MR. KRIEG: Hello, all. Good afternoon. Thanks for coming on a -- late on a Friday, and let me start by apologizing for having to schedule this so late on Friday during -- it was hard to coordinate schedules and meeting rooms during budget week. You've all been running from pillar to post since last Friday's QDR through this week's budget. So I just want you to know how much I appreciate your taking the time to come here this afternoon.
For those of you who don't know, I was the co-chair of the business practice's portion of the Quadrennial Defense Review or QDR. Although the need to improve business practices was first introduced in the 2001 QDR, the current defense review marked the first large- scale effort to actually analyze and understand how best to improve our business as part of the QDR process.
We started our review by focusing on the customer, our joint warfighter. Our warfighters are facing an enemy that requires them to be flexible and agile. Therefore, the department's business practices and processes need to be flexible and agile, so we can respond to the needs of that customer over time. And we must do so in a manner that is both efficient and effective, whether in surge or in steady state, wartime or peacetime, long-term or in the intermediate.
From a strategic point of view, our customer, the joint warfighter, has been horizontally integrated, or joined, for over 20 years. What we need to do now is to move to the next level and have a better integration of the department's support infrastructure to support that warfighter. We also need to do -- need more agile and better-aligned processes that can react to the dynamic rapidly- changing world and then deliver effective joint warfighting capabilities.
And finally, the department must organize for success with three distinct roles necessary in any strategy-driven organization. This is critical.
The first level is that of governance. This level includes the senior leadership. The governance level focuses on strategy, macro resource allocation and oversight. We need to provide strategic direction and empower the next level of management to carry out their specific responsibilities.
Management is the group, as you know, who translates strategy from the governance level to specific tasks and outcomes for those who are responsible for sound execution.
The people at the execution level, then, must implement that strategy by carrying out those tasks as determined and monitored by the management level.
All three levels should be aligned to a common strategy, ordered by a set of strategy-driven goals and tracked and measured by outcome- oriented metrics in a transparent enterprise data framework.
Now that's a lot easier to say than it is to do, and we have a lot of work actually to do, but I'm confident we're up to the task.
With that as an overarching strategic framework, I'll touch on -- just to go and list just a couple of areas that we plan to apply this strategy in specific, tactical ways. And I'll be glad to go in more detail to the extent that you are interested during the question and answer period at the end.
The areas that we reviewed in the QDR in particular -- our capability portfolio management, strategic and -- what I -- not my term, not -- the book's term -- strategic and tactical acquisition excellence, supply chain logistics, business processes and systems, and a high-performing, agile and ethical workforce.
So that's a short version of the overview for the department I think you can see both reflected in the QDR and the president's '07 budget request, as well as what I've set out as my goals in AT&L.
I'll be happy to answer questions now.
Q Thanks. Rebecca Christie from Dow Jones Newswires.
MR. KRIEG: Hey, Rebecca.
Q Thanks for making time for us this afternoon.
With regard to the QDR, we hear an awful lot about how the QDR has informed a lot of the different decisions that are being made around the building -- on programs, on budgeting, on transformation -- all these things. But the document is a pretty thin document, probably so that one person can read it, but it doesn't have a lot of the detailed analysis for where this came from, how this decision was reached or even spelling out that a decision was reached, other than maybe broadly saying, "We're in favor of, you know, some generally accepted goal."
So my question to you is do you have internal documents, memos and records of these decision-making meetings and things like that, so that there's some kind of an accountability for all these decisions, so people don't just use the QDR as an excuse for everything?
MR. KRIEG: Good question. I mean, as you know, you run a battle any time in producing a document that someone might read and producing a volumetric, you will, accounting of this. I actually brought one down. And you didn't even prep me on that question, so I get points for at least one thing.
But I mean, yes, there are a number of decisions that are prefaced or focused or framed in the QDR that then play out in a number of places. For instance, the Defense business systems and processes work started to lay out in the Enterprise Transition Plan, which we issued in September. This is the whole question of how we're going to work Defense business processes and Defense business systems over time. As you might recall, we created a Defense Business Systems Management Committee, chaired by the deputy and the vice chair, to look at business management processes and systems.
