say specifically 

what the results of this effort will be, statutorily required key drivers of our business transformation efforts, such as the Business Enterprise Architecture, will continue to be key management priorities. The Department is committed to accomplishing the Secretary’s vision of reducing overhead costs by eliminating excess and 

duplication while still ensuring every taxpayer dollar is well spent. 

40. Senator MCCAIN. Dr. Carter, what about other competencies related to, for example, how the Department buys major systems—in particular, those that actually 

enable savings and efficiency and are, as such, worthy of increased investment? 

Dr. CARTER. The purpose of the efficiency initiative is to redirect the Department’s 

limited resources from unproductive to productive purposes. A natural result of this 

process will be increased investment in areas where the Department identifies more 

productive uses for our limited resources. The Department will identify those areas 

for increased investment by pursuing the five following goals: (1) Target Affordability and Control Cost Growth; (2) Incentivize Productivity and Innovation in Industry; (3) Promote Real Competition; (4) Improve Tradecraft in Services Acquisition; and (5) Reduce Non-Productive Processes and Bureaucracy. In parallel with 

these efficiency initiatives the Department is continuing to build its acquisition 

workforce, both in size and in capability. 

41. Senator MCCAIN. Dr. Carter, in those areas, the better we perform in those 

areas, the more money will be saved for the taxpayer. Are they subject to being cut 

under the initiative? 

Dr. CARTER. The Department will not cut the core competencies that are saving 

the Department money; doing so would be inconsistent with the goals of the Secretary’s efficiency initiative. 

42. Senator MCCAIN. Dr. Carter, when will we get auditable financial statements? 

Dr. CARTER. We recognize that Congress places a high priority on the Department’s audit readiness and that the National Defense Authorization Act for Fiscal 

Year 2010 requires DOD to have fully auditable financial statements by 2017. 

Achieving auditability is not an easy task for the Department. However, the current 

approach put in place by the Under Secretary of Defense (Comptroller) is sound. 

The Department is focusing first on improving the quality, accuracy, and reliability of the financial and asset information that we use every day to manage the 

Department with clear near- and mid-term goals. This approach lays the foundation 

for achieving auditability in the most cost effective way, while simultaneously improving the daily management of our financial enterprise. The Department has also 

created a strong governance framework to manage its audit readiness efforts and 

dedicated the necessary resources to the effort to achieve success. 

Achieving auditability is dependent on a number of factors—such as the successful implementation of many defense business systems, including Enterprise Resource Planning Systems. With the successful implementation of these systems, adVerDate Aug 31 2005 10:34 Apr 20, 2011 Jkt 000000 PO 00000 Frm 00067 Fmt 6633 Sfmt 6621 Y:\BORAWSKI\DOCS\65072.TXT JUNE PsN: JUNEB
64 

ditional resources devoted to financial improvement, and a well developed Financial 

Improvement and Audit Readiness Plan, the Department should achieve significant 

progress toward audit readiness by 2017. 

INSOURCING

43. Senator MCCAIN. Dr. Carter, Secretary Gates stated on August 9, 2010, his 

intent to discontinue the conversion of contracted work to in-house work, also 

known as insourcing. The reason that he cited for reversing course was that he 

wasn’t seeing expected savings from insourcing those jobs. Please elaborate on the 

lack of expected savings from insourcing. Specifically, what has been the end result 

of 2 years of growing the civilian personnel manning without assessing the longterm impact in terms of benefits. 

Dr. CARTER. In April 2009, the Secretary announced that he wanted to find $900 

million in savings through insourcing a specific segment of contracted services. 

These positions were insourced and the $900 million goal was reached, but these 

positions were only about 1 percent of all contracted services. While we were 

insourcing this small segment of services, we were also spending a lot more on providing most other services. The net increase turned out to be more than $5 billion 

from fiscal year 2009 to fiscal year 2010. While insourcing remains an appropriate 

course of action in cases where contracted functions would be more effectively performed by government personnel, we must focus on reducing our total growth. For 

DOD organizations where the Secretary has directed us to limit organizational 

growth, in-sourcing efforts are being evaluated in terms of mission priorities and, 

where appropriate, exceptions for in-sourcing may be submitted. 

44. Senator MCCAIN. Dr. Carter, despite Secretary Gates’ statement, I understand 

that, in actuality, the Department is not reversing its insourcing initiative. While 

there will be a billet freeze on DOD components (other than the military departments), insourcing within the military departments will not only continue but it will 

continue at its original pace. Is this correct? Can you clarify Secretary Gates’ current plan on insourcing? 

Dr. CARTER. All DOD components are reviewing contracted services and providing 

consideration for in-sourcing those services. There are DOD organizations at which 

no contracted services have been identified as appropriate for in-sourcing but no 

DOD organizations are outright exempted from in-sourcing. For DOD organizations 

where the Secretary has directed to limit organizational growth, in-sourcing efforts 

are being evaluated in terms of mission priorities and, where appropriate, exceptions for in-sourcing related growth may be submitted. 

45. Senator MCCAIN. Dr. Carter, in those cases where you do a cost analysis to 

determine whether insourcing would be more cost-effective than outsourcing, problems exist with the quality of these analyses (e.g., bad or old data, assumptions, et 

cetera). As the Department continues its in-sourcing initiative, to what extent will 

those business cases be done openly and transparently—to ensure their fidelity? 

Dr. CARTER. When cost effectiveness is the determining factor for in-sourcing contracted services, such as those services determined to be not inherently governmental, not closely associated with inherently governmental, or not otherwise exempted from private sector performance (i.e., to mitigate risk, ensure continuity of 

operations, build internal capacity, maintain control and oversight of operations, 

meet readiness needs, etc.) cost analyses are required to be done in accordance with 

the business rules set forth in Directive Type Memorandum (DTM) 09–077. 

This DTM establishes business rules for use in estimating and comparing the full 

costs of military and DOD civilian manpower and contract support. The full costs 

of manpower include current and deferred compensation costs paid in cash and inkind as well as non-compensation costs. The DTM mandates that DOD components 

shall use the business rules to estimate the full costs of the defense workforce in 

support of strategic planning, defense acquisition, and force structure decisions, as 

well as when performing an economic analysis in support of workforce decisions. 

This includes, but is not limited to, determining the workforce mix of new or expanding mission requirements that are not inherently governmental or exempt from 

private-sector performance. The DOD Components shall also use the business rules 

to decide whether to use DOD civilians to perform functions that are currently being 

performed by contractors but could be performed by DOD civilians. All DOD Components must adhere to these rules which are publicly available via the DOD’s 

issuances website. Additionally, the cost factors the DTM requires for consideration 

are all in the public domain. 

65 

Individual cost analyses in support of in-sourcing actions are not made publicly 

available by the Department due to concerns over the inclusion/release of private 

sector propriety pricing information and business sensitive information. Furthermore, public release of cost analyses could put at risk the integrity and fidelity of 

future procurements and the ability of affected private sector interests to be competitive. Firms affected by individual in-sourcing decisions may request a cost analysis through Freedom of Information Act (FOIA) channels. Requests will be reviewed and adjudicated in accordance with all standard FOIA regulations and Department practices. 

46. Senator MCCAIN. Dr. Carter, what, if anything, are you doing to ensure that 

openness and transparency across the military departments, in particular? 

Dr. CARTER. Our acquisition workforce strategic plan, available to the public online, at https://acc.dau.mil/acquisitionworkforce, details our workforce strategies, key 

measures, and initiatives. DOD provided this plan, which includes appendices for 

each of the Military Departments, to Congress in April 2010. Openness and transparency are also achieved by sharing and reviewing progress at the defense acquisition workforce senior steering board that I chair and is composed of senior acquisition component and functional leaders. 

47. Senator MCCAIN. Dr. Carter, what, if anything, are you doing to ensure that 

your proposal on insourcing is being implemented properly and consistently among 

all the military departments? 

Dr. CARTER. When it comes to my efforts to rebuild the capacity and capability 

of the Defense Acquisition Workforce, in part through insourcing contracted services, I have supplemented Deputy Secretary Lynn’s and other Department-wide policies implementing statutory workforce shaping with guidance directly geared to the 

acquisition community and its leaders. To date, our monitoring of growth resulting 

from insourcing within the acquisition workforce, consistent with our human capital 

planning efforts, is strengthening our in-house engineering and program management capability. This growth is consistent with our broader strategies to strengthen 

key in-house acquisition workforce capability. 

ADJUSTING PROGRESS PAYMENTS TO INCENTIVIZE PERFORMANCE

48. Senator MCCAIN. Dr. Carter, as you of course know, from a financing perspective, how the DOD customarily pays its bills (that is, upfront, regularly and often 

before the contractor performs) tends to overwhelmingly favor industry. So, without 

any benefit to the taxpayer, the DOD tends to provide industry with a high cash 

flow return on invested capital. I’m intrigued about what you intend to do to change 

that. Please explain what you intend to do more fully. 

Dr. CARTER. There will be short- and longer-term aspects to this initiative to insure we are being fair to industry while protecting the interests of the taxpayer. 

The current Federal Acquisition Regulations states that when Government financing is provided, Performance Based Payments (PBPs) are the preferred method on 

fixed price contracts. PBPs provide financing up to a maximum of 90 percent of the 

contract price which provides considerably better cash flow to the contractor than 

customary progress payments which, for large businesses, provide 80 percent of the 

contract cost. The financial value of this better cash flow is measurable. Based on 

Department data, it does not appear that the Government has been receiving adequate consideration when PBPs are used. 

My September 14th memorandum entitled ‘‘Better Buying Power: Guidance for 

Obtaining Greater Efficiency and Productivity in Defense Spending’’ stated that the 

Department will negotiate prices on the basis of customary progress payments and 

then consider an arrangement that provides better cash flow to the contractor and 

negotiate adequate consideration. The Department is developing a tool (cash flow 

model) that will be made available and mandated for use by all contracting officers 

when the Government provides PBPs in lieu of customary progress payments. This 

tool will also be adapted for use in other situations in which improved cash flow 

might be provided to the contractor. Since industry and the Government have a different view of the time-value of money, a win-win solution (Lower Price for Better 

Cash Flow) can be identified. This use of the tool will allow both sides to benefit 

fairly from the improved cash flow. 

Longer term, the Department is examining the structured approach (Weighted 

Guidelines) used to develop Government profit objectives on contracts. The impact 

of contract financing will be a part of this review to ensure the benefits of cash flow 

are adequately addressed in the profit policy. Changes to profit policy require 

66 

changes to associated regulations and public input and comment, which will take 

longer to implement. 

49. Senator MCCAIN. Dr. Carter, do you have even a rough sense of how much 

taxpayers could benefit from this particular initiative? 

