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i 

58–104 2010

[H.A.S.C. No. 111–134] 

ADMINISTRATION PERSPECTIVES ON 

MANAGING THE DEFENSE ACQUISITION 

SYSTEM AND THE DEFENSE 

ACQUISITION WORKFORCE 

HEARING 

BEFORE THE

PANEL ON DEFENSE ACQUISITION REFORM 

OF THE

COMMITTEE ON ARMED SERVICES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

MARCH 11, 2010 
(II) 

PANEL ON DEFENSE ACQUISITION REFORM 

ROBERT ANDREWS, New Jersey, Chairman 

JIM COOPER, Tennessee 

BRAD ELLSWORTH, Indiana 

JOE SESTAK, Pennsylvania 

K. MICHAEL CONAWAY, Texas 

DUNCAN HUNTER, California 

MIKE COFFMAN, Colorado 

ANDREW HUNTER, Professional Staff Member 

JOHN WASON, Professional Staff Member 

MEGAN HOWARD, Staff Assistant 
(III) 

C O N T E N T S 

CHRONOLOGICAL LIST OF HEARINGS 

2010 

Page 

HEARING: 

Thursday, March 11, 2010, Administration Perspectives on Managing the 

Defense Acquisition System and the Defense Acquisition Workforce ............. 1 

APPENDIX: 

Thursday, March 11, 2010 ...................................................................................... 35 

THURSDAY, MARCH 11, 2010 

ADMINISTRATION PERSPECTIVES ON MANAGING THE DEFENSE ACQUISITION SYSTEM AND THE DEFENSE ACQUISITION WORKFORCE 

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS 

Conaway, Hon. K. Michael, a Representative from Texas, Ranking Member, 

Panel on Defense Acquisition Reform ................................................................ 3 

Cooper, Hon. Jim, a Representative from Tennessee, Panel on Defense Acquisition Reform ........................................................................................................ 1 

WITNESSES 

Carter, Hon. Ashton B., Under Secretary of Defense for Acquisition, Technology and Logistics, U.S. Department of Defense ........................................... 4 

Hale, Hon. Robert F., Under Secretary of Defense (Comptroller), U.S. Department of Defense .................................................................................................... 7 

McGrath, Elizabeth A., Acting Deputy Chief Management Officer, U.S. Department of Defense ............................................................................................. 9 

APPENDIX 

PREPARED STATEMENTS: 

Andrews, Hon. Robert, a Representative from New Jersey, Chairman, 

Panel on Defense Acquisition Reform ......................................................... 39 

Carter, Hon. Ashton B. .................................................................................... 44 

Conaway, Hon. K. Michael .............................................................................. 42 

Hale, Hon. Robert F. ........................................................................................ 57 

McGrath, Elizabeth A. ..................................................................................... 64 

DOCUMENTS SUBMITTED FOR THE RECORD: 

[There were no Documents submitted.] 

WITNESS RESPONSES TO QUESTIONS ASKED DURING THE HEARING: 

Mr. Andrews ..................................................................................................... 81 

Mr. Hunter ........................................................................................................ 81 

QUESTIONS SUBMITTED BY MEMBERS POST HEARING: 

Mr. Conaway ..................................................................................................... 85 

(1) 

ADMINISTRATION PERSPECTIVES ON MANAGING THE 

DEFENSE ACQUISITION SYSTEM AND THE DEFENSE 

ACQUISITION WORKFORCE 

HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, DEFENSE ACQUISITION REFORM PANEL, Washington, DC, Thursday, March 11, 2010. 

The panel met, pursuant to call, at 3:02 p.m., in room 2261, Rayburn House Office Building, Hon. Robert Andrews (chairman of the 

panel) presiding. 

OPENING STATEMENT OF HON. JIM COOPER, A REPRESENTATIVE FROM TENNESSEE, PANEL ON DEFENSE ACQUISITION 

REFORM 

Mr. COOPER. [Presiding.] The hearing will come to order. 

Welcome to the 13th meeting of the Defense Acquisition Reform 

Panel. 

No, I am not Rob Andrews, nor do I pretend to be. I am certainly 

not from New Jersey. But Rob is unavoidably detained for a few 

moments, so we will kick off the hearing. And I would like to read 

his opening statement on his behalf. 

Today the panel approaches the end of its work. Last week we 

issued the panel’s interim findings and recommendations, and 

today we hear from the Administration on their acquisition reform 

priorities and their thoughts about the panel’s work. 

Having received this feedback, as well as feedback from our previous witnesses and other experts, we intend to deliver a final report to Chairman Skelton and Ranking Member McKeon at the end 

of next week. At that point, the panel’s official mandate will expire. 

However, the panel’s recommendations will serve as the basis of 

legislation that will be considered in the House this year, and we 

expect, enacted into law. 

Today’s hearing marks the panel’s 13th hearing since we were 

appointed by Chairman Skelton and then-Ranking Member John 

McHugh in March of last year. In these hearings, the panel has 

found that, while the nature of defense acquisition has substantially changed since the end of the Cold War, the defense acquisition system has not kept pace. 

The system remains structured primarily for the acquisition of 

weapon systems at a time when services represent a much larger 

share of the Department’s acquisitions. And the system is particularly poorly designed for the acquisition of information technology, 

even though we are now in the Information Age. 

Even in the acquisition of weapon systems, the Department’s historical strength, the system continues to generate development 
2 

timeframes for the major systems measured in decades—an approach which has resulted in unacceptable cost growth, negative effects on industry and, in too many cases, a failure to meet 

warfighter needs. 

The panel has found that there is little commonality across defense acquisition systems. The acquisition of weapon systems, the 

acquisition of commercial goods and commodities, the acquisition of 

services, and the acquisition of information technology have very 

diverse features and challenges. 

In a few areas, however, the panel has found common issues. 

Across all categories of acquisition, significant improvements can 

be made in the following: managing the acquisition system; improving the requirements process; developing and incentivizing the 

highest quality acquisition workforce; reforming financial management; and getting the best from the industrial base. 

The panel began with the question of how well the defense acquisition system is doing in delivering value to the warfighter and the 

taxpayer. For most categories of acquisition, only anecdotal information exists about instances where the system either performed 

well, or poorly. Even where real performance metrics currently 

exist, they do not fully address the question. 

The panel continues to believe that real metrics are needed. The 

panel has also heard that challenges with the requirements process 

are a major factor in poor acquisition outcomes. The requirements 

process for the acquisition of services is almost entirely ad hoc. The 

process for developing requirements for the acquisition of weapon 

systems is overly cumbersome, lacking in expertise and capacity, 

and subject to requirements creep. 

There is no doubt that the Department needs an acquisition 

workforce that is as capable as its advanced weapon systems. To 

achieve this, the Department requires flexibility to efficiently hire 

qualified new employees, and to manage its workforce in a manner 

that promotes superior performance. 

The Department must develop new regulations for the civilian 

workforce which include fair, credible, and transparent methods for 

hiring and assigning personnel, and for appraising and rewarding 

employee performance. 

Also underlying the success of the defense acquisition system is 

the Department’s financial management system. The panel is concerned that the inability to provide accurate and timely financial 

information prevents the Department of Defense (DOD) from adequately managing its acquisition programs and from implementing 

true acquisition reform. 

Finally, the panel has heard that the Department can enhance 

competition and gain access to more innovative technology by taking measures to utilize more of the industrial base, especially small 

and mid-tier businesses. And in managing that industrial base, 

that the Department is best served when it deals with responsible 

contractors with strong business systems. 

We look forward to hearing from today’s witnesses about these 

topics, to get their expert views on how these problems can be 

solved. 

[The prepared statement of Mr. Andrews can be found in the Appendix on page 39.] 
3 

Mr. COOPER. And I will now turn to my friend, Congressman 

Mike Conaway of Texas, for his opening remarks. 

STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE FROM TEXAS, RANKING MEMBER, PANEL ON DEFENSE 

ACQUISITION REFORM 

Mr. CONAWAY. Thank you, Mr. Chairman. 

Ladies and gentlemen, thank you for all of you being here today. 

I have a short statement, so we can spend most of our time listening to what you have got to say about it. 

First I want to thank, in absentia, Chairman Andrews for his 

leadership, and the other members of this panel for their commitment to dealing with these important issues. We have had many 

early morning meetings and hearings on the subjects ranging from 

services and Information Technology (IT) contracting to auditing, 

and we have learned a lot. 

To our witnesses, thank you for being here. Our panel has been 

very fortunate to have some great witnesses in the past. Some of 

you are repeat offenders, and we appreciate having you with us 

today. We understand and appreciate how busy you are. The fact 

that you have made time to be with us today is our privilege, and 

we appreciate that. 

I would also like to thank Mr. Fisher from the Business Transformation Agency (BTA) for being here. The BTA has a critical role, 

in my view, in what we are discussing today. 

And having said that, we realize that there is an awful lot of 

hard work to be done across the system. And I reiterate what the 

chairman has said, that we want to work with the Department to 

get this right. We are not adversaries. We are all in it for the exact 

same reason, and that is to get the best value for the taxpayer and 

get the warfighters what they need at the time and when they 

need it. 

So, we appreciate your feedback, and we look forward to modifying the report as we understand the things that you have got to 

say to us about that. 

So, with that, Mr. Chairman, I yield back. 

[The prepared statement of Mr. Conaway can be found in the Appendix on page 42.] 

Mr. COOPER. Thank you, Mike. 

Our witnesses today are unusually distinguished—so distinguished, they need no introduction, so they will not receive one. 

[Laughter.] 

We have with us the Honorable Ashton B. Carter, the Under Secretary of Defense for Acquisition, Technology and Logistics; the 

Honorable Robert F. Hale, the Under Secretary of Defense, the 

Comptroller; Ms. Elizabeth A. McGrath—I assume you are honorable, too—acting Deputy Chief Management Officer; Mr. Shay 

Assad, acting Deputy Under Secretary of Defense for Acquisition 

and Technology; and Mr. Fisher, as Mr. Conaway mentioned already, from the Office of—— 

Mr. CONAWAY. Business Transformation Agency. 

Mr. COOPER [continuing]. Business Transformation. Thank you. 

Mr. Carter, you are on. 
4 

STATEMENT OF HON. ASHTON B. CARTER, UNDER SECRETARY 

OF DEFENSE FOR ACQUISITION, TECHNOLOGY AND LOGISTICS, U.S. DEPARTMENT OF DEFENSE 

Secretary CARTER. Thank you. I am grateful for the opportunity 

to be in front of you. And I am especially grateful to all of you who 

take an interest in the performance of the acquisition system. It is 

not what it ought to be, and the taxpayer and the warfighter deserve better. It is something we are trying to work on in the Department of Defense. 

Secretary Gates has been very involved and is outspoken about 

it—President Obama, also. It is not always that a President of the 

United States takes an interest in the accomplishment of the job 

that I am in, and President Obama does. 

And then, of course, both houses of Congress last year unanimously—both parties—in the Weapon Systems Acquisition Reform 

Act, which this body had a lot to do with. 

