Our frame of reference in the Department of Defense is changing dramatically, and like Justice Holmes, it is sometimes difficult to know where one is going in such a period of great change. The DOD's technology strategy is really shaped by three dramatic changes that are occurring in today's environment changes which I am looking at as fundamentally driving how we are going about technology development and utilization in the Department of Defense.
The first of these changes deals with change in post-Cold War needs. There is a transition in why we buy what we are buying for our major programs today. This environment can be characterized sort of in simple mathematical terms for me. If we look at the mean value of the greatest threat that the United States is facing today, the mean value of that single, monolithic, pre-Cold War threat has been reduced dramatically. And as a result, we are taking down our forces in response to that, taking them down by about a third. The irony for us in this situation is that the variance of the threat that we are facing in the external environment is not down. It is actually up considerably in this environment.
This is giving us a more difficult external environment to plan for. It is the reason why you see Secretary Perry placing so much emphasis on the readiness of our forces because, in fact, as we look back over the past several years we find that our deployments are actually up by about a third dealing with the greater variance in our frame of reference.
As we have taken our forces down by about a third, we have taken our major investment accounts down even further. And this has caused what has come to be known as our pause in procurement. We have taken our procurement investment down by about two-thirds.
We have been able to take this procurement pause as a conscious strategy, recognizing that as our forces have come down what we have done is kept the new equipment and removed the older equipment from the inventory. This is a fine strategy during the transient period in which forces are being reduced.
As the forces come to a steady-state level we will need to re-initiate a procurement program again. So we are in a period of pause where we are looking to create entry ramps to be able to begin the development of new systems for the future. So this a very critical time in the Department's science and technology and research and development program to be able to create entry ramps for the new systems that we will be proceeding with in the future.
That leads really to the second change. That is a change in the way that America fights in the future and what weapons systems we will be buying. I do not anticipate that across the board we will be replacing platform with platform. We will not be doing a complete recapitalization. The generation of new entry ramps gives up the opportunity to do some things differently in the future.
This change is captured in some circles by what is described as a revolution in military affairs. It is driven largely by the desire to make use of a wide range of new technologies to improve fundamentally our battlefield situation awareness and to shorten the time that it takes United States commanders to bring effective force to bear on an objective. The goal here is for United States forces to be able to exploit what is happening in the information revolution to achieve dominant battlefield awareness. What I mean by that is to know everything that is going on in a battlefield that might be 100 kilometers by 200 kilometers in size.
The second component, from a command and control perspective, is to be able to close the loop to achieve a dominant battlefield action cycle time of which we can cause indirect fire systems to have a shorter cycle time than direct fire systems have today.
The third transition that we are dealing with is a change in the way America develops and fields its future weapon systems. This I would describe as a resources transition and one that I am promulgating very strongly in the Department in my position. This is aimed at how we buy our weapon systems, placing far greater reliance than we have in the past on commercial sources to ensure that the Department fields technologically superior weapons systems at an affordable cost. And cost is something I want to underline.
As I look back at the paradigm on which the Department operated during the Cold War, cost played a much smaller role than it would be playing in the future. We operated in a situation in which we had very good intelligence information on what our primary adversary was doing. We had information about the weapon systems that we would be faced with and the future threats. We had good information on the characteristics of those systems and even on the time over which they were going to be fielded.
We could, in a sense, develop what I would describe as an F equals MA response to define the system that was required to counter that threat system. We could tell a very convincing story to the American people and to the Congress about what was needed to counter that system and when it was required.
In this environment performance was the sine qua non. Cost was whatever it had to be. It was a fallout. It was a dependent variable in this process. In the environment that we are in today, that is fundamentally changed. Cost is an independent variable in the process that we are managing in the future, and it is another reason that we are looking so much more strongly to commercial sources where cost is the key.
