and first lady michelle obama on the role of first ladies throughout history. it's available through the discounted price of $12.95 plus shipping at c-span.org/products. the website has more about the first ladies, including the special section, "welcome to the white house" produced by the partner, the white house historical association which chronicles life in the executive mansion in the tenure of each first lady. now congressman mack thorn berry talks about trying to change the way the defense department spends money and gives security clearances. the texas republican is heading initiative for the house armed services committee for the pentagon acquisition process. the international cities hosted this one-hour event.

>> i was in abu dhabi when i said that mack thornberry was going to give a big announcement. i got back. it was three hours ago. the most important thing for me to do is get away from the stage quickly because i will make mistakes if i try to stay here. i can't resist. i wanted to say that i was in abu dhabi this last weekend, two weeks before that, i was in tokyo at a conference. and two weeks before that, in seoul. and every place, i'm hearing the

same thing. it is what the hell are you doing to yourselves. they want america to be a global leader. they see what they're doing, and they're genuinely anxious, worried about what we're doing. they say why -- why is this happening? i give them an explanation about very deep turmoil we have within our government about how do we establish priorities when our budget is so out of whack. and it's -- this is going to be with us for a while. i tell them that, i say this is going to be a longer term problem. we're going to have this problem for a while. and you can feel everybody sag that we had this -- but i said, don't be mistaken. if we're needed tomorrow, if the iranians were to do something crazy, we'll be there, we'll be there. don't worry about that. so what we're -- what we really have to look at is not today. we have this remarkable

capacity, remarkable military. what are we going to have in ten years, what are we going to have in 15 years. that's really the issue on the table. that's really what vice chairman thornberry is doing. he's going to look at the most important questions. we can't do what we've been doing and stay on the path with iran. we don't have those resources yet the world needs us to be just as capable in 10, 15 years as we are today. how are we going to do that? that's the challenge in front of us. i'm not at all surprised that the chairman turned to mack and asked him to head this up. he's so in this town, having been here for 19 years going on 20, having had such

distinguished service, having touched the department so many ways, there's no one better suited for this challenging time than mack thornberry. please welcome him with your applause. we look forward to his speech. >> thank you, john. i'm excited to be here with the serious work that goes on here. with all of the interactions with csis exports over the years, i benefitted tremendously from their guidance and ideas. and i have no doubt that the work that goes on here makes an important difference. y'all are nice to listen to me, but we could all take notes from

dr. hambry or some of the other experts here on this topic. i do have to note, however, the last time i was at csis, it was for a cyberexercise. i was asked to play the president and dr. hambry has not invited me back since. it was deeply disturbing for him as is understandable. chairman mckee and i have been talking about a focused defense reform effort for sometime. he wants me to tackle acquisitional reform, organizational bloat, and the security process. something mike rogers equally interested in. today i'm going to focus on the first of those topicings. i have to confess that the first two questions that popped into

my mind when buck asked me to tackle this were one, is it possible, and, two, is it worth the effort? if that comes across as skeptical, for every three years in congress, we've passed some sort of legislation on acquisition reform. now, maybe some of it was helpful. maybe some of it contributed to the problem. but if you look at the whole picture, there are things that are certainly no better now and some ways they're worse than they were 20 years ago. so let me give you a multiple choice question here. six problems with the d.o.d. acquisition, schedule slippage, lost growth, lack of qualified personnel, adequate cost destination, and insufficient training and management contractors. what year do you think that was done? 1962, 1982, 202, 2012?

yeah, the -- i think the answer is it could have been done in any of those years. as a matter of fact, in the last 50 years, we've seen 27 major government studies and over 100 nongovernment studies on those issues. that was harvard business school study in 1962 looking a it the same things. frank kendall mentioned here a few days ago, defense acquisition has been a significant issue for us since the revolutionary war. but at the very same time, dr. hambry is written about this, one of the key factors in our success in world leadership has been that industry is an indispensable partner with the armed force s forces in defendi country. we wrote, we have harnessed the power of the profit motive to national security. so it is a fundamental strength.

