[In this Special DoD News Briefing on the Technology Reinvestment Project (TRP), Dr. Paul Kaminsky, Under Secretary of Defense for Acquisition and Technology, is joined by Ken Flamm, Special Assistant for Dual-Use Technology and Lee Buchanan from the Advanced Research Projects Agency.]
Dr. Kaminski: Thank you all.
I have with me today Ken Flamm, who is my Special Assistant for Dual-Use Technology. We will also be joined, in a few minutes, by Lee Buchanan, from ARPA, who has responsibility for the TRP program.
As you may know, today, the House Appropriations Committee has voted to rescind about $500 million from our TRP program in '95. That is something that will hurt the DoD. And, what I wanted to do for you, today, is to take the time to give you my personal appraisal of the TRP program and how it fits within the underlying strategy in the Department.
I've been in my job now, as the Under Secretary for Acquisition and Technology, about four months, so the TRP wasn't really invented on my watch, but I would say, today -- if I were looking for something to fit into the underlying strategy I've laid out in my position -- that TRP would be one of those elements. Here, I mean the TRP as it's going forward in our '96 program.
Let me say just a little bit about the context of this strategy and what we're working to do. If I take a step back and look broadly at what's impacting the Department, we are in the throes of what I would call a dual transition. You hear a lot of discussion about what I would call the "needs piece" of our transition -- the fact that the mean value of the threat that the United States is facing is down considerably. The size of the model of the threat that we have been dealing with in the past has been reduced considerably in the former Soviet Union.
As a result of that, we've taken our forces down by about a third. But we are finding ourselves in a situation where, despite the reduction in the mean value of the threat, the variance is up considerably. So we're actually finding our deployments are up about a third over where they have been in the past.
This overall environment is causing us to place an appropriate premium on readiness, and what we have been doing, as our forces have been coming down, is using our investment accounts as the bill payers. Our procurement accounts, as you know, are down by about two-thirds.
As we move through this transient phase, and we reach a steady state, our investment accounts will go up some in the future. But driven by these external changes, we're trying to do a great deal more with less in all accounts. In the face of this I see the second transition that I wanted to talk with you more about today and I would describe that as the "sources transition" -- what and how we buy things. Our investment accounts for the Department.
I think the changes here are as significant as the changes in the needs piece of the environment. The motivation is a simple one of trying to do more with less. It means that we still will be looking to field superior technology in our major systems, but the issue is how to go about that, better leveraging our industrial base.
We have no choice but to be moving from a separate defense and commercial industrial bases to a more integrated, national industrial base.
Let me share with you a chart. The first chart looks at the overall investment and employee base in the Department of Defense. The top curve on this chart shows the investment accounts. Those are in constant dollars, constant '95 dollars, and you use the scale on the left to read the amount. So, for example, at its recent peak in 1987, that account reached just a little over $160 billion. That's the sum of our procurement in RDT&E funding.
We've come down a steep curve in that account, reaching a steady state condition in about '96 or '97 that brings that investment down to about $85 billion of 1995 dollars.
Just below that top curve, in the dark squares, is the employment in our defense industry. You can see it attracts the investment pretty well. That's gone from a peak of about 3.7 million people -- and incidentally, this counts the whole flow-through down into the supporting tiers into our system -- come from about 3.7 million down through '94 of about 2.3. So that's about 1.4 million people who have gone out of this industrial base.
As you can see, I don't have figures to extend the employment, but you can sort of do that with your eye, seeing that this base still has to go down by about another 400,000 people before it reaches steady state.
That's an enormous change in the underlying industrial base, in an environment in which our commercial industry is still growing. So, one of the things that the Department has to do -- and let me draw your attention now to the next chart -- is to deal with the realities of what's happening in our production and in our R&D bases. This chart shows R&D investment expenditures, DoD in the solid curve and industrial in the triangular curves. Those two curves crossed in about '65 and you can see now that it's about a two-to-one difference as we move into the '90s.
A good piece of my strategy is to try to leverage what's happening in the commercial industrial base. The first piece is to leverage the technology development, and that's a central theme of our whole dual-use technology program. The second piece has to do with leveraging commercial production. The reason that we're interested in leveraging commercial technology is a simple selfish reason. it's taking advantage of what's happening in the commercial world.
In so many of the areas that drive the leading edge of DoD technology, DoD is no longer in the lead in pushing forward that investment base. It's commercial industry that's leading in information systems, telecommunications, micro-electronics. So the issue is leveraging off this investment base in a technology sense.
