November 15, 2002

Commander, Los Angeles Space and Missile Center

Senior Vice President of Air Force Systems for Integrated Defense Systems, Boeing

Executive Vice President, Space Systems, Lockheed Martin Corporation

President and Chief Operating Officer, Northrop Grumman

Lieutenant General Arnold: We are delighted to be here. It is indeed a great day. This is my second opportunity to be a host of the space symposium and it is a lot of fun. Great speakers already—General Ryan, General Lord, General Lyles—and we’ll have Mr. Teets at lunch time. Now, a very good panel discussion here with our industry partners. We have a lot of people to thank. One person we ought to thank who retires next week is Ms. Darlene Druyun. She will retire after over 30 years of service to this great country and we all owe a great debt of gratitude one way or another in the acquisition business to Ms. Druyun. I’d offer that we are all thankful for her services.

We are also thankful to the Air Force Association. What a great team here in Los Angeles, the Schriever Chapter, the LA Chapter here, very powerful support to the military and to our industry partners as well as at the national level. Pete-O, we appreciate all you do to volunteer and all the great things you do for the Aerospace Education Foundation. You helped put five Arnold kids through college. It didn’t screw them up too bad—two of them are Air Force pilots so I guess you did ok. Truly, they are the backbone and they are the support and they are the great mentors for all of us. We look to you for your advice and seek your help constantly.

We are here today right now, as General Ryan says, "we are all airmen," whether we are involved in space or we are involved in the air, we are airmen indeed. We are focusing this symposium truly on the great subject of space. As you know, space industry has suffered through some problems recently. The foundation, the economic problems we are having, lots of lay-offs. Which reminds me of a little story...

There was this unemployed aerospace engineer that was seeking employment and unfortunately he was laid off in the satellite factory locally. He had a PhD and he looked up and down, all over LA, and he couldn’t find a job. He tried Disneyland, he tried everywhere. Nobody could use his skills. He ventured down to San Diego. He looked at Coronado, he looked at the Naval Base, he looked up and down and he couldn’t find a job there. Finally he got back on the 15 and he was heading back north and he passes the San Diego Zoo and he says, "hmm, let me give it one last shot."

The aerospace engineer pulls into the San Diego Zoo and sets up an appointment to go in to see the zoo keeper. He explains all his great skills and he is this engineer and he can help with the infrastructure, he can help with plumbing and electricity, and the zoo keeper says, "look, I’ve got lots of people already that can do those kinds of things. I’m sorry." So the guy turns around dejectedly and starts to walk out. The zoo keeper says, "well now just a minute. Our gorilla just recently died. We’ve ordered a new gorilla from Africa but it won’t be here for a couple weeks and I do have a gorilla costume. Would you mind maybe putting it on and acting like a gorilla?"

The engineer said, "wait a minute. I am a PhD in engineering, but I’ve got to put food on the table" so he said ok. So the next morning he shows up, puts the gorilla costume on and as a normal geeky engineer, you expect he was a little bit awkward out there at first. But then, by the afternoon, he really got into it and he is jumping around the cage like a real gorilla and he is swinging from the branches and accidently he flies over into the lion’s cage. The lion comes running out of the cage and the gorilla runs to the bars and yells, "Help! Help!" and the lion comes up and says, "Shut up, damn it, or they are going to fire both of us!"

Hopefully, I won’t be an unemployed aerospace engineer after this. We are very proud at SMC to be a member of this great Air Force team that is the big blue wrecking crew. SMC is indeed proud to be part of Air Force Space Command under the leadership of General Lance Lord. As General Lord says, "we are skilled in air and experts in space." In our business out here at Space and Missile Systems Center, we are skilled in the acquisition and development in acquiring space systems. We are the "stuff" getters, as I tell my son, for the Air Force. For rockets, for satellites, for satellite control systems, no matter what kind of satellites they are and launch vehicles and missiles.

But we don’t do this alone. We do it with our great industry partners that we’ve got here represented today on the stage with Mr. Albert Smith, from Lockheed Martin Company, Mr. George Muellner, formerly Lieutenant General George Muellner, from the Boeing Company and Mr. Ronald Sugar, from Northrup Grumman Corporation. The rules of engagement is that I will speak for probably about 10 minutes and then each of the individuals on the panel will speak for about 10 minutes. This will be followed by about 15 minutes of questions and answers and then I will allow each of the panel members to give one final rebuttal or closing comments and then we’ll move on to lunch.

We certainly have a very interesting set of questions that we can ponder. We hear a lot, "is space broken?" Some would ask, "is the glass half full or half empty?" The question we probably address will be, "how can we improve our space systems?" We might focus on how we maximize our space portfolios with the limited funds that we have. We might focus on how we deal with the shortages in personnel and limited skill base. But I would offer that General Lyles would agree that they suffer from the same problems in the aviation industry as we are suffering in the space industry. Nothing different. I’ve been on both sides. Dick and I worked the B-2 program together. I’ve seen the same evidence and the same kinds of issues. They are not new to us. They are not all focused on space firsts at all.

We learned an awful lot dealing with these kinds of things. For example, the SBIRS program just over the last year. While that has been tough, we have some real heroes out there—Miles Crandle from Lockheed Martin and Colonel Mark Brakowski. I couldn’t be prouder of their leadership. I think in the end this will prove to be a very valuable system for the warfighter. We’ve learned a lot of valuable lessons. We didn’t toss those away. We’ve incorporated those lessons into virtually everything we do at Space and Missile Systems Center. There is great value in taking those lessons and then talking about them and discussing those issues so that we can manage our programs better and that is exactly what we intend to do and we cover those very closely.

