which is how do we institutionalize the rapid wartime acquisition capability? there's been really for many years two acquisition systems at the pentagon. there's the long-term one we all know with large programs that start with requirements. and that's the bulk -- been the bulk of the spending. the second is one that wasn't all that big until after 9/11. and we started fighting these wars. and now it's become much larger. and that's a short-term acquisition system driven by the needs and the field of a combatant commander. and it's sprung up in the pentagon, committees, approaches, and lots of rbrbl@ b

approach to industrial policy across the board. a few comments on the framework for this. fundamentally demand drives supply. that is to say, you know, you're

not going to buy things largely because of industrial needs. you're going to buy things because we have national security needs for those things. but that said, supply has to inform demand. and the capabilities the industry can offer get taken into account in shaping the defense demand. i think within that framework, there are a number of steps and tools that have to be taken. and some of the tools have fell -- i don't think there's any magic to these tools. monitor, assess the supplier base particularly relative to the priorities set forth in the qdr. take industrial capabilities into account in shaping acquisition strategies. when we work on the demand side in the pentagon, taking the defense industrial capabilities into account. considering sources as supply, establishing some conflict of interest rules, adding commercial suppliers, making it more sensible for commercial suppliers to play. merger reviews, maybe we need

some guidance here as we go into this new era, and some ensuring better stewardship by primes of the defense supply base. i want to touch on a few. look, on monitoring the supplier base, that's what brett's office and brett are about. and that's the historic responsibility. what you need to do here is matrix demand of supply. the qdr lays out a bunch of priority areas and what i would urge them to do is go sector by sector and look at each of these sectors. the issue here is resources. poor brett's office has atrophy over the years, i don't think by intent. but he today doesn't have the resources to do this. and i would ask the pentagon leadership to bring more resources to the task. because without more resources, he can't do much more than react. and so that's point one. the second point. they need to do --

>> i think that was a good point. >> shaping acquisition strategies. we began to do this in the late '90s and it fell into abeyance. we need to look at the industrial capabilities and bring it into play. again, that doesn't mean we decide on -- we make source selection decisions on the basis of we need this industrial capability, therefore we're going to do it that way. it does mean as we shape long-term acquisition strategies in a capability area like radar or what not. we need to look at industrial capabilities as part of that equation. and i would favor a more wholistic capabilities. on sectors like radars. you look at the acquisition and the community and you essentially do a set of trade-offs to -- in a wholistic and coherent way. and that's not really done today. and i think that's the way to bring industrial capabilities

into account. and if you begin to shape acquisition strategies that way, you can do things like address supplier-base issues. you can say aha, let's have some competition at the substance level. we can eliminate some program redundancy if we do that too. foreign sources of supply. the qdr mentions foreign sources of supply. i think we need to look at our defense industrial base and in an expanded way. and indeed, we have. in the last eight years as the study we did showed farmers have gotten a good portion of the uptick. and most of the major foreign firms have secure facilities here, a ticket to the dance. and i think we need to take more steps to encourage more globalization with our industrial partners in support of that. and my second to last point is on export controls, which is the issue of globalization. i was heartened to see the qdr and in the president's state of

union the export controls which is the key impediment to this kind of globalization and collaboration. i just came back from a trip to the uk where senior officials are talking about programs. when our closest ally starts talking about those programs, we need to listen. it's not the root of all evil. to be sure and we need export controls, but we need to listen. oci is an important issue going forward. i know the roles in coming out. it is not directly mentioned in the qdr. but i think the rules in implementation of that reform act is a critical issue for the industry going forward. and i think there's some things that need to be done here. and i do worry here that we need to set a rules that provide greater certainty to industry. we need to carve out the most sensitive task from these contracts on the demand side and lay out a policy that says while it's good to have ominous