The second component, and here's where the TRP also plays a role, is in leveraging off the commercial production base. I am putting a great deal of interest in our commercial programs in trying to take advantage of commercial production. I don't think we will be doing that widely in the full system that's produced. It will be more the exception than the rule, buying a full defense system off of a commercial line, but I think there is great potential for doing that at subsystems and at critical component levels.
Let me go through the third chart to give you an illustration. It's a complicated chart, so let me try to explain it carefully.
This chart has to do with a packaging technique. It's called multi-chip modules, in which one takes bare dye, and rather than packaging each little semiconductor dye in its own package, to place those bare dye on a substrate and integrate this into one, sort of large super chip.
DoD has been the leader in advancing the early piece of this technology, and what I show on this curve, the yellow line shows the total market value. In the early '90s it's zip, a very small market. Our projections are that this will grow to a market of several hundred millions of dollars by the turn of the century.
In the '90s, shown in red is the DoD. We were the principal, in fact the only user in 1990 and 1991. In 1992, you start to see some use being made in telecommunications and the computer industry. As we move off to the turn of the century, as the market goes up to $700 million, the DoD percentage of that market goes to about ten percent or so.
What we are trying to achieve in this kind of arrangement and, in fact, in investing in the MCM market and, in fact, in trying to establish and leverage a commercial base, is to be able to buy off these commercial lines and to see substantial reductions in the prices at which we buy, by buying off these commercial lines.
I have no interest whatsoever in seeing a commercial capability developed from my defense viewpoint if I'm not planning to buy off that commercial line, and in the net trip reduce the cost to the Department of Defense by buying off that commercial line.
I have two interests in doing this kind of work. One is when we acquire the system to begin with. But in this changed environment that we're operating in, my projection is that we're going to be keeping our equipment longer. Therefore, the support costs for that equipment become more important in the overall equation, and I want to be able to support our systems using the components and subsystems, again, purchased off of commercial lines to the maximum extent that I can.
That is one of my principal motivations for our acquisition reform activity, is to be able to have access to commercial products from industries who wouldn't normally be interested in dealing with the Department of Defense.
As you look to see where this all heads, we have some work ahead of us to change the whole culture of our operation in the Department an din the industry. People in the Department would have rather used their own funds to develop the capabilities we need, rather than do the harder effort, attracting what's going on in commercial industry and try to leverage it to our use.
TRP is a model program that's trying to do just that.
As I look through this for a specific example, as we were doing things in our past DoD way, we were looking at buying receivers for our global positioning system that weighed 17 pounds and cost about $35,000. As we loosened some things up and went to a commercial line, we ended up buying receivers that weighed three pounds and cost $1,500. Using these advanced packaging techniques and monolithic microwave integrated circuits, we end up having the opportunity to buy things like that, that comes off a [mayo] Motorola line using commercial production techniques. That chip is a six channel, GPS receiver. All it needs is an antenna and a display. That's produced for about $600.
So, as I said, my objective is a selfish objective here in terms of getting more for less. If this TRP program were not in place today it would be something that I would be starting to foster -- this dual-use approach to both development and production for the Department. As I said, I have only one interest in this program and it's a selfish one, of being able to invest dollars in developing capabilities which in the round trip will save money for the Department.
I would say that, as I look back at the history of the TRP -- in terms of this criteria, a direct benefit to the Department of Defense -- there were programs -- components in the program -- that provided less of that advantage in the early phases of the TRP than they are providing as the TRP goes on. The two changes that I can see, as we move through the implementation of this program, are in tightening up that relevance criteria and in making the award system more productive. As we learned how to do this program the first time out, we solicited too many bids. There was too much wasted effort in preparation of proposals for the number of awards we could make, so we had to begin to calibrate that system to have the supply and demand more in balance. As you look at the trends again, I think you will find -- each year, as we've gone through the program -- those trends have become more favorable, and more balanced, so that we're using it more constructively, as opposed to unnecessarily energizing people.
That's all I wanted to say in the opening statement. We'd be happy to take questions about the TRP.
As I said in the opening statement, we find the loss of this program and the recision conducted by the House, to be one that will be very detrimental to my interests in making better use of dual-use technology for the Department of Defense, and it's something I -- and I believe the Department -- will oppose.
One other element to announce. We are releasing this paper on dual-use technology. This was developed in close coordination with the White House. As you may know, the President's Science Adviser, yesterday, Jack Gibbons, announced an overall dual-use program. DoD was represented in that meeting. This report is our component of the overall...