and at the same time, it's a persistent problem. most all of the studies that have looked at the problem over the last 50 years have said roughly the same thing. and as i mentioned there's been a number of legislative attempts with unsatisfactory results. the lesson i learn with that is we have to go deeper. we have to not just treat the symptoms but deal with the root causes of the problem that have made it so difficult for us to solve these problems over the last 50 years. remember, we're talking about a lot of money here. last year the department of defense let contracts for $360 billion, that's 10% of the entire federal budget, and more than 50% of d.o.d.'s obligations. and as g.a.o. testified in our hearing a couple of weeks ago, if you compare 2008 to 2012 and

look at cost estimations just in those four years we got 7% worse on developmental costs. 13% worse on total acquisition costs. and the average delay in initial operating capability went from 22 months to 27 months. so just looking at the last four years, we've gotten worse. in all of these categories. but, of course, it's not just the acquisition of weapons and equipment. the pentagon spends more on service contracts than it does on weapons. and there it's harder to know if the taxpayers are getting good value. what we do know is if you look at the last five years, contract spending is down 10%. but bid protests are up 35%. there's hardly a contract awarded these days that there's not a protest on. what's the effect of these trends.

well, we waste a lot of money and effort. we have more tail and less tooth. more overhead and less -- that fighting capability than we should have for the money we spend. who said this and when? as long as we offer assistance where the checkers are outnumbering the doers, the doers are going to spend more paper work for the checkers. it could have been any or all of the defense manufacturing facilities i visited in the last two or five years. but that's admiral rickover quoted to packard in a letter to george schultz in 1970. we're at the point where it's estimated that about a third of the procurement dollars are going to overhead right now. and the rest of the story is that it's not just waste. we're not as agile and response i have as we need to be in a

dangerous world. so we face this festering problem of getting good value for the taxpayers in a timely way in a larger context of two essential facts. one of the facts is the world is not getting any safer or any less complex. when you retired a couple of months ago, deputy cia director morrell said he didn't remember a time in his 33 year unless the cia where we had so many front burner national security issues. i won't go on about it. but just a brief list of cyberproliferation, terrorism, syria, russia, china, iran, north korea, keeping the alliances together, makes the point. things are not getting any easier. i think the second essential fact is we're going to face tightened defense budgets as far as the eye can see. truth is, we dug ourselves a deep hole of debt.

now we all hope that the economy improves. we need the reform entitlement programs which is where most of the spending is. we need to find a way to get our fiscal house in order without the across the board cuts that sequestration would impose. we need more stability in funding because the disruptioned caused by the uncertainty that we faced are undermining every attempt to improve a system and are costing us dearly. but the point i want to make is if all of that stuff is solved in the way i wanted it to, i notice no scenario that envisions a return to large defense budget increases short of some catastrophic event that none of us want to see. so even in the best case scenario, we've got to face a dangerous complicated world with limited resources. that means we have to get more defense for the dollar. that's the reason chairman

mckeon has asked me to spearhead this effort on the three interrelated topics, focusing first on how the pentagon buys goods and services. let me be clear, the purpose is not to cut defense or not to make it easier to cut defense. the purpose is to get more defense, more value out of the dollars we spend. one very encouraging thing is i think this is completely bipartisan and bicameral. adam smith, the ranking member of the house armed services as well as senator levin and senator inhoff are just as interested in this as we are on our side. that's an essential place to start. i'm also very encouraged with a lot of what frank kendall had to say here ten days ago. and i guarantee we will be more than happy to sit down and go through with him line-by-line, federal regulations to thin them out and to simplify them.

of course, along the way, we can't just focus on big d.o.d., we've also got to work with the services up and down the chain of command. you're not going to do this without full participation of the industry partners that dr. hambry talked about. but i think we're at a point where everybody agrees this, is the time we have to act. we started october 29 with a hearing look back at the last 25 years of acquisition reform efforts. three excellent witnesses that came the insights. we're going to continue across government and outside of government. and, again, so far, there's been nothing but eagerness to help. i expect we're going to have working groups across organizations in the coming months and obviously we're going to have hearings directly on this topic.

