tv Panel Discussion on U.S. Foreign Policy CSPAN October 5, 2015 11:41am-12:40pm EDT
it will be available later this year, the result of on going questions. in the case of e-mails, the navy knows that reliability is above the december 2014 reliability growth curve. as performance andest it testin testing, it indicates it was not on a goal. what the effects thoon short falls, if any, in the ultimate reliability these systems could be will not be known until development, operational tests are conducted in post delivery. the specific nature of the failures encountered and their difficulty of repair will be important to understand. the navy has indicated that the e-mails and installation on cvn-78 is such that failures and components will result in multiple being down for extended period. this is because there is no ability to isolate components permitting as in current fleet
operations, maintenance while flight operations are performed on operating catapult. the reliability will be determined whether they will actually realize. the schedule of activities for cvn-78, subsequent to its delivery, including the timing to are a number of exercises is determined primarily by the navy's certification and training requirement. operational testing of strike c combat cannot be accomplished, will be conducted as part of the joint force task force exercise. the plan is to test systems realistically, as early as possible to provide feedback to the program office and to combine training and testing. the current test schedule remains in my view aggressive with current ship based and land-based developmental testing and with some including very
important first-time testing. in august, the deputy of secretary defense directed them to conduct the trial. historical experience indicates this i a key means to identify and mitigate mission critical failures before the ship and their crew deploy into harm's way. finally, cvn-78 was designed to reduce manning and limiting total cost. however, recent navy assessments show concerns about manning issues on cvn-78 that would only be exacerbated by any short falls in the reliability of this. the navy's manning front-end analyses have not been finalized. that won't be possible until we know more about what their reliability will be and what their maintain ability will actually be. thank you. >> thank you, mr. chairman, mr.
reed, members of the committee. i appreciate the opportunity to talk about the carrier program this morning. let me start with the cvn-78. my bottom line on the cvn-78, is same story, different program. in 2007, we reported that costs were likely to be underestimated by 22% on the construction of the ship and that the three main technologies, emall, aag and dbr, were immature, likely to slip to the right and out of schedule margin. we said the navy would be faced with the decision to either push the ship to the right or push the technologies to the right. fast forward to today, 2015, cost increases are 22%. the three key technologies, they have slipped about five years. the decisions made to keep the ship construction scheduled pretty much intact but let the
technology split. that's probably hard to see. but, the top charge, we have circled here, three, four, five, and six. those are the three key technologies in the beginning of ship board testing. so the original plan on the top was clearly fly before buy. where we are today, they have all slid past slip launch. that's buy before fly. my view at this point is ship costs are going to continue to increase. the full capability of the ship has been deferred. right now, we are looking at getting less for more. now, why would i say that? i remember 25 years ago, i was interviewing the second undersecretary of defense for atnl, john betty. he told me, cost estimates in the department of defense, it is not like they are impossible to be achieved but they do count on hitting seven home runs in the
bottom of the ninth. i apologize for the sports analogy but it is not mine. so let's look at the home runs that the cvn-78 has to hit. you can kind of see them bunched up here. we have to do land-based testing, ship-based testing, integrated testing, all the time, we are trying to complete instruction. it's a big list. let's go to cvn-79. what are its home run. right now, the cvn-79 cost estimate depends on reducing construction labor hours by 18%. 9.3 million labor hours, never been done before. twice whatever has been done in the past. the dual band radar has been removed. it will be replaced with a radar that is to be determined. upgrades that were planned for the ship have been postponed. i think that's ringing a lot out of the program already.
already, with all these changes, it is at cap and we are seven years from delivery. i think cost increases are likely regardless of what's reported. i would like to put the carrier in a little context here against acquisition. i think, mr. chairman, you brought this up, as did mr. reed. the cvn-78 program is a typical acquisition. 22% increase in costs. scheduled delays are pretty typical for acquisitions. mr. chairman, i have testified before you a number of times on different things. we have think of the example, jff, fcs, f-22, lcs. i think what's different here, this program we knew all along this was going to be the case. we shouldn't be surprised by anything that's happened here. we saw it coming. it is not an i told you so moment. it is a we all knew it. ask yourself, kr does something
like this happen? best practices are pretty well-known. mature technologies before you put them on the program. it wasn't done here. go with a realistic cost estimate and budget to it. we have always gone with the lowest process, the navy's estimate and we still are. and fly before buy. it wasn't done here. you ask yourself, why don't we do these things. my belief is that it is the collective pressures that the different participants bring upon the process that create incentives for programs to noefr statement what they can do and technical risks and schedule. that's how you get funding and programs approved. so i would just like to say where does this leave us today. i will say, i know it is popular today, the acquisition process
being broken. i think it is in a happy equilibrium. maybe not so happy. but it is in equilibrium. it has been that way for 50 years. i think it is going to stay this way until the incentives change. as the chairman said, i've been in this job for 40 years, i haven't given up hope yet. i believe that congress is the game-changer here. i think congress can change the incentives by reclaiming its oversight rule, which i think has been diminished over the years. what do i mean by that? your most important oversight tool is the initial funding you provide to a program. you give that tool up pretty early. if i'm in a program at milestone "b," congress had to improve my funding two years ago.
