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Hearing of the Air and Land Forces Subcommittee of the House Armed Services - The F-22 Program

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Location: Washington, DC

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REPRESENTATIVE JIM MARSHALL (D-GA): Thank you, Mr. Chairman. Mr. Young, it's been pretty difficult to follow the back and forth here, but your last statement seems to me to be the clearest one, to date. Basically, the idea is that, of the $523 (million), we said no more than $140 can be obligated, which gives the next administration the opportunity to decide whether or not to continue with the acquisition process. And what you figured out, at least in your opinion, is that we can obligate a lot less than the $140 -- $50 million to be precise -- and essentially accomplish the exact same objective, at no additional cost to the taxpayer. And in fact, a substantial saving to the taxpayer if, in fact, the new administration decides not to move forward with the acquisition of additional F-22s.

What I've heard from staff is that your decision to limit this to $50 million and to only four F-22s in lot 10 could have the impact of adding additional cost -- up to $500 million -- if, in fact, the new administration decides to move forward with additional F-22s. In your testimony, what you say with reference to that is that, if the decision whether or not to move forward is delayed until March, and at that time, the new administration decides to move forward, then the Department of Defense, quote, "only faces estimated additional costs on the order of amounts Congress had permitted DOD to obligate." I take that to mean -- I'm a little nervous about the "on the order of amounts" -- it'd be nice if you simply said, it's still not going to cost us more than $140 million and a total of $523.

But I take that to mean, basically, that there are no additional extraordinary costs that will be incurred should the new administration move forward. So, in effect, your strategy offers a savings in the event that the administration decides not to and at the same time, doesn't hold out the prospect of large, additional costs, perhaps an additional hurdle, as part of the decision whether to move forward with additional F-22s. What bothers me, of course, about this, is just having heard the possibility that there could be huge additional costs associated with this decision, and could you clarify that for us?

MR. YOUNG: Congressman, I think you've been extremely articulate, maybe more so than me, in explaining the situation. My -- there are concerns, as other members have articulated, I think the chairman said it best; this is a very complex production process that starts with raw materials and builds sophisticated items. It's difficult to estimate all of the aspect of this and that's why you hear, "on the order of," but I do believe we --

REP. MARSHALL: But you chose not to just go ahead and say on the order of $500 million as possible additional costs?

MR. YOUNG: Well, to be honest with you, sir, if I say it will be $500 million, that will be the starting point, potentially, for industry negotiation. I'm trying very hard not to endorse those negotiations because there are other people -- I actually have leadership members who've built airplanes and do not believe that some of the cost estimates for the gapping and the delays are legitimate and that industry can manage those effectively to not have them be real. I'm not ignoring the industry estimates, but I'm also not granting them credibility and so, the way you said it's exactly the right way: If we do nothing until March, I could face -- and that's what I was told by industry -- a cost, which I would seek to negotiate away on behalf of the government. I think the likelihood of that cost -- a higher cost of the airplanes in March -- is probably real.

REP. MARSHALL: You're not willing, at this point -- well, could you give us your range of what you think those additional costs might be?

MR. YOUNG: I would appeal to you, Congressman, not to ask me to do that. I said it was on the order of what you've allowed me to obligate, so I therefore clearly put it --

REP. MARSHALL: You're worried that if you go ahead and mention a figure, then, as you put it earlier, it would be the starting point for negotiation.

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REP. MARSHALL: Thank you, Mr. Reyes. Mr. Van Buren, I would like to follow up with you the line of questioning that I had for secretary Young. Okay, so the plan at the moment is to take 50 (million dollars) and obligate that with the possibility of obligating the balance -- 90 -- and secretary Young suggested that the new administration probably ought to make that decision by January 21, whether to obligate the additional 90. And if the decision was made by January 21 to do so, there would be no significant additional costs. Do you agree with that?

MR. VAN BUREN: There will be a cost above the 143 multi-year cost, no question. What I'm uncomfortable in doing, right now, is giving you an exact cost above the multi-year procurement.