We have refocused our efforts across the board on how to handle and manage difficult issues. The three key issues I want to address right now are, first of all, program performance and execution—because that is our bottom line and that is what we owe to Mr. Pete Teets, our boss and the Undersecretary of the Air Force—is to execute our programs on time at cost in meeting the warfighter’s needs. That is our vision very simply at SMC. The second thing I’ll focus on is processes and the third thing is our great people and how we frame that to develop them, or as we call it now, "force development."

To begin with program performance and execution, let’s go back and look at some of the things that we ventured into. For example, Total System Program Responsibility, known as TSPR. It was a challenge. It was a new concept. We dove right into it, head first, without explaining it to our industry partners. We paid dearly for that. We dumped it on them. We abdicated our responsibility as government members and we gave TSPR totally to the contractor. It caused huge problems because, first of all, our industry mates didn’t understand it; we didn’t do a good job explaining it.

Secondly, it didn’t work because it caused a lot of confusion between the primes and the subs. We’ve been directed and rightfully so not to go down the path of TSPR in our complex developmental programs. On sustainment programs, it works quite well. We see that with TRW running the ICBM business right now. But in our very complex space programs, particularly in the developmental stages, we will not venture down that path again. The government is principally taking on that role. Therefore we need more qualified aerospace engineers and our own engineering talent in order to take that on. Another area that we needed to focus on we found and General Craig Cooning and I and General Taberney and Bill Maikisch really understood well that we needed to focus on systems engineering. As General Lyles said, Craig explained that at a recent CEO conference and that has really caught on. A lot of people are interested in what we are doing. But simply put, systems engineering makes us aware of what is happening in our programs. It gives the spotlight for our program managers and system program manager SPDs to develop issues and look at where we need to focus our attention and cost schedule and performance, all the way down to the third and fourth level.

It is how we determine where we focus our attention. It facilitates the spotlight on solutions. It provides me what I call the "headlight metrics" of where we need to focus our attention. More importantly, it provides us valid data that goes into our earned value management systems that we roll up and then we pass on as to how we are executing our programs. It forecasts problems for us so that we can be proactive versus reactive. We can’t do our business without systems engineering. It is a slight investment up front. But it will have a huge pay-off in the end.

The second point I want to discuss is our processes. In the past, we had the PEO that existed in Washington and the Defense Acquisition Commander out here and the Center Commander. So we had split responsibilities. We had split portfolios and the Center Commander, General Tattini, can probably tell you better than anybody and General Lyles, you really didn’t control the big budget because they were controlled by the PEO back in the Washington.

I will tell you, things have changed because no longer are we decentralized, we are centralized with the PEO being out here and being the Center Commander. In the past, the OIPT process had too much authority and everybody could say no, but nobody could say yes, and so your programs kind of muddled along with nobody really in charge.

Now, today, with the PEO the single point of contact reporting to Mr. Teets for milestone decision authority, we’ve invested a lot more power out here and I will tell you it is great and I think we are starting to make headway. It has only been really in place since February officially we are starting to see some significant changes. Internally, we’ve revitalized our decision making process to go with what they do in industry with a board of directors, the way a CEO runs or a COO runs an organization. We have monthly PMRs that go very deep down into various levels of a program.

We also are blessed with a world-class set of program managers and SPDs. I couldn’t ask for better management attention from our very experienced folks here and I am blessed with that. More importantly now, I report directly to Mr. Teets for milestone decision authority and I report to General Lance Lord for organize, train and equip and all operational issues. Secondly, we are involved with Air Force Space Command and all of our PMRs, either out here at SMC or like we are doing next month in Colorado Springs, we will take the entire portfolio out there to review it with their staff. But we are closely linked in tying operations and acquisition together as we are directed to under the Space Commission.

The other things we are looking at doing in a more fluid process is getting away from the old DAB process, the Defense Acquisition Board that would go up to AT&L and we will now take our programs to Mr. Teets under a DESAB program called the Defenses Space Acquisition Board, much like the NRO does today under the NAB or the NRO Review Board. It is a very streamlined process. The first of the programs that we will bring forward will be GPS 3 sometime in the month of December. This is a new process, much more streamlined, and we are all looking forward to it, but we want to do it right. We are going to spend a lot of time up front because if we don’t do it right, then somebody is going to challenge us and they are going to take that ability away from us.

Second thing we are doing here internally is we are redoing our FM, our financial management, to give me and my FMP really good, deep metrics in all of our programs and that is very helpful. It gives me great insight into the details of our programs.

The third thing we are doing is we are building for the first time an organic cost estimating capability. That has been one of the flaws we’ve had in the past, that we start a program off and we don’t know really what the cost is and it kind of fluctuates and we get in big problems and we start to say this cost program is overrun. But if we start off with the right kinds of tools, and we can organically hear due cost estimating, it is really going to help us for the future. That is a real focus. It takes again a little more investment up front, but it will have high pay-offs in the future.

Last of the processes we are starting to focus on is bench-marking, where we will bench-mark our industry partners and then we will bring them in for a full day to exchange between program managers and our industry partners pluses and minuses of how we can do our business better. The first time we will do that, we will be with the Boeing Company and George Muellner’s group in January and then we’ll move on to the other larger corporations.

Shifting now to personnel, the most important aspect of what we do. They are the key to our success no matter whether they are our bright young airmen, young officers, our civilian corps, or our great chiefs out there, we can’t do our business without them. We need to focus on that. We focus on retention. We focus on recruiting. And unfortunately we have a very greying, aged aerospace industry out there where we see the same thing in our civilian work force in our engineering talent. That concerns us and we are focused on how we can improve on that.