Over the past 30 years the evolutionary change in the industrial base that supports DOD has really been no less dramatic than the changes in the world order since the end of the Cold War. While DOD purchases have declined, America's commercial markets have continued to expand. In aggregate terms, commercial industry passed DOD in research and development spending way back in 1965. The disparity between DOD and commercial sector investment and research and development has been growing wider ever since.
This difference means that this nation's technological momentum is no longer driven to a greater extent by defense activities than commercial in fact, quite the opposite. In this environment the Department of Defense has no choice but to move from dealing with separate industrial sectors for defense and commercial markets, but instead to move to an integrated national industrial base. And that is what we are about.
Leveraging commercial technology advances in this environment to create military advantages is critical to ensuring that our equipment remains affordable and the most advanced in the world. Now underpinning this framework is a fundamental, dual-use strategy. Here is where the Department's dual-use strategy and ARPA's Technology Reinvestment Program (TRP) are playing a significant role.
The intent is to leverage commercial technology advances to create a military advantage, ensuring that the equipment we have remains the most advanced in the world and the most timely in terms of a fielding cycle time. Our objective is to marry the momentum of a vigorous, productive, and competitive commercial industrial base with the unique technologies and system-integration capabilities provided by our defense industrial base. A tighter linkage with commercial markets can shorten the cycle time for our major weapon systems as well as reduce the cost for inserting technological improvements into that system.
In this environment the Department can no longer afford a 15-year acquisition cycle when a comparable commercial turnover is less than 3 or 4 years. The issue here is not only cost but that the lives of our soldiers, sailors, marines, and airmen may depend on shortened acquisition times as well, because in the global market everyone including our adversaries has access to this growing commercial technology base. The military advantage will go the nation who has the best cycle time to be able to envision where this commercial technology may be applied, to capture it, to be able to integrate it into the major systems, and to train our forces to use it effectively. That cycle time is going to become more critical in the future.
In this kind of environment the system engineering and integration skills that have been developed in the current defense industrial base are going to end up becoming more important, not less important, in terms of being able to apply, to add software application glue to various hardware technologies or information system technologies that have been developed for commercial applications.
The Department's dual use of investment strategy is based around three main pillars. The first pillar involves leveraging the commercial sector's technology-based investment. Commercial industry is now the technological agent of change in information systems, telecommunication systems, and micro-electronics. Portions of the Defense Department's program in the past use to lead in aspects in each of these three sectors. That is no longer the case. The commercial markets are leading in each of these three arenas.
Our dual-use program is now tailored to leverage off the commercial technology base so that the taxpayer does not have to pay for the entire investment. It is easy to say this. It is really quite a bit harder to do it in the Department, because we need a cultural change to cause people from being accustomed to developing everything that they use on their own account as opposed to capturing what is being done commercially and applying it to defense purpose. That is a major cultural adjustment process that we have in place, and it will take us some time to actually bring that about.
The second pillar in this strategy is the dual-produce concept. Here the Department is placing a great deal of emphasis on taking advantage of commercial production to manufacture defense equipment. I am not so naive as to believe that we are going to have major defense systems being produced on commercial lines. On the other hand, we have a great opportunity to make much broader use of commercial production of key subsystems and components that can be adapted and integrated into our defense systems, resulting in a warmer commercial production base, lower cost, and greater capability. Again, the system engineering and system integration skills will be key to successfully capturing and applying these commercial technologies.
The third piece of this strategy calls for the Department of Defense to make those investments that are needed to facilitate use of commercial components in defense systems. The objective here is to have components that are, in fact, designed for dual use. This pillar recognizes that our program of acquisition reform and dual-use technology investments are not by themselves sufficient to ensure use of commercial components.
A good example of the implementation of the Department's dual-use strategy is our investment in an electronic packaging technique in fact, techniques in general. The particular technique I would illustrate is our work in something called Multi-Chip Modules (MCMs), modules that are used to capture and package their die and integrate them in effect at a broad level of integration on a chip.
