Krieg Speech to the Contract and Fiscal Law Symposium Charlottesville VA December

							                        United States Department of Defense

                        Speech

2007 Goals for AT&L
Remarks as delivered by the Under Secretary of Defense for Acquisition, Technology and
Logistics Ken Krieg to the Contract and Fiscal Law Symposium, Charlottesville, VA, December
7, 2006.

Thank you, Lt Col Ralph Tremaglio, for that introduction, and thank you all for having me here
today.

This is a very busy time in Washington, DC. We have lots of speculation circulating about the
impact of the change in the House and Senate leadership, not to mention the changes that have
already happened and the guessing games about more to come.

I have no idea what will happen in the days and months to come in regard to those changes. So
today, I’d like to stick to what I do know, and that it is that the Pentagon is in the midst of big
changes in the way we do business. And as Under Secretary of Acquisition, Technology and
Logistics, I will continue to play a leadership role.

No matter what party is in control of the House and Senate and no matter who is named
Secretary of Defense, I think we can expect to face tough choices as budget realities set in.

So, the question we face as a Department is: How are we going to assure that we carry out our
missions effectively and economically? The question you face as our contract attorneys is: How
are we going to do so within the bounds of the law? I would add that you need to ask yourselves
how you can help the process move more quickly, while still allowing time for being thorough
and accurate.

I have delivered dozens and dozens of speeches talking about the importance of balancing cost,
schedule and performance. I’ve written magazine articles, and sent out emails echoing the same
message. I also head up milestone decision meetings for programs that require this balance so
we can move forward.

In the negative extreme, we can set requirements that reach toward superiority in all domains,
fund at what we are wiling to pay today, and then differently – tomorrow. And in the success
oriented world of acquisition, link optimistic assumptions about technology maturation, life-
cycle costs, manufacturing readiness, etc., etc.

This is a recipe for a future Nunn-McCurdy breach – and I’ve crawled through a few of them.




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So, I’ve asked myself: What will it take to avoid such a breach? Here’s what I’ve come up with
– We need:

   A common sense of value – the efforts in defining joint capability are trying to advance this
    cause.

   A willingness to trade between and among priorities and within portfolios at the governance
    level.

   A commitment to trade among independent processes – domains. At the management level,
    trade among cost, schedule and performance, or among requirements, resources and
    acquisition at the process level.

   A steely determination to configuration control, resource stability and honesty about risk at
    the program execution level

   A constant focus on delivering to the customer as promised…and on time.

   And an ability to make hard decisions based on the transparent understanding of facts.

Where these sorts of characteristics are evolving, we are making real progress toward both
superiority and affordability.

Some of this change process is leadership and people based. Some is technology based. Some is
process based. Almost all of it is steeped in various cultural norms.

To help drive this change process, my senior leadership group and I have developed seven goals.

Goal 1 - High Performing, Agile and Ethical Workforce. This is really an over-arching goal.
Both within the Department and throughout the larger Defense community, we have an
increasingly aging workforce. As we move to both grow the careers of our younger staff, as well
as attract new people, we have to be able to identify and recruit those who can work in this new
atmosphere.

This isn’t just a problem for DoD. It’s an industry wide problem and we all pull from the same
pool of candidates. That’s why I’m working with academia, industry, the Services, and defense
agencies to evolve and implement a Human Capital Strategy.

Goal 2 - Strategic and Tactical Acquisition Excellence. Here, we distinguish between “Big A,”
or what we decide to buy at the strategic level, and “little a” or how we develop, test, produce
and sustain individual weapon systems at the tactical level. Advancing in both areas is
absolutely critical to success.

It is under this goal that we are addressing procurement process improvements, and looking for
the best value, results and consistency in contracting.



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Goal 3 - Focused Technology to Meet Warfighting Needs. This goal acknowledges that some
areas of technology are more significant to our warfighting capability than others. Some
technologies absolutely require American dominance, while others will not.

We must decide on which technologies we should focus, and that decision needs to be driven by
strategy, then give ourselves permission to make the hard choices.

Goal 4 - Cost-effective Joint Logistics Support for the Warfighter. We are moving toward
“supply chain as offense” which intimately ties our logisticians to the warfighter. End-to-end
supply chains must be built on customer success, based on common data, and enabled by
transparent business systems.