but in addition to that, this topic is going to shape all of the rest of the hearings we have. whether it's shipbuilding or airplanes or how to best meet the needs of our service people who are deployed and the contract support there. these questions are going to influence all of the hearings that we have in the coming years. now, we're not looking at this as, okay, we're going to take two years to study it and come out with a 2,000-page bill to come out with all of the problems in the world. we're going to make progress along the way as we go. and also have a good humility, understanding that not all of the answers to this are going to come through legislation. some of what we need to do in congress is to change our oversight, the questions we ask. and to help encourage some changes in culture in the pentagon and in the services. one suggestion already being made is y'all ought to have a hearing on an acquisition

program that's done well. and pat them on the back. don't just call it the people who are in trouble. reward the people who have done a good job. and obviously, we need y'all's help. your input, to make this work. not just about substantively what needs to happen, but what sort of process will help us reach the best results. so let me get back to my two questions -- is it possible? and is it worth it? i think there's a lot of understandable skepticism that goes with 50 years of frustration. there's some people who argue that basically there's only a few things that you can try. you can centralize or decentralize, you can have greater flexibility or more rigid mandates, emphasize the government or the contractor. there's lots of options we tried and it's not going to get better than this. i don't buy that. i think it is important as we

did in the first hearing to acknowledge that what he we've done so far has not worked out so well. and to try to learn the lessons that that teaches us. but i also think we're not going to make things better by piling on new mandates, new oversight offices, new micromanagement. that's not the direction we need to go. unless the story is that the auto maker can take a car from concept to customer in less than 24 months, if a computer company can change its manufacturing requirements in a day, if boeing can take a commercial airliner and develop and field it in less than five years, surely to goodness, we can do better than we're doing now for the men and women who risk their lives to serve our country around the globe. as with most things, i think the key factor comes down to people. one thing is we're making it

harder and harder for people who know what they're doing to serve in the system. and that's a problem. we also have to hone in on the reasons that good people who are in the system act rationally but their decisions are not good for getting the best value for the taxpayers. so it seems to me incentives in the system are incredibly important. we've got to ask, what does the system encourage someone to do? the simplest example is it encourages you to spend all of the money before the end of the year or you'll get less of it next year. but here's another example. if you have to replace the pipe in your home, do you pick copper or plastic? if you have a system to reward you that will always with reward you for taking the least expensive item at the beginning

of the acquisition, you know what the answer will be. are we looking at the lifetime costs of the decisions that we have to make? isn't that what the taxpayers are going to be on the hook for? let me give you another example that was brought to our attention. the system today would rather play $1 billion for something and allow the contractor to have a 5% profit than pay half as much and allow the contractor to have a 20% profit. how could that be good for the taxpayers or for getting the most value for our money. so things have to change. we may well have before us a unique opportunity to change some of these built-in incentive incentives. a set of circumstances that give us a better chance but also demand from us the responses that we've had in the past 50 years. let me just suggest some of the

reasons that give us this opportunity. the defense base was consolidated 25 years ago. today there's six. secondly, d.o.d. is becoming a less influential buyer in the market generally. but also more and more companies are focusing on other customers other than d.o.d. and the harder and more expensive it is to do business with d.o.d., the more companies will do so. commercial technology is often in the lead on innovation and obviously we have to take advantage of that. fourth, we have better data than we had before, we have more insight than what's happening in the system. that's allowing us to get new opportunities to get down at a deeper level. fifth, other countries are not sitting still. sixth, iraq and afghanistan have proven what acquisition can mean in saving lives and, yet, we had