REP. MARSHALL: Just to be clear, there will be a cost above the multi-year, no matter what we do. Is that fair?

MR. VAN BUREN: Yes.

REP. MARSHALL: Well, if it's -- I'm trying to figure out -- you would help us greatly if you would just go -- Mr. Van Buren, why don't you try and take a shot at this -- if you would simply tell us if the 140 were obligated now, versus 50 now, 90 January 21, or 50 now, nothing until March 1st, then we scramble and try and do something March 1st. I suppose actually we should be thinking about the legislative process here a little bit more. The fact of the matter is that if the new administration says we're not interested in purchasing this next lot of F-22s, we could say we disagree. And that would take some time.

And so there would be a significant additional delay, during which period of time probably members of Congress would be wondering whether or not it was so wise to stick in the 140 bridge. And whether we didn't make a mistake by limiting the 523 at all. Just do it. And then we'll argue with the next administration whether or not we should be buying additional F-22s. But that's for another day. For right now we're just trying to figure out this 140.

So can you tell us roughly what happens if we obligate the 140 now versus just 50? Then 90, January 21st, or we postpone the additional 90 until March 1st?

MR. VAN BUREN: I think as you change the dates by which you obligate the money, you start drawing into greater risk with regard to subcontractor production lines that might be gapped to some degree. You run the risk that it's not as efficient as if, let's say, you were running a multi-year procurement, or tailing it exactly in line with the previous procurement. The order of magnitude of that is what I'm comfortable in giving you an exact number right now. We have a not- to-exceed which is consistent with our previous numbers, which I mentioned we just received. We haven't done a full analysis of that to look at the parts, look at the TL component of that.

So you've spoken of some numbers earlier today. We don't have those cast in concrete, but they're on the order of magnitude that you would look at after the 153.

REP. MARSHALL: Okay. I didn't necessarily follow that, but you said not to exceed.

MR. VAN BUREN: Congressman, you asked the question, if we proceeded with the turn-on of the 20 right now -

REP. MARSHALL: Right.

MR. VAN BUREN: -- and the best estimate I have is something on the order of that 153 million. That is the delta between the multi- year procurement and if we went out on a single-year procurement of 20 aircraft.

REP. MARSHALL: I'm also asking the question because right now we're talking about no more than 20. We're not talking multi-year.

MR. VAN BUREN: No, I understand that.

REP. MARSHALL: And at the moment the question is simply whether it should be 140 obligated now or 50 obligated now. And so if it's only 50 obligated right now, I'm trying to figure out what happens on down the road, what additional costs. The secretary is raising his hand.

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REP. MARSHALL: Is that not-to-exceed contemplates that the additional 90 will be forthcoming by January 21?

MR. VAN BUREN: The not-to-exceed for the four aircraft is valid until 26 November. The not-to-exceed for 16 aircraft and 20 aircraft is valid until 16 March 2009.

REP. MARSHALL: Well, geez, it would have been helpful if you guys had just told us that a little while ago, but thank you, gentlemen.

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REP. MARSHALL: Thank you, Mr. Chairman. I apologize for taking a little bit more time on this. The not-to-exceed estimates that you've got from industry, I assume industry is going to be interested in talking with whoever has signaled, identified in any way in the new administration about this particular issue, and the decision making time frame within which the new administration needs to act it's going to take advantage of these not-to-exceed estimates.

From your perspectives, in the transition here how will that occur if you're not going to rely on industry to let folks know? Will Air Force just make sure it gets done? Is that basically what's going to happen? The blue suits here, the people who are going to be around, whether they're civilian or not, are just going to make sure with the administration, good gosh, something needs to be done by January 21st. Does this committee need to do anything, do we need to send a letter to the president-elect, you know, that sort of thing? Could you give us advice?

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REP. MARSHALL: The problem with the first six months is obvious in what we're talking about here time-wise.


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