Think of me and us as a resource to help navigate that. What i brought today for the purposes of an introduction, im glad to answer any questions about our body of work but i highlights pages to two testimonies and theyre on the table over there. One was a testimony in may of 2010 before this committee, and it was based on a report that came out in july of 2009. And we were asked to look out how much progress had sba made in implementing the Small Business Disaster Response and improvement act of 2008. Its a mouthful. Ill now call it the 2008 act. Very important piece of legislation. It was a good way to look at progress sba had made from basically the problems that incurred during katrina and rita and it was also what remained to be done. The other thing we did was extensive fieldwork looking at the response of the 2008 disasters, which were of a smaller magnitude of katrina or sandy. It was the midwest floods and hurricane ike in particular where we did extensive fieldwork and we could see well how sba had done and the response had improved, so thats one, you know, data point that i want to provide through that testimony. Then the other document is last month we testified before house Small Business on a response to Hurricane Sandy, and it was based on a report and updates the report. The report was issued in september of 2014. Here we looked at obviously a much larger disaster, and looked at the response. We saw certain deficiencies in terms of timeliness and deficiencies in terms of following through with plans instated plans to initiate other provisions of the 2008 act. And in particular three loan programs that would operate through private sector lenders, and so ill just to close up this statement and look forward to questions is that our report in 2014 on sandy had two recommendations. One was to better account for the early influx of applications due to greater use of electronic reporting, electronic applications. The other one had to do with really get do a documented evaluation of lender feedback on in particular the immediate disaster Disaster Assistance program. To really evaluate lender input and to move forward with a pilot. And this is something that goes back a number of years. Its one that it is important in terms of developing a capacity, at least testing how well a program of that nature could work in a future disaster. So for now, i say, again, thank you for the invitation. I look forward to the discussion. Great. Thank you very much for that body of work. Next well hear from andrea deadwyler. On behalf of our inspector general, i represent the dedicated men and women of the sba. The sbas Disaster Assistance program is a high risk program. I believe our investigations and audit recommendations are having a positive impact on the integrity of the program. The Disaster Loan Program plays a vital role in the aftermath of disasters to assist with rebuilding disasterdamaged properties. Following Hurricane Katrina the sba released several reports. Sense the gulf coast hurricanes sba hazardss addressed many of our recommendations. Sba controls to prevent duplication with huds. Regarding dupelication of benefits, our 2010 audit provided controls. As a result of our audit, hud and sba improved internal controls. When we conducted our audit in 2015, we found that controls were adequately designed and generally working as intended. Sba implemented an electronic application for Hurricane Sandy survivors. However, the office of Disaster Assistance did not anticipate the surge in workload, which resulted in a backlog of over 29,000 loan applications. Excuse me. Consequently the agency implemented expedited process for home and disaster loans based on Credit Scores and loan amount. But the expedited process for Business Loans did not result in any time savings. We have identified challenges with sbas ability to meet disaster performance goals. Contributing factors includes sbas need to significantly increase Staffing Levels especially in response to a largescale disaster as well as a need to mobilize and train staff quickly. Sba reported an improper payment rate of 12 in its disaster program, which is a significant reduction from the 18. 4 reported in the prior year. The reduced volume of approved disaster loans for one went from 2014 from 332 million compared to the 2. 8 billion in approved loans in 2013 primarily due to Hurricane Sandy. They also implemented multilayer reviews at a Distribution Center to identify proper payments. However, we also note that the improper payment rate continues to exceed the 10 level. Hence, we consider this an ongoing challenge. In closing, the oag acknowledges the challenges that the office of Disaster Assistance faces in balancing its mission to provide loans with the responsibility of ensuring prudent loan practices. Due to the impact and risk associated with the Disaster Loan Program, we will continue to emphasize these programs as a priority in our office. Thank you for the opportunity to participate today. I look forward to your questions. Okay. Thank you very much. Next is tee rowe. Thank you mr. Chairman. Appreciate the opportunity to be here to discuss sbas Disaster Assistance program. Im tee rowe the president of americas sbdc which suspects the Small Business development centers. When a disaster hits, were there. Were there because its our neighborhood, its our clients, its our community. And in every case and particularly with katrina, sbdcs have learned a lot. Our past state director in louisiana did an amazing job with our committee on Disaster Recovery helping people share best practices and really tear down our effort to coordinate with sba and improve the response. And i have to say from my personal experience during katrina, i was head of Congressional Affairs at sba, so i was there in the trenches with james. Maybe not as deep in the trenches, but i saw what sba went through and how theyve come forward. And my members of the sbdcs have seen that same change. In every disaster people are overwhelmed. And at the sbdcs, we pool together as a family to try to share resources to try and bring volunteers from other sbdcs to help set up the Disaster Recovery center. Because when you set up a Disaster Recovery center, we work with sba now. Theyre temporary because theyve got to move from place to place, so theyre there for about a week, and were still there at the sbdc helping the Small Businesses. And that process has gotten so much better. Our new york state director cant say enough great things about the work that james has done. I just was on a call with our southeast directors so theyre kind of the disaster specialists just because of the way Mother Nature works. And they truly appreciate both the changes that sba has implemented but also the changes in your bill because youre removing some roadblocks to the cooperation we try to achieve. For instance the ability of an sbdc to operate across state lines. When things were started i think when the legislation was written, it just kind of forgot about disasters. Your bill does a great thing in letting us in disaster situations send folks from across the country to help out. Its a great improvement in the way sbdcs will be able to assist Small Businesses. And i would like to talk really quickly because ms. Bennett mentioned something very important. While were there at a Disaster Recovery center and were helping people work through their disaster loan applications, were helping them retrieve information put their lives back together. Because as mr. Paulsen said the Small Business is the hub of the community, and what weve been focusing on more and more and we actually have two specialists in florida who work all throughout the gulf region. Theyre recovery specialists, but theyre really resiliency specialists. And we work so hard to make sure that the clients all across the country are prepared to recover. Because without that preparation preparation, youre just that many more steps behind. Now, ill just quickly sum up that the last thing we really appreciate section 102 of your bill, the additional awards to sbdc. Weve found in sandy how helpful that additionally fund was because even still three years after, were still doing recovery work. Its vital to us to be able to provide that longterm assistance in a recovery situation. With that, ill finish up and thank you so much. Great. Thanks to all of you for the comments. Now, we just want to have a open conversation following up on all these topics, so theres no particular format. Please, jump in whenever you have a relevant thought. My questions and concerns are probably naturally going to focus more in light of the katrina experience my experience, and also the Small Business side of things since were in the Small Business committee. I guess this thought or question is mostly for sba, fema, red cross, and sbdcs. How is your response different for catastrophic disasters whatever that means, sandies versus other events . Do you have a different rule book, a different playbook and where roughly is that line that you would distinguish between catastrophic disasters and other events . Anybody want to take a stab at that . I can go first and then i look forward to hearing what fema and the American Red Cross says. We are much more coordinated today than weve ever been before, so the major disaster declarations are handled by fema. Red cross is always around in every major disaster. Weve been on the ground. Well stay there for 60 days. Generally, we were there for two months or as long as theres a need from that perspective, but were well coordinated in our Recovery Centers where theres a Disaster Recovery center for the major disaster re erer declarations. Coordination between our agencies, we hiccupped a lot back during katrina rita wilma. Today, we have the framework in place. It may look like a larger bureaucracy, but its a much more efficient process. When gerilee and i first met we were discussing the difference between response and recovery. We figured that out now. Ten years later, were Mature Organization when it comes to these are the roles and responsibilities of the responders and the recovery players. Now we have Disaster Preparedness 3r5igsprepared ness operation teams so we can continue as we get in and out of the disaster the longer term effect from that perspective. Okay. Fema . Gerilee, you want to take a stab . Yes. Thank you, mr. Chairman. I would say we dont have a different playbook for a catastrophic disaster because its really important we have the basic plans and systems and teams in place for all disasters in that they practice on the smaller disasters and it exercises what they would do if there were a catastrophic disaster. If we designed things that we would do things much differently in a catastrophic disaster, we wouldnt be as ready because we havent practiced it that way. We have some plans for very specific highrisk scenarios that we Work Together clab collaboratively with our partners, so we do do that but those plans are really very much based on the systems and teams and all hazard plans that we have in place for all scenarios. Okay. Russ . The commitment we make for people to have a warm safe, dry place to go with their family, food to eat, someone to talk to about whats next doesnt change. We provide services beyond that in regular, big disasters. After sandy for example, we did case work with individual families trying to help bridge gaps things that the fema programs cant cover due to statutory limitations. We would try to bridge gaps. That one on one casework assistance is very labor intensive and long and something we probably wouldnt get to quickly after a catastrophic disaster. We dont have a number in mind for whats the difference between a catastrophic and a regular, big disaster, but i would say when something is like katrina, ten times bigger than anything weve dealt with before, that counts as catastrophic. Sandy was a big disaster. Certainly, if you go through any disaster, its catastrophic for you, but regular systems worked for that scale of a disaster. Okay. Anybody else . Well, i just echo what russ said that any disaster is big for you. At an sbdc level the playbook doesnt necessarily change center by center in a localized disaster. Where it becomes a problem is when you do get the larger disasters and you need the extended resources for the extended recovery. You know, at sbdc, you can absorb it on a localized level understanding that