Remarks as Delivered Secretary of Defense William J. Perry - American Institute of Aeronautics and Astronautics
Washington, D.C.
Wednesday, September 11, 1996 - noon
I spent most of my career as an executive in the defense
industry during the Cold War. And as I look out at this
audience, I recognize colleagues with whom I worked during those
years. You and I were all cold warriors during this critical
period in our nation's history. And during that period, I spoke
many times at the AIAA meetings. In 1979, when I was at DDR&E, I
spoke about the actions that we were taking to deter the Warsaw
Pact from launching a bold strike into Western Europe. I
described the offset strategy, applying our technology to offset
the numerical superiority of the Soviet Union. I talked about a
new generation of weapons that were being developed -- precision-
guided missiles, AMRAAM, satellites, F-18s. Of course, we were
developing the F-117. Nobody then talked about that.
In 1980, I spoke again to the AIAA. And I spoke about the
actions necessary to maintain our nuclear deterrent against the
Soviet Union. I described the major programs that were underway
to develop a Trident submarine, the Trident missile, the ALCM,
the GLCM, the Pershing, the MX -- all of them designed to close
what we perceived to be a window of vulnerability. How long ago
all that seems. And how the world has changed.
Today, the challenges we face are very different: The
challenge that you face in the defense industry, the challenge
that you face if you are in a university today, and the challenge
that we face in the Defense Department. Now, we are almost 10
years into the post-Cold War era. And the shape of the future is
becoming clearer. The threat of nuclear holocaust has receded.
But now we face a growing danger of proliferation of weapons of
mass destruction. The threat that was created in Europe is gone.
But now we face a growing danger of regional conflicts and civil
wars.
And through all this, the defense budget has dropped about
40 percent in real terms. But I expect this has probably leveled
off now and will continue at this level on into the next century.
But how do we collectively -- we in the Defense Department, you
in industry -- confront these challenges? How do we deal, for
example, with the threat of the proliferation of weapons of mass
destruction?
We have helped Russia dismantle thousands, literally
thousands, of nuclear warheads in the last few years. We have
helped them destroy literally hundreds of missiles, and bombers,
and silos. We have a vigorous program to prevent rogue states --
North Korea, Iraq, Iran, Libya -- from gaining nuclear weapons.
And we are leading an effort to get the Chemical Weapon
Convention Treaty approved. In fact, this will come to a vote in
the Senate, probably later this week.
I urge you to support that treaty. One of the things it
does is destroy 40,000 tons of poison gas which is in Russia
today. That has to be in our national security interest to see
that happen. It will also restrict sales of prohibited chemicals
to the rogue nations that don't join, making it harder -- not
impossible, but harder -- for them to develop the chemical
capability
How are we dealing with the other problems? How are we
dealing with the problems we face everyday? The danger of more
regional conflicts? And doing that in the face of a 40 percent
reduction in budget?
The last two times we cut the defense budget that much --
after the Second World War it was cut even larger and after the
Vietnam war it was cut about the same -- we had a disaster on our
hands of trying to restructure, adjust our forces. Particularly
after Vietnam, we tried to maintain the force structure and we
ended up with a large hollow force. This time we are doing it
right. We are downsizing the force, at the same time maintaining
varied high levels of readiness.
This adjustment started with Dick Cheney, Colin Powell and a
Base Force which they specified more than five years ago. That
call for a 25 percent reduction in the military forces was
continued with Les Aspin's Bottom-Up Review, which basically
sustained the cuts -- the reductions being made in the base force
-- and carried them on for three years longer, for a total of a
33 percent reduction in the force. And at the same time to
strengthen the commitment to higher readiness.
Today, today, this draw-down is essentially over. We have
gone from over 2.1 million in the armed forces to just under 1.5
million. And in my judgment, it has been successful. The
readiness of our forces is as high as it has ever been. I see
this many ways. I see it, for example, in the bill we get for
O&M. Today we are spending more O&M dollars per military
personnel than at anytime in history. I see it in the
statistics, the monthly readiness reports, which are submitted in
voluminous detail. I see it with my own eyes every time I go to
bases, go to our deployed forces. But most importantly, I see it
in the performance of our forces when we deploy them; when we
deployed them to Haiti, when we deployed them to Bosnia, when we
deployed them to Southwest Asia.