Dr. CARTER. Based on data collected in the Department’s profit reporting system, 

a conservative estimate of savings would be approximately hundreds of millions per 

year based on the value of contracts using Performance Based Payments as the 

method of contract financing. 

ELIMINATING LOW VALUE ADDED STATUTORY PROCESSES

50. Senator MCCAIN. Dr. Carter, among the internal processes that you have identified as providing little value are certain Nunn-McCurdy reviews—in particular 

‘‘full’’ reviews of programs that have grown in cost only because of changes in how 

many units we want to buy. I understand that, in those cases, you want some relief. 

We have, however, come far in changing Nunn-McCurdy from just a ‘‘paper tiger’’ 

into a tool that can help keep program costs from growing excessively. Also, bear 

in mind, that all too many times, we have had to cut how much we intend to buy 

in a program precisely because that program has been poorly managed or because 

it’s otherwise poorly performed. Rarely do so-called ‘‘technical’’ breaches (a term that 

has no meaning in any DOD Instruction or other authority, by the way) occur in 

a vacuum. So, I would strongly suggest caution here. Regarding Nunn-McCurdy, 

please explain exactly what you identify to be the problem here and what you have 

in mind to have the process changed. 

Dr. CARTER. I fully support the Nunn-McCurdy process, to include the recent improvements that were made by the WSARA of 2009. The Department takes each of 

these breaches very seriously, and we conduct the prescribed review according to the 

provisions of the statute. However, each review is costly to perform and should be 

avoided when the critical breach is caused primarily by a change in quantity that 

was made in response to changes in threat or other fielding requirements and not 

the result of poor performance or mismanagement. For example, the Army Acquisition Objective for the Guided Multiple Launch Rocket System and, more recently, 

the Excalibur projectile program were both reduced by more than 70 percent due 

to an approved change in force requirements. Due to a learning curve and the amortization of development costs, significant quantity reductions frequently result in 

critical Nunn-McCurdy breaches. 

My proposed revision to section 2433a of title 10, U.S.C., would reduce the statutory requirements for critical Nunn-McCurdy breaches caused primarily by quantity 

changes (as long as the quantity change was not made as a result of an increase 

in unit cost). In our proposal, the root cause of the cost growth would need to be 

validated by the WSARA-created office of Program Assessment & Root Cause Analysis. Since the statutory requirements of a Nunn-McCurdy critical breach under section 2433a are extensive, this section would reduce the requirements for quantityrelated critical breaches. That is, for the review, only a root cause analysis would 

be conducted to substantiate the causal effects of the quantity change, followed by 

a written statement from me that it is in the best interests of the Government to 

continue the acquisition program notwithstanding the increase in unit cost. 

51. Senator MCCAIN. Dr. Carter, similar to your proposal on Nunn-McCurdy, I am 

concerned about your interest in relieving the Department from doing so-called 

‘‘look-back’’ milestone certifications for programs that are already in the development and production pipeline. As you of course know, this committee’s interest here 

arose from high-profile examples of big weapons acquisition weapons being ‘‘put on 

rails’’ almost right after they started. That resulted in billions of dollars of the taxpayers’ money invested without, for example, alternatives ever having been analyzed, critical technologies having matured, design drawings having been reviewed, 

et cetera. So, we made these milestone elements that needed to be certified to and, 

for programs already in the pipeline, required the DOD to go back and make sure 

these things were done. I believe that what this committee did here was a move 

in the right direction. So, just as with Nunn-McCurdy, I would similarly caution 

care here in changing the current requirement dramatically. Please explain what exactly the problem is and how Congress can help you address it. 

Dr. CARTER. The Department requests the repeal of requirements to perform retroactive certifications. The process of applying the certification criteria retroactively 

to programs that had already received Milestone (MS) A or MS B approval prior 

to enactment of WSARA provides, at best, marginal utility as a forensic tool and, 

67 

at worst, is a non-productive use of the Department’s limited funding and personnel 

resources. Personnel resources available across the enterprise were inadequate to 

review all of the 50-plus programs (identified for retroactive certification) against 

the appropriate certification criteria within the time allotted by WSARA. As one example of the burden, both the 2366a and 2366b certification criteria require an independent cost estimate (ICE) to be performed. Even if the Department’s cost estimation personnel had been wholly dedicated to just that task—forsaking all work 

on programs that are currently approaching Milestone events or that have experienced unit cost breaches—the Director of Cost Assessment and Program Evaluation 

could not have completed the necessary 50-plus ICEs with the current number of 

personnel within the allotted timeframe. The Department’s resources are best employed toward focusing on the appropriate certification activities for programs currently approaching a Milestone decision event, rather than attempting to apply 

those certification criteria to programs already well-past those events. The lack of 

a real benefit proportionate with the personnel and resource costs of doing retroactive certifications is even more evident in the case of those programs that had already entered the Production and Deployment phase. 

52. Senator MCCAIN. Dr. Carter, you also assert that organizational changes that 

Congress mandated within your organization (that is, at Acquisitions, Technology 

and Logistics) may require a relook or an adjustment. In the WSARA of 2009, we 

required certain organizational changes where, with the benefit of analysis done by 

or for the DOD, we found that some functional areas within your organization that 

are vital to effective program management and oversight had atrophied. In those 

areas (like developmental testing, systems engineering, and cost-estimating), we 

concluded that additional investment would likely result in greater savings. Now, 

however, you say that you need ‘‘flexibility’’ to resource your organization. Please 

describe exactly what the problem is here and specifically what you propose in this 

area. Exactly how does your proposal here derogate from organizational changes 

that Congress (and this committee) required? 

Dr. CARTER. In support of continuing to implement WSARA and continuing to 

stand up the responsible offices, AT&L has requested that the remaining WSARA 

resources be exempted from the Secretary’s authorization freeze, to adequately staff 

the Systems Engineering, Developmental Test & Evaluation and Performance Assessment & Root Cause Analysis offices. 

AT&L needs to implement WSARA while also finding ‘‘efficiencies’’ in our workforce by putting the right people in the right positions, which may require resource 

flexibility to fill the desired acquisition billets. 

TECHNOLOGICAL READINESS LEVEL REVIEWS

53. Senator MCCAIN. Dr. Carter, I understand that among the OSD-level reviews, 

you would like to change at reviews for ‘‘technological readiness levels’’ (TRL). As 

you of course know, these reviews are vital to informing the Department’s investment decisions on programs early in the defense acquisition system and to managing those programs effectively. For those same reasons, this committee has been 

pushing the Department to review engineering and integration risk similarly. But, 

you would like to eliminate the OSD’s review of those kinds of risk from its TRL 

review. If that’s done, at what point would the Department independently vet engineering and integration risk so as to inform its investment decisions on major systems? 

Dr. CARTER. The DDR&E has cognizance over both research and systems engineering. In response to my concerns about how the Technology Readiness Level review and certification process has grown well beyond our original intent, his research staff is currently finalizing a new approach for evaluating technologies and 

associated risks to inform both program managers and the Defense Acquisition 

Board decisions. On the other hand, I look to the engineering staff to assess independently the engineering and integration risks associated with systems and systems of systems. They support this effort by conducting Program Support Reviews 

prior to milestones to assess the adequacy of the planning and execution of technical 

and management activities, which include engineering and integration efforts. Results are presented to the Overarching Integrated Product Team, and a risk assessment is presented at my Defense Acquisition Board meetings. These engineers also 

maintain continuous engagement with programs to monitor progress and technical 

risk mitigation activities. 

68 

SERVICE SUPPORT CONTRACTS

54. Senator MCCAIN. Mr. Lynn, Secretary Gates has stated many times that 

health care costs are unsustainable within the Department’s budget and will impinge on readiness if unconstrained. The President’s budget requested over $16 billion for care purchased from civilian providers through large health care contracts, 

an increase of approximately $1.5 billion from the previous year. In March 2008, 

the Department announced a new acquisition program for DOD purchased care, 

known as the Third Generation of Contracts (T–3). This program was designed to 

encourage competition, improve contractor performance, weed out fraud and abuse, 

and achieve cost savings. 18 months later, only one of three contracts has been 

signed; two others remain in dispute or discussion as a result of flaws in the acquisition process. As a result, in addition to not achieving anticipated savings in the new 

contracts, billions have been expended by the Department in extension of the existing contracts, which is never advantageous to the taxpayer. Several weeks ago we 

were informed that the Department is now beginning to design yet another version 

of these contracts, known as T–4, before the previous version has even been awarded. These are some of the largest service support contracts in DOD. Is any effort 

underway to examine the acquisition system that has resulted in obvious ‘‘inefficiency’’ in proceeding with this program? 

Mr. LYNN. Yes, there is an effort underway to examine the acquisition system. In 

early 2010, the Assistant Secretary of Defense for Health Affairs appointed a Component Acquisition Executive (CAE), as defined in the DOD 5000 series of directives 

pertaining to managing the Defense Acquisition System. Following this action, DOD 

developed a variety of improvements and infrastructure of the acquisition process 

for the Military Health System. For example, 

(a) The CAE hired and appointed an Acquisition Career Manager to oversee identification and certification of the acquisition workforce, including conducting 

a survey to identify the acquisition workforce. 

(b) The CAE also hired 9 contract specialist developmental positions in fiscal year 

2010 with plans to hire an additional 22 developmental positions in various 

acquisition career fields in fiscal year 2011 and beyond to improve TMA’s ability to efficiently execute timely acquisitions. The CAE is also in the process 

of identifying and appointing Program Executive Officers and Program Managers for major acquisitions. To facilitate this effort, the CAE hired professionals in program management, systems engineering, and logistics for the 

CAE staff to oversee TMA programs and ensure they meet the DOD 5000 series requirements. 

(c) In addition, the CAE is hosting the first ever Industry Day to provide transparency into TMA information technology acquisitions. 

(d) The CAE is aggressively insourcing contract support personnel to reduce reliance on contractors and is conducting a spend analysis to identify opportunities for strategic sourcing to reduce duplicative acquisition requirements and 

improve the Government’s buying power. 

At the same time, as part of initiatives announced by the Secretary of Defense; 

the Under Secretary of Defense for Acquisition, Technology, and Logistics; and the 

Assistant Secretary of Defense for Health Affairs/TRICARE Management Activity 

are reviewing various acquisition initiatives with a goal to reduce expenditures of 

our managed care contracts. 

55. Senator MCCAIN. Mr. Lynn, why begin design of a new contract, without the 

benefit of experience under the proposed improvement? 

