A Conversation with Ashton B. Carter

LYNN DAVIS: Let me extend my welcome to all of you. Given the focus and the public debate on Iran and Afghanistan, I think it's a real credit to you, Ashton, that you've drawn so many people to a discussion of the Obama administration's assessment of defense resources and priorities.

You've spent your career seeking to solve major policy issues, largely with a focus on weapons of mass destruction, but not entirely, the nuclearization in countries of the former Soviet Union, counterterrorism, missile defense, individual preparedness for nuclear attacks, doing this both inside the government and outside the government.

But now as a physicist, trained to think about those kinds of issues, you're taking on the challenges of acquisition, technology and logistics as undersecretary of Defense, a really big job. So we're really glad to have you today.

And I'm really privileged to be your moderator and to structure our discussion in the first 30 minutes, focusing on acquisition, technology and logistics and then in the second half of the meeting opening it up to your questions and your discussion with Ash.

Right now, I'd like to note that the discussion this evening is going to be on the record. And I've been asked to ask you all to turn off your cell phones, your BlackBerrys, any wireless whatevers, and that's so that the sound systems isn't interfered with in terms of our discussion.

So on acquisition, the first part of your title, Secretary Gates in the spring laid out a plan for the administration's budget, looked across the various services and put together a strategy of acquisition in which he decided to go ahead with certain programs, decided to stop certain programs. And now with decisions to put out the RFP on the tanker, I'm kind of wondering whether or not your job is basically just to implement the program. (Laughter.)

ASHTON B. CARTER: Oh, no, on the contrary. It keeps the pressure on.

DAVIS: Whether there are any critical issues that you might see looming on your horizon. So take it from there.

CARTER: Secretary Gates is a demanding boss. And I'm not going to have any trouble being kept busy. I know and I hope when we get to logistics I'll have a chance to speak to that part of the responsibility which, for those of you who know, AT&L over the years, as I have back when it was DDR&E and then all the way up to AT&L now, the logistics piece and the piece that is associated with the conduct of two wars is now much larger for me than it was for any of my predecessors. And I know or I hope we'll get to that later.

But I think you're really talking about the sort of normal, major part of what has historically been this job, which is the acquisition programs.

And two things about is it over now -- three things actually. The first is that I think Secretary Gates is convinced that there's more to do, that changing the way we do business is not something you just do in the spring of one year and then continue on. So he would like to see us do more, and we are doing more. And I'll come to those things in a few moments.

The second is he's not the only one in town who feels that way. The president has taken an interest in my area, which is good news if you're an undersecretary. And both houses of Congress unanimously, both parties, both houses, in the acquisition reform legislation passed earlier this year. A lot of people in my world take that as an indictment. Okay, maybe part of it is. I look at it the other way around. It's an opportunity.

So there are a lot of people who have expectations that we will do things better. We can do things better. That starts with the president and includes the secretary of Defense. So I'm certainly not let off the hook.

Secondly, a number of the decisions that the secretary took in the spring were of the nature of, let's take another look at and restart something. Let me give you an example which you know quite a bit about, which is future combat systems.

Future combat systems, I canceled, but I didn't cancel Army modernization. The Army still needs to have a future and be modernized. And so I'm in the process now, with the Army, of taking the pieces of what was FCS and managing them differently. There was the manned ground vehicle portion. There is a network and the associated comms. There are various pieces, like the unmanned ground sensors and unmanned aerial sensors and other bits and pieces I guess you'd call them.

Then there's the process by which the brigade combat teams are spun out into the Army.

All of that was managed under one roof, under FCS. For a variety of reasons, the secretary rightly concluded that wasn't the right managerial scheme, and I'm putting together an alternative managerial scheme. That feels like work. That doesn't feel like FCS went away.

Let me give you another example -- TSAT. He canceled the TSAT program, but we still need --

DAVIS: For those that don't know your acronym --

CARTER: Transformational satellite program. But we still need satellite communications, so in the area of wideband comms, in the area of protected comms, we need a follow-on activity of some kind that fills that void.

Presidential helo VH-71, I terminated the VH-71. Now, that's several months ago. But the president does need a helicopter, a new helicopter and a new process now of trying to ascertain which of the many needs that the White House has for short-haul transport can be met with a helicopter of a kind that we can actually build.