to set up a separate acquisition system for the things we wanted the most to get around the current system because it couldn't get them there fast enough. and i want to add a last factor. that is i think d.o.d. is in transition. partly because of tighter budgets, partly because of the wind down in afghanistan, the changes happening around the world. things are in flux. so if you put those thingings together, this is the time. not only is it possible. i would suggest it's a necessity that we take advantage of it. so finally, is it worth the effort? well, our goal is to help the pentagon be a smarter buyer of goods and service s services an top quality equipment and services contributing to our security quicker. and the difference of our security that comes from getting more defense for the dollar, and

having a more agile responsive system, is juste nowhere mouse. in his book reviewing the history of warfare since 1500, max booth writes, innovation has been speeding up. that means keeping up with the pace of pain is harder than ever. the risk is rising. today there is no room for error. i have to say that very point was made over and over again this past weekend out at the reagan library at the reagan defense conference. where we heard about the pace of technological change getting faster and faster and the -- and the difficulty in catching up once you get behind. military writer, little heart wrote in 1944 military history is filled with the record of military improvements that have been resisted between the development of new weapons or

tactics and their adoption, there's often been a time lag. sometimes a generation. and that time lag has often decided the fate of nations. now, i'm not going to tell you that i think the fate of our nation is dependent upon the success of this project. but i really do believe that a lot is at stake and that we have to do better and that we have to overcome 50 years of frustration. and that we can only do that with your help with all of us working together towards this common goal. thank you. [ applause ] >> ladies and gentlemen. thank you very much for that conversation there. here's how you're going to proceed for the remainder of our

hour, if you will. we'll engage in a short and brief conversation up here. i have a couple of questions we're going pick up on based on your comments this morning. then we'll open the microphone to questions from the floor. be thinking about a question. you'll raise your hand and have a procedure of using the microphone and identify yourself and move forward. let me have a couple of thoughts about your useful description of why you're doing what you're doing and what we hope to do. there's a lot on -- worth the effort piece, if you will. i think you made a case strongly for why it's important or critical as you say. it's a little harder, though, to talk about the possibilities, not necessarily the possibilities of undertaking the effort, but the possibilities of actually achieving results. how are you going to measure your success here if you will? are you going to measure it based upon what you can contribute even to next year or

to the fy-16 bill? or was there a broader set of perspectives that you want to use as measures of success. >> we have not set a particular time frame, though we're thinking roughly two years. and if we can identify things to do in next year's defense authorization bill, we're going snatch that up. but at the same time, we're going continue the conversations, working groups, etc., with an idea for next year's bill. again, i think it's really important. you don't hear this that often from the people in congress that legislation is not going to solve all of this. so, for example, i had a conversation last week with one of the service chiefs about career progression, for program managers. and so part of it is i think these conversations we're going to have in hoping to influence the what's rewarded, what's not. the culture within the

institutions. now, what's your ultimate measure of success? you know? i hope some of the figures that i recited looked better in five years' time. yeah, i don't know if there's one that will tell us the whether or not he will answer. i think it's okay if we don't solve all of the problems in the world. but we have to do better. >> what you described is a process in which this is not a stove pipe effort by the committee, but really not only within the armed services committee itself but reaching across the aisle and to the senate side as well. that's a bit encouraging because just to take your example of promotions of individuals. we've learned i think the hard way of no matter what the power of the acquisition dynamic is, it's not enough to bring a change to the overall personal management system and the promotion about this. there's a set of rules and regular lags in place there. f fundamentally they don'try ward people for staying in place

for too long. it's a management structure that would have stability and continuity and management looking around to see the results of their own decision. by putting it in a kplee level, perhaps you're able to bridge some of the nonacquisition-related pieces. is that part of your game? >> think about this. if you're in charge as a program manager for a highly complex weapons system, you're on the job for 18 months or two years, by the time you figure out what the job is, you're gone. so to give me another example, in the subcommittee i chair, jim lan drum and i make a habit with nearly every hearing with the services coming to testify before us of talking about -- talking about -- asking him about cybercareers. because it's a little different than the traditional military career. if we're going to get and keep the best people we need for cyber -- for cyberwork, then we have to adjust the career path

