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USD Aldridge Media Roundtable on Acquisition Program Updates

Presenters: Edward C. "Pete" Aldridge, Jr., USD ATL
March 22, 2002 10:00 AM EDT

(Media roundtable on Acquisition Program Updates)

Aldridge: Well, I'm Pete Aldridge, and I'm the undersecretary of Defense for Acquisition, Technology and Logistics. It's a pretty broad portfolio, more so than I thought when I first accepted the job. We deal a lot with certainly the weapon systems; we deal with all the technology efforts and all the logistics support. And I also have responsibility for the chemical and biological defense activities through an assistant to the secretary for Nuclear, Chemical and Biological Defense Programs. So our activities these days have been quite busy.

I thought I'd just talk -- a couple of things that are on my mind, and then I'll open it up for questions.

Okay, first of all, we've been very pleased with the response from the international partners on the Joint Strike Fighter. We now have -- as you know, several people have already signed up to be partners on the Joint Strike Fighter. We have what we call three levels of participation. Level one is a highly active participation where -- such as the United Kingdom is a level-one partner. They have contributed $2 billion to the Joint Strike Fighter program development, and they are -- were involved with the source selection process and have people in the Project Office.

The level-two partners are in the levels of like $800 million to a billion dollars, and we have two countries which are in the final processes now of making the approval. Their cabinets have approved joining, and now they've taken it to their parliament, and we expect their parliament to make a decision by the first week -- second week in April. And that's the Italian and Netherlands. Both of those have got their processes in place to make that happen.

Then we have level-three partners, which are in the $150 million range. They get to participate in the programs and their industries can participate in the development of the aircraft, and so forth. Canada has already signed up as a level-three partner. We have Denmark, Norway and Turkey have all announced their intent to sign up with us. They have to go through their parliamentary process as well.

But the program looks in pretty good shape from an international perspective, and we would expect many some more countries would come on board. We're in discussions, in formal discussions, with other countries on that activity.

Missile defense. As you know, the secretary signed out in January an organizational change for missile defense. That is now being implemented. We're streamlining the process to give General Kadish an ability to make very tough decisions in what is -- what would be called as a system-of-systems approach to missile defense. We have various layers, intercept layers, from boost phase, mid- course, terminal. And we're looking at various ranges of rockets, from short, medium and long range. So we've kind of got a matrix. And the system-of-systems approach is being addressed there to look at solving that very difficult problem. He needs a streamlined decision process to do that, and we've implemented that for him.

There's been some criticism that we're not providing sufficient oversight of the missile defense activity. That is not true. We formed a Missile Defense Support Group, which is 13 individuals representing all the equities of the Office of the Secretary of Defense and the military departments, including the Joint Staff, OT&E (Office of Test and Evaluation) -- all those people are -- there's individuals named so that they can access the Missile Defense Agency and get information. They are supported by a working group consisting of analysts that will handle the day-to-day details. There's two people per organization assigned to that slot. So we have 39 individuals from the department who will be providing oversight for the Missile Defense Organization. They will be given access to the -- all the data on missile defense. They have independent -- ability to do independent analyses. They report to me, as the undersecretary. They provide advice to the director of the Missile Defense Agency for whatever activities they feel they want to provide him advice.

And they also provide advice to the Senior Executive Council. The Senior Executive Council will be the board of directors that will oversee the Missile Defense Agency and make the major decisions regarding if we're going to deploy or not and those activities. Senior Executive Council is -- was formed by the secretary, which is the deputy secretaries and the chairman. The three service secretaries are on the board, and I serve as -- also as a member of the Senior Executive Council. So that will be the oversight -- that is the board of directors for missile defense, and then the Missile Defense Support Group provides advice both to the director, as well as to the SEC in advising these decisions.

The last thing I'll talk about today is V-22. I did a review of the V-22 program plans just a few days ago. We plan to start flight- testing the end of next month. And activities are underway to make that happen -- getting prepared. The secretary of the Navy and I will have a final return-to-flight review before it actually starts flight testing, to make sure everything's in place to do what we expected to be done. It'll be an event-driven test program. It will not be driven by schedule. And all the activities that we've outlined -- they need to be performed to make sure the airplane is reliable, safe and operationally suitable. We'll be done, and those plans will be put in place before we will accept the flight-test program, and we'll monitor that during the period, to make sure it's working okay.

So with that, I think that's enough. I'll just turn it over to questions.


Q: Can you tell us where you're at on the anthrax-vaccination program?

Aldridge: Yes. As you know, the -- my favorite topic -- (chuckles) -- the bioport facility was, in fact, approved by FDA for production. It is now producing vaccine. We're trying to get the contract in place to -- because we actually had a stop-work contract -- a contract which we actually stopped work on. It is now being renegotiated to get back on the contract. We're now looking, and the secretary of Defense is looking at the anthrax-vaccination policy now that we have production. He has not made his decision on that as yet. But we are now producing the anthrax vaccine that -- (inaudible) -- in fact, been approved by the FDA.

Q: Do you expect to start giving shots at some point?

Aldridge: That's being reviewed by the secretary, in fact, almost as we speak. It will be decided within the next week or so as to how to proceed at this point in time.


Q: With respect to missile defense, in the last administration, with the issue of deployment, there were certain activities that were actually planned if deployment took place. At this point, what would a deployment decision do for the activities that you aren't doing now?

Aldridge: The -- well, as you know, the president has announced that we will withdraw from the ABM Treaty. As of June the 14th, we will not be restricted by the treaty constraints. We could do whatever the president decides he wants to do in regard to deployment.