The problem with the VH-71 was a lot of people think that requirements creep is our principal acquisition problem. We actually have made every mistake you can imagine, and by no means are our mistakes confined to acquisition creep. And if you want an illustration of that, think of the VA-71 which wasn't an example of requirements creep at all. It was an example of the stubborn persistence in pursuing a set of requirements long after it became obvious that they couldn't be met by any realistic helicopter, certainly no easy derivative of a helicopter already in use.

DAVIS: So what about the follow-on bomber?

CARTER: Can I add one other thing? I know I went on a long time, but there's one other ingredient, which is the budget. The budget climate's changing. We think that we require more real growth in order to fund the defense budget. But I'm also realistic and recognize that we're not going to enjoy the double-digit year-on-year growth that immediately followed 9/11.

And so one needs to manage in that context. And there are people who have now managed for six, seven, eight years in that environment. And I would love to have that environment, but I don't expect to have it. And so one needs to manage to context, and that's another reason why I'm not going to be --

DAVIS: You still have a job. You still have a job. Well, how about the follow-on bomber? Not to go forward, by the secretary's words, until you understood the need.

CARTER: Right. And we're working through the need for a bomber which is a form of long-range strike. It is also along a form of long-range reconnaissance, and it relies upon long-range reconnaissance and, in turn, is a form of long-range reconnaissance.

There are other things that do reconnaissance. There are other things that do long-range strike. And so one needs to look at the whole menu of possibilities and the process of doing that and, at the same time, tending to the technology base that underlay the now-canceled program, with an eye to making sure that we have an adequate industrial and technology foundation to go forward in whatever direction we decide to go forward in.

DAVIS: Well, you mentioned the fact that the defense budget probably isn't going to grow as it's grown in these past years. And I think that's probably clear to most everyone here in the audience. I'm just wondering, I was sort of intrigued by the second part of the title of our discussion, which is a shifting relationship with Capitol Hill and the business community, something that I know you've been talking about. And a lot of those folks are actually here.

I'm just wondering whether that term of art is really sort of code for managing the downturn.

CARTER: Not in my mind. I have said many times, and I really believe in my friends from industry, some of whom are here, know that I really do believe in the partnership between government, the Department of Defense and the defense industry.

The reality is that we don't, in the government, build the weapons systems upon which our security depends. We contract for them with the private sector, and that creates a situation of partnership. And I feel more comfortable taking things on directly. I encourage my friends from industry to call me up. They do when they have a problem -- hey, we don't understand why we're suffering under this regulation or that regulation, why you did this or that.

We may agree to disagree, but I want to have that conversation. And I call them up when I need help, need advice, when I see something that's not working right, and I say, you really need to look into this, because I'm concerned about the health of this or that program.

So I think that the relationship needs to be an open and frank one. And for some reason that I have, I haven't really done the forensics on, the department got more and more constricted over the years in terms of the relation between its senior executives and the senior executives of industry.

I went to the "last supper" with Bill Perry and John Deutsche in 1993.

DAVIS: You have to be pretty old to remember that.

CARTER: The "last supper" which was -- well, Norm Augustine, I saw on the list. I don't know if Norm's here, but Norm was famously at that dinner, much more famously than I was. And that was an example of the senior Defense Department leadership sitting down with the senior leadership from industry and saying, what do you see, what do I see, and trying to come to some common view.

And I think that that's a good thing to do.

DAVIS: Are you going to hold another one?

CARTER: (Laughs.) We are. You know, how many times can you bill something that's the "last supper?"

No, but in all seriousness, at that time it was becoming clear that -- well, at that time, in every era there are industrial-structure consequences to the decisions the department takes. And we'd be fools not to be attentive to them. So I think that's definitely one of the subjects that is on the table for us and the industry.

DAVIS: So I want to shift to technology, the second part of your responsibilities, and look back a bit about that far, maybe even a little bit farther, to a time in which Harold Brown and Bill Perry were in the Defense Department. And as you know, their focus at that time was on stealth and on precision guidance. And now we're many, many years since then.

And I'm wondering sort of, as you look out into the technology into the future and the very different environment of the kinds of wars that we're fighting, all the way from irregular warfare to potentially cyber warfare, how you see sort of technology in that context? So I'd open it up to how you're thinking about technology.

CARTER: Harold had a great line when he used to say -- he was a physicist also, maybe even Harold is in here, I don't know -- that's a really good theory, it just doesn't fit the facts. (Laughs.) Standard Harold Brown line, and he had a very good way of winnowing out what was fact and fiction technology. It's not an area I have problem with, because that's sort of where I come from.

