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Leadership, Balance and Strategic Opportunities

Undersecretary of the Air Force Erin C. Conaton

Thank you Sandy for your kind introduction. I'm honored that Secretary Donley has chosen to attend today. Sir, thank you for your tremendous leadership; it is an honor to be your deputy. Sandy had it right yesterday when he said that we have the ideal leadership team for these challenging times in you and the Chief. And thanks too for the presence of our Air Force senior leaders. I am enormously proud to be part of this team.

Mostly today, thank you to the Air Force Association--Sandy, Mike, and your entire team--for your great work in hosting this important conference. AFA is an incredible advocate not only for the Air Force mission, but more importantly, for the brave men and women who make up our Service. Thank you for all you do to promote the Air Force, our Airmen, and our mission. I'm grateful to be here with all of you today.

Let me first say that I'm well aware that I'm delivering a speech during the last session of a day full of great presentations, and I imagine some of you already hear your watches ticking loudly. So I'll be relatively brief.

Much of the talk this week is about the current budgetary challenges. And I'll beat that drum a bit myself. But I want to start on a sincere, positive note. This is also a time of great opportunity. Your Air Force leaders are dedicated not only to good stewardship of our finances, but also to ensuring that the Total Force we have 10 and 20 years from now remains the greatest air, space, and cyber force the world has ever known. This is a time for creativity and innovation and our Airmen have these qualities in spades. It's an important and exciting time to serve. That's the attitude I come to work with every day. I can assure you that I am not unique in that regard inside the halls of the Air Staff!

My Role as Under Secretary
As the Air Force's Chief Management Officer, I am responsible for improving the overall processes, systems, and management of the Air Force. In one of my more "enjoyable" roles, I--along with the Vice Chief--am responsible for presenting our program objective memorandum, or POM, to the Secretary and Chief, and to defending that POM through the DoD budget process. And while I'll talk more about the budget in a moment, let me start with our most critical management asset--our people. Page of
Managing Personnel

Many of you heard Secretary Donley and General Schwartz speak to the
importance of our Airmen, our core Air Force missions, and our ability to continue to excel within a decreasing budget. Secretary Donley emphasized that we are approaching budget reductions with an eye toward strategy and balance--balance among all of the core functions the Air Force provides the Joint force and the Nation; balance among the components of the Total Force; and balance among force structure, modernization, and readiness. Both the Secretary and the Chief are adamant that, no matter what size force we are, we will be highly-capable and ready. Fulfilling their charge, even as a smaller force, means ensuring we continue to recruit and retain the highest quality Airmen. We will continue to invest in their education and training. And we will continue to focus on supporting their families. This is all key to our readiness as a force.

I had the opportunity to spend some time at the Air Force Academy--the "other" AFA--last week and I've also been able to visit with Airmen graduating from Basic Military Training. If you need to be inspired about our future as a force, head to Lackland or to Colorado Springs. General Rice, General Gould, thanks for all you do to ensure the strength of our future force and Air Force leaders. These young Airmen are not only high-quality, they are highly motivated. The future is bright with young people like these continuing to choose to serve and bringing innovative ideas with them.

The Chief addressed some of the challenges facing military personnel, including efforts to deal with the dramatic increase in personnel costs. I'd like to complement his remarks with a few words about our civilian workforce.

The career civilian workforce in the United States Air Force is absolutely essential to our achievements as a service. These outstanding individuals provide not only deep expertise, but also continuity. With uniformed partners who change jobs every few years and political appointees whose terms are by nature temporary, they are the lynchpin to the plans and programs that support our National policy and our Airmen.

And yet, it is a challenging time to be in the federal workforce. Beyond the limits placed on pay increases and yesterday's announced proposed changes to retirement contributions, the DoD decision late last year to limit growth in the civilian workforce beyond FY2010 levels has had some real impacts. For the Air Force, we had planned to grow about 21,500 people by FY2017. Under the new construct, that growth was limited to approximately 4,000.

We are grateful that we did not have to shrink our workforce, but the reality of significantly restrained growth has necessitated some tough decisions. We have frozen hiring for 90 days to ensure we don't exceed our mandated levels, and we are moving forward with plans to help some who might be interested in voluntarily leaving the Air Force. We did this mindful that the new fiscal reality means we need to ensure our talent tracks with our highest priority missions.

I want to say to our entire civilian workforce--thank you. Much of our Service's successes rely on the work you do. I also believe you will have an incredible opportunity to helpus figure out how to do business smarter and how to make hard choices to the benefit of the Air Force and the Nation.
Budget Context

We'll need the best talent possible because the challenges in this budgetary environment are significant. As all of you know, the sluggish recovery from the recession, and our mounting federal debt, have required us to re-think how we plan and manage the Air Force's money.

