It is a great pleasure to be with you today. Fifty years ago on this date, Aug. 30, 1945, Gen. Douglas MacArthur landed at Tokyo Bay to accept the unconditional surrender of Japan. The rapid conclusion of the war in the Pacific was due, in large part, to the overwhelming deterrent effect of America's demonstrated nuclear capability.
In this period of dramatic change in our national security environment, let there be no doubt in anyone's mind about one constant: Our strategic nuclear deterrent forces will continue to play an important role in U.S. post-Cold War defense strategy for the foreseeable future. That role will include supporting the nation's nonproliferation policy and deterring the use of weapons of mass destruction.
As I look broadly at the changed external environment, I believe we need to broaden our traditional approaches to national security. Last March, I traveled with Secretary [of Defense William J.] Perry to four of the former Soviet republics Russia, Ukraine, Kazakstan and Uzbekistan. We visited an SS-19 silo near the city of Pervomaysk in the Ukraine. I think I had seen that silo before, but from a different orientation. On that day, an SS-19 missile, one previously targeted against cities in the United States, was being withdrawn from the silo and the critical nuclear materials were placed under control.
On the same trip, we toured Russia's Engels Air Force Base and saw former Soviet bombers being dismantled using American equipment provided through the Nunn-Lugar program. It is in America's interest to pursue a policy of cooperative threat reduction. Use of Nunn-Lugar funds to support weapons dismantlement and defense conversion is a good investment. In concert with CTR, we need a hedge against possible reversals. Doing so requires investment to sustain our U.S. strategic deterrent forces.
As the undersecretary of defense for acquisition and technology, one of my most important responsibilities is to ensure that our forces are strong and ready, not only today, but to lay the groundwork for ensuring their capability to support national policy in the next 10 to 20 years. Nowhere is this responsibility more serious than in preserving a credible, strategic nuclear deterrent force.
Our past investments have endowed us with high levels of force readiness and an exceedingly capable inventory of strategic nuclear weapons and delivery platforms. My job is to ensure this remains the case within an affordable budget profile. Let there be no confusion on this important point: The department is committed to sustaining a smaller, but highly ready strategic Triad of manned bombers, intercontinental ballistic missiles and submarine-launched ballistic missiles.
The department has extensively examined strategic forces in the Nuclear Posture Review, the Heavy Bomber Study, the Nuclear Command, Control, Communications and Intelligence Review and many other studies. As a result, we have determined that our existing strategic systems, properly sustained, can address the projected mission needs for many years to come.
We are completing production of Ohio-class submarines in 1997. We are not buying more ICBMs. We have completed our advanced cruise missile procurement. We have defined the "thin line, critical nodes" for nuclear C3, which means we will upgrade selective systems, but others may not be replaced. When the final B-2 is delivered in 1998, we do not plan to order more. But this issue remains unsettled since congressional action must still be taken on three of our four defense bills.
In accordance with the START I [strategic arms reduction talks treaty] provisions, we are diminishing our total accountable warheads. Upon ratification of START II, we will make further reductions and eventually eliminate all land-based multiple re-entry vehicle missile systems. This means we would retire the entire Peacekeeper force and reduce the number of warheads on each Minuteman III from three to one. While this is a sobering list, it is not news every CEO [chief executive officer] present in this room is aware of these facts.
The outlook for the industry supporting our strategic systems is not all bad news. We continue to invest in updating and sustaining our strategic delivery platforms and reconnaissance systems with continuing R&D [research and development] for major subsystem and component upgrades. There is also considerable commonality with the industrial base supporting nonstrategic systems.
For example, the Navy is planning to build a third Seawolf [submarine] and developing a new attack submarine, exercising much of the industry we'd need for future ballistic missile submarines. We are investing in a $4.5 billion D-5 backfit program to replace C-4 missiles aboard Trident submarines. We also have a $250 million Trident Navigation Commonality Program under way to provide an updated, D-5 compatible navigation suite.
Another major program thrust is the Air Force's $2.9 billion Minuteman III propulsion replacement program and $1.6 billion guidance replacement program that will extend the service life of this system through 2020 with technology insertion, electronics upgrade and solid-rocket motor repouring.
We are updating our strategic command and control by installing the new REACT [Rapid Execution and Combat Targeting] system in Minuteman launch control centers. We are also initiating a $100 million MMRT (Modified Miniature Radio Terminal) program to update the very low frequency capabilities for E-4 and E-6 airborne command and control platforms, as well as for launch control centers.
And finally, the Department of Energy is pursuing a science-based Stockpile Stewardship Program that includes application of advanced modeling and analytical techniques supported by new experimental facilities, to assure that the nation's nuclear stockpile is adequately protected. We have some work ahead to fully define this program; it is a fundamentally new approach.