youre going to have to do that much extra work with the businesses that have been affected in your area as they recover. But when you run into Something Like sandy where, i think, sba had, what, 600,000 applications or 400,000plus is what we had in katrina sbdcs are literally working with hundreds of thousands of businesses in helping them with longterm recovery . And at the same time, while a year or two later, everybody thinks, oh, the disaster is over that was then, its still affecting the community. Its still affecting the businesses. Let me jump in one. One of the reasons i asked this question is i know the gao concluded about sandy that the sba didnt surge operations quickly enough, didnt sort of realize the scope quickly enough, so thats part of the reason im asking. Is there a metric where you get it immediately that this is another category and theres a surge that starts that would not be required in lesser disasters . So in response to the gao question, one of the things we did postdisaster, we always do an after action report. Weve shared that with your staff as far as what weve done. In regards to how we staffed up, we had 800 people on the roles. We went up about 200, 300 people as a result of the louisiana hurricane that predated sandy. We ended up with 2500 employees. Staff wasnt the issue. Its just because we didnt put them on board fast enough. At katrina, we didnt have a staffing strategy. We had 800 employees. We hired 6,000 employees in six months. Postkatrina, we have 2,000, 3,000 reservists that are on call, that are available. The timing of how quickly we on boarded the staff, that was really the issue internally. We were prepared to on board much quicker. The difference between the electronic loan application coming in sooner versus the traditional paper intake curve we tripped up there, but weve addressed that. Weve changed our sop. Weve changed an updated our Disaster Preparedness plans internally, so that shouldnt be an issue, if we have any type of disaster activity. The staff is available. Weve even taken another step where we have a contract in place that will supplement if we go beyond that 3,000 level employee where we can have them fill any gaps that we may have across the disaster program. Okay. Go ahead. Sure. It was sandy was obviously the biggest disaster since katrina, so it was a much bigger task then lets say the 2008 disasters. James said it wasnt a matter of having the planning in place to take into account the electronic applications and the speed of them coming, so that was definitely part of it and part of the delays. Where were at now is there have been changes at what we call at sba the playbook which is one of three major elements of the disaster process. Theres the Disaster Recovery plan. Theres disaster forecasting models. Weve seen a change to the playbook. James and i have talked about this and a liaison at sba. We need a little bit more assurance from them. It might just be talking us through the steps as far as how do these different pieces fit together to make sure that if there was another major disaster like sandy or that magnitude that the process would work out differently and that sba would be more ready to respond. Okay. Let me move to a slightly different topic, which was a huge frustration of mine after katrina and continues to be in general, which was that i saw in so many cases federal response, roof contracts debris removal, et cetera, focus on National Mega firms. And local Small Businesses were virtually completely left out. If they had any participation, it was literally five subcontracting layers down getting pennies on the dollar. As all of you acknowledged in various ways in your comments a big part of recovery is local Small Business recovery, right . So heres a huge opportunity to drive that through this work, debris removal, blue roofs whatever, and i saw so many cases after katrina where the locals again either were forgotten or what are you doing differently since katrina to involve far more local Small Business . I guess thats primarily fema, but certainly involves others as well. Gerilee, you want to start . I can get back to you later with specific statistics, but i can describe to you the approach changes we are taking. In order to be able to get in fast and provide that surge, we do still rely heavily at fema on standby contracts and on interagency agreements where we provide funding to the army corps of engineers. But i think what were doing differently in approach is we have those and we dont provide the full scope for the full scope of the disaster upfront. We asked that they get in and do early work and then transition to local Business Contracts as soon as possible, so we can get you more details about how that works and statistics afterwards. Okay. Anybody else . So postkatrina, we saw that as a challenge. We under. We met interagency. As a procurement goal, we met with fema and with the other federal agencies and we said, look, we need to focus in. As gerilee explained, the first step is they come in but we definitely make sure theres a focus of Small Business contacts. We can make the referral directly to the organization that has the assignment on how to get the work. That didnt exist prekatrina but thats something we have developed for all disasters since then. Okay. Let me just also make the comment. To me this is a problem outside of disasters too. To me theres been a trend for federal Government Agencies to deal more and more with mega contracts or bundling contracts that by their size have to go to mega entities. And i think its mostly easier on the bureaucrats. If you have one mega contract youre dealing with versus 100, its a lot easier within the government bureaucracy. I think thats a very worrisome trend. It is completely cutting out Small Business. Small out Small Business. Small businesses either cant participate or if they do, they are layers down in terms of subcontracting, getting pennies on the dollar. I think a lot of postdisaster contracts and work is a particular worrisome example of that. But i think its a bigger trend. Thats just my two cents. Id love for you all particularly small sba to look at the relevant provisions regarding this in my bill, s147. We rare that they use local subcontractors for debris removal or demolition and provide incentives to federal agencies to work with local contractors. Id love your very specific feedback on those provisions. And im guessing most of those provisions really could be implemented in some form or fashion by you if you wanted to do it now. So id love your feedback on that. Any other comments on that in that general area . Okay. Let me ask the ig based on your audits and investigations of sbas Disaster Recovery programs, what are the outstanding biggest concerns that you have and what areas have the disaster programs been vulnerable to fraud or waste or abuse, and what are your top line recommendations . [ inaudible ]. Im sorry. [ inaudible ] waste and abuse in those programs. I think our investigators get referrals from many different sources. And they diligently look into any allegations of fraud. They participate on task force with regard to especially the big disasters. And that was a multilayer question. As we speak what would be your top line recommendations in that whole category . Top line recommendation well one of the big things we talked about and its been talked about with regard to the work as well and thats the gearing up in emergency. As james mentioned, theyve implemented a lot of different results to make sure theyre prepared for future disasters when it comes to receiving those recommendations. I think in sandy they had just started the electronic application and got so many more than they anticipated initially. So it took a while to address that back log. But i think with the implementation of the rapid, expedited process, i think they should be, and with the new plan to ramp up more quickly. I would like to think theyd be able to address those issues. We just have to wait and see. James mentioned every disaster is different and the approach is different. I think we just have to wait and see. Okay. Let me highlight another concern, and its probably outside any of yalls specific focus because its about the Flood Insurance program which isnt feem amafema but its not direct Disaster Response. One big issue weve seen and focused on in Flood Insurance programs is Participation Rate. Theres been very low Participation Rate. That, obviously is a major problem and issue in terms of solvency of the program and affordability of the program. By some estimates like a study in 2006 said only 49 of homes in special flood hazard area had Flood Insurance. So were having half the Participation Rate we should. I think this is a continuing problem. Weve talked about it. Weve talked about it in committee, in the Banking Committee with administrator fugate. But i have not seen those rates rise dramatically. I havent seen studies that document that. Ms. Bennett, do you have any observations on that or maybe fema can follow up and give us a status on work in that area . Ill just mention that fema has taken the concerns of the Flood Insurance issues postsandy very seriously and weve established a task force thats focusing on revamping the way the program is operated and making sure its customer focus and customer friendly. We have an ombudsman function to help People Better understand how their par tasipation, how they can participate in the program and make sure they have a place to provide feedback about the program. As to specific efforts to address Participation Rates well get back to you on that, sir. Okay. Let me start wrapping up. Thank you all again for your participation and ongoing work for this discussion. I want to highlight something i mentioned in my opening comments, which is some recent legislation weve developed and worked on in this committee. I just mention s1470, the rise after disaster act. Id love you all to continue to work at those provisions and respond and react pro con, anything in between suggestions. Its anything in between but its still moving through the process, and also the National Disaster relief tax act we introduced that last month. Take a look at that as well and please after any suggestions you might have. This is obviously ongoing work for all of us. And ongoing discussion. Im sure well have plenty of followup, including the specific things i mentioned as followup for the record. With that well be adjourned. Thank you very much. On the next washington journal, your phone calls and reaction to the fox news republican debate. After that, thom file and philip bump discuss voter turnout and demgraph ics from president ial and Congressional Elections since the late 1970s. Plus your Facebook Comments and tweets on washington journal live at 7 00 a. M. Eastern on cspan. Sunday night on q a former emergency manager of detroit kevin orr talks about detroits Financial Issues and his job overseeing the largest municipal bankruptcy in u. S. History. If detroit had taken that 1. 