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89–243 PDF 2003

CONTROLLING COSTS IN TACTICAL AIRCRAFT

PROGRAMS

HEARING

BEFORE THE

SUBCOMMITTEE ON NATIONAL SECURITY,

EMERGING THREATS AND INTERNATIONAL

RELATIONS

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

APRIL 11, 2003

Serial No. 108–47

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpo.gov/congress/house

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

DAN BURTON, Indiana

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

DOUG OSE, California

RON LEWIS, Kentucky

JO ANN DAVIS, Virginia

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

ADAM H. PUTNAM, Florida

EDWARD L. SCHROCK, Virginia

JOHN J. DUNCAN, JR., Tennessee

JOHN SULLIVAN, Oklahoma

NATHAN DEAL, Georgia

CANDICE S. MILLER, Michigan

TIM MURPHY, Pennsylvania

MICHAEL R. TURNER, Ohio

JOHN R. CARTER, Texas

WILLIAM J. JANKLOW, South Dakota

MARSHA BLACKBURN, Tennessee

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. ‘‘DUTCH’’ RUPPERSBERGER, Maryland

ELEANOR HOLMES NORTON, District of

Columbia

JIM COOPER, Tennessee

CHRIS BELL, Texas

———

BERNARD SANDERS, Vermont

(Independent)

PETER SIRH, Staff Director

MELISSA WOJCIAK, Deputy Staff Director

ROB BORDEN, Parliamentarian

TERESA AUSTIN, Chief Clerk

PHILIP M. SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON NATIONAL SECURITY, EMERGING THREATS AND INTERNATIONAL

RELATIONS

CHRISTOPHER SHAYS, Connecticut, Chairman

MICHAEL R. TURNER, Ohio

DAN BURTON, Indiana

STEVEN C. LATOURETTE, Ohio

RON LEWIS, Kentucky

TODD RUSSELL PLATTS, Pennsylvania

ADAM H. PUTNAM, Florida

EDWARD L. SCHROCK, Virginia

JOHN J. DUNCAN, JR., Tennessee

TIM MURPHY, Pennsylvania

WILLIAM J. JANKLOW, South Dakota

DENNIS J. KUCINICH, Ohio

TOM LANTOS, California

BERNARD SANDERS, Vermont

STEPHEN F. LYNCH, Massachusetts

CAROLYN B. MALONEY, New York

LINDA T. SANCHEZ, California

C.A. ‘‘DUTCH’’ RUPPERSBERGER, Maryland

CHRIS BELL, Texas

JOHN F. TIERNEY, Massachusetts

EX OFFICIO

TOM DAVIS, Virginia HENRY A. WAXMAN, California

LAWRENCE J. HALLORAN, Staff Director and Counsel

J.VINCENT CHASE, Chief Investigator

ROBERT A. BRIGGS, Clerk

DAVID RAPALLO, Minority Counsel

(III)

C O N T E N T S

Page

Hearing held on April 11, 2003 .............................................................................. 1

Statement of:

Miller, Eric, senior defense investigator, Project on Government Oversight; Christopher Hellman, senior analyst, Center for Defense Information; and Steven Ellis, vice president of programs, Taxpayers for

Common Sense .............................................................................................. 169

Walker, David M., Comptroller General of the United States, U.S. General Accounting Office, accompanied by Allen Li, General Accounting

Office .............................................................................................................. 31

Wynne, Michael W., Principal Deputy Under Secretary of Defense (Acquisition), Department of Defense; and Dr. Marvin Sambur, Assistant

Secretary of the Air Force (Acquisition), Department of the Air Force,

Department of Defense ................................................................................. 85

Letters, statements, etc., submitted for the record by:

Ellis, Steven, vice president of programs, Taxpayers for Common Sense,

prepared statement of ................................................................................... 183

Hellman, Christopher, senior analyst, Center for Defense Information,

prepared statement of ................................................................................... 176

Kucinich, Hon. Dennis J., a Representative in Congress from the State

of Ohio, prepared statement of .................................................................... 4

Miller, Eric, senior defense investigator, Project on Government Oversight, prepared statement of ........................................................................ 171

Sambur, Dr. Marvin, Assistant Secretary of the Air Force (Acquisition),

Department of the Air Force, Department of Defense, prepared statement of ........................................................................................................... 108

Shays, Hon. Christopher, a Representative in Congress from the State

of Connecticut, prepared statement of ........................................................ 28

Tierney, Hon. John F., a Representative in Congress from the State

of Massachusetts, prepared statement of ................................................... 12

Walker, David M., Comptroller General of the United States, U.S. General Accounting Office, prepared statement of ........................................... 35

Wynne, Michael W., Principal Deputy Under Secretary of Defense (Acquisition), Department of Defense:

Information concerning the F/A–22 business plan ................................. 145

Prepared statement of ............................................................................... 89

(1)

CONTROLLING COSTS IN TACTICAL

AIRCRAFT PROGRAMS

FRIDAY, APRIL 11, 2003

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON NATIONAL SECURITY, EMERGING

THREATS AND INTERNATIONAL RELATIONS, COMMITTEE ON GOVERNMENT REFORM, Washington, DC.

The subcommittee met, pursuant to notice, at 10:06 a.m., in room

210 Cannon House Office Building, Hon. Christopher Shays (chairman of the subcommittee) presiding.

Present: Representatives Shays, Platts, Schrock, Duncan, Murphy, Kucinich, Maloney, Dutch, Ruppersberger, Bell, and Tierney.

Staff present: Lawrence Halloran, staff director and counsel; J.

Vincent Chase, chief investigator; Robert A. Briggs, clerk; David

Rapallo, minority counsel; and Jean Gosa, minority assistant clerk.

Mr. SHAYS. A quorum being present, the Subcommittee on National Security, Emerging Threats and International Relations

hearing entitled, ‘‘Controlling Costs and Tactical Aircraft Programs,’’ is called to order.

I would like to first thank the Budget Committee for allowing us

to use their hearing room. I apologize for being a speck late. I am

going to catch my breath by asking Mr. Kucinich to give his statement, then Mr. Tierney, and then I will recognize Mr. Schrock.

Mr. KUCINICH. I thank the chairman very much, and I promise

you that my statement will not take your breath away.

I want to thank Mr. Tierney for the excellent work that he has

done on this issue, and we both, I know, appreciate the Chair calling this hearing on the F–22.

If there is a single message this subcommittee can send to the

Secretary of Defense at the conclusion of our work here today, let

it be this: End this program. Let it be a resounding and unified

statement to pull the plug on this ill-fated program before we

waste billions and billions of dollars, which are hard earned dollars

paid by the American taxpayers. I hope the Secretary has a chance

to review the testimony of the head of the U.S. General Accounting

Office.

Mr. Walker, thank you for being here today. It’s a pleasure to

have you before our committee.

I have reviewed Mr. Walker’s statement, and I can say I have

seldom seen a statement from the GAO that is so comprehensive,

so thorough, and so damning as to the testimony he has provided

to this committee. It highlights the F–22 program as a prime example of how not to develop an aircraft. This program will end up

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being the poster child for a weapons development program gone

awry.

I hope the Secretary also listens to our independent experts in

the final panel. They come from outside government and have no

stake in this other than ensuring our defenses are strong and our

taxpayers’ dollars are not wasted. And I think that equation is very

important for the American people, because there is some assumption that simply by spending a lot of money you are going to get

a lot of defense. Sometimes spending a lot of money just means

spending a lot of money.

The people who are here who are the outside government experts

are from the nonpartisan project on government oversight, the

budget watchdog group, Taxpayers for Common Sense and the

highly esteemed Center for Defense Information. I hope that the

Secretary will listen to their unanimity expressed, and end this

program. Listen to Colonel Everest Riccioni, one of the developers

behind the F–16, who said: The cost of this aircraft are escalating

to insane levels, so high, in fact that we will be able to afford only

100 to 175 planes. He says: This result is manifestly absurd because it will render our fleet impotent.

Listen to him. End this program.

Of course, everyone knows how badly the Air Force wants this aircraft, but production costs have increased nearly $20 billion

since 1996. The number of planes the Pentagon can afford has

plummeted to less than a third of their original goal.

I realize there are many devoted people working very diligently,

both at the Pentagon and for the contractors trying to streamline

this process and find production efficiencies. The fundamental

issue, however, is the underlying program of cost and growth of

cost that has never been addressed. Efforts to fund production improvement plans are an afterthought, a remedial effort to offset

damage that has already been done and will continue far into the

future. Judging from their actions, certain Air Force officials know

they’re trouble. They have lashed out, accusing the GAO of inaccurately portraying the state of the program.

Even worse, the Air Force and Department have simply begun to

disregard the Federal statute that governs the overall costs of this

program. The Air Force has argued, justified, and spun this as best

they can. Their latest effort is called buy to budget. Or, maybe considering the cost of this, it should be good-bye to budget. I don’t

know what their slogan signifies, but if it means ignoring the congressional cost cap, consistently underestimating production cost

growth, and then denying that they have a problem, they are definitely succeeding.

Mr. Chairman, I support the elimination of weapons systems like

the F–22 that are spiraling out of control with no end in sight. I

support the budget submitted by the Congressional Black Caucus

and the Progressive Caucus, which cancels the F–22 and replaces

it with the increased procurement of the F–16. We can have a

strong defense without having to spend and waste the kind of

money that’s being wasted.

The Air Force will point out, correctly, that its fleet is aging rapidly and we need to replace hundreds of fighters. But buying fewer

than 200 F–22s will do little to alleviate this problem. Instead, why

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not buy 500 F–16s and save the taxpayers $25 billion over the next

10 years?

Mr. Chairman, again, I want to thank you for holding this hearing. I want to conclude my statement by urging the Secretary, in

addition to listening to the chorus of voices coming from this committee today, to also listen to his own better judgment. This was

what was told to him when he came to the Pentagon, and I think

that this type of program which we are going through today is the

kind that should be ended; and hopefully, the Secretary will agree

with our assessment. Thank you, Mr. Chairman. Thank you, Mr.

Tierney.

Mr. SHAYS. I thank the gentleman.

[The prepared statement of Hon. Dennis J. Kucinich follows:]

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Mr. SHAYS. Mr. Tierney, if you are ready, I would love it if you

would give your statement. I would just say that you have been a

very active member of this committee in general and very clearly

interested in this issue. This is the fourth hearing we’ve had, and

I will say it’s good to have institutional knowledge because we remember the three before.

Mr. Tierney.

Mr. TIERNEY. Thank you, Mr. Chairman. Actually, I want to

thank you. Under your leadership, this subcommittee has pursued

our goal, and that is one of achieving the appropriate level of readiness to defend against and respond to the sophisticated threats

that our Nation may be facing. As you said, over the past 4 years,

and particularly on this issue, I think we have lived up to the oversight responsibility, aggressively monitoring waste, fraud, and

abuse as it relates to the Pentagon’s procurement process. I appreciate your convening this meeting, and I think this fourth meeting

is going to be telling.

At past hearings, we questioned the Air Force and Defense Department personnel on the skyrocketing costs, on anticipated production and development delays, and recurrent infrastructure problems of the F/A–22. In response, we received assurances that these

problems were being aggressively managed as various initiatives

were being implemented. Unfortunately, today, in light of the new

report released by GAO, we are here to ask the same questions and

demand some real answers.

My skepticism about this program, Mr. Chairman, and the viability of the F/A–22 has grown exponentially. This program, which

began over 15 years ago, has yet to yield the expected results. As

far as I’m aware, there is no dispute that the F/A–22 program has

had $20 billion of unanticipated cost growth since 1996. In addition, the number of aircraft the Defense Department can purchase

has plummeted from 648 to less than 224. The program has also

encountered critical testing programs, including buffeted vertical

fins, weak horizontal tails, overheating, and persistent instability

in the development of avionics. Last month, test planes were

grounded because the landing gear on one aircraft collapsed after

the weapons bay doors—under the weapons bay doors.

Rather than addressing all these issues on their merits, the Air

Force and the Defense Department have chosen a different path.

It appears that they have been less than forthcoming with us and

with you, Mr. Chairman, and with the investigative arm of Congress, the General Accounting Office.

Let me give you just a few examples. Issued in February, the

GAO report we are discussing today recommended that the Pentagon reconsider its plan to forge ahead prematurely with the production of additional aircraft, at least until testing problems were remedied. The Department of Defense appears to have rejected this

recommendation. On March 28, a Washington Post article revealed

that the Department of Defense’s Defense Acquisition Board approve the purchase of 20 additional aircraft. In this report, GAO

recommended that the Pentagon fully fund initiatives for production efficiencies, which was, after all, a program of production efficiencies proposed and planned by the Department and approved by

Congress.

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Apparently, the Department of Defense no longer intends to follow this course. In a January 2003 letter, they inexplicably blame

the General Accounting Office for not proving that these plans

would actually save money when, as I mentioned, in fact, it was

the Pentagon’s origination of that plan, that emanated from the

Defense Department.

The General Accounting Office’s report also recommended that

the Pentagon provide Congress with information on additional cost

growth that could occur if production efficiencies do not materialize. The Department of Defense wrote in that January letter to Mr.

Allen Li of GAO that they found no reason to comply with GAO’s

recommendation. GAO recommended that the Pentagon provide

Congress with information on precisely how many aircraft it can

procure within current cost limitations. In this case, the DOD also

found no reason to comply.

Mr. Chairman, more than just turning a blind eye to suggested

recommendations of the General Accounting Office, those in charge

of this program have not strictly adhered to actions taken by Congress, nor have they been responsive to requests of Members. For

instance, in the fiscal year 1998, Department of Defense authorization bill, Congress directed the Pentagon to adhere to a production

cost cap. Rather than proceeding as directed, it appears the Pentagon has now begun using its own cost cap, which is more than $6

billion higher than the one Congress established.

And, Mr. Chairman, in a letter to the Pentagon in August 2001,

you requested information on projections and methodologies for future cost savings. To my knowledge, the Department of Defense did

not comply with your request, and you were forced to write to the

Appropriations and Armed Services Committees complaining that

the Pentagon was obstructing the committee’s oversight work.

In preparation for today’s hearing, in a response to the GAO’s

February report, I wrote to Secretary Rumsfeld on March 19 asking

him for similar information: The number of aircraft they expect to

be able to purchase within the cost cap, and the various risks of

future cost growth, and I asked for that information by April 7. I

received a late response, which I think can fairly be characterized

as unresponsive to the questions that were specifically raised. Let

me just quote, Mr. Chairman, the response from this letter: ‘‘since

the Department intends to seek legislation to increase the congressional cap on production, the Air Force does not estimate how

many F/A–22 aircraft can be procured within that figure.’’

Translated, it means: Since we have no intention of complying

with Congress’s cost cap, we are not going to answer your question,

and we are going to just try to make sure we get the votes to get

that jacked up again and continue on with this folly.

Let me reiterate that this program has had $20 billion in cost

growth since 1996, and the Department ultimately will procure less

than one third of the amount of aircraft they originally planned.

When will the Department be held accountable for a failing program, and how much longer are we going to allow costs to skyrocket uncontrollably? I sincerely hope, Mr. Chairman, that at today’s hearing we get some honest answers, not empty assurances

and equivocations; that we get them from all of our witnesses on

these issues, so we can reevaluate this program and assess if there

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are wiser investments that we can make or not. We need straight

talk from the Department today, because this issue has far-reaching effects. As we strive toward a leaner, more agile defense system, and in the midst of obligations in Iraq and Afghanistan and

elsewhere, unabated deficits and many other urgent spending priorities, ultimately we have to make a decision in this program of

whether it’s worth it or not, whether it’s worth the exorbitant funding, or whether we can put that to better military procurement or

Homeland Security or other uses.

I look forward to hearing from our witnesses, Mr. Chairman.

And, again, I thank you for your good work on this issue and others.

Mr. SHAYS. I thank the gentleman.

[The prepared statement of Hon. John F. Tierney follows:]

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Mr. SHAYS. At this time, we will recognize Mr. Schrock.

Mr. SCHROCK. Thank you, Mr. Chairman.

This is deja vu all over again for me. For about 38 years, most

of which was spent in the U.S. Navy, I have heard discussions like

this on every air frame that’s come down the pike. All we are doing

is changing the date from those that I used to hear about when I

was active duty Navy.

We need to understand one thing. When you develop an air

frame, it is going to cost a lot of money, it’s going to take a lot of

time. There are going to be a lot of changes, there are going to be

a lot of unhappy people. Just use the C–17 as an example. Everybody thought that was a horrible waste of money, and we realize

now it’s been a workhorse in this conflict in Iraq, and we need

more of them now. And it seems like we tinker with these programs so much, that’s why we have today, that number tomorrow,

and a week from now it will be another number.

I don’t agree at all as the first speaker said that we should pull

the plug on this program. We are 4 minutes from the last of the

fourth quarter, we are about to win this thing. I am going to ask

the Comptroller General at some point on page 7 of the GAO report

it talks about the production improvement program. And you look

at what it was in 2000, and you look at the incredible improvement

it was in 2001. But I see nothing there for 2002. When I looked

at my BlackBerry this morning, this is the fourth month of 2003;

so I should certainly think that somewhere in this thing we should

show what the improvements are for 2002, and I don’t see that at

all.

We are putting young men and women in air frames that are

falling out of the sky. I am not unconvinced that some of the crashes we’ve had in all of the services in the last year or so are because

they are riding, they’re flying in old air frames that simply have

just outlived their usefulness. And if we are truly going to change

that, we have got to get some new air frames in production. And

the F–22 is clearly one of them. I have sat in the simulator of the

F–22; I have gotten a good strong briefing on it, and I for one,

based on my military experience, am convinced that this is the air

frame of the future for the U.S. Air Force. It does things that no

other air frame can do. And, based on the threat we are going to

be facing in the decades ahead, it certainly is something that we

have to take into consideration. There is—the tax dollars are not

being wasted on this. It costs a lot of money to develop these air

frames, and we need to continue doing that.

Talk about institutional knowledge. I realize there is some institutional knowledge up here, but I would suggest that 38 years of

institutional knowledge on my part makes me somewhat knowledgeable on what these programs can do and what we need to do

to make them work. And sure it’s taken 15 years in development.

But look at the history of a lot of other aircraft; it has taken a long,

long time to get these in the fleet in the case of the Navy and with

the Air Force and the Army and the other two services. But it

takes a long time to make sure you get it right. And that is the

purpose of testing, you know; sure you are going to have problems,

but that is what testing is all about. If the attitude I have heard

here this morning had prevailed 100 years ago, we would still be

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flying the Wright Flyer with Orville and Wilbur. And I think we

need to change that, and we need to change that pretty quickly.

So I for one am anxious to hear what the testimony says today,

and—that the people are going to testify will say today, and I have

some questions for them as well.

So, Mr. Chairman, I just think when lives are at stake and when

the future of our country is at stake, we cannot sit still and sit idly

by and allow our folks to be flying in air frames that have simply

outlived their usefulness. And I look forward to our hearing today.

Thank you.

Mr. SHAYS. I thank the gentleman.

Mr. Murphy, I understand you don’t have a statement.

Mr. MURPHY. No, sir.

Mr. SHAYS. Thank you.

I will just conclude, and then Mr. Walker, thank you for your

statements. So we will swear you in then.

Acquisition reform at the Department of Defense [DOD], remains

a promise unfulfilled. Despite much heralded intentions to shed

cold war inefficiencies and bad habits, the Pentagon is still falling

prey to rampant cost growth and interminable schedule slippage in

the development of multi million dollar weapon systems. The gulf

between promise and practice has been apparent for some time. In

tactical aircraft acquisitions, particularly the Air Force F/A–22

Raptor program. As in the past, we appear posed to spend far more

than planned for far fewer aircraft. In three previous hearings before this subcommittee on F–22, development and production reforms, successive projections have stabilized costs and realistic

timetables have proven at best—at best, optimistic, with projected

production costs now $6.7 billion over the $36.8 billion statutory

cap, the magnitude and persistence of rosy but wrong estimates

suggest problems far more fundamental than mere overconfidence.

For some time the General Accounting Office [GAO], has been

studying F–22 acquisition strategies and DOD adherence to commercial best practices. At the request of our subcommittee, colleague Congressman John Tierney, GAO also examined current

production cost projections and the extent to which those costs are

being accurately conveyed to Congress. Today, we also release the

GAO report done at the subcommittee’s request that finds substantial waste stemming from the failure to develop standardized rather than system specific aircraft tests and maintenance equipment.

Unless aggressive cost controls and other acquisition reform

strategies are embraced by F–22 program management, the aptly

named Raptor is at risk of devouring itself.

As we will hear in testimony today, findings and recommendations by GAO and others on tactical aircraft acquisitions aimed to

stop the hemorrhaging of time and money in the F–22 program and

prevent those problems and other major procurements critical to

fighter fleet modernization as our witnesses bring important information and expertise to our discussion, and we look forward to

their testimony. All our witnesses bring important information and

expertise to our discussion, and we look forward to their testimony.

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We are particularly grateful to Comptroller General David Walker for his leadership of GAO on this issue, and we appreciate the

continued and thoughtful work by Mr. Tierney on this oversight.

[The prepared statement of Hon. Christopher Shays follows:]

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Mr. SHAYS. I understand we also have another Member who is

on our side here on the left side of me here, I apologize, Mr.

Ruppersberger of Maryland. And I welcome, if you have any statement.

Mr. RUPPERSBERGER. Yes. Thank you, Mr. Chairman, for calling

this hearing on the F–22 Raptor and controlling costs in tactical

aircraft programs.

I hope today we can have an honest discussion of this aircraft.

I hope this is a balanced discussion between alleged cost overruns

with performance and benefit to national security. The GAO report

claims this project’s cost overrun is due to several factors, including

the delayed start of a multi-year production authorization contract,

inflation increases as a result of a revised production rate, and because of the change in avionics suppliers for the F–22 Raptor.

We have to remember that we live in a new age where threats

can come from anywhere and anyone. Because of these unknown

threats, we have to make sure that our military, our men and

women who serve and fight for our freedoms, have the most modern and technological advanced weapons. The F–22 Raptor is such

a weapon. I represent many of our country’s defense contractors. In

my district, we have two Army bases, a Coast Guard yard. In my

district, we build the radar that is used for the F–22 Raptor.

I am concerned about cost overruns in any endeavor, but we have

to seek a balance. I understand that recent tests on performance

of the Raptor has yielded remarkably successful results, both in

terms of technical and operational requirements. The success of

this aircraft seems clear to me. In fact, the Raptor is meeting or

exceeding all eight aircraft performance-related key performance

barometers. I hope that those issues are also remembered as we

continue this hearing.

Now, I know some have said that the F–22 Raptor was designed

for a cold war threat. I would have to strongly disagree with that

statement. The F–22 Raptor is much more. This aircraft has transformed itself. While maintaining all the air to air capabilities of the

original design, the F–22 Raptor has also added technologies that

will combine air dominance with precision attack capabilities and

joint close air support for ground troops. Also, the F–22 will be

vital to our national security interests in the 21st century. It is the

only aircraft that will be capable of countering anti-access threats,

advanced SAMs cruise missiles, fighter aircraft theater, ballistic

missiles, weapons of mass destructionsites from day one.

We have to remember that this was a project started almost 20

years ago. Technology in the past 2 decades has jumped leaps and

bounds ahead of what we could have imagined. Issues will rise, but

they will solve them, and our Nation will be safer and our Armed

Forces will be stronger for it.

Also, we have to remember that this fighter is in cornerstone of

the Air Force future capabilities. While we discuss the issues of the

hearing, let’s make sure that we do not inadvertently slow down

this project, which in turn could hinder our Armed Forces capabilities. Now is the worst possible time to reduce production funds.

The program is at a critical stage on the production ramp and

learning curve. The tools, people, and training are in place for an

orderly ramp-up to max rate production. Furthermore, reducing

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procurement at this point will severely damage supplier confidence,

which will reflect in increased prices to the contractor.

Currently, 65 percent of the cost of F–22 is in the supplier base.

The resulting termination liability, increased supplier cost, and inflation impacts will further reduce the number of Raptors the Air

Force will be able to procure. Delaying procurement will exacerbate

the already critical logistics and operational impacts associated

with retaining F–15s well past their planned retirement age.

Finally, the single greatest enabler for reducing 22 costs is program stability. Program stability leads to supplier confidence,

which in turn yields increased supplier investments, increased program efficiencies, reduced production costs, and ultimately increased production quantity.

Thank you, Mr. Chairman.

Mr. SHAYS. Thank you, Mr. Ruppersberger. I appreciate your

presence. I’m sorry I didn’t notice that you were here earlier.

Mr. RUPPERSBERGER. I’m a little small. That’s probably why.

Mr. SHAYS. This is really an ideal kind of hearing. We have

members who have expressed a variety of concerns at either end

of this issue, and we have extraordinarily good documentation and

we have wonderful witnesses. So we will hope that we will all find

the best answers to the problems that face us.

We have before us to start the Honorable David M. Walker,

Comptroller General of the United States, the U.S. General Accounting Office. We appreciate, sir, that you are here. As you know,

we swear in our witnesses, and I will ask you to stand.

[Witness sworn.]

Mr. SHAYS. Note for the record our witness has responded in the

affirmative. I just will get one bit of housekeeping out of the way,

and ask unanimous consent that all members of the subcommittee

be permitted to place any opening statement in the record, and

that the record remain open for 3 days for that purpose. Without

objection, so ordered.

I ask further unanimous consent that all witnesses be permitted

to include their written statements in the record, and without objection, so ordered.

I think what we will do is he’ll have you give your testimony, and

then I’m going to give 10 minutes to each witness—excuse me, each

Member. We did go to bed at 3:30 last night, maybe a little later

for some. At any rate, we will begin. Thank you, Mr. Walker.

STATEMENT OF DAVID M. WALKER, COMPTROLLER GENERAL

OF THE UNITED STATES, U.S. GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY ALLEN LI, GENERAL ACCOUNTING

OFFICE

Mr. WALKER. Thank you, Mr. Chairman, Mr. Kucinich, and other

members of the committee. It is a pleasure to be here to talk about

DOD acquisition practices, and the F/A–22 as an illustration of

some of the challenges associated with historical DOD acquisition

practices.

Let me also thank Mr. Schrock. At the outset on page 7 of the

report that he refers to, he has found the one typo in that report.

Those numbers for the graphs should be 2001 where it says 2000,

it should be 2002 where it says 2001. And in fact, the text is corVerDate 11-MAY-2000 11:43 Sep 29, 2003 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 D:\DOCS\89243.TXT HGOVREF1 PsN: HGOVREF1
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rect, it just so happens that the graph contains a typo. And thank

you for pointing that out. Normally, they don’t happen in GAO

products, but it did happen in this case, and I apologize for that.

Mr. SCHROCK. Mr. Chairman, then I rest my case. There is major

improvement being made. So I will let that be said for the record.

Mr. SHAYS. I think the the amazing thing is this is the first time

I have ever encountered this in the entire, whatever.

Mr. WALKER. Well, when it happens, we admit it, Mr. Chairman.

