DoD News Briefing - Dr. Gansler and Mr. Bacon

Thursday, June 22, 2000 1:30 p.m. EST

(Also participating: Dr. Jacques Gansler, under secretary of Defense for Acquisition, Technology and Logistics)

Bacon: By popular demand, because he did so well on Tuesday, we have Dr. Jacques Gansler back, the under secretary of Defense for Acquisitions and Technology. Today he is going to talk to you about the Joint Strike Fighter. And then I will take questions on other topics.

Dr. Gansler?

Gansler: What I wanted to do on the Joint Strike Fighter today was, because Secretary Cohen has sent a letter up to the Hill on the program, which we'll pass out to you by the way, after this talk, I thought it was appropriate to try to give you a little background understanding of the purpose and intent of it.

Basically, it has two objectives, the letter: One is to stress the urgency and importance of meeting the schedule, keeping the funding and keeping the schedule. As you know, there have been some questions on the Hill about both the funding and the schedule, so we thought it was important for the secretary to give his personal views on the importance of that.

The second thing is there has been a lot of discussion about acquisition strategy and what we might do on acquisition strategy for the Joint Strike Fighter, whether we have competition or no competition or things like that. So we wanted to clarify that in this letter. So the letter deals with those two subjects. And what I thought I might do is just spend a few minutes trying to give you a little background on those two subjects so you would better understand a little bit of why we did the letter and what we intended to do about it.

First, the status, just in case you weren't aware of it:

There are now real airplanes from both Boeing and Lockheed, and of course this is still a competitive program, so the one thing I can't do is tell you about, you know, who's ahead and who's behind, and things like that. But what I can tell you is that they both are now out. And these will be the first two flights, which of course will not be the vertical flights; these will be both the Navy and the Air Force versions that'll be the early flights. I'll come back and talk about that in a minute.

But the Boeing one has actually taxied. The Lockheed one will be taxiing next, in July, and so they're about comparable status of the two programs.

The reason why Secretary Cohen made such a big point about schedule in the letter and why it's really important and why we've been emphasizing this on Capitol Hill and elsewhere is the fact that the Marines and the Air Force have serious schedule problems relative in the out years to wear-out of airplanes. This is the AV-8B, with the Joint Strike Fighter coming in -- I don't know if you can see the distinction -- I think you can, with the colors. But the idea -- instead of standing in your way, let me use a pointer.

You can see what happens is that just wear-out of the airplanes, with the F-14s, the AV-8Bs, F-18A/B -- you see here around 2010, 2009, that time period, you better bring in the Joint Strike Fighter, or you're going to cut your Marine air force dramatically.

And you have same problem in the Air Force, except it's even worse in the Air Force. The current F-16s have a projected life of about 6,000 hours, and of course the F-22 is in small quantities, so that doesn't come anywhere near filling this big gap. And what happens is that you have a rapid falloff, as a result of the aging of the F-16s, that starts here in the '09 time period. And since the Joint Strike Fighter in volume won't come in early enough, what the Air Force is forced to do is to spend a couple of billion dollars on upgrading the F-16s, in order to keep them going long enough so that you can get out here into the 2010, 2011 time period for the Joint Strike Fighter to start coming in.

And that's the dilemma. Both the Air Force and the Marines have serious need for an upgraded airplane. And you can't, frankly, fill that in with F-22s, because of its high price. This is a quantity requirement.

And you see what happens if you don't have the Joint Strike Fighter: you basically cut the number of wings the Air Force has rather dramatically. That's something that we can't afford to do.

So our plan for the Joint Strike Fighter -- and it's not different than it's always been. I mean, these numbers are the ones you are very familiar with in terms of initial operational capability of the Marines in 2010, of the Air Force in 2011, and then of the Navy and the U.K. in 2012. These are the four participants in the program. The program has a phased evolution in terms of its engineering phase, with the block one being the initial military capability that it will have in terms of JDAM and AMRAAM, and then evolving with close air support and interdiction, and then further evolving as additional weapon systems become available. You keep upgrading the software, primarily, and adding weapon systems. The hardware basically stays pretty much the same.

So you start getting aircraft here, Marines and Air Force, I think it's something like seven for Marines, six for Air Force, then you start building them up so that you get an initial operational capability in the time period that just matches that fall-off that I showed you on the Marine and Air Force curves. And that's the criticality of the schedule part, and that's the reason why it's so important not to let the schedule slip. And as I said, some of the proposals from the Hill have talked about schedule slips. And dollar reductions, of course, result directly in schedule slips. I mean, these are correlated.

The last chart is simply the upcoming events that we have planned. As I said, the concept demonstration aircraft are being flown over the summer in terms of the Air Force and Navy variants, and on through the spring of '01, where particularly the latter part will be related to the vertical lift for the Marine version.

We have a draft Request for Proposal that will go out probably the end of next week or early the following week, a release of the final Request for Proposal at the beginning of September, the receipts from the contractors coming in November. Then we have a period of evaluation. But it's obvious that what we're talking about here is waiting until we have the vertical lift demonstrated, and that should take place sometime between the winter and spring of '01. And at that point we then are in a position to make a contract award.

Now, the reason for waiting out in here is that the critical technology to be demonstrated in this program has been, and always has been, the vertical lift portion of it, particularly the engine aspect of the vertical lift, but the flight controls as well on the system. So we want to actually allow the two contractors the opportunity to demonstrate the vertical lift, and that would take place, most likely, by the spring of '01. And that matches, then, the schedule that I just showed you in terms of the overall development plan on into production.