DOD was the early leader in advancing this technology in the late 1980s and early 1990s. As we look to the future we can expect this MCM technology to find its way into more and more of our defense equipment and into more and more of our commercial equipment as well. The advantage of this MCM technology is of critical importance in military applications like smart weapons and commander control systems. These advantages will also be important for future leadership in portable and mobile communications and information processing for both defense and commercial applications.
The primary factor that has been constraining the use of technology has been cost. MCM technology today is still too expensive for many applications. The market is very small. Our studies, however, show that we can expect unit costs to come down by about a factor of ten or more as we move to large-scale production. Our strategy to make co-investments with commercial applications to get the costs down.
In 1990 when we began there was virtually no commercial market, and the entire market was taken up by the Department of Defense. We are now seeing significant growth in commercial applications so that today commercial MCM sales represent about half of the total market. Our projection is that this will grow to about a $700 million a year market by the year 2000, at which point the DOD share will be less than 10 percent.
As an illustration of the power provided here, I would illustrate for you our experience in global positioning system receivers. When the Department started out in this arena we developed a 17-pound Global Positioning System (GPS) receiver that would have cost as much as $20,000 in full rate production quantities. We later went to commercial, off-the- shelf fabrication of this receiver, and we were able to reduce the 17 pounds to 4 and the cost down to $1000 per unit in large runs.
The MCM version of the GPS receiver is here in my hands. This is about an inch and a quarter hybrid MCM chip. This is a six-channel Global Positioning System receiver. All it needs to work is a display and an entry device. In large production lots this would be produced for $400. You can see the sort of edge this has for DOD, not only in the packing for us to get functionality in a small place, but also for the cost.
One of the programs on the forefront of our dual-use technology efforts is the Technology Reinvestment Project (TRP). One of the most important features of the TRP program is the element of cost sharing, not only leveraging the Department's resources, but also providing strong indication of the commercial potential for the project with the associated commercial matching investment.
The second key piece of the TRP process has to do with the fact that it is competitive. Particular earmarked programs are not being added to the Department's budget. Competitive forces are brought to bear, because the best rises to the top of the program.
TRP projects allow us to enhance our military capabilities by leveraging the investments and research and development made by industry and bringing industrial creativity to bear on problems of interest to the Department of Defense.
For example, one TRP project involves the use of composite materials to construct bridges. I use this example because it is one that has been criticized for the fact that bridge building would not seem to be a vital defense technology. Despite the criticism, this particular product does have important military applications. The Army Corps of Engineers is a partner in this project, because their technology may be used for tactical mobile bridges which require minimal side preparation. That is not the whole issue here.
More broadly, composite materials are extremely important for defense especially with respect to our future aircraft and missile programs. Defense procurement thus far has largely sustained the whole production for composite materials. As the industry has come under severe pressure as a result of this procurement pause that I have been describing, we are in need of a broader base for a composite technology. Without an adequate base of composite manufacturers, higher costs would put future aircraft and missile systems in jeopardy. Hence, the composite bridge program also seeks a way to sustain and expand our overall production base for composite manufacturers.
If the project is successful and composite materials can be used for large structures like bridges, production volumes will increase and costs to DOD will come down accordingly. I have been in my job now for about five months so I can say that the TRP program was not invented on my watch. I must say that if it did not exist today, a program like the TRP program would be precisely what I would be looking for to better leverage the Department's position by applying commercial technology not only for performance but for lower costs in the long run.
In summary, given DOD's new budget realities and the amount of research being conducted by commercial firms, we have no choice but to take an innovative approach to technology development and utilization. The examples I have used show how a dual-use strategy is improving the quality of our systems and reducing the cost of those systems, while updating our overall response to the adjustments we need to be making in the post-Cold War world. If we are to have assured and affordable access to the technologies needed for our future military systems, then we must reach out and exploit the technological advances being made in the commercial world. I believe that the strategy that I have outlined today is a prudent way to accomplish that goal with minimum cost. Thank you.
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