And there is improvement, but there is still a gap. So, in any event.

Mr. SHAYS. Let me just say, without any hesitation, the work of

the GAO, and particularly under your leadership, has been extraordinary, and we all appreciate it, even when we don’t like what your

reports say.

Mr. WALKER. Thank you, Mr. Chairman. Sometimes people don’t

like the facts, as we all know.

Before I begin to address the DOD acquisition process in general

and the F/A–22 in particular, I think it is very important to provide a solid foundation and the broader context and why this is important. As you know, Mr. Chairman, and other members, GAO

twice a year performs long-range budget simulations to project into

the future and see what the future looks like. That latest simulation which was done in January shows that we face large and

growing budget deficits due in large part to known demographic

trends and rising health care costs. In addition, mandatory spending is far outpacing revenue growth.

Without significant changes in mandated programs or significant

tax increases, discretionary spending will come under growing pressure. DOD will ultimately feel this squeeze as well.

When you take a look at discretionary spending, the largest accounts are in DOD. Weapons acquisitions alone account for $150

billion annually. Our weapons systems are far superior to any

other nation, but DOD will continue to need to spend significant

sums to maintain this advantage and to replace aging equipment.

In doing so, it must consider needs versus wants along with overall

affordability and sustainability issues. We must also keep in mind

that it is not just the superiority of our platforms that count, it’s

the superiority of the people who man those platforms that counts.

With regard to the F/A–22, it’s obvious that we are going to

produce the F/A–22; we’re in limited production at the present

point in time. So it’s not a question of whether or not it will be

built, but how many, when, with what capabilities, at what cost,

and, very importantly, with what ripple implications to other Air

Force systems and to DOD overall, including readiness.

Given past experience and future challenges, in my opinion, Mr.

Chairman, it is time for DOD to present a new business case as

to how many F/A–22s are needed, why, at what cost, and with

what ripple effect on other tactical air systems as well as other Air

Force and DOD needs.

The Air Force must move away from its historical ‘‘plug’’ approach to the quantity of F/A–22 Raptors. Whether and how many

platforms to fund is a policy issue to be decided by the Congress,

and irrespective of what Congress decides in that regard, it’s important that any design, development, and production effort follow

a best practices approach unless there is a clear and compelling naVerDate 11-MAY-2000 11:43 Sep 29, 2003 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 D:\DOCS\89243.TXT HGOVREF1 PsN: HGOVREF1
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tional security reason not to. A clear and compelling threat to our

national security should be the only reason that one should not follow that approach, in the opinion of the GAO.

Our report shows that the Department has consistently made decisions with too little knowledge in connection within with the

number of historical systems. That is, the DOD has started programs with immature technology and had to manage technology

development at the time they should have focused on product development. At production start, they did not have mature designs

or manufacturing processes in place.

Our first chart on the far left, which is also in the testimony,

demonstrates that under DOD’s historical approach, including with

the F/A–22, systems take longer than anticipated to deliver and require performance compromises and cost growth increases that far

outstrip initial estimates. The F/A–22 is a case in point. The F–22

started in 1986, yes, in the middle of the cold war era. Costs have

increased 128 percent and delivery time has increased 104 percent.

In addition, planned acquisition quantities have dropped from the

initial 648 to 276 and still dropping.

Had the Air Force used the second chart, which is also in the testimony, the so-called evolutionary approach rather than the big

bang approach, they would have avoided many problems including

significant cost increases and delays, and they would have been

able to field earlier versions of the tactical aircraft fighter quicker

to the troops to help modernize——

Mr. SHAYS. Could you make that point again? I was just asking

a question.

Mr. WALKER. Yes. Had the Air Force used an evolutionary approach rather than the big bang approach, they could have avoided

many of the problems that they have experienced. Namely, they

could have avoided the significant cost growth, the significant

delays, and they could have fielded earlier versions of the aircraft

or the platform much quicker to try to deal with the aging issue

that has been mentioned before. Namely, the idea being spiral development, which I will come back to, which the Department is

now embracing, where you try to develop versions and enhance

those versions over time such that you are taking an evolutionary

approach rather than a revolutionary approach, which is much

more prudent, much more cost effective, must more consistent with

best practices as we have reported.

I have no doubt, and I am sure that none of you have any doubt,

that the aircraft that is ultimately delivered will have a high level

performance. It will be the best in the world. There won’t be anything that’s even close. In America, with enough time and enough

money, anything is possible. However, inefficiencies in this program can only negatively impact other investment decisions the

Department must make. There is a very real ripple effect on other

TACAIR—Air Force systems and DOD needs, especially given the

increasing budget pressures that are here and are only going to

grow in the future.

GAO’s best practices reports in this area make recommendations

to correct these problems, start programs with requirements that

can be met with available resources, especially mature technologies, achieve design stability by critical design review, and

34

achieve statistical process control by production. While the Department has largely accepted many of GAO’s recommendations with

regard to best practices, and in fact has incorporated these into

their new updated policy manual—which is laudable and commendable—their application in practice to individual programs is not always consistent with policy. In other words, in design, it’s there;

in practice, it’s not always there. It’s uneven. They are getting better. It’s obviously too late to adopt this for part of the F/A–22 program, but at least hopefully from here on out, they can try to do

that.

The Department’s recent emphasis on evolutionary acquisition,

or as they refer to it spiral-development, is clearly a step in the

right direction. That is, focusing on fielding some capability earlier,

and better managing the unknowns by improving weapons systems

incrementally such that you go from a series one to a series two

to a series three is a very logical approach. And, by the way, that’s

the approach that technology companies take as we see every day.

And as we know, the fact of the matter is, that’s not the approach

that the F/A–22 took. It was the big bang approach, and we are

paying a big price because of it.

Another challenge to effective acquisition of weapons systems in

an efficient economical and meaningful way is the significant

planned turnover or preprogrammed turnover in connection with

key personnel responsible for the acquisitions effort.

The far right chart, which is also in my written testimony, shows

the typical number of key players that you would have within a life

cycle of a major program. There is, frankly, just too much

preplanned turnover in order to appropriately affix responsibility

and assure accountability for these programs.

In the final analysis, Mr. Chairman, there is no question that

however many F–22s Congress decides to fund, this will be a superior weapons system. I have flown the simulator myself. It is very

impressive. But we must, however, consider the ripple effect, and

to focus on wants versus needs; and in that regard, we are happy

to continue to work with the Congress in trying to provide information for your consideration in making the difficult choices that lie

ahead.

Thank you, Mr. Chairman.

Mr. SHAYS. I thank the gentlemen. I thank him very much.

[NOTE.—The GAO report entitled, ‘‘Tactical Aircraft, DOD Needs

to Better Inform Congress about Implications of Continuing F/A–

22 Cost Growth,’’ may be found in subcommittee files.]

[The prepared statement of Mr. Walker follows:]

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Mr. SHAYS. We are joined by Mr. Duncan. Mr. Duncan, it’s nice

to have you here.

I am going to start out with Mr. Tierney, and then I’m going to

go to Mr. Schrock, and then I’m going to go to Mr. Ruppersberger,

unless Mr. Kucinich gets back, and we’ll just keep going back and

forth. I think it’s better to do the 10-minute round of questioning

and it will take us a little longer, but it’s the best way to get information.

So Mr. Tierney, you have the floor for 10 minutes.

Mr. TIERNEY. Thank you.

Thank you for your testimony, Mr. Walker, and for the work that

was done on this report by you and your able staff.

I want to just lay a little foundation here, if I could, on the issue

of production cost growth. In your report, you said the Department

established a joint estimating team in 1996 to examine production

cost growth. In 1997, the team found $13.1 billion in unanticipated

cost growth. Is that fairly accurate?

Mr. WALKER. That’s my understanding.

Mr. TIERNEY. It seems to me that’s a pretty astounding amount

of unanticipated growth. But it didn’t stop there. In 2001, the Defense Acquisition Board reexamined the issue, and found another

$5.4 billion in cost growth, if I’m not mistaken; Right?

Mr. WALKER. That’s correct.

Mr. TIERNEY. Another, I think, spectacular number, but it didn’t

stop there. In your report most recently, you identified yet another

$1.29 billion in cost growth.

Mr. WALKER. That’s correct.

Mr. TIERNEY. Now, did the Air Force include that amount in its

estimate?

Mr. WALKER. It is, but it also causes problems with regard to the

current cap, as you noted before.

Mr. TIERNEY. Right. It went right by it. Right? Now, the Office

of the Secretary of Defense, did they include that amount in their

estimate?

Mr. WALKER. No, they did not.

Mr. TIERNEY. How do we explain that, that they didn’t include

it in theirs, and the Air Force had it in their estimate?

Mr. WALKER. You would have to ask the SecDef that.

Mr. TIERNEY. OK.

Mr. SHAYS. Could I just ask, if the gentlemen would yield?

What’s the significance of not including it?

Mr. WALKER. An unreconciled difference off the top of my head.

If the Air Force, which is responsible for the program, is saying

that this is what they think it’s going to be, and then the Defense

Department says no, they are going to go with a different number,

you have to wonder why that gap exists, which is the more accurate number and what, if any, potential implication that can have

on being able to stay within the cost cap? It’s an unreconciled difference that needs to be explained. And I am saying maybe the Air

Force can do that. I know you’ve got representatives of the DOD

and the Air Force coming on after me.

Mr. SHAYS. Thank you.

Mr. TIERNEY. And part of it, Mr. Chairman, is that when you

have the Air Force who is responsible for this system, telling us

61

that they are $1 billion plus over and the Office of Secretary of Defense just ignoring that and going on, and then in response to our

questions just basically telling us it doesn’t matter what we had set

as a cap as Congress or whatever, they are going to ask for more

money anyway and they are just blowing on right by. I think it

goes a little bit to the forthrightness or lack of that to this committee in terms of our estimates of how we are going to plan out a

budget here in defense. But we can also carry a little bit of that

over on into the issue of the number of planes that are going to

be built.

On your chart, you had six points of time; and during 1991 the

plan development was 648 aircraft; am I right?

Mr. WALKER. Correct.

Mr. TIERNEY. In 1993, there was a bottom-up review done, and

reduced that number to 442.

Mr. WALKER. That’s correct.

Mr. TIERNEY. In 1995, it was reduced to 438 as part of the

preproduction verification phase. And then during the 1997 Quadrennial Defense Review, it fell to 339.

Mr. WALKER. Correct.

Mr. TIERNEY. And then I think they took six aircraft over into

production, and so that really reduced it to 333. Now, in 2001, Mr.

Aldrich has written a letter to me. And if you extrapolate out

amongst all the other jargon, it looks like the number now is 224

aircraft, while remaining—if they try to stay within the congressional cost cap.

Mr. WALKER. That’s with the cap. That’s correct, Mr. Tierney.

Mr. TIERNEY. Right. So we are now down from the original 648 aircraft down to 224 aircraft, and all of that the additional $1.29

billion in cost, production cost overgrowth. So we’re in these charts

going in opposite directions, the number of aircraft that are being

built and the cost of the program going up. Were you able to determine just how much each one of these systems is going to cost,

each plane is going to cost? My estimate is about $200 million a

plane. Right?

Mr. WALKER. It’s over $200 million.

Mr. TIERNEY. Over $200 million. And if we reduced it by another $2 billion because of these overruns, it would mean another 10 or

so less planes. So you are really down about 214 if you keep them

within the cost cap.

Mr. WALKER. It would be a reduction; correct.

Mr. TIERNEY. So I think, just getting those numbers down, part

of our inquiry from the Department and from the Air Force is going

to have to be, as I think you stated quite well in your—what was

the number that we need? What’s the mission here? Is the mission

anywhere still related to where it was 648 that we originally need.

And, if it isn’t, how has it changed? Why is it now allowable that

we can perform the same mission if we can with so few planes?

What are the costs ultimately going to be? And, as you said, I think

quite clearly, then what’s the effect on all the other things that we

think we need as we move forward in our defense posture?

But let me finish by just saying, one of the major conclusions

that I got out of your report, Mr. Walker, was simply the Pentagon

has not been providing Congress with the information that we

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asked for, and with adequate information, really, to assess and

evaluate this program. They are not telling Congress how much

aircraft they can buy while staying within a production cost limit.

And I’m just wondering, you know, what—describe for us, if you

would—I think it would be interesting to put it on the record—

what the congressional cost cap is, and, if you have an institutional

memory, why we put that cost cap there.

Mr. WALKER. As I recall—and if you don’t mind, Mr. Tierney, Mr.

Chairman, I have Allen Li, who is head of our effort in this area.

So he may supplement my efforts, if it’s not a problem.

Mr. TIERNEY. The chairman may want to swear him in then.

Mr. WALKER. But I’ll go ahead and start.

Mr. TIERNEY. Great. Thanks.

Mr. WALKER. Due to the significant increase in the estimated

cost of this program, Congress was concerned with being able to

maintain some type of control over it, and therefore ended up putting in a cost cap with regard to production as a means to try to

control costs. Obviously, that’s one way that you can end up determining that you are not going to spend more money, but it doesn’t

necessarily assure how many aircraft you are going to get if there

is a continued escalation of what the cost is per aircraft.

What has happened in the past, quite frankly, is that the Air

Force has just generally plugged the numbers. Whatever amount of

money you will give them, they will produce whatever they can

produce with that amount of money.

My personal opinion is, there have been huge subsequent events

since 1986. And while you can clearly make a compelling business

case for this platform in 1986, given the huge subsequent events

since 1986 both as relates to the budget, our national security posture, the state of the world, etc., there is a need to fundamentally

reassess the business case and find out what’s the right number

rather than what the ‘‘plug’’ is.

Mr. TIERNEY. I think you’ve hit the crux of this hearing right on

the head. And the idea is that we had set that cap, and it was up

to them to determine how many they could make. But I’m not sure

we’ve ever heard back any of the justification or explanation for

how the mission may or may not have changed and the goals and

the other issues and questions that follow from that.

Mr. WALKER. Well, as you know, Mr. Tierney, originally it was

for air superiority, and now it’s an F/A platform. So the Air Force

is seeking to expand the mission and utilization of the F–22.

Mr. TIERNEY. Right.

Mr. WALKER. That doesn’t make it cheaper. I still think there is

the need for the business case.

Mr. TIERNEY. Have you ever had an adjustment in so-called business case——

Mr. SHAYS. Will the gentleman suspend? I’ll give him more time.

Do we need to hear from Mr. Li? If so, I’ll swear him in.

Mr. WALKER. Not yet. Well, we may, if it is all right, as a matter

of caution.

Mr. SHAYS. Then let’s do that. If you would stand please.

[Witness sworn.]

Mr. SHAYS. Thank you.

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Just for the record, in the 9-years I have chaired hearings, the

only person we didn’t swear in was Mr. Byrd, because I chickened

out. But I’m not going to have you get to that level.

OK. Mr. Tierney, you have the floor.

Mr. TIERNEY. Thanks.

You know, I’m concerned obviously for the fact that we set a cap,

and it appears to have been blown by without any prior discussion

with Congress or conversation. But you also made a recommendation that the Pentagon tell Congress how many aircraft they can

buy within that cap. And, as far as I can see, your recommendation

was flat out rejected. Would there be some other interpretation you

would to put on it?

Mr. WALKER. We haven’t been provided that number nor have

you.

Mr. TIERNEY. All right. When I read the comments back, the information from the Department, seemed to think that they were indicating it would be redundant, and that they had already provided

the information to Congress. Were you able to find anywhere that

they provided that information to Congress?

Mr. WALKER. I’m not aware of that.

Mr. TIERNEY. Now, I’ve since—I sent that letter in my opening

remarks or whatever, and got a nonanswer back on that. But in

their letter, they indicated that the Department, not Congress—the

Department had approved the procurement budget higher than the

congressional cap. Does that mean anything to you in terms of the

legality situation? Is there some law that I’m missing that allows

the Department to set a cap different from the cap that Congress

has set.

Mr. WALKER. They can propose a cap in excess, but I don’t see

how in the world they’re going to be able to spend the money.

Mr. TIERNEY. You would think. Wouldn’t you? When I compare

that, their statement to Section 217 of the Public Law 105–85, it

certainly looks to me as if they’re actively and affirmatively violating the letter and intent of that Federal statute. I want to make

that note to the chairman, because I think it’s a fairly serious matter. You know, we go about trying to have some accountability in

this Congress for large expenditures. We have a lot of security

issues to deal with and we set a cap, and the next thing we get

back is a letter saying that the Department—not Congress, but the

Department approved a procurement budget higher than the congressional cap.

It seems to me to be a direct contravention of public law, and I

think that we ought to take that under consideration, and decide

what we are going to do about that.

Mr. LI. Mr. Tierney, can I clarify?

Mr. TIERNEY. Yes, Mr. Li.

Mr. LI. Can I clarify that, please?

Mr. TIERNEY. Sure.

Mr. LI. I’d like to clarify something relative to the cap. It is true

what the Comptroller General said in terms of his explanation of

the intent of the cap is financial discipline to ensure that the expectations are met. I should note to you that the DOD, in their statement to the subcommittee today, has identified the fact that they

recognize that they will exceed the cap, but that they have not yet

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exceeded that cap but that they will exceed that cap in 2009. And,

as a result, they feel that what they need to do is to request from

the Congress relief from that particular cap. So I wanted to make

sure that I clarified that point.

Mr. TIERNEY. I appreciate your doing that. I’d just make the note

that’s not at all what they said in their letter. The letter clearly

indicated—and this is a quotation—that the Department approved

a procurement budget higher than the congressional cap.

Mr. LI. And that’s correct. And as a matter of fact, Mr. Tierney,

a few years ago, Mr. Aldridge had identified the fact that he was

recommending termination of the cap. However, the current language, which I have just read from the Department, indicates that

they would ask for relief. You would have to ask them whether or

not relief means termination or an increase in the threshold.

Mr. TIERNEY. OK.

Mr. WALKER. Mr. Tierney, my experience has been is it’s more

the ‘‘plug and pray’’ approach. The plug is, you plug the quantities,

and pray that you can get more money in order to increase the

quantities. But you can ask the Air Force.

Mr. TIERNEY. I shall. Thank you.

Mr. SHAYS. Thank you.

Mr. Schrock, you have the floor for 10 minutes.

Mr. SCHROCK. Thank you, Mr. Chairman.

And General Walker, Mr. Li, thank you for being here. You came

on a good day. You’ve got us all at a disadvantage because none

of us got any sleep last night, so we are probably going to be victimized. But that’s all right; we are used to it.

Mr. Walker, let me make just a couple comments on what you

said, things I agreed with.

Your comments on spiral development is absolutely right, and

clearly a lot has happened since 1996. And I think that’s the problem I have with any military platform, whether it’s a plane, a ship,

a tank, or whatever: By the time you get it into the fleet or into

the air, is the threat still there. We need to tighten that at some

point. And I agree with you that defense budget pressures are horrendous. For each dollar they spend, we have to make sure we

spend each one of them economically. So I am really right on with

that.

Let me start by asking you, in your report titled, ‘‘DOD Should

Reconsider the Decision to Increase F/A–22 Production Rates while

Development Risks Continue,’’ you recommended limiting the productions from 22 to 16 aircraft. Now, I’ve read a lot of this stuff

and I may not have seen it, but did you do a cost analysis, cost

benefit analysis on that report? And, if you did, what did it say?

Mr. WALKER. Allen, could you cover that?

Mr. LI. Yes, sir.

A risk analysis, risk assessment was produced by DOD about the

same time that we issued that report. And there, what our recommendation was, sir, was that they update that particular risk

assessment. And we still stand by that. Then the reason why is,

their analysis was on the basis of the 303 aircraft; and now that

it’s reduced down to 276, we believe that, following operational

tests and evaluation and all of them showing that all problems

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have been fixed, I think it would be appropriate for them to revisit

that risk assessment under those new conditions.

Mr. SCHROCK. Did you mean 333 or 303?

Mr. LI. It was down to the 303, because it was 295 plus——

Mr. SCHROCK. OK. I see. I see. That’s right. Did you quantify the

risk of retrofits? Because that can be mighty costly as well.

Mr. LI. Yes. And we recognize the fact that the cost would involve termination costs to their subcontractors. However, sir, the

concern that we had expressed and that we have identified in several of our reports has been that it’s more expensive to fix things

after production. And it was a concern on our part that 73 aircraft

would be on contract by the time operational tests and evaluation

was completed. We thought that was a high risk.

Mr. WALKER. Our best practices work has clearly shown that the

later you are in resolving these technology problems, you have an

exponential growth in cost increases in order to solve those problems after the fact. And so that’s the premise.

Mr. SCHROCK. Did you assess the impacts of limiting production?

Mr. WALKER. It depends on what you mean by the impacts. The

impacts on the contractor, or the impacts on our defense posture?

Which aspect?

Mr. SCHROCK. The cost estimate.

Mr. WALKER. Yes.

Mr. LI. As I indicated, we looked at their risk assessment, and

we believe that indeed, several of the factors that they identified

are correct. I think that you would incur termination liability

charges. However, the amount is one in which you would have to

weigh that versus the cost of the retrofit. And I think that’s the difference in opinions, sir. The DOD thinks that the changes that they

are making now address the issues that we have previously indicated in terms of the fin buffet problem, overheating, and whatever. We think that it would be wiser to wait until operational

tests and evaluation is completed before you know what those

changes would be.

Mr. WALKER. Part of the difficulty, as you know, is that you

know what the termination charge is, that’s something that you

can calculate. It’s a certain amount. You don’t know with certainty

what the additional retrofit costs are going to be. But our experience leads us to believe that they would be higher. But you don’t

have the same degree of certainty, obviously, as you do in the contract termination charge.

Mr. SCHROCK. Last year Congress authorized and appropriated

funding for greater than 16 in lot No. 3 and lot No. 4. In fact, I

believe the Defense Department recently approved lot 3 to be 20

aircraft and lot 4 increased procurement for up to 24 aircraft, if I

have those figures right. What would the termination liability be

by reducing those down to 16?

Mr. LI. I don’t know what that figure would be, sir. But I recognize the fact that there would be some if you were to—that would

only impact upon the long lead items that are under contract, not

for the actual aircraft themselves, the long lead items for them.

Mr. SCHROCK. There is no way to determine that figure.

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Mr. WALKER. No. I would suggest that something that might be

more appropriate for the DOD to do. We would be happy to take

a look at it and comment on it independently, if you would like.

Mr. SCHROCK. What about the inflationary impacts of delaying

procurement?

Mr. WALKER. That’s not the major driver of the cost. Inflation is

not the major driver of the cost of this platform.

Mr. SCHROCK. Did you assess the increasing O&S costs of retaining our legacy aircraft longer? That is a real concern to me because

every year they’re in life it’s costing more and more money, so it’s

like throwing good money after bad.

Mr. LI. No, we did not. However, we are aware of it. The fact of

the matter is there is no guarantee that the F/A–22 would be able

to be in place to replace, for example, the F–15 at that point in

time.

Mr. SCHROCK. Was consideration taken into account on what the

impact to the young men and women flying these planes would be?

What the impact would be on them by delaying this capability?

As I said earlier, helicopters are falling out of the air at an

alarming rate as far as I’m concerned. It happened a couple of

times in Iraq. I’m wondering if it was from a hostile situation, a

combat situation, or if the frames are just worn out and they had

mechanical repairs that had been stretched to their limits.

Mr. WALKER. There is absolutely no question that the Air Forces

faces a serious problem with regard to the aging of its airframes.

At the same point in time, I would respectfully suggest that part

of the business case analysis that I had recommended earlier needs

to take that into consideration. It may or may not be that the F/

A–22 is the answer to that. Clearly, you’re going to have the F/A–

22, but how many do you need? And to the extent that you end up

deciding that is going to be a different number, it may end up freeing up more dollars to be able to get more platforms to our airmen

and women quicker than otherwise would be the case with the F/

A–22. So there are tradeoffs there I think.

Mr. LI. If I could add to what the Comptroller General said, 2

years ago the General Accounting Office actually did an analysis on

what the age of the fleet was; and we raised concerns to Secretary

Rumsfeld in anticipation of the analysis that they would be doing

for the Quadrennial Defense Review. We identified the fact that,

even with the investments that they would be making in the F/A–

22 and the JSF and the F/A–18 EF, that the average age of the

tactical fleet was still going to be going up. As I’m sure you can

recognize that’s because the quantities, airplanes are costing more.

So, therefore, the fleet is still aging.

Mr. SCHROCK. By bringing something like the F–22 into the fleet,

it’s going to drop—they can decommission some of the old aircraft.

It would certainly bring the average age of that life down dramatically—I would perceive, anyhow.

Mr. WALKER. The problem is the numbers. Yes, you’re right. If

you can bring in the F/A–22, that helps, because it’s obviously

brand new. On the other hand, these cost so much per copy that

it really—as our report shows, it really is not going to help the average that much. It might help with regard to the F–15, but it’s

not going to help with regard to the overall issue. Because the

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quantities just aren’t big enough, and they’re getting smaller year

by year.

Mr. SCHROCK. I’m led to believe that the current Air Force estimate in the fiscal 2004 President’s budget is for 276 aircraft. Does

the Air Force—does that current estimate account for your concerns?

Mr. WALKER. My view is, as I mentioned before, is I don’t think

that we should be plugging the numbers. I think a new business

case is needed. A new business case is needed to say what is the

right number, why, at what cost and what is the ripple effect. That

was not done in coming up with that number is my understanding.

Mr. SCHROCK. Could it be——

Mr. WALKER. Oh, clearly it can be done and I think it should be

done.

Mr. SCHROCK. OK. My time is expired.

Thank you very much, Mr. Chairman.

Mr. TIERNEY. If the gentleman would yield for one question

through you to the witness, if we could.

One of the comments was made that the inflation wasn’t the

major driver of the cost of this aircraft. I’m wondering if you could

ask the gentlemen if he could identify what is, in fact, is the major

driver of cost to this aircraft or the one or other factors. Thank you.

Mr. LI. I’m sorry. I don’t quite understand the question, Mr.

Tierney.

Mr. TIERNEY. Mr. Walker indicated the major driver of cost to

this aircraft was not inflation. What are the major drivers of cost

to this?

Mr. LI. I’m sorry. Now I understand. Initially, in the $13.1 billion

increase, inflation was a significant portion of that. Air frame was

the second most important. Then in the $5.4 billion increase, the

time when that occurred there was a flip-flop, that actually air

frame and labor costs were the ones that—where it’s most important with inflation being second. So the Comptroller General is correct in that the second, it’s becoming less of an issue. But the fact

of the matter remains that a lot of that cost is because of the air

frame and labor costs associated with it.

Mr. MURPHY. The gentleman’s time has expired.

Now recognize the gentleman from Maryland, Mr.

Ruppersberger, for 10 minutes.

Mr. RUPPERSBERGER. That’s why they call me Dutch. Either way.

Mr. MURPHY. We now recognize Dutch for 10 minutes.

Mr. RUPPERSBERGER. That’s fine. That’s great.

By the way, as far as sleep is concerned, it’s been said sometimes

that sleep is just a waste of time. So we should be OK with that.