5 billion in 2005 and 2006 when the stock market went down to 6700 and if it had just invested it in an index fund the stock market is now trading at 18,000. Almost three times what it was. They not only would have tripled their money but could have paid the pensions in full. Used to be a practice of giving pensioners a 13th check at the end of the year, including to the 12 theyre do. They could have fixed themselves if there had been some sober management going on. If you have some strong leadership and some focused leadership you can resolve these problems but it takes a lot of effort. Sunday night on cspans q a. At the brookings institution, military analysts and defense contractors discussed new technologies that have the potential to transform how wars are fought. Much of their discussion focused on 3d Printing Technology and reforms to how the government procures defense contracts. This is an hour and a half. Good morning, everyone. Welcome to brookings. Im Michael Ohanlon with the Foreign Policy program here. Weve got a wonderful event here today talking about Defense Technology. And im pleased to have a number of members of our National Security Industrial Based working group, from a number of americas greatest companies, thinking about Technology Innovation across defense and nondefense sectors, and ill introduce the panelists in just a moment. They represent companies that have been part of our group in an important way for a number of years. In some cases more recently than others, but a lot of expertise on several topics. Im going to say a brief word of introduction about the panelists and the topic. Let me do that first. What were trying to do is look at a few specific areas of Defense Technology and innovation. A lot of you have heard of socalled 3d printing or Additive Manufacturing. Were also going to talk about propulsion technologies which in some ways are, you know, a longstanding interest of the u. S. Military, and sort of a traditional and in some ways Old Fashioned area of technology, yet one of very rapid and ongoing innovation. Very central to the performance of our military forces as well. And were going to talk about software and the ways in which systems, electronic systems, countermeasure systems that have heavy electronics and i. T. Component have to be thought about today, have to be improved. All of this relates clearly to some big themes in defense, budgeting, Defense Strategy, to what extent is Technology Changing so fast that we need to emphasize pursuit of a revolution of military affairs perhaps even more than we have been. To what extent do we need to get on top of a new wave of innovation and make sure our adversaries dont do it first. Or what extent is this an ongoing evolutionary process and a lot of exciting important things are happening but we dont need to get overly excited or disruptive about our approach to defense resource allocation. And the broadest of all senses it relates to the sequestration of the Defense Budget and whats going to happen to some of the innovations were trying to facilitate or promote if indeed, when Congress Returns in a few weeks it cant figure out some way to stave off the looming budgetary showdown with the president and the possibility of sequester or even shutdown, which these things are perhaps, in a cosmic sense, they dont look all that horrible to the average observer because it typically involves 5 , 7 , 8 of the Defense Budget, but the disruption on programs can be much greater than that. Whether we get to all those topics or not in the opening, we hope youll raise some of them in the discussion period. Were going to speak amongst ourselves. Im going to ask each of the panelists a general question about one of the areas of technology, and well talk up here before going to your questions. Let me say a bit of a word about each one. Sitting next to me is Brennan Hogan with the Logistics Management institute. Or lmi. Shes going to lead off the discussion of 3d printing and ill ask her because shes the leadoff hitter to say more to explain what this area of technology is for those of you who dont know, but its an area thats being touted as a remarkable, important area of innovation that, according to some people, could change everything. Because we could produce technologies, manufacture technologies in ways that are entirely different from ever before, relying less on traditional factories. To what extent thats partly hype, to what extent thats real, to what extent it applies to more areas than others, shell help us understand. As will jim joyce, who will speak after her and is seated immediately to her right. And he is with deloitte and has spent a great deal helping the department of defense think through how to take advantage of opportunities from Additive Manufacturing, again, in realistic ways. This is not future talk were going to do up here for the most part. Maybe a little bit of that. Were trying to think practically about what can dod do in the short to medium term to take advantage of these areas of changing technology. Just to the right of jim joyce will be dave logan from bae. Another outstanding defense company. And he is going to talk about software and Information Technology and countermeasures. Hes sort of going to be the electronics guy, and ill look to him to explain how he explains this area, what part of the Defense Budget and sector hes most focused on and what he recommends. And finally, jimmy kenyan, to my far right, with pratt and whitney. Hell talk about engine and Propulsion Technology and also, our bryce harper of the team, have a chance to say whatever else he thinks needs to be done to clear the bases and get ready for your questions as we try to preserve the lead that the nationals enjoy in the American League east and america enjoys in Defense Technology but neither lead is safe if we get complacent. Thats the general framing. Thank you for your indulgence as i went through a bit of background. Now i would like to begin with brennan and really ask her not only to help us understand what 3d printing or Additive Manufacturing is, but to help us understand what its realistic prospects are in the short to medium term for helping the department of defense. Over to you. Absolutely. So first of all, thank you very much, mike, for having me. Its wonderful to be here today. Beautiful day outside. Luckily not too humid. And i appreciate all the baseball analogies. Im sure we can keep those going. Quick, to baseline, Additive Manufacturing is not a new technology. Its been around for over 30 years. There have been numerous organizations both in the private and Public Sector that have been using it. For those of you that arent familiar, though in the audience, how many of you have gone to build sand castles at the beach . Either recently or in the past. A few of you. Okay. So you can build a sand castle two ways. You can either fill up the bucket with sand and then put it down and then row have parts of the sand castle or an entire sand castle if you have a big bucket. The other way is you can put sand and water into a bucket and then slowly drip it, a drip castle effect. Layer by layer. At the end, you have two castles. Theyre similar in structure, but they have different makeup and their components are a little different but basically the same. That is what Additive Manufacturing is to subtractive manufacturing. Your old way of making a sand castle and a new way. With that, what were looking at at lmi is we understand the dod, especially their logistics and supply chain, and one of the things we recognize is just because a new technology can provide a service like printing new things doesnt mean it necessarily should provide that service. So were trying to help the department of defense understand at the strategic and policy level what are all the implications of applying this technology. And its not just making sure that you have the machines to print the material or to print the actual parts. Its not just making sure you have material that is chemically able to produce the part and make it the strength and the heat indices that you need, but its what are the training and workforce implications of it. What are the policy implications . What are the standards you need to apply . How are you going to assure quality . How are you going to test these parts . Do you test all of them . One of them . Some of them . Do you test them in the field . Do you test them before they get to the field . What are the implications on essentially turning the supply chain on its head . And our traditional supply chain, you have the parts that are manufactured and then you send them to the depot and they go on to a piece of machinery or the field. With Additive Manufacturing, they have started, the army has started deploying the technology so you can meet the need where it is in the field. Does that work, though . And what are the skills that you need in the workforce that is doing that in the field . So there are a lot of different implications. Another key area is the security piece of it. So if you have if you are printing parts using Additive Manufacturing, you have to have 3d data. The department of defense does not own all the data for their parts. A lot is 2d. What is the conversion process . Is it worth it, and then who owns the data . Is it the department, the oems, someone else in between, and how does that all fit together . Then the cybersecurity aspect, were all familiar with that. So if you have all of this data out there, that can produce critical parts to key pieces of machinery or components, how do you secure that so it doesnt fall into the wrong hands . So, that in a very quick nutshell is what were doing and looking at and how were trying to help the departments think through the actual application of the technology, whether or not its disruptive and whether or not that disruption is effective. Let me ask you one quick followup question and a segue to jim. Thank you for that background. And by the way, oem, original equipment manufacturer. Sorry. So many acronyms. Were going to try to connect, as brennan did very well, some of the very Innovative Technology areas to practical conversation. So let me ask how much of the dod budget could realistically wind up in the Additive Manufacturing realm lets say by 2020 . Just to be clear, we all know that the procurement budget for the department of defense today is about 100 billion a year. The Research Development test and evaluation budget is around 70 billion, and the parts of the operations and maintenance budget that are involved with spare parts and things that involve purchases of hardware is around 30 billion so were talking about 200 billion a year enterprise. Is Additive Manufacturing so revolutionary that were going to see tens of billions of dollars produced in Additive Manufacturing in the next few years, or is it a much more modest incremental effect . I would not venture to guess a number. Im not quite comfortable doing that yet, but the most effective way to apply the technology is in a modest, incremental way. One of the ways were helping doa, the defense logistics agency, and they supply all of the parts to all of the services. Hundreds of thousands of parts every day. Some of those are very, very high in demand. Some are low in demand. Some you dont even need. You might need to replace a part every 10 or 15 years. At that point, the original manufacturer may not have the tooling to create that part. So there is a need or a potential use for Additive Manufacturing, but were trying to determine where it might be most effectively applied. Where we think and this is a project were working with doa on now, is evaluating which parts can be produced with Additive Manufacturing and still actually have the same functionality they originally had, and with that, is the demand signal appropriate to print those parts . So, and then, again, do you have the data . Can you actually print it . Do you have the type of material and machines and 3d process to get the part that you need at the end . So i think that our recommendation is that it is a modest incremental and more of a 10, 15, 20year timeframe, but there are a significant amount of parts in the hundred thousand range you could potentially print if you go through this whole process of evaluating the application of it. Excellent. Jim, if i could turn things over to you to pick up where we are in the conversation, and with one ongoing question, how big of a deal is this . And whats going to happen over the next 10 to 20 years as we see 3d printing come into its heyday. I would qualify it as an incremental deal for right now. But i would qualify my qualification by saying a couple things to bear in mind. The first is that the next hot toy at christmas in the next two to three years is Additive Manufacturing. And sort of democratization of the ability to manufacture things. The breaking of the tyranny of scale of Capital Machinery and people in manufacturing will be the basis of the profound revolution. It wont be such a technical revolution as a logistic revolution, and Additive Technology is a chief factor in that, and thats going to break the tyranny of scale. Now, what turns the spigot on . Whats that hurdle we have to get over in Additive Manufacturing before we can unlock the sort of logistical revolution . Its really part certification. So if i make a part on my machine, can i replicate that process in all its detail and result on another machine and be sure that i did it . Can i predict what the finite attributes and functional characteristics of that part are before i make it, and then when i send it somewhere else to be made. Once you crack the code, and it has been cracked for some materials but not a lot of other ones, you really unleash this technology. Why it will be propelled is because its a costsaver, number