So this is the current plan. As I said, Secretary Cohen sent up the letter to the Hill stressing the importance of the schedule and the full funding. Those are the critical issues that relate to the schedule portion of it.

The other major message in the letter was that associated with the acquisition strategy. Now, as I said, the down-select -- in other words, the picking of the winning design, and there's only one winning design, there really is a big winner here -- associated with this program would be done when we have one or both having demonstrated vertical lift.

I mean, I say it that way because one could self-eliminate if they don't fly or if they have major problems and fall too far behind. But as we now expect, they will both fly, and we'll have a competitive evaluation of both their flights and then of their overall designs and their plans and their management plans and so forth for the overall program.

The strategy that it will be in this request for proposal, the draft and then the final that go out, will be a winner-take-all program, which is what we had planned all along and which we still have assessed as the one that seems to make the most sense to us. As you know, we have been evaluating in-house a set of alternatives that we thought we should look at. It's responsible for us.

This is, by the way, I think, the largest single program in history. You know, what we're talking about here is 3,000-6,000, depending upon foreign sales, airplanes, program range in the ballpark of probably 200 million to 400 million, depending upon foreign sales. And so you're talking about a very, very large -- billion. If I said million, I meant billion. I'm sorry. Got to keep these on track.

Q: You ruined the sound bite. (Laughter.)

Gansler: I'm sorry.

Q: So how much will it cost? (Laughter.)

Gansler: We're talking about 3,000-6,000 aircraft, 3,000 for the U.S. and the U.K., 6,000 if we have the large foreign sales. The overall program is in the range of 200 billion to 400 billion. And that's, as I said, the largest one, I think, in history.

Now, what you would like to do, and the concern you have with a single war in this case, a winner-take-all strategy, is the fact that for that long period of time and with that very large program you have a sole producer. And we have a history that sometimes sole producers raise their costs. And so what one would like to have, if one could figure out a way to do it efficiently and effectively, is some form of competition. And that's the reason we had this evaluation internally going on.

The trade here is pretty obvious. If you were to try to figure out a way -- the only way we would do this would be with a single design. In other words, you pick the winning design, and then you figure out a way to have these two producers compete in production. And you'd obviously have some start-up costs associated with the second source, some tooling costs associated with it, and some requalification costs associated with it.

What you then want to balance those against is the potential benefits that you might get from having two people continuously competing, and hopefully driving up the performance and lowering the costs, the sort of experiment that we have run in AMRAAM and the great engine war and a lot of other programs, where we found very significant cost benefits and performance benefits, as a result of competition. That was the only reason for saying, "Let's step back and look at it."

And our initial internal investigation said that we're not sure that really makes a lot of payoff in terms of costs. And so we said, "Well, let's stick to the plan that we have now, the winner-take-all. But let's just to make sure" -- because it really is such an expensive program and so huge and such international implications, as well -- "that we are going to have an independent assessment of whether or not we are pursuing the best strategy." So we are going to contract with Rand Corporation over the coming months, and their report will be due to us by December 1st. And that's also stated in the letter that Secretary Cohen sent to the Hill. And they will just do an independent assessment on making sure that the approach we are taking is really the best one. I think it's sort of prudent for us to do that. It's our responsibility with federal funds of the magnitude of $200 billion to $400 billion. So that's the plan.

In terms of the acquisition strategy, we will go out with an RFP for a winner-take-all, first in draft form, then in final form, with the basis for the decision on the best design, being based on the combination of the responses we get to those proposals, the costs and the other considerations, the management approaches they take, and the results of the flight testing, all three versions of the flight tests, frankly. And by the way, the U.K. will take part in the source-selection process as well, because they are major participants, the United Kingdom, in this overall program.

I think that's basically the essence of the letter and the things I wanted to cover. Two points, as I said, that are highlighted in the letter: One is the fact that it's so critical to maintain the schedule and the full funding for the program, in order to meet the Air Force and Marine requirements; and secondly, the fact that we have made this decision on how we are going to go ahead with the acquisition strategy. So other than that, I'll throw it open to questions.

Q: But was there any concern that if it was split up, that that would lead to delays in producing the aircraft?

Gansler: You mean if we had competition?

Q: Yeah.

Gansler: Yeah. No, if the competition -- if there were competition, it would be in the production phase, not in the development phase. We would pick single design, and that would be the design, and the winning contractor -- contractor team, actually -- would be the team that would go ahead with that design.

If you were going to have competition in production, you'd want to bring in the person -- the team that lost, in effect, early in the development phase, in order to have them up to speed as early as possible, so that when you go into production, they wouldn't be too far behind. So it would be a fairer competition. So you'd want to pay something in the development phase to bring them up to speed.

But you would never slow down the development phase. You might have to spend a little more in order to bring the second source in. That would be the only effect on schedule.

Q: So those two points are unrelated, then -- the two points that he makes in this?

Gansler: Yeah, the two -- the main point that he's making, really, is the criticality of the overall program staying on schedule and full funding, and the -- because of the Marine and Air Force need.

The reason for bringing in the acquisition strategy point of it is that there seemed to be so much interest in the fact that we've been doing this study in-house and looking at what form of acquisition strategy we'd use, and that seemed to introduce some sort of uncertainty and whether, you know, does the program really know where it's going and so forth? And so we wanted to just make it very clear that going ahead with the way we're doing it makes a lot of sense. We just felt -- I felt, and so did the secretary, that it was our responsibility on this large a program to make sure that what we were doing made a lot of sense in terms of is there a better way to do it. And we have a lot of time to do this. The production decision doesn't come along for quite some time.

