Index

TESTIMONY OF

STAN Z. SOLOWAY

DEPUTY UNDER SECRETARY OF DEFENSE

(ACQUISITION REFORM)

&

DIRECTOR, DEFENSE REFORM INITIATIVE

UNITED STATES DEPARTMENT OF DEFENSE

 

BEFORE THE

HOUSE OF REPRESENTATIVES

GOVERNMENT REFORM COMMITTEE

SUBCOMMITTEE ON

NATIONAL SECURITY, VETERANS AFFAIRS

AND INTERNATIONAL RELATIONS

 

 

May 3, 2000

 

Mr. Chairman, members of the committee, it is a great pleasure for me to be here today, and I thank you for this opportunity to discuss with you our continued progress with acquisition reform, particularly how it applies to the Department’s Joint Strike Fighter (JSF) Program. Before I get into the specifics on the JSF, I would first like to begin our discussion with an understanding of the changes we have made and continue to make throughout the Department.

 

As you know, Acquisition Reform has been a top priority for the department for the last several years, and encompasses a wide range of initiatives. From eliminating unnecessary government unique process requirements in favor of commercial performance standards…to using innovative contracting approaches that allow us to access commercial technology providers that would otherwise be unable, and unwilling to do business with us. Key to the progress we have made has been our strong partnership with Congress.

 

Many of our initiatives are specifically designed to allow more flexibility in managing programs and increasing business opportunities with the continuing overarching goal of providing systems, equipment, services and other support faster, BETTER and less expensively, to our men and women in uniform. We have had many, real successes in implementing Acquisition Reforms. Let me mention just a few programs that illustrate the progress made.

 

One excellent example is the Joint Direct Attack Munition (JDAM), which performed so flawlessly in Kosovo….designated as an acquisition pilot program, JDAM was originally expected to cost in excess of $40,000 per unit; but through a combination of acquisition reforms and focused, innovative program management, we can now purchase JDAM for less than half that.

 

Then there is the Precision Location GPS Receiver, or PLGR…this receiver, purchased largely through the commercial buying authorities contained in the Federal Acquisition Streamlining Act (FASA), replaces a previous field version, built to extensive military specifications, that weighed over 30 pounds, required two operators, had only one channel and cost us thousands of dollars per unit…PLGR on the other hand, requires only one operator, has five channels, weighs just over two pounds…and costs less than a thousand per unit.

 

The All Ordnance Destruct System (AODS) is a flight termination system used on the Rocket System Launch Program (RSLP) vehicles at the Space and Missile Systems Center Test and Evaluation Directorate. The majority of these RSLP vehicles are used as targets in support of Ballistic Missile Defense Programs. By utilizing FAR Part 12 commercial contracting methods, unit costs were reduced from the previous purchase price of $900K per kit, down to $55K per kit. Not only were they cheaper, but the new kits were also technically superior – the modular design permits multiple configurations and eliminated components such as batteries and the aft launch umbilical cable and incorporated many commercial-off-the-shelf (COTS) components.

 

Today, circuit cards for the avionics in the F-22 are being produced largely on a commercial line at TRW…thus saving the Department significant resources that would have had to be devoted to unique development and production facilities. Moreover, the reliability testing on those circuit cards have demonstrated excellent results…and costs appear to be significantly lower than expected, 55%-70% less than their military standardized counterpart.

 

Getting away from military unique requirements, where possible, is our goal. For instance, aircrews must have boots that will protect them in the often hazardous, military unique environment. In preparing to buy a new boot for our aircrews, the Defense Logistics Agency (DLA) and the Air Force first did extensive market research to locate commercial sources. Candidate boots were then subjected to fire resistance and thermal protection testing to simulate the stressful environment the boots would have to endure. Historically, the procurement process for new, military unique equipment takes 7 to 10 years. In less than a year, DLA and the Air Force were able to purchase this new, commercially manufactured boot.

 

Acquisition Reform is also central to the development of the Navy’s New Virginia Class Attack Submarine. Key to the success of the program has been the use of Integrated Product and Process Development Teams that ensure the most efficient design early in the development process. The use of open systems architecture and insertion of COTS technologies has resulted thus far in savings of $24 million. By simplifying specifications, using appropriate commercial standards and reducing the number of drawings required by the government, the Navy will benefit from a cost avoidance of $30 million per ship. More importantly, the Virginia Class will operate at a 32% lower total ownership cost then the comparable SEAWOLF.

