but sometimes even rivals realize they share a common goal. america's beverage companies have removed full-calorie soft drinks from schools, reducing beverage calories by 88%. together with schools, we're helping kids make more balanced choices every day. ♪ we're helping kids make more balanced choices every day. i stand before you today... to apologize.

the system has failed you. i have failed you. i have failed to help you share your talent with the world when the world needs talent more than ever. yet, it's being wasted every day... by an educational system steeped in tradition and old ideas. well, it's time for a new tradition. it's time to realize talent isn't just in schools like this one, it's everywhere. it's time to use technology to rewrite the rules of education, to learn how you learn so we can teach you better. it's time the university adapted to you, rather than you adapting to it. it's time--time--time for a different--different kind of university. it's your time. next on this week in defense news, the ceo of eads north

america talks about the tanker bid. and the industrial policy chief. now this week in defense news with vago muradian. >> good morning, welcome to this week in defense news. what is the future of the u.s. defense industrial base? we will get inside view from the policy chief. first, after criticizing the u.s. air force's $35 billion tanker contract, eads decided it will compete on its own to replace aging refueling planes. we have sean o'keefe, he's former pentagon comp troller and nasa administrator. we're honored to have you. >> nice to be here. >> your company accused the pentagon of tilting this

competition in favor of boeing. you lost your north american partners integral to your win, and northrup grumman is that not bidding with you this time around. what happened? >> this was not a criticism of the department. they changed the parameters of what they were asking for. the last time around they asked for air refueling modernization effort. give me the best capabilities you got, give me all the aspects of not only accomplishing the refueling missions but capabilities above and beyond that. and the best value and the best capability is going to win. this time having didn't disqualified by the general accountability office and the secretary of defense having cancelled that sis tation two years ago, they're asking for the replacement of kc135 that is a less smaller, less capable asset that is in the air force inventory right now. as a consequence this has gone

from modernization tool to straight-out replacement. that then trends down the level of performance required, dumbs it down to the lowest denominator as a minimum requirement of what is necessary and that is what we're competing for at this point. >> there are those who say it is more capable and carry more cargo, it costs more to operate. how do you feel you still have a good shot at winning if your product is more expensive? >> if you look at the commercial performance, this is an a330 aircraft, whatever it is the other guys and competitors will offer, we'll see, i don't know. but in the end what we're looking at, we know what the performance characteristics are. we know what the fuel burn is. we know what the maintenance and logistics costs are. it is a newer aircraft and as a consequence the capabilities necessary to perform the mission we need everyone of the 372 rigid requirements the air force has laid out. and as a consequence i think we

can concentrate now on this particular proposal on keeping the cost to operate, maintain the aircraft at its most efficient levels. >> you do need a partner, while your boss over in europe, has said you guys need an american partner in order to handle the classified bits of the program. where are you in the process of getting an money partner or partners on in order to fill the role of northrup grumman. >> the first issue is that the defense department has come to a determination, conclusion, the eads north america is a u.s. company chartered in the state of new york. we're a prime contractor on several other defense contracts, and, therefore, a trusted agent, able to handle all classified information that would be necessary under this contract. national security agency has a national interest determination which makes it, you know, possible for us to access and

have been released now, all of the elements of the classified elements of the rfp. all of those issues are not applicable as it pertains to access of the information. that is a fairly straightforward proposition in development that the defense department having deliberated on the question that we've asked came with that conclusion and saying this is all the reasons why it is not a challenge given the fact we are a special arrangement security company thal follows through on all of the requirements of that and review and audit of close classified handling, we've passed that with flying colors. the second issue is having the capacity, among all our suppliers, to have the capability to competently produce the best version of the a330 aircraft modified to an aerial refuel tanker capability. in doing so, we ought to really recruit the folks who have the demonstrated proficiency.

we have been able to do this. we have a flying airplane today that we're producing and it is in test and trials right now for the trail yens. the uk, saudis and the arab emmir rates are three contracts that follow hereafter for a number of number of aircraft, couple of dozen aircraft, that in turn will meet all of the requirements necessary for them and most, if not all, of the requirements under the terms of the air force rfp. as a result we know how to do this. but there are others that know other suppliers and industry partners who may be able to do this because it is their primary core competency. we want to maximize that, increase efficiency and make sure our performance is the best we can offer. >> let me take to you a criticism, norm dix made this criticism, as well. why should the united states allow a european company, airbus, to come in to the u.s. market, established a manufacturing base here, to with

pentagon money to better compete against boeing on the commercial aircraft market where boeing is the leading u.s. exporter. what is the answer you give to folks like that about why it is that the united states would want to do something that, you know, could be in its industrial net disinterest over time? >> i don't know if that is what they're doing. what they're proposed is an -- and asked for -- is a proposal that would provide an aerial refueling tanker aircraft. what we intend to do is provide an aircraft like the commercial programs we produce every single day in which we build upwards of 500 airplanes a year and deliver them to all of the different commercial airlines around the country and around the world, as does our competitor, and more than half of the product is u.s. origin and will be in this particular case, as well, and, as a matter of fact, interestingly, it is about the same content as what our competitor does. we're going to produce or

