▶ 0:15:18>> think you all for coming. The committee is discussing the topic that is great interest to every member of this panel, defense innovation. We must change the way the pentagon does business. Otherwise there is no way we can maintain deterrence, particularly against china.
▶ 0:15:40We will hear from three experts, shyam sankar, chief technology officer at palantir, which is done important work for the military. Mr. sankar has published on innovation and we look forward to hearing his ideas today. We will also hear from nate diller, who worked at the department of defense and the house appropriations committee where I previously worked in another life.
▶ 0:16:10Mr. diller is the ceo of divergent technologies which is seeking to make changes in manufacturing. We need revolutionary changes at dod. Finally, james geurts is with us today. In addition to having one of the coolest nicknames around, hondo, he is successfully served this country as the acquisition executive for socom and the navy. Thank you for being here to talk about innovation.
▶ 0:16:40The past few years have been marked by some success in innovation improvements but we have much to have much work to do. Most is ahead of us. We are poised to go faster and further that we have thus far. I'm optimistic many of my colleagues' ideas for improvements will have an enthusiastic perception.
▶ 0:17:03I appreciate my friend, ranking member reed, for holding the hearing in the previous congress on the planning program, budgeting and execution reform commission. I expect we will continue to make progress in this new congress. As a matter of fact, Mr. reed and my colleagues, we need a game changer and we need it now.
▶ 0:17:28The committee took steps to remove unnecessary steps from the acquisition process and get defense innovators more powerful hiring authority. We should continue on that positive trajectory. I recently released the forged act, restoring freedom's
▶ 0:17:53Forge: America's innovation unleashed. I appreciate the positive comments and response we have heard from industry and from government officials. The white paper lays out in specific detail my plan to implement smart spending practices. It proposes the most comprehensive set of budgeting and acquisition reforms in decades.
▶ 0:18:23Forge: It focuses on five areas. We must cut the red tape that birds are defense workforce. Our regulations are full of outdated and excessive compliance requirements. Addressing this is exactly the type of work doge is contemplating. I hope we can make progress in the area. Contracting regulations total more than 6000 pages. Financial regulations at up to more than 7000 pages.
▶ 0:18:51Forge: I'm interested to hear the witnesses address how this committee can reduce the statutory and regulatory burdens as we retain the core elements of good policy. We should harness one of our nations core temperatures, our world-class tech sector, which is built by american entrepreneurial spirit. Government requirements have made it nearly impossible for commercial companies and startups to do business with the department of defense.
▶ 0:19:21Forge: We need to reward commercial innovation by making it possible for innovative companies to work with the pentagon. Third, we must create competitive pressure by rapidly qualifying new suppliers to help build our weapon systems. More than 20,000 suppliers have exited the navy's shipbuilding industrial base in the past 20 years. That is just the navy. 20,000 suppliers gone.
▶ 0:19:49Forge: I hope our witnesses will address how we can lower barriers to second sources and adopt technologies like 3d printing which can dramatically reduce costs and expedite production schedules. We must enable senior officials to manage programs by reducing the bureaucracy's ability to veto their decisions. A typical acquisition must satisfy nearly 50 documentation requirements. And 50 external sign offs.
▶ 0:20:20Forge: We need to be careful about the taxpayers' money but that is excessive. We need to give program managers the tools they need to success while retaining an appropriate level of checks and balances. We should modernize the defense budget process by allowing money to move as fast as technology and threats change. It currently takes at least two years to request and receive funding.
▶ 0:20:45Forge: The commercial sector deploys new generations of technologies in less than two years and the pentagon is continually lagging behind. We cannot keep conducting business as usual. We need a game changer in this regard and we need it now. United states is entering the most dangerous period we have faced since world war ii. Our adversaries are rapidly innovating and leveraging commercial technologies.
▶ 0:21:13Forge: We must expand our capacity to produce and sustain high-end weapons like ships, aircraft and missiles. We must adopt autonomous, adaptive, and networked systems. This is not an either or effort. We must use traditional systems quickly and at the scale of relevance to ensure we can deter adversaries from taking action against us and our interests.
▶ 0:21:44Forge: In other words, peace through strength. I look forward to discussing those initiatives with our witnesses. I welcome all three of them to our hearing and I recognize my friend ranking member reed for his remark.
▶ 0:21:59Sen. Reed: Thank you very much, Mr. chairman. Let me join you welcoming our witnesses. Mr. james geurts, Mr. shyam sankar, and nathan diller, thank you, donovan. You bring -- gentlemen. This is a very serious discussion. For many years this committee has examined challenges with the defense acquisition system. We have heard the system is too slow, rigid, and outdated.
▶ 0:22:33Sen. Reed: The committee has worked hard and made progress to streamlining the system. We have helped provide the department of defense with significant flex ability in the acquisition authorities, including initiatives like middle tier acquisition, rapid acquisition authority, and other transactional authorities. These authorities are intended to enable the department to tailor acquisition strategies and contracting approaches to fit the needs of each program.
▶ 0:23:04Sen. Reed: Lengthy, risky programs demand more rigor and oversight, whereas less risky, non-developer the programs may move quicker with fewer bureaucratic checks in the process. I would ask the witnesses for their views on successes and shortcomings of the acquisition authorities. Responsible regulation is key to the success of the acquisition echo system -- ecosystem.
▶ 0:23:28Sen. Reed: The centralizing aspects is beneficial but going too far may result in poor coordination among officers and could introduce duplication and waste. A lack of coordination among the services or stove piping is problematic for programs intended to improve jointness throughout the force. Legislation to reform has helped alleviate the issue and deregulation in some areas may be useful.
▶ 0:23:56Sen. Reed: I caution against quick decisions that could undercut the progress we have made. Many existing statutes and regulations exist because of past failures by the department or poor behavior from industry. It's important we remain uncompromising stewards of taxpayer dollars. I would ask the witnesses' views. Are acquisition network is only as strong as our workforce.
▶ 0:24:23Sen. Reed: To me growing demands the acquisition workforce must grow accordingly to include contracting officers, subject matter experts, and skilled technicians in the defense industrial base. I am concerned we are beginning to see attacks on the department's workforce. The trump administration has taken pride in the threat to slash the bureaucratic workforce, arguing an equivalent between fewer personnel and greater efficiency.
▶ 0:24:54Sen. Reed: Producing the workforce is likely to increase the contracting timeline and eliminate positions that support acquisition professionals will inject new inefficiency into the network. I would appreciate our witnesses' thoughts on the acquisition workforce and recommendations to make sure acquisition workforce is appropriately sized and trained. I would look to point out that innovation.
▶ 0:25:24Sen. Reed: Improving the innovation strategies will require more than overhauling systems or increasing funding. It requires full thinking by leaders at every level of the enterprise. I provided of a quote attributed to winston churchill. Tillman, --gentlemen, we have run out of money and now we have to think. We must not only adapt to new technologies and adaptive processes and situations were technology is not yet available. Now we must think.
▶ 0:25:53Sen. Reed: I look forward to hearing from this insightful panel of experts. I hope we can work together to develop better understanding about the department of defense and adapt quickly to a changing world. Thank you to our witnesses and I look forward to your testimony.
▶ 0:26:08Chair Wicker: Thank you very much, Mr. reed. We will hear from our witnesses and then have a round of five-minute question and answer. So that this senator will understand and be prepared, I will yield my five minutes to Mr. sheehey.
▶ 0:26:40Chair Wicker: He has to preside in a few moments. He will ask questions and then be followed by the ranking member. Then we will go forward with senator fischer. Mr. sankar, you are recognized for five minutes.
▶ 0:27:01Mr. Sankar: Thank you for the opportunity to testify today. I want to commend you on your proposal. I was fist pumping when I was reading it. This is the kind of reform we need to win. I have spent two decades at palantir fighting the the argosy to deliver technology to our war fighters. My message is simple. Defense innovation and procurement are broken at precisely the moment we need them to deter and defeat adversaries. For reasons that are profoundly un-american.
▶ 0:27:33Mr. Sankar: The root of the problem is the pentagon is a bad customer. It's also the only customer. The defense market is functionally a monopoly where a sold buyer shapes the market with prescriptive requirements, complex regulations, and five-your plans worthy of stalin. The cold war is over and every has given up on communism except for cuba and the dod. It has created a divide between defense and commercial sectors. I call it the great schism. Think of it like the berlin wall.
▶ 0:28:03Mr. Sankar: On the commercial side, companies are free to compete and innovate. On the defense side, a dwindling number of contractors toil away for them enough city. -- monopsidy. The companies fit enough to defect to the free world did so long ago. If we are going to win, we need to tear down the wall and your report helps us do just that. Cut the red tape.
▶ 0:28:32Mr. Sankar: Procurement is constrained by mountains of regulations that paralyze leaders and punish creativity. This is not what was intended but this is reality. The road to hell is paved with good intentions. The dod 5000 series was seven pages when david packard wrote in the 1970's. It is now 2000 pages, and 11% compounded growth rate. Eliminating burdensome regulation must be a priority. No amount of process can save us. It can destroy us.
▶ 0:29:03Mr. Sankar: Second, unleash innovation. We need to reverse the great schism. During the cold war, 6% of spending on weapons went to defense specialists. Chrysler made cars and missiles. General mills made cereal and torpedoes. That great schism, we need to turn it on its head. That has turned into 86% going into defense specialists. America needs our primes and that is what we need to ensure they are subject to commercial incentives and market pressure to keep them fit.
▶ 0:29:33Mr. Sankar: We can fix this by ending the cost-plus mentality which makes us lower, poorer and dumber. Spacex reduced launch cost by 85%. We also need to stress a commercial first mindset. Fafsa is a law of the land. We should enforce it. Increased competition, yes please, but we need to increase competition inside of government. During the early cold war the services competed against each other to develop the best ballistic missiles.
▶ 0:30:02Mr. Sankar: The navy's polaris and air force's minutemen won but not before the regulus, jupiter, thor, allison titan were developed. -- atlas and titan were developed. Today it would be duplication. I see a market with multiple players pressured to innovate and no point of failure for the department. Enable decisive action. We are a nation born of founding fathers. We understand the importance of great creative leadership.
▶ 0:30:31Mr. Sankar: In place of the cargo cult that worships process, let's empower people. We would not have icbms without the nuclear navy, the apollo program without jean krantz. Navy comparable figure overseeing most major programs today. It is not for a lack of talent. We need to stop rotating people like fungible cogs every two or three years and give them the time and space to create. Modernize the budget process. A budget is a plan and we are planning to fail.
▶ 0:31:01Mr. Sankar: No private company could survive if it took two years to budget for projects internally. They would be completely outcompeted in the market. The loop is not survivable and that sets the pace for the industrial base. Decision-makers in the building deserve to be treated like decision-makers with a pot of money and discretion to reprogram rapidly to meeting threats. Unless we ashley do -- we should not be under illusions about how hard the changes will be.
▶ 0:31:29Mr. Sankar: You have to mobilize talent and attack the problem again and again. That is what I think this hearing is valuable. I look forward to taking your questions. Thank you.
▶ 0:31:38Chair Wicker: Thank you very much. Mr. diller, you are recognized.
▶ 0:31:44Mr. Diller: Chairman wicker, ranking member read and distinguish members, it is an honor to discuss defense innovation and acquisition reform with you today. At the core of this discussion we must focus on ensuring america's ability to deter aggression, and create overwhelming strength while minimizing risk to human life and reducing the burden on the taxpayer.
▶ 0:32:11Mr. Diller: Unfortunately america's ability to deter is at its lowest point in many decades. That said, the forecheck and other successes leaves me more optimistic today that america cannot only reverse the trend, but actually do it in a way that creates a renaissance in american manufacturing and actually unlocks human creativity. We must act today.
▶ 0:32:41Mr. Diller: The word forge provides personal markers for me. America's manufacturing output tripled that of china during the time I was pulling forged plows on a farm. By the tamiflu f-16s dropping bombs, -- by the time I flew f-16s, dropping bombs.
▶ 0:33:06Mr. Diller: After years I am convinced a nation that does not manufacture technology cannot maintain a technological and military advantage. This is what led me to transitioning to divergent technologies today led by kevin zinger and his son lucas where they are revolutionizing the factory, bringing us an ability to actually turn a great idea into hardware for deterrence.
▶ 0:33:39Mr. Diller: Daily divergence transforms a car factory into a weapons factory. It is operating a production scales leveraging 700 patents, driven by ai, and right now we are literally printing our 253 mile an hour hypercard in the morning and a cruise missile in the afternoon. This can be done. It is all made in america. We are in agreement with most defensive primes and great american startups. Delivering capably's for air, land, sea and space.