accordingly. the same thing needs to happen here. we need to keep and get the best. they need to be rewarded. some suggestions are that you can increase their salary right away. even if they are on the military side, even if their ultimate promotion opportunity are more limited. i don't know, we need to talk with the personnel people about what we can do and what we can work with the services to do to have the kind of quality people. they've got to be trained. but, again, the question is, what does the system reward them for doing? because that will overcome any legislation that we can pass. >> so if you're going to tackle the question of acquisition reform from a broader perspective, beyond just a level of acquisition itself. one thing on incentives, prospects for managers inside the system. the other aspect is what are you doing this for? answering the what question. it's a requirements issue, but also a what's your long-term strategy.

the committee's broader review of strategy and forestructure of answering the question, why do we have this military? >> well, i think some of those questions will inevitably come up. but at the same time, i'm really conscious of not trying to do everything in a single bound. so, for example, a lot of things were talked about reforms in personnel compensation and retirement and health care and so forth. maybe a very good discussion to have. but it is not something beyond what we've talked about with the program manager but with the general reforms, that's not something that we're going to deal with. i think there's lots of very important questions about strategy and particularly the way that the world is changing that will influence certainly requirements and what we buy. but what we're focused on here is -- is the value that we get for the money we spend on whatever it is, goods or

services? >> let me notch that down a little bit. secretary gates when he was postulating some of his deductions in 2009, 2010, what he referred to as the 70% solution or the 80% solution, you can find them using either of those words. the idea is tell us what you can get now a more affordable price and reasonable timeline that meets most of the requirements if you will. is that something you take a look at. >> yeah, that will be part of this ongoing process. again, so at key milestones, a lot depends on the questions we asked in congress. >> right. >> and if we talk about the 70% solution and preventing retirements creep and all of the problems that all in all can make a difference. we can make a difference with

the questions we ask. that will apply across all subcommittees and the full committee. all of the meetings and the hearings we have for the coming year. >> let me hear from the industry piece as well. you mentioned d.o.d. has fewer companies on which they're more dependent now than 25, 50 years ago.

part of that process that's streamlining elsewhere. more i sit on a think tank much more galatarian than that.

let me turn to the audience, we have a wealth of talent and expertise if you will here. going to recognize some of the reporters. this is on the record, as you know. i'll start out with the middle here. joshua, the hand up there, jells sei? yeah, just identify yourself and your affiliation. and the speech in question. >> breaking defense.com. former student of dr. burteau's. >> am i responsible for whatever it is i'm about to say. >> you're also -- >> i'm making notes right now. >> mr. thornberry was back in 19 8, i think. you mentioned the revelations several times, going through them line-by-line. what i didn't hear much was legislation. arguably, a huge amount of the problem was created by the

congress. congress has the personnel system that's hardened by regulationings. up until now are part of the original legislation. the military personnel act. a lot of the oversights managed by congress is a big part of the job, taking large sections of title x, or peeling them in today's language. >> yeah, absolutely. congress contributed to this problem over the years. to a substantial extent. so as we go through the regulations that come from the department, we absolutely go through the statutes and reporting requirements and briefing requirements that congress imposes as well. and we need to thin it all out. absolutely. >> wait a minute for the microphone. >> sorry. >> my name is edward.

i'm acquisition executive in the '80s. we almost finished the 600 ship navy -- the system can be made to run. it can also be -- it has two modes -- effective and disaster. right now you can see the effective mode in the p.a. very successfully run program and you can see the disaster mode in the lcs, the carrier. and the f-35. those decisions were made by people. i'm refreshed at your comments this morning. you're on the right track. i've been part of the acquisition system for 30 years, a student for 20. and in the last few years, i've had the opportunity to study -- to study it in detail. your recommendations are very close to the ones that i worked at and currently with the mccain institute, my job there is acquisition. so where do i sign up.