So with that as the governance framework, we then issued an Enterprise Transition Plan that tried to lay out both a strategy for thinking about business processes and business information, and then it actually allocates who's going to do what to whom by when. And we're now using the -- we stood up a business transformation agency that would work both the enterprise level systems and then continue to track the work that's laid out in this plan and in a federated process.
We had a review process that actually went through and reviewed every single major business system over a million dollars of investment, whether that review was done at the service level, the agency level, or up at the corporate level or department level. That then formed the basis of the '07 request.
And then this Defense Business Systems Committee meets on a monthly basis to continue driving metric development, what kind of metrics and performance should we have in there, and then the work over time.
So it's an example of -- it gets three paragraphs in the QDR, and there is a lot of work that then lines up behind it.
I would say of -- you know, not every three paragraphs inside the QDR have that full an answer behind them. Some of them are really signaling to where we want to go in the future. And it'll be a mix of those as we go through it.
But yes, there was a lot of work. And as I think many have told you over time, there were a lot of us, like me, who were engaged in many hours of going through it, trying to order the work and try to make decisions and then try to figure out -- as the deputy says, this not only lays out a set of decisions, but it really sets an agenda for going forward.
Q So where are the nuts and bolts, like why retire the U2 and kill the Standoff Jammer, but keep transformational communications? Where can we see the trades and the strategic reasoning behind those decisions?
MR. KRIEG: Well, you'll see that as we roll out the whole budget discussion. I mean, that will be part of the way we describe what we're doing over time.
Q Do you have documents to show how you reached those decisions internally that you can show to the Congress and perhaps the public?
MR. KRIEG: I mean -- yeah, there's documentation galore. But, I mean, you know -- I mean, we'll be describing how we're going to -- we'll be describing those decisions as we go forward in the budget review process on the Hill.
Q As you know, the Pentagon is going to enhance the IED task force, and a retired four-star, and I think there's $3 billion or more in the budget this year for the efforts. Could you talk a little bit about the role the QDR will play in informing their ability to acquire that what they need to get the job done, whatever the platforms are they need to defeat IEDs? How does that change?
MR. KRIEG: Well, I think -- the QDR starts to talk about, and actually DAPA talked about it as well, the notion of time defined -- or time certain -- we use "time defined" acquisition. To me, a lot of the work on the IED Task Force is around -- the technology-related work is around either rapid acquisition or rapid development. So the Congress of the United States has been very supportive in the last several years of providing both rapid acquisition authority and then resourcing for it. Rapid acquisition obviously needs something to be available today that you can buy to meet a need. That next tier of rapid development -- "I know I want to be able to do something, I've got something that's pretty close but I need to quickly adapt it in order to make it perform" -- is that next tier of work we need to do. And we do that in things like Advanced Concept Technology Demonstration Programs, and the like.
But, you know, from the technology side, I think obviously the QDR sets out that notion of being agile, in turning quickly on the needs of the combatant commanders. The IED Task Force -- or the Joint IED -- I'm going to forget the new term of art --
Q JIEDDO [Joint Improvised Explosive Device Defeat Organization.]
MR. KRIEG: Yeah, that one. That one. General Meigs', Retired, effort. You keep changing the names on me faster than I can keep up with them. But General Meigs' effort looks not just at technology, but he'll work with the operating forces on, you know, tactics, techniques and procedures; on the information-needed side, and integrate all of those pieces together to create a result.
And I think aside from the acquisition, that overall notion of bringing all elements of capability together to solve problems is one of the adherent messages in QDR. And clearly, the IED Task Force lays that out.
Q Do the regs get in the way or does Congress get in the way of --
MR. KRIEG: Congress has been amazingly supportive of the work on IED Task Force. I mean, we have no concerns about it. They've given us the Joint Rapid Acquisition Cell authority that gives us the ability to quickly turn and manage regs. If we've needed supporting legislation, they've been thoroughly supportive. So I mean, I feel like there's an overall national consensus on that and we're moving out on it.
Q Secretary Rumsfeld said the QDR was going to begin shaping the spending decisions in '08.
Can you say, in terms of the procurement spending for the FY Defense Plan -- the Five Year Defense Plan [FYDP], what areas we can see beginning to change in '08, and give some examples of some programmatic areas?