That is a thumbnail sketch of the department's plans the future business forecast. I do not see any significant change in the budget for new strategic systems. Readiness in the years to come will depend in great measure on sustaining our existing systems, and we have a lot to learn about sustaining those systems. We do not have a large experience base to draw from. We also will have some issues with regard to sustaining the design capabilities of the industrial base supporting these systems.
As we look to the future, we also need to think more clearly about enhancing capabilities to deal with what I believe to be evolving requirements that have not yet stabilized. Some focus areas include the need for more flexible and responsive targeting as well as the need to deal with new classes of targets i.e., deep, hardened and/or relocatable targets. This is a key part of the department's sustainment planning considerations, but the subject of another talk.
Before I discuss specific sustainment issues unique to our strategic deterrent force, I would like to give you a brief rundown on the department's economic security policy relating to the industrial base.
At the outset, let me acknowledge that this audience knows the broad outline of the DoD budget and is well aware of the planned decline that has occurred in the department's investment accounts. Procurement, across the board in general and for strategic systems in particular, is at a historic low.
We are seeing dramatic changes in the defense industry, including internal streamlining and external consolidations. Some participants are exiting prior product lines. Internal restructuring has been particularly effective. Despite lower revenues, defense firms have generally maintained or improved their profit margins.
Most firms are reducing excess capacity, streamlining processes and revamping supplier relationships. Several prime contractors have made a 10-to-1 reduction in their direct suppliers, going from thousands to hundreds of suppliers. The sum total of these actions has led to increased efficiencies and reduced defense product costs a better value for taxpayers.
I believe that industry is adapting well to the dramatic changes in the defense budget and posturing itself for the future. The department's economic security policy complements industry's transition in three important ways.
First, we are actively supporting industry-led consolidations and restructuring. We are implementing FY [fiscal year] 1995 legislation that allows industry to claim restructuring costs against DoD contracts, predicated on a certified audit showing net savings to DoD.
We are also actively participating in antitrust agency reviews of defense mergers and acquisitions. We assess combinations in terms of cost savings, competition and capabilities, and then provide a DoD judgment to the Federal Trade Commission or Department of Justice, as appropriate. To date, in case after case, we have found substantial savings for the DoD. Where we have had issues, we arranged specific business restrictions or contract changes to address our concern.
Second, we are reforming our acquisition processes to reduce the cost of doing business with the department and remove the barriers preventing us from leveraging the capabilities of our commercial industry. The department has a long way to go, but we're fully engaged and beginning to make visible progress.
I've been in my job for about a year now, and it has become obvious to me that our fundamental need is to transform the risk-averse culture that has grown up within the department over the years to create an environment in which it is sensible for people to begin to take prudent risks, to streamline our program management and reduce our acquisition cycle time.
We are systematically eliminating military specifications and standards on existing and new procurements, clearing the way to better access dual-use technologies and commercial products. We have redirected our management process so that cost is explicitly treated as an independent variable in program decisions and cost goals are set in each program phase.
Our objective is to reduce not just acquisition costs, but life-cycle costs. Life-cycle cost should be one of the most critical factors in sustainment. In order to attack life-cycle costs, we need two things: support cost data and incentives.
Earlier, I spoke of some visible progress in acquisition reform. I've been keeping book on the acquisition process at my level. For example, the cycle time for acquisition decision memorandums it averaged 23 days in 1994 is three days thus far in 1995. Eleven of 16 scheduled DAB [Defense Acquisition Board] reviews in 1995 were not held they were not needed because there were no issues as a result of our new overarching Integrated Product Team process.
On the Space-based Infrared program, we shortened the DAB preparation cycle from six to two months, and supporting documentation for the DAB went from 1,000-plus pages to 47 pages. The story is the same on other programs as well programs like the Joint Direct Attack Munition and the Army Tactical Missile System.
The third, and perhaps most important, policy element to you here today is to ensure that the industrial capabilities we need to meet our requirements will be available now and in the future. When I say industrial capabilities, I mean the skills, processes, facilities and equipment needed to design, manufacture, modernize and sustain defense goods and services. The industrial base is not just a single company. It includes subtier suppliers as well as primes. Industrial capabilities cut across products, weapons systems and markets. We must be able to identify the cases where there are real problems with industrial capabilities.
However, DoD actions or investments to preserve current industrial capabilities come at the expense of spending for other defense needs, including modernization. Such actions should only be on the most considered, exceptional basis.
