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Air Force Modernization and Recapitalization Strategy

Ms. Blakely, thank you for that kind introduction and for the invitation to speak with all of you here today.

Many of you in this room are key partners of the Air Force -- and our sister Services -- and I appreciate your continuing contributions to our national defense.

For those of you who are also employers of our citizen Airmen, Soldiers, Sailors, Marines and Coast Guardsmen, I offer a sincere thank you for all you do to support their service.

Priorities
I have been back in the Air Force for just under five months. I say back, because as many of you recall, I had the privilege to serve as the Air Force Assistant Secretary for Financial Management under the first President Bush, and serve as the Acting Secretary for seven months in 1993. Since my return, it has been, as I'm sure you're aware, a challenging time.

As a result, General Norty Schwartz and I have looked closely at the critical issues facing our Air Force, and we have established five top priorities.

First is to "Reinvigorate the Air Force Nuclear Enterprise" -- and last month we published a Nuclear Roadmap to outline our approach to address the systemic problems we have found.

Second, we are working to "Partner with the Joint and Coalition Team to Win Today's Fight."

Third, we are taking actions to "Develop and care for Airmen and their families" -- and this is especially true with respect to our wounded warriors.

Today, however, I'd like to focus on the last two priorities -- as these are the two areas that directly relate to you here today -- modernizing our aging air and space fleets and Acquisition Excellence.

Current Environment
Achieving these last two priorities is complicated by the fact that all of the Services are currently facing significant funding challenges -- despite the budget increases of the last several years and the supplemental budgets that helped fund the ongoing Global War on Terror. And some of the funding that has come through supplemental budgets will have to be migrated back to the baseline budget, which will add pressure on an already stressed baseline.

Our aircraft and space systems are both in need of recapitalization.

Today, our aircraft have an average age of about 24 years, and that figure is projected to increase in the near term.

We have KC-135E aircraft that are 50 years old. We are using some of the best models in the business to try to figure out how much "life" is left on our systems. But models are only as good as the data and assumptions that feed them -- but at this point we are getting beyond most life cycle models and we need to realize there are "unknown unknowns."

These aircraft were designed in the 1950s using materiel and manufacturing processes that would be considered antiquated by today's standards. And while our sustainment models account for fatigue, I am told that they do not account for the combined effects of fatigue and corrosion.

Our strike assets -- basically our fighter/attack aircraft and our bombers -- average 21 years old. The average age of our tankers -- even when you include the much newer KC-10s to the mix -- is 44. Our strategic airlift fleet of C-5s and C-17s is 15.7 years and our tactical airlift fleet of C-130 aircraft is 24.2 years.

Our space assets are aging as well. Some of our on-orbit systems are beyond their anticipated life expectancy and, unlike our aircraft, there is no option to perform Service Life Extension Programs or bring them into a Depot -- and the costs of new systems to take their place are escalating.

Corrosion and fatigue issues with the KC-135, structural concerns with some of the F-15 models, and the recent grounding of several A-10s due to wing cracks tell me that we are operating an aircraft fleet that is full of uncertainties about its long-term viability.

Missions
Additionally, the Air Force is adding some significant new missions, while our existing missions are becoming more complex and are under increasingly higher demand from our sister services in the "joint fight."

Unmanned aerial systems -- and the ISR and attack missions they perform -- are a relatively new capability for the Air Force. The demand is insatiable.

Cyber operations, for example, are a growth industry for the Air Force, as well as our joint and interagency partners.

More satellites and other objects in space mean that space situational awareness is becoming increasingly important. National Security Space is clearly an interagency domain. America's Airmen play an important role in our interagency discussions about the Nation's space future.

And, as we reinvigorate the Air Force Nuclear Enterprise, it has required the reallocation of significant resources where we have dipped below the highest standards of performance appropriate to this mission.

Increasingly, our operations are also "going interagency." More and more, we are recognizing that strategic success comes from partnering across the interagency for a "whole of government" approach. So, progress in space, cyber, intel, and other areas requires not only joint but also interagency collaboration on requirements and concepts of operation.

People
At the same time, we also have fewer airmen to perform this work. Military end strength has declined from a peak of 900 thousand during the Vietnam War to the force of 330,000 we are working toward today.

I raise this people issue for a reason. Previous Air Force leaders had decided to reduce the active duty size of the Air Force to 316,000 with the specific intent that personnel savings could be redirected to modernization and recapitalization. That decision was reversed this summer in part due to increasing demand for manpower in the missions just mentioned.

Even at this level we are relying on service contracts to provide the manpower necessary to carryout our responsibilities. Today, as you know, services account for the largest slice of the DoD contract dollars awarded annually. And many in Congress believe we are relying too much on contracted services.

Modernization and Recapitalization Strategy
The Air Force has a responsibility to organize, train, and equip not only for the missions I've just discussed, but also for the many missions I haven't mentioned.