I'm not sure if I understand your question. The -- we were preparing for deployment, but we could not do anything because of the treaty. Now when the treaty gets removed this coming June, we will -- we can do whatever we believe is feasible to do with regard to deployment.

Q: And what activities fall under that, then, would you say?

Aldridge: We have a plan to use -- we have a test program set up in which part of the test activities were a series of silos in Alaska that could be -- that were going to be used for test activities. They could in fact be used as an emergency missile defense capability -- use the test assets for missile defense, with the radars and the interceptors that would be deployed --

Q: So we're not building a full X-band radar?

Aldridge: All of that is -- we have made no decision to deploy past --

Q: That would be a deployment decision.

Aldridge: That would be a deployment decision. We could use the test assets as a limited capability. That's all that has been decided -- that we could use that if we so select to do so. But we have not made any deployment decision at this point.


Q: Also on the missile defense issue, you said the process is being streamlined, but you have 39 officials doing oversight. Can you explain specifically how it's being streamlined and how it's saving anything from the current process?

Aldridge: Okay. The -- as you know, when you talk about a given weapons system, there is a defense acquisition process that's in place, that goes through a series of meetings and reviews. For one weapons system, that is pretty comprehensive. Missile defense has several weapons systems. They have the ground-based midcourse system. They have the Navy's midcourse capability. They have the PAC-3. We're looking at space-based technologies for -- that could be applied -- the SBIRS-Low (Space-Based Infrared System), for example. All of those are weapons systems in their own case.

What we've done is told the Missile Defense Agency they are combining all those into essentially a system of systems. So he has the decision authorities to trade off among all of those things, with only reviews by the Missile Defense Support Group. So his decision process is much like what we would describe as the National Reconnaissance Office. It was kind of a centralized office in which the director has a lot of the decision-making authority within his review, rather than having to go through all the OSD staff reviews prior to making those decisions.

So the OSD staff now looks at what he's doing, provides inputs to him, but not as individual offices. If you thought about all 13 offices going to the Missile Defense Agency at different times, getting different information, that could be terribly disruptive to an organization like they have. So we're saying: Let's have one group go simultaneously. They all hear the information at one time. They're preplanned, predetermined, and it's a much quicker way to make decisions that way.

Q: So can the director make funding decisions, like shift funding from midcourse to sea-based, or --

Aldridge: Yes, he can.

Q: He can.

Aldridge: He can do that -- within limits, obviously. I mean, there has to be -- he's not going to make a decision to cancel a program in favor of another one. But if he's finding a program within the midcourse area, it needs some funding transfer, he can do so within the limits provided by the Congress, of course. They have to be involved. There's reprogramming limits in there, in what you can do within a program element. But he has the authority to do that. It won't be done in isolation of the reviews that are ongoing, but he has the ability to do that.

Yeah? Right here.

Q: There have been some reports about the Navy and the Marine Corps weighing a proposal to really seriously cut back on the Joint Strike Fighters and F-18 purchases coming down the pike, by 30 percent. I understand that proposal hasn't been, you know, presented in a final form to you folks yet, but can you talk about what your feeling is on that and whether any significant cut would have serious implications for the per-unit cost?

Aldridge: Well, the details of that are going to have to be done by the Navy and Marine Corps.

But let me just say that in the department we do studies all the time, and in this particular case, this study was asked for by the secretary of Defense last year -- or -- and as part of the Defense Planning Guidance. The Defense Planning Guidance asked the secretary of the Navy to take a look at the Marine/Navy TACAIR (tactical air). They've done that study. The study has been brought back into the Pentagon. It's now being evaluated as to what to do about it, and there are lots of questions being raised about the various assumptions being made in the study and the impact of unit cost and the impact it might have on the Air Force and the impact it might on the international partners. If the unit -- if the number of aircrafts drops, unit cost goes up, well, how can you mitigate unit cost? What's the mix of the various kinds of airplane -- you know, question after question, and we're -- now we're going through all those questions. And so when the Navy's -- and the Marine Corps are prepared to address those, I think they plan to come and talk to you about it. But at this point in time, it's very premature. Okay?


Q: Now that you've got more international partners almost signed up, when you figure the U.S. cost for Joint Strike Fighter, are you assuming a certain number of foreign partners, or is it a bonus when --

Aldridge: No. Our assumption was the unit -- number of aircraft procured was the U.S. plus the U.K., which was a signed-up partner. And that was roughly 3,000 airplanes. We made no assumptions about how many international partners. So whatever reduction, if it's accepted that we'll take a fewer number of aircraft for the Navy and Marine Corps, if we buy X -- that same number (inaudible) international, it's offset. So we are anticipating that the international buy will be in the thousands. So I -- it's -- I'm not worried so much about the unit cost, but -- and certainly it has no effect whatsoever on the development program or the initial production. It's what you do way at the end of the program; it's what they're talking about.

Q: But wasn't the --

Aldridge: Yes. (inaudible) -- right here. Yeah. Were you -- ?

Q: Your office has directed that defense -- (inaudible) -- agencies fully fund their programs to OSD CAIG estimates. Can you talk about how that has affected, I guess, your relationship with these services' program managers --

Aldridge: (chuckles)

Q: -- and also how it's affected their budgets?

Aldridge: The first reaction was not very favorable; I'll put it that way. But the -- it is fortunate that the service secretaries that we have are businessmen. They come from -- they understand this problem. And so they have accepted the fact that this is going to be -- to use the CAIG (cost analysis improvement group) estimate most of the time. There are certain conditions in which we look at it and we make a conscious decision. The CAIG was good for that part. It was maybe not quite so good for another part. Maybe the services have a better way to do that.