Let me also introduce Lee Buchanan, who has now joined us.
I'll be happy to take some questions.
Q: You're saying this is very detrimental, and, presumably without TRP -- if it's eliminated by the Senate and the whole Congress -- weapons of the future are going to be so expensive... That was always the argument, that the weapons of the future will be so expensive we can't afford... What really happens if TRP disappears from this year? We won't be able to buy weapons five years from now?
A: We'll be able to buy fewer weapons five years from now, or weapons of less superior quality. There's not a predictable impact today based on that recision. This is a longer term issue.
The behavior changes I was talking about, they're really two-fold. In fact, if you look at, especially, the earlier TRP awards, you'd find in many situations a defense company and a non-defense company teaming up. The reasons for that were often that the commercial company just didn't want to work with the Department of Defense. Too many complicated things to do, so they sought a company who was experienced with the Department to provide that buffer, and then to bring some of their commercial technology to bear to benefit. That's one of the other things we're trying to change in this process, is to make it easier for commercial companies to deal with the DoD. TRP I think was a step...
Q: ...about TRP, though?
A: They both will. Acquisition reform by itself is changing many of the regulations and the procedures. Long-term, though, we have a behavior modification issue to address, both in the Department of Defense and in the industry. TRP is another arrow in the quiver. The whole set of acquisition reform initiatives are, as well, but TRP is a help in my opinion. It's a help to begin to change these cultures that developed with a separate commercial industry and a separate defense industry.
Q: How do you (inaudible) programs that aren't technology or production? Things like education programs. How do those...
A: The way I think of our manufacturing education and related programs, you will find more of those in the early programs than you will in the later. Those programs, I think, in the long run are beneficial to the Department of Defense, but in the very long run. There isn't a cycle time that I can give you that's predictable in terms of a commercial supply. It's educating people. Probably my issue here is in who's budget those activities best belong. Probably, in the longer run, I would say they more belong in Department of Commerce than Department of Defense budget.
Q: Is the loss of TRP a threat to long-term national security?
A: The loss of TRP by itself, I would say, is not a major threat to national security, but it's a component. It removes one of the tools we have to be able to buy more and better equipment for less.
Q: What would be some specific categories of things you think are not relevant? You talk about tightening [belts] on the criteria.
A: I think in our '96 program everything would pass the test that I described. I'd say, if you looked at the first program that we instituted, some of the things associated with education and training would be on the fringes of that test -- a few percent of the program. But I think you would see a trend in the direction that I just described.
Q: Was that a mistake, then, putting that education (inaudible) in there, or you're just not focused at the time...
A: I guess I wouldn't describe it, sharply, as "a mistake." I would say it's an issue of where the responsibility lies in the country for that kind of activity. We certainly need to educate and train our people. We do that under Department of Defense every day, we spend money to educate and train our people.
The broadening of our overall industrial base, I'd say, is probably more a responsibility of Commerce than of DoD.
Q: What do you do to save it now? It's up on the Hill and one House is about to kill it for '95, and I assume that in '96 they're going to laugh at the request. What are your prospects for making sure the Senate funds it?
A: Let me respond in a couple of ways. In some sense, this TRP and the initiatives in it are regarded in a more narrow, partisan sense. As I've gone back and looked at some research that goes behind the program, what I find is several components of the program, to include some of the education and training initiatives, have a broad background of bipartisan support. I've found evidence of recommendations for some of the components of the things that found their way into the Post article, yesterday, had come back from a 1992 framework.
Ken, would you...
A2: I think what Dr. Kaminski is referring to is, in 1992, there was a Senate Republican Task Force led by Senator Rudman, which incidentally, contained as other members Senators Brown, Cohen, Danforth, Domenici, Hatch, Kassenbaum, Trent Lott, Richard Lugar, John McCain, John Siemer, Ted Stevens, John Warner, which, among other things, recommended a manufacturing education program. If you'll look at that report, you'll see that, and I won't read you the whole thing, but, basically, they argued that one of the key limitations to building a competitive manufacturing base is the lack of education programs emphasizing the manufacturing production and process engineering. They talk about the need for integrated multidisciplinary programs involving a significant work experience component. To make a long story short, they recommend continuation of the program in manufacturing education that's authorized in the FY92 Defense Authorization Act.