Q: I'm still confused. If competition has worked for you in other programs, what's the fundamental difference here or the fundamental reason you decided it wasn't workable in this one? What's the bottom line here?

Gansler: Well, first of all, we've never done it on airplanes. We've never done it on something this large.

Secondly, there is a lot of the program that is already being subcontracted to a variety of different people, and some of that is being competed, like the engine is being competed, the avionics, and radar -- we could at a subsequent time re-compete. There are other ways of bringing in competition. We may want to even do it on a subset or a subsystem at some point.

The airframe itself is the part that we were really considering whether or not it makes sense to have a second source. And it becomes somewhat attractive as we start looking at modern manufacturing techniques because you don't have to spend as much for tooling as you used to in the old days with lean manufacturing, and that makes it look a little bit more attractive. But on the other hand, there's a significant cost for requalification and for bringing in the second source. And when we went through all the numbers it wasn't, at this point, overwhelming enough to say we ought to go do it, and we didn't want to have the uncertainty hanging for a long period of time.

Q: But the companies say if you don't have competition, the other guy will wind up going out of business and that the United States will essentially be left with one company, for the first time in history, making fighters for the U.S. military. And do you think that poses a national security risk to have just one company in this country doing that?

Gansler: One thing we have analyzed quite carefully is, at least for the near term, both in terms of the air frame manufacturers and in terms of the engine manufacturers and in terms of the radar avionics manufacturers, there is considerable business still around for each of them. In other words, in the case of Boeing, they're doing the F-18; in the case of Lockheed they're doing the F-22 and the F-16. There is work still going on.

When you get way out into the out years is where you might get into an industrial base question, but it's much more of a future competition question, and then it becomes a question of what other programs may be coming along in that time period; there's something like the UCAV [unmanned combat air vehicle], the unmanned future aircraft. And we have started analyzing sort of the long-term picture, and that's really, I think, the issue that you're raising. But in terms of the relatively nearer term, there's quite a bit of work in each of the major prime and major subcontractors, so that the industrial base, in that respect, is not the issue that was driving us.

The issue that was driving us was not an industrial base issue, it was primarily a cost question, whether we could make a savings in the long term. And, of course, you have to discount future savings because of the fact that they're in the future, and so you have a discounted cash flow analysis.

Q: Dr. Gansler, how much of your strategy reflects the fact that the Senate endorsed the Senate Appropriations Committee position that prohibited you from changing the strategy; question one. And two, how does this strategy now -- the schedule accommodate an admitted flight schedule slip in the STOVL [short take-off vertical landing] flight testing that will carry the program into March and April?

How can you do a spring down select if you're just finishing the STOVL testing?

Gansler: Well, the contractors still anticipate an earlier flight testing of the vertical lift in both cases. What we are somewhat being conservative in saying, you know, the March-April kind of time period is more likely in terms of what may well end up happening. And so our schedule is based on the assumption that we'd be able to do it in the spring. If it turned out to be, you know, that they were a little later in that time period, I think if we were able to complete the flight testing and the evaluation by even June we probably would still be able to make our overall schedules.

The issue here is that we're going to be doing evaluation of their proposals beginning in November. So we'll have time to go through the process of the evaluation and of the sort of approval chains and so forth that we have to go through. And this simple vertical lift test is only one of a wide variety of measures. It's not a zero-one: you know, one guy's flies and the other one doesn't, and that's it. That's not the way it'll work at all, and we'll have lots of data leading up to the decision point for both of them in addition to the vertical lift case.

Q: And the reality of the Senate Appropriations Committee mark being -- (inaudible) --

Gansler: No. Really, we had started this assessment well before the Congress even began meeting and deliberating on it. In fact, it may well have been the inverse of it. The fact that we were holding this study may have led them to think, well, I guess they don't know which way they're going and therefore they'll tell us which way to go. And so it's really just the opposite. We were doing our independent in-house assessment; now well be doing this independent outside assessment. But our decision was not because of that. In fact, as I say, and Senator Cohen -- Senator Cohen -- Secretary Cohen's letter -- I've known him too long. In Secretary Cohen's letter he makes the point about the fact that we don't want to have either the schedule dictated to us, as one of the legislative bodies chose, or the form of the competition, or the amount of money, which is probably of all the three the most critical, because we had the money, we should be able to make the schedule subject to any technical problems that come up.

Q: Just to follow that, where -- what is the current status of the testing of these two aircraft? Is everything going well insofar as that testing phase is concerned?

Are they performing well? And then secondly, how does this affect the funding from the Congress that you're going to need -- I guess you're going to need this month? Is that June of '00 here, or --

Gansler: Oh, no, no. What we're doing in June of '00 is putting out a draft request for proposal. This program is funded for '00. The issue isn't '00 funding; the issue that Tony was referring to is basically the '01 funding. This is the debate going on now on the Hill. It's next year's. In other words, beginning in October.

Q: Oh --

Gansler: It's the funding beginning in October that's the question. And whether we get enough of it to carry us through next year in order to be able to do this testing and then go on into full-scale development. That's the -- we have the money for this year. And the answer to the first part of your question about the testing, as I said in the very beginning, the problem I have in this program is that it is a competitive evaluation. And about all I'm in a position to say is that they both are doing fine, you know?

The fact is that these are -- the reason we call them "concept demonstrations" is that these are early flight test programs. We're trying to work out the bugs on them. So we anticipate there will be some, and that's all built into the schedule.

