July 29, 2015
Washington, D.C. – U.S. Senator John McCain (R-AZ) delivered the following remarks today on defense acquisition reform at the U.S. Chamber of Commerce Procurement Council Policy Meeting in Washington, D.C.:
“Thank you, Jim, for that warm introduction. I am very pleased to be back among friends at the Chamber of Commerce. Over the past several years, the American people have been through a trying period of economic uncertainty. But through it all, the Chamber has been a constant champion for American free enterprise, the principles that made our economy the envy of the world and that remain the surest path to jobs, growth, and opportunity for all.
“I am also grateful to the Procurement Council for the invitation to speak before you today, and for all the work you’ve done over the years to simplify government contracting and make this process work for government, businesses, and taxpayers.
“Procurement and acquisition policy may not be the most exciting subject in Washington. And perhaps it is healthy that for most people, this issue is about as thought-provoking as a sleeping pill. But there are few other issues that have as great an impact on the performance of our government in meeting its responsibilities to the people it serves. That’s true in healthcare, education, and caring for our veterans. And it’s certainly true when it comes to our national defense.
“That’s why as Chairman of the Senate Armed Services Committee, I have made acquisition reform a top priority. And in the National Defense Authorization Act, or NDAA, that passed the Senate in June, I believe the Committee has proposed the most sweeping acquisition reforms in a generation.
“We need reform on this scale because our Nation is at a key inflection point. For the past decade, America’s adversaries have invested heavily in rapidly improving their militaries to counter our unique advantages. At the same time, the speed of globalization and commercialization means that advanced disruptive technologies are now—and increasingly will be—available to less sophisticated militaries, terrorist groups, and other non-state actors.
“In the face of these trends, our Defense Department has grown larger but less capable, more complex but less innovative, more proficient at defeating low-tech adversaries but more vulnerable to high-tech ones. And the self-inflicted wounds of drastic defense cuts have made all of this worse.
“As a result, we are now flirting with disaster: our military technological advantage is eroding – and eroding fast – precisely as the rules-based international order, which has been anchored by U.S. hard power for seven decades, is being seriously stressed around the world, and with it, the foundation of our security and prosperity.
“Changing course and maintaining our military technological advantage is about much more than a larger defense budget or a better fighter or submarine. These things are important, but to give our military the capabilities it needs to defend the nation, the Department of Defense must be able to access innovation in areas such as cyber, robotics, data analytics, miniaturization, and autonomy – innovation that is increasingly likely not to come from Washington or the defense establishment.
“In other words, the Pentagon confronts an emerging innovation gap. Commercial R&D in the United States overtook government R&D in 1980, and now represents 75 percent of the national total. The top four U.S. defense contractors combined spend only 27 percent of what Google does annually on R&D. The problem grows worse beyond our borders. Global R&D is now more than twice that of the United States. And Chinese R&D levels are projected to surpass the United States in 2022.
“Even when the Defense Department is innovating, it is moving too slowly. Innovation is measured in 18-month cycles in the commercial market. The Defense Department has acquisition cycles that can last 18 years. This is due to a defense acquisition system that has been broken for decades. It takes too long and costs too much—and that’s if it actually produces something. According to one estimate, the Defense Department spent $46 billion between 2001 and 2011 on at least a dozen programs that never became operational.
“This broken acquisition system, with its complex regulation and stifling bureaucracy, leads many commercial firms to choose not to do business with the Defense Department, or to limit their engagement in ways that prevent the Department from accessing the critical technologies that these companies have to offer. If we are going to maintain our military technological advantage, we simply cannot afford a defense acquisition system with regulations so byzantine that compliance becomes a competitive advantage. Our military should be doing business with companies where the best minds work in the laboratory, not the legal department.
“That’s why a major focus of the NDAA is improving access to non-traditional and commercial contactors. The NDAA incentivizes commercial innovation by removing barriers to new entrants into the defense market. By adopting commercial buying practices for the Defense Department, the bill makes it easier for non-traditional firms to do business with the Pentagon. And crucially, we ensure that businesses are not forced to cede intellectual property developed at their expense to the government.
