U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

45–590 PDF 2009

S. Hrg. 110–819 

ADDRESSING COST GROWTH OF MAJOR 

DEPARTMENT OF DEFENSE WEAPONS SYSTEMS 

HEARING 

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

SEPTEMBER 25, 2008 

Available via http://www.gpoaccess.gov/congress/index.html 

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs 

( 

(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

BARACK OBAMA, Illinois 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

SUSAN M. COLLINS, Maine 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

PETE V. DOMENICI, New Mexico 

JOHN WARNER, Virginia 

JOHN E. SUNUNU, New Hampshire 

MICHAEL L. ALEXANDER, Staff Director 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, 

FEDERAL SERVICES, AND INTERNATIONAL SECURITY SUBCOMMITTEE 

THOMAS R. CARPER, Delaware, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

BARACK OBAMA, Illinois 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

TOM COBURN, Oklahoma 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

PETE V. DOMENICI, New Mexico 

JOHN E. SUNUNU, New Hampshire 

JOHN KILVINGTON, Staff Director 

KATY FRENCH, Minority Staff Director 

MONISHA SMITH, Chief Clerk 

(III) 

C O N T E N T S 

Opening statement: Page 

Senator Carper ................................................................................................. 1 

Senator Coburn ................................................................................................. 4 

WITNESSES 

THURSDAY, SEPTEMBER 25, 2008 

Hon. James I. Finley, Deputy Under Secretary of Defense for Acquisition 

and Technology, U.S. Department of Defense ................................................... 6 

Michael J. Sullivan, Director, Acquisition and Sourcing Management, U.S. 

Government Accountability Office ...................................................................... 18 

Steven L. Schooner, Co-Director, Government Procurement Law Program, 

The George Washington University ................................................................... 20 

Clark A. Murdock, Ph.D., Senior Adviser, International Security Program, 

Center for Strategic and International Studies ................................................. 22 

ALPHABETICAL LIST OF WITNESSES

Finley, Hon. James I.: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 35 

Murdock, Clark A.: 

Testimony .......................................................................................................... 22 

Prepared statement .......................................................................................... 79 

Schooner, Steven L.: 

Testimony .......................................................................................................... 20 

Prepared statement .......................................................................................... 64 

Sullivan, Michael J.: 

Testimony .......................................................................................................... 18 

Prepared statement .......................................................................................... 47 

APPENDIX 

Chart referred to by Senator Carper ...................................................................... 53 

Questions and Responses for the Record from: 

Mr. Finley .......................................................................................................... 86 

Mr. Sullivan ...................................................................................................... 111 

(1) 

ADDRESSING COST GROWTH OF MAJOR 

DEPARTMENT OF DEFENSE WEAPONS 

SYSTEMS 

THURSDAY, SEPTEMBER 25, 2008 

U.S. SENATE,

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT,

GOVERNMENT INFORMATION, FEDERAL SERVICE,

AND INTERNATIONAL SECURITY,

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS,

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:32 p.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Thomas R. Carper, 

Chairman of the Subcommittee, presiding. 

Present: Senators Carper and Coburn. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. The Subcommittee will come to order. Dr. 

Coburn, how are you? 

Senator COBURN. I am fine. Glad to be with you. 

Senator CARPER. Good. I am glad to be with you. I just checked 

in with the cloakroom to see if we are going to have any votes during your testimony, Dr. Finley, or the testimony of the second 

panel. It looks like we will not. 

Senator COBURN. I would advise the Chairman that I am going 

to be on the floor at about 3:50 p.m., so I will be leaving. 

Senator CARPER. Fair enough. But we are looking forward to this 

hearing. We appreciate the willingness of our Subcommittee to address the cost growth of major Department of Defense weapons systems. Currently, the financial strain on our country and our government is daunting, and government must watch every dollar that 

we spend and stretch those dollars that we do collect from taxpayers. 

That challenge has gotten even tougher and the road steeper 

with the President’s proposed bailout that we are chewing on literally as we speak. 

More and more families every day lose their homes as a result 

of foreclosures, and their neighbors face devaluation of homes in 

their neighborhoods. More Americans are losing their jobs as unemployment rates are at their highest level in some 5 years. I do 

not know what the unemployment rate is like in your State, but 

we are up to almost 5 percent, which for Delaware is very high. 

2 

1The chart appears in the Appendix on page 53. 

The cost of food and gas has skyrocketed over the last year or 

so, making it harder for Americans to fill up their tank and fill up 

their stomachs at the same time. And just last week, some of our 

Nation’s oldest financial institutions folded, warning of a potential 

stock market crash and threatening the security of retirement investments for millions of Americans. 

Given the times that we live in, every dollar that the government, our government, spends inefficiently is a dollar that is not 

spent to help the American taxpayer deal with these financial 

strains in their lives. 

This Subcommittee tries to examine every aspect, but a lot of the 

aspects of the Federal Government to better ensure that our spending is working for Americans and not against them. This means 

that we need to look to see if the Department of Defense—where 

some of the most costly items in the Federal budget reside—is also 

spending taxpayer dollars efficiently. 

Some of us may remember that at this time last year we actually 

looked at a very small part of the Defense budget, and we investigated whether or not we were achieving strategic airlift, our ability to move troops and cargo over long distances by air in a costeffective way, and at the time we held a hearing to decide whether 

efforts to modernize our largest airlifter, the C–5 Galaxy, remained 

a cost-effective way to meet our strategic airlift needs. And we 

learned that there were ways to reduce the cost of modernizing our 

C–5 fleet. And I am happy to say that Under Secretary of Defense 

John Young, whom I think Dr. Finley reports to and serves with, 

was a key player in helping to enact those cost reductions and provide more cost-effective airlift. It turns out we can modernize two 

or three C–5Bs for roughly the cost of buying one brand-new C– 

17, and each C–5B carries about twice as much as a C–17. C–17s 

are great planes, but when you have C–5s that you can modernize 

for that kind of cost, we decided it would be cost-effective to do 

that. 

But one year later, we are here to apply the process of identifying and enacting cost reductions on a broader scale. 

This hearing will examine the cost growth of some of the Department’s largest weapons systems and some of the problems the Department has had with delivering these systems on time and under 

budget. And this hearing could not have come any sooner. 

Last April, the Government Accountability Office released its annual assessment of the DOD’s major acquisition program and revealed that the cost overruns on the Department’s 95 largest acquisition programs have now amounted to some $295 billion over their 

original program estimates, putting the sum total of these acquisition costs at $1.6 trillion. And as we can see on the chart to our 

left.1

In 2000, 75 programs were picked by GAO, I guess, as major defense acquisition programs; next year, 91; next year—what does 

that say?—95 in a cost overrun situation. The dollars were most interesting. There was not a great growth in the number of programs 

over that 7-year period, although there is some significant growth. 

But the thing that really caught my eye is the amount that these 

3 

programs that are over budget had grown from $42 billion in 2000 

to some $295 billion in 2007. 

I am not good enough in math on my feet, but if we were to run 

that out for another 10 or 20 years, that would really be startling. 

But it has caught my eye, and it sure did Dr. Coburn’s as well. 

During a Senate Armed Services Committee hearing on this 

same topic, the Chairman, our friend Carl Levin, outlined what the 

Department of Defense could have bought with that same $295 billion, and I want to take it just a little bit further and ask what 

the Federal Government, not just the Department of Defense, but 

what the Federal Government could have done with that money. 

And right behind Dr. Coburn, we can get an idea. We could pay for the Iraq war through the spring of next year worth $85 billion, 

and we would still have plenty left over. We could fix all the levees 

in New Orleans for $10 billion. We could go on to create the Apollo 

program to help our auto companies kick our addiction to foreign 

oil. We could pay for the SCHIP program for 5 years. We would 

still have money left over to provide universal preschool for the 

next 10 years, expand our Army divisions for the next 10 years by 

two divisions, and that is about 40,000 troops, I believe; and then 

meet our nationwide demand for passenger rail corridors, another 

$60 billion. And that would add up to $295 billion. That is a lot 

of stuff that we could do. I think for the most part really good stuff. 

And we cannot do it because we do not have the money. As it turns 

out, we do not have this $295 billion either, but we are going to 

turn around to borrow it from other countries around the world. 

Some young students were in the other day, and they asked me 

about printing money. They said, ‘‘When the Government runs out 

of money, do you just print it?’’ I said, ‘‘No. We borrow it.’’ We borrow it from people around the world. And the unfortunate thing 

about that is that sometimes it puts us at their mercy, especially 

on foreign policy issues. When you are borrowing a lot of money 

from a country like China, the question is: Do we do the same 

thing in our foreign policy that otherwise we would do if we did not 

owe them all that money? It reduces our options. 

Let me say that, clearly, we could have tackled a bunch of major 

problems with this money that our country faced, but we do not 

have these funds. And I wish DOD had used these funds to buy 

the silver bullet that would help us to secure Iraq, defeat al Qaeda, 

the Taliban operating in Afghanistan and along the borders with 

Afghanistan, but we do not. 

However, that is for another hearing altogether, and maybe we 

will have a chance to consider those issues then. But we are not 

here to look at what we might have spent this money on, what we 

could have spent this money on. We are here to look at flaws in 

the defense acquisition system which has led to our collective wallets being about $295 billion lighter. 

When the Senate Armed Services Committee looked at this back 

in June, Chairman Levin and the GAO identified four factors that 

they believe were most important in leading to this situation: First, 

unrealistic cost and schedule estimates; second, unrealistic performance expectations; third, advancing the program with immature technologies; and, fourth, changing program requirements during development. 

4 

The goal of this hearing is to further investigate how these four 

factors produced the situation we are in today, which I believe is 

untenable, and our witnesses are going to help us address these 

factors and how we can plug the holes in the inefficient acquisition 

process. 

I am delighted to be here with Dr. Coburn. 

OPENING STATEMENT OF SENATOR COBURN 

Senator COBURN. Well, first of all, let me thank all of our witnesses for being here and to relay on behalf of the Chairman and 

myself that we do appreciate your public service. We understand 

oftentimes you are unappreciated, and so we plan on having a fairly frank discussion today with you about what we see as a commentary to what Senator Carper mentioned. 

We have enumerated powers in the Constitution, and a lot of the 

problems that we are facing today financially have to do with the 

fact that the Congress got outside of those and did not manage 

them and did not oversight them and did not regulate them. And 

so we see problems. However, the subject we are going to be talking about is very specifically enumerated within the Constitution, 

and that is the defense of this country. And when we look and see 

what has happened in procurement, this is not a new problem. 

As a matter of fact, if you go back to the first ships George Washington ordered, they had a significant problem with cost overrun 

and delay. They started with six ships and went to two. So this is 

a pretty longstanding problem. But I think it has very good relevance that we have never addressed the real issues. 

One of the things that I hope that we will cover—and I know Dr. 

Finley has, and I know GAO has—is there are tremendous incentives to underestimate the cost so you can get a program started. 

And, some unique contracting can take care of that. If you underestimate the cost, you pay for it. There is a penalty to the contractor who underestimates the cost. That will stop some of that. 

That is not hard to do. That is done in business all the time. 