information was less. optimism fills the voi. a cardinal rule on acquisition says, don't take money off the table. once you have approved my funding, two years later, you have the milestone make the decision for me. second thing, i know the committee has many, many heavy responsibilities. but one of your responsibilities is you're the appeals court for the services. so if osb says something they disagree with, and i'm seeking broadly, if mike gilmore's shop says something they don't agree with, if the cape estimate they don't like, if it's the recommendation they don't like, the services come up here. you're the appeals court and they try to strike a deal and they get those deals. finally, a movement in the department and i think particularly with the navy is the bundle up programs in multi-year procurements, blocked buys and option contracts.
so not only do you give up your funding, initial funding power, you can't touch the program afterwards because it's on a lockdown in a block contract. so i guess my appeal to you today is, let's not think of the cvn 78 program as the story per se. but let's think about it as an object lesson in acquisition process and acquisition culture. and what congress can do about it. not just telling what the department can do but how you might do it differently. what you do with money sends messages as to what is acceptable. thank you, mr. chairman. >> thank you, mr. francis. if you have seen some of the changes we have made in acquisition and the defense bill that we passed through the senate? >> i have, mr. chairman. >> are those steps in the right direction? >> i think they are in the right direction. in many cases for the
department. but i think as you said in your opening statement, to the extent that the department comes in with a bad business case, if you still approve it and fund it, you're sanctioning it. so with the improves that have to be coupled with what you do in programs, i think a couple of those would be healthy. >> i think senator reid and i realize that we are just beginning in acquisition reform. and we will continue to make it our highest priority. secretary mcfarland, is there anything you disagreed with? >> mr. chairman, i'm taking notes. and if i was in paul's
perspective, i would write a similar summary with some minutes. i don't have an equivalent of it right here, but the summation of the systemic issues, i think they are -- i think he is correct on spot. and what i would -- what i would suggest is that we are making some systemic changes on our side and you, likewise, with the congress to try to address these issues. and i don't give up on them. >> secretary mcfarland? >> chairman, ranking member, i agree with much of what paul said. in fact, i haven't spent 40 years but i've been spending at least 30-plus years being both the program manager and the tester in most of the functions that are performed inside the acquisition. and the challenge is the culture and it is the people. it's the workforce itself. i think the department is very grateful for the committee and for the congress for providing defense acquisitional air force development funds to help. but inside of this culture, there needs to be a constructive
change to how we work together as a team to provide these products. >> i'm going to buy back one moment on that, too. paul hit the word incentives. and the context that he uses, i would make it much broader. if you look at the complexity of our acquisition system from end to end starting with congress and program manager and industry, the incentives across the board are not all aligned to the same outcomes. and as long as that is true, we have forces pulling in opposite directions to impact program execution. >> i would like to direct the witness' attention to one of the grievous aspects of these run, and that's the advance resting gear, which from original estimate of $143 million is now estimate of $1 billion.
it growed so much that just two years ago it hit the threshhold to become a major defense acquisition program. and it continues, as we mentioned, to go up. i understand the navy has assessed how their contractor has performed on this program and is consistently substandard. it's having significant difficulties meeting scheduling charges. if we ask the department management officials they characterize this type of performance as typical or average. secretary stackley, do you agree with the characteristic that a cross growth of 6% is typical or average? >> absolutely not, mr. chairman. >> secretary mcfarland, on page three of your statement, you said acknowledging that the aeg problems have had the largest impact on construction.