I am reminded of your introduction. I have heard the opposite 

version of that, Congressman Cooper, which is, I once heard Brent 

Scowcroft introducing Henry Kissinger. And he said, ‘‘Now, everyone would say that Henry Kissinger requires no introduction. But 

Henry Kissinger requires an introduction.’’ [Laughter.] 

So, we are the opposite. 

I am glad to be here with my colleagues. I think that you have 

had the opportunity to introduce them all. I just wanted to say that 

Shay Assad works in my office and is really a superb contributor 

to the performance of the acquisition system. I am glad to be here 

with my colleague, Bob Hale, the Comptroller. They say the Comptroller’s credo is, ‘‘We are not happy till you are not happy.’’ 

[Laughter.] 

And that is the way it feels. That is the way it feels. 

I am not going to try to read—I prepared a lengthy statement 

containing our thinking about the many topics on which the panel 

is focusing. And I do not intend to read that. I thought I would just 

touch on a few wave tops, and then we can have a discussion. 

The first thing I wanted to say—and Congressman Hunter and 

I have talked about this previously—is, even though a lot of our 

focus tends to be on the big ticket items and the multi-decade programs, in this particular era, an important part of the acquisition, 

technology and logistics job has to do with being responsive to the 

wars we are in. And that is new. 

That is something predecessors of mine back in the Cold War 

when we were preparing to fight, but actually not—but not fighting. So, it was a different kind of job, and I try to be attentive to 

that. 

There is, first of all, the need to be rapid and responsive in acquisition to support the warfighter in Iraq, Afghanistan, or in the war 

on terror around the world. We now go to war on at least a oneto-one basis with a contractor for every soldier. And the management of those contractors is a responsibility that we have. And that 

is both a lot of money and a lot of responsibility and accountability, 

and that is important also. 

And a third is logistics, which sounds boring to many people. It 

is the heart of what has to happen now in Afghanistan, because we 

cannot have success until we are in there. And we cannot get in 
5 

there until we get set. And it is about the most austere logistics 

environment you can possibly imagine, and so everything is a 

struggle to get in. And so, that is a big responsibility. 

And then last—and I will be speaking with some of you separately next week about this—the Secretary asked me and General 

Paxton, the Director of Operations for the Joint Staff, to make a 

special effort over these critical months at the counter-improvised 

explosive device (IED) problem in Afghanistan, because the IEDs 

not only are a threat to life and limb, but if we cannot go outside 

the fence, then we cannot do counterinsurgency. So, it frustrates 

the mission if you cannot leave your base. 

And IEDs dispirit our people and the Afghan people and our coalition partners, as well. So, for all those reasons—I know Congressman Hunter has been concerned about this—IEDs are a big deal. 

And I just wanted to open on that note. I know that is not the 

focus of the hearing, but it has got to be something that is always 

on my mind. 

I wanted to say something about the performance of the acquisition system and acquisition reform in general, and then touch on 

the three key insights in the draft report that you have, which I 

have read, which are, hey, it is not just about weapon systems. It 

is services, too, which is a big idea, and a very important one, and 

one that we are listening to and have under-attended to. So, that 

is very big. 

A second one is IT and the management of IT systems as against 

the management of weapons systems. And the last is the workforce. Those are, it seems to me, three things that I think you have 

hit on that are critical, and perhaps have not received the amount 

of attention they should have in the past. 

Backing up to the acquisition system in general, Secretary Gates 

always says about acquisition reform—and I think this is absolutely right—there is no silver bullet. We do not make one mistake 

over and over again. We make lots of different kinds of mistakes, 

and there is no one single fix to it. 

I have been associated with acquisition reform in one wave after 

another throughout my career. And we have changed the system 

from time to time. We still are, including some ideas that you had 

last year. 

But at the end of the day, none of that is going to make any difference, if we do not have discipline and good people. And discipline 

I will say more about. Good people is something you focused on as 

a panel. 

A good way to divide acquisition reform in your mind is into the 

acquisition reform at the beginning of programs, in the middle of 

programs and at the end of programs. 

The beginning of programs, you know what the principles are, 

and you wrote some of them into the Weapon Systems Acquisition 

Reform Act last year. Do not kid yourself at the beginning of a program. Do not buy in cheap. Do an independent cost estimate. Be 

sure you know what you are getting into. 

Understand what you are doing in the requirements process. Set 

them intelligently. Do not change them willy-nilly, and so forth. 
6 

All—and particularly the independent cost estimate aspect—are 

things that we have implemented, and are implementing, in the 

Department. 

As you go into the middle of a program, this is a matter of excellence in execution. And we are taking your Performance Assessment and Root Cause Analysis (PARCA) idea, which was in your 

previous report, and implementing that as well. That was essentially not an administrative thing or a bureaucratic thing. It was 

the suggestion that we have the capacity to monitor our programs, 

so that we detect early enough that something is off the rails, that 

we have the opportunity managerially to address it. 

And the Nunn-McCurdy Act—which is in existence, has been in 

existence for a long time—is a very healthy thing. It terrifies everybody, and deterrence is a good thing. But the reality is that the 

Nunn-McCurdy bell rings too late, and it frequently is a false 

alarm. And so, it is not an ideal mechanism. 

And PARCA gives us—was an opportunity to give us—a tool and 

a method which we used to have, and had fallen into destitution, 

and we are reviving, to monitor the progress of programs in their 

mid-life, and recognize when things did not look right. And I think 

that was a great insight on your part, and one that we are implementing. 

Another thing we need to do in the mid-life of programs is get 

a better business deal. You were referring to this early, Congressman. And I am not satisfied that we have gotten good business 

deals. 

I review contracts, and so forth, that we have. We need to get 

a better business deal. 

The end of the program—not many people write about acquisition reform at the end of the program, at the end of program lives. 

But that is something that Secretary Gates has paid a lot of attention to, namely, having the discipline to stop doing things when we 

no longer need them, or have enough of them. That is always a difficult thing to do. 

He took a number of steps last year to cancel programs that either were not performing, or that we had enough of, or for which 

the need had passed in history, and he is doing more of that this 

year. And that is painful, but that is a necessary kind of acquisition reform, as well. 

With respect to services, I would just say that I look forward to 

your insights in that area. That is more than half the dough. And 

so, it is important that we pay attention to how we spend that half 

of the money, and not just the half of the money that is in the traditional programs of record. 

So, I am grateful that you are focusing on that. And I would like 

to focus on that with you. 

Ditto, information technology. We are a little further along in 

that in the sense that we became aware of the need to manage IT 

systems and acquisitions in a different way from ordinary weapon 

systems acquisitions a few years ago. But we are still crawling, not 

walking or running in that field. And we are trying to get better. 

Workforce—I cannot say enough about that. And Mr. Assad, 

among many other things he does, is managing our workforce improvement effort. But it is not a quantity thing, it is a quality 
7 

thing. We are, in our civilian acquisition corps, going to increase 

the numbers by 20,000—half by insourcing, half by hiring. Obviously, the numbers do not matter nearly as much as the quality of 

the people. 

We are assisted by the state of the economy in our recruiting in 

terms of quality. But we have tried to look carefully at the skill 

sets we need: there is pricing, there are contract officers, there are 

systems engineers, and so forth, and make sure that we improve 

the quality of our people, and not just the quantity. 

And that is true in the uniformed services, as well. The uniformed services also, I think—and they would say this themselves—have under-attended to the acquisition cadre in all of the 

services. They are trying to change that, as well. 

What is important is that, if you are a major or a colonel who 

has acquisition acumen, and that is your calling, that you be able 

to look up your personnel cone and see general officers who have 

your area of expertise. And that is a very important thing to do. 

So, I applaud your focus on the workforce. And I look forward to 

discussing all of these matters with you, and I appreciate the opportunity to be with you. 

[The prepared statement of Secretary Carter can be found in the 

Appendix on page 44.] 

Mr. ANDREWS. [Presiding.] Secretary Carter, thank you. 

I want to extend my apologies for being late for the hearing. 

Some other pressing business here in the Capitol. I want to thank 

my friend, Mr. Cooper, for filling in, and for agreeing to vacate the 

chair once I got here. I was a little worried. [Laughter.] 

And I want to add my note of appreciation to the witnesses for 

your excellent preparation for today. We look forward to the dialogue, and I represent—or I acknowledge—Secretary Hale. 

STATEMENT OF HON. ROBERT F. HALE, UNDER SECRETARY 

OF DEFENSE (COMPTROLLER), U.S. DEPARTMENT OF DEFENSE 

Secretary HALE. Well, thank you. Mr. Chairman, members of the 

panel, thank you for the chance to be here, and thank you for the 

support you give to the men and women in the military. We could 

not succeed without you. 

I am going to summarize my prepared statement briefly. I will 

focus on the issues you raised about improving financial information and audit readiness. There are some others I would be glad 

to discuss. 

First I would like to point out what I believe are the strengths 

of defense financial management. Not too many people mention 

them, including my colleague here. 

Drawing on 30 years of experience and numerous conversations 

with commanders, I think I can tell you that, generally, we are 

able to provide the resources and the financial support to meet our 

national security objectives. And that is our main mission. And 

while we need to make some improvements—and I will talk about 

one of them today in terms of audit readiness—we have got to take 

care not to achieve those improvements at the cost of meeting that 

fundamental mission. 
8 

DOD also has effective financial processes in some key areas— 

payment processes, our summary reconciliation with Treasury. And 

importantly, in my view, we have a sound process for funds control 

and distribution, one that has been reviewed and validated by external auditors. And this process, I think, provides reassurance to 

the Congress that we are spending the money as directed by law. 

We have also made some progress toward achieving financial information improvement and audit readiness. Several DOD organizations have and are maintaining clean audit opinions, and several 

of them have. But frankly, major problems remain. 

When I took over as the Chief Financial Officer a little more 

than a year ago, I quickly became convinced that we did not have 

a common goal or common priorities in the area of improving financial information and audit readiness. The services were doing kind 

of their own thing, and with widely varying degrees of commitment. 

And worse yet, we were investing time and money improving financial information and seeking audit readiness for data we simply 

do not use to manage the Department of Defense. 

The best example, in my view, is the valuation of military weapons. Over the past decade, the Department has devoted a lot of resources in an unsuccessful effort to identify auditable, historical 

costs of all our weapons and modifications. That information under 

current rules is required to achieve clean audit opinions. 

Yet, in more than 30 years of working in defense policy and 

budget issues, I have never used the historical costs of defense 

weapons in analysis—replacement costs, yes, that frequently, but 

never historical costs. And I really do not know anyone else who 

has, either. 

And to a lesser extent, that same indictment I think applies to 

much of the valuation information that we are required to audit on 

the balance sheet. 

So, in my view, DOD needed a new approach. It needed a coordinated approach. It needed to improve financial information and 

audit readiness, and it needed an approach that focused on the information we actually use to manage. 