Message has gone out all the way to the Secretary of Defense on how we’ve come back down in the last ten years, dropped down about 30 percent in the total number of people that work here at SMC, while at the same time almost tripling the number of programs and the level of money that we are using to invest in these programs. Right now, today, it is about eight and a half billion and if it stays on track, we will grow to somewhere around ten billion in about two years with a reduced workforce of about 30 percent from where we were back in 1992.

On the positive aspects, though, we have continued to field solid weapon systems for the warfighter. We can see that day in and day out in Operation Enduring Freedom. Take Milstar 5 for example. We launched it. We put it in orbit and we put it over the AOR in a record 62 days. When we got that system on board, Milstar 5 with a medium data rate, that day we were able to take the ATO, the air tasking order, and transmit it from PSAB to the theater not in an hour, but down to 5.9 seconds. That is combat capability and that is what space is able to provide. Look at the way we are using GPS as General Lord described. And on and on and on. Our weather systems, our warning systems, they are all there. They are performing very successfully so we don’t really have a lot to apologize for, we need to do a better job in managing our acquisition side, but the space systems are up there. They are doing their job. They are really helping the warfighter and we are darn proud of that.

We also have a great track record in our launches. Right now we have had 23 launches in a row. My senior advisors tell us that is the longest record streak of success that we’ve ever had in our launch business. But we are not about to rest on our laurels. Some would say we are lucky, I would say it just is, because of the focus and the vigilance, we’ve all given both at the operational wings and what we give it at our SPOs and our detachments soon to change.

As I mentioned, we are entering a risky time. While we fly out our current systems and, as General Lord said, we don’t call those our heritage systems or legacy systems, they are our current systems, whether they are the Titan IV that are going to carry some very expensive payloads or the Delta IIs—we need to focus on those at the same time as we bring on the new Delta IV and the Atlas V.

We are probably at the highest point of risk as at any time in our launch business. And so for that we are responding to this challenge by looking at the realigning of our launch organizations to more closely tie the current and new launch systems at the same time the way we process launch and satellite generations at the launch bases—more to come on that. But General Lord and I have been in a dialogue. We will go describe this to Mr. Teets and then on to the Chief as to how we are going re-do this organization to be more streamlined, to accommodate all these changes that we are seeing out there. More to come on that.

We’ve also seen a series recently of some drops in launch processing, particularly in the GPS and the Milstar. We are not taking those things lightly. While there may not be a common thread, it does bring me some concern. Again, I make mission success my highest priority. No matter what we do, we owe it to the taxpayer to do these things right.

So, some of the emphasis I’ve seen and I’ve done recently—I’ve sent a letter our to all of our great providers, to all of the members here on the panel, of what I expect from them and what I’d like them to look at in terms of processes and procedures, checklists, particularly focused on discipline and training and then report back to me, as soon as they can, on what they find. I’ve asked them to look at organizational conduct and organizational assessment. We participated, with our SPOs in key contractor hardware assessment while conducting our own independent analysis. We are conducting internal reviews in oversight and insight procedures down at the Cape and, in fact, General Lord and I are flying down there tomorrow to spend some time with the detachment to see if there are any issues down there.

The next point I have is that I’ve set up an independent team of some senior retired members of our great government to give me some advice and they will come back on the 15^th of December and I’ve asked them to look end-to-end to see if there is anything indicative out there that I really need to pay attention to. Then we also, all the way along, continue to our own independent or IRRT team review with each of our SPOs to clear and release each technical issue that we deal with because if the satellite is not ready, if the rocket is not ready, then it certainly won’t get approval for the launch. But be assured, we are focused on mission success. The warfighter depends on it, particularly right now in the crisis that we are in, in our country. Our responsibility is to deliver these satellites on orbit, but they won’t go until they are ready and I assure you of that. But, again, we’ve had overall tremendous success in our portfolio despite these shortfalls in manpower. I think this is a testament to the great men and women of Space and Missile Systems Center, as well as a great testament to the men and women of our industry across this country.

General Ryan said you can’t get the job done without talented people. Our responsibilities are not going down. With this global war on terrorism, it will probably go on for days, weeks, months, years, perhaps your lifetime—who knows? We need to be always ready and space provides us with an additional capability. But space doesn’t do it alone, as General Lyles said. Space enables us to be successful because we have balanced it with effects and capabilities, horizontally integrating with air and space and using C⁴ISR to seam us together and tie us together and we do this in the enterprise nature. We get together and really focus on how we can provide those capabilities and effects to the warfighter, because that is what our business is all about.

We need highly skilled people here because we deal in highly skilled or highly complex issues. We need to focus on our seed corn and that is our junior officers, our junior airmen and our junior civilians and I ask for your help. Things that we are looking at are training, mentoring, education with industry, hands-on experience and at systems engineering as I mentioned, where we’ve got some 43 up at California Institute of Technology right now to learn about systems engineering and it is not cheap, but it is a wise investment.

The small investments we are making right now will have big pay-offs in programmatics as well as in operations, particularly in launch successes for the future. We’ve got more work to do. We are not out of the woods yet. I think we are delivering on our promise. Some would say we are lucky and I’d like to close my comments by quoting from the great Vince Lombardi, when he was walking off the field and the Green Bay Packers had just demolished yet another team. The coach shook his hand and said "you were lucky." And he looked the coach right in the eyes, and he said, "Luck? Luck is nothing more than preparation colliding with opportunity. Thank you for giving me the opportunity to kick your ass."

In closing, I feel like the luckiest guy in the world to be manager of a great organization like Space and Missile Systems Center and I look forward to the question and answer session.