▶ 0:34:13Mr. Diller: The capital efficiency that comes from this agility can reduce taxpayer burden, increase war fighting capability and quickly reveal -- rebuild U.S. global innovation and manufacturing dominance. What reform is needed to bolster defense innovation and attract companies like divergent to create american military advantage. First, we have to be clear of turning america's software advantage into a hardware advantage.
▶ 0:34:42Mr. Diller: We must foster competition for fully digital nai-driven design and -- and ai-driven design and production. We must scale successes, new acquisition paths and organizations to create a broad industrial base. With the ability to create a hedge portfolio of software-driven hardware. It is not clear we have the structure to scale this to success.
▶ 0:35:09Mr. Diller: Three, we need to build a civil reserve manufacturing network so america can build. The factory is the weapon. The taxpayer buys billions of dollars of weapons every year solely for war. Why are you not buying factories as a service?
▶ 0:35:25Mr. Diller: The factories distributed could produce parts for legacy platforms to ensure we can fight tonight, can scale a hedge portfolio or produce commercial goods in a way that bolsters competition, increases our military zillions he and capabilities -- resiliencecy and keep abilities. It expresses the gravity of the moment.
▶ 0:35:49Mr. Diller: The act of forging is literally defined eras of civilization going back to the bronze age as civilizations turn technology and hardware. Our eroded capacity of turning ideas into hardware is creating this national crisis. Visionaries mobilize a whole of mission effort in world war ii. It is time for freedom's forge 2.0.
▶ 0:36:21Mr. Diller: I am optimistic because I believe the ingredients are present for a general -- generational shift in manufacturing and defense innovation that could be more notable thing going from the stone age to the bronze age. I'm confident america will forge that peaceful and prosperous era. Ladies and gentlemen, it is time to build.
▶ 0:36:42Chair Wicker: Thank you very much, Mr. diller. Geurts. -- Mr. geurts.
▶ 0:36:50Mr. Geurts: Distinguished members of the committee, good to be back with you again. It is quite an honor to be here for this discussion. Having spent the last almost 40 years of my career trying to drive innovation and acquisition, as a person in uniform, as a civilian, and appointee and now in the private sector, it is a subject that is near and dear to my heart. I think it is critically important for the nation.
▶ 0:37:17Mr. Geurts: I found the honor to lead some of the nation's finest teams in times of war and global competition. I have seen what is possible when there is a clear understanding of intent, a sense of urgency at all levels of the organization, a close connection between the acquirer and operator, every boston diverse network of industry partners --a robust and diverse network of industry partners, and it empowered acquisition workforce.
▶ 0:37:45Mr. Geurts: Unfortunately in the last several decades our ability to do this at scale across the department has decayed. The industrial base and service -- that served us so well after world war ii is not up to the challenges right now that we need as a nation alone. The accumulation of decades of statutes, regulations, processes, special-interest, all well-intentioned about which permeate the bureaucracy have hobbled her ability to adapt and change -- our ability to adapt and change.
▶ 0:38:15Mr. Geurts: The risk-averse culture that has driven has thank you used -- organizations, departments and the workforce so it is unclear who is actually accountable to deliver. They are not empowered to actually deliver the results we need from them. The challenges facing the department and nation are many.
▶ 0:38:40Mr. Geurts: The nation needs to be innovative, productive and agile will ensuring their relentless stewards of the taxpayer dollars. Rather than trying to rebuild the industrial base we once had, I believe we need to focus on building the future industrial network we need that gives us the ability to scale and be agile in the time of global competition.
▶ 0:39:01Mr. Geurts: Harnessing our collective give abilities, talents, and innovations into a dynamic and aligned network will help overcome the limitations and linear thinking risk-averse approaches that have been impairing the nation's competitive capabilities since. I'm thankful this committee is placing such an emphasis on this issue. I'm optimistic with the tenets of the forge act. We have a systematic issue. We have to attack it systematically.
▶ 0:39:31Mr. Geurts: We tried in the last couple of decades, tweaking, making changes, making some changes there. If we are going to act at the scale and with the speed we need as a nation we need to overhaul both our approach to the industrial base focusing on the industrial network as well as leveraging a clearly accountable and empowered acquisition workforce. Thanks for the opportunity to appear before you and I look forward to your questions.
▶ 0:39:55Chair Wicker: Thanks to all three of you. For the benefit of the listening public and the audience, typically in a hearing where there are three witnesses the majority suggests tw other witnesseso one.
▶ 0:40:15Chair Wicker: Be hard for the listening public to know which witnessed today was a majority witness in which was a minority witness. I appreciate your thoughtful testimony. At this point to begin our questioning, senator sheehy, you are recognized for five minutes. Sen. sha
▶ 0:40:47Sen. Sheehy: The word innovation is thrown down a lot. I don't think we have an innovation problem. Private companies innovate. They have these fusion labs that innovate pretty well. The challenge is adopting the innovation at a programmatic level in the fielding it quickly. I served as a seal team leader.
▶ 0:41:09Sen. Sheehy: We had threats that would -- the enemy would watch how we would disarm an ied and the next day they would change the design literally the next day. They would rewire it and come out the next day. Our policies were fielding equipping to counter those ied's were stuck at the pace of our defense acquisition system. We would send that feedback home and maybe a year or two later we would get a new jammer or new tactic out.
▶ 0:41:36Sen. Sheehy: God blessed god blesse the guys other doing it. Our ability to innovate -- we did not in a debate that innovate at the speed of the threat. -- we did not end of eight at the speed of the threat. -- innovate at the speed of the threat. What is the single biggest change we can make as a legislative body quickly to encourage adoption of the innovation that exists?
▶ 0:42:06Mr. Geurts: Thank you for the question. I concur. Many of our roadblocks are self-inflicted and culturally reinforced. It is for a lot of different reasons. Number one that you can do is empower the program manager and hold them accountable. Right now the answer to a -- to dozens and dozens of folks.
▶ 0:42:29Mr. Geurts: They have to go get permission to to move a dollar to a better priority, initiate new technology, they have to spend years creating a program to adopt that. That is one. , two breaking down the barriers -- two, breaking down barriers. We need new entrants and commercial providers. We need program managers that have the authority to actually have visibility of all those things and rapidly be able to choose the best performer.
▶ 0:42:59Mr. Geurts: Finally we have to break down the barrier we created between the person buying the equipment and the person using the equipment. Well-intentioned headquarters staffs that have became related overtime. Reviewing that reviewer to do or ratio. Get the doers doing. Get them allied with the operational needs and give them the flexibility to make the best decisions and hold them accountable to deliver.
▶ 0:43:22Sen. Sheehy: Mr. sankar, I love your write up and agree 100%. I started a defense company myself. We had this with the company in two for investment purposes. What you referred to as that wall, which is accurately portrayed, but in addition to the regulations and the dca accounting requirements, there is a restriction of innovate something commercially and bring that innovation back and have a crossfeed valve for the defense
▶ 0:43:53Sen. Sheehy: Technology benefits for commercial innovation is almost not allowed. We are missing out on a massive pool. Especially as we move into ai. How can the dod better leverage commercial innovations to make sure the defense innovation is adopted at the speed that private-sector innovation is?
▶ 0:44:15Mr. Sankar: Thank you. Congress saw this in the 1990's. This is why we have the federal acquisition streamlining act. You have a broader market around which you can amortize your r&d. You can bring that stuff at a lower risk and with much greater speed to the dod. We delivered the operation warp speed supply chain in two weeks during operation warp speed. Two years before that, we built a similar solution in oil and gas. You can't connect the dots respectively.
▶ 0:44:46Mr. Sankar: -- prospectively. If you're going after hard problems you can benefit whole of nation. At some point every car, camera and cereal box american bought actually subsidize our national security. I would attack this systematically by thinking about the barriers that have been developed in the defense industrial base and lossy the american industrial base. -- lost the american industrial base.
▶ 0:45:14Mr. Sankar: We don't have innovation problem. -- innovation problem. If you're unable to finance your idea, that tells you something about your idea in this country. Innovation does need customers. Shortening that loop of how quickly -- I think we would be better spending half the money twice as quickly. It is time. Speed has a quality all its own. That is I you drive a commercial adoption. It will pull these folks in a way we need.
▶ 0:45:46Mr. Sankar: Yes, we need to cut the red tape and get rid of regulations. The biggest barrier is encouraging adoption, empowering people. I cannot agree more with senator reed's comments. It's actually a people problem, leadership problem. You cannot chop off -- are regulations -- something goes wrong and we come up with a new rule. We are trying to chop off one end of distribution. You can't do that without making sure nothing can go right either.
▶ 0:46:16Chair Wicker: Mr. reed.
▶ 0:46:21Sen. Reed: Mr. geurts, we recognize how critical the workforces to getting anything done. Particularly the case in acquisition. What is your assessment of the department's acquisition workforce in terms of its capacity and capability?
▶ 0:46:40Mr. Geurts: I think it is mixed. We have a talented workforce that has been hobbled for a bunch of years. They are also not fully informed on the full market available to them. I think as we -- as the committee makes all of these very value-added changes, we have to make sure we handle the implementation step.
▶ 0:47:10Mr. Geurts: Right now we have lots of great authorities in the department. We have not limited them to the full extent nor trained to the workforce to leverage them to their full extent. Part in part with change and authorities and rules needs to be rapid implementation, guidance, and rapid training. Hold everybody accountable after have done those two steps.
▶ 0:47:33Sen. Reed: One of the observations made with summary construction is covid triggered a premature retirement of a lot of government supervisors, workforce acquisitions managers, etc. We are lacking in those people and their experience. To comes down to people, as Mr. sankar said.
▶ 0:48:04Sen. Reed: We have to rebuild that workforce?
▶ 0:48:05Mr. Geurts: I would do two things. We have to review the reviewer to do or ratio. We have a lot of workforce tied up in multiple levels of review that could be deployed to help immediately. Get those assets doing work, not reviewing other people's work. Secondly, we need to create a training pipeline which fully informs them of how commercial markets work. How venture capital markets work. How traditional manufacturing works.
▶ 0:48:39Mr. Geurts: So they are exposed to these opportunities and hold them accountable for creating a strategy that best leverages all those capabilities.
▶ 0:48:48Sen. Reed: Mr. sankar, inc. You for your testimony. -- thank you for your testimony. One of the approaches we took was trying to attract nontraditional defense contractors. That was a term that has changed because now many nontraditional defense contractors are defense contractors.
▶ 0:49:13Sen. Reed: In addition, they also have access to and involved with governments in many capacities. Would you recommend changes to this approach of the nontraditional defense contractor?
▶ 0:49:35Mr. Sankar: I think what we seek is the same power of the american economy. People will take their private capital and put it at risk to build new things and offer it to the government not at the taxpayers' expense. That is what you see with the nontraditionals. They are raising private capital , putting their balance sheet at risk, delivering innovations.
▶ 0:50:02Mr. Sankar: If I was to contrast that to the traditional market, I will pay you by the hour. I will control everything you are doing. I will only you create. We are surprised that category of traditional player is not investing more in r&d. We have gotten the industrial base we have incentivize getting. -- incentivized getting. We would turn them into nontraditionals. That would really power our national security.
▶ 0:50:31Sen. Reed: One other aspect, and observation. We understand the defense industrial base has shrunk dramatically from 20 years ago. A lot of that was through mergers, acquisitions, and some cases looking at a threatening competitive company and buying it for reasons of my not be -- might not be appropriate. How can we stop that?
▶ 0:51:03Mr. Sankar: I'm spending my time personally on that. The antidote to the consolidation wave is the first breakfast. Palantir has blazed the trail, survived the valley of death. I want to lower the ladder and make it possible for many more new entrants to get their. How do I reduce the time it takes to get accreditation? How do you feel yourself not in an exercise but in the actual war fighting needs? Get more feedback and scales. We need a positive mindset here.
▶ 0:51:34Mr. Sankar: The big shrinking in the last supper encourages a zero-sum thinking which we need to get out of.
▶ 0:51:38Sen. Reed: Thank you.
▶ 0:51:39Chair Wicker: Before I turn to senator fischer, Mr. geurts, changing the reviewer to doer ratio, we can do that without changing the statute, could we not?
▶ 0:51:53Mr. Geurts: In some cases yes and in some cases no. There are certain parts of the statute that require different offices review things. We have let the functional side get -- the contracting folks have to review it independently. Independent flight test authority. Many are internal. Many are driven by either statute or intent from external stakeholders.
▶ 0:52:21Chair Wicker: Senator fischer, you recognized.
▶ 0:52:24Sen. Fischer: Mr. geurts, the impact of cr's on the department is well-documented. Limiting new starts for the challenges of increasing production rates. While cr's result in concrete negative impacts, the department has little influence over whether acr actually occurs -- a cr occurs since it is the purview of congress.
