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[H.A.S.C. No. 109–34]








JULY 12, 2005

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TERRY EVERETT, Alabama, Chairman
CATHY McMORRIS, Washington

JOHN SPRATT, South Carolina
RICK LARSEN, Washington
JIM COOPER, Tennessee

Josh Hartman, Professional Staff Member
Andrew Hunter, Professional Staff Member
Katherine Croft, Staff Assistant
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    Tuesday, July 12, 2005, Space Acquisitions


    Tuesday, July 12, 2005

TUESDAY, JULY 12, 2005



    Everett, Hon. Terry, a Representative from Alabama, Chairman, Strategic Forces Subcommittee

    Reyes, Hon. Silvestre, a Representative from Texas, Ranking Member, Strategic Forces Subcommittee
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    Levin, Robert E., Director, Acquisition and Sourcing Management, U.S. Government Accountability Office

    Lord, Gen. Lance W., Commander, Air Force Space Command, U.S. Air Force

    Rustan, Dr. Pedro ''Pete'' L., Director, Advanced Systems and Technology, National Reconnaissance Office

    Young, A. Thomas, Former CEO, Lockheed Martin Corporation, Former Chairman, Defense Science Board, Department of Defense

[The Prepared Statements can be viewed in the hard copy.]

Everett, Hon. Terry

Levin, Robert E.

Lord, Gen. Lance W.

Reyes, Hon. Silvestre
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Rustan, Dr. Pedro ''Pete'' L.

[There were no Documents submitted.]

[The Questions and Answers can be viewed in the hard copy.]

Mr. Everett
Ms. Sanchez
Mr. Thornberry


House of Representatives,
Committee on Armed Services,
Strategic Forces Subcommittee,
Washington, DC, Tuesday, July 12, 2005.

    The subcommittee met, pursuant to call, at 1 p.m., in room 2212, Rayburn House Office Building, Hon. Terry Everett (chairman of the subcommittee) presiding.

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    Mr. EVERETT. The hearing will come to order.

    We are scheduled for a series, I think, of four votes about 1:15, and I thought we would get as much out of the way as we can so we won't have to stay here any longer than necessary.

    Let me begin with my statement.

    The Strategic Forces Subcommittee meets today to receive testimony on national security space acquisition. I thank all of you for coming.

    I welcome our four witnesses: General Lance Lord, Commander, Air Force Space Command; Mr. Thomas Young, former CEO of Lockheed Martin and chairman of the Defense Science Board panel on acquisition of national security space programs; Mr. Pete Rustan, director of advanced science and technology, National Reconnaissance Office (NRO), warfare requirements and programs; and Mr. Bob Levin, director, acquisition and sourcing management, U.S. Government Accounting Office (GAO).

    Each of the witnesses will give, please, brief opening statements. And, without objection, the complete written statements will be included for the record.

    The national security space community faces a number of challenges in meeting its responsibility for improving systems of development and acquisition. Repeated cost schedules, growth and delays in several space programs indicate larger problems.
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    For example, Space-Based Infrared Systems High or SBIRS High, Advanced Extremely High Frequency (AEHF), Future Imagery Architecture (FIA), National Polar-Orbiting Environmental Satellite System (NPOESS) weather satellite represent billions of dollars tacked on to their already multibillion-dollar budgets. Each program has been restructured but continues to experience cost growth and schedule delays.

    In an effort to achieve transformation, the national security space community has continued to initiate programs that are technically revolutionary. The community can be commended on its vision for the solutions of the future and its desire to embrace risk.

    But past performance has created a lack of confidence. Can the current acquisition program accommodate the risks associated with the current business model and actually produce what it promises?

    Acquisition and management practices, as well as industrial standards and quality control, must be vastly improved. Today's critical transformation opportunities exist in finding new ways for the acquisition community to do business and address the fundamental need for change.

    The areas of major congressional interest include a requirements process, acquisition cost estimating, the role of science and technology, industrial base issues and a new business model.

    Gentlemen, investment in our critical national security-based infrastructure begins to ramp up in the future, as it should. Fiscal year 2006 budget for national security space is over $20 billion. By fiscal year 2010, the budget is expected to grow by approximately 40 percent, in an attempt to transform our national security effort.
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    The acquisition challenges of national security space are critical from both a fiscal and operational context. We cannot continue to tolerate countless cost overruns and schedule delays. We must get a handle on it, and we must put the right structure and processes in place now.

    The purpose of today's hearing is to establish a constructive and cooperative relationship necessary to fix these problems. I look forward to hearing from our distinguished panel on these issues that we face in national security space acquisition.

    And I now recognize my good friend and colleague from Texas, Mr. Reyes, the ranking member of the subcommittee. Mr. Reyes.

    [The prepared statement of Mr. Everett can be viewed in the hard copy.]


    Mr. REYES. Thank you, Mr. Chairman. And I am certainly glad that you escaped the wrath of Hurricane Dennis, at least hopefully relatively unscathed.

    Mr. EVERETT. We did. I thank you. And I thank you for all your thoughts about it.

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    Mr. REYES. Good. Good.

    Today's hearing, Mr. Chairman, is an important one. I want to welcome our witnesses, as you have, to this very important hearing.

    This hearing on space acquisition continues the focus that the House Armed Services Committee has had on problems with the Department of Defense's acquisitions system. Nowhere are the challenges facing the department more evident than in space acquisition. Space is the ultimate high ground, and the space capabilities that exist today are essential to the way that we fight.

    Furthermore, the space capabilities of the future are fundamental for the operation of every new weapon system currently on the drawing board. This is why I strongly support the continuation of a robust space development and acquisition program at the Department of Defense.

    Having said that, however, there is mounting evidence that the Department of Defense has lost its way in space acquisition. Program after program suffers from schedule delays and astronomical cost increases.

    Meanwhile, the warfighters' demand for space capabilities, especially in the area of communications, consistently outstrips the Department's supply. We need to identify ways to fix these problems, and hopefully this hearing will be a step forward in that effort.

    Space systems bring unique capabilities to the battlefield, many of which can only be realized from space. At the same time, space systems operate in one of the harshest environments known to man. Space systems are also significantly constrained by size and weight limitations and the cost of launch systems.
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    For this reason, we must carefully consider the requirements we include in space systems to be sure that they are truly necessary. Requirements that can be fully met by ground, air or other systems should not be included in our space programs. By constraining our appetite for more and more capabilities, we should be able to afford the truly critical capabilities that only space can provide.

    The witnesses we have here today, Mr. Chairman, thoroughly understand the strengths and the weaknesses of our space acquisition system. I look forward to hearing their views on what steps we can take to ensure that we continue to develop and to build an effective space system.

    With that, Mr. Chairman, I yield back my time.

    [The prepared statement of Mr. Reyes can be viewed in the hard copy.]

    Mr. EVERETT. Thank you very much.

    And I am indeed impressed with our panel here, with all their expertise, and we are glad to have them here. And we know that they only want to do the very best for this country.

    General Lord, how about kicking it off for us?

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    General LORD. Thank you, Mr. Chairman.

    Chairman Everett, Congressman Reyes and other members of the committee, thanks for this honor and privilege to be invited back to appear today. I am representing the nearly 40,000 space and missile professionals in Air Force Space Command, so I am delighted to be here. It is also a pleasure to share this opportunity with Dr. Tom Young, Dr. Pete Rustan and Mr. Bob Levin. I appreciate their hard work. They are part of our team. We have worked together, and I think we can take space acquisitions to the next level with this team of professionals.

    I am also proud to have in the back with us Lieutenant General Mike Hamel in attendance. We tapped him recently to lead the space and missile systems center in Los Angeles. He has got the skill set required to get the job done right. I have been impressed with his visionary leadership over the years, and already I am very, very excited to see the results that are coming from his organization.

    The issues that you raised and we are focusing on today will have enormous impact to our fighting men and women in our nation's future.

    I would like to extend my sincere gratitude to the chairman and the members of the committee for your tremendous support of military space and missile forces and your interest in this vital topic.

    More than ever, our joint warfighters realize that the capability space brings to the fight are critical to land, air and sea forces. Battlefield capabilities and effects provided through space generate enormous advantages for our armed forces. We have an obligation to provide our men and women in uniform with the capabilities they need, when they need them, at the cost we say that we can deliver.
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    Many of our legacy systems have outperformed their expectations. Our past acquisition processes were not perfect, but we got the job done. However, we have reached a critical place where we need to recapitalize our space systems.

    We fully realize the processes of the past do not hold all the answers for the future. The restructuring of Air Force Space Command has allowed us to have a single focus. Over the past three years, we have sharpened our sights on the challenges as we push toward this future.

