Thank you, General Ham.
It's humbling to stand here today and speak to such an accomplished group. I was particularly concerned about the level of contribution required to be a sustaining member, and that I wouldn't measure up -- but General Ham assured me that your contributions are non-refundable.
Before I begin I'd like to mention that Under Secretary of Defense for Acquisition, Technology and Logistics, the Honorable Ellen Lord is here, so thank you, Miss Lord, for coming. [She's] A great teammate who has stepped in very quickly to help work on our programs and we're very grateful to have you here, thank you.
I thank all of you for attending, and your continued support of the Army and our Soldiers, Family members, Army civilians, and your sustained support to AUSA.
I'd like to take a second here to talk about General Ham, a man I got to meet back in my last tour in the Pentagon, and an outstanding officer and wonderful human being, even though he is a fan of the Cleveland Indians -- the runner up to my Chicago Cubs, who won the World Series in 2016, in case you forgot, defending World Series Champions who are on their way to the pennant after we take care of the Nationals tonight in Chicago! Well, there will be 26 millionaires in Boston in front of a flat screen, watching the Cubs tonight, the Boston Red Sox. -- [There's] Always next year. -- I'll be here all day, guys -- I got the podium for like another 45 minutes.
But seriously, General Ham, thank you for your leadership of the AUSA team. I think the best way to describe General Ham is when he came up and took the podium Monday morning, Secretary Mattis leaned over to me and said, "A Soldier without pretense." I could not articulate it any better, and I wanted to make sure everybody knew that.
I'd also like to thank the AUSA team, meeting all the requirements, satisfying the needs of vendors, you all can be a very demanding bunch, I know, I used to be one of you. The AUSA folks manage things expertly. Remaining flexible are the hallmarks of a first-rate organization. Once again, you've done a remarkable job and you made it look easy. So thank you very much to all the AUSA folks that are sitting out here, and the ones that aren't in here, thank you very much.
We've been at war for 16 years against technologically inferior enemies, who created asymmetrical techniques that adapt quickly and cheaply. While we have been focused on the wars in Iraq and Afghanistan, competitors like Russia, China, North Korea and Iran, have invested heavily in their capabilities. They've invested in technologies that counter what have traditionally been the strength of the American military -- our force projection capability. They've invested in the next-generation of standoff technologies, while we have made incremental improvements to our legacy close-combat capabilities.
Russia in particular has invested significant amounts of funds in their anti-access and area-denial capabilities, including cyber, anti-ship, long-range fires, robotics, unmanned aerial systems, and air and missile defenses, and they're exporting those technologies across the globe. To use a sports analogy, Russia and China are training as a boxer, and we continue to train as a wrestler. They focus on throwing punches from a distance, to prevent us from getting close enough to use our strengths, and they're improving faster than we are.
The foundation of our Army's superior combat capability, the Abrams, the Bradley, the Apache, the Black Hawk and Patriot, were designed over four decades ago. It was arguably the pinnacle of the industrial era, before the explosion of the information age. Their development was enabled by a fundamental change in the institutional structure of the Army, and a continuity of thought that ran through the terms of six Army Chiefs of Staff. They've been continuously and incrementally upgraded since their introduction. The problem is that evolutionary improvements on these aging platforms simply no longer offer the degree of overmatch our Army requires. Our modernization strategy is now on the curve of diminishing returns.
I'm sure that by day three of AUSA you've gotten the word that we are making the most significant organizational change to our Army's procurement system since General Creighton Abrams did in 1973. Prior to Abrams' post-Vietnam reorganization, the Continental Army Command established in 1955 was responsible for all of the active units in the continental United States, as well as all training centers, schools, and doctrine development. The only activity for which it was not responsible was combat developments, which fell to the Combat Developments Command.
Abrams recognized that CONARC's span of control exceeded that of a single headquarters and consequently inactivated the command. In its place two organizations were activated to share the load. They were US Army Forces Command -- FORSCOM, and Training and Doctrine Command -- TRADOC. Together with Army Materiel Command, these three Army commands have served as the foundation of the Army since 1973, organizing, equipping, and training forces to conduct prompt sustained land-combat operations in support of combatant commanders, and they've served us well. However, current ways of thinking, executing and organizing, limit our capability to keep pace with change with respect to modernization and acquisition.