Getting back to the subject matter first thing, Mr. Tierney, I

think that you’ve—I praise you for bringing this issue to the table.

Accountability is always important, especially when it deals with

cost and especially what is happening with our economy.

Now the Defense Department is doing a tremendous job, in my

opinion, with respect to the war. We’re winning this war because

of our technology, because of our military and our training of our

men and women; and we want to be superior in this realm so we

can have our freedoms.

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But after hearing the testimony and what is happening here

today, it seems to me that more—if we were more honest, if the

Defense Department was more honest about cost and time estimates, these programs could be a lot more cost effective so that we

all know what the ground rules are. If in fact there is a problem

and we have to move forward because of development issues or

whatever, then we lay that on the table. We come back. But we do

have oversight. That’s what makes this country so great. We cannot keep spending forever; and we have to understand where the

programs are, how effective they are, and what the costs are and

whether we can afford them.

Now, let me ask you this question. We talked about the GAO

studies, that inflation is a factor in the cost overruns. Maybe we

should give Chairman Greenspan credit for that since inflation

hasn’t grown as high in the last 10 years. But how about the issue

of cost of technology in the advancement of technology? Has that

increased the overruns as we’re going through the process, the development process? And then technology is changing forever. Has

that in any way increased the cost?

Mr. WALKER. Obviously, the cost of trying to deal with some of

the technology problems, avionics, etc., has been a significant contributor to some of the additional costs in this program. But, as you

know, generally, over time, as we have seen in the private sector,

that once that technology has been—has matured, that over time

advances in technology tend to drive costs down, not up. It’s the development part, the research part.

Mr. RUPPERSBERGER. But it can go both ways. It depends on

where——

Mr. WALKER. It depends on where you are in the cycle.

Mr. RUPPERSBERGER. Sure. The knowledge-based product development process has to show that it can be manufactured within

cost schedule and quality targets. Did the manufacturers of the

Raptor demonstrate that?

Mr. LI. I don’t believe that has been done sufficiently. One of the

concerns that we had expressed as part of our reviews has been—

for example, the stability of the statistical process was not demonstrated. Earlier in the program, we had concerns about the stability in terms—and the proxy being how many of the drawings—

engineering drawings themselves were completed at a certain time.

Those would be indicative of a program that was ready to be produced in large quantities.

Mr. RUPPERSBERGER. In your testimony, you state that, because

DOD did not follow the steps, that, ‘‘a cascade of negative effects

became magnified.’’ You continue by adding, these led to acquisition outcomes that included significant cost increases and scheduled delays, poor quality and reliability. Is it your contention that

the F–22 is a bad, unreliable product?

Mr. WALKER. No, that’s not what we’re saying.

Mr. RUPPERSBERGER. That’s why I asked the question.

Mr. WALKER. That’s correct.

Mr. RUPPERSBERGER. Do you think if DOD applied knowledgebased product development process it would stop or kill the Raptor

program?

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Mr. WALKER. Well, you can’t change history. You can try to learn

from what has happened in the past to do two things: one, not

make the same mistakes going forward with regard to the F/A–22

with regard to additional production and funding decisions; and,

No. 2, to make sure we don’t make these mistakes on other weapon

systems platforms such as the JSF, etc., going forward.

Mr. RUPPERSBERGER. A concern of mine, and I think this is a

part of the issue on DOD, and you have the vendors, will it make

contractors and vendors hesitate in developing the best product to

reach these goals? That happens where we set a certain limitation

and in order to get those goals we don’t have the quality product.

Do you feel that will have any impact?

Mr. WALKER. We strongly believe at GAO, that following commercial best practices is in the interest of the government, that is

in the interest of the contractors, that is in the interest of the

warfighter, and that is in the interest of the taxpayers. There is absolutely no question about that.

Because when you have a situation such as the F/A–22 where

you have delays, cost increases, compromised performance standards, nobody is a winner on that. All those parties are losers.

So, again, I don’t want to unduly pick on the F/A–22 because we

were asked to use that illustrative example, if you will, but there

is no question that following commercial best practices is a win-win

situation for everybody involved.

Mr. RUPPERSBERGER. In your testimony you also say that DOD

is too rigid and because of that program managers are basically

setting themselves up to fail. Now, do you think the most honest

cost and time estimates—and you’ve really answered this—will

make programs more cost effective?

Mr. WALKER. Partially what we need is a cultural transformation, quite frankly. I would describe historically that part of

the pressures that DOD—and part of the culture has been get the

money, spend the money, hit the milestones. That’s basically what

has happened. If you don’t end up getting the money, spending the

money, hitting the milestones, then there can be negative ramifications to one’s career.

There hasn’t been a whole lot of positive reinforcement for individuals to make tough choices and enhance transparency when

things are not going as you would like it to; and so I think, you

know, there is a cultural issue here.

I think part of the problem is what I put up before. If you’re

going to change program managers so frequently, you know, that’s

a fundamental problem in assuring a reasonable degree of continuity and an appropriate degree of accountability for positive outcomes over time.

Mr. RUPPERSBERGER. What you’re really talking about is the

management issue of accountability, and that accountability—and

yet I’ll say this. My impression is, trying to change the culture of

DOD at a time of war when we’re hopefully all behind what—at

least our military and what’s going on to protect our freedom,

that’s going to be very difficult. That’s why I praise Mr. Tierney for

bringing up this issue on a very, very—a piece or era of F–22 that

is something that’s very important to our freedoms but yet it’s

something that seems to be totally lack of accountability.

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I would hope that we would somehow—this program would help

us in that regard and also not send a chilling effect to the vendors,

the manufacturers that are in a very difficult position because they

have to move into an arena where they’re told this is what we have

to do and DOD says do what you have to do and you have Congress

here trying to make them accountable.

Mr. WALKER. If I can, Mr. Chairman, I think you’re right that

you need some stability. You need some certainty. But I would respectfully suggest that the way you get that is by basing the decisions on what you’re going to do, when you’re going to do it, how

many you’re going to have based upon an up-to-date business case

and then, after you’ve done that, to employ these commercial best

practices with regard to the execution on that number. Both of

those things I think will help to provide increased certainty and

stability which you talked about that the contracting community

needs.

I think if you talk about DOD—I have a son who is a company

commander in Iraq right now with the Marines. There is no question that we are No. 1 in the world in fighting and winning armed

conflicts. There’s nobody even close. It’s not just because of our

platforms. It’s because of our people and our technology. But the

fact of the matter is DOD is a—they’re an A in that, No. 1 in the

world in effectiveness. They’re a D in economy, efficiency and accountability. And with the budget pressures that we face, it’s not

in our collective interest or, frankly, in their interest not to deal

with these issues.

Mr. RUPPERSBERGER. If it weren’t for hearings like this, it might

even get worse.

Let me say one other issue I think needs to be addressed, too;

and that is the issue of flexibility. Because we still do have—we

talked about inflation, which you’re saying right now doesn’t have

an impact, the advance in technology. We still need flexibility, but

maybe that can be looked at on an annual or biannual basis.

Thank you, Mr. Chairman.

Mr. MURPHY. Thank you.

The Chair recognizes himself for 10 minutes. I just want to followup on some questions you were just asked.

You referred to there is not real positive reinforcement. There’s

cultural issues which interfere. Could you elaborate on what you

mean by what sort of positive reinforcement and cultural issues are

not there that you need to have there?

Mr. WALKER. Well, the fact of the matter is, to the extent that

you experience problems, human nature being what it is, you want

to try to solve those problems. At the same point in time, if additional transparency associated with those problems could lead to

reduced funding or could—then obviously there is a conflict there.

My view is that for any system to work, you know, whether it’s

an acquisition system, you know, whether it’s a health care system

or a corporate governance system, you have to have three things:

incentives for people to do the right thing, including knowing when

to say no; two, reasonable transparency to provide some assurance

that people will do the right thing because somebody is looking,

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ing; and, third, appropriate accounting mechanisms if they don’t do

the right thing.

Mr. MURPHY. Do we have the first one?

Mr. WALKER. We don’t have the right incentives, I don’t believe.

No, I don’t believe that the incentives there right now are there for

people to make tough choices, to say no in appropriate circumstances. Whether that be with regard to platforms, whether it

be with regard to quantities, whether it be with regard to delay

moving into the next stage because we don’t have the technology,

maturity, the right level. That’s a victory. You get the money, you

spend the money, and you don’t really hit the milestone. In form

you may hit the milestone, but in substance you don’t. Everybody

is a loser on that. I think people need to understand we need to

move away from that.

Allen, you’re closer to it day to day.

Mr. LI. I absolutely agree with the Comptroller General. The

issue is there is obviously a disincentive to be able to tell your superiors that you have problems with your program because that

might translate into reduced funding in the following year. When

the evolutionary approach that we have identified in terms of making sure that we have the sort of technologies that would match

those expectations and the resources, I think that would be the answer, sir.

Mr. MURPHY. So in practical terms, how do we do that? What is

standing in the way of that implementation?

Mr. WALKER. One thing in—so much in government, we need to

end up defining how do you measure success. You need to end up

aligning institutional and individual performance measurement

and reward systems with a modern definition of success.

I will tell you there are dedicated professionals, both in uniform

and civilians, working on this program and other DOD programs.

They’re not the problem. The problem is the system. The system

and the process and the historical ways of measuring success. People are doing their best to try to make this system and others

work. I have no doubt about that.

Mr. MURPHY. That’s frustrating.

Let me move to another area. Since the F/A–22 is still in development, why is it too late to adopt a knowledge-based acquisition

approach? What is its impact upon the joint——

Mr. WALKER. It’s not too late prospectively for what’s left. It’s obviously too late for the stages that we’ve been through.

I think part of that has to do with the issue that was raised before. What type of quantity should we be producing at this point

in time? What is the maturity of the technology and do we want

to increase production rates?

We should use the commercial best practices maturity of technology concept as part of that decisionmaking process, not as to

whether you’re going to produce but when and how many you’re

going to produce.

Mr. LI. Mr. Chairman, the F/A–22 is both in development and in

low-rate production. It has been in low-rate production since 2001.

Development is about 95 percent complete. That is the reason why

it is very difficult to apply those principles.

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Mr. MURPHY. I guess when I look at the numbers of what was

estimated that would first be developed of where we are now over

time, how many do we really need then? Do we need 300, 400, 500,

200? This is very frustrating to see these numbers floating all over.

Mr. WALKER. It’s not our job. We’re not in a position tell you how

many we need. I think that’s where the Department of Defense has

to make a business case. I think they need to make that business

case based upon today and tomorrow, not the past. What’s the situation in the world today? What do we expect it to be in the future,

to the best of our ability? What are the types of threats that we

face? What type of capabilities do we need? To what extent does

this address that threat, and at what cost and what ripple effect

on the JSF, on the space systems, on, frankly, programs for other

services as well?

Mr. MURPHY. One other category I want to ask about is the timeframe on production and development here. When I look at some

of the numbers, look at inflation and change orders or whatever

else is in there, I’m puzzled on this when we look at the cost overruns. Are those pretty clearly in the initial estimates of cost of production when it was set up years ago? There would be anticipation

of this inflation, there would be anticipation of change orders, anticipation of technological changes?

Mr. LI. Not the change orders.

Mr. WALKER. The change orders you wouldn’t. The inflation you

would. Obviously, you know, there’s going to be some change orders. Honestly, change orders, you know, affect many different

types of things, including, for example, the Capitol Visitors Center.

There are change orders on the Capitol Visitors Center; and, therefore, that ends up costing more money.

So it’s a basic concept, but let’s not go into that concept right

now.

Mr. MURPHY. I just think of whether—and people may be watching this, may know nothing about these planes, recognize where

they’re adding a room on to their home and building a new school

building in a local school district that very often one gets these estimates, and it sounds like—good and affordable, and inevitably

there’s changes that come through. So I’m wondering if that’s part

of what we ought to put into our initial estimates of where things

are, to recognize that’s an inevitable part of any production, instead of getting hopes up on the Department of Defense and Congress that we can build this many planes for this amount of money

and this amount of time. I would think any business would be anticipating that is part of the cost of building production, that there

will be those changes.

Mr. WALKER. Well, I would respectfully suggest there’s a strategic level for this discussion and kind of a tactical level.

On the strategic level, when you’re talking about the platform

itself, whatever platform it is, whether it’s F/A–22 or whatever it

might be, you know, you have to say not what you want but what

you need. I think to a certain extent one could debate whether or

not this platform—it may have been a need in 1986. It may or may

not be a need now. It may be more of a want. I don’t know. That’s

the business case. You’ve got to be able to develop a business case.

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So, as I said before, in America we can do anything with time

and money. We can build all kinds of things, but we have limited

resources. So we have to figure out what should we be doing based

upon credible threats, what can we afford to do, what are the ripple

implications of that.

Mr. MURPHY. Thank you. I yield back.

Mr. TIERNEY. Ask the gentleman to yield so I don’t have to ask

for additional time. I will squeeze this in on that.

One thing I wanted to make clear, however, in the original estimates of this program and others, people make predictions of some

element of change. I mean, they understand there’s going to be

some change orders, some inflationary factors, whatever. We’re talking here originally of some $13 billion plus of unaccountable, unforeseen expenses that should probably—some portion

of those, not a great portion of those—should have been foreseen.

Mr. Walker, has the Department of Defense or the Air Force ever

indicated to the GAO any change in their plans for the number

needed from the original plan? Have they ever said to you, we’ve

made a determination that we’re going to need a different number

from that 600 and whatever it was in the beginning, and here is

the reason why? Have they ever come forward with that?

Mr. WALKER. I haven’t seen that; and, candidly, I haven’t seen

the business case that I talked about before.

Mr. TIERNEY. So I guess we can follow right down the line. So

they haven’t indicated why they need those numbers, they haven’t

indicated what the cost per plane would be at that number, and

then I guess we can assume that then there has never been any

analysis done of what the effect of that final number would be on

other plans for the Air Force or other plans for the Department of

Defense systems and things of that nature. This would be a good

area for us to start looking at here, from what I gather.

Mr. WALKER. We haven’t seen it. But I will say this: The Department is making progress in many regards. There is no doubt about

that. They’re making progress not only with regard to the adoption

of spiral development, they’re also making progress with regard to

trying to match the POM with the budget, the program planning

with the budget.

They’re doing that. That’s a positive step. But they’re only looking out 1 and 2 years.

The problem is, you need to consider longer-range implications

and total life-cycle cost. So you can manage that for the next year

or two, but the implications over the longer term are much greater

on the ripple effect than the short term.

Mr. TIERNEY. Has the Department of Defense or the Air Force

ever indicated to the General Accounting Office if you made less of

these F/A–22s with the money not spent on those what other platforms or systems could be increased and how that would effect the

mission of the Air Force or the Department of Defense generally?

Mr. WALKER. They haven’t, but I think it’s something they need

to do. Because there’s a very real issue of aging platforms. There

is no doubt about that.

Mr. TIERNEY. Thank you.

Mr. MURPHY. Recognize Mr. Duncan for 10 minutes.

Mr. DUNCAN. Thank you, Mr. Chairman.

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I was interested in, Mr. Walker, in your statement you said, the

problem is the system, not the people, that you would give the Pentagon an A on the people and technology or something—and a D

in efficiency, economy and accountability or something to that effect.

I think, actually, there are many fiscal conservatives who would

make that D and F when it comes to programs like this.

I was told by staff that in 1991—they don’t have the original cost

estimate. The old shell game in Washington is to low-ball the cost

of any program when it first starts and then allow all these cost

overruns and add-ons and everything else—that they said they

don’t have what the original estimate was in 1996. But in 1991

they estimated that these planes were to cost $93 million apiece,

and now you said a few minutes ago it’s now over $200 million.

They tell me it’s $257 million. Is that roughly correct?

Mr. WALKER. Allen.

Mr. LI. Mr. Duncan, it’s nice to see you again. A few years ago

I testified before you on transportation issues.

Mr. DUNCAN. I remember.

Mr. LI. It’s different now to talk about defense.

But, switching gears to defense, they are different numbers because the Air Force in their explanation, for example, in today’s

statement identifies how it’s decreased by lot. The figure that the

Comptroller General gave to you is an average figure for the entire

program.

Mr. DUNCAN. That leads me into something else. You know, unfortunately, here in Washington it seems that too many people forget that $1 billion is a lot of money. $1 billion is a lot of money.

What I have from the staff says the current production cost cap is

$36.8 billion. Apparently, this is what was set by the Defense Authorization Act of 1998. The current production cost estimate is

$42.2 billion, according to the Air Force, and $43.5 billion according

to the GAO. Therefore, the project is $6.7 billion above the cap.

I mean, that should be mind-boggling or shocking to most people.

It doesn’t seem to shock anybody around here, but it sure should.

What is the difference—where is the $1.3 billion that the Air

Force and the GAO disagree on? Do you know—even that should

be considered a lot of money.

Mr. LI. It wasn’t a disagreement between the Air Force and

GAO. As we identify in the report, the Air Force acquisition plan

identified that figure of $1.3 billion. What we were indicating in

the report was that the Office of the Secretary of Defense’s number

of $43 billion initially did not include that $1.3 billion. That’s what

we were pointing out, that were they to consider the full—all of the

cost that came subsequent to their decision in August 2001 they

would include that.

In direct answer to your question, the $1.3 billion part of that,

for example—and we heard about this earlier—is the change in

subcontractor. For example, initially, a subcontractor, the avionics—one of the avionics subcontractors actually was part of Lockheed Martin. Subsequent to that, that particular subcontractor was

sold. So the savings that they originally thought that they would

get from somebody being within and not having to pay for profit,

now they’re having to incur that extra cost.

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Mr. DUNCAN. Well, you know, I love my children, but I’m always

on to them about not wasting money. In the same way, I’ve always

considered myself to be a pro-military type person. But that doesn’t

mean that I just want to sit back and watch the Pentagon waste

billions and billions of dollars. It seems to me if we can justify this

we can justify almost anything, I mean just anything. I know these

companies are making obscene profits out of this, but this is wrong.

This is just wrong to have these kinds of overruns.

I know this is a time of great patriotism, and we’re all proud of

the job the troops have done, and there is certainly nothing against

them, but this doesn’t mean because everybody is pleased about the

quick and decisive victory in Iraq that we should just sit around

and justify billions and billions in cost overrun and that we can

just sit back and cavalierly accept anything that happens in the

Defense Department.

Because when we just lose billions and billions of dollars it hurts

poor and lower income and working families all over this country,

and we seem to forget that.

Then we talk about these change orders. You know, I guess some

people would like to have a Rolls Royce, but maybe they have to

settle for a Mercedes. And I think that’s the way it is with some

of these planes. We can buy a plane with every bell and whistle

on the world on it, but we might be able to buy one for $100 million

less that could would be just as safe and do just as good a job.

I’m a low-tech person living in a high-tech world, but they tell

me that a computer is obsolete on the day that it’s placed on a

desk. That’s is how fast technology is moving.

So if we’re going to have research and development and then we

start production and then 2 or 3 years down the road we come in

with all these change orders because we’ve got some new high-tech

gadget that somebody wants on there—I mean, where is it going

to stop? What we’re going to see in the future, we’re going to see

worse cost overrun and explosions in programs than what we’re

seeing here today. If we don’t stop this, we’re in bad trouble in the

years ahead.

Yes, sir, Mr. Walker.

Mr. WALKER. In fairness, Mr. Duncan, I think the DOD has

adopted most of our recommendations with regard to their acquisition policy. They are moving to an evolutionary or spiral development approach. With regard to some of the newer systems—not the

F/A–22—but with regard to some of the newer systems, we have

definitely seen improvement.

The biggest problem of late has been that sometimes they’ll

adopt a policy that embraces commercial best practices evolutionary development, rather than the big bang approach, etc., but in

practice they don’t always implement that policy. It’s getting better.

This amount of money—we can’t afford it as a Nation. Frankly,

DOD can’t afford it. Because with the budget pressures that are

coming it’s going to have a very real effect. There are going to have

to be tradeoffs. So they can’t afford these kinds of overruns either,

I would suggest.

Mr. DUNCAN. You know, I’m for a strong national defense, but

we’re spending more on defense than just about all other nations

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in the world combined. It seems to me that if we’re going to do all

the other things that people want us to do we have to limit some

way.

I’m glad to hear that you’re saying that things are improving or

getting better.

Mr. LI. I’ll like to build on what the Comptroller General just

said.

In terms of the way that the program has recently been managed, DOD has itself—and I would assume that Dr. Sambur, when

he comes on in a few minutes, he will tell you that he was not satisfied when he came on board when he found out that the development costs had increased by $876 million. They have made and

they have told me they have made significant management changes

both at the Air Force level and also insisted that occur at the contractor level. So the concern is there, and I think that’s encouraging.

Mr. DUNCAN. I’ll tell you this, if people aren’t concerned or upset

or shocked about what’s happening in this program, they’ve been

in Washington too long.

Thank you, Mr. Chairman.

Mr. MURPHY. Thank you, Mr. Duncan.

The Chair recognizes Mrs. Maloney for 10 minutes.

Mrs. MALONEY. I thank the chairman for calling this important

hearing.

I would like to be identified with the comments of my colleague

on the other side of the aisle, Mr. Duncan.

But, first, I’d like to welcome Mr. Walker and all the panelists.

I just came from the floor where I put into the record the entire

GAO report that you did on the Royalty in-Kind Program and how

that is going to end up costing taxpayer dollars. So I congratulate

you on the work that you’ve done to help us manage government

better.

If there was ever a program that needs to be managed better—

this program was called the flagship of acquisition reform when it

started. Now it looks like a disaster personified. You’ve done a good

job in sort of pointing out what went wrong.

I’d like to join with my colleagues on the other side of the aisle

asking Mr. Walker to come forward with some suggestions on how

we prevent this in the future. We obviously need stricter guidelines, more accountability and more honesty in contracting.

One of the things that we did in New York City when I worked

there when companies had huge overruns in the—we kept a record

of it so that when they came back for city contracts they got demerits for poor performance, and their ability to get a future contract

was diminished. So that contractors then tried to be more honest

about how much it’s going to cost.

But going into a program where we’re going to get 648 planes—

and I see one of my colleagues who was an officer in the military,

Mr. Schrock, in the Navy before this, I know he must be outraged

that we could—when we went in there we were going to get 648

planes. Now we can only get 224 because of the tremendous $20

billion cost overrun.

My question is, how can we put more accountability into the cost

overrun situation so that it doesn’t get so out of hand?

77

You know, granted, if the military comes in and says I want to

redesign the plane, that’s another thing, but when they happen—

it’s usually the contractor saying I need more money. So how do we

put more government control or accountability or better planning

on this? As Mr. Duncan said, we spend more than the whole world

combined on our defense. We are ready for the next war. We are

ready for any war. But we’ve got to get some control on this military spending or our deficits are going to go up and we’re not going

to have the money for education or for child care or for health care

here at home.

So, Mr. Walker, how do you——

Mr. WALKER. We have made a number of recommendations. Let

me deal with it on several tiers just briefly.

Mrs. MALONEY. On cost overruns, how would you control the cost

overruns?

Mr. WALKER. I think the primary way you do it is twofold. No.

1, you adopt the evolutionary best practices approach that we

talked about, where you make sure that you’re trying to use spiral

development, which is what the Department is talking about, to

mature the technologies, to develop certain levels of capability such

that you can get some platforms delivered earlier. Then you end up

upgrading over time as new technologies mature and as they become available to do that. I think that makes eminent good sense.

That was not done in the case of the F/A–22. They’re trying to

adopt that practice with regard to other systems.

I think, in addition to that, you have to look at your contracting

terms. You have to make sure that your contracting terms provide

for the appropriate incentives and accountability mechanisms to

the contractors to make sure that, you know, if things go better

than you thought, then somehow they will suffer—they will gain

from that, if it goes better than you thought. If it doesn’t go as well

as you thought, they may have some penalty associated with that.

Frankly, many of our contracts don’t work that way. We need to

make sure that we have an adequate amount of transparency in

the interim to know how things are going so not only DOD can

manage it better but the Congress can oversee it better in order to

try to help intervene earlier rather than after it’s too late to really

do much about it.

So those would be a few things off the top of my head.

Mrs. MALONEY. But how would you build the incentive in? It

sounds good. Put incentives in that they perform better. Specifically, how would you do that? We’re going to pay you more if you

keep your contract or line or we’re going to keep a record of your

overruns and penalize you the next contract? How do you build in

the carrot and the accountability?

Mr. WALKER. Well, frankly, this happens in a lot of different

types of contracting arrangements, not just weapons systems. It

can happen with regard to information technology systems. It can

happen in a whole range of areas where you end up defining what

you want. You define, you know, key success factors. You develop

appropriate milestones. Cost, quality, timing and performance

being other elements.

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To the extent that people end up exceeding those expectations,

they may have some gain from it. To the extent they don’t, they

may suffer some penalty as a result of it.

The problem is that many of the contracts, frankly, that we have

at DOD are so complicated that it’s almost impossible to understand, much less to administer. We could have days of hearings, I

think, on this.

But I’ll be happy to visit with you individually on this, if you

want.

Mrs. MALONEY. Thank you.

Mr. MURPHY. The Chair recognizes Mr. Shays for 10 minutes.

Mr. SHAYS. Thank you, Mr. Walker, for being here. I thank my

colleagues for the questions we asked.

We had a hearing and December 7, 1999. The purpose of the

hearing was to examine how the Air Force implemented cost control strategies and dealt with scheduled overruns in the F–22 program.

We had a hearing on June 15, 2000. The purpose of the hearing

was to examine the status of the Air Force production cost reduction plans in the F–22 program.

We had a hearing on August 2, 2001. The purpose of that hearing was to continue the subcommittee’s examination of production

cost reduction plans for the F–22 program and to determine why

the DOD and the Air Force were projecting different production

cost estimates.

Nw we are having a hearing on April 11, 2003. I was thinking

that we have kind of missed a gap here, but when I look at the

hearing, we had the third hearing—it was August 2, 2001. And

something quite significant happened on September 11, 2001.

But this is a hugely important hearing. It’s hugely important in

my judgment for just the terms of what we can learn in the process

and how we can see what happens in the future. And it’s very important based on the actual program itself.

I agree with my colleague, Mr. Schrock, that we need the plane.

I also agree with Mr. Tierney that this is short of an outrage. To

go from 750 planes in 1991 and make it 648 to 438 in 1993, to 339

in 1997, to 333 in 1999, to 276 in 2002, to maybe 224 today and

not get the same numbers from the Air Force and from DOD—and,

frankly, the arrogance of not—their lack of willingness to tell us

how many planes.

For instance, I want to know from the Air Force how many

planes can they build under the cap of $36.8 billion. That’s what

I want to know.

The other thing I want to know is what we can do with 276 or

224? What planes are they replacing? The F–15, Mr. Walker, is

that the only plane that would be replaced by this?

Mr. LI. Because of the age of the F–117s, the attack version of

the F/A–22 would also enable them to replace the F–117s.

Mr. SHAYS. So am I to make an assumption, though, when we’re

doing—we have replaced all those planes with a number of 224 or

276?

