and the resurgence of manufacturing in the united states and in my state, minnesota, really should inspire us to invest more in training more americans for these good manufacturing jobs. i don't know what the focus of umpqua is, but, again, i believe i speak for everyone in this body that our heart goes out to body that our heart goes out to

your attention to this issue. operating on a cost positive type of contract and a building technique that the shipbuilders using a program such as the virginia class program paid some of the probl

this involves incorporating all the new technologies of the first ship which foresee a deed to make risky choices in the aircraft carrier program and we are living the results of those choices now in the delayed deliveries and increased course. the navy is not blameless in this process either. the navy should be planned for our friends for risky technologies that did not mature in time to meet ongoing schedule. i believe the navy could have done this even with the parameters of transformation. while such off-ramps may not prevent at all the problems that

face of would have would have had it least given us better options when we had unpleasant discoveries during the development phase. the navy and the contractors share blame for starting construction for sufficient work has been -- and history is shown in efficient production schedule delays and cost increases. finally congress shares responsibility for having approved a popular sense approach to acquiring these aircraft are. the only changes were instituting a legislative cost gap on the program and what i think this cost gap has brought some discipline to the program is not prevented this problem. i look forward to hearing from these witnesses on this important program. changes have been made and can be made in the future to prevent the cost of schedule overrun we see today and again thank you for your leadership. snack i thank the leadership and we will hear opening statements from secretary macfarland,

dr. gilmore and mr. francis and then we will proceed with questions. we will begin with you secretary macfarland. welcome. >> chprogram to succeed to

include revitalizing the acquisition workforce and the skills of whom we represent here several thousand men and women who lead our nation acquisition.

the timeline and québec city is associated with the construction of aircraft carriers.

as this committee has impressed upon the department and grandpa sizes here today that her future carrier has the capability necessary to be at future threat

operating and maintaining these incredibly complex ships is beyond any other nations undertaking. those members who have visited the construction fully appreciate the daunting numbers that measure her. tens of thousands of tons of structure, thousands of miles cable and fiber optics, hundreds of miles of pipes, thousands of compartments hundreds of ship systems tens of thousands of sensors integrated to drive greater than 2000 megawatts of nuclear power across the globe throughout its life. it's a remarkable demonstration of what america industry is able to achieve and it's a quantum increase in capability for our warfighters the capability required higher navy in the century ahead. to be clear however this program has had significant challenges resulting and unacceptable cost growth and to understand the cause of this cost growth is important to understand the

carrier's history. requirements were drafted to modernize future carriers to a traditional serial evolution of technology development ship design and construction. total of 23 new capabilities were to be incremental introduced across three ships commencing the cbn 77 at a pace consistent with maturity of related technologies. these development capabilities were provided and the 33% increase at the rate at which the aircraft launch and recover. the propulsion plant providing three times the generating capacity in 25% more energy increased service life allowances to enable future modernization increased survivability. importantly a 4 billion-dollar reduction per ship in total ownership cost over the ship's 50 year life technology development was initiated for the electromagnetic aircraft

system. the advanced arresting gear for aag and it ends weapons elevators for modernization of weapons centers and immigration systems would be accomplished by incorporating new capabilities being developed by programs including the dd2 1000 tool radar. the new power distribution advanced system and automated control systems would be incorporated to improve survivability new reactor plant propulsion machinery control systems would be develop in power requirements and carrier superstructure redesigned to accommodate the electronic systems and to enable improved flight operations. all of these upgrades would contribute to a total manpower reduction of 1200 sailors. mr. chairman is pointed out in 2002 with priority placed on transformation by the secretary of defense dod change course so that they modernization would be accomplished in a single step on a single step cbn 70.

this decision resolve that and what it is proven to be critically high degree of concurrent development design material procurement and construction. costs were estimated and design and construction proceeded with inadequate information regarding the complexity of the new systems and with inadequate risk factors to account for the high degree of concern today. ultimately impacting cost and performance in each phase of development design build and test the cbn 78. today design is effectively completing production is near 95% complete and we are focused on completing the test program and delivering the lead ship. actions put in place from 2009 22007 have been effective in halting the early cost growth of cbn 78 including converting the design to completion contract with a firm target and incentive fee placing contract design under strict control reducing fee consistent with contract

provisions and incentivizing improvements upon current cost reforms. contracting and competing alternative sources of supply to mitigate the significant impact of material delays facing completion levels at each stage of construction to improve production efficiencies. following a detailed review in 2009 the navy converted the e-mails into aeg contract for a firm fixed-price contract for production to costs on each of those systems and the shipbuilder suggested his process to review by competitor shipyards in order to identify fundamental changes necessary to improve their performance. finally management changes were instituted and coupled with increased readiness reviews focused on cost performance and critical path issues to ensure we are doing all they can be done to improve cost performance.

i personally conduct reviews and no less than a quarterly basis often monthly and have assigned for these past four plus years the navy officer with a single greatest experience across carrier operations construction and program management is a program executive officer. we have made essential changes to eliminate these causes for cost growth and to further improve performance on cbs 79 and 80. as reported to congress in may of 2013 requirements for cbn 79 are locked down. the design model is complete and 80% of initial drawings released new technologies on cbn 78 are virtually mature and cbn 79 the materials being ordered efficiently and nonskid -- unscheduled.

the navy is implementing a two day delivery plan to allow the basic ship to be constructed and tested in the most efficient manner by the shipbuilder while enabling select ship systems and to be completed in the second phase with their work completed accomplished more effectively and use of skilled installation teams. the net result of all these actions was a fixed-price construction contract that in conjunction with gfd government first equipment secures cbn 75 at or below the congressional cost on target on cbn 79 to continue to reduce the cost of future ships of the class. mr. chairman you have raised questions regarding accountability. i'm accountable for the decisions i make about the shipper in the navy wearing core program which has acquisition executive.

the simplest tastes -- doesn't adequately address your a concern. the current system is challenged to align responsibility accountability and decision-making a large complex project that could take years to develop and deliver. this program in particular has spanned four secretaries of the navy, six chiefs of naval operations, for physician executives, six defense at executives for program managers and eighth congresses. court decisions have been critical. the decision to pursue a transformational approach driving three increments when hans ships into one was made for what was believed to be the right decision at that time. as the acquisition executive what can be done to stabilize the cost and pursue cost performance improvements on the remainder of the class i believe is being done. we have much further to go in this regard but i believe we are on the right path.

going forward is under the secretary's direction and the cno the commandant and i are changing the way we do business within the department of the navy to achieve much greater clarity of authority, this ability to performance and therefore accountability to cost and schedule on major programs. we hope to have the opportunity to share these details with you and your staff. in some the navy is committed to providing sailors the capability they need to perform emissions around the world around-the-clock every single day of the year. and we strive everyday to do this in a way that enhances affordability while ensuring we maintain robust industrial base to hedge against an uncertain future. we look forward to answering your questions. >> mr. chairman senator reid i will summarize my written statements.