one. And number two, it transfers resources from the tail to the teeth. So as an analog, i would say the Industrial Revolution essentially tethers maneuver units to an Industrial Base. Railroads, pretty significant supply chains, roads, et cetera. If you go preIndustrial Revolution and you look at the way a ship of a line operated in the napoleanic navy, it essentially once it was at sea, if it had a good carpenter and a good metal worker, could stay at sea indefinitely, making ports and calls to pick up material to repair the ship, modifying the ship, transforming its abilities. In fact, when a new captain took over a ship, it was the first thing they did was talk to the carpenter, redid the rigging and sails to try to get more speed out of it. So what Additive Manufacturing starts to do is it breaks that tether to a heavy Industrial Base required to support maneuver units. How does it do that . Well, if you look at a machine shop aboard a ship, a field repair depot, they have a certain envelope of capabilities that they currently have to manufacture and repair things. What Additive Manufacturing does, supported by other technologies, is it greatly increases that envelope because youre working more from raw material than you are from already fabricated parts that you have to predict their consumption, have them on hand, carry them. So the revolution comes when you can certify the result of the Additive Manufacturing on a repetitive basis. It comes because of the logistical pressure. It takes off newer units, but it also comes because in an environment of constrained resources, youre likely to see innovation going on in the way that it used to be done, again, which is with maneuver units in the field. For example, with Additive Manufacturing, many of the socom will deploy with it and theyve come up with a number of innovations that includes things like the bone to keep antennas apart. Field hospitals needing unique equipment to treat wounds, printing specialized clamps and surgical guides to take care of those as well. So youve got this logistical component to it, this innovation component which is really, i think, tremendous. And there are sort of First Derivatives of both of those, which is theres this notion of hacker. So i have been around for a while, and i can remember cutting down grenade launchers and putting pistol grips on them so they could be used as a sidearm. That sort of innovation, all of a sudden, not only has a much wider capability of manufacturing options, but also through social media and communication, can be spread a lot more quickly. So i think youll see a lot of innovations start to come from the units themselves and bubble up that way. So let me follow up with you with one quick question before i go to the next subject and with dave. You emphasized in a very vivid way, very helpful way, the benefit for expeditionary units of Additive Manufacturing. Is that the primary benefit . Or are we also going to see traditional manufacturers here at home move in this direction just because they can somehow make something more economically, more flexibly with less tooling in their factory, or is that whole set of changes going to be more gradual than the benefits to the expeditionary units. That change is going to be more gradual. Simply because manufacturing Accounting Systems work against Additive Manufacturing. The way you can equate the benefits of Additive Manufacturing runs contrary to the way a lot of traditional manufacturers calculate economics. They have to take a broader perspective to it. What i think will happen is youll see the rise of innovative individuals and companies that are producing, beginning with obsolete parts, and then frankly going into mainstream parts as we start to sort out what is protected, what isnt protected legally. And manufacturing increasingly becomes a commodity where folks can just get in. They dont need as much money. They can set up a very capable machine shop and manufacture things that traditionally were done by very large defense companies. So i see that change coming as a result of internal Competitive Pressures within the Defense Industry as opposed to an evolution or revolution in how Large Companies act. Thank you. And dave, if i could go to you. Youre going to now bring to the discussion a little different area of technology, but of course, jim and brennan before have been talking about how Additive Manufacturing is really part of a broader set of changes, and so maybe you can help connect what youre going to talk about to what we have been discussing. I know youve got the whole i. T. Software and Adaptive Software world and subject matter to address. Please help us understand that, a little introduction and how you see the opportunities going forward. Sure. So i think that many of the motivations for these adaptive, sometimes called Cognitive Software systems, share a similar inspiration. We want to be able to reduce the cycle times, we want to provide capability much more quickly than we have had to in the past. In the past, we were able to analyze, for example, threats that are out there in Design Systems that give us a competitive advantage. Work through our acquisition cycles and get out there with some of that advantage preserved. Based on the time constants. Our adversaries are increasingly migrating to commercial technologies. Like us, theyre moving away from intensive exquisite kind of Hardware Solutions and driving more of the content in these Weapons Systems into software, which makes them inherently more agile. So were doing similar kinds of things, right . If you look at radio systems, if you look at Electronic Warfare systems, were getting digital closer and closer to the front end of the systems. Were also investing in sort of all the buzz words you hear about modular architecture and spiral development. But thats only going to get us so far. Were still going to get to the point where we are fielding capabilities that are going to run up against environments, threats, that are ill characterized at the time of design. And so the thought here is that you architect systems that, you know, draw from the cognitive kind of analogy here where they have an ability to sense the environment. Maybe ill motivate this for the communications example. So if you were to take a radio of 15 or 20 years ago and crack the lid, even a radio like you have at home, what you would find is circuits, transistors, ics in there. If you were to look at the state of the art radios today, most of the functionality that they provide, actually lives in the software. Softwaredefined radios. And so we have the ability to upgrade them over time very quickly. But when we put one of those out in the field and maybe we get exposed to interference that we didnt anticipate, the desire and the potential of things like cognitive learning is to go out and figure out mitigation strategies in realtime. Hence the environment, explore options within the trade space of the as Design System to configure it in different ways and be able to mitigate that interference whether its from an adversarys jammer or whether its just environmental interference that youre running up against, and learn over time which approaches actually work. And do that in mission time as opposed to acquisition time. So this is, you know, probably falls broadly under the umbrella of autonomy and some of the key areas of investment that the dod is pursuing. Were applying that across many of our products in our portfolio. The radio example is one example that is real. And the idea there is that we can come to the field with systems that are inherently adaptable. Most of that adaptation right now we see occurring in the software base. You can build systems that characterize the environment, understand how they can operate in different configurations and optimize their configuration in realtime. But you could think about taking that same kind of design pattern and asking, is the limiting factor on the performance of the system an algorithm or configuration, or might it be, again to the radio example, might it be the antenna were actually using . That was designed much earlier. If it is the limiting factor, then we can look to things like potentially Additive Manufacturing to be able to rapidly prototype, potentially even in field situations, alternatives that we could then integrate into the system and allow the cognitive processing to figure out how to better exploit a more tailored version, for example, of that antenna. So this sounds like a realm of activity that could influence a large fraction of dods systems in the field today, even though it may not im trying to, as you know, simplify by using the amount of dollars at stake as one of my metrics for the conversation to help unify the different themes. It sounds like youre talking about the wide array of systems that bae and other companies manufacture. So the software and electronics guts of most of our advanced weapons today are the realm of discussion here. Yeah, as i said earlier, increasingly, the amount of content is driving towards the software content. Theres no magic bullet in the sense that, you know, with that adaptation you inherit other challenges you have to address. How you make sure the systems as theyre adapting in the field continue to provide the behaviors and performance you want. So there are some issues that still need to be resolved, the predictability of the performance, the stability of the performance, those kinds of things. When were in an environment where our adversaries are able to increase their cycle times or decrease their cycle times very quickly, we need to respond just as quickly. Could i ask, too, one more question that occurs to me, as i hear you explain this subject is the difficulty of writing Good Software for modern Weapons Systems. The complexity is what youre talking about a partial response or solution to that in the sense that are you maybe im getting it wrong, but it sounds like youre talking about an ability to continually modify and adapt and therefore not be locked into the system you started with. That could be beneficial if your adversary did things you didnt anticipate, and it could be beneficial if you made mistakes in the original incarnation, i dont mean bae, but in general, if there were Software Problems or other problems, that we could fix them more easily as we discover them in the field. Is that a fair i think what we see is many of the software challenges we find today are complex systems that need to be implemented. I dont see it as a technology thats going to make our Software Better than our coding disciplines, but there is often a challenge associated with how well we have characterized the objectives or the desired performance. At some point, we have to lock that down. Today, thats locked down in a fairly ridged kind of way. I see this as an opportunity for us to have a broader ability to adapt perhaps to environments we couldnt perfectly anticipate. Thank you. Jimmy, pratt whitney, very important Engine Manufacturers across the defense and civilian sectors in the United States and the world today. You know as much about engines as anybody. Youre kindly offering to help us understand trends in engines and propulsion. Ill turn it over to you. Thank you. Thanks. It builds on what we have heard already. As an engine manufacturer, thats what we do, we make jet engines. We use things like software, and we work on how we improve our software, make our software more adaptive. We look at techniques like Additive Manufacturing and how we can make our jet engines faster and better and less expensive. But at the end of the day, we also see this adaptability, if you will, rolled up at a higher level. But i think to really understand it and to put it in context, i want to talk a little bit about Defense Strategy. What were looking at is in 2012, the dod released what was at the time a very new and different Defense Strategy that called for, among other things, a smaller, more agile, more flexible, more technologically advanced force. And now even as were transitioning toward the third offset strategy, we see a lot of consistent themes there as the department tries to get more and more out of the systems that it buys and fields. Were seeing the same thing in propulsion, in jet engines for aviation. And thats important. If you follow along, of course, i do jet engines because i love the thrill of the roar when the jet engine