Second is research and development, having the contract and 

having the cost overrun ought to be borne by the developer of it, 

which would, therefore, reflect in the higher up-front cost estimate 

rather than a low-cost estimate knowing that they are going to get 

remunerated for it. 

Sometimes we hear, well, it is the shrinkage in the number of 

contractors that has increased the cost. But we had these same 

problems 30 years ago, and we had three times as many contractors. So what we are talking about is not anything that is really 

new. 

Sometimes we hear the fact that, well—and we know, I recognize 

this is a problem, the acquisition force and the retirement dates 

and the decrease versus what we would like to see, except we had 

a full-fledged acquisition force during the Cold War, and we had 

the same problem. 

So some of the reasons that we put forward for why we are having a problem today, they do not pass the muster of history. They 

do not answer the question. The real problem is underestimate, 

lack of contractor accountability in cost sharing and risk sharing, 

and then the real major problem is called ‘‘requirement creep.’’ 

5 

And so when you combine lack of proper incentives to get the 

right prices combined with requirement creep, you are going to 

have a disaster. And the Defense Department, unfortunately, is not 

the only Department in the Federal Government that has that 

problem. But if we do not get a hold of it, the problems that we 

are facing in the future are going to be horrendous. 

The latest estimate on Medicare and Medicaid is $100 trillion unfunded liability. I do not see a way out of this unless we really 

markedly change things. 

So I look forward to our testimony. I believe a lot of what GAO 

has reported is right. But the answers on what the problems are, 

the answers in addressing those markedly having an increase in 

the realistic cost when we start a program rather than kidding ourselves so we can get it started and have it within our budget, hoping the money is on the come and that we will catch up with it, 

is really fooling ourselves. And in the long run, it fools the Defense 

Department, because you end up getting less of what you wanted 

and not as effective a component as what you wanted, and so I look 

forward to the testimony of Dr. Finley, as well as our other witnesses, and I hope that we can together, Senator Carper and I can 

bring to bear some common-sense solutions to this in the next defense appropriations, defense authorization bill so that we start 

changing the incentives. 

With that, I thank you, Mr. Chairman. 

Senator CARPER. You bet. Thank you. 

Jim Finley is the Deputy Under Secretary of Defense at the Department of Defense. He is responsible for advising—I almost said 

‘‘advertising,’’ but he is responsible for advising the Secretary of 

Defense and the Under Secretary of Defense for Acquisition, Technology, and Logistics on matters relating to acquisition and the integration and protection of technology. Prior to joining the Department of Defense in his current position, Dr. Finley spent over 30 

years in the private sector and held a variety of operational management positions with General Electric, with Singer, United Technologies, and General Dynamics. 

And we are delighted that you—in addition to doing all those 

things, you managed to take out time in your life to serve our country, and you have been in this job for what, a couple years? 

Mr. FINLEY. Thirty-one months. 

Senator CARPER. Thirty-one, OK. And does it seem like 31 years? 

Mr. FINLEY. No, sir. Every day seems awesome. 

Senator CARPER. Oh, that is great. Well, we are glad you are 

doing it, and we are delighted that you are here today. 

Your entire statement will be made part of the record, and we 

would ask that you summarize as you see appropriate. Thanks for 

joining us. 

6 

1The prepared statement of Mr. Finley appears in the Appendix on page 35. 

TESTIMONY OF HON. JAMES I. FINLEY,1 DEPUTY UNDER SECRETARY OF DEFENSE FOR ACQUISITION AND TECHNOLOGY, 

U.S. DEPARTMENT OF DEFENSE 

Mr. FINLEY. Thank you. Let me start off by, first of all, saying 

that I completely agree with your opening remarks and the focus 

of keeping our eyes very sharp on the taxpayers’ dollars, serving 

our country and our national security. It is the highest on our 

radar screen. 

Chairman Carper, Senator Coburn, and distinguished members—who will hopefully yet appear. 

Senator CARPER. Some are coming. 

Mr. FINLEY. Thank you for the opportunity to appear before you 

today to discuss the Department’s policies and practices in the acquisition and technology of major acquisition systems. I will also 

discuss the GAO report entitled ‘‘Defense Acquisitions, Assessments of Selected Weapon Programs.’’ I am fully committed to acquisition excellence and the restoration of the confidence in our 

leadership for our acquisition system. 

The history of acquisition reform for the Department of Defense 

covers more than 60 years and over 128 studies on waste, fraud, 

and abuse. At the time of my confirmation hearing, February 2006, 

the consensus seemed to be that the DOD acquisition process was 

broken. 

After my first 90 days in office where I listened, discussed, and 

reflected on the leadership perspectives of Congress, industry, and 

DOD military and civilian personnel, my opinion was that the acquisition process was not broken. We quickly moved to recruit and 

fill key positions. We eliminated a layer of management to tighten 

communication. We aligned the organization for better accountability and improved efficiency and effectiveness. 

My perspectives and actions coming from industry with over 30 

years of experience in aerospace and defense have been shaped utilizing that experience to help hold together the acquisition workforce and leverage existing and new acquisition reform and transformation initiatives. We have added oversight discipline into the 

process to ensure that the basic blocking and tackling in executing 

the acquisition process is being done. We have gained insight to 

help scale and tailor processes where and when needed, to implement changes with a sense of urgency that streamline and simplify 

the processes. 

We established three overarching goals: One, to reduce our cycle 

times; two, to increase competition; and, three, to broaden communications—up, down, and across the DOD and with Congress, industry, academia, and our coalition partners. We developed a 3- 

year plan, established our vision and strategy, and implemented 

goals and initiatives with a sense of urgency. Today, we are 31 

months into implementing that plan. 

We are striving for acquisition excellence with a vision that 

starts with leadership and ends with predictable performance. Our 

strategy reshapes the enterprise to accelerate lasting change. We 

deployed a broad set of objectives by using short- and long-term initiatives. Those objectives include enabling decisionmaking for balVerDate Nov 24 2008 08:48 Jun 08, 2009 Jkt 045590 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 P:\DOCS\45590.TXT SAFFAIRS PsN: PAT
7 

ancing the program and portfolio trade space with the convergence 

of affordability, schedule, and performance needs; getting programs 

started right with improved up-front planning and utilization of 

risk management, competitive prototyping, technology and manufacturing readiness metrics, early integration and tests; collectively 

providing a basis for cost realism prior to major acquisition decisions. 

Improving process efficiency with a focus on tailored, agile, open, 

and transparent communications; checks and balances that utilize 

Lean Six Sigma methodology, objective incentive fee criteria, systems engineering across the acquisition landscape, and conducting 

preliminary design reviews prior to milestone B. 

Providing program stability with program management tenure, 

organizational empowerment, stable funding, integrated master 

schedules, and Configuration Steering Boards. 

These objectives and initiatives are also applied to Nunn-McCurdy breaches. More examples are provided in the semiannual Section 804 congressional report in accordance with the John Warner 

National Defense Authorization Act for Fiscal Year 2007. 

A comprehensive analysis of the GAO report ‘‘Assessments of Se- lected Weapons Systems’’ has been initiated. Of the $295 billion of 

cost growth identified in the report between 2000 and 2007, $202 

billion—approximately two-thirds of the $295 billion—was incurred 

before 2004; $93 billion was incurred from 2004 to 2007, with a 

pipeline of about $1.5 trillion, representing an approximate 3-percent growth per year for those 2 years utilizing year 2008 base year 

dollars. We are still analyzing that 3 percent. We do not consider 

it to be a crisis, but need to better understand the uncontrollable 

elements of rising medical costs, rising material costs—i.e., specialty metals—rising fuel costs, and requirements changes. 

Another perspective is the definition of the baseline of the GAO report of $295 billion cost growth. Between 2000 and 2006, we 

added 48 programs and removed 30 major defense acquisition programs. That mix change represents a content-to-content difference 

and is not fully understood and is still being analyzed. For example, the quantity of ships, aircraft, vehicles all changed during the 

GAO report time frame. The DDG 51 ship baseline went from 23 

to 62 ships. The JSF quantities were cut by 409 aircraft, reduced 

the total quantity to 680. The future combat systems increased 

their quantities for brigade combat teams. The Virginia class submarine shifted from a two-per-year procurement to a one-per-year 

procurement at two naval shipyards and experienced increased 

shipyard labor and material costs. 

Our review of the GAO data reflects the changes, some but not 

all, as characterized here for these four programs contributed $147 

billion, 50 percent of the $295 billion. The GAO data in this regard 

continues to be reviewed with the GAO to better understand the 

root causes of the cost growth and where to focus attention and 

take action. 

Our perspectives of the five conclusions from the GAO report 

have been summarized in our written testimony. We continue to 

work with the GAO to better understand their data, methodologies, 

and conclusions associated with the assessments of selected weapons systems. 

8 

In summary, measurable progress for acquisition excellence has 

been accomplished on a broad front of initiatives. We have traction. 

We will continue to improve. Much work remains to be done. A 

plan for that work has been established. It goes beyond this Administration. 

Chairman Carper, Senator Coburn, and distinguished members 

of the Subcommittee, thank you for the support of our troops. I will 

be pleased to address any questions you may have. 

Senator CARPER. Thanks, Dr. Finley. Let me just lead it off. And 

thanks very much for your testimony. 

The Department’s weapons system acquisition process has, I 

think, been on the GAO’s high-risk list—I want to say about 18 

years, since 1990. And since that time, the Department has made 

what GAO has called ‘‘well-conceived changes to its acquisition 

policies.’’ But as we have seen from the graphs up here earlier, the 

outcomes still are not improving, or at least not the way we would 

like for them to. 

In your own view, why are the acquisition programs immune to 

the kind of improvement that we both seek? And what are the factors that make them so susceptible to cost growth, to delivery 

delays, and to poor performance? 

Mr. FINLEY. Well, I think there is a lot of agreement between the 

GAO and DOD on some of the issues that are driving these, as you 

summarized on the chart. Technology maturity has been a definite 

problem, and—— 

Senator CARPER. Talk about that a little bit, if you would. 

Mr. FINLEY. OK. The technology maturity is now defined to be 

a Level 6 before we go forward with an ACAT I major defense acquisition program. At a Milestone B decision, you are to have demonstrated a Level 6 of technology maturity. Some programs in previous decisions have not achieved a Level 6 and yet have gone forward with a Milestone B decision. 

Senator CARPER. Who allows that to happen? And whose job is 

it to ensure that it does not happen? 

Mr. FINLEY. Well, I think it is a collective responsibility. OSD— 

in my case, I am OSD in A&T. We are to provide the oversight to 

make sure that does not happen; or if it does, we need some assurances as to how these technology maturity issues would be mitigated in a timeline that would not be detrimental to the critical 

path of the program. 

Senator CARPER. So you have, on the one hand, your program 

managers for a particular weapons system pushing hard to try to 

get something done, built, through the pipeline. And at the other— 

it is almost like having your car, you have an accelerator and you 

have a brake. 

Mr. FINLEY. Right. 

Senator CARPER. And you have to be able to use both of them. 

Somebody has got to be pushing on the brake. 

Mr. FINLEY. I think many programs that were coming forward 

were of a PowerPoint design, paper design, and trusting without 

verification was being done. 

Senator CARPER. Without prototypes. Is that correct? 