MR. KRIEG: Well, if I could give that, we wouldn't have been through the review yet. I mean, no, not in particular, although you can sort of point out the kinds of things -- I mean, the QDR lays out areas of emphasis. I think the secretary talks about, you know, shifting the balance or shifting of the emphasis. In terms of the overall capabilities of the department, there were clearly emphasis in the '07 budget on soft capabilities. There was the investment to begin working on the defense against biological capabilities effort. We've set out a challenge to ourselves to think through in the area of joint capabilities this capability portfolios question -- you know, joint command and control, space operations, and what was the third one -- network centric operations, where we're going to try to look at the overall portfolio of capability -- portfolio of investment opportunities -- against the capabilities we want to have, and try to figure out how we manage trades in there.
But I mean, I would argue -- people often want one decision document to be the be-all and end-all of change forever, and I really think it's more -- managing large organizations, particularly an organization as large and complex as this one, it's really a continuum of decisions over time, from 2001 through this document, through the '08 budget and continuing.
Q So are you saying that the '07 budget is sort of an inkling of what we're going to see in '08 and --
MR. KRIEG: I can't -- if I could predict '08, I'd tell you. If I knew what '08 was, I'd save an awful lot of pain between now and then. But I mean, I think it begins to tell you -- it begins to point out at least what we believe the vectors of change are now. But turning that into specific programs that will be different by '08, I mean, that's what we'll go through in the next period of time.
Q The joint capabilities portfolio, the concept, the question is how do you fund something that is supposedly joint from the start? Do you put a service in as the lead and they fund it? Do you create an OSD [Office of the Secretary of Defense] account? How do you --
MR. KRIEG: It's actually a very good question. It's one of the really hard things in trying to make change. If we go back and look at areas where we've done it in the past, we've sort of done everything; you know, from a centralized agency that has responsibility for it -- missile defense -- to a centralized account that's decentralized and distributed to performance -- I don't know if you remember the joint national training investment that we started to make two years ago.
We put a billion dollars over the FYDP into it. JFCOM [Joint Forces Command] manages it. It's a way of getting service training and joint training more aligned, and so JFCOM uses that as a pool to align the efforts of the services with the joint community. If one thinks about it, in a sense, BRAC [Base Realignment and Closure] had a central pool of money, but the decisions were managed -- you know, the decision making was actually managed from independent areas up through centrally; as now, money was centrally held and is now being decentralized for execution.
So you know, there's examples of we've done it a number of ways. I don't know the -- I don't know that there's a perfect answer for how to do it. I mean, I'm not one who tends to think that OSD ought to run a lot of things. I mean, we ought to be in -- we ought to be at that governance level -- macro choices, making strategic decisions, setting vectors -- setting strategic vectors, allocating resources and then tracking performance. If we do the management, hard to do the oversight. But I think it will be a mix of those as we go along.
The last -- I think the last part of your question was, you know, how do you get individual services interested in joint efforts. You know, one of the grandest challenges of all time. I mean, I think that's -- we're going to work at that as we go through these capabilities to try to figure out how to manage them.
Q How do you change the JROC [Joint Requirements Oversight Council] process or whatever you're going to do to make it joint from the start? Because as of now, they merge up from the service, JROC blesses it and it goes on.
MR. KRIEG: Yeah, and I think -- Admiral G probably -- I'm not going to answer for Admiral Giambastiani on how he intends to do that, but I mean, I think that's something he's clearly got in his head and he's thinking through. He and I -- as Admiral Giambastiani is the head of the joint requirements and in effect my job as, you know, head of oversight of acquisition for the enterprise -- the two of us have decided that if we're going to make changes, we need to make them together.
And we've worked very closely together, both at the programmatic level in trying to drive some choices and at the strategy level. We'll be very engaged in thinking through those portfolios together, because, obviously, you know, sort of capability management is the intersection between what you want to be able to do -- concepts of operations and the effects you want to create -- with various things you could invest in. And managing that intersection is clearly going to be -- require having requirements guys, the acquisition guys and the resources guys together making those choices.
Q On the Air Force's CSAR-X [Combat Search and Rescue] program, the exhibition strategy seems to be held up a little bit, and yet we're moving toward a contract award. Could you cover a little bit about that on what's holding that up, and when it might be approved?
MR. KRIEG: I'm going back into my memory for the last time I talked about that one. I think what we've asked them to do is come back and look at that overall portfolio of capability that the department has and what they seek to do, and try to think through that program in that context.