contracts on the support side, those ominous contracts are creating these conflict situations. i think we need some merger guidance here on what happens when you have a company with a lot of support services buying a company with products. and i believe we really need to look for some guidance here to say that we're going to have structural solutions in those kinds of mergers. firewalls don't work. finally we need a set of regs. i don't think it makes any more sense to give all of the discretionary to carve solutions out to oci when the solutions affect the industry. i think we have to create some broad safe harbors and clear rules. for example, if the answer is that a separate subsidiary will cure and mitigate some ocis, we need to lay that out explicitly and not leave the programs of that program. if collaborative activities

being company a and b are going to give rise to oci and industry teaming as the norm, i think we ought to not leave that to a program officer asserted to. finally as we get into this era again here as this flattened demand, you're apt to see more consolidation. and i do think again we're going to see some guidance on a couple of points. i'd like to see some guidance on distinguishing no ining innovat markets from legacy markets. i think we should be more willing to accept consolidation in the legacy area in markets like uav market. two, i think we have to think about the role of private equity. and what is the feeling in the pentagon and the role of private equity as a steward of a sector where we really would prefer stewardship with a long-term vision in mind. and so, let me close on that. but i think the question is brett needs the resources, and can the pentagon give him the

sources to take the set of tools i just outlined and use that to implement division? thank you. >> thank you, jeff. now, we'll turn to an exploration of what is perhaps one of the most complex dialogue arenas in western civilization. and that is the dialogue between wall street and washington. and for insight on that and the industry base views of qdr, i'll turn to byron kalin. byron? >> thanks, everybody for coming here this morning. i want to try and keep my thoughts fairly brief. and, you know, start out with the financial market's perspective. i guess the first thought is just as the qdr talked about, a nuance defense industrial base, the financial markets are obviously very nuanced, as well. we tend to think of wall street as, you know, maybe akin to the

very large defense contractors. but the financial community is also very nuanced. it's not just the large sell side research analysts that are quoted in the newspapers. it's a whole range of institutional investors both here in the united states and frankly globally. jeff just mentioned the private equity community there have been a very important player and i think will continue to be a very important player in shaping the industry of venture capital is important at sewing the seeds for the young emerging companies. and clearly commercial banks that provide credit lines and assist in the merger and acquisition activity are part of this broader financial community too. so i'd expand that notion it's not just wall street, it's the financial markets in general. i do think, you know, it was very significant that the qdr chose to acknowledge not just

the defense industrial base and approximately two pages, but that paragraph about the acknowledging the role of the financial community and basically maintaining and shaping the industrial base was unique. it's not just the united states, it's something i haven't seen in the white papers that have come out of australia or the french white paper last year. the uk papers, the green paper yesterday and i think there was one yesterday, an acquisition paper that just came out. so the capital markets have been a key strength in shaping this industrial base. and i think that role and that acknowledgment is very significant going forward. you know, my perspective right now, the large public companies are in fairly good shape financially. but the small to mid-sized companies are going to continue to tap capital for their growth needs and for consolidation. and i think it's going to continue. there will be restructuring of the industry going forward.

and really, you know, kind of across the spectrum for the publicly traded companies, at least. equity's going to be important component to retain and attract people and provide stable career paths. i know boeing, for example, recently did an equity contribution, their pension plan that provided security for their people going forward. so this isn't just about mergers and acquisitions or divestitures. it's also about a component of compensation of the defense has to compete against the private companies or public companies outside the defense, as well, that i think is important. there was a lot in the industrial part of the qdr about dialogue and transparency. and i think, you know, this administration's really gotten off on a good start. brett mentioned the meeting

recently with wall street analysts. but i think that's extended to ceos and industry, as well too. i think those are important means. they're not ceos and industries, too. those are important means. they're not obviously ends in there' theirself. it's going to be risk and return from my perspective. the nature of the beast inherent in the defense sdrip as it is in other secretary perps investors inevitably will want predict and and stability's the future is set to be unpredictable and, you know, stable. that's always going to be that tension. this dialogue and openness and transparency i think can help that but other parts of the qdr suggests there's going to be continued uncertainty and