Of course, I use an example: the F-22. We did -- we took the Air Force estimate for the F-22, and when there was a disagreement -- but we said we were going to buy the number of airplanes that the CAIG says you could buy at that number. So we took the CAIG procurement rate or procurement totals with the Air Force estimate.

Now the incentive is in the right direction. It's with the contractor and the Air Force to buy, to make the cost go down so they can buy more airplanes. If the cost doesn't go down, they can buy less airplanes. So it's -- the incentive is right. And I think from this point on -- it's a combination of two things at work here. It's the combination of a spiral development, to put my favorite topic in the conversation. To get things in the field quicker, with less risk, with technology that's matured and properly pricing the program provides stability, which is the biggest culprit of all the problems we have in the Department of Defense -- is the instability in the procurement cost, as the cost -- the funding is inadequate to fund the program, it slipped. So delays and every dollar you take out of a program this year, you put three or $4 back into it later.

So properly pricing programs with spiral development is a way to enhance stability. And as a matter of fact, I'd call properly pricing programs as a cost-savings measure, because you don't have to do that multiplication of $3 or $4 to one out in the out years.

Yeah, way in the back.

Q: What prompted this review of the Joint Strike Fighter plans for the Marines and the Navy? Is it budget-driven, or is there something about, you know, the need for so much tactical aircraft?

Aldridge: Well, it's -- you know, it's -- it was decided in the Defense Planning Guidance. That's what the directive was. The Defense Planning Guidance for the last year, 2001, asked for it to be done. It was done under the assumption of: We are transforming the force. We have a new technology called Joint Strike Fighter, which has a very good v-stall capability, different than the Harrier. And we looked at the QDR and the DPG together, talked about anti- access capabilities. It was a viewpoint that says let's look at the Navy-Marine Corps from an overall point of view, from a strategy, from a technology, and see if it's right. And that's what -- I can't say it any closer than that. It's always money at the back. I mean, the taxpayer has to pay, but it is primarily focused on strategy and technology and what could it do for you for the future.

Q: And the conclusion was that you didn't need as many as you thought you initially would.

Aldridge: No conclusion yet. They've basically provided the study, they've come forth, we're reviewing it. The study has made some recommendations in regard, but the secretary of Defense has not signed off on this, we in the department have not signed off, and still a lot of questions to be asked about it.

Q: Can you say how long a decision may -- you know, when do you expect to come to some kind of decision about this study?

Aldridge: We'll come to a conclusion when we have to. But, you know, there's no -- this study will not have any impact upon the force structure of the Navy-Marine Corps until the year 2020. It has no effect upon the development program for the next four or five years. It has no effect upon the production program until the year 2012. It's really at the end of the production when these force- structure things will be seen. You know, when do you stop the production? And I'll tell you, I have no idea how many planes you're going to buy in the year 2020, and neither does anybody else.

Yeah, right here, second row.

Q: During the concept demonstration phase of JSF, Israel and Singapore participated as FMS (Foreign Military Sales} players, Has an invitation been extended to these guys to play in (inaudible)? And are you engaged in talks with these two countries?

Aldridge: Yes. I was at Singapore, at Singapore air show just a couple weeks ago. I talked to Peter Ho, who is my counterpart in Singapore, as well as the minister of defense. They are interested. They talked about how might they participate in the program. I don't know if they've made a decision as to whether they will be an industrial partner or whether they'll just be a participant in some type of study, and they don't know at this point. But we've invited them to come. We've given them briefings on the program. And if they would like to join us, I think Singapore is such an ally at this point that we would be delighted to have them with us.

Q: And Israel was the other FMS participant.

Aldridge: Israel is being -- we've been talking with Israel, but it hasn't gone past more than just some discussions at this point.

Yes, way in the back?

Q: A question. There was a report recently, about a month ago, that we used so many precision-guided munitions in Afghanistan that the Defense Department has asked the manufacturer of those kits to work essentially around the clock to bring the stores -- you know, the stocks back up, and that could potentially delay a move against Iraq or some other country by some months; six months, I think, was what the story said. Can you comment on that?

Aldridge: I'll comment on the thing that I know something about, and that's production of the munitions.

Q: Okay.

Aldridge: We have, in fact, accelerated the production rate for both the JDAM (Joint Direct Attack Munition} bombs and the GBU (guided bomb unit) laser-guided bombs. It was very clear that the utilization rate that we had in Afghanistan was certainly above what our peacetime stockpile would support, so we've had to go back and readjust the production rates. We have funding in the emergency supplemental to make that happen. We did accelerate also the laser-guided bombs. I'm looking at that again to see if we -- if that production rate is sufficient to provide it so the stockpile can handle any contingency for the future that might be anticipated. That's anybody's guess as to what that might be and where it might be.

Q: I think the report was that literally we've asked the company to go sort of 'round the clock, three shifts, 24 hours a day to crank these things out.

Aldridge: I know it's multiple shifts. I don't know if it's three per day, because sometimes that's very difficult to do. You need a maintenance period to kind of clean things up. But we're trying to -- we're facilitizing to build -- get the rates up to a sufficient level to meet our requirements.

Q: Is there a time goal for that; you know, we want to have them back up to what we need by X months?

Aldridge: No, we're basically looking at what we can actually do, because there are some long poles in the tent here about the components can only be produced at a certain rate. We're trying to do that to just about the maximum rate, and we'll fill it up as quickly as we can. That's as quickly as we can and what we can afford to do and what the facilities will permit us to do with the components that are available.