Mr. WALKER. No.

Mr. SHAYS. So what am I to assume and what is the Air Force

assuming?

79

Mr. WALKER. That’s why I say I believe you need a business case.

You need to demand a business case and to try to understand that.

I think what’s been happening is that the numbers have just

been going down in order to fit whatever appropriation is there,

and that is not the way to do it.

Mr. SHAYS. I think that is fairly obvious. I just wanted that on

the record.

The challenge I have, Mr. Schrock, is coming to grips with the

fact that we have an DOD and Air Force that is not cooperating

with the committee or Congress in helping us sort out this mess.

It has become a gigantic mess.

In terms of process in general, I’m intrigued by the evolutionary

approach versus the so-called revolutionary approach. And I’m interested that you make the claim evidently, Mr. Walker, that we

would have had—we would have planes—some of the F–22s would

be in operation today, that they would cost less, and we’d be able

to buy more of them. That’s really what you’re saying to us. But

I don’t know how you get there.

Mr. WALKER. Well, basically, what it comes down to, Mr. Chairman, is I would characterize that what happened on the F–22 is

that in 1986 we were in a very different security environment. We

faced very different adversaries. The Air Force decided that we

needed to maintain air superiority over time and therefore developed this F–22 concept. The concept was, to a great extent, based

upon wants rather than—not just needs; and there was some

need—there’s no question—but also wants. They wanted to design

the Rolls Royce, as was mentioned. Why can’t we do this? Wouldn’t

it be nice if we had this? And even when they came up with that,

the definition of this evolved over time.

My point is that spiral development says, what type of capabilities do you need versus what would you—what do you want, which

you may not need. It says, determine what those capabilities are

and start to build systems in an evolutionary approach where you

end up, you know, maybe getting an 80 percent solution for the

first batch and then you end up—as technologies mature, you get

a 90 percent solution for the second batch, and you get a 100 percent solution for the third batch.

This is oversimplifying it, but that’s basically the concept, rather

than putting, you know, all your money and trying to build the

Rolls Royce when technologies have not been, you know, have not

matured, experiencing significant problems, having to deal with,

you know, retrograde, retrofit and all these other issues, just not

the way to do it. It’s not the way it’s done in best practices, not

the way it should be done at DOD.

Mr. SHAYS. One of the most instructive points that was made to

me by a Congressman who is no longer here, but when I was a

newer member he said, the decisions you make in defense—and he

was saying that to me as a new Member, given that I was in a

State House of Representatives and the one area that was totally

new to me was defense expenditures. He said to me, whatever decision you make today will only have impact 10 years later. Or basically—not only—but in a sense he was saying what I do today is

going to impact the military of 10 years and beyond.

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So in 1991 I was thinking—and we were fighting the Gulf war.

I was thinking, thank gosh that people in the early 1980’s and late

1970’s made us look good in 1991. I’m a Member of Congress, but

I had only been in for 4 years.

He also told me something else. He told me our job in Congress

is to make sure it’s never a fair fight. That my job is to make sure

when your son is in battle he has the best equipment and the best

training. That’s my job, and we never want it to be a fair fight.

So what I’m thinking right now is we could keep the F–15, and

we are still slightly superior. The Russians, that’s the one area that

they seem to do well, is make planes. The French make a pretty

good plane. So I’m going through this kind of dialog, is this my—

you know, a moment of truth for us? Is this what makes sure it’s

never a fair fight?

But now, looking at the war right now, we control the air; and

I’m wondering, so we didn’t need fighter to fighter in this war. And

I’m wondering when we’ll need it. And so it strikes me, one, we

have to monitor what other planes are being made.

Sorry for this long introduction, but I believe in the concept of

opportunity costs, which is what, you know, was drilled into me in

graduate school. That was the clear concept that if you spend your

money here you’re not going to be able to spend it here.

I would say to Mrs. Maloney it’s not just an issue of opportunity

costs in terms of education and so on, it’s within DOD. They’re

going to have to make some really tough decisions.

So it gets me to this question. In your judgment, Mr. Walker, are

we so far along that it makes sense just—even if we can only make

224 planes, does it make sense for us to continue, given all the investment we’ve made? So the opportunity cost is—we have kind of

already been at the opportunity cost level.

Mr. WALKER. Well, the opportunity cost is what I refer to as the

ripple effect. If you have negative variances, what is the ripple effect of that negative variance? My personal view is—and we’re already making the plane. We’re in limited production right now. So

we’re going to have some F–22s.

I think the real question is I believe the business case needs to

be focused on how many do we need, for what purpose, at what

cost, and with what ripple effect. Looking forward with regard to

10 years from now or more, what do we think we’re going to face?

That’s what I think has to be done.

How many that is, I don’t know. I wouldn’t want to speculate.

But it should be based on a need, not a want and not a plug.

Mr. SHAYS. But in one sense we should almost separate the cost

out and have a very studied approach as to you are replacing some

plane, how many planes are you needing to replace. So technically

what number you need—it might even lead you potentially—I

wouldn’t make the assumption now—that you would rebuild a

plane that we’ve made in the past at a lower cost and make the

F–22. We don’t know that, right?

Mr. WALKER. No, you could decide that you might make some adjusted number of the F/A–22 which is, you know, obviously the

most advanced system that is on the drawing board right now and

redeploy some of those dollars, keep it in defense and redeploy it

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to buy larger quantities of either existing systems that have been

upgraded or the JSF or whatever.

That’s not my job. I can’t do that. But that is part of the analysis

that has to happen here.

We can’t look at these programs in isolation. We can’t be wedded

to what we wanted years ago and what we may or may not need

today.

Mr. SHAYS. Thank you.

I notice we have another colleague.

My time has run out. I do thank you for all your good work on

this and other issues.

I will say to you that I think that this committee will devote

some time to the whole concept of—that is being done now, but examine it in other programs and maybe ask you to show us some

cases that are working well in the evolutionary versus the revolutionary.

Mr. WALKER. We do have some of those, and I think it’s important to note those for the record.

I would like to thank you, Mr. Chairman, for allowing me to have

Mr. Li here, who is on the point for our F–22 effort.

Mr. SHAYS. Well, you have good people working for you; and he

is one of them. Let me say it differently: You only look good because of your good people.

Mr. WALKER. We’re only as good as our people, Mr. Chairman.

We all know that.

Mr. SHAYS. I have a great committee.

Mr. MURPHY. Thank you, Mr. Shays.

The Chair recognizes Mr. Bell for 10 minutes.

Mr. BELL. Thank you, Mr. Chair.

I want to commend Chairman Shays and Ranking Member

Kucinich for their leadership on this issue, as well as Representative Tierney, who I know has demonstrated a commitment over the

years, too, on the issue.

For just a moment I want to focus on the past—and sometimes

it can be a good guide to the future—and, more specifically, some

of the risk that GAO had identified several years back with the

program, such as tactical problems. If you could, Mr. Walker, if you

could tell us how those problems that were identified were addressed and tell us if it’s fair to say that a lot of the problems that

were pointed out by GAO were successfully addressed.

Mr. WALKER. We have pointed out a number of problems in the

past. I’ll answer briefly and then ask Mr. Li to provide some additional details since he has been involved with this a lot longer than

I have.

The basic problem that we’ve found is the failure to follow commercial best practices with regard to the maturity of technology before you move between different stages, design to development to

limited production, for example. That’s the basic problem. There

have been avionics problems. There have been various aspects that

I would ask Allen to get into as to what some of the details are

there.

Mr. BELL. Can you talk about how they are addressed?

Mr. LI. Indeed, yes, sir. Thank you for your question.

82

The Air Force in the previous reports that we identified—we

identified problems, for example, with their canopy, the fact that

cracks were occurring in the canopy. That has since been resolved.

We had identified—this year, we’re identifying issues regarding

the fin buffeting issue; and they have said that they have a fix to

that. The fix that they have has been demonstrated above 10,000

feet. Under 10,000 feet has still not been demonstrated. So while

that shows their commitment and their progress, they have not finished that.

The last thing I would identify is avionics. We’ve identified that

as an issue and a problem area for several years, and that still remains a problem. Dr. Sega and Dr. Sambur are in the midst right

now of trying to resolve those problems. They think they have a fix

to some of those avionics problems. It’s going to take a few months

for them to get that resolved.

Mr. BELL. Looking back to the past for a guide and moving forward to the March 2003, report, do you think it’s fair to say that,

given the past response, that there will be a similar response to the

problems identified in the 2003 report or are we talking about a

different set of hurdles that simply can’t be overcome?

Mr. LI. I don’t have a crystal ball to be able to identify whether

or not in operational test and evaluation something will crop up.

I am encouraged by the fact that the Air Force is responsive to the

identification of problems and is trying to find solutions to them.

Mr. BELL. Mr. Walker, I wanted to go back when you were talking about the question of how many and trying to determine how

many will be needed. How would you recommend going about figuring that out and basing it on what?

Mr. WALKER. First, I think intellectually what we ought to be

doing is figuring out—we ought to be looking at current and expected future threats, which presumably should be part of the national security strategy. That then should translate to the national

military strategy. That should then translate to what type of capabilities do we think we’ll need at what relative timeframes to be

able to do that and also what relative quantities we think we’ll

need not just to replace what we have—because the number we

have may not be what we need. The number that we have and had

for the cold war era may not be the appropriate number that we

need for the future.

So my view is that there is a need to fundamentally step back

and to say not what path we committed to in 1986 that we’re still

basically going down. The only difference is, how many of those are

we going to buy and when are we going to get them? We need to

take this point and look forward and say, what type of capabilities

do we need and what relative quantities?

If you assume that the Defense Department is going to have a

budget cap, which I think is a reasonable assumption, given our

long-range budget simulations, then for them to make more conscious tradeoffs as to what the long-term effect might be on JSF,

what it might be on space systems and what the effect might be

on other military services as well, I don’t think that has happened.

I don’t think that’s happened.

Now, I will say for the record that the Defense Department is

doing a better job on evolutionary development. I will also say they

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are doing a better job of matching the POM, which is the program

planning, with the budget. But they are only looking out 2 years.

You need to look much longer than 2 years, because the ripple effect on some of these things gets much greater over time.

Mr. BELL. I was going to ask you that. How often do you think

that assessment needs to be made in terms of how many? How

often should we be coming back to that question? Because I think

what you are recommending is a pretty large degree of flexibility

based on what’s going on.

Mr. WALKER. I would respectfully suggest that I’m not aware

that it’s been done in years, and so it would be good to start with

one. Then after that I would suggest that we look at the changing

environment. If there are material subsequent events in the global

condition, in the security condition, in our budget situation or

whatever, then it might make sense to relook at it. But we need

to start with one.

Mr. BELL. So when you say it hasn’t ever been done, would you

believe it was always done as far as fixing the number was always

done in somewhat arbitrary fashion?

Mr. WALKER. I don’t believe that it was arbitrary. I believe that

it was a plug. It’s not arbitrary. In fairness, now, this is not the

only plug. I mean, I am the audit partner on the consolidated financial statements of the U.S. Government. There was a $17.1 billion plug in coming up with the last audited financial statements

with the U.S. Government. So this is not the only plug that exists

in government, and that’s real money too.

Mr. BELL. Thank you.

Thank you, Mr. Chairman.

Mr. SHAYS. Thank you. We have 11 minutes to go—I’m going to

recognize Mr. Platts, but you probably won’t want to use your full

10 minutes.

Mr. PLATTS. Thank you, Mr. Chairman. Actually, I will be very

brief. I appreciate the focus of the subcommittee on this issue. And

thank goodness for C–SPAN radio. I was delayed because of the

weather and a traffic accident in getting in here this morning. I got

to hear most of the testimony from Mr. Walker and questions. So

I appreciate that opportunity via the radio.

Mr. Walker, I do have maybe just one question. I appreciate your

testimony previously in the Subcommittee on Government Efficiency and Financial Management. And one of the things we talked

about there is Chief Financial Officer, a career position, perhaps a

10-year term or so, to try to have some better direction. Would that

type of position translate to a benefit in what some of the problems

we saw here from the financial management side of the Raptor program if we had that type of position in place today?

Mr. WALKER. As you know, there’s a level two position, the

Under Secretary of Defense for Acquisitions. My personal view is,

is that the importance of the acquisitions process and all related

activities and the amounts of money involved clearly justify having

a level two person focused full time on those issues. The position

that you are referring to that we talked about a couple days ago

was GAO has talked about the fact that we believe that it may be

appropriate for the Department of Defense and certain selected

other entities who have had years of problems in dealing with basic

84

management infrastructure items, you know, things like financial

management, information technology, knowledge management,

these types of issues, procurement, to have a chief operating officer,

chief management officials at the level two level who would be responsible for planning, integration, and execution of the—dealing

with the issues that frankly just don’t get dealt with under our current structure.

I mean, DOD has six of the high-risk areas on GAO’s high risk

list plus each one of the governmentwide areas they are subject to.

I think you need to consider having somebody with proven experience and track record on that with something like a 7-year term

with a performance contract who could stay focused on the things

that need to be done, including the cultural transformation efforts

which, based on my experience in the public and private sector,

when you’re talking about cultural transformation, it takes 7-plus

years to make it work and make it stick. We don’t have anybody

that sticks around that long. And you know, with all the turnover

on the acquisitions part that I showed before—and I’m not saying

you need 7 years for a program manager, but for this kind of position, the chief operating officer, chief management official, I think

it makes eminent good sense, and I think it would help tremendously at the Department of Defense to deal with a lot of these

high-risk areas and help improve economy, efficiency, effectiveness,

and accountability.

Mr. PLATTS. Thank you, Mr. Walker, and, Mr. Chairman, thank

you. And my hope is through some of the efforts of the Government

Efficiency and Financial Management Subcommittee working with

Chairman Shays that we will have that cultural change that will

benefit not just the F/A–22 program and how that’s going forward

but DOD in total.

Mr. WALKER. And, Mr. Platts, as you know, you are familiar with the $17.1 billion plug that we talked about a couple of days ago,

Right?

Mr. PLATTS. We had a good discussion about that plug. And, as

you said, it is real money, and trying to account for it is somewhat

challenging apparently right now for the Treasury. So thank you.

Mr. SHAYS. Thank the gentleman.

Mr. Walker, we thank you for your testimony. You have made it

very clear to us in other hearings where we dealt with cost overruns, programs, technology that isn’t working and so on that we

need a chief operating officer, chief management officers. They

need to have continuity. I will just emphasize, as I’ve looked at this

political process, that these are deputy positions, that sometimes

they are not assigned when a President takes over for a year. They

may take another year to go through the process. And so they are

in office for about 2 years, and Lord knows who is doing those positions during the transition.

So we look forward to working with you on that issue in general.

Let me just ask, is there anything you need to put on the record

before we adjourn?

Mr. WALKER. No, Mr. Chairman, I don’t.

Mr. SHAYS. Before we recess, I’m sorry.

Mr. WALKER. No, there’s not. But I would mention one thing. We

do right now—as you know, at DOD you have two level two posiVerDate 11-MAY-2000 11:43 Sep 29, 2003 Jkt 000000 PO 00000 Frm 00088 Fmt 6633 Sfmt 6633 D:\DOCS\89243.TXT HGOVREF1 PsN: HGOVREF1
85

tions that I’m aware of. You have the Deputy Secretary and you

have the Under Secretary for Acquisitions. I would respectfully

suggest that they both have full-time jobs. And so what I’m talking

about is another level two person who would be this chief operating

officer or management official in order to deal with these basic infrastructure items.

Thank you.

Mr. SHAYS. Thank you for clarifying that.

Let me say to our next panelists that we are going to expect from

DOD and from the Air Force that they tell us, without any reluctance, how many planes they can build with the statutory cap of

$36.8 billion. That is the least that this committee can expect to

get from the Air Force and DOD, and so I hope that is forthcoming

without even needing to ask that question.

So we will duct empanel, our next panel as soon as we have this

vote. I’m not sure, is it a one vote that we have? I don’t see a clock.

It’s two votes. Thank you. So it probably is going to take us about

20 minutes, give or take.

Thank you again, Mr. Walker and Mr. Li. We are recessing and

will be back.

[Recess.]

Mr. SHAYS. We will call the hearing to order, and we will welcome Mr. Michael Wynne, Principal Deputy Under Secretary of Defense, Acquisitions, Department of Defense, and Dr. Marvin

Sambur, Assistant Secretary of the Air Force, Acquisition, Department of the Air Force, Department of Defense.

And to say that I know that Mr. Wynne in particular has an important meeting with some of our congressional colleagues at 3,

and we will definitely get you out of here 15 minutes before and,

who knows, maybe sooner. If you give us all the right answers, you

can be out of here real quick.

And the right answers are just the honest answers. I don’t mean

that you wouldn’t be honest. But in other words, if we can get right

to the point, we will probably cover a lot.

I need to swear both of you in, and if you would rise, please.

[Witnesses sworn.]

Mr. SHAYS. I would note before calling on you, Mr. Wynne, that

this is an issue that basically goes from one administration to another administration to another administration. But ultimately

right now both of you are in command of this program, have responsibilities. We are just trying to understand where we are,

where we are going, and the logic to, you know, to both issues and

to be clear as to what contribution our committee can make.

So, Mr. Wynne, you have the floor.

STATEMENTS OF MICHAEL W. WYNNE, PRINCIPAL DEPUTY

UNDER SECRETARY OF DEFENSE (ACQUISITION), DEPARTMENT OF DEFENSE; AND DR. MARVIN SAMBUR, ASSISTANT

SECRETARY OF THE AIR FORCE (ACQUISITION), DEPARTMENT OF THE AIR FORCE, DEPARTMENT OF DEFENSE

Mr. WYNNE. Thank you, Congressman Shays.

Mr. SHAYS. Thank you.

Mr. WYNNE. Mr. Chairman, members of the committee, I am

pleased to come before you today to talk about the F–22 program,

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and the acquisition that is and has been managing the cost, schedule, and technical aspects that together make a program that has

as its goal to bring to the defense of America the best tactical fighter aircraft that this country has ever produced. The aircraft, now

designated the F/A–22, has characteristics to address the threats

to our freedom for many years into the future. Though this aspect

is not the direct thrust of this hearing, it is important to keep the

purpose of the acquisition in mind as we progress.

Secretary Aldridge set out five goals as we set out to improve the

acquisition process in general, and the first among them was the

restoration of the credibility in the budgeting process to gain your

confidence that year after year cost increases on our weapons systems could in fact be minimized. This provided the opportunity for

the inclusion of the independent cost estimate in the determination

of annual and program budgets, reconciling differences and making

informed judgment if there were variances between the independent cost estimate and the program budget. This policy has in fact

led to dramatic reduction in cost driven changes and allowed some

focus on stability in other areas that impact cost, such as technical

risk and changes in quantity.

The F/A–22 program, which has been in existence for some time

prior to this policy, had in fact suffered from previous steps to manage cost using caps for R&D and caps for production. The cap for

research and development had the program coping with inadequate

test articles and a single consolidated avionics integration laboratory as well as a clear erosion in the area of systems engineering,

which appeared on the surface to be redundant engineering on this

highly integrated weapons system.

During this same period, the acquisition work force was being

steadily downsized. Program offices were directed to be of a certain

size in attempting to comply with downsizing pressure, yet expected to retain the fiduciary, financial, and legal oversight. This

led to a reduction in analytic engineering capability within the program offices in general and for in particular the F/A–22 program

office in the area of systems engineering and integration. This pressure continues and has the potential to introduce yet more risk in

the process. The areas that suffer are areas that seem redundant

when things go well and then seem essential when things don’t.

Disciplined systems engineering is essential as software and integrated systems are becoming the vogue for defense. Two million

lines of diversified distributed software code are being integrated

for the F/A–22, and 6 million are forecast for the Joint Strike

Fighter, and I believe triple that again for the Future Combat Systems in total.

I have spoken out on the need for increased systems engineering

in the community at large, and firmly believe that, as we have addressed the cost risk, we must also address technical risks by restoring and agreeing to pay for our supplier capability in this critical software skill area, and, within our own community, stop the

erosion of our capability to be smart buyers.

Here we have turned to another capable group, the federally

funded research and development centers, to assist in reviewing

the current crop of problems and advise us on a good path forward.

Although their primary role is in research and not troubleshooting,

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they are also great sources for talented engineers who can and

have helped. I would ask that as you deliberate the complex budget, that you consider them as yet another part of the engineering

talent pool that the Department has to draw on and that has over

time been reduced in numbers using the rubric of budgetary savings and often accused of being redundant to the Department work

force.

I digress to emphasize that we are here today talking about an

effect, cost increase for a specific weapons systems, and recognize

that to get at it in a systemic way, we must as well look at all the

causes. For if we are blind to the causes, then we are destined to

confront the same issues in another forum like this. As one author

put it, ‘‘History doesn’t repeat itself, but it rhymes well.’’

Turning to the present situation with the F/A–22, we have a case

where the airframe has proven to be superior in its characteristics

while the software lags in development. The F/A–22 is meeting or

exceeding the key performance parameters regarding aircraft performance. Flight testing today demonstrates the capabilities that

meet the requirements for the air combat warriors. Thus far, the

structural fix with the titanium substitute for carbon graphite has

in fact provided additional structural strength, reducing the risk of

fin buffet for the aircraft that the GAO refers to in their report.

And it appears to be an acceptable fix. Yes, testing in the harsher

environment below the 10,000-foot altitude, currently scheduled for

June, has not been accomplished, but it is not expected to change

that outlook, according to the computer simulations that have been

accomplished.

From a technical risk perspective, this leaves as the highest risk

area the integration of the software and the embedded instabilities

being discovered in the avionics software. At our request and with

great cooperation from the Air Force, the Director of Defense Research and Engineering formed the Avionics Advisory Team, made

up of software experts from DOD, academia, and industry, to do

two primary tasks: First, to identify underlying systemic flaws, and

to advise OSD as to the likelihood of a fix requiring a major change

to the avionics architecture and/or the flight weapons control computers. Second, they will identify impediments to resolving the

issue and provide suggested approaches to the Air Force and contractor design teams.

Let me address each in turn. First, the team reported that they

have not uncovered any evidence that the architecture is fatally

flawed, And they added that radical change to the architecture

would likely make it harder, not easier, to resolve the underlying

software integration issue in any kind of a timely manner.

Second, the team identified systems engineering concerns which

likely contributed to the problem and trouble shooting software

tools that they suggested would help reduce the schedule for resolution.

The F/A–22 has embraced the Avionics Advisory Team’s recommendation in the areas of instrumentation and testing modalities to assist in detecting and correcting root causes for the software instabilities. The Air Force, as you will hear, has allocated 60

additional days to this resolution process. We want dedicated independent operational testing and evaluation to be event driven, not

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schedule driven, and have established some objective criteria representing the product we want for the air combat warrior. This includes a run time stability measure which will allow testing to be

performed in an efficient manner.

While we are encouraged by recent reports of progress, we remain concerned about meeting the criterion within the allocated 60

days. We have scheduled a review in mid-June to determine

courses of action to best address all of our concerns, and we are following the F/A–22 design team’s progress.

I have been briefed recently on actions and progress which, if accomplished, should make a difference. That having been said, I

have to be skeptical until hard metrics allow me to be otherwise.

On behalf of all the men and women in uniform, I want to thank

you for your support and encouragement, which led to the magnificent performance of our total force thus far. I am prepared to address your questions.

Thank you.

[The prepared statement of Mr. Wynne follows:]

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Mr. SHAYS. Thank you, Mr. Wynne. At this time we will recognize Dr. Sambur.

Dr. SAMBUR. Thank you. Good afternoon, Chairman Shays,

Ranking Member Tierney, and Congressman Schrock. Thank you

for this opportunity to discuss with you the Air Force’s efforts and

progress on acquisition reform. Mr. Wynne and I are proud to come

before you today and discuss our acquisition reform policies to increase agility and provide credibility in the cost and schedule of our

development programs. Our intent is not to make excuses for our

performance of the past, but rather to spell out what we are doing

to significantly improve our future performance.

The Secretary and Chief of Staff of the Air Force gave me a mandate to improve the way we do business in delivering capabilities

to the warfighter. From slipping development times to reducing deliveries to increased costs, programs have not met established baselines and goals. During this past year, I have been working to determine the root cause of these execution problems. The findings

identify several factors that lead to poor performance, including unstable requirements, faulty cost estimates, lack of test community

buy-in, inadequate systems engineering, and unstable funding. For

the Air Force, these program execution problems result in the average cost growth of 30 percent and an average development time of

nearly 10 years.

Given the problems noted above and the resulting increases in

program costs and delays in program schedules, I have formulated

a series of policies to address the underlying causes. These policies,

as they say, are in violent agreement with those you heard this

morning from Mr. Walker.

First, in order to overcome our inadequate requirements process,

I have implemented an agile acquisition policy.

Mr. SHAYS. Could you just make sure—you said ‘‘violent agreement?’’

Mr. WALKER. Agreement.

Mr. SHAYS. A violent disagreement? Or——

Dr. SAMBUR. A violent agreement, meaning I concur.

Mr. SHAYS. OK.

Dr. SAMBUR. I’m sorry if I said it incorrectly.

Mr. SHAYS. Oh, no. You said it correctly; it’s just the word ‘‘violent’’ is a word usually associated with disagreement. But in this

case, that means that you are in strong agreement.

Dr. SAMBUR. I agree with the policies for improvements for the

future. In particular, in order to overcome our inadequate requirements process, I have implemented an agile acquisition policy that

demands collaboration; that is, active, cooperative dialog between

the warfighter, acquirers, engineers, and testers. This creates a

team from the outset and throughout the requirements and development process. This team approach results in a true understanding and buy-in to the requirements and leads to a stable requirement foundation. As the policy states, it encourages spiral approach and is opposed to the big bang that you heard this morning.

Second, not having test community buy-in created problems within the acquisition process. To resolve this issue, we are developing

a seamless verification process to ensure that both the development

tests and operation tests occur in a single process. If the operVerDate 11-MAY-2000 11:43 Sep 29, 2003 Jkt 000000 PO 00000 Frm 00109 Fmt 6633 Sfmt 6633 D:\DOCS\89243.TXT HGOVREF1 PsN: HGOVREF1
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ational testers are involved early in the process, then they can assess the operational value of development testing and reduce the

duplication of effort.

Third, we need to instill a strong systems engineering foundation

within the acquisition process. I have implemented a process by

which all future milestone decisional authorities will not sign out

any future acquisition strategy plans that lack the necessary attention to systems engineering. Additionally, I am demanding that

systems engineering performance be linked to contract award fees

and to the incentive fee structure.

Fourth, unstable funding is a constant problem, one that will be

better managed by instituting a more disciplined program priority

process and by insisting on the use of spiral development methods.

We have had several successes based on these new policies and

procedures. One such example is the Passive attack Weapon. This

weapon was developed as a result of a 180-day quick reaction program at Air Combat Command. It was available to the warfighter

at the 98-day mark. Other successes are detailed in my written

statement.

