Air Force Efficiencies and Enhancements

Secretary of the Air Force Michael Donley

Remarks at the Air Force Association's Air Force Breakfast Program, Arlington, Va., Jan. 12, 2011

Good morning to all, and thank you for joining us. And thank you Mike and Sandy for AFA's leadership in hosting this event and so many other important events in support of our Air Force. It's good to see so many corporate partners and international partners here as well, with whom we share lots of business and long-time relationships in air, space and now cyber power as well.

So I appreciate the opportunity to share with you this morning some of the issues in front of our Air Force, and I think what we'll start with this morning is really the themes and the issues raised last week by the Secretary in outlining the department's plans for efficiencies in the department.

I'd like to take a minute to again sort of set the stage and set the context for this work. Many of you, perhaps, have heard me describe the changes in the strategic environment, the technology environment, the resources environment, which all come together at this point in history, at this time for our Air Force, for our defense establishment, which I think represent an important inflection point where we have significant challenges and choices to make.

So the security environment, as you know, in the last 30 years especially has shifted from a very Eurocentric approach to one more focused on the Middle East and the Far East. We've refocused our attention on homeland defense in ways that we had not had to do previously. We have shifted attention to new and rising state actors, some of which have uncertain intentions and are considered rogue nations. But we also have new non-state actors and the challenge of international terrorism that we need to confront.

At the same time on the technology front, rapid advances have reduced the long-term advantages that the United States had enjoyed in the post-World War II environment, especially the rapid advancement of IT technologies in the last 10 to 20 years has produced a more competitive, a more level global playing field as information moves more quickly, laterally across the globe.

All this is occurring during a very challenging resource time for our nation, still recovering from our worst economic crisis since the Great Depression. Many of our defense resources over the last ten years have gone into supporting operations in Iraq and Afghanistan. Certainly we've made important investments along the way which will hold us in good stead going forward, but again, much of the cost has been focused on supporting operational requirements rather than long term investment and recapitalization. So as we come to the close of a significant period of defense growth after about ten years, the budgets look like they are flattening.

And underneath that resource environment where the budgets are flattening, we have this changing security environment. So missile defense, cyber, 24x7 ISR requirements, and the requirements in a changing space domain for us to be more involved and more focused on space situational awareness. Those are new missions and tasks for the Department of Defense and for our Air Force that were not in place ten years ago.

So with this kind of tension in terms of new mission requirements, changing security environment, rapid changes in technology and squeezing down our resources, that really sets the stage for why Secretary Gates determined it was time to refocus the department on internal efficiencies to ensure that we could provide for internal growth in those areas where it is required, without necessarily assuming that we're going to get big increases in the defense top line going forward. Because the President, certainly the Congress, all of Washington is concerned about the rising deficit and the need to get control over federal spending. So that is sort of the context for the work that was undertaken last spring and summer as the Secretary directed us to look for ways to reduce overhead costs, improve our business practices, and continue to squeeze and eliminate excess or troubled programs, to save money inside the defense budget as a means towards reallocating those resources toward the tooth of the services to protect the size, the reach, the strength, the flexibility of our military despite the declining rate of growth and eventually flattening of the defense budget.

In this process the Air Force identified $34 billion in efficiencies across the FYDP. This has not been a new task. We've felt like there was pressure on the Air Force to do this work for several years. We have been about that process of squeezing functional areas and support areas, and reallocating manpower and resources toward growing requirements. So this work had been underway, but certainly the Secretary gave us a shot in the arm and gave us a great, I think, inducement to proceed with this work with the simple caveat that what we found in the Air Force for savings and efficiencies would stay in the Air Force. We would be allowed to redirect that to other high priority operations and investments that were required.

Last week obviously the Secretary made those announcements for cross the department, and I think I would just like to focus on those items he mentioned with respect to the Air Force.

Specifically consolidating Air and Space Operations Centers, consolidating Numbered Air Forces, saving fuel, improving our logistics and weapon system sustainment, and reducing IT costs. I'll talk about each of these individually, and then we'll talk about some of the enhancements, where the money went.

First stateside, we have plans to consolidate the Air and Space Operations Center, or AOC, at Tyndall Air Force Base which supports NORAD and the U.S. Northern Command, and the AOC at Davis-Monthan Air Force Base in Arizona which supports U.S. Southern Command, into one AOC. As we do that we'll follow the existing strategic basing process that we have used successfully I think over the last couple of years to determine which one will be absorbed into which. And similarly, we plan to consolidate AOCs supporting U.S. European Command and U.S. African Command at Ramstein (Air Base, Germany) into one. In all these consolidations we expect to get about 550 manpower authorization savings in manpower authorizations.