you stated that the engineering problems are now in the past. and that's in your statement. and yet i have in front of me a defense contract management agency evaluation of the aeg contract performance from just this past month that directly contradicts your statement. in fact, it expects additional delays due to issues that have not yet been resolved. now, i understand you oversee the defense contract management agency. tell me, what's the disconnect here between you and the people that in are making this estimate about the aeg? and can you assure this committee that this cost increase has stopped? >> chairman, i do not believe that the cost has stopped. i do believe that the majority of the engineering aspects of this program in terms of tech no logical risks and development have been retired. there's still testing to be completed. there's still opportunities for
risk to be realized as part of that effort. and i do believe there are activities in front of us. it's essentially that we have in front of us a program that has sunk a lot of effort to get to where it is. and to go backward with the opportunities this system has operationally to provide for the carrier does not make a good business case. >> thank you. i would just point out that recently the manufacturers of the new tanker experienced cost overrun. they absorbed that cost overrun. within that corporation. i wonder if maybe we should make that a standard procedure here in defense contracting. i think it should be a subject of a lot of consideration, senator reid. >> thank you very much, mr. chairman. and first, dr. gilmore, you
urged that shock trials be conducted on the cv-78. and they are not going to be done on the cv-78 and will be postponed until the 79. senator mccann, i wrote to the navy accepting your advice and your opinion. why is it so important that the shock trials be done on the cv-78 and not on the next one in your view? >> first, as i mentioned in my testimony, that the secretary decided to direct the shock trial to be done on 78 before its first appointment last month. he made that decision. it's important because history has shown clearly, the history of shock trials has shown clearly they are the only way to discover mission critical failures. there has been -- there has been some claim that component level shock testing qualityification, which by the way has not been funded by the board class, it has been defunded.
now the navy says it will do it. and model and simulation are sufficient. but if those things were sufficient, we should never see any mission critical failures when we do shock trials, which are conducted at less than design level of shock, if but we always do. and i think it was the captain who sent the committee a letter, he was the ceo of princeton when he was hit in the persian gulf, indicating his experience with shock trials and how they provide key information that enabled his ship to survive and function in the gulf after being hit. so the history's clear. you will not know about mission critical failures unless you do the shock trial. and i can assume, and i know that the history that we presented to the deputy secretary and the secretary figured in that decision. >> very good. just for the record, you are on board, no pun intended, with the
shock trials? >> sir, we are moving out. dr. gilmore made reference to the component testing. the component testing was being lined up with a potential cv-79 shock trial. we are moving that back to the left to support cv-78. >> thank you. let me follow-up, secretary stackley, with the issue of off-ramps. particularly when this was decided in 2002 to be a transformative technology and risk when potentially hired, in other cases you have used off-ramp. i know with the 1000 you were able to select a different type when the breakthrough of technology materialized. what is your opinion on the cv-78 and cv 79, do you have a
backup or are we just going to follow this down to the point in which it can't work? and one of the points senator mccain was making useful is we have a system that cannot accommodate every aircraft the navy flies or all the carriers, then we are diminishing our force projection. >> yes, sir. let me -- you're touching on the off-ramps is striking a cord here. the amount of risk that was stacked up on cv-78 without adequate off-ramps put us in an untellable position when we ran into issues. i made reference to this. back to the 2009 aeg e-mails, that was with cost and technicals regarding the performance. at that point in time the ship was off and running in terms of production. so when we look at a potential off-ramp then, it would have
caused a significant halt in production, delay, complete redesign of many of the ship's systems to bring steam back up to the flight deck, to go to an alternative. so there was no tenable off-ramp in that regard. and much of our focus then became, will the system work? are we confident the system will work? can we cap the cost? and that ends up leading to a decision, and frankly with the cno chairing that decision board, that we're going to press on because of the trades in cost, one path or the other, the impact on schedule, the impact on performance, if we were to that point in time taken off-ramp that we had not planned. going back in time, if we had the ability, we could have, in fact, laid in an off-ramp in the early design stages of the cvn-78 if it was not ma sure
enough. this became a highly compressed timeframe for development, design, production and decision making that precluded that. you're example of the dvg-1000 failed in test, we had a backup ready in terms of the advanced induction motor to replace the pmm, and that has proven very successful in terms of its completion and development installation and test on that program. >> just very quickly, going forward -- >> going forward, yes, sir. >> one of the lessons of this expensive exercise, when you do transformative technology, very high risk technology, will you always make it routine to have an off-ramp? >> yes, sir. our assessment of technical risk, if we have a high-ranking system that we bring to a production program, we have to keep a hand on what are our alternatives, at least to a decision point where the confidence is compelling to go forward.