Q: Is there a suggestion that you would increase the number of facilities?

Aldridge: I'm sorry?

Q: Would you increase the number of manufacturing facilities?

Aldridge: Not increase the number of them, but probably tool up within the facilities we currently have.


Q: May I take you back one more time to JSF five?

Aldridge: No, you -- (inaudible) -- topic. (laughs)

Q: Well, you know, so many of these big aircraft programs, we see the numbers death spiral. We saw it on B-2, we've seen it in F-22. You know, this has always been something that's been decried at the Pentagon as not a healthy thing. And, you know, this looks like just the first step in yet another TACAIR program going down the drain. I mean, you have a fundamental problem with your flashy numbers.

Aldridge: Let's see. This is not a program that's going down the drain, I'll guarantee you that. It is a program that -- in fact, if anything can be said about the study that the Navy did, it validated the absolute necessity of the Joint Strike Fighter. They have to have it, both in the Navy and Marine Corps, just without a doubt. It is difficult to predict the future, in the year 2020 what one needs. We can't even predict what one needs two or three years in advance. And part of the QDR process was we must anticipate uncertainty and surprise.

So I don't -- you're right, the study appears, if it's accepted -- we may not accept it at all -- would imply that we could get by with fewer fighters because of the performance of the aircraft we're developing. It's the sortie rate and the reliability and availability that's so phenomenal with the aircraft which results in saying --

Q: No matter, I mean, you can't put one fighter in two theaters.

Aldridge: You can't. That's why we have still 2,600 that are being planned, assuming the study's agreed to, but 2,600 to 3,000 still appears to be our requirement. The world can change in the next two years and that requirement could change. And that's kind of what happened with the B-2 and other -- and the bomber forces when they were predicted. We found that we could have equal effectiveness with some of the munitions that we carry on board; it doesn't have to be the platform that carries them, it's the ability to destroy the target they're after, and that is the munition, not the carrier. That's important.

Yes, right here.

Q: There are a number of programs that have major cost overruns, such as the AAAV (Advanced Amphibious Assault Vehicle), the UH-1 upgrade, as well as the Chinook upgrade. Could you talk to us about how you view programs that have major cost overruns, and specifically whether or not you are considering terminating any major programs in the near future?

Aldridge: Yes, those things I consider a lot. Just a classic example of that is the Navy Area Defense System. We have this thing, this law called Nunn-McCurdy, which we notify Congress when we have a 15 percent cost overrun, we notify them -- or we notify them when we have a 25 percent. Then I have to recertify to the Congress that -- the recertification progress has been delegated to me from the secretary of Defense -- that says if a program exceeds its cost estimate by 25 percent, then I must certify that this program is in the national interest, it must be had for national security, there is no other alternative, the costs are under control and the management is in place to keep it under control.

These programs you mention are those which have a potential Nunn-McCurdy breach, therefore, I must address those four issues to Congress, and I will address them. And if I can't answer those questions, I will not certify. And if I do not certify, the program, by law, stops funding immediately.

So these programs have to come to me and tell me that they believe this is in the national interest, there's no alternative, cost-effective alternative, costs are under control, and the management is in place to keep it under control. And I will not sign a document unless I am convinced that will happen. And I didn't on Navy Area. And I think that message is pretty clear now.

Q: So do you think it may be necessary to do that again to make the message louder?

Aldridge: No, if the services who have those programs -- and I think there's something around eight or 10 that might have this kind of problem coming up, they must convince me, and if they can convince me, I will sign the certification.

We have one that's getting close to certification, one called SBIRS-High -- it's the high-altitude, early-warning capability. It had a Nunn-McCurdy breach. I must certify to Congress by May the 5th of those four criteria. And the Air Force is under process right now to convince me that those four criteria can in fact be met, and if I agree with them, I'll sign the certification, and if I don't agree with them, I will not. And that's -- I'm not going to sign my name on the bottom of a line that I do not absolutely believe I can validate, and appear before Congress to justify. So that's the way it's going to be.

Q: Can I just clarify? When you say you're getting close to certification, are you saying close to having you convinced or you're just close to getting to the date of having to decide?

Aldridge: We have a series of meetings planned to bring me up to speed on how the Air Force is going to convince me that they are doing the right things for recertification. I have to certify by May the 5th. We have meetings on April 26th. There's a last meeting and another status report on April the 2nd to give me where they stand in their process to convince me to recertify. I didn't want to wait till the very last minute and have them come in on May the 4th to try to convince me, when in fact I may have a question or two. So we want to do it a little bit more logically.

Yeah, right here.

Q: Mr. Aldridge, why does OSD want the Navy to buy a ninth LHD (landing, helicopter, dock) ship? I thought the plan was to buy eight and then go to the next -- the successor model.

Aldridge: I'm not sure I would put it in the category "OSD (Office of the Secretary of Defense) wants the Navy to buy." (laughs)

Q: (off mike)

Aldridge: I think probably that came from the Congress, if I'm not mistaken.

Let me put it in a broader context. The Navy shipbuilding program is insufficient to sustain the Navy at this point in time. That's a concern. It was acceptable. The president's budget in FY '03 accepted that risk, because we had the trade-off between near-term risk and far-term risk, and we tried to balance that. And the president's budget really did that. They -- the Navy accepted the fact that it was better for them to buy fewer ships in FY '03 -- the number was five -- in order to begin the process of upgrading capabilities for the future. The DDX -- they wanted to proceed with R&D (research and development) on the DDX program. They wanted to proceed with other upgrades in their systems, and they certainly wanted to proceed with some fighter aircraft. They feel strongly they don't have enough modern tactical air. So they've made that judgment.

