Aviation Week s Areospace and Defense Conference November by DDIG


									                         United States Department of Defense


Aviation Week’s Aerospace and Defense Conference
Remarks as delivered by the Under Secretary of Defense for Acquisition, Technology and
Logistics Kenneth J. Krieg, Phoenix, AZ, Wednesday, November 7, 2005.

Thank you very much for that introduction. And thank you for inviting me to join you. I was
very interested in coming today and addressing this group. You represent a wide cross section
of the Aerospace and Defense industry. I thought it was important that I come here today to talk
to you as key leaders in the aerospace industry.

Over the years, the Department and industry have worked very well together. We share a
common customer – the warfighter of today and tomorrow. The Global War on Terror has and
will continue to fundamentally change the way our customer operates. Therefore, we must
change the way we do business.

The challenges we face today in meeting customer expectations stem from the changing strategic
reality which changes the tactics of war, and subsequently, changes the needs of our warfighters.

In addition to warfighting duties, our forces are being called upon to do more, such as assist with
natural disasters. Furthermore, Congress and the American taxpayer are looking to us to manage
these changes within fiscal limits – the forecast for future resources will likely not be as positive
as we would like.

Therefore, it is more important than ever to work together. So that we can work together more
easily, I wanted to take this opportunity to describe my philosophy and goals for AT&L and
explain how they will mesh with the direction the whole Department is headed in the business
practices portion of the Quadrennial Defense Review, or QDR. Then I will end with a challenge
to you.

Having spent half of my career in industry, I have learned to center my strategies on customer’s
expectations and definitions of success.

Our customers – our warfighters – are demanding, and rightfully so. They expect us to provide
the capabilities they will need to defend America and its interests, not just today, but into an
uncertain future.

We also have a responsibility to the American people, particularly as taxpayers, to wisely invest
their hard earned money in our Nation’s common defense. And as the representatives of the
American people, Congress must also be well-informed of our efforts.

In serving all of these stakeholders, I believe we at DoD must, first, define performance and
make decisions using facts; second, we must align authority with responsibility and assign
accountability for success; third, as decision makers, we must balance the costs and risks of our
various choices; and, fourth, as overseers, we must build business processes that have both agile
performance and strong oversight.

While performing all of our duties within this framework, we must exercise discipline in our
processes and oversight so that we can at least attempt to avoid major surprises. Above all, we
must demand the highest integrity that is due to the public interest we serve, and work in an
atmosphere of transparency.

As we incorporate these basic principles into our daily routine in Acquisition, Technology and
Logistics, we also are mindful of how business at the Department is changing as a whole. And it
is changing dramatically.

With an eye toward jointness, an eye toward interoperability and an eye toward agility, we are
evolving a set of new Defense Business Practices within the Department’s Quadrennial Defense
Review with these three over-arching guidelines. We must be responsive to stakeholders;
empower accountability; and work smarter, not just harder.

Now, based on this framework, I am developing six goals for AT&L with my staff. They will no
doubt sound familiar to some of you, because I believe my predecessors set out a very good set
of goals on which to base mine. Given the changes in the past year, we’ve examined these goals
and re-focused some and expanded others. Yet the basic, enduring challenges remain.

Goal 1: Strategic and Tactical Acquisition Excellence. This goal distinguishes between big “A”
acquisition, or how we decide what to buy at the strategic level, and little “a” acquisition, or how
we develop, test, produce and sustain individual weapon systems. Both are critical.

In the big “A,” I envision an investment review that more tightly couples budgets, requirements
and acquisition at DoD to determine the acceptable balance among cost, schedule and
performance of a program. This, in turn, will help us decide whether the program should be
approved, adjusted or canceled altogether.

In addition, we must continue to improve tools like systems engineering, earned value
management and the other tools of solid program management, in the little “a,” or tactical,
acquisition side.

Goal 2: Knowledge-Enabled Joint Logistics: Integrated, Effective, and Efficient. I believe this
goal speaks for itself. It has been an area of great progress inside this Department in the last
several years.

Those of you who work in end-to-end supply chains know that – built on customer success,
based on common data, enabled by transparent business systems – it really does work. Done
well, it will increase performance and improve productivity and reduce wait times, inventory and
total cost to the enterprise.

Goal 3: Selective Technology Dominance. This acknowledges that some areas of technology are
more significant to our warfighting capability than others. Some technologies absolutely will
require American dominance, while others will not.

Deciding which technologies we should focus on needs to be driven by strategy.

By acknowledging this concept of “selective dominance,” we give ourselves permission to make
choices, rather than try to do everything. I believe we need to focus our attention on what is
important for our customer, the warfighter.

And as a nation, we have done this before – stealth, speed and precision guided our efforts for a
quarter of a century. The question for us today is: What will define success during this next
period of competition?

Goal 4: Assure Cost-effective capability/capacity available 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.

Goal 5: Improved Governance and Decision Processes. This goal is related in a sense to
Strategic, or big “A,” acquisition. In addition, in certain areas we will introduce a Board of
Directors model to help guide management of several large enterprises in the DoD. It will help
build tools that could inform hard decisions that lie before us as we balance our portfolios.