>> thank you very much. >> you specifically asked about the e-mails of aeg going forward, we have absolute confidence in the e-mails at this point. we have conducted thousands of cycles on that system. we have gone through what we refer to as high-cycle fatigue testing, highly accelerated lifetime testing, we have a system at lake hurst that is demonstrating the performance that we need. aeg is where it needs to be. all this in terms of reliability, that's not because of it being poorly designed, we are behind where we need to be to designate tests and the fix. we have a merge between development and production going forward in terms of an off-ramp. first question -- the aeg meeting that i hold, i want to make sure that there's no doubt and we are addressing it. the chairman described a plan to backup aeg and its carriers.
that's proven not to be affordable. that's not affordable because of the impact of the carrier over the cost of the aeg system itself. but if we had to, we could. >> thank you. >> how many years have we been seeing that? it's a remarkable record. senator ernst. >> thank you, mr. chair. secretary mcfarland, gentlemen, thank you for being with us today. secretary stackley, test fix, test, fix, how long are we going to continue to do that? >> ma'am, when it comes to every developmental system, we are still doing test and fix on the dg-450 weapons system that's been in the fleet for 30 years. so there's and continual test and fix as you bring in upgrades and the added performance improvements. on the specific systems delivered to the cvn-78, we'll be in a test and fix mode
through operational testing, just like we do at every major weapon system we do to the fleet and continue to fix those. today test and fix primarily, primarily is software-related. software, not hardware. >> and where is the carrier right now? >> cvn-78 is about 95% complete at the piers at newport shipbuilding in hampton rhodes. >> it's sitting in a shipyard, correct? >> yes, ma'am. >> iowa, we don't have shipyards. the only time it matters to the folks back home for me is when they are actually out there operating. now, across the military services, i have been told that 90% solution on-time is better than the 100% solution too late. and at some point this is going to be too late. and we are rapidly approaching that. now, you have been the assistant secretary of the navy for research development and
acquisition since 2008. and that was the same year that cvn-78 procurement was authorized. have you ever received adverse reaction by the navy or d.o.d. due to the delays and the $2.4 billion in program cost growth? >> no, ma'am. >> has anybody within your chain, your structure, have they ever received adverse action for this? >> in the chain, yes, ma'am. >> and could you describe those actions to me, please. >> there was a program manager associated with the aircraft launch and recovery equipment who was relieved of his responsibilities. >> and at what level is he? >> program manager, captain of the united states navy. >> okay. and secretary mcfarland, also, have you received adverse action? >> no, ma'am. >> has anybody within your
structure been reprimanded? >> not to my knowledge. >> not to your knowledge. folks, this is -- i can tell you a lot of folks have been let go for a lot less. and you can tell, i am extremely frustrated with the cost overruns not being on time. there's no excuse. you can talk about all the gadgets that you want. that's fantastic. but i will tell you that this is affecting all of the other services as well. i still serve in the national guard. i'm a ground-pounder. great, good for me. we are losing in the national guard with this new mdaa. 8200 national guard soldiers were being cut 1100 dual status technicians. we are losing 800 active guard and reserve members. we're being cut forces. and at some point this is going to hit the navy, too. if we keep spending money on gee-whiz gadgets sitting in a
shipyard, some day you may not have the sailors to get that thing out of port. it's affecting everyone. and our taxpayers are going to hold everyone accountable for this. everyone. i am really upset because i have been working very hard, early hours, early months of my work here in the senate, in this committee and on homeland security trying to restore the program management process. and i had a bill pass unanimously on the program management and tried to get something into the mdaa, specifically for the department of defense, but unfortunately it didn't survive the conference. and i'm baffled. i'm baffled why we're not focusing on program management. and cost overruns. this is an epidemic. and we've got to do something about it. i'm sorry on a soap box, but you can tell that i'm upset, the folks back home are upset, and it doesn't do us any good unless
it's actually out there providing protections for the united states. and if we keep sitting on it, not moving forward in a timely manner, it doesn't do us any good. so i would like to hear a response, when are we going to get this done? anybody? anybody, please. >> let me specifically address cvn-78 in terms of when she'll deliver to the navy. now, the cvn-78 at one point will be a 2006 procurement. it was delayed to 2007. delayed to 2008 for budget purposes. as was described earlier, she was tied to being, to maintain 11 carrier navies. today we are at ten carriers. requirement is for 11. since the ship was put under construction, there was a four-month delay to launching the ship. and that was associated with getting completion levels to a higher level to ensure that we could control the cost going forward on the program. since that time, there's a six to eight-week delay we announced a couple weeks ago, which is
tagged to ensuring that we maintain the discipline end cost in executing the balance of the test program. we have not moved the delivery date. we have changed the trials date. so today we are still targeting in april. could go into may. delivery date for cvn-78. all of that lines up to get the ship on its scheduled deployment in 2019. >> i appreciate the response. i hope everybody understands my frustration as well as the other members on this committee. this has got to be corrected and somebody needs to be held accountable. thank you. >> senator, may i make a comment? >> absolutely. >> i think your concerns about the budget are well founded and how those bills are going to be paid. i think if you look at the cbo's analysis of the navy shipbuilding plan, it's executed as its currently planned, the navy needs a bigger budget than its historically got.