Mr. FINLEY. Without prototypes. The initiatives of Mr. Young to 

enforce competitive prototyping not only helps provide us a cost reVerDate Nov 24 2008 08:48 Jun 08, 2009 Jkt 045590 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 P:\DOCS\45590.TXT SAFFAIRS PsN: PAT
9 

alism base, but also it promotes competition early on in the 

timeline. 

Part of our objectives are to cut our timelines by 50 percent. 

Right now we are taking upwards of 10 years plus to field weapons 

systems. We believe we can cut that timeline in half. 

Senator CARPER. Any idea why DOD stopped this process of 

prototyping? 

Mr. FINLEY. I do not have an insight on that. I think part of the 

dilemma that DOD experienced as well as industry was we lost 

systems engineering capability on both sides of the equation. And 

we have been working very actively to bring system engineering 

back into the fold as a key decisionmaker at the table. 

Senator CARPER. A concern that I have, it sounds like the Department of Defense and you and John Young and Gordon England 

are trying to get us back in terms of acquisition on these weapons 

systems, back using common sense, using better business judgment. And I have this concern we are going to have a change in 

administration in about 3 or 4 months, and I do not know if you 

want to sign on for another tour or you want to go spend time with 

your grandchildren or other things. But if we do have a new team 

that comes in, my concern is that some of the reasonable changes, 

solid changes that are being adopted may not stick. And, Dr. 

Coburn, I think part of our challenge is if we stick around here for 

a while longer—I think we have a couple more years left on our 

no-cut contracts. But I think part of our job is to make sure that 

the reforms that they have begun, some of the smart practices they 

are going back to, that the next Administration adheres to those 

as well and builds on them. And I know GAO is going to be here 

to help us to ensure that happens. 

Mr. FINLEY. I feel very good—excuse me, if I may, I personally 

feel very good about where we are at. When I came into office, I 

had a very long timeline to get confirmed even though I had numbers of years of experience and had all the security credentials. 

But, nonetheless, once I got confirmed, when I came in I had six 

direct reports, and four of my six direct reports were not here. And 

people advised me, ‘‘You are in deep trouble.’’ I told people, ‘‘I am 

in great shape.’’ Because what we did was we recruited people to 

fill those positions that had three ingredients and three criteria 

that we established: One, we wanted industry experience; two, we 

wanted them to have military experience, preferably with MDAP 

programs, and the scar tissue to prove it; and, three, we wanted 

them to have the passion to serve their country. 

I am very pleased to inform the Subcommittee that we have 

filled these positions, and we have had these people in these positions now for some years. So they are career SESs at the senior 

level, and this we are talking about now is within OSD. And as we 

build our rapport within OSD and AT&L, going outside the AT&L 

organization into the Comptroller organization, the P&E organization, the Joint Staff organization, and now getting into the component organizations, we start to build traction and respect, and we 

have to work this as a team very collaboratively. It is a contact 

sport. 

But these are expert people. They know the business, and we are 

now also bringing together, pushing this down into the organizaVerDate Nov 24 2008 08:48 Jun 08, 2009 Jkt 045590 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 P:\DOCS\45590.TXT SAFFAIRS PsN: PAT
10 

tion to empower people to make decisions. So I believe, if I were 

to leave today, I personally believe the organization of Acquisition 

and Technology is in very strong shape and would support Mr. 

Young and has supported Mr. Young, as well as Mr. Krieg before 

Mr. Young, in an excellent fashion. I believe we are on the right 

path. I think there is at least one other additional element on the 

areas of factors that are giving us cost growth, and that is funding 

stability. And funding stability—when I came to be confirmed by 

the U.S. Senate, certainly technology maturity and requirements 

creep were right there on the radar screen, and we are in complete 

agreement on those issues, and I believe today we have those 

issues corralled. And I believe we have them shackled, and I believe we have ways as a matter of discipline to hold people’s feet 

to the fire to make the hard decisions and say no if they are not 

ready. 

But beyond that, funding stability became a very visible issue, 

and if I looked at PB08 and the 90-some programs that are MDAP 

category, all but one of those programs had funding changed from 

the PB09 submission. Of the Nunn-McCurdys that were done in 

2007 and submitted as part of the PB08, if you will, five of those 

six Nunn-McCurdys had just been certified by the AT&L; all had 

their funding changed as part of the President’s budget approval. 

So we have got to get a handle on funding stability as part of 

this equation to get better acquisition excellence, or we will be 

struggling with it—and it is not just the Congress, sir. Our own 

OSD Comptroller will play with funding. Our planners and programmers will play with funding to pay unexpected bills. We simply have to get into a better process working together to get more 

stability in the funding program. 

Senator CARPER. We saw that on the C–5 modernization and 

working with John Young. If we ended up ramping up production 

of the C–5Ms, we would go from one to three to five, seven, nine— 

somewhere up around nine is the sweet spot in terms of aircraft 

to retrofit every year. But then if we drop back down to three or 

two and back up to seven, the inefficiencies are there, unfortunately, and the costs are just driven up very high. That is, I guess, 

part of our challenge, and as we are not appropriators—— 

Senator COBURN. We just need to become appropriators, too. 

Senator CARPER. Dr. Coburn says we need to become the appropriators, too. Actually, I was thinking about that today. 

Let me turn it over to Dr. Coburn. I have some more questions, 

and maybe we will have a second round here in a minute. 

Senator COBURN. Dr. Finley, it is your contention that you have 

the systems in place that, without you and the two or three people 

below you, this program change, this culture change that has been 

instituted in the last 31 months will continue? That is your contention? 

Mr. FINLEY. It is a start, yes. But we did not start 31 months—— 

Senator COBURN. That is a different answer than what I—will it 

continue? 

Mr. FINLEY. Yes, I believe it will. But we did not start 31 months 

ago. What we did was we built, I believe, on a lot of good work that 

was done back in the QDR time frame, certainly before I arrived, 

and there were a lot of good ideas, and there were a lot of good 

11 

initiatives going on before I arrived. We simply picked up a lot of 

those good ideas, and we joined each other at the hip, and we started moving them together, forward. 

We will continue to have good ideas, I believe. We will continue 

to become more innovative in our approach to business, things like 

the Configuration Steering Board, which is now going to become 

law. We certainly appreciate Congress’ acting on that, and John 

Young, Mr. Young, brought that forward, in particular to help stabilize some of the funding requirement changes as well as some of 

the stability changes for the programs. 

So we should never stop looking for new ideas to cut the cost and 

reduce the schedule and find smarter ways to do business. 

Senator COBURN. Let me just query you for a minute because I 

am not educated in a lot of these areas and do not have the practical experience or the knowledge. Explain to me why when we contract for a new weapons system that we do not place more of the 

risk on the contractor. 

Mr. FINLEY. Well, I think—— 

Senator COBURN. I mean, if you are contractor, it is a slam-dunk. 

You are going to make money. Now, I do not know any other business in this country that has a slam-dunk no matter what they do 

or what the performance is, they are going to make money. So 

what I do not understand is why we have not transferred some of 

the risks for new technology based on the guaranteed reward that 

is going to be there to these individual contractors. Can you teach 

me or educate me so I can have a better understanding of that? 

Mr. FINLEY. Certainly. Prior to the environment that we are in 

today with cost-plus contracting, we were in fixed-price contracting, 

and the pendulum was, let’s say, way over here on the left. And 

as companies were eating the risk and swallowing the cost, that 

pendulum started to swing over to the far right to cost-plus award 

fee and cost-plus incentive fee kinds of contracts. 

We have changed the award fee criteria so it is not a slam-dunk, 

and we have also advocated and have started to put into regulation 

with the 5000 change that you will now go more toward what we 

call fixed-price incentive contracts and push the profit that companies can make more to the right of their timelines as opposed to 

spread closer to the left, which is where it has traditionally been 

that we have discovered, and by doing that, we share that risk— 

industry shares more of that risk, if you will, than the government 

than before. And by fixed-price, it starts to definitize what has to 

be delivered and what the expectations, what the requirements are 

in terms of the deliverables. 

The dynamic in contracting is changing dramatically, and that is 

very recent. 

Senator COBURN. Are you seeing that transmitted into a decrease 

in underestimation of costs? 

Mr. FINLEY. I would say it is premature—— 

Senator COBURN. A decrease in the frequency of underestimation 

of costs. 

Mr. FINLEY. I would say it is premature. The programs where we 

are going to see fixed-price incentives are new starts or our program restructures out of Nunn-McCurdy breaches, if you will, because we are applying all these techniques both to programs that 

12 

are in the pipeline as well as new starts. But programs like Tanker, programs like JLTV, programs like JAGM, Joint Advanced Missile program—all these programs are carrying fixed-price incentive 

types of contracting vehicles with them. 

Senator COBURN. Did not the—I am trying to think which 

iteration of the Tanker contract. The one that was recently challenged, did it not have a significant component, about 18 percent, 

of cost-plus contracting in it? 

Mr. FINLEY. I am not familiar with all those details. 

Senator COBURN. Well, I may be in error. It may have been 8 

percent or 9 percent. But here is the question for you. Here you 

have something that the Air Force has been trying to buy for 15 

years, and then we let a contract, and 8 or 10 percent of it still 

cost-plus. I cannot fit that with any modem of common sense that 

the Air Force does not know what it wants in the way of a tanker 

in terms of requirements. Why there would still be a component of 

cost-plus rather than a pure fixed-price-plus-incentive contract, I do 

not understand that. And so I am trying to get a hold, if we are 

going to have an impact to try to help you do what you need to get 

more defense for this country for the same amount of money, it 

would seem to me we have to figure those kind of—we have to answer those questions. 

Mr. FINLEY. I agree. 

Senator COBURN. OK. Thank you. I will withhold any additional 

questions. Thank you, Mr. Chairman. 

Senator CARPER. Dr. Finley, when you reported aboard to your 

present position, were confirmed and moved into your job, how long 

had that post been vacant? Any idea? 

Mr. FINLEY. I think it was 31⁄2 years. 

Senator CARPER. That is part of the problem. Why was it vacant 

for so long? 

Mr. FINLEY. I am not familiar with all the details, but I believe 

there was some gridlock for the appointees in Acquisition due to 

the Druyun situation with the Air Force, which had a number of 

people in the Pentagon, like Mr. Wynn was Acting AT&L, he could 

not move. As a result, the AT&L back-ups for him could not come 

in. And then that waterfall just went downhill, and the pipeline 

just got backed up. 

Senator CARPER. I see. So your position that you filled a couple 

of years ago, 31 months ago, that position was vacant for about 3 

years. When you got onboard, confirmed, and moved into your post, 

out of your six direct reports, four positions were vacant? 

Mr. FINLEY. Yes, sir. 

Senator CARPER. That helps explain some of this, doesn’t it? 

Senator COBURN. Yes. That would be our fault. 

Mr. FINLEY. You did have acting SESs in those positions, but 

they were acting, and they were excellent people. But I could have 

certainly promoted those to be permanent, acting directors, if you 

will. I elected to take the road less traveled perhaps, and I wanted 

an experienced senior military, senior industry experience that 

could really build this team for the long run. And we have excellent 

people up and down and throughout the organization. 

Senator CARPER. And your six direct reports, those are folks that 

stay, even if you decide to go off—— 

13 

Mr. FINLEY. I have two politicals that report to me: One is in industrial policy and the other one is in small business programs. 