Mr. LYNN. The Department began the design of a new contract acquisition process 

because the acquisition process is lengthy and requires deliberation in order to obtain the best value for the Department. We believe that one of the mistakes made 

in the past was not addressing future requirements soon enough to allow for full 

vetting of requirements and approaches. The Third Generation of TRICARE Contracts (T–3) current contracts consist of incremental changes from those under the 

Next Generation of TRICARE (TNEX). 

The Twenty-One Total Technology (T4) group will be determining appropriate actions during the second year of T–3 delivery and any potential statutory or regulatory changes that may be sought could be underway with resolution in the third 

year of service delivery. This schedule allows 18 to 24 months to process the followon acquisition in order to have contracts in place by the end of the current contracts. 

Contracts option exercises are granted for 1 year. The Department has a unilateral right to exercise, or not, those options. If the Department is able to identify 

efficiencies and cost reduction through a new approach to the acquisition of health 

69 

care, it would be advantageous to the Government to pursue potential additional 

savings, even if it results in less than 5 years of delivery under the T–3 contracts. 

COST SHARE INCREASES

56. Senator MCCAIN. Mr. Lynn, in view of the comments about the need to control 

health care costs, it would come as no surprise to me if discussions were not already 

underway within the Department on specific cost saving proposals. I hope that the 

Department has learned from previous mistakes and will consult with Congress, as 

Secretary Gates has pledged, before proposing changes in medical benefits. We also 

expect the Department to consult with beneficiary organizations as well prior to proposing changes in the DOD medical program. Can we get those commitments from 

you now? 

Mr. LYNN. The Department is currently considering specific cost saving proposals 

in the DOD and some of those do involve health care costs. However, these proposals are still being reviewed. At this time, it would be premature for congressional 

consultation. At the appropriate time, we will consult with Congress and discuss 

these with beneficiary organizations. 

CAPABILITY PORTFOLIO REVIEWS

57. Senator MCCAIN. Dr. Carter, in your guidance memo of 14 September, you indicated that you plan to conduct capability portfolio reviews similar to the Army’s 

review, which led to the cancellation of the Non-Line-of-Sight Launch System 

(NLOS–LS). Will your reviews be confined to acquisition programs only? Or will you 

review Services’ contracts as well? 

Dr. CARTER. We currently only plan to conduct capability portfolio reviews on acquisition programs. OSD-level assessments of services contracts that are valued at 

$1 billion or more have and will continue to entail three elements: (1) Review and 

approval of acquisition strategies to ensure alignment with the Department’s architecture for service contracts; (2) Pre-award peer reviews to ensure new service contracts are executed in accordance with law and regulation considering best practices 

and lessons learned; and (3) Post-award peer reviews to evaluate whether service 

contractors are delivering value and whether the government team is providing effective oversight. As our management of service contracts matures we will consider 

whether or not to conduct portfolio reviews of certain types of service contracts. 

58. Senator MCCAIN. Dr. Carter, will those programs reviewed by your office be 

limited by dollar threshold (e.g. ACAT Level 1 only), by special interest items, or 

by some other criteria? 

Dr. CARTER. The reviews are intended to identify redundancies in warfighting 

portfolios. That is, I want to ensure that decisions on whether to pursue a specific 

acquisition program are based on whether a portfolio of systems and programs 

taken together provide all or most of the needed capability. As such, the portfolio 

reviews will not be limited by dollar thresholds. 

59. Senator MCCAIN. Dr. Carter, when defense-wide/joint capabilities overlap with 

Service-specific capabilities, who will conduct the review, your office or the Service? 

Dr. CARTER. Generally, my staff will lead those portfolio reviews at the joint and 

Department-wide level. However, we expect all stakeholders to participate. 

60. Senator MCCAIN. Dr. Carter, what is your time frame for completing the first 

two defense-wide reviews of Ground Moving Target Indicator (GMTI) systems and 

Integrated Air and Missile Defense (IAMD) systems? 

Dr. CARTER. For both of these studies, the initial phase of the study has been completed and is in the process of being briefed to senior leaders to determine if further 

analysis is required. 

61. Senator MCCAIN. Dr. Carter, would you be willing to brief the committee on 

the results of these reviews once finalized? 

Dr. CARTER. The IAMD and GMTI reviews will inform the fiscal year 2012 President’s Budget (PB) deliberations. As such, they will not be completely finalized until 

the PB is released. Until then, they are pre-decisional, and we would not plan to 

brief them; however, I will be happy to discuss the results after the PB is submitted. 

62. Senator MCCAIN. Dr. Carter, what subsequent portfolio reviews do you plan 

on conducting? 

70 

Dr. CARTER. We have not directed additional portfolio reviews at the Department 

or joint level at this time. The Component and Agency Acquisition Executives will 

be conducting portfolio reviews to inform individual program milestone decisions 

and budget decisions. 

63. Senator MCCAIN. Dr. Carter, in the same letter, you also directed the Services 

to conduct review for smaller programs. On its own initiative, the Army has already 

conducted/is conducting numerous reviews. Have those reviews been sent to you 

yet? 

Dr. CARTER. Not yet. My specific direction was to conduct reviews of ACAT II and 

III programs to identify and eliminate redundancy and to provide a report on the 

results of those reviews, with the first report due March 1, 2011. My intent in directing these portfolio reviews of smaller programs was to have the Component and 

Agency Acquisition Executives examine their smaller programs and look for opportunities to shift resources within their own portfolios from redundancy or low-value 

added programs to other programs that provide warfighting capability. 

64. Senator MCCAIN. Dr. Carter, what deadline will the Services have to meet in 

conducting their own reviews? 

Dr. CARTER. AT&L has asked for a report on the results of Component and Agency Acquisition Executive portfolios by March 1, 2011, and annually thereafter. However, there is not a specific deadline for them to conduct their reviews. 

65. Senator MCCAIN. Dr. Carter, what will the process be for your review of their 

work? 

Dr. CARTER. The Component and Agency Acquisition Executives will provide reports on the results of their portfolio reviews on March 1, 2011, and annually thereafter. These results will inform both individual program decisions and budget deliberations. 

66. Senator MCCAIN. Dr. Carter, what will happen if you disagree with a Service’s 

findings/conclusion on their own program? 

Dr. CARTER. The Services’ reviews will inform individual program decisions and 

budget deliberations. If the Services and AT&L come to different conclusions, additional analysis may be performed to resolve uncertainties. In some cases decisions 

may be taken through the DAB process or the budget process that differs from Service-preferred positions. 

QUESTIONS SUBMITTED BY SENATOR JAMES M. INHOFE

EFFICIENCY INITIATIVE

67. Senator INHOFE. Mr. Lynn, Dr. Carter, and General Cartwright, while I support the overall efficiency initiative begun by DOD, I also have several concerns. 

First, it appears the $100 billion savings number was chosen to compensate for a 

decreasing defense budget, projected to only be 1 percent real growth. Secretary 

Gates has said the military needs about 2 to 3 percent real growth in its modernization and force structure accounts to maintain the force. Projected savings are approx 

$7 billion in fiscal year 2010, $11 billion in fiscal year 2013, $19 billion in fiscal 

year 2014, $28 billion in fiscal year 2015, and $37 billion in fiscal year 2016. Next 

year, each of the Services has a bogie savings of approximately $2 billion. What percentage of internal budget growth will this savings provide DOD? Is it enough to 

modernize and sustain our military or will Congress see more defense cuts along 

with the cuts that are driving these savings? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. The Secretary has been very 

clear that he does not support any reduction to the Defense topline. He continues 

to feel that modest growth in the Defense budget is absolutely essential to meet the 

national security challenges of today. The intent of the current initiatives is to reduce funding for support efforts, the so-called ‘‘tail’’ portion of the Defense budget, 

and increase funding for readiness and modernization, the so-called ‘‘tooth’’ portion 

of the Defense budget. As the Department shifts $100 billion into warfighting needs, 

the Nation will gain a much more capable Defense force for the foreseeable future. 

68. Senator INHOFE. Mr. Lynn, Dr. Carter, and General Cartwright, what analysis 

went into selecting the targeted budget savings each year and the overall $100 billion savings target? 

71 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. Secretary Gates explained that 

the Department needs 2 to 3 percent real growth in order to sustain the force. In 

order to achieve this growth, he realized that we needed to scrutinize all of our 

spending and specifically reduce low priority accounts like overhead. Given that 

such profound changes in our spending patterns would require equally profound 

changes in behavior, the Secretary and the Chairman settled on $100 billion in savings as an amount that would both free up a sufficient amount of resources and 

force behavioral change. 

69. Senator INHOFE. Mr. Lynn, Dr. Carter, and General Cartwright, what is the 

analysis that shows these savings are achievable? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. As he considered this decision, 

the Secretary received a variety of information concerning combatant commands, 

Defense agencies, and the OSD staff, including missions, staffing levels, and other 

data. He spent considerable time discussing alternatives, critically considering the 

input of his most senior advisors, including the Chairman and Vice Chairman of the 

Joint Staff, the Deputy Secretary of Defense, the outgoing JFCOM Commander, and 

others. 

70. Senator INHOFE. Mr. Lynn, Dr. Carter, and General Cartwright, what happens 

if they cannot or do not achieve their target savings? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. These initiatives are as much 

about changing from a culture of spending to a culture of savings as they are about 

achieving specific fiscal targets. While I have no reason to doubt that we will 

achieve our targets, I can tell you that the pressure to continue to be vigilant about 

carefully allocating resources will continue regardless of this year’s outcome. 

71. Senator INHOFE. Mr. Lynn, Dr. Carter, and General Cartwright, what analysis 

is going into the cuts being proposed by each of the Services? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. Efforts are currently underway 

to assess the Services’ excess overhead costs versus investments in force structure, 

warfighting capabilities, and modernization programs. We are reviewing and tracking the service submissions, and the fiscal year 2012 budget will reflect the results 

when it is submitted in February 2011. 

72. Senator INHOFE. Mr. Lynn, Dr Carter, and General Cartwright, this efficiency 

initiative also reduces the total number of support contractors by 10 percent for the 

next 3 years, reduces funding for congressionally mandated studies by 25 percent, 

cuts funding for boards and commissions by 25 percent, reduces intelligence advisory and assistance contract funding by 10 percent, and cuts some organizations 

such as JFCOM. What analysis went into selecting the reduction percentages I just 

mentioned? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. The Secretary embarked upon 

a four-track approach aimed at making the Department more efficient and effective. 

Before taking any action, the Secretary received various assessments that indicated 

that efficiencies would be gained by taking the actions announced in August 2010. 

These cuts were enacted to create persistent decreases in the substantial growth in 

these areas over the last 9 years. 