that's on the navy side. on the air force side, we have the tanker, the jsf and the long-range strike is coming. those bills will have to be paid somewhere. and if they are higher than we think now, we are going to be in real trouble. and on the program managers, i remember we were at a hearing a few months ago and you asked me a question on that. one thing i wanted to bring up which i didn't then was we really put program managers in terrible positions. so when we create business cases where a program's underestimated and there isn't enough schedule to get things done and technology is immature, we put a program manager in that position and they have to do two things. they have to do part discipline. at the same time, they have to defend the program. so what we do with our program managers is not what industry does. and we grind really good people up. so why do they pick the jobs?
>> exactly. >> senator, may i make a comment? >> absolutely, admiral. >> captain john meyer and his crew have moved aboard and are operating 50% of the systems and the crew is extraordinarily happy with the ship at this point. secretary stackley already outlined the retirement of the risk and the timeline able to do that, but the war fighter does need this ship and we are pleased with the fact that the crew likes the capability that we're delivering there and that the statement referred to that capability. yes, ma'am, absolutely, costs more and has taken longer, but we'll have the ship delivered with higher capability by the time it deploys. and i would like to note for the record the crew is very happy with technology we are delivering. >> thank you, admiral. i'll make a closing comment. i have gone way over my time. but i will tell you $2.4 billion is a lot to help the guys on the ground as well. we could have saved a lot of arms, a lot of legs, a lot of lives if we had that money allocated in our budget as well. thank you.
>> thank you. on behalf of the chairman, let me recognize the senator. >> let me say, it's amazing to listen to this. in the farewell speech of then president eisenhower n the counsels of government we must guard against the acquisition of unwarranted influence, whether sought or unsought by the military industrial complex. mr. francis, i don't know how -- i would like to know how you're able to do this job and keep from being so frustrated. seeing the recommendation, seeing the forecast that you put out all these years and knows that the deficiencies will happen. so what i would ask, has anyone followed those people who have left, i think someone mentioned here, how many of the people that were in charge. whether it be from the secretary on down?
how many have left during the process of some of these acquisitions? and where they have gone to work afterwards? >> i don't know that there's been a comprehensive study. >> we always say follow the money. you usually figure out what the problem is. >> yes. i think there's a fair amount of, you know, government personnel retiring and moving to industry. >> that's the same industry basically they were in charge of overseeing? >> well, there are laws about conflict of interest. and they apply to different levels. so they have to abide by that. but many of them do eventually do that. >> i'm understanding and listening to the testimonies here that there's no repercussion whatsoever, i think, the last statement was made by secretary stackley, no person at the higher level has been reprimanded for incompetency, but one person has
been at the lower level. one person was mentioned. back home in west virginia, if we build a home and it goes over budget and then let's say later on you build another home, you would learn from the first one. and definition of insanity is continuing to do the same thing and get a different result. you would think sooner or later we would learn. >> well, i think sean made a good point when we went through the programs. the leadership changes as every level so many times we are starting over again. and the people who are in a position now don't remember what happens next. i'll also say, i don't think this is a case of bad actors. i think these are people trying to act rationally in the environment -- >> i'm not accusing anybody from being a bad actor but accusing the system the way it's evolved over the years. president eisenhower saw something coming. there's something that got his attention for him to make this statement in his farewell speech and being a military person.
if we operate in world war ii, probably he was thinking, what he saw with the evolution of the industrial complex military, god help us in world war ii. i'm saying something soaked his interest to say we have a problem, be careful. and you're telling me this evolved for 50 years. so he had tremendous issues back then knowing we were going down the slippery path. i was looking at what china is able to do. and if you look at how they are able to advance and jump in very quickly, i'm sure there are other -- they have other ways of acquiring the information there and we have suspicion about that. but there's a process and move that they are able to do things in a much quicker timeframe. what recommendation would you make to us of all of us here and people that make decisions and people that maybe can change the law or create laws that would help us or prevent this from continuing?
there should be a law that when g.o. basically makes a recommendation, we should owe it to the american people to give you an answer back why we accepted your recommendation or why we don't accept your recommendation. it's very simple. and myself and a former senator coburn tried to get that done. someone has to answer to what you're seeing and we're not doing. what's your recommendation for us to fix this system? >> i actually don't think it's a matter of law regulation or telling the department to do anything. i think it's -- when you're making, your biggest opportunity is when you're approving a new program. and you really have to scrutinize that program for what principles it embodies. so if you really believe in mature technologies before you put them in a program, if you really believe and fly before buy, if you believe in estimating scheduling, and a program comes up that doesn't measure up, you have to say no.