As the paramount reason for your subcommittee meeting is the

poor performance of the F/A–22, I will also give you a status update on the program. Again, my intent is not to justify the programmatic performance, but rather to give you an appreciation of

some of the changes we have made and the positive improvements

that have resulted.

It has been a busy year for both the development and production

phases of the F/A–22 program, and I am pleased to let you know

we have made tremendous strides in both. We have seven Raptors

flying almost daily at Edwards Air Force Base. These jets have accumulated over 3,000 flying hours to date. In the summer of last

year, we organized and we made changes so that we could execute

the envelope expansion testing in order to clear the full 9-G point.

We put a new plan in place and we have been executing a two and

a half fold increase to our testing rate over the past 6 months. We

have successfully fired 16 missiles, 4 of which were guided. It is

important to note that one of these shots was an AMRAAM shot

at supercruise. In the future we will drop JDAM at supercruise.

To prove the strength and durability of the airframe itself, we

completed static and first lifetime of fatigue testing. These tests

traditionally uncover potential redesign or retrofit issues, but very

importantly we found no—let me repeat that—no major issues from

either test.

This program tackled technologies others have never faced, and

we are getting it done. We are attacking avionics stability the same

way. We’ve made fundamental changes in our avionic development

effort, and I am confident, very confident that revolution of avionic

stability will be resolved in the future.

In our production program, we are also getting it right. The operation on the production floor at Marietta is rapidly gaining momentum. As expected in our production program, in its infancy we’ve

had growing pains which have manifested themselves in late aircraft deliveries. To address these late deliveries, we have been

working closely with Lockheed Martin to implement a number of

initiatives for reducing bill cycle time. The changes we are putting

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in place are making very visible impacts. During calendar year

2002 alone, Lockheed reduced late aircraft deliveries from 12

months late to 7 months late. At the current rate of improvement,

we expect aircraft deliveries to be back on contract schedule by

July 2004 at Aircraft 4035.

Cost is also important to us. That is why we are very focused on

production affordability. One visible way we are striving for more

is through the production cost reduction program. We have invested $475 million, including $85 million in fiscal year 2004, in

producibility improvements. When we first established this program, we said we would invest $475 million. We have not wavered

from that commitment.

I think it is important to recognize that the ground we are paving on the Raptor in many ways enables our future force. The F/

A–22 is developing and implementing state-of-the-art technology,

fusing leading edge capabilities and pioneering manufacturing

techniques that will ultimately yield not only the world’s greatest

aircraft but will also establish an invaluable set of lessons learned

for developing future complex weapons systems.

The F/A–22’s unique combination of capabilities complement and

increase the effectiveness of the entire joint forces. The F/A–22 is

the kick-down-the-door system. It establishes air dominance. It

opens the door for follow-on persistence forces. It makes, as you

said this morning, Chairman Shays, an unfair fight. The Raptor is

the pathfinder. We have to get it right. The Raptor will propagate

the American standard of air dominance for the decades to come.

In summary, the Air Force remains focused on providing the necessary capabilities to the warfighter in order to win America’s

wars. These capabilities can only be achieved through effective and

efficient management during the development, production, and

fielding of systems. By incorporating a strong collaborative process,

implementing spiral development, and infusing systems engineering in our acquisition process, we can overcome the tough challenges ahead.

We are committed to pursuing these actions necessary to make

transformation work. I appreciate the support provided by Congress, and I look forward to working with this committee to best

satisfy our warfighters’ needs in the future.

Again, thank you for the opportunity to provide this statement,

and I will be glad to answer any questions.

[The prepared statement of Dr. Sambur follows:]

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Mr. SHAYS. I thank both of you.

I want to say we are going to be able to—there are just three

committee members and the two of you. We are going to be able

to really sort this out. So, you know, my point to you is that right

now it’s not sorted out for me, and I am a little disappointed with

one aspect of your testimony. I had hoped that you would basically,

either one or both of you, tell us what our $38.6 billion would buy

if we had the cap. So—and Mr. Tierney was mentioning to me, in

spite of our request to that, we are still not getting that. So you

force me just to ask the question. I hoped you would voluntarily do

it. So, Mr. Wynne, how many aircraft will we get for the $36.8 billion?

Mr. WYNNE. Sir, my estimate—and it is an estimate because we

have only produced seven so far. And it does depend upon whether

or not the predicted cost reduction projects come into being and impact these airplanes. And it does depend upon how such a lower,

reduced quantity would be planned out, whether you would get

more or less inflation, etc. But I estimate the impact to be between

225 and 235 airplanes would be achievable, again depending upon

how the cost reductions would be impacted. I have not conducted

a thorough review, but I have a lot of time in the world of estimating. This is not too bad.

Mr. SHAYS. Thank you.

Dr. Sambur, what would your estimate be?

Dr. SAMBUR. I think Mr. Wynne is correct, about the 225 range.

Mr. SHAYS. Now, sort this out for me. First off, as I used to do

in hearings, and I’ll have to expose my ignorance. But I have forgotten as to—this is to replace the F–15, but is it also to replace

some F–16s? Is this solely going to be Air Force?

Dr. SAMBUR. I think by looking at it as a replacement jet, you’re

looking at it from the wrong way. This is basically a technology

leap forward to encounter the threats we perceive and are actually

happening right now in——

Mr. SHAYS. Let me ask you this. Who is going to use the plane,

Air Force or Navy or both?

Dr. SAMBUR. Air Force.

Mr. SHAYS. OK. So does the Air Force fly any F–16s?

Dr. SAMBUR. The Air Force flies the F–16s.

Mr. SHAYS. And the F–15s?

Dr. SAMBUR. Yes, sir.

Mr. SHAYS. So it is basically—and Navy does not fly either?

Dr. SAMBUR. No. It flies the F–18.

Mr. WYNNE. It specifically flies the F–14s and the F–18s.

Mr. SHAYS. Thank you.

Mr. WYNNE. Yes, sir.

Mr. SHAYS. But when I look at the complement that we have

now, we have approximately 1,600, give or take. What is going to

replace those planes as they wear down? We are not going to go

from 1,600 to 235, even taking your highest amount. What takes

the place of that plane? Of both?

Mr. WYNNE. We have a fairly comprehensive look into the future

on tactical aviation, and we are concerned, as you indicate, that the

cost of replacement aircraft has caused us to reconsider our tactics,

strategy, etc. Right now we are forecasting that we can extend the

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life of the F–18 as well as the F–15, F–16 until the Joint Strike

Fighter comes aboard.

You asked a great question, if I could follow on, sir, about what

airplane does the F–22 replace. I would liken it to making sure

that we have air dominance as we have achieved air dominance

over every projected threat that we can see in the future. Right

now it is not limited to the population of Iraq, as we were often

accused of fighting the last war. We are actually in this case looking forward to the next war.

That being the case, I would say that the F–117 is probably the

most reflective of the capabilities we have, but it is not an air-toair or an air-to-ground, it is—but it does do some of those missions.

Mr. SHAYS. OK. I am still—it would strike me that almost any

reasonable person would conclude—first off, since September 11,

we have used these airframes in lots of different ways, the no-fly

zone, north and south. We are using these planes to fly periodically

over cities. These aircraft, both the F–15 and 16, have gotten a tremendous amount of use in the last few years, and I am told that

it is much like a racecar. You bring an airliner in from overseas,

it just turns around in a few hours and goes back, and it might

come back again. It just is a real workhorse. It is high performance. But I’m told that our fighter aircraft are high performance

and wear out quickly and parts have to be replaced quite often.

So what I need to know is—maybe more from you, Mr. Wynne—

are we looking then at replacing the F–15 and F–16 with more of

those planes? Building more of them? I mean, is that——

Mr. WYNNE. I think we are continuing to buy the F–15 and the

F–16. I think they are planned to be in our fleet for many, many

years to come, if not decades. As far as their capability is concerned, they are not anywhere close to being as capable as the F/

A–22 or the Joint Strike Fighter when it comes on live. So longer

term, I would say that they will be replaced, and they will be replaced with a combination of the F/A–22 and the Joint Strike

Fighter.

Mr. SHAYS. When we went down from 750 in 1991 to 648 in 1993

to 438 in 1997 to 339 in 1999 to 333 in 2002 to 276, and while it’s

not certain that we would go at the cap, I mean, it’s possible Congress will decide to increase the cap level. But if we went with a

cap level of 235, what did we have in its place as we kept bringing

these numbers down and the amount of time it took to build the

F–22? What did we do? Did we just leave this gap, or?

Dr. SAMBUR. Can I just have an opportunity to answer that? I

would like to correct one of the things that Mr. Wynne said. We

are not in the process of building F–15s and F–16s. We are doing

some enhancements to them, but we are not in the process of doing

that.

Mr. WYNNE. That’s right.

Dr. SAMBUR. Earlier this morning you heard a plea from Mr.

Walker about a business plan. We have made that business plan.

As you probably recognize, about several minutes ago there was a

concern within the Department of Defense as to whether or not the

F/A–22 was the right way to go, and they challenged the Air Force

to actually prove the viability of this plane for the future, whether

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or not it was meeting the needs, whether or not we had an adequate plan forward.

So we actually presented to the DOD a comprehensive business

plan that included the requirements that we felt that this F/A–22

needed to meet, a business plan that talked about the aging assets

of the F–15, and it was very comprehensive. And obviously some

of it is classified, but some of the business aspects are open and

you can obviously share that, and be happy to share those parts

that are not classified with you.

Mr. SHAYS. Thank you. The bottom line is, it’s good that we have

that business plan. It needs to be, I think, shared with the appropriate committees, including this committee as well.

Let me just say to you both that you are certain both to appear

before us again, because we are going to—we missed one step along

the way after September 11, but we are going to be back monitoring this. We know that you all are newer to the program, but I

think you can recognize there needs to be some, you know, sense

of statements made and then an assessment of how we are doing

on those.

Dr. SAMBUR. Well, as you said at the beginning, the right way

to testify is to tell the truth. We are telling you as we see it. We

recognize the issues you have, and they are good issues. And as I

said in my testimony, I’m not here to give you excuses for performance in the past, which has not been exactly great, to use that expression. And we are trying to make improvements for the future.

And the point that we are trying to make here, at least from the

Air Force’s point of view, is that we have taken a comprehensive

look at the need for this F–22 and have balanced it with all of our

other needs, and felt that this is the way to go forward. We are not

happy with the number of 224 if the cap is not lifted or 276. You

know, we feel that we need something in the order of 381. And as

we see stability on this program and we get some of these processes in place, we hope to see improvement. And I will be very

happy to appear before you in the future and really show you what

we have done and be accountable if we have not been there.

Mr. SHAYS. Fair enough. Let me say that in our third panel we

have a witness who believes that the number to stay within the cap

will be closer to 175, and the per unit cost of that almost becomes,

in his words, manifestly absurd. It’s very possible that—I mean, obviously in this business plan it will share with us if we build, say,

300, what the per unit cost would be. I mean, I would imagine that

you are giving people, decisionmakers certain options as to——

Dr. SAMBUR. Absolutely.

Mr. SHAYS. And also what our number is regardless of the cost,

what we need?

Dr. SAMBUR. Let me say, Mr. Chairman, that the type of questioning that you are giving to me and to Mr. Wynne is not unheard

of within the DOD itself. There is a tremendous amount of

questionings associated with this program, and the Air Force has

time and time again been asked to prove whether or not this is the

right way forward. And we have had lots of exercises like this, a

lot of data we have brought forward. And if I may, I would like to

correct some of the impressions that you heard this morning on the

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GAO report with respect to the $1.3 billion, which I think there

was some confusion on that.

Basically, the question was whether or not the Air Force has accounted for that in our latest numbers, and let me just make sure

what those items are that were claimed to have been missing by

the GAO. The first was whether or not we would get the multi-year

procurement in a timely fashion as we have projected, because if

you don’t get a multi-year procurement your costs will go up. We

actually were much more conservative. We assumed that we would

not get a multi-year until 2007.

The second concern in the GAO report was whether or not we

would reap benefits from the JSF program, which had a lot of commonality with the F/A–22. We assumed a minimal amount. We actually were very conservative in that.

There also was a claim about inflation, that we did not adequately put in enough for inflation due to some of the schedule

moving forward. We also put that in. And proof of the fact that our

estimates are now more conservative is that for the first time, almost first time ever, the CAIG, which is the independent cost

group within the DOD, now substantiates the Air Force number.

It is highly unusual when the CAIG actually comes in and says,

yes, the services have actually done a good job in validating their

number. And we had a chance to——

Mr. SHAYS. I am going to admit my ignorance. I thank my colleagues for allowing me to go beyond my 10 minutes, and I will be

very generous with their time as well. But just tell me, when you

say CAIG?

Dr. SAMBUR. CAIG, and that’s the Cost Analysis Independent

Group. It is a function within the DOD to give an independent look

at the services’ cost estimates. Historically, and almost every time,

those estimates differ. In this case, they corroborated and agreed

with our numbers. And we went through a very thorough exercise

to make sure that we accounted for all the sources of potential

problems in the past. As a matter of fact, what we tried to do is

give what we call an 80/20 cost view. That means that 80 percent

of the time you will be right and 20 percent be incorrect. Historically, the view is usually 50/50, and we’ve tried to be more conservative. And one of the benefits of that is we are now experiencing

this avionics stability. And you might have read about it.

Mr. SHAYS. Let me do this, because I have really gone over my

time. Let me make sure that you cover what you need to cover, but

it’s going a little beyond what I’ve asked.

Dr. SAMBUR. Sure.

Mr. SHAYS. We will go to Mr. Tierney for a very generous 10

minutes plus.

Mr. TIERNEY. Thank you, And thank you both for testifying.

Mr. Wynne, what happened with the prior intent to use funding

that you requested from Congress and got for production efficiencies?

Mr. WYNNE. Well, sir, I believe there was a chart provided to you

by David Walker, the Chair, that we are starting to use it when

the projects are coming into our attention span.

Mr. TIERNEY. Started to use it is not quite the same as having

told us sometime back that you needed additional funds so that you

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could use them. And, to my information, the GAO had not been implementing them to date, and in fact the indication to me was that

you sort of indicated to GAO that they hadn’t proved that in fact

these efficiencies would be effective. And I thought that was sort

of a bizarre approach, that the Department of Defense proposed

this plan, and then when GAO came back and said, well, we

haven’t seen the plan implemented, haven’t seen these savings

from it, your comment back, DOD’s comment was, well, you haven’t

proven that those things would be effective, seemed a little disingenuous. Could you explain that little byplay?

Mr. WYNNE. Sir, I think we are fairly straightforward on our

plan. There were some suggestions that didn’t have merit after

they were investigated. It’s always debatable as to what the forecasted impact would be, the returns on investment. Though we

hope that they don’t vary over time, some do. And there can be

honest debates and disagreements in that area. But we do need the

money to in fact conduct the cost reduction projects that we have

identified.

Mr. TIERNEY. Well, up until the time that GAO had filed its report, you hadn’t used the money in that regard. Right?

Mr. WYNNE. We want to make sure they are high impact. Yes,

sir.

Dr. SAMBUR. May I have an opportunity to answer that question?

Mr. TIERNEY. You can. I wasn’t asking you because you weren’t

the one that gave me those conflicting answers. But if you want to

get engaged, go ahead.

Dr. SAMBUR. Well, having said it that way, the issue really is

when you use money to improve efficiencies you don’t really see the

outcome of that until you actually start building.

Mr. TIERNEY. The problem was, Dr. Sambur—not to interrupt

you, because I’m on limited time—is they hadn’t used the money.

They promised Congress that this was what they needed the money

for and said they were going to put the money into doing that and

it was going to show savings down the line. On the review, they

had not used the money for that, and then accused GAO of not

being able to prove that they would be efficient. It was their plan—

we were willing to agree that it might be efficient if implemented,

and that was what the money was for. So that was my point. My

point was they hadn’t used the money and then they made some,

I think, bizarre sort of approach that it was GAO’s fault for not

proving that the plan DOD had proposed would in fact be effective.

Dr. SAMBUR. Are you aware of the fact that in 2003 we will be

spending $207 million? In 2002, we did underspend in the plan, but

we are——

Mr. TIERNEY. That’s what—I’m aware of that, and that’s what

my question was.

Dr. SAMBUR. Yeah.

Mr. TIERNEY. That up to that point in time that this report was

done, you did not spend the money.

Dr. SAMBUR. You are correct.

Mr. TIERNEY. We can all agree that you have the best intentions

going forward. If this hearing were just about going forward, you

guys would be having a much easier day. The problem is that this

is a lot about a huge cost overrun in the past to this date, and I

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don’t think that we can let it go that you are going to come in here

and start fresh and saying that, gee, you know, let’s not even just

talk about that. I mean, Mr. Wynne, you’d left 16—I think about

six pages of 16-page testimony, whatever, and left out everything

that dealt with the GAO. I mean, we needed—in the report. We

need to know what’s going on here.

Let me approach it this way. I got a reply from the Department

this week. It says: The Department has approved the procurement

budget higher than the congressional cap.

Now, Dr. Sambur, you said the Defense Acquisition Board approved the Air Force plan—the Air Force to plan a program for $43

billion production program. You also said that Secretary Aldridge

approved the revised program baseline and directed the Air Force

to fully fund the production program accordingly.

So if you set a new baseline, gentlemen, you’ve approved the new

procurement budget and you’ve planned a program under a higher

estimate, tell me how you are not violating the law if Congress set

a cap at $36.8 billion.

Mr. WYNNE. Let me first start, sir, by apologizing for the lateness of the letter. We did deliver it on April 8, and I realize that

it was due on April 7, and I apologize for that.

Mr. TIERNEY. Thank you.

Mr. WYNNE. We have a budgeting process inside the Pentagon,

sir, that is independent of the budgeting process that you consider

but does table up Presidential budgets that we did in 2001, 2002,

and 2003 that each showed that our intent was to go beyond the

cap of the $36.5. When Secretary Aldridge——

Mr. TIERNEY. How does that happen? You have a congressional

cap of $36.8 billion, and then you have this whole system where

you say, oh, we’re going to disregard that. We are going to pull our

own deal of $43-something.

Mr. WYNNE. Might I say, sir, with all due respect, we actually

have a budgeting process within the Pentagon that tables up Presidential budgets, because all may not feel the same way that you

do, sir, with due respect.

Mr. TIERNEY. It’s not a question of how I feel, sir; it’s a question

of how Congress already decided. So if they already decided—they

didn’t ask me how I felt. Congress as a body said it collectively felt

and directed that the budget was going to be $36.8 billion. It’s a

little disturbing to hear now that you’ve got this other budget process that says that we don’t agree and we think we’re going to roll

over that.

Mr. WYNNE. We recognize that is a subordinate budget process,

sir, to the one that you and your fellow Members of Congress and

the Senate agreed to. We do, however, have to plan a future that

we think represents the best we can do for the defense of America.

Mr. TIERNEY. Well, excuse me a second. I think your obligation

is to provide a plan that comports with the law and what Congress

decides, not what you decide you want Congress to do but didn’t

do for you. I mean, explain to me where it is that you just decide

that your opinion circumvents Congress’ opinion, and you don’t like

the $36.8 billion so you’re going to decide what’s best for everybody

and just plan at $43 and assume at some point in time that you

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are going to have a convincing argument that’s going to win the

day.

Mr. WYNNE. Sir, since it is in the outyears, I believe that’s

planned for fiscal year 2006, and we did notify the Congress shortly

after the Defense Acquisition Board as to when we thought we

would schedule that and still intend to follow through with that.

Mr. TIERNEY. Well, but what you don’t intend to follow through

with is with the congressional cap, and I guess that’s my point. The

existing law is a cap of $36.8 billion. You show no indications at

all of even remotely entertaining the idea that you might stay within that cap, that your plans comport with it, everything you’ve

got—it’s all in this higher number that I guess the Department of

Defense has just decided that’s what they want to do.

Mr. WYNNE. Sir, if that’s the direction that the Congress in fact

continues to impose, then we will comply with the law.

Mr. TIERNEY. Well, I would hope so. But it’s taken us an extraordinarily long period of time just to find out that, assuming you

comply with the law, how many planes you are going to be able to

build. And that’s been a long period of time just to get that answer,

which leads me and others I think to believe that intention may

not be as clear and firm as you indicate.

I think the GAO today had some very good points about a business plan. Originally—can you explain, I think it’s worth stating

for the record. What was your original business plan for the F–22

when you first put it on the drawing board? Where were you going

with it? How many planes did you say you needed? What specifically did you need them for? What characteristics did you need?

And how many did you need to fit that?

Mr. WYNNE. I’d have to take that for the record, sir. It’s research

that I would have to go back and do from 1986, was the original

business plan.

[The information referred to follows:]

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Mr. TIERNEY. You are not aware of what the original business

plan was or what the original goal of this particular platform was?

Mr. WYNNE. Sir, I haven’t gone back that far to take a look. I

encountered this program and have studied it principally to effect

my responsibilities going forward.

Mr. TIERNEY. I will yield to chairman for the second.

Mr. SHAYS. Dr. Sambur, wouldn’t that show up in your business

plan that you have developed now? Because in order to know where

we need to go now, wouldn’t we know what we needed in the past?

Dr. SAMBUR. The business plan actually looks at all of those factors.

Mr. SHAYS. So we should be able to find some of those answers

in your business plan?

Dr. SAMBUR. Yeah, we have that. And as you can recognize, since

the early times, the CONOPS, or the concept of operations, for the

Air Force has changed. We have now an Air Expeditionary Force

quality. And based upon this Air Expeditionary Force new method

of operating the Air Force, the number that we need is 381.

Mr. SHAYS. Thank you.

Mr. TIERNEY. Gentlemen, tell us now what your business plan is.

What do you identify as the need for the F–22?

Mr. WYNNE. I believe the number that the Air Force has tabled

up is 381, which would fill out all of the Air Expeditionary Forces

and would allow them some overhead airplanes which, for remaintenance and for in-transit. We have introduced risk into the

process, even at the additional funding level of $5.4 billion. We recognize that. We hope we don’t get to a high usage, low density construct as we are with the F–117, as it has become so popular that

we are wearing out pilots, airplanes, and crews. But we do understand that we have introduced some risk into the process. The Air

Force every year, every year, stemming from the QDR down

through the national security policy, has to reevaluate their best

way to meet the national objectives.

Mr. TIERNEY. When do you project that the JSF will be in production?

Dr. SAMBUR. In around 2012, 2011.

Mr. TIERNEY. And at the rate you are going now, how long do you

think it will be before you have 381 F–22s operational?

Dr. SAMBUR. We are not planning on 381. Our plan right now,

with the budget constraints that have been given to us by the

DOD, is 276. We have a plan on how we would utilize 276 and

hopefully, if we can get the additional funds and the budget relief

from Congress to go beyond that, the 381.

Mr. TIERNEY. Within your plan for 276, what do you use to fulfill

the balance of any need that you originally thought might have required a use of more of the F–22s? You’d use enhanced F–15s and

F–16s? Do you use the F–117s?

Dr. SAMBUR. It’s a combination of all of those things. And for the

record, if some of those aspects are not classified, I will be glad to

share it with you.

Mr. TIERNEY. And what did we meet in Iraq that we were unable

to meet with any of the air platforms that we already have?

Dr. SAMBUR. Well, I think the greatest picture—I saw a picture

on CNN where they had long lines of the Marines ready to go in.

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Without air dominance, we could not have achieved that. There

was nothing in Iraq that we see right now that would have prevented us. Unfortunately, there are proliferations of these surfaceto-air missiles that were mentioned this morning by—I’m not sure

if I’ll pronounce his name right, but he said Dutch.

Mr. TIERNEY. Nobody else does, but Mr. Ruppersberger.

Dr. SAMBUR. Thank you. He indicated the surface-to-air missiles,

the so-called double digit surface-to-air missiles which are proliferating. They are already in China. They’re relatively easy to acquire in terms of money. There is no capability other than the F/

A–22s that will be able to penetrate and give us air dominance.

Without the air dominance, you cannot bring in the forces. In addition, cruise missile defense is a very important attribute of the F/

A–22s which is vitally needed. So this takes a step forward. This

is—you know, as the chairman mentioned this morning, this is the

unfair fight that we want. I mean, the F/A–22 gives us that unfair

fight for many, many years.

Mr. TIERNEY. What does the enhanced F–15 and F–16 not do in

those regards?

Dr. SAMBUR. It doesn’t give you stealth. The stealth is absolutely

necessary to penetrate into these surface-to-air missiles, these double digits.

Mr. TIERNEY. And we have no other stealth aircraft that does

that?

Dr. SAMBUR. No. Not with the supercruiser, not with the maneuverability of the projected F/A–22. And the important point to recognize, and I think Congressman Schrock said that, we’re in the

fourth quarter. I mean, we have already demonstrated all of these

capabilities. I mean, the only thing that remains right now is avionics stability, and we are going to get there. So we are there. We

are demonstrating that a plane meets all of these key performance

parameters that will enable this country to basically maintain air

dominance, and that’s what we need. These surface-to-air missiles,

these integrated air defense systems are here right now. They are

not on the drawing board.

Mr. TIERNEY. Is there something that the F/A–22 does that the

JSF will not do?

Dr. SAMBUR. Yes.

Mr. TIERNEY. What’s that?

Dr. SAMBUR. Well, basically the supercruise, the maneuverability. All of these things are not part and parcel of the JSF. They

complement each other, but the F/A–22 is a significant enhancement.

Mr. WYNNE. Congressman, just one thing. And that’s the F–117

is in fact the airplane we use now to surrogate for the F/A–22 capabilities and the Joint Strike Fighter capabilities in the future. It is,

if you will—that’s why it’s so heavily used; it is our stealthy airplane available to us.

Mr. TIERNEY. I thought it had some stealth capabilities.

Dr. SAMBUR. It doesn’t have the maintainability or the stealth

characteristics of the F/A–22.

Mr. SHAYS. If I could just interrupt the gentleman, and then we

need to get Mr. Schrock into this dialog. But when the F–22 began,

it was basically air-to-air?

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Dr. SAMBUR. That’s correct.

Mr. SHAYS. And we then felt it had some air-to-land mission?

Dr. SAMBUR. Right.

Mr. SHAYS. But in the process of doing that, when we loaded up

with certain weapons systems, it’s not totally stealth, correct?

Dr. SAMBUR. It is totally stealth.

Mr. SHAYS. Totally stealth.

Dr. SAMBUR. Yes.

Mr. SHAYS. OK. When you add these weapons systems, will it

stay stealth then?

Dr. SAMBUR. Yes.

Mr. WYNNE. What you’re referring to, sir, is whether it’s inboard

carriage or outboard carriage. I’m sure that Congressman Schrock

could probably fill us all in on the aspect of this. But once I tuck

the weaponry inside the airplane, then I am inside the platform

and so I can have the same stealth characteristics. When I open

the doors—for example, when the B–2 opens its doors to finally

drop a bomb, then it becomes very briefly visible, and so also, when

an F/A–22 opens its doors to drop a missile. Now, we’ve tried very

hard to minimize its emergence into the light, if you will, but I believe you have to, just like a submarine has to come clean where

it is when it fires a torpedo.

