Change Through Ex-Change Conference
Remarks by The Hon. Jacques S. Gansler, Under Secretary of Defense [Acquisition and Technology], Navy-Marine Corps Acquisition Reform Week 98, May 4, 1998.
I am pleased to have the opportunity to spend a few minutes with you as you take part in your Acquisition Reform Week activities. The Navy and Marine Corps' Change Through Exchange Conference is an important way for service acquisition personnel to communicate new ideas and ways we can transform the way we do business at the Department of Defense. You should be proud of the Navy's success in acquisition reform. I urge you to keep up the good work - not just during Acquisition Reform Week - but every week of the year. Over the weekend, I went through the collection of "success stories" many of you submitted (and a few of which made it to this program.) They are great! If they could be widely applied to all DoD programs, it would have a spectacular impact. I encourage you to study and apply these lessons as widely as possible.
Today, I would like to take a few minutes to discuss our acquisition priorities as they fit into the overall context of current and future U.S. military strategy and to describe the vital role you play in this whole process. The Joint Chiefs of Staff made important recommendations for our future security in their seminal statement on projected global defense requirements, Joint Vision 2010. To combat the new threats our nation faces in the early 21st century, the JCS called for a "Revolution In Military Affairs" -- a fundamental strategic and tactical restructuring that, to be successful, will require a similar dramatic set of changes in the way we do business in the future.
The key acquisition priorities to support this Revolution In Military Affairs will be
to modernize our current weapons systems
to develop and deploy the major new systems and subsystems required for 21st century operations,
to support those systems efficiently and effectively; and
to do all three of these at a lower cost and within drastically reduced cycle times.
To defend our nation and to protect our allies, the U.S. military must have the weapon systems and equipment needed to conduct multiple, concurrent contingency operations worldwide. And it must be able to do so in any environment -- including one in which an adversary uses asymmetric means, such as nuclear, biological, or chemical weapons, information warfare, and large numbers of low-cost cruise and ballistic missiles. To counter these, you and the other members of our acquisition team must provide our warfighters with the full protection of superior weapons and total information superiority in the battlespace.
To achieve total information superiority, we must incorporate advanced information systems into every weapon we acquire. This information superiority is critical to our survival in an unpredictable and increasingly dangerous world; a world where individual terrorists, transnational actors, and rogue nations can unleash firepower in many ways as terrifying as that of a major global power. These are not a few disorganized political zealots armed with pistols and hand grenades. Rather, they are well organized forces, armed with sophisticated, deadly weapons (often purchased on the world arms market) -- with access to advanced information and technology, the skills to utilize them, and few moral inhibitions about their use.
To counter this new enemy, we must not only fundamentally transform our acquisition process in terms of "how we buy", but also in terms of " what we buy. To meet the new threats, we must focus sufficient resources on R&D and procurement of the advanced weapons and, particularly, the systems of systems required to take advantage of the rapidly-evolving technology now becoming available. Specifically: in areas such as integrated, secure, and "smart" command, control, communications, and intelligence infrastructures; smart or brilliant weapons; and credible deterrents against projected early 21st century threats -- biological, chemical, nuclear, and information warfare; and large numbers of low-cost cruise or ballistic missiles. It is especially important that these new systems be developed and deployed on a much faster cycle in order to make the best use of continuing advances in technology and to stay ahead of the technological applications utilized by our adversaries. Our Year 2000 acquisition commitment to the Vice President is to deliver new major defense systems to users in at least 25 percent less time. We expect to exceed that goal; and we must! (Information age technology cycles are 18 months, not the typical DoD cycles that can run 11-13 years, on average and stretch out even longer in many instances.)
Overall, we must pay for the required Revolution In Military Affairs by simultaneously engaging in a "Revolution in Business Affairs". Here we must take full advantage of the technologies and management lessons that have turned around American commerce and industry during the past decade.