Let me add a bit of historical context about the Air Force's starting point in this exercise. RAND reviewed the entire DoD budget since 1948. They found that while funding for the entire Department of Defense is about 30% higher than at the 1985 Cold War peak, this historic high has not translated equally across the services. The Army is 63% above its 1985 level, the Navy is down 4%, and the "Blue" Air Force--not including funds we pass-through to other agencies--is down 20%.

We are also a smaller force. In the last seven years, our Active Duty end-strength has dropped from 359K in 2004 to 332.8K today. Yet with fewer budgetary resources and end-strength, the Air Force has stepped up to a number of additional missions. We have added 6,000 people to our ISR effort and added over 2,000 a piece for Special Operations and the nuclear enterprise. This reflects the Secretary and Chief's deep commitment to winning today's fight and supporting the Joint force.

I mention this to show that our Airmen have continuously stepped up to what the Nation and the Joint Force asked of them. And we will continue to do that going forward. Secretary Panetta has expressed confidence we can implement the cuts called for in this summer's Deficit Reduction Act while maintaining excellence in our military. We strongly support his efforts.

We expect that, like all parts of the Department of Defense, the Air Force will have a share of proposed reductions. But we also feel confident that in these debates, our partners in the Department of Defense understand the critical role of our Airmen across a range of missions that will be essential in the emerging strategy.

We are a central part of any high-end, anti-access area denial fight with our 5th generation fighters, penetrating bombers, and a range of advanced weapons and enabling capabilities. We maintain two legs of the Nation's nuclear triad. Across the spectrum of conflict, our cyber and space enablers along with our command and control, ISR, legacy fighter and bomber fleets, personnel recovery efforts, and tremendous lift and refueling capabilities pay dividends for the Joint force. We will continue to provide the range of capabilities in counter-terrorism and counter-insurgency operations, like our special operations forces and close air support. And we will continue to build the capability of partners Air Forces with excellent training and advice about where they should invest. In short, we believe the Nation will continue to call frequently upon the United States Air Force and that our Airmen will respond with excellence each time.

Managing Money
Debates about how to allocate reductions will not be easy. There will be opposing views and spirited debate. As Secretary Donley has said, in keeping the critical balance among force structure, modernization, and readiness, we will be prepared to make hard choices.

At the same time, we have to make every dollar that remains count. Part of this is our aggressive effort to implement last year's $33 billion efficiency initiative that allowed us to move critically needed dollars from support activities into programs like upgraded F-15 radars, increased space launch investments, and additional F-35 simulators. Another part is buying more efficiently so we can get as much combat capability as possible for each dollar and as much value as possible for the taxpayer. In both our tanker and new bomber programs, requirements have been set with an eye toward affordability. And throughout our acquisition programs, we are scrutinizing costs and seeking to improve industrial base stability.

Let me give you more of an example in our space programs.

Space
Air Force space operations and programs contribute to U.S. National security missions every minute of every day, in every corner of the globe. Like all our operators across the Air Force, the professionals of Air Force Space Command are the best there is. Thank you, General Shelton, for the leadership you provide this exceptional team.

To sustain their contributions, we must replenish aging satellite constellations, improve space situational awareness, and better protect our space-based capabilities. And we have plans in place to modernize in each space mission area, including satellite communications, missile warning systems, global positioning, navigation and timing, weather data, and enhanced space situational awareness.

But space is an expensive business. Twenty percent of Air Force modernization dollars are in this mission area. So we are increasingly exploring creative ways of enhancing capabilities and driving down costs. I want to commend the exceptional team led by Dave Van Buren--and including Lieutenant General Ellen Pawlikowski, Scott Correll, Heidi Grant, and Major General John Hyten--who are taking on this challenge every day.

Increasingly, in alignment with the National Space Policy and the National Security Space Strategy, we are building international partnerships and exploring commercial arrangements for service. Not only does this build partnerships that further our broader National security interests, we are reaping benefits for the taxpayer from our allies' financial contributions or industry's cheaper solutions. Australia's contribution to the Wideband Global Satellite (WGS) system is a good example. By contributing the cost of WGS-6, its associated ground infrastructure, and the launch vehicle, Australia bought into our modernized wideband SATCOM network. On the strength of our partner's investment, we were able to expand the Wideband constellation to the benefit of both Nations.