73. Senator INHOFE. Mr. Lynn, Dr. Carter, and General Cartwright, did that analysis look at potential impacts of those cuts? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. Yes. We continue to monitor 

these effects as we implement the cuts. 

74. Senator INHOFE. Mr. Lynn, Dr. Carter, and General Cartwright, are those 

hard numbers or will they be based on future assessments, meaning the numbers 

could be more or less than the targeted percentage? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. The Department will continually evaluate the numbers in an effort to further the Secretary’s efficiency goals. 

READINESS

75. Senator INHOFE. Mr. Lynn, Dr. Carter, and General Cartwright, during a difficult economy, resources must be focused on our forces, future capabilities, and our 

troops. It is critical for DOD and Congress to work together to increase effectiveness 

and efficiencies but with a bottom line of always providing the necessary funds so 

that our troops are the best trained and equipped military in the world. While the 

72 

savings are internal and not a top line budget cut, people and things will be cut. 

What is DOD’s plan to coordinate with Congress on attaining these savings? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. The Department will provide 

details on all savings proposals no later than the time when the fiscal year 2012 

President’s budget request is submitted. 

76. Senator INHOFE. Mr. Lynn, Dr. Carter, and General Cartwright, when will 

Congress be informed of the proposed areas that will generate the savings in fiscal 

year 2012 and beyond? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. The Department will provide 

details on all savings proposals no later than the time when the fiscal year 2012 

President’s budget request is submitted. 

DEFENSE SPENDING, EFFICIENCIES, AND ACQUISITION REFORM

77. Senator INHOFE. Mr. Lynn, Dr. Carter, and General Cartwright, since the end 

of the Cold War, our military has done much more with much less. Our troops on 

the front lines are forced to use equipment that is well past its service life, in some 

instances by 30 years. The equipment problem is compounded by the fact that the 

pace at which we are purchasing new equipment has been drastically scaled back. 

The fact that Secretary Gates is trying to scrape together $100 billion over the next 

5 years from various accounts across DOD in order to fund modernization efforts 

is evidence that current spending will not sustain our military. Again, while I support this initiative, I firmly believe that alone it will not provide the funding for 

modernization and sustainment of our military. 

In addition to Congress and DOD working together to increase effectiveness and 

efficiency, Congress must increase overall DOD funding and streamline the acquisition process with legitimate and continued reform. Secretary Gates and Admiral 

Mullen have both talked about a goal of setting a target for base or core defense 

spending . . . the number used has been 4 percent and I agree with them. This level 

of spending will guarantee our qualitative and technological superiority, increase 

our military’s capability to fight across the full spectrum of warfare, and operate at 

higher readiness rates with lower costs. 

This increased spending must accompany continued acquisition reform. We cannot 

sustain our military when programs are running 8 years behind schedule and 150 

percent over budget. 

Unfortunately, our answer is to grow our acquisition bureaucracy and procurement process to provide additional oversight. This result has often been less accountability due to diffused responsibilities and a slowing of the entire process. We 

currently have Program Managers spending most of their time managing oversight 

requirements instead of managing their actual programs. Result is increased costs, 

delays in procurement times, cancelled programs, and wasted funds. 

Congress and the DOD must reduce the complexity of the process by removing 

the multiple layers of oversight and the cumbersome reporting requirements and 

regulations. 

What would you think about creating a Congressional and Executive Branch Bipartisan Task Force focused on reforming our Federal acquisition process . . . a task 

force targeted at reducing and streamlining our Federal acquisition regulations, 

maintaining oversight but consolidating and reducing reporting requirements, and 

given the authority to effect all areas of our acquisition process from bids through 

procurement with the goal of cost savings, efficiency, and timeliness for the production of military hardware? 

Mr. LYNN and Dr. CARTER. The Department shares your concern regarding the 

acquisition process and the challenges we face as we seek to modernize our forces 

and weapon systems. As part of the Secretary’s broad initiative to improve the 

American taxpayer’s return on his investment in national defense, Secretary Gates 

has tasked us to improve the Department’s buying power and attempt to ‘‘fix’’ many 

of the areas you bring to light. 

To put it bluntly, we cannot support our troops with the capabilities they need 

unless we do this. Our challenge is to sustain a military at war, take care of our 

troops and their families, and invest in new capabilities—all in an era when defense 

budgets will not be growing as rapidly as they were in the years following September 11. 

The Department welcomes the opportunity to work with members of Congress and 

staff, and we are appreciative of Congress’ generous support for the Department’s 

modernization programs. At this time, however, we do not support a congressional 

and bipartisan Task Force. We believe we can and are addressing these problems 

73 

effectively. The recent WSARA and the measures we are putting in place to 

strengthen the acquisition workforce under the Defense Acquisition Workforce Improvement Act of 1990 need to be given a chance to succeed. 

General CARTWRIGHT. I agree with the urgent need to improve our acquisition 

processes. In fact, the type of reform proposed is being pursued aggressively on two 

fronts. 

The Joint Staff, in partnership with the military departments and OSD, is reassessing the Joint Capability Integration System (JCIDS) process to improve responsiveness and decision support to the Joint Requirements Oversight Council (JROC), 

to include affordability-based conclusions. In order to improve our efficiency, the 

Chairman also recommended fiscal year 2011 legislative changes. These changes 

would expand the JROC to formally include, by direction of the Chairman, a combatant commander when matters related to the area of responsibility or functions 

of that command will be under consideration by the Council. This proposal also extends advisory status to select principals in OSD and to other civilian officials as 

deemed necessary by the Secretary of Defense. The Joint Staff will again, as part 

of the fiscal year 2012 legislative proposals process, recommend this legislative action. 

Concurrently, OSD is conducting a top-down assessment, directed by Dr. Ashton 

Carter, to restore affordability and productivity in defense spending. 

We look forward to working with the oversight committees to continue to make 

progress on these critical issues. 

STRENGTHENING THE ACQUISITION WORKFORCE

78. Senator INHOFE. Mr. Lynn and Dr. Carter, one critical component of this initiative is estimating costs. Whether it is ‘‘Should-Cost’’ or ‘‘Will-Cost’’, DOD needs 

accurate cost estimates. In conjunction with the passage of the WSARA of 2009, 

DOD has been increasing the size of its acquisition workforce. At the same time, 

it is also attempting to increase the skill levels and experience of that work force. 

Secretary Carter, you have acknowledged the need to improve the quantity and 

quality of the acquisition work force. What is the current status of our acquisition 

workforce? 

Mr. LYNN and Dr. CARTER. Secretary Gates’ initiative to strengthen the acquisition workforce, announced in April 2009, is well underway. We have completed 

7,000 of the planned 20,000 new hires. Targeted growth and other quality-focused 

initiatives are strengthening our engineering, contracting, cost estimating, and other 

critical skill capabilities and capacity. 

79. Senator INHOFE. Mr. Lynn and Dr. Carter, what is the project end state 

growth of the acquisition workforce? 

Mr. LYNN and Dr. CARTER. The Department continues to pursue the President’s 

March 2009 direction to ensure the acquisition workforce has the right capability 

and capacity. The President’s fiscal year 2011 budget request provides for continuing the Secretary of Defense initiative to grow the acquisition workforce by 

20,000 positions by 2015. While DOD force planning and requirements will evolve, 

the current estimate of workforce size by 2015 is 155,000. 

80. Senator INHOFE. Mr. Lynn and Dr. Carter, what is the impact of this efficiency initiative on the workload for the existing workforce? 

Mr. LYNN and Dr. CARTER. Our initiatives to improve buying power include targeting affordability and cost growth, incentivizing productivity and innovation in industry, promoting real competition, improving tradecraft in services acquisition, and 

reducing non-productive processes and bureaucracy. While these initiatives will 

focus acquisition workforce effort, they are not new and should be part of our normal expected workload as we accomplish the business of acquisition. DOD efforts 

to strengthen the acquisition workforce in size and quality are key to successful implementation of our acquisition reform efforts to improve how we buy and our buying power. 

81. Senator INHOFE. Mr. Lynn and Dr. Carter, how will another cost estimate expedite our acquisition process? 

Mr. LYNN and Dr. CARTER. Our intention is to employ ‘‘should cost analysis’’ [the 

additional cost estimate we believe you refer to] to drive productivity improvement 

into our programs and make the most efficient use of every taxpayer dollar. We 

want our program managers to scrutinize every element of program cost, assessing 

whether each element can be reduced relative to the year before, challenging learnVerDate Aug 31 2005 10:34 Apr 20, 2011 Jkt 000000 PO 00000 Frm 00077 Fmt 6633 Sfmt 6621 Y:\BORAWSKI\DOCS\65072.TXT JUNE PsN: JUNEB
74 

ing curves, dissecting overheads and indirect costs, and targeting cost reduction 

with profit incentive—in short executing to what the program ‘‘should cost.’’ The objective is to more efficiently manage scarce resources and drive leanness into each 

program. Should cost analysis is not specifically designed to expedite the acquisition 

process, but the information resulting from the analysis will facilitate better business arrangements, improved program planning, and promote more predictable cost, 

schedule and performance outcomes. 

QUESTIONS SUBMITTED BY SENATOR JOHN THUNE

FORCE STRUCTURE SUSTAINMENT AND MODERNIZATION

82. Senator THUNE. Dr. Carter and General Cartwright, as you know, Secretary 

Gates stated in his May 8, 2010, speech at the Eisenhower Library that ‘‘the fact 

that we are a nation at war . . . calls for sustaining the current military force structure’’ and that the goal of this efficiencies initiative is to ‘‘cut our overhead costs 

and to transfer those savings to force structure and modernization within the programmed budget.’’ 

On August 9, 2010, Secretary Gates stated that ‘‘the task before us is . . . to significantly reduce [the department’s] excess overhead costs and apply the savings to 

force structure and modernization.’’ Yet over the summer, there have been rumors 

that the B–1 bomber fleet, which has been a near constant presence above Afghanistan throughout the war, might be proposed to be retired in pursuit of the $2 billion 

in savings the Air Force is required to find under this initiative. General Petraeus 

was before this committee just a few months ago and spoke very highly of the B– 

1’s presence and performance in Afghanistan. So I’m perplexed by rumors such as 

these that propose retirement of the B–1 fleet to obtain the required savings, in 

light of Secretary Gates’ emphasis on sustaining and modernizing our force structure. 

Cutting force structure to find savings under this efficiencies initiative contradicts 

Secretary Gates’ directive to cut overhead costs and transfer those savings to force 

structure and modernization, does it not? 

Dr. CARTER and General CARTWRIGHT. The efficiencies initiatives will not cut 

force structure. The goal is to reduce excess overhead costs and apply the savings 

to operational forces and modernization. 