 

Indeed, much has changed…and for the better. Given the complexity of our business practices, and the entrenched cultures we have inside and outside of government, I believe we have made substantial progress. But clearly, we must do more.

 

The security environment we face is unpredictable and unstable, and includes unprecedented threats of chemical and biological warfare, and the continued threat of nuclear confrontation. Our nation’s military leaders have set forth, in Joint Vision 2010, their blueprint for meeting the principal challenges of the next decade and beyond. Joint Vision 2010 makes clear that our success in meeting those challenges will hinge, in large part, on speed and information…and our ability to access and integrate true cutting edge technologies that provide us the dominance, speed and scope of information we need.

 

To achieve these goals, the Department is focused on a number of high priority initiatives: fielding high quality products and systems quickly and supporting them responsively; reducing the total ownership costs of new and legacy systems; and reducing the overhead burdens imposed by our current acquisition and logistics infrastructure. One of the means for accomplishing these goals is through restructuring how we develop, manufacture and maintain our weapon systems.

 

It is no secret that cycle times for new weapons systems—from concept to fielding-- remain unacceptably high and that such long cycle times too often result in the fielding of already obsolete technologies. Since some technology decisions must be made early in a program, it is clear that our history of taking 15 or more years to field new systems is not at all consonant with the torrid pace of technology change that we see today. There are, of course, many reasons for these long cycle times. Key among them is often the very nature of the requirements set forth for any individual program. Traditionally, our requirements have been both inflexible and involved extraordinary technology challenges that can take many years to meet. Indeed, it has been suggested that we might spend as much as 30% of a weapon system’s cost in our efforts to meet just the last 10% or 15% of performance requirements. And even when a system is finally fielded, as noted above, some of its components are sometimes already obsolete.

 

This is beginning to change. Today, both our operational and acquisition & technology communities recognize that to optimize support for our warfighters in the field, we need to institute new requirements and acquisition strategies that include more flexibility. This added flexibility will allow the kind of logical tradeoffs, based on demonstrated technologies and cost, that will enable us to field new capabilities more quickly. By using what we call an evolutionary approach, we are confident we can indeed significantly reduce cycle times—and costs—and provide systems to the warfighter faster.

 

Through evolutionary acquisition strategies we can define, develop, produce, and deploy an initial militarily useful capability based on the best proven technology available, time-phased requirements, projected threat assessments, and demonstrated manufacturing capabilities. The scope, performance capabilities, and timing of future "Blocks" would thus be based on continuous communications between the requirements, acquisition, intelligence, science and budget communities, and the enhanced maturity of the technology involved.

 

To facilitate an acquisition strategy that is evolutionary, the program manager must use the appropriate enabling tools – the incorporation of open systems and suitable risk assessment – to match the time-phased requirements to critical needs and available technologies. Open systems is a design strategy of incorporating existing, widely accepted standards for system interfaces that allows technology insertion without requiring a major redesign – a "plug and play" concept. And part of determining when a new technology will be incorporated into the design, is, of course, considering the maturity of the technology.

 

How we do this…how we develop, manufacture and maintain systems, is based in the Department’s 5000 Series documents. Currently, the OSD and Service staffs are engaged in rewriting this principal policy guidance – our "bible" for systems acquisition – the DoD 5000.1, The Defense Acquisition System, and the DoD 5000.2, Operation of the Defense Acquisition System.

 

The Joint Chiefs of Staff have already completed a rewrite of the Chairman’s "3170 Series Requirements Generation System" to reflect more flexible and time-phased requirements, interoperability as a key performance parameter, and affordability in requirements documents. The DoD 5000 rewrite will, like the changes to the Joint Chiefs of Staff instruction, address evolutionary acquisition and focus on flexibility in requirements. Additionally, the new DoD 5000 will require greater technical maturity prior to entering the manufacturing phase of a program, integrate acquisition and logistics early in the process, and more. In the new systems acquisition environment, key acquisition decisions and long term funding commitments may not be made until technology shows the required maturity and risks are better understood and mitigated, than has traditionally been the case.

 

One of our programs embracing Acquisition Reform and this new approach to the front end of the acquisition process, is the JSF. Since its inception, the JSF, known as the Joint Advanced Strike-Fighter Technology (JAST) in it’s pre-acquisition days, has been recognized for utilizing and actually pioneering many Acquisition Reform concepts, and applying them to the actual business processes and contract vehicles being utilized.