Many of the challenges we face today and in the near future are the direct result of our deferred modernization during the past decade. During that time, as the defense budget plummeted, we maintained our readiness; but our procurement account, as you know, fell by more than 70 per cent. Now, we are attempting to reverse that trend - by increasing our procurement account -- so that we can replace aging equipment and take full advantage of new technology.
But, with a fixed top line for the Defense budget, the only way to generate the added procurement dollars and still maintain readiness, force structure, and military quality-of-life, is to shift resources from support and infrastructure to modernization. Striking a delicate balance between our current and future needs - with a flat overall budget for the foreseeable future - will not be easy. But we have no choice.
Secretary Cohen, Deputy Secretary Hamre, and I don't plan to run hide from this challenge. We will meet it head on - but only with your help. How can you help? The acquisition reforms that you have produced during the past few years must continue - and expand - if we are to meet our nation's overall strategic goals. And it's not going to happen by waving a magic wand. It's going to have to come from you. And it's going to take hard work; and overcome significant resistance.
You have already seen the results of your hard work to date. The Department of Defense is a much different place today from what it was just a few years ago. We have undertaken a dramatic transformation in the way we do business. We have had much success in making the changes necessary to cut costs, reduce cycle times, adopt new processes and procedures to manage our contracts, trim our workforce, and eliminate excess infrastructure.
The first four rounds of base closings, for example, are already generating greater savings than anticipated -- $3.7 billion in the 1999 budget, $25 billion through 2003, and $5.6 billion every year thereafter. We now seek additional BRAC authority that will provide us $21 billion in additional savings from 2008 through 2015. Maintaining facilities that we do not need today and certainly will not need tomorrow is wasteful and affects our combat forces' readiness and ability to modernize. If Congress does not give us the authority to continue with the next phase of base closings, our ability to sustain this modernization program will be in serious jeopardy.
Our past successes in acquisition reform and infrastructure reductions teach us an important lesson. They must continue and be not only accelerated, but institutionalized.
In the next phase of reform, we will concentrate on: adapting commercial 'best practices' to defense needs (including in the cost accounting and auditing area); restructuring our support systems; significant further infrastructure reductions; greatly reduced cycle times; and, critically important, civil/military industrial base integration.
Such civil/military/industrial integration will greatly expand our partnership with a revived and prospering commercial industry -- not a partnership in which we become simply the pawns of commercial products and processes, but a dynamic and vigorous engagement that, through R&D, creates technically advanced products and systems with common applications and that, through use of flexible manufacturing, allows production of defense-unique items on the same assembly lines as high-volume commercial items. TRW, for example, has been producing electronic circuit boards for the Air Force's F-22 fighter aircraft and the Army's Comanche helicopter on the same production line as its high volume commercial electronics products. This has resulted in 30- 50% savings and a product that actually exceeds our performance requirements.
Another feature of our "Revolution In Business Affairs" will be competitive sourcing of the vast majority of our support and infrastructure work -- a major step in reducing DoD costs.
One example of the way this is taking place is the ExpressMart Program, a new initiative sponsored by the 32nd Street Naval Station and the Naval Air Station, North Island, California. A private company has been awarded a contract to furnish next day delivery of food and supplies formerly purchased through the facility's in-house system. The ExpressMart offers more than 40,000 office, janitorial, maintenance, tool, safety, and galley items to the base. This innovative program - which I urge you all to look at closely as an excellent case study in successful competitive sourcing - offers a single source for acquiring a variety of items; consolidated delivery of these items; overnight service; contract pricing through a large vendor that is significantly better than the base could negotiate on its own; an internet ordering site; and - perhaps most important - an end to in-house inventory maintenance. The program saves the Department of Defense approximately $72,000 per month and reduces inventory and related infrastructure costs by more than $4 million.