Both of those organizations report to me. They will be exiting on 

or about January 20, as far as I know. And we have great backups for them as well. 

Senator CARPER. Well, obviously, the next Administration and 

the next Congress needs to do a better job of addressing this. 

Mr. FINLEY. It is a big issue, sir. It is something I believe Secretary Gates is addressing way up front, much earlier, I am told, 

than previous Administrations, even the current Administration. 

And we are very proactive, and very open and transparent about 

what we believe ought to be addressed. And we are building our 

cases for the people that come in and relieve us, if you will. 

Senator CARPER. In the Navy, we used to have turnover. We 

would be overseas for 6 months, home for 8 months, overseas for 

6 months, and home for 8 months. And whenever we would go 

overseas, the squadron that we were leaving would have a turnover 

document that they would turn over to us and basically explain 

what their jobs were and to help us come up to speed. 

I presume you have a similar kind of turnover, but if it had been 

3 years since your predecessor left, it is pretty hard to have much 

of a constructive turnover. 

Mr. FINLEY. Well, we have accomplished a lot. I believe we are 

back at full stride. I believe that there is a transition team that has 

been stood up in the Pentagon, for Secretary Gates, and it is in full 

swing. 

Senator CARPER. I think one of the things we will get into with 

our next panel is the number of acquisition personnel that we actually have, whether the slots are filled or not, but the number that 

we have and whether or not we give them enough clouts, four-star 

generals, or three stars or two stars, do we have people for whom 

there is a good pipeline to grow to have a career? And do we give 

them enough oomph to do their jobs? Any thoughts on that? I think 

others will discuss that. 

Mr. FINLEY. Yes, the acquisition workforce is very high on my 

radar screen as well. The legislation last year, initiative 852, did 

authorize but not appropriate, but we are taking it as if it were appropriated, and we have agreement with the OSD Comptroller and 

the principals of DOD and how we are going to do this. But it essentially is about $1.3 billion over the FDIP to reinvigorate the acquisition workforce. That is about 12, 13 different functions that 

are called acquisition. 

Now, one of the holes that has come up, as you look at the personnel situation, and as you have addressed, very eloquently, both 

you, Mr. Chairman, and Senator Coburn, is requirements. And 

what do the requirements people get in acquisition? So we have 

also set up training modules and training capabilities and requirements. I think by law by September 30, the requirements people 

must have certifications to these acquisition levels of capability, or 

they will not be allowed to provide requirements for the programs 

of record, if you will, that they are making. 

So we are also very encouraged by this. This has been a major 

collaboration between the military and the civilian workforce at the 

Joint Staff level and all the services as well as OSD, and the P&R 

14 

people of OSD as well. So we see very positive traction. Here, 

again, this is something that I do not think will be solved overnight, but the acquisition workforce, as people would normally 

think about the acquisition workforce, has been relatively flat for 

the past several years, but the workload on this workforce has doubled or tripled. 

Senator CARPER. OK. Now, I am going to follow this up by just 

sharing with you a quote, I think it is a direct quote from GAO in 

the report that they presented to us. But it goes something like 

this: ‘‘The unrealistic cost estimates for major weapons systems are 

developed in an environment where DOD commits to more programs than available resources can support, which promotes 

unhealthy competition among programs for funding. This competition creates strong incentives for program officials to establish requirements that make their particular weapons system stand out 

from others, with less consideration given to the resources that will 

be needed to develop them.’’ 

Now, you have already answered this in part. I want to ask you 

just to reiterate it and then add anything that you want. But that 

is a pretty serious problem, I think you will agree. Share with us 

again what are we doing in the Department of Defense, in the Office of the Secretary of Defense, in your shop, what are we doing 

to address this serious problem with DOD’s acquisition culture? 

You have addressed it some. Restate some of what you have done 

if you want. 

Mr. FINLEY. Well, I think cost realism is a real issue. I do not 

think there has been enough competition. I do not think competition has caused people to buy in. I think it is more perhaps, if I 

have it right, if I was correct with Senator Coburn, you may bid 

unrealistically to get the program of record approved and through 

the decision gates to move forward. As we sometimes say, once you 

have the coffee cups, the mugs, and the T-shirt, you are good to go. 

In 21⁄2 or 3 years, it may be predictable that you will have a NunnMcCurdy. 

So the effort is to start with—the initiative of 852 is to start 

building more of our core competencies that we have lost in DOD 

over the years of attrition and restructuring and outsourcing to 

bring these core competencies that include price estimating and 

cost estimating back into the mainstream of OSD for oversight, but 

also to the services so that they have these inherent capabilities. 

Senator COBURN. Just a little rebuttal. When you had those core 

capabilities, you had the same kind of cost overruns. So how does 

that answer the question? 

Mr. FINLEY. Well, it is a start. Coming from industry and the 

years of fixed-price, more fixed-price development if you will, than 

cost-plus, the leadership I was groomed under and the management training I received was to perform. And if we had problems, 

we came and we worked them, and we went eyeball to eyeball, to 

resolve those differences quickly and not let them drag out. 

Again, there is no silver bullet, but getting the functions back in 

the right place is part of getting the right people in the right place. 

I think the aspects of empowering the workforce, recognizing the 

workforce, fundamentally comes down to a lot of discipline issues 

15 

and leadership issues. And we have got to get that back to where 

it was, with accountability. 

So, again, there is no one piece that is going to do this all by 

itself. It will take time to get back to where we were, and I am not 

sure if where we were was acceptable to you, Dr. Coburn. But I 

would say from my experience of where we were in industry, in excellence and performance, the channels I came up through, is 

where I am trying to help steer this for the future. 

Senator COBURN. Yes, and I am not meaning to demand that. I 

am just looking back at history of what we have seen from the 

1930s, the 1940s, the 1970s, when we had these varying levels of 

competency and staffing and everything else. 

Mr. FINLEY. Yes, sir. 

Senator COBURN. This is the same problem. When we had costplus, fixed-price, we had the same problem. To me it goes back to 

the two major problems: One is requirement creep, which somebody 

has to get a hold of so that if you are going to have a requirement 

creep, it does not happen until you do the first MOD; and the second is underestimation of costs when you begin it so you can get 

a program started. And the transparency in that aspect of it, with 

a penalty—and, really, the Pentagon is complicit in this because 

they want the program, so they have an incentive to have it come 

in under cost knowing that it is unrealistic. And so what happens, 

the American taxpayer gets a program that is supposed to cost 

this, and we all know it is never going to come close to costing that, 

and that is just the way we do business. 

We have to break that cycle because, quite frankly, in the years 

to come the Defense Department spending as a percentage of the 

total budget is going to be less. Our interest costs are going to be 

27 percent this year. Now, think about that. And in 10 years, they 

are going to be 40 percent. Some of it is going to come out of the 

Pentagon. 

So we need to be about making sure—and I applaud your service 

and your leadership. My hope is—and I think, Senator Carper, I 

can speak for both of us—that the leadership that you have put in 

will be followed by similar leadership that will continue to penetrate accountability, responsibility, integrity, and performance. And 

that is my worry. And we did not even talk—I have got several 

other questions which I will submit for the record, but, of the people who are the worst in terms of purchasing IT, it is the Pentagon. 

This Subcommittee has followed all IT problems throughout. GAO 

has been helping us with it. But, by far—and you have the worst 

IT in the country, and the rest of the country is way ahead of you 

on IT. And yet the cost overruns, the programs that are in trouble 

in IT, it is the same problem. 

So our hope is and our appreciation is—we know people are trying, are working. There has got to be something we have not got, 

and I think the two things are underestimation in the original and 

requirement creep. And unless we do something to change those 

things, we are going to keep getting the same results. 

Mr. FINLEY. Another major shift in response to those two areas, 

one of the observations we made when we came onboard was so 

much was being done with these programs—and these programs 

are obviously much bigger and much more complicated, to a large 

16 

extent, than we have had in the history of the DOD. But the acquisition strategies in these procurements were what we would characterize as ‘‘big bang.’’ You would have expectations on requirements that were unachievable, to a large extent. But trust me, no 

problem, we will get there. 

What we have done is we have gone—again, what we have done 

before—this is nothing new to this—is go back to a more incremental strategy that you develop a little, you test a lot, and you 

deliver a capability to the field. And you increment this with a 

strategy that provides the warfighter something they can use in 

the security of the country, and at the same time we do not—we 

can then estimate costs more realistically, and we have a better 

handle on our requirements. 

In parallel with that, in our S&T world, we can be incubating 

newer technologies and newer activities as on ramps to come into 

these programs when and if ready. But they will be done in an incremental block fashion. 

Now, there are several programs of record—F–18, F–16—that 

have practiced this in spades since their inception, and they do get 

very favorable write-ups. Of all the programs written up in the 

most recent GAO report, 10 of the programs, in fact, did return 

money. All these ACAT I programs, MDAPs did not overrun. 

Senator COBURN. And what were those, again, tell me? Just give 

me some examples. 

Mr. FINLEY. The Growler program, F–18G, did underrun its 

budget—on schedule, below budget, meeting performance. 

Senator COBURN. What else? 

Mr. FINLEY. I will take it for the record. I have it somewhere in 

my notes here. 

Senator COBURN. That is OK. I would love to see that. 

Because our tendency, when we are doing Federal financial management oversight, our tendency is to always look at the negative. 

It is great to hear about the positive and to figure out what happened there and why and how do we duplicate it. So I would very 

much appreciate it. 

I am going to offer the rest of my questions for the record so we 

can move on. 

Senator CARPER. One last quick question if I could, Dr. Finley, 

before you leave us. The hearing that John Young came before at 

Armed Services and testified in early June, I think Chairman 

Levin asked him for the Department’s position on a proposal by 

Senator Levin, a proposal to create an independent office that 

would review cost estimates on all major defense acquisition programs and would develop its own independent cost estimates. And 

at the time, back in early June at the hearing, Mr. Young said that 

the Department, your Department, did not have a position on this 

proposal. And I am just asking, do you all have a position now? 

Mr. FINLEY. I think there is a DOD position on this. I do not 

have it in front of me. 

Senator CARPER. Would you submit that for the record for us, 

please? 

Mr. FINLEY. Certainly. I would be happy to. 

Senator CARPER. OK. Well, I think we will excuse you at this 

point in time. Thank you very much for joining us. 

17 

Mr. FINLEY. Thank you so much. 

Senator CARPER. And thank you for your stewardship. Thanks 

for putting together a good team around you. And if on January 

20th, you decide to head out into the sunset, we wish you fair 

winds and following sea, as we say in the Navy. 

Mr. FINLEY. Thank you. We appreciate your service as well, Senator Coburn as well. We appreciate your support to our troops. This 

is an ongoing efforts. Everybody is committed. In my opinion, it 

does come down to leadership. We need strong leadership, and you 

need checks and balances, and you need informed oversight to kick 

those cans in the right place. I think we are making progress. 

Senator CARPER. OK. I hope you are right. I think you are right. 

Thank you so much. 

Mr. FINLEY. Thank you. 

Senator CARPER. Welcome, panelists. I am going to take just a 

moment and provide a brief introduction for each of you, if I could. 