And I think we've got a review -- it's later this spring or summer, but I can't remember exactly when we intend to do that.
Q Do you plan to review the strategy, though? Is that something --
MR. KRIEG: Well, that was -- part of the acquisition strategy would be part of that overall context.
Q Mr. Krieg, the QDR called for a new land-based long-range strike capability to be fielded around 2018. I've heard senior Air Force and DOD officials describe it in many ways. So I was hoping you could give me a better idea of what type of system you think is within the realm of the possible within that time frame. And we're looking 12 years ahead, and you're spending this year doing an analysis. That's going to have about 11 years. While I'm assuming that you will pursue, you know, competition as much as possible, I'm wondering if, within that time frame, you think there's going to be time for kind of like a robust fly-off of two competing systems.
MR. KRIEG: You're all the way to an actual system and competition. The analysis of alternatives starts much earlier and thinks about different ways to effect -- create the effects. And so where I am personally is back here at -- let's go through the analysis of alternatives, let's think about what the options are. I mean, obviously there will be different ways to create that effect or set of effects. And then one then goes from that set of alternatives and tries to figure out what the acquisition strategy is. I think there's a lot of time.
And so the question is, what do we want in that capability and then what do we -- you know, what missions and performance characteristics would it have. And then you get to the question of what kind of system or systems or systems and systems should it be. So I'm not ready to have that conversation till we work through the first part of that.
Q At this point, are there any types of systems that you can exclude because of the shortness of time that you're working with, such as an air-breathing hypersonic system that would now traverse space, that type of thing?
MR. KRIEG: I -- you're much farther ahead of me than I am on that one.
Q Last September you -- at a speech you talked about how the demand for military services is going to grow in the future, but the resources available is going to be challenging, or it's going to diminish. And you said the country would have to make some tough choices.
So now, having gone through this QDR and the budget process 2007, I wanted to see if you would talk about what tough choices you have made and what tough choices you have not made in the process of -- (inaudible).
MR. KRIEG: There were a series of choices in the budget, but --
Q (Off mike) -- talking about in terms of trade-offs between -- (inaudible) --
MR. KRIEG: Yeah, I'm going to go through and say there are a series of choices in the budget: you know, going from 12 carriers to 11 carriers; retiring a number of legacy platforms in the Air Force; making the decision to stop building existing classes of Navy ships and move to the next generation; bringing the C-17 line to an end because the overall mix of capabilities in the mobility area are sufficient.
You know, at the program level for performance, we terminated ACS [Aerial Common Sensor] ; we were dramatically restructuring the ASDS [Advanced Sensor Distribution System]; we decided not to do the B- 52 Stand-off Jammer. There are a series of decisions -- that's eight of them -- if I had notes, I could get you a few more -- that are going to be -- you know, not everyone's going to love those.
And so we'll go through the process. Remember, the president of the United States only proposes. It's up to the Congress of the United States to dispose. And so we'll go through that process with them.
My speech was and remains that over time I believe the department -- unless the nation is willing to continue to fund the department at ever-growing rates, the department will be challenged. And so the president decided to continue to fund the department at that rate in his proposal. I happen to be very pleased that he decided to do that. We'll see how the Congress of the United States disposes on that action.
But remember, my speech was a strategic speech over time, it was not an individual speech -- it was not a speech about each individual year in the process. As a nation we've had a hard time making hard choices. If we're going to change the funding profile over time and turn it downward, there will be even more hard choices that have already been put in place, and those are going to be tough for us to do. But it's important that you make those choices and balance them with the funds you have if you're going to deliver the kind of range of capabilities to the warfighters that they need.
Q I have a question about new acquisition laws that have just gone into effect with the '06 authorization bill. They have some language in there that adds on another layer that's related to Nunn- McCurdy, and it basically forces the Pentagon to compare original cost estimates and report a breach. And I'm wondering to the extent that you have a handle on these new requirements, because on the Hill they're describing this as very significant, and they're not sure that the Pentagon is really prepared for this or they don't know how it's going to play out, at least. And I'm curious your take on that. And also if you could say what programs this is going to affect. Is it going to affect Joint Strike Fighter, F-22, the major programs?