goes. But it is a bedrock of our National Military strategy, and really part of how we do power projection around the world. And aviation has advanced tremendously over the years, but every really significant breakthrough weve had in aviation, especially in tactical military aviation, has been built upon an advancement in Propulsion Technology. Right now, as a result of investment in the strategy, were on the cusp of another breakthrough with the introduction of adaptive engines. So what do i mean by an adaptive engine . Let me give you an analogy, a timely analogy. If you watched the tour de france, you have watched cyclists from around the world trying to negotiate a 3,300kilometer course across france. Widely varied terrain, sometimes its flat, sometimes its hilly, sometimes its plain old mountainous, and all of these guys have the same goal, which is to get there first. To get there first, they have to be efficient because they have to sustain themselves and their bikes 3,300 kilometers. Thats a long way. How do they do that . Well, they manage, if you will, the gears on their bicycles. They change the gears. They optimize the performance of the bicycle and the performance of themselves to adapt to whatever the terrain offers wherever they are on the course. And thats how they make it work. They do it obviously at a level that we cant, but thats a different discussion. Were trying to do effectively the same thing in jet engines. And were partnered right now with the air force on a Major Program called aetd or the Adaptive Engine Technology Development program. Traditionally, a jet engine consists of two main streams of air. You have a core stream, which goes kind of through the center of the engine, and its primary purpose, it produces thrust, but its to power the rest of the engine. Then you have bypass. Thats really what produces trust. When you design an engine, its a single point design. You say what is the most stressing requirement i have to meet, you make sure the engine meets it, and everywhere else, you take a penalty, usually in efficiency. It means range, pay load, fuel burn, all those sorts of things. What were doing in this adaptive Engine Program is introducing a third stream of air that we can modulate, and by modulating it, i can adapt or optimize my performance no matter what the flight conditions are. And by doing that, i get tremendous improvements in Overall Mission capability, mission flexibility, range, payload capability overall. Its a big deal to be able to do this. Now, that doesnt come without challenges, as you can imagine. Adaptive engines arent new. We have been doing it a long time. We invented or recreated the j58 in 1958, really the worlds first adaptive engine, and the reason we did that is so that airplane could take off mach zero taking off and propel to incredible flight speeds sustained above mach three. More recently, were getting ready to fuel the f35. If you are watching that, you know the marine corps version the f35b is able to operate in conventional flight as well as transition into a short takeoff and vertical landing mode. What happens when you make that transition, you introduce profound changes in how the engine operates, but the engine adapts to that. By adapting to that, is able to seamlessly accommodate the changes in what its doing. Today, whats different about what were doing is where you look at those two programs or those two engines, they were meant to adapt to specific parts of flights whereas this aetd Program Adapts everywhere. So it adapts across the flight envelope and really gives you the full benefit of efficiency throughout. You can maximize the capability of your airplane. It has a lot of technology challenges. We had some design and architect challenges. We have a constrained configuration. It must be three strains and fit in a certain size. By doing that, it forces some tradeoffs you might have to make. Were pushing the envelope on temperature. We have technical challenges on how we work on the materials and codings and things to withstand the temperatures. We have challenges in software. We have to work on the software. Challenges in manufacturing. Some of the parts are very complex. They require some new ways to make components, and we evaluate those, and in the bigger scheme, we evaluate all sorts of advanced manufacturing techniques including Additive Manufacturing. And then, of course on top of all the technical challenges, were doing this in a time where we have tight budgets and a lot of things going on in terms of acquisition policies and procedures. But were being very successful. Were being very successful. The Program Overall is proceeding well. Our design is proceeding well. Were projected to meet all of our performance goals and cost targets and those sorts of things. On top of that, we are right now working with the air force to plan the next program, the Adaptive Engine Transition program, or aetp if you like those acronyms. Thats a 2 billion investment by the air force with ourselves and ge to develop and mature these designs even further. The reason i mention is that it underscores the importance of this Technology Going forward. And as a recognition of the importance of Adaptive Technology at the how do i make things work level all the way up to the system level as part of this overall Defense Strategy. Its really exciting. There are a lot of great things going on between adaptive, Additive Manufacturing, Adaptive Software, and how these play into the systems we field, and i think were on the cusp of really big breakthroughs that are part of the Defense Strategy that emerged just a few years ago. Thank you. This sets up, i have one more broad question. Maybe a couple of smaller derivatives of that. I would like to broaden the scope. You have done a great job of explaining a certain number of specific Technology Areas, but i would like to ask you to reflect on what it all means in terms of the overall character of Defense Innovation today. Are we in a period of revolutionary change . Are we in a period where there are a lot of exciting things in various specific domains but they add up to sort of more or less continuous rapid evolution . Thats going to have implications on how to think about the Defense Budget, whether we should be fundamentally rethinking how we allocate resources, whether we should be you mentioned the third offset. And to explain, this is the idea that now at this day and age, we need to think about how to take advantage of our Technology Areas of excellence just as we did with Nuclear Weapons in the early cold war period, just as we did with socalled air land battle and precision strike in the late cold war and desert storm period. The third offset would ask to what extent can be do the same kind of thing with the rise of china and iran and cruise missiles and other kinds of threats to our systems and take advantage of a lot of the things were hearing about today to give america yet another leap forward in technology excellence. Maybe you would define it differently. Im going to invite you to in a second. But the question really, and i would like to just work down the panel on this and ask anybody who wants to venture an opinion, how do you think about where we are today in 2015 in Defense Innovation . You know, viewed in broad historical sweep. Is this a period of revolutionary change or is this a period of sort of important but evolutionary change thats more or less continuous with what we have been seeing in the past . New things are constantly happening, but the pace of change is similar to whats been the case in the past . So im not sure if thats, you know, an overly philosophical question, but it has real world implications. Thats why im putting it on the table. Ill turn it over to you, my friend. I think that if we think about just generally the Way Technology has evolved in the last ten years, you think of the invention of the telephone and how we have gotten to smartphones but then the invention of the cell phone and what we have gotten to today with Handheld Computers in our pockets. Things are moving at a much quicker pace than they did since the Industrial Revolution. The other part of it is that i think there is a recognition that with all of the problems that the Defense Department is facing with constrained resources, transitional workforce, you have a great deal of people who are retiring. Theres a Knowledge Transfer issue. You also are faced with new threats abroad. The changing landscape of Foreign Policy, National Security, isis, rogue foreign states, all of that. You cant just throw technology at the problem. Thats not the solution. Its not you cant throw money at the problem, you also cant throw technology at the problem. I think that there is the potential for revolutionary change. For it to be most effective, it should be a careful and thoughtful and considered evolution and it should take into consideration from a strategic level, all of the implications across how you support the war fighter and how you support the mission and how the new technologies whether it be new jet engines or Adaptive Software or Additive Manufacturing or nanotechnology or different ways of securing our cybersystems and how you do those in a way that is actually considerate to the mission youre trying to support and the new threats that you see both internally and externally. So i think there is definitely a potential for revolutionary change. But in order for it to be considerate, it should be an evolutionary change. So the revolution might be what you get when you look in the Rearview Mirror but its not the goal you set out initially . You dont try to make a revolution. Things like what jim was talking about, one of the key factors where it might be revolutionary with Additive Manufacturing is the innovation aspect. When you deploy a machine in the field and have the capability at the point of need, so at an outpost base or depot or on an Aircraft Carrier or on a submarine or in the International Space station and you can actually create things that you didnt already have, because you have realized that you have a need for them and they didnt exist in the supply chain and now you have this new technology so that you can create them and use them right away, i think thats where the revolution could potentially come from. Thats where we see the greatest potential currently. I think the evolutionary change for things like determining which parts out of the hundreds of thousands of parts doa provides to the services are the ones theyre actually going to additively manufacture is more of an evolutionary change. Jim, if i could turn to you for the same question, where do you see the current pace and character of Defense Innovation in the United States today . I would characterize it as were on an evolutionary path. But we better get on to a revolutionary one. There are structural impediments within the procurement process, within the funding process, within the way we look at r d, that really keep us from the speed and scope of innovation, this potential is there. Thats been recognized among certain corporations that ge, for example, saw that their household products were taking too long to develop. That they didnt really exactly fit what customers wanted, so they set up whats called a hacker space, which is a combo of a playpen of machines for people to try and innovate. Youll see these dotted around major cities now. So there is a sort of democratization of ideas, of manufacturing capabilities, innovation that is really what is driving the next wave in the commercial economy, and the revolution will come, i believe, on the defense side when they start to tap into that. And the best ideas can come from anywhere. So one of the ways that i talk about it is, i spend a large part of my earlier life disagreeing with people who thought the worker should control the means of production. Now, the workers do control the means of production, and we have to recognize that and unleash that. So that the best ideas, the innovation, the adaptability isnt coming through traditional hierarchical organizations and structures. Its coming up through a bubbling up of these new innovative very freeflowing ideas, and oddly enough, as i work with these hackers, one of the things that comes up consistently is a lot of them are former military. Usually from some kind of a socom background where the value of just getting stuff done is extremely high. So i think