whether the quantum improvements and combat ownership cost will be realized that are associated with the new systems incorporated and cbn 78 are not now known the navy indicates the reliability of the aircraft launch system advanced arresting gear and dual band radar ddr will support operational test and the valuation. most recent definitive date i have indicates reliability is below the navy's goal by more than a factor of 10. the reliability of the dvr and redesigned apr are unknown. we only have engineering estimates. prior to his redesign reliability was a factor of 800 below its goal. data providing a first indication of the reliability of the redesigned will be available later this year as a result of ongoing testing testing. in the case of e-mails or liabilities above the december 2014 reliability growth curve however as a consequence of poor performance of test the

growth curve is well below the reliability goal and consequently the data we have was not on the path to meet its goal. what the effects on combat effectiveness and shortfalls of any other identity that these systems will not be known until development operational testingg are conducted postdelivery. ..

the plan is to test systems realistically as early as possible to provide feedback to the program office and to combine training and testing. nonetheless, the current test schedule reins in my view aggressive with current ship based and land-based development al testing with some developmental testing first time integration testing continuing past the start of operational testing. in august the deputy secretary of defense that the navy conduct a shock trial before the ship's first deployment. historical experience indicates clearly this is a key means to

identify mission critical failures before the ship and crew deploy into harm's way. finally cvn 78 was designed to reduce manning and total ownership cost. recent navy assessments raise concerns about manning issues on cvn-78 would be exacerbated by shortfalls in the reliability of aag and dbr. in particular the navy's manning war game three states, front end analyses have not been finalized to capture true maintenance and work load with the carrier's systems and that won't be possible until we know more about what reliability will actually be an maintainability will actually be. thank you. >> mr. francis. >> thank you, mr. chairman, mr. reed, members of the committee and i appreciate the opportunity to talk about the carrier program this morning. let me start with the cvn-78. a little feet back there. my bottom line on the cvn-78 is

the same story, different program. in 2007 we reported that costs were likely to be underestimated by 22% on the construction of the ship and that the three main technologies emal, aag and dbr were immature, likely to slip to the right and out of schedule margin and we said the navy would be faced with the decision to either push the ship to the right or push the technologies to the right. fast forward to today, 2015. cost increases are 22%. the three key technologies, put slide up, they have slipped about five years. so the decisions made to keep the ship construction schedule pretty much intact but let the technologies slip. so, that is probably hard to see. but the top chart we've circles here, three, four, five and six. those are three key technologies in the beginning of ship board

testing. so, the original plan on the top was clearly fly before buy. where we are the three technologies and ship board testing all slid past ship launch. so that is buy before fly. so, my, my view at this point is, ship costs are going to continue to increase. full capability of the ship has been deferred, and right now we're looking at getting less for more. now why would i say that? i remember 25 years ago, i was interviewing the second undersecretary of defense for at and l, john betty. he told me, cost estimates in the department of defense, it is not like they're impossible to be achieved but they do count on hitting seven home runs in the bottom of the ninth. i apologize for the sports analogy but it is not mind. so let's look at the home runs that the cvn 78 has to hit. you can kind of see them bunched up here. do a land-based testing,

ship-based testing, integrated testing, io t & e, all the time we're trying to complete construction. so, it's a big lift. let's go to cvn 79, what are its home runs? right now the cvn 79's cost estimate depends on reducing construction labor hours by 18%. 9.3 million labor hours. never been done before. twice of whatever has been done in the past. the dual band radar has been removed. it will be replaced with a radar that is to be determined. and upgrades that were planned for the ship have been postponed. and, so i think that is ringing a lot out of the program all right. it is already, with all these changes, at cap and we're seven years from delivery. ben i think cost increases are likely. regardless of what's reported against the cost cap. so i would like to put carrier in a little context here against

acquisition. i think mr. chairman, you brought this up as did mr. reed. the cvn 78 program is a typical acquisition outcome. 22% increase in cost, schedule delays, are actually pretty typical for acquisitions. and, mr. chairman, i have testified before you a number of times on different things but we can think of worst examples. jf -- jsf, fcs. f-22. lcs. so i think what's different here. this program we knew all along this was going to be the case. we shouldn't be surprised by anything that happened here. we saw it coming. not and i told you so moment. it's we all knew it. ask yourself why does something like this happen? best practices are pretty well-known. we can go through them. so, mature technologies before you put them on the program. wasn't done here. go with realistic cost estimate and budget to it. we've always gone with lowest

cost estimate, the navy's estimate and we still are. and, fly before buy. it wasn't done here. so you ask yourself, why don't we do these things? and, my belief is, it is prevailing acquisition culture. it's the collective pressures that the different participants bring upon the process, incentives for programs to overstate what they think they can do, to understate technical risks. to understate costs and to understate schedule. that is how you get funding. that is how you get problems approved. -- programs approved. so i would just like to say where does this leave us today? and, i'll say, i know it is popular today to talk about the acquisition process being broken but i think it's in a happy equalibrium. maybe not so happy but equalibrium. it has been this way for 50 years. and think it is going to stay this way, until the incentives

change. and, as the chairman's, excuse me as the chairman said i have been in this job for 40 years. i haven't given up hope yet. and i believe, that congress is the game-changer here. i think congress can change incentives by reclaiming its oversight role, which i think has been diminished over the years. excuse me. so what do i mean by that? i'll cite three things. first, is your most important oversight tool is the initial funding you provide to a program. but you give that tool up pretty early. so if i'm a program today, and i'm at milestone b, congress had to approve my funding two years ago. information was less. optimism fills the void. there is a cardinal rule in acquisition says, don't take money off the table. so once you've approved my funding, two years later, you have actually made milestone b decision for me.

second thing is, i know, the committee has many, many heavy responsibilities but one of your responsibilities is you're the appeals court for the services. so, if osd says, something, a service disagrees with, i'm speaking broadly, if, mike gilmore shops says something they don't agree with, if the cape estimate, they don't like if it is gao recommendation they don't like, the services come up here. you're the appeals court and they try to strike a deal and they get those deals. then finally, a movement in the department, i think particularly with the navy, is to bundle up programs in multiyear procurement, block buys and option programs, or option contracts. not only you give up the funding, initial funding power, you can't touch the program afterwards because it is all locked down in a blocked contract. so, i guess my appeal to you

today, is, let's not think of cvn 78 program as the story per se. but let's think about it as an object lesson in acquisition process and acquisition culture. and what the congress can do about it. not just telling what the department can do but how you might do differently because i really think, what you do with money sends messages as to what is acceptable. thank you, mr. chairman. >> thank you, mr. francis. have you seen some of the changes we've made in acquisition and defense bill, that we passed through the senate? >> i have, mr. chairman. >> are those steps in the right direction? >> i think they're in the right direction. in many cases for the department. but i think, as you said, in your opening statement, to the extent that the department comes in with a bad business case, if you still approve it, and fund

it, you're sanctioning it. so with all of those improvements in acquisition reform legislation, that has to be coupled with, what you do on programs. and i think a couple of good nos would be healthy. >> i think senator reid and i realize that we're just beginning in acquisition reform and, we will continue to make it our highest priority. secretary mcfarland or secretary stackley, is there anything you disagree with that mr. francis said? >> mr. chairman, paying close attention and taking notes and, if i were changing places with paul looking at this from his perspective i would think i write a very similar summary with some edits i don't want to quibble over right here but i think his summation of some of the systemic issues, i think they are, i think he is correct

