have not increased since its enactment. Additionally, other governments, faced with the restrictions of the Stratton Amendment, have made significant efforts to create their own cannon production capabilities with some success. Accordingly, foreign competition has increased and the U.S. has been denied access to improvements made by other countries. In this regard, it should also be noted that even U.S. manufacturers may be turning to foreign sources for cannons for their direct sales to foreign governments as a result of the Stratton Amendment. Lastly, the restriction has weakened the image of the U.S. as a reliable ally. STRATTON AMENDMENT TDP TRANSFER TO FOREIGN GOVERNMENTS Mr. Stratton. Dr. Sculley, does the Department believe that this position should be modified to allow the US Government to transfer technical data packages to foreign governments under coproduction agreements? If so, what conditions should be codified to protect the domestic mobilization base? Dr. Sculley. The Stratton Amendment should be modified to allow flexibility for the selected transfer of technical data for production to enable the United States Government to enter into coproduction arrangements with other governments. In exercising such flexbility, the Army will review each coproduction arrangement on a case-by-case basis. The Army will apply the following considerations: impact on the cannon production base, work sharing arrangements, benefits to the US Government, the ability of the partner country to produce without U.S. assistance, the probability of third country sales without U.S. approval, and other factors to ensure protection of U.S. interests. STRATTON AMENDMENT COPRODUCTION AGREEMENTS Mr. Stratton. Dr. Sculley, if this provision is too restrictive do you believe that it is advantageous to enter coproduction agreements for items that currently are in production for our forces? Or, should these coproduction agreements apply only to items no longer required for our forces? Dr. Sculley. In the interest of Rationalization/Standardization/Interoperability (RSI), the United It should be noted that aside from the restrictiveness of PL 99-190 the U.S. Army in recent years has entered into a number of (non-Watervliet) coproduction agreements. These agreements were consummated only after we had ascertained that our critical technology, unique production capabilities, mobilization base needs and U.S. Army readiness were all adequately protected. All of these programs have resulted in sales of a significant amount of hardware from U.S. sources. [Whereupon, at 11:35 a.m., the subcommittee was adjourned to reconvene at 9 a.m. Thursday, February 27, 1986] FISCAL YEAR 1987 DEFENSE AUTHORIZATION REQUEST, DEPARTMENT OF THE NAVY CURRENT ACQUISITION POLICIES AND PRACTICES HOUSE OF REPRESENTATIVES, PROCUREMENT AND MILITARY NUCLEAR SYSTEMS SUBCOMMITTEE, Washington, DC, Thursday, February 27, 1986. The subcommittee met, pursuant to call, at 9:20 a.m., in room 2337, Rayburn House Office Building, Hon. Samuel S. Stratton (chairman of the subcommittee) presiding. STATEMENT OF HON. SAMUEL S. STRATTON, A REPRESENTATIVE FROM NEW YORK, CHAIRMAN, PROCUREMENT AND MILITARY NUCLEAR SYSTEMS SUBCOMMITTEE Mr. STRATTON. The subcommittee will come to order. This morning, we are pleased to have the Honorable Everett Pyatt, Assistant Secretary of the Navy for Shipbuilding and Logistics, and the Honorable Melvyn R. Paisley, Assistant Secretary of the Navy for Research, Engineering and Systems. Mr. Pyatt will highlight the Navy's acquisition strategy and summarize their findings regarding several key areas of acquisition policy. Mr. Paisley will discuss the specific acquisition policies credited by the Navy for bringing about a fundamental change in the way the Navy conducts its acquisition business. We are keenly aware of public perceptions that have developed over the past few years that suggest we are getting less equipment for increasingly greater amounts of money. These perceptions must be addressed if we are to maintain public support for an adequate defense. Today, the Navy claims that its new acquisition policies can produce more equipment for less money. Therefore, we think it is both timely and appropriate that we examine the Navy's approach to acquisition as part of our fiscal year 1987 budget consideration, with the thought that perhaps if they have a better approach it might properly be applied to other services, as well. Before calling on our witnesses, I would like to recognize Mrs. Holt, our ranking Republican, for any comment she might like to make. STATEMENT OF HON. MARJORIE S. HOLT, A REPRESENTATIVE FROM MARYLAND, RANKING MINORITY MEMBER, PROCUREMENT AND MILITARY NUCLEAR SYSTEMS SUBCOMMITTEE Mrs. HOLT. Thank you, Mr. Chairman. I join you in welcoming Mr. Pyatt and Mr. Paisley before the subcommittee. I agree with the chairman's concern about the need to maintain public support for an adequate national defense. I would also like to commend our witnesses-I have read through your statements-for their efforts to make the DOD acquisition system-one that I think is basically a good system-better. I am looking forward to