That was for this year. If we look out into the future, their judgment is, they want to try to get the shipbuilding back up. And if -- whatever -- whether this is an auxiliary ship, an amphibious ship, or a -- it's up -- kind of up to the Navy which one they want to buy. But they -- we really need combat capability.

And I think I've -- the other day I've -- somebody was interviewing me on the -- in fact, it may be the guy in the front row here -- on the submarines, and I thought that we need to get our -- certainly get our submarine rate back up from one ship per year to something higher than that. And the DDX is going to allow us to get the surface combatants up. And I would -- my leaning would be toward the combat capability versus the amphibious kind of ships.


Q: Can I follow?

Aldridge: Yeah.

Q: As far as the LHD ships, is it your hope that this ninth one will be the last of this series and then you go to its successor?

Aldridge: Let me not answer that. That's really a question for the Navy, rather than me. I like to see their proposal and see where that goes.


Q: There was an interesting report on the radio this morning that the Pentagon, through DARPA (Defense Advanced Research Projects Agency), is not renewing the contract with JASON Group of scientists that's been around for, I think, five decades. Can you explain why that is and if you're planning some kind of follow-on scientific advisory group?

Aldridge: There was some questions -- I don't think a decision has been made on that as yet. There was a question whether DARPA was the right organization to be the sponsor of JASONS. And what's happened -- and I've been talking to my director of Defense Research Engineering, Dr. Ron Sega, and I believe our plan is to have Dr. Sega, who has a broader view of the technology base than just DARPA, take over their sponsorship of JASONS. That's the -- that was a plan that was in place. It was not a question of the role of JASONS, it was where its sponsorship should be in this broader context. We'd like to get them opening up some more activities, such as in the chem-bio area, for example. And Dr. Sega probably is a better place for that to happen.

Q: Are they amenable to that -- opening up, broadening their mission?

Aldridge: Oh, absolutely. Oh, absolutely.

Let me go to somebody who hasn't answered (sic) one yet. Way -- yeah, way in the back. The blue shirt. Right here.

Q: With regard to the Army's transformation efforts, the recent award of the Lead Systems Integrator contract for future combat systems, there were some concerns expressed on the Hill right away that the transformation, future combat systems, projected force -- there's not enough funding, and that they're going to have trouble meeting their aggressive time line, as far as fielding it by the end of the decade. Are these things that you've talked about with the service or are these concerns that you share?

Aldridge: Yeah, I do -- I share them. They're on a very aggressive schedule. As you know, they did award the System Integrator contract. They want to make a Milestone B decision, then, in 2003 -- that's a very rapid schedule to be on -- and to get kind of the first units starting to be deployed in the 2008 period. They have funded that program, as best we know what it is today. The System Integrator obviously we'll start defining with more detail about what are the components, how do they interact, what are the command and control systems, and such, which are questions we don't really know the answers to at this point.

We have talked to the Army about this. There will be very clear criteria developed on how you -- what are the criteria for entering into the Milestone B decision process. Milestone B is where you start the engineering development. We call that SDD, System Development and Demonstration program, now. And there will be criteria by -- which must be solved and achieved by that time in order to go into that point at that early period.

So the Army's fully committed to it. That is the future of the Army. That is the transformation in the Army's vision. And they're making every attempt to get there as quickly as they possibly can. So I think -- I know it's high on the priority list in the Army. If they were going to fund anything, it's going to be future combat system first. So -- yeah?

Q: Aldridge: It was only for the missile defense activities. What we're trying to do is the -- there's a -- when you have a major defense acquisition program, you have to write a selected acquisition report. We don't know, in the Missile Defense Agency, what is going to be a program to completion, whether the Navy midcourse system or whether the ground-based interceptor is going to be a system which we are going to deploy. So we've tried to redefine it as to things which are really -- that we have a plan to develop, produce, and deploy them. And that's part of the SAR process.

We've combined those -- all those into a single Missile Defense and -- Agency report. So the Missile Defense Agency is going to write a single, selected acquisition report on the entire R&D program that they have under way. As you know, when we make a decision to deploy a system, such as we did for PAC-3, we will move it out of the Missile Defense Agency and give it to a service for the actual production and deployment and operation. And so the Missile Defense Agency has no deployment program. It is all R&D.

And so, to make 'em write -- select the acquisition reports on things that they may never go past R&D on -- in fact, some may be terminated, as we did for Navy area -- so why write a selected acquisition report on something which is so ill-defined at this point? And it was the definition of what they were doing versus what was required by Congress. We said "Well, these are not major defense acquisition programs in the missile defense, because they're just looking at R&D." So we've redefined it. Senator Reed was not too happy with that definition, but I think the idea is that we're going to give the Congress just as much oversight as they've always had; it will be just packaged in a slightly different way.

Q: So when that SAR (Selected Acquisition Reports) comes up, would there be an explanation of what used to be Navy-theater-wide? Now it's sea-based midcourse -- would be an explanation like ground-based, or would it just be one SAR that covers the whole thing? You wouldn't know what the money is for the sea-based --

Aldridge: No, you would. You would know what every element would be. There would be funding for -- and as they do in their congressional inputs now. They know down to the very last dollar where every program element -- what they're funding for each item they've got. It's a document like, this thick that Missile Defense Agency provides to the Congress. There will be a different SAR for PAC-3 as -- because it did move out, it's now a deployment program, and it does have production and deployment and O&M cost. The R&D -- they will just be a different one. And when a decision is made to move for those out to deployment, we'll write a different report.

