Transcript

Under Secretary of Defense for Acquisition & Sustainment Ellen Lord Press Briefing on Defense Acquisition

Dec. 10, 2019
Ellen M. Lord, Under Secretary of Defense For Acquisition And Sustainment

STAFF:  Good morning, ladies and gentlemen.  Thank you for joining us today.  This morning Under Secretary of Defense for Acquisition and Sustainment Ellen Lord will provide a department acquisition update.

Ms. Lord will have an opening statement, and then we'll take your questions.  We do have a hard stop at 8:30, so please be respectful with your questions so everyone will have a chance.  Ma'am, over to you.

UNDER SECRETARY OF DEFENSE ELLEN M. LORD:  Thank you, Mike.

Good morning, ladies and gentlemen.  Thank you for being here.

I believe 2019 has been an extremely challenging and rewarding year for acquisition and sustainment.  I am very proud of the efforts and achievements of the department's 175,000 acquisition professionals.

They continue to significantly advance the department's acquisition and sustainment policy reform goals to support the National Defense Strategy and our warfighters around the world.

Today I will provide a brief update on several notable engagements I supported since our last meeting.  Next, I will talk about 2019's significant acquisition reform achievements, and before your questions I'll close with introducing my goals for 2020.

Last time we spoke I was introducing F-35, Lot 12 through 14 contract.  Since then, in mid-November, I had the privilege of hosting a two-day NATO Industry Forum, or the NIF, here in Washington, D.C.

NATO Secretary-General Stoltenberg, Ambassador Hutchison and over 400 military and U.S. and European industry leaders joined to promote stronger transatlantic defense cooperation, and helped contribute to our shared security and defense efforts.

After, we had a celebratory reception at the Andrew Mellon Auditorium, where the NATO treaty was originally signed in 1949, to help commemorate the 70th anniversary of NATO.

Following the NIF, I was the senior DOD representative at the Dubai Air Show, where I met with our ambassador to the United Arab Emirates, Ambassador John Rakolta, our Middle Eastern allies, international partners and industry leaders.

Our participation reflected the strong bilateral relationship between the United States and the UAE, promoted U.S. national security objectives in the region, and visibly demonstrated the Department's commitment and willingness to contribute to regional stability and defense of our allies.

Just following the Dubai Air Show, I supported the Joint Rapid Acquisition Cell and traveled throughout the Middle East, to Iraq, Qatar and Afghanistan.  There I met with our military and embassy leaders to best identify and understand urgent operational needs and how we can best use our rapid acquisition authority to facilitate the timely resolution of urgent warfighter needs.

In Iraq, I met with Ambassador Matt Tueller and Operation Inherent Resolve commanders, who helped provide a great overview of the political and military environments.

In Qatar, I visited the Combined Air Operations Center at Al Udeid Air Base and received briefings from the air perspective.  It was really amazing to be there as the USS Lincoln transited the Strait of Hormuz.  We were able to watch on the screens all of the activity in the air and on the ground.

In Afghanistan, I visited Bagram Airbase and then went to Kabul, where I met with the Resolute Support Leadership, Combined Security Training Command and the Afghan Special Air Wing.

The one takeaway from all of my visits is that we need to continue to focus heavily on counter-UAS systems and strategies.  This remains a top priority for the department, and I will continue to engage with Congress and the Defense Industry on ways ahead.

This past weekend I attended the Reagan Defense Forum in California, where I met with multiple congressional members, industry CEOs and participated on an emerging technologies panel.

I said that we must balance the requirements to maintain our current platforms for the immediate threat, develop new technology to ensure we can dominate in a future fight, and change the way we do business to access the power and progress of the commercial sector.  Counter-UAS is an example, an excellent example of this balance.

In addition, we need to continue to partner closely with industry.  I continue to meet with our industry partners.  I meet one-on-one with CEOs monthly, jointly, with major defense contractor leadership teams and senior DOD and service representatives and more broadly with the industry trade associations.

Secretary Esper has conducted the first two of a series of industry dinners, most recently on November 25th, which focused on issues related to 5G and telecommunications.  Prior to that, he held a dinner for the leaders of industry associations to focus on the implementation of the National Defense Strategy.