Q: Both aircraft are flying?

Gansler: No. No. That was the point of the picture. Both aircraft are made.

Q: On the ground.

Gansler: They're on the ground. Both aircraft are expected to fly this summer. That's what this flight testing in the summer and spring of '01. Right now, one of them has taxied, the other one will be taxiing. They are real airplanes. These are not mock-ups. These are real airplanes, but their flight testing is scheduled for the summer and spring, all the way through. In other words, it's going to be a nine-month flight test kind of a program.

What's interesting about this is that these airplanes have to fly in all three modes. In other words, they have to fly as an Air Force plane, they have to fly as a short-take-off-and-landing Navy plane, and they have to fly vertically for the Marine plane, and they each have two variants that they're going to be flying to do that.

Q: Dr. Gansler, the Rand study, does that open the door, or leave the door open, for possibly having competition in the production phase?

Gansler: Yeah. I mean, if it turned out that there was some, you know, clear direction that we should be taking that's different, we have plenty of time to modify this next December, you know, if that were the case, after their report comes in. But it doesn't affect either the schedule or the source selection.

In other words, there is going to be a winner that's going to be based on the proposals and their flight testing. And then we can decide whether the loser is also going to be brought into the program at that point, if it looked as though there was some advantage to doing so. But that won't affect the schedule, won't affect predominantly the cost. There may be some -- as I said -- some potential early costs -- impact negatively. And then if it was going to be done at all, it would be because the overall benefits would outweigh the overall costs.

Q: Dr. Gansler?

Gansler: You already had a chance.

Q: I am sorry. (Laughter.)

Q: So, Dr. Gansler, the industrial-base considerations, that's not going to be a weighted factor when you make your source selection? Okay, one other one.

Gansler: I mean, in general -- I am not sure I -- I don't want to mislead you -- that the management capabilities, the industrial capabilities, of the two bidding firms is certainly a consideration; you know, whether they have the modern manufacturing and how they are going to approach building the plan and so forth. But the industrial base in the sense of trying to keep two people going or something like that, was not going to be the consideration in picking the best design, at all.

Q: My other question was: The U.K. is going to be on the Source Selection Committee?

Gansler: Yes.

Q: They only have one company in this fight. How do you keep them honest on that?

Gansler: Well, you know, the problem is that -- we are trying to come up with the best design for all four buyers. And all four buyers -- this is government that's on the source selection. And I -- well, first of all, they don't have a majority vote. But secondly, they really I think -- and I have confidence in my counterpart in the U.K., Rob Almsley (sp), to be able to make an independent assessment in the same way that we can make the independent assessment, not based on industrial-base considerations.

The reality is, I suspect, if the other team won, they would be on it pretty quickly. I mean, it's hard to imagine that the U.K. is going to be putting up, in this next phase, over a billion dollars without expecting some participation, industrially. So it may not be as much as they would get if they were on the winning team, but I would imagine there will be some participation from the U.K. in either case.

Q: Thank you.

Q: Is Rand going to look at industrial-base stuff for you guys at all, or is it strictly cost?

Gansler: It's a competition-versus-sole-source analysis that we have asked them to look.

Q: So can I ask you a cost question on EMD?

Gansler: You already had a chance.

Q: Okay. Excuse me. (Laughter.)

Q: The -- (inaudible) -- that you have made leaves you with the concern that you expressed about the price rising with a sole producer and also raises a prospect of low-balling to win --

Gansler: Yeah.

Q: -- and then problems later. What are you doing to guard against that?

Gansler: I mean, that's the traditional problem in all of our competitions.

It's also, by the way, the hard part for Rand to figure out how much it might have risen, because that's a what-if kind of a thing, and we're asking them to do this empirically; you know, based upon prior examples. Same problem with the question of how do you avoid, you know, buy-ins.

What we have been trying to do increasingly is to base much more of our analysis on our independent assessment of what the costs are likely to be based on their design and their manufacturing capability. We use the independent cost analysis group here in the Office of Secretary of Defense, the CAIG [cost analysis improvement group] group, to do an independent assessment of both their development costs and their production costs, and, in fact, in this case of their support costs as well, because we're very interested in that as well.

This airplane, I should emphasize, this airplane is designed to be a very high-performance, stealthy, low-cost airplane. The source selection here is not going to be dominated by the development costs, it will be dominated by the unit production costs and the support costs. We have to be able to buy lots of them. That was the point of that Air Force chart that I showed you. We have to be able to buy, literally, between ourselves, the three services and the U.K., 3,000 of these. They cannot be expensive airplanes. So the unit production cost, we will assess, they will make an assessment. You can't buy in very easily on the projected cost; it's based upon your design. And that's we're comfortable that we'll be able to make independent assessments of their production costs. And then we, of course, will make an independent assessment of their development costs.

Q: Does the analysis of cost conflict with the trend towards price-based acquisition?

Gansler: Oh, I would say just the opposite. It's consistent with it because what you're trying to do is you're trying to get them to worry about costs in the design. And that's what we're really focused on here. It's getting them to -- in fact this has been the whole history of this program, which probably makes it somewhat unique. I mean, in most traditional programs, particularly aircraft programs, we've said, "This is the performance we need, let's figure out how to design it to get that performance, and then we'll figure out what it costs." And if we had two people, we'd hold a competition between them, for an expensive design.