On July 31, 1995, we issued new draft DoD policy guidance, accompanied by a how-to handbook entitled "Assessing Defense Industrial Capabilities." The handbook explains the analysis process and circumstances under which the department will take special action or make an investment to preserve an industrial capability. While the documents are in draft form and under department review, we have asked our buying activities to apply their logic immediately. We've shared the handbook with the Congress and major industry associations. Copies of the handbook are available at this symposium.
It's critical for those of you in the industry and in the operational community to understand how we are evaluating industrial capabilities. We are asking three central questions:
- Is the industrial capability needed to meet a defense requirement truly unique?
- Are we really in danger of losing that capability? This means the entire capability, not only a current supplier.
- If a needed capability is really endangered, is there a cost-effective remedy (beyond simply continued production for example, a technology readiness program)?
As we answer these questions on a case-by-case basis, we are continually reminded of the need to draw on the breadth and variety that already exists in industry. To perform these assessments, we rely on industry's deep knowledge of what it takes to create and manufacture the products we buy.
Industry has actively participated in our sector studies on space launch vehicles (January 1995), helicopters (July 1995), combat tracked vehicles and torpedoes (September 1995). We've worked extensively with key industry participants in our recent program assessments, including the D-5 missile, the B-2 bomber and the new attack submarine.
The FYDP [Future Years Defense Program] funding level about $75 billion a year in investment may not sustain all the current participants. However, our buying program is diverse. The scope and mix of our spending will sustain a wide range of industrial capabilities. Because the DoD manages its products along program and service lines, we may tend to think of defense industry as a set of capabilities existing around a given program. As we examine products in terms of underlying industrial capabilities, we often find more commonality than we anticipate.
We find we can isolate to a few truly unique capabilities, and we find benefits for one product area by investments in another. Space-launch vehicle and ballistic missile solid-rocket motors, while distinct, share many common industrial processes and capabilities. Modifying our B-1 and B-2 fleet for conventional missions will help keep these strategic-alternative systems ready. The JAST [Joint Advanced Strike Technology] and F-22 investments will sustain many of the military-unique capabilities needed for future heavy bombers. These are just illustrations, but they represent the flexible view we must take to meet our needs.
As I said earlier, readiness in the years to come will depend in great measure on sustaining our existing systems. Doing this affordably means our sustainment strategies must be directed beyond the short term.
As we answer our three central questions, we are also reminded of the need to leverage our sustainment and support investments. We spend about $18 billion each year on purchasing new logistics support inventory and $4 [billion] to $5 billion each year in contracted depot maintenance workload.
For sustaining engineering alone, we plan to spend about $3 billion across the FYDP for ICBMs and SLBMs [submarine-launched ballistic missiles], and more than $1 billion (across the FYDP) for the B-2. The department is looking at proposals, including those of the Commission on Roles and Missions [of the Armed Forces], to increase privatization of depot maintenance. The bottom line here is that we need not necessarily procure new systems to maintain many of our military-unique industrial capabilities.
At this point, I want to share my view of the health of industrial capabilities for several strategic product areas. In the process I hope to illustrate our approach to assessing the industry and give you insight into how our decisions are shaped by the three central policy questions I shared with you earlier.
Turning first to bombers, we concluded from the heavy bomber study that with 20 B-2s, our bomber fleet size and mix will meet our mission needs. We did not recommend buying additional B-2s at this time.
There is no doubt the B-2 is a unique aircraft. When we examined the specific industrial capabilities needed for the B-2 and previous bombers, we found there is not a unique bomber industrial base. This is the same conclusion reached by the Strategic Advisory Group in 1993.
The capabilities required to design, develop and produce bombers are available in the broader military and commercial aircraft industries. For example, all 54 of the key B-2 suppliers also supply other aircraft and/or other nonaircraft programs. We will sustain many of the military-unique technologies needed for future bombers, such as stealth technology, via existing programs such as the Joint Advanced Strike Technology and the F-22.
Also, with B-2 modifications, sustaining engineering and depot maintenance, substantial B-2 industrial activity will continue for some time. In sum, we believe that our civil and military aerospace industry can provide the engineering and production capabilities needed to build future bombers.
Our strategy has been to sustain two nuclear-capable shipyards. We've determined that submarine industrial capabilities will be best sustained by building a third Seawolf in FY 1996 and initiating lead production of the new attack submarine at General Dynamic Electric Boat Division in FY 1998. Our plan is to compete the new attack submarine between the two nuclear-capable shipyards to assure the best price as soon as we reasonably can.
We are engaged with the Congress in working out the timing and programmatic details. And while there may be some difference of views on details, the department and the Congress are in agreement on a strategy to maintain unique submarine industrial capabilities by maintaining two nuclear-capable shipyards at the lowest cost possible.