If you'll look at the legislation that was introduced in 1991 on manufacturing education, I think you'll find among the sponsors of the bill, there's a long list of sponsors, I'll confine myself to the Republican sponsors, but they include Senator Warner, Senator Coates, Senator Thurmond, Senate McCain, Senator Dixon, Senator Domenici, Senator Hatfield, Senator Smith, [and] Senator Shelby, who, I guess, was then on the Democratic side of the aisle.
A: You ought to read the Democrats, too. My sense in looking at that, it was bipartisan. It was pretty...
A2: I'm sorry, I erred. But to make a long story short: Nunn, Bingman, Byrd, Warner, Coates, Gore, Thurmond, Worth, McCain, Dixon, Hollings, Domenici, Hatfield, Smith, Exon, Shelby, Bumpers, DeConcini, Glenn, Lieberman, Levin, and Kennedy.
Q: Do you think if you had...
A: Let me make one more comment about this manufacturing extension and education programs. I don't think those are bad programs. I wouldn't want to be on record as criticizing the programs themselves. I think the programs, generally, are useful programs. I would say my only issue is with respect to that criteria I laid out, whether those ought to be funded in the DoD budget or whether those ought to be funded in other agencies' budgets.
Q: Do you think, intellectually, the Republicans have said that we reject your concept that dual-use supports your future procurement and technology needs? Or, do you think this is just vindictive politics at play?
A: I don't think fundamentally that they've rejected this concept. We haven't debated it very well, and I haven't come back to answer your original question about what would we do. Part of the reason we requested this discussion, today, was to begin to engage in that kind of debate on an intellectual level. That's what the Department is interested in doing. We hope we have the opportunity to do that before the Senate acts.
Q: So, at this point, does it look like it's just simply partisanship? They want to throw a monkey wrench into...
A: It certainly looks to me like it's a very quick action without much intellectual discussion or debate.
Q: One of the problems seems to be the still-existing conflict between government and commercial specs.
Q: For example, that GPS module, would it meet military requirements?
A: It would not have met some of our original specifications had we been operating a year ago. In the environment that we're in today, the onus is on the program manager to obtain a waiver to use military specifications. So we're wide open to using commercial specifications, except in those conditions where we can justify that the commercial spec won't work.
I would say that chip will work in the majority of environments that DoD has to operate in. There may be some extreme environments in which it won't. But that's a situation in which we ought to be open to look at some mix of goods. Those for some more routine use, those for extreme environments. That chip would be very useful to us.
Q: How effective has TRP really been about bringing on contractors that (inaudible) the Pentagon? (Inaudible)
A: I would [leave the] comment. But my own sense is, in this partnership arrangement that I was talking about, it's brought in many companies who wouldn't have thought twice about dealing with the Department.
A2: I can answer your question best with a statistic that has to do with the composition of the partnerships that were selected and not proposed. Eighty percent of them -- actually 81 percent of the partnerships that we have -- have on them one large DoD traditional supplier and one non-DoD supplier. So not only are we recruiting non-traditional Department of Defense suppliers to the table, but we're recruiting them in a way that makes sense, namely in partnership with somebody that does know the Department, that does know the business, and that knows our needs.
Q: That 81 percent is for what year?
A2: That's the aggregate up until now, which is two competitions.
Q: What's your Plan B? You must be thinking about, "OK, they are going to kill TRP. What do we do to keep technology development...?"
A: I don't yet have a Plan B, I'm still on Plan A.
Q: Have you spoken with any members of the Senate about what their feelings are on appropriations?
A: I have not, yet, but we will be doing that...
Q: What do you think this is as a signal for the broad range of other programs that are out there? Last year you announced partnership for flat-panel display development; there's a machine tool center; a lot of things which have come to be as part of a general interest in promoting commercial technology with DoD money.
A: I think we may see some of this migrate into those other areas, as well, which, of course, is an even bigger reason for concern. Those initiatives, I believe, passed the criteria that I described in terms of being of net benefit to the DoD.
Q: Are you still thinking about doing a national electronics manufacturing initiative?
A: Yes, we are.
Q: Are you going to fund [them in]? I think that's one of the ones that kind of dropped off the scope.
A: I don't know the status of that. I need to check. I believe our plans are still to fund that, but I need to check.
Q: To go back to tightening criteria and so forth. How are you tightening it now? If the education stuff, you would rather see DOT do that and...
A: My criteria hasn't changed, but, of course, I've been in this job for four months. As I look at DoD investments, I'm looking to see a net return to the Department.