sustain the better part of 48,000 u.s. jobs. wee will build and assemble the aircraft right here in the united states in mobile, alabama. so that is -- >> so that plan is still -- >> absolutely firm. we're moving down that road. in addition to that we'll build and augment that with a lot of the commercial cargo freighter aircraft, that we will use for commercial purposes. so this is going to be an up and going concern. this is only the second capability in the united states. it accrues advantage to the u.s. aerospace industry, to have this american capability right here in the united states, that generates those thousands of jobs. that sounds like a positive benefit all the way around for a company that will be the prime contractor that is a u.s. company chartered in the state of new york. what is wrong with the picture? we're using a design and a capability that is based on the airbus a330 aircraft. we will build it right here.

it will have identical, if not larger content than what our competitors do from the u.s. origin. >> sean, thank you very much. obviously this competition will be ongoing. a look at the pentagon's latest thinking on industrial policy. stay tuned. you're watching this week in defense news.

historically the pentagon has taken a hands off approach to industrial policy largely shaping supplier base through purchasing decisions. today with defense spending at an all time high the industry is dominated by a handful of giants. and when a single program is cut, it can have far-reaching effects. by canceling programs like the f-22 fighter and a future fighter, as well as a key satellite program, it jeopardizes stealth and engineering skills. officials are trying to make sure they don't make that mistake again. they're promising a stronger policy off office that can better identify the program decisions. we have brett lambert, pentagon's director of industrial policy. he will talk about the future of the defense industry and

ensuring fair competitions and how to improve access to technologies. welcome to the show. >> thank you. >> you allowed the eads -- rather, the eads is back in the tanker competition. you don't have the danger of having to negotiate a contract with boeing. what are some of the things you had to tell eads to get them back into the race as well as answering the lingering accusation that this entire competition is tilted toward boeing. >> of course it is in program selection so i can't give you specifics. we didn't have to do anything. the approach, the building and dr. carter, in particular, and the secretary have taken, allowed any credible competitor to compete for the programs. so of the 372 requirements that we laid out, we didn't change a single one of them. i don't think it was so much the department changing their course as it was just realizing that the competition tends to work

and that particular company decided to compete. >> and giving the assurance effectively this is a straight down the middle honest competition. >> absolutely. i don't recall a more transparent major competition than this one. we didn't change anything. in terms of the requirements for the system, we haven't changed anything. >> europe has accused in the wake of the last tanker decision where a french plane won and it was overturned. the anglo italian helicopter competition. the reduction in c27j transports which are italian-made. there was an accusation in europe that the united states and this administration has gone protectionist. how do you respond to that? >> they're isolated examples of programs. whether they're european heritage or u.s. heritage, we terminated a lot of programs, and we're -- >> 50 major programs.

>> $330 billion in terminations that were done in '10. i would turn it back to the arguments is that one of my pillars for industrial policy is that we live in a global environment. we need to embrace that and use it to our advantage. i think these terminations, the fact they affected europeans as well as the u.s. counterpart companies, is a sign that we are truly in a global environment. the decisions will affect companies globally not just domestically. >> even though in your -- and you're trying to preserve a balance while being open to international ideas, particularly ideas the pentagon should be exposed to. is there a legitimate role for protectionism, and what is it as you preserve key sets and other sorts of things? >> in my office there will always be things that the united states military, defense department needs to procure and

protect domestically. we probably are not going to have a lot of commercial nuclear submarines out there, fighter aircraft. and on the other extreme we have simply commercial product s off the shelf products, where we have to focus in the gray area, we have to leverage commercial but protect the war fighter and taxpayer over the long term. that is the major focus of my office. >> during the clinton administration there was this -- it was dubbed black supper, which was merge or die. now we have a new administration that come at a time when defense industries are flush with money. there is the expectation there will be a lot of merger and acquisition activity coming down the road. you regularly meet with the chief executives of the industry. what message are you tell graphing in the mergers and acquisitions you want to see in this industry? >> step back from dictating that kind of message. we're trying, for a long time, and it's not a necessarily

political issue, but it is in a permissive budget environment you don't think about industrial policy. we no longer have a permissive budget. we need more insight what industry is planning and oversight. that starts with transparency. we have to open the dialog up. and we have been doing that from the secretary of defense, to deputy secretary lind and dr. carter and they have been open to industry and that dialog is open, it is robust. we meet regularly, as you said, three or four times a week with industry leaders. and we use that has a basis to move forward to structure an industrial base plan. >> you're not structuring any m & a. you're not encouraging or discowering -- >> i try to del this to industries. we need more insight before we dictate oversight. >> idea of industrial skills and