▶ 0:52:49Sen. Fischer: Are there any specific recommendations you have that would enable the department to continue to make progress on certain programs even through a cr?
▶ 0:53:02Mr. Geurts: Cr's are damaging to a rapid and agile workforce. You have to -- if you're applying to a contract for the year and the cr is occurring, you are doing it in three month increments or two month anchorman sanitizer both sides. Anywhere we can create authorities, if it is small programs --
▶ 0:53:25Sen. Fischer: Is there any place now the department can continue its progress? Do you know of any?
▶ 0:53:32Mr. Geurts: It is really challenging because of the special committee of the cr -- special committee -- specitivity of the cr. The army has asked her authorities to be able to rapidly reprogram and be flexible.
▶ 0:53:56Mr. Geurts: I think there are areas where it's a dynamic environment I think we can work together to build a trust to have more flexibility in the cr period.
▶ 0:54:07Sen. Fischer: Mr. diller, anything to add from a private sector perspective on this?
▶ 0:54:13Mr. Diller: Senator, there have been some notable changes starting with the fy 24 defense appropriations bill that provided some of that ajit billy -- agility that is key.
▶ 0:54:29Mr. Diller: If we look at how quickly our acquisition model works where we are budgeting and it's taking for years for something to become available, that is not the case for the private sector if we look at the pace of large leg which models and artificial intelligence have occurred -- large language models. They were built two to four years ago.
▶ 0:54:55Mr. Diller: I would commend the work of the appropriators that have looked to see what type of flexibility allows the speed of innovation that is happening in the private sector. Tickets to a question of adoption of innovation. -- it gets to the question of adoption of innovation. When we look at the ability to scale, the measured needs to be how we can get the funding that allows that production and movement.
▶ 0:55:24Mr. Diller: There has been increased abilities looking at digital approaches to creating trust across the potomac river where the pentagon and the congress can get a higher degree of assurance money is being spent quickly. This is being piloted with diu. That is going well. It is good for industry, good for trust across the legislative and executive rates.
▶ 0:55:48Sen. Fischer: Mr. sankar, and your work with the department what are some of the key factors that limit your company's ability to innovate?
▶ 0:55:57Mr. Sankar: If you think about -- I thought her competition was going to be the primes threatened by the innovation we were creating. The entity most threatened with the existing program of record. All innovation starts off as something that is heterodox. It will challenge the status quo and upset the apple cart.
▶ 0:56:26Mr. Sankar: We need to enable more flowers to bloom and recognize innovation is fundamentally messy and chaotic. Any attempt to put process around it and make it clean destroys innovation.
▶ 0:56:38Sen. Fischer: Mr. geurts, what are dod's most promising initiative to take advantage of that commercial innovation?
▶ 0:56:46Mr. Geurts: If I look back into 15 years ago, I think -- 10 to 15 years ago, there was a divide in interest in national security and the government's trust they could actually deliver something relevant to national security. If you look over the last five years in particular, that element has broken down. The conversations are occurring. The trust is starting to occur. The demonstrated success is starting to occur.
▶ 0:57:17Mr. Geurts: We have to do that at scale as a matter of business, not as the exception.
▶ 0:57:21Sen. Fischer: Thank you, Mr. chair.
▶ 0:57:23Chair Wicker: Senator shaheen.
▶ 0:57:26Sen. Shaheen: Thank you to the witnesses for being here. I took over as the ranking member of the senate foreign relations committee. One area that comes up is insuring our foreign military sales process works not just for us but for our allies, our military and industries. To ensure that we maximize the capabilities of our alliances we need to focus on being able to fight in an interoperable and coordinate away with allies and partners.
▶ 0:57:56Sen. Shaheen: I assume you would each agree with that. You are nodding. Mr. geurts, how should we think about -- how should industry and government think about and work to ensure american businesses can work with our counterparts with our allies in australia and japan and south korea to ensure systems are built on compatible architectures that allow coordination between our forces in combat?
▶ 0:58:24Mr. Geurts: A couple of things. One is reducing the fms burden in terms of regulation and statute. Things that make it hard to do fms sales and things that distance incentivize allies and partners wanting to use the fms system.
▶ 0:58:42Sen. Shaheen: Are there specific she would pointed?
▶ 0:58:45Mr. Geurts: There's been a number of studies on areas we can break down. A lot of it is the review timeline and the external authorities. There is work to be done there. As commercial is global there are areas where we can leverage commercial capabilities that do span many of our allies and partners that are interoperable from the start. Leverage those verses trying to back in interoperability from a custom dod made area. We have to differentiate it.
▶ 0:59:17Mr. Geurts: We need both.
▶ 0:59:20Sen. Shaheen: I certainly agree with that. Mr. diller, one of the things that has that we have watched how creative the ukrainians have been with many of their responses to that war. Do you think there are lessons we should be taking from what the ukrainians have been able to do?
▶ 0:59:44Mr. Diller: Yes ma'am. Unfortunately, I don't know our defense primes or startups responded in the way we necessarily would want to that type of crisis. Fundamentally, as has been discussed with my colleagues, this is an industrial base problem in america. How do we look at taking the leap that allows the factory to be part of that war fighting system?
▶ 1:00:14Mr. Diller: Tc agility in ukraine -- you see agility in ukraine. If we can actually have a 21st century manufacturing system that is digitally driven, it allows us to actually have the factory evolving at the pace of the war to close the loop and create interoperability between nations and to scale and remain agile in warfare in a different
▶ 1:00:47Mr. Diller: Way that has been -- a leap ahead of the initial lessons seen in ukraine.
▶ 1:00:52Sen. Shaheen: Mr. sankar, I'm a big proponent of small business that creates 16 times more patents than large businesses. One of the ways we try to take advantage of that innovation is through the small business innovation research program, which has been very successful. It is a program that palantir has worked with extensively.
▶ 1:01:17Sen. Shaheen: I'm concerned about the order just came out from the acting director of the office of management and budget. It puts on hold any financial assistance that is dedicated to any programs like sbir. There are 82 of those programs within the department of defense.
▶ 1:01:39Sen. Shaheen: What is it due to the research going on in our small businesses when there is that kind of a halt on the program and we don't how long it is going to last and we don't know whether it is going to be forever or if they will be able to resume what they are doing?
▶ 1:01:58Mr. Sankar: What I can speak to is the value of small business. If you think about the american system, it's about david versus goliath. We need the small business program to continue to encourage many more davids. We should be clear we want david to get big. Where the small business program might be failing is it is just enough to keep them small, a class of indentured servants. That is not what we aspire for them.
▶ 1:02:30Mr. Sankar: We want the small guy to have an opportunity to become the next king. If there were ways of continuing to evolve the program so we were holding ourselves collectively more accountable to how many small businesses were able to get big, how many are now defining the next frontiers of what we are doing in defense innovation, the nation would be better off.
▶ 1:02:49Sen. Shaheen: I certainly agree with that and I hope we can look at the next stages of the sbir program.
▶ 1:02:57Chair Wicker: Senator rounds.
▶ 1:03:01Sen. Rounds: Thank you all for being here today and helping us in this project. Albert einstein in a letter to president roosevelt identified the risk of losing to nazi germany with regard to the possibility of a nuclear bomb. He talked about the need for the U.S. to take a lead role and basically begin that project.
▶ 1:03:26Sen. Rounds: At the same time, once that occurred in the manhattan project -- and the manhattan project was ordered, we started a process within the industrial base and scientific community that was unbelievable at the time.
▶ 1:03:43Sen. Rounds: Part of it has you with a lot of really great people talking to one another, both from within the department of defense, within the national laboratories as they had existed back then, the universities, but also the military and the political leaders. I guess my question, we face a very similar situation now with the limitation of ai, that is -- implementation of ai and adversaries moving rapidly.
▶ 1:04:12Sen. Rounds: This ai tool, the countries best able to incorporate it and move it forward as quick as possible will win the race militarily and economically. Mr. geurts, and the time you are within the department of defense how often did you actually have a roundtable or is it was some of the key thought leaders, industrial base leaders, the innovators? Did you have a roundtable with them or is that restricted?
▶ 1:04:45Mr. Geurts: I did, both with special ops and with the navy. We we create a forum within those -- forum for those discussions. It is available within the statute and critically important in understanding the opportunities in front of us and how to leverage the full ecosystem.
▶ 1:05:05Sen. Rounds: Mr. sankar, palantir is recognized as a thought leader. A proven facilitator with regard to ai, limitation. -- ai implementation. How often are you invited to the pentagon to talk about coordinating with our purchasing organizers?
▶ 1:05:30Sen. Rounds: The acquisition people in terms of actually acquiring the best and coordinating with the weapons systems we have today?
▶ 1:05:38Mr. Sankar: I would say it's a mixed bag. There are certain parts of the community that are very proactive in seeking advice and interest from outsiders. Actually seeking help in pulling together the right group of folks who would be nontraditional and far away from defense. Others have a more captive approach to this.
▶ 1:05:58Sen. Rounds: Have you been invited to sit down and talk?
▶ 1:06:02Mr. Sankar: A few times, yes.
▶ 1:06:06Sen. Rounds: Mr. diller?
▶ 1:06:08Mr. Diller: If we look at the innovation progress in the last desk e -- last decade, you see three eras. The launch of diu. That needed to move into something more meaningful which started forgot the contracts.
▶ 1:06:28Mr. Diller: Notable reform allowed the conversations to happen against sometimes large hurdles that thought the conversation could not happen. We need to get to the third era, how do we scale to get hardware and software so this is not an episodic conversation? This is the way we conduct war in america. This is how we mobilize america for war.
▶ 1:06:54Mr. Diller: That is still a gap that is needing to be filled but I'm optimistic we are on a path building on the successes and pilots.
▶ 1:07:01Sen. Rounds: I agree that is a path forward. I'm questioning whether or not the acquisition process today will allow that to happen. Mr. geurts, we have a rapid acquisitions process that some branches are able to access. Any reason why all of our acquisitions should note based upon a rapid acquisitions approach?
▶ 1:07:22Mr. Geurts: I cannot agree more. I get frustrated when we have the rapid acquisition community and then everybody else. We should all be rapid. I'm a huge believer in the networks. We do have a culture of lawyers that look to everything bad about having conversations versus what is appropriate. That's an area where we can do much better as a community. We have to.
▶ 1:07:45Sen. Rounds: Mr. sankar, rapid acquisitions?
▶ 1:07:48Mr. Sankar: I could not agree more that every thing should be rapid. Speed is our greatest strength. The american entrepreneurial spirit, when everything is on the line, we throw away the rulebook and execute.
▶ 1:08:01Sen. Rounds: Mr. diller?
▶ 1:08:03Mr. Diller: 100%.
▶ 1:08:05Chair Wicker: Mr. sankar, if there were a roundtable and your competitors were invited and not you, when you have a problem with that?
▶ 1:08:15Mr. Sankar: Arguably that is what is happening today. It happens. People need to get the best counsel they can and we need to be together. There are lots of opportunities to compete. We need to move away from a monolithic approach where you have one chance to get involved. Every quarter we are adapting new technologies and there's a constant reshuffling of the performers.
▶ 1:08:38Chair Wicker: Very helpful. Senator hirono.
▶ 1:08:44Sen. Hirono: As one of the authors of the lupine for breakthroughs in defense innovation report, you recommend giving the combat commanders specific funding to accelerate the rapid fielding of new technologies to solve theater specific problems.
▶ 1:09:10Sen. Hirono: What advantages would such a change injected into the defense acquisition system? How would you address concerns from those who argue the combatant commanders already have a say in how deity prioritizes and procures --dod prioritizes and procures technologies?
▶ 1:09:29Mr. Diller: The recommendations were specifically building on the success that chairman calvert championed when he added $220 million of funding to a diu agile and enterprise fielding capability.
▶ 1:09:50Mr. Diller: There has been incredible success in being able to provide the flexibility directly to the combat command, who right now is urgently developing capabilities to ensure the potential 2027 risk is deterred.
▶ 1:10:08Mr. Diller: To make sure there is proper balance, how do we move into 21st century acquisitions of making sure there is a digital accountability between the appropriators, making sure that is tied back into resourcing approaches that are institutionalized in the pentagon and tied directly to the war fighter capability.
▶ 1:10:31Mr. Diller: It is not acquisition authority but it is something that is more -- much stronger than just the combatant command. Having a say over dollars go. -- of where dollars go.
▶ 1:10:47Sen. Hirono: That's an important -- looking at who gets to make these kinds of decisions and who gets to weigh in. I agree that the combatant commanders could have a greater say. For Mr. geurts, everyone agrees that dod's acquisition workforce must manage complex requirements and excessive reporting structures which creates a risk-averse culture. It's been acknowledged the dod has a risk-averse culture.