>> if i may, this is in 2007. you mentioned this, the ford class aircraft carriers lead ship began construction with an unrealistic business case. >> yes. >> you identified that. did anybody here or whoever was there at the time, did they talk to you? did you give them that information on what you saw on evaluation? >> well, i'll tell you, yes, in terms of the report. but i believe this is the first hearing the carrier where outside witnesses have been invited. >> i think that's right. >> i thank the chairman for that because he has great hearings for us to learn more about. sir, i appreciate all your services. ladies and gentlemen, we have to change. $18 trillion of debt and we're climbing. and our military is underfunded from the standpoint or lack of direction. but mr. francis, thank you. i would love to meet with you later on. >> i would like that. >> thank you. >> i thank the senator from west
virginia for his involvement and commitment on this issue. senator taos. >> thank you, chair. mr. francis, you opened your statement saying the same story, different program. and you commented in your opening statement about the committee and the senate or congress as a whole playing a more aggressive oversight role than we have over recent years. so can you give me some sense of how much of that is going forward with new programs? how much of that should be applied retroactively to this subject or any of the other major projects that we have? what are your recommendations to this committee for what specifically we should do, say in the next committee meeting or over the course of the year? >> i would say, right now we're kind of in a period where there aren't as many big programs coming down the pike.
and that's really your opportunity. i don't know how much you can do on a program that's already through the milestone and undercontract without making more of a mess of it. >> maybe just going back, i think you used the analogy of seven home runs in the bottom of the ninth with respect to this graphic here. to what extent do we need to go back and say, we know, i think maybe the twins did it to the tigers, but it's very uncommon and was widely reported as a result. so what we need to do with respect to this timeline about being realistic that we're going to have a timeline, that we're going to achieve? what do we need to do here to at least just not come back and have the same frustrations that senator ernst has about, we see it, we know it's not likely to happen. therefore what should we be doing to set realistic expectations about what is already in the pipeline? >> so, for something like this, i would say, and i think the navy has moved the schedule out
a little bit so far on immigration testing. i think you have to make it okay for the navy to come up and say, we need to move this schedule and it's going to cost more. that has to be okay. and right now we sort of play this -- we are on eggshells. because the navy might not want to come in and say that because they're going to take a beating over increased cost. so we kind of play -- >> i would wait until it happens. >> wait until it happens. >> and i will tell you, somebody's been in -- long responsible for the long-term complex and that's how people lose their jobs. i think what we have to put on the table now is if you come back and explain to us why you are going to miss your dates, that becomes our problem and it becomes senior leadership's problem in the department. if you wait and ultimately realize or come to us and actually say, well, you know, we were wrong, then somebody else needs to lose their job.