Last weekend at Reagan, he held another industry breakfast with defense company CEOs, which resulted in a great dialogue.  Industry dinners in the coming months will focus on mid-tier suppliers, international partners and nuclear deterrence.  A&S remains focused on supporting all three lines of the National Defense Strategy: lethality, strengthening partnerships and alliances and reform.  Every one of my six strategic priorities are aligned under those lines of effort.

My role as under secretary is to ensure that we have an acquisition system that meets - that moves at the speed of relevance.  2019 saw several major steps to achieve that end. We are rethinking the way we do business and are reshaping A&S as a policy and governance organization that enables the services and defense agencies to execute their jobs successfully by scaling to enable innovation and supporting a culture of innovation, critical thinking and creative compliance.

For example, DOD manages 87 major defense acquisition programs, and all but nine have been delegated to the services to execute demanding an agile acquisition framework.  In addition we have seen a 15% reduction of defense federal acquisition regulation supplement (DFARS) clauses from 352 to 298; a 60% reduction in DFARS publication backlog from 128 to 50, and a 50% reduction in procurement, administrative lead time from 32 to 16 months for multiple pathfinder projects.

The results for 13 major program administrative lead time, or PALT, pilots, including six foreign military sales pilots, averaged 16 month savings and $1.5 billion in cost savings from a $15 billion baseline to get programs under contract.

We're in the final coordination of the rewrite of DODD [DOD Directive] 5000.01 and DODI [DOD Instruction] 5000.02.  I hope to have signed policy this month.  I cannot emphasize how important this is, and I continue to scribe it as the most transformational change to acquisition policy in decades.  In fact, what we have here is a description of a lot of that for pamphlets that you can have later that also talks about our six priorities.

We're still on track to publish the adaptive acquisition framework in January which will be the most transformational acquisition policy change again that we've seen in decades.  Once final, we will post all of this on the defense acquisition university website so the entire acquisition community can access and provide feedback and lessons learned.

This will allow acquisition professionals the choice of six pathways that they can choose from based on the characteristics of a product or system or service to be acquired, and shows vignettes of what right looks like on certain types of acquisitions.  For certain acquisition authorities, it suggests what contract types are most appropriate and then gives an example of when they're used correctly and incorrectly.  This is based on data-driven analysis and will be featured on a new website and multiple new courses at DAU, including agile acquisition and services.  Feedback will be built into the system to help stay updated.

Another success is other transaction authorities or OTAs.  Thanks to Congressional support for prototyping, we have seen OTA transactions triple from $1.4 billion in 2016 to $3.7 billion last year.  Our OTA handbook and DAU support both play vital roles in this success.  Just as encouraging is the 88% of OTA business is with companies who typically did not do business previously with the government.  OTAs allow innovation to bypass bureaucracy, reducing timelines and lowering costs to provide the best capabilities to our men and women in uniform.

Next, we are in the final stages of publishing the middle tier of acquisition policy.  This pathway enables program managers to prototype or field mature technology in an operational environment within five years. Since our pilot started 18 months ago, we have gone from zero middle-tier programs in November 2018 to over 50 middle-tier programs today delivering military utility to warfighters years faster than the traditional acquisition system. Again, it's critical we focus on the speed of relevance.

We have formally stood up our OSD intellectual property cadre, led by Director Mr. Richard Gray.  He's coming out of the Office of General Counsel where he has been the department's sole I.P. lawyer, and he will report to Kevin Fahey.  They will operationalize our newly-released DOD policy within the whole-of-government effort to address concerns on data rights targeted by cyber-security threats.

The Cyber-Security Maturity Model Certification, or CMMC, program establishes security as the foundation to acquisition and combines the various cyber-security standards into one unified standard to secure the DOD supply chain.  The department continues to move forward and I'm thankful for the multiple listening sessions we've had with industry and the Hill. We're using over 3,000 public comments to help tailor the final model which will have five levels of certification tailored to the criticality of the subsystem. These levels will measure technical capabilities and process maturity. The CMMC framework will be made fully available in January 2020 and by June 2020 industry will see CMMC requirements as part of requests for information. 

I remain committed to recruit, develop and retain a diverse A&S workforce.  This year we enjoyed the first cohort of our industry exchange program run by our Human Capital Initiatives office.  The program was very successful in providing industry and government participants a view of how the other side works and how we can work better together.

We're planning now for the next iteration that begins in January, which will have increased attendance.  Again, I have some information here that talks about that program.