Now, let me introduce our team here. First is a good friend of mine, Mr. Albert Smith. I’ve known Al now for quite some time. He is Executive Vice President of the Lockheed Martin Space Systems Company and he has been in that place in the position since September, 1999. He has given his personal attention to the Space-Based Infrared High situation over this last year and indeed he is a great leader and has helped turn this program around with the help of Miles Crandall. He has a strong background in the government, with the CIA, and he has served in industry since 1985.

Following Al, will be Dr. Ronald Sugar. Dr. Sugar is the President and Chief Operating Officer of the Northrop Grumman Corporation. He assumed his position in September, 2001 and he has a very strong background in industry in TRW Litton and Hughes.

Finally, will be Lieutenant General George Muellner [retired], an old mentor of mine when I worked at TAC headquarters in ACC. He is a Senior Vice President of the Air Force Systems for Boeing Integrated Defense Systems. He is pulling together air and space architecture for the Boeing Company. He has served for over 31 years in the great Air Force and he is very familiar with our acquisition business.

Those joining me on the panel today will discuss how industry plans on delivering what they promise. With that, welcome Al Smith.

Albert Smith: Brian, thank you. I greatly appreciate the opportunity to be with you today and to serve with such a distinguished panel of competitors—oops—panelists. In fact, they are great friends and great industrial teammates. It is also great to be back with AFA in LA and be among what General Lyles talked about as "space geeks." I have the privilege of working my whole professional life with space geeks and I’ve been extremely proud of that.

With that said, there are three topics I would like discuss briefly with you today. The first is the acquisition and performance of national security space systems. Secondly, as we’ve all seen in the ongoing global war on terrorism, there are several great examples where space is playing an integral role. I think these successes demonstrate a construct of how we can move beyond today’s CONOPS toward what the Chief of Staff, U.S. Air Force, General John Jumper, has described eloquently as effects-based decisions. Third, and last, I’d like to have a brief discussion of two of my favorite programs—transformational comm and Space-Based Radar.

Let’s begin with the premise held by some and somewhat popular in fact—it feels a lot more comfortable being among this group than being a space guy in the Pentagon today—that space acquisition is broken. That somehow we’ve lost our way and cannot deliver as we have in the past. I don’t agree with that premise. However, I do recognize that we have some issues that must be addressed. I am also confident that when you look at this group of people gathered here today and what we have collectively done, over the past 40 to 50 years in space, that if we keep candid dialogue, root cause analysis, and a commitment to prescriptive actions that are a hallmark of this group, we can solve these issues.

Where does my optimism come from? I think we should resist being like the pessimist in a Woody Allen film who said, "We face a crossroads. One path leads to despair and hopelessness and the other to total extinction." I don’t think that is where we want space to be. Instead, consider some of the following examples of our recent success.

As Brian talked about, we recently had a 23^rd successful and consecutive national security space launch. God willing and with good people and processes, we are going to have a successful Delta IV. In the ongoing war against terrorism, we’ve all seen how GPS has enabled special operations forces running around on horseback—equipped with modern communication systems and laser designators—engage in truly transformational precision strike.

Pause for a moment and just think about a dumb bomb equipped with a GPS satellite receiver providing orders of magnitude improvement in cost effective lethality. I want you to think about how far we’ve come since World War II, where to take out one 60 by 100 foot target, we needed 9,000 bombs. Go look at the Tan Wa bridge in Vietnam, where 79 aircraft, 638 bombs and 298 rockets failed to take out this transportation link. Today, we have a B-2 bomber equipped with 16 bombs that can address 16 targets on a single pass. Pretty amazing.

Just as American fighters around the world own the night with their night vision equipment, we have an asymmetrical advantage, a truly great one, in space. Our intel systems are the first to the fight, offering us global reach, understanding enemy force disposition and preparing the precision-targeting databases.

Our comm systems are extending our reach and they provide global and robust command-and-control networks. Our meteorological systems turn weather understanding into a battlefield advantage. It is amazing stuff you guys do, we all do. We should be proud of it.

There are many great things happening that were unimagined just 20 year ago. However, it is also no secret that there are a number of important space systems that have been plagued by cost growth and schedule disappointments. As you are aware, painfully, my company has not been immune from such disappointments. To that end, we recently met with a special task force that was put together by Secretary Teets and the Defense Science Board that is revealing the acquisition process for national security space.

To the task force, we made the following observations, for various reasons: approximately 80 percent, by our estimate, of our national security space portfolio is currently in transition from legacy production to new systems. If you’ve been in this business a long time, you know that history indicates that these transition phases tend to be accompanied by higher costs and schedule risks than production programs. People today are also working in an environment where they don’t have program reserves as we had if you go look back ten or 20 years ago. Today, key components of the space industrial base are operating at poor risk return levels. The problem is especially acute in the launch segment of our business. In a way, we are the victims of our own success. As satellites lived longer, there were fewer acquisition opportunities, competition increased and competition became fierce price shoot outs with competitors making optimistic and—certainly at times—unrealistic pricing assumptions.

Another observation—program budgeting at 50/50 with no program management reserves, either at the portfolio or PM level, does not recognize the realities of development. It is a recipe for program stretches, with inherent increased cost. As a result, we all expose ourselves to the current level of criticism that exists. Therefore, we applaud Secretary Teets for his initiative on revamping program budgeting to provide prudent reserves to program managers.

In conjunction with this exercise with the task force, we made four recommendations and I’ll cover them quickly. One, fund assured access to space. It might seem self serving, but, frankly, as a citizen, we put the whole national security space program at risk if we have an unhealthy business case for launch. Reduce acquisition cycle time. We endorse the Air Force initiative that General Lyles talked about to implement new acquisition directives. Improve the program budgeting process by placing it more on a "should cost" basis by raising the quality and the sharing of cost modeling data. And fund programs at a higher competence level across the space portfolio to provide adequate reserves. Finally, we recommended that we adopt a space industrial base policy and implement it so stable rules of the road exist to sustain our industry’s health.