Shortly after I was sworn in, I began consultations regarding a 

new approach. I outlined that in a memo issued in August of last 

year. And that new approach focuses on improving the quality, accuracy, and reliability of the information we actually use to manage. 

Budgetary information is key there—we manage the Department 

based on budgets—and existence and completeness, which is audit 

term for verifying that we know how many assets we have and 

where they are. That is of great concern to the warfighter. 

Now that we have a new approach, the next and by far most difficult step is implementation. We will offer a detailed implementation plan to Congress in a May report that was required in last 

year’s law, the 2010 National Defense Authorization Act (NDAA). 

I am not prepared to provide details yet; we are still coordinating 

with the services, although getting close. But I can tell you what 

the plan covers. 
9 

It provides long-term milestones, and also interim milestones, so 

we can demonstrate progress. And it focuses, again, on the information that we actually use to manage the department. 

It specifies a governance structure, with a panel that I chair, but 

also, regular interaction with our senior leaders. And it identifies 

specific resources, by service, by year—something we have not done 

in the past—to focus on financial improvement and audit readiness 

(FIAR). 

The plan’s concept has been approved by the Department’s Chief 

Management Officer, Deputy Secretary Lynn. I briefed him a couple of times. And he will get a briefing—he is scheduled to get a 

briefing—on the details of the plan in about two weeks. 

To keep the Congress up to date, we will provide a semiannual 

report on FIAR, as we call it—financial improvement and audit 

readiness—as required by the National Defense Authorization Act. 

Now, while we have a plan, I am not naive enough to think formidable challenges do not remain. Our business environment does 

not always meet auditor standards. We tend to exchange information among a lot of services in ways that makes it, if not impossible, at least very difficult, to audit. Our systems are old, and they 

handle or exchange information in ways that do not pass audit 

standards. 

And I might add, we are in the process of replacing almost all 

of those systems right now with enterprise resource planning systems. And while they offer substantial potential for improvement 

in financial management, they offer potential for disruption during 

the implementation period. And so, I think we need to watch those 

carefully, both in terms of managing the IT aspects and what they 

do to financial information while we are putting them into place. 

And finally, DOD’s enormous size and geographical distribution 

greatly complicates this task. We just cannot afford to hire an army 

of accountants, and too many people were spread around too much. 

Think of trying to do audits in Afghanistan or Iraq. It just would 

not work. 

Despite these obstacles, the Department is committed to improving the information we used to manage and achieving audit readiness. I am personally committed to this effort as part of my overall 

commitment to providing financial services and budgetary information that we need to meet our national security objectives. And 

with your help and support, I intend to make progress. 

That concludes my statement. And when Ms. McGrath has finished, I would be glad to entertain any questions. 

[The prepared statement of Secretary Hale can be found in the 

Appendix on page 57.] 

Mr. ANDREWS. Thank you, Mr. Secretary. 

Ms. McGrath, welcome. Congratulations. I understand that you 

have been nominated to be made permanent in your position. Is 

that correct? 

STATEMENT OF ELIZABETH A. MCGRATH, ACTING DEPUTY 

CHIEF MANAGEMENT OFFICER, U.S. DEPARTMENT OF DEFENSE 

Ms. MCGRATH. Yes, that is correct. Thank you. 

Mr. ANDREWS. Does that require a Senate confirmation? 
10 

Ms. MCGRATH. Yes, it does. 

Mr. ANDREWS. Well, if you figure out how the Senate works, will 

you let us know? [Laughter.] 

Because we have some questions about that. 

Welcome. We are glad to have you with us today. 

Secretary HALE. On advice of counsel, Ms. McGrath, don’t answer that. 

Ms. MCGRATH. Don’t answer it. [Laughter.] 

I will take it for the record. I think that was a—thank you very 

much. 

Mr. Chairman, members of the panel, thank you for the opportunity to testify before you today and discuss the Department’s 

commitment to and progress in the use of performance management to help achieve our strategic goals. 

Strategic performance management is about identifying what 

matters, measuring it, and then managing it to improve effectiveness, efficiency, and overall performance. A lot of your recommendations and what has been discussed already has touched 

upon the importance of those areas. So, certainly, performance 

management within the overall business space is something that 

we are both paying attention to and committed to. 

The Department has always worked to improve the efficiency 

and effectiveness of all of its business operations, especially today. 

Our business directly supports our combat operations in Afghanistan and Iraq in increasingly intricate ways. We provide critical 

services to the men and women in uniform and their families at 

home to help ensure that our Nation is ready to respond to new 

threats in an increasingly complex operational environment. 

Additionally, with increasing demands on the federal budget, and 

a greater demand for government transparency, and the overall 

pace of change in the business environment, execution of our business must become more agile and responsive, and provide enhanced financial stewardship for the American people. 

A key component in achieving results is the execution of a meaningful and robust strategic performance management system. Having read your panel’s interim findings and recommendations, the 

Department shares the panel’s important view that performance 

measures will help us achieve the goals, not only in acquisition, but 

throughout the Department’s business mission area. 

We are committed to driving the use of the performance measures throughout the Department and, supported by the efforts of 

the Office of Management and Budget, to extend performance management improvements throughout the federal government. 

In July 2009, the Department released a strategic management 

plan, created by the 2008 National Defense Authorization Act. It 

was the first step in the Department’s—it was a first step for the 

Department to integrate goals and measures throughout the business mission area. 

This strategy, which is aligned to the Quadrennial Defense Review (QDR), set the strategic direction across the Department’s 

business lines, and outlined five cross-functional, enterprise-wide 

priorities: the first thing, supporting the overall volunteer force; the 

second, supporting contingency business operations; the third, reform DOD acquisition and support processes; the fourth, enhance 
11 

civilian workforce; and finally, but certainly not last, strengthen 

DOD financial management. 

These priorities are cascaded into the performance budget of the 

Department, so they are not just stand-alone. They are tied to both 

the QDR and the overall DOD budget. 

These priorities encompass the most pressing business challenges 

currently facing the Department, and they include specific outcomes, goals, measures, and key initiatives that are critical for success. They also served as the basis for the development of the Department’s high priority performance goals, which were included in 

the 2011 Federal budget. 

Acquisition, Technology, and Logistics (AT&L) goals and measures span the breadth of DOD acquisition, ranging from insourcing 

acquisition functions and the growth of the acquisition workforce, 

to both lowering cycle times and breaches for major defense acquisition programs. It also includes increasing the Department’s use 

of renewable energy. 

Your panel’s goals for faster and more effective acquisition of information technology systems will also serve to help us achieve 

those performance goals as more modern, agile systems can certainly enable greater efficiency, transparency, and effectiveness. 

In closing, I want to emphasize that the Department is committed to the continued use of active performance management to 

help achieve our strategic goals. I appreciate the work of this 

panel, and I look forward to your questions. 

[The prepared statement of Ms. McGrath can be found in the Appendix on page 64.] 

Mr. ANDREWS. Well, Ms. McGrath, thank you very much. 

I also want to thank Mr. Assad and Mr. Fisher for being with 

us today. 

Mr. Assad, welcome back to the panel. I think this is your third 

interaction with us, and you keep coming back. We are surprised. 

We are happy that you do. 

Neither of these gentlemen is going to offer a statement today, 

but each is available as a resource for our questions. That is my 

understanding. 

Thank you for the testimony. 

I wanted to begin, Secretary Carter, with you. In your statement 

you agree, happily, with our conclusion that good metrics are needed to measure performance. And we have attempted to provide 

some guidance as to how we would generate those metrics, and 

who would generate them and how to use them. 

Are there any suggestions you have for us as to where you think 

we could add to our work? Or are there metric identification ideas 

we have that you think are inappropriate? 

In other words, how can we reach this common goal of generating fair, precise, and relevant metrics to measure performance? 

Secretary CARTER. I think that, chairman, the ideas that you 

have, some of which are reflected in my statement, for monitoring 

the performance on services contracts is probably the area where 

we have given it the least thought and have the least in the way 

of tradecraft. 

I gave some indications in the statement of where we are trying 

to improve our management of services. Basically, this is an over-
12 

simplification, but the problems are different on two sides of the 

services fence. One side is the contracted logistics support, which 

tends to be fairly—in terms of the personnel involved—fairly 

straightforward. The other is the contracting for specialized services, engineering services. 

In the former category, it is easier to measure contribution per 

dollar than it is in the latter category. We are trying to get better 

at measuring performance in the former category, and develop 

metrics in the latter category, which, however, recognize the inherently intangible nature of engineering talent, and so forth, that we 

depend on, that we have to contract for, because—this gets back to 

our acquisition workforce—we are not able to retain intramurally 

all of the skill sets that we need. We depend upon the external contractors for a lot of that. 

There are in my statement a number of steps that we are taking 

to shape our acquisition of services programs, including severely 

curtailing the use of new time-and-materials contracts, limiting 

service contract periods of performance to three to five years, ensuring and requiring organizations dedicate sufficient resources to 

performance oversight, and demanding competition for task orders 

in definite delivery and in definite quantity contracts. So, these are 

a number of the steps that we are taking. 

One other thing I will mention, Mr. Chairman, if I may, on the 

services side which is very important for contingency contracting, 

is the provision not just of contracting officers, but contracting officer representatives (COR). These are the people who do not write 

the contracts, but who ensure the contractor’s delivery of the services promised on the contract. And that has been a big issue for 

us in contingency contracting. 

And one of the innovations that has been made that will be very 

constructive in the last couple of years in the Department is the 

training of deploying units, so that they have embedded in them 

people who have the training to be CORs. That is not necessarily 

a full-time job, but it is needed unit by unit. 

Mr. ANDREWS. I certainly think that our recent experience—some 

negative, some positive—would certainly fortify the wisdom of that 

idea. 

Secretary Hale, the senior Republican on the panel, my friend, 

Mr. Conaway, has championed for a long time the need for comprehensive financial audits of the Department. And I completely 

subscribe to his idea. I think it is a credible argument that we 

could save in the neighborhood of $130 billion over the next five 

years, if we made some pretty modest improvements. 

Do you think—and honestly, there is not pride of authorship 

here. That is why our report is called an interim report. 

Do you have any suggestions as to how we could improve our approach to the financial audits that we require? 

Secretary HALE. Yes. As I indicated in my testimony and my oral 

statement, I think we need to focus on improving information. That 

is the key. The audit is a verification tool. The benefits come from 

improving the information. 

We ought to do it in the areas where we actually use the information to manage. And again, the parts that we have picked that 

fit that criteria are budgetary information, because that is what we 
13 

use to manage the Department of Defense, and also this existence 

and completeness, knowing where our assets are and how many we 

have of them. 

If we focus there, I think we have got a business case for going 

forward in terms of spending money to improve the information. 

Mr. ANDREWS. Isn’t the way that you gain information through 

doing the audits? Isn’t that one of the purposes of having the audits? 

Secretary HALE. Well, they tell you where you have problems. 

That is true. But, I mean, the information comes in through the 

systems in the field. 