were on a path which is evolutionary. I think we need to get on one which is revolutionary. And i believe that comes when we start to relook at the way were fairly hierarchical and rigid in the way we innovate and procure. And that needs to change if we are to really take advantage of the potential of the countrys economy and the people. And this raises the subject of acquisition reform which is Something Congress is trying to work on this year so i hope we come back to that later in the discussion. In the meantime, dave, same question to you, how do you describe the nature in broad historical perspective. I think there is an opportunity and a compelling need for us to accelerate the way we are driving new capabilities, leveraging the technology. But the challenge is we need to be more deliberate around the way we are experimenting with the technology in the hands of the war fighters. And the dialogues im having with the leadership in the dod, there is a renewed sort of enthusiasm around taking Emergent Technology and the war fighters getting them together putting that recipe together and doing some experimentation. Were trying to figure out, what does the potential of the technology hold . But in many ways the Technology Like myself, i dont anticipate how they want to use it. They are far better ways of using that i can conceive. It is this brainstorming process that allow you to adopt the evolution of the technology the evolution of the techniques and technology that youre going to employ and the capability to feed that back in the acquisition process. And basically tighten up that cycle time. So it is a thought around the coevolution of the solution where the technology and the war fighters are working together through experiments to drive new capability out into the field. Do you have an example of the kind of thing you could be talking about, just a practical way to think about it . Yeah. A good example of that. So one of the other areas of technology is multisensor fusion of data where you take feeds of data from radar, imaging sensors, all kinds of different sensors and bring those together. And typically the technologists will want to wring every ounce of information out of the sensors we have there. And what we find when we engage more strategically with the operators is first of all, that is a fairly attractable problem, to try to get all of that information out of every sensor all of the time everywhere, right . But there is this nice sort of positive feedback when working with the operators, they dont think about the problems that way, they think about areas where they need more information and less information and tips and cues from one area to the other. And it drives a different thought process around how you architect things when your customer, the war fighters here, visualize and conceptualize the environment differently than where the technologists would go which would maximize sort of everything in the capability. And listening to you two, i thought of armed drones. Because armed drones were something that the air force didnt want to do a lot with in the traditional period of the 1990s and it took a war environment which was sort of the real world version of experimentation and evaluating war fighter need to push first the cia really and then ultimately the air force and the services to overcome the bureaucratic resistance to think creatively to bring together technol gists with the far fighters. But were not going to have as much fighting to do, god willing, in the next five, ten or 15 or however many number of years so we have the innovation without the war time push. Is that a fair example . I think that is a good example. And jimmy, same question to you. But let me precede it with one vignette from an event we had here in april with bill and frank kendall. Frank kendall is the undersecretary for technology and logistic and bill lynn the former secretary of defense and now ceo frank went first and i asked him how would you evaluate the strength of the american acquisition system today and he said it is good. We make the best weapons in the world. And i would say it is a bplus, maybe an aminus. Obviously he is pushing reform, and im not saying hes complacent but he thought we were doing well. And bill lynn got up and said i agree with secretary kendall for major platforms and maybe for engines. He didnt say that but im surmising that is what hes thinking about. But i dont think we do well with electronics, where Adaptive Software might be relevant and on that kind of a thing we need the revolutionary reform. So im blending here and paraphrasing. But to put the question to you, is it fair, because were hearing a couple of different things, this is a period of rapid innovation in some sectors and it should be even faster, but youre talking about ongoing improvements in propulsions your company has been doing for decades. That strikes me as impressive but not more rapid than five, ten, 15 years ago. So help me understand, is the pace of innovation fast paced in some areas and slower in others and how should we think about this holistically . I would argue that would argue that the potential for revolutionary advancement is absolutely there. And i think weve heard that already with some of the things weve talked about. Where we are though is we have an acquisition system that is ill suited to deal with that. Why . And you can assume it up in one word and that is complexity. All of the things we talked about this morning introduce complexity and other things that introduce complexity. We heard about the various things you can do with Additive Manufacturing. How do you manage that strategic strategically that adds complexity to it. Everybody would argue the more software, the more complex and therefore Software Means complexity. The engines were talking about are more complex. And when you look at all of these things together and in a whole myriad of other technologies and other things were doing it adds complexity. And add to that globalization of of the Industrial Base. Globalization of the structural base and the Customer Base and these various things. All of that adds complexity. Add to that many of the new threats and things that are moving at different paces around the world. That all adds complexity. And when you put all of this together and then, oh, by the way, add the budget environment were in and the uncertainty of funding from year to year and the uncertainty of requirements from year to year, that all adds complexity. And what happens, as you begin to add complexity, we have a system that doesnt handle complexity very well. It is very risk averse in that sense. And why . Because these things cost money. And these things cost taxpayer money which the department is trying very, very hard to manage as effectively as it can. But what that does, it adds a risk aversion into the acquisition process that makes it hard to introduce some of these more complex but much more revolutionary capabilities very rapidly. We have no tolerance for failure. We have a system that is more willing to tolerate a budget increase than a performance shortfall. And we just keep adding this and adding this and so things take longer and they cost more and as a consequence we end up, instead of getting the revolutionary things out there more quickly, we take more risk averse approaches and go for off the shelf type of approaches because they are theoretically less risky, and we take more incremental approaches because i have more confidence that ill get there. But even at that, i end up taking longer and costing more because of the complexity of what were dealing with. Thank you. And thats going to lead i have one question derivative of that before we go to all of you, and it does relate to the ongoing acquisition of reform as its being considered on capitol hill. This will give a chance for anybody who wants to weigh in a to do so. s its been explained to me, one way to think about the debate on capitol hill and why the problem is hard to solve there as well as for the broader Defense Community is that there are at least two competing ways to think about the number one priority of Acquisition Policy, and one is to make sure that the taxpayer doesnt get ripped off and we minimize any kind of potential for the 600 hammers of the chuck spending days of the 1990s and we want as much oversight to make sure that doesnt happen and another strand says if you do that, youll have so much regulation and so much dead weight sitting over Corporate America that its not a lot of companies arent even going to want to work for dod and those that do are going to spend most of their creative juices figuring out how to comply with regulations rather than designing new technology. I think i just heard you said that you would probably concur with the school of thought that says we better be careful about overregulating and and overmonitoring, not that were trying to encourage a lax environment, but if we put too much regulation and too much restriction on companies they will fail to innovate so i want to make sure i heard you right and give you a chance to see where you stand with acquisition reform today and then work down panel for others comments. Well, mike i think the truth is somewhere in between. I think if you deregulate too much you do run the risk of the taxpayer getting ripped off. I like to think certainly on behalf of my own company, but i like to think most defense contractors, are very mindful of of their responsibilities to our ultimate customer the war fighter and the american people. We take that commitment very seriously, but by the same token we dont always agree on a business basis with what our customer wants to do and thats a natural thing thats going to occur in any sort of relationship like that but that being said you clearly dont want to create the government has a responsibility to the taxpayer to be fair and to be transparent. You have to do that. Now the question becomes how can you do that but at the same time give industry the flexibility to do what they need to do. I dont know that theres a good answer which is why acquisition reform has been a buzzword for decades and continues to be something that we continue to strive for and continue to struggle with. But i would say that thats probably the hard problem of the century, but nevertheless its something we have to strive to get better. There is a balance there. There is a balance between letting industry innovate and letting industry take responsibility and put goods into the hands of the war fighter that meet the war fighters nodes and making sure that the responsibility of the taxpayer is upheld. So before i go dave, let me just follow up with a very specific question. Is there one word base on your current understanding of where congress has left this debate, as its leaving town now, july 31st, 2015. Is there one word of advice you would give them to push this process to the next realistic level knowing were not going to have a Silver Bullet were hot going to solve it once and for all and based on where you think the understanding is right now, one word of advice you would like to provide. Understand the difference between business and government, and in understanding the difference between business and government, understand that you cant run government as a business, and you cant run business like a government. And if you can understand the differences between the two and draw the differences between the two, that helps to settle that relationship. Thank you. Dave, any thoughts on acquisition reform policy where we should be going with that . I think likewise we take our responsibility there very seriously, as most of our peers do. I think its also its about balance, right . And either extreme you get the kinds of behaviors that none of us want, right . So in addition to finding where that right balance is there, i think we also need to step back and reflect a little bit on the kind of acquisition objectives that we want to have as we see the cycle times and the kind of technologies coming in all right . Being able to acquire things that, you know, incrementally add capability over time, right . Its a different kind of acquisition that you do there. And so in addition to kind of getting that set point right, you know, and we have a joint responsibility with our customers to help make that happen, its also sort of reflecting a little bit more on how these incremental