I should say that the orientation here was to look at locations where the Air Force has major command headquarters, has Numbered Air Force headquarters and Air Operation Centers at the same location. And while there is good rationale for how and why that structure was put into place and there are different roles and functions at the major command level, the NAF and the AOC itself, our focus was finding the synergies across that, eliminating the minor redundancies that go with having these major operations going on at the same location.

We'll also consolidate three Numbered Air Forces or NAFs, and the associated overlapping support activities with their collocated major command component staffs. So 19th Air Force at Randolph Air Force Base which supports AETC, also at Randolph, will be inactivated, and we expect to get about 40 manpower savings out of that. 13th Air Force at Joint Base Pearl Harbor and Hickam in Hawaii will be inactivated and combined with the staff of Pacific Air Forces with a single integrated headquarters staff and AOC supporting the U.S. Pacific Command. This will allow us to again reallocate about 39 active duty positions and probably eliminate up to 69 civilian billets as well. And finally, 17th Air Force at Ramstein will be inactivated and consolidated with the USAFE headquarters staff to support EUCOM and AFRICOM, and we expect to reallocate about 66 active duty and about 117 civilian positions in that process.

Next, we do estimate savings of approximately $500 million over the FYDP by reducing fuel and energy consumptions within the Air Mobility Command. We'll do this by leveraging proven commercial aviation practices for flight planning and weight reduction, both of which reduce the amount of fuel required to accomplish the mobility mission. Air Mobility Command accounts for almost 40 percent of fuel consumption in the United States Air Force and I think that's, off the top of my head, my recollection, that is about nine or ten percent of the DOD total. So it is a significant amount and it is certainly a good place to start.

The Air Force, as I suggested, is the largest user of fuel in our government, and the MAF, the Mobility Air Forces, is the largest user of fuel in the Air Force. They consume about 477 million gallons annually. So savings here become significant in fairly short order.

Fourth, we plan to implement a more efficient space acquisition strategy through a new approach which we call Evolutionary Acquisition for Space Efficiency or EASE. Major tenets of this new approach include block buys of satellites, even when the block buys may be only as small as two satellites. Greater use of fixed price contracting and more stable R&D investment and a modified annual funding approach. We're still working out the details of how to affect this, but our challenge in the satellite world is that we have been waiting until the last minute, if you will, to produce new generations of satellites. We've been stretching the operational lives of those satellites on orbit.

As we do that, we have stretched out our acquisition programs and we have created breaks in production between the first and the second satellite, or between the second and third satellite in a small buy of satellites in a way that has cost us tremendously. Broken production lines, cut off supplier base, regular production of supplier and support assets. So we have created more costs, we have created industrial base challenges when we do this. At the same time, we still have major spikes in our satellite funding. For us, buying a satellite is a very significant investment and it's like for the Navy, it's the equivalent of a major capital ship, if you will, for the Navy.

We needed to smooth out funding. The Congress has encouraged us to look for better ways to do this, and we'll be bringing the EASE proposal and strategy to the table this year. We hope to get started with that on the AEHF program in FY12 and then move on to other programs in the out years.

Fifth, we're projecting savings of just over $3 billion across the FYDP by modifying our depot and supply chain processes to support weapon systems sustainment. This has been a challenging area and we've had an end-to-end assessment working group underway to identify efficiencies in the supply chain with respect to supply chain management, consolidated asset management, and depot performance that we need to make some significant improvements on.

I think I'll take a moment just to back off a little bit, and especially since I have General Reno in the room who can correct me to 100 percent on this, but this is a little bit more complicated story. When we left the FY11 President's budget, we started our work on FY12, we realized that we had a requirement for a $7 billion addition to weapon systems sustainment over what was forecast in FY11 in order to increase our weapon system sustainment from 80 to 82 percent, so a two point change in weapon system sustainment was going to cost us $7 billion over the FYDP. This kind of growth is really unsustainable and it is a good representation of the challenges we face in cost and mission growth inside our Air Force budget which needs to be accommodated even as the overall top line becomes flat.

Our challenge here has been in the receipt of over 400 new airframes of one kind or another in the last several years. More C-17s coming on-line, more MQ-9s coming on-line, MC-12, Global Hawk, C-130Js, F-22s being bought. So new aircraft coming into the Air Force, which is a good thing, but we cannot sustain that kind of growth in requirements for weapon system sustainment to get that kind of a marginal increase. So we put the end-to-end assessment working group on this task.