I mean, we certainly learn more about them by doing it. And indeed, we have a process that, gradually, you move toward a surging of audit readiness. And there is a series of reviews that go on, 

as actually required by the National Defense Authorization Act of 

some years ago, which stopped us from just going to audits right 

away, because they felt we were wasting money, but rather, required a series of reviews. And those are very helpful in telling us 

where the problems are. 

But we need to focus them on the information we use to manage. 

And unfortunately, some of what we have to audit is information 

we simply do not use to manage. 

Mr. ANDREWS. Understood. 

Ms. McGrath, on page three of your statement, you say it is the 

Department’s view that, ‘‘when measures are appropriate and well 

defined, progress is made, and people can be held accountable for 

performance.’’ 

You go on to say, the Department shares our panel’s ‘‘important 

view that performance measures will help DOD achieve its goals in 

not only the acquisition arena, but throughout the Department’s 

Business Mission Area. We are committed to driving the use of performance measures throughout the Department’’ and support the 

efforts by the Office of Management and Budget (OMB) to extend 

performance management and improvement throughout the federal 

government. 

We have placed PARCA in an important role in that evaluation 

in our report. 

Do you think that is the right decision? Do you think it belongs 

somewhere else? What would you recommend to us? 

Ms. MCGRATH. With regard to the—I think the important piece 

is the collection of the information. Are we collecting the right 

measures for the right things? And each of these acquisition opportunities, be it services, information technology, or major defense acquisition programs, have different performance measures that have 

meaning for each of the different acquisition types. 

To me, getting those right is the most important thing, and the 

transparency and visibility of the information to those who make 

the decisions. I think that we have a structure within the Department right now, where in the Office of the Deputy Chief Management Officer, we collect the information from across the business 

lines to enable the transparency. 

So, be it in PARCA, or be it in another organization—— 
14 

Mr. ANDREWS. So, is it correct—I think I hear you saying that 

the quality of what is collected is more important than the collector, than who collects it. 

Ms. MCGRATH. Yes. 

Mr. ANDREWS. Okay. Thank you. 

I want to yield to my friend, Mr. Conaway. 

Mr. CONAWAY. Mr. Chairman, with the indulgence of the chairman, I would like to yield to my colleague from California. 

Mr. ANDREWS. Of course. 

Mr. Hunter is recognized. 

Mr. HUNTER. Thank the ranking member from Texas. 

And Mr. Chairman, thank you for your indulgence. 

Dr. Carter, good to see you again. I look forward to next week’s 

talk about IEDs and intelligence, surveillance, and reconnaissance 

(ISR), and all of that fun stuff. 

On page 10 of your testimony, you were talking about the industrial base, and how you want to help the industrial base. So, my 

question more specifically is about the M–16 and the M–4, and the 

ability of the Secretary of Defense to expand the small arms industrial base to more than the three names that are on it. 

There are 3 names right now that are included in the small arms 

industrial base that, if it turns out that we need a new M–4, M– 

16, or a new carbine for the military, right now, if as is, it would 

be bid out to these three players, one of which makes the .50-cal 

machine gun, the ‘‘Ma Deuce.’’ They are not going to be competing 

in it. 

One is a foreign-owned company. Hopefully, they will not get to 

compete in it. And one is an American company. 

The Nation’s largest small arms manufacturer is not even on this 

list. Secretary Gates, though, has the ability to expand the list. 

And I find it strange. I was talking to General Phillips yesterday. 

This is the only place that we can find where you actually list companies that are allowed to compete for something, where you say 

we are going to choose one of these companies out of four or five, 

and we are going to let that one company compete—I guess with 

itself is what it is going to look like now, if it is not expanded 

upon—if we do have to have a new carbine. 

So, that is my question. If you are going to encourage Secretary 

Gates, or if the Army has encouraged you, to allow more American 

industry into this competition, if we do have to have a bid-off from 

multiple American small arms companies. That is my question. 

Secretary CARTER. Very good. 

I do not have a complete answer for you. That is one of the areas 

of the industrial base that we are studying, and where I have the 

same concern you do. And I guess you have discussed it with General Bill Phillips. Also, that we have a set of procedures that goes 

back some decades, if not centuries. 

So, that is one of the sectors, along with some others. Our stealth 

aircraft sector, space, solid rocket motors, protected communications, where we have in their various ways an industrial base concern. 

And I will promise you, Congressman, when we are done reviewing that, I will discuss it with you. I have the same concerns you 
15 

do, I just do not have the answer for you right now on that aspect 

of the industrial base. 

One of the problems that we have—if I could just raise a general 

question, or a general issue occasioned by your question is—I have 

found that we do not have very good information on the industrial 

base that supports us. And that is another kind of—you are talking 

about information about the financial system, PARCA, which is basically, what is the health of our programs on an ongoing basis. Another one is, we do not have, believe it or not, very good information about our industrial base. And that is another thing that we 

are looking to improve. 

So, I will get back to you on this. I know exactly the issue you 

are talking about. I just do not have an answer to it right now. 

[The information referred to can be found in the Appendix on 

page 81.] 

Mr. HUNTER. Thank you, Dr. Carter, the gentleman from Texas 

and Mr. Chairman for your indulgence. Appreciate it. 

Mr. ANDREWS. Thank you very much, Mr. Hunter. 

The chair recognizes the gentleman from Tennessee, the former 

chairman of the panel, Mr. Cooper. [Laughter.] 

Mr. COOPER. There was no coup attempt. There is a Cooper attempt going on right now. 

Any of the panelists are welcome to answer the following questions. 

Was there anything in the interim report that we left out that 

we should have included? Errors of omission are harder to find 

sometimes than errors of commission. But I am about to ask you, 

what should we have left out that we, in fact, included? 

Secretary HALE. Well, I will start with two thoughts for you. I 

do not know if it is commission or omission, but it is a theme I 

have struck before, that I would like to see you, or just to focus on, 

audit efforts on the information we actually use. I think I have 

probably hit that point to death, so I do not need to go over it 

again. 

You brought up a point that I think we need to think about, that 

I would urge you to understand how we use, and that is financial 

thresholds, at which point we review the financial situation in an 

acquisition project. We do set thresholds for both procurement and 

research, development, test, and evaluation (RDT&E). 

They are not slavish thresholds. If you do not meet them, in 

terms of a certain percentage of your money obligated, it does not 

mean you lose that money. You probably will get a phone call and 

asked what is going on in your program. And you may be asked 

to provide a briefing or other information. 

We do find some programs go more slowly than others. Some 

need additional funds, and we do try to move them around to get 

the most out of the national security dollars that you make available to us. 

But I would urge you to acknowledge, these are not automatic at 

all. They are triggers for reviews. And those are two points I would 

keep in mind. 

Mr. COOPER. Any other takers? Ash? 

Secretary CARTER. I have a concern about the PARCA passages 

in the draft report, which is just this, and only this, but it is impor-
16 

tant. I share the objective entirely—and you called it to our attention last year, and we are. I could not agree more, and it is a good 

opportunity for us to improve our ability to track programs on a 

program-by-program basis. 

That said, I would hope we can avoid a situation where that develops into not a management tool, but another hurdle for the system. I know that is not your intent, or anybody’s intent. But I am 

always amazed at how many hurdles we already have in the system, and how little good they seem to do. And it can create a system where just getting through the hurdles seems like victory all 

by itself for all too many program managers. 

And so, it is supposed to be a system that has content and purpose, and not just a system of milestones. So, if you can help us 

to avoid that in connection with PARCA, I would be grateful. 

Mr. COOPER. Are there any acquisition regulations you would 

like to see repealed outright? It goes larding on, report after report, 

recommendation, statute, rule? 

Secretary CARTER. May I ask Mr. Assad if he has an answer to 

that? Shay, do you? 

Mr. ASSAD. No, I do not believe we are looking for repeal. We do 

share your view with regard to the tax withholding. We share your 

view on that. We believe that that would be an effective piece of 

legislation, to repeal that. That is more of a hindrance than it is 

anything else. 

But beyond that, I would not recommend the repeal of any existing legislation. 

Secretary HALE. Can I add one more thought? And that is—and 

I will ask Shay Assad’s help here—I believe there is a passage toward the end indicating that the Defense Contract Audit Agency 

(DCAA) certifies business systems. I think the fact is, they recommend to our contracting officers that certification. I think that 

is right. 

Mr. ASSAD. Yes, sir. 

Secretary HALE. And I want to fix that. 

Mr. ASSAD. And it is important, because the distinction is that 

the auditor is providing us an audit opinion. And the contracting 

officer is ultimately held responsible for deeming whether that system is adequate or not adequate. So, we do want to keep that separation. 

And we absolutely want independent audit opinions. But we do 

not want it to go the point where it is deeming a system is deficient 

or not. We want their findings. And we want the contracting officer, in concert with the auditor, to make a determination of do they 

believe it is deficient or not. 

Mr. COOPER. I have a feeling my time is expiring. 

Mr. ANDREWS. If I may before—I am sorry. 

Ms. McGrath, did you want to comment? 

Ms. MCGRATH. Since we have the opportunity to add. 

Mr. ANDREWS. Please do. 

Ms. MCGRATH. Specifically on the business systems, IT business 

systems, there is not a specific recommendation focused on business process reengineering of those areas in the National Defense 

Authorization Act. Section 1072 specifically does require a look at 
17 

the business process reengineering, I think, from a holistic acquisition approach. 

I mean, there are many lessons learned out in industry, that if 

you do not perform the adequate business process reengineering up 

front, very much akin to the requirements development and tied to, 

have you locked the requirements, do you have the right ones. If 

you do not understand the process by which you are going to execute, and then the system it will serve, then you have missed the 

opportunity. 

So, if there is a way to address that within the recommendations, 

I think that would be beneficial, specifically from a business system 

perspective. 

Thank you. 

Mr. ANDREWS. Jim, I certainly do not want to rush you. If you 

have other questions, you are welcome to ask them. 

I did want to ask Secretary Carter, I agree completely with your 

point about not creating another hurdle for PARCA, but creating 

a good management tool. We would welcome your specific suggestions as to how we accomplish that as the report moves forward, 

Because, clearly, we do not want this to be another box people 

have to check off that is another annoyance. We want it to actually 

be a productivity tool. So, we would welcome your point. 

The chair recognizes Mr. Conaway. 

Mr. CONAWAY. Thank you, Mr. Chairman. 

Again, thanks, everybody, for being here. 

Secretary Hale, when you say something three or four times, obviously, you get my attention. The information you use to manage 

your business—I hope that is not code for, we are going to continue 

to use that as our mantra to not get to a point where we can audit 

the financial statements, because there is not a Chief Executive Officer (CEO) in America who would not love to have that standard 

versus the standard of a qualified opinion. 

So, I know it is hard. Probably the hardest effort anywhere in 

financial kingdoms is yours, because of the breadth of what DOD 

does and spends. And you and I will have some conversations, as 

you mentioned earlier today, and I look forward to that. 

I do not know if you had a comment on that. But I hope that is 

not something that we will use to say, you know, it doesn’t matter 

what a historical cost of an M–1 tank is—and I agree. But nevertheless, without an unqualified opinion, there will be that lingering 

doubt in the taxpayer’s mind that you do not have it right yet. 