In this budget environment, all programs--including our space programs--have to demonstrate that their modernization plans are cost effective. And we are working to do just that.

More Efficient Space Procurement
One of the ways the Air Force is pushing space acquisition reform is through Efficient Satellite Procurement, which was derived from the Evolutionary Acquisition for Space Efficiency ("EASE") proposal. Even if you are not in the Space business, we think this model offers a good example of how to incentivize greater affordability.

Here's the "bottom line up front:" current satellite procurement practices have led to increased costs due to production line breaks, parts obsolescence, and inefficient use of labor. We haven't been getting the best deal for the taxpayer's money. At the same time, the requirement to fully fund satellites in a single year creates large funding spikes in the Air Force budget. When money is tight, such a policy can cause us to push off a satellite buy, leading to inefficient production profiles.

The larger DoD push for more Efficient Space Procurement addresses these two dynamics by: (1) Driving down costs to the taxpayer, (2) Improving space industrial base stability, and (3) Fostering investments in technology that will ensure we are making continuous technical improvements rather than waiting for the next great leap. Sounds great right? Taxpayers get lower costs; and industry gets to know when the next buy is coming.

This proposal has four basic components: (1) Block buys of satellites, (2) Stable research and development investment, (3) Fixed price contracting on mature programs, and (4) Full funding spread evenly over multiple years.

We have partnered with Congress on the merits of this proposal and to understand their concerns. But we also know we cannot keep buying satellites the way we have-- particularly in this budget environment.

As a part of what we're doing to drive down the cost of space systems acquisition, we are also pursuing a robust examination of contractor costs and making aggressive efforts to achieve cost reductions.

We call these "Should Cost Reviews" and in some cases we've also deployed "Tiger Teams" to create even more visibility into the cost structure of major program contracts. We're doing this across many other programs, but those on our space programs are beginning to bear fruit. We owe it to the taxpayer to know how every dollar is being spent, why things cost what they do, and what can be done to drive costs lower.

These efforts by definition involve close cooperation with our industrial partners, and by and large I have been really encouraged by the collaboration that's occurred. Given that many of those partners are with us today, let me say thank you. This partnership is critical and will allow us to buy more of what you're making for the benefit of our Airmen.Page of
So with these efforts, with your partnership, and with Congress' support, we are confident that these efforts will help us achieve considerable savings in the acquisition of some of our most critical space assets and yield a better deal for the taxpayer.

Energy
In addition to driving down costs in our procurement of weapons, the Air Force is thinking about how to do things more efficiently and in a more sustainable way. For example, the Air Force is the largest consumer of energy in the federal government, with a tremendous amount of energy going to power our installations and fuel our aircraft in providing combat power to the Nation.

Using the Air Force Energy Plan as our foundational policy document, we've worked to diversify our sources of supply and to reduce consumption both on our installations and in our operational flying.

Part of what drives us to innovation for our installation energy is that the Air Force powers an enormous footprint. Air Force Installations cover 10 million acres of land--that's twice the size of New Jersey.

Our facilities cover 626 million sq ft of building space--88 times the footprint of Microsoft.

Throughout our installation portfolio, we're looking for ways to diversify our energy sources, to include more solar and wind. The 14.2 mega-watt photovoltaic array at Nellis AFB, for example, produces 28,570 mega-watt hours--more than 25 percent of the total power used by the base population of roughly 12,000 people. We're also working with industry to install 24 wind turbines at Vandenberg AFB--a base where we have already reduced energy consumption by 19.2%. And these innovations aren't limited to our large active duty bases as we have seen the Total Force embrace diversified energy as well.

We're also reducing installation demand in smart ways. At Warner Robins Air Logistics Center, they are poised to shave by 33 percent the amount of energy they use in a key industrial process--painting our fleet of C-5 aircraft. They'll do this because they examined their processes and concluded they didn't need to control the climate in the painting facility all of the time; just when the C-5s were there. Through this change in procedure, they'll not only use less energy, they'll also cut their costs at that facility by almost a half a million dollars a year. That's pretty nice work and just the kind of innovation we'll need more of!

Seeking advances in aviation fuel is also a big deal because the Air Force represents about 11% of the aviation fuel market. For some perspective, the Air Force used 2.4 billion gallons of fuel in FY10, at a cost of 6.8 billion dollars--more than FedEx and US Airways combined.

One of the efforts I am most proud of is our progress toward greater use of diverse aviation fuels. Yesterday morning, we honored the team working in this area. I want to again commend General Hoffman, General McCaslin, and the entire alternative fuels team for what they are doing to innovate in this area.