“We will never stay ahead of our adversaries with an acquisition system in which it takes years just to fill out the paperwork for a new capability. In case you think I am exaggerating, an Army study looked at the time it would take to go through all of the reviews inside the Office of the Secretary of Defense and buy nothing. What was the answer? Ten years. Ten years to buy nothing. Our adversaries are not shuffling paper. They are building weapon systems. It is time for us to do the same.
“That’s why the NDAA supports the use of flexible acquisition authorities and the development of alternative acquisition pathways to acquire critical national security capabilities. It establishes a new streamlined acquisition and requirements process for rapid prototyping and rapid fielding within two to five years. The bill streamlines the process for buying weapon systems, services, and information technology by reducing unnecessary requirements, reports, and certifications. And it establishes an expert review panel to identify unneeded acquisition regulations.
“Finally, the heart of the acquisition reforms in the NDAA is accountability. Two years ago, I asked the Chief of Naval Operations who was responsible for $2.4 billion in cost overruns on the USS Gerald R. Fordaircraft carrier. His answer? ‘I don’t know.’ In today’s vast acquisition bureaucracy, where personnel and project managers cycle through rapidly, everyone is accountable, and no one is accountable. This madness must stop, and our reforms would put an end to the blurred lines of accountability inside the defense acquisition system that allow its leaders to evade responsibility for results.
“The NDAA gives greater authority to the military services to manage their own programs, and enhances the role of the service chiefs in the acquisition process. In exchange for greater authority, the bill demands accountability and creates new mechanisms to deliver it. Services chiefs, service secretaries, service acquisition executives, and program managers would sign up to binding management, requirement, and resource commitments. The bill also creates new incentives for the services to deliver programs on time and on budget. If military services fail to manage a program effectively, they will lose authority and control over that program. And they will be assessed an annual cost penalty on their cost overruns, with those funds directed towards acquisition risk reduction efforts across the Department.
“As many of you know, these proposals have been the subject of some controversy in the press. In particular, there have been concerns on our proposal to transfer milestone decision authority for a limited set of programs from the Undersecretary of Defense for Acquisition, Technology, and Logistics, or AT&L, to the services. Let me be clear. This proposal is about aligning authority with accountability. Service leaders that are responsible for identifying requirements and setting budgetary resources must be responsible for ensuring that acquisition programs deliver on schedule, within cost, and perform to expectations. And when they fail to do so, they must be held accountable.
“Our proposal places no special faith in our military services. They do not have a perfect record on acquisition. But in our current acquisition system, no one does. The services have at times, and to varying degrees, suffered from the same inefficiency and dysfunction that have crippled our defense acquisition system more broadly: unwarranted optimism in cost and schedule estimates, funding instability, requirements creep, immature technology, excessive risk-taking, and concurrency between testing and production. The only antidote to these problems is real accountability for results. That is what the NDAA demands.
“It is also my hope that by making the services responsible for their own programs, we will empower AT&L to focus more on the 80% of defense acquisition that is not made up of major defense acquisition programs. For example, the Department of Defense is about to award an $11 billion contract to build a new electronic health record system. This is real money, and in era of budget constraints where every defense dollar is precious we must have the same rigorous oversight for information technology as weapons systems. And as the Pentagon pursues its “Third Offset” strategy, AT&L has a critical role to play in crafting strategies to develop technologies that deliver greater returns on investment and help maintain our military technological dominance.
“My friends, our failing defense acquisition system is no longer just a budgetary scandal—it is a national security crisis. But I am optimistic that we can solve these problems. I believe America’s brightest minds will always be driven to solve the world’s toughest problems. Those are the problems our military confronts every day. And these are the problems we can solve if we create an acquisition system that enables the Department of Defense to take advantage of the creativity and ingenuity of America’s innovators and entrepreneurs. Thank you.”