At the end of that process we realized we could cut back that anticipated growth from $7 billion to $4 billion. So we still have growth, but for us internally this represented an important efficiency where we could take $3 billion, apply it to other requirements. And even in this process of working through better supply chain management, more careful management of work flow through the depot, the use of overtime and these kinds of issues, we think we can get weapon system sustainment from 80 to 84 percent. So again, closer attention to these issues, we think we can squeeze a little bit more readiness, materiel readiness and sustainment and not spend so much money in doing that. So that's been an important area.

The reason why I wanted to flag that is because we list that as an efficiency. The requirement was for $7 billion of growth and we cut it back to $4 billion. In the process we saved that $3 billion. That was internal to the Air Force, so it's listed as an efficiency, but there's still $4 billion of growth across the FYDP in this area.

Finally we're reducing IT costs by over $1.2 billion over the FYDP. This is a 25 percent cost reduction projected by consolidating enterprise hardware, software, services. There are significant initiatives underway within the department to consolidate data centers and do our computer networking and cyber work more efficiently.

The Air Force had embarked on this a couple of years ago. We recognized the need to get a more centralized approach underway to reduce the flexibility of individual MAJCOMs to go their own directions on IT. This was a theme as we were putting together 24th Air Force. It is now a broader theme across the department so we do think there are opportunities for some significant savings in this area.

Let's talk about the enhancements. These are examples the Secretary used of investments that we are able to make because in many respects of the savings realized in the efficiencies process that I just described. It's not an exhaustive list, as you can imagine. Those of you who have lived this and worked with our POM and budget builds will recall painfully there are lots of puts and takes in this process.

But first, probably one of the more significant outcomes from our point of view in this budget cycle is the decision to invest in the new long range nuclear capable penetrating bomber which will continue to provide the President with options to hold any target at risk at any point on the globe.

Efficiencies will enable our continuing investment in establishing a new program of record for this long range strike platform, and in the context of continuing work on this broader family of systems related to long range strike. This new long range penetrating bomber is envisioned to accommodate manned or unmanned operations, to be nuclear capable, and will provide great operational flexibility to joint commanders.

In contrast to the program that was canceled in 2009, the Next Generation Bomber, as it was known, development of this new bomber will leverage more mature technologies and we think will reduce the risk in the program, allow us to deliver with greater confidence on schedule and in quantities sufficient to support the long term sustainment of long range bomber capabilities after the current fleets of B-1s and B-52s retire.

We'll constrain the requirements for this platform, and there is certainly more emphasis on affordability.

Second, this set of enhancements will allow us to reallocate funds to enhance ISR capabilities. It's amazing when you look at the current force structure of the Air Force how much of the existing ISR force structure has been built in the last ten years, much of it out of supplemental funding. So the MQ-1, MQ-9 fleets, the MC-12s, other ISR-related capabilities, grown from the supplemental and contingency budgets that have not yet become part of our institutional Air Force baseline budget. And this opportunity for enhancement has allowed us to move the MC-12 capabilities from the OCO into our base budget. It's a bellwether of things to come. One example of the kinds of capabilities that need to migrate from the supplemental funding to the base budget because the supplemental funding will eventually go away. It's already starting to shrink, and for those capabilities we need and want to protect long term, we need to move the funding for that into our base budget. Another example of why we need to continue to find efficiencies going forward so we can make room for these capabilities.

Also we'll be able to produce our most advanced MQ-9 capability, the Reaper capabilities, at maximum rate and continue on track with that program. Again, it's an area where to the outsider looking in it may not look like a big change, but for us going into FY12, those dollars were at risk because we had so many other bills to pay, so many other pressures. Our ability to do that and to make the transition from the MQ-1 to the MQ-9 fleet was in question until we had identified enough efficiencies that we could pay for this kind of continued enhancement.

Third, we'll increase procurement of our Evolved Expendable Launch Vehicles, the EELV, which is critical to our launch capabilities, to ensure access to space for both military and other government agencies. EELV has been a challenging program. We received help last year from the so-called Bar X report done by General Welch which helped us identify the minimum requirement across the defense industrial base for the EELV production capability, across the government. So we have provided stable funding now for a DOD requirement of about five boosters per year, and the work associated with that has been coordinated with NASA and with the NRO, the National Reconnaissance Office. So good cooperation and collaboration across the government agencies involved to establish the baseline required to support the defense industrial base and the launch requirements across the government, and to coordinate that work across three budgets.