on spot and what i would, what i would suggest is that we are making some systemic changes on our side, and you likewise with the congress to try to address these issues. and i don't give up on them. >> secretary mcfarland. >> chairman, ranking member i agree with much of what paul said. in fact i haven't spent who years, but i spent 30 plus years and program manager and tester and most of the functions performed with inside acquisition. the challenge is the culture and people and workforce itself. i think the department is very grateful for the committee and for congress providing defense acquisition workforce development funds to help but inside of this culture there needs to be a constructive change to how we work together as a team to provide these products. >> i'm, going to buy back one moment on that too. paul hit a very, he hit the word

incentives and, the context that he uses that i would make it much broader. if you look at complexity of our acquisition system, from end to end, starting with congress right down to the program manager and industry, the incentives across the board are not all aligned to same outcomes. as long as that is true, we have forces pulling in opposite directions impacting program execution. >> i would like to direct the witnesses attention to probably one of the most egregious aspect of these cost overruns and of course that's the advanced arresting gear which from original estimate of $143 million is now estimate of one billion dollars. it grows so much that two years ago, this, just this aspect of the carrier had grown so much it hit the threshold, to become a major defense acquisition program and it continues, as we

mentioned, to go up. i understand the navy has assessed how the contractor has performed on this program is consistently substandard. having difficulties meeting costs and schedule targets and we asked the contractor and department's contract management officials, they characterize the to this type of performance to my staff as typical or average. secretary stackley, do you agree with the characteristic a cost growth of 600% is typical or average? >> absolutely not, mr. chairman. >> secretary mcfarland, on page 3 of your statement, you said, acknowledging that the aag problems have had largest effect on construction, you stated these engineering design problems are now in the past. that's in your statement. yet i have in front of me a defense contract management agency evaluation of the aag contract performance from just this past month that directly

contradicts your statement. in fact, expect additional delays due to issues that have not yet been resolved. now, i understand you oversee the defense contract management agency. tell me that is what's the disconnect here, between you and people that are making this estimate about the aag and can you assure this committee that this cost increase has stopped? >> mr. chairman, i do not believe that the cost has stopped. i do believe that the majority of the engineering aspects of this program, in terms of technological risks and development have been retired. there is still testing to be completed. there is still opportunities for risk to be realized, as part of that effort. and i do believe that there will be activities in front of us. it's essentially that we have in front of as you program that sunk a lot of effort into getting where it is and to go backward with the opportunities

that this system has operationally, to provide for the carrier, does not make a good business case. >> thank you. i would just point out that recently the manufacturers of the new tanker experienced cost overrun. they absorbed that cost overrun within that corporation. i wonder if maybe we should make that a standard procedure here in the defense contracting? i think it should be a subject of a lot of consideration. senator reid. >> well, thank you very much, mr. chairman, and first, dr. gilmore, you urged that shock trials be conducted on the cvn8 and -- 78 and are not going to be done on the cvn 78. they are postponed to the next ship in the class, 79.

mccain and i wrote basically accepting your advise and your opinion. why is it so important that these shock trials done on cvn 78 and not look forward in your view? >> first of all as i mentioned in my testimony, the deputy secretary decided to direct the shock program be done on 78 before its first deployment last month. he made that decision. it is important because history has shown clearly, history of shock trials shown clearly they are the only way to discover mission critical failures. there is claim component shock testing not funded for forward class. now the navy says he will do it. modeling and is should be sufficient. if they were sufficient we shouldn't see any mission critical failures while doing shock trials which are designed

at less than level shock but they always do. the captain sent a committee the letter. he was ceo of princeton when it was hit by a mine in the persian gulf indicating his experience with shock tries and how they provided the key information that enabled his ship to survive and function in the gulf after being hit. so the history is clear. that you will not know about mission critical failures. i can assume and i know, history we to the deputy secretary and secretary figured in that decision. >> very good. just for the record, secretary stackley, you're on board, no pun intended with the shock trials for the cvn 78? >> sir, we're moving out. dr. gilmore made reference to the component testing. the component testing was being lined up with a potential cvn 79

full ship shock trial. we're moving that back to the left to support cvn8. >> thank you. let me follow up, secretary stackley, with the issue of off-ramps, particularly when this was decided in 2002 to be transformative technology and risks went definitely higher. in other cases you have used off-ramps, i know with the ddg 1000 and, you were able to select a different type of motive when the desire or breakthrough technologies and materialized. what's your position with respect to the cvn 78 and 79 emals and others. do you have a backup? or are we just going to follow this down to the point at which it can't work? one of the points i think senator mccain made very useful, if we have a system that can not accommodate every type of aircraft the navy flies for

all of our carriers, then we are diminishing our force projection. >> yes, sir. let me, you're touching on off-ramps striking a chord here. the amount of risk that was stacked up on cvn 78 without adequate off-ramps put us in untenable position where we ran into issues. i made reference to this review we did on emails and the ag in the 2009 time frame. that was with concern, cost and technical regarding the program's performance. at that point in time, we had the ship, was off the and running in terms of production. so when we look at potential off-ramp then, it would have caused a significant halt in production, delay, complete redesign, of many of the ship systems to bring steam back up to the flight deck to go to alternative. so there was no tenable off-ramp

in that regard. and much of our focus then became, will the system work? are we confident that the system will work? can we cap the costs? that ended up leading to a decision. frankly with the cno chairing that decision board that we're going to press on because of the trades and costs. one path or the other, impact on schedule, impact on performance if we were, to that point in time, taken off-ramp that we had not planned. going back in time, if, you know, if we had the ability, we could have, in fact, laid in an off-ramp in the early design stages of the cvn 78 in the event that we determined emails or ag was not mature enough. had is manifestation what became highly concurrent, highly compressed time frame for development, design, production and also decision-making that precluded that. your example after ddg 1000 going from what would be the

permanent magnet motor, higher risk, failed in test. we had a backup ready in terms of advanced induction motor to replace pmm. that is proven very successful in completion or development or installation and test on that program. >> just very quickly, going forward. >> going forward, yes, sir. >> one of the lessons of this very expensive exercise when you're doing traps formative technology, very high-risk technology will you always make it routine to have an off-ramp? >> yes, sir. our assessment of technical risk, if we have high-risk system we're bringing to a production program, we have to keep hand on what are our alternatives, at least to a certain decision point where the confidence is compelling to go forward. >> thank you very much. >> you specifically asked about emails and ag going forward. >> yeah. >> sir, we have absolute confidence in emails at this point. we have conducted thousands of cycles on systems. we referred to high cycle

fatigue testing. highly accelerated lifetime testing. we have a system at lakehurst in fact demonstrating performance that we need. aeg is behind where it needs to be. all the data dr. gill more referred to in terms of reliability. that is not because it is poorly designed that is because we're behind where we need to be in terms of time to demonstrate reliability, test, fix, test, fix. we have a merge between development and production, going forward, in terms of an off ramp, first question, every aag meeting i have is the system going to work, make sure no doubt we're addressing it. the chairman described how there was a plan to back fit aag on all the nimitz-class carriers. that proven to be to the affordable. that is not affordable as much because of impact of a carrier than the cost of the aag system itself but if we had to we could. >> thank you.