83. Senator THUNE. Dr. Carter and General Cartwright, can you confirm that the 

Department is looking only at bureaucratic redundancies and overhead and will not 

reduce force structure in order to provide the savings the Department seeks? 

Dr. CARTER and General CARTWRIGHT. The Department is determined to protect 

current and future warfighting ability. In pursuit of this goal, we are considering 

how to best allocate our scarce resources to maximize our capabilities. These considerations remain under review and deliberations. 

84. Senator THUNE. Dr. Carter and General Cartwright, has Secretary Gates 

issued a mandate which directs the Services to look beyond bureaucratic inefficiencies and redundancies and consider reducing current force structure as a means to 

modernize and recapitalize the current force structure? If so, please provide a copy 

of that mandate. 

Dr. CARTER and General CARTWRIGHT. The Secretary has not issued such a mandate. 

REDUCING FORCE STRUCTURE

85. Senator THUNE. Mr. Lynn, Dr. Carter, and General Cartwright, Secretary 

Lynn has stated that there is an ongoing ‘‘scrub’’ of the warfighting accounts to ‘‘see 

if we can gain better effectiveness, better efficiency, better productivity from those 

forces.’’ What reductions in force structure do you believe would be required to make 

the forces we have the most effective they can be to accomplish the mission? Please 

provide specifics. 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. This ‘‘scrub’’ refers to the Department’s commitment to identify every opportunity to reduce overhead and associated costs not an attempt to cut force structure. The Secretary’s goal was to effect 

a real cultural change in how we do business and gain efficiencies to protect current 

force structure and modernization. 

75 

86. Senator THUNE. Mr. Lynn, Dr. Carter, and General Cartwright, should we expect another announcement requesting a further reduction in combat air forces, 

similar to the 250 fighter aircraft that were retired this year, with those savings 

being applied to aircraft modernization and recapitalization? If so, what aircraft will 

you seek to retire? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. The Department is currently 

reviewing the fiscal year 2012 budget, and no final decisions have been made with 

respect to specific programs. Consistent with Secretary Gate’s efficiencies initiatives, 

the Department’s intent is to focus on efficiencies that enable movement of resources from overhead activities to fund capabilities required to fight the current 

war and prepare for future conflicts. 

87. Senator THUNE. Mr. Lynn, Dr. Carter, and General Cartwright, with regard 

to the B–1 bomber fleet, do you agree with General Petraeus, the current commander of our forces in Afghanistan, that the B–1 bomber aircraft plays ‘‘a very big 

role’’ with regard to providing close air support for our troops on the ground in Afghanistan, and that the B–1 is ‘‘a great platform’’ and ‘‘a very capable bomber’’? 

Mr. LYNN and Dr. CARTER. Yes, as a team member among multiple combat assets 

providing close air support to our troops in Afghanistan, the B–1 plays a large role 

and is a capable platform. The B–1 provides the Joint Force Commander massive 

conventional firepower coupled with significant loiter capability perfectly suited for 

the inconsistent tempo of today’s ongoing operations in Afghanistan. The B–1’s supersonic dash capability allows a single aircraft to perform as a ‘‘roving linebacker’’ 

over large portions of the Area of Responsibility. 

General CARTWRIGHT. The B–1 provides the Joint Force Commander conventional 

firepower coupled with a loiter capability well suited for the tempo of today’s ongoing operations. The B–1’s dash capability allows a single aircraft to perform as a 

roving standby asset over large portions of the area of responsibility (AOR). The Air 

Force continues to improve the B–1’s conventional capability through ongoing modernization efforts. For example, the B–1 is the threshold platform for the Extended 

Range version of the Joint Air-to-Surface Standoff Missile (JASSM–ER). When combined with the ongoing Fully Integrated Data Link (FIDL) modification, these investments will ensure the B–1 remains a leading-edge combat platform. 

88. Senator THUNE. Mr. Lynn, Dr. Carter, and General Cartwright, Secretary 

Gates has said that ‘‘the fact that we are a nation at war . . . calls for sustaining 

the current military force structure’’. The B–1 bomber fleet is an example of the 

kind of current military force structure fighting the war in Afghanistan that should 

be sustained rather than cut, is it not? 

Mr. LYNN and Dr. CARTER. The B–1 is a critical part of our combined team of 

platforms supporting our ground troops in Afghanistan. DOD is committed to the 

continuing sustainment and modernization of the B–1 fleet and will continue to 

work toward completing the modifications we have outlined in the Future Years Defense Program (FYDP). The Air Force is currently reviewing the B–1’s long-term 

role as part of the overall Long-Range Strike force structure, along with Tactical Air 

force structure, considering military requirements, modernization and sustainment 

costs, and fiscal constraints. 

General CARTWRIGHT. DOD continues to sustain and modernize the B–1 fleet and 

we will continue to work towards completing the modifications programmed in the 

FYDP. The Air Force is currently reviewing the B–1’s long-term role as part of the 

overall Long-Range Strike (LRS) force structure and will provide recommendations 

to DOD leadership for the proper balance of bomber assets. 

CONSOLIDATION OR CLOSURE OF EXCESS BASES AND OTHER FACILITIES

89. Senator THUNE. Mr. Lynn and General Cartwright, as part of his August 9, 

2010, announcements, Secretary Gates authorized the military departments to ‘‘consider consolidation or closure of excess bases and other facilities where appropriate.’’ 

At the time that you are answering this question in writing for the record, have 

there been any recommendations made about base closures or consolidations since 

the Secretary’s August 9 announcement? If so, please specify. 

Mr. LYNN and General CARTWRIGHT. Not to my knowledge. 

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GLOBAL FORCE POSTURE REVIEW

90. Senator THUNE. Mr. Lynn and General Cartwright, Secretary Lynn referred 

to an ongoing global force posture review during the hearing. When was the review 

authorized? 

Mr. LYNN and General CARTWRIGHT. The review began as part of the 2010 QDR. 

91. Senator THUNE. Mr. Lynn and General Cartwright, how long has the review 

been in effect? 

Mr. LYNN and General CARTWRIGHT. This review began as part of the 2010 QDR 

and is ongoing. 

92. Senator THUNE. Mr. Lynn and General Cartwright, when will the review be 

completed? 

Mr. LYNN and General CARTWRIGHT. We expect some elements of the review to 

be completed in time to inform the fiscal year 2012 budget. Beyond fiscal year 2012, 

the Department will continue to conduct rigorous analysis of global force posture, 

and consider adjustments of our approach as the environment warrants. 

93. Senator THUNE. Mr. Lynn and General Cartwright, who is conducting this review? 

Mr. LYNN and General CARTWRIGHT. The review is strategy-driven and led by the 

Office of the Under Secretary of Defense for Policy, in close consultation with other 

elements of OSD, the Joint Staff, the combatant commands, and the military departments and Services. 

94. Senator THUNE. Mr. Lynn and General Cartwright, what has been learned so 

far during the review? 

Mr. LYNN and General CARTWRIGHT. First, forward stationed and rotationally-deployed U.S. forces continue to be relevant and required. The long-term presence of 

U.S. forces abroad reassures allies and partners of our commitments—we cannot 

simply ‘‘surge’’ trust and relationships on demand. 

Second, our defense posture must balance the need for a permanent overseas 

presence with the need for a flexible ability to respond to contingencies, emerging 

threats, and global security needs. 

Third, we must balance the need for assured access to support ongoing operations 

with the risks of introducing fragility into the lines of communication. We will seek 

innovative ways to add strategic depth to our posture network. 

Fourth, America’s defense posture should provide a stabilizing influence abroad 

and be welcomed by the host nation. 

Finally, our defense posture will continuously adapt to changes in the strategic 

environment. Deliberate, ongoing assessments of national interests, military requirements and the strategic environment should guide U.S. global defense posture 

planning. 

95. Senator THUNE. Mr. Lynn and General Cartwright, have any conclusions been 

drawn during this review? 

Mr. LYNN and General CARTWRIGHT. First, forward stationed and rotationally-deployed U.S. forces continue to be relevant and required. The long-term presence of 

U.S. forces abroad reassures allies and partners of our commitments—we cannot 

simply ‘‘surge’’ trust and relationships on demand. 

Second, our defense posture must balance the need for a permanent overseas 

presence with the need for a flexible ability to respond to contingencies, emerging 

threats, and global security needs. 

Third, we must balance the need for assured access to support ongoing operations 

with the risks of introducing fragility into the lines of communication. We will seek 

innovative ways to add strategic depth to our posture network. 

Fourth, America’s defense posture should provide a stabilizing influence abroad 

and be welcomed by the host nation. 

Finally, our defense posture will continuously adapt to changes in the strategic 

environment. Deliberate, ongoing assessments of national interests, military requirements and the strategic environment should guide U.S. global defense posture 

planning. 

96. Senator THUNE. Mr. Lynn and General Cartwright, what are the objectives 

of this review? 

Mr. LYNN and General CARTWRIGHT. The purpose of the review is to examine the 

Department’s current approach to global posture and to make strategic judgments 

77 

about the need for adjustments. The review is strategy-driven, and seeks to rationalize global posture planning with resource constraints in a dynamic geostrategic 

environment. 

97. Senator THUNE. Mr. Lynn and General Cartwright, what is the intent of this 

review? 

Mr. LYNN and General CARTWRIGHT. The purpose of the review is to examine the 

Department’s current approach to global posture and to make strategic judgments 

about the need for adjustments. The review is strategy-driven, and seeks to rationalize global posture planning with resource constraints in a dynamic geostrategic 

environment. 

98. Senator THUNE. Mr. Lynn and General Cartwright, will this review be used 

to inform decisions on base closures and consolidations in the fiscal year 2012 budget? 

Mr. LYNN and General CARTWRIGHT. Our ongoing review of global posture assesses the strategic and operational implications of overseas basing. As such, it 

helps inform overseas closure and consolidation choices. 

99. Senator THUNE. Mr. Lynn and General Cartwright, will you provide us a copy 

of the complete review? 

Mr. LYNN and General CARTWRIGHT. The global posture review is an ongoing 

process to position the United States for emerging threats and opportunities in a 

dynamic geo-strategic environment. DOD provides an annual report to Congress on 

Global Defense Posture. DOD will complete the next iteration of this report during 

the first quarter of 2011. 

JOINT BASING

100. Senator THUNE. General Cartwright, according to a September 20, 2010, Air 

Force Times article, the Air Force Chief of Staff, General Schwartz, said that the 

2005 BRAC initiative to consolidate 26 installations into 12 joint bases is a failure 

that has not produced the cost savings the DOD expected. In fact, the Government 

Accountability Office stated ‘‘it was unclear whether joint basing will result in actual savings,’’ and an Air War College study stated that joint basing is ‘‘actually 

costing DOD more money than if the 26 bases and posts had remained separate.’’ 