To take full advantage - as you have - of opportunities for increased competitive sourcing and access to the superior products and processes many world class companies provide, we must deal with government cost accounting and auditing requirements that some of these industries find overly burdensome - and which some of our critics claim are antiquated and highly unreliable. Given our status as the world's largest single purchaser of goods and services, we must take every action required to assure that we receive world-class products and services at the best possible prices and the highest possible quality, from as broad an industrial base as possible. We must also consider how we can accommodate some bidders' need for long-term contractual relationships and how we will deal with troublesome intellectual capital/property rights issues. These important business issues discourage some industries from agreeing to bid on Defense Department work and must be addressed.
Another potential payoff area for us will come from a total reengineering of our DoD logistics system. We are living today with a 1950s' logistics model that is no longer affordable and which fails to provide acceptable performance. Advanced information systems and rapid transportation are keys to our success in this area. Two of our Year 2000 logistics support commitments to the Vice President are to achieve visibility of at least 90 percent of all DoD materiel assets and reduce average order to receipt time by more than 50 percent. Such actions will have huge advantages in warfighting sustainment and, simultaneously, in support cost reductions.
Finally, and perhaps most important from your vantage point, we must focus on training and educating our acquisition workforce in order to meet the demands of this massive re-engineering effort. Unless we all know how best to do what we are doing and comprehend the benefits we derive by doing it better, acquisition reform will not succeed.
As we accelerate the pace of reform, I must warn you, there will occasionally be mistakes (as was recently found on some spare parts purchased a few years ago, as we began to introduce commercial buying practices). When our systems of audits and controls reveal errors, we must act quickly (as we did in the cases identified), to correct the errors and make sure we do not make the same mistakes again. This is a process of continuous improvement.
I have, for example, directed the Deputy Under Secretary of Defense for Acquisition Reform to develop and deliver, on an expedited schedule, special training modules designed to respond to issues raised recently by the DoD Inspector General concerning needed improvements in sole source spare parts purchase procedures. All appropriate DoD personnel will be required to take this additional training on techniques that will improve our overall acquisition standards. This takes added resources, but it is an investment with huge returns, and one we must make.
As you can imagine, the largest acquisition organization in the world is going to make a few mistakes as we transform ourselves into world-class buyers. However, we must not let these set us back. The overall results being achieved - in cost, performance, and cycle time - from the acquisition reforms to-date, clearly justify moving ahead aggressively. The benefits identified are already in the billions of dollars. We are well on the way to a successful Revolution In Business Affairs. While issues like overpriced spare parts are serious and will continue to be taken seriously by the Department of Defense, we must focus on the overall savings and benefits which come from catalogue pricing and similar commercial purchasing practices.
Increasingly, as we implement this successful Revolution In Business Affairs, the result will be a DoD acquisition activity that looks much more like a dynamic, restructured, reengineered, world-class business. We are learning important lessons from successfully restructured world-class corporations to fully utilize competitive sourcing to achieve the best performance at the lowest cost -- to get the "best value" for the government - from both the public and private sectors.
Finally, we will be looking to industry to help us in this effort. As we move more and more aggressively toward dependence on competitively sourcing, we, as the nation's largest buyer, must expect the best prices and the best service from our private contractors. We also should expect their managers to work with our managers to help us get best value for our combat forces. We will continue to train our workforce to become more proficient and astute in their management of our suppliers - utilizing tools such as competition, market research, and price analysis. And we are also looking to industry to insure that its acquisition and selling professionals fully understand the demands of the defense market and do their share to insure highest quality, decreased cycle times, lowest prices, and maximum performance. We should demand and receive nothing less.
I have been on the job as Under Secretary of Defense for Acquisition and Technology for about six months now. It seems like only a very short time. But, it has been long enough for me to develop a deep appreciation for the dedication and hard work of our Navy and Marine Corps acquisition workforce. This is a difficult - and challenging - period for all of you, as you put into place the new procedures and policies required to revolutionize the way the Department of Defense does its business. Our success comes from your hard work and commitment to reform. We are proud of you and appreciate all you have done to sustain the momentum of acquisition reform.
Thank you for all your extra efforts - the nation's security over the coming years depends on its continuance. I know we can count on you.