In this vein, let me quickly share a few factoids that may affect how you think about the cost of national security space. As many of you know, we are spending about two billion to do the next generation, two billion non-recurring to do the next generation EHF system that has been very successful in the last couple generations. Some people think that is too much money. Up in Boston, my hometown, I found out that Gillette spent $1.1 billion inventing the Mach III razor. It decreased shaving time by a little bit, maybe increased quality a little bit. Last week, I was reading, if you look at the annual payroll, just for the player’s segment of major league baseball, it hit $2.5 billion a year. Ford and Chevy now spend between two and three billion to do a model switchover on a car. I believe these comparisons can be helpful sometimes in looking at value delivered in investment in space system cost.

Speaking of value, I recently had the pleasure of hearing John Jumper espouse the virtues of effects-based decisions. It is a simple, but elegant logic that I believe can be extremely helpful to our community. The approach focus is simply on the desired effect that uses means and actions to produce synergistic and cumulative effects to achieve an outcome.

Let’s apply the concept briefly to the proposed Space-Based Radar. First the name "space-based radar" implies a solution. Let’s do everything from space. But the effect we want is persistence and 24/7/365 precision targeting with the ability to find and engage the movers. When you examine the problem from an effects-based perspective, you arrive at an entirely different solution domain. For example, space certainly has its advantages—high ground with global reach and near-immediate access to the fight. But it also has its short comings. It cannot do JSTARS level targeting with the technology that we have today. Logically, an effects-based approach will drive us to develop a conops and how we want to fight that uses the best mix of assets to achieve the desired results.

Concerning Space-Based Radar, I continue to believe the country should converge towards one national radar program and that Space-Based Radar will occur when we define the right mix of ground, air-breathing, and space assets that will ensure a major improvement in our ability to find, fix, target and engage enemies in all weather, whether they be fixed or mobile. Also, when we define a Space-Based Radar that has a migration path concerning technology, that manages transition risk versus swinging for the fences on day one.

Turning briefly to transformational comm, as General Lord said better than I, it is not about more bandwidth. Our kids show that we have an insatiable appetite for bandwidth and that we can project requirements for bandwidth endlessly. TCS really has to provide the user the ability to network seamlessly within the battlespace. In reality, it is the core of network centric warfare.

Our military satcoms, as many of you in this room know, have grown up in stove pipes. Stove pipes either by application, by frequency band, or by operation centers. With TCS, the paradigm should shift from stove pipes to information and knowledge delivery. Accomplishing this synthesis into an integrated communications architecture is a tough job. But it will sustain well into the future the overmatch situation our warfighters now enjoy in all components of the battlespace. The people in this room have the knowledge and the ability to make that paradigm shift.

By now, I’ve used my time and you’ve received enough output from me today. Let me bring my remarks to an end. I do appreciate your commitment to keeping America strong and pre-eminent in space. I thank you for the time and look forward to the question period.

Dr. Ronald Sugar: I have to follow Al, but I am the only thing standing between you and George. . . I appreciate the opportunity to address this group of people, this community of interests in air and space. I’d like to offer some observations today from the perspective of an industry person, on the state of national security space programs. As was not mentioned in my brief bio, I actually started my career as a boy engineer in the space business down the street at Aerospace Corporation. When I started, SMC was called SAMSO, for those of you who can remember it. Somebody does remember it? Must be an old consultant or something. The number one hit song was "Hey Jude" by the Beatles. It was an exciting time.

On a more serious note, there is enormous challenge in creating future space systems for our country and getting it right for the nation has never been more important than it is today. Let me share a few observations from the benefit of some perspective and then offer a couple of recommendations and I would say right at the outset, I don’t have miracle answers or cures and much of what I am going to tell you may not be brilliant or new, but it is sort of the way I view the world.

If you take a look at the record we’ve accomplished as an industry, as a fighting force and as a nation, national security space programs are critical and irreplaceable. One cannot think of going to war without them. We get them in orbit, despite the travails and the problems. Most often they are highly successful. They last longer than they were planned to last. They do what they were intended and they often do more. One example I think of, it is a little bit of a dated example, but during the Gulf War, the DSP satellite was intended for a certain mission and we all know that it also performed an interesting new mission, which was identifying, tracking and warning of SCUD launches. It was not designed for that. I don’t think the inventors conceived that it would be used quite in that fashion, although it was clearly a good extension of its capability.

Over the last five to ten years, getting these systems built has become even harder. The process of getting them built is incredibly complex and frankly is getting more so. Because these are in fact very complex systems. There is the usual litany of problems and technical difficulties, cost-overruns, schedule slips inherent in almost any ambitious space program, indeed, any ambitious national defense program. That is the nature of the game and if we didn’t take on these challenges, this nation would not be pre-eminent in war.

The easiest systems to field are those which represent direct evolutionary extensions from currently operating programs. The reason for that is that the concept of operations for the basic system is understood. The folks operating it in uniform understand how they want to use it. They are learning as they use it. And the folks who build it are there and there is a continuity of brainpower and manpower associated with keeping these things going. Unfortunately, we can’t progress into the future by simply and always extending existing systems. At some time you have to take new systems and go through new developments.

Major new starts are a lot harder and I can think of a couple new examples. MOSTAR, which is something I was personally involved in as the chief engineer of the payload, way back in the old days. I worked with Al and a few other folks in this room on that many years ago. It was a really hard program, for those of you who weren’t around. Certainly, in current times, programs such as FIA, SBIRS High and a handful of others, we all know the names, they are all ambitious programs. But new starts or new major block changes are significant challenges.

