Mark esper, secretary of the army. Heather wilson, secretary of the air force, and james gurts, assistant secretary of the navy for Research Development and acquisition. Acquisition reform is one of the most important and frustrating topics this committee addresses. For years, we have been warned that america is losing its technological advantage. I hope you all have seen the work by rand on this topic. That is why the department of defense needs acquisition reform. Not just for efficiency or to save money. Simply put, we will not be able to address the threats facing this nation with the system of organized irresponsibility that the defense acquisition enterprise has become. I want the witnesses to Pay Attention here, okay . Were still dealing with a trilliondollar f35 program that continues to operate in dysfunction. The air force still subsidizes ula for space launch with costplus fixed fee contracts. The army has sunk nearly 6. 5 billion into wint. And that work that doesnt work. And the navys lcs program is delayed. And many of the capabilities remain unproven. Thats why this committee enacted the most sweeping acquisition reforms in a generation through the last two National Defense authorization act. And yet despite that legislation, and in the face of our eroding military advantage, the department has been unable or unwilling to change. While the Previous Administration offered some rhetoric about reform, this committee was disappointed that we saw no meaningful action. Though i remain deeply concerned about the state of our acquisition system, im encouraged by their early signs from your team. It appears that you are beginning to make progress. Let me remind you of our expectations. First, the office of the secretary of defense needs to let the Services Manage their programs. Congress has returned significant authority to the services, but we will be watching closely to make sure that you do business differently, and use that authority wisely. Second, while we have empowered the services, that doesnt mean you can go and do whatever you like. The Services Must let osd set strategy and policy and do real oversight. That means being transparent and following the guidance set by osd. Again, we will be watching. This Committee Takes its own oversight role seriously, and we will rely on you to keep us informed so that we can do our job. Third, a system must move faster. Time is of the essence. The work of groups like diux, the Strategic Capabilities Office and the rapid Capabilities Offices should become standard practice, not workarounds to the regular system. And we need these innovations for major defense acquisition programs, not just science and technology efforts. Fourth, you need to be willing to take more risk and be willing to fail when you try new things. We recognize that congress can make that difficult. Keep us informed of your plan so that we can Work Together so that were not surprised when things dont go exactly as planned. We would rather have a small failure that teaches us something early in the acquisition process than deal with a multibilliondollar program that becomes, quote, too big to fail. Fifth, invest in the acquisition work force and empower them to succeed. Too often we hear that acquisition personnel are unfamiliar with or nervous about new authorities. And finally, reform your organizations and Business Practices to simplify and move faster. The major changes we have instituted through legislation are intended to give you the opportunity to make more detailed changes in your organizations. This is an opportunity to update your organizational structures and internal processes accordingly. And along those lines, i dont if you fail, i would much rather you try and fail than do nothing. Okay . And if you keep in contact with us, and tell us what youre trying to do, and what youre doing, we will be patient for about five minutes. And finally and finally, reform your organizations and businesses practices to simplify and move faster. The major changes we have instituted through legislation are intended to give you the opportunity to make more detailed changes in your organizations. This this is an opportunity to fail, this is an opportunity to update your structures and internal processes accordingly. Now, you have reforms and you want to try them come and see us. We would be glad to cooperate with you. And dont be afraid to fail. Because the only way that we will succeed is to take the risk of failure. Congress has provided you with all the tools you require. We expect you as part of a new administration to use these tools, unlike your predecessors. As you do so, you will have a willing partner in this committee. Do not hesitate to pick up the phone or come over and see any members of this committee. We have given our subcommittee chairs a great deal of latitude and authority as we go through the decisionmaking process. Do not hesitate to call any of them with the exception of senator reid. Thats right. Finally, i believe, and ill be glad we will be glad to hear your requirements and how we can help you do your business better and in a more efficient fashion. We expect you as part of the new administration, as i said, youll have a willing partner in this committee. Look, we had a hearing not a hearing. We had a briefing from the rand study that i think my friend jack reed would agree was one of the more disturbing briefings that we have had in the years that ive been a member of this committee. The gap is closing. Were not going to succeed unless we have a partnership here, okay . Thank you. Jack . Thank you, mr. Chairman. I want to thank the witnesses, also, for appearing here today. We look forward to your testimony. We have a shared goal to ensure that our military forces are equipped with the best systems and technology