    Today's warfighter is asking for a more responsive and agile space presence to better fit with the current landscape. We have answered the call of the Space Commission report and begun a clear and dramatic process of improving our acquisition practices.

    We continue to fight this in a two-prong battle, if you will. In the short term, we are battling to maintain a stable acquisition baseline. In the longer term, we are driving to institutionalize reforms by capitalizing on our most valuable resource—our people. The committee's continued support on both fronts is appreciated.

    One of the biggest threats, I would argue, to any acquisition program is an unstable baseline. I believe the steps we have taken regarding space acquisition will mitigate some short-term risk but put us on a path to future success.

    A stable acquisition baseline puts the entire system on the right path. It helps to rein in requirements creep and overly optimistic cost estimating. It also leaves no doubt as to the expectations placed on industry.
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    Our space professional development program is the other key to the future, and it is on a pathway to success as well. It is the space professional that is the foundation of an efficient and effective acquisition process.

    It is imperative that we develop our engineers, scientists, program managers and operators on an equal level of determination. Placing emphasis on the development of these professionals will ensure our ability to attain space superiority during future conflicts.

    As always, I am honored to appear here before this distinguished committee. I look forward to your questions and working with each of you to chart our path to the next level of excellence in space acquisition.

    Thank you, Mr. Chairman.

    [The prepared statement of General Lord can be viewed in the hard copy.]

    Mr. EVERETT. Thank you, General Lord.

    Mr. Young, please.


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    Mr. YOUNG. Mr. Chairman, I appreciate the opportunity to offer my views on space acquisition. Successful space acquisition is built upon a foundation of a small set of basic principles, and I offer 10 principles for your consideration.

    First, space is different. It is a one-strike-and-you-are-out business. It is different than ship or airplane acquisition, and it requires space professionals with relevant space acquisition experience.

    A mission success culture is a prerequisite for success. For more than a decade, we tried making cost a primary focus, with disastrous results. The program manager and program management staff are the only ones who can make a project a success. We need outstanding program managers with relevant space acquisition experience and a positive career path.

    Programs must be funded for the most probable cost estimate, which I believe to be a statistical 80/20. And it must include, within the most probable cost estimate, a reserve, which I believe to be necessary in the 20 percent to 25 percent level. An underfunded program is a flawed program and, in many instances, in some that you mentioned, actually become unexecutable because of the funding circumstances. Absence of a prudent reserve guarantees space acquisition failure.

    Requirements definition must be disciplined, and requirements implementation must be controlled. Too many requirements with too little control is a formula for failure.

    Government capabilities to lead and manage space programs is critical. Industry cannot do the government's job.
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    Systems engineering in the government and industry must be at the A-Team level. A program with weak or inadequate systems engineering in either the government or industry will be a troubled program.

    Independent program assessment and independent cost estimating are necessary to balance natural program advocacy enthusiasm. Senior leadership and industry have a critical role in assuring proven engineering and management practices are implemented and the customer is advised when a program is flawed.

    And my final principle: Avoid quick fix schemes that profess to allow you to get ten pounds in a five-pound bag. Programs such as acquisition reform, faster-better-cheaper, reliance upon commercial practices, a push to take more risk, add the unintended consequences of billions of dollars of failures.

    Taken as a whole, I believe—and I have no doubt—that these principles, if rigorously implemented, will maximize the probability of a successful space acquisition system.

    Unfortunately, this list of principles is not a menu, and failure to implement any one of the principles will result in a flawed and most likely unsuccessful system.

    Thank you.

    Mr. EVERETT. Thank you.
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    Mr. Rustan.


    Dr. RUSTAN. Mr. Chairman and members of the committee, I am honored and privileged to appear before you today to speak about improving acquisition processes for space systems.

    I think space acquisition procedures are the biggest challenge facing our space system today. We must do things differently. Unless decisive actions are taken, I believe we will continue to spend a large amount of money without returning a commensurate capability for our stakeholders.

    The U.S. Government manages tens of billions of dollars to build and operate a space system. Unfortunately, during the last 15 years, a negative trend has developed with respect to the procedures the government uses to acquire U.S. space systems. In the pursuit of accommodating the needs of various stakeholders, we have developed strict requirement-based processes that are having adverse, unintended consequences.

    I think we need to transform today's organizational, cultural and processes used to acquire our space systems. I have also outlined 10 specific problems and their respective solutions in the statement for the record that I submitted to the committee.
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    For this opening statement, I want to leave with you just a few thoughts. I think it is critical to move away from the strict requirement-driven procedures in place today so we can have the flexibility to describe expected performance attributes of proposed systems, their approximate schedule and the proposed funding profile.

    I also think that we should make sure the critical technologies are in place before entering the acquisition process and strengthen our management of the contractors to prevent them from making serious mistakes. If we follow these recommendations, we can develop effective business models that apply to the entire industry.

    I remain deeply concerned that the culture and the processes that we have come to accept as the de facto standard operating procedures do not represent the best framework for the enhanced capability we need to provide to the military and to the intelligence community.

    We must transform the ways we do business and become much more proactive and effective in Federal acquisition program management. Our challenge is to return more to the Nation for resources invested.

    To rise to this challenge and continue to be the leading space-faring nation, I think we must modify, streamline or eliminate some of the processes and change the culture to which we have become accustomed during the last 15 years. We must learn from our mistakes, galvanize our efforts and move forward to transform our space acquisition processes now.

    Again, I want to thank the committee for the opportunity to discuss this important topic. I look forward to answering your questions.
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    [The prepared statement of Dr. Rustan can be viewed in the hard copy.]

    Mr. EVERETT. Thank you.

    Mr. Levin.


    Mr. LEVIN. Mr. Chairman, thank you, Mr. Reyes, other members of the committee, Mr. Spratt, Mr. Larsen. Thank you for the opportunity this afternoon to present GAO's views on space system acquisition. It is an honor to sit at the table with these distinguished witnesses.

    Our written statement today and our past reports to Congress have detailed how space systems have cost more, taken longer to acquire than DOD initially promised, and why these outcomes have occurred.

    I offer two observations today. First, as you know, when acquisition programs are initiated, DOD establishes an acquisition program baseline, or APB, with cost, schedule and performance estimates. The APB is a promise to Congress, and one way to look at significant cost overruns and schedule delays is that they are broken promises.

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    We have found that the first full APB is usually flawed because the cost, schedule and performance estimates were made with inadequate knowledge. Far too often, DOD begins an acquisition program despite not yet knowing that the planned technologies can achieve system requirements. DOD has not invested in the needed technology development and systems engineering before programs start. And there is a bias to be optimistic about cost, schedule and performance to sell the program. This is true for most weapons system acquisitions initiated by DOD, not just space programs.

    Second, based on our many years of studying DOD acquisitions and our recent interviews with more than 40 experts in the space system acquisition business, we have found many reasons why DOD goes ahead anyway and approves the start of an acquisition program without knowing that its planned technologies can achieve system requirements.

    The primary reason is this: money. It takes money to do technology development and systems engineering, and the best way to get money is to start an acquisition program. We found that 80 percent of research and development funding has been allocated to acquisition programs, not S&T activities.

    To illustrate the underlying incentives at work, let me share with you a conversation that I had with the DOD program manager. His program started despite having unproven technologies and uncertain requirements. I queried whether the APB's cost schedule and performance estimates scared him, because he was likely to be held accountable for estimates that were generated based on inadequate knowledge. He said, in effect, that accountability was tomorrow's problem. Today's problem is to secure funding. And establishing an APB is essential to compete in DOD against the other demands for money coming from other acquisitions and other missions.
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    In closing, Mr. Chairman, I recognize the tremendous importance of DOD space systems for military operations as well as the U.S. economy and homeland security. Satellites in orbit today have performed quite well and longer than expected.

    Our goal at GAO in making recommendations has been to facilitate DOD's efforts to field future capabilities more quickly and efficiently. That way, the warfighter will get these capabilities as soon as possible, and DOD can better deliver on its promises to the Congress and the American taxpayer.

    Thank you, and I welcome your questions.

    [The prepared statement of Mr. Levin can be viewed in the hard copy.]

    Mr. EVERETT. Well, thank you very much.

    And, Mr. Levin, the buzzing was no reflection on your testimony. However, we are faced with four votes, one 15-minute vote and three 5-minute votes, which unfortunately translates into about 40 minutes to 45 minutes. And I would just ask you to be patient. We will reconvene the hearing as soon as the voting is over.