Several forces have been at work during the last ten years or so that have been working against us. Certainly with the drawdown in military spending and the dis-investment in national security systems, impact from costs or apparent costs on programs has been very important in contract selections. Now, it has always been important, but contract selections seem to have been driven more than ever by lowest cost or lowest—I would say—apparent cost. And, also at the same time, the experienced cadre of both government program managers and industry folks dramatically thinned. The government often delegated its oversight role to contractors through TSPR and other mechanisms on very complex development programs and that is a difficult situation. I think the general consensus now is that works well for sustainment, not as well as for development, as was mentioned earlier. It is a little bit like delivering lettuce by rabbit. It is hard to do. As a contractor, when I was first proposed the idea of doing a TSPR job, I said "goodie, we’ll get it right." But the fact is, it is very important that there be very strong government participation, oversight and control with a strong contractor participation.

With lowest cost as the dominant factor, we’ve had to do a lot of corner cutting. Often the contractor faced the grim alternatives that Al mentioned, either hopelessness and despair, which means he won the program when he bid it, or extinction, which means he didn’t win the program when he bid it. When you are operating a major enterprise for the benefit of share holders and employees in your communities, you are faced with some tough choices in that regard. While nobody wants to low-bid a job and nobody wants to take excessive risk in a job, our competitive system, which requires us to sharpen our pencils constructively also during periods of extreme excess, causes us as an industry to do things that we are not comfortable with and frankly that we and the nation pay for over a period of many years following.

The low bid is what I sometimes call the original sin. Often on a tough new program, the contractor and the government never quite recover from it because we got the wrong baseline going in and we are always working to our disadvantage in trying to recover from that. Sometimes corners are cut, thermo-vac testing is not done, and management reserve is not available or we may pretend we have management reserve when we really don’t. Contractors forced to perform 50/50 estimates or other such devices. I’ve been in this business a long time. I’ve got to tell you, I’ve never seen a 50/50 estimate that ever worked out. Maybe there have been examples where it has, but when I hear 50/50, my ears go up. Now, faster, better, cheaper was a concept which developed in many quarters because the fact is we do need to find ways to do things faster, better and cheaper. But often we are able to pick only one or two of those three and not get all three right.

Another factor which we’ve had to deal with is the fact that the requirements process can get out of control. We all know this. There are many players in the game here, all with legitimate interests in the new system, particularly for space systems, where you don’t get to start these things every year, but there is a major start, it takes many years to get a program formulated, it takes many more to gestate and then it lasts for decades on orbit. It is very difficult for acquisition executives and, frankly, contractors to say no to warfighters who have legitimate reasons to want to put requirements into systems. That is what we are here for. We are here to make sure that we get those things done right. So we have a myriad of requirements, both the KPPs which sometimes number in the 20s and 30s and 40s and that is maybe a little too many KPPs for a system. Or the many little "r’s" which can get us the devil in the details, the little requirements. Requirements are not frozen, often by PDR or sometimes not by CDR. I know of an example of a program that was in thermo-vac test and new requirements were coming in. In this case, we really can’t do a whole lot at that point in time.

Also, over the last five to 10 years, as a result of the general draw-down, the number of experienced military and civilian program managers and system engineers has been dramatically reduced in industry and on the government’s side. Program managers and system engineers in my company are the highest leverage folks we have. We have a lot of great folks who do all sorts of things, but that is a challenging set of skills to get. I believe it is exactly the same situation on the government side.

In industry, a program manager is a high-stress, high-risk, high-reward job and those who are successful often go on to general management, become vice president, some run companies. Unlike industry, in the government that is not always a clear path. It is in some cases, but not always. The risks are certainly every bit as severe. The rewards are not as obvious. We have great folks, both on the military and civilian side, doing program management work. We just need more of them.

Congressional funding, finally, is a serious issue that we all deal with and we can basically blame Congress, but of course Congress funds us because that is the money of the people of the United States. But again there are many players in the loop, a funny instability saps the energies of top government and industry players, under-bid and under-funded programs are particularly vulnerable because of Nunn-McCurdy. When you are fearing cancellation, which is again "do I want to be hopeless and despairing or do I want to be extinct?" it creates enormous stress on the system.

There are a lot of issues there and I perhaps haven’t told you anything you don’t know. There are many other perspectives one could offer. Let me offer a few thoughts on what we might all do here to make this better going forward.

I think first if we can do something to work on getting a requirements process under control, it has enormous leverage on any new system we are going to put together. It often requires a very strong individual to emerge in the cloud of battle, a requirements czar, somebody in acquisition chain at some level, maybe it is the program manager, maybe it is someone higher, who can sort out the KPPs from the myriad of little "r’s" and decide what is and is not right and personally take some risk, frankly, and deal with the system and try to get this thing done so we can get a system done with some stability. It is very much in the government’s and contractor’s interest to stabilize requirements as early in the program as possible and then handle the variations later as spirals. It is a highly disciplined process.

Yesterday I sat in a meeting chaired by Secretary Aldridge with international partners for the Joint Strike Fighter. A lot of discussion was around the issue of requirements and requirements discipline. I will give you a quote here from assistant secretary of the Navy John Young. He said this recently at an MDI meeting, "I believe I have a solid mandate from Secretary Gordon England and from Pete Aldridge to reject requirements or push those requirements into later development blocks and phases of the program in an effort to maintain schedule, control the costs and deliver the program as advertised." That has to do with a Navy/Air Force/Marine Corps fighter plane with international partners. I think it is true of any ship, plane, aircraft, spaceship that we ever built.