that the department of defense builds and buys, and that those systems are the most effective and efficient ways possible to protect the nation and protect particularly the men and women in our armed forces. We also have a shared goal that the pentagon should be able to access the most innovative people in technologies available from the best small companies, defense industry, labs and universities. Also, we owe it to the taxpayers to ensure that we are buying things at reasonable prices and within reasonable budgets. This hearing will give us a chance to learn how the department is also working to make those shared goals a reality. In my view, the services should play a very Important Role in the research and acquisition programs that provide advanced systems and capabilities to our combatant commanders. Under chairman mccains leadership, congress has strengthened the services role and the planning, requirements and review processes that strongly shape whether our acquisition programs succeed or fail. These new responsibilities are in addition to the roles the services have always played in the development of their plans in budgets, ensuring that programs are appropriately prioritized and funded, especially in difficult budgetary environments. Finally, the Services Play a critical part in nurturing the careers in military and civilian personnel who work in acquisition requirements and budget fields. Too often, we forget about those individuals and the necessity to maintain, enhance and prolong their effective careers within the department of defense. Building on the successes of the Weapons Systems acquisition reform act and the pentagons better buying power initiatives and making use particularly of the new reforms in the Defense Authorization act, again, led by chairman mccain, we are seeing some improvements in acquisitions processes and outcomes today and are wellpositioned to make more improvements, but we must do much, much better. And thats why youre here today. I look forward to seeing how the Services Plan to use their authorities and live up to their responsibilities to support successful acquisition efforts. I also welcome a discussion of further changes that can be made to strengthen their role, as appropriate, with the hopes of continuing to improve acquisition outcomes and provide the best value and the best military capability for the nation. Thanks again to the witnesses and the chairmen, and i look forward to the testimony. I would like to say how much i appreciate the partnership that i have with senator reed, despite his educational lacking. But we are partners, and the fact that the defense bill was passed through this Committee Without a single dissenting vote i think is ample testimony to the bipartisanship that characterizes our conduct of this committee. And im very proud to have senator reed as a partner. So well begin with the honorable ellen lorde, undersecretary of defense for Acquisition Technology and logistics. Secretary lorde. Chairman mccain, Ranking Member reed by the way, could i just mention one thing . We may have depending on what happens here, theres going to be an event at 11 45 on the floor of the senate, and we may have to recess until that event is completed. Go ahead, please. Thank you. Well, thank you for the opportunity to testify today on defense acquisition and Reform Efforts. Im pleased to be joined by secretary esper, secretary wilson and assistant secretary gurts. After having spent 33 years in industry, ive come to my current position during a unique period of time. One which provides a great opportunity to make a positive change. First, the National Defense authorization act for fiscal years 2016 and 17 have provided the direction and the tools for the department to advance the capabilities required to restore our overmatch. Speed the rate at which we field these advanced capabilities and improve the overall affordability of our fighting forces Weapons Systems. Secondly, secretary mattis has placed a priority on implementing these provisions, alongside other departmentwide reforms, and practices required to improve the lethality and militariness. Using the industry analogy, i believe that the osd should function as a corporate office. Very lean, enabling the services as businesses to execute programs theyre responsible for. At l should be pushing the majority of the departments work back to the services, and focusing on proto typing and experimentation, developing architectures and standards, interpreting law into policy and procedures and simplifying acquisition processes to quickly and Cost Effectively provide material and services to the war fighter. Stating it plainly, at l needs to be the strategic body. With focus across the board, driving affordability and accountability, reducing time lines and equipping the services to execute their programs. Given the fact that the dod average awards daily 1,800 contracts and 36,000 delivery and task orders, every process improvement we make has the potential to produce significant results. Having reviewed data measuring the typical lead time following validation of a war fighter requirement, until the award of the resulting major Weapons Systems contract, i have concluded that we have the ability to reduce this procurement lead time by as much as 50 . Some of the ways in which we plan to do this are incentivizing contractors to submit responsive proposals in 60 days or less, and implementing electronic departmentwide acquisition streamlining tools. Furthermore, Congress Gave us the ability to conduct ten pilot programs, permitting the reduction of cost and pricing data for Foreign Military sales. Key to our success would be to have the same flexibility for our u. S. Procurements. If we were granted the Statutory Authority on sole source procurements, it would allow us to use our judgment to reduce the cost and pricing data we would require when we have cost transparency with the companies with which we do business. In my testimony, i stated that we have initiated six pilot programs that push the limits of our contracting agility. This is in order to demonstrate our ability to responsibly reduce this procurement lead time. Tell us a couple of those programs. C130j retrofit kits and the japanese global hawk. So one u. S. , one Foreign Military sales. Our goal is to get these pilot procurements done within 210 days from the issuance of the request for proposal. 