Q: I'm sorry. Which could possibly happen if you decide on a contingency capability for the Ft. Greely site?

Aldridge: To be defined. That's a -- because we're using essentially residual test assets for a limited deployment. If you augmented it, maybe with another radar or more interceptors, you might think about a different report. But I think that would be kind of a different -- I think the Congress would be -- would be informed, obviously, with all the information they'd ever need on what this capability would be, but maybe not a different report.

Yeah, way in the back, in the white shirt.

Aldridge: Sir, tagging onto the missile-defense side of things, as well as air warfare and the Navy in general: There's a lot of development going on with center networking systems in the Navy now - CEC (Cooperative Engagement Capability), Naval Fires Network (NFN); a lot of these things are starting to mature. Can you provide a snapshot of where you are in supporting the acquisition of these technologies, particularly CEC and NFN and things like that?

Aldridge: The whole network-centric concept is very, very good. It provides a force multiplier to the -- to all of our weapon systems -- the Army, the Navy working together, the Navy working with multiple sensors. Being able to fuse the data is a very important thing to do. And let me just go on and answer a question you didn't ask, but I would like to answer anyway, and that is: Part of the transformation in this year's budget is for something which is relatively new, and it provides a backbone for the future. And that is a much wider -- very large-bandwidth communications capabilities. Everywhere you go and you talk to any communications guy, they will tell you they're bandwidth-limited. We have put something in this year's budget to begin the process of eliminating the barrier, that constraint.

We have fiber optics in the ground that transmit gigabits of data. We are moving into the direction of putting what is the equivalent of fiber optics in space, some new concepts called laser communications. They're, again, gigabit types of capability. And the communication satellites that will transmit -- gather and transmit this kind of information.

So we're beginning that process. Again, it's just beginning. It's going to take years for us to get there. But the end point, the vision we want to accomplish is unlimited bandwidth with global access. Now, we're not going to get exactly there, but that's the concept that we're thinking about: The ability to communicate as much information as we need, we can fly as many UAV (unmanned aerial vehicle) orbits as we like basically to try to allow the warfighter to be able to process information, pull information, push information through the system that will be -- that is not restricted to the bandwidth that we have available in our communication system. That's the ultimate objective, and if we get there, if we can get that backbone -- now, I know what's going to happen, we're going to still fill it up, but the fact is we're going to provide a much larger bandwidth into the hundreds of gigabits of bandwidth kind of capacity is what we'd like to achieve.

Q: Are you ready today to support full rate production for CEC in the Navy?

Aldridge: I believe so. I haven't gotten quite up to speed on all of the ramifications of that, but the testing process that I have seen so far says it's doing quite well and --

Q: Is competition part of that sense that you have that it's ready to go?

Aldridge: I'm always in favor of competition, but I'm not sure exactly how it fits in with that at this point in time. I just -- I haven't seen that recently.

Yeah, right here.

Q: On the V-22, you had such shaky confidence in it this fall that you actually ordered a review of alternatives to it. Are you satisfied with the way the testing program has gone? Has the V-22 performed for all the criteria that was laid out by the blue ribbon panel? What's your --

Aldridge: Well, since the crashes, it hasn't been in a testing program at all, it's been grounded. So we stopped the flight test program. We've limited the production to the minimum sustaining level.

We will start the flight test program in -- I think it's going to be April 29th, around that date. There will be a review right before that to make sure the flight test program meets the criteria we want. It will be about a two-year flight test program. Again, not on schedule but on event. If it takes three years, it will take three years. But we have a two-year flight test program in place, and if that proceeds well, then we'll start the production back up, starting turning it over into an operational capability.

I will not approve the flight test program start unless I'm pleased that the flight test plan meets all the criteria that I believe need to be met and are satisfying all the recommendations that both the blue ribbon panel did, which was an early one, and then another panel that is run by NASA (National Air and Space Administration). They have a series of recommendations that need to be performed in the flight test program. They need to do those as well as a couple of others we've added. And we will not approve to start the flight test until that plan is in place. And then we will review the progress. If we find out that there are some test points that need to be repeated, we will repeat them if we see things going wrong.

Q: Are you still looking at alternatives to the V-22?

Aldridge: Yes. Yes. Definitely.

Q: Does the flight test program include operational testing, operational suitability testing?

Aldridge: Absolutely. Absolutely.


Q: Sir, can you give us a status report on the restructuring of the Comanche program?

Aldridge: I'll leave that -- you probably ought to ask the details. The Comanche program has been restructured to be more spiral. It was too concurrent. It was too risky. They had some technologies that were not mature enough to enter into the program as soon as they would like to have seen it. The risk was very high. And so the Army has restructured the program to include now spiral development, in effect introducing the technology when they believe it's mature enough to be introduced. They've stretched the program a year to make that happen. And it's, I believe, what I've seen of the program as the first cut through the restructuring, is it looks like they've got a program that's doable now and I'm much more confident in it.

Yeah, right here?