Source selection, secondly. With a healthy skepticism on the part of the selectors regarding the cost. We really need to estimate the true cost of execution, somehow build management reserve into the program manager’s budget at the beginning. This requires experienced, savvy, a willingness to take some personal risk and, frankly, nobody wants to make the program look like it is going to cost too much because it won’t get funded.

Third, I think it is important to continuously strengthen the government program office’s authority and capability and I think there, if we can establish additional incentives to attract and retain folks in program management on the government side in system engineering, that will be very helpful, certainly as industry partners as we work with our government counterparts.

Fourth, if we can implement contractor incentives to reveal and fix problems early. There is a tendency to delay the airing of critical problems and it does lead to later issues, often disasters. I don’t have a magic answer here. But the fact is we all know that a problem identified early and addressed early is painful, but if we let it fester, it becomes very serious.

Finally, I think we need to insist on a partnership and strength on both sides of the government and industry partnership in the program. Candid feedback, two ways, very important. I kind of view a duality of roles between the government program manager and his partner in industry. The government program manager, if he can do it, and this is a wish list, would manage all the aspects of the U.S. government in terms of requirements and funding to create a stable set of boundary conditions within which a program can be operated. The contractor’s job is, within that boundary condition, to develop and deliver the resources of his company and the industry team to meet the commitments that his company signed up to. It is a double-edged sword. Both sides have to do it right. It is easier said than done, but that is what I think would help.

In all of this, let me just finally say—I’d be remiss if we in industry were not doing as well as we should be doing—we do need to do a better job in industry. We need to execute better. We need to deliver what we commit to. Our national security space programs are not broken entirely. They are not. The space system glass is not half empty. It is more than half full. Industry and government partnership can fill this glass up all the way to the top. That concludes my remarks.

George Muellner: Thank you for this opportunity. Al did point out to me that I stand between you and lunch and that I needed to push it up and so I do understand those terms. [Laughter]

I would really like to start out by thanking the AFA and Brian and his team for hosting this event. I have had the opportunity to attend this for a number of years. It has been increasing in significance and size every year. I think that reflects several things. One is that it a class act put on the Schriever Chapter and by SMC. The second is the increasing significance of these issues to the U.S. warfighter. And then the third is the increasing significance that space plays in what the Air Force brings to that joint warfighting table. I commend you all for this forum.

In talking about shaping the future, I’d like to touch on really three issues. The first is one that both previous (industry) speakers have addressed and that is the space acquisition system. Is it broken? I don’t think it is, either, although it does have some bends in it that we need to straighten out. Having been on the acquisition side in the government and having looked across the broad portfolio to include space, I see a lot of the same problems evident in the space side that we have in other areas, but in some cases, if you look at it from a risk mitigation standpoint, the out come is much more serious in space. In many situations we end up with a one or a zero event and that is a significant issue we have to deal with.

Since I’ve moved into industry, I’ve found that some of the areas on the space side that are just not as mature are the areas of risk management and really understanding how to mitigate risk to provide for that mitigation. As Ron pointed out, I’ve seen very few 50/50 programs make it in the aviation side, either. That is something we need to move beyond and really provide a lot of focus in this area of risk management and risk mitigation.

I think another key part of it is what Brian touched on and that is the area of systems engineering. We do not have the number of experienced systems engineers and program managers that we would all be comfortable with. We find ourselves actually having to move people off of programs, on to new programs, a lot sooner than we would like in many cases, because they are carrying most of the experience and we need to broaden that capability. I think we all have—and many in conjunction with the Air Force, as Brian talked about—initiated programs to try to include and improve that talent base. But we’ve got a lot of work to do there.

Requirements creep. As one who grew up in the requirements world in the Air Force, I now look back and recognize that we really led this creeping function. We had an inordinate list of requirements that, oh by-the-way, grew over time. Clearly that is the nemesis of a good stable program and supporting good stable funding.

On the industry side, what I have found is that there is almost total resistence to push back on our customer when they come in and ask for something. In fact, there is even resistence to tell that customer what that might cost. I’d offer to you that the program run just described, JSF—the success we had early on that program is because we made sure that when the customer wanted another 300 miles of range, they were told what that was going to cost and how it would impact the program and magically they found out that a TSAM could kill that one percent of the target set. We in industry really need to be part of this process by providing that push back. In the case of SBIRS, it was mentioned. Having been part of the initial SWARF process there, I remember the very first SWARF meeting we had upwards of 350 hard requirements that had to be met. Obviously, none of those were affordable.

The last thing on the acquisition side is the comment that was made relative to TSPR and I would broaden that into the acquisition reform arena. I think acquisition reform was certainly necessary. It remains a necessary element that we need to pursue in the future. But nowhere in there can the government abandon its role in the process. I think that is a key thing that happened along the way here. The government side just really tried to walk away. And in some cases, it decimated the very work force that was capable of providing that off-site and in some cases adult supervision that was necessary.

Let me talk about two other challenges very quickly. We have all heard John Jumper very eloquently describe horizontal integration as a key task for the future, to really be able to exploit all of the capabilities the Air Force can bring to the table. I would offer to you that this community, represented in this room, has probably been one of the best at building stove pipe systems. I would offer to you that we in industry have gotten very good at satisfying—I think John’s word—"tribal requests" from our customers. To some extent, we really continue to want to do that. I need to challenge all of us that we need to move away from that. We need to exploit the advantages that information technologies give us to produce much more interoperable systems. We really need to make our systems network compatible from the beginning. We need to make sure that is part of an acquisition process that in many cases creates these tribal boundaries, because that is the way we acquire a lot of these systems.