I'm also committed to providing our workforce new insights and best practices that we can take from the commercial sector.  Earlier this year we held a successful TEDx event at DAU, and we're looking to do another one next year.

Last month in Texas, the department and the Texas A&M University system co-sponsored Drone Venture Day, where over 39 U.S. manufactures of unmanned aerial vehicle systems and counter-UAS systems met with 12 trusted capital providers to explore mutually beneficial partnerships, business partnerships, focused on national security concerns.

Drone Venture Day represented the inaugural event, in a series of trusted capital opportunities to build an ecosystem where trusted capital providers and domestic companies can limit adversarial foreign access to technology and strengthen domestic manufacturing in the defense industrial base.

While this event focused on unmanned systems, others will focus on additional key technology areas. These fora will assist in promoting and protecting the industrial base, especially fragile sectors, as identified by the executive order 13806 report.

Moving on to military housing.  I want to be very clear that the department remains absolutely committed to the health and safety of our men and women in uniform, their families, houses and communities in which they live.

On military housing, you've seen multiple hearings recently, to improve the trust and accountability of our leadership to provide safe -- safe, healthy homes for our military families renting privatized housing.  Department and service leadership are finalizing a military housing resident bill of rights.

We are planning for publication and implementation following the NDAA release.  This bill of rights was based on resident surveys and inputs.

On the PFAS Task Force, this remains a significant focus topic for the department.  Every service secretary and OSD leadership remains strongly engaged.  With Mr. McMahon leaving, Mr. Potochney is now running the Task Force.  The next deliverable is an interim report to the Secretary on the activities of the Task Force.

Moving on to bi-lats, international bi-lats; I am very fortunate to have represented the department around the world with so many of our key allies and partners.  Through our International Cooperation Office, I have supported 68 bilateral engagements with international partners, engaging them on vital issues and promoting greater exportability around the world.

Building on our most recent U.S.-India Defense Technology and Trade Initiative, or DTTI, meeting in India, where we signed a joint statement of intent on several projects.  We're going to end the year with the 2+2 ministerial dialogue.  The upcoming to 2+2 this month in Washington, D.C., is our near-term opportunity to finalize the standard operating procedures document that will identify and develop cooperative DTTI projects.

I also continue to consistently meet with professional staff members and members outside of hearings to talk about programs, reforms and to answer their questions.  I remain fully committed to consistent and timely engagement with Congress.

In 2019, there was an enormous amount of focus on acquisition.  In 2020, we will keep that momentum going, focusing on the CMMC rollout, 5G, protecting intellectual property, fielding counter-UAS systems and strengthening the national technology and industrial base.

In 2020, sustainment will continue to play a vital role, from service aircraft, ground and sea systems sustainment, to military housing and supporting military PCSs.

In closing, it's regrettable that we are again under a continuing resolution.  C.R.s cause great damage to military readiness and disrupt our ability to modernize our strategic forces, including nuclear, for the future.  I have seen the NDAA summary that was released last night, and I strongly encourage Congress to pass a defense appropriations and authorization bill now, so that we can move forward with the many important programs needed to ensure our readiness and deter our adversaries.

With that, I look forward to your questions.

Tony?

Q:  Yes, a couple F-35 questions.  The NDDA has got a number of provisions on the program, but a couple things.  What's your latest assessment on when the full-rate production decision can take place next year?

And two, after you and the General were up here announcing block 11, I mean 12 through 14, and then you testified before the Hill, the JPO put on a temporary suspension of deliveries for something called co-mingling of different fasteners, from Texas, to Georgia, to Italy, to Israel.  Seems like a major supply chain issue that should be solved before you do full-rate production.  What's your take on both issues?

MS. LORD:  All right, multiple questions here.

Q:  They were succinct.

MS. LORD:  Okay, they were succinct.  I take note of that.  We expect the full-rate production decision in the fall of 2020.  And then relative to the fasteners, DCMA noted on 12 November, that Lockheed had found instances of co-mingling of Titanium and Inconel Fasteners.  I have full faith and confidence in Lockheed's ability to deal with quality issues such as these.  I meet with Marilyn Hewson on a monthly basis.