Mike Sullivan served as Governor of Wyoming when I was first 

elected Governor of Delaware. You looked different then. You have 

a lot more hair now. Actually, Mike Sullivan was a Governor of 

Wyoming, but it was another Mike Sullivan. And I am sure there 

are a bunch of you out there. This Mike Sullivan serves as Director 

of Acquisition and Sourcing Management at the Government Accountability Office where he has worked for 23 years. Most recently, he directed GAO’s Annual Assessment of Major Weapons 

Systems Programs, which is the subject of our hearing today, and 

we are grateful to you for being here. 

Steve Schooner is an associate professor of law and co-director of 

the Government Procurement Law Program at The George Washington University. Before joining the law school faculty in 1998, 

Professor Schooner was the Associate Administrator for Procurement Law and Legislation at the Office of Federal Procurement 

Policy in the Office of Management and Budget and served for— 

how many years in the military? Twenty good years? 

Mr. SCHOONER. Twenty good years. 

Senator CARPER. Twenty good years in our armed forces. Thank 

you for that service. 

And Clark Murdock—this is the second hearing we have had literally in a week where one of our witnesses’ names was Murdock. 

The other fellow, we had to call him ‘‘Dr. Murdock.’’ He is the fellow who is the head of the census. 

Clark Murdock is the Senior Adviser to the International Security Program at the Center for Strategic and International Studies, 

specializing in strategic planning, defense policy, and national security affairs. He currently directs the four-phase study on the Defense Department’s reform ‘‘Beyond Goldwater-Nichols: U.S. Government and Defense Reform for a New Strategic Era.’’ Mr. 

Murdock has served in many roles in the defense world, including 

as a Senior Policy Adviser to House Armed Services Committee 

Chairman Les Aspin, with whom I was privileged to serve. This 

Clark Murdock looks familiar to me. I know that our paths have 

crossed before, and I very much enjoyed serving with Les Aspin. 

We thank you for joining us today and for your willingness to testify. 

18 

1The prepared statement of Mr. Sullivan appears in the Appendix on page 47. 

2The chart referred to appears in the Appendix on page 53. 

Gentlemen, I have been asked by my staff to remind you that we 

would ask you to try to keep pretty close to 5 minutes. I am not 

one who will gavel you down at 5 minutes, but try your best to 

keep close to 5 minutes, and then we will get into some questions. 

Thank you. 

Mr. Sullivan, why don’t you lead us off? 

TESTIMONY OF MICHAEL J. SULLIVAN,1 DIRECTOR, ACQUISITION AND SOURCING MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. SULLIVAN. Thank you, Chairman Carper. I am pleased to be 

here to discuss the Department of Defense’s management of its 

major weapon system acquisitions. My statement today will focus 

on current acquisition program outcomes, the reasons for them, 

and potential solutions, some of which the Department is now trying to implement, as you heard from Dr. Finley earlier. 

With regard to outcomes, the Department is not receiving expected returns on its investment. As the table to my far left indicates, which mirrors some of the—— 

The most important number on that table is the $295 billion, 

probably.2

Senator CARPER. All right. 

Mr. SULLIVAN. Since we began our annual assessments in 2000, 

which is one of the columns on that table, the number of major acquisition programs has grown by 20, from the 75 to the 95. Total 

investment by the Department in those programs has doubled to 

$1.6 trillion. Development cost overruns have increased from 27 

percent in 2000 to 40 percent in the programs in the 2007 portfolio. 

And delays in deliveries have increased from 16 months to 21 

months. All told, this represents the total cost growth that you allude to on your pie chart up there of close to $300 billion and results in degraded buying power for not only just the Department 

but, as you point out, for the Nation as a whole. 

There are systemic problems that contribute mightily toward 

these poor outcomes, and we break them into strategic and programmatic. At the strategic level, there simply are too many programs chasing available dollars in the Department’s acquisition 

budget. As the other graphic up here to my left indicates—and I 

think this gets at some of the questions that Dr. Finley was fielding—the Department’s organizations and processes that identify 

needs—in other words, candidates to become programs—funding, 

and the acquiring of the weapons systems, which together these 

three processes and their leaders more or less make up the Department’s overall acquisition team, are fragmented and broken. Leadership at these levels is not necessarily answerable to each other, 

and, therefore, there is little accountability for the poor outcomes. 

The requirements process, which is led by the Vice Chief of Staff, 

tends to be stovepiped. Each of the services may offer different new 

acquisition programs, sometimes to fill the same capability gap, 

creating an overwhelming number of candidate programs that must 

promise very high, sometimes unachievable performance, with very 

19 

low, often unachievable cost estimates in order to fit into the Department’s budget. The funding process, led by the Comptroller, accepts these overly optimistic cost estimates as inputs, which is not 

a sound basis for allocating resources and ensuring program stability. 

Finally, the acquisition process, led by the Under Secretary for 

Acquisitions, initiates these programs, signs cost-reimbursable contracts with sole sources, and begins expensive product development 

with little or no evidence that technologies, designs, or manufacturing capabilities will be able to build the weapons system in 

question. 

At the program level, the programs begin with an unmanageable 

business case, cost, and schedule estimates heavy on optimistic assumptions, light on data. As a result, true costs and schedules are 

usually not known for years on these programs until assumptions 

give way to empirical evidence and significant sums of money have 

been consumed. 

To be sure, problems resulting from a poor business case at the 

outset will quickly cascade into design changes, manufacturing inefficiencies, quality problems, and delayed deliveries. Solutions are 

available, and we have made recommendations. A well-balanced, 

well-prioritized mix of candidate acquisition programs would alleviate the pressure each program now faces in winning the competition for funding in the Department. This means the Department 

must become more unified. Each of the three organizations that we 

have on our chart are critical to acquisitions and must integrate 

and must make early hard decisions together concerning needed capabilities and limited resources. That is something that does not 

exist today. There is an awful lot of segmentation between these 

three critical organizations. 

If the Department’s leadership can get priorities right, limit the 

number of programs to start, and establish sound business cases 

which are executable, program managers that are responsible for 

those programs will be empowered to control program execution 

and then can be held accountable for their outcomes. 

The Department understands all this, and Dr. Finley talked to 

some of that today. It has many initiatives underway now, which 

I would be happy to go into in the Q&A. Some of them are in response to our recommendations, and some are in response to 

passed legislation that has been designed to address these problems. However, we have seen initiatives like this before that go 

back almost all the way to Dr. Coburn’s example of General Washington needing the ships. The most recent Packard Commission in 

the 1980s is probably a good basis where a lot of this stuff has been 

said before, the answers are out there, but they just for some reason have not ever been implemented properly. 

Too often in the Department, well-meaning policy just does not 

translate into practice. Cultural barriers, the transitory nature of 

the positions at the top, and the stovepiped nature of acquisitions 

make culture change and improvement very difficult. Therefore, we 

will maintain a healthy skepticism until we see some results from 

these initiatives. 

In conclusion, Mr. Chairman, let me say that significant and 

lasting change in this acquisition process and in the requirements 

20 

1The prepared statement of Mr. Schooner appears in the Appendix on page 64. 

process and in the funding process can only take place with improved cooperation across the Department and the military services, continuing support and advocacy from a unified departmental 

leadership, and perhaps most importantly, sustained oversight 

from this Subcommittee and others in the Congress. 

I look forward to your questions on these and other ways to solve 

some of these problems. 

Senator CARPER. Mr. Sullivan, thank you very much. Thanks for 

your good work and for being with us today. 

Next we will hear from Steve Schooner. Mr. Schooner? Is it Dr. 

Schooner? It is, isn’t it? 

Mr. SCHOONER. Steve Schooner is fine, but professor is OK, not 

doctor. 

Senator CARPER. Professor Schooner, take it away. 

TESTIMONY OF STEVEN L. SCHOONER,1 CO-DIRECTOR, GOVERNMENT PROCUREMENT LAW PROGRAM, THE GEORGE 

WASHINGTON UNIVERSITY 

Mr. SCHOONER. Chairman Carper and Ranking Member Coburn, 

I appreciate the opportunity to discuss these issues with you today, 

and I will try to briefly offer some explanations in context and recommend that DOD could achieve better results by more aggressively employing incentives than disincentives and making a significant investment in the acquisition workforce, all of which you 

have apparently already heard at this point. 

Major systems are, by definition, challenging, complicated, and 

inherently risky. We have fundamental pathologies, we have absence of market forces on the buyer, an unwieldy appropriations 

cycle, a diffusion of responsibility, and all of this makes accountability maddeningly difficult. And that is why it is, frankly, overly 

optimistic to expect any institution to consistently and quickly advance the state of the art and employ significant untested technological applications while still meeting firm budgets and schedules. 

None of that means that we are not going to get superb weapons 

systems and we do not get value for money. And I do not mean diminish the importance of costs or schedule, but it is important to 

keep in mind that costs and schedule are not the only metrics. 

The relationships that we have seen discussed today typically 

proceed on the unstated assumption, by both parties, that the problems will be worked out during contractual performance. The parties do not resolve the ‘‘unknown unknowns.’’ They do not aggressively reduce programmatic risk. The government simply chooses a 

course of action, it selects a partner, and the parties know they will 

out the problems later. Contractors sign these contracts because 

they know that the likelihood of catastrophic failure is particularly 

low for large-scale and important programs. 

But just because DOD either will not or cannot pay for the necessary research and development needed for the systems to mature 

does not mean that the contractors have any meaningful choice 

other than to propose immature technologies and commit to longterm delivery schedules, knowing that the government’s needs are 

rapidly evolving. The contractors enter these programs willing to 

21 

invest and lose money on their bid and proposal costs, in their research and development, and typically in initial production—all 

hoping someday they are going to recoup that investment during 

full-scale production or, increasingly, foreign military sales. 

But because the government also lacks the patience to mandate 

demonstration and validation, we rarely see functional prototypes, 

and we almost never see competitive prototypes anymore. We 

would need a dramatic cultural change to generate the necessary 

funds and patience to complete R&D before production. 

Now, granted, the alternatives to tolerating overrun are limited 

and unattractive. You can stop the contracts and squander the investment made. The government can accept substandard products, 

or the contractors can suffer devastating losses. But none of that 

will work. The only way we are going to get better cost control and 

schedule discipline is to slow down the process, break the programs 

down into clearly defined stages, and then impose discipline ensuring that nothing goes forward until technological and design issues 

have been resolved. 

I just briefly wanted to go back to a point that Dr. Coburn made. 

The underestimation that you describe is caused in large part by 

government policies and practices, and to place all of the cost risk 

on contractors for that is simply not feasible in the current environment. Some of the most spectacular acquisition debacles we have 

ever seen in history were fixed-price research and development contracts. 

So when we go forward, I think what we have to look at is meaningful incentives and disincentives, not just disincentives but 

meaningful ones. 

Just last week, Minneapolis unveiled the new bridge replacing 

the I–35 bridge that collapsed just last year. That contract successfully employed meaningful incentives, a $200,000-a-day bonus. By 

bringing that contract in on time, the contractor made nearly a $20 

million special profit for that. 

On a larger scale, DOE employed extremely lucrative incentives 

for the clean-up out at the Rocky Flats Environmental Site in Colorado. There, a project that many people thought simply could not 

be done was done for half a billion dollars under budget. Now, 

granted, this made a lot of contractors very wealthy, but you have 

a very satisfied government customer. 