MR. KRIEG: First of all, I don't know on the programs, because we're trying to sort that out now. But yes, I mean, obviously it will -- I think it will have significant effects. I don't think it's altogether bad to continue to continue to reference yourself back to what your original baseline was, which is at least part of the intent of the proposal.
The interesting challenge will be if we changed what that program's characteristics were in the process, how do we account that back to the original baseline proposal? So if the proposal was for a system of characteristic X and we changed it to Z and it now has a different cost and schedule, how do we account for that?
The system -- that's part of what we're struggling with thinking through. I mean, over time, particularly for programs that are sort of spiral or evolutionary development programs, they don't fit that -- decide what the program is and stay with that forever kind of model.
But anyway, we're working through those details, and we're glad to be working with the Hill on trying to sort that out. I mean, we've got legislation in six, eight weeks ago. We got a team getting together trying to sort that out, figure out what the implications are, figure out how we're going to manage it. But I think it's a significant piece of legislation.
Now, having now run one Nunn-McCurdy review -- and I have two under way -- let me tell you, we take that charge of a Nunn-McCurdy breach and the requirement to answer those four questions pretty seriously, and spend an awful lot of time thinking through the import of program, its relative options and what we ought to do about it, you know, whether the cost estimate of the option we picked to go forward is a valid cost estimate, and whether we have confidence in the management team, both inside and outside the department, inside the department and inside the contractor to deliver on the program of record that we end up with.
We spend a lot of time and effort trying to do that because it's a pretty serious -- I mean, it's -- A, it's a piece of legislation, but B, programs that get themselves in that space deserve to have a hard look at executive level. So --
Q Do you know how long it might take?
I mean, is this like a year-long process or --
MR. KRIEG: We're supposed to report to them by a time certain. And I'm sorry, I don't know that. We can get you that answer. There's a report to them by a time, and then there's a waiver period for the first year -- and I'm now stretching my ability to remember the specifics of the legislation. But, you know, we're pretty serious about it and we're following the intention, and we'll work with them as they ask us to.
Q Hi. Jeff Schogol with Stars and Stripes. Can you say whether the QDR anticipates funding operations in Iraq and Afghanistan for the next four years?
MR. KRIEG: I don't believe the QDR goes to that level of detail.
Q Well, when you were formulating the QDR and you were figuring out what the Defense Department's going to need for the next four years, did you anticipate that operations in Iraq and Afghanistan would still be going on four years from now?
MR. KRIEG: I think we looked at the whole range -- remember that the war operations -- the current operations are funded principally through supplementals. So we thought about the implications of the long war, and obviously the book talks a lot about the long war. But I don't think we talked about relative funding levels and relative size levels to any kind of specificity through that period. That obviously -- a lot of that takes place -- I don't spend my time in a lot of that area, so I'm not the best to opine on how that was done.
Q I'm Gerry Gilmore with American Forces Press Service here, sir. I don't know if you have anything to do with this, but can you speak a little bit about the battleships they have that are like really old tech. And I understand there was serious proposal to mothball them or to get rid of them altogether. Can you discuss that briefly in terms of transformation? And can they be modernized? And have you got any push-back from any people who would want to keep those ships available?
MR. KRIEG: Yeah, I mean there's -- I don't have a lot of details on this, I mean other than I know that there is a group of people who believe strongly in the capability that the battleships provide. They believe it with a great degree of fervor and intent.
As we've looked at it, that's an awful lot of mass that would have to be updated to bring it to the current kinds of specifications. It requires a tremendous number of people relative to modern ships to employ it. And all the looks that I know have been done at it inside the department have said while it -- and remember, we brought them back once -- while it provides a significant capability, there are alternatives ahead of us, like DD-X and other kinds of integrated joint fires at a range that provide a better mix of quality, a better mix of capability at a more cost-effective price.
And so, I mean, I think the department's been pretty adamant in saying it doesn't have any interest in bringing the battleships out of retirement or even continuing to fund their caretaker status to hold that option.
Q So you would agree with that, then. You think they should be scrapped?
MR. KRIEG: I haven't spent a lot of time analyzing it, but, having analyzed it in the '80s, where it was of value at that time, there are other options now and I can't -- I won't -- I haven't done any piece of analysis lately to say that it would give me reason to go back and look at the work that others have done and say it was wrong.
STAFF: I think we have time for about one more. Maybe somebody that hasn't had a chance yet.