Q: Can you say anything about how much stress the logistics system is under? I know, for example, that the Air Force has said that it doesn't have the airlift capacity that it needs. So I'm just wondering if anything --

Aldridge: It's under stress, that's clear, because the people are working 24 hours a day, seven days a week, to try to support it. I just, in fact, had a briefing yesterday from Admiral Lippert of the Defense Logistics Agency. And they have been on a 24- hour, seven-day-a-week shift since September the 11th to make sure that the people are getting the supplies they need. On the other hand, if you talk to the customer, they'll say they are delighted. They are getting everything they need when they need it. It is stressful, there's no doubt about it. We're flying the wings off airplanes and trying to haul fuel into the Afghanistan area and Pakistan, and it's not -- we're basically hauling it by airlift, which is a terrible way to do it.

Q Is there any capacity for expanded operations at all, or are you maxed out?

Aldridge: The logistics systems meets the job they are asked to do and it's always been done. And how they do it, it's magic, but they always do it, because you never hear a complaint.


Q: Could you expand a little bit on what alternatives to the V-22 you are looking at?

Aldridge: There are several. There's -- let me just talk about a few of them. There's a CH-53X, an upgraded version of the CH- 53. There's the EH-101, an Agusta helicopter. There's an -- I guess it's called S-92, it's built by Sikorsky. There are some upgrades of the Huey, the H-60. And I know the commandant may have some other alternatives. He is -- I just talked to him a few minutes ago and he is serious about reviewing alternatives. He believes that's the right approach to making sure that the Marines have what they need.

They absolutely have got to replace their helicopters with something. And under the -- and we all assume and hope that the V-22 is going to be successful so that will be a replacement. But in case it does not, he has to have something in place to replace their aging helicopters and he's looking at these. He may be looking at others; those are the ones that come to bear that we've looked at already.

Q: Are you going to wait to make a decision on alternatives for the full V-22 testing program to be completed, or is it possible --

Aldridge: We can make that decision at any point. If we see some problems occurring early in the flight test program, we may not continue it, and we could stop and head off in another direction.

But I know the commandant has insisted that he have alternatives in front of him if we find that we have a problem. And he will share those with me at the time.

Yeah, right here.

Q: There are quite a few rotary wing delays, hitches, snags affecting industry at the moment. Is there a concern that this is going to impact on the helicopter industrial base, that you can sustain the manufacturers you have at the moment, given the number of delays?

Aldridge: You mean for the V-22?

Q: Well, V-22, Comanche, the Huey upgrade program. I mean Bell, for instance, is potentially seriously impacted by this.

Aldridge: I think the helicopter industrial base has some problems right now. I have a study underway, which so happens I'll be briefed next week on, on the helicopter industrial base. I think -- we believe there are problems there. It is not being sustained at the right rate, and it may be that we may have to make some type of adjustment. It's a little premature to tell at this point.


Q: Sir, in recent weeks there has been some criticism that's arisen about the fact that in response to a Government Reform Committee inquiry about alternatives to Halon 1301 your office didn't include information about a report that the Air Force had written. Is that true? And if so, why wasn't it included in your July 6th response back to Representative Burton?

Aldridge: I have not the slightest idea. (laughs) I'm sorry! I just vaguely remember the problem -- there's some problem with the F-16 and replacing it, and the Air Force made a decision not to replace it on the F-16 for operation reasons. And at that point, I lost the bubble. I don't recall -- sorry, I can't answer all of that.

Yeah, right here.

Q: Speaking of the defense industrial base, you were talking about the shipbuilding questions earlier and the fiscal year '03 funding, you're talking about five ships with six major shipbuilders in the United States. How much of a concern is it in the administration that that can impact negatively on the shipbuilding industrial base?

Aldridge: We're very worried about it. It's the combination of one, the number of ships aren't enough to sustain the Navy at the level we think is necessary, and we're concerned about the industrial base because we're not building ships at a rate that we need.

It's always a trade-off between the dollars that are available and the needs of the future. And right now the Navy has made a judgment, and I support it, that that rate is okay. But I don't believe we can sustain that type of rate for very long. And I know the Navy is worried about it. They're looking at their budget. We're now just starting the FY '04 budget review process. The secretary is now going through the defense planning guidance for fiscal '04, as we did last summer. We're doing it at a much more -- a different time now because we can do it earlier. But that is a concern and it's something we're going to have to address.

Q: You spoke at a conference last month about your desire to establish some kind of standardized oversight of DOD service contracts, similar to what you have on the hardware side. Can you give us an update on that?

Aldridge: Yeah. That's still being worked. The issue here is that we find that the amount of money we're using for purchase of services, base maintenance and things of that nature, are now equal to what we buy in equipment. So we've had this very rigorous process in the acquisition of weapons systems equipment and we have no such process in the acquisition of services.

We're working with the various service departments -- "services" versus services -- military departments -- we're working with them to put in place a series of processes that allow them to do their own review below a certain threshold, and that it will be brazed to kind of a major defense acquisition program or acquisition category one, if it exceeds some other threshold. All of that process is now being worked and negotiated within the building.

Q: When would you like to have that in place?

Aldridge: I'd like to have it in place last year. It's not going fast enough, in my view. But it's a process that has to take place, so -- yeah?

Q: If I can go back for a second to what we were talking about before, the SAR reports for missile defense, the idea of having one consolidated SAR report. So, for example, if there is a new Navy terminal program or a terminal sea-based program and it's under the consolidated programs that are reported to Congress through MDA, how would you know if there are the cost increases that led to the Nunn-McCurdy breach for the program that was just cancelled if it's consolidated?

Aldridge: Well, you don't because Nunn-McCurdy really was associated with weapons systems that are kind of in deployment in the R&D plus production period. In the -- if you're just going to leave the program in R&D, then it's going to -- we'd still see the cost increases, but Nunn-McCurdy would not apply to programs just in the R&D phase.

