Index

TECHNOLOGY DEVELOPMENT STRATEGY

 

Prepared Statement

For

One Hundred Sixth Congress

CONGRESS OF THE UNITED STATES

House of Representatives

Committee on Government Reform

Subcommittee on International Security, Veterans Affairs

And International Relations

 

By

Wesley L. Harris

Professor of Aeronautics and Astronautics

Massachusetts Institute of Technology

Cambridge, MA

 

 

 

 

 

 

 

_______________________________________

A Hearing On

Joint Strike Fighter (JSF) Acquisition Reform: Will it Fly?

 

Rayburn House Office Building

Room 2247

Washington, DC

May 10, 2000

 

 

 

TECHNOLOGY DEVELOPMENT STRATEGY

 

 

 

Thank you for this opportunity to speak with you today. My name is Wesley L. Harris. I direct the Lean Sustainment Initiative at the Massachusetts Institute of Technology where I am Professor of Aeronautics and Astronautics. The views I express are my own. My research on economic incentives for defense systems in full production has given me an acute awareness of the challenges of acquisition reform, many of which have been presented to and accepted by the Department of Defense (DoD) and the U.S. defense aircraft industry. My former duties and responsibilities as Associate Administrator for Aeronautics, NASA, included the management of the parallel development of technology critical to the advancement of new, high performance civil aircraft. I believe that this experience at NASA is directly relevant to providing an informed perspective on the central issues being addressed in this hearing.

1.0 Introduction

 

Acquisition reform for the procurement of military systems and technology is driven by several factors, many of which are interrelated in a complex manner. These include greater life cycle value, higher performance, more rapid deployment, upgradeability, sustainment and maintenance. The challenges confronting acquisition reform in the procurement of military systems are sharpened by the pronounced decline in the DoD procurement plus research and development outlays from a high of $150 billion in 1983 to a low of $50 billion in 1998 (measured in FY99 dollars). The changing characteristics of the threat to national security have added to the difficulty of developing and remaining committed to a consistent acquisition reform strategy. The very high rate of change of technology, especially information technology, remains a singular almost insurmountable challenge to the acquisition of advanced commercial and military systems with superior performance. In addition, the resistance to cultural change by contractor and government as customer has not been an enabler for acquisition reform.

 

The impact of acquisition reform extends beyond the procurement of defense systems and related technology. Given the relationship of the military industrial base to the national economy and world peace, an acquisition reform strategy that effectively and efficiently supports both the industrial base and our war-fighters is needed. At risk is our ability to control our future, to maintain our way of life, to produce wealth, and to continue to contribute to the advancement of humanity.

 

Acquisition reform has evolved to the level where the most effective relationship between technology maturation and product procurement is demanded. Several models of such a relationship exist. Some are commercially derived while others are defense unique. Factors such as technology and product complexity are important determinants in the successful execution of many of the models. Existing processes, practices, and statures may be barriers and or enablers in implementing these models. My objective today is not to critique the various models. Rather, based on my economic incentives research and my NASA experience, I will give my views on the critical relationships between contractor and customer that enable the maturation of technology and the procurement of defense systems.

 

2.0 Economically Incentivized Production

 

To develop technology to a high readiness level and to procure products in production require the establishment of an environment that facilitates a "win-win" solution for government and contractor. Several factors contribute to the establishment of this desired environment. The primary factors enabling a "win-win" solution are:

 

 

A critical assumption in identifying the necessary conditions above is that the program has funding to allow continuation to the next stage of development including the insertion of technology developed in parallel to, or outside of, product acquisition. The existence of these factors in successful "win-win" incentivized contracts has been documented in several case studies supporting my research and in NASA technology development programs. The case studies include the Sensor Fused Weapon (SFW), Joint Direct Attack Munitions (JDAM), C-17, C130J, F-414 engine, and F-117 engine. The NASA advanced technology development programs include the High Speed Research Program (HSRP), the Advanced Subsonic Technology Program (ASTP), and the joint NASA - DoD Integrated High Performance Turbine Engine Technology Program (IHPTET).

 

In each of these programs government goals, contractor goals, and joint government-contractor goals are identified and accepted by both parties. Government goals include affordable defense systems with performance characteristics exceeding known and anticipated threats and technology developed to a high readiness level. Contractor goals include customer satisfaction, planning stability, good financial performance, and cash flow. A joint goal common to both government and contractor is to assure the pre-eminent military strength of our country by providing the war-fighter with superior weapon systems.

 

 

Strategic government goals include the continued existence of a robust and competitive defense industrial base. Also strategic contractor goals include enhanced reputation and continuous improvement of its processes and practices to remain competitive.