 

For instance, prior to the JSF Program, there was little experience and capability within DoD to perform electronic source selection for major, high technology research and development activities. The old way of doing business required the contractor to deliver his proposal literally by the truckload. In the first source selection, two contractors were chosen to participate in the 4-year concept demonstration phase, which is currently ongoing. In this initial competition, the JSF Program replaced the traditional paper process with an electronic process, thus reducing the total time from initial planning through award from the normal 12 months to 4 months. This early success in electronic commerce gave the JSF Program the confidence to implement further acquisition reform initiatives.

 

Consistent with Acquisition Reform and the Department’s policy, performance based specifications are the JSF Program’s goal. True to this ideal, the philosophy of the JSF program is to tell industry what is needed, not how to meet the need. The Request for Proposal (RFP) for the Concept Demonstration Program contained no minimum requirements, and instead gave the contractors the freedom to trade off cost and performance to achieve the most cost-effective solution. In addition, the contractors were encouraged to utilize commercial standards and best practices and to make recommendations regarding the use of specifications. While military specifications do have value, they are often an unnecessary burden to the contractor, frequently have an even higher performance commitment than required, and impart other non-value-added requirements and tremendous documentation.

 

Simulation Based Acquisition is also a major thrust of the Department and is one of the key tenets of the DoD 5000 re-write. Modeling and Simulation (M&S) has been proven in both industry and government to help reduce the time, resources and ultimately, risk associated with systems development. Representations of proposed systems, virtual prototypes, are embedded in realistic, synthetic environments to support the various phases of the acquisition process. The JSF Program has made extensive use of M&S and Cost as an Independent Variable (CAIV) trade studies in the requirements development process. JSF is now continuing the use of M&S with mission level virtual pilot-in-the-loop simulation to support a more thorough evaluation of required avionics capabilities. Virtual Manufacturing and Virtual Maintenance are also being pursued to facilitate planning and thereby drive down the associated costs.

 

The JSF is also incorporating an evolutionary acquisition strategy, as defined earlier in my statement. The program is truly joint and has achieved an unprecedented level of cooperation between industry and the participating U.S. and international services, and between the requirements and development communities. This cooperation enables the communication flow that is the key to an evolutionary acquisition strategy. In other words, the warfighter and the buyer work side by side to allow a better understanding of the requirements, facilitating decisions on trade-off between performance and cost. Specifying operational requirements in an incremental manner phased over time, and matching them against the projected threat and available technologies, have allowed the JSF Program to exercise thoughtful judgement in balancing cost, schedule and performance. And JSF’s use of evolutionary acquisition further mitigates risks by allowing technologies to be inserted as they mature.

 

As I mentioned before, probably the most important change in the new DoD 5000 re-write is the emphasis on technology maturity before entering into system integration, or what is known as Engineering and Manufacturing (EMD) in today’s DoD 5000. Approximately one quarter of JSF pre-EMD resources are allocated to technology maturity efforts in the crucial technology areas of flight systems, propulsion, supportability and training, structures and materials, manufacturing and produce-ability, and mission systems. Technology investments have been selected based on the potential to improve life cycle affordability and enhanced capability in the areas of survivability, supportability and lethality.

 

Transitioning advanced technologies from the laboratory into operational systems is a challenge in every program. In the JSF Program, the design teams and the program office will determine the acceptable level of technological readiness. Operators, maintainers and the design teams have been involved in the selection and structuring of technology maturity projects from the beginning. This has resulted in an improved coordination between historically distinct laboratories, system design/development, and user communities.

 

Among the many factors that help us make overall technology readiness assessments are Technology Readiness Levels, or TRLs. The minimum rating of "1" begins at paper studies of a technology’s basic properties and rises to the maximum rating of "9" for a system in its final form operating under mission conditions. However, there is no hard and fast rule, in DoD, NASA, or elsewhere, as to specific threshold TRLs for any given decision. Indeed, the DoD 5000 rewrite does not prescribe a required level of technology readiness, but instead recommends using TRLs as a tool to help assess the maturity level of the technology. What the DoD 5000 does prescribe, is using technologies demonstrated in a relevant environment, and having a fallback plan at a higher maturity level. In other words, if a far-reaching newer technology did not pass relevant testing, a lesser, proven technology could be utilized, as long as it enables the system to still achieve its critical performance requirements.

 

Recently, the GAO provided a draft report to the Department on the JSF that recommends extending the JSF development schedule to allow for further maturation of technologies. Their recommendation is based on their understanding that critical technologies will have inadequate levels of technology maturity, based on TRLs, at the time the EMD contract is to be awarded in Spring 2001.