At the time that they found the issue with the fasteners in November, we temporarily stopped accepting aircraft, then the U.S. government and Lockheed engineering analyses were done.  Those analyses showed that the aircraft were safe to fly.  So on 27 November, we resumed accepting aircraft.

So again, we are working with Lockheed.  We have DCMA hand-in-hand with them, but I am fully confident that we have strong quality systems at Lockheed and this will only make us stronger.

Q:  So, one offer is indication of a systemic problem, though?

MS. LORD:  I have no indication of a systemic problem, and that's why we have our government DCMA reps on the floor every single day working along with Lockheed to ensure we have no systemic problems.

STAFF:  Aaron?

Q:  Thanks, ma’am.  Couple things on the Texas event.  The --

MS. LORD:  The drone?

Q:  Yes, can you just run through -- you mentioned there were 12 trusted capital providers.  Were there -- is that totality of the trusted capital program at the moment?  You also said that there were 39 companies who went there.  Did any contracts actually come out of that?  And then, when's the next event, and what's that focus going to be?

MS. LORD:  Ok, so, we did not actually cut any contracts that day.  We did not have the focus on that.  Our focus was to try to vet capital providers to make sure that we can provide what I call "clean money" into, particularly, our small businesses, often who were started with U.S. government money at universities or labs.  And the companies that are trying to transition from SBIRs and so forth into an ongoing concern with business cases that are self-sustaining.

We have found way too many times that we have what I'll call "adversarial capital" coming into companies, and we then have to go through what I'll call "defensive measures," such as the Committee on Foreign Investment in the United States (CFIUS), to stop that, to make sure we have a secure and resilient supply chain.

I think that that is necessary, but it's not sufficient to have a robust, secure and resilient industrial base.  So what I wanted to do was to have an injection of capital on the front side.  This -- by no means, these 12 capital providers, are not the totality of our trusted capital partners.  However, they were particularly interested in this inaugural event.

We see this as developing an ecosystem to have investment in areas that the Department of Defense thinks are particularly critical for providing capabilities to the warfighter, but also translate many times into commercial products.  And I think you know that DJI flooded the market with low-cost quadcopters particularly, which eroded our industrial base and really altered the landscape for the U.S. government and for the small drone industry.  What we want to do is reinvigorate that.

Q:  Future events, the next --

MS. LORD:  We have several events.  I think we are considering things from microelectronics, critical components, the 5G integrated supply chain to, perhaps, even castings for aircraft engines, that type of thing.

So we have an enormous amount of interest from our services.  And, in fact, we are trying to, at the OSD level, provide some rule sets for vetting capital that then will play into some of the efforts the Air Force, the Navy and the Army has going on as well.

STAFF:  Lee?

Q:  Thank you.

At the beginning of your comments, you mentioned counter-UAS and how you see a need there.  Could you talk about your discussions with commanders on the ground and what they're seeing and how you -- and how that will translate into prototyping or programs of record in the future?

MS. LORD:  So one of the threats seen in every AOR -- and as well, CONUS here, coming towards a lot of our military installations, are a variety of different drones.  Often small, difficult to detect with typical sensor packages we have.  We have had each of the services and a number of agencies over the last few years, focused on trying to come up with systems to combat this.

What we in the department have done, and what I talked to everyone down-range about, is the fact that we're coalescing these efforts to try to be efficient and effective.  We have just named the Army as the executive agent for counter-UAS within the department, working very closely with A&S.

We're using our senior integration group, our warfighter senior integration group construct, to meet on a routine basis with all of our COCOMs by Secure Video Teleconferencing, and then with all the services and the support groups, to talk about how we qualify systems and neck-down to the critical few that have the sensor modalities and the actual either kinetic or electronic warfare-type systems, to neutralize incoming threats.

What I particularly talked to everyone down-range about was the nature of the threat they see and how the evaluations that we're doing in conjunction with DOT&E are going.

My goal is to make sure we have three to five systems that are tailored to a series of different types of threats, and that we can get the economy of scale, of having a few best systems out there.  And we talked about how to get those systems into the warfighter's hands as quickly as possible along, very importantly, with training and a logistics tail.

Q:  Thank you.

STAFF:  Tony?

Q:  Thank you, ma'am.

It seems like, going into 2020, there are going to be two distinct efforts that might push against each other.  You're trying to make acquisition faster and more streamlined.  But yet at the same time, with supply chain security initiatives and CMMC, you're going to put another oversight regime on top of many layers of bureaucracy at the Pentagon.