And a couple of things I'd say about that. I share the concern that probably any of you, who is technologically oriented, would ever field defense outside of Defense, that I know the president feels, and I think all the senior leadership in the government now, and for all I know in the previous administration as well, for the competitive edge and the technological bedrock upon which the prosperity and security of the country rests, that's a big issue.

It is our comparative advantage in warfare as Americans. I mean, next to our people, which are the principal source of excellence in military affairs in the United States is the quality of the people that we are able to get, next to that, our comparative advantage in technology. And this isn't a birthright. It's something that you, in today's world, have to earn. And so I and the DDR&E now, who has the job that Harold had once a long time ago, Zach Lemnios, who's an incredibly talented individual, I am really looking to that organization to be a lot stronger than it once was.

Industry also has a problem. And those of you industry know, attracting engineers, keeping them, that's afflicting some of our fields differentially. I would say space is one that is particularly finding it hard to attract younger talent to come in and go through the many programs that it takes to become an artist in this area of spacecraft design where there are lots of tricks of the trade.

And so we see that in field after field after field. And it's an erosion that's worrying to me. And we have a number of things going to address that. But it's not going to be done by the Defense Department, because the days are gone when the technology needed by Defense can be -- long gone -- can be found within our walls or can be found within the borders of this country.

DAVIS: Okay. So now I'm going to turn to logistics. And you said you wanted to talk about logistics. I call it an arcane subject of support and management in times of war; arcane, though, only to those who are not fighting or to the families of those fighting. So I've been really struck by the importance that Secretary Gates has placed on that and the lessons that he's starting to learn about all of that. So if you could elaborate a bit on that.

CARTER: Yeah. No, I really welcome the chance to do that. On January 5th is when Bob Gates offered me this job. And he said, as he's said publicly many times, the troops are at war and the building is not. And then he'd say, especially AT&L. And he had the experience during the first 18 months or so that he was in office that nothing was done in support of the wars by the enterprise, corporately, that he himself didn't push on personally.

And so his job talk was so that he wanted to sort of push on me, and what an alternative to pushing to directly. (Laughs.) So I take that very seriously. And it ends up having -- there are kind of three pieces to what that means.

The first is in the logistics area, is the retrograde from Iraq, which you all take for granted, and you should, because you assume that it's being taken care of. But it's one whale of a lot of stuff. And this is on a time schedule certain that's been established by the president. It's not like after Desert Storm when we could get out, you know, as and when we wanted to. And it's in a climate or an environment where our access isn't unchallenged.

And in order to take everything out of Iraq, you have to figure out where it goes. So does it go to reset the Army? Does it go to the Guard? Does it go to the Reserve? Does it go to Kuwait and await a future contingency? Does it swing to Afghanistan? Do we want it at all? Is it worth fixing? Is it worth taking home? Do we want to give it to the Iraqis, et cetera, et cetera, et cetera?

And that's hard for a Humvee, it's hard for an MRAP, it's hard for all the so-called white equipment. That's the stuff like air conditioners that we've bought that everybody seems to want one of. And so it's more challenging than you might think, and yet it's a national objective to do that. And it's not a piece of cake.

Getting into Afghanistan, very, very, challenging. You know, spin the globe and say, what's the last place on earth you'd like to be trying to support a war effort? And you'd have to pick, next to Antarctica, Afghanistan, fed by these very narrow arteries. And everything I work on -- I'll get to this in a moment, you know -- MRAPs, ISR, trying to introduce all this stuff, because we can't get effective until we get set. And we can't get set until we get the logistics base in there so that we can introduce things.

Everything is a for-want-of-a-nail story, you know, the for-want-of-a-nail story. Everything is like that. You want to ship MRAPs in there? Well, you can't, because you can fly them in there, but there they sit until you have an apron where you can mount on the gun turret and so forth. Well, why don't you have an apron? Because you don't have the concrete. Why don't you have the concrete? Because there is no concrete in Afghanistan, you have to go to Pakistan to get the concrete.

Well, I live in that world of going to Pakistan to get concrete to build the apron so that I can unpack the MRAP. And then you need to get the troops out of the field and back and trained on the MRAP so that they can go out. And the MRAPs not a -- I mean, MRAPs save lives. I've talked to many, many, tens of soldiers now, who are with us, who wouldn't be with us without the MRAP. Any of you who has been to the theater or talked to people know that these are lifesaving vehicles. So logistics is a big deal.