it's a matter of whose problem it is. and i'm not citing any one person, but it seems like it's obvious that we're going to have to pull a rabbit out of the hat to achieve these dates. somebody owns the responsibility to speak honestly about that and set the right expectations. if they don't, then they need to own it. and i think -- i don't think you disagree with that. i think going forward, because you said it's the same story, different program, we do need to come up with some sort of findings of fact before we approve future programs so that we can really have people own this going forward instead of having it as senator manchin said, be the insanity that seems to be driving a lot of the large complex programs. for the admirals, i'm going to ask you a general question. first off, with respect to china, i know we spend a lot of time trying to take the edge off
of our quantitative disadvantage with say a country like china that's tuchurning out a lot of ships. but quantity has a quality of its own. at some point our capabilities may end up being matched by the sheer quantity of some of our potential adversaries and what they are building up. what was so important in some of the unproven capabilities going on to these ships? what sort of leaping capabilities justify the cost overruns and the basis of the discussion we're having today? and i'll open it up to the admirals in advance. thank you for your service. >> senator, as a director of war fair, i'm responsible for stability of requirements that go into the acquisition programs. when you have stable requirements, you control cost or at least that's one aspect of the controlling cost. we developed the ford class carrier starting in the
mid-'90s, but before that a look at the future of aircraft carriers. we don't look at only one country, sir, we look around the world at potential conflicts and take the conflicts from relatively low-end conflict with like you're seeing in the north arabian gulf with the carriers operating over the top of iraq and syria. and we look at higher of the end conflicts against countries like iran who match our capabilities. we do campaign modeling. we actually have names for them like thunder and storm and they are joint campaign models using u.s. air force, u.s. navy, u.s. army and other military assets to affect that campaign. as is already stated by secretary stackley, the united states navy nuclear power largest aircraft carrier is a chess piece in our navy. the chess pieces are a critical factor on the campaign plans we bring forward. when we looked at the future and the threats around the world, we
devised the class. with the capability with enhanced technology in electric capacity and with the e-mails in the aeg and the ability to increase getting airplanes on and off the ship, and other technologies around the ship, that campaign model, sir, looking at threats around the world is what delivered the requirements base that resulted in the ford design you see today. we stablize those requirements, that's a stabilization in the schedule. >> sir, from a pure acquisition standpoint, the other reason we built a ford class is the other class is reaching the end of its service life. technology changes and we have to keep one the technology. but the other thing is that the first class was built in the era where peopthese were very
inexpensive. it's pretty clear as we go forward, not only did we need the warfare capability, but we needed to get people off the ship. that design needed a complete retirement on the ship. aeg not only provides operational capability but a significant reduction in the people on the ship. so we're going to take 663 sailors off ford compared to nemitz. the net result is over 50 years the cost to buy that ship, own, operate and maintain it will be $4 billion less than the nemitz aircraft carrier today. >> i must say those things the admiral pointed out are undeniably accurate. but those numbers there are totally unacceptable. and i hope you realize that.
i would like to point out that senator mccain has been very constructive and helpful in informing this committee. and he is a strong advocate for the men and women who are doing great work in the construction of this or these aircraft carriers and arguably one of the finest shipyards in the world. senator cain. >> thank you, mr. chairman. thank you for the comments on the shipyard. i'm proud to represent the thousands of shipbuilders who manufacture the largest and most complicated items on the planet earth, nuclear aircraft carriers and subs, many from north carolina and virginia work at the shipyard and didn't make the decision about putting all the new technologies on the first in class of the ford class. they also didn't develop the weapons systems in the aeg and the systems complicated. those were developed elsewhere and they are working to install
them. but i have been on the ship many times and seen the work underway. i saw the core inserted into the ship one day. i have seen the navy take control of the ship in recent months and they are very excited about it. but a couple items, cost overruns. and i agree that there's very systemic issues that are demonstrated that we need to tackle. cost overruns, i would say that a lot of this is less an overrun than poor cost estimation. and i think you unpack what cost overruns are. poor cost estimation. before 2010, when the navy was talking about their cost estimate on this project to this committee and others, repeatedly the navy said that their confidence level in the cost estimate was less than 50% or even in some cases less than 40%. isn't that correct? >> yes, sir. >> and i gather that that was because, first in class and the addition of all these untried
tech n technological systems, that was one of the reasons the confidence level was low, is that right? >> yes, sir. >> now, let me talk about first in class history because mr. francis, you talked about -- this is a similar problem but just a new example. i think it was eric labs who did the study this summer where he looked at navy acquisition programs and looked at first in class over a variety of programs. and he basically concluded, i think, that has a general matter, first in class acquisitions in shipbuilding tend to be 10% to 30% higher than the estimate that the navy has begun with. isn't that essentially true? >> yes, senator. i think in my statement we have a list of the most recent, the first in class and the average cost increase is 28%. >> so i'm not going to defend 23% as better than an average. but to put it in context isn't
that that unusual. but maybe what is more important is what happens after first in class. so first in class on the class cruiser, there's a lot of problems. the high seas have potentially dangerous stability problems. that was established by the first class of defense in 1982. that program ended up being significantly improved as it moved along. the arley-burke destroyer was called the navy's billion-dollar hole. and driving to the washington in a cadillac was written about in "the post" in 1996. that significant limb proved after the first in class. one i love is the virginia class submarine that's done in tandem between the shipyard in new port news and electric boat. that's turned into a very successful acquisition program, but wouldn't you agree the first
in class at that had some significant challenge and cost overruns or cost estimation problems. have i basically given the history correct on these three? >> sir, you're absolutely correct. one important thing to keep sight of is in each case, unlike other major weapon systems programs, there's not a prototype ship. >> right. >> the lead ship is the prototype. it's the first opportunity to bring these complex systems together to integrate, test, and there are uncertainties, unknowables and risks that get brought to that ship in production when it is most costly to find and fix those issues. >> i love the tried and buy it. for some weapon systems, that's really what you do. you protoetype it and then buy it. but for a ship of this size, the prototype is the actual. that's why you see difference between first in class and the subsequent history. you talked, secretary stackley,
about the changing in the contracting mechanism between 78 as a cost-plus to 79 as a fixed cost. and i'm assuming that 80 will be fix cost as well? >> yes, sir. both 79 and 80 are fixed contracts. >> and finally, the question on the ons savings, actually, for as much as we talk about the cost of constructing and operating is even larger on platforms such as this because they have such a long life. and i gather that one of the main design features of this is to put in physical design to dramatically reduce the number of sailors and then drop the personnel costs by $4 billion. i credit it was dr. gilmore or mr. francis who said, yes, there's a projected savings in personnel cost, but we haven't achieved it yet. we have to see whether that's accurate. there may be some challenges that would reduce that.