We cannot continue or maintain operational advantage, unless we outpace our adversary's development, acquisition and implementation sectors. Doing so requires a change to the Army's modernization enterprise.
Most significantly, we're rewiring the organization against modernization. To achieve the unity in command we need by aligning, consolidating, and synchronizing disparate processes and elements, folding them into a new command, who will report directly to the Vice Chief of Staff of the Army and the Undersecretary of the Army, whose focus is on modernization and future capabilities.
We are not looking at creating a new organization that will simply compete against the others -- we've done that before and this has further exasperated our challenges. Instead we are consolidating the war-fighter, technical, programmatic, and financial communities, to fuse the time and investment against clear priorities outlined by the Chief and I just this last week. This realignment of responsibilities is not additional force structure, it is a streamlining of the work which will serve as the custodian of our modernization effort to overcome bureaucratic inertia and stove-piping found in the Army's current construct. It will directly incorporate requirements from the war-fighter in to the acquisition process, and allow us to prototype concepts. It will enable disruption, the messy, chaotic work that is the hallmark of truly innovative organizations. It will ensure leadership involvement in the early stages of the process.
It will reduce the time to deliver the new systems we need to regain a competitive advantage before the next first battle.
Following the National Defense Authorization Act for fiscal year 2016, the Secretary and the Chief of Staff took some immediate actions to prove the Army's ability to evaluate and reform our acquisition process, actions that are continuing and informing aspects of this new command. The most significant of these are the reinvigorating the Army Requirements Oversight Council, making it a command-centric vice staff-centric forum, and establishing the Army Rapid Capabilities Office to quickly address emerging threats through early development and demonstration of technologies. The Rapid Capabilities Office incorporates a streamlined requirements and materiel solution decision-making process that leads to early development of capabilities to the field. Through rapid prototyping, fielding Soldiers, gaining war-fighter feedback, it provides critical data for ongoing and emerging requirements in materiel solutions.
The Rapid Capabilities Office proved to be a successful organization that provided the initial enhanced electronic warfare capabilities to the Army. The lessons learned from this organization will be used to inform our future modernization efforts, as will combining warfighters and acquisition professionals, to establish a new command and unity of effort under a single roof.
These efforts have led to some significant changes in our Army processes, but we have more to do. We are implementing initiatives that will increase the Army's ability to move more quickly, provide capabilities to Soldiers, while being fiscally responsible with taxpayers' resources that Congress allocates.
These initiatives will be outlined through directives addressing specific business practices. The first two fundamental directives have already been signed, addressing the most critical aspects of our challenge -- the requirements process and talent management.
The first directive addresses our capabilities requirements process. Ultimately it will be faster, more agile, meeting the demands of ever-changing threats. The goal is to reduce the current process by two years from the estimated three to five years it currently takes from concept development to an approved capability requirements document.
Critical in this directive is the establishment of pilot cross-functional teams or CFTs -- to embrace horizontal and vertical integration and improve the quality and speed of materiel development activities.
The concept is to develop a requirement informed by experimentation and technical demonstrations, to enable the development of a capability document, and improve the decision for a potential program of record. They will compress the cycle through an organizational construct enhanced by centralized planning and decentralized execution, involving warfighter in requirements definition, interpretation, prototyping, and concept validation, to deliver the best possible return on investment for Soldiers.
Each scalable team will be led by a director, nominated from a panel chaired by Vice Chief of Staff Jim McConville, and approved by the Chief of Staff. The director will report to the Vice Chief of Staff and the Undersecretary of the Army. Teams will consist of empowered subject matter experts from across the requirements, acquisition, science and technology, test and evaluation, resourcing, contracting, costing and sustainment communities that participate through the duration of the mission.
CFTs will also leverage industry and academia to help perform the capabilities development process. The end state is an empowered team that rapidly integrates and synchronizes developmental operations activities that enables the delivery of leader-approved capabilities to the operating force.