A second thing that's going on, and it surrounds the war, is the contractors on the battlefield, which also fall to me. And as you know, we have as many of them as we have troops, and necessarily so. And that is also part of our way of conducting military operations, and unavoidably so.

And I don't think any of us is happy with the way that contingency contracting has been done since the wars started. It was new to the department. That was the exigency of war that causes you to act quickly. And I think it's fair to say that the country didn't admit to itself how long it was going to be in Iraq. So for all those reasons, as we look back over how we did contracting, certainly as I look back, I'm not comfortable that the taxpayer has at all times been well-served.

And so we are going down the list of mistakes we've made and trying not to make them in Afghanistan, the mistakes we've made in Iraq. And that's an important thing to do. There are many commissions looking into this of very able people. And we're working off the same list that they are and welcome their help.

And the only point I'd make is that there is a balancing that needs to be done between sort of controls and effectiveness. And I work that balance every day. As somebody comes on the net in Afghanistan, they're looking for such and such, there's a regulation that stops them from spending money in that way, and you have to ask yourself whether you're prepared to waive that in some circumstance or another.

We're trying to get out of the cash business in Afghanistan and not use cash as much as we used it in Iraq so we don't put ourselves at risk. We're still terribly short of contracting officers and contracting officer representatives in Afghanistan, a very small number of people disbursing lots of money. And it's important to get in there and get set as fast as we can.

And then the last piece -- and then I'll shut up; obviously, this is something that animates me, because it animates my boss, and it should -- is the rapid acquisition -- MRAPs, ISR, FOB protection, forward operating base protection. As you read in a newspaper over the weekend, helo -- helicopter survivability, all of these things where you try to ask yourself, what might be -- how to say this -- the IED-like problem coming in the next round? And that is something that is a tactic that has strategic importance, and I would like us to be out in front of that and anticipating that.

And so all of this stuff that has to do with the fact that the wars in Iraq and Afghanistan is -- in 15 (years ?) of being programmed, the helicopters, the tankers and so forth. And this will all be over by the time they enter the inventory, one hopes. So it's a different time scale.

DAVIS: Okay. Now, it's time to take questions from the floor. Those of you who would like to ask a question, the mike is going to come around so that others can hear your question. If you would give us your name and your affiliation when you ask a question, that would be terrific.

Here, right in the front.

Q John Scott (sp) -- (affiliation inaudible). Software is the only resource that is a renewable resource for the military. Have you been looking into any plans of how you re-look at the intellectual property regime around policies and procedures, and how the DOD and military treat the intellectual property that's created on taxpayer dollars?

DAVIS: Did everybody hear the question okay?

CARTER: I didn't hear the -- I didn't -- you have to speak slowly and the very first word which was the subject of your sentence.

QUESTIONER: Sorry, I'm getting a cold -- getting over a cold. So software is the only renewable resource --

CARTER: Software.

QUESTIONER: Software is the only renewable resource for the military. Version two is made up of pieces of version one. Have you looked at the -- traditionally, DOD has not done a good job of managing the amount of money that we put into systems. It's not just military. It's Census, it's FBI. Have you looked into like re-looking at like intellectual property regime around software?

CARTER: Yeah, I --

DAVIS: Did you get us that time? Okay, great. Go ahead.

CARTER: A couple of things. This is about IT programs like -- (inaudible) -- writ large, which is an area of concern to me. It's an area I know something about, where we are still struggling to create an acquisition approach to IT that takes into account the differences between IT and a weapons system.

And it's easier to say than it is to do. But the tricks to IT, any of you who do that, is that, you know, it's a very fast-moving thing. So you really have to think in terms of spirals rather than some program of record that will play out over a decade or so. Obvious point, harder to do than to say.

And second, IT tends to get into people's sort of trousers, I guess you'd say, in the sense that they start asking themselves why they're doing what they're doing and why they're doing it the way they're doing it, when the software that accomplishes their mission is on the table.

And so you have on top of the fact that you're trying to deal with a rapidly moving area of technology that we don't do very well, you're frequently dealing with an organization that is in the process of some sort of identity crisis because of this.