But in the modern era, even with the revisions to DOD’s profit 

policies with the weighted guidelines approach, we still have the 

problem that many government officials believe that artificially 

suppressing contractor profits is a public good. And as long as we 

live in a world where profit is evil, market-based incentives and 

disincentives will not be the primary way to ensure that the government gets value for money. 

The human capital crisis is something that we could discuss at 

length. I am mindful of my time, but let me just mention three 

things. We have a legitimate crisis in terms of the acquisition 

workforce; we do not have enough quality program managers, and 

we are particularly short in terms of systems integration staff, and 

the new Defense Science Board study is very good in that regard. 

I just want to close with two brief anecdotes, and I will try to 

do it quickly. 

22 

1The prepared statement of Mr. Murdock appears in the Appendix on page 79. 

First, if we look at the Future Combat System, which is actually 

in GAO’s report, this originally proceeded under the OTA, or ‘‘other 

transactions authority,’’ and, frankly, there is nothing less transparent or less appropriately managed that we have in our arsenal. 

I am glad to see that this program came out of the OTA program, 

but I encourage Congress to limit OTA authority to the maximum 

extent possible. 

But I would like to close with an anecdote talking about the Air 

Force and the tanker program. The Air Force has been saying for 

years that its aging in-flight refueling capacity was one of its highest priorities. We had an original lease deal that was ill-conceived, 

non-competitive, and it was ultimately derailed. We followed that 

up with a competition that failed. And, recently, Defense Secretary 

Gates conceded that DOD can no longer complete a competition 

that would be viewed as fair and objective in this highly charged 

environment. 

Looking back, what this saga created was: It cost private industry and private shareholders staggering sums of money in proposal 

costs and legal fees; it generated the dramatic and destabilizing 

procurement scandal; it exposed relentless protectionist pressures 

that hamper the procurement system; it diluted public confidence 

in the procurement system; and at the end, it achieved nothing in 

terms of meeting the warfighters’ needs for restoring the Air 

Force’s in-flight refueling capacity. 

So, in closing, let’s not forget that the ultimate goal of major system acquisition is providing the end user with the tools necessary 

to perform the individual’s or the organization’s role in furthering 

the agency’s congressionally mandated mission. Obviously, lots of 

room for improvement remains. 

That concludes my statement, and I look forward to answering 

any of your questions. 

Senator CARPER. Professor Schooner, thank you. 

Dr. Coburn said, ‘‘I have got to go. I have just been paged.’’ He 

is heading over to the floor, but he expressed his thanks to the 

panel. 

Mr. Murdock, you are recognized. Please proceed. Thanks for 

joining us. 

TESTIMONY OF CLARK A. MURDOCK, PH.D.,1 SENIOR ADVISER, 

INTERNATIONAL SECURITY PROGRAM, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES 

Mr. MURDOCK. Thank you. I am pleased to be here, sir, and I 

commend the Subcommittee and commend GAO for its long record 

of substantial analysis of this problem. I will just say a few words 

in summary. I have a statement that I have submitted. 

The defense acquisition system is incredibly complex, process 

centric and risk averse. As the Defense Science Board (DSB) concluded when it looked into the Darleen Druyun scandal, it is so 

complex that her mastery of the system gave her the ability to 

abuse it and give her a position of invulnerability. 

The system is characterized, as we have been discussing throughout, by a loss of competency, a lack of accountability. I think that 

23 

was really demonstrated when the previous witness, Dr. Finley, 

when you asked him why was it that systems were passing Milestone B authority when they did not have the mandated Level 6 

technological maturity, you asked him who is responsible for that, 

and he said, ‘‘Well, it is a collective responsibility.’’ Committees are 

not responsible. Individuals are responsible. Program managers are 

responsible. That is one of the reasons why I think we have to 

change the system instead of continuing to talk about the system. 

There is a lack of transparency, and we have all talked about the 

dysfunctional incentives system that causes everyone—we say it is 

overpromise, we say it is underestimate, we say it is structural optimism in the system. Really what it is is everybody lies. The incentive structure is that strong. You want to get a program started? You say what you have to say to get it. You want to get a program through Milestone B? You say what you have to say to get 

it through Milestone B. You want to get a requirement validated? 

You say what you have to say to get it validated by the Joint Requirements Oversight Council (JROC). Systems do not fail, yet they 

continually underperform. 

My package depends upon a couple of large precursor statements, one of which is addressable, one of which is not. 

The first is, I think, the military services get out of the requirements generation business. Only the combatant commanders have 

operational requirements. They are the warfighters. They are the 

only ones with the requirements. The services provide capabilities 

to meet the combatant commanders’ needs. We need processes— 

and there has been progress in that direction, but it is incomplete—processes that increase and enhance the authority and the 

influence of the combatant commanders over the definition of requirements. We have made a number of proposals on that. It is 

something we can examine in questions. 

The second one is an issue that has been referred to a number: 

Budget discipline, too many programs chasing too few dollars. Secretary Young earlier this year urged in an early 2008 memo that 

programs should be properly priced and that he was ready for the 

resulting budget increases to squeeze programs out so that we 

would have a fully funded acquisition program budget left. Well, 

good luck with that. We say these things all the time. We do not 

do them. There is nothing harder in Washington to kill than a bad 

weapons program, as we all know. 

What is the goal here? I think it is a very straightforward one. 

As I indicated, it is an acquisition system characterized by accountability and realism, and by that we mean the accountability of institutions, decisionmakers, and program managers based on realism in cost, schedule, and performance goals, based on realistic assessments of technological maturity. And I think the way you get 

there is through much greater transparency to both the Office of 

the Secretary of Sefense (OSD) and to the Congress on how acquisition programs are managed. 

We suggest briefly four things: Restore the service chief’s authority and responsibility for the management and execution of acquisition programs. We have had civilians in AT&L and service secretariats managing these systems for the last 20 years. Look at the 

track record. GAO has documented it. They cannot do it, and uniVerDate Nov 24 2008 08:48 Jun 08, 2009 Jkt 045590 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 P:\DOCS\45590.TXT SAFFAIRS PsN: PAT
24 

formed bodies tend to be much better on accountability than those 

in civilian suits. There is a crisis in the C–17 scandal. Two general 

officers and one civilian were involved in it. Two general officers 

lost their jobs. The civilian was Darleen Druyun. She went to 

NASA for an extended stay. 

The second thing, we need to establish four-start systems commands back in each of the services to build a cadre of acquisition 

generals that you need. 

We also need an acquisition process that has shorter, more frequent programs phases that are aligned with the tours of the program managers, and the program managers held accountable for 

the performance during that phase of the acquisition program, not 

one big one like Acquisition B, many smaller ones. 

And, finally, we need to establish independent assessment offices 

in both OSD and the military services that provide independent estimates, not just of costs, as Senator Levin suggested, but also of 

performance and also of technological maturity that would be available to those who have oversight. And then we need a NunnMcCurdy on steroids that really punishes programs that fail. 

Thank you, sir. 

Senator CARPER. I know both Sam Nunn and Dave McCurdy, the 

idea of them being on steroids, I am trying to sit here and think 

what that would look like. But I think I understand what you are 

saying. 

All right. I think I am going to start off by asking Mr. Sullivan 

and Professor Schooner just to respond to some of what Clark 

Murdock has said here in his testimony. 

Mr. SULLIVAN. Yes, I think one of the points that Mr. Murdock 

talked about I think I would agree with is that as you start to 

maybe try to take apart some of the basic problems with organizations and accountability in this, writ large, the acquisition process, 

which takes up those three—requirements and budgeting and acquisition processes as a whole—and, in fact, Mr. Murdock has done 

a lot of work in this. There is a Defense Science Board study that 

backs up a lot of what he says, that the services should stick to 

acquisitions. The services should get out of the requirements business. The COCOMs should have a lot more to say about requirements. They are fighting the wars, they are matrixed, they are 

joint. They are not as stovepiped. They can have representatives 

that bring prioritized needs forward. The funding process then 

should—the idea of an independent office I think is a good idea. It 

should be studied. It should be done properly. But right now cost 

estimates that come with the requirements that come forward with 

candidate programs are unreal. I mean, they basically have no 

founding in reality most of the time, and the reason for that is because the acquisition community and the S&T community, quite 

frankly, do not have a good handle on the technologies that they 

are asking for to get the capabilities that they want. They do not 

have a lot of the design experience that they need on these. These 

are revolutionary needs that they bring forward, things like the F– 

22 fighter. 

So these programs begin with an initial business case that I do 

not think anybody in the business inside the Pentagon even takes 

seriously. You have to wait 4 or 5 years, usually, and a lot of 

25 

money spent and sunk into a program before you start getting to 

the reality of things. We are looking at a program right now, the 

Joint Strike Fighter, that is about midway through development, 

and real costs are beginning to come out on that. 

So I think that is one thing. The services should stick to proposing solutions. The Under Secretary for AT&L should make the 

decision. The Comptroller should accept better cost estimates based 

on knowledge. And the COCOMs, who have real skin in the game 

in terms of what they need to fight, should be more involved with 

the requirements. 

Senator CARPER. Professor Schooner. 

Mr. SCHOONER. Both Mr. Murdock and GAO have focused on the 

issue of accountability, and I think this is a great opportunity just 

to look at one slice of the acquisition workforce crisis. In major programs, leadership is tremendously important, and there are a lot 

of people who believe that you need a visionary or one particularly 

dynamic individual, and that is critical to the success of any major 

program. 

But what private industry does is completely different than the 

approach the government takes. First of all, they use very significant monetary incentives, and they also provide key personnel with 

stability. Among the uniformed ranks and among a lot of senior 

government people, stability is anathema. Frequent rotation and 

diversity of assignments are necessary for promotion. 

Dr. Finley concedes that program managers on average are in 

their position for slightly less than 2 years, and that is an improvement. That is simply not going to get the job done, and we are nowhere close to really making significant progress on that. 

Senator CARPER. Mr. Murdock, one of the things that Professor 

Schooner talked about was trying to introduce incentives, financial 

incentives, whether you are building a bridge in Minnesota or 

whether you are trying to clean up Rocky Flats in Colorado, to offer 

incentives for contractors. And I think back, I mentioned this to 

Professor Schooner in a conversation earlier this week that we had. 

When I was Governor of Delaware, we basically closed I–95 between the Pennsylvania line and Wilmington, Delaware. Initially 

we did it to the southbound lanes, just closed them, did not move 

them over to the northbound lanes, but we just closed them, and 

provided incentives for the contractor to get the lanes ‘‘rubble-ized’’ 

and rebuilt and repaved, and offered incentives for doing that. 

Then we did the same thing for the northbound lanes. And it 

worked. It was ahead of schedule. We were very pleased with the 

outcome, provided the incentive payments as well. 

But it works in highways. It works on I–95 in northern Delaware. It works on bridges in Minnesota. It apparently works out in 

Colorado at Rocky Flats. Is this idea a good one? Would it work 

and is it applicable to these major weapons systems? 

Mr. MURDOCK. There are aspects of it that I think would work, 

but I think there are many concepts that come out of the private 

sector that depend upon a healthy infrastructure to operate. I will 

give several examples—a few examples. 