enhancements help us with our budget pressures help us get capabilities into the hands of the war fighters more quickly, but theres challenges associated with how you acquire those kinds of systems. And where does that have to happen . Wheres the number one roadblock now . Is it in existing law . Is it in the culture of the military services . Is it in the nature of the acquisition work force . Im sure youre going to say its a little bit of all of the above, but if theres one community, one part of the process thats most in need of fixing today or innovation, what would that be in your mind . Yeah, i think it is, and a little bit in all of those areas there. I think, that you know technology and the future capabilities that dont necessarily respect the organizational constructs that we have right now so increasingly, you know technology is forcing us to think about acquiring things that involve you know, varied stakeholders in ways that we havent had to bring them together in the past. Its just the way it is and so part of it is just the communication across folks, both in industry and in government that form that Stakeholder Community that have not regularly actually been working to acquire those kinds of systems. Jim, you called for more revolutionary change. Do you see a way to make that happen, to catalyze that in the context of this conversation . I think we just heard a Million Dollar comment here which is that the technology doesnt respect the current kind of organizational structures and the way that it was adapted, so i dont know when i, you know could you have a pretty good argument about what era our procurement system harkens back to and some people would say its a civil war essentially model. And and its about mass and resources. Well, we need a procurement system which isnt about mass. We need one thats about the adaptability and knowledge continent effectiveness of what were procuring and to do that what we really need to do is look at the procurement system not so much in terms of whether we have enough regulation to protect the taxpayer or not or, you know, are we acquiring the right Weapons Systems. We should look at it in terms of how do we widen the base of the sources and the resources being uses for developing and delivering these systems . So when i talk to some of the leading folks on in private industry about their technology and how its being used by the department of defense, they repeatedly say to me, you know, there are a lot of folks out there, folks like the chinese, that are much better at taking innovation wherever it is and effectively militarizing it and bringing it in. So i think our system is some ways archaic procurement. Its about acquiring Large Capital expenditures. Its not driven by innovation or adapt adaptability, so if i were, you know to counsel the folks who are going home on vacation i might tell them not to come back but i would also but i would also say the games changed here okay . Its not about massing resource and allocating budget. Its about accessing the full continuum of innovation and effectively militarizing it as required. You know, ultimately their responsibility is not around protecting taxpayer money or executing big programs. Its about winning. And a lot of folks in private industry will say, transition civilian technology or technology wherever it is and into military use, were losing our lead on that and just because of the sheer weight and the wrong model. The model doesnt respect the technology. So brennan over to you for any thoughts that you got, but i guess one question that occurs to me, you know, is the Glass Half Full or half empty because weve got contending themes in our conversation, not really debates one person against another, but there are themes that are saying, you know were making the best stuff in the world. Weve got the best stuff in the world. Were doing interesting things ais cross the domains that you all have been discussing this morning and at the same time were bureaucratized and we oscillate and dont innovate really well during peacetime. Do you have a bottom view of whether the glass is half full or half empty . Thats actually a perfect segue because i was trying to think of one word that i would apply and i think its two words and i would counsel congress on being realistically optimistic which is a way of life that i try to ascribe to. You cant have everything all of the time and you cant think that everything is going to be going well all of the time but you can be realistic about the potential, and i think that all of the organizations that we represent, we really do have the taxpayer in mind, and there seems to be a struggle between those of the current leadership on the hill and their understanding of what the Industrial Base is trying to do, and whether or not they have actually the war fighters best needs in mind. Lmi was founded because secretary mcnamara recognized the need that somebody outside of the pentagon needed to look at the logistics issues facing the military 50 years ago and see it in a different light and try and solve those complex problems and we have since continued to support that mission, and one of the things that we continue to try to do is look at innovation as a atto support the mission constantly. Theres a great sfrirt not to get philosophical but i will, in this country of entrepreneurship and innovation and that is what will drive the potential solution and the potential evolution and revolutionary opportunities that there is, and i think that trusting that entrepreneurial and innovative spirit is actually going to be okay and if you fail and at least fail forward and learn from those mistakes, it is an accurate and efficient investment in the technology then its all worth, it and the process and the structure, as everyone as the gentlemen to my right have recognized it does not facilitate that process. It ties up the process to the people who might actually have the solutions dont even want to participate so i would counsel congress to be optimistically realistic about the future and to have a little bit more trust in the private sector and bringing these technologies to bear on Public Sector problems. One followup in. What way is the congress not trusting private sector enough right now, because it pushes dod to use the traditional bureaucratized regulated methods of procure president and needs to encourage congress to take advantage of the federal code and the options for commercial acquisition style you know of procurement . Mean, whats a specific way in which Congress Gets in the way . Think that the acquisition proses is so cumbersome and the requirements dont actually meet the needs of what things are being proposed so a lot of times the questions that come out and the problems that are trying to be solved, if theres a new way of solving them there isnt a recognition that you have to look at it and evaluate it in a new light. Youre trying to apply old regulations and old Acquisition Policy to new solutions and there isnt theres a disconnect between how you do it. And there is also i think sometimes a fear of the unknown. If you dont have all of the answers at the beginning or if if the evaluation process isnt educated enough for the individual evaluators that are part of the acquisition process dont understand it, instead of asking questions again and again to better educate the Acquisition Policy process there is a fear and just a shutdown of the process so i think its just the general purksypurk sy and jimmy said it, i would characterize it more of red tape and the complexity in the acquisition process that prevents these new solutions from being applied. Great. Lets go to all of you. Ill take two questions at a time. Please wait for a microphone andive yourself and if you can pose your question specifically to one person it would he. Its not obligatory but preferred. Well do two at a time. The woman here in the fourth row and the gentleman i guess in about the seventh row, both on the aisle. Good morning. Thank you for your comments. My name is margaret cope. Im an independent consultant and i have a background in Life Cycle Management in the air force. My question has to do with pma, product manufacture approval. Where is that with regard to this whole process . I know when you talk a bunch of constraints, that was an area that we were looking significantly at, and i would just like to know if you have an update. Probably, jimmy, youre the one who would know most about that. And before we do. Well get two on table. That way we can pick and choose. Go ahead. Im john wartman with the association of american geographers. My question is probably for brennan. Weve been real advocates for Stem Education here in the United States. As we talk about things like agile systems complexity revolution, evolution, what are the implications for the 24th century war fighter . How has the Defense Department been thinking about what war fighters are going to need to be able to do with these new technologies in mind . Jim well start with you and then go to brepan. Sure. So pma becomes a very interesting discussion and especially in light of things like what we heard earlier with Additive Manufacturing. I can take apart and i can figure out how to do it in the field and there you go. The problem you run into particularly with aircraft systems, is that there are certain characteristics of those parts that you have to have. Its Material Properties as well as qualities such as surface finish and dimensionality and things like that. If you dont have them, that part can fail and when it fails, it will be spectacular and not in a good way. And so one of the things you worry about when you go through the pma process, the whole idea is that youve proven that you can produce that part to have the right quality so that you have the quality part that can do what it has to do. If you decentralize that and take away that thats an authority that youre given. Things like Additive Manufacturing can challenge because how do you then maintain the authority in the challenge for us at manufacturers is we stand by the quality of our products, and if you start flying around products that have parts that we cant stand by then it makes it very difficult for us to stand by our products any more. So i think right now where we are on pma. Its bureaucratic ashoreuthoritative process and things like that, and where you can successfully do it it can drive competition and can try cost improvements but you have to be very very mindful of the quality issues and looking ahead as we look at things like Additive Manufacturing, that may become yet even more complex. Brennan . Sure. So with regard to some education, we actually work very close which with the universities in our research and development program, do internal r d and do academically funded r did projects and one of the things weve been looking at with regard to Additive Manufacturing is how do you provide the work force that can actually use the technology, and a key component of that are what are the skills and capabilities that they immediate . And there is in some areas a misconception that when you use a new technology, can you kind of throw all the other stuff baby out with the bath water and you dont need to know traditional engineering aspects. Physics is not changing. It is the same. The technology that is going to be have to withstand those physics when you produce a part and put it on a plane or an aircraft careerier or a submarine, you have to understand the traditional engineering aspect because you have to know how you prodies that part in the past and then how you have used this new technology to create a new part whether its the same part or whether its three parts that you can now print as a singular part. But you have to have that background in engineering, and you have to have that capability to understand how to use it. With regard to how that applies to the war fighter, it is a question that continues to need to be answered, and thats what were working with the dod on the training and work force perspective. If you put Additive Manufacturing in the field Forward Operating base or combat outpost and have an infantry unit that is 30 guys, who within that team has capability to actually take the software, to pryne the part, to create a part as its needed to use cad filed and 3d data to print the parts . So what are the skill sets . And i think the stem piece continues to be an area