▶ 1:11:17Sen. Hirono: What training or tools to acquisition professionals need to better leverage their existing innovative procurement pathways like ota? The other transaction authorities or the military acquisition pathway. We have tried to create innovative ways for our faster acquisition but not if people do not take advantage of these pathways.
▶ 1:11:42Mr. Geurts: There are plenty of pathways at socom. We created 17 different ways to buy things and then empowered managers to pick the right one and held them accountable to deliver. We have to get away from the idea that we are efficient if we pick one way to do everything and then train everybody to one standard as opposed to exposing them to all the different opportunities and then training them with the right tool to pick for the right job.
▶ 1:12:13Mr. Geurts: Part of that is empowering the program manager so they have the ability to pick the tool and it is not spread out between what legal thinks or contracts thanks, what the operator thinks. I think that will go a long way.
▶ 1:12:25Sen. Hirono: Did the other panelist agree with Mr. geurts' approach?
▶ 1:12:31Mr. Sankar: I do agree. One thing on top of that, it is bringing acquisition closer to the operators, to the war fighters. There's a way where we divide these things up so and acquisition can deliver on its own. Another way of thinking about your question on combatant commanders, it is the answer. We have 13 cocoms.
▶ 1:12:54Mr. Sankar: We should be celebrating the heterogeneity and the need to cross our cocoms and set of a unitary solution driven by the services that needs to be universal.
▶ 1:13:03Sen. Hirono: Before I run out of time I wanted to mention the importance of sbir. It's a way for us to really support and encourage small companies to be innovative and creative and we should be supporting them. Apparently now there is a pause on these initiatives. Mr. sankar mentioned you understand the importance of sbir. I would like to know with the other members agree?
▶ 1:13:35Sen. Hirono: Mr. diller.
▶ 1:13:36Mr. Diller: I have issued thousands a year. There are reforms that should happen but it is done incredible things to help mobilize the american industrial base.
▶ 1:13:46Mr. Geurts: Yes ma'am.
▶ 1:13:49Sen. Hirono: You agree? Thank you.
▶ 1:13:52Chair Wicker: Senator ernst.
▶ 1:13:55Sen. Ernst: Thank you for being here today. I am particularly excited about the session today and I hope that we can take this information in your thoughts and actually act on it. So I'll start with you, Mr. diller. I serve as the chair of the semi committee on small business and entrepreneurship and I'm working on a bill to actually reform sbir.
▶ 1:14:26Sen. Ernst: While it is important, I agree it needs to be reformed. A number of the average you helped create have been very successful in scaling technologies from innovative small businesses for the war fighter. So Mr. diller, how can we reform sbir and expand on this fork across the dod innovative ecosystem?
▶ 1:14:50Mr. Diller: First, thank you for your leadership and being a champion for small businesses. We talk about mobilizing america. This particular capability is key. When we picked it up, it was not a perfect program but it was a tool that we had and thanks to capitol hill, it has been better year after year. I think there are three important things that we need to do in the program. One, I think expanding the number of companies you can get in.
▶ 1:15:22Mr. Diller: This frustrates sometimes the venture capitalist, but this is the venue, the conversation about how we bring in many companies for the conversation. This is the venue for that conversation. So actually more with lower dollar amounts initially. But we also need to be very deliberate about scaling and scaling quickly those best companies.
▶ 1:15:43Mr. Diller: We need to be better judicious reviewers of which companies to scale, and then build on things like the program that can literally take a company from a $50,000 program in one year to a $50 million program the next year through proper due diligence. The last piece of that is the due diligence.
▶ 1:16:05Mr. Diller: Making sure that the dollars that are going through the program are actually going to american companies and are not in the atmospheric and that is making sure that that is consistent and rigorous across the department with clarity for those companies that want to make sure they have capital. How is that conversation happening and there's more to build a proper relationship with industry to get everyone on board with that.
▶ 1:16:31Mr. Diller: >> that is fantastic and making sure the dollars go to american companies is extremely important as well. As chair of the senate doge caucus, I couldn't agree more with your defense reformation paper where you state that small business programs should not be welfare.
▶ 1:16:52Mr. Diller: I agree wholeheartedly, and in the past decade, 25 companies they are notoriously known in my circles as sbir mills received 18% of all award dollars and dod amounting to about $2.3 billion. That's a $92 million windfall for company in a program meant for small businesses.
▶ 1:17:20Mr. Diller: Gao reports that these frequent flyers have lower sales and investments and fewer resulting captains. We have a problem here. How can we eliminate this waste of taxpayer dollars and reorient the sbir program to its original purpose as a source of merit-based seed funding?
▶ 1:17:41Mr. Sankar: I could not agree more, that is clearly an abuse of the intent here. One thing we could think about his time limiting how long a company is eligible. It is not just about the size, but we aspire for the small companies to get big. I don't know if the right threshold is five or 10 years but in some amount of time we expect you to have the opportunity to get big and we are going to bet on other entre nous errors in the future. The other part is more top-down.
▶ 1:18:10Mr. Sankar: We should really be thinking about how many big companies will be able to create? I think that will help us to have a clear head as we think about the next rounds of investments. >> you agree, and if you go back and you look at the companies that are benefiting from these programs right now, most of them exist on the east and west coast.
▶ 1:18:31Mr. Sankar: Very few of those dollars are actually getting spread into middle america, and I do think that this will change in the future and provide opportunity for more small businesses. I will get back with you one questions for the record, but I appreciate your service to our nation. >> thank you, ma'am. >> thank you very much, senator ernst.
▶ 1:18:57Mr. Sankar: A few of our members of the committee have referred to a paper written by Mr. sankar consisting of 19 pages. Some of them are just title pages, but I ask unanimous consent that we enter that into the record.
▶ 1:19:27Mr. Sankar: Without objection, it is so ordered. >> if I could, Mr. chairman, I'd like to recommend as we are looking at this topic that we also have a hearing on work worse because I think acquisition reform is needed. I think a lot of their challenges are also around inadequate workforce in the defense industrial base and I would love to have a committee hearing on that topic as well. This is something Mr. ernst and I have talked about before.
▶ 1:19:59Mr. Sankar: Mr. diller, you mentioned di you, the defense innovation unit and I want to ask you and the others if you care to comment. I've been impressed with their mission and I've been impressed with some of what they've done but I haven't been involved with this. How would you assess both the performance of di you and maybe more importantly the promise of di you? >> from a performance perspective this is a start up inside a very complex bureaucracy.
▶ 1:20:31Mr. Sankar: For years, those start internal to the bureaucracy largely getting by the bureaucracy. You can look at the rate of hiring to actually be able to build the organization, even when the top leadership in the pentagon says go higher, the frozen middle certainly make that a challenge. I saw the same thing. Given the headwinds that they must address, I think they've been making great progress.
▶ 1:20:58Mr. Sankar: There have been great companies getting built because of the collaboration. Real contracts are now turning into capability that is actually deterring an adversary. >> what advice would you give to the pentagon today about diu and the way they should position it within the dod?
▶ 1:21:16Mr. Diller: I think the ndaa had the impact of elevating specifically the challenge that we had with innovation in the past is when these new technologies come to the forefront, it is not necessarily fit in with our traditional program executive officers. It is not necessarily fit in with our training and adoption pipelines, and many times it doesn't necessarily obviously fit in one of the services. And it is nothing pejorative to the service, it is just new and we don't have a home for it.
▶ 1:21:47Mr. Diller: It has fit that place of actually identifying joint capabilities to support the joint war fighter, and I think that elevation as it is being reported directly to the secretary of defense, so that the conversation with great companies in this ecosystem can be free and open, so that it is encouraging. Using existing authorities to create the speed so that you can actually move.
▶ 1:22:21Mr. Diller: There's a lot still to build out in that structure. Diu is the small adoption piece on this and there are some questions of what specific problems are these organizations solving. That doesn't fit in at the beginning, either, so there's room. >> a lot of the testimony this morning has been about emerging technologies that might not directly within the silo mentality.
▶ 1:22:47Mr. Diller: I want to talk about acquisition innovation in an ongoing area that we have a lot of problems, that is shipbuilding and such. $5.7 billion at the end of the year into the virginia class subprogram to try to move it more into on-time, on budget. And that was after putting money into the program on top of the base budget.
▶ 1:23:09Mr. Diller: What would be a way to think of acquisition reform in the context of ship and sub building, should be look at different contract vehicles, what would your thoughts be on that? >> we should look at innovation acquisition reform in all phases. We spend over $10 billion a year on ship repair. There is state-of-the-art technology that could enhance that today, reduced the -- reduce those bills, get throughput out. We need a network of performers.
▶ 1:23:43Mr. Diller: We need capital-intensive shipyards, rapid manufacturing, that is a piece I think we are missing. We have these pockets of old legacy things, new commercial things. We haven't yet tied back together into a well performing network where people can come in and out of that network at their performance merits. >> others have thoughts on shipbuilding in particular in my last 17 seconds?
▶ 1:24:15Mr. Diller: Just briefly -- >> the whole 30 seconds, I'm sorry.
▶ 1:24:21Mr. Diller: We are living in an industrial age that does not match the talent pool that we have out there. We must think about what the next leap is in manufacturing. >> act of the workforce question, I appreciate that. >> thank you very much. Senator budd. >> thanks for your service.
▶ 1:24:48Mr. Diller: What are some of the takeaways that you've had from your approach to rapid acquisition, and do you think it is realistic to apply those lessons learned to military services? >> absolutely. I think a couple of those key things are rapid decision-making, creating venues to get exposed to all the technical capabilities and performers that are out there like software.
▶ 1:25:11Mr. Diller: I think it is having trust of congress and a relationship to be flexible, and I think it is empowering the program executive offers to manage a portfolio, not manage individual programs. >> appreciate that. Mr. same car -- sankar, we will start th you first. What has been your experience navigating the pentagon, terms of payment, all that.
▶ 1:25:42Mr. Diller: How has that affected your ability to do business with the dod? You said you been there a couple of decades, so maybe in the early days as a smaller company, may be much more intimidating at that point. If you would go back in history into the bed, what was it like as a startup trying to do business with dod?
▶ 1:25:58Mr. Sankar: It was quite calm gated. I can't tell you the number of times we submitted invoices and somehow didn't fill out the right box somewhere. I think you can count on the government in the end, but perhaps not always on time.
▶ 1:26:22Mr. Sankar: We should be thinking about where the divergence comes from, helps the government, and I think it does act as a deterrent to new entrants coming in. >> for the small business vault out there listening, what would payment terms file perhaps in the early days, what would be expected?
▶ 1:26:43Mr. Sankar: Everything is paid in arrears of course, we can't structure in any other way. Maybe the payment terms are quite reasonable. >> what is the difference between that and reality? >> we would probably add a couple of months on that. >> I'm glad you survived. >> sir, we have one contract right now with a government that is a cost accounting.
▶ 1:27:11Mr. Sankar: If we can avoid it, we will not do that again. It does not serve the government well for this type of work and it certainly does not serve the small business well. So I think going back to this question of the reviewer and the doer, we still have failed to get the department of defense into the 21st century. To digitize the reviewer part at a pace of relevance, so that they can be more doers.
▶ 1:27:40Mr. Sankar: That work still is lacking significantly, slowing down the government, creating waste and keeping us from getting the best technology. >> thank you. Acquisition professionals often cite the high cost, the best penalties and disincentives to taking problematic risks, and I think it result in a culture of compliance. You mentioned that a little bit this morning.
▶ 1:28:04Mr. Sankar: So in contrast, in the non-dod world, many industry-leading companies celebrate failure in the adopted approach to learn quickly. How might program managers be able to achieve while minimizing the risks of failure? It seems to me if you want to address the cultural issue here, and I don't know if it is class or I heard some of the asked what tools do you need, I think it is more than that, I think it is a cultural issue. If you agree or disagree, please weigh in on that a little bit.
▶ 1:28:37Mr. Sankar: >> it is absolutely a cultural issue. There is training you can do but if they are in the wrong culture, they want take advantage of the tools. I think it goes back to being outcome-focused, having unity of command, and then holding that person accountable and there was more of that, and there was flexibility.
▶ 1:28:58Mr. Sankar: You could create strategies where you would have multiple performers because you could act very efficiently, and then if a company performs well and has a product the operator once, you buy more of them. If they don't, you buy less and go to a different product.
▶ 1:29:16Mr. Sankar: That doesn't align well with a centrally planned, 30% of our program elements are less than $10 million a year, 447,000 pages of budget documentations and then you get hold up if you make a decision that is the right decision, but doesn't align with that bureaucracy. We've got to get to a better spot. >> thank you. >> thank you, senator budd. Senator kaine.