Mr. SHAYS. Does the gentleman have another question before we

go to Mr. Schrock?

Mr. TIERNEY. I do. Thank you.

Who, if anybody, has any technology even remotely close to the

F–117?

Dr. SAMBUR. Well, there are several aircraft that are being developed. France is developing one. I think China is developing that.

But more importantly, if you look at our F–16s, if you look at

what’s being developed in Korea and the UAE, our plane, if we just

maintain what we have right now, would probably be the third or

fourth most capable fighter plane in the world, and that’s a pretty

sad situation.

Mr. TIERNEY. Thank you.

Mr. SHAYS. I thank the gentleman.

Mr. Schrock.

Mr. SCHROCK. Thank you, Mr. Chairman.

That is a sad situation. We used to be the leader in all of that,

and we are slowly losing that edge, and that is clearly something

we have to change.

Let me do a followup on your comments on what Secretary

Wynne said, Dr. Sambur. The F–22 is going to replace the air-toair F–15s, while the Joint Strike Fighter is going to replace the F–

16s. I did that for his benefit. He didn’t hear it, I guess.

Let me make a few comments on some of the things you have

all said. First of all, I think this Defense Department suddenly realizes they have to change the way they do business, and I think

that was the primary goal of Secretary Rumsfeld when he took that

position. But of course after September 11, 2001, a lot of the focus

changed over there. But he is trying to get back to that now. And

a lot of what the GAO folks said this morning, I was glad that—

I think it was Dr. Sambur that said you agreed wholeheartedly

with what the GAO said. And I was pleased to see that, because

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clearly some things have to change over there. There is no question

about that. And I’m not sure I blame the Air Force and I’m not

sure I blame the manufacturers. I think it’s just the mindset that

is so ingrained over there. It’s a cancer in that place that at some

point has to get chopped out of there or we’re going to operate this

way forever.

And I know that mentality of those people who were there forever think well, the secretaries will leave. They think, ‘‘I can outwait them, and the guys in uniform will get transferred and I can

outwait them,’’ and I think that’s half the problem. So we’re going

to have to change some of that to make sure we don’t have to have

hearings like that eliminating problems that we are finding here.

And I, you know, I have talked to the Air Force a lot about this,

and I am convinced that the changes you talked about are being

made. I think they realize they have some fundamental problems,

and I see the curve going up to make sure that those changes are

incorporated, and we will solve some of these problems, and I agree

with the chairman too.

We have to establish air dominance. I don’t want a fair fight. I

want us to be so far superior that nobody will think about coming

at us, and I think we saw that the last couple of weeks in Iraq.

And your comments about the 22 being stealthy, that is so important. That’s going to save a lot of lives so that nobody can hone in

on us, and I think that is one of the things that this platform offers

that a lot don’t. And I, you know, I think, I hope nobody here

thinks that the Air Force is the only one going to use the joint

strike fighter. The 1,760 airframes they are going to build are

going to be used by the Navy, the Air Force and Marine Corps.

So I think that’s a good bang for the buck as well. I’ve got two

questions I’m going to ask, one of the secretary and one of Dr.

Sambur. You know, you heard me ask the GAO about the cost risk

assessment for increasing the production above the 15 aircraft. And

I think I read somewhere in a statement, your statement from the

Department of Defense, that you performed an analysis. Is that

true and if so, what did you find out? What were the conclusions

you came to.

Mr. WYNNE. What we really looked at, sir, was whether the risk

of retrofit, which is really the dominant thing that would affect the

four airplane difference in production, would be. As I mentioned,

we have produced thus far seven. This was actually the entering

into a 36-month purchase, which gives you some—also some opportunity to, for in line, install if you have a problem. So you look very

hard at what is the risk of retrofit which means that, are you going

to have these airplanes fully produced and then pull them over to

the side and then install whatever the corrective action is.

The risk of retrofit at the time was simply the twin tail flutter.

And when we took a look at that and we noted that the Air Force

had done quite a bit of testing and simulation on substituting titanium and had gotten themselves into an acceptable risk. We have

had twin tail flutter with us, I think since the F–4, the F–111, the

F–15, and now the F/A 22. So I’m sorry. F–18 as well.

So it’s not an unknown problem for us to solve. It is a question

of can we get the right vibration analysis together so that we have

an acceptable risk and we can then put the pilots, give them a

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flight policy, if you will, that they don’t get to pull 101⁄2 or 14 G’s

to introduce that concept. The only other risk that we saw was the

integrated avionics risk. The integrated avionics risk is like your

home computer going askew. This is unstable, and I mean, perhaps

yours are all very stable. Mine tends to ground on me when I type

in strange stuff. This is really debugging, and I will tell you that

the aspects of systems engineering are important here because we

have to understand how to look into the processors and look into

this software development.

Microsoft, bless their hearts. They have a lot of people that

debug their software and not just people inside the company, but

all of us who are users that get on to their scheme. We actually

don’t have that kind of capability because we don’t let this out to

all the universities and all of the public. So we must concentrate

on how do you develop efficient tools to do 2 million lines of codes

and debug them. When I looked at that I felt, as did my boss, Secretary Aldridge, that the risk there was actually very slight.

But to put it in perspective, we did ask that the director of Defense Research and Engineering to conduct a review for us and give

us a feeling as to whether the architecture was stable. If the architecture was not stable, then all bets are off, and now we have to

go in and pull that, and that’s very expensive and it takes a long

time. Their comments back to us in their professional opinion, we

would have introduced more problems than we currently have taking that action. I would love to get this system to be modular open

systems architecture. We have all but mandated modular open systems architecture for our future weapons systems. This is sort of

the last of a generation.

Well, Comanche will probably be the same ilk. That having been

said, the cost of retrofit is very inexpensive. For any problems that

arise and we would see. It is the cost of duration of fix that we’re

now worried about. And that’s what the review in June is the cost

of the duration of fix. As I mentioned, Secretary Sambur has allocated 60 days additional for this problem to be resolved so we can

meet our entry criteria. He’s very optimistic. I must be skeptical.

Mr. SCHROCK. Your comment about open architecture is important. I’m not sure the word retrofit bothers me that much. I realize

it costs money, but when you figure that they first started drawing

this thing in 1986, here we are in 2003, people have to understand

that architecture and technology and all the fancy things that go

into these planes change all the time. As you heard Congressman

Duncan say, by the time he gets a brand new computer on his

desk, it’s old. And that has created a lot of this, I’m sure.

So that’s why I think, I wish we could tighten these, get these

things designed, approved and built and close that gap. That might

eliminate some of this sort of thing. Because I mean as we sit here,

there are probably things that are going to change in the next few

weeks that are going to want to put on the Raptor that’s going to

get everybody’s ire up again. But the fact is we want the best that

we can get.

Mr. WYNNE. Certainly if not in the next 2 weeks, sir, over the

next decade.

Mr. SCHROCK. Yes. That’s exactly right. Dr. Sambur, the GAO

highlighted in their reports a number of issues, especially with reVerDate 11-MAY-2000 11:43 Sep 29, 2003 Jkt 000000 PO 00000 Frm 00160 Fmt 6633 Sfmt 6633 D:\DOCS\89243.TXT HGOVREF1 PsN: HGOVREF1
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gard to the increased costs, and I think that’s something that we’re

all concerned with, and I know I am because we’re supposed to be

good stewards of the taxpayers’ dollars. Based on that, and based

on what those reports said, do you really think, does the Navy—

I was Navy. You can take the guy out of the Navy. You can’t take

the Navy out of the guy. Does the Air Force still think this is a

bargain? This is a good thing to do based on all of the things that

they have heard concerning costs that the GAO has brought up?

Dr. SAMBUR. Well, I think to answer your question, let me just

go back to what I said before. About my comment about looking at

CNN. Technology, the unfair fight is what makes us secure as a

Nation. If we do not understand the emerging threats and build

planes that can basically dominate the air in spite of these emerging threats, it’s a disservice to this country. We feel that this plane

is absolutely needed. We think we have a handle on the cost. We

think that once stability occurs in the program, once the vendors

feel that this is a program that will go forward, we will see something, I think you said in your opening comments about the C–17

or one of the other Congressman, that program, once it achieved

stability, the C–17 costs went down dramatically.

Once you have stability and vendors feel comfortable, you’ll see

the cost reductions occurring. So once we get over this hurdle, once

there is a feeling this program will be there, I think we’ll have

many more planes than the 276 that we’re forecasting now. That

happened with the C–17. The number that were forecasted almost

grew by a factor of two, just based upon the stability factor.

Mr. SCHROCK. So the answer is yes, the Air Force——

Dr. SAMBUR. Yes we need it, and yes the cost will come down.

Mr. SCHROCK. And let me reiterate again. I believe every platform, every air frame that has been created for the services in history, has had problems. I mean, it takes a while to stabilize things,

and we’re just going through that phase of this one right now.

When we finally get it to the fleet, I think it is going to serve the

same capabilities as, you know, as well as the C–17 is doing right

now in Iraq.

Dr. SAMBUR. But in fairness to the committee, the points are

good points. You know, the panel here was in terms of controlling

costs. As Mr. Walker said, a lot of the things in the F/A 22 are already in concrete and we can’t do much about it. But we can learn

from our past. We can institute some of these changes in terms of

insisting upon systems engineering, insisting upon a spiral development process that basically eats the elephant one bite at a time as

opposed to trying to gulp all these requirements in the so called big

bang. So I think we can do better.

We’re committed to do better. The Air Force recognizes there

were problems on this program. There’s no attempt to apologize for

it. There’s only an attempt to try to do better for the future.

Mr. SCHROCK. And I agree with that. And I agree with some of

the frustrations that Mr. Tierney has expressed. I think we all feel

that way. And you guys are clearly the new guys on the block now

pretty much, and you’ve come in to try to turn this thing around,

and I think that’s good.

Dr. SAMBUR. I mean, it is extremely disappointing to the Air

Force to have a program in which we can only buy, given that we

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get relief from the cap of 276. That is not acceptable to us. And

that’s why the Chief and the Secretary of the Air Force are intimately involved in this program. Plus the CEOs of Lockheed Martin, Vance Kaufman, the CEO of Northrop Grumman, Ron Sugar,

they’re all involved in this program. I speak on a daily basis to

these people to make sure that they are putting their best people,

that they recognize how important it is and most importantly, they

recognize that we don’t have any credibility here.

As the chairman said, you know, there’s been a lot of these meetings like this. And I’m sure a lot of people like myself and Secretary Wynne have come up and made statements to you. Our

credibility has run out. So we can’t come up to this panel again and

say don’t worry, things are getting better. We have to perform. We

have to do better. That message that you’re taking to us is well received.

Mr. SCHROCK. I thank you for that. Thank you, Mr. Chairman.

Mr. SHAYS. Thank you. Before calling on Dutch Ruppersberger,

I would like to just ask you, what is the cost of going above the

cap and doing the 276?

Dr. SAMBUR. It’s the $5.2 billion over and above the cap. The

number that Mr. Aldridge indicated in his memo. That’s where our

costs are based on, and that includes all of the issues I talked to

you before about, the multi year procurement slippage, the JSF

commonality, the inflation factors, all of those additional costs were

baked in. There’s even conservatism in the development program.

We mentioned dedicated IOT&E the testing starting in October.

We actually assumed in our estimates that it would occur 4 or 5

months later than that. So there is conservatism baked into the

number. I talked to you about the 80/20 percent philosophy that we

use in the costing.

Mr. WYNNE. Sir, I think the production number is $42.2 billion,

sir.

Mr. SHAYS. OK. Thank you. Dutch Ruppersberger.

Mr. RUPPERSBERGER. That was perfect.

Mr. SHAYS. I got the second one right. Give me credit here. Let

me just say to the gentleman from Maryland he’s an outstanding

member of this committee, and we really enjoyed having him.

Mr. RUPPERSBERGER. Well, first, Dr. Sambur, and excuse me. I

had to miss a little time. I don’t want to be repetitive. I think your

comments in the end are what we all believe, and that is accountability. We all want to do the best. We want to have the best. We

need air superiority. We have a great military. We have great expertise in our business community, and the manufacturing community that works with you in partnership to develop this. But I think

what the problem is, and I think it is a culture. You lose—and you

mentioned this. And the credibility doesn’t mean that you’re lying.

It is just credibility of a project generally, and of an institution,

that DOD needs to be more honest about cost and time estimates.

And that will—if you can do that.

Now, if you make a mistake, if you feel when you get into the

program, that you have underestimated the program, that—and

that there has to be a change, then immediately, that’s the time

when you see with the expertise and the contractors whoever get

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the bids, or whoever get the projects, that they will then come back

because right now, the credibility isn’t there.

Everybody wants to do well. But that doesn’t mean that you’re

going to do well. And there has to be some accountability. And

that’s what our jobs are about. So let me ask you just a couple of

questions. First thing, I know—just about the Raptor itself. Where

do you see it going from—and maybe Mr. Wynne too, either one of

you. Where do you see the future combat capabilities based on the

type of defense we will have in the future, including the issue of

terrorism, including, you know, will we have an Iraq. We know

where that is right now. And we always have to be ready for that.

Mr. WYNNE. Let me start, Marvin, and I’ll be quick. When September 11 happened, no one in America relieved us of being aggressive to the outyear threat. It actually expanded and our requirements for defense of America. Whether it be missile defense,

whether it be fighters, we want to have our unfair fight that Marv

talked about. And I’ll let him take it up there.

Dr. SAMBUR. Yes. You mentioned——

Mr. RUPPERSBERGER. Is that because he’s a doctor.

Mr. WYNNE. Yes, sir. I defer often.

Dr. SAMBUR. I’ll give him a couple of aspirins after this hearing.

What we mentioned previously is the fact that the air defense systems that are coming into vogue, these surface-to-air missiles are

the newer ones are called double digit because of their increased

capabilities. Right now, Iraq had an SA–3, I believe the single digit

surface to air missiles that prevent the air systems from coming in.

The newer systems that are under development right now are assets right now, the F–15s, the F–16s would have a very difficult

time penetrating those. The F/A 22 will be able to kick the door

down, which is the expression that our chief uses, enabling us to

get it there and neutralize these air defense systems in a very effective manner.

And being able to have air dominance allows us to do many,

many things, which you see on the TV right now. Without that air

dominance our Marines, our Army people could never come in with

the limited amount of casualties that we’re getting right now. You

mentioned terrorism. One of the things that we’re concerned about

is cruise missiles. The F/A 22 because of its super cruise capability

has the ability to basically protect us against cruise missiles. So

there are many things that the F/A 22 does for us. And that’s why

we need it. You had missed part of the earlier session, but there

was a call this morning for a business plan, a business plan that

would look at some of the economics balanced against the needs.

We had to do that because if you recall during the summer period, the Department of Defense took another look at the F/A 22

to really assess whether or not it was needed, just as they’ve done

with a lot of programs, because there’s a recognition as most of the

people have indicated in this committee that there is other things

that they’d like to do. There’s opportunity costs. I think this was

mentioned this morning. And whether or not the F/A 22 is a legitimate use of precious funds. The Department went through a complete analysis of that and determined that it was.

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Mr. RUPPERSBERGER. Let me ask you this. I missed some of the

testimony. I assumed you talked about retrofitting. I don’t want to

do that.

Dr. SAMBUR. Yeah, the issue that came up this morning was

there was a vague comment this morning about retrofits have an

exponential nature, and I think someone asked them to clarify that

and there wasn’t a real answer. What we actually did, the Air

Force was asked to justify why we should produce 20 as opposed

to 16. We did a cost benefit analysis. We actually gave them what

the cost of retrofitting some of these programs would be versus the

cost of limiting the production from 20 to 16. That limitation

caused termination costs. It caused costs associated with the eventual cost of the production because if you ramp slower the cost of

the models later become more expensive.

So we gave them a detailed business cost analysis. The cost associated with retrofit versus the benefits of going forward and Pete

Aldridge, Secretary Aldridge analyzed that with his people and it

was more beneficial on this business case analysis to go forward

with producing 20 rather than limiting it to 16. And that’s why the

DAB gave us that ability.

Mr. RUPPERSBERGER. Are you familiar with the advanced amphibious assault vehicle?

Dr. SAMBUR. No, I am not.

Mr. RUPPERSBERGER. Are you familiar, Mr. Wynne?

Mr. WYNNE. Yes, sir. I have enough to get into trouble.

Mr. RUPPERSBERGER. Well, I think GAO report mentioned that

they came in under the projection, the cost projection.

Mr. WYNNE. Yes, sir, they did.

Mr. RUPPERSBERGER. The reason I bring it up is another Army

base in my district, Aberdeen is very aggressively pursuing trying

to get that to be made there. So that’s just a side, but you have

to be parochial sometimes.

Mr. WYNNE. Well, they did a great job partnering with the Marine Corps on that job.

Mr. RUPPERSBERGER. Right. Well, anyhow, that is a single systematic approach effect, correct?

Mr. WYNNE. Yes, sir.

Mr. RUPPERSBERGER. Now, what is your opinion, as far as systematic approach for all projects?

Mr. WYNNE. I have been on the hustings talking about systems

engineering, and I think an integrated systems engineering approach really pays off. And it will, I think, in the——

Mr. RUPPERSBERGER. Do you want to define that for the panel?

Mr. WYNNE. Well, let me just describe it in the triple AV, which

is the amphibious assault vehicle, where they did, in fact, integrate

logistic. They integrated tests and they integrated the systems engineering for the entire vehicle, a very holistic design. And I think

they ended up balancing weight, as you know, versus capability,

and have a terrifically fine vehicle. But it is really systems engineering is addressing the entirety of the system in a holistic way

so that one change here can actually be weighed against the benefit

to the whole system.

Mr. RUPPERSBERGER. Because different projects take lives of

their own.

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Mr. WYNNE. Yes, sir, they do.

Mr. RUPPERSBERGER. Should we have one method or approach to

developing our weapons systems.

Mr. WYNNE. I will tell you that the world of systems engineering

does address that. But the specific aspects of each technical hurdle

that you overcome is different. In the world of the triple AV, they

had to overcome sea states. As you know, since it’s coming in from

so far off shore, that was the big technical hurdle. Here on the F/

A–22, its integrated mission software and super cruise, that was

the technical hurdles that they had to overcome. So there are differences. On the other hand, I think a systematic disciplined approach could be the overarching methodology, and it should be.

Mr. RUPPERSBERGER. Now, this might have been asked before.

But I’ll ask. If it has, I don’t want to be repetitive. I know DOD

already said the production cost for the program is $43 billion.

Concerns have been raised about overstepping the $36 billion cap

or congressional cap. I know DOD has budgeted $43 billion. Now,

would that be the total cost? Would it be undercost? Overcost?

What is your feeling?

Mr. WYNNE. Right now, we estimate that we can get between 276

and 290. The Air Force is trying to get way over 300. They have

great plans for the cost reduction projects that are underway. And

I think that Secretary Sambur is right. Once this program stabilizes, I think we are going to see remarkable progress. Right now

all of the subcontractors are a little bit nervous as to whether or

not they’re going to get to produce or not get to produce. And so

they’re hedging their bets, if you will.

Mr. RUPPERSBERGER. Well, if you have some inconsistency that

may scare everyone away, and we don’t want to do that either. Let

me ask you a final question. Assuming that you get the program

under control, cost effectiveness you know where you are going to

be, your estimates are correct and again, the cost estimates are just

so important for credibility at this point, with the flexibility that

you might need depending on what occurs in the future. If, in fact

it is, where would you like to see the program go? What would you

like to see based on understanding that we’re in a very difficult

economy right now, we’re having historical deficits.

I mean, there’s a lot of issues within our economy. It is affecting

education, it is affecting other issues on the home front. Based on

that consideration, and if you get your program under control,

where do you think we should go? How many of these airplanes do

you think that we should really, really build for the future?

Mr. WYNNE. Right now from our perspective, sir, we have introduced at that—the budget cap of $43.4, I think you mentioned

we’ve instituted for right now, by the budgets. But it does—which

means that we would like to see 276 to 290 approximately. We realize that this introduces some risk on the part of the Air Force.

But it has a lot to do.

Mr. RUPPERSBERGER. Why risk on the part of the Air Force?

Mr. WYNNE. Well, because they wanted 381, which fills out their

10 air expeditionary forces. Now, it really does depend, though, on

whether JSF, Joint Strike Fighter, stays to its schedule.

Mr. RUPPERSBERGER. All these acronyms. Remember, I just started.

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Mr. WYNNE. Yes, sir, I know. The Joints Strike Fighter is the

fighter that is coming along and it is doing very well by the way.

And we hope to make it—I recognize that this was called the—a

model. But we really do have to hope to make the Joint Strike

Fighter a model. We have a lot of international people relying on

our capability to produce this airplane, not just the Marine Corps

and the Navy, but all of our Armed Forces. If it tends to slip and

programs are very fragile in this regard, then we may extend the

F/A 22 production. If it stays to its schedules, I think there’s going

to be a real debate.

Mr. RUPPERSBERGER. OK. Thank you.

Mr. SHAYS. I had a question to ask at the end, but Mr. Tierney

has a question, and I think Mr. Schrock’s all set and then we will

get to our next panel.

Mr. TIERNEY. Thank you. We talked about why there is a credibility issue and the gentleman didn’t want to talk about the past.

But you know recently Air Force Secretary James Roach had this

comment to make. ‘‘If you use the KA of the cost analysis improvement group divisions you get 270 planes. I don’t care what the hell

ours is. It’s 310. Who cares?’’ And think it’s that kind of

dismissiveness that gets every body up here concerned and why

you find us making some inquiry on that. But with that said, today

we talked about the congressional cap as it exists now, $36.8 billion, and the testimony that you gave me was you think it’s somewhere between 225 and 235 aircraft for that amount.

The interesting thing about that is, Mr. Aldridge told me back

in 2001, that he could get just 224 airplanes then. If you could

have gotten 225, 224 airplanes then, and now you think you get

somewhere between 1 and 11 more, the 225 to 235, I don’t understand how you get an increase if you stay at the cap of what it was

in 2001 the costs haven’t decreased in the past 2 years. Labor

hasn’t become cheaper; schedules haven’t been accelerated; all the

avionics problems haven’t been resolved. In fact, on all those

things, just the opposite seems to be occurring. So it would seem

to me that means fewer than 224 planes. Fewer than Mr. Aldridge

told us in 2001.

Mr. WYNNE. Sir, an estimate is an estimate. I defer, of course,

to my superior knowledge of my boss. But an estimate is an estimate. 224 is certainly within the range that I expressed.

Mr. TIERNEY. Well, let me tell you that since the 2001 estimate,

$763 million has been taken away from production and put toward

development. Right.

Dr. SAMBUR. $876.

Mr. TIERNEY. $876. All right. Thank you. So I guess that would

further reduce the number of planes.

Dr. SAMBUR. That’s already baked into the numbers that you’re

seeing now.

Mr. TIERNEY. Not the 224 number though.

Dr. SAMBUR. Well it would be because the 224 is based upon the

reduction in the——

Mr. TIERNEY. No, the 224 that Mr. Aldridge gave me in 2001 preceded your taking the $876,000 and putting it over so——

Dr. SAMBUR. Oh, that’s correct.

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Mr. TIERNEY. So from that number in 2001 it would actually reduce it on that so——

Dr. SAMBUR. You’re right.

Mr. TIERNEY. We just keep going around and around. But if

that’s the case, you’re down below 224. And that’s at the congressional cap. And so I just make that note on that, that this doesn’t

seem to be consistent. If you had to stay within the cap, the congressional cap, and you had 224 or somewhat fewer or somewhat

more planes, how would you compensate for that. What would the

rest of our force look like going forward?

Dr. SAMBUR. You ask a question that is best answered by the

people in the XO or operations. They would have to assess what

could be done with 225 or more than that. You know, I’m not the

right person to ask, so——

Mr. TIERNEY. You didn’t draw the plan, the game plan. The business plan? Somebody else did that?

Dr. SAMBUR. There’s two aspects of the plan. There is a business

plan associated with costs; and then there is a requirements plan,

the operations plan; and that’s done by the warfighters.

Mr. TIERNEY. Because I think it would be worth knowing whether or not—if the cap were maintained, whether it’s worth proceeding, you know, whether or not the 224—unless there’s something

that does—serves the purpose. I think that’s what Mr. Walker was

getting at.

What is your mission here? What do you want to do? And if it

is not, what do you replace it with? And if it is worth going forward

with, then if there is a difference between that 224 and 276 or 381,

what do you fill it up with and how is that going to serve us? And

does it serve us less expensively and are we able to do other things

militarily or homeland security or wherever else with the difference

and are we better off in the long run having put our moneys in that

regard?

I think we would like an opportunity to see those two plans, or

the two aspects of that plan; and I don’t know quite how we are

going to work that out if some parts of it are classified. But I would

like you to get back to me and the committee on that, if you would,

as to how we might get a hearing or at least have provided to us

that plan and the two aspects of it, the operational aspect and the

business aspect of it. Is that something we can do?

Dr. SAMBUR. I’m not sure with respect—the Air Force has never

looked at the 224 number. The Air Force has looked at the 381, the

339 and the 276 number for a business plan.

Mr. TIERNEY. And that’s regardless of the fact that Congress set

a cap at the other number.

Dr. SAMBUR. Well, you have to understand two aspects—and I’m

not apologizing because, you know, I understand the point that

you’re making here. I was not here when the DAB led by Secretary

Aldridge told the Air Force to plan for an increased budget. We’re

not anticipating exceeding that budget until 2006, so we haven’t exceeded the budget. We’ve been planning, based upon our guidance

from the acquisitions czar, and that’s how we’ve been planning.

Mr. TIERNEY. Well, if you would exceed the cap by $5.2 billion

just getting to the 276, are you able to tell us now how much would

you exceed that cap if you went to 381?

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Dr. SAMBUR. I don’t have the number. No. No, we would—you

know, obviously, what we are hoping for—you know, your previous

question talked about why do you see—what improvements would

happen.

Now one of the things that we used in our estimate right now

is a certain learning curve—and I think you’re familiar with the

learning curve—which tells you as you build more how does your

experience help you. Lockheed Martin, when they made the estimate, we asked them to be very conservative because we wanted

to maintain credibility. We didn’t want to go back to the well again.

Lockheed has been arguing with us—basically, arguing is the

wrong choice of words—but trying to give us evidence that as this

program progresses that learning curve should improve significantly.

In addition, the producability costs that we’ve been spending on

this program, that investment, we assumed that our relationship—

that we would get a 5.6 return on our investment. Some of the earlier projects have been achieving 18 to 1 or better. We took the

more conservative view. Some—a lot of people in the group have

forecasted significantly higher returns on the investment. But

we’ve come back and given a lower number, again, because we

want to maintain credibility and not go to the well again, so to

speak, in terms of our estimates. So we’re challenging everybody to

do better, and we’re putting processes in place to do better.

But, you know, you’ve asked very fair questions.

Mr. TIERNEY. Thank you.