What is your reaction to this criticism that the 2005 BRAC joint basing initiative 

has probably ended up costing money, rather than saving money? 

General CARTWRIGHT. The Chairman and I are supportive of the Department’s 

initiative to streamline installation support at 26 of our geographically proximate 

locations into 12 joint bases. The first five bases obtained full operational capability 

(FOC) on October 1, 2009, and we are less than 6 weeks into the final seven joint 

bases obtaining FOC. Therefore, it is too early to judge the overall success and viability of joint bases. Some innovative solutions have been enacted in support of joint 

bases. Application of a jointly developed support-standard could potentially have an 

impact across all installations. The Department has also implemented a formalized 

quality and cost control reporting mechanism for joint bases that could also have 

far reaching effects. As expected and planned, there has been cost growth early in 

implementation of these complex mergers. We fully expect lessons to be learned that 

will streamline operations and allow joint basing to realize its potential while also 

acting as a beta test for innovative solutions that can be applied to all joint bases. 

The 12 joint bases are: 

Phase 1 (established 1 Oct 09) 

1. Joint Base Andrews-Naval Air Facility Washington (AF Lead) 

2. Joint Base McGuire-Dix-Lakehurst (AF Lead) 

3. Joint Expeditionary Base Little Creek-Ft Story (Navy Lead) 

4. Joint Region Marianas (Navy Lead) = Naval Base Guam, Andersen AFB 

5. Joint Base Myer-Henderson Hall (Army Lead) 

Phase 2 (established 1 Oct 10) 

6. Joint Base Charleston (AF Lead) 

7. Joint Base Elmendorf-Richardson (AF Lead) 

8. Joint Base San Antonio (AF Lead) = Lackland AFB, Randolph AFB, Fort Sam 

Houston 

9. Joint Base Langley-Eustis (AF Lead) 

10. Joint Base Anacostia-Bolling (Navy Lead) 

11. Joint Base Pearl Harbor-Hickam (Navy Lead) 

78 

12. Joint Base Lewis-McChord (Army Lead) 

JOINT UNMANNED AIRCRAFT SYSTEMS CENTER OF EXCELLENCE

101. Senator THUNE. Mr. Lynn, Dr. Carter, and General Cartwright, with regard 

to the proposed closure of JFCOM, I’m concerned about the future of the Joint Unmanned Aircraft Systems Center of Excellence (JUAS COE), which is owned by 

JFCOM, and is headquartered at Creech AFB in Nevada. One of the key issues 

General Odierno said he wanted to focus on as the new head of JFCOM was to 

bring his many years of experience as a commander in Iraq to bear on the issue 

of coordinating intelligence, surveillance, and reconnaissance (ISR) assets and understanding how to best utilize them in an asymmetric environment. Can you discuss what the plan is for this JUAS COE? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. The mission of the JUAS COE 

is to optimize Joint UAS employment through the development and integration of 

UAS common operating standards, capabilities, concepts, technologies, doctrine, tactics, techniques, procedures, and training. The JUAS COE publishes the Joint UAS 

CONOPS, where they utilize lessons learned from current operations, to form a joint 

vision for the operation, integration, and interoperability of UAS. The CONOPs examine unmanned-manned integration, airspace management, and urban operations 

issues. This joint look is critical as we rely more and more on UAS. 

We are reviewing all USJFCOM functions, including the JUAS COE, to determine 

whether the continuation of each function is essential. These and other considerations, will inform the Secretary of Defense’s recommendations and decisions concerning each of these functions. 

102. Senator THUNE. Mr. Lynn, Dr. Carter, and General Cartwright, who will own 

it and where will it be located? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. The integration of unmanned 

aircraft systems (UAS) into joint operations has improved and the need for a separate center of excellence to manage the joint integration of these systems is yet to 

be determined. The knowledge and expertise associated with the UAS operations located at Creech Air Force Base is being considered to serve as a catalyst to drive 

the continued development and improvement of the tactics, techniques, and procedures associated with this maturing capability. 

103. Senator THUNE. Mr. Lynn, Dr. Carter, and General Cartwright, do you believe this is an important initiative in light of our heavy reliance on this capability 

in the wars we’re fighting? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. The JUAS COE is an important 

initiative with the mission to optimize Joint UAS employment through the development and integration of UAS common operating standards, capabilities, concepts, 

technologies, doctrine, tactics, techniques, procedures, and training. The JUAS COE 

publishes the Joint UAS CONOPS, where they utilize lessons learned from current 

operations, to form a joint vision for the operation, integration, and interoperability 

of UAS. The CONOPs examine unmanned-manned integration, airspace management, and urban operations issues. This joint look is critical as we rely more and 

more on UAS. 

We are reviewing all USJFCOM functions, including the JUAS COE, to determine 

whether the continuation of each function is essential and unique. These and other 

considerations, will inform the Secretary of Defense’s recommendations and decisions concerning each of these functions. 

104. Senator THUNE. Mr. Lynn, Dr. Carter, and General Cartwright, what can be 

done to ensure that General Odierno will still be able to focus on this important 

issue if JFCOM is in fact closed? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. Any decision concerning the 

JUAS COE will take into account current and future operational UAS and ISR capability requirements of joint mission roles across all Services and combatant commanders. 

FUNDING FOR ADVISORY AND ASSISTANCE CONTRACTORS IN INTELLIGENCE

105. Senator THUNE. Mr. Lynn, Dr. Carter, and General Cartwright, Secretary 

Gates in his August 9, 2010, speech said that he was implementing a 10 percent 

reduction in funding for advisory and assistance contractors in intelligence areas 

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tions. Following the attacks of September 11, 2001, we determined that we had a 

critical shortfall in intelligence and immediately began building up this capability. 

It takes years and in some cases decades to build up experienced personnel. How 

will you determine the proper level of manpower to eliminate while ensuring we 

won’t harm our current intelligence capability? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. The Department’s efficiency initiatives are designed to protect current and future capability; saving money and reallocating those savings towards building capabilities is a means to that end. In that 

respect, we are approaching the intelligence review with the same methodology we 

are approaching every other part of the Department. We are looking for unnecessary 

redundancies and overhead that offer little contribution to the critical capabilities 

that you reference. As part of that effort, we are reviewing and prioritizing the Department’s Civilian Senior Executive requirements, to include our Defense Intelligence Senior Executive Service and Defense Intelligence Senior Level positions. 

While this work is still in process, we are actively involving the Director of National 

Intelligence and both the providers of intelligence capabilities and their end users 

in an effort to get a complete understanding of where there are opportunities to 

shift resources toward highly valued applications. 

106. Senator THUNE. Mr. Lynn, Dr. Carter, and General Cartwright, how much 

in savings do you expect to gain from this 10 percent reduction? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. These reductions are still under 

review. We expect to provide you more information on these savings by January. 

REDUCING CONGRESSIONAL REPORTS WHILE MAINTAINING OVERSIGHT

107. Senator THUNE. Mr. Lynn, Secretary Gates stated in his August 9, 2010, 

Pentagon briefing that ‘‘this Department is awash in taskings for reports and studies. In 1970, the Pentagon produced a total of 37 reports for Congress, a number 

that topped off at more than 700 reports in last year’s cycle.’’ In addition he stated 

that in order to accomplish these reports, the Department employs nearly 1,000 contractors with more than 200 of them working full time with a good number of those 

reports internally driven, with the remaining being mandated by Congress. Can you 

discuss why you think there has been such an increase in the number of required 

reports? 

Mr. LYNN. There are a number of reasons and I’ll just summarize a few. First, 

considering that the Department has waged two wars spanning most of the past 

decade, and that its operating budget has grown apace, it is not surprising that 

Congressional oversight has expanded through its report assignments. Second, during the annual Authorization and Appropriation bill processes legislative proposals 

that need more time to fully mature into viable statutory provisions are often supplanted by reporting requirements, so that both Congress and the Department can 

gain valuable information to make good proposed law into better and viable law. 

Third, and finally, I also believe that the congressional report process itself produces 

duplicative reporting requirements and requests, and that both Congress and the 

Department would be better served if, in partnership, we could more often combine 

similar reports and provide committees interested in the same information one report that satisfied all of their oversight requirements, rather than producing many 

reports on the same topic from incrementally different perspectives or data-sets. 

108. Senator THUNE. Mr. Lynn, Secretary Gates has proposed working with Congress to meet our needs while at the same time reducing the number of mandated 

reports. Can you discuss your thoughts on how to go about reducing the number 

of mandated studies? 

Mr. LYNN. The congressional reports process is not appropriately coordinated. For 

example, many of the requested reports cover similar issues or are outdated. We 

would like to have an agreement with Congress that streamlines reports so as to 

eliminate duplication and to ensure that what we do provide continues to have 

value. 

109. Senator THUNE. Mr. Lynn, how would you recommend Congress conduct 

oversight and see the analysis behind your decisions without requiring these reports? 

Mr. LYNN. The Secretary believes that the intent of eliminating duplication and 

overlap in the requested reports should not negatively impact Congress’ oversight 

responsibilities. More efficient use of the Department’s resources will enhance the 

quality of the reports and the underlying analysis used to support decisions. 

80 

ARMY-AIR FORCE UNMANNED AERIAL VEHICLE DUPLICATING

110. Senator THUNE. Mr. Lynn, Dr. Carter, and General Cartwright, the Army’s 2011 budget proposal requested over $578 million toward the acquisition of MQ–1 

unmanned aerial vehicles (UAV), as well as their payload and weaponization. With 

that money, the Army would buy 26 more aircraft next year in addition to the 24 

purchased this year with 158 total aircraft in the Army inventory by the end of 

2015. By comparison, the Air Force has 144 MQ–1s today. The rationale for these 

duplicative purchases is that there is an urgent need for more ISR platforms in the 

field. Specifically, the Air Force has been tasked to provide 65 combat air patrols 

(CAP) on a daily basis using these types of aircraft. As part of this efficiency initiative, Secretary Gates has directed each Service to find savings of $2 billion in next 

year’s budget. What synergies do you envision could be made between the Army and 

the Air Force with regard to unmanned capabilities and where do you think they 

can save money and reduce duplication? 