    Mr. EVERETT. The hearing will come to order.

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    In the interest of moving this thing along, I am going to go ahead and get started with some questions. And you all gave great testimony and obviously hit on some important points.

    I would like to ask each of you to comment on this next question. We will start with you, Mr. Young, and then Mr. Levin and Mr. Rustan and then General Lord, if you do not mind. And it is a tough question, but how would you recommend that we afford or balance capability against affordability? And, Mr. Young, we will start with you.

    Mr. YOUNG. Well, the——

    Mr. EVERETT. I know one thing. For instance, we cannot catch up with technology. It is always going to be in front of us.

    Mr. YOUNG. I think the first thing that I would say to answer that question is that it is necessary, going into these programs, to have a pretty good understanding as to what they are going to cost, first, and second, to have a pretty good understanding as to what the requirements are for the program.

    And I think if you understand the requirements and what it is that you want to get from the program, and you understand what it costs before you have kind of gotten on the roller coaster of program execution, you can make the trades and the decisions between can I really afford those requirements.

    And if I cannot, and if they are negotiable, then it is an opportunity to adjust the requirements so that they are more compatible with the cost. But built into that whole statement is the concept of really doing a quality estimate as to what it is going to cost and a disciplined determination as to what the requirements are.
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    So I would say that you have got to start going in at that particular location, and to then have some assessment as to what the country can afford in this area.

    Mr. EVERETT. And, Mr. Levin——

    Mr. LEVIN. I agree with——

    Mr. EVERETT [continuing]. Let me also get you to comment on, how do we check—and this may be a question that I need to also put to each of you. How do we make sure that we are just not reaching for bells and whistles, that we are actually reaching for something that we can afford and can produce? In other words, let's don't get into the money chase first.

    Mr. LEVIN. Right. I think the key probably is the systems engineering that Mr. Young refers to, where you take those requirements and you flow them down to specific technologies, and you understand what the technologies can do, can they deliver on those requirements.

    So I would say that is probably the key first step, and you want to do that before programs start. Obviously, it takes an investment that goes back to my earlier point about it takes money to do that technology development and systems engineering, but it pays off later.

    And I would also add maybe a little different perspective that I have not heard here today, and that refers to the DOD-wide requirements process. It is hard to look at space programs in a vacuum. DOD has set up a new process called Joint Capabilities Intergration and Development System (JCIDS) that is supposed to take a look at battle space awareness, force protection, command and control, a number of different broad functional areas, and look across those and decide where they want to emphasize certain requirements, what requirements are most important to fulfill, and then try to line up investments with those requirements.
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    And that is one additional way that I would emphasize that DOD can do a better job of making these affordability decisions, because it is hard to just say well, we cannot afford space without thinking about well, what other capabilities do we need.

    Mr. EVERETT. Dr. Rustan, this is not just——

    Dr. RUSTAN. Yes, sir.

    Mr. EVERETT [continuing]. A DOD problem. It also involves our intel community, too. Would you comment on——

    Dr. RUSTAN. Absolutely. I am very much in support of Bob Levin's points. Those are the major three points that I was going to articulate.

    First, when we talk about something that we need—I like to use the word need instead of requirements—you know, what are the needs—and try to understand how we can meet those needs, and engage the user in a very disciplined process back and forth until we fully understand the needs. And once we understand the needs, do the system engineering trades and determine what type of performance expectations, and what is the proposed schedule and the expected cost profile to meet those needs, and then go back and work with the user and say Okay, you know, I think we can meet these needs with those cost and this schedule, and make sure that we can support that and do the technology development before we go to acquisition.

    We get trapped into this technology developing side of the acquisition cycle, which means that you have to feed a very large army where you are still finding out what the science and technology can do for you.
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    If you can solve some of these problems ahead of time, before you enter the acquisition process, your cost expectation are going to be much lower. If you were going to ask about what is independent cost estimate of a program that the technology presumably is very mature, you are going to get a much lower number than you will get if you start the program when the technology is not very mature. It is just a big difference. It might be half of the cost.

    So I think, you know, having more discipline, interacting with the users to understand their needs, doing the system engineering trade study end to end, not just the space segment but end to end, how to get that information to the users, you know, from the time that we collect the task and collect exploitation data to the users, and have a real understanding, as Mr. Young indicated, what are the cost expectations to that. And then you can see it in a table and you can put something that has the best value proposition, you know, because here is the highest performance at the lowest possible cost.

    Mr. EVERETT. General Lord, in addition to addressing capability versus affordability, are we in a position where we are letting what we want dictate our needs, or are we wanting more than our needs actually are?

    General LORD. Thanks for——

    Mr. EVERETT. I know it is a tough question for a warfighter, but it is probably something we need to talk about.

    General LORD. Well, Mr. Chairman, I think you are on the right track here. I would focus on one thing that Mr. Young did for us twice at his look at Space Missile Command (SMC) and our processes—really get us off of the focus on costs and really onto mission success, because I think that is where you can really find a balance in terms of affordability and capability, because you cannot—failure costs more than success in this business.
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    And we saw that, and one example that we saw that was in the late 1990's when we lost three of our prime boosters with national security payloads and put billions of dollars in the ocean as a result of launch failures.

    And then we went back to basics. We found that we did not know—we did not lose the recipe. We just kind of quit paying attention to it. And we went back to basics and went through our process, like Mr. Levin and Dr. Rustan talked about, to make sure we focus on the systems engineering part, follow the process, and really scrutinize and pay attention to the detail and do what we really need to do.

    And so far in our business, with 40-plus successes in a row in the launch business, we have been able to get back on the right track. So I think the recipe's there. We have to have the discipline, the requirements, the systems engineering, the road maps that will help us stick to that.

    In this case, I do not think we are—if we stick to the basics, and have a good systems engineering map, and do the right kind of technology readiness levels when we get ready to implement a program that will be successful, in that case I think we can balance affordability with capability and get what we need to meet the warfighters' requirements.

    Mr. EVERETT. Thank you very much. My 5 minutes are up.

    And before I go to Mr. Reyes, General Lord, if I did not wish you a happy birthday, I know this is 39 again and again and again.
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    General LORD. Yes, sir.

    Mr. EVERETT. Mr. Reyes.

    Mr. REYES. Well, happy birthday, General.

    General LORD. Thank you.

    Mr. REYES. This is a heck of a way to spend a birthday.

    General LORD. Oh, it is just what I had in mind all along, sir. [Laughter.]

    Mr. REYES. But, gentlemen, thank you again.

    I want to start off with you, Mr. Young, and I want to ask from your perspective, since your update of the Defense Science Board report back in July of 2004, how do you view the changes that have been made to improve the national security space acquisition?

    Mr. YOUNG. When we looked at it in July of 2004, I can comment with some specifics. We have not looked at it since then, other than I have obviously a general interest in the subject, so I do not have a disciplined answer.

    When we looked at it in 2004, there indeed had been some significant positive things that had been implemented. One General Lord just mentioned, and that was making mission success the number one criteria for the programs.
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    Second was putting in place 03–01, the policy which recognizes that space is different. Third was the space cadre which began to work the issue of human resources. Fourth was trying to reconstitute the systems engineering capability within the government which had atrophied to basically zero.

    So we found positive things that had been done. We also found some areas that needed a lot of continued improvement or attention. And let me touch on those. One is budgeting, and if we do not budget these programs for the most probable cost, including a prudent reserve, then on day one the program is in trouble.

    And we did not see as much progress in that area as one might like. The second item is in requirements. And requirements really comes in two stages. One, which the chairman was asking about—and that is at the beginning of the program. And there is, at least when we looked at it, quite an impressive process in the DOD for the requirements development.

    Our problem was it just did not quite work. And what I really mean by that is that our argument is you need a single authority, we said within the DOD, with the intelligence community—you need a single authority who really has the responsibility of taking requirements and matching them against cost, schedule, warfighting capabilities to get the requirements to a reasonable stage before you start the program. We did not see much progress in that area at the time.

    The second is controlling the requirements once the program gets going. We saw a lot of progress in that area, and General Lord's activity has something they are implementing called urgent and compelling, I guess, if I remember correctly, which was quite positive.
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    The other item we said that even though I made a comment on the space cadre, the thing that has probably got to be as large a concern as anything is the government capability to manage these programs. And it is not because the government does not have a lot of capable smart people. It is having people who have space acquisition experience, because my argument or our argument is that space is different. And so our belief is that the space cadre has to be subdivided into those people who really have space acquisition experience.

    When we went through the 1990's with acquisition reform and other activities, fundamentally we decimated many of the government's capabilities to manage these programs, systems engineering being at the top of the list. People are doing a lot in that regard.