And so, it is important to get ultimately to the unqualified opinion. 

Secretary HALE. Well, I think what we need to do is look at 

whether or not it makes sense to spend what could be hundreds of 

millions—maybe billions—to get that kind of information we do not 

use. Perhaps we need to revise the audit standards. And the Chief 

Financial Officer (CFO) Council is looking at that issue. I don’t 

know that they have concluded that yet, but I believe it is something we need to look at. 

I do not think you would want me to spend enormous sums to 

obtain information that is useful in the private sector, but, frankly, 

is not used in the public sector and the Department of Defense. 
18 

Mr. CONAWAY. Well, again, not to be argumentative, the CEOs 

of most of those companies who fought their way through section 

404 of the Sarbanes-Oxley Act and spent a lot of money in relation 

to what they do to get their internal controls audited, and all the 

other kind of your systems done to support ongoing information, 

and the ongoing efforts. 

But again, I think we both want to get to the same point. But 

again, without that final unqualified opinion at some point, I think 

the code, the law says now 2017, which I think is too far down the 

road, but nevertheless. 

Mr. Fisher is here from the Business Transformation Agency. As 

I understand that agency, they have responsibility for business 

transformation across the Department of Defense, but precious little authority to do anything, other than just the persuasion, I 

guess. 

Mr. Fisher, we continue to spend a lot of money on IT acquisition 

for new business systems. Maybe Ms. McGrath, you want to weigh 

on this one, as well. 

Can you give us a sense of how the Department is doing as they 

move these business system investments? Are they moving—does 

it move the ball toward an unqualified audit, in your view? 

Mr. FISHER. It can. It should. It is questionable right now whether it is. 

Our track record is that we have been on the Government Accountability Office (GAO) high-risk list now for business system 

modernization for quite some time. On the enterprise resource 

planning systems that we have been implementing throughout the 

decade, we have spent almost $9 billion on those systems over the 

last 10 years. 

Some of them are in production. Some of them are still in development. So, our acquisition and delivery of those systems has been 

a real problem. 

If we can overcome those inherent challenges—and I can articulate some of them that we have observed over time, and that my 

agency is certainly trying to work with the components on, with 

military departments. We will, clearly, never achieve a clean audit 

opinion unless we can get these systems implemented. 

Just implementing the systems will not get us a clean audit opinion. But our current systems environment is prohibitive, in my 

opinion, to ever getting there, because it is so fragmented, so 

disaggregated. And we have so much data exchange in a non-standard way today, that I do not believe we would ever get there. 

If we can overcome those challenges with these new system implementations, then that is certainly a path to getting to an audit 

readiness standpoint. 

Our problems are largely—we look at these as technology 

projects. As somebody once told me, these are not technology 

projects, they are sociology projects. They are about people. This is 

change to people, and people are highly resistant to change. 

We are organized today through our many, many stovepipe functional organizations, who have spent decades figuring out how to 

make their piece of the pie work really well. Well, the systems that 

we are implementing, and the kinds of end-to-end processes that 

we need to execute to ultimately achieve an audit opinion, or good 
19 

information, or however you want to describe the positive effect, 

rely on us breaking down those silos. We need to operate in this 

end-to-end fashion. 

And we have a clash between the way we have always done 

things and the way these systems have always been designed to be 

used. And that clash hits in these implementation programs. When 

we talk about acquisition with our acquisition program managers 

(PMs), are faced with that clash. 

My optimism turns on, frankly, some legislation that has come 

in the last couple of years. The Chief Management Officer (CMO) 

legislation I think is critical to this whole thing. We finally now 

have an organizational construct within the military departments, 

and with Ms. McGrath’s office at the Office of the Secretary of Defense (OSD), that spans the individual functions. 

We need to do that, if we are going to be able to implement these 

systems and execute business in an efficient and effective way. We 

cannot continue to optimize locally, if we expect to optimize the 

end-to-end, which is really the capability that we are delivering. 

So, our ability to effectively use those CMO, Chief Management 

Officer positions, again, is one of the things that I am counting on 

to be able to drive some of this change, where we have the endto-end cooperation. 

The other is what Ms. McGrath also mentioned, the reengineering element that came in the NDAA last year. Change, 

again, comes hard. People are used to doing things the way they 

do them, and we spend a lot of time with programs arguing about, 

no, we are not going to do it that way anymore; here is a better 

way. And those tend to be lengthy arguments. 

Well, now it is the law that we not only need to have those arguments, we need to bias ourselves in the direction of change. And 

we in the Department now need to use that legislation as an ongoing lever when we engage with functional communities that are 

highly resistant, to say, I understand that is how you have always 

done it. You need to trust. You need to look at these opportunities 

to do things better holistically, and then move forward. 

So, I think those are a couple of levers that we need to continue 

to push, if we are going to be able to achieve the outcomes you described. 

Mr. CONAWAY. Okay. Thank you. 

Ms. McGrath, you have some comments on that? 

Ms. MCGRATH. I would just echo the importance of digging across 

functional enterprise look as we implement the enterprise resource 

planning (ERP). As you know, they are designed to be cross-functional. And as David pointed out, we are historically stovepipe-focused. 

And so, this does, say, provide an opportunity for us to actually 

look longitudinally across the department. But it does also—it is a 

significant change management challenge. 

And as we are pursuing the implementation for the ERPs, it is 

not just the program manager’s responsibility, but it is the responsibility of the functional requirements, those who run and operate 

the business, to enable that cross-functional implementation. 

So, I would echo, the ERPs are more difficult, because we are 

asking them to do not only more, but different things across an en-
20 

tire enterprise, be it the military departments or the Defense Department. 

Mr. CONAWAY. Well, thank you. 

One of our panelists last time made an analogy to bull riding in 

a rodeo. That seems odd. But nevertheless, the scoring system 

there is the bull gets scored, and the rider gets scored. Can you— 

we have got an acquisition system, and then we have got folks who 

ride that system. 

Should we have evaluations of both? Is there a reason to have 

in place an evaluation system that grades both the system itself, 

as well as how well we implement it, from an acquisitions standpoint? 

Secretary CARTER. I think we grade the system more than we 

grade the programs. And one of the nice—the idea of PARCA is to 

grade the programs, rather than grade—in other words, you are 

grading them on their performance, their performance for real, like, 

are they delivering capability on budget, not their performance in 

the system. 

Because, as I said, you can get through all the hoops, except you 

start over here with a tiger, and then it is a mouse that goes 

through the last hoop. And that is getting through the hoops, but 

it is not delivering the goods. 

So, I think that the innovation represented by PARCA, and the 

essence of it is to operate at the program level, to give us the visibility into the health of programs, whether they are performing— 

not just in meeting milestones, and so forth, but performing in 

their essence. 

And that, if I may say so, is the perspective I take on the information systems problem, as well. At the level below the discussion 

we just had, which is excellent, one has to look at the quality of 

our program management and who is actually running this thing. 

It frequently happens, as Ms. McGrath said, that the components 

who are running it, they are subject matter experts. They are rarely experts in information technology management. And this is a 

kind of dog-bites-man story that repeats itself on and on and on in 

IT systems, where the people who are trying to—who are acquiring 

the IT system are essentially trying to automate the system they 

have, and are not adequately open to changing their patterns of behavior and response. And you just see it repeated over and over 

again. 

That is why it is so important to have an ability to not just oversee, but to give best practices to people who will be doing it for the 

first time, because they do it kind of once a decade. And most of 

the time, they are worried about—their focus is on providing health 

care, let us say, not on health care IT. 

Mr. CONAWAY. I am sure we will have another round, but thank 

you. 

Mr. ANDREWS. Thank you. 

The chair recognizes Mr. Ellsworth for five minutes. 

Mr. ELLSWORTH. Thank you, Mr. Chairman. 

Dr. Carter, I think it was in your opening statement, when you 

talked about something that I have a big interest in. It was talking 

about the proper ordering of equipment and storage, about ordering 

the right amounts. I know we have to be fair to our contractors, 
21 

but in my district alone, we just went through a long process of destroying VX gas that we stored for many years at Newport, Indiana. Just got rid of that. 

I know that I am trying to help seek funding for the destruction 

of armament at Crane Naval Warfare Center in the millions of dollars. 

And so, that was in your comments, right, in your opening statement? 

Secretary CARTER. It was—— 

Mr. ELLSWORTH. And I was just—— 

Secretary CARTER [continuing]. In a different direction. 

Mr. ELLSWORTH [continuing]. Just curious. And I have often 

heard stories, you know, talking to some warfighters who said they 

were either—this goes back to Vietnam, actually—but talking 

about dumping ammunition over the side of the boat, or just going 

out in the ocean and shooting it up, because, if we do not use it, 

we are going to lose it, or we are going to the supply line. 

And can you explore a little bit how we are going to do that, or 

what your thoughts are on how we could get the right amount, so 

we are not seeking millions down the road? Or billions? 

Secretary CARTER. Yes. I would just make clear, I was certainly 

not suggesting that we buy things that we do not need, or would 

not need, or would not need more of later. 

I was specifically addressing—I think the passage you are referring to is in the contingency contracting world. It frequently happens that in the course of the war, that we can see an evolving requirement developing for a piece of equipment. We do not know exactly how many we will need. 

Yet the acquisition system wants to not start until it knows exactly what the objective is—in our terms, the requirement. 

In a war, since you cannot know exactly how many you are going 

to need, if you delay, you are depriving the warfighter of something 

they need. It is an unnatural act for the acquisition system to begin 

acquisition before the requirement is fully defined. 

In normal times, that is a perfectly reasonable expectation to 

have. In wartime, it is not always. So, I am frustrated from time 

to time by our ability not to anticipate needs. 

I will give you a great example, which is the mine resistant ambush protected all-terrain vehicle (MRAP ATV), which we began 

buying last summer. And we have now changed the requirement 

several times, because the troops get them, they like them. The 

threat changes, we need them. We are going to Afghanistan, not 

Iraq, which is mountainous, not flat, so you need the independent 

suspension of the MRAP ATV. 

And lo and behold, the requirement goes up. 

Well, if we had waited till last summer, till we were sure, finally, 

for once and for all how many, we still would not be producing 

them, which means they would not be falling into the hands of the 

troops. 

So, sometimes when you are in war, you need to take a little 

leap, at least quantitatively. And it just turns out that we are not 

set up to do that. And I have to personally intervene in force. Secretary Hale helps out in that regard, because the funding system 

is not prepared to do that either. 
22 

And it just goes back to the acquisition system was designed to 

prepare for the war. When it comes to conducting war, we are cumbersome and have to work overtime to get the result that the taxpayer and the warfighter ought to want in Afghanistan. 

Mr. ELLSWORTH. I would rather have too much than too little. 

But how much too much? I think if we can get better at estimating, 

obviously, that would be a great thing. 

