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.
Click here for the full transcript, on the Pentagon website.