I believe each of the programs -- each of the elements you would see in the '96 program -- would pass that test. I believe that there has been a trend in fewer programs that wouldn't pass that test.
Q: You were saying before... Do you think that, in the future, TRP should not be doing education programs, should not be doing manufacturing or extension centers?
A: No, I'd say that's too narrow, but I would want to apply a tight relevance test in terms of "can I make an expected, predictable return to the Department?"
Let me give you an example. We spend money to train technicians, today. I can see the return on that training as they do a better job of maintaining equipment. I believe that's a useful expenditure.
As the training gets more remote -- in terms of a broad industrial base issue, which might or might not be deployed to Department of Defense needs -- now, I'm getting further away from my relevance tests.
Q: What about manufacturing technology, ManTech programs?
A: ManTech programs... There are places where we're still going to be making investments in ManTech programs. We've had very good payoffs in ManTech programs in the past.
Let me make one more comment about ManTech. I talked about these two trends -- the needs and the sources trend. The impact of both of those trends, and what is really driving me, which I neglected to say at the start.
In the past Cold War environment, the cost of our major systems was often not a very major factor in our considerations. We had a paradigm of operating in which we could see we had exquisite intelligence. We could see a threat system being developed. We could understand, sort of, in an F=MA sense, what kind of capability did we have to have in our new system to overmatch the adversary system that was being developed. We could make a good case to the American people for our new system [that] had to have the following performance. We could make a good case to the Congress. The cost of the system was a fallout, it was whatever it had to be to meet that performance.
In the environment that we're operating in, I will tell you that cost has a place at the table in which we're looking to make these tradeoffs. Costs and commercial activities go hand in hand, which is why I'm placing so much emphasis on looking at commercial technology and commercial production, not only in the early acquisition, but in setting up a line so that we don't have to support a unique defense industrial baseline so that I can buy components off of an existing commercial line. Cost, really, is an important parameter for us now as we're looking to manage our acquisition program.
Q: I wanted to know if you could give us a specific example of how, without TRP, it's going to affect a specific program, like the F-22 or JAST? How is that really going to affect something...
A: It's hard for me to give you a tight specific example., but let me give you a generic one. If we look at a program like JAST, JAST is the very model of what I was just describing. What we're trying to do in JAST is to get multiple use out of a set of components. To look hard at can we develop one engine and use that for a single engine, light weight fighter, and perhaps use two of those engines in a larger, two engine fighter, and obtain some economies of scale from this base.
If I draw your attention to this kind of packaging, to be able to develop avionics for that kind of a program, this little module contains all the radio frequency electronics, the front end radio frequency amplifiers, the conversion to intermediate frequency, and then the digital processing hybrids, all in one package. This kind of a capability, as you might imagine, has revolutionary capability in the avionics of fighter aircraft where we're trying to package functionality into a small place.
What this means is the difference not only in what the F-22 is going to cost, what JAST is going to cost initially, but I think more so in the life cycle costs. Sixty to 70 percent of the cost of our weapon systems in their life cycle occur after deployment. To the extent that we can use the same avionics package in multiple platforms, I think this has very high leverage.
Q: But it's (inaudible) cost. It's not really technology...
A: It really is more cost-based. It is moving in this direction of getting functionality for lower cost.
Q: A question about GPS. Has the Department, sort of, taken a look at the downsides of using commercial technology? For example, this GPS. GPS-aided munitions are the next wave, the new generation that the Pentagon is putting a lot of stock in. But, having a commercially purchased GPS system in these munitions, doesn't it make them more susceptible to jamming, and other countermeasures, because it's commercially widely available, so it's easy to understand and counteract?
A: It does open up some vulnerabilities that have to be accounted for. If you ask me, "Would we put all of our dependence in a GPS-guided munitions and have no fallback?" I'd say, "No, that would be a mistake." But to have a significant family of low cost, accurate munitions, which we can complement with others in the face of jamming, and have some other tools to counteract the impact of jamming... For example, the introduction of low cost inertial measurement units. We have, in exploratory development, today, inertial measurement units -- full three-axis guidance systems that fit on similar chips. Those help to mitigate the jamming vulnerabilities of a commercial GPS system. Marrying those two together does provide some resilience.
But, I would also say, in this global commercial environment that we're heading into as this leading edge commercial technology is developed, it should be apparent to us all that this is as equally accessible to our adversaries as it is to us. The country that has the better process for capturing, understanding the strengths and the limitations and integrating it into our systems is going to be the country that comes out ahead.
Thank you very much.