Secretary CARTER. Well, if I can say so, if we start ramping up 

and start producing, and then we get the requirement, then we will 

cut off the buy at the appropriate date. It is those critical months 

when you could have been producing something, and you were not, 

because you are thinking how many you are actually going to need. 

It is just those critical months. 

And, you know, in Afghanistan, it is all a matter of months. 

Mr. ELLSWORTH. Sure. 

Mr. Hale, I talked to a gentleman last week back in Indiana. He 

was talking about his wife was in purchasing, and said she came 

home to the dinner table and said, ‘‘I had to spend up $150,000 

today.’’ 

Does the report—kind of the spend it or lose it syndrome, which 

happens a lot, probably happens in these halls and in our offices, 

too—but does the report, in your opinion, address that? I know we 

have talked about some stuff, and the chairman and I have talked 

about that, you know, we can solve some of this with an incentive 

to actually save that money and not spend it up. 

Secretary HALE. Well, you do bring it up. I mentioned the financial thresholds that we used to suggest when we should look at an 

acquisition project. I agree, it could create incentives. It could create the wrong incentives. 

And incidentally, there are also a number of limits. I am not sure 

whether they apply to acquisition. They certainly do in the operation and maintenance area. We are not allowed to spend more 

than a certain amount in the last quarter. So, there are some limits. 

But, you know, I think we have to depend on the good will and 

good intentions of our program managers to be careful in how they 

use this. And I think the great majority of them do that. 

I mean, you could say that giving grades causes kids to cheat. 

And it probably does sometimes. But for the great majority, I do 

not think you want to stop giving grades because of that. What you 

want to do is find the occasional ones who cheat, and take the right 

steps. 

I think our program managers are aware that they are going to 

have their financial programs looked at, and I think they should. 

But they will get a chance to say why. There may be good reasons 

why they are not able to obligate the money. And in that case, we 

will move ahead. 

Mr. ELLSWORTH. That is all I have, Mr. Chairman. I yield back. 

Mr. ANDREWS. Thank you very much. 

The chair recognizes Mr. Coffman. We appreciate your contributions throughout this, but most recently on the foreign sales industrial base issue, which we try to take into account. 

Mr. COFFMAN. Thank you, Mr. Chairman. 
23 

In the export restrictions, I am concerned about the industrial 

base. We have a declining industrial base that is becoming less and 

less competitive in terms of trying to maintain it for defense acquisition. 

And so, one question I have is—and one issue that has been 

raised in the report—is taking a look at those export restrictions, 

and reviewing them and seeing if they are realistic, you know, in 

today’s environment. Because if they can, in fact, be effectively relaxed, and that our industrial base then has more of a foreign market, then it will strengthen the industrial base and make it more 

competitive for our own acquisition. 

And would any of you like to respond to that? 

Secretary CARTER. I would, if I may. 

That is an area that the Secretary of Defense feels very strongly 

about. He has expressed himself publicly in his view that our export control system is outdated. And he has asked for—with the 

Department of State and the Department of Commerce which also 

have responsibilities in this—a unified, what he calls ‘‘clean sheet 

of paper’’ approach. 

That review is being done. It is being led by Secretary Flournoy, 

the Under Secretary for Policy. And I really think it is a clean 

sheet of paper. And I think they are going to be reporting out in 

a short while. 

So, the Secretary absolutely shares your concern. 

Mr. COFFMAN. Anybody else? 

Let me raise another thing concerning our industrial base and 

the difficulty in maintaining a competitive environment. If we 

take—there are some areas that it seems that the Department of 

Defense has to consciously look out after in order to maintain the 

industrial base at all. 

Shipbuilding is an example. We maintain six shipyards at this 

time, and their only customer is the Department of Defense. 

And I think the question is, given the acquisition requirements 

of the United States Navy at this time, is it cost effective to maintain six shipyards? Or should we look at some sort of Base Realignment and Closure (BRAC)-like process to bring them down to a 

more reasonable level that would make it more cost effective— 

again, given our acquisition requirements? 

Would anybody like to address that? And you can take the Fifth 

Amendment. It is a politically sensitive question. 

Secretary CARTER. I will just say that I know that the Navy is 

constantly assessing the shipbuilding industrial base. I know it has 

been an interest of Secretary Mabus, naturally enough, trying to 

get more efficiency out of the base we have, and figuring out who 

is good at what. 

It is not a free and open and competitive situation, so there is 

a requirement for more government intervention and management 

than there is in other aspects of the defense industrial base. So you 

are absolutely right. 

Mr. COFFMAN. Anyone else? 

Dr. Carter, I think you mentioned that we are now at a one-toone ratio, I think, in Afghanistan. And I am not sure if we are at 

a one-to-one ratio in Iraq, as well, between U.S. military personnel 

and contract personnel. 
24 

Secretary CARTER. Slightly higher in Iraq. 

Mr. COFFMAN. It is slightly higher in Iraq. 

Are you taking into account personnel that are not necessarily 

involved in logistical support, but involved in maybe some kind of 

advisory support? Or contract security personnel, are you taking 

into account those? 

Secretary CARTER. All sorts of functions. 

Mr. COFFMAN. All those? 

Secretary CARTER. All contract personnel. 

Mr. COFFMAN. In your estimation, is that the right number? Or 

is that number too high in terms of contract support? 

Secretary CARTER. The alternative to contractors would be to 

have the functions now performed by contractors, performed by 

uniformed personnel. 

There are obviously some advantages to doing that in the sense 

that you have all government personnel. You have all personnel 

that you vet, you order, you discipline. The disadvantage is that all 

studies show that that is more expensive, and is a distraction from 

military functions for military people. 

So, we are a long way from World War II, where all of the kitchen, and all of the laundry, and all that stuff was done by people 

in uniform. So, if we were going to reverse that course, we would 

need to deal with both the economic and the organizational consequences of that. 

Mr. COFFMAN. Are there issues that we might reexamine in that 

context? I believe in Kuwait there was a situation with a higherechelon vehicle maintenance that was done by private contract, if 

I recall, that had extraordinary problems. And that is something 

that has historically been done by U.S. military personnel. 

Can you comment on that issue? 

Secretary CARTER. Yes. I think the principal thing that we 

learned in Iraq, and are trying to learn the lessons of Iraq for Afghanistan, with respect to management of contractors, is having 

the expertise there to write the contracts so that they are fair to 

the taxpayer, and then monitor the contracts to make sure that 

they are implemented the way they are supposed to be. 

It is different when you are back here at home, and you have all 

the contracting officers and all the contracting officer representatives you want. Over there, we cannot send people who are not uniformed people over there. So, we are chronically short of contracting officers and contracting officer representatives in theater, 

just the people who make the contracting system work, because 

they are needed there. 

We are trying to do a lot more of it back here, do some of the 

contract officer work, particularly, back here for contracts there. 

But monitoring of contracts can only be done on the spot. If you 

are building a building, you are building a road, there needs to be 

somebody who goes out to the building of the road and makes sure 

it is done the way it should be. 

So, we are chronically short of people. And I think that is the 

area where we have been most deficient, first in Iraq, now in Afghanistan. 

Mr. COFFMAN. Thank you, Mr. Chairman. I yield back. I have an 

additional question, but I will wait for the second round. 
25 

Mr. ANDREWS. Okay, thank you. 

I have two brief questions to kick off the second round. 

Secretary Carter, my understanding is, in December the Secretary of Defense directed you and your colleagues to do a consolidation of array of information systems study for the major weapon 

systems. And I just want to know if you could bring us up to date 

on the implementation of that as part of the Resource Management 

Decision 700 series. 

How are we? What are we up to? When can we expect to see 

some yield from that effort? 

Secretary CARTER. If I can, I would like to get you a comprehensive answer. If I may, if I can take that one for the record and get 

back to you. 

[The information referred to can be found in the Appendix on 

page 81.] 

Mr. ANDREWS. Sure. No, we would be happy to do that. 

Secretary CARTER. And Mr. Assad, if I might prevail upon you. 

We have made some recommendations in our report—our interim 

report—with respect to personnel, the human capital of the procurement organizations. We have made suggestions about quantity 

and training and incentives, and various other issues. 

I will ask Mr. Cooper’s question. Is there anything in there you 

would like to see us add, or delete, that you think would improve 

the quality of our recommendations? 

Mr. ASSAD. First of all, Mr. Chairman, I would like to thank this 

committee for their unwavering support in improving the capability 

of the acquisition workforce. We really appreciate your support. 

Mr. ANDREWS. We appreciate your service and your good wisdom. 

Thank you. 

Mr. ASSAD. There is probably one area, and it goes to how we 

move folks around who may be able to take on a position, a new 

acquisition position. In other words, that person might be, in the 

old vernacular, GS–13. And there is a GS–14 opportunity. 

Well, the way the language is written, you might not be able to 

use the Acquisition Workforce Development Funds to actually hire 

or provide that opportunity to a person who is already in service, 

and then replace that person at that lower level with the funds 

that normally support him. 

So, one of the things that we are asking the committees to look 

at is to have that flexibility. The idea was, of course—and I know 

why the committee put the language in, or the Congress put the 

language in—was because they wanted to prevent just a shifting of 

people and, you know, kind of swapping of the deck chairs. 

But there are instances where we need to make sure that folks 

who are deserving of opportunities that might be funded with an 

acquisition development workforce fund could, in fact, be used with 

that. So, that is one area that we would like to make sure that we 

have got clarity to do that. 

Mr. ANDREWS. Very well. And I think it is a recurring theme in 

our report that prior reports, I think, have been ineffective or irrelevant, because they have been proscriptive—prescriptive, rather— 

where we try to anticipate future situations and write rules about 

them. 
26 

Our intention is rather different. We want to recruit and retain 

the very best people we can—and we believe we have many of them 

already—give those men and women the tools to do the job, give 

them standards, and then get out of the way. 

So, I think that your recommendation is very much in the spirit 

of that. And I would issue a blanket invitation to our witnesses 

today. If you see provisions that you think are overly prescriptive 

and interfere with that spirit, we would like to hear them. We will 

not necessarily agree with all of them, obviously, but we would like 

to hear them. 

I am going to yield to Mr. Conaway for a second round. 

Mr. CONAWAY. Thank you, Mr. Chairman. 

Focusing on this issue on IT and services and commodity purchasing, we talk about setting up standards and metrics to measure all of that work and to make sure the taxpayer is getting the 

best value. And that resides in the PARCA. A, is that the right 

place for that function to reside? 

B, where should all of that myriad of metrics get decided at the 

front end? 

You will have to have somebody monitor them after you have decided what you are going to measure and how you are going to hold 

people to things. But that work to be done on the front end, where 

in the system does it make the most sense to do that? 

Does the BTA have a role in helping set those standards up? And 

is PARCA, in fact, the right agency to then shepherd those through 

on an ongoing basis as it works to evaluate the purchasing of IT 

services, commodities, the non-weapon system money that gets set? 

Thoughts across the panel on that? 

Ms. MCGRATH. I can start. 

Mr. CONAWAY. Okay. 