At the headquarters, our responsibility is to optimize the effectiveness of the limited resources available, across all of the Air Force missions. This includes determining how to modernize and recapitalize an aging inventory - one of the Air Force's most critical challenges.

Strategic balance is a key element for consideration. Our modernization and recap strategy must reflect a balance of low end vs. high end, and of today's fight vs. tomorrow's challenges. At the highest end we need to support nuclear deterrence -- still a critical element of our security strategy.

Current operations suggest that a force structure driven largely by Major Combat Operations may be viable, but not necessarily efficient, for lower-end operations. And yet the requirement to be able to defeat near-peer technology has not gone away. We do not want our hard-learned lessons on fighting conventional wars to atrophy.

And while this balance is sorely needed, I share Secretary Gates' concerns that our budgetary processes, bureaucracy, defense industry and Congressional oversight are not yet geared toward achieving the right balance.

Although we have made progress, institutionally, we have considerable work to do. My view is that we are not yet on track for achieving the necessary balance between today vs. tomorrow in our budgetary processes and discussions. The same holds true for achieving balance in our capabilities for conventional operations vs. counterinsurgency and stability operations.

Later this year, we will release the Air Force's Global Partnership Strategy. Through this work, we are exploring new ways to build partnership capacity with our close allies and new partners. To make these partnerships effective, our modernization and recapitalization strategy must reflect requirements for ensuring the interoperability, integration and interdependence of the world's Air Forces with vastly different measures of affordability. Building partnership capacity is one of those "no brainers" in which an ounce of prevention is worth a pound of cure.

As we optimize across the Air Force portfolio to achieve the best balance within the resources available, we will have to sub-optimize in some individual missions.

The current budgetary and operational environment tends to favor joint enabling capabilities -- the types of defense capabilities that apply along all points of the conflict spectrum -- from high-end major combat operations to lower-end irregular warfare and humanitarian aid. In the Air Force, examples of joint enabling capabilities include lift, air refueling, cyber, space, ISR, and net-centric communications architectures.

Specific Concerns
Before I close this morning, I would like to share with you some of the areas where I think that the Air Force and the aerospace industry can be better partners to each other. Together, the Air Force, the Department of Defense and the aerospace industry need to be good stewards of the Nation's defense capabilities. We're all in this together.

The increasing complexity and cost of new systems is resulting in longer times to recapitalize, as well as the deferral of some recapitalization efforts. Across the board, there is considerable frustration at many levels with the cost and time related to procuring new systems.

In contrast, we have been doing well with some of the expedited, near team acquisitions that are critical for supporting today's war. Important capabilities like MRAPS, unmanned aerial systems, and Project Liberty are getting to the field quickly and with tremendous effect.

It seems, then, that we are struggling with deliberate, long-term acquisitions, and succeeding with wartime, short-term acquisitions. It also seems that we would need a step increase in investment funding to recapitalize all of our aging systems on a schedule we would prefer. Since nothing points to that step increase in the foreseeable future, it seems clear that that we need a new approach to modernization and recapitalization.

On the government side is the need to provide clear, achievable, and stable requirements. On the industry side is the need to deliver proposals with realistic costs, schedules, and technical promises. And once a decision is made, both sides need to stick to the plan.

Also on the government side is to objectively review and fix how we acquire systems. Currently, we are doing that through two studies.

The first study is an internal assessment by Air Force personnel that is being aided by OSD and our sister services. The second study is an independent assessment by a Federally-Funded Research and Development Center. Both assessments will produce recommendations by the end of December 2008.

Clearly, the Chief and I are committed to acquisition excellence. That's why we are preparing several options for the new administration as they consider the way forward on the F-22 and C-17 production lines, and the source selection strategy for the new tanker. Seven years without a new tanker has disappointed everyone, and has not been a healthy experience for the Air Force, OSD, Congress or industry.

Conclusion
As a new administration prepares to take the reins, it will find an Air Force where funding challenges preclude making the modernization and recapitalization investments on the schedule that we would like. It will find an Air Force that tried to self-fund modernization by cutting end strength, and a Secretary of Defense that agreed the cuts had been too fast and too deep.

It will find an Air Force where new missions have been added to the portfolio, existing missions becoming more complex, and the demand for both from our sister services and interagency partners is high and growing.

It will find an Air Force acquisition community somewhat bruised from its recent experience on KC-X and CSAR-X, but refocused on improving our internal performance.

It will find leadership interested in protecting best value for both the warfighter and the taxpayer, and also interested in effective partnerships with industry.

On that note, I'd like to open up the floor to your questions.

Thank you, once again, for your contributions to our Airmen and the joint team, and for inviting me to join you today. You are vital partners in strengthening America, and we appreciate your support. I look forward to your questions.

Engage

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