some of the challenges we face. there are fewer program starts than ever. more programs are multi-purpose and supposed to stay around a lot longer than they ever were. that is creating serious skillset preservation issues. once you make a joint strike fighter, do you have to completely change the way we do acquisition, saying, this will be less multi-purpose and shoot for 80% solution but have another competition in 10 years? >> i think you have to understand that we -- the new world, and i think it was arctic anticipated by the secretary of the budget and will be in the subsequent budgets, is that we have to realize where we are. we are fighting two wars. the number one priority is war fighting and we need to get the technologies and capabilities there. that requires some changes in acquisition approach. it requires some changes in our contracting approach. now, over the longer term we're still focussed keeping our eye

on the ball on the peer threats or potential peer threats, but there will be adjustment. it goes back to transparency. industry, i have found over the 20 years i've been doing this, will respond if they are given clear, transparent guidelines or directions. in the past we haven't been as good as we could have been. >> we'll be right back in a few moments, brett lambert, the pentagon's policy chief.

i'm back with brett lambert, director of the pentagon's industrial policy office. let us talk about skillsets. your office is in charge of taking a look at secretary carter last year said some

program cancellations caused problems in stealth. are you some day going to have to subsidize key capabilities that you need for the future. >> on some programs where there were terminations we recognize that skill, design teams, manufacturing design teams, are a national asset that we need to maintain. we're actively looking at that. we made decisions that will be announced in the next budget to preserve those design teams, to preserve options in the out years. it is important to step back and when we talk about skilled jobs in the defense industry, not all skills come with college degrees or graduate degrees, and i refer to this as we have skills of -- from laborers who take showers when they go home, like a welder in the shipyard is just as important in the skill base as well as ph.d. and design team. we're looking across the spectrum in the skills we need. >> in terms of preserving some

of the skillsets, defense industry is held up at paragon on spirit. sue peer i don't remember rit tee. >> the one factor throughout manufacturing history is that every line comes to an end. for every line we don't end, it is money we can't invest in a new line. when i look at competitiveness overall i understand our investments need to go to those programs that can keep our technological edge. i think that is the decision that the secretary has made clear. in essence, we have a cap in trade program. for every dollar we spend that we don't need, is a dollar that can he weren't spend on what we do need and investment we don't spend to make us competitive in the future. >> let us talk about breaking down barriers. every administration tried to get more commercial technologies into the hands of the pentagon

and high barriers of entry. pentagon can be a very, very tough customer. and military contractors like that they don't have to compete with the commercial contractors. how can you break this down to get innovative ideas even if it means put older legacy businesses out of business. >> there is valley of death in the commercial companies. we have the summit of death in the defense department. you spend so much time trying to get a contract, and once you're there it is hard to go back and refresh technology, in many cases. so that is an area we're working very, very hard on. it is going to take some time for us to get that right. but you're absolutely correct in that we need to reach out to the commercial sector to better understand what they're cape bill of doing and how we can incorporate into that gray area of systems i mentioned earlier where we can utilize commercial markets. >> including taking good commercial ideas and get them to

partner with military contractor. >> absolutely. some of that can be mentoring protege, which i'm a big fan of and our small business office is a fan of. reaching out to the defense contractors and solve some of the contractual issues you mentioned before. >> let us talk about organizational conflicts of interests. do advisory services. this week you issued new guidelines, draft guidelines. what do you think the solution is going to be to the problem? >> well, not specific until my shop, i have been working closely because industry has obviously has a lot of inputs. we did release the draft. we had a meeting with industry on december 8, where they were allowed to if us inputs. some were inflected in the draft. you know, at the end of the day this is common sense. we would -- we would look to mitigation whenever possible. the fact is that we have encouraged consolidation and we

need to understand that the playing field we're on now. but i think that this next 60-day period where there is review by industry, we should get a lot more positive and constructive inputs and i'm hoping to get it out some time this summer. >> we have 25 seconds left. quickly, you've got a huge job. you're looking everything from materials to skillset studies, but you're only 12 people in your office. are you going to get the resources you need to deliver on all of your responsibilities? >> i can't say enough about from the secretary -- secretary lind, dr. carter, they rallied around this idea we need to think about this base and take a strategic view. we've been working hard on that. but we need to get better and we need to get bigger. >> coming up is "my notebook." .

the pentagon spends tense of billions of dollars on intelligence to understand future threats so we can counter them. it failed to study industrial issues as comprehensively as it should. given the american defense strategy needs technology, an inadequate approach cons sfupts unacceptable risk. whether it is manufacturing skills, the pentagon needs to understand broad trends to preserve key capabilities and sources of supply. that will take better internal coordination, more people and money. when you spend hundreds of billions of dollars on research, development, acquisition and

lodge jis sdiks, you should be able to find 10 or $15 million annually to make better decisions. if dod can't find the money, congress should. give it the clout it needs within the pentagon and industry and government. the dod shaped its industry through procurement decisions. they should think through those procurement decisions before it makes those. you can watch this at defensenewstv.com. have a great week.