    The other item that we said that needed some real special attention was we have kind of reached the stage today that most of these systems satisfy both a warfighting and an intelligence requirement. And integrating the requirements from those two communities can be especially challenging now.

    My knowledge is more observation as opposed to analysis, but I think a fair amount of progress has been made on that latter stage, particularly with space-based radar.

    Mr. REYES. So do any of you—and I appreciate your candid comment on that. Do any of you think that we have not cut back too much in the acquisition force? And I asked that, if you recall, Mr. Chairman—I think it was under Chairman Spence—when we had the issue that we had too many shoppers. Do you remember that?

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    And I think we all—if we were not in agreement, we all went along with it because of all the issues that were brought up at the time. I think based on what we know now, not only—and that is why I was asking if anybody disagrees with that.

    General Lord.

    General LORD. Congressman Reyes, let me see if I have got this right. As a result of decisions taken over 10 years ago, we kind of took the heart out of that line that we had there of people that work for General Hamel out at SMC, especially as Mr. Young was talking about.

    And now we are trying to play catch-up, and we have got a lot of programs instituted at Los Angeles to do the systems engineering school, start the process when we bring new people into the organization. But we are behind.

    And we are trying to pull out all the stops to fill that gap, with either federally funded research and development folks like Aerospace Corporation that help us with the engineering talent to do some of the systems engineering things, growing some of our own as well as keeping people longer in the positions.

    We have made it a goal of ours in the command to have program managers stay at least four years and maybe more, if we can, and continue to develop the right kind of people in that process.

    Here is one area where I will yield to my colleague on the left, Dr. Rustan, because we have made some great successes with trading people within the National Reconnaissance Office back to Air Force Space Command and rotating our talent, probably not as much yet as we want to, but we really would like to use some of those folks.
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    And we have been able to demonstrate at the operational and tactical level—we cannot talk about the details here, but have really paid off in terms of leverage by using people with experience and real time capabilities in both the National Reconnaissance Office as well as what we are doing in Air Force Space Command and certainly with General Hamel at Los Angeles.

    So I would argue our current structure with, you know, the undersecretary of the Air Force as the director of the NRO is a good way to continue that black and white space integration, because it pays off not only operationally but it pays off on the acquisition side as well.

    Mr. REYES. So based on your comments—and I do not want to put words in your mouth, but I am trying to understand. Is there a career development process in the acquisitions professional force in place now——

    General LORD. There is, yes, sir.

    Mr. REYES [continuing]. To kind of grow our own——

    General LORD. To grow our own within—in the space professional cadre, if you will, a combination of both things that we do in Air Force Space Command, with space professional development, as well as comply with the law, with the Defense Acquisition Work Force Improvement Act, which mandates certain assignments at certain times and certain levels of certification.
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    We have had that synchronized so that the people who come to work for General Hamel have all the capability. But we are in a certain set of circumstances where we have some of our younger people that may have all the schooling done, if you will, but do not have the maturity and experience yet, which they need to get, the mentoring and the coaching from their seniors in the organization, which we are working.

    And we are looking to people like Mr. Young and others to help us with that senior level experience and keep driving that back into the organization.

    Mr. REYES. Very good.

    Thank you, Mr. Chairman.

    Mr. EVERETT. Thank you.

    I note that, not because Mr. Spratt's up next, that we are on a 5-minute rule. We will have as many rounds as we need. John.

    Mr. SPRATT. Thank you, Mr. Chairman, I think.

    What strikes me is we are not looking at a new problem. This is not a novel problem at all. I have been in the Congress for 23 years. I have worked in DOD for a couple of years when I was a young officer in the Army. And they go all the way back.

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    And furthermore, if you look at these systems, they have got cost growth written all over them. You are pushing the envelope. You are doing what we typically do with new systems. Instead of making incremental changes, we go for leapfrogs in technology, and that inherently carries with it enormous risks with respect to cost, schedule and technical performance.

    One of the quests that we have striven for over the years is some kind of system by which to track what was represented with respect to a system's cost, schedule, performance and how you are doing, and second, as a subordinate feature of that, to have some sort of system whereby you get an early warning.

    You pick out the most vulnerable technologies, the things where you are really pushing the envelope the hardest, and you get people on the plant floor who can report back at your level, summarized in some document that you can understand.

    We developed years ago the SAR, selected acquisition report. DOD developed it. It has a long history. But part of the problem with the SAR is it is not as useful as it needs to be, and because it is not useful, we do not use it, and because we do not use it, we do not improve it. It has hardly changed. It has been static ever since Nunn-McCurdy was adopted as an amendment to it. It has been barely changed at all.

    What sort of variance analysis reporting system do you have institutionalized so you can identify the base cost, the base schedule and the technical performance, and get early warning as to when something is going awry?

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    General Lord.

    General LORD. Yes, sir. Thanks, Congressman Spratt. We have adopted at Mr. Young's urging as well—and we went out and looked at what used to be called NRO Directive 7, which was their acquisition directive, and we kind of modeled our new N.S. 03–01, which is our new acquisition kind of framework.

    We modeled it after that, went out and got state of the art looks by everybody all over the community to try to put together a framework.

    And essentially, what we have done is we have moved lots of independent cost estimates, independent reviews ahead of the key milestone decision points for the milestone decision authority so that we could do just what you said, identify those weak areas, make sure that we understand where we are headed, and put together a program that we can execute within the structure.

    I again would go back to what Mr. Young said, though, but we want to have a stable baseline. We spent a lot of time with our warfighting colleagues and all the combatant commanders and ask them what they want, look at their integrated priority list, make sure we match up the big——

    Mr. SPRATT. With all that said, we have got these problems, these cost problems, and schedule and performance problems with, for example, Space-based Infrared System (SBIRS) High, SBIRS Low. Years ago Milstar was a problem program and probably a much over-specced program. We keep repeating the same old problems, and the question has to be asked, are we learning anything?
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    General LORD. I think we are, you know, kind of in between now, sir. Not to be defensive, but I think those were generated in a time when we had a different way of doing business.

    And what we are saying is it is going to take us a little while to get out of that hole with those older programs designed with a different kind of structure.

    Mr. SPRATT. Let me raise one problem, because I have got this 5-minute limit.

    General LORD. Yes, sir.

    Mr. SPRATT. When Mr. Packard undertook his study back in the 1980's, one of the findings they made was that when you had to choose between civilian personnel and uniformed personnel, the uniformed personnel were the better choice for program management, particularly technically oriented program management. You had the dual advantage of giving a connection with the user having the military people there aboard. But you just expressed one of the problems with doing that, and that is not many uniformed military types who are on the way up—they may want to get their ticket punched in this area but, as you were saying, it is hard to get people to stay longer than four years. Four years, you are just beginning to learn and institutionalize and become adept at this, and most officers are ready to move on at that point in time.

    How do we get people who can acquire these lessons from hard experience and then stay so that they internalize, institutionalize, and we get the advantage of what they have learned over a long period of time?
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    General LORD. Well, that is my job as the space functional manager in the cadre development is to keep those people in the space business, and maybe, you know, keep them longer on the acquisition side.

    I was just talking specifically of program managers, but people are growing in a program for GPS, global positioning, and other ones as well. We want to keep them involved in that business, maybe go out and have an operation tour and then right back to the acquisition center with more knowledge about how to use what they have been acquiring.

    That is our plan, is to continue to grow them like that.

    Mr. SPRATT. Mr. Young, I seem to read in your bio that you were at one point head of the Defense Science Board, or the Defense——

    Mr. YOUNG. I headed a study.

    Mr. SPRATT. Sir?

    Mr. YOUNG. I headed a study for the Defense——

    Mr. SPRATT. I see, I beg your pardon.

    There also needs to be somewhere in the process a disinterested but very determined body that can sort of hold your feet to the fire, and deal with these excessive demands from the users, and keep the thing on an even keel and, if it sees it going off track, taking action that those who are too close to the system might be not apt to do.
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    Do we have that today with the DAB, the Defense Acquisition Board? Did the Defense Systems Acquisition Review Council (DSARC) have it? Is this a problem still that we have not mastered, a high level review by somebody disinterested who can make a tough call?

    General LORD. That is the way our system is set up with N.S. 03–01, is to have an independent look at each one of the key decision points, so that we can make sure we are on track with the problem, a disinterested party, group, that can measure us against what we say we are going to do, in accordance with the program.