The Nuclear Posture Review revalidated the need for ICBMs and SLBMs. As a result, we've performed extensive studies to identify how we can keep ICBMs and SLBMs on alert for decades to come.
We developed an investment plan for ICBM service life extension which includes inserting new technologies in the propulsion systems, guidance systems and re-entry vehicles. Our Minuteman III propulsion replacement program, a $2.9 billion effort that includes repouring rocket motors, is funding work at three rocket motor manufacturers.
The $1.6 billion Guidance Replacement Program will provide a full upgrade for aging Minuteman III electronics. We are investing $37 million in FY 1996 and planning about $50 million per year across the FYDP in coordinated Navy and Air Force re-entry vehicle and guidance applications research and development programs.
We're coupling these programs because ICBMs and SLBMs share several related performance and industrial capabilities. In this case, we found that some very specialized industrial capabilities are needed to sustain ICBMs. However, the most cost-effective DoD option is not to continue an old production process, but to use technology insertion to extend and sustain system viability.
While we aren't developing new SLBMs, we are producing the Trident D-5 missile. We concluded that certain aspects of the solid-rocket motor production process are truly unique due to the type of propellant. D-5 safety and quality could be endangered unless we sustain the process flow. The most cost-effective DoD action in this case is to fund production at a minimum rate. For the lowest feasible production rate, we are consolidating from three to two suppliers, who will work in one process line. This low rate production, along with selected critical component orders, will keep in place the capabilities needed for viable D-5 production.
Strategic systems rely on the availability of radiation-hardened electronic components. Weapons-grade RADHARD parts are unique to DoD. In the last seven years, we have gone from 16 to four suppliers due to a decline in demand.
We want future RADHARD production to stay close to mainstream component technology and suppliers. The dilemma is how and to whom we might make a low volume, high-type mix of specialized components an attractive business.
While buying RADHARD parts represents a very small part of DoD's budget, it exemplifies some lower-level product niches that are operationally important and may pose special problems. We will approach this case with the same set of industrial capability questions. We expect to establish an integrated product team to look at providing a crosscutting response on RADHARD components for all DoD users.
Before I summarize, let me offer you a final thought on the department's long-term budget plan. When I think of the future investment budget, I'm reminded of the "Peanuts" cartoon in which Charlie Brown is getting ready to kick a field goal and just downfield, Lucy is kneeling on a hash mark representing the year 2001. The football she is holding represents a procurement budget that we are counting on to grow by nearly 50 percent to pay for much-needed modernization programs across the department. Despite having been burned so many times before, Charlie Brown wants to believe the football will be there when he tries to kick it.
Ladies and gentlemen, I am not confident that the projected increases we are counting on will be there in 2001. ... [My] outyear forecast of the defense budget ... [comparing] the difference in budget authority set by the congressional budget resolution with that of the president's budget ... [indicates] there is an unsustainable ramp in the near term and in the long term.
Lucy appears to be planning to pull the football!
... The DoD must continue to reduce infrastructure and to execute our plans to achieve greater efficiency if we are to prevent Lucy from pulling the football away.
In conclusion, my thoughts regarding the support of our nation's strategic systems can best be summed up as follows:
One, the major results of the Nuclear Posture Review are as valid today as when the study was completed one year ago. For this reason, I do not see the need for any significant change in the budget for new strategic systems.
Two, the Department of Defense is committed to supporting industry-led restructuring; reforming our acquisition processes; and acting, when necessary, to protect endangered industrial capabilities looking across the defense program, though, I believe that these cases will be few.
And three, we need to pursue an affordable long-term sustainment strategy to support our strategic forces. This must include investing in key technology insertion and service-life extension programs and must give more careful thought to evolving requirements (i.e., flexibility, responsiveness and target changes hard, deep, relocatable).
As we move through today's agenda, I believe these points will continue to surface as recurring themes.
In closing, I'd like to echo the words of Secretary Perry when he said, "In this uncertain new era, our strategic nuclear forces will continue to be America's ultimate insurance policy." It will take a team effort among the department's acquisition community, the operators and industry to support and sustain the men and women who will stand ready and pay the daily premium on America's insurance policy, 24 hours a day, for perhaps another 10,000 days.
This symposium will help illuminate the issues to be dealt with in creating a legacy for U.S. strategic forces in the year 2010. Talking about the issues and solutions is OK, what matters is what we do about them.
Thank you all for coming. I appreciate the opportunity to meet with you and to get firsthand exposure to your issues and your views. We have an opportunity to work together here to increase our common understanding of the issues and forge a path ahead.