In today’s very dynamic, unstable world out there, we are probably not going to have six months to wire together our warfighting solution as we did in the Gulf the first time in Desert Storm. I remember an early night—in fact it was the night before the air war started in Desert Storm—of having to send some folks down to the Riyadh Radio Shack to get some plugs so we could take a ten cap system that we had brought along with us and get it to actually play with the rest of the systems. It seems that the system it was designed to interconnect with had a male plug as did this ten cap system. Thank God for Radio Shack saving our bacon that night, but we can’t operate that way in the future and clearly our warfighters demand a lot more of us.

I think the challenge is as Al pointed out in the transformational comm area. We really need to stay the course and make sure that does indeed transform the way we develop and acquire systems.

A second area of challenge that remains, from the technical standpoint, is the need for not only assured access to space, but also a responsive access to space. Clearly, as pointed out on the industry side, we have some things to do to make sure our mission assurance is what it should be to meet the manifests that we promise and commit to. Beyond that, though, it is hard for me imagine that we are really going to be able to exploit the asymmetric advantages that this nation has in the space arena when we have to manifest things years or month—at least—ahead of time. I don’t think the unstable environment that we are facing is going to give us that much lead-time or that our predictive battle space awareness is that good. We’ve got to move to a more responsive launch capability. Brian talked about some of the CONOPS changes that I think are being done to help us in this area. But we also need to start looking at some other technology solutions down-stream to where we really can provide a much more responsive capability to exploit what space can provide.

I don’t think we are ever going to get to that five minute alert status, although there are some that have solutions in that area. But we really have to improve over what we have got right now, which is neither assured in many cases nor responsive enough to the warfighter.

I would just like to wrap up with one summary comment and that is it is interesting to me now, being on the industry side, to see the complexity of delivering on some of the space capabilities that this nation needs. In order for us to do that, it is really going to take a very close teaming process between industry and government players in order to make sure that we give our warfighters what they need for the future. Thank you for this opportunity and we look forward to your questions.

Q: Thank you very much, panel. The next to last point you made, Mr. Muellner, we have a question that focuses on that. In the light of NASA’s recent revisions to their space launch initiative, what do you see as the evolutionary future in reusable boosters for both vertical and/or horizontal launch?

George Muellner: I really think there are opportunities for us in the future and especially on the reusable side—there are technologies that are maturing. But I can tell you what I don’t see is a process of industry and the government working together. In fact, I don’t even see the government working together. The space launch initiatives out of NASA has been very wide in the net it has cast out. Ron Sagen, the DDR&E activities with the national aerospace initiative, are focusing on some of these activities. I think, if we are really going to make progress in moving to a reusable launch capability, a more responsive launch capability, we all need to get together in the same room and move forward to make sure that Paul Nielson and those of us in industry that invest in technologies are maturing the right technologies and that we are pulling these together into operational concepts that are significant to the warfighter. One of the real challenges now is there are a lot of efforts to start up concepts in this area, but to me it almost looks like we are resurrecting NASP after about three years of struggling with the concept. We are going to find out that the long-pole technologies are still not mature enough to go forward. We’ve got some leg work to do first.

Q: Following along on that, in our acquisition process, the definition requirements process is often difficult and not crystal clear. Do you see a process that would get around the exclusion of having contractors involved in the definition process or the requirements process? Evidently there is a rule on the contractors in the requirements process, not being part of the requirements process. Do you see a way that we would be able to be more successful if we had our contractors involved in the requirements part of it?

Dr. Ronald Sugar: I am not sure what rule is he is referring to. Each service may do it slightly differently, but it seems to me the most successful systems will be those where thoughtful and informed decisions by the specifiers will be made knowing the consequences of what they are specifying. The biggest challenge we have as an industry team is to make sure we give you quick linkage and feedback on the "what if?" questions. If we can do that, then you can make the growth-sizing decisions, take the program forward to the Secretary or whomever, and say, "this is the program and this is about how big it is going to be to build it" and we can actually live by it.

Lieutenant General Arnold: I don’t believe there is any exclusion there. In fact, some of the most successful requirements documents have been well fleshed out with our industry partners, getting those back in draft form, seeing sets of solutions that are doable and affordable, and working our way through that. I think we need to encourage industry participation versus excluding them.

Q: With the challenging market we have in the space business—commercial space and launch services as well as military—do you see any potential for more joint ventures in this area?

Albert Smith: In the launch market, I think as we have talked about, we have seen the commercial market crater. We all remember the days of Iridium and Global Star and Teledesic when we were going to litter the sky with satellites. That market clearly has dissipated. There are some people that are optimistic with some of the applications that a portion of that may come back. I can tell you in all the forecasts that we’ve put together, and I think Boeing sees it the same way, is we don’t see a positive vector in the next five years. I will tell you that the products that we are building that Boeing is building afford a significant improvement in reliability and cost over our legacy systems and we have to stabilize those.

I’d like to make two quick points on reusables. The dialogue that has been started by Secretary Teets and Sean O’Keefe in the NASA/DoD interface is a very good one. If you look at the cost of what it took us to do the shuttle or the cost we have in expendables today, the constrained budgets are going to make reusables a difficult task. And it is going to take a lot of good cooperation and good focused budget planning if we are ever going to see reusable technology in our professional lifetimes.

Q: This is an omnibus question. In your view, what do you consider to be the most critical set that industry and government can take now to help shape our space activities better for the future?

Lieutenant General Arnold: If you were to link all the top ten, I usually have 16 in my top ten, the number one is assured access. We can’t do our business if we can’t get the satellite on orbit and, like I mentioned in my remarks, we are at a critical juncture flying out our current systems and bringing on two new EELV systems. If we don’t have sufficient assured access funding, we are going to sit here five years from now and wonder why we can’t get satellites on orbit. That is the most important thing in my view.

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