And so I see many -- the FBI's electronic case file is probably the most fabulous example or storied example of this. I have the electronic health records of the Defense Department and the V.A. now, just to give you an example.

DAVIS: You have?

CARTER: Yeah. And it's a real headache, because the people who understand health are really expert at health. It's not a criticism of them that they're not an expert in IT. And so for all these reasons as a management matter, IT systems raise particular challenges. You're absolutely right.

DAVIS: Okay, a question right here in the front -- a mike to your left.

QUESTIONER: Hi, Ash. Ruth Wedgwood from, lately, of the Defense Policy Board and Johns Hopkins. Just a question, and this may be outside of your own job description, but it certainly affects you, of the reliable replacement warhead versus what I'll call the reliable rebuilt warhead. If the president hopes to get down to 500 nuclear weapons or 700 nuclear weapons, and he can't do testing when we ratify the CTPT, and these things are older than my 15-year-old Acura which doesn't run anymore. Comfort me.

CARTER: Well, it's a good question. And there is a nuclear posture review going on, and there are arms control discussions going on, all of which I sit downstream of on the program side, and with my DOE counterparts and the Nuclear Weapons Council try to create for the president, as he makes these decisions, the, you know, programmatic sense what the alternatives are, amongst which he can pick.

And I'd just like to make a sort of general point about that, which is that -- and Secretary Gates has spoken about this quite a bit, and I am following his lead. And President Obama in his Prague speech said the same thing. Which is, we kind of have a two-pronged approach to nuclear security. There's the nonproliferation and arms control side of it, and then there is the investment side of it, which is partly in the deterrent, but then another investments that underpin our nuclear security, be they counterterrorism things, threat reduction and so forth.

That's my prong, that investment portfolio. And I'm paying quite a bit of attention to it. And it's the warheads and the deterrent and the delivery systems and the command and control. And whatever the president decides about how much he wants and whatever he wants, I have to have a program to deliver that. And the country has been locked in immobility in the nuclear area now for quite a long time, and that shows in the program sense, not a lot of high-level attention. Certainly in the Department of Energy, I think it's fair to say, not the resources that are necessary to carry out their side of the mission.

You see that in selected areas in the Defense Department as well, things that we're going to have to take a look at and decide how to sustain them into the future.

So we are, I think appropriately now, it just happens these activities are getting a kind of attention they haven't really gotten in a long time, because nuclear weapons aren't the answer to anything in Iraq of Afghanistan or to al Qaeda. So over the last 10, 15 years, the country just hasn't paid a lot of attention to nuclear weapons. And I'm not saying we have to pay a whole lot of attention. We have to pay enough that we're doing a responsible job of stewardship of the programs. And we've got some work to do there.

DAVIS: A question over here, right here.

QUESTIONER: Nigel Sun (ph) from Raytheon International. My question is on export controls, sir. The president made an announcement, I think it was in early August, about export control reform. We know the NSC has been pushing out on this, especially addressing the directives under the Bush administration with commodity jurisdictions and so on. What's the plan for -- if you can give me, sir -- what's the general sense and a DOD perspective, especially in disclosure, transfer and disclosure shop, of where the plan's going to kind of go with that?

CARTER: Yeah. The president has ordered government as a whole to take a look at this subject. I know that Secretary Gates personally believes that this is an area where we can make a lot of improvements. I, in a previous tour in the Defense Department, had more direct responsibility for that than I do now. It's really Michele Flournoy under whom most of this falls, and especially the part that is the most difficult to get your arms around, and that is the dual-use part, and that has ever been so.

And this is a kind of policy that -- dual-use is civil or commercial and military articles that could be used for either one in how to control their export. This is a subject that's only gotten harder over the years. And it's a challenging thing to come to grips with whether you should export an individual article when you have hundreds of thousands of them, and you're counting upon, you know, a few hundred people in the government to have intellectual mastery. I mean, forget it. It's too hard.

And so you end up with lists and so forth, and that's what people find so unsatisfactory outside.

In the arms area, a different subject, also one that the president wants us to look at. I have one particular thing which is in the particularly sensitive areas -- low observables, counter low observable, electronic warfare and so forth. And I administered that little slice. And I have been pleased to find that we have actually a very good analytical team underpinning our decisions in that area. I don't think you can say that about all the other areas. But in that particular niche, we do.

But it is under review. Michele really is in the lead.

QUESTIONER: (Off mike.)

CARTER: They used to work for me, so I know them well.