>> how many years? have we been seeing that? it is remarkable record. senator ernst. >> thank you, mr. chair. secretary mcfarland, gentlemen, thanks for being with us today. secretary stackley, test fix, test, fix, how long are we going to continue to do that? >> ma'am, when it comes to every developmental system, we are still doing test and fix on the dd g5 1 aegis weapons system for 30 years. there will be continue all test and fix as you bring in upgrades and performance. on ddgcvn 78 we'll identify further testing and operational testing like we do with every major weapon system we bring to the fleet and we'll continue to fix those. today, test and fix primarily, primarily is software related.

software, not hardware. >> where is the carrier right now? >> cvn 78 is about 95% complete at the piers at newport news shipbuilding in hampton yards. >> it is sitting in a shipyard, corrects. >> yes, ma'am. >> iowa we don't have shipyards. only time it matters to folks like me are whether it is out there operating. across military services, told 9% solution on time better than 100% solution too late. at some point this is going to be too late. and we're rapidly approaching that. now, you have been the assistant secretary of the navy for research, development and acquisition since 2008. and that was the same year that the cvn 78 procurement was authorized. have you ever received adverse action by the navy or dod due to

the delays, and the $2.4 billion in program cost growth? >> no, ma'am. >> has anybody within your chain, your structure, have they ever received adverse action for this? >> in the chain, yes, ma'am. >> could you describe those actions to me, please? >> there was a program manager associated with the aircraft launch recovery equipment who was relieved of his responsibilities. >> and, at what level is he? give me rank. >> program manager, captain united states navy. >> and secretary mcfarland, also have you received adverse action? >> no, ma'am. >> has anybody within your structure been reprimanded? >> not to my knowledge. >> not to your knowledge. folks, this is, i can tell you a lot of folks have been let go for a lot less. i, and you can tell, i am

extremely frustrated with the cost overruns, not being on time, there is no excuse. you can talk about all the gee whiz gadgets that you want. that is fantastic. but i will tell you that this is a affecting all of the other services as well. i still serve in the national guard. i'm a ground-pounder. great, good for me. we're losing in the national guard, with this new ndaa, 8200 national guard soldiers. we're being cut 1100 dual status technicians. we're losing 800 active guard and reserve members. we're being cut forces. and at some point this is going to it had the navy too. if we keep spending money on gee whiz gadgets sitting in a shipyard, some day you may not have the sailors to get that thing out of port. it is affecting everyone. our taxpayers are going to hold everyone accountable for this. everyone. i am really upset because i have

been working very hard. early hours, early months of my work here in the senate, in this committee and on homeland security, trying to restore program management process and i had a bill pass unanimously out of hsgac. tried to get something in mdaa specifically for department of defense. unfortunately it didn't survive the conference. i'm baffled. i'm baffled why we're not focusing on program management and cost overruns. this is an epidemic. we have to do everything about it. i'm sorry i'm on a soapbox. you can tell i'm upset. folks back home upset and doesn't do us any good unless it is actually out there providing protections for united states. if we keep sitting on it, not moving forward, in a timely manner, doesn't do us in guyed. so, i'd like to hear a response.

just when are we going to get this done? anybody? anybody? please. >> let me, specifically address cvn 78 in terms when she will deliver to the navy. cvn8 at one point in time would be 2006 procurement. delayed to 2007. delayed to 2008 for budget purposes. as was described earlier she was tied to being, maintain 11 carrier navy. today we're at tenncare yes, sir. requirement is for 11. since the ship was put under construction, there was four-month delay to launching the ship, that was associated with getting completion levels to a higher level, to insure that we could control costs going forward on the program. since that time, there is a six to eight-week delay we announced couple weeks ago, which is tagged to insuring that we maintain the discipline and cost in executing balance of the test program. . .

if it is executed as it is currently planned, the navy will need a 30 percent bigger budget than it has historically gotten. on the air force side we have the tanker, jsf, and long-range strike that is coming.

at theat the same time the army is shrinking. those bills will have to be paid somewhere, and if they are higher than we think now, we will be in real trouble. program managers were adhering a few months ago, and you asked me a questiona question about that. one thing i wanted to bring up which i didn't is we put program managers and terrible positions. when we create business cases where a program is underestimated and there is not enough scheduled to get things done and technology is a mature, we put a program manager in that position, and they have to manage the program and impart discipline and at the same time defend the program what they do with our program managers is not what industry does command we grind good people up. >> exactly. >> may i make an operational comment? >> absolutely. >> captain john mayer and his crew have moved aboard ford operating almost

50 percent of the systems, and the crew is extraordinarily happy with the ship at this point. the war fighter does need thisthe ship, and we are pleased with the fact that the crew likes the capability that we are delivering there and the statement referred to that capability. yes ma'am absolutely cost more and is taking longer, but we will have the ship delivered with that capability, and i would like to know for the record that the crew is very happy with the technology. >> i will make a closing comment. i have gone way over time, but $2.4 billion is a lot of up armor. could have saved a lot of arms, legs, and lives if we had had that money allocated in our budget as well. >> thank you. we recognize senator mansion >> thank you,you, mr. chair. it is unbelievable to sit here and listen to this.

i am reminded, in the 1961 farewell speech of then president eisenhower, and the councils of government we must guard against the acquisition of unwarranted influence whether sought or unsought by the military-industrial complex. i do not know -- i would like to know how you're able to do this job and keep from being so frustrated, seeing the recommendations, the forecasts that you have put out all these years and knowing that the deficiencies will happen. what i will ask, has anyone follow those, how many people that were in charge, whether it be from the secretary on down, how many have left, and where they have gone to work afterward?

>> i don't know if there has been a comprehensive study. >> we always say follow the money. >> yes. i think there is a fair amount of government personnel retiring and moving to industry. in thein the same industry basically that they were in charge of overseeing. >> well, there are laws about conflict of interest and they apply to different levels. many of them do eventually do that. >> their seem to be testimonies here, no repercussion whatsoever. nobody at the higher level has ever been reprimanded got relieved for a competency. in the privacy, if we build a home and it goes over budget you would learn from the 1st one.

and the definition of insanity is continuing to do the same thing and expect to get a different result. you would think sooner or later we would learn. >> sean makes a good point. these programs take so long. the leadership changes at every level. the people in position now don't remember what happened then. also, i don't think this is a case of bad actors. these are people trying to act rationally in the environment. >> am not accusing anyone of being intentionally a bad actor. i'm accusing system, president eisenhower saw something:. there is something that caught his attention. attention. being a military person command we operate in world war ii the way he saw the evolution of the industrial complex, military, got help us in world war ii.