▶ 1:29:43Senator Kaine: I'd like to go back to the opening statement at the end where he talked about churchill and the necessity of thinking first. The first step, it seems to me in this process is to have a better focus on what we need in the future and not what we needed in the past. The prime examples to me are directed energy. The interceptor program, those missiles that are designed to hit a bullet with a bullet are $70 million apiece. By the way I got that number from nai app on my phone.
▶ 1:30:17Senator Kaine: But the point is that we've been fighting the last war. Instead of talking about direct energy, rather than $70 million, the focus has been on missiles and missiles. And by the way those missiles won't do anything with hypersonic. That's another technology that we were late on. New technologies win wars.
▶ 1:30:44Senator Kaine: Genghis khan conquered the world because of the invention of the stirrup. World war I, the tank. World war ii, the atomic weapon. I think this discussion has to start before we get all the processes that we are going after the right products. Do you have any thoughts on that?
▶ 1:31:08Mr. Sankar: I do. I love the tank example in particular because it was the royal navy that the tank. >> they were called tanks because the codename was tankers for the eastern front or something.
▶ 1:31:20Mr. Sankar: And I think this shows you before there was the tank, there was a landmine. This seems to be hearing about churchill in many ways. If you have asked the army, the british army to think of what they were going to need to win world war I, they would have been wrong. >> they said more troops and deeper trenches.
▶ 1:31:42Mr. Sankar: We have to recognize that the innovation win the next war will come from the edges of our military, people who are closest to those problems. It's very unlikely to come from the city. >> we wouldn't have had a nuclear navy.
▶ 1:31:56Mr. Sankar: The navy have three enemies, the soviet union, the air force, and --. He was not widely loved but I think we need more tolerance for the heretics because these heretics end up being our heroes. >> I don't know how you inject creativity into the process. Any thoughts on that? >> I also think that we need to invest in the capacity to act quickly.
▶ 1:32:25Mr. Sankar: So even if we plan much better, if we don't have the industrial network that can react quickly, if we have to wait to decide the perfect thing we want, so I'm also a fan of the plan for the unplanned. Create the capacity. We've lost the middle of our industrial base. We've got very big performers, a lot of little small performers and that is where I think the commercial marketplace scaling internet middle becomes really important.
▶ 1:32:54Mr. Sankar: >> speaking of acting quickly, this is a chart that derived from our dear departed chairman jim inhofe. It compares the time it takes in concept to a new product starting back in 1945. The dark line is the military aircraft. The light blue line is the commercial aircraft, and the redline of the automobile.
▶ 1:33:21Mr. Sankar: Back around the 60's and 70's, those things took around the same time to get the prototype and actually going. But something happened and now a military aircraft is 25 or 30 years from concept to development. Commercial aircraft, much faster. The automobile has gone down.
▶ 1:33:53Mr. Sankar: The other thing that bothers me of the pentagon that can't buy something off the shelf. I don't know how many thousand pages, instead of going to commercially available handgun, all of that would require, requirements creep is another problem. Requirements keep stacking up. Do you have any thoughts?
▶ 1:34:20Mr. Diller: Sure. The air force has emptied the museums in the boneyard for c-130 hubcaps. This took us days to build. It will take months to get it certified. Nothing changed, the data was available on day one. The hardware was available on day one, it did not change. We have to change the pace of adoption. We must digitize our industrial base. We must digitize our bureaucracy.
▶ 1:34:48Mr. Diller: >> one of the problems is the risk-averse, which is been discussed, as I've observed the developing of hypersonic's, the chinese seems willing to fail. They do tests and fail. We have to have every test worked, and that is dramatically slowing down our development of some of these important technologies. You are nodding your head, is that correct?
▶ 1:35:10Mr. Sankar: Just like the starship. Elon learned more from the starship breaking up and he does from inherently waiting and slowing down to get the right perfect launch one time around. The rate of learning, the first driven learning is our competitive weapon. How quickly can we adapt, how much are we changing tomorrow. I could not agree more. >> thank you very much.
▶ 1:35:45Mr. Sankar: I think we need to add to the record a smaller copy of that chart. >> I will provide it to the committee. >> I find it very interesting. And also, if you don't mind, senator vance, what is the object that you just picked up and tell us a little bit more about that.
▶ 1:36:06Mr. Diller: Going to your first point, if america goes to war tonight we will go to war with the multitrillion dollar force that we have today. We talk about innovation, while there are great third offsets, replicators of autonomous robots, we must make sure that innovation is supporting the multitrillion dollar force that we have today.
▶ 1:36:32Mr. Diller: The c-130 as the air force has said, did not have a supply chain for hubcaps. They had emptied the museums, they had emptied the boneyard. This is available to be three printed, literally designed by kevin and his team at divergent technologies and did it in days, digitally designed.
▶ 1:36:54Mr. Diller: There was a degree of data available that is unprecedented with legacy approaches, but the challenge of getting this adopted into the dod bureaucracy is one that goes back to this risk aversion, those back to how do we digitize this entire system, how to use digital engineering and digital manufacturing because this saves the taxpayer billions of dollars and it allows aircraft that are available today in a legacy force to fly tonight.
▶ 1:37:22Mr. Diller: Many of them cannot do that today because of the horrific, horrific debt that we have in our depots and in our sustainment enterprise. This leads innovation. >> be a little more specific about what the holdup is.
▶ 1:37:33Mr. Diller: The holdup is the risk aversion. There are things that failed. >> where?
▶ 1:37:40Mr. Diller: It goes through our airworthiness processes. In some instances there are some parts that if they fail, it is a loss of human life and how is it that we make sure that we are using digital approaches to identify where those safety critical things are, how do I consume data in the 21st century manner that is a digitized touch to that engineering design?
▶ 1:38:06Mr. Diller: That is taking a degree of data when we are certifying parts for aston barton, who, mclaren. We are doing that with data sets were unprecedented and un-consumable today by the department of defense. Those companies, the highest brand-name companies in the world would not be offering those safety critical parts on their vehicles if they did not have assurance from the data sets.
▶ 1:38:35Mr. Diller: We look at the department of defense, penciling to take years. We must drive that adoption. It is going to take a nudge to actually digitize and to make sure that that massive risk aversion is saving dollars for the taxpayer in providing capability.
▶ 1:39:00Mr. Diller: >> thank you very much senator banks, you've been indulgent and the chair will be indulgent with you on your questions. >> what kind of a difference would make if we gave the combatant commands their own acquisition?
▶ 1:39:15Mr. Sankar: I think it is the single biggest difference that we can make here. The department of defense is the only institution I know of that divides up supply and demand. The integration of supply and demand is the beating heart of any company. They provide the supply. They thought all needs were perfectly noble and unitary across space and time here.
▶ 1:39:44Mr. Sankar: All of our advantage comes from the fact that we might be slightly different things in the signal is the commander. How do we get the people closest to the fight the ability to express a little bit of competitive signal? 90% of what you want is probably coming from the services but that 10% gap is what is going to make or break us. How do we give them the ability to break the monotony and introduce something like a free market produce multiple signals coming?
▶ 1:40:13Mr. Sankar: How did we have a world where every service was competing to build? Maybe a commander should decide whether the navy or the air force has the concept for this specific force or the emergent needs they are actually seeing. I think that competition will get us all to be better. >> why aren't we doing that already?
▶ 1:40:32Mr. Sankar: Having the luxury of having won the cold war as we view is wasteful. Why can't we just pick the right answer upfront? I think our system is exquisitely designed to solve all problems that can be solved top down. We can think our way through it. But the promise of america is that there is so much messiness. It is all inductive. Our system is poorly set up currently defined the things you've got to reason your way through.
▶ 1:41:00Mr. Sankar: You've got to experience it, roll up your sleeves, get dirty and realize new insights as a consequence of doing that. I think we solved that by getting a little bit of strategic and ptolemy to buy what they need and to build what they need. >> play that out, how would the servant sees -- services and the defense agencies react?
▶ 1:41:21Mr. Sankar: I think most people don't really like competition but if you get past the initial history, the next step is how do I change what I am building so that they want what I am building? That is how we're going to start to get the leverage from that. This is also the idea around competing programs.
▶ 1:41:42Mr. Sankar: Competing program manager that I saw, what is the incentive for a program manager to adopt new commercial approaches and actually disrupts their existing approach? Today's incentive is denied, deny, deny, pretend it doesn't exist, block it. Vs. I'm competing against another great american, I want to be the first person to adopt the disruptive technology so I can win. >> few have an example of where the combatant commands lack acquisition, authority, cost delays or commission?
▶ 1:42:15Mr. Sankar: >> could look at the success of project maven which didn't really come from the services. People love to divide the efforts as bureaucratic for not sustainable, but that innovation really came from the 18th airborne. It came from the afghan ne-yo, the emerging demand signal in the world, the crisis that had to be responded to. The learning that could only happen there folded and capabilities.
▶ 1:42:42Mr. Sankar: >> program managers and the private sector obviously paid more than government employees. They also get bonuses and stock options for good performance. But in dod, the military personnel and civilians managing our critical weapons programs it paid the same whether they deliver or not. Do you think the limited pay to performance system that the dod is trying has worked?
▶ 1:43:04Mr. Geurts: My experience both personally and professionally is it is not a pay issue. The high ability of program managers want to deliver in operation relevant and capable for the war fighter. A bunch of outside stakeholders. Anything where people can say no, they can say yes. So they spend 90% of the time managing the bureaucracy, not managing the effort.
▶ 1:43:34Mr. Geurts: And I think the other piece is we got to also get to the point to be innovative. We have to start things quickly and we also have to be able to kill things quickly. And for a lot of different reasons, and I think tha is one of the challenges, we will start a lot of things but if we can't kill the things that aren't performing for whatever reason, then you won't have a highly functioning and adaptive system. >> well put, I yield back.
▶ 1:44:05Mr. Geurts: >> thank you very much. Senator cramer? >> thank you all three of you for being here. I've stayed the whole time because frankly, this is why I'm here is what you are talking about. I'm not sure of all the solutions but so far I like what I'm hearing. This is exactly why senator kelly and I stood up the defense modernization caucus, so thank you for your comments today. I'm going to go in a completely different direction that I was planning to.
▶ 1:44:37Mr. Geurts: I was thinking back to my first days in the senate, and it was at that time when dod was looking for somebody to win a contract for competing. Her memory the jedi competition. And I remember they chose microsoft and amazon early 2019 to compete.
▶ 1:45:05Mr. Geurts: Late in 2019 they were microsoft, and what resulted in that was of course immediate protest. And they went on a wild longer, flip the script. Chose amazon, and microsoft protested and then nsa took over. Anywhere, five years later we finally have multiple companies doing cloud computing.
▶ 1:45:31Mr. Geurts: I was very frustrated by the ability for a company who didn't win a contract regardless of who the company is to protest the company who did and then hold up modernization by five years. A lot of things were happening in the meantime, but then we fast-forward to today or we read about now but I believe to be the most innovative agency within the dod, the space development agency, which has been under attack since the day we stood it up by swamp
▶ 1:46:03Mr. Geurts: Creatures and legacy space operators and legacy acquisition and procurement officials, and a protest that I almost guarantee you will slow up the proliferated war architecture, which is the worst thing that could happen. And it's even led, as you know, to a claim that is much more political than real to me, quite honestly.
▶ 1:46:34Mr. Geurts: And I would just like each of your comments or opinions about the protest regime and whether there's more that can be done there. Don't get me wrong, competition requires the ability to challenge. But it shouldn't provide the opportunity to make the country less safe. I will just start with you and go down.
▶ 1:46:55Mr. Geurts: I do agree there needs to be an avenue, but that avenue overtime has gotten abused. One thing I suggested early on was you get one bite at the apple. You can protest the gao, or court of federal claims, you can protest twice. I also think there should be somewhat at behavior over time and some disincentive for what I would call crime protesting, particularly by incumbents.
▶ 1:47:26Mr. Sankar: I agree it's also been abused. It's a hard problem for the reasons that you've already articulated but I think one way that we can really bring this down is by doing more bake-off's. Getting more things fielded because anyone can win a fiction writing contest. It has no correlation to your ability to perform. But when we have a satellite in space we will be able to tell. Maybe we will decide actually we should have multiple performers.
▶ 1:47:54Mr. Sankar: Maybe we are getting bad decisions because we are evaluating you through a fiction writing contest instead of empirically in the field. >> I thought the examples one of you use a little bit ago, elon musk, I was at the starship launch with president trump and it was very confusing for several of the businesspeople there to hear elon speak so positively about the rooster that didn't come back that they had to put in the water. But we learned so much.
▶ 1:48:26Mr. Sankar: That is a tough culture. In our business and in government, but it is one that we have to foster. Your comments on the protest.