DAVIS: I have a question, actually the woman in the back right there.

QUESTIONER: Okay. Andrea Ashewall (ph), eService Reuters. There has been quite a lot of difficulties with the acquisition programs over the past years, you know, whether it's the protests that have been upheld or whether it's the, you know, programs that have had cost overruns and schedule delays. And I know that you're trying to get a handle on these things. But I wonder if you can walk us through what your thoughts are now, after having been in office, about what's wrong with the acquisition system and how do you actually fix it.

CARTER: Yeah, a good, good question.

DAVIS: we have five minutes. (Laughter.)

CARTER: Well, I mean, first, how is the patient? There are way too many programs that are not performing as they should -- way too many. So I'm not at all comfortable with the portfolio that we have.

Secretary Gates says that there's no silver bullet to acquisition reform, and he's right. And that's another way of saying what I said earlier, which is we don't make one mistake again and again and again, we make lots of different kinds of mistakes.

So I'm a grease-under-the-fingernails kind of manager, so I'm going through program by program now and trying to surface problems and then solve them. There are some common denominators, there are some themes that are worth sharing. And they kind of -- a good way to break it up in your mind is the way programs are birthed, birthing new programs well. Second is sort of managing them through the middle. And the third is ending them.

Let me start at the beginning. The legislation that was passed this year and that Senators Levin and McCain did so much to create, addresses the front end of programs, the birthing of programs, and such questions as whether we're lying to ourselves about what this thing is really going to cost, and it will end up costing twice as much so we'll buy half as many, or it will take twice as long to buy them, because we'll stretch out the buy. Whether we are capable of doing development planning and systems engineering at the early stage of a complex program. JSF's a very good example of a program that's a very complex development program, lots of concurrency and so forth, but also the most elaborately engineered development program I've ever (seen ?) in history.

So we've got a lot of very good advice that we are managing around, and it addresses the birthing of programs.

Now, we get to the middle part, and we are going to be -- you'll see us doing more fixed-price contracting. You'll see us doing that in KCX. You'll see us doing that in small-diameter bomb. We're doing it in LOGCAP. That is not a crusade, and it's not appropriate in every circumstance. But there are circumstances in which a fixed-price environment is a preferable managerial structure for both sides, the industry side and the government side, to a cost environment. So you'll see us doing more of that.

You get into the middle, lifetime of a program, and then it's a matter of, is this performing well or not? And do I problem solve? We have one big bell called Nunn-McCurdy. And Nunn-McCurdy is effective because people are terrified of it. And you don't want to be the program manager whose program manager rings the Nunn-McCurdy bell. And to that extent, Nunn-McCurdy has had a really very salutary effect.

It's also true, however, that by the time the Nunn-McCurdy bell rings, you're usually in the soup, and the thing is so screwed up that it's difficult to straighten out.

And it's also true, by the way, that Nunn-McCurdy has a very high false alarm rate, so the bell rings and there's nothing wrong, it was just the buy was adjusted or something, so there is a certain amount of false alarming.

So I am very attentive to other indicators of a program's health than the Nunn-McCurdy bill. I'd like to get to things earlier, problem solve earlier before we get all the way down the stream with Nunn-McCurdy.

Then we get to the end of programs, and not many people write as much about that, but we really do need to end things that aren't working or aren't needed any longer. And that's acquisition reform at the back end. And we are doing that, too. You saw that in the VH-71. You see that in the F-22 and so forth. And we need to have the discipline to do that when programs aren't working or aren't needed any longer.

DAVIS: A question right back in the back -- right there, yeah.

QUESTIONER: Hi, sir. Chris Castelli with Inside the Pentagon. I wonder if you could talk a little bit about the way head for the VH-71 program or the VXX program. You've talked about the mistakes, but where do you go from here? What's your vision?

CARTER: Well, the key is to the requirements and to a set of requirements that one can design around and come up with an affordable and practical solution. And we're working now. I'm working with the White House, who is the customer in this case, to get a more realistic set of requirements than those that underlay the VH-71, because that was the fundamental reason why the program couldn't be executed.

DAVIS: Okay, right here.

QUESTIONER: Bill Lennox from Goodrich. I was wondering, the two main jobs that you and the secretary are balancing right now are supporting the current fight and planning for the future, maybe a near-peer competitor. And I know the QDR is going on. But I'd like to get your take on how you balance those, particularly with the budget constraints.