that there is a growing need, and i think that there will be a need for having specialists and generalists who can facilitate the process so that the technology can be applied in a forward or deployed setting. Thank you. Lets take two more. These two gentlemen here. Thank you. John harper with National Defense magazine. I guess this question is probably for brennan and jim. Can you give some examples of the ways in which the services are using Additive Manufacturing now and what some of their plans are for utilizing that technology in the coming years . Sure. Im Randall Doyle from georgetown university. Id kind of like to look at this from a different angle listening to the process of acquisition. I want to talk about the external factors with the advancements of fighter and manulife planes in china. Im wondering how much pressure is on you to be able to produce these products for the military and so forth and whether maybe because of chinas vast advancement in weaponry and so forth, whether that will be part of the process of breaking down the red tape that you talked about and maybe would make you happier with congress . Ill add one more and then potentially we have a question for everybody so well see. Thats what im hoping. Thank you. Im elliot horwicz former member of the Intelligence Community and the state department and the world bank. For mr. Kenyon i have a question. What is the rate of progress of our meshajor adversaries the peoples republic of china and Russian Federation in terms of adaptive propulsion . Why dont we begin with jim this time and then well work across the panel. I would characterize the use of Additive Manufacturing amongst the services as islands of experimentation, and in many ways driven by either individuals or programs or units that i have an inherent interest in the innovation so were the concrete examples of how its being used in the field would be the deployment of Additive Manufacturing machines with socom. I mentioned the dog bones with the antennas. Theres been a lot of innovations of weapons so rather than being mass produced they are more custom fit to individuals, and theres been theres an example of something a was used for a sling underneath the helicopter that was made in the field. Again, i would say that this is not in any way new and, in fact, when you Start Talking about the navy its inherently in the navys dna to do this kind of stuff. A ship is out there in the middle. Ocean. Its going to keep going and the machine shop will come up with a solution and what this particular technology does is it widens the envelope of possible solutions, that that machine shop can execute on. So the adoption path within the services is really a function of need and frankly of immediate need. Theres nothing like having to solve a people that causes you to propel a technology forward. Now in the Industrial Base, the adoption of the technology is really kind of bifluctuating. The machine and the materials the Price Performance envelope on them is crashing and effectively within that class of machines they are xhodizations going on both in the material and the machine. Theres also a group of machines and materials that are becoming highly specialized and are regarded as a competitive advantage. Though if i would turn to jimmy and say, hey, would you tell me how youve locked down your processes and have eliminated variability, well, how do you guarantee your final element analysis . He wouldnt tell us because that is the competitive vac so theres a limited number of folks usually with a lot of capital that are truly differentiating themselves in Additive Manufacturing and frankly they are having to build the machines themselves. The machines that are available just arent up to snuff. So in the commercial industrial sector it really is playing out is this a commoditytype capability with commodity materials or is there an opportunity to create a distinct competitive advantage, and what were seeing so far is it takes a lot of money to lock down the processes on metal side and create parts but when you do you have an advantage over other companies that is significant and justifies that capital investment. Brennan, do you want to add an example or two before we go to jimmy and then dave . Sure. I think theres two key examples that are helpful to jims point. The navy has been using addtive manufacturing for a number of years. The naval of dental school has been printing bridges for people in their mouths for many years, probably almost 30 years. With the evolution of Additive Manufacturing the customization to an individual persons physiology. Theres a great opportunity there, and and the medical Services Continue to provide that. Theres a lack of infection when you have customized prosthetics or skull caps when you have drumtic brain injuries and so thats a growing area. The other example that i like to use pretty often is the Rapid Equipment force that i mentioned earlier. Socom special Operations Command that was deployed in afghanistan. Infantry units were given flashlight and there was an exterior button on flashlight so they would put the flashlight on the pocket or back and every time they would walk it would click on an off and any of you familiar with night patrol know thats rule number one and they came back and said we need a cover for this and they actually produced a cover. Produced a cover for the flashlight and printed them in the field and provided them immediately to the infantry units so that is a key example of the innovative aspect of it. And there is that is continuing to go on and to jims point earlier about the service. At the services they are pushing envelope constantly because they are primarily there to support the war fighter and sometimes luckily they dont want to put up with the impediments that i mentioned earlier about support supporting that mission and they are pushing the technology from a strategic perspective. Where were trying to help docd as you push the technology across the services having a comprehensive strategy for how you apply the technology. I dont know if youre comfortable about stalking about Global Trends and propulsion. Yeah. That that its a little hard to answer directly but heres what i will say and i actually touch on both of those questions. Theres been a lot of investment a lot of work going on poet in russia and china and thats been fairly public. Theres been a lot of art californias in the press lately regarding chinas desire on commercial side to develop propulsion capability and so clearly thats something that bears watching. If you were to watch secretary kendalls remarks we have a 1 billion investment in propulsion and even while were struggling in other areas and why is that. Propulsion is recognized as a differentiator for the United States. Its something that sets us apart and thats why keeping that technological lead is a big reason for that. Thats an interesting thing and looking at your bigger question, its remarkable in this nation historically. Weve been able to rise to the occasion when we have a national imperative imperative. When you go back to world war ii we had this thing going on in europe and this thing going on in japan, and result of that was just a tremendous blossoming. Defense Industrial Base and particularly the aviation base. Weve produced airplanes, punching them off the production line day after day after day because we needed them in the fight and we found ways to do that, both the government and the Industrial Base. Fast forward a little bit, and once sputnik was launch and detected, boy, we took off, and and not that long later we were putting people on the moon, and that was just one part of what turned into the cold war and the Technological Advancement that was the cold war because of a compelling National National imperative. Where are we today and when we consider what we see going on in russia and what we see going on in china, and when we look at the Defense Strategy that we hear about, is it a compelling national imperative . Well, when you look at our defense acquisition system today you might argue not yet. But are we headed in that direction . Maybe. Thank you. Dave, anything you want to add to that . Maybe ill hit on both of those as well. From the Additive Manufacturing kind of perspective, you know, i spend my organization a lot in the r d spaces, right, but were using that very extensively. In there its really about being able to respend you know prototypes very quickly and far more cost effectively. I was in a proposal review just a couple of weeks ago, and were talking about how were going to modify a system going phase two and in they walk with an aluminum version of what were use as the infrastructure there and were also experimenting with far more sophisticated materials as well beyond the aluminum as an instance in that particular case. When it comes to the pace of our adversaries and what were doing technologywise and capabilitywise im actually very optimistic in the sense of some of the dialogs that i think are occurring right now. You dont have to be more than a few minutes of conversation with secretary kendall on this kind of a topic before he asks a question. Are you getting data you need . Are you in the conversations with our folks about where our adversaries are going . Where our deficits are and what were doing to potentially overcome those . All right. Same thing mr. Stackly and the navy, they are very keen on making sure that those conversations are occurring and are substantial conversations around data and security and the like being and they are not just operating within stove pipes either. Ive seen good conversations coming across services so you know, im not suggesting that those conversations werent occurring before, but they are occurring now with a severance intensity that i i can actually see the difference. I think were going to do one more round of questions and well allow everyone to make a final comment. And im also going to say we have general campbell coming from afghanistan to be here tuesday at 3 00 to talk about the state of play there. But that also is an opportunity, and im sure everybody in the room would probably want to join me. We may or may not have another opportunity in short order on cspan to say thank you to a departing group of military leaders that as many of you now are leaving en masse and were seeing the cheryl and vice chairman of the joint chiefs of staff as well as the chief of staff of the army and chief of Naval Operations but certainly all those appear to be change in the coming weeks. The navy part is still in transition, as i understand it, but im sure we all want to thank not only general dempsey general on the other handio and the admirals and all those who served with them through this intense period of service to our country. I wont ask them to thank them now but when we thank panelists lets give the round of applause for all the military leaders as it is an historic moment as the United States transitions out of war and seeing them all leave simultaneously brings it home for me. Sorry for that little aside. Lets get three last questions and well do a final wrapup. Ill take the question at the very back and then you two here and then well just go across panel. Matt jones from the boeing company, and i want to thank the panelists for a very informative session here, thank you very much. My question is related to i guess ill aim it at jim. Youve talked about the application of Additive Manufacturing to logistics and other aspects of it. Do you see much evidence of how Additive Manufacturing is changing design philosophy . In other words, are people starting to really design for Additive Manufacturing . The gentleman here in the fourth row and then Ryan Sturgell with the cohen group. I wanted to ask what initiatives you see either dod funding or potentially even other departments for Additive Manufacturing, and, for example the white house has, you know, moved to set up this National Network for manufacturing innovation and the first center is on Additive Manufacturing, i think based in Youngstown Ohio and dod kicked in a fair amount of money to fund that initially. Other and maybe you can comment on sort of how thats going, but are there other initiatives like that sort of coming down pipeline that we might see. Thank you. Over here. Im sean lingus with federal computer week magazine. Dave you
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