These CFTs are aligned with six signature modernization priorities that General Milley and I approved, priorities that can be realized in the near to midterm.
I've also initiated a reprioritization of money in the POM (Program Objective Memorandum) and an S&T (Science and Technology) review that will support the development of these priorities. And, I will continue to invest in them with ruthlessly protected resources across the five-year futures defense plan.
First, a long-range precision fires capability that restores the US Army's dominance in long-range munitions and target acquisition, including launcher and radar improvements, railguns, extended range and treaty-compliant munitions.
Second, next-generation combat vehicles, including optionally manned variants, with the most modern firepower, protection, mobility, and power-generation capabilities, to ensure our combat formations can fight and win against any foe. Capabilities such as reactive armor, active protection systems, signature management, artificial intelligence, autonomy, improved power generation, hybrid energy, lasers, kinetics, advanced materials, and manned and unmanned teaming.
Third, future vertical lift, optionally manned, both attack and lift, that are survivable on a modern future battlefield, systems that also benefit from improved power generation, autonomy, artificial intelligence, and manned and unmanned teaming.
Fourth, an Army network that is mobile and expeditionary -- that can be used to fight cohesively in contested cyber and electromagnetic environments. Incorporating electronic warfare resilient, secure, and interoperable hardware, software and information systems, assured position, navigation, timing, and low signature networks.
Fifth, air and missile defense capabilities like mobile SHORAD, directed energy and advanced energetics -- capabilities that ensure our future combat formations are protected from modern and advanced air and missile delivered fires -- including drones.
And last but not least, Soldier lethality. This spans all fundamentals -- shooting, moving, communicating, protecting and sustaining. We will field not only next generation individual and squad combat weapons, but also improved body armor with sensors, radios, and load-bearing exoskeletons.
Putting this all together we must improve human performance and decision-making, by increasing training and assessment starting at the Soldier level. This will require a rapid expansion of our synthetic training environment, and deeper distribution of simulations capabilities down to the company level, and the simulation capability to model combat in megacities, a likely future battlefield.
The second directive enhances the talent management of our capability requirements, acquisition, and resource management workforces to improve acquisition outcomes. It directs that personnel supporting the capabilities and acquisition processes require enhanced training, education, experience, and certification. We will develop a broadening assignment program for DA civilians and require memorandums of agreement to institute broadening assignments, across science, technology, engineering, materiel development and sustainment, as well as fellowships with industry to enhance talent management and develop leaders with a broader understanding of the generation and acquisition of Army requirements.
Additionally we will develop a talent management plan for future program managers to gain experience in science, technology, engineering, and contracting. This plan will include a one-year operational assignment between major and full colonel to enhance their understanding of user and operational needs.
We have a number of future acquisition reform initiatives in development that will adhere to four overarching principles designed to improve Army processes.
One, use of early engagement and collaboration.
Two, centralized planning, decentralized execution.
Three, cost and resource reform decisions.
Four, consistent metrics to evaluate success.
This is a leader issue. We are adjusting our organization to put capable proven leaders at the head of every organization who will be singularly focused. On top of that, the four people ultimately responsible for the success, the Secretary, the Undersecretary, the Chief of Staff and the Vice Chief of Staff.
This is a merger. We are moving roles from traditional major commands, and realigning them to empower of the Chief of Staff in order to provide focus and clarity to the requirements process.
I've spent the last 10 minutes giving you a history lesson, telling you what the Army needs to do, what we have done and we are doing with respect to modernization and acquisition processes. Now I want to tell you what the Army needs from all of you out in industry.
We need our industry partners to continue to invest in tech. We're addressing the rules of the road to make it easier. I understand that industry is loath to do business with DOD, because we have implemented so many prohibitive rules that it isn't worth it. We've discouraged small innovative startups who don't have the resources to contend with our overly bureaucratic processes and prolonged timelines. Major industry players don't want to do business with us because our budgets, requirements and acquisition systems are not aligned.