CARTER: One point in that regard that the secretary has made, that is persuasive I think, is that the dichotomy between the low end and the high end as we've known it in all our careers in defense is not as sharp a dichotomy as it used to be. You mentioned near-peer. Well, near-peer, if you're talking about China, which is what everybody, China is less intent upon matching the American military item by item than it is puncturing the dominance of the United States in the areas where we clearly have dominance and, in that sense, has something in common with what you would regard as a low-end opponent, such as those that we're dealing with in Iraq and Afghanistan, also after the same points of vulnerability.

And so when you start asking yourself, where are we playing a game where we put out a lot of resources and the opponent puts out few resources and manages to, you know, keep the boundary from moving at that? So you've got to ask yourself whether we are doing the right thing.

When you have a capability that's only good for one end or the other, then you need to be asking yourself whether that's a capability you should be investing in. So we're looking for things that don't follow the dichotomous model. And we're also looking for investments that don't have a single purpose.

DAVIS: A question right here.

QUESTIONER: Chris Miller with the Air Force. Sir, I wonder, as you're looking out at recapitalization of the major programs that you oversee, how far out, just sort of the way you look at the problem, how far out do you look? And what processes do you think we have in DOD that either support looking out that far, to allow you to layer the kinds of recapitalization that the department needs, or where do you think we need to improve in that respect?

CARTER: Well, we just did a draft KFP for the KCX competition, which looks at a lifetime of an airplane that from now until the retirement of the last KCX is some 60 years or so. And that's the reality. We keep these things around for a very long time, and so you have to have that kind of reach in your mind and realize that you're trying to put something on the rails in an orderly enough way that your successors and your successors' successors will find things in good order. It's just in the nature of the capital stock of the Defense Department. It's so large, it's so expensive that we can only turn it over every few decades.

I don't really like the term recapitalization. The tanker happens to be a good example of it. But in general, we should be asking ourselves whether we need x, not in the first place, not just when old x wears out we need new x. And so you've got to do both.

DAVIS: Okay, way in the back there.

QUESTIONER: Thank you, sir. Gail Von Eckritsberg (ph). I wanted to ask you about energy, specifically operational energy. And if you could talk a little bit about kind of your vision and your investment strategy for at least supporting the current conflict but also in the strategic context for future expeditionary operations.

CARTER: Yeah, a couple of facts that many of you may be familiar with, but some may not. At a forward operating base in Iraq or Afghanistan, question, what uses more fuel? Ground vehicles or helicopters or generators? Answer: generator. Why? Well, for starters, we start out down at Leatherneck, down in RC South in Afghanistan with tents. And what do you do in the summer in a tent? You air condition the tent. So now, do the thermodynamics of air conditioning tents, and there you are blowing cold air, you know, putting several air conditioner in a big tent. When the Marines brought the 2nd MEB down there to Leatherneck, they had to do that.

So then we have to get the generator in there. Then you have to get the fuel to get the generator, and the fuel is not a trivial thing to get in Afghanistan. And there is some hazard associated with bringing it there. So if you're going to bring it in your own convoys, you have to arm your own convoys and do the route clearance and all that that goes with an accompanied convoy, or you try to contract with somebody who's willing to take the risk and do it for you.

But it all goes back to you're air conditioning a tent. And so that's an example of what's called operational energy, which is taking a look at the way in which we consume energy and the burden it places on the logistics pipe. And that's something I'm very, very sensitive to.

Another one is vehicles. We're about to do the joint light tactical vehicle. And we're rethinking the manned ground vehicle portion of the Army modernization program which used to be future combat systems. And in all these areas, it makes sense to look at the fuel efficiency of the vehicles that you're buying, with an eye to the width of the logistic pipe it takes to supply them, because that can be the rate-limiting step, as it is in Afghanistan. It's certainly a cost burden, but it's an additional hazard and burden upon the warfighter to carry all that fuel along.

I mean, you can go on and on. There's the efficiency of jet engines, a long-time-researched subject of the Department of Defense, but we're still doing it. And so the whole field of operational energy and the so-called fully burdened cost of energy that is, what is the cost at the pump in, you know, FOB (Sarana ?). It's not, you know, $2.50, it's more like $40 a gallon to get that gallon of fuel from wherever it started, all the way out there, safely.

DAVIS: What a breadth of things that you're interested in. It just gets broader and broader as you keep talking. And the questions keep coming.