opportunity in things like the aircraft modernization programs. you know, what happens to spare parts managing flush out older generation aircraft? those are parts of the financial community, they're going to work through. there was language about fixed priced contracts and alignment of profitability with performance. those issues are going to continue to weigh on how investors look at the sector. i think in the past where capital has really been spooked by what's happens in the defense sector has really come from a big surprise, sudden surprise as abrupt changes. the pbd 75 decision in 2004 were we saw a number of programs cancelled abruptly. the f-22. c-130 caused surprise and had people pull back from this

sector. another area where it appears investors shied away from the sector have been where the risk has overwhelmed a particular company. lockheed in the early 1970s with the c-5 program, mcdonnell i think brett mentioned the comment about sunset industries and poor business models.

i don't really know at this point what is a sunset industry. i've got my own ideas, but we could argue 10 or 15 years ago maybe track and wheel vehicles might be something of a sun vette industry, yet a program like mrap has proven how important those shifts and changes could be. there was a comment in the back of the room about willow run, and it's just a reminder that it's not just the defense industry. it's the broader economy and the skills and capabilities of the broader economy, that they bring to the defense, to the national security of the united states. so thinking of this about how do we sustain a quell quell quell tavtive, that's going to be critical going forward and something that we could write a book on easily. >> thank you, byron.

thank you very much. we'll turn now to the surface side of the equation. defense now spends about as mum money under contract services as it does in procurement and research and development. that's a side actually to call it an industrial base prime as level of inprecision in the term, but as some of you know, we here at the center for strategic international studies for a number of years spent a good bit of analytical time wloon we call the professional services industrial base. those industries campaigneds and workers who do provide those services to national security. so now we'll turn to alan for his reflection in the news. alan? >> thank you, david. good morning, ladies and gentlemen and thank you for the invitation and opportunity to be here. the professional services council is a national trade association. we represent over 3w 40 companies all of whom sell tech tickle services to the government and focus on the way

the defense department buy and sells goods and services and services in particular. i was struck by the qdr because it starts with a description of some changing department missions, and, of course, from our perspective, the industrial base exists to support the department's missions and the recognition of this evolving agent in emissions is important, because the industrial base has to exist to support that. the qdr talked interestingly about a whole of government approach reiterating from of the secretary's views in support of the president's views of a 3d strategy of defense, diplomacy and development but then went on to raise concern answer the quality of the inner agency coordination's i think we have goals set out yet challenges ahead. it talks about the importance and in the industrial base of a total defense force which recognizes the contributions that the active military, guard

and reserve can make along with the defense civilian employees and the contractor community and the contributions that each of those make. yet it proposes to reduce the amount of support contractors working for the defense department. so i think there's some questions about priorities and signals. it recognizes that the industrial base is not monolithic. i submit it's not even very well organized, and so as we look at differentiating among the many suppliers, i think it it's important that at some point and this qdr isn't the place to do it or it would be 10,000 pages not simply 1,000 or 160, but to look at the contributions and the role of domestic versus foreign. almost no mention of small business, but the role of the small mid and large firms we're looking at. the differentiation between

platform companies and byron talked about the role of financial institutions. secondly, there was a discussion of work force, although not a very elaborate discussion of the work force. repetition aimed at clear departmental policies already in place to grow the size of the federal work force and the defense department work force in particular, and that's a goal that we support. unquestionable that defense departments work force is atrophied not only in the areas of acquisition but in technical skills as well, and it's fortunate approach, to greek row some of that, but it has to be done strategically. the guy who has the deputy department of defense issued some statements that under secretary carter has made, and the office of management and budget discussed focuses on that strategic major, identifying key