something stoked his interest to say we have a problem. this is involved for 50 years. he had tremendous vision back then knowing they were going down a slippery path. i was looking at what china is able to do, and if you look at how they are able to advance and jumping quickly, i am sure they have other ways of acquiring information they are getting , and we have suspicion about that. but there is a process, they can they can do things in a much quicker timeframe. what recommendation would you make to us? and people that make decisions and maybe can change the law or create laws that would help us prevent this from continuing. there should be a law that when gal makes a recommendation, while we accepted your nation why we

don't accept your recommendation. very simple. myself and former senator coburn tried to get that done. someonesomeone has to answer to what you are seeing and we are not doing. >> i actually do not think that it is a matter of law or regulation. i think it is -- we need your biggest opportunity is when you are proving a new program and really have to scrutinize the program for principles that embodies. so if you really believe in mature technologies before you put them in a program, if you really believe in fly before by, realistic estimating and scheduling command the program comes up to does not measure up, you have got to say no. >> this is 2,007 you mentioned this. before class aircraft carriers,carriers, the lead ship began construction with

an unrealistic business case you identified that. say yes in terms of the report. i believe this is the 1st hearing on the carrier were outside witnesses have been invited. thank you and i love to meet with you later on. >> i think the sen. from west virginia for his involvement and commitment on such. >> you open up your

statement by saying the same story different program and also commented in your opening statement about this committee and the senate or congress as a whole playing a more aggressive oversight role than we have over recent years. so can you give me some sense of how much of that is going forward with new programs, how much of that should be applied retroactively to this subject or any of the other major projects that we have? what are your recommendations to this committee for specifically we should do in the next committee meeting over the course of the year? >> i would say right now we are in a period whethera period whether or not as many big new programs coming down the pipe which is your opportunity. i don't know how much we can do on a program that is through the milestone and under contract without making more of a mess of it.

>> i think he used the analogy of seven home runs in the bottom of the 9th with respect to this graphic here. to what extent do we need to go back and say we know. i think maybe it had twins set it to the tigers. but it is very uncommon and was widely reported as aa result. but we need to do with respect to this timeline about being realistic that we will have a timeline that we are going to achieve. what do we need to do here to at least not come back and have the same frustrations that senator ernst has. we see it and no it is not likely to happen. therefore what should we be doing to set realistic expectations? >> for something like this i would say, and the navy has moved the schedule out a little bit, we have to make it okay for the navy to come

up and say we need to move his schedule and it's going to cost more. right now the navy might not want to come in and say that because they will take a beating over increased cost. we kind of -- >> wait until it happens. >> wait until it happens. >> and i we will tell you, someone who who has been responsible for long-term complex problem is where people lose their jobs. the thing we have to put on the table now is, if you come back and explain to us why you're going to mr. dates, that becomes our problem. if you wait and ultimately realize our come to us and say we were wrong, someone else's to lose there job. it is a matter of who's problem it is, and i am not citing any one person, but it seems like it is obvious that we

are going to have to pull a rabbit out of the hat to achieve these. somebody owes a responsibility toa responsibility to speak honestly about that and set the right expectations. if they do not, they need down it. i don't think you disagree. >> no. >> going forward, we do need to come up with some sort of findings of fact before we approve future programs so that we can really have people on this going forward instead of having it be the insanity that seems to be driving a lot of these large, complex programs. i'm going to ask you just a general question. first, with respect to china, i no we spend a lot of time trying to take the edge off of our quantitative disadvantage with a country like china that is churning out a lot of ships by the qualitative advantage.

our capabilities may end up being masked by the sheer quantity the sum of our adversaries are building up. i'll open it up to the emeralds. >> am responsible for stability of requirements that going to our acquisition programs. when you have stable requirements to control cost more that is one aspect. we developed the forward class carrier starting in the mid- 90s, actually before that with a look at the future of aircraft carriers. we don't look at only one country. we look around the world the

potential conflicts and take them from relatively low and conflicts like you see in the north arabian gulf command we look at higher and conflicts against countries who can through technology attempts to match our capabilities. we do campaign modeling, have names for them like thunder and storm, and they are joint campaign models using us air force, navy, force, navy, army command of the military assets to affect that campaign. as has already been stated, the united states navy, nuclear powered aircraft carrier is a chess piece in our navy. they are a critical factor of the campaign plans moving forward. when we looked at the we look at the future and the way that threats around the world were going, we devised the four glass with 33 percent greater capability, advanced technology and electric capacity and with the

ability to increase getting airplanes on and off the ship and other technologies around the ship. campaign models around the world, that's what delivered the requirements that resulted in the forward design you see today. stabilizing those elements is one aspect of stabilizing the cost and schedule. >> if i may from a pure acquisition standpoint, the reason that we built the four classes the nimitz class was starting to reach the end of its useful service life. technology changes. the other thing is, the nimitz class was built in a narrower people were relatively inexpensive. from a total lifetime cost perspective and nimitz class is expensive. people make expensive. people make up 40 percent of the cost of the ship, so it is pretty clear that we had to drive long-term affordability into the ship over the 50 years and that

the most important thing we could do was to get people off of the ship which required a complete redesign some of the things are seeing, not only the operational capability but a significant reduction in the people on the ship. going to take 663 sailors, 1200 when you compare the airline. the cost to buy that ship, ownship, own it, operated, and maintain it will be about 4 billion less. >> i must say, all those things that both pointed out are undeniably accurate. those numbers are totally unacceptable. >> i like to.out, more involved in the situation in regards this carrier, has been constructive,

incredibly helpful in informing the committee. the men and women who are doing great work in the construction of these aircraft carriers and arguably one of the finest shipyards in the world. >> thank you, mr. chairman. i am proud to represent the thousands of shipbuilders who manufacture the largest and most complicated items on the planet earth, nuclear aircraft carriers and subs. they did not make the decision about putting the new technologies on the 1st in class. they did not develop the weapon systems in the aag and e-mail systems. those were developed elsewhere. but i have been on the ship many times and seen the work underway. i have seen the navy take

control of the ship in recent months, and they are excited about it. a couple of items car cost overruns, and i agree, i would say that a lot of this is less overrun the import cost estimation. unpack what cost overruns are for cost estimation. before 2010 when the navy was talking about the cost estimate to this committee and others, repeatedly the navy said that their confidence level in the cost estimate was less than 50 percent or even in some cases less than 40 percent. >> and i gather that that was because 1st in class and the addition of all of these untried technological systems has mandated. thatthat was one of the reasons that the conference level was low. >> yes, sir.

>> let me talk about 1st in class history. this is a similar problem but a new example. eric lasted the cbo study were elected acquisitions programs and 1st in class and basically concluded that as a general matter, they tend to be 30 or 40 percent higher than the estimate that the navy has begun with >> in my state we have less than the most recent and the average cost increases 28 percent. >> is better than average, but to put it in context it is not unusual. what is more important is what happens after. first in class on the ticonderoga class cruiser,

there was a lot of problems, andcommand obese walrus of the high seas with potentially dangerous stability problems. that program ended up being significantly improved. it was called the navy's billion-dollar home water. another example. generally that acquisition program significantly improved. one that i love is the virginia class submarine. which has turned into a very successful acquisition program. some significant challenges and cost overruns are estimations.

