Director, Strategic and Tactical Systems









December 7, 1999




Mr. Chairman, members of the committee, thank you for the opportunity to appear today to discuss the Department of Defense’s efforts to control the costs and adhere to the schedule of the F-22 aircraft program.

As you know, the F-22 is a technically challenging development program with the goal of producing a tactical fighter aircraft with unprecedented capabilities in the areas of low observability, the ability to fly supersonically without afterburner, and advanced avionics and sensors. The F-22 is intended to assure that our air forces remain dominant in the 21st century.

The program is currently progressing well technically, with two developmental aircraft already in flight tests. Four more flight test aircraft, including the initial avionics flight test platform, are scheduled for delivery in calendar year 2000.

A program as technically challenging as the F-22 brings with it a concomitant challenge regarding cost and schedule performance. This challenge was made more difficult by

Section 217 of the National Defense Authorization Act for Fiscal Year 1998. That statutory language imposed separate cost caps on the Engineering and Manufacturing Development (EMD) phase ($18.88 billion) and on the production phase ($39.76 billion) of the program.

The Department has several senior-level management, oversight, and budgeting processes and reporting and documentation mechanisms that it uses to address the challenges of the F-22 and of any other major defense acquisition program.

These tools are intended to provide the Secretary of Defense and his staff with the information he needs to monitor, control, and reduce costs and maintain program schedules.

The principal processes used by the Department are the Requirements Process, the Defense Acquisition Board (DAB) process, the Defense Acquisition Executive Summary (DAES) process, and the Planning, Programming, and Budgeting System (PPBS). The Department also gives special attention to cost containment and reduction on particular programs.

The requirements process first confronts both cost and schedule issues, as the senior military leadership on the Joint Requirements Oversight Council (JROC) addresses cost and schedule in establishing the military justification for an acquisition program.

With constrained defense budgets, the JROC is particularly focused on whether weapons programs are affordable, and whether they can be fielded in a timely manner. Cost is now a required parameter that must be included in formal requirements for weapons systems.

The DAB acquisition process is a milestone-based review and decision mechanism that considers the cost, schedule, and technical content of major defense acquisition programs. The DAB is an advisory group to the person chairing it, the Under Secretary of Defense for Acquisition, Technology and Logistics (USD(AT&L)). It also includes other senior officials in the Office of the Secretary of Defense (OSD), the Joint Staff, and the Military Departments, and importantly, the Vice Chairman of the DAB is the Vice Chairman of the Joint Chiefs of Staff who also chairs the Joint Requirements Oversight Council.

At a minimum, the DAB meets before major transition points, or "milestones," as a program progresses through each discrete phase of development and production. Cost and schedule considerations are a major focus at each DAB review, and the several staff offices within OSD that assess programs from these perspectives support the Under Secretary in this process.

For example, at the development and production milestones, OSD’s Cost Analysis Improvement Group (CAIG) provides an independent cost estimate. The CAIG’s independent cost estimates provide useful cost information to DoD decision-makers. The CAIG estimates are intended primarily as internal working documents to ensure that senior officials receive the most candid and complete information about weapons acquisition programs.

Views are also provided by other offices which might have significant perspectives regarding cost and schedule. For example, the Office of Program Analysis and Evaluation and the Office for Acquisition Resources and Analysis jointly perform an affordability analysis that considers the affordability of each major weapon system program in a broader context.

The third major process is the DAES, which on a quarterly basis, highlights to the Under Secretary the cost, schedule, technical performance, management, and other key parameters of major defense acquisition programs. The DAES Summary Report is an internal document highlighting program status and often containing what is termed "Earned Value Management System" information. "Earned value" information is the most up to date set of metrics we use to assess cost and schedule performance, and it is a methodology employed by some of the most successful American corporations.

Finally, the Department reviews the adequacy of the overall defense program in the Planning, Programming, and Budgeting System or PPBS. PPBS encompasses policy planning; long-range programming of forces, personnel, and funding; and near-term budgeting. The PPBS provides in its programming phase for the development of detailed program plans that are identified in the Future Years Defense Program (FYDP), a multi-year plan updated on an annual basis (the full six-year plan is updated every other year, with only the five remaining years updated in the so-called "offyear" review). Initial proposals for each year’s updated FYDP come from the Military Departments in their Program Objective Memoranda (POMs). The overall balance of these POMs is evaluated in the summer Program Review, culminating in Defense Resources Board (DRB) consideration of alternative approaches that might provide improved overall effectiveness within available funds. These reviews of the service POMs consider the balance among force structure, modernization, readiness, and sustainability, seeking to accomplish the established policy goals within available funds. The Department’s tactical aircraft programs are included in the potential scope of these reviews, although specific issues raised to the DRB in any given year may or may not include specific tactical air force modernization topics. Specific issues can vary significantly from year to year depending upon the circumstances.

Throughout these deliberations, as Ms. Druyun can attest, OSD spends significant time examining and understanding the cost and schedule projections presented by each armed service for each of its programs at issue.

What I described above refers to the Department’s internal process. We also make reports to Congress on program costs. The Selected Acquisition Report is a document required from the Department by the Congress to provide it with cost, schedule, and other information about major development and procurement programs.

The Under Secretary also holds program reviews more often for high priority programs. In fact, a Defense Acquisition Executive program review for the F-22 is scheduled for Thursday (December 9) as part of the regular oversight process in the Department.

In addition, the Acquisition Decision Memorandum that was signed by the USD(AT&L) subsequent to the decision in December 1998 approving the go-ahead for production of the two aircraft lot reiterated the importance of maintaining continued emphasis on executing the F-22 program within the congressional cost caps.

The USD(AT&L) challenged the Air Force and its contractors to continue efforts to reduce costs. He also directed the Air Force to provide him with quarterly briefings on development and production cost status. The Department has used these special reviews to examine cost and schedule trends over shorter periods and to track program status to a higher degree of fidelity.

For example, the USD(AT&L) has been able to track cost and schedule variances, the actual costs of each EMD aircraft being produced (compared to the projected cost), and the status of the individual Development Cost Reduction Plans (DCRPs) and the Production Cost Reduction Plans (PCRPs).

Trends to date in cost and schedule variances have shown some improvement, but the "jury is still out" on the ability of the DCRPs and PCRPs to produce the cost savings needed to ensure performance under the caps. Continuation of these quarterly USD(AT&L) reviews will give us added confidence that the decision-makers have the best information at each milestone decision on the ability of the Service to execute the F-22 program as planned, and within the cost caps.

Finally, in structuring an acquisition strategy for our programs, we make every effort to include the concept of competition as both a mechanism to control program costs and to maintain a viable defense industrial base. This can be in the form of a "head-to-head" competition, or in the case where we have already down-selected to a single contractor, we try to take advantage of a "dissimilar’ competition. Mr. Chairman, all of these tools have been used, and will continue to be used, to ensure that the F-22 program will be accomplished for an acceptable cost and on an acceptable schedule.

The Department’s senior leadership believes it has made a commitment to the Congress and the American taxpayer to achieve this objective.

I will be happy to answer any questions you and the other members may have.