Done well, this system will increase performance, improve productivity, and reduce wait times,
inventory and total cost to the enterprise.

Goal 5 – Reliable and Cost-effective Industrial Capabilities Sufficient to Meet Strategic
Objectives. This goal addresses our concerns with the industrial base – both domestic and
foreign – as well as our own research, development and sustainment facilities.

This goal is where we hope to address ways to improve competition – I’ve always said that more
competition is better than less competition. I would like to see more non-traditional defense
companies competing for our contracts.

One thing I’d like to emphasize, particularly to this group, is that the recent United Launch
Alliance decision was an unusual situation, and should in no way be interpreted as a precedent.

I want to make it clear that it is the Department’s policy to oppose business combinations that
severely reduce or eliminate competition. Although this transaction could have an adverse effect
on competition, it presents unique national security benefits that outweigh the loss of
competition.

Goal 6 - Improved Governance and Decision Processes. This goal is driven by the notion of
needing to drive strategic choice. We will introduce ideas like portfolio management, and Board
of Directors models to help guide the management of large enterprises inside the Department of
Defense. We will also continue building the tools that could inform hard decisions that lie
before us as we balance our portfolios.

Our last Goal 7 – Capable, Efficient and Cost-Effective Installations. With this goal we are
working to deliver effective, safe, and environmentally sound living and working spaces for our
military personnel, their families and our Civil Service personnel.

The Department of Defense manages over 571,000 buildings and structures, valued at over $650
billion that must be properly maintained so that we can provide world class operating support for
the mission.




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It is important to remember these goals – and they can be found on our Web site,
www.acq.osd.mil – because it shows where our priorities are.

The coming years will bring tough choices for us all. We will be called upon to make trades
between cost, schedule and performance that will likely draw criticism. We will be pressured to
add “one more thing” to our contracts that could severely impact the tenuous balance between
cost, schedule and performance.

However, if we make promises and set targets, I believe we have to hit them. Bringing in
unbalanced programs up front and fixing them later is not good business.

At the end of the day, the cumulative effect of consistently over promising and under delivering
is corrosive to the trust that is necessary to sustain support for programs over time.

Losing trust and confidence is … well … as my 13-year-old would say, “Not good, dad.”

I would be remiss if I did not take a minute to talk about the other huge dissatisfaction in trust
and confidence – poor ethical performance.

The way I see it, ethics is really not different in many respects from other important issues we
face in the workplace, such as safety. I pick safety from my manufacturing industry background,
because improving safety and ethical performance share some common characteristics.
In both cases, failure can be catastrophic.

Performance is important at the individual level.

Being successful is not always intuitive from the grounding of how we have always done it.
Success takes work and it takes real commitment from the business and line management of an
organization.

You don’t just hand out safety manuals to employees on their first day of work and say, “Whew,
now I can relax knowing my workplace is completely safe from all hazards.”

No, you have to give employees hands-on training, then you follow up with inspections and
correct errors as you go along. You also need to encourage appropriate behavior, talk about it
frequently, and make sure your leaders set the standard high with their own behavior.

And also, just like safety lapses, ethical lapses are not necessarily intentional. Keeping that in
mind, we need to differentiate between intentional and accidental lapses and correct them
appropriately.

My years in business taught me several lessons that I’ve brought with me here to the Pentagon.
These lessons have helped me to stand strong.

We need to be focused on the customer – the joint warfighter – and understand successes in their
eyes.



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We need to be based in strategy.

We need to focus on the challenges of our market – and by “market” I mean the broad world, not
just industry.

We need to work horizontally across traditional boundaries for customer success.

We need to be willing to trade among investments at the portfolio level.

We need to be honest in our trades among cost, schedule and performance risk at the program
level.

And we need to worry about “speed to market” in innovation, not just technology for
technology’s sake.

As our contracting lawyers and an important part of our team, I hope you will keep these goals
and lessons in mind as you work with our staffs to make things happen. You are part of the team
that is making sure our joint warfighter is properly equipped to do his or her job.

I think that as we all work through the changes and into the next phase of our defense future that
you will see that our decisions in AT&L will be driven by these goals and this philosophy.

Thank you all for coming. I would be happy to take any questions now.

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