▶ 1:48:34Mr. Diller: It gets to that risk. I went to a french test school, and the speed that my five-year-old was able to learn french compared to me, he didn't care. He did not have this risk-averse culture. It is the same with elon musk. When we look at these protests, if we take this approach, our chairman of the joint chiefs of staff uses the phrase acquire to require.
▶ 1:49:03Mr. Diller: How do we slowly build trust, because at the core, it is a trust issue. If we actually worked together at the beginning in ways that we are allowed to, that trust can be built. >> thank you very much, senator cramer. Before I go to senator warren, we have a statutory authority in place to have the type of bake-off that you've described?
▶ 1:49:26Mr. Sankar: We absolutely do and we have participated in those words of processes. >> so it is just a matter of the budget. Senator warren. >> they queue for holding the steering.
▶ 1:49:43Mr. Sankar: Dod buys a lot of stuff from defense contractors, and to protect the military and taxpayers, it has long been the law that defense contractors must give dod contracting officers certified cost and pricing data to help verify that a price that is being charged is fair and reasonable.
▶ 1:50:06Mr. Sankar: One of the big exceptions to this, though, is for commercial goods and services based on the principle that the market will make sure it is a fair price. If you could buy it on amazon, that is a fair price, you don't have to go into how you got there. I get that. And I am all for commercial buying. But the fact is this has turned into a massive loophole.
▶ 1:50:34Mr. Sankar: Where big defense contractors withhold data even though there's no market, paint dod, effectively the only customer, doesn't have this information so that these giant companies can price gouge the military. So I want to give you an example.
▶ 1:50:54Mr. Sankar: For years, there were not enough helicopter engines from honeywell and honeywell successfully lobbied congress so it's engines would be treated as commercial and honeywell wouldn't have to turn over the certified cost and pricing data. You are the cto of a billion-dollar tech company, that contracts with dod.
▶ 1:51:22Mr. Sankar: Once honeywell got the engine moved to a commercial engine, what do you think happened to the price?
▶ 1:51:29Mr. Sankar: I'm not familiar, senator. >> it went up, not down, by 100%. And that is the problem we've got here. Too often, dod is outdone when it is negotiating with these giant defense contractors, which is exactly why it meets the cost and pricing data to avoid being ripped off.
▶ 1:51:56Mr. Sankar: Your company is looking to create a consortium with another defense tech company, is that right? To jointly bid for something called "other transactions agreements" or since we have to get everything initials, ota, where the government also weighs taxpayer protections on how to get pricing inflammation.
▶ 1:52:24Mr. Sankar: And I'm sure it is not your intent to team up with another organization in order to price gouge the military, so this next question should probably be easy here. Dod inspectors general recommended requiring big contractors to alert military contracting offices when the price of a good or service goes up by 25%. In other words, moving up so other people can devise on it.
▶ 1:52:57Mr. Sankar: Diva agreed with the recommendation? >> I do agree, I think the price signal is part of the competitive market and encouraging more entrants into capital. I would defer to my team here but I don't think we would have any conceptual disagreement with that. >> can I treat that as a yes?
▶ 1:53:23Mr. Sankar: I would defer to my team at the cto. >> we only know about most of these other charges because of the work that the department of defense inspector general has done. This is the person who president trump just illegally fired on friday night along with at least 16 other ig's.
▶ 1:53:49Mr. Sankar: I am deeply concerned that this administration is removing exactly the cops on the beat that would need to identify waste and prevent these kinds of increases, so do you think it helps or hurts national security to have senate-confirmed watchdogs who can be there on pricing questions like this to call balls and strikes?
▶ 1:54:15Mr. Sankar: As a technologist what I can speak to is when you look at intel but the cofounder of intel, the coinventor of the transistor always imagined a bigger market. >> can you relate that to the question I just asked?
▶ 1:54:38Mr. Sankar: Our ability to deliver was because actually he could create integrated circuits that were thousands of times cheaper than when we were building a bomb. If you haven't item that doesn't have commercial applicable to, if that is not able to leverage the base that goes beyond the government, that is the promise that should lead to price performance improvements in the government and were not getting the value.
▶ 1:55:08Mr. Sankar: But when you look at space for example, I grew up in the shadow of the space coast. The cost to get a kilogram into orbit for the shuttle was $50,000. >> I very much appreciate that you're trying to put on cost. The question I have asked you is whether or not we need ig to are the whistleblowers who say people are cheating on the cost, for example, on the definition of commercial or somebody who could help us bring these cost down.
▶ 1:55:38Mr. Sankar: The pentagon is spending 440 billion dollars this year on contracts. It is important for us to get that in procedures in place to get some eyes on what we are doing and ig help us do that. >> thank you very much, senator. Perhaps Mr. sankar would like to respond on the record to that last matter, and with regard to deferring to your team, once you've had a chance to do that, perhaps Mr.
▶ 1:56:05Mr. Sankar: Sankar you can supplement your question on the record. Along with other things. Senator schmitt.
▶ 1:56:14Senator Schmitt: I will start where Mr. sankar left off and ask a question and all three of you feel free to chime in. I also serve on the commerce committee and to my surprise, my first year I was ralph nash named ranking member.
▶ 1:56:34Senator Schmitt: I would not have put that on the bingo card and coming into the senate in my first two years but I found it fascinating because of the innovation that is happening in space driven by the commercial private sector. One of the things that we were able to do was to extend the learning period, which is kind of essentially allowing these companies to innovate and any regulations that would come, really kind of follow the path of what has worked.
▶ 1:57:05Senator Schmitt: Not to artificially constrain the innovation on the front-end, not really knowing where or what the rules of the road really should be. I'm wondering, how would we construct something similar, we are all getting at this challenge, and how do you unlock it in what seems to be a pentagon that is just sort of being captured by centralized planning.
▶ 1:57:37Senator Schmitt: Our great advantage against communist china is we are really good at copying and innovating. But if we hamstring our ability to innovate, we lose our advantage. This example of learning as it relates to commercial space, what would be a version in your mind that we could sort of replicate in the nda?
▶ 1:57:56Mr. Sankar: Commercial space is a great example where spacex wasn't given the monopoly, they had to earn it. They could do that a price-performance level no one else could. The inductive, bottoms up innovation is the american spirit. How do we get more shots on goal?
▶ 1:58:23Mr. Sankar: Less certainty, more space to have new performers, new entrants present ideas. I think for that to really take hold you either need to have a competitive program within the services or you need to empower them to create that sort of demand signal that varies, that pushes the adoption of innovation. All of our adoption came from the field, from iraq, afghanistan.
▶ 1:58:53Mr. Sankar: It actually came despite the program offices. They were resistant to this as something that was going to screw up their cost schedule performance. Some kind of smooth process to go from new ideas. That is always going to be messy. If we wrap that process we will kill it, but if we enable ourselves to lean into that, we will be able to field the edge technology.
▶ 1:59:22Sen. Schmitt: So in addition to in our meeting prior to this hearing where we talk a little bit about having the competition among services as an idea, combatant commanders having some flexibility to adjust so whether it is a separate pot of money dedicated for that, we talked about having a separate pot for smaller players, the disruptors you make them in the marketplace. What other concrete ideas exist?
▶ 1:59:52Sen. Schmitt: And because I won't have time for the second question, in the context, if we were at war right now, let's say we are at war with china tomorrow. What would we do differently? What would we do differently that we are not doing now?
▶ 2:00:11Mr. Geurts: I go back to this industrial network. We have tremendous commercial capacity beyond tapping into. But not rebuild what we used to have. Rebuild it with modern technology that is flexible. We have to think about let's take logistics, leveraging electric vehicles, things that already exist rather than trying to re-create this giant purpose force.
▶ 2:00:41Mr. Geurts: Become really fast adopters, integrators and not try to be the inventors. There's plenty of invention around. We need to be superfast at importing it, integrating it and getting into the hands of our men and women in service.
▶ 2:00:56Mr. Diller: I think there are models that exist that have been practiced over the next -- last several years that were not scaled. I don't know if we have the structure to scale this currently. The department should be commended on incredible work of these projects. Eventually, they must build on the successes of reaching out to thousands of companies and speed is everything.
▶ 2:01:21Mr. Diller: How do you scale them in a relevant time, it requires some flexibility and transparency from the department. >> thank come senator schmitt. Mr. sankar, I'm so glad senator schmitt asked that question. If we found ourselves at war immediately, go ahead and be the third response to that question.
▶ 2:01:44Mr. Sankar: I think we were leaning heavily into the privacy of people. Do you have the right person in charge of these programs, would stop rotating them immediately, you would go deep on focus. He would probably do a lot more with integration and the capabilities not reliant on the horizontal supply chains. But I think we would organize around the most credible people and humans we have and limit the number of programs we have, concentrate our errors behind those things.
▶ 2:02:11Mr. Sankar: Today we kind of have this bingo card approach to rotating our general offices around and making sure that they have this array of experiences. I think that probably helps you in peacetime and I think it strictly hurts you. You haven't been in the role long enough to learn from the mistakes you've made. You don't even know there are mistakes yet. It takes a long time for these programs to get to the point where you're of the learning curve. I don't think you could just randomly replace the lawn and expect these rockets to keep working.
▶ 2:02:40Mr. Sankar: They have accumulated this knowledge over 20 plus years. >> are we in peacetime now?
▶ 2:02:46Mr. Sankar: In my opinion, no. I think we got to get the whole country to realize that. >> thank you very much. >> thank you, chairman wicker and ranking member read. I'd like to thank each of you for being here and testifying today. I want to build off what senator warren brought up on competitive pricing.
▶ 2:03:12Mr. Sankar: Consolidation american fence -- defense industrial base is concerning to say the least. The 1990's the number of prime contractors has shrunk from 51 down to five. As a result the department of defense is increasingly dependent on a small number of contractors for critical defense capabilities.
▶ 2:03:34Mr. Sankar: This constrains us in many ways and what they can teach us, you've been speaking to that, but that is a much larger conversation to have in five minutes. Mr. diller, how should dod help support advanced technology, small businesses that do that, especially those who struggle to find private capital?
▶ 2:03:59Mr. Sankar: We wanted to be more attractive for investment so they can survive the infamous valley of death stage, a college technology transition and become part of our defense industrial base. Answer secretary gertz, for those defense focused small businesses who can't find private capital, they don't make across the valley of death, how might public/private partnerships incentivize domestic investors to help support them? Mr. diller and then Mr. geurts.
▶ 2:04:28Mr. Diller: When we launched what we called -- 2.0 in a 2020 week read the process. You can say what you want about the particular marketing around it, but what it did is it recognized that there are many technologies, emerging technologies that dod can actually become an incredible incubator to reduce the technical risk, reduce the rate of the tory risk and produce
▶ 2:04:58Mr. Diller: Three have adopted risk. And in a few instances we were able to actually establish dual use set of technologies to some degree in actual market in america because of that approach, because very quickly some of those companies at the beginning came in on $50,000 small business contract that we've been talking about. But we were given authorities to turn that $50,000 contract into a $50 million contract over the course of the year. So speed is everything.
▶ 2:05:28Mr. Diller: Getting the department to understand the critical nature of speed as we are in a wartime footing, that is ever more critical. Those things have been piloted. There have been initial moves by the department to flexible funding to actually get them to scale. We must do a down and make sure that that success can scale. >> what do we do if they don't make it across, how do we incentivize these public-private partnerships?
▶ 2:05:55Mr. Geurts: I don't think every company is going to make it across. And we want to make sure we don't over rotate the other way so that if you don't have a product that meets a need at a price that is affordable and reasonable than you may not make it across.
▶ 2:06:13Mr. Geurts: Where I do think we have to focus more is how to quickly scale the products and services that we need and in many cases, these small businesses have a piece of the solution but aren't the whole solution. So that is where I think there is opportunity to create network where either they get together or they band together with a commercial or another company that can help get them across.
▶ 2:06:37Mr. Geurts: >> you can connect them, they can potentiate their value together. I want to keep a little bit on this because technology is dependent on a fragile global supply chain of critical minerals to semiconductors. Nevada, we have lithium, magnesium.
▶ 2:06:59Mr. Geurts: We have a role to play but only if we make a concerted effort to strategically leverage our resources, leverage our advantages to overcome our global supply chain challenges. So again, what specific strategies in the U.S. employed to mitigate these vulnerabilities, investing in domestic industry to help strengthen our supply chain resilience?
▶ 2:07:21Mr. Geurts: I'm really optimistic on the focus of not only owning our supply chain, but adding multiple sources of resilience. And I think five years ago that wasn't part of the conversation. It's part of every conversation now. How do we incentivize that is going to be critically important. Whether it is the rare earth and minerals all the way to being able to manufacture a part that has been out of production for 30 years.
▶ 2:07:53Mr. Geurts: >> as the only former software developer here in the U.S. senate, I want to talk a little bit about high-quality systems of software and how we prioritize across the enterprise, and we develop software systems. I will submit that to the record.