Here we've asked both contractors to design a high-performance, low-cost fighter. And that's been the focus of this whole program. And occasionally we'll make little trades, you know, a half a dB [decibel] here against some costs, or a little bit of speed against some costs. And we get the requirements people and the cost people making these trade-offs. And that's been the focus of this whole program's evolution. And that's why in the source selection, we're going to be able to assess -- and we've been doing this now with them for some period of time -- we're in strong position to be able to assess what it really is going to cost because cost has been a dominant factor in the design. So it's going to be harder for them to buy in, basically.

Yeah.

Q: Let me try to understand the significance of the Rand study. Is this sort of "winner takes all" with an asterisk, pending the results of that, or --

Gansler: No, it's winner take all unless something says that it shouldn't be. I mean, you know, it's our responsibility, I think, to make sure we're doing the right thing. And a year from now, you know, we'll know a lot -- December we'll know a lot more. But I -- no, it's more a "winner take all unless," you know, rather than an asterisk, I would say.

It strikes me that we owe it to the taxpayer to continuously assess whether we're getting the best deal. And this is such a large program, and there is so much empirical evidence as to the benefits of competition, that you don't want to just sort of throw that away and ignore it. But if the costs don't justify it, then you do. And we'll look at other ways to get competition: maybe at the subsystem level.

Q: What do you estimate the per plane cost will be if it's 3,000 planes total?

Gansler: We have, you know, design numbers for each of the -- slightly different for each of the three, and we also have slightly different numbers coming from the contractors. But we're actually pretty much in the ballpark, which is one of the things that makes us so pleased and goes right to the question as to whether or not cost has been part of the design. We're pretty much still on the targets that we had set out, you know, when -- of course, they were quoted in '94 dollars. You have to inflate them for the -- '94 dollars. But --

Q: Well, what's a sensible number to use, if you were to use a number?

Gansler: I don't know. They're, what, 32 million for one version -- what are the three versions that we're right now talking about?

Staff: The goal for the Air Force is 28; the Navy is, I believe, 31 to 35. And the -- (inaudible). So I would say in the 30 to 35, 36 range.

Gansler: Yeah, in that ballpark in '92 dollars --

Staff: In '94.

Gansler: Or '94 dollars, I mean. Yeah. But --

Q: You said that's a goal, though.

Gansler: No, but that's what I was saying in my statement, which is that we seem to be pretty much making these goals, you know, within the ballpark of the kind of precision that you have at this point in the program.

I mean, what we were trying to really do is to distinguish this in the $30-$35 million airplane versus an airplane that's 80 million or 100 million or something, in that sort of -- we're really very confident that we're in the right ballpark with the numbers and the design that we're getting out of this program. I don't think it's -- precision is not the important thing here, it's accuracy that matters.

Q: Have you made any kind of estimates what it would cost to compete the production lines out instead of having a sole-source contractor?

Gansler: Yeah, that's what I said we've been doing. We've been doing some of that in-house. Now what I'd like to do is to get some independent assessment of that, and that's what Rand's going to do.

Q: Well, I mean, are you in a position to say that -- are you -- are we -- you want Rand to double-check your work. Is your work --

Gansler: No, I want them to do an independent assessment.

In fact, I went -- in talking to Rand, I explicitly said, "Don't talk to us. You know, they can get numbers from the program office, they can get numbers from the contractors, but I don't want to influence your assessment. I want it to really be an independent assessment."

Q: Okay. So Rand is essentially checking your numbers; you're not asking them to go look in new areas or do some independent --

Gansler: If they have some greater ideas than we had, that's even better, you know. But it's just -- I mean, we've asked for an independent assessment. That's all it is.

Q: Do you know who's going to lead it for Rand?

Gansler: Yeah. (To staff.) John Brink -- Brinkler?

Staff: John -- or Birkler?

Gansler: Birkler?

Staff: John Birkler.

Gansler: But he's just getting started. I mean, he won't be able to give you much more information on it.

Q: Sir, when the DSB [Defense Science Board] looked at this issue, they basically recommended splitting the work. Having read their assessment, can you tell us what part of their reasoning you disagree with?

Gansler: Well, let me make sure you understand what they recommended, because they didn't recommend splitting the work; they recommended the same thing I just talked about, which was some form of a competitive environment. On a single design -- there's some misunderstandings about people trying to use different designs to compete or having one of the two of them build -- one build the Navy, one build the Air Force. That's not what we're talking about.

Q: I understand they recommended dividing the production work.

Gansler: But they had not done a quantitative, detailed analysis of it. They simply said -- and this was what, two years ago or three years ago when they did it -- couple of years ago, at least. They said, "This looks like something you really ought to investigate," is the way I read their report. And that's why, frankly, we didn't -- really do our own internal investigation and why we're now asking Rand to do one, too, because it's such an obvious thing to think about. And yet, as I said, it's never been done on airplanes. It's been very successful on missiles, very successful on jet engines, in the great engine war. But airplanes are different, and so we want to look at it more carefully in terms of airplanes.

But it won't affect the program, and that's the main point. And there's some misunderstanding -- in fact, the first question, you know -- will it affect the schedule? Will it affect the costs and the overall program? And our objective here is not to do that.

And that's one of the arguments, and it's a very important one that you should recognize, that what we're talking about is figuring out a way, if we do it at all, to compete in production and not to influence the full-scale development or this competition.

Q: But there's no particular part of their reasoning that you would respectfully disagree with?

Gansler: No, not that I can think of, no. I mean, I'm thinking back two years to their report, but I hadn't read it before coming here today, but as I recall, that was kind of the tone of their -- they sort of looked at the program and said, How could it be improved? And one of the things would be to figure out a way to try and get competition into the production phase, which is what we've been trying to do.