but i do know that those bringing down the number of personnel is one of the main advances over the nimitz design part of this ford class. and we should all stay on it to make sure there's achieved. i strongly support the chair's acquisition reform strategy. what we did in this year's mda was important but i think, mr. chairman, i certainly see that as a down payment on what we will be doing going forward and think it is important that we do it. >> senator cain, can i make a -- >> please. >> first on the contract for the cvn-79, the current contract is fixed price. that covers about 45% of the construction costs. 55% has already been paid for under a cost-plus contract. so keep that in mind. and then i think you're exactly right on -- the first of class
of any weapons system, we seem to have a lot of trouble with. and then later on we kind of -- we kind of get comfortable with the fact that we have worked out the problems and everything looks good. and it creates a little complacency. so i think a challenge for us is, if we're repeatedly having trouble with first article, and it is not just navy, what is it we can do in terms of estimating and risk analysis so we are not making those same estimating errors every time? >> could i add to that, senator? i think it's important that this committee has actually received from the director of cape an information package that showed since the implementation of wasara, the cost estimating techniques were improved with information and data right directly from contractors. and it shows that the distance between the service cross divisions and the independent cost positions has gone at a
spe medium to 6% in the margin of error. so over the period of time, what the senator points out is exactly what needs to be done to improve our future understanding of how costs are gone. >> but isn't it also true that the delays in cvn-78 have had a significant effect on the cost of cvn-79? >> yes, sir. there's the program plan for the carriers, cvn-78, 79 and 80 has been stretched out. in the 2008 mdaa, the navy was authorized to procure the 78, the 79 and 80 on four-year centers, which was consistent with 12 carrier navy. the decision was subsequently made by the department of defense that we're going to stretch that out to five year centers.
so now the cvn-79, which was going to be an earlier carrier, is not put under contract until 2013's budget. then the 80 was bumped further. so the program has been stretched out and that's brought frankly more cost to the program just associated with costs that run with time. >> senator ayod? >> thank you. i just want to say that i think one of the challenges, and as mr. francis referenced in your testimony, here we sit here today with billions of dollars in overrun and people are very frustrated by it. and you have cited also that the jsf program, the m-22, the combat ship, they were actually worse. and this is a typical acquisition outcome. so here's the challenge. weave got to change this dynamic
because we have had the leaders of all our military rightly come in here and testify about the impact of the sequestration. and the fact that we are going to diminish the size of our fleet that we need more ships, more attack submarines and more ground troops, obviously, more fighters and making sure we have the training for the men and women in uniform. and then my constituents look at billions of dollars in overrun that is have been multiple exams of it and look at us and say, why aren't you dealing with that? if we are going to give you more money, then we need you to deal with that. so all of us who care very deeply about making sure that we do what needs to be done to defend this great nation, this is an issue that we -- it's got to go from being the bottom priority to a top priority. the one question i would ask all of you, whoever is the best,
secretary stackley, secretary mcfarland, mr. francis, whoever is best to answer this, you mentioned a lining responsibility and accountability in decision making. how are we rewarding good acquisition behavior within the pentagon? in other words, if you are doing a good job, how are you rewarded? and, in turn, i think one of the questions you're hearing from all of us is how are those being held accountable, not just at the captain level that we have heard about today, but at the highest levels that this has to be a priority for all of us if we want to make sure they have what our men and women in the military need and to make this important. whoever appeals that, that's the question here, we are clearly not aligned in accountability, priority and how we're rewarding the people who are doing a