>> you are absolutely correct. >> in each case unlike other major weapons programs there is not a prototype. this is the 1st opportunity to bring these complex systems together and integrate the tasks. there are uncertainties in the nobles and risks when it is most costly. >> for some weapon systems that is what you do. that is why you often see difference. you talked about the changing in the contracting mechanism between 78 as78 as

a cost plus and 79 is a fixed cost. >> yes, both fixed price contracts. >> finally, the senator asked the question. for as much as we talked about operating a cost is larger because they have a long life. i gather one of the main design features of this is to put in physical design to dramatically reduce the number of sailors and then drop the personnel cost. it was either dr. gilmore mr. francis who said, yes, yes, there is a projected savings and personnel cost, but we have not achieved it yet. i do know that those bringing down the number of personnel is one of the main advances over the nimitz design.

and obviously they committee should stay very much on you. make sure that it is actually achieved. i strongly support the chairs acquisition reform strategy, what we did in this year's was important, but i certainly see that as a down payment somewhat we will be doing going forward. >> senator, can i make a comment? >> first on the contract for the cvn 79. the current contract is fixed price which covers about 47 percent of the construction cost. 65 percent is already paid for. and then you are exactly right, the 1st of class of any weapon system we seem to have a lot of trouble with. later on we kind of get comfortable with the fact that we worked out the problems and everything looks good.

if we are repeatedly having trouble with 1st article, what is it that we can do in terms of estimating and risk analysis so that we aren't making the same errors every time. >> i think it is important that this committee received from the director and information package that showed that since the implementation the cost estimating techniques for improved because we were given access to information and data right directly from contractors showing that the disparate distance between the service cost positions in the independent cost positions has gone of the medium from over 6 percent to less than 2 percent and 3 pee margin of error. so the senator points out exactly what needs to be done.

>> is net also true that the delays have had a significant effect on the costs? >> the program plan for the carrier that has been stretched out programmatically and budgetary early. originally going to be an 06 carrier that became of seven and then 08. in the 2,008 the navy was authorized to procure 78, 79, and 80 on for your centers which was consistent with 12 carrier navy. the decision was substance the made by the department of defense to stretch that up to five your centers. so the cvn 79 which was going to be an earlier carrier is not put under contract until the 2013

budget until the 80 was bumped further. the program has been stretched out which has brought more cost to the program. >> senator. >> thank you, chairman. i just wanted to say comeau one of the challenges you reference in your testimony is here we sit today billions of dollars of overrun command people are frustrated by it, and you cited also that the gsf program, the f-22, the combat ship, they were actually worse, and this was a typical acquisition outcome. here's the challenge. we have to change this dynamic because we have had the leaders of all of our military rightly coming year and testify about the impact of sequestration. and the fact that we are going to diminish the size

of our fleet, that we need more ships, more attack submarines, more ground troops, obviously more fighters and making sure that we have the training for our men and women in uniform command thenin my constituents look at these billions of dollars of overruns and look at us and say, why are you dealing with that? if we are going to give you more money than we need you to deal with that. so all of us that care very deeply about making sure we do what needs to be done, this is an issue that has got to go from being the bottom priority to a top priority. the one question i would ask all of you, whoever is best to answer this, you mentioned aligning responsibility, accountability, and

decision-making. how are we rewarding good acquisition behavior within the bending on? in other words, if your doing a good job, how are you rewarded? intern, how are those being held accountable, not just at the captain level that we have heard about today but at the highest levels, this has to be a priority for all of us if we want to make sure that our men and women in uniform have what they need and that we can make this case to the american people about how important this is. so whoever is best to feel that, but that is clearly the big question here. there clearly not aligned. i'm sure that's demoralizing. >> i think your points are well made.

i am not sure we report program managers well. the only thing that ii can see from my experience is often. in terms of polling folks accountable when we see a clear connection between what they did and there outcomes we do retire the murmur of them, both civilian and military. beyond that, the incentive structure you are referring to is not clear or adequate and ties to the earlier chairman and ranking member talked about, it's where those decisions are made and what paul talked about in terms of how is it the culture and the decisions are directed into a program manager relates to their ability to perform. >> also as leaders if you have got someone you have to let go at the captain level the leader is to be held

accountable because anyone of us of our team does something, we are ultimately responsible. i had a specific question also about what senator mccain reference. and how the contractors absorbs the cost overrun. wouldn't it make sense for all major defense acquisition production programs to be designed so that the contractor absorbs the cost overrun for production? ..

>> we took a look another our contracts across all the enterprise, across the services and, indeed, yes. >> let me make one point regarding that. we talked about ship-building and the lead ship of a new class thatline a cost-plus ship. the following ships are production. over the last -- since i've been in this office we have been trying to drive down the number of cost-plus ships in the program, today across the department of the navy we have two cost-plus ships in production, one is the cbn78. >> my time is up but i'll submit a question for the record that concerns me as we look at the cost growth.

i like to understand as we look at the ohio class submarine replacement program, what lessons we learned from this so we don't go down the same road with the ohio class, and is very important to our nation. so i'll submit that for the record. >> senator, can i jump in on the time you don't have left? >> of course. with the chairman residents latitude. how is that. >> thank you. on your right on production contracts. they should be fixed price. but there's still times -- ships aside, there's still some contracts that are cost-plus rate. you have to manage your risks. so a good contract can't save a bad program. so if the risks are high, i don't necessarily fault the contract type. i raise the question why are we going into production if we're not done with the development yet? >> well, it's a bad program we shouldn't be investing it in itn

the first place. >> yes, or if it's just not ready to take next step. and then people being held accountable, a it's good philosophical question, accountable for what? what constitutes success. if i'm a program manager and trying to get my program through the next milestone, and i do that, and then there's a cost increase, what am i going to be rated on, getting it through the milestone or the cost increase. if a get to to be the former. i if you can get it moving, that's what your accountable for. >> that's a problem, because it could cost you a lot more and you're putting it out there butout get it on time, that's not meeting your target. so people need to be held accountable, otherwise we have billions of dollars in overruns. tough. >> senator? >> thank you, mr. chairman.

i know the department has undertaken reductions and the congress has reiterated the need to reduce headquarters positions for efficiencies and other savings, and while we all want to reduce waste and inefficiency, i would urge the department to look at possible headquarters reduction targets on a case-by-case basis and make informed decisions, keeping in mind that cuts today can come back to cost much more in the long term than we get in the short-term savings. the acquisition so is fightal to ensuring our acquisition programs, and lead to successful outcomes so that our men and women in uniform are given the tools they need to effectively carry out their missions. we have to ensure that we are able to recruit and retain a quality acquisition work force if we for be successful in defense acquisitions and, if hey have acquisition teams that are

understaffed, untrained or two inexperienced we cannot expect to have good results in our acquisition programs. as described in secretary mcfarland's testimony today we cut the dod acquisition work for us by roughly 57% during economy drives of the late 1990s and early 2000s. i believe those reductions contributed to a large number of the problems that dod has had in major acquisition programs over the last two decades, and i agree that congress has an jointer overright role fly on acquisition, however, at the start i want to know that our acquisition work force can perform and we can rely on their analyses and processes of our acquisition team before a program is recommended. therefore, when we look to implement mandatory cuts to headquarters, we should be -- we should consider the potential long-term effects on our acquisition programs, among, of course, among other programs.

