Opening Statement of Senator Carl Levin Senate Armed Services Committee Mark-up of S.454, the Weapon Systems Acquisition Reform Act of 2009

The Armed Services Committee meets today to mark-up S. 454, the Weapon Systems Acquisition Reform Act of 2009. I introduced this bill with Senator McCain on February 23, to address problems in the performance of DOD’s major defense acquisition programs at a time when cost growth on these programs has reached levels that we simply cannot afford.

The Government Accountability Office recently released its annual report on DOD’s acquisition of major weapon systems. GAO reports that “the cumulative cost overruns are still staggering—almost $296 billion in fiscal year 2009 dollars—and the problems are pervasive,” and concludes that “The time for change is now.” The GAO supported the approach taken in our bill at our hearing about a month ago.

In January, Secretary Gates told our Committee that we must work together to address the “repeated – and unacceptable – problems with requirements, schedule, cost, and performance” from which too many of our defense acquisition programs suffer. And on March 4, the President told the press that “It’s time to end the extra costs and long delays that are all too common in our defense contracting” – and endorsed the goals of S. 454.

As a general rule, when DOD acquisition programs fail, it is because the Department continues to rely on unreasonable cost and schedule estimates, continues to establish unrealistic performance expectations, continues to insist on the use of immature technologies, and continues to adopt costly changes to program requirements, production quantities and funding levels in the middle of ongoing programs.

To give just one example: With regard to JSF, GAO reports that initial estimates assumed that commonality between the three variants of the aircraft could cut development costs by about 40 percent – however, this level of commonality has proven impossible to achieve. Twelve years after the program started, three of JSF’s eight critical technologies are still not mature, its production processes are not mature, and its designs are still not fully proven and tested.

The bill that we are marking up today is designed to help put major defense acquisition programs on a sound footing from the outset by addressing program shortcomings in the early phases of the acquisition process. By introducing sound practices to reduce risk on defense acquisition programs, the bill should will reduce DOD’s reliance on cost-plus contracts.

In some of the key provisions of the bill, we require DOD to rebuild its systems engineering capabilities, we reestablish the position of Director of Developmental Testing, and we establish an independent cost estimating office headed by a Senate-confirmed director who reports directly to the Secretary – just like the Director of Operational Test and Evaluation – in an effort to ensure that the budget assumptions underlying acquisition programs are sound. We require the increased use of competitive prototyping, and we put teeth into the Nunn-McCurdy statute by establishing the presumption that any program that exceeds its original baseline by more than 50 percent will be terminated unless it can be justified from the ground up.

The Committee held a hearing on S. 454 on March 2, at which four witnesses, including two former Under Secretaries of Defense for Acquisition, Technology, and Logistics, endorsed the Committee’s acquisition reform effort. Ashton Carter, the President’s nominee to serve as the next Under Secretary for AT&L, added his support at his March 26, 2009 hearing. In addition, we have since received extensive comments on the bill from the Department of Defense, from the defense industry, and from independent experts on the acquisition system.

Senator McCain and I have taken these comments into consideration, and are offering a substitute amendment for consideration at today’s mark-up. The key changes that would be made by the substitute are:

• Section 102, on developmental testing, has been modified to address DOD concerns by ensuring that test and evaluation activities are fully integrated into the Department’s system engineering activities.

• Section 104, on independent cost estimates, has been modified to address DOD concerns by allowing the new Director of Independent Cost Assessment to rely on estimates prepared by the military departments for smaller programs, if he determines them to be independent and reliable.

• Section 203, on lifecycle competition, has been modified to address DOD concerns by providing additional flexibility in the requirement for competitive prototyping.

• Section 205, on organizational conflicts of interest, has been modified to address contractor concerns by providing greater flexibility and adding a phase-in period.

We have not done so. These provisions are tough medicine, but the acquisition system needs tough medicine. We will, of course, continue to work with the Department and others during the legislative process in an effort to address their concerns about the bill without undermining any of its central provisions.