>> a note has already been made. and -- and i'm sure -- i'm serious. i'm not just saying things when i say we're going to need y'all's help. whether it's experience in the past working in the system, whether it's experience in industry, whatever it is. this cannot be a congress comes up with the answer sort of thing. it's too complex a problem. and, again, what we've got to do is not come up with an answer that you try to impose on the system. you've got to understand what it's like down in the system for program managers and the decisions that they make and see what those incentives and the -- the rewards and punishments are. and then we can start to get at some of the root causes that are ultimately going to prevail. and so we need all of the help we can for that. so i appreciate it. thank you. >> let me mention -- piggyback on it a little bit. then to auto's question.

the question of course often gets written into the way contracts are done, right? you build incentives to contracts. unfortunately one good solution comes well everybody has to do it that way. you have to watch out it seems to me for successful incentives becoming a requirement process guarantee. if you'd like to e-mail your questions, you can e-mail skostro at csi.org. can you bring the microphone to the guy in the third row there? >> i had a question with several others. 20 something years of covering you folks have seen congress does to make it work, one of them is 10, 15 years ago, you did the attack on the pentagon shoppers and got a 25% cut in d.o.d. acquisition. that turned a lot of it in to

the acquisition process r&d, the design over to the contractors. didn't work out particularly well. as far as expediting procurement, any time someone decided to speed up the process, congress said we're going too fast. we need to regulate and slow the whole thing down. you mentioned part of your problem we discovered the intermediary, it's us. so how do you -- how do you get the contradictory things of if you turn it loose, industry loose, they end up in some way confiscating the process. and how does congress get out of the way and another bugaboo, gao, you can't do anything unless it's technology level six. which means it's obsolete before it ever gets into the fleet.

the first is you're right. we contribute to the problem. how do we contribute to the problem. the first part of finding a solution is understanding. secondly, this is a good point. walmart tolerates a certain percentage of what do they call it? shrinkage. because if they absolutely prevented shoplifting from every one of the stores, they frisk you coming and going. it's in the cost. we have to accept some amount of risk that somebody will do something they shouldn't do. but at the same time, we have to have the transparency and the accountability that goes with that in order to find it. so not micromanagement, but the accountability for the decisions that were made.

i can't recall the lady's name who worked in the army. she said she was astounded at how little decision making power that the program managers in the services actually have. versus outside. we have to empower them. understand there's risk that somebody will have to make a decision. give them more power. hold them accountable. that means leaving them there longer. that -- at least an approach in a we need to move toward is exactly the problem that you describe. >> you mentioned the hearing that the committee held three weeks ago looking back 25 years back to the report of the packard commission and the creation of the undersecretary of defense for acquisition, there are those who would argue those 25 years of commission reforms have failed and therefore they should be junked if you will. ohs would say they've never

really been tried. the basic idea of finding the right person, getting them charge, pooling the requirements and the resources they needed to do to do the job and setting out the goals and holding them accountable. is that something you can legislate or reward that more by as you pointed out, finding the examples of success and making them visible. congress has a role to play in terms of highlighting and illuminating success as well as failure. >> it takes both. there's an eisenhower quote that something like the right system doesn't guarantee success. but the wrong system guarantees failure. i kind of think that applies here. so if we have all of the barnacles of legislation building up over time, good people are hamstrung, they can't do it. if you get the barnacles , does that mean that you have the

right decisions, but you try to make it result in the best value of the taxpayers that's our chance. you may not get a perfect system, of course. but you can have a bert one than we have now. >> 30 years since senator nun and congressman mccurdy signed their name to the acquisition process, the basic idea is if there's too much cost in the system, you have to cancel it or the secretary of defense is going to have to baseline it and say we'll not go over the cost. they looked at program kills. i refer to it as disasters in terms of cost schedule and performance will be cancelled. no many have been cancelled in that regard. is this part of the problem with congress as well? how do you change the intended structure in congress for at least tolerating or signing up to cancellation or termination

of programs that need to be determined. >> didn't underestimate the problem. i agreed what we end to do is stretch things out, rather than making the decisions. a lot of that responsibility does rest with us. i'll push back on anybody to suggest that congress' job is to automayically go along with whatever occasions the pentagon proposes and there have been lots of examples that it doesn'twork out. we look back to the questions we asked, key milestones along the program's path. we need to do a better job of watch i watching for cost growth and understand why it's happening.