Earlier, you said that there—two of our allies, the European

Union and South Korea, have airplanes or technology that may

make us even third in terms of capability for fighters.

Dr. SAMBUR. Actually, there’s a program called Block 60 which

is being produced in the UAE with the F–16 plane.

Mr. TIERNEY. The UAE.

Dr. SAMBUR. UAE—United Arab Emirates.

Mr. TIERNEY. OK. Another ally of ours, generally. I mean, we sell

them military equipment day in and day out. I hope they’re considered an ally or a friend.

Dr. SAMBUR. I hope so, too.

Mr. TIERNEY. And they’re doing that partially with the technology, and some aspects of that come from us.

Dr. SAMBUR. They’re doing it with all of our technology. We gave

them the ability.

Mr. TIERNEY. So we have the UAE, European Union and South

Korea all building new fighters that now make us believe that we

have the capability that exceeds that so we will end up being further down the line here.

Dr. SAMBUR. Well, the question, if I may turn it around a little

bit, is not the issue of a fighter capability. The question is the air

defense systems. When you come in and you basically try to establish air dominance, there’s two things that you’re worried about.

First, you’re worried about their integrated air defense systems,

their radar and their surface to air missiles that basically recognize

you and then send out missiles to kill you; and then you’re also

worried about the fighters that they have that can basically take

you on as you defeat them.

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Mr. TIERNEY. Addressing that part of it, I think what you are

saying is that those three countries at least, using our technology,

may have——

Dr. SAMBUR. But I am also telling you that in the integrated air

defense systems, the surface to air missiles, the double digits will

be proliferating to other countries that can—for example, if

Iraq——

Mr. TIERNEY. And how will they be proliferating to other countries?

Dr. SAMBUR. Because they’re being sold by Russia. China makes

it. Russia is making it. They will sell these things to other countries, and the countries will buy that.

Mr. TIERNEY. Is any of that technology ours at all?

Dr. SAMBUR. No.

Dr. SAMBUR. Congressman, I would say, not to debate the cataloging, but the real concerns are the Russians’ so-called 31, if you

want to get the airframes, and that’s also being exported to China.

Russia cannot produce in quantity, I agree, but they are selling

their advanced engineering products to India, Pakistan, China and

others.

Mr. TIERNEY. Thank you.

Who do we expect that the United States is going to export its

technology on the F–22 to?

Mr. WYNNE. There are no plans to export the F–22.

Mr. TIERNEY. Are we putting a prohibition on it or are we just

saying there’s currently no plans?

Mr. WYNNE. There is no plan right now.

Mr. TIERNEY. What about the JSF?

Mr. WYNNE. Joint Strike Fighter, I think there are currently

eight international partners starting with the U.K., Australia. I’m

not sure I can go down the list, but it ends with——

Mr. TIERNEY. So, just following some of our logic, does that mean

that, by virtue of that, the minute we get the JSF done and we

start selling it all around the block that now we have to come up

with something else because of that proliferation and where that

might go from there?

Mr. WYNNE. I think we really do look at the so-called 31, rather

than looking at confronting any of our allies. We do carefully analyze who we intend to partner with and when they get this airplane. But we do hope that our technology progress continues. We

are an advanced engineering country and we will, I think, continue

to push the envelope lest there be somebody out there.

Mr. TIERNEY. Well, I guess my point is—and I think you have

it—is that it might be one thing to be concerned about other people’s technology, it’s another thing to be giving them ours and have

to be concerned that they have it.

Mr. WYNNE. Right.

Mr. TIERNEY. Thank you.

One last statement if I could. The Producability Improvement

Projects, the so-called PIPs, I really just want to get a clear stand

on where we are there. They were identified, Dr. Sambur, by you

as investments to improve manufacturing processes or to incorporate new technologies to reduce costs.

Dr. SAMBUR. Yes.

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Mr. TIERNEY. At one point, there was an indication that those

were going to be used to save us costs. But another point, as I mentioned earlier, the GAO is accused of failing to provide credible evidence that these investments in PIPS would reduce costs. Could I

ask both of you to tell me now, do we believe that the investments

in PIPS do reduce costs or not and will they be used on this project

or not?

Dr. SAMBUR. The answer is yes, we are.

Mr. TIERNEY. Do you agree, Mr. Wynne.

Mr. WYNNE. I certainly have seen great evidence of that, sir.

Mr. TIERNEY. OK. Thank you.

Mr. SHAYS. Before letting you go, Mr. Wynne, we’ll get you out

with the 10 minutes you wanted; and, hopefully, we can get you

out with the 15 minutes that I wanted.

Mr. Tierney had raised some questions, and I want to just nail

this down on two areas: first, that the argument is we don’t want

to it be a fair fight. I do want to respond and say that part of the

argument, as I heard it, was, with the F–16 in particular, that our

allies are—the European market, European Union, South Korea

and others—are going to be developing this same technology and

surpassing us. But with the Joint Strike Fighter we clearly are

going to be taking a much improved plane; and our allies, some of

whom you have mentioned, you know, the European Union will

have a good look at that plane as well. Obviously, we’re building

it with the Brits.

What we’ve asked GAO to do is a tech transferability study on

the implications of that. Because it does concern us and because we

don’t have that unfair fight in the sense of that technology is out

there, and that becomes almost an absurdity. We’ll keep making

the argument our allies have it and others have it because we

shared it with them.

Dr. SAMBUR. If I may just interject for a second, Mr. Chairman.

What we’re saying is that these air defense systems—again, these

double-digit surface to air missiles—so-called double-digit SAMS

are there now. They’re basically proliferating. They’re being made

in China. They’re proliferating throughout the Third World countries. For a limited investment these people can basically stymie a

great deal of our capabilities in terms of air dominance.

The F/A–22 is here right now, as Congressman Schrock so eloquently put it. We’re in the fourth quarter right now. The F/A–22

is something real that will come out.

The JSF is not going to be here——

Mr. SHAYS. We’re beyond the point of arguing whether we’re

going to have the plane. But the issue is understanding the logic,

though, of what we’re doing with the JSF in particular. You get the

point. OK.

But let me just ask you this other—because I really have trouble

with these numbers. And you both have been, I think, very candid

with us. I would have liked to have seen the business plan before

the hearing, but you have been very candid with us, and I appreciate that. It is a good way to have a relationship, and we are all

in same team. That is for sure.

Dr. SAMBUR. That is for sure.

167

Mr. SHAYS. But what I’m wrestling with now is that, in an attempt to help me, Mr. Wynne, you said to stay within the cap we

could build 225 to 235 planes. If I take the higher number, the 235,

that means to do the 276, which is your intention, that’s 41 additional planes. When I subtract out the $36.8 billion from the $42.2

billion—in other words, the additional $5.4 billion—you’re saying

that we can do 41 planes for $5.2 billion, and if we use the lower

number, 225, you’re saying we can do 51 planes. I have a big disconnect, and I think you can understand why.

Mr. WYNNE. Sir, I haven’t said that we can do those kind of—

when you do large variances on small numbers or small variances

on large numbers, estimating is fun to debate. But what I said was

at the $43.4 I thought they could get between 276 and 290 if things

go well. Down at the lower end number, my estimate was 225 to

235. I make no insinuation as to whether that——

Mr. SHAYS. I’m going to take the most conservative.

Mr. WYNNE. But, sir, an estimate is an estimate. I have no quarrel if you take a different estimate.

Mr. SHAYS. No. Hold on a second.

Mr. WYNNE. Yes, sir.

Mr. SHAYS. I appreciate estimates, and I understand what they

are, but I’m talking—you gave me a range, and I am taking the

lower of both. In other words, I’m taking—saying you’re going to

have 235 as the cost of the cap, and I’m saying not the 290 number. I am taking the 276, and that is 41 planes. You’re basically

saying that you, for $5.4 billion, in that marginal cost, are going

to do 41 planes; and that strikes me as going to be difficult.

Dr. SAMBUR. Mr. Chairman, may I just try to attempt to answer

that? We’ve been talking about learning curves; and what learning

curves tell you, basically, is that the first units cost significantly

more than the latter units. The last bunch of planes are significantly less expensive than the first bunch.

Mr. SHAYS. I agree with that.

Dr. SAMBUR. And that’s why you can get—basically, for that $5.4

billion, you can get significantly more planes.

Mr. SHAYS. I’m just wanting to put it on the record that we’re

saying we can get, at the minimum, 41 planes with those estimates. And we could potentially—you’re saying 51 or even, if I go

to the 290 figure, my gosh, we could get, you know, in the 260’s—

excuse me—we could get in the 60’s.

It’s leaving me a little uncertain here because it seems to me

quite a drop in marginal costs. But if you’re comfortable with it——

Dr. SAMBUR. Yes, we are.

Mr. WYNNE. I’m not comfortable, sir, with any estimate. I am

only trying to answer the question as best I could.

Mr. SHAYS. No. No. You’re trying to answer the question as best

you could. But, with all due respect, you’re a professional here; and

we’ve gotten to the point where we can start—because we are in

the fourth quarter, make some meaningful estimates. I didn’t pin

you down to, you know, from 225 to 227. We gave you a range of

10. I’m just using the lower number, OK?

Dr. SAMBUR. From the Air Force’s point of view.

Mr. SHAYS. We’re not playing tricks here. We’re just trying to understand.

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Dr. SAMBUR. I appreciate your understanding of the issue is very

clear. From the Air Force’s point of view, our point here is that

there is a lot of leverage to be gained at the end of the programs

when you add money there because the marginal costs at the end

is much lower than at the beginning and there’s a lot more clout.

So you can get more planes. We feel comfortable that for that extra

investment we can get that additional number of planes.

Mr. SHAYS. I’ll tell you, as a Member of Congress, I’m going to

be asking to get more planes at those marginal cost differences.

Dr. SAMBUR. And this is legitimate. That’s why as you add more

quantities you get more value. The unit costs go down, and the latter part of that run is always significantly less expensive than the

beginning part.

Mr. SHAYS. OK. Here’s what we’d like from you gentlemen. We’d

like the cost of the program, we’d like the cost per plane, and we

want to know how many planes you need. So that will be something we’d like from you in the interim.

In regard to the business plan, I didn’t want to make a big deal

out of it. But we are Members of Congress, and we do have access

to, obviously, classified information. This committee has never in

the time that I’ve certainly chaired it, any problem with classified

material; and we have been told many things that would have been

interesting for people to know about. So whatever you send us, if

you send it to us in the classified way, it will be secure.

But we want to know the cost of the program, the total cost of

the program, the cost per plane and how many planes you need.

Dr. SAMBUR. Well, we can give you those answers right now. The

cost of the program, it will live within the caps. I mean, if we cannot get relief from the congressional cap, that’ll be the cost of the

program. If the cost—if the cap is relieved, the cost will be the $42

billion number. We’re estimating that, with the relief of the cap,

there will be 276 planes; and there are a number of—you know, in

our various——

Mr. WYNNE. Congressman, in the interest of time, could I please

take that for the record and get with your staff and get you an answer?

Mr. SHAYS. You have been patient. You told us up front. You

both have been very fine witnesses; and I appreciate, Dr. Sambur,

you putting that on the record. We’ll nail it down a little better.

You have 10 minutes to get to your next meeting, and I hope you

have a chance to stop along the way.

Mr. WYNNE. Thank you very much and thank you very much for

holding this conference, this meeting. Thank you.

Mr. SHAYS. Thank you both. We appreciate your being here and

appreciate your service to our country, both of you.

Our third panel is Mr. Eric Miller, senior defense investigator,

Project on Government Oversight; Mr. Christopher Hellman, senior

analyst, Center for Defense Information, and Mr. Steven Ellis, vice

president of programs, Taxpayers for Common Sense.

Gentlemen, if you would come up, stay standing; and we’ll swear

you in.

[Witnesses sworn.]

Mr. SHAYS. Thank you. Note for the record our three witnesses

have responded in the affirmative.

169

I think we will do it as I called you, and I think you’re in that

order: Miller, Hellman and Ellis. We will go in that order. I thank

all three of you.

Mr. Miller.

STATEMENTS OF ERIC MILLER, SENIOR DEFENSE INVESTIGATOR, PROJECT ON GOVERNMENT OVERSIGHT; CHRISTOPHER HELLMAN, SENIOR ANALYST, CENTER FOR DEFENSE INFORMATION; AND STEVEN ELLIS, VICE PRESIDENT

OF PROGRAMS, TAXPAYERS FOR COMMON SENSE

Mr. MILLER. Good afternoon, Mr. Chairman and members of the

committee. Thank you for this opportunity to comment on controlling costs in tactical aircraft programs.

Founded in 1981, the Project on Government Oversight is a nonpartisan, nonprofit watchdog that strives to promote a government

that is accountable to the citizenry.

I was very impressed with the candid testimony of Mr. Walker

today——

Mr. SHAYS. Mr. Miller, I’m just going to interrupt you because

I want to make sure that it’s clear for the record that we are asking the business plan from the Department of Defense and the Air

Force; and we’ll just make sure that is part of the record. I think

it’s clear, but I want to make sure. Thank you.

Mr. Miller, I am going to have you start all over again; and we

are going start that clock all over again. I apologize.

Mr. MILLER. Mr. Chairman and members of the committee,

thank you for this opportunity to comment on controlling costs in

tactical aviation. Founded in 1981, the Project on Government

Oversight is a nonpartisan, nonprofit watchdog that strives to promote a government that is accountable to the citizenry.

I was very impressed with the candid testimony of Mr. Walker

this morning, and we would tend to agree with many of his conclusions. We would, however, have to respectfully disagree with Mr.

Walker on his testimony that the F/A–22 will be the best aircraft

ever built. From our vantage point, the facts show we don’t really

yet know how the tactical fighter will perform, particularly in the

area of avionics. After all, it has not been operationally tested yet.

Your instincts to closely scrutinize the financial aspects of the F/

A–22 program are right on target. As you have seen, probably observed, the Air Force has a public face. But the people that we talk

with inside the acquisition system share your concern. In places

where these people let their hair down and feel free to talk candidly, they question whether the F/A–22 has a role, if it is worth

the cost and if it really will work.

Just like all of you, we continue to read troubling public accounts

detailing out-of-control cost escalation in the F/A–22 program and

reports of seemingly insurmountable technological challenges. We

also understand from our context and sources that critical problems

within the program have been the subject of some rather heated internal debate at the Pentagon. We wish the debate would become

more public.

My organization typically focuses on holding weapon systems accountable, and we rarely call for the outright cancellation of a

major weapons system. However, in light of the September 11 tragVerDate 11-MAY-2000 11:43 Sep 29, 2003 Jkt 000000 PO 00000 Frm 00173 Fmt 6633 Sfmt 6633 D:\DOCS\89243.TXT HGOVREF1 PsN: HGOVREF1
170

edy, we are now more than ever convinced that an F/A–22 buy is

not consistent with the Pentagon’s goals of transforming the military. In fact, Defense Secretary Donald Rumsfeld has publicly stated that, although he has to pick his battles on canceling systems,

killing the F/A–22 is a battle he’s considering taking on.

The F/A–22 essentially has become an aircraft without a practical mission, not unlike the B–2 bombers that have, for the most

part, been sitting on runways even during recent conflicts. Why

purchase one $257 million aircraft like the F/A–22 when you can

buy several F–16 Falcons or F–15 Eagles for roughly the same

price? It doesn’t make sense to us. The F/A–22 is a solution to a

problem that no longer exists.

Of course, anyone who studies the history of the Pentagon’s acquisition system would be hard pressed to claim that rising costs,

the dumbing down of testing and the shrinking number of buys are

unique to the F/A–22.

It looks to us that what you, as Members of Congress, are now

facing is a repeat of the procurement of the B–2 bomber. At first,

the Air Force told us that $40 billion would buy from 135 to 150

B–12s. In the end, you might recall, you only got 21 B–2s for that

same price, each costing roughly $2 billion.

To us, the only reasonable answer is to terminate the program.

It doesn’t take a clairvoyant to see that the F/A–22 is shaping up

to be a part of the problem, rather than a solution to the Air

Forces’ shrinking tactical fighter fleet. It may be a sleek-looking

aircraft and fly a little bit faster and longer than other U.S. fighters and it may be somewhat harder to detect on a radar screen in

darkness, but it’s a budget buster. Its structural soundness is suspect, and its avionics package is still little more than a dream.

The Air Force wants that aircraft so bad that it’s willing to mortgage the future. We fear that unless you, as Members of Congress,

will have the will to hold the military and defense contractors accountable, the F/A–22 will become another sorry chapter in the history of Pentagon acquisition boondoggles.

Thank you for inviting me to testify before the subcommittee. I’m

happy to answer any questions.

Mr. SHAYS. Thank you, Mr. Miller.

[The prepared statement of Mr. Miller follows:]

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Mr. SHAYS. Mr. Hellman.

Mr. HELLMAN. Thank you, Mr. Chairman and members of the

committee and also to Mr. Tierney, for bringing attention to this

issue and also for his able representation in my home State.

Like many analysts, I believe that cost growth in successive generations of weapons systems is inevitable. Over time, the threat

will increase. Capabilities of systems that supercede the past generation have to be improved correspondingly, and new technologies

are usually more costly than those of the current technologies.

It’s also a truism that costs of developing a new weapons system

will rise over original estimates, as one of the previous panelists

pointed out. Historically, that expectation is roughly in the range

of 30 percent; and that’s due to a lot of factors. But if one agrees

with the precept that cost growth in weapons systems is, to a certain extent, inevitable, then I think an important question is what

extent of cost growth is acceptable and how does one determine

what is reasonable and what is unacceptable.

Further, in attempting to answer that question, it’s critical to

discuss whether strategies that might limit this growth are applicable and, if so, whether they’ve been adopted.

With that in mind, I’d reference statements earlier by Mr.

Tierney where he was discussing the PIP programs that GAO identified and the service’s use of some of those funds not to leverage

additional savings in the future but actually to pay for existing cost

overruns.

The second thing that I think is important to point out is the impact that cost increases have in programs like this. As GAO has

pointed out, this is going to have an impact on efforts to modernize

the tactical Air Force—the tactical aircraft fleet.

The first impact is going to be there’s going to be a slower replacement schedule of existing aircraft. What that will do is drive

up the costs of operations and maintenance of the existing aircraft

as they age. These costs always inevitably go up; and if you replace

them more slowly, estimates about growth and O&M costs are

skewed.

The second thing to point out is that the number of aircraft ultimately will diminish, and I think that has been discussed at length

here. We talked about the original 648 down to, at this point, a

possible number as low as 224. This also has an impact, particularly on the overall age and cost of maintaining the TACAIR fleet.

Earlier, the gentleman from GAO alluded to a study that they

had done—actually, that GAO had done back in 2001 that looked

at the average age of the TACAIR fleet and the effect that the current modernization program would have on that age. What they

discovered and what some of your questions have highlighted is the

fact that the current plan—and at that point they were talking

about a buy of 329 F–22s, not the 225 that were being discussed

under the current cost cap—was that the actual age of the Air

Force fleet would grow over the current—and well above the target

age of about 11 years of age for aircraft in that inventory.

So in effect what happens is that if you stick with the F–22 program and look at it as a solution to your modernization of the

TACAIR fleet, not only is it not the solution, it actually increases

the problem.

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Then I want to return to something that Mr. Walker spoke to

this morning which I hadn’t heard quite so well defined before, but

the plug and hope approach to determining number of aircraft that

would be purchased in the F–22 program. I think that when you

look at this, that number, the 225 or the 276 or wherever it is, you

have to recognize that number really doesn’t do a lot in terms of

one-for-one replacement of the existing fleet.

This is something that I believe you, Mr. Shays, brought up earlier, which is, what are these aircraft attempting to replace? Even

at the 381 mark, which is the most optimistic number I heard discussed today in terms of aircraft that would be required, you’re

talking about a one-for-two replacement over the current fleet of F–

15s.

While technologically the aircraft could be twice as good as the

program it’s designed to replace, at some point numbers do make

a difference in terms not just of our ability to project force on a

given battlefield but just the aircraft that are available to do the

things that they do, when they are not fighting, training, maintenance, those types of things.

You can only substitute technology to a certain point; and my

concern is that when you get numbers this low you’re not going to

be able to fill out the roles of all the things that you’re asking our

air expeditionary forces to do in the future.

And the question that was raised but not answered—and I did

hear some very good answers today. But one of the questions that

was raised and not answered is, if you look at the lower numbers,

the 224s or the 276s, what other types of aircraft are you going to

look at in order to fill out the numbers across the tac air fleet, so

that you can do all the things that the Air Force is going to be required to do in the future? And I would be interested, at some

point, in hearing that information revealed to us.

And with that, I would like to say once again, thank you. And

I look forward to your questions.

Mr. SHAYS. Thank you, Mr. Hellman.

[The prepared statement of Mr. Hellman follows:]

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Mr. SHAYS. Mr. Ellis.

Mr. ELLIS. Good afternoon, Chairman Shays, Congressman

Tierney, Congressman Schrock.

Thank you for calling this hearing and inviting me to testify. It’s

been very informative and helpful. It has caused me to—as evidenced by my testimony, which I’ve scribbled all over to try to revise it and improve it so that I could provide some assistance.

I’m Steve Ellis, vice president of programs at Taxpayers for Common Sense, a national, nonpartisan budget watchdog group.

In the 6 years my organization has been watching the F/A–22

Raptor program, we have found it to be a veritable poster child for

some of the problems of putting the weapons production cart in

front of the development and testing horse. The unprecedented cost

increases of this program coupled with several other factors, including a reduction in the number of F/A–22s procured, the development of the F–35 Joint Strike Fighter, and the overwhelming air

superiority the United States already enjoys, raise the fundamental

question: Do we need to continue to pursue the acquisition of the

F/A–22, or is it unnecessary and redundant?

We cannot stop asking questions just at improving the acquisition process. TCS strongly agrees with the Comptroller General

that the Bush administration, the Department of Defense, and

Congress need to seriously evaluate what are our needs and whether the F/A–22 is still an essential part of our force mix, or if the

billions planned for this program are better spent elsewhere.

The discipline acquisition procedures embodied by ‘‘fly before you

buy,’’ basically, conduct Operational Testing and Evaluation before

moving into full-scale production, have been abandoned in the case

of the F/A–22. Until that approach is rectified, cost overruns, system failures, and a lack of performance can be assured. The simple

mantra of the carpenter: Measure twice, cut once, also applies to

aircraft acquisition, but the Air Force’s aggressive production plan

for the F/A–22 seems to be: Cut first and measure later.

In an admirable but failing effort to control cost overruns—although we hope not in the end failing—Congress mandated that

the F/A–22 production cost not exceed $36.8 billion. However, current DOD estimates put costs at $42.2 billion, $5.4 billion over the

cap.

Additionally, the Air Force ‘‘buy to budget’’ strategy reduces contractor incentives to control costs and essentially guarantees that

taxpayers will get fewer aircraft for the money. Or, worse, contractors and the Air Force hope to use an old salesman trick to force

taxpayers to buy more to meet the real need—purportedly 381—

after the production run is over. This is the ‘‘plug and hope’’ approach Comptroller General Walker discussed.

Rather than slowing down or potentially pausing F/A–22 production levels to stabilize cost overruns, DOD has done the opposite,

increasing 2003 production levels to 20, arguing, unconvincingly,

that the increased costs of terminating some contracts, inflation,

and reduced manufacturing efficiencies outweigh the high risk of

expensive retrofitting and repair of aircraft and more costly delays.

The problems revealed so far in the F/A–22 testing impair safety

and performance.

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The Air Force posture seems to be little more than a policy of

‘‘get as many planes as you can, as fast as you can,’’ despite the

long-term risks. This is more of the ‘‘buy before you fly’’ approach

that got us in the vicious cycle of cost overruns and project delays

in the first place.

The delays in aircraft delivery have forced DOD to slip schedules;

but instead of shifting the full testing and production schedule,

DOD plans to slip just the testing, while leaving the timing of the

full-scale production decision unchanged. The new schedule removes a 3-month lag between the two, and requires the production

decision to be 4 months before the completion of OT&E. Common

sense, as well as recent experience with the F/A–22 and other

weapons systems, has revealed that significant changes and improvements generally result from OT&E. But under this plan, 25

to 30 percent of the production aircraft will be completed and will

have to be retrofitted at possibly significant cost. An additional cost risk factor is that by—is that only $14 billion of the $27.3 billion of the announced Program Cost Reduction Plans

are implemented. One cost reduction tool, the Production Improvement Plan [PIPs], require an initial government investment to improve production processes, but are predicted to reduce long-term

cost growth by $3.7 billion. However, in fiscal year 2001, 2002, the Air Force had used $87

million in planning PIP funding to offset cost growth in the first

two production lots as previously discussed. By failing to invest in

these improved processes, we are guaranteeing that some of the

planned savings in future years will not occur.

The Air Force has led taxpayers down the primrose path on the cost of the F/A–22. Original plans called for 750 aircraft at $68 million per plane. We just heard the DOD could purchase 225 to 235

planes for the congressionally mandated production cap. That’s

more than $250 million per F/A–22, roughly six times the cost of

an F–15. The acquisition and procurement problems serve to highlight that this program needs further scrutiny. The fundamental

question of whether we need to pursue acquisition of the F/A–22

remains, and taxpayers need it to be answered.

Thank you, again, for inviting me to testify. I will be happy to

answer any questions you might have.

[The prepared statement of Mr. Ellis follows:]

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Mr. SHAYS. Thank you, Mr. Ellis and Mr. Hellman, again, and

Mr. Miller.

We will start with Mr. Schrock.

Mr. SCHROCK. Thank you, Mr. Chairman.

Mr. Chair, let me say before I question, first of all, welcome to

all of you. I don’t usually say this about hearings that I attend all

day, but this has probably been one of the best ones I’ve been to

since I’ve been in Congress. This has really been good. And I’m telling you, I have learned a lot of things from people I didn’t think

I was going to agree with that I do agree with. And I think when

that situation happens, I think a lot of good things happen. And

I appreciate everything I’ve heard and what you all say, too.

Let me just make a couple comments. Mr. Miller, I think you’re

right, no one is questioning that there have been some real problems with this platform, and they certainly need to be corrected. I

think they are. And it has cost a lot of money to do that. So you

are dead right on that.

You mentioned that you felt the F–16 could probably do what the

F/A–22 does, with the exception, I believe, that the F–22 has the

stealth capability that I think is going to be so important for our

war fighter in future years, because our adversaries out there are

creating all sorts of nasty things they want to lob at us. And if we

can get a pilot in and out real quick and do the job, I think that’s

going to save lives, and I really think that has to be one of our

main goals.

And I don’t think I heard you correctly. You weren’t suggesting

the B–1 isn’t doing what it’s supposed to do. It did a beautiful job.

I think it’s done a beautiful job in the last 3 weeks. I hope I didn’t

hear you——

Mr. MILLER. No, sir. I was talking about the B–2.

Mr. SCHROCK. Oh, the B–2.

Mr. MILLER. A more sophisticated stealthy bomber.

Mr. SCHROCK. OK. Great.