skills and how to accomplish growth in the work force in a strategic manner. unfortunately what we've seen so far is growth that is opportunistic rather than strategic and some of the insourcing and i can take the rest of the time to talk just about insourcing, but i won't, we see much of the insourcing activities taking place in the defense department today being driven by the budget rather than by any overall strategy. to the extent the work force issues can be addressed as part of a four-year strategy, the department has to come to the recognition of how it wants to address the insourcing issues. and baked into that budget are some arbitrary savings from this insourcing activity and i think that needs a little more inspection as well. so if we've got a new strategy for the department missions and we look at an industrial-based

capabilities, we have to look at how the government buys goods and services and what the aq acquisition service is that links these two to support the department's mission. i think brett mentioned in his remarks in the qdr, one size can't fit all in the industrial base, nor can one size fit all in an acquisition system. the qdr talk answer the importance of agility in the okay k acquisition but little indication there's going to be change at the core system. what i do see is several references to developing ways to circumvent the current system. whether that's the creation of a contingency acquisition fund or rapid acquisition cells. these are really recognitions of the challenge that the core system and importance of the agility and ways to make sure that the department can meet its mission and if we have that at the edges, we ought to consider doing so at the core as well.

we need to look, then, at the techniques that are available. byron mentioned some of the techniques available. i thought that qdr did a masterful job of acknowledging some of the acquisition techniques around fixed price development, for example, but noted that that's to be used only where appropriate. and i think that's a signal to folks that this is not the only policy to be available and, in fact, recent report from the defense business board highlights the findings that fixed price contracting, particularly in terms of development, is rarely appropriate, and i hope the department in its acquisition techniques would take a look at that in a slightly unrelated context. saying that the areas unblemished by success and i think he could talk to us specifically to fixed price

development as that poster child. finally, if we understand that we have a work force available and an acquisition stham system that can asport how the service buys it's goods and services and are using the right techniques to do that we have to look at a conflicting set of policies and priorities that have been addressed and jeff mentioned some and brett mentioned some, but i think the qdr doesn't really talk about how to balance some very significant challenging priorities and policies from competition to the role of organizational conflicts. how do we handle job retention and creation, particularly at the technology level with issues about buy america? particularly in contingency contractsing? so there's a whole list of policy issues that i think are touched on, because of the strategies and the qdr, but

certainly not resolved. i think that gives brett and his colleagues in the department plenty of opportunity for more work. i'm hopeful that the partnership will exist, will bring us lots of opportunities for dialogue. but these are just a few of my favorite things. >> thank you, alan, very much. now, our final panel member, bill greenwald, also served as the deputy under secretary foreindustrial policy during the second bush administration, and here to reflect on his views of the qdr, bill. >> thank you, dave. it's actually kind of nice to go last. i can say, everything they said and they touched on most of the issues, but this is, i think qdr is extremely important for the first time institutionalizing industrial base considerations into the, in the qdr. i think that's something that a

lot of outside observers and industry has been hoping to see and i think it's a very positive first step. i think we've heard a number of things that are in there, and the qdr, industrial base sections really asking the right questions. so i might take this to the next step and say, well, how should that be implemented? and what are the challenges to implementing it? i think the first issue to do is to gain visibility of the supply chain, and to do that, i think i have to key off on jeff bialos' point. you need the capability in the work force to do that, and since the reduction in the acquisition work force over the last 20 years, industrial base analysis has not been as -- is not as strong as it used to be, and to build that up, it's hopeful of

the 20,000 acquisition work force positions that the secretary would like to get, hopefully a few of those happen to be industrial based analysts who can really cut across and look at the industry. brett has some tremendous staff, and some tremendous capabilities there, but they need to clone them. and, you know -- they're so good even david's hired one of them. so i mean, it's -- >> insourcing or outsourcing? >> that a good question. we have to look into that. so i think the work force is key, and therefore, not just the work force that's hired. it's the, getting into the peo and the capability managers to have them start looking at what is it we need to cut across these programs? and getting into ddr and the s & t community to look at and institutionalize, these are the