    Mr. YOUNG. Yes, if I might comment, that was one of the recommendations in the report, as General Lord said, to have a rigorous, independent cost estimating and independent program review capability. And by independent, it really means, capital I, independent. And it is new, you know.

    It is just starting on some of the more recent programs, but 03–01 requires that to be done, and if done as intended, which I would expect it would be, it should give decision makers another view, hopefully a more realistic view, as to what the status of a particular program is.

    Mr. LEVIN. Mr. Chairman——

    Mr. SPRATT. It looks to me like Mr. Levin would like very much to say something.

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    Mr. LEVIN. If I could have a moment to go back to Mr. Spratt's point about the selected acquisition report (SARs)—thank you, sir.

    Mr. EVERETT. We will take it out of Mr. Larsen's time. [Laughter.]

    Mr. LARSEN. Just a moment.

    Mr. LEVIN. GAO had the pleasure this past year of reviewing 650 SARS and analyzing the kind of information the Congress was getting. We sent a report to Senator Stevens back in March this year highlighting the findings of that review. What we found was that DOD was very often re-baselining programs. I think the worst case was the F–22. It had been re-baselined 12 times in 10 years. And so all the Nunn-McCurdy calculations were going back against the most recent baseline, not the original baseline that you were talking about.

    And a fairer way to judge a program is to look at what the current status is against the original baseline, and we made recommendations to try to, one, have DOD identify when a program's being re-baselined, let you guys know immediately about that, and second, to do the current estimate against the original estimate, and we thought that would enhance accountability.

    Mr. EVERETT. Now, Mr. Larsen, you have 45 seconds left of your time.

    Mr. LEVIN. Sorry. [Laughter.]
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    Mr. EVERETT. No, you are recognized for 5 minutes.

    Mr. LARSEN. Thank you, Mr. Chairman.

    Mr. Levin, in your testimony you talked about a couple of points—of course, the ABP and what that is, some of the problems with it. You also talked about, if my notes are correct, approving a start without knowing if it works.

    So 80 percent of R&D goes into acquisition and not to the science and technology. Could you explain that a little bit?

    Mr. LEVIN. Yes. We tracked the spending in the RDT&E account——

    Mr. LARSEN. Yes.

    Mr. LEVIN [continuing]. For a number of years and looked to see where that money was going, and it went to programs that had already initiated. They had already gone through their milestone decision, whether it was Milestone B or Milestone 2.

    And the programs were approved and ongoing, and there was a lot of technology development activity occurring after the program had started. Our argument has been consistently that a lot of that technology development should be occurring in the S&T environment because that is more forgiving.
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    Test failures are part of the learning process. You are not driven by a schedule. You do not have an APB hanging over your head that says you have to deliver this program at a certain date for a certain amount of money.

    If the decisions at Milestone B, at the start of the program, are to be based on mature, proven technologies, you want a lot of that technology development to occur in a more forgiving S&T type of environment.

    So the best way to promote, I think, sounder programs with better business cases is to make sure that systems engineering and technology development activities are completed before you even start the acquisition program.

    Dr. RUSTAN. Let me expand on that, if I may——

    Mr. LARSEN. Sure.

    Dr. RUSTAN [continuing]. Because often we can even extend what Mr. Levin is trying to say, sir, by actually building the payload subsystems ahead of time before you go to actual acquisition.

    So, let us say, you know, payload is a difficult thing, the complex thing, and the imaging system or signal system or GPS system—if you are trying to do something fairly complex, you can just build that on the side.

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    You can have a competitive procurement for that specific technology, and you can develop that, and once you have proof of that technology, then you can go for an acquisition, a real acquisition program, in which you take that technology that has been built and you interface it with the rest of the systems to make a total spacecraft.

    So actually I very much support that technique, and I use it in everything that we do in the National Reconnaissance Office today, because that is a way to really minimize the total amount of schedule in that program, by actually building technology as far as we can.

    We call it Test Readiness Level VI, where you actually have a prototype built, and then you can just have the integrator to actually use that system, either GFE for the government, or maybe they did it themselves, you know, and now the risks are mitigated significantly.

    Mr. LARSEN. I have a question about that. It raises a little bit of a caution in my mind still, although, you know, I agree with the concept you are talking about. But just a little bit of a caution that as we are rightfully trying to tighten up on the acquisition side, and some of these perverse incentives that have existed on the acquisition side that are getting squeezed out so we get some more rational decision making get shoved to another account or, you know, to RDT&E.

    And then we need a Nunn-McCurdy maybe for RDT&E along in the future because that is where everything is taking place, and we do not have those bumpers on the bumper cars of the budget process.

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    And, Mr. Young, I want to ask you a question on that, on the budgeting process. You said one of the problems that yet exists is on the budgeting, just trying to get some more probable cost estimates and then a prudent reserve. That has not yet occurred, or are they moving toward that?

    You defined that as one of the problems that still exists. Can you talk about why maybe that still exists? And, General Lord, in fairness, I want to maybe have you address that as well.

    Mr. YOUNG. General Lord probably could comment exactly right now, but I would like to comment on that item, and let me give you just a—I think this is one of the biggest issues as to why we have the cost overruns today, and that is that the cost budgeting process is inadequate.

    And let me see if I can really describe what I mean by that. If you go back to many of the programs that are being executed today, they were budgeted on a concept of a 50–50 probability, either by policy or by practice. And if you look at them, some even are more aggressive than that, and I will touch on it. And let me see if I can really kind of quantify it, because you really asked a great question. If I take a program that, by some magic, I know when it is over is going to cost $5 billion—that is what it is really going to cost—and so I would put that at what I call my 80–20, those probable cost, and I happen to know that.

    If I instead budget that program at 50–50, the difference between a 50–50 and an 80–20 for the kind of problems we are talking about is about 25 percent. So I would budget that program, if I was budgeting at 50–50, at $3.75 billion. That is more accurate than I know it, but that is what I would do.
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    Many of the programs we are talking about were budgeted that way. The program manager, the first day he or she walks into the office, has, in my view, a guaranteed cost overrun of $1.25 billion, guaranteed, if my most probable is correct.

    Okay, now let me make it even more complicated. There are many programs that are out there that actually had been budgeted at the contractors' cost proposal or a cost-plus competitive program. A contractor's cost proposal for a cost-plus competitive program is probably about a 20–80 on my statistical basis.

    And you say why. It is because that is what wins. Contractors are trying to bid the lowest credible cost, not a dishonest cost, but the lowest credible cost. So if I am correct that most of their bids are 20–80, and I believe that to be true, there is about another 25 percent between a 20–80 and a 50–50.

    So now if I take that same $5 billion program and budget it at what the contractor proposed, I will budget it $2.5 billion. So now the day the program manager walks in the door, he or she is almost guaranteed a $2.5 billion cost overrun. I mean, these are big numbers we are talking about.

    And if I could complicate it just a little bit more, and that is that we do not typically recognize we are in deep trouble until we get about halfway through the program, when we get to Concept Design Review (CDR) or the beginning of integration or test.

    And now, you do not fix it just by putting back in the amount you underestimated it, because now you have not done all the right systems engineering. You have not done all the right testing. You have not tested out or checked out all the right components. You have assumed some commercial components would work in space, which sometimes they do not.
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    So now you have got a premium on top of that, so it is not a one-to-one replacement dollar, so this $1 billion or $2.5 billion guarantee now probably has a premium of a factor of two, you know, on top of it, and that is where these enormous numbers come from.

    And my argument is that if we collectively do not get to the point where we budget these things at the most probable cost, and then, within the most probable cost—not on top of it, within it—establish a prudent reserve that the Congress, the Office of Management and Budget (OMB), the heads of DOD do not automatically take because it is a reserve, then if we do not get to that point, you know, 5 years from now we will be having this same hearing. I hate to say it.

    Now, there is a lot more to it, as we have all talked about, but that is a fundamental that if we do not resolve then, you know, the circumstance of the cost overruns we are talking about—you know, they are not random. You know, we are building them into the programs, and I think people are recognizing that now.

    But if I could just cheat one more time, the widely held view——

    Mr. LARSEN. That will be up to the chairman.

    Mr. YOUNG. Yes. The widely held view of people who are managing these programs at the management level is that Congress, the OMB, the leadership of DOD will not allow there to be a reserve, and if there is a reserve then somebody's going to come and, you know, take it away. And a reserve, not a slush fund—and it is within the most probable cost. But a reserve is as necessary to manage these programs as the funding for the computer or the funding for the attitude control system. The reserve should not be used for new requirements. It should be only used to execute the program that the collective you approve.
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    But then the other thing is if it is part of the most probable cost, then the most probable outcome is all the reserve will be spent, so we should not be surprised when we spend the reserve. It is just that we will spend it where we need it rather than where we do not need it.