 

My research has revealed that the pillars supporting the desired enabling environment are (1) mutual trust and (2) mutual respect between government and contractor. Mutual trust and mutual respect eliminate the traditional challenge associated with the Principle-Agent model of contracting in which there is an asymmetry of information between the two parties. This mutually trusting environment leads to a open flow of information between parties. Mutual trust and mutual respect are the sine qua non of today's acquisition reform. This conclusion is supported by my research and is valid for both technology development and product procurement.

 

 

2.1 Outcomes of "Win-Win" Solutions

 

Both government and contractor receive gains in a "win-win" partnership. Government gains include:

 

 

Contractor gains are:

 

 

 

With this set of outcomes, the interests and welfare of the U. S. tax payer and the corporate shock holder are protected. The goals of the government and contractor as well as the joint common goals have been achieved. The near term and long term interests of the nation are also protected through a "win-win" partnership of government and contractor in the development of advanced technology and acquisition of high performance weapon systems.

 

 

 

2.2 Lessons Learned

 

The primary lessons learned through my investigations and study of successful programs covering a very diverse range of technological complexity are:

 

 

 

 

 

The above lessons learned are relevant to the issues being addressed by this Subcommittee. I propose to further demonstrate that relevance by arguing that by utilizing appropriate incentives, technology can be developed in parallel to the acquisition of a product which depends upon that technology in order to satisfy performance requirements.

 

 

3.0 Incentivized Parallel Technology Development

 

A few comments on successful development of critical, complex technology in advance of full system acquisition. In the early 1990's, NASA Office of Aeronautics under my leadership as Associate Administrator for Aeronautics did develop and manage two technology development programs. These programs were the High Speed Research Program (HSRP) and the Advanced Subsonic Technology Program (ASTP). The NASA Office of Aeronautics also worked jointly with DoD and industry to develop advanced gas turbine components within the Integrated High Performance Turbine Engine Technology Program (IHPTET). These technology development programs were successful due to several factors, namely:

 

 

 

 

 

Note the very strong commonality between the factors leading to successful development of technology parallel to system acquisition and the factors that enable a "win-win" solution for programs in production. At the most fundamental level, the environment for favorable development of advanced technology is very similar to the environment for acquisition of defense systems in production where the technology risk is low corresponding to technology at a high maturity level.

 

Advanced technology at a high maturity level is essential to the acquisition of affordable weapon systems with requirements for superior performance. Without advanced technology one is not able to develop superior performance systems. Without this advanced technology at a high maturity level, acquisition policy and practice is null since there is no worthy objective or defense system to procure. The importance of advanced technology at a high maturity level is so great that the government must incentivize the contractor to develop advanced technology. The government as customer must place a premium on the development of advanced technology to a high maturity level. The premium must compare favorably with the profits and or awards, both financial and non-financial, that a contractor would earn in producing systems for acquisition.

 

The necessary high premium will drive the government to a lean portfolio management condition within the constraints of at least a fixed research and development plus acquisition budget. Advanced technologies selected for development to a high maturity level must be based on realistic projections of need. Otherwise, the development of advanced technology would become a sandbox for non-value added play. Without a realistic projection of need, the probability of inserting matured advanced technology into a defense system would be low. Traditional technology roadmaps that are produced sans the rigor and quantitative refinement necessary to increase the probability of later inserting developed technology from that roadmap will not provide sufficient incentive to the contractor to accept the risk associated with developing such technology to maturity.

 

 

An improve chance of success in developing advanced technology to a high level of maturity would be enabled by the adoption of a common, quantitative-based language and assessment tools. Specifically, qualitative descriptions of technology readiness levels are insufficient and inconsistent with the above mentioned realistic projections of need. The desired quantitative-based language and assessment tools are recommended to be derived from probability theory. Thus, each technology readiness level would be defined by probability bands. Government as customer and contractor would have a quantitative, well-defined target at which to direct their efforts to develop advanced technology. Obviously, requirement instability limits the effectiveness and utility of a quantitative-based set of tools and languages defining technology readiness levels.

 

4.0 Conclusion

 

In conclusion, I would like to emphasize the complex and interlocking structure of our acquisition policy and practices -- a necessity in the complexity of major shifts in our defense industry base, declining acquisition budgets, and evolving threat characteristics. There exist case studies of successful parallel development of advanced technology to high maturity levels where the government is customer. Likewise, there exist several case studies of successful acquisition of defense systems in production. In very important areas, the processes of both successes are quite similar. This similarity should be exploited to build creative structures to ensure the development of advanced technology to high maturity levels essential to the acquisition of affordable weapon systems with superior performance.

 

_____________________________________

Wesley L. Harris
Professor of Aeronautics and Astronautics
Director, Lean Sustainment Initiative
Department of Aeronautics and Astronautics
Massachusetts Institute of Technology