Yeah?

Q: What specifically are your concerns about funding? You said that the letter --

Gansler: Oh, the funding, specifically, is one committee cut $150 million out, another committee cut $170 million out. One committee said, "You can't start full-scale development until fiscal year '02." I mean, those are -- the specific --

Q: Isn't it a fact that some of them boosted funds for the current concept demonstration phase?

Gansler: Yeah, but it's the total dollars that we need for that year that is the problem -- the fact that they took it out of one pot and put it into the other one but lost some when then they shuffled it. I'm not as interested in the pots because, you know, we can always get permission to move it from one pot to the other, but if the dollars aren't there, you can't make them up. I mean, you know -- and that's the problem. The pots of money problem there is, whether you call it concept development or concept demonstration or full-scale development, I'm sure the Congress would be willing, if we had an airplane flying, to let us start EMD [engineering manufacturing development], unless there's a law that's written that says you can't, and that's the part that I'm worried about. There was one committee that wrote a law that says, "You can't start full-scale development until '02," fiscal '02, which would mean, if we were successful in our schedule, we would sit for six months and wait until the next fiscal year came. That doesn't make sense to us.

Q: What does that schedule say about EMD, when that would begin?

Gansler: It will begin --

Q: After the down select?

Gansler: Right. Exactly that. Right after the down select, in the spring of '01, if we're ready. In other words, as Tony pointed out, if the airplanes aren't ready, we're not going to make a down select. And we won't start EMD until they are ready. But if they're ready, it seems to me wrong for the Congress to tell us, "You can't start," and to have to wait till October. That's the part that we're objecting to.

Q: Thank you.

Q: One more? Can I ask you, on EMD, the cost estimates have gone up from $16 billion to $19.8 billion. Why?

Gansler: You noticed in the -- oh, I'm sorry. You want -- you noticed in the chart that I had about the modular developments --

Q: Yeah.

Gansler: -- one of the things that caused that is the fact that we've added more missiles and more weapons to the program. I mean, that's a significant piece of it. Another piece of it is the fact that we've gotten more realistic estimates, frankly. One major cost difference is the software costs have gone up in industry considerably. And this is a -- all of our weapons today are software- intensive. This is certainly one of them.

Q: How much money is missing from your pot?

Gansler: Oh, the 150 million? That's -- that's --

Q: A hundred and fifty million?

Gansler: Yeah.

Q: But you have to have that.

Gansler: Yeah. When they took money out of one pot and put it in the other, they lost 150 million in the shuffle. And so we would like them to put that back in.

Yeah.

Staff: Last question.

Q: Are you confident or just optimistic that there will be another major program, fighter-size program for the loser to compete for when F-18 and F-22 wrap up?

Gansler: I am very confident that we will have unmanned vehicles of significant volume in the future. I think that is -- and certainly, that's what Senator Warner tends to feel as well. I think it is the direction that we'll be moving. I also think we'll have airplanes for a very significant period of time out there. And I think we'll have extensions on these programs that we have now for some period of time: you know, the F-18, the F-22, the -- even the F- 16 block 60, the UAE version. So we have quite a bit of work in those plants. And it was for that reason that I didn't think industry base considerations should drive this decision as much as the pure economics of it.

If, in fact, we only had this one program, one could argue, well, then, that's all you need, if you're not going to have future planes you don't need to maintain a second source from an industrial base perspective and you're better off just going down a learning curve with higher volume for that one plant. The counter-argument is that you down steeper learning curves when you don't have competition. And those are the trades that they want us to make.

Q: Do you think this may be the last generation of manned fighters? Is that what you're suggesting?

Gansler: It may. It's hard to be that predictive about it, but, you know, we're talking out here a very long period of time when we start completing this program and the dollar investment for development and the dollar investment for production is so high. And with this particular airplane, because of the high volume of it, it's going to be almost impossible for someone to compete with it on a worldwide basis.

You know, it's just going to be awfully difficult to come up with an airplane in this price range, with -- this stealthy, and with advanced avionics, with all these weapons on it. It's going to be very tough for someone to compete with on a worldwide basis. That's why we predict the volume may have another 3,000 in foreign volume to it, and why other countries, by the way, are very interested in getting in on this program. We'll probably have much more than just the U.K. involved in even the development program.

Having said that, then the question is, who else will develop the next one? And then the question is -- there's two different questions there. One is, if someone wanted to compete, or the question you're implying, is this the last of the manned vehicles. And I'm not very good at forecasting years ahead, you know.

Bacon: Last question.

Q: No, that's all right. It was taken care of.

Gansler: Okay. Thanks.

Bacon: Okay. We'll move quickly into the next phase here. I've got a couple of announcements to start with.

Q: Ken, are you going to make the secretary's letter available?

Bacon: Yeah, it's available. It's out there on the table.

Q: Oh, it is?

Bacon: So you can get it when you leave. The letter is available.

First, Secretary and Mrs. Cohen are hosting today the first annual senior enlisted forum here in the Pentagon. This is E-9s from all the services. And it's part of the continuing dialogue the secretary has had with senior enlisted personnel to, as the leaders of the enlisted cadre, to find out what's on their minds and what can be done to address issues of concern in terms of pay, service conditions, et cetera.

And at 5:00 today, Dr. Bernard Rostker, the under secretary of Defense for personnel and readiness, will be here with some of the participants in the forum to report out on what's happened and to answer your questions.