type of industry base and partners we're going to need in the next decade and beyond. once you have a visibility into the supply chain and into what -- you need a criteria for intervention, if you're actually going to intervene, and that -- that is going to be one that is going to require a lot of thought and a lot of analysis, but you can break it up into various time frames. like, what is it you're going to need to do rapid acquisition? what do you need support of n raps and how is that looking? looking into the midterm, how your typical n apps and smaller programs and out into the future as far at future technology? i know your ofrlts office

started developing that criteria in a number of studies dealing with the s & t base and going into the future nap criteria might be good to apply to the various segments. what are those technologies and what are those areas where we need to be ahead of the world? what are those areas where we can partner with our european and other allied industrial bases? and what other areas that we're happy to be dependent upon, the commercial industrial base. so that's getting that criteria for intervention will be key. i think the third area to be successful here is going to be funding. and there are a number of programs designed to, how to intervene in the industrial base and to support the industrial base whether it's dpa title 3 money or man tech money, but the problems that one faces in these

are more near term than that. in other words, you're faced with how do i intervene? i've got a supplier that's going out of business. what do we need to do here? and where do you get the money? well, if it's a program, the program's going to deal, but if it cuts across a@ @ @ rbrbiarbrb

it was very successful. some of that is, that consensus may be under threat at the current time. so this is a good time to ensure that those companies and those process and those barriers are maintained, and then obviously, there are a number of areas where there are still barriers to bringing in non-traditional contractors, which could help, help the base. and obviously looking at whatever incentives for future innovation again. with that, since jeff pretty much did all the rest of my topics, i will key it over for questions.

>> all right. thank you, bill. let me give you an administrative announcement before we proceed into the questions. at 10:00, and it's right now about nine minutes after 10:00. at 10:00, another event began in, here in the basement on the other side of that back wall, the philippine foreign minister is giving a talk. so -- no. we're not going to go over, but i want to alert you to that. i don't actually -- we won't take a poll on which one you'd rather attend, but i do want to alert you to that, because there may be some -- they've been asked to be respectful of our needs for noise abatement and we've been asked to do the same. particularly when we wrap up and get ready to leave, i'll ask you to exit with the quietness of new fallen snow. i am also here to tell thaw it is not yet snowing. so we're all still fine in that regard.

let me now open up the floor to questions. we do have staff with microphones. i would ask you to raise your hand. i'll recognize you. you wait for the microphone. identify yourself and your affiliation then direct yore question to one, two or all of the panel here. let me start over here on the left, science i ignored thince during the first round of questions. here comes the mike. >> bill, cic. the last summer was referred to how did the consolidation after the last summer work out on balance? were there any lessons learned that will be helpful for what may lie ahead, if there is flattening and perhaps decline in defense spending? >> well, i don't think we truly know the answer to that. i think what i take away, this

is a personal view, having been in the industry when it occurred, was that it was necessary. it was the right thing to do at the right time. i think what we struggle with is from a business point of view, largely consolidation of stock symbols. not necessarily capacity. and we perhaps overlooked as a department the need to promote the consolidation at the capacity level. so we weren't working at 20% or 30% of the factories capacity and the taxpayer was paying that overhead rate. so i think, again, i think it was the right thing to do at the right time, and i have tremendous respect for everyone involved in that process that they lived through it. i think if there were to be another last surp, because i don't think that's going to happen, maybe a first breakfast at some point, that we would try to think more about the business

implications, the financial implications, and what incentives and disincentives we would look to. i actually would be interested in everyone's comment on that, particularly byron's, because they see this in the financial community all the time. the implications of that consolidation. so -- >> i think you certainly crea d created, you know, maybe jeff mentioned it, and i alluded to it, i think, for a number of the company, the large companies that were at the forefront of the consolidation, you have a much more financially stable industry right now. the large companies, some have more cash in their balance sheets than they do debt right now. so with whatever comes out of the budget in the next couple of years, i just don't think -- companies should be able to work through this without the kind of perils of pauline drama we've seen in the past. lockheed, in the '70s or mcdonnell douglas in the '90s. from a financial perspective,