>> you have your own member of congress. the third row. raise your hand, sir. >> the consultant with the darfur program. this whole acquisition process is a very expensive proposition for the services. particularly for the uniformed officer corps. for example, a few years ago, the army had 6,000 officers tied up in the acquisition core. why not contract the whole thing out? >> i think you're spending taxpayer dollars. there his to be some federal oversight on how the money is spent. do we need to have the number of federal people that we have? i'm not sure.

as the rickover quote kind of indicates, what i hear when i go to places is how many people the contractors have to put on the payroll to meet the needs of all of the checkers and the oversight people and it gets to be this escalating overhead system that weighs down the system. we need your help on this. fewer people, more power to make decisions and a system that can hold them accountable for the decisions they make is a better model to move forward rather than outsourcing out the -- you know, the whole thing. >> let me add if i could, the observations on the value of career military officers as acquisition and procurement personnel. two big plus ifs you will. we need to be careful to

preserve the advantages in some other way if they weren't done that way. one is you want a bridge between the operators and the acquisition community. the operators being the military union form, they didn't use the equipment and the services at the back end. at least the practice has been that active duty officers will have the operational focus bert than anything you can write in a contract. you have to write in flexibles. it's difficult to put in place. the second is you need to have someone in the room while they're making decisions. and they're typically not going to be in the room when you do that. you have an active duty military. they need, however, not to be treated as second class sipts. if they are, they won't be part of the process. another question right next to you there. >> robby harris. former naval person.

you mentioned empowering program managers, by helping program managers to become wet better at what they do. i would encourage you not to look just at the program managers, but look at equally hard the requirement folks of the pentagon. it's a very fair point. that's one of the reasons in the process we're trying not to look too narrowly for the regulations for the small a acquisition. we're looking atry tirmts and budgeting and how that whole system comes together to operate. so i appreciate the point. >> so a couple of questions from the web that i'll read you if you will, although in these cases i'm not clear to identify who asked them. how is it that contractor profit could be used to motivate the

good performance of the acquisition system. you mentioned the billion cost versus half of the profit, 20% versus 5 of the profits. extend that thought. can we use profit as a motivation? is that academically acceptable? >> i think we can put in the incentives to make a profit. and not ideas on how it goes. the increase the overhead. you get that money back. so i was interested in frank kendall's comments a few days ago when they look it a the contracts and that there didn't seem to be the kind of

difference that one would expect. i think all of that are avenues that we need to understand better. the most agile responsive system to the changing world environment. i have no doubt that the contractors will adjust to whatever system we set up, however many contractors are left. what we need to have is the system that encourages them to get the best value. and if that means they make a bigger profit than somebody wants them to make, that's the way it workings. >> there's a wall street side to this as well. the financial community, in the -- in the days past, the defense companies were often a little bit different than you

will than the rest of the publicly traded firms. increasingly, though, the financial market looks at the defense department the same as you don't get bonus points for patriotism and the need for serving the military. you need to meet the same in terms of return on investment and benefits to capitol. how do you take that into account. because in many cases, that's a short term focus. very narrow focus if you will. a lot of value in that. we don't have the need from the nation from a military point of view from that process. >> it's a fair point. although i'm struck by the number of people who point out that we don't really punish contractors who don't do a good job. as far as future contracts go. and so one of the things that we ought to at least ask about is if you do a good jorks how does that enhance the possibility to

do more jobs. if you don't do a good job, what effect does that have for your ability to have future contracts. that gets a little more back on whether the company is going to be successful or not. rather than companies that played the game. one example is intentionally underbid the acquisition cost knowing you're going to end one the maintenance cost and that will be even bigger over the next few years than the acquisition. but you intentionally do that. those are some of the things that we need to understand better. >> you and i in our own lives reward contractors that we hired. we did a good job by giving more work and not reward those who did bad job. we're not responsible when we, for instance, buy services from a plumber and go service kitchen appliances. we're not responsible for maintaining the network of plumbers that are going to be around nor the appliance providers. so it's a bigger tradeoff. >> and, again, we're not going