 

The GAO report clearly articulates a strategy for systems development that we embrace, as evidenced by the revisions to the DoD 5000 I mentioned earlier. Indeed, for the most part, we are in violent agreement. Where we differ is on the definition and applicability of TRLs in the decision making process. As noted earlier, we, like NASA and others, see TRLs as but one input to the decision process, albeit an important one. And it is one that varies from program to program. In fact, as the NASA Director of Programs told us:

"NASA does not formally use nor rigorously apply the definitions of technology readiness level (TRL) to its systems developments."

 

He went on to point out that the use of TRLs is a management decision that typically differs from program to program and added:

 

"We generally commit to development of operational systems when all critical technologies have achieved TRLs of 5 or 6."

 

In addition, the model advocated by the GAO would require essentially a full-up integration of technologies, essentially a full-scale prototype, be demonstrated prior to EMD. This would be both prohibitively expensive and is we believe, the appropriate role of an EMD phase, which is the time during which the major systems integration takes place.

 

In assessing a TRL prior to EMD, we seek to assess whether the individual technology has been proven, or is close to being proven, in appropriate developmental environments. We do not agree that it is necessary, or even feasible, to demonstrate the full integration of the technology prior to EMD. Thus, if we take out the requirement to fully integrate the technologies prior to EMD, we believe that our TRLs on virtually all critical technologies will be at least at the 5 or 6 level NASA generally uses, but more likely at 6 & 7 at the time the JSF goes into EMD.

 

Further, it is important to note that the GAO arrived at their recommendation based on TRLs that the JSF Program Office and contractors used to grade the technology. Their original rating was due to the rationale that technologies were not being flown on the actual JSF platform. However, not all technologies must be flown to be demonstrated. Much of the JSF avionics and software, for example, can and should be demonstrated on the ground at a lower cost. Technologies that must be flown for adequate demonstration, will in fact be, or have been, flying on the concept demonstrator aircraft, commercial aircraft, F-16, F-22, F/A-18E/F and the Eurofighter. So, in short, although the technology will not be demonstrated on the actual JSF, it will be tested in a relevant environment – flown on similar aircraft. And the success of those demonstrations is critical to our confidence in our ability to successfully integrate the technologies during EMD. Therefore, the Department agrees that TRLs are an important measure, but alone, are not sufficient to decide when and where to insert new technologies into a system.

 

GAO also expressed concern that if we make a premature production decision, we could be locked into manufacturing processes based on an expected technology capability, thus creating the risk that if the integration fails, we will face exorbitant cost and time in redevelopment. We agree there is risk. And how the JSF Program mitigates those risks is the key. As I think you will hear from Dr. Delaney, the risk mitigation initiatives associated with JSF have probably been the most comprehensive and aggressive of any DoD program ever. Further, as I noted before, the rapid maturation of modeling and simulation capabilities has enabled the development and testing of a wide range of critical technologies that might not otherwise been possible and has played a key role in our ability to effectively assess the risks on the JSF program. Thus, any decision to proceed into production of the JSF, will carefully assess all risks against the fallback alternatives.

 

Finally, let me be very clear. The strategy I have articulated for the revised acquisition process that will be prescribed in the DoD 5000 rewrite, and which is largely being implemented on the JSF, represents a real departure from our traditional approach to systems development. In the past, we would consider technology development as part of the engineering and manufacturing phase. Now, we have a technology development phase before we make a commitment to proceed into system development and demonstration and, eventually, into production.

 

Mr. Chairman, Acquisition Reform has, as I said before, been made possible by a strong partnership between the Congress and the Executive Branch. It reflects our mutual commitment to ensuring that the government operates far more efficiently and effectively than has historically been the case. I do appreciate having had this opportunity to appear before you today, because as we continue on the successful path we have forged, we need the continued commitment and support of Congress. We also believe that it is important to let programs like JSF, that are demonstrating the acquisition and management reforms of recent years, have the flexibility to manage their programs and make decisions based on weighing the risks against cost, schedule and technology maturity.

 

I thank you and the committee for this opportunity to comment on Acquisition Reform in general, and as it relates to the JSF Program acquisition and development strategy. I hope the information I have provided will prove helpful.

 

I am happy to answer any of your questions now and certainly stand ready to provide any additional information the committee believes would be helpful in fostering a clearer understanding of this and other DoD programs.