that's probably the most significant change. >> if i could just add one of the other implications is the way the department approached the marketplace. so the growth of large idiq contracts, large in the multiple award contracts, the growing the size of procurements in part is a result of the shrinking of the acquisition work force, those two factors i think both have to be addressed. one on the industrial side and one how the department goes to market, and thus over time we've lost some of the agility and flexibility that the department has, and i think both from a capability standpoint as well as a contracting standpoint, we're now seeing the results of that consolidation as new markets and requirements are emerging, and compromising a little bit on the flexibilities. >> i mean, as i alluded to at

the outset, i think will are lessons learned from. it -- as we go into it and as we go into a declaration period and consolidation we need to be more vigilant about the affect on the industrial base. the have a jilty emerged in the last cycle, the debt on raytheon and lockheed, known but only a focus late in the game. this goes back to more monitoring of this. i will say it was inevitability and the question you have to ask yourself, do we have a sufficient number of robust competitors in the core sectors in the industry? i think we kind of came out of it and the answer, youn the maj. >> all right. other questions? i'm having trouble seeing hands,

because actually the lights are more bright than your faces. so -- i think there's one in the back, and then we'll come over here. so -- yes? >> hi. aye maim is rod from the -- institute. my question is pertain og to some of the issues addressed around bringing in really third and four tier suppliers or attracting new suppliers that are capable of addressing some of the emerging needs. suppliers that are really bringing newability abiliabilia a defense market specifically, defense sector specifically what do you see as really key barriers to entry and key barriers to attracting those types of companies that are developing in the emerging -- >> i guess i -- start by saying, having spent my previous career

working with many of those companies, you might want to switch your question to, what isn't a barrier to entry into the federal marketplace? and this is why i think the qdr was hopefully effective in at least illustrating our commitment to begin to understand the complexities of that issue, because everyone up here has a different take on it. there's a financial take. can they get access to capital? byron alluded to the fact any of our primes have two-year backlogs at least. our second and third tier may have six months. some 12 months. the restriction to access for capital for them and the procurement process we have and how we pay them and how they can get paid from the primes has a tremendous affect on their capacity for both innovation and growth. and we have not, i think, adequately addressed the complexity of that issue. there will always be barriers. we can't rewrite all the

defares. that's not going to happen. we have to rule with reason do what's practical and in the best interests of the taxpayer and the war fighter. one of the vehicles that has been quite effective is this rapid acquisition process. and to the points that were made earlier, there's always a danger of that process, and, in fact, i've seen it. with one program where i was looking at something got into a rapid acquisition process with an ioc i think of 2018. so you know, as the system adjusts, you know, the systems, the building will adjust. so that's always a danger, but i think -- it's a serious question on a whole bunch of different levels, is how we promote this innovation and i think what's exacerbated, at least in my concern was exacerbated the issue is the collapse of access

to capital. and i see this quite often at the smaller firms. and it's not just the firms that are trying to offer innovative solutions for rapid deployments. it's the second and third tiers providing to programs of record that can't get access to capital. that's forcing the primes to actually make investments that are, in fact, unnatural acts. and so i don't have an answer to that question, and i think we don't understand the intricacies of that question well enough yet. >> let me add, two seconds. historically, the concerns have always been around by commercial firms, intellectual property rights. the issue of what to do with the technology, whether -- what the export control process is going to deal with and general, unique, acquisition rules and regulations and auditing and financial burdens they have to