Q Can I ask you a non-QDR question? Not too many people --
MR. KRIEG: Non-QDR question? I'm here for QDR! (Laughs.)
Q I know, but not too many people know your views on some broader defense issues, like mergers and acquisitions. What's your philosophy right now in terms of what the department would encourage if -- the tier one and tier two levels of -- they're pretty much maxed out from a consolidation standpoint, merger and acquisition standpoint. I mean, where do you see any room for consolidation that would be of benefit to the department and the public?
MR. KRIEG: I don't have a specific formulation of an answer to that in my head right now, Tony, except to say I'd like more competition rather than less. I'd like to find out ways to bring competition from -- more competition from traditional but also nontraditional suppliers into the marketplace. You know, I tend to be kind of a -- I like competition. Having suffered battle scars in the real private market, I can tell you that while you're out there competing, competition isn't always fun, but it definitely makes you a better supplier and a more customer-focused enterprise if you got to deal with competition. So, you know, as a matter of principle, I'd like to have more competition rather than less, but I like it to be real competition.
I'd like to figure out a way to make the department a more interesting place to do business for people who are not now interested in doing business with the department, for which there are a lot of people in the marketplace who choose not to do business with us because we're often slow in our decision-making; we're difficult to work with; you got to get lots of people who understand the complexity of our system in order to do business with us. And so I'd like to work at those kinds of issues over time.
Q Along those lines, the United Launch Alliance creates a monopoly where once there were two rocket launchers. How does that fit into this construct of competition? And where does that stand right now, from the department's standpoint?
MR. KRIEG: The United Launch Alliance, which was a proposal, is an issue being managed by the Federal Trade Commission. They are the regulator that reviews those kinds of issues.
They have asked us as a principal customer how we view it.
Q How do you view it?
MR. KRIEG: No comment. You know, I'm -- we continue our work, and we continue our work with our -- with the regulators to think through it, but that is a very active piece of work between us and the FTC, and it has all sorts of implications for market activity, so I won't be discussing it.
Q It creates a monopoly, though. I mean, that's why I wanted to get your sense of how does --
MR. KRIEG: I gave you my views on the desire for competition, but it's got to be competition for which there is real competition.
I can do one last. I got one in the back. A very -- you know --
Q I've been very patient.
MR. KRIEG: Yeah, I've been working the front. I'll go one to the back.
Q Thank you. Does the QDR --
MR. KRIEG: By the way, you know, you got to understand the risk trade off of sitting in the back, so --
Q (Off mike) --
MR. KRIEG: I know. I know.
Q Well, this might be an easy one, but the QDR says the department's considering moving from cost-based acquisition to risk- based, and you know, earlier we were talking about cost and acquisitions. How serious is the department to moving to risk-based acquisitions? It was something that the DAPA panel recommended.
MR. KRIEG: Yeah. I mean, to Rebecca's first question it's actually nice, because it rolls it back full circle. That's one of those where I think that's something I like -- that we like, and we're going to move in that direction. Although, if you were to ask me, show me the 50-page piece of paper that says exactly what that is, I don't have it yet. But it simply says that, you know, as you go out and look at -- as you go out and look at competitors and evaluate them, there's a lot more than just whatever they put as the price in it. You got to think about their ability to deliver on the technology risks. You got to think about their performance over time. You got to think about how much business they have already. Those are all parts of thinking about the overall risk framework of can they deliver on the outcome.
And I -- you know, to the degree that I can tell you what that means, it is there's more in the balance of thinking about a selection than just price, and so bringing -- and it's not to say that price has been the only factor in selections. It's just to say, you know, back to the shifting of emphasis -- to put more emphasis on the overall risk management and risk choices that one thinks about as you do these major procurements. And so that's -- I think that's what DAPA was trying to get at, but that's clearly how I've interpreted it.
And the direction -- so we're now trying to think through, "What does that mean? What kind of policies do we -- how do we have to shift policies? You know, are there any regulations we have to shift?" It's probably more of a point of emphasis than it necessarily is a new piece of legislation or anything we need.
But it's just back in my view that, you know, you want to manage the overall balance of risks as you think about these, not look at one vector only when making those kinds of decisions.
Anyway, thanks for your time late on a Friday. You know, get home safely before that big snow hits, and thanks.
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