    Mr. LARSEN. Thank you.

    Mr. EVERETT. That was most sobering.

    Mr. Franks.

    Mr. FRANKS. Well, thank you, Mr. Chairman.

    And thank you, gentlemen, for being here and for doing all that you do for this country. I am astonished sometimes at the challenge that you have to go from one technology to another. It seems like that has been the problem for military planners forever, you know, as these technologies change, I suppose all the way back down to the caveman. You know, we went from knife to gun. A lot of things change, and the ability for the user to actuate these technologies—and in this day, you know, there is a geometric increase in the frequency of that transition, and I do not really know how you do it.

    But I guess my question is simply based on the premise that, you know, history does not always repeat itself, as they say, but it does rhyme, and is there any mechanism that you have, either in your process or your philosophy, to say this technology has reached its zenith, this is about all we are going to be able to do with it, and it is time now to make a transition into a new technology to keep up with the warfighter, or whatever the military application might be?
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    Given the implications, how do you decide when that transition has to be made? And it seems like it is going to be a problem you are going to always have. And is there any philosophy or any mechanism that you employ that gives you some sense of confidence in the complexity that you have to deal with?

    General LORD. Let me——

    Mr. FRANKS. General Lord.

    General LORD. Sir, thank you for the question. One thing we have in our modernization planning process is, really, we identify our deficiencies as we go around and talk to our combatant commanders, what they need from their space systems and missile systems.

    And we put together what would be a one to N deficiency list, and then we trace that back through with our lab folks at Air Force research lab and through the lab structure to identify basic and applied research that needs to be done to meet those needs.

    And then we put this together in a process to look at how we have to grow those technologies, and then what level they have to be in, as Dr. Rustan and Mr. Levin said, about putting things together in the right kind of process.

    And we work it through our modernization planning program, and then that gives us kind of a lead on how we want to go with the next generation of technologies that will be used to satisfy a certain set of requirements.
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    And I think Pedro talked about that in a good kind of way, and I think they have really done a good job at the NRO, especially in his office, to kind of get a leg up on that.

    Dr. RUSTAN. We are continuously looking for high payoff technology, knowing, as you said, this will be high risk. So we do the system engineering trade of the benefits of that new technology. You know it is going to give us 10 times, 20 times more performance.

    I know it is going to be difficult to integrate into the system because it is going to have inherent risk attached to it, so we build it on the ground until we feel that we have enough testing on it that is reproducible enough that we can take it to space.

    We do all the space qualifications, the thermal, the vacuum, the electromagnetic interference, all the things that you do to try to emulate the space environment, and then we go forward, you know.

    So we do a system engineering trade. We decide what the benefits are, and if there is a high payoff, we take the risk. This is all about risk, sir, and we have to take the risk because the capabilities are great.

    So we keep trading the risk versus reward ratio, and when we have a high reward, even though there is some risk involved, we just go ahead and do it.

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    Mr. FRANKS. Well, I certainly do not envy the challenges you have there. That is, you know, tremendously important to the country that you make those decisions correctly.

    Having said that, when it comes to cost overruns, is there anything about the history of cost overruns that rhymes? I mean, is there anything that you continually run into and say well, you know, as we proceed down this path, we nearly always have cost overruns? Is there anything there, any patters that develop over time that give you any sense of being able to say well, this is the most likely area for us to have cost overruns?

    Mr. YOUNG. I can think of one, sir, that I will bring up, and then my buddy here on the left certainly, I think, does a better job than we have recently in that respect, and that is component-level testing, which we really have to do to make sure we can integrate these systems, we have found.

    And if we do not have the right industry-government partnership to really watch over that very, very closely and make sure we have the A-Team on both sides looking at those component tests, what happens is when you integrate these things later on, and try to make it work to produce a particular effect, or an image or some other kind of sensor, then you are going to have problems.

    And that is a source of then having to go back to find root cause, and that consumes resources and everything after the fact. I think Pedro—although he does talk about taking risks, I think they really dedicate themselves to component-level testing in a way that is something we need to all take a look at.
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    Dr. RUSTAN. There are several areas, sir—in my testimony I have discussed 10 areas. Some of them are intrinsic within an industrial base, and the one—General Lord is talking about it—a major problem with the spacecraft system today is component-based failure.

    You know, new generation electronics is very compact. Microchip technology—things that were completely separate devices 20 years ago—they are all compacted into one device today, so you have to check the yield rate and, you know, how that technology came about and have full understanding in the manufacturing capability and technology before you integrate that technology and put it into a space environment.

    So that is one area, and we work very hard with the industrial base and the other space partner to help us to understand those issue and prevent them. You have to be very proactive in this business, or else it does not work.

    It is easy to avoid the problems when you have it. That is not a place we want to be in. We want to be in a place where we can prevent problems from ever happening. And that is much higher state of understanding of what the issues and the industrial base are.

    And we see problems also with the contractor and the mismanagement of subcontractor, and the industrial base have consolidated quite a bit. There are only a few big companies, and they subcontract with a lot of the other companies, and they do not usually know how to manage those companies properly, and that creates a lot of problems.

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    Often they do not flow the requirements down to the proper smaller second, third tier, and later on you find out gee, that company did not know it was supposed to be doing that job, and that resulted in another $1 billion in cost overruns, and so forth.

    So through my testimonies I went carefully to enumerate the problems that we have with an industrial base and how we are trying to face those problems, and problems that we have in the government ourselves. And that is one area you can help us with, is the area that Mr. Young has made reference several times, is the budget flexibility.

    I really would beg the committees to look at that very carefully. We need management reserve. We need more flexibility to do our business, because we tend to throw the problem under the carpet because we do not have the flexibility to fix it.

    Of course, if I ever find one of my guys doing that, I would fire him, but, you know, people tend to do that. And the problem gets bigger and bigger every time. So if you can correct the problem earlier on, you are much better off, but you cannot correct it if you do not have budget flexibility.

    So we really would like to ensure that we get some budget flexibility and fewer line items. We have so many line items. We do not have any way to have flexibility between line items. In my specific area I have three or four line items that I have to follow—expenditure center.

    I cannot move much money between those area, even though they are under my control. So when you go to my boss, the director of the National Reconnaissance Office, he has to manage 40 different line items, and he cannot move money in those line items, up to $10 million—that is all—without getting complete authorization from the committees and so forth.
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    So that is the lack of flexibility, so we need to have more flexibility, fewer line items, and we have to have a little bit of budget reserve built in. So that is a part you can help us with. The rest, we have to work very hard to do it ourselves, with your help, of course.

    Mr. FRANKS. Well, my light has been red for a long time, so thank you all very, very much.

    Mr. EVERETT. Well, thank you.

    I was struck by the statement that space is different. And it is different, no question about that. It is cutting edge technology, technology that is the future as well as the present. And of course, what we need to concentrate on, in my estimation, is on the present rather than reaching out too far to a vision for the future. On the other hand, I guess 150 years ago, a repeating rifle was bad technology, too.

    And I hope we never get in a position where we are trying to stay up with technology, because we will never stay up with technology. We need to serve the here and now.

    And I would like to switch the questioning just a bit, although it does have to do with capability versus affordability. And the issue was raised a little earlier, and I would like for each of you to comment on the merging of black and white.

    In my estimation, I think Secretary Teets was absolutely correct. I am not sure we can afford to have separate systems for everybody that wants separate systems.
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    And if you would, General Lord, if you could start off by just giving us a brief overview on what progress we are making and, in as much as possible, how far you think we should go or can go in that direction.

    General LORD. Thank you, Mr. Chairman. I would be delighted to talk about that. I think it is very important, and I would certainly agree with Mr. Teets and his assessment. I think it is important to keep the black and white space team together in a very efficient kind of way.

    We have made tremendous successes since it was recommended by Secretary Rumsfeld when he did the Space Commission on the 11th of January, 2001, and I think we made some great steps since then, as I mentioned earlier today in answering questions.

    We have had at the operational and tactical level some great benefits of combining our National Reconnaissance Office folks with the black and white space—work together to do things to satisfy our warfighting requirements.

    We obviously cannot talk about the details, but suffice it to say that there has been major accomplishments because we have been able to cooperate. We have worked together to build relationships, have the teamwork that goes with that, and I think that is only good for America. That is good government. It is good business. And it is certainly good for the space community.