So how do we change that? We do it along three integrated levels. First, we define the requirements of this new organizational construct, and align with the CSA's priorities, powered by the Secretary of the Army. The second step is putting our science and technology money against those priorities and to assure discipline utilizing the cross functional teams to prevent priorities from drifting. The third effort is resourcing these teams with the right people. Talent management is vital to prevent the tendency for silos of effort and pockets of knowledge to form between program milestones.
The DOD invests about $83 billion annually in R&D, including overseas contingency operations. The US expenditure on R&D is $463 billion, but defense-related S&T continues to decline. Industry investment is 2% below inflation, and over the past five years has brought back $85 billion in stock [$78B] among the seven largest companies. We want to change that, and we're addressing this through steps to change our business practices.
Over the long term, companies have to find ways to grow revenue and operating income, and you do that through research and development. You do that through finding ways to win new programs and expand the market. Let me be very clear. We want industry to be profitable. We want you to create things that improve society, that advance commerce. We want you to be successful. As an American formerly in the industrial sector, I want American industry to thrive. I want industry to bet on us, to know that we aren't going to demand the intellectual property that you create, while working with us, to solve our security challenges.
We need to partner better. We need to reestablish close relationships that are only possible with mutual trust. We [the Army] must not compete against industry in science and technology, we must instead be complimentary.
In fact, on September 13th, the Undersecretary of Defense for Acquisition, Technology and Logistics, Miss Ellen Lord, who's sitting down here, signed a memo effectively rescinding a policy requiring excessive documentation for the internal research and development spent by companies working with the department. In fact, she'll be speaking later today to specifically address these efforts being undertaken to improve our relationships with industry. Removing this burden is intended to encourage industry to invest the resources and technologies that may benefit the national defense.
OSD is rescinding and modifying previous policies that discourage communication between industry and the Army that made people on both sides risk averse. This is changing and changing fast. We must increase dialogue and collaboration. Our intent is to be active partners with OSD and industry.
We need visibility on where industry is headed, we don't want to control it, we don't want to restrict it. This is a division of labor. There are unique military applications and certain technologies that should receive the bulk of our [the Army's] S&T efforts, while our industry partners invest their resources in technologies, with wide application -- including defense.
To our industry partners and anyone interested in working with us, we need your help. We need your engineers working against our signature efforts. The world is a dangerous place and we need improved capacities and new capabilities to guarantee our Soldiers are in a position to win in combat.
Lastly, I fully understand that there are other factors affecting the willingness to do business with the Army and DOD in general. I recognize that in order to mobilize this new modernization strategy, it will require a major river crossing operation -- we must cross the Potomac!
The Army has to foster healthy relationships with Congress to secure sufficient, sustained and predictable funding. We defend the nation with a force based on a strategy, not on a budget. The equation is as hard as we can make it, on all of us -- the constraints of the Budget Control Act and continuing resolutions have, and continue to be, the greatest challenge to both readiness and modernization.
I completely agree with what Secretary Mattis said on Monday -- that we must continue to explain the situation persuasively and objectively, that if we are compelling, the American people and Congress will have no doubt about what our needs are and what we're asking for. I tell people the BCA and continued resolutions breed mediocrity, and it's true, but we have to explain why.
Whenever I do interviews I get asked my thoughts about returning to the Pentagon and the Army. I tell them it is the honor of a lifetime, and I'm excited and humbled to have been asked by Secretary Mattis. I tell them that having been on active duty and deployed in combat allows me to appreciate the culture of the institution and what it's like to be a young person at the tip of the spear, heading into combat and the unknown.
I think about the people I served with, particularly those who died, and the families who still suffer their loss. I think about the men and women I've met over the past 70 days while traveling to some of our stateside posts and facilities, seeing our troops forward in Germany and Poland, and those in harm's way in Afghanistan. I think about the flag-draped heroes I've seen return to Dover Air Force Base, and I think about the families that I've tried to console. I'm completely devoted to being the undersecretary they all deserve, and earning their service and their sacrifices.
I'm committed to seeing this effort through. An organization as large and complex as the US Army does not implement change easy. It requires resolute determination, conviction, and strength of will. I accepted this opportunity because of my enduring passion for the Army and our Soldiers. Thank you all for your time and attention this afternoon, and your participation at AUSA.