so second mcfar lean, what is your assessment of the health of the acquisition work force, especially dialing with very complicated acquisitions such as the ford class. >> senator, first, thank you. this is such a human endeavor. that is the principle understanding of the underprying problems to ensure our work force is appropriately trained and experience to do these jobs inch 1986 we had 622,000 core acquisition people. by the time frame of this program in 78 was conceived and 196 through 2002 we reduced the work force to less than 300,000 people. this committee, and congress in general, has provided us the defense acquisition work fours development fund that has allowed us to regrow, retrain, and educate 8,000 to thousands

people. that has been a critical. improvement to where we are. the work force is ready for retirement and the next work forcees -- these capabilities were discussing were bred by people that may not have adequate acquisition experience or understanding of the business case that needed to be executed here. so, i would say that we're very fragile right now is the best way i can say it. these people are working very hard. their very loyal, patriotic people. don't get very well paid. a lot of abuse in the press. also an opportunity to forget what they have done that is done well, like the jotv program that is actually been put together under the principles of the better buying power initiatives and i can really commend the services, the navy, marine corps and army for the program and others that are doing much

better by having the disciplined approach. the only way to protect our future is invest and protect that core capability. >> secretary, would you like to comment also? >> i think i'll add one comment. back in may of 2014, chairman mccain and senator levin sent out letters soliciting inputs regarding what we need to do to improve this acquisition system, and i was fortune enough to have the responsibility to respond, after giving it much thought. my concern and conclusion was programs that succeed, succeed because you have a high he talented experienced team in place that is able to overcome, work through, in and around this very dense, difficult system we have, and at the same time master the technical details and

oversight to deliver complex weapons systems. programs that fail quite often fail because of not having the same attributes in terms of the acquisition workforce team. so first and foremost we have to give us the tools to attract, train, and retain those professionals to get the job done. >> i empa size how important it is -- emphasize how important to have an acquisition team we can rely upon because these are very click i indicated systems and programs, it would be very difficult for our congress to be the first line in terms of analyzing the efficacy and reliability of the programs. so i expect our acquisition people to do that, and therefore, thank you very much, mr. chairman. secretary carter's hearing for confirmation i showed a chart of $40 billion that was spent on programs that never became

reality. that is not an acceptable system or situation. we value the men and women who work in this business, but these problems are of such magnitude in the view of most members of this committee that we can't lose sight of the fact that the system is badly broken. senator sullivan. >> thank you, mr. chair, and thank you for your leadership on this issue in terms of oversight. critically important function of this committee. i'm not sure the question has been asked but maybe i'll just ask it pretty simple. secretary stackley, secretary mcfarland, who is responsible? who is responsible? who is kind of raised their hand and said, this cost overrun is my responsibility? i accept it. >> today i'm responsible. you see the gentlemen at the

table here responsible for elements of the program that come together for the carrier that has a service acquisition executive. i assume responsibility for this program. and the decisions i have the opportunity to make as we execute. >> secretary mr. farland. >> sir, the navy is -- no. i'm not talking about an organization. that's very amorphous. i'm talking about people. individuals. >> sir, believe we could have done much better in preparing and advocating for the right aspects of the praise to be condition ducted from the beginning go throughout the execution. >> so who is summon your -- who is responsible in your view? >> the department. >> it's a ridiculous answer. so, who -- in your view, who is responsible? part of the issue here is that the responsibility seems to be placed in -- i mean, secretary

stackley, i appreciate your statement. i think that's up front. secretary mcfarland, i'm asking the same question of you. who is responsible? i'm talking about individual. that's how we fix it. can't bailiff it on the navy. >> sir, i will tick absolute responsibility for not having done the correct things in terms of helping the program along. >> so who is responsible? >> then i would say myself, sir. >> okay. admiral moore, admiral gaddis, looking at your buy wyoming, im -- bios, impressive as far as your careers. when you-under assigned as a program manager as a senior flag officer in the united states navy, is that something you celebrated or were like, oh, gees, d how is your job as uniformed military officer viewed in the navy and is that part of the issue here?

>> well, other than i i got to spend my 16th consecutive year in washington, dc for taking the job, -- no, it's -- >> i feel for you. >> it's an honor. >> is that a career enhancer to successfully complete a tour that is obviously filled with landmines, or is that something you try to avoid? what i'm getting at is, do we have our most ambition, top-rate officers trying to get these jobs or are they trying to avoid them and is that part of the problem? >> sir, i believe this is the best job in the navy. i was ordered to be asked by secretary stackley to take the job itch think most of us -- anybody sitting at this table will tell you that we want the challenges, and we're not going shy away from the responsibilities that go with jobs. i'm ultimately accountable for this program, like secretary stackley, i accept the responsibility.

i want the tough jobs. i was glad to take it. i think we have made strides on 78. nobody is happy with the cost overruns on 78 and have done better on 79. but to your basic question, good people want these jobs. they're tough jobs. and i think you're going to continue to get the right people in these jobs going forward. >> so, i know you see the frustration from the committee. i think senator antidid a very good -- ernst did a good job of articulating that. we're talking about opportunity costs with regard to the defense of our nation. so, just one of these cost overrun on one carrier could fund a brigade combat team in the army for ten years. that's a really important issue. and the army wants to cut 40,000 troops right now. and so strategically it just doesn't seem to make sense. let me ask a quick question in followup on senator ayotte's

comments. do you need statutory authority to have the responsibility of cost overruns be borne by the contractor and not the american taxpayer or can you do that now presently? >> we have the that when we contract with the contractors to put the contract in place that hold them accountable. >> we're making that from a production standpoint regular part of our contracting work right now? >> yes, sir. absolutely. >> thank you, mr. chairman. >> mr. chairman, first i want to thank you for your interest in this topic. i think it's one of the most important responsibility wes have, and -- but die think in terms of today's discussion, there needs to be some context. i suspect the first mcintosh computer cost a million dollars. in terms of the work i've read about the work they went through to develop that computer, but then they made them by the

thousands or millions and they went down to the -- the price went down to $1,000. one problem here, mr. francis, you identified it and this is where we need to focus our attention, is that we're dealing with first in-class products, new protects, and you mentioned two terms, fly before you buy and mature technologies. and i understand that. but the problem is we're building a product here that is supposed to have other 50-year life, and if we build it with fully mature and nye before you buy technologies it's going to be obsolete the day it enters the water. and we're talking bat qualitative technological edge. so i think we -- and senator mccain pointed out we're building prototypes. no way to do a prototype of that first macintosh. it was a prototype that could sit on this desk but you can't build a prototype of an aircraft carrier so i think the problem -- you identified it, mr. francis. how do we deal with the first in

class issue? and maybe it's more realistic estimates at the beginning, maybe it's more realistic estimates of the time, but to simply say there's an overrun here, center mccoin pointed out, if the estimates at the beginning had been more realistic there would be in overrun. it would have been what was estimated. so, mr. francis, how do we deal with this -- it's a risk and cost balance, it seems to me, and in order to build the highest technology, most advanced weapon system, we have to take risks in terms of being sure that technology is the most advanced possible when that ship launches. talk to me about what you identified issue think properly, this isn't an overall blew accumulator problem of the military but the fact it seems to happen in every branch on

every weapons system when the first -- whether it's the f35 or this or other weapon systems, tanks, how do we deal with the first in class issue? >> well, senator, i think there's a way to take risks. we need to take them. our position has been, let's take more risks in science and technology before we get into acquisition. that takes money. and we're kind of stingy about money before we get into a program. >> it would be accurate to say that some of these systems -- this is an r & dr & d on the hoof. >> yes. we talked about offramps. if you're going to take a risk, we should say, let's say we're taking a risk and we got an offramp. so if this doesn't work out we

got a plan b. we tend not to do that. we tend to bet this will come out just the with a we say, and if you look at the original plan for the cvn78, these systems were going to get wrung out in land-based test before they got on the shirk but we were too optimistic about the schedule for taking that risk so they slid on to the ship. so myself personally, i'm not terribly concerned about the types problems on the systems. it's when and where we're discovering them. i think there's a way to take risk to take it more intelligently. again come back to acquisition culture. the culture here is to say there is no risk. that we can do it for low cost. if you come in and say it's going to cost 13 billion, maybe you'll get told, no. and so you can't put that on the table. so, somehow our culture has to change, so we can say, it's okay to take a risk, and hearings how we'll do it.