I also see the quality and morale of our forces as being
high. I see this in the recruiting statistics. We are still
bringing in historically high levels of high school graduates and
high qualification test scores. We still have historically high
records of retention rates. And again, I see this quality and
morale with my own eyes every time I visit a base. That's the
good news. But we have paid the price for this high readiness
level. That is, we had to drive the modernization funding down
to new lows to achieve that.
Now, when you do that, when you squeeze down the
modernization funding, ordinarily you would expect that to lead
to obsolescence of equipment and, therefore, to a readiness
problem because the equipment isn't functioning properly. That
has not happened to this point. The reason it has not happened
is pretty obvious if you stop to think about it. Because we are
bringing down the modernization budget at the same time we are
constricting the force, we are taking equipment out of the
forces. Obviously, we took the old equipment out. And so as a
consequence, the average age of our equipment is still at good
levels. But as I told you, the draw-down is now over. And
therefore, if we do not get the modernization back up, it would
be a year older every year with many of our systems.
So it is crucial that we get this modernization program back
on track. The question is how do we do it? The first key to
this is that we have to pour more money into it. We do not have
magic wands, we do not have smoke and mirrors. We have to put
more money in our modernization. The five-year budget of both
the Administration and the Congress do just that. The
President's budget, for example, calls for a 40 percent increase
in real terms in the modernization budget over the five-year
program. Congressional budget proposals call for about the same.
This is the good news there. A qualification on that good news
is both the Administration and the Congress have a strong
commitment to achieving a balanced budget. And as the years go
on, it will become more and more clear if these two goals are in
conflict. So that is a problem ahead of us. But at least the
baseline that we will be starting from is that the modernization
budget is scheduled in our budgets for about a 40 percent
increase.
In order to achieve this, we have to divert major resources
from infrastructure expenses to modernization. A big part of our
management in the Defense Department in the last few years, and
certainly on into the future, is going to be effecting that
transfer of funds of infrastructure to modernization. The
leading edge on this has to do with the savings from base
closing. The last few years the savings from base closing have
all been negative savings. That is, it costs us money. There is
a front-end investment associated with closing the bases. Two
years ago that was $4 billion. This is not small change. Now we
are going, within a two or three years, to a $6 billion savings
in base closing. So we are swinging about $10 billion from a
cost of $4 billion to a savings of $6 billion just to the bases
that we have closed. And by the end of the decade, during the
tail-end of this five-year program ahead of us, we will have
another $10 billion to put into modernization as a result of
those sets of actions.
The Defense Science Board in its summer study this year
recommended other major actions we can take to swing resources
from infrastructure to modernization. The most promising of
those, I thought, was the savings that can be achieved by
undertaking a vast and a comprehensive program in inventory
reduction. These are not new and untested ideas. Industry has
been doing this for years and the savings which we think can be
generated there are on the same order of magnitude of the savings
that we are going to make from the base closings.
But a third part of our strategy, however successful we are
in these other elements of our strategy, is to make major savings
in acquisition reform. This has been a primary goal of mine ever
since I came back to the Pentagon three-and-a-half years ago. It
has been the goal of other secretaries of defense, and so far in
history, it has been notable as a goal which has been noticeable
by lack of achievement. This time we are going to achieve it.
Now, the first year I was in the Pentagon, I concentrated on
getting new legislation put together and putting an acquisition
team in place. The Congress has been very supportive, very
cooperative. They gave us the legislation that we asked for.