Ms. MCGRATH. It sounds like you have a few questions in there 

in terms of what should those standard measures be for those different types of acquisitions? And I think that we are better at defining some of those today than others. 

I think for IT, I would distinguish business from non-business, 

because they are very different. Command and control is very different than an ERP. And so, the types of things we are looking to 

measure, I think the definition of those, the different organizations 

would play a role in defining those. 

For example, BTA, Business Transformation Agency, and the 

highly qualified experts they have within their organization who 

have ERP experience and industry experience, I would say would 

be well positioned to define what those are. I would not, however, 

ask them to define command and control measures, because I do 

not think we would get that right. 

So, I think the identification of the need is well articulated. We 

would certainly have different organizations actually define those 

measures, be it within PARCA or another organization, the transparency of all of them and the standard implementation, so that we 

understand across the Defense Department, how are we doing in 

business systems irrespective of organizational home, if you will. 

So I think the definition, and then the proliferation of those 

standards, and then the reporting into a central place, and then 

the transparency of those, is important. 
27 

Mr. CONAWAY. So what you are saying is, rather than have one 

agency like PARCA be responsible for monitoring the performance 

against those standards, you would rest that role with each of the 

individual agencies? Or in other words, decentralize that? Is that 

what your idea is right now? 

Ms. MCGRATH. Sir, there is an aspect of it that would be decentralized. I think the centralized part is the definitional piece. So establish what the standards are, ensure that those who have acquisition oversight, because there are multiple organizations that have 

that. I have acquisition oversight responsibility for some of the 

business systems, some of these ERPs that we are talking about. 

And so, I would want, as an acquisition authority, to look at how 

well are we performing against those standards. And then, yes, I 

would feed to sort of a central place within the Department, so 

that, again, we understand holistically how we are performing. 

Mr. CONAWAY. Anybody else have any comments? 

Mr. ASSAD. Sir, I would just like to say that I would like to kind 

of jump on the bandwagon with Beth. It is important for PARCA, 

I think, to participate as far as program performance is concerned 

in establishing standards. 

My concern—PARCA happens to be under the acquisition envelope—is overwhelming PARCA with—you know, they need to be focused on program performance. And they certainly can establish, 

and participate in establishing, the standards by which program offices set their goals. But if they actually participate in setting the 

goals, then they cannot be an independent and honest broker of 

evaluating whether or not those goals were met. 

And there will always be a question as to whether or not the 

goals that were established—you know, we get the checker checking himself. 

And I do think that PARCA needs to be that independent, honest 

broker that provides information to the Under Secretary, and not 

necessarily overburden it, especially in the near end here as we 

begin to establish it, with other responsibilities. 

Secretary HALE. I would just add one thought. You are talking 

to the policy arm of the Department of Defense, especially in the 

services area. And most of the execution is by the military departments and the agencies. 

We can set the standards, but they are the ones that are going 

to have to execute these programs. We do not have, and should not 

have the staff or the capability to do that—with the exception for 

some of the major defense acquisition programs where Ash Carter 

really has a kind of operational role—but even for most of the 

weapons programs they are executed at service level. 

Mr. CONAWAY. Okay. So, I guess what I would ask the panel is 

to look at how we have approached that issue within our report, 

so that we do not get ourselves in a position where it looks like we 

are recommending something that, collectively, you do not believe 

operationally works, because that is not what we are—that is not 

the intent. 

The intent is to put in place measurement systems that work, 

and then have that accountability occur within wherever it needs 

to occur that makes the most sense. Because I agree, Mr. Hale, 

that we do not want to set up a giant, new bureaucracy within any-
28 

thing, because the idea was to, you know, not do that. That is done 

easily and too often, and it really does not accomplish what we 

want to. 

So, as you look at the recommendations for this and the role 

PARCA plays, we would appreciate any thoughts you had on how 

we might need to fine-tune our recommendations, so that it does 

not mislead the system to go a direction that does not make sense, 

because I do not think that does any of us very well. 

So, thank you, Mr. Chairman. 

Mr. ANDREWS. I would associate myself with Mr. Conaway’s remarks. We want to provide a tool, not an impediment. And so, your 

practical observations about what will work are very much welcome. 

Mr. Cooper is recognized. 

Mr. COOPER. In case anyone is getting sleepy, let us stir things 

up a little bit. 

So far we have heard a lot of abstract concepts, a lot of jargon, 

a lot of acronyms. Probably, the average citizen would have great 

difficulty even following the discussion. 

Yesterday, the Air and Land Forces Subcommittee heard from 

the Army, that even though the FCS—Future Combat Systems— 

spin-out failed operational tests last August, they are still planning 

on buying two brigades’ worth at $285 million a set. This apparently includes unmanned aerial vehicles (UAVs) that are designed 

to operate for 24 hours, but so far can go barely an hour-and-a-half 

without breaking down. 

It costs $360,000 a unit. Meanwhile, the Raven costs $17,000 a 

unit. So you could buy 21 Ravens for every one of these that they 

are thinking about buying. 

So, I think folks back home worry about things like that, as well 

as refrigerators that the Air Force used to be able to buy for 

$17,000, when just a year or 2 later—it is a miracle—they are 

$32,000. 

Should we be upset about these things? Are they budget dust? 

Do you all care? You know, should taxpayers care? 

Secretary CARTER. Absolutely, they should. It is the taxpayers’ 

money, and it is equipment for the warfighter. So, the example you 

gave is one that I am looking at very carefully, the Army’s Early 

Infantry Brigade Combat Teams (EIBCTs) and the legacy of the 

Future Combat Systems program, and getting what we can get out 

of that program that is useful. 

But I just testified this morning on another program, the F–35, 

the Joint Strike Fighter program. And the burden of the testimony 

was that that is not where you would want it to be. And our responsibility collectively is to make it better. 

So, I do not know. There is no reason why the citizens should be 

able to follow this discussion. They are counting on us to do right 

by them. And you give some examples of cases where we do not do 

right by them, and there are such examples. 

Mr. COOPER. Another question. One of the most disturbing things 

this committee found was the fact that the Defense Contract Audit 

Agency, at least in a sample of their work, had almost completely 

abandoned the principles of accounting. 
29 

And I am not an accountant. I defer very much to my colleague 

Mr. Conaway’s expertise in these matters. But that was deeply disturbing, and the lady subsequently resigned from her job. And she 

led an army of 4,000 or 5,000 of these folks. 

You worry about incompetence. You worry about corruption. 

And Mr. Hale, when I hear from you that, you know—and every 

audit has its limits, and historical information is not as valuable 

as future information. And the distinction was made earlier, well, 

these are public sector standards, and we just do not worry about 

that. And the private sector has different standards, and it is irrelevant. 

You are aware, of course, how critical the GAO is of the Pentagon’s complete failure to be audited. It is by far the worst of all federal agencies in terms of non-compliance with management practices that have been in place for a long, long time. 

And I am sure you are a fine man, but I just do not get from 

your testimony or from your statements any sense of urgency or 

concern. I get a lot of self-satisfaction and a little bit of arrogance. 

And I think—maybe I just do not understand accounting well 

enough, but my colleague Mr. Conaway certainly does. And I think 

we need to get to the bottom of this. 

And just, we are doing fine right now, go away, is not a good answer. 

Secretary HALE. Well, I do not think that is what I said. But let 

me first address the Defense Contract Audit Agency, because you 

are right, we have got serious problems there. I am afraid we had 

a maxim in acquisition—faster, cheaper, better. We got two out of 

three with DCAA, but it definitely was not better. 

We have appointed a new director, making a number of changes, 

going to move to a more risk-based approach to auditing. They do 

about 30,000 audits a year. Nobody can do that and apply government audit standards. So, we need to make a number of changes, 

and are committed to making some significant ones within the 

year. 

We probably got into this problem with DCAA in a decade. We 

will not get out of it in a year, but we need to make progress. 

To your broader point, I am sorry if it came across that way if 

it did. I do feel a sense of urgency to fix the information that we 

use to manage. But I feel a sense of commitment to the taxpayer 

not to spend money on things we do not use to manage. If that 

came across wrong, I am sorry. 

The statements about what financial management does well are 

to put in context. I do not want to lose that. I do not want to have 

people stop meeting the needs of the warfighter because they are 

so concerned that they may do something that leads to a statement 

that is not auditable. 

We have got to find a balance. And that was the point that I was 

trying to make. In terms of the things that we do right, I want to 

keep those, and build on the things we do not. 

I do feel a sense of urgency. But at this 20th anniversary of the 

CFO Act, about the 15th anniversary, I think, of the Government 

Management Reform Act, which is the one that actually required 

auditable statements—and we are not real close. And we have had 

a lot of false starts. 
30 

We have had some successes. The Army Corps of Engineers has 

fully auditable statements. The United States Marine Corps has 

asserted audit readiness for its statement of budgetary resources. 

But we have still got a long way to go. We do not have a coherent 

approach, as I said in my statement, and we do not have resources. 

I think we will, or we do now, but we have not in the past. 

So, if it came across as arrogant, I am sorry. It was not meant 

as that. It was meant to say, I want to keep what is good and build 

on it. 

Secretary CARTER. May I comment on that also, on Secretary 

Hale’s sense of balance there? Because I encounter that also in the 

contingency contracting area, where we are trying to be exigent, 

and we are operating in unusual places like Afghanistan, and unusual circumstances—and we are trying to be good stewards of the 

taxpayer’s dollar, as well. And there has to be a balance there. 

And Secretary Hale has been of huge assistance to me in all the 

contingency things we have done, which does have an enormous 

sense of urgency. And so, that is an important balance for us to 

strike. And he has been an important part of making sure that we 

achieve that balance at the same time we do all the things that we 

need to do so urgently for the fight in Afghanistan and Iraq. 

Mr. ASSAD. If I might say something about the men and women 

at DCAA, because I am their customer. I represent the 26,000 contracting officers who are out there buying goods and services. 

And we cannot get a good deal for the taxpayers unless we have 

an effective and able Defense Contract Audit Agency. 

Like the acquisition workforce, the Defense Contract Audit Agency’s workforce, over a number of years, deteriorated in terms of just 

the number of folks that they have to do proper auditing. 

That has been recognized in our Acquisition Workforce Development Fund. We, in fact, have approximately funds for 800 auditors. 

We have already hired—Mr. Hale has already hired 300 auditors. 

In addition to that, Mr. Hale has set up an executive committee to 

oversee DCAA. I am a member of that committee as their ultimate 

customer. 

And we are very well aware—you are right, Mr. Cooper—there 

were issues at DCAA. But the new director, Pat Fitzgerald, is focused. We, as an executive committee reporting to Mr. Hale, are focused on getting those things corrected. 

We have got to get a better deal for the taxpayers. And we will 

not be able to achieve what Secretary Carter talked about unless 

we have an effective and efficient DCAA. 

But I want you to know that the vast majority of inputs that we 

get from DCAA are quality products. They are documents and analysis that we can use at the table. 

Do they need to be improved? Absolutely. Just as we need to improve in negotiating deals for the taxpayer. 