place. and historically, there have been a number of ways to allow those companies to participate. whether it's commercial item exemptions or other transaction contracting authorities. and the issue, i think in today's environment is, we can easily buy commercial off the shelf, but can we actually get modifications to those, and what are those rules having impact? i think it's -- kind of in that transition, but it's a number of issues that historically the congress and administration is trying to address and bring access to these. so we'll go from there. >> and it's probably worth noting that that's an issue that you never actually get to the end of and say, okay, we got that one fixed. now what? because it will constantly evolve in that way. i think i saw a hand up or a couple over here. the guy at the middle table. we haven't had a middle table question. >> joe from atk. in the context of the insight

before oversight comment and as well as information from second lynn this past fall, framing the issue, which is operating a railroad at the same time you're laying the track. a lot of good ideas came out here today from the temporal nature of looking at the industrial base in addition to the intertemporal time way to look at the industrial base. how do you intend, mr. lambert, to prioritize these great ideas that are here in getting that insight at the same time that some progressal decisions are pending and industries are changing and forming, reforming and restructuring very quickly at the same time, which will ultimately impact defense capabilities? >> well, of course, i constantly and fervently agree with

secretary lynn. he has -- i mean, i've known secretary lynn for some time. he has a unique perspective having been in both industry and government, and i think his insights as well as those of dr. carter frankly bring, again, a kind of new paradigm for understanding these industrial kplesties. in terms of priority, i have to say it is -- everyone said this when i came in. you'll be drinking with a fire hose. i had no idea what the challenges that the department faces. across the services and across policy. you know, we immediately set out to understand iteming better. we've met with your ceo. we've met with most of the companies ceos in here, and that's new.

what we can't figure out and i've had this discussion with dr. carter, we don't know when and why the departments stopped having these meetings and stopped dating the insight and creating the transparency and dialogue. so we are, we're learning in realtime. i think that's goes to secretary lynn's comments about trying to run a railroad while you're laying the tracks. in terms of priorities, i can only say that i have now learned from microsoft office how you move tasks to 8:00 a.m. but it is difficult when you get calls -- because our office as all of our folks up here know and have had to deal with you know we have to have a reactionary portion, which is siffous and where we're on clocks, that are not of our own making. so a lot of the priorities are not of our choosing, they're dictated to us by law. and so our priorities literally shift daily, in terms of the

tactical priorities. what i'm trying to do and i think what everyone has reinforced here is that the office of industrial policy should be thinking ahead. we should be thinking about not solving yesterday's mistakes, but trying to address tomorrow's problems. and i'm desperately trying to get our office oriented in that direction. we're not there yet. i have to be honest, and it's going to take some time to get there. >> let's see. let's go to here and then up to there. thank you. jesse. >> bill with iss. on the question, this is probably more for the panel, no offense, mr. lambert, given that -- >> he used to work with me. so obviously -- >> yes. in that i would never want to set you up in that respect. if it ever comes back, in that respect -- around the partnership, i'd be interested in your thoughts about the impact, particularly as you look at developments in the uk on

the, on the east pacific rim, asia, in terms of acquisition procurement policies. if you're gone the public, private policy and with the partnership industry and burden sharing driven heavily by the investment in these areas, is that a role looking forward particularly with austerity in the economy, around the budgeting right now and looking how do you balance, then, the investment for the two wars and still keep the long-term investment going around strategy, and if so, or if not, rather, you know, how does that then affect the transatlantic relationships when the criteria for the businesses in europe we want to integrate are changing against the fiscal course and the budgetary constraints they're under? >> i'll try the first question then maybe jeff you can go for the second. i don't know.