The acquisition team that I put in place, in particular the
acquisition executives, were selected because, first of all, they
had to be experienced. They had to be able to hit the deck
running. We could not do on-the-job training for the time we had
to work this problem. They had to be dedicated to the same goal
that I was dedicated to: of really converting our acquisition
system over to one which uses commercial practices and bought
commercial components, wherever feasible. And they had to be
managers. They had to be able to drive this system, not be
driven by it. The team of acquisition executives we have in
place -- Paul Kaminski, Gil Decker, Art Money, John Douglas --
all meet those tests.
The second year of this program, we have been implementing
the new laws that we have gotten into regulations. I see Colleen
Preston in the audience here. She played a major role in making
that happen. And educating the acquisition team as to how we are
going to be doing business in the new way. And with all of that
together, then, we had to start the pilot programs -- a half-
dozen pilot programs in which we intended to demonstrate that you
really could save money and get high quality products this way.
There was considerable skepticism on that basic point.
The third year we started to get the results from the pilot
programs. And the results were stunning. You heard about that
already some this morning and I will not repeat that in detail.
In the fourth year, now our task is scaling up -- going beyond
the pilot program to hundreds of programs and applying the
techniques. Not just to the new programs being started but back
retroactively to the programs that are already underway in the
Defense Department.
All of our pilot programs have showed great promise and have
led the way to the future. The most dramatic results probably
came from the JDAM program, the Joint Direct Attack Munitions. I
don't know the extent that it has been discussed or that you are
familiar with it. Let me just tell you that program converts
dumb bombs into smart bombs. It is a program that is worthy
in and of itself, quite aside from the acquisition reform aspect
of it. But under the old acquisition system, these conversion
kits were scheduled to cost $42,000 a pop. And now we have the
fixed price bids in and we are building and delivering those
systems. And they are coming in at $14,000. Now, this is not a
5 percent or a 10 percent reduction. It is a cost of one-third
of what the original estimated cost of that program was.
We are buying tens of thousands of these munitions. So you
put that all together, that one program alone is going to save us
$3 billion -- $3 billion dollars which we will be able to apply
to other modernization programs, more force modernization. I am
absolutely convinced from the data that I have seen on those
pilot programs that we are talking about many billions of dollars
a year savings, which means we will be able to buy many more
quantities of equipment with the same resources.
But acquisition reform does more than improve the quantity
of weapons systems we have. It also improves the quality. We do
not have to make a trade-off on quality for doing this. Indeed,
the quality that we have incorporated in the new systems stem
from the new generation of computers, communication systems, semi-
conductors, and software. In all of these cases, the technology
is developing at a breathtaking pace. But it is developing at
that pace in the commercial computer, communication and software
sectors. And in the past, our defense acquisition system, by
creating barriers, had simply limited our access to this
technology in a timely way. And the new acquisition system
eliminates those barriers and speeds up by at least a generation
our access to modern communications and software technology. And
we are counting on this new technology to give our military
forces the ability to dominate the battlefields of the future.
The first element of this, and the one that is easiest to
see, is air dominance. By dominating the air, our strike forces
can devastate opposition ground and naval forces while at the
same time protecting our own forces. And the key to this air
dominance is stealth technology, and superior performance from
our interceptors and our air-to-air missiles.
Therefore, we are committed to the development of the next
generation of tactical fighters: the F-22, the F-18 E&F, the
joint strike aircraft. These programs are expensive. If you
didn't know that from personal experience, you can read about it
in the newspapers because the critics are coming out everyday
explaining just how expensive they are. And they have become,
therefore, the favorite targets of budget cutters. And those who
want to cut these programs out argue that we can maintain air
superiority without them. Well, during the Cold War, air
superiority was our goal. In DESERT STORM, however, we did not
just have air superiority. We had air dominance. And that air
dominance allowed our strike aircraft to devastate the enemy
ground forces with virtually no losses to our own. And at the
same time allowed our ground forces to operate without air
interdiction.
Having once experienced air dominance, we liked it. And we
are going to keep it. And we are going to keep it by tapping
into the power of information technology and by investing what we
have to invest to get it. It does not come cheap when you are
buying it. But the effectiveness of it is without question.