Mr. LYNN and Dr. CARTER. The Air Force MQ–1B Predator and the Army MQ– 

1C Gray Eagle are not duplicative efforts. In fiscal year 2009, the Air Force ceased 

procurement of the MQ–1B and has transitioned to maximum procurement of MQ– 

9 in order to effectively field 65 orbits of combined MQ–1B/MQ–9 aircraft. Remaining procurement in the MQ–1 Predator program is for conversion of existing MQ– 

1 aircraft to the MQ–1B configuration and to support incremental modification of 

those aircraft to include new capabilities such as digital video and encrypted data 

links. As the Air Force has transitioned from the MQ–1B to the more capable MQ– 

9, the Army plans to meet their ISR capability needs with the more capable MQ– 

1C aircraft. The MQ–1C program has leveraged significant investment in the MQ– 

1B program to field initial capability quickly in the form of Quick Reaction Capability (QRC) deployments as the system completes developmental testing and heads 

into full-rate production. The Office of the Secretary of Defense’s Unmanned Aircraft 

Systems Task Force was directed in 2007 to look for acquisition efficiency areas between the two systems. The Task Force found efficiencies and savings in areas of 

the sensor ball and communications data links used by both systems. The Army and 

Air Force have committed to procurement of a common sensor ball configuration between MQ–1B and MQ–1C as well as fielding interoperable communication data 

links. The Task Force is continuing to look at ground station architectures with the 

intent of defining a future architecture that would allow the military departments 

to take advantage of the power of a service-oriented-architecture to achieve increased competition and efficiency in software development. 

General CARTWRIGHT. The Army’s MQ–1C Gray Eagle and the Air Force’s MQ– 

1B Predator are different aircraft that complement each other in meeting extensive 

ISR demands. Physically, the MQ–1C was built from lessons learned using the MQ– 

1B. The MQ–1C is slightly larger and has improved payload and range performance 

than its predecessor, the MQ–1B. Operationally, the MQ–1B provides theater level 

support, while the MQ–1C directly supports ground commanders with tactical ISR 

data, thereby enabling a full spectrum of support. The Air Force will operate both 

the MQ–1B (procurement ended in fiscal year 2009) and the much larger, more capable, MQ–9 Reaper to meet the required theater-level 65 CAPs by the fourth quarter fiscal year 2013. Remaining procurement funding in the MQ–1B Predator program supports modifications such as encrypted data link. 

The Department continues to pursue commonality and full interoperability where 

appropriate. The Services are dedicated to fielding interoperable communication 

data links and a common (EO/IR) sensor ball configuration between both the Predator and the Gray Eagle. The UAS Task Force is also defining a future ground station architecture that would significantly drive down costs by moving away from 

proprietary stand alone ground station architectures. 

111. Senator THUNE. Mr. Lynn, Dr. Carter, and General Cartwright, are you seeing this as an opportunity for the two Services to work together to achieve the goal 

of 65 CAPs that the Combatant Commander has requested? 

Mr. LYNN and Dr. CARTER. The Resource Management Directive 700 signed on 

December 23, 2009 directed the Air Force to add funds to procure additional MQ– 

9 Reaper aircraft and to deploy 65 Combat Air Patrols (CAP) of MQ–1B Predator 

and MQ–9 Reaper by 2013 to meet theater-level requirements. There are currently 

44 Air Force CAPs in place, 30 MQ–1B CAPs and 14 MQ–9 Reaper CAPs supporting 

theater-level needs. MQ–9 Reaper aircraft continue to deliver until a total of 65 

CAPs of MQ–1/MQ–9 capability are fielded in fourth quarter, fiscal year 2013. 

Separately, the Army is delivering organic Intelligence, Surveillance, and Reconnaissance capability with a variety of systems including the Raven, Shadow, and 

Gray Eagle Unmanned Aircraft System at the brigade level and below. This capaVerDate Aug 31 2005 10:34 Apr 20, 2011 Jkt 000000 PO 00000 Frm 00084 Fmt 6633 Sfmt 6621 Y:\BORAWSKI\DOCS\65072.TXT JUNE PsN: JUNEB
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bility is not duplicative with higher theater level requirements but reduces the organic ground forces requirement that is requested at the theater level. Capacity at 

both the organic and theater-level provides flexibility and responsiveness to meet a 

range of warfighter requirements. 

General CARTWRIGHT. We are continuously looking at operations to provide the 

combatant commander with the right level and type of capability to prosecute our 

strategy. The Army’s MQ–1C and the Air Force’s MQ–1B are complementary aircraft that support the warfighter at the tactical and theater level respectively. The 

65 CAPs (combined Air Force MQ–1B/MQ–9 aircraft) support the Combatant Commander at the theater level. The MQ–1B Predator and MQ–9 Reaper systems are 

on a path to reach the 65 CAP goal by the fourth quarter of fiscal year 2013. 

INSOURCING

112. Senator THUNE. Mr. Lynn and Dr. Carter, I would like to discuss for a few 

moments Secretary Gates’ insourcing initiative. Under this initiative, he directed a 

10 percent reduction each year, over the next 3 years, in funding for support contractors. His goal is to reduce the number of contractors that are performing functions that are inherently governmental. Can you describe how big of a problem this 

is within the DOD? 

Mr. LYNN and Dr. CARTER. The Secretary’s goal in reducing funding for service 

support contractors is to reduce the Department’s overreliance on those types of contractors. Independent of that goal, functions that are inherently governmental 

should not be performed by contractors. While there may be some overlap between 

these initiatives, they are largely separate. 

113. Senator THUNE. Mr. Lynn and Dr. Carter, what savings do you expect to receive from this initiative and would you agree that we should stop insourcing jobs 

that are not inherently governmental? 

Mr. LYNN and Dr. CARTER. Not necessarily. On a case-by-case basis DOD components and organizations find that they can perform some functions more cost effectively using government civilians than through continued private sector personnel. 

In other cases, the private sector may provide the most efficient and effective means 

of providing valued functions. The goal is to curb cost growth and redirect spending 

to more highly valued uses. We can provide more information on the extent of these 

savings by January. 

ECONOMIES OF SCALE AND MULTI-YEAR BUDGET

114. Senator THUNE. Mr. Lynn and Dr. Carter, one of the goals that Secretary 

Gates outlined was the ability to achieve greater benefits in cost and efficiency 

through the use of economies of scale. Although he used the consolidation of the IT 

infrastructure as an example, I believe another example of economies of scale would 

be the ability to make multi-year purchases. We recently saw the benefit of this 

when we authorized the Navy to purchase F/A–18s as part of a multi-year contract. 

I recently proposed an amendment as part of an overall budget reduction plan, that 

proposes transitioning the budget process to a multi-year process versus accomplishing it every year. Creating a budget every year doesn’t seem to be the best way 

to save money. Multi-year contracts allow us the opportunity to buy equipment over 

2 years and take advantage of a multi-year buy in purchasing negotiations. What 

inefficiencies do you see with maintaining a yearly budget and do you believe you 

could obtain more savings from contractors if the DOD budget transitioned to a 

multi-year budget? 

Mr. LYNN and Dr. CARTER. From an acquisition perspective, mature major weapon system procurements can often benefit from multi-year purchases and/or multiyear budgets by providing some fiscal stability. Our concern is that we do not give 

up flexibility while gaining stability. Annual budgets with multi-year appropriations 

work well for investment programs, but it depends on the acquisition stage of the 

major weapon system. Multi-year procurement contracts are best suited to those 

programs with consistent requirements, reasonable production runs, and stable design configurations. Without these attributes, there is greater risk in not achieving 

the projected savings associated with economies of scale or absorbing costs from 

breaking a multi-year commitment. Multi-year budgeting does not guarantee certainty in the procurement process, and there is no guarantee that contractors will 

pass on savings to the government. Multi-year budgeting is effective if it is used 

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ment to accommodate dynamic program requirements and the changing fiscal environment. 

QUESTIONS SUBMITTED BY SENATOR SUSAN COLLINS

SAVINGS DISTRIBUTION

115. Senator COLLINS. Mr. Lynn, a key assumption of Secretary Gates’ efficiency 

initiatives is that the Services will be able to direct the savings they identify in 

overhead towards modernization accounts for additional ships, planes, or other assets. So long as the Services are actually empowered to reinvest savings from overhead costs to modernization accounts, many of us that have urged the Department 

to increase its investment in building and maintaining a 313-ship Navy or a larger 

Air Force might welcome such a proposal. However, as you know, there have been 

instances in the past where the Services identified savings but were unable to translate those savings into increased procurement. Has the President or the Director of 

the Office of Management and Budget assured you or Secretary Gates that the savings identified by the Services will not be used to reduce the overall defense budget 

top-line or be redirected to other priorities? 

Mr. LYNN. The President understands and supports the effort. Secretary Gates explained that the goal is not to reduce the Department’s top line budget and that 

the Services will be able to keep the savings they generate to reinvest in higher priority warfighting needs and modernization programs. The President has called the 

effort, ‘‘another step forward in the reform efforts.to reduce excess overhead costs, 

cut waste, and reform the way the Pentagon does business.’’ He has also affirmed 

that the funds saved will help us sustain the current force structure and make needed investments in modernization in a fiscally responsible way. 

116. Senator COLLINS. Mr. Lynn, in his August 9, 2010, announcement of the efficiency initiatives, Secretary Gates stated that, ‘‘I believe that sustaining the current 

force structure and making needed investments in modernization will require annual real growth of 2 to 3 percent, which is 1 to 2 percent above current top-line 

budget projections.’’ This statement suggests that Secretary Gates believes that a 

1 to 2 percent growth in the annual defense budget is a fair and realistic assumption for the future. Have you received assurances from the President or the Director 

of the Office of Management and Budget that they share Secretary Gates’ assumption that a 1 to 2 percent growth in the DOD budget is a fair and realistic assumption for future budget projections? 

Mr. LYNN. The President has not commented specifically on this item, although 

he applauded Secretary Gates on August 9 for undertaking this critical effort to support our men and women in uniform and strengthen our national security. 

117. Senator COLLINS. Mr. Lynn, as a part of the Department’s efficiency initiatives, Secretary Gates authorized the military Services to consider consolidating or 

closing excess military facilities as a part of their efforts to find savings in their 

budgets. As you know, in many towns and communities, a military installation can 

serve as the economic engine for an entire region. The announcement made by Secretary Gates creates immense uncertainty for the many businesses in these communities that are struggling in an already uncertain economic environment. It is the 

investment by these very businesses that can create many of the jobs that are needed in our country. What assurances, if any, can you provide the businessmen and 

women looking to expand their businesses in the hundreds of communities that are 

home to military installations about the future of those military installations? 