pfis and such and the partnerships that are going on around there rely on a long-term contracting arrangement. and now there are energy savings performance contracts in the u.s., which are ten years long. a little longer, then others, a few others like that, but in the last few years what we're seeing is the link to contracts actually going down. so that's -- so you're going to have a hard time getting industry to make the type of investments that they're making in the uk long term, because they need to know what the return is going to be in five, ten years. if you only have a three-year contract you're going to have a hard time having those kind of partnerships. in one sense the acquisition system is moving away from that here while our allies are looking for cost saving ways to partner with industry and having a lot more longer term contracts. so i don't know about as far as the latter part, as far as how

that mish-mash will occur. i think industry will kind of just you know, adapt differently, and while our partners overseas may have a different perspective and ability to do that, the question is whether the department of defense will want to do has or not and if they do, obviously there might be opportunities for them, because they have experience. >> well, i don't have a lot to add. i agree with a lot of what bill just said. i mean, i do think you know, an unfortunate set of circumstances arose over a period of time when you know, the other transaction authority here sort of withered under the line, so to speak, under political pressure, and i think that's unfortunate and i think in a period we're entering again here you would like to see more creative uses, that kind of authority. you would like to see models like leasing in some context. like pfi-type models.

i've heard a laugh over herish b, but the environment has not been great but it may be as numbers flatten, these types of things work. i could give you one example. there is a program called nextview i believe it's called that's a good example of the kind of future we ought to think about in some of these areas. i mean, this is a program that's designed by the defense agency that buys imagery and in the past the idea would be, let's build a satellite system. build a satellite system for this kind of imagery data. they did it in a different way. rather, a long-term contracts to buy imagery data. here's what we want. we'll sign a longtime -- the winner. the winner signed the contract and took the contract to the bank, got the project advance add went and built the satellite system. that's the kind of model you would like to see, particularly in the areas where you know,

there is some commercial market going on and companies can sort of value the service and figure out how to do this. and you get the government out of being a program manager. out of building satellite systems, basically, and i do think it would be great to be able to see more activity in this field. as i said, unfortunately the political overlay has made this very hard. >> we're reaching the end of our time. i anticipated actually the time for another question, but i didn't anticipate the time for the answers. and i think actually -- no. that's not a slap, because i thinkically think was was a serious question and deserved a thorough answer, as did all of them. clearly, we have only begun to scratch the surface of the issues here this morning and could go on another hour and a half, and move forward. i want to do a couple of closing remarks. we do try to end these thing on time, because we recognize people have other commitments as well, but we're happy to stick

around and take questions after the mikes are turned off and help you out in that regard. these are clearly critical questions that have been raised by everybody up here this morning. csis is going to continue to analyze and report on these and 408 events like these to further the public debate, because this has been a neglected area for many, many years here. what did we hear this morning? we heard brett lambert describe d.o.d.'s commitment to do a better job and they need help to execute on that commitment. as we move forward collectively across the government it's going to take all of our efforts. where do we go from here? the qdr actually cites a number of additional areas in need of study. and space and anti-access to forces and manpower, and it's not clear what the impact of those studyies will be. clearly, some programs and contracts are going to depend on the outcomes but we're not going

to have them in time. so congress will have to make its own budget decisions in a bit of a vac kule and i think they are beginning to recognize that as a result of the hearings this week. those of us who analyze defense and national security are still waiting in addition for the information that we usually get with the budget. so we can actually tell what the qdr says it did shows up in the budget and in the -- we'll see that hopefully over the next few days and weeks. it will give us the details to really be able to provide a judgment here. and then finally, there is most of you know, a congressional mandated panel to review this review. earlier this week it was announced that that panel will be co-chaired by former secretary of defense bill perry and former national security adviser steve hadley. i commented and i think everyone here would commend that that panel would in fact pay some attention to these industrial based issues as it undertakes its review and reports out to the congress in late spring and early summer. so i think that this is going to

be an ongoing series of discussions. my final thing is, i would like to ask you to join me in recognizing and acknowledging the csis staff who made this event possible. i'd like them to please stand and let's give them a round of applause. those of you who -- so before we go, i want to remind you about the philippine foreign minister next door. i want to thank you for coming. i wanted to thank you even more for your attention and support on these issues. have a great snowy weekend.

>> when combined with inconsistent conference costs and attend daance numbers, they need have better management controls to ensure conferences are funded and attended for only mission-critical purposes and that costs are minimized to the greatest extent possible. the department needs clear and