Fourth, we have continued and moved forward a bit our commitment to modernize legacy F-15 fighters to keep them viable for the future with the Active Electronically Scanned Array or AESA radars, and operational flight programs. This was already underway. Thanks to the enhancements we were able to move up the schedule for this work.

So by reallocating funds from efficiency savings, this investment completes enhancements to the F-15Cs one year earlier, and eight years earlier than planned for the F-15Es. So we will reduce RDT&E and unit costs in moving that work forward.

Finally, to ensure successful integration of the F-35 into the Air Force which continues to be part of our plan, of course, we've been able to reallocate and enhance funding for 16 additional F-35 simulators. In the Joint Strike Fighter program it is forecast that up to 50 percent of pilot training will be accomplished through simulators, so this helps us get into that work more deeply. It also has the benefit of contributing to fuel efficiencies as we keep pilot training on the simulator side of the syllabus.

That's sort of a big picture summary of both the efficiencies and the enhancements that the Secretary laid out last week. There are more on the efficiencies side, more detail. There's more detail on the enhancement side. These are the ones the Secretary had chosen to illustrate the work of the department over the last year. There will be more details rolling out with the FY12 budget in February, so I'm a little limited as to what I can address here today. But I did want to just finish by providing a broader summary, if you will, of our top acquisition priorities, investment priorities coming into the next year.

First, of course our mobility assets are central to joint, interagency and coalition operations in peace and at war. So procurement of the KC-X remains a very, very high priority for the Air Force. Our source selection process continues and we appreciate the cooperation, the collaboration and indeed the decorum of the offerors as the source selection process moves toward completion.

Second, the procurement of the Joint Strike Fighter remains a priority for DOD but also it remains a challenge as well. Following the restructure last year and changing management, Dr. Carter and the Secretary of Defense, put in place a new management team. We had undertaken under Dr. Carter's leadership a technical baseline review by the new program manager, the new PEO, that has actually given the department perhaps the best basis it has had in years to plan and manage the JSF program going forward. I think we've seen some progress this year already in terms of the department's and the government's understanding of exactly where that program stands.

The major decision from this TBR has been to decouple the testing of the U.S. Marine Short Take-Off Vertical Landing, the STOVL variant, from the conventional and the carrier variant to ensure that we do not slow progress on the conventional and the carrier variant as they continue to move forward. So that was an important program management decision taken this winter.

But because there is still work to be done on the system development side of the program, there's still work to be done on software and testing, you'll see that the department is adding money for SDD, and again, as last year, taking even an even more conservative approach to production rates as we go forward, so that will look fairly flat from FY11 to FY12.

As we consider the impacts of this conservative approach to Joint Strike Fighter going forward, we have anticipated that we would need to look at F-16 SLEPs, so we continue to refine the requirements for F-16 SLEPs going forward -- what kind, how much and when. And we are committing resources in that direction in this FYDP. More to follow on that, but I think that question is more of a how much and when and what kind rather than if.

Third, we need to continue to field our ISR systems on the schedules committed to the operational commanders to get from our current level of 48 CAPs to 50 by the end of FY11 and to 65 by the end of 2013. Obviously this remains a high priority for our Air Force. As we go forward we'll want to continue to look at how to balance our investment in aircraft that are perhaps less capable in a non-permissive environment with the next generation of UAVs that will follow. Of course there's lots of work going on on those kinds of programs.

Fourth, as I already mentioned, supporting the long range strike family of systems work is a major priority for our Air Force and getting the new bomber program off in the right direction is certainly a priority for us within that family of systems, which includes ISR, includes electronic attack weapons and communications. Much of the details of this, of course, is in the classified parts of our budget and we will not talk to the details of that, but it nonetheless remains a very high priority for the Air Force.

Finally, we'll continue to enhance space control and situational awareness capabilities as well as focusing on stronger management of our space programs to ensure we operate effectively in the increasingly competitive, congested and contested space domain that has been described in our National Policy and our National Security Space Strategy documents. National Security Space actually is about to be released here shortly.

This I think provides you a good overview of our efficiencies, our  enhancement, our major priorities for the coming year.

I neglected, but I would like to finish actually by emphasizing that all of this work gets done by Airmen. So supporting Airmen and their families remains a high priority for our Air Force. It's the men and women of the Air Force who make all this capability work end-to-end. Along with our corporate partners and international partners, it takes a whole team effort to make this Air Force advance in the directions and at the pace it needs to to continue to remain the finest Air Force in the world.

I appreciate all your support in that effort and your support along the edges of your work for our Airmen and their families.

With that, I'll be happy to take some questions. Thank you.

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