But your comments are recognized. But I want you to know that 

there are a large number of those auditors out there who are doing 

a very good job. 

Mr. COOPER. Thank you, Mr. Chairman. 

Mr. ANDREWS. Mr. Coffman. 

Mr. COFFMAN. Thank you, Mr. Chairman. 
31 

Both parties are raising the issue of reforming the appropriations 

process, specifically earmarks. And in terms of the defense acquisition process, do you have any recommendations in terms of which 

earmarks are adverse to the process in terms of the efficient acquisition of the needs of our warfighters? 

Secretary CARTER. I will hazard one comment, which is in our 

science and technology base programs. Just because, even as free 

and open competition is the principle that guarantees value and excellence in acquisition, in our science and technology base it is peer 

review. And scientific and technological excellence is the—ought to 

be—the basis for selecting projects. And that is an area where it 

would be particularly disturbing to see principles other than technological excellence at work in the selection of projects. 

Mr. COFFMAN. Anybody else? 

Secretary HALE. I mean, I think in general, we oppose earmarks 

in the Administration. We also understand that, in the end, if you 

enact a law, we are going to follow it. And that is how our system 

works. So, if you put it in the bill and tell us to do it, we will execute it. 

Mr. COFFMAN. Okay. 

I raised, in the previous round, International Traffic in Arms 

Regulations (ITAR) reform. And I want to take a different tack now 

on acquisition, and that is that, are there areas that we contract 

out now with foreign providers, non-U.S. providers, that made us 

over-reliant, that during time of war create a problem in our supply chain? 

And let us take the area of ammunition, of munitions, that there 

is a reliance on foreign providers when it comes to munitions. And 

is that problematic to the United States to be so reliant upon foreign providers? 

Would anybody like to answer that? 

Secretary CARTER. I will take a shot at it, but I think, Shay, if 

I may ask you also. 

It is a requirement that we assess our dependence on foreign 

suppliers, and make sure that we are not overly dependent upon 

foreign suppliers, and that we do not put at risk our supply chain. 

At the same time, there are different gradations of foreigners. 

And another aspiration we have, just for the balancing sense, is 

to be able to dip into the global technology base, because 50 years 

ago, most technology—advanced technology was ours. That is no 

longer the case. 

And the most advanced technology was defense technology. That 

is no longer always the case, either. So, if we cannot reach out into 

the commercial base, which is inherently global, we will not have 

the best. 

So, we need to make sure we are not overly dependent, but also 

that we are availing ourselves of what is out there. Otherwise, we 

will become an enclave, which will not be good for the taxpayer and 

the warfighter. 

And, Shay, on the regulator side, or any other side, anything to 

add? 

Mr. ASSAD. Well, I just think the comment that you made earlier, 

Mr. Secretary, in terms of what the Director of Industrial Policy is 

doing to kind of really expand. We have not had the kind of insight 
32 

and capability, Mr. Congressman, that you are talking about in 

terms of, did we really understand our industrial base—not just 

our domestic industrial base, the international industrial base— 

that we rely upon? And is it appropriate for us to be placing so 

much reliance on a particular international partner? 

One thing that you can be assured of, that when we—we obviously make every attempt to, when we issue our procurements, to 

live by the standards and the requirements of only dealing with 

qualifying countries as it relates to the Buy America Act. 

But there is more work to be done in this area of assessing the 

industrial base, and in particular the international industrial base, 

because it is a global marketplace that we are in. 

Mr. COFFMAN. Okay. Let me close with just a comment, a concern, that the Department of Defense is not looking forward 

enough in terms of supply chain issues on the industrial base. 

And I think the rare earth metals is a great example of that, 

where we seem to be wholly reliant—not wholly reliant—but I 

think China has about 95 percent of the market right now. We are 

reliant upon them for imports. I think that their demand will soon 

catch up with their supply. 

We have no mining of rare earth metals in the United States to 

use in advanced weapons systems. And I think that we need to be 

more cognizant of that—not simply from a mining issue, but from 

a refining and other aspects of the supply chain. 

Thank you, Mr. Chairman. I yield back. 

Mr. ANDREWS. Thank you very much. 

I want to thank our panelists for their excellent presentations 

today and their preparation. I want to thank my colleagues and describe our process from here on out. 

Yes, Mr. Conaway? 

Mr. CONAWAY. I just wanted to comment. 

Mr. ANDREWS. Sure. 

Our interim report was put on the internet last Friday, and it 

is open for public comment from all interested parties, both inside 

and outside the government, certainly. 

The members of the panel are going to have a business meeting 

next week, where we will discuss our views about modifications to 

the interim report. I would especially invite our panelists here 

today to make any suggestions they have prior to that time. Early 

to mid next week would be helpful. 

It is our intention, then, to try to proceed the week after next 

with a public meeting where the panel will consider adoption of the 

report to forward on to the full committee. 

So, I would again invite members of the public, as well as, obviously, the Department, speaking more officially, to give us recommendations and suggestions, so that the members can take 

those recommendations into account when the members meet next 

week. 

I would be happy to yield to Mr. Conaway. 

Mr. CONAWAY. Well, thank you, Mr. Chairman. 

I also want to thank folks for coming today. 

I have got a question for the record I would like to submit. It has 

to do with a KC–135 contract that recently was bid between a 

small company and Boeing. And the small company lost out, be-
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cause of the impact of a fee they had to pay to Boeing. So, I do not 

expect you to have an answer for it, but we will submit that for 

the record, because it has to do with this idea of an open, fair competition thing that we are talking about. 

And I just want to thank everybody for participating. This is not 

the end of the deal. As I said earlier, I think we are all in this together—ought to act as if we are all in this together—for the best 

interest of the warfighter and the taxpayer. And I look forward to 

continuing dialogue among all of you as to how we can get this 

whole process better than it is currently being done. 

Thank you, Mr. Chairman. 

Mr. ANDREWS. We thank you for your participation. 

The hearing is adjourned. 

[Whereupon, at 4:42 p.m., the panel was adjourned.] 

A P P E N D I X 

MARCH 11, 2010 

PREPARED STATEMENTS SUBMITTED FOR THE RECORD 

MARCH 11, 2010 

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WITNESS RESPONSES TO QUESTIONS ASKED DURING 

THE HEARING 

MARCH 11, 2010 

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RESPONSE TO QUESTION SUBMITTED BY MR. ANDREWS 

Secretary CARTER. The Department directed, via RMD 700, a study to improve the 

transparency of budgeting and programming of resources for Major Defense Acquisition Programs (MDAPs). The initial study effort is investigating the options to ensure transparency of the data reported in our Selected Acquisition Reports (SARs) 

and consistency with information provided in the President’s Budget Request, Future Years Defense Program, and Budget Justification documentation. Under this 

first effort, we are reviewing the merits of and risks associated with reporting SAR 

financial data through one authoritative source, such as the USD (Comptroller) system, along with improvements in data structures. Decisions made to use either a 

common, single data source, or multiple data sources, and the aforementioned structure changes will be implemented in time for submission of the December 2010 

SARs in early April 2011. 

Successes from the SAR transparency study above will serve as the baseline to 

further improve the transparency of budgeting and programming of resources—Research, Development, Test and Evaluation, Procurement, Military Construction, and 

Operations and Maintenance—for MDAPs, including details at the Subprogram 

level as reported in SARs. This second study effort, intended to incorporate statutory changes emanating from the 2009 Weapon System Acquisition Reform Act, certification of new MDAPs under Sections 2366a and 2366b, and all current MDAPs 

that are Section 2366 certified, will include recommendations for changes to all affected DOD Information Technology Systems in time to support the FY 2012 PBR. 

[See page 25.] 

RESPONSE TO QUESTION SUBMITTED BY MR. HUNTER 

Secretary CARTER. The Department encourages competition for most of our acquisitions including small arms weapons. The latest competition for the M16 rifle was 

full and open. Two companies entered that competition—Colt’s Manufacturing Company in West Hartford, Connecticut, and FN Manufacturing in Columbia, South 

Carolina. The Army is developing an acquisition strategy for the development of a 

new carbine to support our Warfighters. The Army will use full and open competition of American-based companies for this acquisition. The Army held an industry 

day where 10–11 companies participated. The Army plans to release a draft Request 

for Proposal (RFP) as soon as the Joint Staff approves the weapon system’s requirements document. The Army does limit the acquisition of specified small arms spare 

parts as required by title 10 USC 2473. This title is a unique statute requiring procurement of barrels, bolts, and receivers for a select set of small caliber weapons 

be restricted to three domestic firms (General Dynamics Armaments and Technical 

Products, Colt Manufacturing Company, and FN Manufacturing), unless an exception is approved by the Secretary of Defense. The Army is evaluating the need for 

this statute. Initial Army findings indicate that this statute is not necessary because 

the authority to restrict acquisitions to support the industrial base reside in the 

Competition in Contracting Act. [See page 15.] 

QUESTIONS SUBMITTED BY MEMBERS POST HEARING 

MARCH 11, 2010 

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QUESTION SUBMITTED BY MR. CONAWAY 

Mr. CONAWAY. Since your confirmation last year you have repeatedly emphasized 

your desire to maintain a healthy and competitive defense industrial base, sentiments that are also emphasized in the 2010 QDR. 

I am aware of a contract recently awarded by the Air Force for KC–135 tanker 

maintenance in which Boeing Co. was chosen over a small contractor in Alabama 

that directly contradicts both your statements and the policy positions laid out in 

the 2010 QDR. 

Alabama Aircraft Industries Inc. (AAII) has for generations provided services to 

the U.S. military through its maintenance of C–130s, P–3s, and KC–135s. There has 

been an ongoing dispute between Boeing and AAII regarding the aforementioned 

contract to provide KC–135 maintenance. As a small business of about 800 employees, down from its peak of 1500, AAII is the only company other than Boeing that 

can perform this maintenance, and it has been doing so for over 5 decades with an 

excellent record of delivering defect-free aircraft. 

The KC–135 work is the vital core of AAII’s business, without which the company 

will be forced to shut its doors, leaving the USAF with only one source of repair 

for a vital airplane. Not only would maintaining multiple maintenance sources reduce costs through the utilization of existing resources, but it also provides for continued needed capacity to cover unforeseen changes in demand. Given the continued 

KC–X delays, multiple sources are critical to the KC–135 maintenance program and 

this aircraft’s continued service to the war fighter. 

How does USAF decision to eliminate a competitive, small business square with 

your position, comments and the 2010 QDR? 

Secretary CARTER. I appreciate your concern for the health of our industrial base, 

and I remain committed to robust participation by qualified small businesses. Still, 

sufficient competition and capacity exists to assure the future of KC–135 operations. 

Further, the process of procuring services in a competitive marketplace is governed 

by federal laws and regulations, and the KC–135 Programmed Depot Maintenance 

competition has been thoroughly reviewed by both the Government Accountability 

Office and two Federal Courts. We take great care to ensure fairness throughout 

all such competitions, and we will continue to do so as required by law. 

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