210 days. 210 days is the interim goal. We would like eventually to get to 180 days. We have the process to work down. Were going to work with you and your teams to demonstrate how we do it. And were going to come back to you as we need additional authorities, if needed, but we believe its really interpreting the authorities we have now, making sure you agree with them, and having us move forward. So were also prepositioning production contracts to include options for yettobedeveloped sms requirements. In other words, in the official contracts, we have the language so we can almost fill in the blank for fms sales. Again, prethinking this is going to reduce the time line and allow us to be very, very responsive to international customers. So you dont need a 100page rfp for a pistol. Absolutely correct. On the joint Strike Fighter program, we are determined to reduce the cost of production and sustainment. We have initiated an extensive jsf cost deep dive, led jointly by my office, atl, and cape. The purpose of this cost review is to understand in detail at lockheed martin, northrop grummond, rollsroyce and bae, as well as their primary subcontractors and there are 100 of them in total, what jsf costs. Why it costs what it costs. And most importantly, what we can do to improve cost performance at the prime contractor, and up and down the supply chain. This will be a completely transparent process with the companies involved. The knowledge gained will inform our product contract negotiations, and all of our sustainment efforts. On a goforward basis. And well promote more effective and timely contract negotiations. Just yesterday, the fy2017 defense acquisition work force awards ceremony was held. Deputy secretary shanahan and i recognized the outstanding accomplishments of 27 top dod acquisition professionals. Out of a work force of 165,000. A few of their accomplishments include implementing a cuttingedge approach to Cyber Security, testing for aircraft Weapons Systems, accelerating the testing for defensive systems on ac130j aircraft by two years. Getting 3,000 Tactical Combat casualty units to medics and special forces operators. Improving Cyber Security for medical facilities. And reducing biological agent decontamination time by 50 to accelerate the return of equipment back to the fight. Out of the 17 individual awards across requirements and acquisition critical functions, the United States special Operations Command received four. Our challenge is to take these pilots, these silos of excellence, and scale them to the big army, the big navy, the big air force. Were also and how many f18s are operational and ready to fly . Not enough. Ill defer to my colleague, mr. Gerts, on that one. Okay. The numbers i recall are 60 are not flying. Operational availability across our air assets is an issue. As i talk to each of the service secretaries, its very clear, theres a lot we can do at the beginning of these programs to design in the sustainment portion. And were focusing on that and well come back and tell you how were working on it. And let us know who is responsible. Absolutely. I would look forward to a small discussion in your office, and we can talk about the actions were already taking in terms of accountability with individuals. Thank you. So were also working to make use of the new rapid hiring flexibilities provided by this committee to bring in worldclass talent in areas like robotics, lasers, artificial intelligence, as well as new Contracting Specialists and test engineers. For example, in 2016, our labs hired nearly 2,000 new scientists and engineers using the hiring Authorities Congress provided. Reforming and improving the defense acquisition system to create an average i will enterprise is a continuing process. Requiring Close Partnership across the department and with congress. You have my total commitment to the success of that partnership. Im looking forward to working closely with the committee and the professional staffers to further implement the initiatives we have already begun. Thank you for your support in this significant effort and i look forward to answering your questions. Thank you. Secretary esper. Chairman mccain, Ranking Member reed, distinguished members of the committee, good morning. When i appeared before this committee in mid november, i stated that modernization was a top priority of mine, and that ensuring the future readiness of the total force in a highend fight would be very difficult without fundamental reform of the current acquisition system. In my few weeks as army secretary, i am even more convinced that this is true. And more aware of the urgency for us to modernize. I am encouraged, though, by the progress the army has made, consistent with congressional direction to begin overhauling the current system. To be sure, a long road lies ahead, and the challenges are great. But Army Leadership with this important advice of congress is fully committed to bold reform that promises to provide americas soldiers with the weapons and tools they need to fight and win our nations wars as part of the joint force. This committee is well aware of the growing challenges our military faces. Around the world. Rising near