Mr. LYNN. Closure and realignment decisions are difficult and the Department 

does not undertake them lightly. While Military Value has been the primary consideration in each of the five BRAC rounds, the Department fully considered the impact on local communities and is keenly aware of the close relationship between 

military installations and the surrounding communities. In each round, the Department made difficult choices based on thorough analyses and subsequent evaluation 

by an independent, legislatively mandated commission. In carrying out any closure 

or realignment decision, the Department seeks to minimize the economic impact of 

the decision to the local community. The Office of Economic Adjustment, in coordination with other Federal agencies, assists States and communities to work with affected businesses, workers, and community stakeholders to understand and respond 

to the impacts of these actions. 

83 

BASE CLOSURE

118. Senator COLLINS. Mr. Lynn, Dr. Carter, and General Cartwright, when budget analysts go searching for defense savings, it usually does not take long for someone to suggest another BRAC round. In fact, General Roger Brady, the four-star 

general who commands our U.S. Air Forces in Europe, said on September 15, 2010, 

that we have too many bases and that we need to consider additional base closures. 

However, it seems to me that it is premature to discuss a future BRAC round until 

we know if the ongoing 2005 BRAC round resulted in the savings it promised to 

deliver. A July 2010 GAO analysis found that DOD’s reported costs for the 2005 

Round are not complete because the Army has not reported all of its BRAC-related 

costs. In addition, the current $35 billion cost estimate to implement the 2005 

BRAC is 50 percent more than the Department’s original cost estimate, and costs 

could increase as the BRAC 2005 deadline approaches next September. Given the 

current status of the 2005 BRAC round and the economic uncertainty facing many 

of our businesses, do you or this administration support another BRAC round? 

Mr. LYNN, Dr. CARTER, and General CARTWRIGHT. The Secretary has directed the 

military Departments to ‘‘consider consolidation or closure of excess bases and other 

facilities where appropriate.’’ Regarding savings, the GAO estimated in its November 2009 report that the BRAC 2005 round would produce $3.9 billion in annual 

recurring savings beginning in fiscal year 2012. These savings will be used to support new capabilities and improve operational efficiencies. This is a significant benefit that comes as a direct result of successfully implementing the BRAC 2005 recommendations. The Department is not currently seeking authority for another 

BRAC round. 

119. Senator COLLINS. Dr. Carter, Secretary Gates has asked the Services to identify $100 billion in savings over the next 5 years. Would you estimate the savings 

that will result over 5 years from the changes you are seeking strictly within the 

acquisition community alone? 

Dr. CARTER. Last year, we identified savings in the defense budget by canceling 

unneeded programs, and we will need to do more of that. We must also find savings 

within active programs and in ongoing activities. The Department must achieve 

what economists call ‘‘productivity growth’’ and what I have called ‘‘learning to do 

more without more;’’ delivering the programs that both the Department and 

warfighter need for the amount of money we are going to get. 

The goal of this productivity growth is to redirect defense budget dollars from unproductive to productive purposes, and we will get there by laying the policy groundwork to increase the Department’s buying power as I detailed in my September 14 

memorandum to acquisition professionals. Redirecting tens of billions of dollars to 

productive purposes is a result of the necessary changes we were making in the way 

we do business; we are not implementing broad reforms to simply reach a fixed dollar target of saving, and doing so would be dishonest to the process. Even if it were 

possible, we would be reluctant to project the total value of resources redirected over 

the next 5 years in acquisitions. Right now we are focused on getting the policies 

right and implementing true reforms, and billions in savings will be the natural result. 

ACQUISITION WORKFORCE

120. Senator COLLINS. Dr. Carter, the defense acquisition workforce has experienced an increasing workload resulting from expanded uses of services contracts, increased procurement requirements from Congress, and efforts supporting counterinsurgency operations over the last 9 years. In your September 14, 2010, memo to 

acquisition professionals, you describe the importance of achieving productivity 

growth—in your words: to ‘‘do more without more.’’ Given that the acquisition workforce is already stressed and possibly overworked, are you confident that there is 

existing capacity in the acquisition workforce to follow the 23 points identified in 

the memo to achieve the intended savings targets in addition to their current duties 

and responsibilities? 

Dr. CARTER. Yes. In addition, DOD is continuing efforts to strengthen the acquisition workforce size and quality. This is key to successful implementation of our acquisition reform efforts to improve how we buy and our buying power. Also, reducing non-productive processes and bureaucracy is a key efficiency initiative that will 

enable the acquisition workforce to focus critical skills and efforts on improving acquisition outcomes. 

84 

121. Senator COLLINS. Dr. Carter, one of the targeted areas in your 23-point plan 

is to mandate ‘‘affordability’’ as a requirement. Can you explain how this requirement will be evaluated in acquisition decisions? 

Dr. CARTER. In my September 14 memorandum to acquisition professionals, I outlined several specific measures directing program managers to treat affordability as 

a requirement before granting milestone authority to proceed with the program. 

Specifically, at Milestone A, my Acquisition Decision Memorandum (ADM) approving formal commencement of the program will contain an affordability target to be 

treated by the program manager like a Key Performance Parameter (KPP) such as 

speed, power, or data rate—i.e., a design parameter not to be sacrificed or compromised without my specific authority. At Milestone B, when a system’s detailed 

design is begun, I will require presentation of a systems engineering tradeoff analysis showing how cost varies as the major design parameters and time to complete 

are varied. This analysis would allow decisions to be made about how the system 

could be made less expensive without loss of important capability. This analysis 

would then form the basis of the ‘‘Affordability Requirement’’ that would be part of 

the ADM decision. These measures will help us control costs while delivering the 

best possible capability to the warfighter. 

122. Senator COLLINS. Dr. Carter, in your September 14, 2010, memo, you indicate that you want to work with Congress to develop special rules to eliminate some 

of the detailed Nunn-McCurdy reporting for critical cost breaches and the associated 

requirement for a Milestone A or Milestone B recertification. You identified more 

than $10 million and 95,000 hours of overhead labor associated with compliance of 

Nunn-McCurdy requirements for programs that had a critical cost growth breach 

simply based upon a change of procurement quantity approved by Congress. What 

was the impact on the cost, schedule, and capabilities of the programs that were 

subjected to a Nunn-McCurdy review simply because of a change in the procurement quantity? 

Dr. CARTER. First, let me state that I think there has been a misunderstanding 

about the impact on the Department for having to perform Nunn-McCurdy reviews 

for programs that have experienced a critical unit cost growth simply based upon 

a change of procurement quantity. The impact has not been the $10 million and 

95,000 hours of overhead labor for those programs alone. Rather, as my September 

14 memorandum set forth, this estimate covered all six of the Nunn-McCurdy reviews that the Department conducted in the spring of 2010. An actual number for 

programs that have experienced a critical unit cost growth because of quantity adjustments is not possible, because the Department does not closely segregate costs 

for its overhead functions and it does not track Nunn-McCurdy review cycles for socalled ‘‘innocent’’ or ‘‘administrative’’ breaches separate from those breaches where 

problems in program execution have triggered the unit cost growth. We comply irrespective of the fundamental causes. However, in cases where the unit cost breach 

can be attributed to changes in quantity, the fundamental, if not sole, question is 

whether it is in the best interests of the Government to continue with the acquisition of the program notwithstanding the increase in unit cost. 

There are also costs imposed by second order impacts stemming from the NunnMcCurdy certification process. Regardless of the circumstances, if the program is 

certified, the previous Milestone must be rescinded and repeated, and no funding 

can be obligated for any contract without specific prior approval of the Milestone 

Decision Authority (MDA). A repeat Milestone requires new cost estimates, new 

Milestone certification documentation, preparation reviews, etc. Much of this is required in separate statutory requirements for those decision points, but it becomes 

necessary as a result of the Nunn-McCurdy review. Repeating these things comes 

at additional expense to the taxpayer and, in the case of quantity-driven changes, 

adds little value to the process or product if the Department has already answered 

the fundamental question about proceeding with the program. The additional time 

and effort obtaining MDA approval is burdensome and distracting to those executing 

the programs. 

123. Senator COLLINS. Dr. Carter, what changes to policy, regulation, or statute 

would be required to implement the special rules regarding the Nunn-McCurdy 

process that you describe in your September 14, 2010, memo? 

Dr. CARTER. I fully support the Nunn-McCurdy process, to include the recent improvements that were made by the WSARA of 2009. The Department takes each of 

these breaches seriously, and we conduct the prescribed review according to the provisions of the statute. However, each review is costly to perform and should be 

avoided when the critical breach is caused primarily by a change in quantity that 

was made in response to changes in threat or other fielding requirements and not 

85 

the result of poor performance or mismanagement. For example, the Army Acquisition Objective for the Guided Multiple Launch Rocket System and, more recently, 

the Excalibur projectile program were both reduced by more than 70 percent due 

to an approved change in force requirements. Due to a learning curve and the amortization of development costs, significant quantity reductions frequently result in 

critical Nunn-McCurdy breaches. 

My proposed revision to section 2433a of title 10, U.S.C., would reduce the statutory requirements for critical Nunn-McCurdy breaches caused primarily by quantity 

changes (as long as the quantity change was not made as a result of an increase 

in unit cost). In our proposal the root cause of the cost growth would need to be 

validated by the WSARA-created office of Program Assessment & Root Cause Analysis. Since the statutory requirements of a Nunn-McCurdy critical breach under section 2433a are extensive, this section would reduce the requirements for quantityrelated critical breaches. That is, for the review, only a root cause analysis would 

be conducted to substantiate the causal effects of the quantity change, followed by 

a written statement from me that it is in the best interests of the Government to 

continue the acquisition program notwithstanding the increase in unit cost. 

[Appendixes A through G follow:] 

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APPENDIX A 


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APPENDIX B 


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928ful61.eps
113 


928ful62.eps
114 


928ful63.eps 928ful64.eps
115 


928ful65.eps 928ful66.eps
116 

APPENDIX D 

[Deleted.] 

117 

APPENDIX E 


928ful25.eps
118 


928ful26.eps
119 


928ful27.eps
120 


928ful28.eps
121 


928ful29.eps
122 


928ful30.eps
123 

APPENDIX F 


928ful31.eps
124 


928ful32.eps
125 


928ful33.eps
126 


928ful34.eps
127 


928ful35.eps
128 


928ful36.eps
129 


928ful37.eps
130 


928ful38.eps
131 


928ful39.eps
132 


928ful40.eps
133 


928ful41.eps
134 


928ful42.eps
135 


928ful43.eps
136 


928ful44.eps
137 


928ful45.eps
138 


928ful46.eps
139 

APPENDIX G 


928ful47.eps
140 


928ful48.eps
141 


928ful49.eps
142 


928ful50.eps
143 


928ful51.eps
144 


928ful52.eps
145 

[Whereupon, at 12:58 p.m., the committee adjourned.] 

Æ 


928ful53.eps