    Besides that, what we were able to do is work within the Army, Navy, Air Force, Marine Corps and all the people that help work in the organization to help develop the same space cadre to work across both black and white space and take the benefits of both sides back and forth.
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    And I think it is paying off for us, and I would encourage us to keep those two together as close as we can and retain the Undersecretary of the Air Force as also the Director of the NRO.

    Mr. EVERETT. That was a subject that we wanted to talk——

    General LORD. Yes, sir.

    Mr. EVERETT [continuing]. About a little bit, and each of you might comment on the—I guess it is rumor stage at this moment—that they might divide the NRO and the Undersecretary of the Air Force from that position.

    And Mr. Rustan, I think, probably—I understand from the look on your face you would like to get into this.

    Dr. RUSTAN. Yes, I would like to get into that, sir. I do think that we have a lot in common between the white and the black programs, and we need to work very closely together if there is a lot of synergism.

    We face similar challenges with the acquisition, the technology, development, and we work very closely. Some of the technology development that we do in National Reconnaissance Office is done by the Air Force Research Lab, by the Naval Research Lab, many other government labs, so there is a lot of interface going on in there.
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    When you get to the actual control process, I personally have my—I would prefer to have two directors, both of them reporting to Undersecretary of the Air Force. You know, I would prefer to see it this way, and I have carefully thought about the pluses and the minuses of what I am trying to say to you, Mr. Chairman.

    For one thing, we need a dedicated person in there. It is a large organization with a lot of money. We are facing other challenges, and we cannot afford a part-time individual to come one day a week or two days a week.

    We need somebody who is there 100 percent plus of his time, you know, consumed with the issues that we have end to end with our partners, with fighting a war, trying to bring the data to the military and so forth. So it is difficult to do that job if you are there part time.

    At the same time, that person has to be interacting with somebody, although they will report to a common individual. The question is where the commonality will happen, whether it will be at a higher level or the lower level.

    I would personally prefer it to be at the higher level. I would like to see a DNR director by himself, I would like to see a director of white programs by himself, and both of them reporting to the same individual, so the commonality happen on the undersecretary or the secretary of the Air Force level.

    Mr. EVERETT. Mr. Thomas.
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    Mr. YOUNG. I align myself very much with the comments that General Lord made. I think my personal observations would be we cannot afford a white space program and a black space program.

    The world was pretty nice when the warfighter only needed a little communication capability and the intelligence all went to the President and some senior leaders in our country.

    Space has matured to the point that it is an extraordinary advantage to the warfighter, as General Lord very effectively said, an extraordinary advantage to the intelligence community, and almost every system we put up has a user in the warfighting side and in the intelligence side.

    And I think that recognizing that and integrating that together is a way to get not only better systems but significant efficiency. You know, a specific example is Space-based Radar. You know, obviously, the intelligence people would like to have radar and the warfighting people would like to have a radar.

    My personal view is that will never happen. You know, there will be one. And so therefore it is a strong necessity that we have the ability to put together the requirements of intelligence and the requirements of warfighting into a single system.

    And I think that is most effectively done if in national security space we have a leader who is responsible for the total of the space program.
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    Mr. EVERETT. Mr. Young, thank you very much. Would you like to comment on should the Secretary of the Air Force and the Director of NRO be the same person?

    Mr. YOUNG. I would have the same person.

    Mr. EVERETT. Mr. Levin, does GAO have a dog in this fight?

    Mr. LEVIN. Not really, sir.

    Mr. EVERETT. My time is up.

    Mr. Reyes.

    Mr. REYES. Thank you, Mr. Chairman.

    We have been at this since, what, 1959? So there is a track record, and I am wondering with the add-ons that we see—and you know, sometimes I get frustrated because we start out using a Volkswagen frame, and then we want all these add-ons for—as you said, Mr. Young, you have got the warfighter and you have got the intelligence. All the add-ons just completely overwhelm what we started with. So is there perhaps a private sector model that government can use to perhaps either streamline or keep in check kind of the runaway add-ons that plague some of our programs? That is number one.

    Number two, how do we monitor or how do we police that built-in budget surplus that you were advocating? You know, you made mention that if the program or the project is X number of millions of dollars, then perhaps we ought to build in a surplus of whatever, 10 percent or 15 percent, or whatever, because just in practical terms, I think, you know, from what I have seen, that only encourages that well, we have got that extra cushion, let us go ahead and make it part of the project or part of the initiative anyway.
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    So how do we—is there a private sector model that we can use? And I ask that question primarily because of—I forget what the vehicle was out in California that just blew up into space, one that $10 million—but certainly, one of the——

    Mr. EVERETT. I believe it was the Falcon.

    Mr. REYES. The Falcon? Thank you, Mr. Chairman.

    One of the things that struck me was that they made the statement we can do it a heck of a lot cheaper than government can, so if, in fact, that is true, why don't we follow the guiding principles of private industry, or can we, or is that feasible, possible, logical?

    Mr. YOUNG. Let me try a little bit, and others will probably want to add. First off, let me kind of clarify what I think you interpreted me saying. I am not advocating surplus, and I am not advocating cushion. I am advocating budgeting at what it is really going to cost, and then within what it is really going to cost have a management reserve not on top of, but within, so that the program manager has the ability to solve problems as the program progresses.

    And if it really is budgeted at what it is really going to cost, and if the reserve is within what it is really going to cost, then it is not a cushion or a surplus. It is really a required part of the budget, if I could just clarify that.

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    Commercial models—that is a great question. I guess that maybe the closest thing that we have might be—Mr. Larsen from Washington—would be the commercial airplane business. And obviously, Boeing and Airbus both want to produce, you know, outstanding airplanes but they also want them to be affordable.

    And I suspect that, you know, a key aspect of that is how requirements are levied and how requirements are controlled, and again, if I really come back to the fact, I think that a requirements process that does not have budget, schedule, accountability that goes with it is a process that will cause costs to spiral. So I think that the model in my mind is to really be sure that you understand what the cost implications are of the requirements when you start.

    The other item I would really argue is there is a school of thought that says if you have got a requirement, you know, it is sacred and therefore, you know, you never change it.

    And I think that that is probably not realistic either, in my view, and I think that you have mechanisms built into programs at the right times where you can review requirements and to see whether or not you—whereas you might have thought a requirement was easy, it turns out it would just be extraordinarily difficult, or even vice versa might be the circumstance, and adjust requirements as you go along, at least until you get through the preliminary design phase.

    So that is my model. If I come back to the commercial space venture you talk about, I think that is fantastic, you know. I applaud it. I have been in the space business all my life, and I think it is terrific. But I sure would not equate that to the launch that is going to take place on Wednesday of this week, space shuttle, as an example, or the sophistication that is built into a FIA or even built into a SBIRS, with all the problems that exist.
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    That does not at all negate that, and I think that we should encourage that. And when commercial space gets to the point, as it does, that they can continue to eat into what the government does, I say fantastic, you know, let commercial space take it. But it has got to earn its way in.

    Mr. EVERETT. I will correct my statement to you. That was the vehicle called Discovery I, rather than the Falcon. I think the Falcon goes off in—it is a shot that we are going to take in September.

    General LORD. Yes, sir.

    Mr. EVERETT. Mr. Spratt.

    Mr. SPRATT. Mr. Young, going back to your experience on the Defense Science Board, did you have the impression that bodies like this wielded real influence in the Department of Defense, where you saw something that was technologically very complex, that you warned the OSD at least that we were about to embark on something that had great risk?

    Mr. YOUNG. When you say bodies, let me be sure.

    Mr. SPRATT. The Defense Science Board.

    Mr. YOUNG. Like the Defense Science Board?

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    Mr. SPRATT. Yes, sir.

    Mr. YOUNG. Yes, I think the answer is yes.

    Mr. SPRATT. What I am looking for is some kind of countervailing. In a way, we want General Lord to be a maximizer. We want him to tell us what his maximum requirements are, within reason.

    But at the same time, we need a countervailing body which can rationalize those requirements within the needs and resources of the rest of the Department. And I am looking for bodies that exercise that influence.

    One would be the Defense Science Board, obviously. I have the impression that it is kind of an outside advisory group that does not have a great deal of inside clout.

    Mr. YOUNG. Well, let me comment. And I cannot comment in a macro sense, you know, on the Defense Science Board. Our group was put together because the Department of Defense and the Air Force and the NRO believed they had a real problem. And they put the group together, in my view, because they thought that we could potentially help with understanding the nature of the problem and make some recommendations as to ways to improve the system. My belief is that we did that. And my belief is—and General Lord can comment, and Pete also, but my belief is that they took this very seriously. We spent a lot of time at it, and we did it for—I will stay away from that.