▶ 2:08:13Chairman Wicker: Thank you. Senator scott? >> thank you for holding this hearing. Mr. geurts, when I was in business, I had a written purpose for everything we spend money on. When I went to wall street to raise money, they wanted to get return on their investment. When I became governor of florida, there's 4000 lines in the budget. We had a written purpose for every line. And if they didn't meet the purpose we didn't continue to fund them.
▶ 2:08:44Chairman Wicker: Is that how dod works?
▶ 2:08:47Mr. Geurts: I would say yes and no. I would say there is a written purpose and a stack of budget docs this thick where there is a purpose against every budget line. Are those looked across, and are they scrubbed the way they need to be? No. His return on investment looked at as closely as it needs to be? No. And are we good at stopping things we started? We are horrible at that.
▶ 2:09:18Mr. Geurts: And that is one of our biggest inhibitors to innovation, is we can't stop things that aren't adding value to fund things that we need to be working on.
▶ 2:09:27Sen. Scott: Can you give me an example where it did not hit a purpose, did somebody lose their job, can you give me one example of there was a written purpose for something, it didn't happen and something has changed.
▶ 2:09:47Mr. Geurts: Not sure I have a clear example of that, as many times we are issued, sometimes congressional budget changes, activities to go work on that were not in our original plans. Some of that can be value added, some of that may not be value added. I can't think an example of where they're the purpose for funding and somebody didn't execute the purpose.
▶ 2:10:15Mr. Geurts: You could argue whether the purpose of the right purpose, but I can't think of an example.
▶ 2:10:19Sen. Scott: So you don't have an example where anybody was ever held accountable for not fulfilling their purpose?
▶ 2:10:25Mr. Geurts: I think there's plenty of examples, you can look at what I did as a navy secretary in the foreign program management.
▶ 2:10:33Sen. Scott: Did somebody get fired?
▶ 2:10:36Mr. Geurts: Yes he did.
▶ 2:10:37Sen. Scott: What didn't he do?
▶ 2:10:41Mr. Geurts: Didn't execute the outcomes I expected as a program manager.
▶ 2:10:45Sen. Scott: Do you guys like to compete?
▶ 2:10:48Mr. Sankar: I love it.
▶ 2:10:50Sen. Scott: How about you?
▶ 2:10:52Mr. Diller: Absolutely.
▶ 2:10:53Sen. Scott: To compete, does it make you better?
▶ 2:10:56Mr. Sankar: 100%.
▶ 2:10:58Mr. Diller: Without exception.
▶ 2:11:00Sen. Scott: Have you lost?
▶ 2:11:02Mr. Sankar: Yes, often.
▶ 2:11:04Sen. Scott: And when you did, what did you do?
▶ 2:11:06Mr. Diller: Try better.
▶ 2:11:08Mr. Sankar: Try harder.
▶ 2:11:10Sen. Scott: Do you think that is how dod operates, trying to get people to figure out the best product or service, things like that?
▶ 2:11:18Mr. Sankar: I think it attempts to but sometimes the nature of the competition can be a fiction writing contest, sometimes the competition is so constrained and not real-world enough that it doesn't bite them long enough runway. Sometimes the competitions are just too sure actually what you want is you want to be able to get a bunch of people in continuous competition. Just because you're winning today, I want to have incentive to invest my private capital next month. Try to show up and do that again.
▶ 2:11:46Sen. Scott: Are you rewarded for that?
▶ 2:11:49Mr. Sankar: Spiritually right now we are. I think we are at the beginning of a broader transition with dod where that can result in the sort of rewards that make this sustainable.
▶ 2:12:02Sen. Scott: For both of you, if you have three things you are going to do to force a big change at dod, what would you do?
▶ 2:12:11Mr. Sankar: I would be like, I'm starting to sound like a broken record but my two core suggestions, have competing programs. Do not get the program a monopoly on a certain capability area. Let multiple departments, organizations, units, programs within the government compete with each other. That's why space is so innovative right now, because it is a food fight between various different agencies. The second one is push more authority to the combatant commanders to decide what they need.
▶ 2:12:41Mr. Sankar: Use that to drive signal and reformation to the services and the department.
▶ 2:12:48Mr. Diller: Digitized. The future is digital and we are not there yet. Second, be clear that there are different types of portfolios that attract different types of companies and make sure that there is a path of doing that. And lastly, make sure that we actually have the ability to manufacture in america. Dod could be the catalyst to actually shift american manufacturing.
▶ 2:13:11Mr. Diller: The manufacturing is not a dod problem, this is an american problem that must be solved to avoid the crisis that we have and turning ideas into hardware.
▶ 2:13:22Chairman Wicker: Very good, senator scott. Senator kelly. >> thank you, all of you, for being here today. At the ranking member of the subcommittee and the cochair of the defense modernization caucus along with senator cramer, I'm focused on maintaining our competitive edge over our adversaries.
▶ 2:13:43Chairman Wicker: To achieve this, we've got to ensure our military is not only equipped with cutting edge technology, but also has the infrastructure to remain effective in contested environments where supply chains and sustainment could be disrupted. I don't know if the three of you saw an order from omb, from the white house last night or yesterday, an expansive order with repercussions across the country.
▶ 2:14:12Chairman Wicker: It's unprecedented and this order, I will explain in a second, where I think the defense impact could be. But this is cutting, pausing medicaid health plans, meals for kids, nutrition, programs for pregnant mothers, programs to help homeless veterans.
▶ 2:14:33Chairman Wicker: And it appears that it also may freeze federal funding and grants for department of defense research in manufacturing technology and other small business innovation programs. So I want to ask each of you starting with Mr. Mr. geurts, have you look at this memo that was issued last night, and are you concerned that a blanket freezing of these funds, how it would impact our readiness and ability to compete with china and other adversaries?
▶ 2:15:13Mr. Geurts: One of the challenges with dod is a customer that there is lack of trust they will be there and they will start and stop. I think that could send a bad signal to business, and also if we stop a bunch of research and are not staying on, that could be detrimental.
▶ 2:15:30Mr. Geurts: >> and free you specifically, let's just say in a couple of days, you find out that that contract payment that you were about to receive, you are not going to receive it and you are not going to receive it next month or the month after that. Could you talk specifically about how that would impact your company?
▶ 2:15:51Mr. Sankar: I think you can imagine that would cause quite a bit of heartburn. Could really for services already rendered. It is a difficult environment. >> and where are your employees?
▶ 2:16:02Mr. Sankar: All over. >> how many?
▶ 2:16:05Mr. Sankar: 4000. >> if you didn't get paid for three months, how many of them would you have to lay off?
▶ 2:16:12Mr. Sankar: I'd rather not think about it. >> Mr. diller, for divergent, what would be the impacts if you're federal dollars, contract payments were to stop?
▶ 2:16:27Mr. Diller: As a company that really is just starting to be defense space certainly it would deter us from continuing that. We've seen this over the years and this is one of many things that create the risk for companies and in some instances when I was a director, you simply could not convince some commercial companies to do business with the department of defense.
▶ 2:16:53Mr. Diller: So obviously trust is key on these things and understanding continuity of agreements is important. >> so you're going to find out in the next 24 hours if it is going to impact you and your company and your employees. Dead people who live in those communities. But this is an unprecedented overreach from the white house.
▶ 2:17:19Mr. Diller: With a directive, to freeze programs that focus on this committee in the united states senate authorized money to be appropriated from very specific programs, programs I will get back to that help homeless veterans. Nutrition programs for moms.
▶ 2:17:42Mr. Diller: Also programs that affect our safety, our readiness and our troops to make sure that they have the combat that they need to win. So I'm very concerned about this action that the white house took without.
▶ 2:18:05Mr. Diller: I get for notified us that you take a closer look and see what the impact is going to be to you and your employees and our readiness. Thank you, Mr. chairman. >> thank you Mr. chairman. Al follow-up on senator rosen commenting on critical minerals.
▶ 2:18:29Mr. Diller: I will ask the comment unable to good executive order and the critical mineral issue is the good news is biden's outcome a trump is in, especially for my state. We have incredible resources, incredible minerals for the military and joe biden spent four years shutting down alaska because radical environmental groups said don't mine in alaska, get it from china. So that is what we did for four years. Donald trump is changing that on day one.
▶ 2:19:00Mr. Diller: Senator rosen asked about critical minerals, the good news, the most important is for critical minerals is biden's gone and trump is in and that is really good. For people in my state who have been sanctioned more than iran and venezuela by the last administration. I am preventing here in bit, sorry. Let me get to the point of the hearing. Thank you for holding this hearing.
▶ 2:19:28Mr. Diller: This is really something all three of you are going to have experience on, so I really want to get a sense of it. You might remember at the lunch that you and I were at recently where we were talking about contracting officers in the middle of their careers, don't want to rock the boat, this idea of a frozen middle in the pentagon. We all love our military.
▶ 2:19:56Mr. Diller: Mr.you actually served as a contracting officer and acquisition officer. What are some of the ways we can best incentivize contracting officers to take risks on newer companies as opposed to always default to lockheed and raytheon and take the easy route.
▶ 2:20:19Mr. Diller: I think the culture in the pentagon is one thing we have to work on and you all have experience on that. I would love to get your sense quickly. Culture contracting officers, how do we incentivize risk-taking without people being scared ofall three of you. >> first is get them out of the pentagon.
▶ 2:20:47Mr. Diller: Maybe we need to have our contracting officers deployed closer to where the problems are, understanding the ways. There is a reason space-x locates their r&d on the industrial floor. That is where you observe the problems and change the design.
▶ 2:21:05Sen. Sullivan: We could do that now, couldn't wait? >> we could. The second is have another american they are competing against. The risk of disrupting your schedule is outweighed by the fact that that person will win and you will lose. >> we went from no contracting shop and we were saying we were establishing a different culture.
▶ 2:21:32Sen. Sullivan: There are people in the department of defense that want to move at speed. This is not about money. It is a mission they want to engage in. When leadership takes on the risks themselves it unlocks the people working for them. You can attract contracting officers. There are so many and they are ready to move at speed to buy the right thing.
▶ 2:22:00Sen. Sullivan: They need to be told it is ok to contract with this up and coming upstart versus the big guy who will take 15 years to get his product out.
▶ 2:22:21Mr. Geurts: You have to get them aligned with the program manager and then that team puts together the strategy. The second thing is the burden we put on a contract officer, number of things they have to sign and certifications is ungodly. This committee could help ice grommet the underbrush.
▶ 2:22:43Sen. Sullivan: That is not a statute, is it?
▶ 2:22:47Mr. Geurts: Yes sir. It is a statute that we propagate implementation of processes. I want to ask one final question. Mr. sankar you did a great job on your defense reformation piece published in october and I love the idea of competition between programs.
▶ 2:23:08Mr. Geurts: How you envision the acquisition system working when the services have a lot -- you are very focused on the combatant commands and that makes sense but the services have a lot of skin in the game. Is there a challenge that if you are moving into combat and commands that is my piece of the territory. What we need to do and how you make them work together better?
▶ 2:23:40Mr. Sankar: If we thought about it at the margin a little bit of overlap is what gets them to rise to the occasion.
▶ 2:23:47Sen. Sullivan: That is your competition thesis.
▶ 2:23:51Mr. Sankar: I'm not sure you would say air force bill be an aircraft carrier but where are we on the margin. We have over match, we have a pmh and project convergence. Each of those is trying to build software within their service which we can argue is a contradiction on the concept to begin with.
▶ 2:24:16Mr. Sankar: Maybe a more productive frame would be each is seeking to feel the software capabilities across components and across services that will create the productive tension to win and that would force interoperability and a lot of the things we aspire for. It would be mostly in practice instead of on paper. We forget that first you have to be effective before you can focus on efficiency.
▶ 2:24:41Chair Wicker: Members can supplement their answers. Senator slotkin.
▶ 2:24:48Sen. Scott: Can I was glad our
▶ 2:24:52First -- Sen. Slotkin: I was glad our first hearing should be something where we should have a bipartisan approach the issue. I a former c.I.a. Officer and pentagon official and saw a lot of this up close. The most important step that I measure success or failure is someone told me that to go for the chinese government to go from concept to fielding a program in their military is a one-year strain.
▶ 2:25:23First -- Sen. Slotkin: For the united states -- I cannot imagine the man-hours in three years. For me I hope we never of a conflict with china or anybody else but we have to have the speed of decision-making to change on a dime.
▶ 2:25:42First -- Sen. Slotkin: I have seen in iraq in three tours with special authorities the special forces have to really innovate in the field the most exciting stuff I've ever seen was where the flash bang was we have a problem, we have authority to do it, let's do it. I would describe, I did six years on the house armed services committee, our committee was ready to hurl authorities at the pentagon if we thought it would actually help move things.