In the private sector, people say best value, and they mean it; 

that people will pay for high-end performance if it is genuine highend performance. The government is a very dumb customer. It has 

26 

a very weak acquisition force. They say best value. They do not. 

They mean cheapest. And so you always have a mismatch right 

there at the very beginning where a contractor does not know what 

kind of incentives to respond to. 

My feeling is that I very much believe in making individuals accountable for different phases of the acquisition process. That program managers stay there for only 2 years is shocking. What you 

do is have shorter acquisition phases, you overlap the tours of program managers with those phases, and you make their PARs, their 

performance reviews, dependent upon what they inherited at the 

beginning of the phase and what they performed at the end of it. 

The incentives that they will have and the disincentives they will 

have, if you poorly perform, you are not going to get promoted. If 

you poorly perform, you are not going to go up the chain. 

So my belief is that you have to start with the individuals, and 

I believe there should be educational awards, there should be perhaps cash bonuses for good performance during that time the way 

we do with SES’ers. But I would do it at the individual level first 

before you start talking the large kind of incentives. 

In the private sector, there are two things that can change the 

performance of a company on a dime: One, performance metrics 

that are quantifiable and that you can measure; and two, performance-based compensation. Those two things are extremely hard in 

the government. 

And so my feeling is that, yes, you can use incentives, but I 

would start on a smaller scale before going to a larger scale. 

Senator CARPER. Mr. Sullivan. 

Mr. SULLIVAN. Yes, I think my perspective on that is we have 

had a good discussion here about the development contracts that 

contractors get into and the risk that is assigned to those development contracts and the length of time they take. And if you look 

at a traditional, a current, typical DOD big acquisition—I will use 

the F–22; you could use anything else—you are looking at a program that begins with a cost estimate that is not grounded in any 

really firm data. You are looking at usually a 15-year development 

program, and you are looking at having a program manager who 

is going to be there maybe 2 or 3 years to start it. 

So, we have done an awful lot of work in the commercial world 

to go out and find best practices for how to develop products. We 

have tried to find some very complex products, low-volume products 

that would match up with DOD, things like satellites, and oncology 

systems, medical devices. And what we found consistently is that 

in those best practices, the things that they have to have before 

they would start a program similar to what they do in the Department of Defense is they would limit it in terms of schedule. So they 

immediately would say we are going to build something, we are 

going to try to hit the market with cutting-edge technology, but we 

are going to limit ourselves to 3 to 5 years to do that. We are going 

to have the same person responsible for that program from the outset to the end. And if we have to call a contractor in to do this, 

we are going to do the proper systems engineering and the requirements analysis that is required to understand exactly what kind of 

technologies and technical problems and design issues and manufacturing issues we are going to have, and we are going to have 

27 

that in the first business case that we have; and then we are going 

to baseline that cost and schedule. 

So they are limiting time frames, they are understanding their 

cost estimates before they begin the program, and they limit the 

technologies to what is available to them at the time. So requirement, in essence. Again, we are back to these three arrows. So the 

requirements are limited, and they have evolutionary product development. 

Now, the way that they—usually, these companies will have a 

revolution within 20 years, which is the same amount of time it 

took the F–22 to be the revolutionary fighter over the F–15 and F– 

16. In fact, if you go back to the F–15 and F–16 acquisitions and 

look at how they did it, they were kind of incremental in the way 

they did that. They had block upgrades to those aircraft. Those aircraft are still pretty good today. They hold their own up in the air 

today. And they were done pretty good on cost and schedule, too. 

The idea of this, the companies that we looked at that were really pushing technologies and trying to get to market as quickly as 

possible, they took on a lot of risk in that product development. Basically a fixed-price environment for them because they were going 

to invest a certain amount of money and they were going to have 

to recoup all that money. The Department can do the same thing, 

and the defense industry should be able to do the same thing. 

What they need to do is they need to get requirements under control, do them in quick spurts, and continue to upgrade their products, and they can move to more fixed-price kind of development 

contracts. 

I think Professor Schooner said that we have tried that, we have 

been there, we have done that, and it did not work. But we mandated development contracts in the 1980s without any of this, and 

requirements were just the same. So there was nothing else really 

done at that time to try to make that fixed-price environment work. 

Those are the kinds of things that we learned, and what we 

brought to this study that we did here is keep requirements simple, 

keep your S&T base vibrant, let them take the risks there, but 

keep product development pretty much fixed-price and fixed-schedule and deliver to the warfighter quickly, no bells and whistles, except the 80-percent solution. 

Senator CARPER. OK. Thank you. 

Let me just ask Professor Schooner and Mr. Murdock, anything 

in GAO’s report that you especially agreed with or maybe disagreed 

with that you would like to just underline? 

Mr. SCHOONER. Well, let me just underline two things because I 

think they emphasized both of them. I think they did, in fact, emphasize the acquisition workforce, which is tremendously important. And we can sit there and kick that dead horse as long as we 

want. But it is going to be a generation for us to undo what we 

have done. I think that Dr. Finley undersold the amount of damage 

that was done. Congress started taking apart the DOD workforce 

in the late 1980s, and we took an entire half-generation of cuts, 

and then we have been flat during this decade. And procurement 

spending has gone from the low $200 billion to over $435 billion 

in this decade alone, and we do not have the workforce to do it. 

And even worse, the workforce we have were not hired to do the 

28 

work we need them to do today. So this is a legitimate crisis, and 

I think that is really important. 

I think that overall the report is really good. The one thing that 

I do take issue with is I think in the end, in an abundance of kindness, GAO suggested there were reasons for optimism, and I think 

they were being a little bit kind in that regard. 

Mr. SULLIVAN. Well, if I could address that this goes back to how 

I opened with, we have been here before. And I would agree with 

that. But I would say that the Under Secretary of Defense for Acquisitions now, Mr. Young, and Mr. Finley as his Deputy, they 

have—in fact, we have looked at policy revisions they have made 

to their acquisition policies, and we have looked at all these policy 

memos that Mr. Young has issued over the past year. And they are 

really right on what we think would be best practices. But I agree 

with Professor Schooner. As I said, we have been here before. 

The problem is sustained leadership, and I think you talked 

about that earlier. How do you keep someone in place who has the 

leadership capability and the ideas? I mean, how do you sustain 

that leadership? How do you hold accountability when you have got 

three processes and three process owners that can say no to each 

other? These are the critical things that have to be solved: Who is 

in charge? Who is going to be held accountable? And how do you 

sustain that, given the appointment process that we have? That is 

a real problem. 

Mr. SCHOONER. But I think you heard from all of us, I think 

GAO is absolutely right, that if you wait until you have mature 

technology, then you have a fair chance of controlling costs and 

schedule. Without mature technology, it is a pipe dream. 

Mr. SULLIVAN. If you have technologies that are mature enough 

to meet the requirements, you are way ahead of the game. I would 

agree with that. 

Mr. MURDOCK. And I believe that the way you get there is 

through transparency and accountability. The transparency is why 

I think it is so important to have an independent assessment office 

that gives people assessments of cost, of performance, and technological maturity, and a schedule that OSD has, that Congress has, 

that empower a program manager, because he or she has them and 

they cannot be changed through requirements creep, they should 

not be changed through program instability, funding instability 

and so on. And I think you have to have transparency to do that 

because there is a lack of transparency right now. 

I will give one vivid example. If there was ever a source selection 

that the Air Force had to get right, it is the KC–135 replacement. 

Given its baggage, had to get it right. And yet I am told that when 

the Air Force outbriefed Boeing on why it did not win the competition, in that briefing the sections were left blank on the front of the 

cover: Who is the source selection authority, what was the composition of the group of people who advised the source selection authority, and who was the composition of the special overarching board, 

somewhat like the Configuration Steering Boards that Secretary 

Young has called for, who composed those. Before the protest was 

upheld, Secretary Young was quoted as saying, ‘‘Well, we created 

this board, and Sue Payton, the Assistant Secretary, said it was 

29 

very useful and very helpful.’’ Total fiasco. The decision of the GAO 

was a slam-dunk, the procedural infractions were so great. 

Now, accountability, the standards of accountability have been 

established by Secretary Gates with the Chief of Staff of the Air 

Force and the Secretary of the Air Force on the nuclear mission, 

or with the person who headed up Walter Reed and the persons in 

the Army who were not moving fast enough. The whole Air Force 

acquisition unit had failed, but it was a broader DOD failure because there was some kind of overarching committee with it as 

well, and satisfaction being expressed by the Under Secretary, the 

defense acquisition executive for the process. 

These are—not these individuals, because these individuals are 

relatively new. Some of them had to wait 31⁄2 years before they 

could get into their job, whether it has been these individuals that 

have been running the process since Goldwater-Nichols and implemented the Packard Commission results. We need a different process, and we need a different structure to do it. 

Senator CARPER. A friend of mine who began and has run a great 

nonprofit nationally in this country likes to say—and his program 

is designed to help young people to improve their lot in life and improve their futures. He likes to say, ‘‘Programs do not change people. People change people.’’ And a good program puts a person who 

needs change in their life with somebody who can help them 

change. 

I do not want to do a play on words here, but when it comes to 

programs and cost overruns, rather than saying that programs do 

not change people, we need people who can change programs. We 

really need people who can oversee these programs. And the idea 

that Dr. Finley’s position was vacant for 3 years, the idea that he 

walked into his job and four out of his six direct reports were not 

around, and he had to go out and hire them—hopefully—he says 

he thinks he got good people and they will be around for a while. 

But that is just—talking about a system that is broken or at least 

a situation that was broken. 

I went back in my head trying to think through 2 years ago, did 

we have a majority Democrat Congress in place at the time who 

was denying the Administration their appointments? And, actually, 

2 years ago we did not. It was a Republican majority in the Senate 

and a Republican Administration. So I am not sure that would 

have played a role. 

I look and I think about all the different positions within the Executive Branch for which we require Presidential appointment and 

Senate confirmation. And I am wondering if—we talked about requirement creep in programs. I wonder if we have some kind of 

creep in terms of Senate confirmation for some of these positions. 

We really need it for all of them. 

Let me just ask you to think about that last point. Have we run 

amok? I remember when I was Governor of Delaware, I was nominated to be on the Amtrak Board of Directors. I loathed the process. I had been a naval flight officer for 23 years, a Congressman 

and State Treasure and Governor. I was nominated to serve on the 

Amtrak Board, and the disclosure process I had to go through was 

maybe not outrageous, but it was just so time-consuming and laboVerDate Nov 24 2008 08:48 Jun 08, 2009 Jkt 045590 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 P:\DOCS\45590.TXT SAFFAIRS PsN: PAT
30 

rious. Finally, I got confirmed, served for 4 years, enjoyed my service. But, boy, there was a lot to put up with to get confirmed. 

Do you think we require too many Presidential appointments to 

be confirmed by the Senate? Is this an issue that is part of the 

problem? 

Mr. SCHOONER. I believe Mr. Murdock’s testimony specifically 

cites to the Defense Science Board study that was done after the 

Druyun debacle, and I actually served on that group when we did 

it. And one of the things that was discussed in there at great 

length—and there is even a terrific chart in there that shows the 

level and the extent of the vacancies at the highest level of the Defense Department—and it is complicated for a number of reasons. 