Second, Sunday at 2:00 p.m., Secretary Cohen will host the 50th anniversary of the Korean War commemoration. And that will be at the Korean War Veterans Memorial. He will be there -- the formal opening ceremony with President Clinton as keynote speaker will commence at 4:00 p.m.

I have screwed this up. There is a pre-ceremony at 2:00 p.m, and then the formal ceremony is at 4:00 p.m. on Sunday at the Korean War Veterans Memorial.

In that regard, I want to bring you up to date on what's been a continuing issue over the last 40 years -- really 45 years -- since the end of the Korean War, and that's the issue of a Republic of Korea War Service Medal for Americans who served in the Korean War.

Such a medal has been approved. It will be provided by the Republic of Korea at no cost to veterans. The U.S. Air Force has been designated as the lead agency to receive and distribute the medals. And we have a blue top on this that lays out the standards that veterans must meet to receive these medals.

But an important point is that the families of deceased veterans, veterans who died during the Korean War, are eligible to receive these medals commemorating their service in the Korean War.

Q: You say that the Korean government is issuing them?

Bacon: Yeah. This is something that has been -- the medal was initially offered by the Republic of Korea government in 1951 to United Nations forces serving in Korea and adjacent waters. At that time, the U.S. government rules prohibited American soldiers from wearing medals issued by foreign governments. In 1954, Congress changed the policy to allow U.S. soldiers to wear medals issued by the Korean government. But by that time, most of the service members had returned home, and nobody really got around to addressing this issue.

Then in 1998, the government of the Republic of Korea renewed its offer to provide medals to Americans who had served -- and presumably other nationalities as well -- who had fought for the freedom of South Korea. But they renewed the offer to American military personnel. And that has been approved, and --

Q: By -

Bacon: -- well, the letter -- actually, the letter came on May 13th, 2000. The letter was sent to Secretary Cohen from the defense minister of South Korea, announcing that the government would provide the medals. The approval of our acceptance of the medal was made in 1999. And then --

Q: (Inaudible.)

Bacon: -- it was the Defense Department. And then the same -- Dr. Bernard Rostker, I just mentioned, wrote back to the defense minister of Korea and said we accepted this and looked forward to setting up a program.

So approximately 1.8 million U.S. veterans are eligible to receive this medal.

Q: I'm sorry to make such a big deal out of this. But you said in May -- what happened in May?

Bacon: In May -- all of this is laid out in the blue top.

Q: Oh, okay, fine.

Bacon: But in May, the -- to put the sequence right, in 1998 South Korea renewed its offer to provide medals from the Republic of Korea to Americans, and presumably to others, but I'm just talking about Americans, who served in Korea during the war. In August of 1999, we accepted that offer, the Defense Department accepted that offer. And then, on May 13th, 2000, Korean Defense Minister Seong Tae Cho wrote to Secretary Cohen and formally announced that his government would provide these medals. So these medals are being provided and paid for by the government of the Republic of Korea to Americans who served in the Korean War. And at Secretary Cohen's request, Bernie Rostker then wrote back and said we accept. And the Air Force was designated to be the executive agent for the program.

Q: And the 1.8 million vets, that's vets alive today or --

Bacon: Well, I assume so. We'll double check that. But the press release says that approximately 1.8 million U.S. veterans of the Korean War are eligible to receive it. Now it also says -- that's probably the number who served, because then it goes on to say that next-of-kin to eligible deceased veterans can apply for the medal. So I think the total number who served is 1.8 million. Some of those are alive, some are not, but their families, the next-of-kin can apply to get the medals.

Okay, finished with that? Are we finished with this? Do you have a question?

Q: Yeah, on a different subject.

Bacon: Well, I have one more announcement to make, which is on Tuesday at 10:00 a.m., Secretary Cohen will honor the Fairfax County, Virginia Urban Rescue -- Search and Rescue Team. These are the people who deploy quickly to disaster areas, whether they be earthquakes or embassy bombings or whatever, around the world, with dogs and people trained to detect and dig people out of rubble.

So they have performed a terrific service to the nation and frequently working with the military. So Secretary Cohen will honor them on Tuesday at 10:00 a.m.

Q: So the people and their dogs? Will the dogs --

Bacon: They're -- yes, he's honoring the people and the dogs, but I can't tell you if dogs will show up at the ceremony, or how many dogs will show up at the ceremony. But he is honoring the team and search dogs for their courage and selfless work in disaster search and rescue over the last 14 years.

Q: And they will get awards of some kind?

Bacon: I don't know whether the dogs will get awards -- no, I think they're just being honored. I'm not -- I don't see that they'll get awards here.

Okay. Questions on dogs?

Staff: There will be dogs.

Staff: There will be dogs there. (Laughter.)

Bacon: There will be dogs? How many dogs?

Staff: Anywhere from one to seven, sir. (Laughter.)

Bacon: All right.

Q: And will the dogs receive awards of any kind?

Q: They'll got Bronze Stars!

Staff: I believe at least one of the dogs will be specially recognized.

Q: Okay.

Staff: Thank you, sir.

Bacon: Thank you. It's important canine news.

Q: Yeah.

Bacon: All right. Questions? Yes?

Q: Can I ask you, on Colombia and the counter-drug plan, what's the military assessment on Hueys versus Blackhawks for Plan Colombia?