to solve all of the problems of the world. but the whole industrial base issue here at home is something that i think we need to be thinking about. again, it was talked about several times this weekend at the reagan defense conference might not we want to have some federal -- some d.o.d. programs designed with a purpose of maintaining and industrial base. as that base shrinks. that is something we have to look at. >> you mentioned data in the prepared remarks today about the performance of the system recently, 13%, increasing costs and so on. 5 1/2 years ago, 4 1/2 years ago, a remarkable piece of legislation, a whole new set of requirements for d.o.d. to do a better job and identifying a job of budgeting. a office of program assessment

and analysis. a look at some of these things. has it taken this long for those kinds of reforms to take root? or maybe the numbers you cited showed you didn't go far enough? what happened? >> interesting question. we got differences of opinion about that. some people say it is making a positive difference. other people say iing best laid hope not making that big of a difference. the hard part is proving what it would have been like without that. but, even if it is making a positive difference and even if we have not fully realized the full extent of that positive difference, things are getting worse. so it's not enough. to me, that's the bottom line. >> one thing that i think you can be certain of is that the problems that you've been asked to work on here, that you volunteered this morning and laid out your plan, are not going to fix themselves. they're going be around for a while. if you're going to get the opportunity to work on the whole two years of your effort, if you will.

thank you very much for coming here this morning, sharing the thoughts with us. entertaining the thoughts and comments. we'll do everything we can to make you successful going forward. >> thank you very much. >> appreciate it. >>. [ applause ] >> the debate this week is on the program bill. harry reid said he wanted that bill done by thanksgiving. how likely is that? >> with ear hearing from senate

aides they don't think it will finish the bill. a sweeping pentagon policy bill. more than $600 billion in defense spending. it has a number of controversial proposals this year that fear might make it unlikely that we'll get it done before thanksgiving. >> what are the proposal s? >> the first one might be over iran sanctions. the u.s. sitting down with iran to try to reach an agreement on the nukes lar plan, the senate wants to push new and tougher sanctions on iran that the obama 5d minute straights is warning could derail the whole talk. so they plan to push it on this bill. but on friday, leadership aides were suggesting there wasn't going to be time to finish the defense bill and have a vote on those sanctions. now the senator who held up all last week over his obama care amendment said reed was trying to turn him into a scapegoat

saying there wouldn't be enough time. >> another issue is sexual assault in the military. that's likely to come up as a part of the bill. who's leading the effort on that. how is it expected to be happenedled in the debate? >> very vocal issue this year. democrats on both sides of this leading this charge. pushing the proposal to prosecute casish outside of the chain of the command. the measure has the support of 47 senators including republicans like ted cruz and rand paul and most women in the senate. if it's opposed as leaders of the armed services committee, senator karl rechb and jack reed. it's one of the debates that is not following along party lines. >> what are some of the other issues likely to come up. >> one thing that we're going to sigh in our detainees, a chairman and safe with karl rechb.

the time frame continues out of guantanamo. the republicans waited in the committee to debate those but they're going to try to talk to him on the floor. we're probably going so see a will fight over the nsa spying programs. an amendment was crushed through that bill, but to strip the nsa of the bulk collection programs. we don't know for sure if that's going to come up, but it's likely we'll see some sort of nsa amendment. >> what ant the minimum wage. how will it come up why these germane bills ended up being a social security bill. they urged the colleagues to keep the ball. if they didn't get finish this week, the senate doesn't come back for the who-week recess until december 9. the house supposed to be adjourning for the year on december 13 which gives it no

time to complete the bill at the house and took a finish. >> thank you. >> thank you. >> that's ford relation stat toe. the pitching earlier, the typing -- at 10:30 eastern on c-span 3.