>> of course one of the problems here is that we're talking bat class of ships that we're building three of them. so you don't have 50 or 60 to spread those essentially r & d costs over. the ddg51s an example of that. cheaper than when it was back in 1987. it has a whole lot of problems and now it's the mainstay of the navy. so i think we have -- again, i think this is a very important subject. i don't mean to sugarcoat it but we anyplace to understand in the cop text and focus on the problem which seems to be how to deal with the quantitative risk. i spent two hours in a classified briefing on the new bomber, same kinds of issues, and trying to hammer about how do we do the contracts, who take this risk, whether it's the contractor or the government? and -- but this is a tough probable policemen when you talk about trying to build the most

technological advanced weapons system in the world, and senator manchin mentioned the china. that are doing pretty well by stealing our intellectual property, he alleged. i alleged. but that's one way to shorten -- short, circuit the r & d. i hope you all -- madam secretary and secretary stackley, you have done a lot of thinking about this. i think it would be helpful to present us with thinking how to deal with the first in class problem. that's what we are talking about across the government. admiral? >> senator mccain, this is more complex than the technology risk than just white washing first in class, and that is what technologies do you choose to put in the first in class. secretary stackley and others said the original plan had part out; all pushed into one class. we talked about i think rankingmen member reid talked about the enterprise sufferance

to replace the radar. that's management of risk because the radar is a nondevelopmental solution. we created requirement sets that look at what industry has now to reduce the risk of technology and development on time and schedule. the p8 program. antisaab in warfarary craft, the boeing 737. we reduced the risk of integrate into a air frame by using something that was already proven or realizing the risk. several weapon programs we use the back end motor with a brand new seeker on the front. very, very capable. when the vehicler is do we do the back end motor later on. so the type of risks you take on in the first of class is key if we choose to do a full developmental first of class like the joint strike fighter, that's a revolutionary weapons system. that is better than any aircraft in the world. there's a lot of risk there,

sir, and we're realizing the risk now. the ford was revolutionary between the nimitz and the ford. so i sentence the comment are exactly on the mark. we have to look clearly at the risk. if your first in class is revolutionary and you don't do the things you're talking about for technology, you're going have a cost delivery mismatch you have to deal with later on, and we look at that risk. >> if i may just add, because senator ayotte brought up the ohio. you're asking -- just spot on question and issue we wrestle with continuously. the next being thing in the department of the navy in terms of first of class, program that will be providing reliable, secure, certain, sea-based strategic deterrents until the 2080s. how do you design and dolph the capabilitied that go on that boat on the front end, deliver on schedule so she can be on

deployment in 2031, certainly and then throughout its life remain that secure sea-based -- >> still be an effective weapons system 50 years from now. >> yes, sir. so we're not going to go big bang. we have been working this. we look at what do we need to do on the ohio replacement that we don't already do on the ohio? well, right now, we have a very effective, very -- high performing strategic program in terms of the weapons system. we're not going to develop a new weapons systems. we're going to port over the existing weapons system in its current state of technology on to the the ohio replacement hull. the virginia class, very effective combat systems, sensors, communication platform. we'll port over that technology on to the replacement hull. the advances we need to make are in terms of stealth and survivability of the ohio replacement hull for the next

half century, and that's where our focus is in terms of development and design. and we're challenging requirements. you have to get the requirements right up front, and that doesn't just mean what does the operator need but what its feasible, what of their risks risks you carry? when you identify those make sure you have a development program. that works the risks so everybody insured that you're making progress before your cutting steel, and then have the offramped we discussed. that's a 2019 boat that we're sitting here today doing those developments, managing -- 202, 1 excuse me. -- that we're managing closely today, and then assessing the risk each step along the way, visibly for the congress forks their department of defense, with industry to ensure that each step along the way we are making the right decisions and we don't find ourselves where we are today with delay and the

cost growth we're seeing. >> admiral, when you're -- your time expired. when you use the joint strike fighter as a success story, sir you have lost the connection between the military and this committee. the most expensive, longest cost -- and largest cost overreturn first trillion dollar weapons system in history and you're using that as a success story, sir. you have lost connection with the members of this committee, and those of us who have been involved in this fiasco for a decade. mr. francis, you have to respond to some of this. we're now being painted pictures, everything is fine. >> i think that this is the byproduct of culture and the long timeline. so when programs get through their problems, we fall back on, well, so much better than what we have. but we forgotten the cost and

the opportunity costs it took to get there. so, i think we could agree that the system produces tremendous weapon systems but they cost more and take much longer, and we're giving things up along the way but we don't know what those things are, and that not a pattern we want to repeat. want to get it right the first time. >> senator cotten. >> mr. chairman i did not intend to use it at a success story but to illustrate innovative technology is a challenge. >> innovative technologies in silicon valley reduce costs. innovative technologies in the department of defense apparently increase costs. >> thank you. i know we have again over the details of this program. so i won't rehash those. i do in the spirit of inquiry and problem-solving-moving ahead, have a couple simple

question is want to ask. mr. francis, i'll start with you. has the nevery ever delivered a ship underbudget and on time? >> i don't know if i can answer that for history. i want to say in the recent ones we have looked at, that hasn't happened. but probably mr. stackley has better data on that. the one we looked at dish. >> first, you said a ship and the answer is,ey, we do it consistently. what you want to get is a lead ship, since we discuss lead ships. the answer is, yes, we have and that's when we have been very measured in terms of the risk we carried into the lead ships. as we look forward, i talk about the -- when we look at the lead ships coming our way right now think first one is the taox we'll leverage existing technology and design to

minimize the risk and that will fixed price. the next one is the next am amphib program. the minimize the risks to ensure we -- at a cost we can both afford and rely pop when it delivers. we'll re -- use use technology we understand and supports the mission and then just deal with those changes to the mission that are necessary for the changes to that platform. >> so, those are ships in the future, though, retrospectively, what is the lead ship the navy delivered underbudget? >> i don't want to oversimplify this but the last lead ship was the mobile landing platform. that delivered on schedule, under budget. >> okay. ...

>> discuss the issues driving the national conversations. mitt romney and valerie jerrett were speakers. on saturday night at 10 p.m. eastern, we talk about