Q: But wasn't that the problem with Navy area -- that the cost didn't really go up until it hit production? I mean, without -- (inaudible) -- the R&D --

Aldridge: It was the plans of both the R&D and the production cost that caused the thing to go up. It was a plan to deploy something, because, see, in that particular case, that program belonged to the Navy, and they had a plan in place for how it was going to -- where they were going to take it in terms of its production. So that was the combination of all that. It wasn't just the R&D cost, although that was a big factor.

Let me try some -- yeah? Right here. Yeah?

Q: Yes, I wanted to ask about the recent problems with purchase cards. There was a GAO report about some problems with two Navy units. That was just the tip of the iceberg, supposedly. I was wondering if you're looking at those problems and rethinking the idea of using purchase cards at all.

Aldridge: Yeah, the idea of purchase cards was a great idea because it eliminated a huge amount of bureaucracy in bill-paying and so forth. And the purchase card idea is still good.

The problem is discipline, a process of how you avoid people doing things with the purchase cards that are not appropriate.

There are two types of cards, by the way, that people can mix.

Q: Right.

Aldridge: One's a travel card, we all have to go -- pay our hotel bills and so forth. We all -- that bill comes to me. I mean, I have to pay it just like it's in my credit card. The other one is the purchase cards that allow people to buy equipment for their offices.

And in these cases, somebody violated the rules. And I believe perhaps in this case the violation of the rules were not monitored properly. There are clearly rules in place of how -- what are the -- how you can use these cards, for what purpose, and it's very well laid out. We could write more rules, make it more restrictive, and we -- maybe put a couple of auditors around to monitor them, and then you've defeated the purpose of the card in the first place.

So I think you just have to make sure that there's a disciplined process in place to make sure that they don't use them in the improper way. And we've got now -- we're looking at that and how do you do that. And Dov Zakheim and I both -- he has the travel card, I have the purchase card under my repressibility, so we're getting together to see if we can write some better rules and regulations without violating the purpose of this thing.

So -- yes?

Q: Do you think that the OMB will lift its A-76 quotas on DOD once it finds out the recommendations of the GAO panel? Is that a possibility?

Aldridge: I don't think so. We've signed up to those quotas. We finally got OMB (Office of Management and Budget) and ourselves to agree on the rate which we can make these A-76 competitions. We want to go beyond A-76, which is -- that was the debate that was around. We think there are some other ways to do this job better. We think there are some ways to divest of some non-core/core functions that we don't need to do and do this competition a little better.

As you know, there's another -- there's a panel that was set up by the Congress called the Commercial Activities Panel -- it's chaired by David Walker at GAO -- to go look into the old A-76 issues. OMB is on that panel. I am the member of the Department of Defense. We are in the final process of writing the report from the panel. It should be out the first of May. Can't go into the report because it's private at this point in time, but there will be some recommendations on how to improve the process for A-76 to make it more efficient.

Yeah, Bernie?

Q: But that's about international arms cooperation, armaments cooperation. Beyond JSF, what are the near-term goals that you have for industrial cooperation in Europe and Asia-Pacific region?

Aldridge: Let me focus on Europe first. We have -- as a matter of fact, the next month I'm hosting what's called the five- power conference. This is my counterparts in the UK (United Kingdom), France, Germany and Italy. We're hosting it here in the United States. This is my turn to host. We rotate every year. And we meet to talk about essentially international cooperation. Joint Strike Fighter is obviously going to be high on the list of everybody, but there are some other things we have working for us.

We have an International Cooperation Opportunities Group -- we call it the ICOG -- that works for us that looks for things that are meaningful in the international arena that we can cooperate on. We have some other things already in place. The MEADS, Medium Extended Air Defense System, with Germany and Italy. We're working already on things such as the Alliance Ground Surveillance Systems, AGS, for NATO. It will be a NATO-owned and -operated system.

But we're looking for other opportunities, and those opportunities center around things like UAVs, air-to-air refueling, combat ID, littoral ships. We found that our allies tend -- are quite good at building smaller, more mobile ships because they have smaller waters to defend against, and we have some interest in that and we believe there's some cooperation. In fact, we're leasing a Norwegian ship and an Australian ship to do some experimentation with. But things like that that we're looking for, opportunities that would make a difference. And we can in fact do things together without getting into all this export control hassle. Clearly, we can share these -- air-to-air refueling, for example, is something that's not going to get into the export control.

Q: And what about Asia?

Aldridge: And Asia, let's see. Obviously -- well, Australia, certainly. Let's go around this way. Singapore, we've talked about Joint Strike Fighter. We have -- I have 33 initiatives working with Singapore, for example, on the cooperative activities. Certainly in Japan we've got the patrol aircraft, we've got the fighter aircraft, Korea, obviously F-15 is involved there. It's just a whole series of things in that regard.

I've really got one more question I can take. Who do I take? You! (laughter)

Q: Now that the department has decided not to convert any more air-launched cruise missiles to CALCMs (conventional air-launched cruise missile), does that have any impact on your thoughts about JASSM (joint air to surface standoff missile) and some of the other cruise-missile options that are available to you?

Aldridge: Oh, yeah. The JASSM is doing great. It's one of the most successful programs we have. It's coming in under its cost estimate, and it's achieving its objectives quite well. So yeah, the cruise-missile capabilities we see for the future look quite attractive, and the costs are well under what we would've expected it to cost. I shouldn't tell the contractors, that, though; they'll probably come back and ask for more money. But it's doing very well.

Okay, thank you very much.