this morning's testimony and discussion. Thank you, gentlemen. Thank you, Mr. Chairman. Mr. STRATTON. Mr. Pyatt. STATEMENT OF EVERETT PYATT, ASSISTANT SECRETARY FOR SHIPBUILDING AND LOGISTICS, DEPARTMENT OF THE NAVY Mr. PYATT. If I may, I would like to submit my entire testimony for the record and briefly summarize some of its more significant points. Mr. STRATTON. Without objection, your statement will be put in the record. You may proceed as you see fit. Mr. PYATT. When we first started looking at the Navy and what we had to do for the future, and what financial constraints were going to be, it became quite clear to all of us that our first task was to provide an affordable defense an affordable 600-ship Navy. It was from that point on we proceeded to put together our plans. Earlier this month the Secretary gave you an overall summary of our activities. I would like to take a few of the areas I have been particularly responsible for and discuss them a little bit. First of all, competition. I believe competition is fundamental in defense acquisition or in any acquisition, whether it is for government or for our personal activities. We have tried at every opportunity to increase the competitive percentage of the dollars that we spend. Since 1982, we have increased the competitive percentage of our procurement dollars from 27 percent to 45 percent in 1985. Our goal in 1986 will be 51 percent. By procurement dollars, we mean not only what is in the procurement appropriations, but we also do a lot of contracting in the O&M account, so our total contracting endeavors are what I am talking about. We focused first on shipbuilding, because we felt that was the place where we needed to control cost, utilize some of the changes in shipbuilding technology that were coming around, and force the shipbuilders into employing improved technology in order to stay in business. In 1980, 15.7 percent of the shipbuilding budget was competitively awarded. In 1985, the figure is 84.3 percent, the only noncompetitive ship being Trident, and we are working on that. Trident, I think, is clearly one of the most complex weapon systems, submarine and weapon systems in the country, and it is quite a challenge. Competition of the Aegis cruiser program brought new efficiencies to the shipyards and reduced our costs far below the expectations of many folks. In fact, in some of the internal debates we were accused of underpricing Aegis when, in fact, we ended up turning back money even though the cost analyst said we would go over the budget. In the SSN 688 Program, we have achieved savings again, and brought new construction techniques into the shipyards. They had to do it to stay in business and to maintain a share of each year's awards. Now we are in the process of competing overhauls between the public and private sectors, because we believe the public sector needs to shape up, and it can learn efficiency from the private sector. We have saved a lot of money, and we are proud of it. In the 3 years from 1983 to 1985, we saved $4.4 billion in shipbuilding and over $1.2 billion in aircraft procurement. The base line is the President's request submitted to Congress. Part of that was negotiated away during the appropriations process, and we got a better understanding of how contracts came in. Part of it was appropriated and then used to do something else. We subsidized the MX Program for $750 million. We weren't very happy about it, but that decision was made over here. We funded one battleship activation from savings in fiscal year 1984 and a second battleship activation in this year's program. Unfortunately, it got hung up in the authorized, appropriated, but unauthorized process. We hope to get that sorted out over the year. So, we have real results to report. The money is not a figment of anyone's imagination. It has been appropriated. It is real, and it has been spent in other areas taken as actual savings against program. In looking at our acquisition process, we are continually looking for opportunities to streamline. I think that it is fundamental to reduce the amount of bureaucracy involved and the amount of overhead the government supports? We challenge the contractors on overhead, but we don't challenge ourselves enough. Secretary Lehman took a major step with the disestablishment of the Naval Materiel Command about 10 months ago. The initiative was to streamline and simplify our acquisition system and make lines of communication more open and more available for folks to use. That worked very well. In fact, only 2 weeks ago he disestablished the remnants of the transition organization, and now it is entirely gone, and we have taken about 450 people out of the overhead process. Mr. STRATTON. One less four star admiral, is that it? Mr. PYATT. That is where admirals belong, I believe, in operations. We have one less four star admiral in acquisition. There are still other barriers we need to work on, and some of these jointly. One is the monumental-I use monumental, because I was amazed when we started to look at how much it is-amount of laws and regulations that govern our activities. The Secretary of the |