As many of you know, the Air Force has led the way in alternative fuels going back to 2006. 99% of our fleet has been certified for the 50/50 synthetic fuel blend. We're also certifying the fleet on a biomass blend. Testing and certification for unrestricted operations on the F-15, F-16, and C-17 has been completed, and we've demonstrated performance of the A-10 and F-22 using a 50/50 blend of traditional JP-8 and biofuel. Even the Thunderbirds have flown on biofuels--an exciting event at May's Open House at Joint Base Andrews. The Air Force remains on the glide path to certifying our fleet to fly on biofuels by 2013. We're excited to complete these efforts and will continue to review, evaluate, and demonstrate potential alternative aviation fuel candidates.

We are eager to move to greater use of bio-fuels, but we cannot afford a steep premium over the cost of JP-8. So what these certification efforts mean, is that we're looking ahead to the time when industry can deliver a cost-competitive product. Our message to you in this industry is--we're ready to buy as soon as the product is cost-competitive.

Decreasing fuel demand is certainly a challenge, especially for a fleet as operationally focused as ours, but we have made great strides in fuel reduction. Colonels Bobby Fowler and Kevin Trayer represent the current and former directors of the Fuel Efficiency Office in the Air Force's Air Mobility Command. Over the past few years, the two of them have not only helped the Air Force reduce its fuel consumption among its cargo aircraft, but have also helped every command in the Air Force reduce their aviation fuel use. Obviously they haven't done it alone. The leadership of General Ray Johns has been essential. Folks like Lieutenant General Rusty Findley, the AMC Vice Commander, our great Assistant Secretary Terry Yonkers, as well as Kevin Geiss and Gordon Ettenson in the Pentagon have provided a great deal of leadership. Rusty and Gordon, with the Energy Council and Kevin's support, jointly hosted a series of events over the last few months designed to identify and implement the best practices for aviation fuel reduction.

While they have been helping reduce the fuel consumption across the Air Force, Colonels Fowler and Trayer have also been working to reduce the impact fuel has on the Air Force's budget as part of our ongoing efficiency initiatives. AMC alone has identified over $500 million in potential savings by reducing fuel consumption and operating more efficiently. Basically they looked at industry's best practices and adopted many of them to fly smarter. This $500 million represents over 100 million gallons of fuel the Air Force won't be buying.

These are important numbers, but not because we're trying to build a nice looking excel spread sheet. These efficiencies have consequences. The net $372 million in savings AMC will accrue allowed us to make investments in combat capability. Every dollar we don't have to spend on energy is a dollar that can go to weapons systems, maintenance, and family housing or other projects that support our Airmen.

My point is that we can help ourselves. Our Airmen are innovative and those innovations stand not only to better our energy independence but also our financial strength as a service. Page of

And with efforts like those I've tried to highlight--among many others--the Air Force is leading the way.

Conclusion
To sum up, we have arrived at a point in time where we are no longer discussing impending financial challenges. These challenges are here, and will stay with us. The broader Department of Defense and Air Force are engaged in a robust discussion about our strategy and budget, firm in the knowledge that we have the responsibility to ensure the Nation will always have the global power, reach, and vigilance of the Air Force to rely on.

Our vision is one of balance, with a clear commitment to sustain the core capabilities we contribute to the Nation and the Joint force, ensure a strong return on our investments, and work in partnership with industry toward these goals. We value practical, cost effective, sustainable projects that aid us now, and into the future.

It's a fantastic time to serve in--and work with--our military. We are shaping the Air Force of the future, and as we tackle these challenges, the Air Force looks to you for your best ideas, especially your innovations that merge mission readiness with fiscal responsibility.

We are constantly searching for ways we can do our business more efficiently and effectively--whether it's through space acquisition reform, alternative energy projects, or any number of Total Force developments. Let's use this opportunity in the Air Force's history to showcase what we CAN do to further our missions across air, space, and cyberspace.

Finally, to the Air Force leaders in the audience, I encourage you to take the messages and insight from this great conference and bring them back to your units. Emphasize to your Airmen, including our civilian leaders, how critical they are to the current debate and to the solutions that will shape the future of our Air Force for decades to come.

And while I won't stand here and say it will be easy, I sincerely believe that our current efforts to determine our military strategy--and the role of the Air Force in that strategy--will position our service well for the future National security environment.

Thank you again to the Air Force Association for your valued work, to Secretary Donley for your leadership, and to the men and women of our incredible Total Force. I'm honored and humbled to serve with you. Thank you.

Engage

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