The second key area in achieving this dominance of our
military forces, is precision strike capabilities. These
precision strike forces allow us to destroy enemy targets with
one or two weapons. And the key to these, of course, is the PGMs
-- the Precision Guided Munitions, which again proved themselves
in DESERT STORM. Recently, there has been a report by the GAO
that have questioned whether these and other smart weapons are
worth the price. The analysis in that report made the profound
observation that in DESERT STORM we dropped many more dumb bombs
than smart bombs at a much lower cost per bomb. This analysis
missed, however, that the cost measure is not how many bombs you
drop, but how many targets you destroy. And by that measure, our
PGMs performed brilliantly. The analysis also leaves out
important details which are hard to quantify, such as the down
side to collateral damage, and such as the increased risk to the
crews that are flying the airplanes.
The one area that the critics are on safer ground is by
suggesting that we could make our smart weapons smarter. And
with that, I fully concur. And indeed, our entire R&D program in
this area is directed to just that objective. The new generation
of PGMs that we are designing now are designed to overcome the
vulnerability to counter-measures which was evident in DESERT
STORM, but never exploited by the other side, and the
vulnerability to adverse weather. Indeed, the new generation
will achieve true fire and forget capability and nearly all-
weather capability.
The third key to force dominance is focused logistics. Not
just the weapons systems we buy, but the logistics system is a
huge part of our capabilities and here, too, information
technology plays a vital role. With the systems that are now
being introduced, the tracking of logistics is going to make a
huge difference in our ability to manage the whole logistics
better on the battlefield. And there is also a very great
indirect benefit. Because with the Precision Guided Munitions,
we know we can hit a target in one or two shots and that means
dramatically fewer weapons to store, to transport, and to guard.
So we see a transformation, a true revolution in logistics,
stemming from the application of information technology, both in
the management of logistics and in the development of improved
weapons.
The fourth area I want to mention that is key to battlefield
dominance is achieving situational awareness, meaning that the
commanders will have complete, real time knowledge of the
disposition of all enemy and friendly forces. We had that -- we
demonstrated that for the first time in DESERT STORM. And at the
same time, we succeeded in denying that knowledge to the opposing
forces. DESERT STORM demonstrated that when the number of forces
were roughly equal, the synergy of air dominance, precision
strike, focused logistics and situational awareness give us the
ability to dominate the battlefield. And there is little
question that with the new generation of information technology,
we can develop force dominance to an extent that we could have
only dreamed about five years ago. And the key to our succeeding
in doing this over the next 5 to 10 years is our success in
acquisition reform.
Now, I have talked about a budget for doing all this work.
And I have also said that both the Congress and the
Administration are planning 40 percent additional funds in
modernization over the next five years. They are giving you some
clue that this is not something that anybody can put into their
pocket at this stage because there is a political consensus in
Washington to balance the budget during that same period. And
the question, then, that I want to come back to, is how can we do
both? That will be one of the big issues which we will address
in our Quadrennial Defense Review coming up next year. This will
be the 1997's equivalent to the Bottom Up Review.
The revolutionary changes that we are making in military
technology and military warfare can be the tool which will help
us square this circle. And the simplest example that I have in
mind is the combination of smart weapons and smart logistics that
I just mentioned to you. Because that combination can be a real
manpower saver and a real cost saver. But, whatever we do,
whatever we do in this modernization program, does require
getting our acquisition system transformed. I sum up again, it
is not only because the cost savings will allow us to buy the
quantity of weapons we need, but require this acquisition reform
to allow us to bring in the latest generation of information
technology which is the key to the quality of our weapon systems.
I'd like to conclude with my favorite quote from Winston
Churchill, who said, You can always count on the Americans to do
the right thing after having first exhausted all other
alternatives. We have, I believe, exhausted all other
alternatives for defense acquisition. And we are finally doing
the right thing. And with your help, and with the help of
Congress and the dedicated team of acquisition executives we have
now we'll do the right thing. And the benefit to that will be to
our troops in the field who have the best and most effective
weapons systems U.S. industry can supply for them.
Thank you very much.