This side -- yes.

QUESTIONER: Bruce McDonald, Strategic Posture Review Commission, the Perry-Schlesinger Commission. First, a big thank you to you, Ash, for your great service, chairing one of our expert working groups. Although we were crushed, we understand why you left us a little early, you got a promotion.

My question has to do with something that's occupied a little bit of your time in the last few months, I suspect, and that has to do with European missile defense and the third site. I thought the decision was a very well-reasoned, nuanced decision. But one thing I found missing, not that it wasn't there, but there was one issue that people have talked about was a possibility that, you know, Russia has to worry about missiles coming from Iran as well as we do. After all, they're a lot closer. And there was some talk in the months leading up to the decision that maybe there would be some kind of U.S.-Russian cooperation, maybe, you know, sharing sites, technology, so forth.

But nothing came out on that. I wondered if there's -- can you speak to -- is there anything that you can say about where we may be vis-a-vis talking to Russia about cooperation and missile defense?

CARTER: Well, first of all, with respect to the Perry-Schlesinger commission, I have a conflict of interest. They both were at my wedding. Bill Perry was my best man. I worked on the commission. I think, and I think it's actually widely shared, that the Perry-Schlesinger commission is what I referred to earlier as what has been needed, as the sort of high-level adult attention to things nuclear, that has been so lacking for so long just because people have taken their eye off it.

And I think that the essence of their report is the two prongs that I talked about and that's shared by President Obama. And that's the construct within which we can all go forward. So I think they did a great job after I left. And it's a good report and well worth following.

I can't give you a good answer. I know that there are discussions going on with the Russians. I am kind of down in the boiler room. And so I was involved in the options, creating the technical options from which the president chose the option he did. I mean, the only thing I'd say, from a purely technical point of view, it makes a lot more sense than what it replaces, and it keeps our options open. But it builds upon some of the program's strengths in a really good way.

So from the program manager's point of view, that is MDA which reports to me, the Missile Defense Agency, and in terms of technical performance and executability, it's very well done.

DAVIS: We have time for one more question. And also, Ash, if you want to take the liberty of the last question to say anything that maybe you didn't have a chance to do, that would be fine as well.

So right here.

QUESTIONER: Jason Bertolmae (ph), United States Air Force. Sir, I would like to go back to your comments about acq(uisition) reform and the three-layer cake you presented. And my question is, do you feel the policy architecture we have in place right now is accommodating to the rapid technology advancements that we see and if there are any things that you see that might be able to accelerate our ability to equip weapons systems in a more efficient and cost-effective way?

CARTER: Well, no and yes. (Laughter.) No, it's not well-suited. And what can I say but a yes, we've got to do better. I'll tell you, though, as I said, I'm sort of an engineer's grease-under-the-fingernails approach to things rather than the abstract, how to take the system and the processes and the milestones and move them around and so forth. That is necessary. But at the end of the day, no fiddling with the boxes and the process is a substitute for good order and discipline, you know, disciplined program review, you know, where you dig in and see what the challenges are and meet the challenges program by program. There's just no substitute for that.

And the last thing is good people. And that's kind of, if I have a note to end on, it is that, as the government disburses all this money for our defense needs, we need to be concerned with our capacity as a government to do that with excellence.

The acquisition workforce has taken a hit in many ways over the last 10, 15 years. I think we have allowed the pendulum to swing too far in the direction of believing that we could outsource to industry much of the program management functions, the systems engineering function. And that didn't work out very well. It turned out that there wasn't a reservoir of capability there that we imagined. And so we need to bring that back a little bit.

The secretary has committed to the substantial increase in the size of the acquisition workforce. I think that's necessary. My job is to do this increase in size and quality at the same time. So it's not enough to trade out a contractor for a government worker. If the contractor is very well-qualified, where does that get you? So I am being very careful about how we're doing that. But the size and the quality of the acquisition workforce. And then the sense that they're part of something that obviously matters but something that is top notch. And we need to get that back. There's too much money at stake, and there's just too much of our security at stake not to. So people really are going to count a lot, much more than the process.

DAVIS: Well, on behalf of everyone here, let me say thank you for being, you know, sort of not only you answered our questions but you took the range of questions.

CARTER: Appreciate it. Thank you, Lynn. Thank you all.

DAVIS: Thank you very much. (Applause.)


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