I have one question and a comment for Mr. Miller and then one

for Mr. Ellis. Somebody gave me an article when they knew I was

coming here to read from the Fighting With Failure series. I think

you are familiar with that. And the stated purpose for the series,

of course, was to document weapons that don’t work but waste taxpayers’ money and aren’t suitable for combat. And they particularly

focused on the C–17, which clearly had its problems initially. But

I’m wondering if you all still believe that the C–17 doesn’t work,

and it’s not suitable for combat. Because I think it’s done a yeoman’s job.

Mr. MILLER. Oh, no. We don’t believe it doesn’t work. It’s had

some problems and it has some very—if you read the most GAO

report, it has some astounding maintenance cost problems. It’s a

very costly aircraft to operate and maintain. It has not qualified in

some areas, for example, of dropping a brigade of troops and such.

Some of its aspects have not been realized fully yet, but I think we

were more critical of the actual process of the development process.

Mr. SCHROCK. Just the development process. Let me make a comment on that, and it’s a statement, and it follows on from what I

said this morning about the C–17. And I raise it because I think

it’s relevant to this discussion.

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You know, the C–17 went through the same turbulence that the

F–22 is going through now, and many people question its value

when, in fact, we reduced the numbers for what was planned, I

think, to be 220 down to about 40, to as low as 40, and we were

ringing our hands about the development issues, and now, we are

back up to 180 with, potentially, even more being built. And it really has proven almost everything I think we’ve anticipated. And I

can’t imagine not having that platform, not having that air frame

in this particular war that we have just gone through and continue

to go through. But, guess what? All that hand wringing and doubt

caused the plane to cost more because we were producing fewer.

And I think the F–22 is going through the same thing, it’s no different.

So we need to really get—and I think that’s what you are all saying. We need to get stability into these programs so that we can

get the cost down. And at some point in the Pentagon, they have

simply got to do that.

As I said before, I don’t really blame the Air Force or the manufacturers. It’s all within that mindset at the five-sided puzzle palace across the river, where I worked for several years. So I understand the problems they have over there. But I think there is no

doubt in my mind that this is going to be—we need this aircraft,

and it’s going to be a good one.

And Mr. Ellis you are from the Taxpayers for Common Sense.

That’s a great title, I love it, because I think we all—as taxpayers,

we all need to have common sense.

But I have an opportunity on almost a weekly basis to talk with

the men and women in uniform. I represent the Hampton Roads

area, which is Virginia Beach, Norfolk, and represent more military

than 385 members, combined. And one of the things—when you

ask them what they are most concerned about, you swear it’s going

to be pay and benefits. But what they want is equipment that

works, they want spare parts, and they’ve been sorely lacking in

that for a long time. And that’s one of the key things I hear from

them. And, of course, the cost of maintaining a lot of this equipment, a lot of the air frames is skyrocketing. And I find myself increasingly concerned that, if we don’t modernize, we are going to

find ourselves no longer able to provide the war fighter with the

air dominance that we have all talked about here today, and especially as we have seen demonstrated in the last few week weeks

in Iraq.

How does your organization propose to deal with these issues?

And as a taxpayer myself, modernizing, and modernizing with the

incredible capabilities of a platform like the F–22, just seems to

make common sense. How would you do it differently?

Mr. ELLIS. Well, first let me say that——

Mr. SCHROCK. Your credibility is already pre-established, being a

Coasty, because part of the sea service, that really——

Mr. ELLIS. Right. And not only a Coasty, but a son of a career

Naval officer and nephew of another one. So I’ve had a lot of time

in the Hampton Roads area.

Mr. SCHROCK. You’ve just gone up two more rungs on the ladder.

Mr. ELLIS. Well, I dropped one when I went to the Coast Guard

Academy instead of Annapolis.

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Mr. SCHROCK. Not at all.

Mr. ELLIS. But, and actually, the other thing on reliability and

understanding that is, is the ship—first ship I was on in the Coast

Guard was the Coast Guard Cutter Sorrel, which I happened to be

on board for the 50th anniversary of its commissioning. So the

Coast Guard is clearly aware of age infrastructure. As a matter of

fact, from the gentlemen from the other chamber—or used to be in

the other chamber, now the Governor of Alaska, Senator Murkowski, served on the Sorrel as a seaman. So, the same ship I was on.

Mr. SCHROCK. He’s an old-timer.

Mr. ELLIS. Yeah. So, but—no. I think that actually coming to

grips with the critical issues of modernization and really spending

our money wisely and putting it in the most appropriate places is

what’s going to make our service members the most happy.

And that we need to—we need to really target our funding, our

acquisition dollars. And I realize there is different accounts, and

you can’t just change acquisition money into money for spare parts

or—etc. But that the key thing for us is to making sure that we

are acquiring new assets that are maintainable and easily maintainable, that are cost effective; that we are not trying to keep alive

incredibly old assets, like a 50-year-old buoy tender, and that you

know we look at, we really—the key thing, and I saw in the business plan, the discussion there, it seemed to me the Air Force when

they were discussing that, the F–22 was always—F/A–22. Excuse

me. I haven’t quite gotten used to that—was always part of the

mix. That, you know, instead of really stepping back and looking

at the need and looking at the universe and what do we actually

need, and then figuring out, OK, what are the various factors?

Does the F/A–22 fix and actually fit into that mix? They instead

seem to have the F/A–22 already there, and then, what part of it

does it fit into?

And that’s not really a way of doing a business plan, and that’s

not really going to get us to have the most cost-effective approach

into dealing with these issues.

Mr. SCHROCK. Appreciate that.

Thank you, Mr. Chairman.

Mr. SHAYS. Thank you, Mr. Schrock.

Mr. Tierney.

Mr. TIERNEY. Thank you.

Mr. Schrock, just to add on. I have to say that I don’t think I’ve

had an occasion to be in a lengthy hearing with you, but I appreciate your perspective on these issues. And I think you have added

a lot of value to the hearing, and certainly, we learned a lot from

your questioning and some of your comments.

And just to ingratiate myself with you, my father and brother

were both in the Navy, so you won’t be slinging anything over here.

Just cover yourself at all times, Mr. Chairman, is what I say.

Let me cut to the quick on one thing. When I tried to ask the

Air Force and the Department of Defense what the need was for

the F/A–22 going forward, whatever the answer I seemed to get—

and you can correct me if I’ve misstated it—was that there is a

particular aircraft that the Soviet Union is supposedly creating and

maybe sharing with China and others. And Mr. Chairman or Mr.

Schrock may remember what it was, the 31 Sorrel, or the Russian

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aircraft that the Department of Defense and the Air Force indicated that they were concerned with that the F/A–22 was going to

combat. And they also were talking about double surface-to-air missiles and those things.

Talk to me, if you would, the three of you, in turn, is the F/A–

22 going to address those issues? Is it the only platform that can

address those issues? And, how do we address those issues if they

are real threats and we don’t have the F/A–22?

Mr. HELLMAN. I’m going to go first just by default. I think part

of the answer—because I’m not an expert in threat assessment, but

I think part of the answer has been answered already, which is,

we are already going to buy the F/A–22, and that, therefore, the

question becomes one of how many and at what cost?

One of the things that I’ve looked at is trying to—and this is

something that Mr. Kucinich brought up earlier, was what’s the

mix going—what’s the force mix of tac air going to look like? Clearly, it’s going to have a component of F–22. The question then becomes: How much of the mix is going to be F–22, and how much

of it is going to be something else?

We haven’t heard what the other options are that are out there.

I would argue that you could do it with an upgraded F–15, maybe

it’s an upgraded F–16. But the point is that there has to be some

discussion of that. Because I believe from a purely budgetary

standpoint that you can’t do the full replacement with F/A–22s, nor

do I think that’s necessarily a good idea. Because I think one of the

things that you have to recognize about programs like the F/A–

22—and this is not unique to the Air Force, it’s true of a lot of the

Capital Improvement Programs in other services, which is why I

think this discussion is particularly relevant—is that it’s going to

bleed funding away from other priorities.

The Air Force is not just a fighter—a school for fighter aircraft.

They have other functions. And one of the things that they are

struggling with right now is how they are going to upgrade their

mid-air refueling capability. They have to revamp so they can stop

calling on the Navy; they have to resuscitate their airborne jamming capability. These are all things that are going to place demands on the Air Force budget. And my belief and my fear is that

the F–22 is going to place a disproportionate burden on that, and

that, therefore, you have to look at alternatives, so that you can

achieve the balance within the Air Force budget and within the

DOD budget, so that you can get all the things that you need to

do done.

Mr. TIERNEY. Do the other gentlemen feel compelled to add something? Or are you going to let that go?

Mr. Miller.

Mr. MILLER. I think it is also a matter of how much you want

to spend. Accountability. Are you getting for the taxpayers what

you tell them you are going to get them? And I don’t think that’s

happening with the F/A–22. So far we haven’t seen demonstrable

evidence.

And I think—while I’m not made privy to classified information,

I haven’t seen a lot of evidence yet supplied by the Air Force that

there are better aircraft out on the drawing board, better than the

F–15, and I’ve not seen evidence that any other countries would be

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willing to spend the kind of money to develop those types of fighters that are so costly. But, again, I’ve not had access to any classified information, so maybe—perhaps the Air Force has.

Mr. TIERNEY. Thank you.

Mr. Ellis, either I stole a phrase from you or you stole it from

me at one point. I think I may have heard it, but I was using the

expression you used for developing—‘‘put the development cart in

front of the testing horse.’’ I think I used it in terms of National

Missile Defense, but I think one of the problems—and Mr. Schrock

mentioned it earlier, too. I think one of the problems we have in

all these systems is this apparent desire to race forward and develop something before you have tested it appropriately, and then

end up spending a lot of money retrofitting it or whatever expression you want to use, at a much higher cost and less efficient result

on the long run on that.

But I don’t want to stop you from answering any other question;

I want to make that point, that I quite agree with you on that, that

one of the issues we’re looking at here today is, if you get over the

threshold, and you can’t go back, and they are already in production of some of these F/A–22s, then the question is, how do we not

make that mistake of putting the development cart in front of the

testing horse in the future or with respect to the rest of what we

have to do with the F/A–22?

Mr. ELLIS. Well, yeah. Before I go to what you asked previously,

absolutely, the getting the development—or the cart before the

horse in this case actually worked. I mean, we’ve all pretty much

conceded that we are going to be building some F/A–22s. And so

the Air Force, in some measure, has gotten what they wanted. I

mean, they have gotten a series of these aircraft and where people

are conceded, basically anywhere between, you know, somewhere in

the hundreds to 225.

Mr. TIERNEY. I guess the question would be, if we had done this

properly, might that not have been the case, and might we have

had other and better choices as we went around if we found out

we were going to have this kind of cost overrun and this kind of

technical problems with avionics and everything else, might we

have shifted gears, gone to a better platform, or—if it were the

case, and upgraded the others more efficiently than now saying,

well, they were persistent enough, and they kept jamming it in; it

has all these problems, still way over cost, but here we are.

Mr. ELLIS. Right. Sort of abandoned the economic theory of sunken costs and go ahead and sink more in to it.

No. I think that those are critical issues, and I think that some

of the discussions about spiral planning and some of the discussions about, you know, really having—if they are going to do a real

business plan, I mean, a really ground-up sort of business plan of

what do we need and what do we think is going to happen. And

obviously there are going to be new threats developing over time.

I mean, that’s understandable. And we are going to have to evolve

and hopefully we do a design—we design a planning process that

will answer that. I don’t have the perfect idea in my head. I don’t

think anybody does.

I think that just a little point that I would add on the potential

opponents, competitors for the F/A–22 air dominance, the key

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things that—air frames are not the only thing that have made our

country have the greatest air superiority. Some of it has been

training and has been equipment and has been maintenance. And

those are all things that other countries are going to be far behind

us on and have been previously. And I think that is something that

I’m sure that Congressman Schrock would agree with, that we

have the best trained and the best outfitted pilots and aviation personnel in the world. And so that’s one area that always will assist

us in air superiority.

And then the other is, that I’m a bit jaded by a lot of the things

that happened in the cold war, where we heard a lot about the Soviet military threat and how big it was and how bad it was. And

I’m not saying that there wasn’t a threat there by any stretch of

the imagination, and I remember those Soviet threat books that we

used to get when I was at the Coast Guard Academy in the 1980’s.

And, lo and behold, when the Iron Curtain fell, we found out that

they were not nearly as capable as we thought they were.

And I’m not saying that people are drumming up or are more

concerned than is necessary, but I am also somewhat concerned

about that, just as Mr. Miller mentioned, that I haven’t quite heard

about this new capability out there that is going to outperform our

F–15s and F–16s. And so that’s the other thing that I—I’m not

going to say that it isn’t out there, but I don’t know to the level

of the threat. And again, it does come down to the cost benefit

analysis across the spectrum of the Department of Defense spending that Mr. Hellman mentioned.

Mr. TIERNEY. Thank you. Thank you all for your testimony here

today. It’s been enormously helpful.

Anything that any of you want to add?

Mr. MILLER. I think, with respect to the F/A–22, I think we

shouldn’t forget that the F–16 and the F–15 are getting some incredible upgrades to their systems, to their avionics. So they are

not the same aircraft that they were when they were first built.

And so the answer some of the threats—might be able to answer

some of the threats with the upgrades.

Mr. TIERNEY. We actually had a hearing on that some time back,

the chairman will remember, and the people testified what the upgrades were from the Air Force and from the Department of Defense. My memory of that hearing is that essentially with the upgrades there was very, very little that they couldn’t do with the enhanced existing capabilities, as opposed to what they were proposing on this.

Now, I don’t know how much they now seem to think that

they’ve gone beyond that or whatever; it was only a couple years

ago. But I think they were at least, at one point in time with a different group of people that testified and today, were willing to

admit that with upgrades, the others did essentially all of the tasks

that we would be asking an F/A–22 to do. So that is interesting to

note.

Mr. Chairman, I will yield back the balance of the time. Thank

you.

Mr. SHAYS. Thank you. Appreciate that.

Gentlemen, what was your reaction when you learned about the

business plan that they have? What was your reaction to that?

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Were you—was your reaction, well, that makes sense; they should

have it? Were you surprised they had it? Were you surprised they

haven’t made it public?

Mr. ELLIS. I was not aware of it. I’m not surprised—and I’m curious, at least the part that I can see, to know what exactly is it comprised of.

You know, as I mentioned earlier, I am concerned that it seemed

that there were a lot of preconceived notions that went into the

business plan rather than actually a real identification of need and

then finding how to match that need or meet that need.

Mr. SHAYS. Anyone else?

Mr. MILLER. That was the first I’d heard of the business plan.

I mean, I’m not sure I even understand it or that it was very well

explained.

Mr. SHAYS. OK. In terms of the issue of marginal cost, if, in

fact—this is what we have a pretty good idea of: They are saying

that they can build 276 planes for $42.2 million, which is $5.4—

excuse me 276 planes for $42.2 billion. They are saying for the cap

level of $36.8 billion, they estimate—but even this 276 is an estimate. They estimate for the $36.8 billion, they can build 225 to

235. Were you surprised that the marginal cost of the last 41

planes to 60 would be in the realm of $5.4 billion?

And, do you think that’s realistic?

Mr. ELLIS. I was quickly doing my long division on my pad when

those numbers were coming through, and I came out to $131.5 million per copy for that last 41. You know, for that—basically for that

$5.4 billion number, Mr. Chairman. And, yeah, I think that it’s a

pretty significant cost savings. I would be curious to see—obviously, it’s, you know, a pretty widely accepted fact and widely

known fact that the more copies you produce, generally, that the

reduction in prices is greater.

So I’m not surprised that’s occurring. But the scale to deviate

from the average, from which the average is somewhere around

$250 million per copy, it’s a pretty significant cost savings over

$100 million there, almost 50 percent savings over the life of the

program. I think that pretty large.

Mr. SHAYS. In your experience of looking at other programs,

would that be a consistent drop?

Mr. ELLIS. Well——

Mr. SHAYS. If you don’t know——

Mr. ELLIS. We could try to answer that for the record.

Mr. SHAYS. See, what I’m going to be very interested in is, if we

do decide—given the reality that in 1991 we went from 750 to 248,

in 1993 to 438, and in 1997 to 337, and then 1999 to 333, 2002 to

276, down to potentially 225 to 235, I am—I’m wondering if we

aren’t going to get caught in this trap of then saying, let’s build 276

at that additional cost, or let’s build—if the marginal cost is so

much less, you know, it appears to me maybe—and the requirement is there, let’s build 330 of them or 380 of them, if we aren’t

going to then find that once we committed, that then we are going

to find the cost is going to go up.

Is there any way that you would know to nail down this number

in any work that you have done with other projects?

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Mr. HELLMAN. The short answer to that one is, no. And I think,

in part, it may be because this program is somewhat unique in a

lot of ways. But I think that—first off, I thought the number was

pretty optimistic. But, again, that’s intuitive, and it’s based on

what we have seen about cost projections not so much in other programs but in this program, which has been notoriously bad.

So while I recognize that to a certain extent, it’s new day here

and that, you know, the past is not necessarily a precursor to the

future, and taking into the account the fact that you will see obviously improvement in cost as you get further into the program on

the per unit costs, it seems that given the track record in this program in making those types of projections, it’s reasonable to ask

how they came up with that number. And it goes back to what Mr.

Walker was saying about the ‘‘plug and hope’’ approach to this.

It also leads me to a question about how—because it seems that

your question is, how do we avoid a situation where we agree to

do something and then find ourselves with a fait accompli, where

the money that we agreed to spend on it is not there and, yet, we

have already gone so much further down the road, that we have

to make up the difference.

Mr. SHAYS. Given that, all of you have pointed out that in the

late 1980’s and early 1990’s, this didn’t seem like a bad deal if you

could get 700-plus planes.

Mr. HELLMAN. Right.

Mr. SHAYS. But if you had told us in 1990 that in 2004, 2005 and

2006, we might end up with 224 planes at approximately that cost,

we might have said, I’m not sure we are going to do it.

Mr. HELLMAN. And I think that Mr. Miller’s point on the B–2 in

that regard is well taken, because that was a situation where Congress, despite receiving repeated assurances from the Air Force

about what they were going to get for the investment, found that

it didn’t—actually didn’t never come to pass, and, ultimately in

their wisdom, they decided to end the program. Ultimately, you

have that recourse. But it would seem to me that, from what I

heard today, they still have to do a little bit about making that

case, at least just on a numbers perspective.

Mr. SHAYS. Let me just ask two more questions, and then I think

we will be done here. Should the statutory—let me ask you this

first. What—and if you don’t have an answer to it—if you are not

feeling confident to answer it, then I don’t want an answer. But

what actions does the Department need to take to stabilize program costs? Any of the three of you want to take a stab at that?

Mr. HELLMAN. In just this program?

Mr. SHAYS. Yes. Let me ask this question. Should the statutory

production cap be eliminated? And the question is, why or why not?

Mr. Ellis.

Mr. ELLIS. Mr. Chairman, we would be very concerned about removing the statutory cap. I think that although people can talk

about how it may have hurt the program or the fact that now it’s

much cheaper per copy, that was part of the reason why.

I mean, that the cap actually helped force the Air Force to look

very hard and come up with different things to try to reduce costs

in out years, and it made them really make hard decisions about

what they need. Or maybe not as hard as I would have liked, but

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still harder than they wanted to make on this. And it wasn’t free

money. And I think that the cap has served us well and that we

can evaluate in the future, if there is a need for additional copies

in some discreet amount to go at. And I think that’s something that

is lost, is something of the benefits that we have already achieved

from the wisdom of Congress in establishing that in the past.

Mr. SHAYS. Let me react to it, though. When I look at the charts

that we see, whether they’ve gone up $19.8 billion or close to that,

we are certain that the drop in the number of planes is there. If

the cap simply means we are going to spend the same amount of

money and get one-third the planes.

I’m not—I don’t know if the cap has done all that much. If you,

on the other hand, are saying to me that the costs would have gone

up even more than $20 billion, then I guess I’d agree.

Mr. ELLIS. That would be my impression. Yes, and, no, absolutely, that’s one of the things that I raised in my testimony is, is

that—I mean, the sad thing is, is that we are still spending the

same amount of money. I mean the taxpayer is on the hook for the

$40 billion plus. Whether we get 100 planes or we get 300 planes,

we are still paying the same amount of money. And the sad thing

is, is that, in this case, as per unit cost goes up, we are getting less

bang for the exact same buck. And that is the conundrum about

the cap.

Mr. SHAYS. We basically are existing with 400, therefore, less

planes that we anticipated, and we are getting them much later

than we anticipated, and so on.

Anyone else want to respond before we close up? I see Mr.

Tierney——

Mr. MILLER. I would say, we would probably want you to stay

with the cap. But I suppose it would also be a judgment call on

your part as to how bad you as a Member of Congress want this

aircraft and feel that the fighting men and women really need it.

It might set a bad precedent.

Mr. SHAYS. You started, Mr. Miller, making the point that, rather than what was beginning to develop as a consensus, that we are

probably going to see some of these planes. The question is how

much. Your view is that you are not convinced that we should see

any of these planes.

Mr. MILLER. No, we are not.

Mr. SHAYS. Mr. Hellman. Your view is?

Mr. HELLMAN. Well, the fact is we have already authorized 51 of

the aircraft and the funding. Therefore, and it’s already in limited

production, so we’re going to see some. So then the question is, how

many and at what cost. I mean, there have been plenty of programs that have been overseen by Congress that did not have a

cost cap. So I think that function can be performed without the

rigor of a cap, if that’s what you so decide.

But I think it’s important to remember that first the initial cap

was based on Air Force figures that were supplied to Congress, and

it was adopted by Congress because their efforts to regulate costs

in this program prior to that had been unsuccessful. And it was,

I think, in part, to actually set a hard limit but also, in part, to

put these people on record.

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Has that been effectively done? It seems so. Is it the only way

to achieve that? I’m not sure. But given the track record on costs,

this is a program and the projections that GAO has made about

some of the changes or some of the problems that they see in the

future in both schedule and technology, there is likely to be further

cost growth in this. And I’m not sure how one keeps that under

control without a cap.

Mr. SHAYS. Which one of you was making the claim that there

is a real maintenance issue on this plane? Did one of you say that

there was a challenge on maintenance? Was that you, Mr. Miller?

Mr. MILLER. No, I didn’t say that. But—I think that was in the

new GAO report; that in effect their goal with the F/A–22 was to

get 3 hours of flying time between maintenance actions, and I

think it comes down to about 17 minutes between every average

maintenance. It’s point 29 or something like that hours.

Mr. SHAYS. Well, that will be something I should take a good

look at, because I didn’t catch that. But thank you.

I have no further questions to ask. Mr. Tierney, do you want to?

Mr. TIERNEY. If I could, just a couple.

First of all, it seems to me that the reason that the cap was set,

was for all the reasons you stated, about kind of to control costs.

But I heard on a number of occasions here, people keep saying,

whether it was the Air Force or the Department of Defense, they

need stability in this program.

That was what the cap was all about. Wasn’t it? Am I wrong?

The idea was to set, this is a cap, this is all you can spend. It’s

about as stable as you can get. Congress is telling you, that’s it.

And it wasn’t even cold, and then all of a sudden it’s like, well, the

hell; we’re not going to worry about that. We got a call here from

the Secretary, they said earlier that, the hell, our number is different and we’re just going forward. So they’ve had stability.

They’ve had it at least since the time they had the cap. And that,

clearly, has not done the trick.

So I hope, Mr. Chairman, that we will be mindful of that, that

all these assertions that we need funding stability, really doesn’t

mean that. What it means is, they need an unlimited pocketbook,

so they can go do whatever the heck they want to do. Because

when they had stability, it didn’t quite work out that way, instead

of restraining them.

Mr. SHAYS. I might comment that what seemed to have replaced

the cap is the number 276. In other words, locked into the 276

rather than the $36.8. That’s what it appears.

Mr. TIERNEY. No, I think what happened is that they are now

going to spend up at $43-something, and decided that what they

can do for the $43-something is 276. But I think it’s going the other

way; I think it’s plugging, just like Mr. Walker said it was.

Mr. SHAYS. To be continued.

Mr. TIERNEY. But I think that’s—so I made a great point on that.

It’s like, whatever we get, we’ll just figure out what we can make

it at that point in time and keep on rolling here. And now they figure if they get another $5.2 billion we’ll do 276. Because, otherwise,

I heard no logic of why 276. I heard that they wanted 381, and

they seemed to have some logic for that although I’m not sure what

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it is, but there was no logic for 276 other than that’s the amount

we think we can squeeze out.

I think it’s imperative, and I hope the chairman and maybe others in this committee might join me in a letter to the Department

of Defense and the Air Force asking them for that business plan.

I think that’s critical to see that. And to then, if we need to, followup on it with a hearing, to do that. Because we have to see that

information so Congress can establish an opinion of the amount of

these aircraft that are needed, if any.

Mr. SHAYS. Then it will be a request with your signature on it

from the committee and the other the chairman and myself and

others.

Mr. TIERNEY. Because I mean, I think that’s really where the

crux really comes in. We see what they say their business plan is,

we see whether or not the enhanced F–16, F–15 can serve some of

the functions or all of the functions there. We will know whether

we don’t need the F–22 at all, and that to go forward is just going

to be such maintenance cost and such continued overruns or whatever, that we should fill this need otherwise. We will know whether

or not we should just take the 51 or whatever that’s authorized

now and stop there, and fill the remaining need for tactical aircraft

with other things or just what we need to do and how we can better spend the money. So I look forward to seeing that report.

Again, Mr. Chairman, I thank the witnesses for all of their help

today, as well as, again, thank you for an excellent hearing as

usual.

Mr. SHAYS. Thank you very much. Appreciate all your participation and work on this.

Is there anything that any of the three of you would like to put

on the record before we close? Anything that you might have been

prepared to answer that we should have asked that you want on

the record?

Mr. MILLER. I don’t know if you—if the committee would—if it

will be proper for the committee to do this. But I notice the Air

Force said that they now agreed with the Cost Analysis Impact

Groups’ assessment of what the costs would be. And those documents haven’t been public since 1997, I believe, when they were

made public by appropriation legislation, I think. It would be nice

for those to be public to see there is actually—if they are on the

same page, because they were $9 billion off the last time we heard.

Mr. SHAYS. I can’t imagine why they wouldn’t be public, and so

we will work on that.

Mr. MILLER. Thank you.

Mr. SHAYS. That’s one thing that I’ve tried to emphasize with

this administration, and that is—on a whole host of areas. But if

the administration wants more authority, more power, then there

has to be more congressional oversight and there has to be, frankly,

more transparency. Clearly it’s been a tradition, as long as I can

remember, that when we talk about costs, Congress has obviously

not just a right to know, a responsibility to find out, and the public

has a right to know. So—because we also appreciate the input of

organizations like your own, and we want to make sure you can

take a look at that and respond to it and help us figure out what’s

going on. This is how democracies work.

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Thank you all very, very much. Appreciate it. And we will adjourn this hearing.

[Whereupon, at 3:45 p.m., the subcommittee was adjourned.]

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