I think the one thing we have to think about is there are a lot of 

reasons why these jobs are simply not attractive to the kind of people you need to do the jobs. 

The Under Secretary position is one where we are specifically 

looking for someone with significant business experience. The pay 

stinks. Nobody ever brings them down here to talk about all the 

good news that they have achieved. They are inheriting problems. 

They have got staggering budget problems. They have a grossly inadequate workforce. And they are given impossible tasks. The jobs 

are not attractive. It is tough to find the right people to do it, and 

the incentive structure is totally broken. 

Senator CARPER. But other than that? Does anybody else want 

to comment on this? [Laughter.] 

Mr. SULLIVAN. That is a very interesting question. I think it is 

a huge problem. I do not have any particular specific answers to 

that. I know that GAO is very much involved this year, more than 

ever before, in the transition process. I know the Congress has 

reached out with GAO to try to help—we are looking a lot harder 

at issues, some of the issues that we are talking about here today, 

to bring people up to speed quicker and maybe grease the skids a 

little bit more for these appointments. But to me it is one of the 

key problems. I do not know how you—if it is politically possible 

to take away these appointments or, to have some politically appointed or part of the bureaucracy or how you would do it. But it 

would certainly help if there were a CEO-type mentality in the 

Under Secretary of Defense for AT&L who had the time—as we 

said before, there is a transitory nature. People can wait John 

Young out, quite frankly. But he has got good ideas. He has got the 

will to fix these things. And if he were there for a while and he 

was able to sustain that and push that down through the culture— 

it has got to be a culture change, and that takes years. 

So how do you do that with political appointments? That is the 

question of the day, I think. 

Mr. MURDOCK. I do not think there is any question; there are too 

many political appointees. 

Senator CARPER. Did you say there is no question but there are 

too many? 

Mr. MURDOCK. There are too many political appointees. And it 

is not just confirmable appointees. It is political appointees that go 

deep down into the bureaucracy. You are taking the entire leadership essentially from the Deputy Assistant Secretary on up and 

switching them out every 2 years. Only there are lots of staggered 

31 

empty spots in that, so that you will have a place that is empty, 

filled by an Acting for 10, 11 months; somebody comes in for 2 

years, gone; another gap. 

The vetting process that we go through now for somebody to take 

a confirmable position is onerous. And it is actually, for somebody 

who is a successful career person, humiliating in terms of the kinds 

of questions they are being asked. And it is also very limiting in 

terms of what happens when you come out the other end. You take 

somebody like myself, I am at the end of my career. I do not have 

a future. Maybe I will take that kind of a job. But you know something? I am too old to go through that. So I am not going to do 

that. I do not want to go back into the government now, in part 

because of the process that is involved with it. 

So you do what you can from the outside during that time, and 

you enjoy being a grandfather, and you make your balances. 

Senator CARPER. As we come to a close here, I again want to 

thank each of you for your participation and your preparation and 

the input you have provided for us. Each of you have already spoken to this question I am about to ask, at least indirectly, but in 

terms of what—setting aside the Executive Branch and things that 

they need to do better or differently—and we have talked about 

that a good deal—talk about the Legislative Branch. And we have 

talked about it to some extent in confirming people whose names 

are submitted to us. 

I remember when I was a governor, I served with Tommy 

Thompson, Governor Christie Whitman from New Jersey; Mike 

Leavitt, Utah; Tom Ridge, Pennsylvania—a lot of governors in this 

Administration ended up—former governors ended up being cabinet secretaries, and what I would say to each of them, when you 

nominate good people to be your key direct reports, and you are 

having trouble getting them confirmed, let me know and I will do 

what I can from the inside to try to move those names. And most 

of them took me up on it, and there is just—it is easy for names 

to get just hung up for reasons large and small. Sometimes you 

have somebody in the Legislative Branch who is interested in getting a person in a whole different part of the government confirmed 

or nominated by the President, and they will hold up confirmations 

completely over here in order to get somebody nominated over here 

that they are interested in. So it is not a good situation. 

But advice for us in the Congress? One of the other pieces of advice I think I heard here today was in terms of providing an appropriate level of funding for weapons systems over multiple-year periods of time so that we do not have this going on all the time and 

it is difficult to come up with any kind of efficiencies. But that is 

the kind of thing I am interested in for us. What advice do you 

have for just—— 

Mr. SULLIVAN. If I could start with the funding levels—really I 

would take issue a little bit with what we heard from Dr. Finley. 

The trend has been upward. We are probably in the highest spending trend for development and procurement, the acquisition budget 

itself, since the late 1980s. So the money is there. I think the legislature has funded the Department fully. And I do not think—the 

funding instability that the doctor talked about, I know that I 

would get a lot of debate on this and probably a lot of argument. 

32 

But I think that most of that is done by the Department itself, I 

think, because they come in with such shoddy cost estimates for 

programs, and they begin things on such risky levels that the funding instability builds in the program, about midway through you 

start figuring out what you really have there. 

I think that the legislature, that Congress’ biggest role is over- sight, obviously, and when we do reports like this, this $300 billion—which, by the way, is really $300 billion. I know that Dr. Finley said that if you look at the last 5 years it is 3-percent growth 

per program. Well, if you have 3-percent growth on a program that 

takes 15 years, you have 45-percent growth on the program. These 

are really real dollars. 

So, we have been through some potential answers for this. I 

think we have raised some issues concerning how do you run the 

shop over there, how do you get accountability out of these three 

processes. I think the Congress has to continue oversight over that, 

quite frankly, maybe ask for information more often than when we 

come up and have to show the $300 billion cost growth. That is a 

real portfolio. That is 95 programs that exist today, and it is $300 

billion. And that is an eye-opening pie chart that you have over 

there. So, to me, it is oversight. 

Mr. MURDOCK. I would like to respond second on this one. Actually, I take the province of having worked on the Hill myself for 

5 years but on the authorizing side. And when I worked for the 

House Armed Services Committee, Les Aspin was the Chairman of 

the House Armed Services Committee, and Sam Nunn was the 

Chairman of the Senate Armed Services Committee, and authorizers ruled. That is not the case anymore. Appropriators rule today. 

And that does create a very difficult problem in terms of actually 

killing programs. Appropriators do not do policy oversight. The 

Congress does not do things like Goldwater-Nichols. And then 

when they do do something like enact all of the reform recommendations out of the 9/11 Commission, they reform everything 

but Congress during that time. 

So, for me, as a former Congressman who works—I mean a 

former staffer who works for a former staffer, John Hamre, somebody said Admiral Pollack said—and I am sure he was quoting 

somebody—‘‘A problem that doesn’t have a solution isn’t a problem. 

It is a fact.’’ And that is why very few people talk to you about congressional reform because it seems like such an intractable process. 

One of the recommendations, for example, of the 9/11 Commission, reduce the number of oversight committees. They point it was 

reduced from—what?—66 to 65. This does not help. So there are 

a number of things that Congress could do to strengthen its ability 

to do oversight, and I believe close congressional involvement via 

the transparency of a process that could be produced through an 

independent cost and performance and technology assessment office would give authorizers who cared the tools to bring more transparency and responsibility to the Department of Defense because 

the Department has clearly demonstrated it cannot do it itself. 

Many of the wounds are self-inflicted. But I believe a more effective 

congressional role is essential to solving that problem. 

Senator CARPER. Professor Schooner, the last word. 

Mr. SCHOONER. Three things, quickly. 

33 

Workforce, workforce, workforce. We need some really creative 

solutions, and they are going to have to be outside of the civil service system because it is not going to get done. 

Second, overall the profit policy and weighted guidelines system 

that DOD has to work with is fundamentally broken, and we need 

meaningful incentives and disincentives to do any of the things 

that we are talking about. 

But we also need, third, real discipline on behalf of the government. If you want the government to break things into small pieces 

and lock down their technology before they go forward, then you 

are going to have to actually do something. And maybe what you 

say is, ‘‘I will give you program stability, but the price of that is 

I am going to hold you to your actual promises.’’ And the one thing 

that Congress should never forget is the power of anecdote. And 

when it is all said and done, all you have to do is stop a couple 

of major programs, and you will get some people’s attention. 

Senator CARPER. All right. Well, gentlemen, before you close your 

books and walk away, let me again say thank you. I am glad that 

Dr. Coburn and I were here to participate in this hearing. I am 

glad our staffs are here. I know we have folks in the audience and 

people who may be watching on television. But this has been, I 

think—I turned to our staff, and I said to Wendy Anderson and 

Harlan Geer, this is such an important issue. The dollars are so 

substantial. And at a time when our Federal budget deficit issue 

even before this President’s $700 billion, if you will, bailout to address our financial problems, even before that our deficit was running between $400 and $500 billion this year. Our national debt in 

this 8-year period of time will have doubled from about $5.5 trillion 

to about $11 trillion. And we have got to find a way, all kinds of 

ways to begin turning that back. 

You have helped provide us with some very good ideas, and I am 

encouraged, knowing about Dr. Coburn’s tenacity, knowing a little 

bit about my own, that we might just take this ball and run with 

it. 

I want to close by saying the hearing record will be open for 2 

weeks for the submission of some additional questions and statements, and I would just ask, if you do get those questions, that you 

try to respond promptly to them for the record. 

Again, we thank you very much, and with that, this hearing is 

adjourned. 

[Whereupon, at 4:22 p.m., the Subcommittee was adjourned.] 

(35) 

A P P E N D I X 


45590.001
36 


45590.002
37 


45590.003
38 


45590.004
39 


45590.005
40 


45590.006
41 


45590.007
42 


45590.008
43 


45590.009
44 


45590.010
45 


45590.011
46 


45590.012
47 


45590.013
48 


45590.014
49 


45590.015
50 


45590.016
51 


45590.017
52 


45590.018
53 


45590.019
54 


45590.020
55 


45590.021
56 


45590.022
57 


45590.023
58 


45590.024
59 


45590.025
60 


45590.026
61 


45590.027
62 


45590.028
63 


45590.029
64 


45590.030
65 


45590.031
66 


45590.032
67 


45590.033
68 


45590.034
69 


45590.035
70 


45590.036
71 


45590.037
72 


45590.038
73 


45590.039
74 


45590.040
75 


45590.041
76 


45590.042
77 


45590.043
78 


45590.044
79 


45590.045
80 


45590.046
81 


45590.047
82 


45590.048
83 


45590.049
84 


45590.050
85 


45590.051
86 


45590.052
87 


45590.053
88 


45590.054
89 


45590.055
90 


45590.056
91 


45590.057
92 


45590.058
93 


45590.059
94 


45590.060
95 


45590.061
96 


45590.062
97 


45590.063
98 


45590.064
99 


45590.065
100 


45590.066
101 


45590.067
102 


45590.068
103 


45590.069
104 


45590.070
105 


45590.071
106 


45590.072
107 


45590.073
108 


45590.074
109 


45590.075
110 


45590.076
111 


45590.077
112 


45590.078
113 


45590.079
114 


45590.080
115 


45590.081
116 


45590.082
117 


45590.083
118 


45590.084
119 


45590.085
120 


45590.086
121 


45590.087
122 

Æ 


45590.088