▶ 2:26:11First -- Sen. Slotkin: You have an open door with democrats and republicans. I have come to believe that culture is critical. The idea that a mid-level contracting officer is going to break out and do something new when they are not getting there pressure -- that is like saying senator wicker's mid-level staff should be doing something on his behalf. The buck starts with him. -- the buck stops with him.
▶ 2:26:44First -- Sen. Slotkin: A reform minded secretary of defense is the most important thing to taking this on and prioritizing it. I hope the secretary of defense gets through what I see as site issues and gets back as he says he wants to to war fighting which is the speed of decision-making and taking hold of that acquisition system and changing it. Me this is about culture and until we get that right we will be spinning our wheels.
▶ 2:27:14First -- Sen. Slotkin: I would also note that you guys in the private sector you get to gamble with your shareholders are with your investors money. Gambling with taxpayer dollars is just a higher threshold. It will be a higher threshold. It will never be like the private sector. We complain when the f-35 goes over budget because they are wasting taxpayer dollars.
▶ 2:27:37First -- Sen. Slotkin: There is a conundrum that does not make dod perfect as an analogy for the private sector but we are in violent agreement we need to do things to speed things up. I think it has to be top-down and I hope we can push that agenda and a bipartisan way together.
▶ 2:27:54First -- Sen. Slotkin: In the meantime I have to say following on what senator kelly just said, senator wicker, we have a constitutional issue going on right now where this body has appropriated money for defense programs in a million other things in the trump administration has contravened your own and all of our guidance on programs in the past.
▶ 2:28:22First -- Sen. Slotkin: I'm not talking about programs in the future, every president gets to decide how they want to create programs they want to implement. For things of already been appropriated right now the military health system research projects are all on hold the talk about service members safety and health. Funding for the fisher house wounded warriors on hold. All army contracts on hold. I do not see how this is not just purely throwing the baby out with the bathwater.
▶ 2:28:52First -- Sen. Slotkin: I get that Mr. trump will make change. I won on the same ballot as Mr. trump. I understand that. This to me is breaking the constitutional rules we have set up. I would assume we are going to see serious action from this body on a bipartisan basis. I have filibustered my entire time but all of this is to say Mr. chairman, you have a friend in this cause.
▶ 2:29:21First -- Sen. Slotkin: I want to make it a top-down cause so we move the needle otherwise we are just giving scraps at the margins for contract officers who are going to do with their boss says if their boss to man's action. I will leave it at that.
▶ 2:29:34Chair Wicker: Thank you senator slotkin and let me respond very briefly. I think all three of these witnesses have not had a chance to read the memo to which you and senator kelly referred. Questions are being asked around capitol hill at this very moment about that. There will be more about that issue. It is almost the end of the first round and I'm the last question are.
▶ 2:30:04Chair Wicker: Let me ask a thing were two up Mr. sankar, you said the stockpile is not the deterrent, the flow of mass production is the deterrent. Mr. diller, you say the factory is the weapon.
▶ 2:30:34Chair Wicker: If we need more factories for sustainment of war we should buy that capacity now. You're both saying the same thing there, aren't you. Mr. diller you say we should be buying the capacity now you are not talking about ownership of the factory?
▶ 2:30:54Mr. Diller: No, what I'm suggesting is today we have a crisis in sustainment and there is an instance because of the national industrial based perspective they have locked our sustainment out of being able to create the parts that are needed today to fill the multi trillion dollar portfolio we have.
▶ 2:31:19Mr. Diller: Those depos but field factories as a service that would have incredible agility to ensure the legacy force that we must have that we have invested trillions of dollars in is ready to fight. That needs to be a widely agile factory as a service. That same factory becomes a network.
▶ 2:31:41Mr. Diller: The small companies are able to build new things if we call these hedge portfolios -- the agility of these factors that are available in an entirely new step of american manufacturing. That is possible today. Our depos to be an incubator for that type of thing to go through the digital certification process to save the taxpayer dollars.
▶ 2:32:11Chair Wicker: Mr. diller holds up the hubcaps. Mr. geurts, and we make it unanimous on that port -- on that point?
▶ 2:32:25Mr. Geurts: I will also add we are enthusiastic about prototyping and we are underperforming in production. We are not producing much new capability. In the cases we have we may spin up a production and shut it down six months later. A focus on production in terms of capacity, how to network that production, how to digitize that production and get to producing more and getting our iteration speed up would do two things.
▶ 2:32:55Mr. Geurts: It would allow us to grow this manufacturing capacity that in itself is deterrence. Secondly it would allow us to field new things to the field besides just doing one-off prototypes.
▶ 2:33:09Chair Wicker: In your white paper you say on page nine that our centralized predictive program budget management and oversight process uses time spent rather than time saved. Would you elaborate on that and we will let out other witnesses give their views?
▶ 2:33:32Mr. Sankar: The way we want to provide resources is on how expensive it is to do something. There is a complete disincentive for reimagining things. My critique is we do not have the necessary incentive to design for manufacturing ability. We are so proud of the exquisite weapon we made on a prototype. We did not think through can I make 10,000 of these.
▶ 2:34:00Mr. Sankar: If it takes two years to build a single munition, that will not scare sheep. We need to be thinking about the manufacturing ability from the beginning and that leads us to thinking about different classes of weapon systems in different ways of organizing ourselves in our industrial base to accomplish that.
▶ 2:34:18Chair Wicker: Time spent versus time saved?
▶ 2:34:22Mr. Geurts: I would agree with that. I think we have to differentiate the market. The dod buys a lot of stuff. I think of different ways to do things. I think that is an opportunity. I think the second piece is we need to get to continuous competition on many of our products.
▶ 2:34:45Mr. Geurts: We can bring in new entrants and continually drive the system because right now because of the budget for our program and the rigidity of the planning it is a big bang theory. We have one contract award and you are stuck with that for 15 or 20 years versus continuous competition which then incentivizes all of the behaviors we are looking for.
▶ 2:35:10Chair Wicker: Anything to add?
▶ 2:35:12Mr. Diller: The technology is there available to rapidly transform our department of defense. Adoption, adoption, adoption. We have to engage with this bureaucracy, accelerate the bureaucracy so we are mobilizing that entire industrial base because it is urgent. This is a critical time and I'm very optimistic that america is going to be able to build together.
▶ 2:35:39Chair Wicker: Thank you very much. Senator slotkin, you have other questions? We will begin around two. Mr. sankar thinks it is a shame companies that used to make other products are no longer in that business, only 6%.
▶ 2:36:11Chair Wicker: Chrysler used to make cars and missiles. Ford made cars and satellites. General mills made serial and artillery and guidance systems. Does he have a point Mr. geurts?
▶ 2:36:26Mr. Geurts: Absolutely. The second I would add to that is we have also systematically lost the middle of our industrial base and this is where a lot of the venture backed companies we need to scale in quickly so we have companies that are agile enough to move quickly but big enough to move in scale.
▶ 2:36:49Mr. Geurts: That is one of the things as we build this industrial network in the future and build back the industrial base.
▶ 2:37:02Chair Wicker: There is a reason that happened and can it be reversed?
▶ 2:37:07Mr. Sankar: We think of the industrial base we have today. You had these difficult founders. We recognize them as elon musk personalities who are interested in doing something big. It was not about this quarter's results. They were dual-purpose, not just dual use.
▶ 2:37:29Mr. Sankar: Everything I learned building machinery to process serial I can build into machinery -- we have $120 billion of private capital has been deployed international security companies. That is funding founders, it is funding the palmer luckies of the world and that is how we get back to this long-term commitment our nation actually faces.
▶ 2:37:57Mr. Sankar: We cannot have an anodyne view of capital. Europe has created zero companies worth $100 billion or more in the last 50 years. We graded all of our $1 trillion companies in the last 50 years.
▶ 2:38:10Chair Wicker: Is that a mindset or a statute that needs to be changed?
▶ 2:38:15Mr. Sankar: It is a mindset. It is recognizing within our buyers in the pentagon as well, why did these people leave the industrial base? As much as we want to point at the last supper at the moment, this conversation started in the board rooms in the 1970's and 1980's and what was slowly building up was where I started that the pentagon is a bad customer.
▶ 2:38:40Mr. Sankar: If you look at it financially it makes more sense to sell aluminum cans than to build satellite buses. The pentagon needs to look at that and say how we fit that -- how do we fix that? I want an american industrial base not a group of yes-men in the defense industrial base who have permuted their businesses to serve just me.
▶ 2:39:04Chair Wicker: On that issue, Mr. diller, you wish to weigh in?
▶ 2:39:10Mr. Diller: For all of the pejorative things we have said about the department of defense it is done incredible things it has the opportunity to do something I don't know any other institution can and it has created incredible things. I was a manager in the global positioning system. It drove adoption of one of the most incredible networks in the world.
▶ 2:39:32Mr. Diller: There are instances where dod has been the catalyst for wild change and with all of the great things we have said about commercial you cannot look at a downward trend for many decades now of the loss of not defense industrial manufacturing but of american industrial manufacturing and now chairman is the time for dod to be that catalyst again. It is possible to do exactly what he said.
▶ 2:40:01Mr. Diller: Divergent is today manufacturing cars, we are printing missiles, we are printing satellite buses in the same exact factory floor. If we look to a future that is going to counter an adversary -- there are people who dislike change. Three groups of people. The bureaucrats like to continue doing what they've done in the past. Industry does not like change because we built ourselves on legacy approaches to manufacturing.
▶ 2:40:31Mr. Diller: They look at this and do not want the uncertainty. The third is the enemy. The enemy hates change. We must force the bureaucracy to be agile in the industry to be agile. America cannot afford a $200 billion cost for every new munitions factory, especially when it is a legacy munitions factory.
▶ 2:41:00Mr. Diller: It is possible to create a network of 21st century ai driven industry 5.0, pick your buzzword. It does not look like anything that has ever been manufactured in history. It is a step change, going from the stone age to the bronze age. It could happen today it is the only way you can afford a real deterrence where you have a dual use factory, you have dual use capabilities that come out of that factory.
▶ 2:41:28Mr. Diller: You have dual use capital that is coming from an incredible source of american strength and most importantly it is dual use talent. We cannot talk about a workforce problem or telling our sons and daughters to go back and pound rivets and weld in the same way their great-grandparents did. Children have grown up playing lego robotics, playing in ai. That is not what are factories look like today.
▶ 2:41:55Mr. Diller: This committee could be the catalyst for the change in is the only way we will create real deterrence in a timely manner that must happen for america for a main in its lead from a manufacturing perspective, and economic perspective, technological perspective, and a military perspective.
▶ 2:42:11Chair Wicker: By the same token we hate it when our enemies engage in change.
▶ 2:42:16Mr. Diller: 100%.
▶ 2:42:18Chair Wicker: A couple more questions. You have been most helpful to us. Mr. geurts, let's talk about the requirements process. Does it often overly specify a solution that then gets turned over to industry?
▶ 2:42:41Chair Wicker: Should programs be able to develop multiple committees within a portfolio requirements broadening the scope?
▶ 2:42:51Mr. Geurts: We need to transform our thinking into problem statements and not requirement statements and then you empower a portfolio acquisition executive to tackle those problems with close association to their operator. Back to her previous question, we have program managers that want to drive change. They have not been incentivized or rewarded for moving outside of the system.
▶ 2:43:27Mr. Geurts: With those action you will see the culture.
▶ 2:43:41Chair Wicker: You find yourself competing not with other businesses but with the government itself?
▶ 2:43:47Mr. Sankar: I would say quite often. More often we find ourselves competing with the government than other injuries. Sometimes that takes privileged position or they have a conflict of interest they are deciding what needs to be built and how it needs to be built in a way that is structurally anti-commercial. At the very beginning of our company we were a threat to certain programs of record in the way they were doing it.
▶ 2:44:16Mr. Sankar: I think the industrial players were resisting us so much as the acquisition community was resisting us despite the signal from the war fighter. I think we solve these problems by embracing the fact there will be heterogeneous approaches, there will be constant new technology and that you as a program of record do not have a monopoly. There is someone one corridor down who could move faster on this new capability that provides you the incentive to move faster.
▶ 2:44:41Chair Wicker: Thank you, gentlemen. This is been one of the most informative two and a half hours I have ever had as a member of this committee and also I am proud of the members of this committee and I hope you are. There is a lot of talent and a lot of brainpower and a lot of thought that has gone into this year and and I appreciate the participation. We had 100% attendance today and I appreciate that.
▶ 2:45:10Chair Wicker: Let me see if I need to make an announcement with regard to the record remaining open or anything of that nature? There will be questions for record and I will notify the witnesses as to the time constraints. With that, the hearing is adjourned.