    We did it because we thought it was an important issue. And I think that we identified the crux of the problem, and we identified some of the things which I talked about earlier in my 10 basic principles that can basically fix the system. I think this is fixable.
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    And, I mean, I——

    Mr. SPRATT. Do you mean by that the procurement system, or—

    Mr. YOUNG. The procurement system, the acquisition system. I think we know the fundamental things to do. It is hard. It is hard for the following reasons. One is there are a lot of people today with requirements that if I as a program person embrace those requirements will kind of be an advocate for my program.

    So it is hard to turn off people who have legitimate requirements who will be advocates of my program when I am trying to sell the program. That is why there needs to be an authority who can really manage that process.

    If you have got a system where you have been budgeting everything at what I am calling a 50–50—and I apologize for the nomenclature—and if what we said in our report is correct, you need to be budgeting at 80–20, what that says is we have either got too much program for the budget, or not enough budget for the program. That is hard, you know.

    But there is no alternative to it, in my view. And the problem is that, you know, you either fix the problem or you continually—you know, it is a continual type of perpetual problem, so I think the problem is fixable, and I do think that a lot of things are being done to fix it.

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    But the items that are most difficult and people are struggling with the most are the requirements and the budget issue just for the reasons that I mentioned.

    The other critical item is the people problem which I think General Lord and the people are seriously working. But it took us years to create the gross deficiency in our acquisition workforce that we found a few years ago, and it will take us years to get out of that.

    Mr. SPRATT. Specifically, with respect to the next generation of satellite systems, has the Defense Science Board taken a close look at these, Space-based Radar and the requirements, particularly the user requirements, on the ground, the Transitnational Satellite (TSAT) with its completely new type of bandwidth transmission, laser-based technology, and issued warnings and suggested that maybe the time frame for the achievement of these things was too compressed or too ambitious?

    Mr. YOUNG. In response to the recommendation we made, there was an independent program review with outside people, basically, that was done for Space-based Radar. There was an independent review done with a mixture of people on the transformational com, or TSAT activities.

    That was done 15 months ago, maybe, and I wish I could better answer your question, because I am not close to where it is, you know, today. I have not gone back personally, you know, and taken a look. But I do think the process is in place to be able to do such items as that.

    In our report of July of last year, we did highlight that if we could not figure out how to integrate intelligence requirements and warfighting requirements for Space-based Radar, we would never get there with the program.
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    Now, that was taken seriously, and a lot has been done to try to bring those requirements into sync, and my observation is more reading than having done an in-depth review, but I think significant progress was made in that regard.

    Mr. SPRATT. If we developed a smaller, less complex satellite, what implication would that have on our national security acquisition process?

    General Lord.

    General LORD. Well, I think there is a case to be made for heading in that direction, and I think with your help and certainly with the funding in 2006, which—if the budget goes through as we have proposed it, we will have a chance to continue to work smaller satellites to meet specific combatant commander requirements in specific theaters.

    We will have our first tactical satellite launch later this year, as you already mentioned. And we will get going in a way, I think, that will really help us. Again, we will rely on Pete Rustan.

    Pete and I were together on the launch of the Clementine program, which were smaller sensors, years ago off the West Coast that produced, I think, some great capabilities with smaller kinds of sensorsand capability and a smaller satellite configuration, which I think would be really helpful for us.

    I think there are things that small satellites can do. There are things that big satellites will continue to be useful for. And we ought to strike a balance with both sets.
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    Perhaps the cycle times could be shorter in smaller satellites. We would be able to do things faster. That is what we want to be, more responsive with the lift capabilities and be able to do things in a quicker cycle time, which I think will be useful as well, both operational as well as in an acquisition sense.

    Dr. RUSTAN. Let me expand a little bit on that. I agree with what General Lord said, sir. If we look historically from 1980 on, the capabilities per pound of a spacecraft has doubled every about eight years. So if you think what you could do with one pound of spacecraft in orbit in 1980 versus today, you know, 24 years later, you can just keep multiplying by a factor of two every 8 years.

    So that implies that we can do so much more with a smaller spacecraft today than we could have done in 1980. However, that being said, you have to keep track of the laws of physics. If you are going to get a high resolution image, you have so much aperture, so many photons have to hit your telescope, and you know, you have got to have a large surface area.

    If you wanted to detect a very low frequency signal, you have got to have a high antenna, a big antenna, a very high, very wide, expanded antenna. So there are certain things that you have got to follow the laws of physics.

    You might be able to split that telescope into a few smaller telescope, and then combine the photons together, you know, but that is a difficult thing to do, and you can do it with smaller satellites and combine it together.

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    So if you can be exempted from high resolution imaging and high resolution signal detections, you know, there is a huge amount of work that you can do with a smaller, more compressed satellite, and you can build them a lot faster.

    So the technology is here today to do, you know, orders of magnitude what we could have done in 1970's with a smaller satellite, but we have to be keenly aware of the fact that the laws of physics are there, and certain things cannot be done with the small size.

    Mr. SPRATT. In other words, need would be the determining factor between the——

    Dr. RUSTAN. Absolutely.

    Mr. SPRATT [continuing]. Satellite that we use.

    Dr. RUSTAN. And so if you give me several needs, I might have to do it in one single spacecraft, if you want me to do a very high resolution image, for example, or I might be able to split it into several spacecraft and build a distributed satellite constellation.

    A satellite might be a few hundred pounds or something, and the collective thinking of those several satellites might bring you equal capabilities of a larger satellite. So for some cases, you can do that. In other cases, you cannot, because you need to integrate all the photons or all the electrons together to be able to give you the resolution that you are looking for.
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    Mr. EVERETT. Mr. Young, would you have a comment on that?

    Mr. Reyes.

    Mr. REYES. Thank you, Mr. Chairman. I just have one more question to ask.

    And, General Lord, what is your view on near space and what might it have to offer in this realm here?

    General LORD. A little over a year ago, General Jumper and then Secretary Roach, Jim Roach, of the Air Force asked us to take a look at what we called joint warfighting space, which was more responsive space capabilities, smaller satellites, some smaller payloads, faster launch to space.

    And as we looked across the medium of space, we started from the ground up, literally, and looked at the area past airplanes, 65,000 feet to 300,000 feet, to see if that medium had some operational advantages, there were things we could do.

    We tested some concepts. We looked at free-floating balloons at 65,000 feet. Normally the wind is at about 35 knots. There is some technology in use in the United States right now in the oil fields to measure telemetry from oil wells, so we thought this might be something that we could—so we demonstrated some initial capabilities.

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    So we think there is some room there, might have lighter than air ships, things that can operate in that regime, so we will continue to develop our con-ops. We have done some technology looks, and near space, if you will, may offer some advantages to kind of help integrate across air, space, near space and space to link sensors, to do things that would provide some persistence for a combatant commander.

    And we have had some interest from the combatant commanders in helping them solve some of their problems with respect to communications, which we think we can do. We have demonstrated that the communications—the relay from a balloon is feasible at 65,000 feet to 80,000 feet to enhance the normal operating range of a radio.

    An Army radio that may have 6 to 10 nautical mile use—when you put it up at 65,000 feet and let it slowly move over an area over an 8-hour period, you can extend the range of that radio almost 400 nautical miles, so there may be some advantages to do that.

    So we are kind of at the conceptual stage, looking at operational concepts, lower cost ways to look at near space. There is a lot of interest in the community. There is a lot of interest in lighter than air ships, some propelled with different mechanisms. But it all comes down to what kind of payload can you have, how long will it be usable, and then what is the cost of getting it in the air, and then in turn it is got to earn its way at the table just like anything else. We think there is some operational utility in that environment.

    Mr. REYES. Very good.

    Thank you, Mr. Chairman.
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    Mr. EVERETT. Thank you.

    I want to thank all of you for being here today. We will have some questions we will submit to you in writing and ask for you to respond within 60 days.

    Now, I would like to pick up on something my friend, Mr. Reyes, said earlier about add-ons. I do not see any of my Army friends in the audience today, but living just a few miles from Fort Rooker, Alabama, I am convinced that the add-ons on the Comanche helicopter killed that 15-year-old program, without question.

    And it is our hope that the things that our military needs so badly that we do not see cost escalate to a point that we have difficulty keeping those programs alive in Congress.

    So I want to thank you all for being here. Your statements and comments obviously are very helpful to us. It has been a very good committee meeting. And we all hope that we can work together to improve the process.

    This heating—this hearing is adjourned, and it is kind of hot in here. [Laughter.]

    [Whereupon, at 3:23 p.m., the subcommittee was adjourned.]