How are you going to make that work?  And what are you telling defense contractors who are worried that CMMC is coming down on them too quickly, that it's going to force them to have to get what are known bad actors out of their supply chain, but maybe will hurt, overall, the defense industrial base and what is available?

MS. LORD:  So cyber-security is a threat for the Department of Defense, for all of government, as well as critical U.S. business sectors such as banking and health care.  So we know the adversary is at cyber-war with us every day.  So this is a U.S. economic security issue, as well as a U.S. security issue.

When we look at cyber-security standards, I believe it is absolutely critical to be crystal-clear as to what expectations measurements are, what the metrics are and how we will basically audit against those.

We are standing up third-party suppliers.  We have been on a 12-month listening tour with a lot of cycles of rolling out straw men, if you will, as constructs, getting a lot of feedback.  Our primes understand this.  They understand that this is not a trade like cost, schedule and performance.  There is absolute minimum level to be achieved.

However, it is tailored to the needs of the system and it isn't one-size-fits-all for complex systems.  Major subcomponents will have varying levels of cyber-security requirements.

So that all being clear, we know that this can be a burden to small companies particularly, and small companies is where the preponderance of our innovation comes from; very, very important to us.  So we have been working with the primes, with the industry associations, with the mid-tiers, with the small companies on how we can most effectively roll this out so it doesn't cause an enormous cost penalty for the industrial base.

There are a lot of creative ideas that actually the primes have come up with in terms of how to tackle that, and we are working very hard over the next two to three months on how to incorporate that so that the small companies can be compliant without incurring a lot of cost.

So in future events such as this, I think we'll be detailing what some of that is.  But this is a partnership, and we know we can no longer ignore cyber-security, and we know the adversary looks at our most vulnerable link, which is usually six, seven, eight levels down in the supply chain.

Q:  In terms of the creative ideas, do you envision waivers for companies like this, smaller innovative companies?  Or what would help you get to them?

MS. LORD:  At this point, I don't rule anything out, but I'm not envisioning waivers.  I am envisioning the primes and the industry associations and the government with industrial policy, really working as kind of the help desk, the help agent, enabling these companies to be compliant with a lot of support.

STAFF:  We're going to go right there.

Q:  Just a quick follow-up on CMMC.  Has the third-party vendor been selected that will do the review process to determine a company's level of where they're at in that cyber --

(CROSSTALK)

MS. LORD:  We are working with multiple companies that are interested right now.  We have not officially designated who is qualified.  There will be more than one.

Q:  Will that maybe come out in January when the final policy is released?  Will it be tied together?

MS. LORD:  I'm hoping by the end of January, we will have that.

STAFF:  Travis, and then we're going to end with Sylvie.  Go ahead.

Q:  I just had a follow-up on the CMMC, ma'am.  And it was just a more pointed question about capacity.  Are you worried about a potential bottleneck?  You have a lot of vendors out there and companies.  Are they going to be able to get in, get their accreditation or audit done and be able to do business?  I mean, how are you ensuring there won't be a bottleneck --

(CROSSTALK)

MS. LORD:  We are working on the rollout right now, and we are looking at a rolling rollout for actual RFPs that go out in contracts, so we have to prioritize that in areas where we are particularly concerned.

So I am mindful of not creating something that does have a bottleneck and we're working through those details right now.

STAFF:  Sylvie?

Q:  Yes.  Hello.  Amazon formally complained yesterday about the attribution of the $10 billion contract for the cloud.  Do you -- do you think it will slow the process of implementing this contract?

MS. LORD:  We will deal with Amazon's legal actions -- and I can't comment on those right now -- but I will tell you we are moving right now, forward with the JEDI contract.  We actually have a kickoff event with Microsoft tomorrow morning, so we are moving forward.

STAFF:  Ma'am, do you have any closing comments?

MS. LORD:  Just I'm looking forward to closing out 2019, the calendar year, strongly.  I'm very encouraged by what I see from Congress, working towards both authorization and the appropriations bills.  We had a great weekend with industry, Congress, the whole executive branch out at Reagan this weekend, so I'm very bullish about 2020.  Thank you.

STAFF:  Thanks, everyone, for being here today.  Merry Christmas and happy holidays.