Bacon: The assessment is that Blackhawks are preferable to Hueys on three counts. First, they're more capable. Second, they're more survivable. And third, they are more compatible with the infrastructure and helicopter force that Colombia already has. Colombia has 31 Blackhawks now. Under the Colombia aid bill, they would get 30 more. These are the helicopters that Colombia has requested, and these are the helicopters they're best prepared to maintain. And these are the helicopters that the U.S. military has assessed will be the best helicopters for the Colombian military.

Q: So is the discussion about going to the other helicopters, the Hueys, anything more than political lobbying by the Texas congressional delegation?

Bacon: Well, I don't think I can --

Q: Is there any military value to the Hueys?

Bacon: We think that there is a clear military advantage to the Blackhawks. Every analysis we've done confirms that the Blackhawk is the best way to go. And if Congress does the same analysis, we hope they will reach the same conclusion.

The goal here should be to take the most effective and efficient steps to help Colombia improve its counternarcotics program. We think that the Blackhawks do that. And we have informed Congress of that. We had an assessment team in Colombia just recently, a military -- in fact, they may still be there. But a military assessment team recently made a preliminary report on this and again confirmed that Blackhawks are the way to go. And there's one --

The way it's set up, the House, as I understand it, approved the request of Colombia and the administration for 30 Blackhawks; the Senate voted for 60 Hueys. One of the problems that the Colombian military has had is recruiting and training enough high quality pilots to fly its helicopters. Clearly, recruiting pilots to fly 30 helicopters, an additional 30 helicopters would be easier to do than recruiting 60 pilots to fly the 60 Hueys that the Senate has voted on.

But we think that irrespective of that issue, the Blackhawk is a far more capable helicopter. It flies faster, it flies higher, it is more survivable against the types of threats it's likely to encounter. And importantly, it is compatible with the maintenance infrastructure that Colombia has already set up for its helicopter force.

Bill.

Q: Ken, I'm sorry I didn't get this question to Dr. Gansler. The question basically is, is the National Missile Defense system as it would be initially established on Shemya island, would that system have any kind of utility, any kind of workability to protect Japan from missiles from North Korea, or is that stuff just going to be too low and too far away, or do you know? And then there's a second part to this.

Bacon: The Shemya radar -- and all that would be on that island at the end of the Aleutian chain is a radar, an X-band radar.

It is designed to be part of a national missile defense system that protects the 50 states in the United States from attack.

We are working with Japan an on entirely separate theater missile defense system that would meet Japanese needs. They don't need to be covered by a national defense system that would cover the United States. It's more effective for them to work on a theater missile defense system, and they are doing that.

Q: Is the deadline -- thank you. You anticipated my second question. Is the deadline going to be '05, as it is anticipated that the deadline for that first national ballistic missile defense in Alaska would be? In other words, this anticipation of '05 for our national missile defense, is that going to be the same for the Japanese?

Bacon: The Japanese will have to make their own determination on that, and they will -- it's up to them to meet their own national security needs. We have volunteered to work with them on theater missile defense. But the Japanese government and the Japanese people will have to decide what the threat is, and if and when they need a theater missile defense system deployed.

Q: Oh, so they will call their shots and we will help them?

Bacon: It is a system to protect Japan being built by Japan to meet its own security needs. And, yes, they, as a sovereign nation, will make those decisions.

Q: Thank you.

Q: The Secretary Cohen meeting with Lord Robertson today, have they already met?

Bacon: They are meeting sometime this week --

Staff: Two-thirty is the honor cordon.

Bacon: Yeah, they're meeting momentarily. I think Lord Robertson is arriving at 2:30, in five minutes.

Q: Do you know anything about their agenda? Do their discussions include missile defense or any --

Bacon: Well, I'm sure it will come up. I saw a wire service report today saying that Lord Robertson said that we ought to consider some of the suggestions made by the Russians. This happens to be our view as well. When Secretary Cohen was in Moscow, he said that we were anxious to sit down with the Russians and talk to them both about their boost phase intercept ideas as well as their theater missile defense ideas for protecting Europe. So we agree. We would like to sit down and talk with the Russians. And as I said last week, we've actually made proposals to them as to a specific date, and I don't have any new information on whether these topics actually will be discussed on June 25th and June 26th with the Russians.

Q: Are they going to be discussed with the Russians?

Bacon: I said I don't have any information as to whether they've accepted or not.

Q: I was going to ask that question.

But can I ask something else?

Bacon: Sure.

Q: The Chinese News Agency buying a building a nearby the Pentagon. Does the department have concerns about that, security concerns? Or I guess there's some procedural concerns with the State Department, but --

Bacon: Well, the State Department -- this, in a way, is more a State Department-oriented issue because they do have a requirement that, as I understand it, that China has to ask for permission, or at least report its planned real estate purchases, and then the State Department has a period of time, I believe 60 days, to accept or reject the proposal. So the State Department plans to enact that requirement. They talked about it at the briefing yesterday. They probably said something about it today.

We, of course, will evaluate the pros and cons of having the Chinese News Agency, Xinhua, in that building and make a recommendation to the State Department. We haven't made any recommendation yet. We haven't even begun an analysis, let alone finish an analysis. So that's on the specific point.

On the broader point, I think I should point out that we are mature enough to realize and realistic enough to realize that this building is subject to surveillance from a number of different directions, and has been for more than 50 years. And we obviously have a number of countermeasures that we've installed over time to defeat or foil surveillance of various sorts. And we are always trying to improve those countermeasures. It's not new to us, the idea that people might want to watch or listen to what goes on in the building, and we've been living in that environment, as I say, for over 50 years.

Any more questions?

Q: Thank you.

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