Goal 6: Agile, Capable and Ethical Workforce. This is the final goal and in a sense, it is an
overarching goal. What underlies the title is my concern about our future workforce – both
inside and outside of the Department, but given my job, especially inside the Department.

If someone said to you, “I know this mature company with lots of start up competitors, that may
be facing declining revenues, and that has a workforce where half of the most experienced and
capable people will soon be eligible for retirement.” Would you invest in it?

I believe we need to define our future needs and develop a plan that will address our aging
workforce, and improve retention as well as our ability to recruit high quality talent to these
endeavors. The Department of Defense must be worthy of the American public’s investment.
The Department’s advocacy of a National Defense Education Act and creation of a National
Security Personnel System are two big steps in the process.

My guess is that the problem I’ve laid out is not unique to DoD. Each of you has your own
challenges to recruit and staff, but if collectively we are not bringing sufficient new talent to our
total set of endeavors, we will simply trade resources at increasingly higher prices.

Cutting across all six of these goals, as well as everything we do in AT&L, are what I call three
“key enablers.” These enablers are: (1) data knowledge, (2) strategy driven objectives, and (3)
continuous improvement, with tools such as Lean Six Sigma programs. These tie back to the
basic philosophy I discussed earlier in my remarks.

We cannot deliver results, or be responsive to stakeholders, or work in an agile or transparent
environment without having data to back up our decisions and strategic objectives with which to
measure our progress.

And I believe we must have continuous improvement if we are going to deliver better results, be
more responsive to stakeholders, and maintain agility over time.

That is my philosophy and the six goals set specifically for AT&L. We will begin soon to
translate these goals into specific, observable objectives for AT&L. We will then cascade
responsibility for achieving them into the organization, and track performance.

Now I’ll talk a little about the QDR, but with truth in advertising, I want to be very clear I’m
saying very little.

As part of the Quadrennial Defense Review that the Department is undertaking, we’re trying to
do something different than what has been done in the previous two or three. Duncan McNabb,
the former J4, and I are co-chairing on QDR business practices. We are working business
practices as part of strategy development.

The work that Duncan and I have underway includes five broad business areas: (1) supply chain,
(2) medical readiness and performance, (3) acquisition – big “A,” thinking through demand and
supply, and then tying it to logistics over time – (4) strategic process integration, or tying
planning to resource allocation and execution management, and then (5) corporate governance
for DoD, enterprise wide.

Hopefully, you will eventually see some link between overall DoD strategy, our business
management strategy, my goals in AT&L, and what we strive for in outcomes. Those of you
who work or have worked in large organizations know this is not simple. The complexity of
doing this on the scale of the Department of Defense has surprised even me.

Change in the Department’s competitive environment brings me to my challenge to you – both
individually and collectively. Let me start by asking you a couple of context questions, which
will frame the last part of this discussion before Q and A. I won’t necessarily have you raise
your hands, but please think about it.

First: Do you think that, given the impressive capabilities shown by the U.S. military in the last
few years, the demand for their services will grow over time?

Second: Do you believe that the resources dedicated to the Department of Defense will continue
to increase over time as they have over the last several years?

The third question then becomes: If you believe that demand on the military will grow, but
Defense resources will be challenged, at best, then how will the nation balance this equation?

Answering this last question is a challenge that I believe we collectively face. The only way I
know to answer this is to balance the classic Alain Enthoven question of, “How much is
enough?” with the opportunity cost equation of, “How much risk are we willing to take?”

As we consider this balance, I’m inclined to believe that this can only be done at the broader
level of portfolio trades. And that leads to the toughest question of the four: Is the nation willing
to shift its mix of capabilities and engage in a realistic debate about what it needs and what it can

In periods of great change the challenge is to consider how to balance specific interest with
broader national interest. It is a challenge we all will face. Let’s take a look at four examples
over the past 15 or 20 years.

I point to two sets of case studies: from the first Bush Administration, the V-22 and A-12
decisions; and from the current Administration, Crusader and Comanche.

Let’s review the bidding on each of those decisions. In the first case of V-22, 15 years later, and
I will say “ironically,” I just recently approved the move to a full-rate production decision.

In the second – A-12 – we are still in litigation some 14 years later. The third – Crusader –
involved six months of crawling across broken glass on the Hill to complete. And the fourth –
Comanche – resulted in a half-day’s news story.

The difference in the cases was the reaction of the military-industrial complex to a turbulent
decision. In the final case – Comanche – the Army actually led the change. In each of the
others, the change was, in a sense, imposed on the industrial complex from outside.

If your answers to the context questions were “yes, demand on our resources will increase” and
“no, resource supply will not increase commensurately,” then my challenge to you is to consider
how you and your organizations will react to the choices that we will have to make as a nation in
the future.

These are, indeed, very interesting times in which we live. This will clearly be a journey. I look
forward to hearing your questions, and working with you over time to explore the possibilities.

Thank you for coming out this morning, and I thank you for all you do for our warfighters.

I would be happy to take your questions now.



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